Department of Education and Training Financial Statements For the Year Ended 30 June 2017 Statement of Comprehensive Income TABLE OF CONTENTS Financial Statements Page 3 Page 4 Page 5 Page 6 Page 7 Pages 8 and 9 Page 10 Page 10 Page 10 Page 10 Page 10 Page 11 Page 11 Page 12 Page 12 Page 13 Page 13 Page 14 Page 15 Page 15 Page 15 Page 16 Page 16 Page 16 Page 18 Page 18 Page 19 Page 20 Page 20 Page 21 Page 22 Page 22 Page 24 Page 24 Page 25 Page 26 Page 27 Page 28 Page 28 Page 28 Page 28 Page 29 Page 30 Page 30 Page 31 Statement of Comprehensive Income by Major Departmental Service Statement of Financial Position Statement of Assets and Liabilities by Major Departmental Service Statement of Changes in Equity Statement of Cash Flows (including Notes to Statement of Cash Flows) Notes to the Financial Statements Section 1 About the Department and this Financial Report A1. Basis of Financial Statement Preparation A1-1 General Information A1-4 Authorisation of Financial Statements for Issue B1. Revenue A1-2 Compliance with Prescribed Requirements A1-5 Basis of Measurement B1-1 Appropriation Revenue A1-3 Presentation Details Section 2 Notes about our Financial Performance A1-6 The Reporting Entity A2. Departmental Objectives A3. Machinery of Government Changes A4. Controlled Entities A4-1 Disclosures about wholly-owned controlled entities A4-2 Disclosures about non wholly-owned controlled entities B1-2 User Charges and Fees B1-3 Grants and Contributions B2. Expenses B2-1 Employee Expenses B2-2 Supplies and Services B2-3 Grants and Subsidies B2-4 Other Expenses Section 3 Notes about our Financial Position C1. Cash and Cash Equivalents C2-1 Impairment of Receivables C6-1 Borrowings C2. Receivables C3. Property, Plant, Equipment and Depreciation Expense C3-1 Closing Balances and Reconciliation of Carrying Amount C3-2 Recognition and Acquisition C3-3 Measurement using Cost C3-4 Measurement using Fair Value C3-5 Depreciation Expense C3-6 Impairment C4. Intangibles and Amortisation Expense C4-1 Closing Balances and Reconciliation of Carrying Amount C4-2 Recognition and Measurement C4-3 Amortisation Expense C4-4 Impairment C5. Payables C6. Interest Bearing Liabilities Page I of 58
Transcript
Department of Education and Training Financial StatementsFor the Year Ended 30 June 2017
Statement of Comprehensive Income
TABLE OF CONTENTSFinancialStatements
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Statement of Comprehensive Income by Major Departmental Service
Statement of Financial Position
Statement of Assets and Liabilities by Major Departmental Service
Statement of Changes in Equity
Statement of Cash Flows (including Notes to Statement of Cash Flows)
Notes to theFinancialStatements
Section 1
About the Department
and this Financial
Report
A1. Basis of Financial Statement Preparation
A1-1 General Information
A1-4 Authorisation of Financial Statements for Issue
B1. Revenue
A1-2 Compliance with Prescribed Requirements
A1-5 Basis of Measurement
B1-1 Appropriation Revenue
A1-3 Presentation Details
Section 2
Notes about our
Financial Performance
A1-6 The Reporting Entity
A2. Departmental Objectives
A3. Machinery of Government Changes
A4. Controlled Entities
A4-1 Disclosures about wholly-owned controlled entities
A4-2 Disclosures about non wholly-owned controlled entities
B1-2 User Charges and Fees
B1-3 Grants and Contributions
B2. Expenses
B2-1 Employee Expenses
B2-2 Supplies and Services
B2-3 Grants and Subsidies
B2-4 Other Expenses
Section 3
Notes about our
Financial Position
C1. Cash and Cash Equivalents
C2-1 Impairment of Receivables
C6-1 Borrowings
C2. Receivables
C3. Property, Plant, Equipment and Depreciation Expense
C3-1 Closing Balances and Reconciliation of Carrying Amount
C3-2 Recognition and Acquisition
C3-3 Measurement using Cost
C3-4 Measurement using Fair Value
C3-5 Depreciation Expense
C3-6 Impairment
C4. Intangibles and Amortisation Expense
C4-1 Closing Balances and Reconciliation of Carrying Amount
C4-2 Recognition and Measurement
C4-3 Amortisation Expense
C4-4 Impairment
C5. Payables
C6. Interest Bearing Liabilities
Page I of 58
Department of Education and Training Financial StatementsFor the Year Ended 30 June 2017
TABLE OF CONTENTS (continued)Notes to the Section 3 C6. Interest Bearing Liabilities (continued) Page 31
Financial Notes about our C6-2 Finance Lease Liabilities and Commitments Page 31Statements Financial Position C6-3 Disclosures about Sensitivity to Movements in Interest Rates Page 31(continued) (continued) C7. Accrued Employee Benefits Page 32
C8. Provisions Page 32
C9. Equity Page 33
C9-1 Contributed Equity Page 33
C9-2 Appropriations Recognised in Equity Page 33
C9-3 Asset Revaluation Surplus by Asset Class Page 33
Section 4 D1. Fair Value Measurement Page 34
Notes about Risks and D1-1 Accounting Policies and Inputs for Fair Value Page 34Other Accounting D1-2 Basis for Fair Values of Assets and Liabilities Page 34Uncertainties D1-3 Fair Value Disclosures for Financial Liabilities Measured at Page 36
Amortised Costs
D2. Financial Risk Disclosures Page 36
D2-1 Financial Instrument Categories Page 36
D2-2 Financial Risk Management Page 37
D2-3 Maximum Credit Risk Exposure Where Carrying Amounts Do Page 37Not Egual Contractual Amounts
Notes about our E1-1 Explanation of Major Variances - Statement of Page 43Performance compared Comprehensive Incometo Budget E1-2 Explanation of Major Variances - Statement of Financial Page 43
Position
E1-3 Explanation of Major Variances - Statement of Cash Flows Page 43
Section 6 F1. Administered Activities Page 45
What we look after on F1-1 Schedule of Administered Income and Expenditure Page 45behalf of whole-of- F1-2 Reconciliation of Payments from Consolidated Fund to Page 46Government and third Administered Incomeparties F1-3 Schedule of Administered Assets and Liabilities Page 46
F1-4 Administered Activities - Budget to Actual Comparison and Page 47Variance Analysis
*An explanation of major variances is include at Note E1.
The above statement should be read in conjunction with accompanying notes.
Page 8 of 58
Department of Education and Training and Controlled EntitiesStatement of Cash Flowsfor the year ended 30 June 2017
NOTES TO THE STATEMENT OF CASH FLOW
CF-1 Reconciliation of Operating Result to Net Cash Provided by Operating Activities2017 2016$'000 $'000
Operating surplus/(deficit) 28817 36541
Depreciationand amortisationexpense 522309 507760Net gains on disposal of property, plant and equipment 2729 3034Donatedassets received (4238) (11713)Bad debts and impairmentlosses 7313 2222
Change in assets/liabilities (net of MaGtransfers):(Increase)/decrease in GST input tax credits receivable ( 903) ( 3 118)(Increase)/decrease in net operating receivables 7610 ( 8673)(Increase)/decrease in inventories 389 4(Increase )/decrease in other current assets 52718 ( 12663)Increase/(decrease) in other current liabilities 48610 ( 163)Increasel (decrease) in GSTpayable 102 3Increase/(decrease) in payabies 56308 17907Increase/(decrease) in accrued errployee benefits 29484 100268
Net cash provided by Operating Activities 751248 631409
Page 9 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
SECTION 1ABOUT THE DEPARTMENT AND THIS FINANCIAL REPORT
A1 BASIS OF FINANCIAL STATEMENT PREPARATION
A1-1 GENERAL INFORMATIONThe Department of Education and Training ("the department") is a Queensland Government department established under the PublicService Act 2008 and controlled by the State of Queensland, which is the ultimate parent.
The head office and principal place of business of the department is:
Education House30 Mary StreetBrisbane QLD 4000
A1-2 COMPLIANCEWITH PRESCRIBEDREQUIREMENTSThe department has prepared these financial statements in compliance with section 42 of the Financial and Performance ManagementStandard 2009. These financial statements comply with Queensland Treasury's Minimum Reporting Requirements for reporting periodsbeginning on or after 1 July 2016.
The department is a not-for-profit entity and these general purpose financial statements are prepared on an accrual basis (except for theStatement of Cash Flowwhich is prepared on a cash basis) in accordance with Australian Accounting Standards and Interpretationsapplicable to not-for-profit entities.
New accounting standards early adopted andl or applied for the first time in these financial statements are outlined in Note G4.
A1-3 PRESENTATIONCurrency and Rounding
Amounts included in the financial statements are in Australian dollars and rounded to the nearest $1,000 or, where that amount is $500or less, to zero unless disclosure of the full amount is specifically required. Sub-totals and totals may not add due to rounding, but theoverall discrepancy is not greater than two thousand.
Comparatives
Comparative information reflects the audited 2015-16 financial statements.
CurrenU Non-current Classification
Assets and liabilities are classified as either 'current' or 'non-current' in the Statement of Financial Position and associated notes.
Assets are classified as 'current' where their carrying amount is expected to be realised within 12 months after the reporting date.Liabilities are classified as 'current' when they are due to be settled within 12 months after the report date, or the department does nothave an unconditional right to defer settlement to beyond 12 months after the reporting date.
All other assets and liabilities are classified as non-current.
A1-4 AUTHORISATIONOF FINANCIALSTATEMENTSFORISSUEThe financial statements are authorised for issue by the Director-General and Chief Finance Officer at the date of signing theManagement Certificate.
Page 10 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
A1 BASIS OF FINANCIAL STATEMENT PREPARATION (continued)A1-5 BASISOF MEASUREMENTHistorical cost is used as the measurement basis in this financial report except for the following:
• Land, buildings, infrastructure, heritage and cultural assets which are measured at fair value;• Inventories, which are measured at the lower of cost and net realisable value.
Historical Costs
Under historical cost, assets are recorded at the amount of cash or cash equivalents paid or the fair value of the consideration given toacquire assets at the time of their acquisition. Liabilities are recorded at the amount of proceeds received in exchange for the obligationor at the amounts of cash or cash equivalents expected to be paid to satisfy the liability in the normal course of business.
Fair Value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date under current market conditions (i.e. an exit price) regardless of whether that price is directlyderived from observable inputs or estimated using another valuation technique. Fair value is determined using one of the followingthree approaches:
The market approach uses prices and other relevant information generated by market transactions involving identical or comparable(i.e. similar) assets, liabilities or a group of assets and liabilities, such as a business.
• The cost approach reflects the amount that would be required currently to replace the service capacity of an asset. This methodincludes the current replacement cost methodology.
• The income approach converts multiple future cash flows amounts to a single current (i.e. discounted) amount. When the incomeapproach is used, the fair value measurement reflects current market expectations about those future amounts.
Where fair value is used, the fair value approach is disclosed.
Present Value
Present value represents the present discounted value of the future net cash inflows that the item is expected to generate (in respect ofassets) or the present discounted value of the future net cash outflows expected to settle (in respect of liabilities) in the normal course ofbusiness.
Net Realisable Value
Net realisable value represents the amount of cash or cash equivalents that could currently be obtained by selling an asset in an orderlydisposal.
A1-6 THE REPORTINGENTITYThe consolidated financial statements include all income, expenses, assets, liabilities and equity of the 'economic entity' comprising thedepartment and the entities it controls where these entities are material (refer to Note A4). All transactions and balances internal to theeconomic entity have been eliminated in full.
Page II 0[58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
A2 DEPARTMENTAL OBJECTIVES
The Department of Education and Training is creating opportunities for the success of Queenslanders through high quality learning andskilling services focused on preparing Queenslanders with the knowledge, skills and confidence to successfully participate in thecommunity and the economy.
Through the delivery of learning and skilling services across Queensland the department is contributing to the QueenslandGovernment's objectives for the community of:
• Creating jobs and a diverse economy (through training and skills)• Delivering quality frontline services• Building safe, caring and connected communities.
The department is funded for the departmental services it delivers principally by parliamentary appropriations.
A key focus of the department in contributing to these objectives is the shared responsibility, across service delivery areas, for thecreation of connected and accessible pathways for children, young people and students. Supporting this commitment of workingtogether to lift learning and skilling outcomes are the strategic outcomes for each service delivery area:
Early childhood education and care
Children engaged in quality early years programs that support learning and development and making successful transitions to school.
School Education
Students engaged in learning, achieving and successfully transitioning to further education, training and work.
Training and Skills
Queenslanders skilled to participate in the economy and the broader community.
A3 MACHINERY-OF-GOVERNMENT CHANGES
Transfers out - Controlled Activities
Details of Transfer: Non-reciprocal transfer of training assets (plant and equipment and portable and attractive items) from Departmentof Education and Training to TAFE Queensland.
Basis of Transfer: Ministerial approval dated 5 March 2017
Date of Transfer: Effective from 31 March 2017
The assets transferred as a result of this change were as follows:
The decrease in assets of $1.301 million has been accounted for as a decrease in contributed equity as disclosed in the Statement ofChanges in Equity.
No budgeted appropriation revenue was reallocated from the department to TAFE Queensland as part of the machinery-of-Governmentchanges.
Details of Transfer: Government Employee Centralisation Project - Phase 2.
Basis of Transfer: CBRC 44 dated 30 June 2015
Date ofTransfer: Effective from 1 July 2016
The assets transferred as a result of this change were as follows:
The decrease in assets of $19.398 million has been accounted for as a decrease in contributed equity as disclosed in the Statement ofChanges in Equity.
No budgeted appropriation revenue was reallocated from the department to the Department of Housing and Public Works as part of themachinery-of-Government changes.
Page 12of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
A4 CONTROLLED ENTITIES
The following entities are controlled entities of the department:
Directly Controlled
Aviation Australia Pty Ltd
Support the development and growth of aviation and aerospace industries both in Australianand International markets.
% Interest in Entity & Basis for Control: 100% owned by the Department of Education and Training.
Name:
Purpose and Principal Activities:
Total Assets:
Total Liabilities:
$18.423 million
$ 6.654 million
Total Revenue:
Total Operating Result:
$16.386 million
$ (1.360) million
(Unaudited amounts for financial year 2016-17 are provided.)
The BCITF (Qld) Limited
Assist in the acquisition and enhancement of the knowledge, skills, training and education ofworkers in the building and construction industry. BCITF (QLD) Limited does not trade.
% Interest in Entity & Basis for Control: 100% owned by the Department of Education and Training
Name:
Purpose and Principal Activities:
Name: Queensland Education Leadership Institute
Provide a range of professional learning services to school leaders.Purpose and Principal Activities:
% Interest in Entity & Basis for Control: 100% membership of company's constitution controlled by Minister for Education and theDirector-General, Education and Training.
Total Assets:
Total Liabilities:
$11.558 million
$ 9.358 million
Total Revenue:
Total Operating Result:
$ 6.908 million
$ 0.288 million
(Unaudited amounts for financial year 2016-17 are provided.)
Australian Music Examinations Board - Queensland Advisory Committee
Provides a graded system of examinations in music, speech and drama by offering syllabuses,educative services and publications.
% Interest in Entity & Basis for Control: The Committee is selected by the Minister for Education with changes and recommendationsrequiring the Minister's approval.
Name:
Purpose and Principal Activities:
Total Revenue: $ 1.853 million
$ 0.032 millionTotal Operating Result:
Indirectly Controlled
The department has no indirectly controlled entities.
A4-1 DISCLOSURE ABOUT WHOLLY-OWNED CONTROLLED ENTITIESAviation Australia
In October 2001, Aviation Australia Pty Ltd was formed to provide aviation training. Aviation Australia Pty Ltd prepares and publishesseparate financial statements, which are audited by the Auditor-General of Queensland.
Given the activities of the company, no dividends or other financial returns are received by the department. There are no significantrestrictions on the department's ability to access the company's assets or settle its liabilities.
The assets, liabilities, revenues and expenses of the entity listed above have not been consolidated in these financial statements asthey would not materially affect the reported financial position and operating revenue and expenses.
Page 13 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
A4 CONTROLLEDENTITIES(continued)A4-1 DISCLOSURE ABOUT WHOLLY-OWNED CONTROLLED ENTITIES (continued)
Building ConstructionIndustry TrainingFund
The BCITF (Qld) Limited ('the Company') was established on 1 January 1999 to assist in the acquisition and enhancement of theknowledge, skills, training and education of workers in the building and construction industry. The Company is established as a publiccompany, limited by guarantee, and the Minister is the sole shareholder. The Company is controlled by the department, and is auditedby the Auditor-General of Queensland.
The assets, liabilities, revenues and expenses of the entity listed above have not been consolidated in these financial statements asthey would not materially affect the reported financial position and operating revenue and expenses.
The Company is the sole trustee of the Building and Construction Industry Training Fund ('the Trust'). The Trust is established toadvance the education and skills of persons and organisations involved in the building and construction industry, and is audited by theAuditor-General of Queensland. The Trust is not controlled by the department.
Queensland Education Leadership Institute
The Queensland Education Leadership Institute (QELi) was established on 1 June 2010 to provide a range of professional learningservices to school leaders. QELi was established as a not-for-profit public company, limited by guarantee, jointly owned by the Ministerfor Education, the Department of Education and Training, Queensland Catholic Education Commission (QCEC) and IndependentSchools Queensland (ISQ). Effective from 31 October 2016, QCEC and ISQ withdrew from membership of QELi. The company isaudited by Grant Thornton Australia Pty Ltd.
Given the.activities of the company, no dividends or other financial returns are received by the department. There are no significantrestrictions on the department's ability to access the company's assets or settle its liabilities.
The assets, liabilities, revenues and expenses of the entity listed above have not been consolidated in these financial statements asthey would not materially affect the reported financial position and operating revenue and expenses.
A4-2 DISCLOSURE ABOUT NONWHOLLY-OWNED CONTROLLED ENTITIESAustralian Music Examinations Board
The Australian Music Examinations Board (AMEB) was constituted by agreement between the Ministers for Education of the states ofQueensland, New South Wales and Tasmania and the Universities of Melbourne, Adelaide andWestern Australia. The AMEB exists toprovide a graded system of examinations in music, speech and drama, by offering high quality syllabuses, educative services to ourteachers, examiners and candidates, and quality publications to the highest editorial standard. The Queensland Advisory Committee isselected by the Minister for Education with changes and recommendations requiring the Minister's approval. The financial activities ofAMEB (Queensland) have been incorporated into the financial transactions of the department.
Page 14 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
SECTION 2NOTES ABOUT OUR FINANCIAL PERFORMANCE
81 REVENUE
B1-1 APPROPRIATION REVENUEReconciliation of Payments from Consolidated Fund toAppropriated Revenue Recognised in Operating Result
User charges, fees and sales revenue controlled by the department are recognised as revenues when the revenue has been earnedand can be measured reliably with a sufficient degree of certainty. This involves either invoicing for related goods/services and/or therecognition of accrued revenue. Revenue from student fees is recognised as the service is provided. User charges, fees and salesrevenue are controlled by the department where they can be deployed for the achievement of departmental objectives.
Accounting Policy - Property Income
Property income is recognised as revenue when received.
Page 15 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
81 REVENUE(continued)B1-3 GRANTS AND CONTRIBUTIONS
2017 2016$'000 $'000
10331 18749
25856 249134760 3631455 411
34295 397164238 11 714
80935 95866
Comm:mwealthreceiptsSpecific purpose
Contributions received from external partiesGrants from other State Government departmentsGoods and services received below fair valueDonations- cashDonations- other assets (1)
Total
Accounting Policy - Grants, Contributions and Donations
Grants, contributions, donations and gifts are generally non-reciprocal in nature so do not require any goods or services to be providedin return. Corresponding revenue is recognised in the year in which the department obtains control over the grant! contribution/donation (control is generally obtained at the time of receipt). Where grants are received that are reciprocal in nature, revenue isrecognised over the term of the funding arrangements.
Contributed physical assets are recognised at their fair value.
Accounting Policy - Services received below fair value
Contributions of services are recognised only if the services would have been purchased if they had not been donated and their fairvalue can be measured reliably. Where this is the case, an equal amount is recognised as revenue and an expense.
Disclosure about Donations
(1) The department's policy is to only record physical assets with a value of $10 000 or more for buildings and $5 000 for plant andequipment. Plant and equipment contributed by Parents' and Citizens' Associations were recorded on the department's Fixed AssetRegister.
Employee BenefitsTeachers' salaries and allowancesPublicservants' and other salaries and allowancesTeacher aides' salariesCleaners' salaries and allowancesJanitors'/groundstaff salaries and allowances
Employersuperannuation contributionsAnnual leave expensesLong service leave levyRedundancy payments
Employee Related ExpensesFringebenefits taxWorkers' corrpensationStaff transfer costsStaff rental accorrmodationStaff trainingTotal
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
82 EXPENSES(continued)
B2-1 EMPLOYEE EXPENSES (continued)
The number of employees as at 30 June, including both full-time employees and part-time employees measured on a full-timeequivalent basis (reflecting Minimum Obligatory Human Resource Information (MOHRI}) is:
2017No.
2016No.
Full-TimeEquivalentErrployees 69356 68103
Accounting Policy - Wages and Salaries
Wages and salaries due but unpaid at reporting date are recognised in the Statement of Financial Position at the current salary rates.As the department expects such liabilities to be wholly settled within 12 months of reporting date, the liabilities are recognised atundiscounted values.
Accounting Policy - Sick Leave
Prior history indicates that on average, sick leave taken each reporting period is less than the entitlement accrued. This is expected tocontinue into future periods. Accordingly, it is unlikely that existing accumulated entitlements will be used by employees and no liabilityfor unused sick leave entitlements is recognised. As sick leave is non-vesting, an expense is recognised for this leave as it is taken.
Accounting Policy - Annual Leave
The entitlement for annual leave includes a component for accrued leave loading for teaching staff working at schools, but does notinclude recreation leave, which is not an entitlement under their award.
The Queensland Government's Annual Leave Central Scheme (ALCS) became operational on 30 June 2008 for departments,commercialised business units and shared service providers. Under this scheme, a levy is made on the department to cover the cost ofemployees' annual leave (including leave loading and on-costs). The levies are expensed in the period in which they are payable.Amounts paid to employees for annual leave are claimed back from the scheme quarterly in arrears.
Accounting Policy - Long Service Leave
Under the Queensland Government's Long Service Leave Central Scheme (LSLCS), a levy is made on the department to cover thecost of employees' long service leave. Levies are expensed in the period in which they are paid or payable. Amounts paid toemployees for long service leave are claimed from the scheme quarterly in arrears.
Accounting Policy - Superannuation
Post-employment benefits for superannuation are provided through defined contributions (accumulations) plans or the QueenslandGovernment's QSuper defined benefit plans as determined by the employee's conditions of employment.
Defined Contribution Plans - Contributions are made to eligible complying superannuation funds based on the rates specified in therelevant EBA or other conditions of employment. Contributions are expensed when they are paid or become payable followingcompletion of the employee's service each pay period.
Defined Benefit Plan - the liability for defined benefits is held on a whole-of-government basis and reported in those financial statementspursuant of AASB 1049 Whole of Government and General Government Sector Financial Reporting. The amount of contributions fordefined benefit plan obligations is based upon the rates determined by the Treasurer on the advice of the State Actuary. Contributionsare paid by the department at the specified rate following completion of the employee's service each pay period. The department'sobligation are limited to those contributions paid.
The department pays premiums to WorkCover Queensland in respect of its obligations for employee compensation. Workers'compensation insurance is a consequence of employing employees, but is not counted in an employees' total remuneration package. Itis not an employee benefit and is recognised separately as employee related expenses.
Key management personnel and remuneration disclosures are detailed in Note G1.
Page 17of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
Accounting Policy - Distinction between Grants and Procurement
For a transaction to be classified as supplies and services, the value of goods or services received by the department must be ofapproximately equal value to the value of the consideration exchanged for those goods or services. Where this is not the substance ofthe arrangement, the transaction is classified as a grant in Note 82-3.
Accounting Policy - Operating Lease Rentals
Operating lease payments are representative of the pattern of benefits derived from the leased assets and are expensed in the periodsin which they are incurred. Incentives received on entering into operating leases are recognised as liabilities. Lease payments areallocated between rental expense and reduction of the liability.
Disclosure - Operating Lease
Operating leases are entered into as a means of acquiring access to office accommodation. Lease terms extend over a period of 1 to15 years. The department has no option to purchase the leased item at the conclusion of the lease although the lease provides for aright of renewal at which time the lease terms are renegotiated.
Operating lease rental expenses comprise the minimum lease payments payable under operating lease contracts. Lease payments aregenerally fixed, but with inflation escalation clauses on which contingent rentals are determined.
B2-3 GRANTS AND SUBSIDIES2017 2016$'000 $'000
RecurrentState Government
Grants and allowances to external organisations 538730 501 252Trainingand related services 565088 533688
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
82 EXPENSES(continued)82-4 OTHEREXPENSES
2017 2016$'000 $'000
27076 27213776 820
2729 3034
41444 331 4
37693 365961427 1494
69747 69608
Insurance - QGIFExternal audit fees (1)
Loss on disposal of property, plant and equipmentSpecial payments: (2)
Ex-gratia payments - payments to former CoreAgreement errployeesEx-gratia payments - generalCourt awarded damages
Paymentsto other Govt Departments (3)
OtherTotal
Audit Fees
(1) The total external audit fees relating to the 2016-17 financial year are estimated to be $0.790 million (2015-16: $0.780 million).There are no non-audit services included in this amount.
Special Payments
(2) Special Payments represent ex gratia expenditure and other expenditure that the department is not contractually or legallyobligated to make to other parties. Special payments during 2016-17 include the following payments over $5,000:
the department made an ex-gratia payment for staff transfer costs on compassionate grounds.
reimbursement for damages caused by students at council premises was made by the department.
compensation was paid by the department to a community centre as a result of delayed building works and the associatedimpact on their business.
Payments to other Government Departments
(3) Payments to other Government Departments are related to School Transport arrangements with Department of Transport andMain Roads.
Losses of Public Money
Certain losses of public property are insured with the Queensland Government Insurance Fund (QGIF). The claims made in respect ofthese losses have yet to be assessed by QGIF and the amount recoverable cannot be estimated reliably at reporting date. Uponnotification by QGIF of the acceptance of the claims, revenue will be recognised for the agreed settlement amount and disclosed as'Other revenue'.
Page 190f58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
SECTION 3NOTES ABOUT OUR FINANCIAL POSITION
C1 CASH AND CASH EQUIVALENTS2017$'000
2016$'000
Gash on handGash at bankTotal
165972610
192742776
972775 742968
Accounting Policy - Cash and Cash Equivalents
For the purposes of the Statement of Financial Position and the Statement of Cash Flows, cash and cash equivalents includes cash onhand, cheques receipted but not banked at 30 June and cash in school and central office bank accounts which are used in the day-today cash management function of the department.
Departmental bank accounts (excluding school bank accounts) are grouped within the whole-of-Government set-off arrangement withthe Queensland Treasury Corporation and do not earn interest on surplus funds. Interest earned on the aggregate set-off arrangementbalance accrues to the Consolidated Fund.
C2 RECEIVABLES
2017 2016$'000 $'000
106441 109231(36943) ( 30267)69498 78964
3006 623932 23029( 103) ( 1)2177 399369 291
98879 102688
CurrentDebtors of an operational natureLess: Allowance for impairmentloss
Loans and advancesGST input tax credits receivableGSTpayableOther debtorsEmployeeclaims receivableTotal
Non-CurrentLoans and advances non-currentTotal
30003000
Accounting Policy - Receivables
Receivables are measured at amortised cost which approximates their fair value at reporting date.
Trade debtors are recognised at the amounts due at the time of sale or service delivery i.e. the agreed purchase/contract price.Settlement on trade debtors is required within 30 days from invoice date.
Other debtors generally arise from transactions outside the usual operating activities of the department and are recognised at theirassessed values. Terms are a maximum of three months, no interest is charged and no security is obtained.
Page 20 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
C2 RECEIVABLES (continued)Disclosures - Credit Risk Exposure of Receivables
The maximum exposure to credit risk at balance date for receivables is the gross carrying amount of those assets inclusive of anyprovisions for impairment.
No collateral is held as security and no credit enhancements related to receivables are held by the department. In terms of collectability,receivables will fall into one of the following three categories:
• within terms and expected to be fully collectible• past due but not impaired• past due and impaired
The collectability of receivables is assessed periodically with allowance being made where receivables are impaired. Note C2-1 detailsthe accounting policies for impairment of receivables, including the loss events giving rise to impairment and the movement in theprovision for impairment.
If no loss events have arisen in respect of a particular debtor or group of debtors, no allowance for impairment is made in respect of thatdebt! group of debtors. If the department determines that an amount owing by such a debtor does become uncollectible (afterappropriate range of debt recovery action), that amount is recognised as a Bad Debt expense and written-off directly againstReceivables. In other cases where a debt becomes uncollectible but the uncollectible amount exceeds the amount already allowed forimpairment of that debt, the excess is recognised directly as a Bad Debt expense and written-off directly against Receivables.
All known bad debts were written-off as at 30 June.
All receivables within terms and expected to be fully collectible are considered of good credit quality based on recent collection history.Credit risk management strategies are detailed in Note 02.
C2-1 IMPAIRMENT OF RECEIVABLES
Accounting Policy - Impairment of Receivables
The allowance for impairment reflects the occurrence of loss events. The most readily identifiable loss event is where a debtor isoverdue in paying a debt to the department, according to the due date (normally terms of 30 days). Economic changes impacting thedepartment's debtors, and relevant industry data, also form part of the department's documented risk analysis.
Impairment loss expense for the current year regarding the department's receivables is $7.31 million. This is an increase of $5.09million from 2016, and is mainly due to recognition of corporate receivables unlikely to be recovered.
Disclosure - Movement in Allowance for Impairment for Impaired Receivables
2017$'000
2016$'000
Balance at 1 JulyIncrease/(decrease) in allowance recognised in the operating resultAmounts written off during the yearAmounts recovered during the yearBalance at 30 June
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Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
C3 PROPERTY, PLANT, EQUIPMENT AND DEPRECIATION EXPENSE (continued)
C3-2 RECOGNITIONANDACQUISITION
Accounting Policy - Recognition
Basis of Capitalisation and Recognition Thresholds
Items of property, plant and equipment with a cost or other value equal to or in excess of the following thresholds are recognised forfinancial reporting purposes in the year of acquisition:
Buildings and land improvementsHeritage and cultural buildingsLandOther (including heritage and cultural assets other than buildings)
$10000$10000
$1$5000
Items with a lesser value are expensed in the year of acquisition.
Expenditure on property, plant and equipment is capitalised where it is probable that the expenditure will produce future servicepotential for the department. Subsequent expenditure is only added to an asset's carrying amount if it increases the service potential oruseful life of that asset. Maintenance expenditure that merely restores original service potential (lost through ordinary wear and tear) isexpensed.
Componentisation of Complex Assets
The department's complex assets are special purpose schools and TAFE buildings.
Complex assets comprise separately identifiable components (or groups of components) of significant value, that require replacementat regular intervals and at different times to other components comprising the complex asset.
On initial recognition, the asset recognition thresholds outlined above apply to the complex asset as a single item. Where the complexasset qualifies for recognition, components are then separately recorded when their value is significant relative to the total cost of thecomplex asset.
When a separately identifiable component (or group of components) of significant value is replaced, the existing component(s) isderecognised. The replacement component(s) are capitalised when it is probable that future economic benefits from the significantcomponent will flow to the department in conjunction with the other components comprising the complex asset and the cost exceeds theasset recognition thresholds specified above. Replacement components that do not meet the asset recognition thresholds forcapitalisation are expensed.
Components are separately recorded and valued on the same basis as the asset class to which they relate. The accounting policy fordepreciation of complex assets, and estimated useful lives, is disclosed in Note C3-5.
Accounting Policy - Cost of Acquisition
Actual cost is used for the initial recording of all non-current physical asset acquisitions. Cost is determined as the value given asconsideration plus costs incidental to the acquisition, including all other costs incurred in getting the assets ready for use, includingarchitects' fees and engineering design fees. However, any training costs are expensed as incurred.
Where assets are received free of charge from another Queensland Government department (whether as a result of a machinery-ofGovernment change or other involuntary transfer), the acquisition cost is recognised as the gross carrying amount in the books of theother entity immediately prior to the transfer together with any accumulated depreciation.
Assets acquired at no cost or for nominal consideration, other than from an involuntary transfer from another Queensland Governmententity, are recognised as assets and revenues at their fair value at the date of acquisition.
C3-3 MEASUREMENTUSINGCOSTAccounting Policy
Plant and equipment is measured at cost in accordance with Non-Current Asset Policies. The carrying amounts for such plant andequipment are not materially different from their fair value.
Page 24 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
C3 PROPERTY, PLANT, EQUIPMENT AND DEPRECIATION EXPENSE (continued)C3-4 MEASUREMENT USING FAIR VALUEAccounting Policy
Land, buildings (including residential buildings and land improvements such as sports facilities), heritage and cultural assets, andbuildings under a finance lease are measured at fair value as required by Queensland Treasury's Non-Current Asset Policies for theQueensland Public Sector. These assets are reported at their revalued amounts, being the fair value at the date of valuation, less anysubsequent accumulated depreciation and impairment losses where applicable (refer also to an explanation later in this note regardingthe impact of different methods of accounting for accumulated depreciation and accumulated impairment losses in conjunction withrevaluations).
The cost of items acquired during the financial year has been judged by management to materially represent their fair value at the endof the reporting period. •
Assets built privately (PPP assets) are tendered out and the fair value is calculated based on construction of the assets in a privatemarket.
Assets under a finance lease that would otherwise have been included in the classes above are also revalued on the same basis as theassets in the class to which they would have belonged had they not been under a finance lease.
Fair value for land is determined by establishing its market value by reference to observable prices in an active market or recent markettransactions. The fair value of buildings and heritage and cultural assets is determined by calculating the current replacement cost ofthe asset.
Use of Specific Appraisals
Land, buildings, heritage and cultural assets are revalued by management each year to ensure that they are reported at fair value.Management valuations incorporate the results from the independent revaluation program, and the indexation of the assets not subjectto independent revaluation each year.
For the purposes of revaluation, the department has divided the state into 25 districts and each year's selection is chosen to ensure thatmajor urban, provincial and rural characteristics were included. Districts independently valued in each year are as follows:
2016-17 2017-18Tablelands-Johnstone TownsvilleMount Isa WarwickThe Downs Moreton EastBrisbane North Brisbane SouthLogan-Albert Beaudesert Sunshine Coast NorthCentral Queensland Wide Bay North
2018-19 2019-20Cairns Coastal Torres Strait and CapeCentral West RomaToowoomba Mackay-WhitsundayBrisbane Central and West MoretonWestGold Coast South East BrisbaneWide Bay West Sunshine Coast South
Wide Bay South
The fair values reported by the department are based on appropriate valuation techniques that maximise the use of available andrelevant observable inputs and minimise the use of unobservable inputs.
Use of Indices
Where assets have not been specifically appraised in the reporting period, their previous valuations are materially kept up-to-date viathe application of relevant indices. The department ensures that the application of these indices results in a valid estimation of theasset's fair value at reporting date. The State Valuation Service (SVS) supplies the indices used for various types of assets. Theseindices are derived from market information available to SVS. SVS provides assurance of their robustness, validity and appropriatenessfor application to the relevant assets. The results of interim indexations are compared to the results of the independent revaluationperformed in the year to ensure the results are reasonable. This annual process allows management to assess and confirm therelevance and suitability of indices provided by SVS based on the department's own particular circumstances.
Page 25 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
Any revaluation increment arising on the revaluation of an asset is credited to the asset revaluation surplus of the appropriate class,except to the extent it reverses a revaluation decrement for the class previously recognised as an expense. A decrease in the carryingamount on revaluation is charged as an expense, to the extent it exceeds the balance, if any, in the revaluation surplus relating to thatasset class.
On revaluation, accumulated depreciation is restated proportionately with the change in the carrying amount of the asset and anychange in the estimate of remaining useful life. .
Materiality concepts (according to the Framework for the Preparation and Presentation of Financial Statements) are considered indetermining whether any difference between the carrying amount and the fair value of each asset class is material (in which caserevaluation is warranted).
C3-5 DEPRECIATIONEXPENSEAccounting Policy
Land is not depreciated as it has an unlimited useful life.
Property, plant and equipment are depreciated on a straight-line basis so as to allocate the net cost or revalued amount of each asset,less its estimated residual value, progressively over its estimated useful life to the department.
Key Judgement: The estimated useful lives of the assets are reviewed annually and, where necessary, are adjusted to better reflectthe pattern of consumption of the asset. In reviewing the useful life of each asset, factors such as asset usage and the rate of technicaland commercial obsolescence are considered.
Any expenditure that increases the originally assessed capacity or service potential of an asset is capitalised and the new depreciableamount is depreciated over the remaining useful life of the asset to the department.
It has been determined that the department controls buildings that by their nature require componentisation and the assignment ofseparate useful lives to their component parts. The three components of these buildings are: a) Fabric; b) Fit-out; and c) Plant. Theuseful lives for these assets are disclosed in the table below.
Where assets have separately identifiable components that are subject to regular replacement, these are depreciated according touseful lives of each component.
Useful lives for the assets included in the revaluation will be amended progressively as the assets are inspected by the valuers.
The depreciable amount of improvements to or on leasehold land is allocated progressively over the estimated useful life of theimprovements or the unexpired period of the lease, whichever is the shorter. The unexpired period of leases includes any option periodwhere exercise of the option is probable.
Assets under construction (capital work-in-progress) are not depreciated until construction is complete and the asset is first put to useor is installed ready for use in accordance with its intended application. These assets are then reclassified to the relevant classes withinproperty, plant and equipment.
For the department's depreciable assets, the estimated amount to be received on disposal at the end of their useful life (residual value)is determined to be zero.
Page 26 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
C3 PROPERTY, PLANT, EQUIPMENT AND DEPRECIATION EXPENSE (continued)C3-5 DEPRECIATIONEXPENSE(continued)Depreciation Rates
Key Estimates: For each class of depreciable asset the depreciation rates are based on the following useful lives:
Current usefulClass life (years)
Buildings - Fabric 80Buildings - Rt Out 25Buildings - Rant 25Buildings - Demountablebuildings, sheds and covered areasBuildings - Land improvements (including sporting facilities)Heritage and Cultural AssetsRant and equipment - Computer equipmentRant and equipment - Office equipmentRant and equipment - Artefacts and curiosRant and equipment - Musical instruments and craft equipmentRant and equipment - Rant and machineryRant and equipment - Sporting equipmentRant and equipment - Major refurbishments to leasehold adrrinistrative buildingsLeased plant and equipment
4015 - 808055 - 2050 - 100205 - 25102 - 125 - 10
C3-6 IMPAIRMENTAccounting Policy
All non-current physical and intangible assets are assessed for indicators of impairment on an annual basis. If an indicator of possibleimpairment exists, the department determines the asset's recoverable amount.
The asset's recoverable amount is determined as the higher of the asset's fair value less costs to sell and current replacement cost.
An impairment loss is recognised immediately in the Statement of Comprehensive Income, unless the asset is carried at a revaluedamount. When the asset is measured at a revalued amount, the impairment loss is offset against the asset revaluation surplus of therelevant class to the extent available.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of itsrecoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determinedhad no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income, unlessthe asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Page 27 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended30 June2017
C4 INTANGIBLES AND AMORTISATION EXPENSEC4-1 CLOSINGBALANCESAND RECONCILIATIONOFCARRYINGAMOUNT
At cost 12984 12983Less: Accurrulated arrortisation ( 8897) ( 7635)
4087 5348Softw are WIP
At cost 1526 2231526 223
Total intangible assets - net book value 43779 53375
C4-2 RECOGNITIONAND MEASUREMENT
Accounting Policies
Intangible assets of the department comprise purchased software, internally generated software and right of use facilities.
Intangible assets with a cost, or other value, greater than $100 000 are recognised in the financial statements; items with a lesser valueare expensed.
Intangible assets are measured at cost.
It has been determined that there is not an active market for any of the department's intangible assets. As such, the assets arerecognised and carried at cost less accumulated amortisation and accumulated impairment losses.
C4-3 AMORTISATIONEXPENSEAccounting Policy
All intangible assets of the department have finite useful lives and are amortised on a straight line basis over the intangible's useful life.The residual value of all the department's intangible assets is zero.
Useful Life
ClassCurrent usefullife (years)
Intangibles - Softw are purchasedIntangibles - Softw are internally generatedIntangibles- Other (based on contract life)
7 - 107 - 105 - 25
Page 28 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
C4 INTANGIBLES AND AMORTISATION EXPENSE (continued)
C4-4 IMPAIRMENTAccounting Policy
Intangible assets are principally assessed for impairment annually by reference to the actual and expected continuing use of the assetby the department, including discontinuing the use of software or other intangible.
If an indicator of possible impairment exists, the department determines the asset's recoverable amount. Any amount by which theasset's carrying amount exceeds the recoverable amount is recorded as an impairment loss.
Page 29 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
Trade creditors are recognised upon receipt of the goods or services ordered and are measured at the nominal amount i.e. agreedpurchase/contract price, gross of applicable trade and other discounts, Amounts owing are unsecured,
Borrowings are initially recognised at fair value, plus any transaction costs directly attributable to the borrowings, The fair value ofborrowing is measured at amortised cost and set out in Note 01-3,
Any borrowing costs are added to the carrying amount of the borrowing to the extent they are not settled in the period in which theyarise, Borrowings are split between current and non-current liabilities using the principles set out in the foreword and preparationinformation section of this financial report,
The department does not enter into transactions for speculative purposes, nor for hedging, No financial liabilities are measured at fairvalue through profit or loss,
Accounting Policy - Lease Liabilities
A distinction is made in the financial statements between finance leases that effectively transfer from the lessor to the lesseesubstantially all risks and benefits incidental to ownership, and operating leases, under which the lessor retains substantially all risksand benefits,
Where a non-current physical asset is acquired by means of a finance lease, the asset is recognised at an amount equal to the presentvalue of the minimum lease payments, The lease liability is recognised at the same amount
Lease payments are allocated between the principal component of the lease liability and the interest expense,
Page 30 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
C6 INTERESTBEARINGLIABILITIES(continued)
C6-1 BORROWINGS
Terms and ConditionsAll borrowings by the department are from the Queensland Treasury Corporation (QTC). The maturity profile is disclosed in Note D2-4.All borrowings are in $A denominated amounts and no interest has been capitalised during the current reporting period. There havebeen no defaults or breaches of the loan agreement during the 2017 or 2016 financial years. No assets have been pledged as securityfor any liabilities.
Interest Rates
The interest rate on borrowings is 5.79% (2015-16: 4.26% to 5.79%).
As it is the intention of the department to hold its borrowings for their full tenm,no fair value adjustment is made to the carrying amountof the borrowings.
Undrawn FacilitiesOn 14 January 2013, an overdraft facility with the Queensland Treasury Corporation was approved on the department's main bankaccount. This facility is limited to $250 million and remains in effect permanently. This facility remained fully undrawn at 30 June 2016and is available for use in the next reporting period. The current overdraft interest rate is 5.00% (2015-16: 5.25%).
Finance Lease Terms and ConditionsThe majority of finance leases relate to the PPP Projects - Southbank Training Precinct, South-East Queensland School - Aspire andQueensland Schools - Plenary. Refer to G3 for details.
Interest RatesInterest on finance leases is recognised as an expense as it accrues. No interest has been capitalised during the current orcomparative reporting period.The implicit interest rate for finance leases range from 2.87% to 15.84 % (2015-16: 2.87% to 13.10%).
SecurityLease liabilities are effectively secured, as the right to the leased assets revert to the lessor in the event of default.
2017 2016$'000 $'000 $'000 $'000
Minimum Present value Minimum Presentvaluepayments of payments payments of payments
Interest rate sensitivity analysis evaluates the outcome on profit or loss if interest rates would change by +/- 1 per cent from the yearend rates applicable to the department's financial assets and liabilities. With all other variables held constant, the department wouldhave a surplus and equity increase/ (decrease) of $8.821 million (2015-16: $6.486 million).
Page 31 of 57
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
C7 ACCRUED EMPLOYEE BENEFITS
2017 2016$'000 $'000
59050 5589927871 26476
113378 883241239 1353
201 538 172 052
Annual leave levy payableLong service leave levy payableWages outstandingPaidparental leaveTotal
Accounting Policy - Accrued Employee Benefits
No provision for annual leave or long service leave is recognised in the department's financial statements as the liability is held on awhole-of-government basis and reported in those financial statements pursuant to AASB 1049 Whole of Government and GeneralGovernment Sector Financial Reporting.
C8 PROVISIONS
2017$'000
2016$'000
Current:TrainingServicesTotal
3437034370
Accounting Policy - Provisions
Provisions are recorded when the department has a present obligation, either legal or constructive as a result of a past event. They arerecognised at the amount expected at reporting date for which the obligation will be settled in a future period.
Key Estimates and Judgements Provisions
Training and Skills Division enters into contractual arrangements with training providers in the contestable training market. Since theintroduction of the contestable market in 2014, the number of providers accessing government funding has grown significantly. Thevaluation is based on the number of students enrolled in a competency at the end of the financial year but not completed. The value for2016-17 has been calculated using 2016-17 activity levels with 2015-16 withdrawal rates.
Due to the complexities in estimating the value of the provisions, it is impractical to retrospectively apply this change and provide acomparative for financial year 2015-16.
Page32 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
C9 EQUITY
C9-1 CONTRIBUTED EQUITY
Interpretation 1038 Contributions by Owners Made to Wholly-Owned Public Sector Entities specifies the principles for recognisingcontributed equity by the department. The following items are recognised as contributed equity by the department during the reportingand comparative years:
Appropriations for equity adjustments (refer Note C9-2); and• Non-reciprocal transfers of assets and liabilities between wholly-owned Queensland State Public Sector entities as a result of
machinery-of-Government changes (refer Note A3).
C9-2 APPROPRIATIONS RECOGNISED IN EQUITY
Reconciliation of Payments from Consolidated Fund to Equity Adjustment
2017 2016$'000 $'000
( 24 519) ( 173491)72812 4535248293 (128139)
Budgeted equity adjustmentappropriationUnforeseen expenditureEquity adjustment recognised in Contributed Equity
C9-3 ASSET REVALUATION SURPLUS BY ASSET CLASS
Accounting Policy
The asset revaluation surplus represents the net effect of upwards and downwards revaluations of assets to fair value.
Heritage and LeasedLand Buildings Cultural Assets Total$'000 $'000 $'000 $'000 $'000
Balance at 1 July 2015 4851290 7457786 17392 2490 12328958
Balance at 30 June 2017 5338845 8886701 19627 54928 14300101
Page 33 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
SECTION 4NOTES ABOUT RISK AND OTHER ACCOUNTING UNCERTAINTIES
01 FAIR VALUE MEASUREMENT
D1-1 ACCOUNTING POLICIES AND INPUTS FOR FAIR VALUESFair Value Measure
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date under current market conditions (i.e. an exit price) regardless of whether that price is directlyderived from observable inputs or estimated using another valuation technique.
Observable inputs are publicly available data that are relevant to the characteristics of the assets/liabilities being valued.
Unobservable inputs are data, assumptions and judgements that are not available publicly, but are relevant characteristics of the .assets/liabilities being valued. Significant unobservable data takes account of the characteristics of the department assets/liabilities,and includes internal records of recent construction costs (and/or estimates of such costs) for assets' characteristics/functionality, andassessments of physical condition and remaining useful life. Unobservable inputs are used to the extent that sufficient relevant andreliable observable inputs are not available for similar assets/liabilities.
A fair value measurement of a non-financial asset takes into account a department's ability to generate economic benefits by using theasset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
Fair Value Measurement Hierarchv
All assets and liabilities of the department for which fair value is measured or disclosed in the financial statements are categorised withthe following fair value hierarchy, based on the data and assumptions used in the most recent specific appraisals:
• level 1 - represents fair value measurements that reflect unadjusted quoted market prices in active markets for identicalassets and liabilities;
• level 2 - represents fair value measurements that are substantially derived from inputs (other than quoted prices included inlevel 1) that are observable, either directly or indirectly; and
• level 3 - represents fair value measurements that are substantially derived from unobservable inputs.
None of the department's valuations of assets or liabilities are eligible for categorisation into level 1 of the fair value hierarchy. Therewere no transfers of assets between fair value hierarchy levels during the period.
D1-2 BASIS FOR FAIR VALUES OF ASSETS AND LIABILITIESLand
Current Year Valuation Activitv:
30 June 2017 by State Valuation Services
Market-based assessment. Fair Value Hierarchy Level 2.
The fair value of land involved physical inspection and reference to publicly availabledata on recent sales of similar land in nearby localities in accordance with Industrystandards.
Approximately one quarter of the department's land was independently valued. Indetermining the values, adjustments were made to the sales data to take into accountthe location of the department's land, its size, street/road frontage and access, andany significant restrictions. The extent of the adjustments made varies in significancefor each parcel of land.
• The remaining three quarters of the land assets, have been indexed to ensure thatvalues reflect fair value as at reporting date. This involved the selection of a randomsample of 208 properties from the 18 districts across the state that were notindependently valued in 2016-17. State Valuation Service then provided indices foreach of these sites based on recent market transactions for local land sales. Theseindices increased the value of land in these districts by 2.86% and have been applied.
Effective Date of Last Specific Appraisal:
Valuation Approach:
Inputs:
Page 34 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
01 FAIRVALUE MEASUREMENT(continued)01-2 BASIS FOR FAIR VALUES OF ASSETS AND LIABILITIES (continued)
Buildings
Effective Date of Last Specific Appraisal:
Valuation Approach:
Current Year ValuationActivitv:
Heritage and Cultural Assets
Effective Date of Last Specific Appraisal:
Valuation Approach:
Current Year Valuation Activitv:
Leased Assets
Effective Date of Last Specific Appraisal:
Valuation Approach:
Current Year ValuationActivitv:
30 June 2017 by State Valuation Services
All purpose-built facilities are valued at current replacement cost in accordance withthe requirements for special purpose assets contained in accounting standard AASB13 Fair Value Measurement, as there is no active market for these facilities.
State Valuation Services conduct physical inspections and applied construction ratesfrom the State School Costing Manual provided by GRC Quantity Surveyors. FairValue Hierarchy Level 3.
Approximately one quarter of the department's buildings were independently valued.The current replacement cost was based on standard school buildings and specialisedfit-out constructed by the department, adjusted for more contemporarydesign/construction approaches. Significant judgement was also used to assess theremaining service potential of these facilities, including the current physical conditionof the facility.
The remaining·three quarters were indexed using the Building Price Index provided byGRC Quantity Surveyors. The change in the Building Price Index (June 2016 to June2017) was a 4.38 percent increase. State Valuation Service have certified that theBuilding Price Index is the most appropriate measure for reflecting price changes inthe department's buildings in the years when an independent valuation is notundertaken. Management is of the opinion that the continuing investment in generaland specific priority maintenance would prevent any abnormal deterioration in assetvalues in the period between independent valuations.
30 June 2017 by State Valuation Services
As there is no active market for these assets, fair value was determined using acurrent replacement cost approach. Fair Value Hierarchy Level 3.
Estimating the cost to reproduce the items with features and materials of the originalitems, with substantial adjustments made to take into account the items heritagerestrictions and characteristics.
Approximately one quarter of the department's heritage and cultural assets wereindependently valued. The remaining three quarters were indexed to ensure thatvalues reflect fair value as at reporting date using the Building Price Index provided byGRC Quantity Surveyors. Management of the department has judged that the abovevaluations continue to materially represent fair value as at 30 June 2017.
30 June 2017 by State Valuation Services
All purpose-built facilities are valued at current replacement cost in accordance withthe requirements for special purpose assets contained in accounting standard AASB13 Fair Value Measurement, as there is no active market for these facilities.
State Valuation Services conduct physical inspections and applied construction ratesfrom the State School Costing Manual provided by GRC Quantity Surveyors. FairValue Hierarchy Level 3.
Leased assets were indexed using the indices provided by State Valuation Service asat 30 June 2017.
Page 3S of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
D1 FAIR VALUE MEASUREMENT (continued)
01-3 FAIR VALUE DISCLOSURES FOR FINANCIAL LIABILITIES MEASURED AT AMORTISED COSTThe fair value of trade receivables and payables is assumed to approximate the value of the original transaction, less any allowance forimpairment.
The fair value of borrowings is notified by the Queensland Treasury Corporation. It is calculated using discounted cash flow analysisand the effective interest rate and is disclosed below:
2017 2016Carrying Fair value Carrying Fair valueamount amount
Financial assets and financial liabilities are recognised in the Statement Financial Position when the department becomes party to thecontractual provisions of the financial instrument. The department has the following categories of financial assets and financialliabilities:
Note2017$'000
2016$'000
Financial Assets
Total Cash and cash equivalentsReceivablesTotal Financial Assets
No financial assets and financial liabilities have been offset and presented net in the Statement of FinancialPosition.
Page 36 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
02 FINANCIALRISK DISCLOSURES(continued)
02-2 FINANCIAL RISK MANAGEMENTRisk ExposureFinancial risk management is implemented pursuant to Government policy and seeks to minimise potential adverse effects on thefinancial performance of the department.
The department's activities expose it to a variety of financial risks as set out in the following table:
Risk Exposure Definition ExposureCredit Risk Credit risk exposure refers to the situation where the The maximum exposure to credit risk in respect of
department may incur financial loss as a result of its receivables (Note C2) and the financialanother party to a financial instrument failing to guarantee provided to P&C Association,discharge their obligation. Universities and Grammar Schools (Note 03).
Liquidity Risk Liquidity risk refers to the situation where the The department aims to reduce the exposure todepartment may encounter difficulty in meeting liquidity risk in payables (Note C5) and borrowingobligations associated with financial liabilities that are from Queensland Treasury Corporate (Note C6).settled by delivering cash or another financial asset. The borrowings are based on fixed rate loans.
Market Risk The risk that the fair value or future cash flows of a The department does not trade in foreign currencyfinancial instrument will fluctuate because of changes and is not materially exposed to commodity pricein market prices. Market risk comprises three types changes.of risk: currency risk, interest rate risk and other price The department is exposed to interest rate riskrisk. through its borrowings from Queensland TreasuryInterest rate risk is the risk that the fair value or future Corporation (Note C6) and cash deposited incash flows of a financial instrument will fluctuate interest bearing accounts (Note C1).because of changes in market interest rates.
Risk Measurement and Management Strategies
The department measures risk exposure using a variety of methods as follows:
Risk Exposure Measurement Method Risk Management StrategiesCredit Risk Ageing analysis The department manages credit risk through the use of a credit
management strategy. This strategy aims to reduce the exposure tocredit default by ensuring that the department invests in secure assetsand monitors all funds owed on a timely basis. Exposure to credit riskis monitored on an ongoing basis.
Liquidity Risk Sensitivity analysis The department manages liquidity risk through the use of a liquiditymanagement strategy. This strategy aims to reduce the exposure toliquidity risk by ensuring the department has minimum but sufficientfunds available to meet employee and supplier obligations as they falldue.
This is achieved by ensuring minimal levels of cash are held within thevarious bank accounts so as to match the expected duration of thevarious employee and supplier liabilities.
Market Risk Interest rate sensitivity analysis The department does not undertake any hedging in relation to interestrisk and manages its risk as per the liquidity risk management strategyarticulated in the department's Financial Management PracticesManual.
02-3 MAXIMUM CREDIT RISK EXPOSUREWHERE CARRYING AMOUNTS DO NOT EQUAL CONTRACTUALAMOUNTS
Certain contractual obligations expose the department to credit risk in excess of the carrying amount of any asset or liability recognisedfrom entering the transaction.
The department is exposed to credit risk in respect of the debt guarantee provided to P&C Association; Universities and GrammarSchools. Details of the guarantees and the department's maximum exposure are disclosed in Note 03.
Page37 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
D2 FINANCIAL RISK DISCLOSURES (continued)
02-4 LIQUIDITY RISK - CONTRACTUAL MATURITY OF FINANCIAL LIABILITIES
The following tables sets out the liquidity risk of financial liabilities held by the consolidated entity and the department. It represents thecontractual maturity of financial liabilities, calculated based on undiscounted cash flows relating to the liabilities at reporting date.
D3 CONTINGENCIESLitigation in ProgressAt 30 June 2017, the following caseswere filed in the courts naming the State of Queenslandacting through the Department of Educationand Training as defendant:
Litigation in progressAt 30 June 2016, the follow ing cases were before the Courts:
2017No. of cases
2016No. of cases
District Courtfv1agistrates Court
41
The department's legal advisers and management believe that it is not possible to reliably determine the value of payouts in respect ofthis litigation which, in the majority of instances, represent insurable events in terms of the policy held with the Queensland GovernmentInsurance Fund.
The maximum exposure of the department under this policy is $10 000 for each insurable event.
There are currently 132 (2015-16: 129) cases of general liability and 30 (2015-16: 29) WorkCover common law claims being managed bythe department.
., <.-Page 38 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
03 CONTINGENCIES(continued)
Financial Guarantees and Associated Credit RisksThe department has provided 34 (2015-16: 45) financial guarantees to Parents' and Citizens' Associations, 6 (2015-16: 5) guaranteesto Universities, and 7 (2015-16: 7) guarantees to grammar schools for a variety of loans. These guarantees have been provided over aperiod of time and have various maturity dates.
The department also acts as a guarantor for Aviation Australia Pty Ltd in the event of default loan payments owed to Queensland TreasuryCorporation. The guarantee is limited to $1.157 million (2015-16: $1.457 million), which represents 100%of the outstanding loan balanceas at 30 June 2017. No default loan repayments have been recognised since the inception of the loan agreement, and the department'smanagement does not expect that the guarantee will be called upon in the near future.
The department paid a total of $10.65 million to the Construction Industry Skills Centre Pty Ltd (CISC) between 1994 -1998. The amountis only recoverable in circumstances contingent upon the winding up of CISC and the related trust. The department and the QueenslandTraining Construction Fund (QTCF) (a trust) are equal shareholders ($1 share each) in CISC and founders of the fund.
Key Estimate and Judgement: The Department of Education and Training assesses the fair value of financial guarantees annuallyas at 30 June. It has been determined that the fair value of all financial guarantees is nil as at 30 June as no defaults have beenrecognised since the inception of all guarantees, and the department's management does not expect that the guarantees will be calledupon in the near future. As such, the fair value of the guarantees has not been recognised in the Statement of Financial Position.
Native Title Claims over Departmental LandThere are native title claims which have the potential to impact upon properties of the department, however most departmental propertiesare occupied under a "reserve" tenure, validly created prior to 23 December 1996, and therefore any development undertaken inaccordance with gazetted purposes should minimise the potential of native title claims.
At reporting date it is not possible to make an estimate of any probable outcome of such claims, or any financial effect however it shouldbe noted that native title would not arise as an issue until the property has been declared surplus and attempts are made for the propertyto be sold or transferred. Native title would need to be addressed as part of the disposal process. The department would necessarilyrecognise any cost implications arising from such claims at that time.
Page 39 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
04 COMMITMENTS
Non-cancellable operating lease commitments
Commitments under non-cancellable operating leases at reporting date (inclusive of non-recoverable GST input tax credits) are payableas follows:
2017$'000
2016$'000
Not later than one yearLater than one and not later than five yearsLater than five years
Total non-cancellable operating lease commitments
262448952433113
238659366059679
148881 177204
No leases have escalation clauses except for Moore Park State School lease which was reviewed after 10 years with the repaymentschedule reduced by 10 years. A small number of leases have renewal or purchase options. Where such options exist, they are allexercisable at market prices. No lease arrangements create restrictions on other financing transactions.
Operating leases are entered into as a means of acquiring access to office accommodation and storage facilities. Lease payments aregenerally fixed, but with inflation escalation clauses on which contingent rentals are determined.
No renewal or purchase options exist in relation to operating leases and no operating leases contain restrictions on financing or otherleasing activities.
Capital expenditure commitments
Commitments for capital expenditureat reportingdate (inclusiveof non-recoverableGST input tax credits) are payable as follows:
2017$'000
2016$'000
LandNot later than one year
Total Capital expenditure commitments - Land4848
BuildingsNot later than one yearLater than one and not later than five years
Total Capital expenditure commitments - Buildings
27416037622
1256253186
311782 128811
Grant commitments
Commitments for grants at reporting date are payable as follows:2017$'000
2016$'000
Not later than one yearLater than one and not later than five years
Total Grant com mitments
41105721932
458635130895
432989 589530
Other commitments (Public Private Partnership, Priority Purchasing Program and other)
Commitments for other expenditureat reportingdate (inclusiveof non-recoverableGST input tax credits) are payable as follows:2017 2016$'000 $'000
Not later than one yearLater than one and not later than five yearsLater than five years
Total Other commitm ents
51110153015
1184873
51677152047
12249721388998 1428696
Fixed operating costs for Public Private Partnerships Projects for Southbank Education and Training Precinct - Axiom, South-EastQueensland Schools - Aspire and Queensland Schools - Plenary have been included in the estimates of "Other commitments".
Page 40 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
D5 FUTURE IMPACT OF ACCOUNTING STANDARDS NOT YET EFFECTIVE
At the date of authorisation of the financial report, the expected impacts of new or amended Australian Accounting Standards issued butwith future commencement dates are set out below:
AASB 2016-2 Amendments to Australian Accounting Standards - Disclosure Initiative: Amendments to AASB107
As from the department's financial statements for 2017-18, this standard will require additional disclosures to enable the reader toevaluate changes in liabilities arising from financing activities. These disclosures will include both cash flows and non-cash changesbetween the opening and closing balance of the relevant liabilities and be disclosed by way of a reconciliation in the notes to theStatement of Cash Flows.
AASB 1058 Income of Not-far-Profit Entities and AASB 15 Revenue from Contracts with Customers
These standards will first apply to the department from its financial statements for 2019-20.
The department has commenced analysing the new revenue recognition requirements under these standards and there are unlikely tobe any significant impacts, as the department's main revenue source remains government appropriation. Potential future impactsidentifiable at the date of this report are as follows:
• Grants received to construct a departmental non-financial asset will be recognised as a liability, and subsequentlyprogressively recognised as revenue as the department satisfies its performance obligations under the grant. At present,such grants are recognised as revenue upfront.
Under the new standards, other grants presently recognised as revenue upfront may be eligible to be recognised as revenueprogressively as the associated performance obligations are satisfied, but only if the associated performance obligations areenforceable and sufficiently specific.
• Grants that are not enforceable and/or not sufficiently specific will not qualify for deferral, and continue to be recognised asrevenue as soon as they are controlled. The department receives several grants for which there are no sufficiently specificperformance obligations, so these grants will continue to be recognised as revenue upfront assuming no change to thecurrent grant arrangements.
• Depending on the respective contractual terms, the new requirements of AASB 15may potentially result in a change to thetiming of revenue from sales of the department's goods and services such that some revenue may need to be deferred to alater reporting period to the extent that the department has received cash but has not met its associated obligations (suchamounts would be reported as a liability in the meantime). The department is yet to complete its analysis of existingarrangements for sale of its goods and services, but at this stage does not expect a significant impact on its presentaccounting practices.
• A range of new disclosures will also be required by the new standards in respect of the department's revenue.
AASB 9 Financial Instruments and AASB 2014-7 Amendments to Australian Accounting Standards arising from AASB 9(December 2014)
These standards will first apply to the department from its financial statements for 2018-19. The main impacts of these standards on thedepartment are that they will change the requirements for the classification, measurement, impairment and disclosures associated withthe department's financial assets. AASB 9 will introduce different criteria for whether financial assets can be measured at amortised costor fair value.
The department has commenced reviewing the measurement of its financial assets against the new AASB 9 classification andmeasurement requirements. However, as the classification of financial assets at the date of initial application of the new standard willdepend on the facts and circumstances existing at that date, the department's conclusions will not be confirmed until closer to that time.At this stage, and assuming no change in the types of transactions the department enters into, all of the department's financial assets areexpected to be required to be measured at fair value (instead of the measurement classifications presently used in Note 02-1). In thecase of the department's current receivables, as they are short-term in nature, the carrying amount is expected to be a reasonableapproximation of fair value. Changes in the fair value of those assets will be reflected in the department's operating result.
Queensland Treasury is currently considering mandating this accounting treatment when AASB 9 becomes effective. Another impact ofAASB 9 relates to calculating impairment losses for the department's receivables. Assuming no substantial change in the nature of thedepartment's receivables, as they do not include a significant financing component, impairment losseswill be determined according to theamount of lifetime expected credit losses. On initial adoption of AASB 9, the department will need to determine the expected credit lossesfor its receivables by comparing the credit risk at that time to the credit risk that existed when those receivables were initially recognised.
The department will not need to restate comparative figures for financial instruments on adopting AASB 9 as from 2018-19. However,changed disclosure requirements will apply from that time. A number of one-off disclosures will be required in the 2018-19 financialstatements to explain the impact of adopting AASB 9. Assuming no change in the types of financial instruments that the departmententers into, the most likely ongoing disclosure impacts are expected to relate to the credit risk of financial assets subject to impairment,and investments in unquoted equity instruments measured at fair value through other comprehensive income and de-recognition of theseitems.
Page 41 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
05 FUTURE IMPACT OF ACCOUNTING STANDARDS NOT YET EFFECTIVE (continued)
AASB 16 LeasesThis standard will first apply to the department from its financial statements for 2019-20. When applied, the standard supersedes AASB117 Leases, AASB Interpretation 4 Determining whether an Arrangement contains a Lease, AASB Interpretation 115 Operating Leases- Incentives and AASB Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
Impact for Lessees
Unlike AASB 117 Leases, AASB 16 introduces a single lease accounting model for lessees. Lesseeswill be required to recognise a rightof-use asset (representing rights to use the underlying leased asset) and a liability (representing the obligation to make lease payments)for all leases with a term of more than 12 months, unless the underlying assets are of low value.
In effect, the majority of operating leases (as defined by the current AASB 117) will be reported on the statement of financial positionunder AASB 16. There will be a significant increase in assets and liabilities for agencies that lease assets. The impact on the reportedassets and liabilities would be largely in proportion to the scale of the agency's leasing activities.
The right-of-use asset will be initially recognised at cost, consisting of the initial amount of the associated lease liability, plus any leasepayments made to the lessor at or before the effective date, less any lease incentive received, the initial estimate of restoration costs andany initial direct costs incurred by the lessee. The right-of-use asset will give rise to a depreciation expense.
The lease liability will be initially recognised at an amount equal to the present value of the lease payments during the lease term that arenot yet paid. Current operating lease rental payments will no longer be expensed in the Statement of Comprehensive Income. They willbe apportioned between a reduction in the recognised lease liability and the implicit finance charge (the effective rate of interest) in thelease. The finance cost will also be recognised as an expense.
AASB 16 allows a 'cumulative approach' rather than full retrospective application to recognising existing operating leases. If a lesseechooses to apply the 'cumulative approach', it does not need to restate comparative information. Instead, the cumulative effect of applyingthe standard is recognised as an adjustment to the opening balance of accumulated surplus (or other component of equity, as appropriate)at the date of initial application. The department will await further guidance from Queensland Treasury on the transitional accountingmethod to be applied.
The department has not yet quantified the impact on the Statement of Comprehensive Income or the Statement of Financial Position ofapplying AASB 16 to its current operating leases, including the extent of additional disclosure required.
Impact for Lessors
Lessor accounting under AASB 16 remains largely unchanged from AASB 117. For finance leases, the lessor recognises a receivableequal to the net investment in the lease. Lease receipts from operating leases are recognised as income either on a straight-line basisor another systematic basis where appropriate.
All other Australian Accounting Standards and Interpretations with future commencement dates are either not applicable to thedepartment's activities, or have no material impact on the department.
06 EVENTS AFTER THE BALANCE DATE
No events after the balance date have occurred for the department.
Page 42 0[58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
SECTION 5NOTES ABOUT OUR PERFORMANCE COMPARED TO BUDGET
E1 BUDGETARY REPORTING DISCLOSURES
This section discloses the department's original budgeted figures for 2016-17 compared to actual results, with explanations of majorvariances, in respect of the department's Statement of Comprehensive Income, Statement of Financial Position and Statement of CashFlows.
E1-1 EXPLANATION OF MAJOR VARIANCES - STATEMENT OF COMPREHENSIVE INCOME
User charges and fees: The increase is mainly due to higher fees and charges received directly by schools ($22 million) andhigher international education revenues ($2 million).
Other Revenue: The increase is mainly due to higher than budgeted insurance recoveries from the QueenslandGovernment Insurance Fund ($23 million).
Grants and The majority of the increase is due to Natural Disaster recovery reimbursements ($5 million) and thecontributions: higher contributions received directly by schools ($2 million).
Supplies and services: Lower than budget mainly due to reclassification of training subsidies as grant payments ($661 million);deferral of funding for Australian Government National Partnership programs including Skills Reform($8 million) and Training Queensland ($7 million); offset by higher levels of operating expenseassociated with the larger capital works program ($57 million).
Grants and subsidies: Increase mainly due to reclassification of training subsidies as grant payments ($661 million), partiallyoffset by deferral of funding for Australian Government National Partnership programs including SkillsReform ($76 million) and Early Childhood ($34 million); and due to timing of other Early Childhoodprogram claims ($12 million), and for Senior Assessment and Tertiary Entrance system ($8 million).
Increase in Asset Increase is mainly due to higher asset revaluation outcomes including for building indexation (+ 4.3%)revaluation surplus: instead of the budgeted 2.5% increase.
E1-2 EXPLANATION OF MAJOR VARIANCES - STATEMENT OF FINANCIAL POSITION
Cash and cashequivalents:
Part of the variance for Cash and cash equivalents ($78 million) is attributable to a higher actualopening balance, compared to what was estimated in the budget. The remainder of the variance issubstantially due to factors outlined in the explanations of major variances in the Statement ofCashflows.
The increase is mainly due to higher asset revaluation outcomes ($475 million) including the buildingindexation (+ 4.3%) instead of the budgeted 2.5% increase, and the increased capital works for theAdvancing Queensland Schools and the Significant Infrastructure Projects programs.
Increase is mainly due to the increase in capital works program.
Property, plant andequipment:
Payables:
Page 43 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
E1 BUDGETARY REPORTING DISCLOSURES (continued)
User charges and fees:
E1-3 EXPLANATION OF MAJOR VARIANCES - STATEMENT OF CASH FLOWS
Grants andcontributions:
Supplies and Services:
Grants and subsidies:
Payments for Property,plant and equipment:
Borrowings and financeleases:
Equity injections:
Mainly due to higher fees and charge received directly by schools ($22 million) and higher internationaleducation revenues ($2 million).
Mainly due to Natural Disaster recovery reimbursements ($5 million) and higher contributions receiveddirectly by schools ($2 million).
Lower than budget mainly due to reclassification of training subsidies as grant payments ($661million); deferral of funding for Australian Government National Partnership programs including SkillsReform ($8 million) and Training Queensland ($7 million); offset by higher levels of operating expenseassociated with the larger capital works program ($57 million).
Increase is mainly due to reclassification of training subsidies as grant payments ($661 million),partially offset by deferral of funding for Australian Government National Partnership programsincluding Skills Reform ($76 million) and Early Childhood ($34 million); and due to timing of other EarlyChildhood program claims ($12 million), and for Senior Assessment and Tertiary Entrance system ($8million).
Increase is mainly due to additional funding for the Advancing Queensland Schools and the SignificantInfrastructure Projects programs.
The Increase is due to the delivery of additional stages under the Queensland Schools - PlenaryPublic Private Partnership.
Increase is mainly due to additional equity funding for the Advancing Queensland Schools and theSignificant Infrastructure Projects program.
Page44 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
SECTION 6WHAT WE LOOK AFTER ON BEHALF OF WHOLE-OF-GOVERNMENT AND THIRD PARTIES
F1 ADMINISTERED ACTIVITIES
The department administers, but does not control, certain activities on behalf of the Government. In doing so, it has responsibility foradministering those activities (and related transactions and balances) efficiently and effectively, but does not have the discretion todeploy those resources for the achievement of the department's own objectives.
Accounting policies applicable to administered items are consistent with the equivalent policies for controlled items, unless statedotherwise.
F1-1 SCHEDULEOFADMINISTEREDINCOMEAND EXPENDITURE
2017$'000
2016$'000
Administered Income
Grants and contributionsRecurrent
Specific purpose - Commonwealth 2393462 2239642
Appropriation revenue *Total Administered Income
3242284 30911975635746 5330839
Adm inistered expenses
Grants and subsidiesRecurrent
Commonwealth GovernmentCommonwealth recurrent
State GovernmentGrants and allowances to external organisationsTextbook allowancesGrants to statutory bodies (curriculum, tertiary and training)
CapitalState Government
Non-state and other external organisations
2393462 2239642
664270 63858258341 5692433572 33389
92638 1226603242283 3091 197
2393462 22396425635745 5330839
1
Transfers of Adrrinistered Income to Government **Total Administered Expenses
Operating Surplus/(Deficit)
* This appropriation revenue is provided in cash via Queensland Treasury and funds activities/ expenses that the departmentadministers on behalf of the Government.
** The department periodically transfers to Queensland Government the amount of all cash collected in the respect of administeredrevenue itemised under "Administered Income" (excluding appropriation revenue).
Page 45 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended30 June 2017
F1 ADMINISTERED ACTIVITIES (continued)F1-2 RECONCILIATION OF PAYMENTS FROM CONSOLIDATED FUND TO ADMINISTERED INCOME
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
F1 ADMINISTEREDACTIVITIES(continued)F1-4 ADMINISTERED ACTIVITIES - BUDGET TO ACTUAL COMPARISON AND VARIANCE ANALYSIS
This note comparesthe originalpublishedbudgetedfigures for 2016-17to actual results in respectof the department'smajor classesofadministeredincome,expenses,assetsand liabilities. An explanationof major variancesis also included.
OriginalBudget Actual Variance2017 2017 $'000 %$'000 $'000
Notes Explaining Major Variances for Administered Activities
There are no materialvariancewithinAdministeredactivitiesfor the financial year 2016-17.
Page 47 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
F2 MONIES HELD IN TRUST
The department acts as trustee for and manages one trust established by benefactors to encourage Queensland students to learnJapanese as a second language and recognise their achievements in acquiring this valuable skill.
As the department performs only a custodial role in respect of these transactions and balances, they are not recognised in the financialstatements but are disclosed in these notes for the information of users.
No fees are received by the department for providing trustee services for these funds.
2017$'000
2016$'000
Trust Account - Educational bequestsTotal
251 245251 245
There are no audit fees payable by the department for these trust transactions.
Page 48 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
SECTION 7OTHER INFORMATION
G1 KEY MANAGEMENT PERSONNEL REMUNERATION
Details of Key Management Personnel
As from 2016-17, the department's responsible Ministers are identified as part of the department's KMP, consistent with additionalguidance included in the revised version of AASB 124 Related Party Disclosures. The Ministers are:
• The Honourable Kate Jones MP, Minister for Education and Minister for Tourism, Major Events and the Commonwealth Games• The Honourable Yvette d'Ath MPAttorney-General and Minister for Justice and Minister for Training and Skills
The following details for key management personnel includes those position that had authority and responsibility for planning, directingand controlling the activities of the department during 2016-17 and 2015-16. Further information on these positions can be found in thebody of the Annual Report under the section relating to Executive Management.
Position Position Responsibility
Director-General Strengthening education by boosting participation and quality in early childhood, improving theperformance of schools and delivering a more responsive vocational education and employmentsector.
Deputy Director-General, Strategic leadership for the department's corporate procurement, finance, human resources,Corporate Services information technologies, and infrastructure services functions.
Deputy Director-General, Strategic leadership in the development and implementation of the innovation policy, funding andEarly Childhood and regulatory frameworks that shape the vibrant early childhood education and care sector in Queensland.Community Engagement
Deputy Director-General, Strategic approach to the portfolio's policy development across early childhood, schooling, tertiaryPolicy, Performance and education, training and employment, and Aboriginal and Torres Strait Islander education, at a whole ofPlanning government and national level.
Deputy Director-General, Leadership in the development and implementation of innovative and effective education models andState Schools policies for Queensland State Schools.
Deputy Director-General, Strategic oversight to the department's training and skills functions including overseeing government'sTraining and Skills investment in training, ensuring a quality vocational educational and training sector with informed
consumers.
Assistant Director- Strategic financial advice to the department's Executive and overall leadership of the department'sGeneral, Finance and finance functions. He also has responsibilities under section 77 of the Financial Accountability Act 2009Chief Finance Officer (Qld).
Regional Director Leadership in providing direction to the operations of the department at the regional level across all(rotating representative) service streams, ensuring delivery of planned outcomes in line with departmental vision, values and
strategic direction.
Key Management Personnel Remuneration PoliciesMinisterial remuneration entitlements are outlined in the Legislative Assembly of Queensland's Members' Remuneration Handbook. Thedepartment does not bear any cost of remuneration of Ministers. The majority of Ministerial entitlements are paid by the LegislativeAssembly, with the remaining entitlements being provided by Ministerial Services Branch within the Department of the Premier andCabinet. As all Ministers are reported as KMP of the Queensland Government, aggregate remuneration expenses for all Ministers isdisclosed in the Queensland General Government and Whole of Government Consolidated Financial Statements as from 2016-17, whichare published as part of Queensland Treasury's Report on State Finances.
Remuneration policy for the department's other key management personnel is set by the Queensland Public Service Commission asprovided for under the Public Service Act 2008. Individual remuneration and other terms of employment (including motor vehicleentitlements and performance payments if applicable) are specified in employment contracts.
Page 49 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
Remuneration expenses for those key management personnel comprise the following components:
Short term emplovee expenses which include:• salaries, allowances and leave entitlements earned and expensed for the entire year or for that part of the year during which
the employee occupied the specified position (including any higher duties or allowances earned during that time); and• non-monetary benefits - consisting of provision of vehicle and car parking together with fringe benefits tax applicable to the
benefit.
Long term emplovee expenses include amounts expensed in respect of long service leave entitlements earned.
Post-emplovment expenses include amounts expensed in respect of employer superannuation obligations.
Termination benefits are not provided for within individual contracts of employment. Contracts of employment provide only for noticeperiods or payment in lieu of notice on termination, regardless of the reason for termination.
Key Management Personnel Remuneration ExpensesThe following disclosures focus on the expenses incurred by the department attributable to non-Ministerial key management personnelduring the respective reporting periods. The amounts disclosed are determined on the same basis as expenses recognised in theStatement of Comprehensive Income.
2016-17
Short Term Employee Long Term Post- Termination TotalExpenses Employee Employment Benefits Expenses
Expenses ExpensesPosition
(date resigned if applicable)Monetary Non-Expenses Monetary
Performance PaymentsKey Management Personnel do not receive performance or bonus payments.
Page 51 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
G2 RELATED PARTY TRANSACTIONS
Transactions with people/ entities related to KMP
The department has no related party transactions during 2016-17 with people and entities related to Key Management Personnel.
Transactions with other Queensland Government-controlled entities
The department's primary ongoing sources of funding from Government for its services are appropriation revenue and equity injections,both of which are provided in cash via Queensland Treasury.
The department has a borrowing from Queensland Treasury Corporation (QTC), and Note C6 outlines the key terms and conditions ofthose borrowings.
Note A3 outlines a transfer of assets to TAFE Queensland arising from a machinery-of-Government change during 2016-17.
Approximately 40% of all grants provided by the department were paid to other State government entities.
Page 52 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
G3 SERVICE CONCESSION ARRANGEMENTS
G3-1 Accounting PoliciesThe current accounting treatment applied to these arrangements is based upon the requirements of AASB 117 Leases. There iscurrently no Australian Accounting Standard that specifically addresses the accounting treatment to be adopted by grantors for capitalcosts incurred under a public private partnership arrangement. Additional disclosures are included for each individual arrangement inaccordance with AASB Interpretation 129 Service Concession Arrangements: Disclosures and Queensland Treasury's financialreporting requirements under FRR 50 - Service ConcessionArrangements.
G3-2 Private Provision of Public Infrastructure Agreements
The following three PPP's within the table below are social infrastructure arrangements whereby the department pays for the third partyuse of the infrastructure asset through regular service payments to respective partners over the life of contract.
The land on which the facility/schools are constructed is owned and recognised as an asset by the department.
Fair value of the buildings is recognised as finance lease assets, with the corresponding recognition for future payments as a financelease liability. The leased assets will be depreciated over the economic useful life and the lease liability will be reduced as payment forthe buildings are made. The monthly service payments are split between the capital component to affect the systematic write down ofthe liability over the term of the lease, and the financing component which will be recognised as an expense when incurred. Othercomponents such as facilities management, maintenance, and insurance will be expensed when incurred.
At expiry of each PPP's agreement period, buildings will revert to the State for nil consideration.
PPP (a) Southbank Education and (b) South-East Queensland (c) Queensland Schools-Arrangement Training Precinct (SETP) - Axiom Schools - Aspire - Public Private Plenary - Public Private
- Public Private Partnership Partnership PartnershipEntered Into April 2005 April 2009 17 December 2013ContractPartner Axiom Education Queensland pty Aspire Schools Pty Ltd Plenary Schools Pty Ltd
Agreement 34 years 30 years 30 yearsPeriodFinancing Finance during the design and Finance during the design and Finance is provided by Investec,
construction phases was provided construction phases was provided National Australia Bank, Plenaryby JEM (Southbank) Pty Ltd. by Commonwealth Investments Pty Group, and the State of
Ltd, Bank of Tokyo-Mitsubishi, and Queensland.the National Australia Bank.
The Department pays a series ofQueensland Treasury Corporation co-contributions during thewill provide the remaining 70% of construction phase of the projectthe project's financial requirements towards the construction costsduring the operating phase from totalling $190M.January 2010 to December 2039.
The timing of capital contributionpayments over the StageAvailability Date (SAD)determines the accountingtreatment at recognition of eachstage.
Leasing Head Lease and Sublease with Head Lease, Sublease, and Interim Given the staged constructionArrangement Axiom - the Department will pay Lease with Aspire - the Department schedule, the lease asset and
abatable and undissected service will pay abatable and undissected lease liability is calculatedpayments to Axiom for the service payments to Aspire for the separately for each stage ofoperation, maintenance, and operation, maintenance, and each school, and recognised onprovision of the precinct. Axiom is provision of the schools. Axiom is the respective SAD.granted the right to enter and granted the right to enter andoperate on the site, and is required operate on the site, and is required Plenary is granted the right toto maintain the facilities to a high to maintain the facilities to a high enter, construct, and operate onstandard. standard. the site.
Page S3 0[58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
G3 SERVICE CONCESSION ARRANGEMENTS (continued)G3-2 Private Provision of Public Infrastructure Agreements (continued)
PPP (a) Southbank Education and (b) South-East Queensland (c) Queensland Schools-Arrangement Training Precinct (SETP) - Axiom Schools - Aspire - Public Private Plenary - Public Private
- Public Private Partnership Partnership PartnershipConstruction July 2005 May 2009 January 2014Commencement
Construction 31 October 2008 January 2014 Ongoing; construction is over a 5Completed year period in 3 stages.
At 30 June 2017, Stage 1A and1B of 9 schools and Stage 2 of 2Schools have been completed.
Variable Costs No variable costs for the life of the Variable costs change according to Variable costs change accordingcontract. the number of module units in use at to the number of module units in
the individual sites, utilities, car use at the individual sites,parking agreements, and other utilities, car parking agreements,service payments adjustments. and other service payments
adjustments.
Other In September 2011, the department Inflows for the PPP relate to Nilentered into a lease arrangement cleaning, grounds maintenance, andwith TAFE Queensland leasing the janitorial services. Aspire isSETP to the Institute until 28 June required to use staff provided by the2039. State.
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
G3 SERVICE CONCESSION ARRANGEMENTS (continued)G3-3 Private Provision of Public Infrastructure - Cash Flows (continued)
Disclosure about Service Concession Arrangement Cash Flows
Fixed costs are based on risk free rate of 2.41 per cent (2015-16: 2.12 per cent).
Variable costs include Lifecycle Costs; Utility Payments and Module Units:
• Southbank Education and Training Precinct PPP have no variable costs associated with the contractual agreement.• South East Queensland Schools PPP has a range of variable costs.• Queensland Schools PPP has a range of variable costs.
The estimated cash flows for Queensland Schools PPP do not include the government contribution of $190 million during theconstruction stage.
G3-4 Risks during the Concession PeriodDuring the concession period, the department will carry the following risks and rewards, which include:
Risks Impact to the department
Site risks
Performancedesign, construction and commissioningrisks (performancespecificationadequatelydescribing the department's requirementsandchanges to performancespecifications)
Axiom and Plenaryhave accepted site risk including existing structureswiththe exceptionof non-identifiedpre-existingcontamination. Where nonidentifiedpre-existingcontamination is discovered investigationandremediationcosts will be shared on an equal basis between PPPI party andthe State.Aspire has the sites in their current state and condition.This includesresponsibilityfor the pre-existingcontamination, native title applicationsandartefacts. The State has however undertakento procure remediationrelating to two sites in accordancewith acquisition/developmentagreements entered into by the State for the acquisition of those sites.
The department has defined its performancespecifications. Thedepartment is exposed to the risk that these performance specificationsfailto meet current or future requirements, however processes are in place tomonitor performanceand identify any issues as early as possible tominimise exposure.
Operating/maintenancerisks (network and interfaceand changes to performancespecification)
The department has specified the level of operating and maintenanceperformancewhich is linked to an abatement regime and key performanceindicators. The department is exposed to the risk thatoperating/maintenanceperformancespecificationsfail to meet current orfuture requirements, however processeswill be instituted to monitorperformanceand identify any issues as early as possible to minimiseexposure.
Sponsor and financial risks The department bears the risks associated to interest, CPI and marketrateswith Aspire and Plenary. In regards to Axiom the department hasentered into a fixed contract, subject to CPI and market rates. Thedepartment is exposed to the risk that the Consortium fails to complywiththe requirementsof the Deed and/or fails to be a going concern. In thisevent the department is exposed to the risk of replacing the consortiumwithsuitable operators to continue providing infrastructurefinancing, capital,maintenanceand operating requirements. The department has monitoringprocesses in place to identify any issues as early as possible to minimiseexposure.
Early termination Should the departmentwish to terminate the Deed, it is expected that thedepartmentwould be required to pay Consortiums compensation; howeverany compensation payable would be a key variable in the considerationofany decision to terminate the contracts prior to their planned completion.
Page 56 of 58
Department of Education and Training and Controlled EntitiesNotes to the Financial Statements
for the year ended 30 June 2017
G3 SERVICE CONCESSION ARRANGEMENTS (continued)G3-4 Risks during the Concession Period (continued)
Risks Impact to the department
Market value risk At the end of the concessionperiod the facilitieswill be handed back to thedepartment at no additional cost. The departmentwill receive the benefit ofthe receipt of the fair value of the infrastructureand any associated assets.
Rehabilitation risk At the end of the concession period the departmentwill be responsibleforthe removal of any future contaminationof the sites and other ancillary landand will also be responsiblefor the future removalof infrastructureand anysite rehabilitation. On-goingmonitoring of the sites is within thedepartment's plans for managing the contract to ensure that anyrehabilitationrequirementsare promptly identifiedand costs are minimised.
G4 FIRST YEAR APPLICATION OF NEW ACCOUNTING STANDARDS OR CHANGE INPOLICY
Changes in Accounting Policy
The department did not voluntarily change any of its accounting policies during 2016-17.
Accounting Standards Early Adopted for 2016-17
No Australian Accounting Standards have been early adopted for 2016-17.
Accounting Standards Applied for the First Time
The only Australian Accounting Standard that became effective for the first time in 2016-17 is AASB 124 Related Party Disclosures.This standard requires note disclosures about relationships between a parent entity and its controlled entities, key managementpersonnel (KMP) remuneration expenses and other related party transactions, and does not impact on financial statement line items.
As Queensland Treasury already required disclosure of KMP remuneration expenses, AASB 124 itself had minimal impact on thedepartment's KMP disclosures compared to 2015-16 (refer to Note G1). However, the standard has resulted in the department'sresponsible Minister being identified as part of the department's KMP as from 2016-17. Material related party transactions for 2016-17are disclosed in Note G2. No comparative information about related party transactions is required in respect of 2015-16. Therelationship between the department and its controlled entities is already outlined in Note A4.
G5 TAXATION
The department is a State body as defined under the Income Tax Assessment Act 1936 and is exempt from all forms of Commonwealthtaxation with the exception of Fringe Benefits Tax (FBT), and Goods and Services Tax (GST). FBT and GST are the only taxesaccounted for by the department. GST credits receivable from, and GST payable to the Australian Taxation Office are recognised andaccrued (refer to Note C2).
Page57 of 58
Department of Education and Training and Controlled EntitiesManagement Certificatefor the year ended 30 June 2017
These general purpose financial statements have been prepared pursuant to section 62(1) of the Financial Accountability Act 2009 (theAct), section 42 the Financial and Performance Management Standard 2009 and other prescribed requirements. In accordance withsection 62(1)(b) of the Act we certify that in our opinion:
(a) the prescribed requirements for establishing and keeping the accounts have been complied with in all material respects; and
(b) the statements have been drawn up to present a true and fair view, in accordance with the prescribed accounting standards,of the transactions of the Department of Education and Training for the financial year ended 30 June 2017, and of the financialposition of the department at the end of that year; and
(c) these assertions are based on an appropriate system of internal controls and risk management processes being effective, inall material respects, with respect to financial reporting throughout the reporting period.
im Watterstonir ctor-General
Department of Education and Training
Adam Black FCPA CAAssistant Director-General, FinanceChief Finance OfficerDepartment of Education and Training
Date: Date:JLf 115 J "1 -
Page 58 of 58
INDEPENDENT AUDITOR'S REPORT
To the Accountable Officer of the Department of Education and Training
Report on the audit of the financial report
Opinion
I have audited the accompanying financial report of the Department of Education andTraining.
In my opinion, the financial report:
a) gives a true and fair view of the department's financial position as at 30 June 2017, andits financial performance and cash flows for the year then ended
b) complies with the Financial Accountability Act 2009, the Financial and PerformanceManagement Standard 2009 and Australian Accounting Standards.
The financial report comprises the statement of financial position and statement of assetsand liabilities by major departmental service as at 30 June 2017, the statement ofcomprehensive income, statement of changes in equity, statement of cash flows andstatement of comprehensive income by major departmental service for the year then ended,notes to the financial statements including summaries of significant accounting policies andother explanatory information, and the management certificate.
Basis for opinion
I conducted my audit in accordance with the Auditor-General of Queensland AuditingStandards, which incorporate the Australian Auditing Standards. My responsibilities underthose standards are further described in the Auditor's Responsibilities for the Audit of theFinancial Report section of my report.
I am independent of the department in accordance with the ethical requirements of theAccounting Professional and Ethical Standards Board's APES 110 Code of Ethics forProfessional Accountants (the Code) that are relevant to my audit of the financial report inAustralia. I have also fulfilled my other ethical responsibilities in accordance with the Codeand the Auditor-General of Queensland Auditing Standards.
I believe that the audit evidence I have obtained is sufficient and appropriate to provide abasis for my opinion.
Key audit matter
A key audit matter is that, in my professional judgement, is of mostsignificance in my audit ofthe financial report of the current period. This matter was addressed in the context of theaudit of the financial report as whole, and in forming the auditor's opinion thereon, and I donot provide a separate opinion on this matter.
Valuation of Buildings and Leased assets ($12.9 billion as at 30 June 2017)
Refer to note C3 and 01 in the financial report
Key audit matter How my audit addressed the key audit matter
Department of Education and Training specialisedbuildings were measured at fair value at balance dateusing the current replacement cost method. Thesebuildings are reported as Buildings and LeasedAssets in the financial statements.The Department performed a comprehensiverevaluation of approximately one quarter of itsbuildings and leased assets using a independentvaluer with remaining assets being revalued usingindexation. It is the Department's policy to conductrevaluations on this basis annually.The current replacement cost method comprises:
For comprehensively revalued buildings, theDepartment of Education and Training applied unitrates provided by the independent valuer to derivegross replacement cost. These unit rates requiresignificant judgement in relation to:
identifying the components of buildings withseparately identifiable replacement costsspecifying the unit rate categories based onbuilding and component types with similarcharacteristicselapsed utility estimatesassessing the current replacement cost for eachunit rate category having consideration for morecontemporary design/ construction approaches.
For Buildings and Leased assets not comprehensivelyrevalued, significant judgement was required toestimate the change in gross replacement cost fromthe prior year.• The significant jUdQementsrequired for gross
replacement cost and useful lives are alsosignificant for calculating annual depreciationexpense.
Our procedures for Building and Leased Assetscomprehensively revalued included, but were notlimited to:
• Assessing the adequacy of management's reviewof the valuation process.Obtaining an understanding of the methodologyused and assessing its design, integrity andappropriateness with reference to commonindustry practice.
• Assessing the competence, capability andobjectivity of the experts used by the Department.On a sample basis, evaluating the relevance,completeness and accuracy of source data usedto derive the unit cost rates including:
modern substitute (including locality factorsand oncosts)adjustment for obsolescence.
For Buildings and Leased assets indexed, ourprocedures, included, but were not limited to:
Evaluating the relevance and appropriateness ofthe indices used for changes in Building PriceIndex inputs by comparing to other relevantexternal indices.Reviewing the appropriate application of theseindices to the remaining three quarter of theportfolio.
Buildings and Leased assets useful life estimateswere evaluated for reasonableness by:
Reviewing management's annual assessment ofuseful lives.Ensuring that no component still in use hasreached or exceeded its useful life.
•
• Reviewing formal asset management plans, andenquiring of management about whether theseplans remain current.Reviewing for consistency between conditionassessment and percentage of depreciation.Where changes in useful lives were identified,evaluating whether the effective dates of thechanges applied for depreciation expense weresupported by appropriate evidence.Ensuring that management has updatedaccumulated depreciation this year for changesin remaining useful lives identified.
Responsibilities of the department for the financial report
The Accountable Officer is responsible for the preparation of the financial report that gives atrue and fair view in accordance with the Financial Accountability Act 2009, the Financial andPerformance Management Standard 2009 and Australian Accounting Standards, and forsuch internal control as the Accountable Officer determines is necessary to enable thepreparation of the financial report that is free from material misstatement, whether due tofraud or error.
The Accountable Officer is also responsible for assessing the department's ability to continueas a going concern, disclosing, as applicable, matters relating to going concern and using thegoing concern basis of accounting unless it is intended to abolish the department or tootherwise cease operations.
Auditor's responsibilities for the audit of the financial report
My objectives are to obtain reasonable assurance about whether the financial report as awhole is free from material misstatement, whether due to fraud or error, and to issue anauditor's report that includes my opinion. Reasonable assurance is a high level of assurance,but is not a guarantee that an audit conducted in accordance with the Australian AuditingStandards will always detect a material misstatement when it exists. Misstatements can arisefrom fraud or error and are considered material if, individually or in aggregate, they couldreasonably be expected to influence the economic decisions of users taken on the basis ofthis financial report.
As part of an audit in accordance with the Australian Auditing Standards, I exerciseprofessional judgement and maintain professional scepticism throughout the audit. I also:
• Identify and assess the risks of material misstatement of the financial report, whetherdue to fraud or error, design and perform audit procedures responsive to those risks,and obtain audit evidence that is sufficient and appropriate to provide a basis for myopinion. The risk of not detecting a material misstatement resulting from fraud is higherthan for one resulting from error, as fraud may involve collusion, forgery, intentionalomissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for expressing an opinionon the effectiveness of the department's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the department.
• Conclude on the appropriateness of the department's use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertaintyexists related to events or conditions that may cast significant doubt on thedepartment's ability to continue as a going concern. If I conclude that a materialuncertainty exists, I am required to draw attention in my auditor's report to the relateddisclosures in the financial report or, if such disclosures are inadequate, to modify myopinion. I base my conclusions on the audit evidence obtained up to the date of myauditor's report. However, future events or conditions may cause the department tocease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial report, includingthe disclosures, and whether the financial report represents the underlying transactionsand events in a manner that achieves fair presentation.
I communicate with the Accountable Officer regarding, among other matters, the plannedscope and timing of the audit and significant audit findings, including any significantdeficiencies in internal control that I identify during my audit.
From the matters communicated with the Accountable Officer, I determine those matters thatwere of most significance in the audit of the financial report of the current period and aretherefore the key audit matters. I describe these matters in my auditor's report unless law orregulation precludes public disclosure about the matter or when, in extremely rare
. circumstances, I determine that a matter should not be communicated in my report becausethe adverse consequences of doing so would reasonably be expected to outweigh the publicinterest benefits of such communication.
In accordance with s.40 of the Auditor-General Act 2009, for the year ended 30 June 2017:
a) I received all the information and explanations I required.
b) In my opinion, the prescribed requirements in relation to the establishment and keepingof accounts were complied with in all material respects.
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