Financial Report for the State of Victoria 2009-10

Financial Report

for the State of Victoria 2009-10

Presented by

John Lenders MP Treasurer of the State of Victoria

and

Tim Holding MP Minister for Finance, WorkCover

and the Transport Accident Commission

for the information of Honourable Members

_______________________

Ordered to be printed _______________________

September 2010

No. 374, Session 2006-10

TABLE OF CONTENTS

Overview.................................................................................................................................1 Chapter 1 – Financial objectives and economic conditions ................................................5

Economic conditions and outcomes .................................................................................10 Chapter 2 – General government sector outcome .............................................................13

Financial performance .......................................................................................................13 Measures of financial performance....................................................................................20 Financial position ................................................................................................................21 Net debt and net financial liabilities....................................................................................22 Cash flows ..........................................................................................................................24

Chapter 3 – State of Victoria outcome ................................................................................27 Financial performance .......................................................................................................28 Financial position ................................................................................................................30 Cash flows ..........................................................................................................................32 Net debt and net financial liabilities (non-financial public sector).......................................33

Chapter 4 – Annual Financial Report...................................................................................37 Report of the Auditor-General .............................................................................................38 Certification by the Department of Treasury and Finance...................................................40 Notes to the financial statements .......................................................................................45

Chapter 5 – Supplementary Uniform Presentation Framework tables ...............................213 The accrual GFS presentation...........................................................................................213 General accepted accounting principles/government finance statistics harmonisation..213 Victoria’s 2009-10 Loan Council Allocation .......................................................................220

Appendix A – General government sector quarterly financial report................................223 Appendix B – Financial Management Act 1994 – Compliance index ..............................227 Appendix C – Scope and style conventions ......................................................................231

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OVERVIEW

The 2009-10 Budget delivered the Government’s response to the challenges posed by the global financial crisis. The response focused on building core services, creating a skilled workforce and a record level of infrastructure investment to support jobs, while maintaining the State’s strong fiscal position. The key focus of these activities was to ensure Victoria was best placed to take advantage of economic recovery.

The 2009-10 Financial Report for the State of Victoria presents the consolidated financial outcomes for the State of Victoria, together with the general government sector, the public non-financial corporation (PNFC) sector and the public financial corporation (PFC) sector.

This report demonstrates the Government’s continued achievement of its key financial objectives. By improving service delivery to all Victorians, delivering world-class infrastructure to maximise economic, social and environmental benefits, maintaining net debt at prudent levels and delivering an operating surplus of at least $100 million, Victoria has protected its strong economy and maintained its AAA credit rating.

The Victorian economy The Government has successfully guided Victoria through a challenging 2009-10 financial year. The Australian and Victorian economies have been more resilient than many other advanced economies in mitigating the impacts of recent global financial and economic turmoil. This strength has been underpinned by a number of factors:

• at a State level, undertaking the largest infrastructure program in Victoria’s history, in partnership with the Commonwealth Government, sound fiscal management, a reduction in the regulatory burden on business, no increases in tax rates, and an active economic reform program;

• at the national level, supportive monetary policy settings, the Commonwealth’s temporary fiscal stimulus, a healthy banking system and the relative strength of our major trading partners in Asia;

• strong population growth, which has stimulated consumer spending and investment, particularly in housing;

• Victoria’s employment growth has been the strongest of all the states over the 12 months to June 2010, with over 100 000 new jobs created. Strong employment growth has supported business and consumer confidence; and

• housing construction activity is at near record levels due to low interest rates and first home buyer assistance. Dwelling approvals in Victoria far outstripped those in other states.

The Government framed the 2009-10 Budget against a background of global economic instability. Victoria was predicted to continue to grow because of its sound economic fundamentals and a diverse, flexible economy. Growth is now likely to be higher than initially expected, with Victoria’s gross state product (GSP) estimated to have grown by 2.25 per cent in 2009-10. However, risks to Victoria’s growth remain due to the continued strength of the Australian dollar and financial constraints on private business investment.

Financial Report 2009-10 Overview 1

General government sector outcome The Government remains committed to achieving its short and long-term operating surplus targets and has achieved a strong operating position despite the impact of the global recession. Sustainable finances have been delivered through firm management of underlying expenditure and a tight rein on borrowings, consistent with maintaining Victoria’s AAA credit rating. This approach has supported business and consumer confidence and driven jobs growth.

In the 2009-10 financial year, the general government sector achieved a net result from transactions of $644 million, compared with the revised estimate of $395 million. This result can be largely attributed to an increase in income, mainly relating to increased Commonwealth grants, partially offset by a reduction in revenue from sales of goods and services.

On the expenditure side, the Government continues to focus on improving the health and wellbeing of all Victorians. In 2009-10, the general government sector invested in major health care initiatives including improved service delivery with 1.46 million admissions to public hospitals, approximately 36 000 more than in 2008-09. Victoria’s crime rate is currently the lowest since computerised crime recording began in 1993, and public safety was further improved by providing a stronger and more accessible police force, with the Government meeting its target of 350 additional police officers earlier than anticipated. A secure water supply remained a priority, with a number of major water projects undertaken, including the completion of the Wimmera-Mallee Pipeline, six years ahead of schedule.

In 2009-10, $738 million was spent on responding to and preparing for the 2009-10 fire season. This included additional funding following the 2009 bushfires to assist in the support and recovery for bushfire affected individuals and communities, as well as core funding for fire management and emergency management agencies.

The general government sector maintained its strong balance sheet, with net assets increasing to $117.6 billion at 30 June 2010, an increase of $882 million over the financial year.

As at 30 June 2010, net financial liabilities for the general government sector were $37.5 billion (or 11.9 per cent of GSP). Net financial liabilities increased by $5.1 billion over the financial year, reflecting an increase in borrowings to fund Victoria’s substantial infrastructure program and the accounting impacts of a decrease in the discount rate used to value the superannuation liability. The increase in borrowing also resulted in the value of net debt for the general government sector increasing by $2.7 billion over the financial year to $8.0 billion (or 2.5 per cent of GSP).

2 Overview Financial Report 2009-10

General government sector net financial liabilities

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Other l iabi l i ties (net) (LHS)Superannuation l i abi l i ty (LHS)Net debt (LHS)Net financia l l iabi l i ties to GSP (%) (RHS)Net debt plus superannuation l iabi l i ty to GSP (%) (RHS)

Source: Department of Treasury and Finance

In 2009-10, the Government undertook the largest infrastructure program in Victoria’s history. Investment spending for the general government sector was a record $5.7 billion, bringing general government investment since 2000-01 to almost $30 billion. The Government focused on investment in key infrastructure projects, including continuing the Victorian Schools Plan, working with the Commonwealth Government to deliver the Building the Education Revolution and improving and expanding social housing under the Nation Building – Economic Stimulus Plan, and increasing capacity and services in the transport network by delivering the initial stages of the Victorian Transport Plan.

Financial Report 2009-10 Overview 3

General government net infrastructure investment

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State of Victoria outcome The State of Victoria’s net result from transactions includes the general government sector, the PNFC sector, which includes various water, rail and port authorities, and the PFC sector, which includes government-owned finance and insurance bodies. The State’s net result from transactions for 2009-10 was a surplus of $595 million.

This result was influenced by the strong performance of the general government and PNFC sectors, partly offset by the PFC sector. The PNFC sector achieved a surplus net result from transactions of $395 million largely driven by strong growth in grants revenue. The PFC sector recorded an improved negative result of $114 million in 2009-10, driven by general revenue growth in the sector exceeding increases in a range of operating costs.

The net asset position in the State balance sheet rose by $1.4 billion over 2009-10 to $119.4 billion. This result was largely driven by a revaluation of the State’s fiscal asset base and backed by strong infrastructure investment in both the general government sector and the PNFC sector. The $4.1 billion net infrastructure spend in the PNFC sector reflects the Government’s significant investment in the water and transport sectors. An increase in transport sector assets resulting from fair value revaluations also pushed PNFC sector net assets higher. This was partially offset by a decline in PFC sector net assets, driven by the negative impact of a decrease in the discount rates used to value the sector’s financial liabilities.

4 Overview Financial Report 2009-10

CHAPTER 1 – FINANCIAL OBJECTIVES AND ECONOMIC CONDITIONS

The Financial Management Act 1994 requires the Government to operate in accordance with a set of sound financial management principles. These are to:

• prudently manage financial risks faced by the State, taking into consideration economic circumstances;

• pursue spending and taxation policies that are consistent with a reasonable degree of stability and predictability in the level of the tax burden;

• maintain the integrity of the Victorian tax system;

• ensure that government policy decisions have regard to their financial effects on future generations; and

• provide full, accurate and timely disclosure of financial information relating to the activities of the Government and its agencies.

The Government’s updated short and long-term financial objectives, as published in the 2009-10 Budget, are summarised in Table 1.1. In 2009-10, the Government achieved each of the five financial objectives, discussed in the following sections.

Table 1.1: Financial objectives

Objective Short term Long term Net result from transactions (operating surplus)

At least $100 million in each year. Maintain a substantial net result from transactions (operating surplus) that allows for the delivery of the Government’s infrastructure objectives.

Infrastructure Implement strategic infrastructure projects.

Deliver world-class infrastructure to maximise economic, social and environmental benefits.

Service delivery Implement 2006 election commitments.

Provide improved service delivery to all Victorians.

Taxation Implement reforms. Provide a fair and efficient tax system that is competitive with other states.

Net financial liabilities Maintain a AAA credit rating. Maintain state government net financial liabilities at prudent levels.

Source: Financial objectives as published in the 2009-10 Budget, Department of Treasury and Finance

Financial Report 2009-10 Chapter 1 5

Objective one: Net result from transactions (operating surplus) In the 2009-10 Budget, the Government revised its short-term operating surplus target from at least 1 per cent of revenue to at least $100 million in each year. The revised target reflected the Government’s response to the impacts of the global recession and allowed the Government to deliver vital services and infrastructure to Victorian communities while maintaining a sound fiscal position.

Table 1.2 shows that in 2009-10 the general government sector achieved its updated short-term financial objective by delivering a net result from transactions of $644 million, compared with the revised estimate of $395 million. This result can be largely attributed to an increase in income, mainly relating to increased Commonwealth grants, partially offset by a reduction in revenue from sales of goods and services.

The net result from transactions reflects the financial effects of government decisions and other factors controlled by government while excluding actuarial adjustments and revaluations. By excluding these items, the net result from transactions provides a clear representation of the State’s underlying financial performance. Other operating statement measures are discussed in Chapter 2.

Table 1.2: Summary operating statement for the general government sector for the period ending 30 June 2010

($ million) 2009-10 2009-10 % Actual Revised (a) Change Change Total revenue 44 585.3 43 745.5 839.8 1.9 Total expense 43 941.7 43 350.6 591.1 1.4 Net result from transactions – Net operating balance 643.6 394.9 248.7 63.0 Source: Department of Treasury and Finance

Note: (a) Revised 2009-10 estimate published in the 2010-11 Budget in May 2010.

Objective two: Infrastructure In 2009-10, the Government embarked on the biggest infrastructure program in Victoria’s history through accelerating job-creating infrastructure projects and working with the Commonwealth Government under the Nation Building – Economic Stimulus Plan.

From 2000-01 to 2009-10, the general government sector has invested almost $30 billion in the delivery of world-class infrastructure. In 2009-10, net infrastructure expenditure by the general government sector was $5.7 billion, while net infrastructure expenditure for the State of Victoria totalled $8.6 billion. During 2009-10, significant capital expenditure occurred on the following projects:

• school rebuilding, renovation and extension works totalling $447 million, including capital works as part of the Government’s $1.9 billion Victorian Schools Plan;

• delivery of school buildings amounting to $821 million under the Building the Education Revolution (BER) program;

• major transport projects, including:

− $338 million on the West Gate–Monash Freeways Improvement Project; and

− over $540 million for road infrastructure under the Nation Building (Auslink II) Program, including the Springvale Road Grade Separation at Nunawading, announced as part of the Victorian Transport Plan;

6 Chapter 1 Financial Report 2009-10

• over $670 million in health capital expenditure, including work on key projects such as Stage 2 of the Sunshine Hospital expansion and Stage 1B of the Warrnambool Hospital redevelopment; and

• the delivery of water projects to ensure a secure water supply in Victoria, including the Wimmera-Mallee Pipeline, delivered six years ahead of schedule.

Funding from the Commonwealth Government’s Nation Building – Economic Stimulus Plan augmented the significant investment already made by the Victorian Government. The primary objective of the Plan was to provide economic stimulus and job creation for Australia at a time of global economic downturn through the rapid implementation of a massive infrastructure program in the areas of education, social housing, energy efficiency, community infrastructure and transport. For the Victorian Government, the Nation Building program included total package funding of $2.5 billion for government schools under the BER program, $1.3 billion for social housing plus a range of transport projects. Victoria remains on track to deliver the program on time and on budget in the period ahead:

• as at 30 June 2010, progress on BER projects was on track to meet the March 2011 completion deadlines, with over 1 000 of the 1 253 government primary school construction projects, and 66 of the 70 science lab and language centre projects at government secondary schools underway or contracted to commence. In addition, 96 per cent of maintenance and repair works at every government school in Victoria had been completed under the National School Pride element of the program;

• under the social housing initiative, Victoria achieved practical completion of 746 new dwellings against the Commonwealth’s 2009-10 target of 572 dwellings, and remains on track to deliver the overall program of 4 500 dwellings by the 30 June 2012 deadline. Victoria also successfully completed major repairs and upgrades worth $99 million to almost 6 000 dwellings to meet the targets set by the Commonwealth for this part of the Nation Building Plan; and

• in transport, Victoria completed 58 of the 59 level crossing upgrades set for 2009-10, and completed all 166 black spot road projects under the Nation Building Plan.

Objective three: Service delivery In addition to responding to the worst bushfires in our history, the Government remained committed to improving the quality of, access to, and equity of, services provided to all Victorians. In 2009-10, the Government continued to deliver core services that Victorians demand and expect, meeting commitments made in the 2009-10 Budget and Growing Victoria Together. Examples of improved service delivery during 2009-10 include:

• 1.46 million admissions to Victorian public hospitals, approximately 36 000 more than in 2008-09. The provision of emergency department services also increased, with 1.4 million emergency presentations in 2009-10, around 43 000 more than in 2008-09;

• increased investment in training places for Securing Jobs for Your Future and the Skills to Transition program, along with support for new apprentices and trainees through the extension of the Apprenticeship and Traineeship Completion Bonus scheme;

• an ongoing strong commitment to funding education which has been reflected in Victoria performing at or above the national minimum standard for literacy and numeracy across all test levels of years 3, 5, 7 and 9; and

• providing a stronger and more accessible police force by meeting the Government’s commitment of an additional 350 police by June 2010.


Following the 2009 Victorian bushfires, the Victorian Government provided funding for bushfire recovery, response, reconstruction and preparedness. In 2009-10, $738 million was spent across departments and government agencies for fire-related activities, including core expenditure for fire and emergency management agencies to prevent bushfires through suppression activities and to respond to the 2009 Victorian Bushfires Royal Commission Interim Report recommendations.

Objective four: Taxation A key financial objective of the Government has been to provide a fair and efficient tax system that is competitive with other states. The Government views taxation reforms as critical for a competitive and productive economy. Over the years, the reforms undertaken by the Government have reduced business costs and red tape significantly, driving new investment and creating job opportunities.

In an attempt to address the issue of deteriorating budget positions caused by the global financial crisis, several states, including New South Wales and Queensland, announced revenue-raising measures which involved raising tax rates in their 2009-10 state budgets. In contrast, the Victorian Government maintained the levels of all tax rates in its 2009-10 Budget. In 2009-10, Victoria’s taxation revenue grew by 8.8 per cent from a year earlier, which was stronger than expected and reflected the turnaround in the domestic economy. Aggregate taxation income for 2009-10 was $13.7 billion, $98.5 million (0.7 per cent) above the 2009-10 revised estimate. This was largely driven by higher land transfer duty receipts due to the strength in the property market, including the non-residential market, towards the end of the financial year.

Victoria’s preferred measure of tax competitiveness is state taxation revenue expressed as a share of nominal GSP, as it aligns the level of taxation revenue to economic activity (Chart 1.1).

Chart 1.1: Taxation revenue as a share of nominal GSP(a)

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Sources: Australian Bureau of Statistics; Victorian Department of Treasury and Finance; and various state budgets.

Note: (a) For 2009-10, actual taxation outcomes used for Victoria and budget estimates used for other jurisdictions and for the Australian

average.


Chart 1.1 shows that Victoria maintained a higher tax to GSP ratio in 2009-10 than the resource-rich states and the Australian average. However, making interstate comparisons of tax competitiveness is difficult and Victoria’s position needs to be considered in a broader context. Victoria, unlike other states, has only minimal access to mining royalty revenue. In 2009-10, Queensland was expected to collect approximately $1.9 billion in royalties, Western Australia just under $3.0 billion and New South Wales about $1.0 billion. In contrast, Victoria only collected $47 million. With higher royalty revenue, other states are not as reliant on state taxes for revenue. Chart 1.2 shows that Victoria’s ratio of taxes plus royalties to GSP has been below the Australian average for a decade, which demonstrates the significant share of own source revenue that royalties occupy in states with abundant mining resources.

Chart 1.2: Taxation and royalty revenue as a share of nominal GSP(a)

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Sources: Australian Bureau of Statistics; Victorian Department of Treasury and Finance; and various state budgets.

Note: (a) For 2009-10, actual taxation and royalty revenue outcomes used for Victoria and budget estimates used for other jurisdictions and for

the Australian average.

Objective five: Net financial liabilities Consistent with its AAA credit rating, the Government has maintained a modest and sustainable level of net financial liabilities throughout its term, largely through firm management of underlying expenditure and by maintaining borrowing at sustainable levels despite the adverse impact of the global financial crisis.

Victoria’s balance sheet in 2009-10 produced the following general government sector outcomes:

• net debt of $8.0 billion as at 30 June 2010 (2.5 per cent of GSP), up from $5.3 billion as at 1 July 2009 (1.8 per cent of GSP); and

• net financial liabilities of $37.5 billion as at 30 June 2010 (11.9 per cent of GSP), up from $32.4 billion as at 1 July 2009 (11.1 per cent of GSP).

The increases in net financial liabilities and general government net debt during the year reflect the borrowings used to fund the Government’s significant capital investment program. The level of net financial liabilities was also affected by an increase in the superannuation liability, which was primarily driven by a reduction in the discount rate that was used to value the liability.


ECONOMIC CONDITIONS AND OUTCOMES The Australian and Victorian economies continue to recover, after proving to be more resilient to the challenges posed by the global downturn than most other developed countries.

The resilience of the Australian economy has been underpinned by a number of factors, including the support provided by the State and Commonwealth Governments’ fiscal stimulus packages, a healthy banking sector, expansionary monetary policy settings and the relative strength of our major trading partners in Asia. The Victorian Government, in partnership with the Commonwealth Government, delivered the largest infrastructure program in Victoria’s history in 2009-10. This, combined with the Government’s ongoing efforts to pursue economic reforms and keep the business environment competitive, helped to moderate the impact of the downturn.

Australian gross domestic product grew by 2.3 per cent in 2009-10, higher than the forecast of 2.0 per cent in the Commonwealth Government’s 2010-11 Budget. Nationally, the labour market was buoyant, with employment growing by 2.9 per cent over the year to June 2010, and the unemployment rate falling from a peak of 5.8 per cent in mid 2009 to 5.1 per cent in June 2010. Increased flexibility in the labour market has helped to keep the unemployment rate in check.

Headline inflation picked up in the latter half of 2009-10, driven by increases in the prices of services and other non-tradeables and a stronger domestic outlook. Underlying inflation has eased, but remains in the upper half of the Reserve Bank of Australia’s (RBA) medium-term target band of 2 to 3 per cent. In October 2009, in response to the quicker than expected recovery of the Australian economy, the RBA raised the official cash rate for the first time since the onset of the global financial crisis. Among developed economies, it was the first central bank to do so. From then until June 2010, there have been six rises taking the official cash rate to 4.50 per cent.

When the 2009-10 Budget was framed, the Victorian Government was aware of the weakness in the economy but still expected continued growth because of Victoria’s sound fundamentals and flexible, diversified economic structure. The economic growth forecast of 0.25 per cent for 2009-10 in the 2009-10 Budget was revised upwards to 2.25 per cent in the 2010-11 Budget. Strong population growth in Australia and Victoria was one of the main factors that underpinned economic growth, boosting consumer spending and investment, in particular the demand for housing. Australia’s population grew by 2.0 per cent over the year to the December quarter 2009, far outstripping the average population growth experienced in other OECD countries. Over the same period, Victoria’s population rose by 2.1 per cent, above the Australian average. This was predominantly driven by net overseas migration which contributed more than two-thirds of the total increase. Population growth began to moderate towards the end of 2009, reflecting falls in net overseas migration due to immigration policy changes, lower international student commencements and lower business visa lodgements.

Household consumption rose solidly in 2009-10, recording growth of 2.7 per cent over the year, assisted by strong population growth. Other drivers included income growth from a strengthening labour market and improvements in consumer confidence.

Victoria’s housing activity recorded a solid increase over the year, buoyed by low interest rates and the Commonwealth and State Government housing boost to first home buyers. During 2009-10, Victoria outperformed the other states by accounting for almost one-third of national dwelling approvals.


Business investment posted notable growth of 2.9 per cent in 2009-10, largely as a result of stimulus measures offsetting weakness in private business intentions. The Commonwealth Government’s temporary investment allowance helped boost machinery and equipment investment, which increased by 6.1 per cent. New engineering construction also grew strongly in 2009-10, up by 26.8 per cent, while non-residential building construction fell by 18.4 per cent. Public investment also contributed significantly to Victorian state final demand throughout 2009-10, increasing by 34.8 per cent over the year.

Chart 1.3 illustrates the resilience of the Victorian labour market, with the unemployment rate peaking below what was previously forecast and the number of employed persons showing a strong upward trend since mid 2009. Greater labour market flexibility limited the unemployment rate to a peak of 6.2 per cent in August 2009, below the forecast of 7.0 per cent in the 2009-10 Budget. Victoria’s employment increased by more than 100 000 jobs over the year to June 2010, recording the largest increase of all the states. This result was largely driven by an increase in full-time employment. Over the past six months, employment growth has moderated towards its trend rate and the unemployment rate has stabilised.

Chart 1.3: Victorian unemployment rate and number of employed persons

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Source: Australian Bureau of Statistics

After 2009-10, which proved to be a strong year for Victorian economy, economic growth is expected to gain further traction in the coming year as domestic demand picks up and the labour market continues to strengthen. The 2010-11 Budget forecast Victorian GSP growth to accelerate to 3.25 per cent in 2010-11 before returning to trend growth of 3.0 per cent in subsequent years. Population growth is expected to continue to moderate towards its long-term trend.

While the domestic economic outlook is largely positive, downside risks posed by global economic uncertainty remain and may hamper growth in the future.



CHAPTER 2 – GENERAL GOVERNMENT SECTOR OUTCOME

This chapter summarises and analyses the financial results of the general government sector for the 2009-10 financial year against the revised budget estimates published in the 2010-11 Budget in May 2010 and last year’s results presented in the Financial Report for the State of Victoria 2008-09.

The general government sector consists of all government departments and other public sector agencies that are controlled and largely financed by government. It excludes government-owned corporations and other bodies set up to engage in market activities, which form part of the public non-financial corporation (PNFC) and public financial corporation (PFC) sectors.

The general government sector is primarily responsible for the delivery of government policy as set out in the annual budget.

FINANCIAL PERFORMANCE The Government’s long-term objective is to maintain a substantial net result from transactions (income from transactions less expenses from transactions) which contributes to the delivery of its infrastructure objective within prudent debt constraints. In the short term, the Government’s key financial objective is to maintain a net result from transactions of at least $100 million each year.

Table 2.1 shows that the Government has again achieved this target by delivering a 2009-10 net result from transactions of $644 million, compared with the revised budget estimate of $395 million. The net result from transactions is an important component of sustainable financial management and this result has enabled the Government to fund its investment program while keeping net financial liabilities at prudent levels and maintaining the State’s AAA credit rating.

The comprehensive financial statements for the general government sector and the whole state public sector for the 2009-10 financial year are included in Chapter 4.


Table 2.1: Summary operating statement for the period ending 30 June 2010

($ million) 2008-09 2009-10 2009-10 Budget % Actual Actual Revised Variance Change

Revenue Taxation revenue 12 626.9 13 740.5 13 642.1 98.5 0.7 Interest 378.2 333.5 348.5 ( 15.0) ( 4.3) Dividends, income tax and rate equivalent

revenue 490.4 485.6 459.2 26.5 5.8

Sale of goods and services 4 940.5 5 289.5 5 427.9 ( 138.5) ( 2.6) Grants 18 970.0 22 717.8 22 111.3 606.4 2.7 Other revenue 1 878.9 2 018.4 1 756.5 261.8 14.9 Total revenue 39 284.8 44 585.3 43 745.5 839.8 1.9

Expenses Employee expenses 14 296.9 15 404.8 15 395.8 8.9 0.1 Superannuation (a) 2 013.9 2 394.5 2 408.7 ( 14.1) ( 0.6) Depreciation and amortisation 1 515.8 1 869.7 1 888.4 ( 18.7) ( 1.0) Interest expense 642.4 843.3 830.1 13.1 1.6 Other operating expenses 13 198.4 14 254.9 14 363.1 ( 108.2) ( 0.8) Grants and other transfers 7 366.3 9 174.5 8 464.5 710.1 8.4 Total expenses 39 033.7 43 941.7 43 350.6 591.1 1.4 Net result from transactions - Net

operating balance 251.2 643.6 394.9 248.7 63.0

Total other economic flows included in net result

(8 624.0) (6 056.8) 1 104.5 (7 161.2) 648.4

Net result (8 372.8) (5 413.1) 1 499.4 (6 912.6) 461.0 Source: Department of Treasury and Finance

Note: (a) Includes superannuation interest expense and other superannuation expenses. The higher than estimated net result from transactions can be largely attributed to increased grants revenue (mainly through a rephasing of Commonwealth grants), other revenue and taxation revenue. This was partially offset by a reduction in revenue from sales of goods and services and growth in expenses primarily related to the pass-through of additional Commonwealth grants.

Revenue Total revenue for 2009-10 was $44.6 billion, $840 million (or 1.9 per cent) higher than the revised budget estimate of $43.7 billion. Chart 2.1 shows that the major revenue categories other than grants were largely consistent with the revised budget.


Chart 2.1: Total revenue by category for the 2009-10 financial year compared with the revised budget estimate

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2009-10 Actua l 2009-10 Revised budget


Grants revenue

Grants include Goods and Services Tax (GST) general purpose grants, specific purpose and national partnership grants from the Commonwealth Government (both operating and capital). Aggregate grants revenue for 2009-10 was $22.7 billion, $606 million (or 2.7 per cent) above the 2009-10 revised budget estimate of $22.1 billion. The higher than expected revenue mainly relates to:

• $322 million provided to the social housing program under the Nation Building – Economic Stimulus Plan;

• $120 million in payments for local government assistance grants;

• $106 million for non-government school grants as part of the Building the Education Revolution program;

• $61 million of Commonwealth funding provided to health services for a range of purposes including research, the Pharmaceutical Benefits Scheme (PBS), Chemotherapy Pharmaceutical Access Program and capital investment;

• higher than expected funding of $60 million received from the Commonwealth for the First Home Owners Boost; and

• $40 million for Commonwealth Housing Affordability Funding.

This was partially offset by a reduction in GST grants of $102 million, reflecting weaker than expected GST receipts towards the end of 2009-10.

When compared with the 2008-09 actual result of $19.0 billion, grants revenue was $3.7 billion (or 19.8 per cent) higher in 2009-10, largely reflecting additional funding provided by the Commonwealth Government via the national fiscal stimulus packages.


Taxation

As Table 2.2 indicates, aggregate taxation income for 2009-10 was $13.7 billion, $98 million (or 0.7 per cent) above the 2009-10 revised budget estimate of $13.6 billion.

Table 2.2: Taxation for the period ending 30 June 2010

($ million) 2009-10 2009-10 Budget % Actual Revised Variance Change Taxes on employers’ payroll and labour force 4 055.8 4 022.9 32.9 0.8

Taxes on immovable property Land tax 1 177.7 1 218.6 ( 41.0) ( 3.4) Congestion levy 47.2 44.9 2.3 5.1 Metropolitan improvement levy 122.8 121.6 1.2 0.9

0.0 0.0Property owner contributions to fire brigades 34.4 34.4 1 381.9 1 419.4 ( 37.5) ( 2.6) Total taxes on immovable property

Financial and capital transactions Land transfer duty 3 603.9 3 498.0 105.9 3.0 Other property duties 7.0 8.6 ( 1.6) ( 19.1) Financial accommodation levy 51.8 53.4 ( 1.6) ( 3.0) Total financial and capital transactions 3 662.7 3 560.0 102.7 2.9 Gambling taxes Private lotteries 356.0 369.4 ( 13.4) ( 3.6) Electronic gaming machines 985.0 990.6 ( 5.7) ( 0.6) Casino 151.1 154.4 ( 3.4) ( 2.2) Racing 129.3 132.1 ( 2.8) ( 2.1) Other 10.3 9.3 0.9 10.2 Total gambling taxes 1 631.6 1 655.9 ( 24.3) ( 1.5) Levies on statutory corporations 69.4 73.7 ( 4.3) ( 5.8) Taxes on insurance 1 402.8 1 400.9 1.9 0.1 Motor vehicle taxes Vehicle registration fees 864.2 843.4 20.8 2.5 Duty on vehicle registrations and transfers 572.7 563.9 8.8 1.6 Total motor vehicle taxes 1 436.9 1 407.3 29.6 2.1 Franchise taxes 23.3 26.3 ( 3.0) ( 11.5) Other taxes 76.2 75.7 0.5 0.7 Total taxation 13 740.5 13 642.1 98.5 0.7 Source: Department of Treasury and Finance

The higher than expected taxation revenue was mainly due to: • an increase in land transfer duty of $106 million (or 3 per cent) due to higher than expected

volume growth, consistent with the improved property market. In particular, the volume of non-residential property land transfers rebounded strongly towards the end of 2009-10;

• a $33 million (or 0.8 per cent) increase in payroll tax. This small upward variation in part reflects higher than expected employment in the June quarter; and

• an increase in motor vehicle taxation revenue, which was $30 million (or 2.1 per cent) higher than the revised budget, reflecting greater than expected average registration fees for heavy vehicles and the strength of motor vehicle sales, which were at historically high levels in the June 2010 quarter.


The increase in taxation revenue described above was partially offset by lower than expected outcomes in:

• land tax (down $41 million or 3.4 per cent) – mainly reflecting a greater than expected impact on revenue from amendments and objections to issued assessment notices, as well as a higher number of unissued assessments than in previous years; and

• gambling taxes (down $24 million or 1.5 per cent) – reflecting lower than expected revenue across all major categories and in particular, for lotteries revenue (down $13 million or 3.6 per cent) in which the higher revenue of recent June quarters was not repeated.

When compared with the 2008-09 actual result of $12.6 billion, taxation revenue was $1.1 billion (or 8.8 per cent) higher in 2009-10, largely driven by an increase in land transfer duty of $803 million, due to the rebound in the property market.

Sale of goods and services revenue

Revenue from the sale of goods and services was $5.3 billion, $139 million (or 2.6 per cent) below the 2009-10 revised budget estimate, which primarily reflects revised funding arrangements for the desalination plant, whereby payments from Melbourne Water Corporation will now be recognised as revenue in the year the desalination plant is commissioned.

When compared with the 2008-09 actual result of $4.9 billion, sale of goods and services revenue was $349 million (or 7.1 per cent) higher in 2009-10 largely representing:

• a $265 million increase in public transport fare revenue, largely reflecting revised arrangements under the new franchise agreements. All fare revenue is received by the State and then paid to rail operators; and

• a $63 million increase in fees for service revenue in the TAFE sector, reflecting higher enrolments in the sector.

Other revenue

For the 2009-10 financial year, other revenue totalled $2 billion, $262 million (or 14.9 per cent) higher than the 2009-10 revised budget estimate. This was in part due to:

• $57 million in additional revenue from the TAFE sector from various miscellaneous fees (including car parking fees, the hiring of facilities to third parties, bookshop receipts and childcare) and assets received free of charge from the University of Melbourne and Swinburne University;

• additional unbudgeted assets received free of charge from the Murray-Darling Basin Authority of $57 million following the new agreement for the management of the assets and water rights within the Authority;

• $31 million for a higher than expected receipt of unclaimed monies following the first full-year effect of legislative changes which decreased the duration entities may hold onto unclaimed monies; and

• $19 million received from other states in relation to the National Registration and Accreditation Scheme to support the health workforce.

Income from dividends, income tax and rate equivalent revenue

Income from dividends, income tax and rate equivalent revenue was $486 million in 2009-10, $27 million (or 5.8 per cent) above the 2009-10 revised budget estimate and lower than the actual result in 2008-09 of $490 million. The revenue increase above the revised estimate in 2009-10 was largely a result of a better than expected performance from the metropolitan water corporations and higher profits from the Port of Melbourne Corporation due to an increase in trade volumes.


Interest revenue

Interest revenue was $334 million, $15 million below the 2009-10 revised budget estimate, and $45 million (or 11.8 per cent) below the 2008-09 result, due in part to lower holdings of financial assets by the hospital sector in 2009-10 and average interest rates in 2009-10 being lower than average interest rates in 2008-09.

Expenses

As shown in Table 2.1, general government sector expenses from transactions for 2009-10 were $43.9 billion, $591 million (or 1.4 per cent) higher than the revised budget estimate of $43.4 billion.

Chart 2.2: Total expenses by category for the 2009-10 financial year compared with the revised budget estimate

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Employeeexpenses

Superannuationinterestexpense

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$ bi

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2009-10 Actua l 2009-10 Revised budget


Chart 2.2 shows the major expense categories were largely consistent with the revised budget.

The expense for grants and other transfers was $9.2 billion, $710 million (or 8.4 per cent) above the revised budget estimate. This was mainly due to the on-passing of Commonwealth grants, primarily:

• $322 million in higher than expected payments for the social housing program under the Nation Building – Economic Stimulus Plan;

• $120 million in payments for local government assistance grants; and

• $106 million in grants payments for non-government schools.

Employee expenses were $15.4 billion, $9 million (or 0.1 per cent) above the revised budget estimate. Compared with the 2008-09 actual result of $14.3 billion, employee expenses were $1.1 billion (or 7.7 per cent) higher in 2009-10. This mainly represents additional service delivery initiatives and the effects of enterprise bargaining agreements negotiated in accordance with the Government’s wages policy.


Other operating expenses, which reflect the operating supplies and consumables used to support the Government’s service delivery, were $14.3 billion, $108 million (or 0.8 per cent) below the revised budget estimate. The major driver of this variance was expenditure recorded in the schools sector, which had been originally budgeted as an expense but was subsequently reclassified to capital expenditure to match the actual nature of the expenditure.

Interest expense was $843 million, $13 million (or 1.6 per cent) above the revised budget estimate and $201 million higher than the 2008-09 actual result, reflecting:

• a $186 million increase in borrowing expenses to fund the State’s substantial infrastructure investment; and

• a $20 million expense reflecting the commencement of the finance lease interest payments relating to the Melbourne Exhibition and Convention Centre.

Other economic flows included in the net result The difference between the net result and the net result from transactions is due to other economic flows, which include various revaluation gains and losses on assets and liabilities and provision for doubtful receivables. In particular, the non-cash impact of actuarial gains and losses associated with the superannuation liability contributes to the volatility of the net result due to the impact of movements in factors such as bond rates and investment returns, over which the Government has no direct control.

Other economic flows included in the net result for 2009-10 totalled a net loss of $6.1 billion, primarily driven by a reduction of over $4 billion in the valuation of land under roads, due to a review of the underlying valuation methodology by VicRoads in conjunction with the Valuer-General.

There was also a $1.5 billion reduction related to actuarial losses on superannuation. This loss arose due to:

• changes in bond rates that underlie the assumptions that are used to value the superannuation liability. The discount rate that is used to value the superannuation liability decreased from 5.7 per cent as at 30 June 2009 to 5.3 per cent as at 30 June 2010. The lower discount rate caused the reported superannuation liability to increase by over $2 billion during 2009-10;

• other factors, such as actual salary increases and other fund experience, also contributed approximately $500 million to the actuarial loss on superannuation during 2009-10; and

• these actuarial losses were partially offset by better than expected investment returns on superannuation assets of $1 billion.

The actuarial loss of $1.5 billion in 2009-10 was significantly lower than in 2008-09. This was due to a partial recovery of global investment markets which saw investment returns rebound to more normal levels and less volatility in bond rates, which underpin the valuation of the superannuation liability.

It is important to note that changes in the superannuation liability that arise due to movements in bond rates do not impact on the amount of cash required to fund this liability over time.


MEASURES OF FINANCIAL PERFORMANCE Fiscal aggregates are analytical balances that are useful for macroeconomic analysis purposes, including assessing the impact of a government and its controlled agencies on the economy. These measures are derived from the information disclosed in the financial statements in Chapter 4. Four operating fiscal aggregate measures are shown in Table 2.3.

Table 2.3: Operating fiscal aggregates

($ million) 2008-09 2009-10 2009-10 Actual Actual Revised Net result from transactions – net operating balance 251.2 643.6 394.9 Net lending/(borrowing) (1 184.4) (2 212.8) (2 485.3) Comprehensive result – total change in net worth 26 299.8 876.7 4 754.8 Cash surplus/(deficit) ( 897.9) (1 270.5) (1 940.6) Source: Department of Treasury and Finance The net result from transactions for 2009-10 for the general government sector was $644 million. This measure excludes the effects of revaluations (holding and realised gains or losses) arising from changes in market prices. Key drivers of this outcome have been discussed previously.

The net lending/(borrowing) measure is equal to the net result from transactions less net acquisitions of non-financial assets. The net borrowing measure for 2009-10 was $2.2 billion which was used to fund expenditure on fixed assets for infrastructure projects. This result was $273 million lower than the 2009-10 revised borrowing amount, primarily reflecting a higher than expected net result from transactions.

The comprehensive result (total change in net worth) measure includes the effects of revaluations arising from changes in market prices and other changes in the volume of assets. The comprehensive result (total change in net worth) was $877 million, which is mainly attributable to revaluations of non-financial assets. Compared with the revised budget, the comprehensive result is $3.9 billion lower, primarily driven by the reduction in the valuation of land under roads, following a review of the underlying valuation methodology by VicRoads in conjunction with the Valuer-General. The difference between the 2009-10 actual result and the 2008-09 actual result is due primarily to the recognition of land under roads for the first time in 2008-09.

The cash surplus/(deficit) measure is equal to the net cash flows from operating activities, less net cash flows from investments in non-financial assets. For 2009-10, a cash deficit of $1.3 billion was recorded, compared with the revised budget estimate of $1.9 billion. The difference of $670 million primarily reflects higher than expected cash flows from operating activities, supporting the increased net results from transactions for the year.


FINANCIAL POSITION The Government continues to manage a strong and robust balance sheet and manage the State’s net financial position at prudent levels consistent with its short and long-term financial objectives.

Table 2.4: Summary balance sheet as at 30 June 2010

($ million) Actual Actual Actual Budget Revised 2009 Movement 2010 Variance 2009-10 Assets Financial assets 8 478.8 568.2 9 047.0 1 331.1 7 715.9 Non-financial assets 88 415.2 2 135.4 90 550.7 (2 720.5) 93 271.2

Investments in other sector entities Public non-financial corporations 59 836.3 4 340.3 64 176.6 2 617.9 61 558.6 Public financial corporation 798.5 ( 466.4) 332.1 (1 576.4) 1 908.6 Total assets 157 528.9 6 577.6 164 106.4 ( 347.9) 164 454.3

Liabilities Superannuation 20 672.3 1 861.9 22 534.1 2 265.6 20 268.5 Borrowings 10 640.1 2 972.3 13 612.5 92.6 13 519.9 Other liabilities 9 542.7 861.6 10 404.4 1 187.0 9 217.3 Total liabilities 40 855.1 5 695.9 46 551.0 3 545.3 43 005.7 Net assets 116 673.8 881.7 117 555.5 (3 893.1) 121 448.6 Source: Department of Treasury and Finance

As shown in Table 2.4, total general government sector net assets increased by $882 million to $117.6 billion in 2009-10.

Financial assets include cash assets, investments and loans and placements. Financial assets for the general government sector increased by $568 million to over $9 billion by 30 June 2010. This increase primarily reflects the receipt of Commonwealth funding late in the 2009-2010 financial year, an increase in cash deposits to meet short-term cash requirements as well as an increase in fines and regulatory fees receivable.

The primary component of non-financial assets is the Government’s capital stock, which is driven by the acquisition of fixed assets and revaluations of property, plant and equipment. Non-financial assets increased by $2.1 billion to $90.6 billion in 2009-10, reflecting an increase in investment in the capital program for schools through the Building the Education Revolution, Trade Training Centres programs, Partnerships Victoria in Schools, continued progress of the Victorian Schools Plan and additional TAFE works. There was also a higher investment in roads projects in 2009-10.

The decrease between the 2009-10 actual non-financial assets and the revised budget figure of $93.2 billion (lower by $2.7 billion) can be attributed to the reduction in the valuation of land under roads, which has been discussed previously.

General government sector investments in the PNFC sector increased by $4.3 billion to $64.2 billion as at 30 June 2010, primarily driven by substantial investment in water and transport infrastructure, combined with the revaluation of assets within the transport sector.

General government sector investments in the PFC sector declined by $466 million to $332 million as at 30 June 2010, driven by an increase in financial liabilities due to market value changes of Treasury Corporation of Victoria’s borrowings and the State’s insurance liabilities due to a reduction in the discount rates that are required to be used for valuation purposes.


Total general government sector liabilities increased to $46.6 billion in 2009-10, $5.7 billion higher than in 2008-09. The movement is largely driven by:

• higher borrowings of $3 billion, driven predominately by Victoria’s significant capital investment program; and

• a $1.9 billion increase in the superannuation liability due to a number of factors including further benefit accruals and an actuarial loss on superannuation of $1.5 billion, as outlined earlier in this chapter.

Table 2.5: Balance sheet fiscal aggregates

($ million) 2008-09 2009-10 2009-10 Actual Actual Revised Net worth 116 673.8 117 555.5 121 448.6 Net financial worth 28 258.5 27 004.8 28 177.4 Net financial liabilities 32 376.3 37 503.9 35 289.8 Net debt 5 291.7 7 963.6 8 710.7 Source: Department of Treasury and Finance

The net worth measure is equal to total assets less total liabilities. As shown in Table 2.5, the general government sector net worth increased by $882 million to $117.6 billion as at 30 June 2010, which was primarily driven by an overall increase in the value of PNFC assets throughout the year, including revaluations, partially offset by the reduction in the valuation of land under roads. The movement also reflects an increase in the State’s capital program which has been discussed previously in the chapter.

The net financial worth measure is equal to total financial assets less total liabilities. For 2009-10, net financial worth decreased by $1.3 billion to $27 billion, which was predominantly due to increases in the superannuation liability and borrowings (discussed previously) which was partially offset by an increase in the net worth of the PNFC sector.

NET DEBT AND NET FINANCIAL LIABILITIES The Government’s commitment to sound financial management includes maintaining the State’s net financial position at prudent levels in order to achieve its objective of maintaining Victoria’s AAA credit rating. Key measures of the general government sector’s financial position are net debt and net financial liabilities, which are highlighted in Table 2.6.

The strength of the general government’s balance sheet is reflected in Victoria’s AAA credit rating which was last reaffirmed by Moody’s Investors Service in January 2009 and Standard & Poor’s in September 2009. Further discussion on Victoria’s credit rating is provided in Chapter 3.


Table 2.6: General government net debt and net financial liabilities as at 30 June 2010

($ million) Actual Actual Actual Budget Revised 2009 movement 2010 Variance 2009-10

Assets Cash and deposits 2 846.0 375.4 3 221.3 955.4 2 266.0 Advances paid (a) 269.0 9.1 278.0 ( 39.7) 317.7 Investments, loans and placements 2 550.6 78.4 2 629.0 52.6 2 576.4 Total 5 665.5 462.8 6 128.3 968.3 5 160.0

Liabilities Deposits held and advances received 317.1 162.3 479.4 163.6 315.8 Borrowings 10 640.1 2 972.3 13 612.5 92.6 13 519.9 Total 10 957.2 3 134.7 14 091.9 256.2 13 835.7 Net debt 5 291.7 2 671.9 7 963.6 ( 712.1) 8 675.7 Superannuation liabilities 20 672.3 1 861.9 22 534.1 2 265.6 20 268.5 Net debt plus superannuation liabilities 25 964.0 4 533.8 30 497.7 1 553.5 28 944.2 Other liabilities (net) (b) 6 412.3 593.9 7 006.2 660.6 6 345.6 Net financial liabilities 32 376.3 5 127.7 37 503.9 2 214.1 35 289.8

(per cent) Net debt to GSP 1.8 2.5

Net debt plus superannuation liabilities to GSP

8.9 9.7

Net financial liabilities to GSP 11.1 11.9 Source: Department of Treasury and Finance

Notes: (a) This equals advances paid plus investments in general government sector entities using the equity method. (b) Other net liabilities includes other employee entitlements, provisions and other non-equity liabilities, less other non-equity assets.

Net debt is determined by deducting liquid financial assets from gross debt. The rationale for deducting liquid financial assets is that, in a period of financial difficulty, liquid assets would be readily available to redeem debt. Net debt increased by $2.7 billion in 2009-10, from $5.3 billion as at 1 July 2009 (1.8 per cent of GSP) to $8 billion as at 30 June 2010 (2.5 per cent of GSP). This reflects the Government’s commitment to deliver a record infrastructure investment program despite the effects of the global financial crisis on the State’s GST and taxation revenues.

Net financial liabilities are total liabilities less all financial assets (excluding equity). As shown in Table 2.6, net financial liabilities increased by $5.1 billion in 2009-10, from $32.4 billion as at 1 July 2009 (11.1 per cent of GSP) to $37.5 billion as at 30 June 2010 (11.9 per cent of GSP). The increase in net financial liabilities during the year was mainly due to an increase in borrowings used to fund Victoria’s significant capital investment program which in turn created and secured jobs, and an increase in the superannuation liability, primarily driven by a reduction in the discount rate that is used to value the liability.

Chart 2.3 shows the trend in the general government sector net debt and financial liabilities since 1999.


Chart 2.3: General government sector net financial liabilities

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Other l iabi l i ties (net) (LHS)Superannuation l iabi l i ty (LHS)Net debt (LHS)Net financia l l i abi l i ties to GSP (%) (RHS)Net debt plus s uperannuation l iabi l i ty to GSP (%) (RHS)


The superannuation liability is in relation to public sector defined benefit superannuation schemes and represents the present value of expected future benefits that scheme members have accrued as a result of past service offset by the value of superannuation assets. As noted earlier, the increase in the superannuation liability during 2009-10 is mainly due to a reduction in the discount rate that is used to value the liability.

As previously mentioned, it is important to note that movements in the liability that result from movements in the discount rate do not impact on the amount of cash required to fund this liability over time.

CASH FLOWS The Government is undertaking a substantial capital investment program in order to deliver services and secure jobs. Table 2.7 outlines the use of cash resources to fund Victoria’s capital investment program. It provides a summary of cash generated through the operations of Victorian Government departments and other general government sector agencies, and how that cash is applied to infrastructure investment.


Table 2.7: Application of cash resources

($ million) 2009-10 2009-10

Actual Revised Net result from transactions – net operating balance 643.6 394.9 Add back: Non-cash revenues and expenses (net) (a) 2 559.8 2 247.5 Net cash flow from operating activities 3 203.4 2 642.4 Less:

Net investment in fixed assets Expenditure on approved projects 5 897.8 6 283.6 Sale of non-financial assets ( 187.4) ( 270.8) Net investment in fixed assets 5 710.5 6 012.7 Finance leases 74.5 74.7 Other investment activities (net) 90.3 ( 26.0) Decrease/(increase) in net debt (2 671.9) (3 418.9) Source: Department of Treasury and Finance

Note: (a) Includes depreciation and non-cash movements in liabilities such as superannuation and employee benefits.

A detailed statement of cash flows is provided in Chapter 4. In 2009-10, 56.1 per cent of the general government sector capital program was funded from the net cash flow from operating activities.

As Chart 2.4 shows, since 1999-2000 the Government has significantly increased the size of its capital program.

Chart 2.4: General government net infrastructure investment

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1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

$ bi

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Net investment in fixed assets for 2009-10 was $5.7 billion, which was 5.3 per cent lower than the revised budget figure. This result was over $1.6 billion higher than the investment in fixed assets in 2008-09.

Infrastructure investment in the general government sector for 2009-10 mainly focused on education, transport, housing and health. During 2009-10, significant capital expenditure included:

• $821 million for the delivery of school buildings under the Building the Education Revolution program, delivered in partnership with the Commonwealth Government and a further $447 million as part of the Victorian Schools Plan, to renovate, rebuild or extend government schools;

• major transport projects, including:

− $338 million on the West Gate–Monash Freeways Improvement Project;

− over $540 million for road infrastructure under the Nation Building (Auslink II) Program, including the Springvale Road Grade Separation at Nunawading, announced as part of the Victorian Transport Plan; and

− $241 million for new X’trapolis trains for the metropolitan network;

• almost $1 billion for improving and expanding social housing, including the practical completion of 746 new dwellings under the Nation Building – Economic Stimulus Plan which incorporates grants to housing associations; and

• over $670 million in health capital expenditure, including work on key projects such as Stage 2 of the Sunshine Hospital expansion and Stage 1B of the Warrnambool Hospital redevelopment.


CHAPTER 3 – STATE OF VICTORIA OUTCOME

This chapter summarises and analyses the financial outcome for the State of Victoria for the 2009-10 financial year compared with the previous year. The State comprises the general government sector, which has been discussed in detail in Chapter 2, the public non-financial corporation (PNFC) sector, and the public financial corporation (PFC) sector. It is important to note that due to transactions occurring between the sectors, not all variations in each sector will affect the overall State of Victoria outcome.

The PNFC and PFC sectors comprise a wide range of entities that provide goods and services while meeting commercial principles through cost recovery via user charges and fees. The largest Victorian PNFCs are those providing water, housing, transport and port services. Victoria’s PFCs can be categorised into two broad types; those that provide services to the general public and businesses (such as the statutory insurers); and those that provide financial services predominantly to other government entities.

The fiscal aggregates reported in this chapter are not targeted by the Government’s budget strategy, although they do contribute to the Government’s objective of maintaining net financial liabilities at prudent levels, including the maintenance of the AAA credit rating. The financial position of the broader state is of particular significance considering the level of investment in new infrastructure being implemented by the State’s PNFCs.

The full financial statements for the State of Victoria are provided in Chapter 4, where sector contributions to the State’s outcome are also shown.

The results for the State of Victoria mainly reflect:

• Victoria’s strong, resilient economy, and the Government’s ability to successfully steer it through the global financial crisis;

• delivery of the largest public sector infrastructure program in Victoria’s history; and

• accounting impacts of a decrease in discount rates sourced from financial markets, which has driven a consequential increase in the valuation of insurance and superannuation liabilities.


FINANCIAL PERFORMANCE

Table 3.1: 2009-10 Summary operating statement – State of Victoria

($ million) 2008-09 2009-10 % Actual Actual Change Change Revenue Taxation revenue 12 443.6 13 534.6 1 091.0 8.8 Interest 1 190.0 982.9 ( 207.1) (17.4) Dividends, income tax and rate equivalent revenue 411.7 422.7 11.0 2.7 Sales of goods and services 10 326.9 11 024.2 697.3 6.8 Grants 18 722.6 22 606.6 3 884.0 20.7 Other revenue 2 354.5 2 591.3 236.8 10.1 Total revenue 45 449.4 51 162.4 5 713.0 12.6 Expenses Employee expenses 15 037.0 16 218.3 1 181.3 7.9 Superannuation (a) 2 124.0 2 505.1 381.1 17.9 Depreciation and amortisation 2 544.0 3 392.5 848.6 33.4 Interest expense 1 410.1 1 527.0 116.8 8.3 Other operating expenses 19 184.3 20 292.0 1 107.7 5.8 Grants and other transfers 5 273.8 6 632.8 1 359.0 25.8

.. .. Other property expenses .. .. Total expenses 45 573.1 50 567.6 4 994.5 11.0 Net result from transactions – net operating balance (b) ( 123.8) 594.7 718.5 n.a.

(12 965.0) (6 272.4) 6 692.6 n.a. Total other economic flows included in net result Net result (13 088.8) (5 677.7) 7 411.1 n.a.


Notes: (a) Includes superannuation interest expense and other superannuation expenses. (b) 2008-09 actual restated.

Operating Statement The financial results of the general government sector are discussed in Chapter 2. Other activities contributing to the net result for the State of Victoria relate to the operations in the PNFC and PFC sectors, which are discussed in further detail in this chapter.

On a consolidated basis, the net result from transactions for the State of Victoria for 2009-10 is a surplus of $595 million. As shown in Chart 3.1 (below), the net result is driven by:

• a $644 million surplus in the general government sector;

• a $395 million surplus in the PNFC sector as a result of strong growth in grants revenue; and

• a deficit of $114 million in the PFC sector, a $76 million improvement from 2008-09 due to general revenue growth in the sector exceeding a range of operating costs.


Chart 3.1: Net result from transactions by sector

- 200

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General government Public non-financialcorporations

Public financial corporations

$ m

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2008-09 2009-10


Revenue

Aggregate revenue for the State of Victoria increased $5.7 billion (or 12.6 per cent) to $51.2 billion for 2009-10. Most components of state revenue are largely driven by the operations of the general government sector, and therefore discussed in Chapter 2. A number of components influenced by factors outside the general government sector are explained below.

Revenue generated by the State from the sales of goods and services increased by $697 million (or 6.8 per cent) to $11.0 billion for 2009-10. The movement included a $109 million increase in the PNFC sector, primarily as a result of:

• an increase in the regulated water price for sales by water entities as approved by the Essential Services Commission;

• higher residential and commercial land sales by VicUrban; and

• an offsetting reduction in revenue resulting from the absorption of the Victorian Energy Networks Corporation into the national Australian Energy Market Operator on 30 June 2009.

In addition, sales of goods and services revenues in the PFC sector increased by $194 million to $3.3 billion during the period, largely reflecting the impact of consumer price index and wage-inflation increases, as well as vehicle and employment growth, on premium revenue earned by the Transport Accident Commission and Victorian WorkCover Authority.

Grants revenue received by the State of Victoria for 2009-10 increased by $3.9 billion (or 20.7 per cent) to $22.6 billion. Within the PNFC sector, grants revenue increased by $923 million to $2.9 billion, mainly driven by the receipt of additional Commonwealth funding for social housing projects.

On a consolidated basis, other revenue increased $237 million (or 10.1 per cent) to $2.6 billion during the period. This included an increase in the PNFC sector of $94 million, relating to the receipt of higher developer contributions in the metropolitan water sector, as well as the receipt of land free of charge by the Melbourne Convention and Exhibition Centre.


Expenses

Aggregate expenses for the State of Victoria increased $5.0 billion (or 11.0 per cent) to $50.6 billion for 2009-10. Most components of state expenditure are largely driven by the operations of the general government sector, and therefore discussed in Chapter 2. A number of components influenced by factors outside the general government sector are explained below.

For the 2009-10 financial year, depreciation and amortisation costs for the State increased by $849 million (or 33.4 per cent) to $3.4 billion. Within the PNFC sector, the $492 million increase in depreciation is driven by a higher depreciable asset base largely resulting from:

• the first time revaluation of assets within the water and transport sectors at 30 June 2009; and

• significant infrastructure investment during the period.

At $1.5 billion, interest expense was $117 million (or 8.3 per cent) higher for 2009-10 compared with the corresponding period in 2008-09. This is driven by a $4.5 billion increase in State of Victoria borrowings, of which $1.6 billion is attributable to the PNFC sector. The increase in PNFC sector borrowings again reflects the significant investment in capital infrastructure, in particular projects aimed at securing the future water supplies of the State.

Other operating expenses for the State of Victoria increased $1.1 billion (or 5.8 per cent) to $20.3 billion for the 2009-10 financial year. The movement includes a $113 million increase within the PFC sector, representing a nominal 3.0 per cent increase.

Other economic flows and net result

As depicted in Table 3.1 (above), the net result for the State of Victoria in 2009-10 is a deficit of $5.7 billion. The difference between the net result and the net result from transactions is the impact of revaluations and remeasurement items included in other economic flows. The separation of these items from the net result from transactions provides a clearer representation of Victoria’s underlying financial performance.

Other economic flows for the State of Victoria totalled a net loss of $6.3 billion in 2009-10, primarily driven by a reduction of over $4 billion in the valuation of land under roads in the general government sector, combined with $1.5 billion relating to actuarial losses on superannuation (refer to Chapter 2).

FINANCIAL POSITION

Table 3.2: Summary balance sheet – State of Victoria

($ million) Actual Actual Actual 2008-09 2009-10 movement

Assets Financial assets 36 053.4 37 130.1 1 076.7 Non-financial assets 158 200.6 166 338.7 8 138.1 Total assets 194 254.0 203 468.8 9 214.8

Liabilities Superannuation 20 755.1 22 597.7 1 842.5 Borrowings 24 126.0 28 580.3 4 454.3 Other liabilities 31 369.3 32 900.3 1 530.9 Total liabilities 76 250.4 84 078.2 7 827.8 Net assets 118 003.6 119 390.6 1 387.0 Source: Department of Treasury and Finance


Balance sheet The State of Victoria’s consolidated statement of financial position as at 30 June 2010 (refer to Table 3.2 reveals net assets of $119.4 billion. As indicated in Chart 3.2, the increase in net assets is driven by both the general government and PNFC sectors. The general government sector recorded an increase in net assets of $882 million, and the PNFC sector recorded an increase of $4.3 billion over the same period, driven by the substantial investment in non-financial assets within the sector and the revaluation of transport assets. Conversely, the PFC sector saw net assets decline by $466 million, primarily reflecting an increase in liabilities as a result of the impact of volatile financial markets, which saw a reduction in the discount rates used to value these items.

Chart 3.2: Net assets by sector

0

20

40

60

80

100

120

140

General government Public non-financialcorporations

Public financialcorporations

Whole of state

$ bi

llion

2008-09 2009-10


Assets

Total assets for the State of Victoria increased by $9.2 billion to $203.5 billion as at 30 June 2010. A significant portion of the movement in the State’s asset base was driven by the operations of the general government sector, and therefore discussed in Chapter 2. A number of components influenced by factors outside the general government sector are explained below.

A significant amount of the $37.1 billion in consolidated financial assets is held within the PFC sector. The sector experienced strong growth in financial assets during the period, primarily driven by an increase in the market value of investments as global financial markets recovered some of the losses incurred in 2008-09.

On a whole of state basis, non-financial assets increased to $166.3 billion as at 30 June 2010, of which $75.7 billion related to the PNFC sector. In addition to the revaluation of assets within the transport sector, growth in PNFC sector non-financial assets during the period was a result of the Government’s substantial infrastructure investment program.


Liabilities

Total liabilities for the State of Victoria increased by $7.8 billion to $84.1 billion as at 30 June 2010. A significant portion of the movement in the State’s liabilities was generated by the operations of the general government sector, and therefore discussed in Chapter 2. A number of components influenced by factors outside the general government sector are explained below.

Total borrowings for the State of Victoria (including borrowings by all sectors) increased by $4.5 billion to $28.6 billion as at 30 June 2010. Of these new borrowings, $1.6 billion funded infrastructure investment in the PNFC sector. Of the $32.9 billion in other liabilities at 30 June 2010, $24.5 billion related to the PFC sector, primarily reflecting payables and claims liabilities of the State’s insurance businesses.

State Electricity Commission of Victoria (SECV)

Associated with the supply of electricity to the aluminium smelters at Portland and Point Henry, the State of Victoria (through SECV) holds Electricity Supply Agreements with Alcoa. In relation to the Electricity Supply Agreements, the State recorded a net onerous contract liability of $442 million at 30 June 2010, a $159 million decrease from the same time last year. The reduction in the net liability was primarily driven by an increase in the market price of aluminium, combined with a reduction in the estimated value of the remaining commitments as the contracts get one year closer to expiry in 2016.

CASH FLOWS

After excluding non-cash impacts such as asset revaluations and depreciation, the change in operating receipts and payments for the State of Victoria broadly reflects the same factors underpinning the operating income and expense movements already discussed in this chapter.

Infrastructure investment The consolidated statement of cash flows in Chapter 4 shows State of Victoria net investment in fixed assets for the 2009-10 financial year totalled $8.6 billion. This included $4.1 billion net investment by the PNFC sector, which largely represents capital infrastructure spending on water projects, social housing, port infrastructure and public transportation. Some of the key projects include:

• the Northern Victoria Irrigation Renewal Project (Stage 1), implementing water distribution and delivery efficiency improvements by 2012-13;

• the Wimmera–Mallee Pipeline Project, which involved building almost 8 800 kilometres of reticulated pipeline to replace 17 000 kilometres of inefficient open channels, saving around 103 billion litres of water a year; and

• the Channel Deepening Project, which involved the dredging of Port Phillip Bay shipping channels and associated works.


NET DEBT AND NET FINANCIAL LIABILITIES (NON-FINANCIAL PUBLIC SECTOR) The non-financial public sector (NFPS) comprises the general government sector and PNFC sector (i.e. it excludes the PFC sector). Under the Uniform Presentation Framework adopted by all Australian jurisdictions, this is the broadest sector classification for which data is currently required to be presented. It is also the sector for which current year and forward estimates are published each year, and forms the basis of analysis and interstate comparisons by the international credit rating agencies.

Chart 3.3: Non-financial public sector net debt

0

3

6

9

12

15

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06(a)

2006-07 2007-08 2008-09(b)

2009-10

$ bi

llion

0

1

2

3

4

5

per c

ent

Non-financial public sector net debt (LHS) Non-financial public sector net debt to GSP (RHS) (c)


Notes: (a) 1998-99 to 2004-2005 data calculated under Australian-Generally Accepted Accounting Principles. 2005-06 to 2007-08 data

calculated under Australian—International Financial Reporting Standards. (b) 2008-09 and 2009-10 data calculated under AASB 1049. (c) Historical figures varied to reflect revisions to ABS estimates of the economy.

Chart 3.3 shows the trend in net debt and net debt as a proportion of GSP since 1999 for the NFPS. The upwards trend during the financial year shows net debt increase to $14.8 billion at 30 June 2010. As a proportion of GSP, this represents an increase from 3.7 per cent at 30 June 2009, to 4.7 per cent as at 30 June 2010. As discussed previously, the increase largely reflects the additional debt raised to fund the State’s substantial infrastructure program, which is aimed at placing Victoria in a competitive position to take advantage of the global economic recovery.

Table 3.3 summarises a number of items from the statement of financial position for the NFPS. Net debt plus superannuation liabilities rose by $6.0 billion during the year to reach $37.4 billion at 30 June 2010. In addition to the movement in net debt discussed previously, $1.8 billion of this increase relates to the movement in the superannuation liability. As discussed in Chapter 2, the increase in the net superannuation liability primarily reflects the reduction in the bond rate used to value the liability, offset to some extent by better than expected investment returns on superannuation assets. Changes in the superannuation liability that arise due to movements in the bond rate do not impact on the amount of cash required to fund this liability over time.


Table 3.3: Non-financial public sector net debt and net financial liabilities as at 30 June 2010

($ million) Opening Actual Actual % 1 July 2009 30 June 2010 movement Change

Assets Cash and deposits 3 561.9 3 899.5 337.6 9.5 Advances paid 125.8 113.3 ( 12.5) (9.9) Investments, loans and placements 4 059.7 4 321.9 262.3 6.5 Total 7 747.4 8 334.7 587.3 7.6

Liabilities Deposits held and advances received 417.6 587.8 170.2 40.8 Borrowings 18 026.2 22 557.6 4 531.4 25.1 Total 18 443.8 23 145.4 4 701.6 25.5 Net debt 10 696.4 14 810.7 4 114.3 38.5 Superannuation liability 20 755.1 22 597.7 1 842.5 8.9 Net debt plus superannuation liabilities 31 451.6 37 408.4 5 956.8 18.9 Other liabilities (net) (a) 7 529.4 7 859.3 330.0 4.4 Net financial liabilities 38 981.0 45 267.7 6 286.8 16.1

(per cent) 3.7 4.7 Net debt to GSP

10.8 11.9 Net debt plus superannuation liabilities to GSP 13.4 14.4 Net financial liabilities to GSP


Notes: (a) Other net liabilities include other employee entitlements, provisions and other financial liabilities, less other non-equity assets.

The addition of other net liabilities to net debt plus superannuation liabilities sees net financial liabilities reach $45.3 billion as at 30 June 2010, a $6.3 billion increase from the same time last year. As a proportion of GSP, this represents an increase from 13.4 per cent at 30 June 2009 to 14.4 per cent at 30 June 2010.

Indicators of financial condition Key indicators of financial condition for the State of Victoria are shown in Table 3.4. The movements in the financial sustainability and assets ratios during 2009-10 largely reflect the impact of the State’s record capital infrastructure program which was in part funded by borrowings, as well as the increase in the superannuation liability as already discussed.

Significantly, for 2009-10 the key measures of financial flexibility, being borrowing costs to income from transactions (i.e. debt serviceability), and superannuation expenses and borrowings costs to income from transactions (i.e. liability serviceability), remain strong and sustainable at 3.0 and 7.9 per cent respectively.

By delivering an operating surplus, and maintaining debt at prudent levels, the Victorian Government remains committed to maintaining the State’s AAA credit rating. The international rating agencies Standard & Poor’s (S&P) and Moody’s Investors Service (Moody’s) consider a range of financial indicators when assessing a state’s credit rating. A key indicator used by S&P is NFPS net debt plus superannuation liability (excluding advances paid) as a proportion of NFPS revenue. This ratio was 78.8 per cent as at 30 June 2010, and remains well within the 130 per cent target required by S&P to maintain the current AAA credit rating.

Victoria’s credit rating was formally reaffirmed by Moody’s in January 2009 and S&P in September 2009. Both agencies also provided confirmation that the 2010-11 Budget (released in May 2010) was consistent with the current AAA rating.


Table 3.4: Indicators of financial condition – State of Victoria (per cent)

2003 (a) 2004 (a) 2005 (a) 2006 (b) 2007 (b) 2008 (c) 2009 (c) 2010 (c)

Actual Actual Actual Actual Actual Actual Actual Actual Financial Sustainability

Long-term borrowings to total assets 10.1 8.9 9.4 8.7 9.2 8.4 9.3 10.5 Total borrowings to total assets 13.6 13.0 11.8 12.3 11.3 12.0 12.4 14.0 Superannuation liabilities to total assets 13.2 10.8 8.6 9.9 7.1 8.7 10.7 11.1 Total liabilities to total assets 48.3 44.1 39.2 41.3 38.1 38.8 39.3 41.3 Long-term borrowings to GSP 5.2 4.4 4.9 4.7 4.9 4.4 6.2 6.8 Total borrowings to GSP 7.1 6.4 6.2 6.6 6.0 6.4 8.3 9.1 Superannuation liabilities to GSP 6.8 5.3 4.5 5.3 3.8 4.6 7.1 7.2 Net debt plus superannuation liability

to GSP (d) 8.4 6.7 7.9 7.0 5.3 6.0 10.8 11.9

Net debt plus superannuation liability to revenue (d)

57.1 49.3 57.9 50.1 37.6 42.3 75.1 78.8

Total liabilities to GSP 24.8 21.6 20.5 22.1 20.3 20.6 26.1 26.7 -(e) -(e) Current assets to current liabilities 100.3 100.9 111.5 121.0 91.7 95.6

Financial flexibility (f) Borrowing costs to income from

transactions 2.9 2.7 2.8 2.7 2.7 2.6 3.1 3.0

Superannuation expenses to income from transactions

8.4 1.0 1.8 5.3 4.3 4.0 4.7 4.9

Superannuation expenses and borrowing costs to income from transactions

11.3 3.7 4.5 8.0 6.9 6.6 7.8 7.9

Assets Growth in non-current physical assets (g) 7.4 9.7 13.9 5.1 5.3 11.0 41.1 5.0 Net asset investment to non-current

physical assets 4.4 4.2 4.5 4.3 4.9 5.1 6.4 5.5


Notes: (a) 2003-2005 ratios calculated under A-GAAP. (b) 2006 and 2007 ratios calculated under A-IFRS. (c) 2008, 2009 and 2010 ratios calculated under AASB 1049 Whole of Government and General Government Sector

Financial Reporting. (d) ‘Net debt plus superannuation liability’ and revenue is based on the NFPS, rather than on a whole of state basis. In line with

Standard and Poor’s methodology, NFPS advances paid are now excluded from the calculation. (e) Under AASB 1049, assets are ranked in liquidity order and aggregated into financial and non-financial assets. As assets are no

longer classed as current or non-current in the financial statements, the current assets to current liabilities ratio is no longer presented. (f) Between 2003-2005 under A-GAAP, ‘income from transactions’ is total revenue and ‘superannuation expenses’ is total

superannuation expense, whereas in 2006 under A-IFRS ‘income from transactions’ and ‘superannuation expense’ represent only those transactions that are directly under the Government’s control.

(g) 2006 growth ratio incomparable as 2005 assets based on A-GAAP and 2006 assets have been restated on A-IFRS. The impact of A-IFRS on 2006 non-current assets is due to revaluation/reclassification of property plant and equipment balances that has resulted in a higher asset value reflected in the high growth ratio. Under AASB 1049, the fair valuation of infrastructure assets in the transport and water sectors have been recognised for the first time. Under AASB 1051, land under roads has been recognised for the first time in 2008-09.



CHAPTER 4 – ANNUAL FINANCIAL REPORT

This chapter contains the audited 2009-10 Financial Report for the State of Victoria and the Victorian general government sector.



Report of the Auditor-General

INDEPENDENT AUDIT REPORT State of Victoria

To the Responsible Ministers The Financial Report The accompanying Annual Financial Report for the year ended 30 June 2010 of the State of Victoria and the Victorian General Government Sector has been audited, except for the original General Government Sector budget estimates disclosed in Note 31. The Annual Financial Report comprises a consolidated comprehensive operating statement, consolidated balance sheet, consolidated cash flow statement, consolidated statement of changes in equity, the accompanying notes contained in Chapter 4 of the Annual Financial Report, and the certification by the Department of Treasury and Finance. The Annual Financial Report includes the entities disclosed in Note 40 to the financial statements.

The original General Government Sector budget estimates disclosed in Note 31 were subject to a review as required by Section 16B of the Audit Act 1994 upon which an unqualified review report was issued on 30 April 2009.

The Treasurer’s and Minister for Finance, WorkCover and Transport Accident Commission's Responsibility The Treasurer of Victoria and the Minister for Finance, WorkCover and Transport Accident Commission, through the Secretary of the Department of Treasury and Finance, are responsible for the preparation and the fair presentation of the Annual Financial Report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the financial reporting requirements of the Financial Management Act 1994. This responsibility includes:

• establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error

• selecting and applying appropriate accounting policies

• making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility As required by the Audit Act 1994, my responsibility is to express an opinion on the financial report based on the audit, which has been conducted in accordance with Australian Auditing Standards. These Standards require compliance with relevant ethical requirements relating to audit engagements and that the audit be planned and performed to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The audit procedures selected depend on judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, consideration is given to the internal control relevant to the Secretary’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Department of Treasury and Finance’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used, and the reasonableness of accounting estimates made by the Secretary, as well as evaluating the overall presentation of the financial report.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

1

Level 24, 35 Collins Street, Melbourne Vic. 3000 Telephone 61 3 8601 7000 Facsimile 61 3 8601 7010 Email [email protected] Website www.audit.vic.gov.au

______________________________________

Auditing in the Public Interest


Independent Audit Report (continued) Matters Relating to the Electronic Presentation of the Audited Financial Report This auditor’s report relates to the Annual Financial Report published in Chapter 4 of the 2009-10 Financial Report for the State of Victoria and on the website of the Department of Treasury and Finance. The Secretary of the Department of Treasury and Finance is responsible for the integrity of the web site. I have not been engaged to report on the integrity of the web site. The auditor’s report refers only to the statements named above. An opinion is not provided on any other information which may have been hyperlinked to or from these statements. If users of this report are concerned with the inherent risks arising from electronic data communications, they are advised to refer to the hard copy of the audited financial report to confirm the information included in the audited financial report presented on the Department of Treasury and Finance’s web site.

Independence The Auditor-General’s independence is established by the Constitution Act 1975. The Auditor-General is not subject to direction by any person about the way in which his powers and responsibilities are to be exercised. The Auditor-General, his staff and delegates comply with all applicable independence requirements of the Australian accounting profession.

Auditor’s Opinion In my opinion, the Annual Financial Report presents fairly, in all material respects, the financial position of the State of Victoria and the Victorian General Government Sector as at 30 June 2010 and their financial performance and cash flows for the year then ended in accordance with applicable Australian Accounting Standards (including the Australian Accounting Interpretations), and the financial reporting requirements of the Financial Management Act 1994.

MELBOURNE D D R Pearson 10 September 2010

2

Level 24, 35 Collins Street, Melbourne Vic. 3000 Telephone 61 3 8601 7000 Facsimile 61 3 8601 7010 Email [email protected] Website www.audit.vic.gov.au

______________________________________

Auditing in the Public Interest

Certification by the Department of Treasury and Finance The Financial Report for the State of Victoria has been prepared by the Department of Treasury and Finance through the consolidation of audited financial information provided by the Victorian public sector reporting entities listed herein.

In our opinion, the Annual Financial Report:

(a) presents fairly the consolidated financial statements of the State and the Victorian general government sector as at 30 June 2010; and

(b) has been prepared in accordance with Australian Accounting Standards and pronouncements, in particular AASB 1049 Whole of Government and General Government Sector Financial Reporting and the financial reporting requirements contained in Part 5 of the Financial Management Act 1994.

At the time of signing, we are not aware of any circumstances which would render any particulars included in the Annual Financial Report to be misleading or inaccurate.

Steve Mitsas, FCPA Principal Accounting Officer

Dean Yates Grant Hehir Deputy Secretary Secretary Budget and Financial Management

Authorised for issue on:

10 September 2010


Consolidated comprehensive operating statement for the period ended 30 June

($ million) General

State of Victoria government sector Notes 2010 2009 2010 2009

Revenue from transactions Taxation revenue 3 13 534.6 12 443.6 13 740.5 12 626.9 Interest revenue 982.9 1 190.0 333.5 378.2 Dividends and income tax equivalent and rate

equivalent revenue 4 422.7 411.7 485.6 490.4

Sales of goods and services 5 11 024.2 10 326.9 5 289.5 4 940.5 Grants 6 22 606.6 18 722.6 22 717.8 18 970.0 Other revenue 7 2 591.3 2 354.5 2 018.4 1 878.9 Total revenue from transactions 51 162.4 45 449.4 44 585.3 39 284.8

Expenses from transactions Employee expenses 16 218.3 15 037.0 15 404.8 14 296.9 Superannuation interest expense 8 867.7 610.4 866.7 609.7 Other superannuation 8 1 637.4 1 513.6 1 527.8 1 404.2 Depreciation 9 3 392.5 2 544.0 1 869.7 1 515.8 Interest expense 10 1 527.0 1 410.1 843.3 642.4 Grants and other transfers 12 6 632.8 5 273.8 9 174.5 7 366.3 Other operating expenses (a) 11 20 292.0 19 184.3 14 254.9 13 198.4

13 Total expenses from transactions 50 567.6 45 573.1 43 941.7 39 033.7 Net result from transactions – net operating

balance 594.7 ( 123.8) 643.6 251.2

Other economic flows included in net result Net gain/(loss) on disposal of non-financial assets 14 ( 49.5) 66.5 ( 40.4) 62.2 Net gain/(loss) on financial assets or liabilities at

fair value 187.2 (4 022.2) 64.0 ( 83.8)

Net actuarial gain/(loss) of superannuation defined benefits plans

8 (1 435.8) (7 572.5) (1 450.2) (7 510.1)

Share of net profit/(loss) from associates/ joint venture entities, excluding dividends

49.6 ( 30.4) ( 1.4) ( 74.4)

Other gains/(losses) from other economic flows (a) 15 (5 023.8) (1 406.4) (4 628.8) (1 017.9) Total other economic flows included in net result (6 272.4) (12 965.0) (6 056.8) (8 624.0)

Net result (5 677.7) (13 088.8) (5 413.1) (8 372.8) Other economic flows – other movements in equity

Net gain/(loss) on financial assets at fair value 25.1 ( 10.1) 15.2 8.7 Revaluations of non-financial assets 6 769.3 20 441.0 3 416.7 1 316.8 Net gain/(loss) on equity investments in other

sector entities at proportional share of the carrying amount of net assets

.. .. 2 513.9 14 237.7

Transfers to accumulated funds/other movements in equity

265.3 19 063.2 344.1 19 109.4

Total other economic flows – other movements in equity

7 059.7 39 494.0 6 289.8 34 672.7

Comprehensive result – total change in net worth 1 382.0 26 405.3 876.7 26 299.8 KEY FISCAL AGGREGATES Net operating balance 594.7 ( 123.8) 643.6 251.2 Less: Net acquisition of non-financial assets from

transactions 2 5 737.7 5 044.6 2 856.4 1 435.6

Net lending/(borrowing) (5 143.0) (5 168.4) (2 212.8) (1 184.4) The accompanying notes form part of these Financial Statements

Note: (a) Reclassification of discount movement associated with insurance claims expense from ‘transactions expense’ to ‘other economic flows’ has

required re-presentation of the 2009 results.


Consolidated balance sheet as at 30 June

($ million) General


Assets Financial assets

Cash and deposits 4 711.5 4 317.0 3 221.3 2 846.0 Advances paid 16 1 527.7 1 375.9 278.0 269.0 Investments, loans and placements 16 25 299.4 24 960.9 2 629.0 2 550.6 Receivables 17 5 058.3 4 922.4 2 883.6 2 783.3 Investments accounted for using the equity

method 18 533.2 477.1 35.1 30.0

Investments in other sector entities 19 .. .. 64 508.7 60 634.8 Total financial assets 37 130.1 36 053.4 73 555.8 69 113.6

Non-financial assets Inventories 20 929.7 925.3 268.4 249.3 Non-financial assets held for sale 21 108.1 80.2 91.5 74.2 Land, buildings, infrastructure, plant and

equipment 22 163 746.1 155 979.1 89 419.7 87 409.7

Other non-financial assets 23 1 554.7 1 216.1 771.0 682.1 Total non-financial assets 166 338.7 158 200.6 90 550.7 88 415.2

24(b) Total assets 203 468.8 194 254.0 164 106.4 157 528.9 Liabilities

Deposits held and advances received (a) 1 478.8 2 151.4 479.4 317.1 Borrowings (a) 25 28 580.3 24 126.0 13 612.5 10 640.1 Payables 6 975.6 6 130.1 4 849.0 4 164.0 Superannuation 8 22 597.7 20 755.1 22 534.1 20 672.3 Other employee benefits 26 4 686.7 4 569.2 4 357.9 4 277.2 Other provisions 27 19 759.2 18 518.6 718.0 784.4 Total liabilities 84 078.2 76 250.4 46 551.0 40 855.1 Net assets 119 390.6 118 003.6 117 555.5 116 673.8 Accumulated surplus/(deficit) 28 48 299.9 53 888.9 43 263.9 48 424.8 Reserves 28 71 046.2 64 075.2 74 247.0 68 209.5 Non-controlling interest 28 44.5 39.5 44.5 39.5 Net worth 119 390.6 118 003.6 117 555.5 116 673.8 FISCAL AGGREGATES Net financial worth (46 948.1) (40 197.1) 27 004.8 28 258.5 Net financial liabilities 46 948.1 40 197.1 37 503.9 32 376.3 Net debt (1 479.5) (4 376.5) 7 963.6 5 291.7 The accompanying notes form part of these Financial Statements

Note: (a) Certain items previously classified as borrowings have been re-classified as deposits held and advances received, in line with the GFS

framework.


Consolidated cash flow statement for the period ended 30 June

($ million) General


Cash flows from operating activities Receipts

Taxes received 13 665.6 12 268.1 13 871.5 12 451.4 Grants 22 503.9 19 262.3 22 716.8 18 970.2 Sales of goods and services (a) 12 689.1 11 848.1 6 158.8 5 512.6 Interest received 811.2 1 024.0 323.8 389.1 Dividends and income tax equivalent and rate

equivalent receipts 422.6 411.5 471.9 470.8

Other receipts 1 878.1 1 096.9 1 611.7 1 427.8 Total receipts 51 970.5 45 911.1 45 154.4 39 221.8 Payments

Payments for employees (16 109.3) (14 836.0) (15 335.9) (14 115.2) Superannuation (2 092.8) (1 900.2) (1 982.8) (1 778.5) Interest paid (1 371.3) (1 262.3) ( 767.4) ( 571.8) Grants and subsidies (6 554.0) (5 763.0) (9 233.3) (7 298.3) Goods and services (a) (20 081.5) (18 390.6) (14 194.7) (13 072.6) Other payments ( 440.7) ( 406.8) ( 436.9) ( 404.7)

Total payments (46 649.7) (42 559.0) (41 951.0) (37 241.1) Net cash flows from operating activities 29(b) 5 320.8 3 352.1 3 203.4 1 980.7

Cash flows from investing activities Purchases of non-financial assets (8 943.1) (7 435.2) (4 661.2) (3 146.8) Sales of non-financial assets 318.6 345.6 187.4 268.2 Cash flows from investments in non-financial assets (8 624.5) (7 089.6) (4 473.9) (2 878.6) Net cash flows from investments in financial assets

for policy purposes (b) 4.8 42.6 (1 236.6) (1 168.5)

Sub-total (8 619.7) (7 046.9) (5 710.5) (4 047.1) Net cash flows from investments in financial assets

for liquidity management purposes 58.8 ( 98.8) ( 1.0) ( 375.7)

Net cash flows from investing activities (8 560.9) (7 145.8) (5 711.5) (4 422.8) Cash flows from financing activities

Advances received (net) (c) (1 631.3) ( 2.1) ( 0.3) ( 1.8) Net borrowings (c) 4 413.7 4 064.7 2 892.6 2 487.2

( 8.3) Deposits received (net) 787.8 352.7 ( 57.2) .. Other financing (net) (b) .. 65.4 ( 227.7)

Net cash flows from financing activities 3 635.7 4 187.6 2 884.0 2 428.2 Net increase/(decrease) in cash and cash

equivalents 395.5 393.9 375.9 ( 13.9)

Cash and cash equivalents at beginning of the financial year

4 315.8 3 921.9 2 845.5 2 859.3

29(a) Cash and cash equivalents at end of the financial year

4 711.4 4 315.8 3 221.3 2 845.5

FISCAL AGGREGATES Net cash flows from operating activities 5 320.8 3 352.1 3 203.4 1 980.7 Net cash flows from investments in non-financial

assets (8 624.5) (7 089.6) (4 473.9) (2 878.6)

Cash surplus/(deficit) (3 303.7) (3 737.5) (1 270.5) ( 897.9) The accompanying notes form part of these financial statements

Notes: (a) These items are inclusive of goods and services tax. (b) Investment from the general government sector received by the PNFC and PFC sectors for policy purposes have been reclassified as

‘other financing (net)’. (c) Certain items previously classified as borrowings have been re-classified as deposits held, in line with the GFS framework.


Consolidated statement of changes in equity for the period ended 30 June

($ million)

State of Victoria Equity at

1 July

Total comprehensive

result

Transactions with owner in its

capacity as owner Equity at 30 June

2010 Accumulated surplus/(deficit) 53 888.9 (5 677.7) .. 48 211.2 Other movements in equity .. 88.7 .. 88.7 Adjustment for change in accounting

policy .. .. .. ..

Non-controlling interest 39.5 .. 5.0 44.5 Physical asset revaluation surplus 61 661.6 6 769.3 .. 68 430.8 Net movements in other reserves 2 413.6 201.8 .. 2 615.4 Total equity at end of the year 118 003.6 1 382.0 5.0 119 390.6

2009 Accumulated surplus/(deficit) 48 527.8 (13 088.8) .. 35 439.0 First time recognition of land under roads .. 18 682.5 .. 18 682.5 Other movements in equity .. ( 232.6) .. ( 232.6) Non-controlling interest 32.0 .. 7.5 39.5 Physical asset revaluation surplus 41 220.6 20 441.0 .. 61 661.6 Net movements in other reserves 1 810.5 603.1 .. 2 413.6 Total equity at end of the year 91 590.8 26 405.3 7.5 118 003.6

General government sector Equity at

1 July

Total comprehensive

result



2010 Accumulated surplus/(deficit) 48 424.8 (5 413.1) .. 43 011.7 Other movements in equity .. 252.3 .. 252.3 Non-controlling interest 39.5 .. 5.0 44.5 Physical asset revaluation surplus 29 776.6 3 416.7 .. 33 193.2 Net movements in other reserves 788.1 107.0 .. 895.0 Accumulated net gain on equity

investments in other sector entities 37 644.8 2 513.9 .. 40 158.8

Total equity at end of the period 116 673.8 876.7 5.0 117 555.5 2009

Accumulated surplus/(deficit) 37 686.9 (8 372.8) .. 29 314.0 First time recognition of land under roads .. 18 682.5 .. 18 682.5 Other movements in equity .. 428.3 .. 428.3 Non-controlling interest 32.0 .. 7.5 39.5 Physical asset revaluation surplus 28 459.7 1 316.8 .. 29 776.6 Net movements in other reserves 780.7 7.4 .. 788.1 Accumulated net gain on equity


Total equity at end of the period 90 366.4 26 299.8 7.5 116 673.8 The accompanying notes form part of these Financial Statements


NOTES TO THE FINANCIAL STATEMENTS

Note 1: Summary of significant accounting policies .........................................................46 Note 2: Disaggregated comprehensive operating statement for the period ended

30 June.................................................................................................................72 Note 3: Taxation revenue ..................................................................................................80 Note 4: Dividends and income tax equivalent and rate equivalent revenue ....................81 Note 5: Sale of goods and services...................................................................................81 Note 6: Grants ...................................................................................................................81 Note 7: Other revenue.......................................................................................................82 Note 8: Superannuation ....................................................................................................82 Note 9: Depreciation.........................................................................................................86 Note 10: Interest expense....................................................................................................86 Note 11: Other operating expenses ....................................................................................86 Note 12: Grants and other transfers.....................................................................................87 Note 13: Total expenses by government purpose classification ..........................................87 Note 14: Net gain/(loss) on disposal of non-financial assets ................................................88 Note 15: Other gains/(losses) from other economic flows....................................................88 Note 16: Advances paid and investments, loans and placements ....................................89 Note 17: Receivables ..........................................................................................................90 Note 18: Joint ventures ........................................................................................................92 Note 19: Investments in other sector entities........................................................................96 Note 20: Inventories.............................................................................................................97 Note 21: Non-financial assets held for sale..........................................................................97 Note 22: Land, buildings, infrastructure, plant and equipment............................................98 Note 23: Other non-financial assets...................................................................................109 Note 24: Assets classified by government purpose classification ......................................110 Note 25: Borrowings...........................................................................................................111 Note 26: Other employee benefits ....................................................................................111 Note 27: Other provisions...................................................................................................112 Note 28: Reserves, accumulated surplus/(deficit) and non-controlling interests ................115 Note 29: Cash flow information .........................................................................................117 Note 30: Reconciliations....................................................................................................118 Note 31: Explanations of material variances between budget and actual outcomes ......124 Note 32: Financial instruments...........................................................................................135 Note 33: Commitments.....................................................................................................153 Note 34: Contingent assets and contingent liabilities (State of Victoria).............................157 Note 35: Funds under management.................................................................................165 Note 36: Subsequent event...............................................................................................165 Note 37: Public account disclosure...................................................................................166 Note 38: Glossary of technical terms.................................................................................195 Note 39: Government purpose classification ....................................................................203 Note 40: Controlled entities ...............................................................................................205


Note 1: Summary of significant accounting policies This Annual Financial Report presents the audited general purpose consolidated financial statements of the State of Victoria and the Victorian general government sector. The purpose of the report is to provide users with information about the Government’s stewardship of the resources entrusted to it.

(A) Statement of compliance

These general purpose consolidated financial statements have been prepared in accordance with the Financial Management Act 1994 and applicable Australian Accounting Standards (AASs) which include Interpretations, issued by the Australian Accounting Standards Board (AASB). In particular, the financial statements are presented in a manner consistent with the requirements of AASB 1049 Whole of Government and General Government Sector Financial Reporting. Where appropriate, those AASs paragraphs applicable to not-for-profit entities have been applied.

Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.

Except as identified in Note 31 Explanations of material variances between budget and actual outcomes, the accounting policies applied are also consistent with those applied for the 2009-10 Budget, subject to the latter reports being prospective in nature and requiring application of estimation techniques to future amounts.

The Government Financial Statistics (GFS) information included in this report is based on the GFS manual published by the Australian Bureau of Statistics (refer to Note 1(E)).

To gain a better understanding of the terminology and key aggregates used in these financial statements, a glossary of terms can be found in Note 38 and Note 39.

The annual financial statements were authorised for issue by the Secretary of the Department of Treasury and Finance on 10 September 2010.

(B) Basis of accounting, preparation and measurement

The accrual basis of accounting has been applied in the preparation of these financial statements whereby assets, liabilities, equity, revenues and expenses are recognised in the reporting period to which they relate, regardless of when cash is received or paid.

These financial statements are presented in Australian dollars, the functional and presentation currency of the Victorian Government.

In the application of AASs, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on professional judgements derived from historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of the judgements. Actual results may differ from these estimates.

The estimates and associated assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and also in future periods that are affected by the revision. Judgements made by management in the application of AASs that have significant effects on the financial statements and estimates, with a risk of material adjustments in the next year, are disclosed throughout the notes to the financial statements.


Note 1: Summary of significant accounting policies (continued) This report has been prepared in accordance with the historical cost convention. Historical cost is based on the fair values of the consideration given in exchange for assets.

Exceptions to the historical cost convention include:

• general government sector investments in other sector entities which are measured at net asset value;

• non-financial physical assets which, subsequent to acquisition, are measured at a revalued amount being their fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent impairment losses. Revaluations are made with sufficient regularity to ensure that the carrying amounts do not materially differ from their fair value. The fair value of an asset other than land is generally based on its depreciated replacement value;

• productive trees in commercial native forests, which are measured at their fair value less costs to sell;

• derivative financial instruments, managed investment schemes, certain debt securities and investment properties after initial recognition, which are measured at fair value with changes reflected in the consolidated comprehensive operating statement (fair value through profit and loss);

• certain liabilities, most notably unfunded superannuation and insurance claim provisions, which are subject to an actuarial assessment; and

• available-for-sale investments which are measured at fair value with movements reflected in ‘Other economic flows – other movements in equity’.

(C) Reporting entity

The State of Victoria reporting entity, referred to in this report as ‘the State’, includes government departments, public non-financial corporations (PNFCs), public financial corporations (PFCs) and other government controlled entities. The State and most of its subsidiary entities are not-for-profit entities. These entities are classified into sectors according to the System of National Accounts described below.

System of National Accounts

(i) General government The Victorian general government sector includes all government departments, offices and other bodies engaged in providing services free of charge or at prices significantly below their cost of production. The general government sector is not a separate entity but represents a sector within the State of Victoria reporting entity, and is reported in accordance with AASB 1049.

The primary function of entities within the general government sector is to provide public services (outputs), which are mainly non-market in nature for the collective consumption of the community, and involve the transfer or redistribution of revenue which is financed mainly through taxes and other compulsory levies.

(ii) Public non-financial corporations The primary function of entities within the government PNFC sector is to provide goods and services within a competitive market that is non-regulatory and non-financial in nature. Such entities are financed mainly through sales to the consumer of these goods and services.


Note 1: Summary of significant accounting policies (continued)

(iii) Public financial corporations The government controlled PFC sector comprises entities engaged primarily in the provision of financial intermediation services or auxiliary financial services and which have one or more of the following characteristics:

• they perform a central borrowing function;

• they provide insurance services;

• they accept call, term or savings deposits; or

• they have the ability to incur liabilities and acquire financial assets in the market on their own account.

Disaggregated information about these sectors is presented in Note 2. This information is provided because there are differences between general government activities and those of the public sector entities in the PNFC and the PFC sectors. Disclosure of this information assists users of the financial statements to determine the effects of differing activities on the financial position of the State. It also assists users to identify the resources used in the provision of a range of goods and services, and the extent to which the State has recovered the costs of those resources from revenues attributable to those activities.

(D) Basis of consolidation

In accordance with AASB 1049 and AASB 127 Consolidated and Separate Financial Statements: • The consolidated financial statements of the State incorporates assets and liabilities of all

reporting entities (refer to Note 1(C)) that are controlled by the State as at 30 June 2010 and revenue and expenses for the reporting period.

• The consolidated financial statements of the Victorian general government sector incorporates assets and liabilities, revenue and expenses of entities classified as general government. Entities in the PNFC and PFC sectors are not consolidated into the financial statements of the general government sector, but are accounted for as equity investments measured at the Government’s proportional share of the carrying amount of net assets of the PNFC and PFC sector entities before consolidation eliminations. Where the carrying amount of the net assets before consolidation eliminations of an entity within the sectors is less than zero, the amount is not included.

Any change in the carrying amount of the investment from period to period is accounted for as if the change in carrying amount is a change in fair value and accounted for in a manner consistent with AASB 139 Financial Instruments: Recognition and Measurement. Entities which are not controlled by the State, including local government authorities, universities and denominational hospitals, are not consolidated into the financial statements for the State.

Where control of an entity is obtained during the financial period, its results are included in the consolidated comprehensive operating statement from the date on which control commenced. Where control ceased during a financial period, the entity’s results are included for that part of the period in which control existed. Where dissimilar accounting policies are adopted by entities and their effect is considered material, adjustments are made to ensure consistent policies are adopted in these financial statements.

In the process of preparing consolidated financial statements for the State and the Victorian general government sector, all material transactions and balances between consolidated entities are eliminated.


Note 1: Summary of significant accounting policies (continued) Although certain entities prepare their audited financial statements on a calendar year basis, their information on transactions and balances supplied for consolidation purposes relates to the financial year ending 30 June.

Consistent with the requirements of AASB 1004 Contributions and AASB Interpretation 1038 Contributions by Owners Made to Wholly Owned Public Sector Entities, contributions by owners (that is, contributed capital and its repayment) are treated as equity transactions and, therefore, do not form part of the revenues and expenses of the relevant sectors of government. These transactions between the sectors are eliminated upon consolidation in the State’s consolidated balance sheet.

Significant entities consolidated by the State are listed in Note 40.

Funds held in trust

The State has responsibility for transactions and balances relating to trust funds held on behalf of third parties external to the State, such as the 2009 Victorian Bushfire Appeal Trust Account. The revenue, expenses, assets and liabilities arising from funds managed on behalf of third parties are not recognised in these financial statements as they are managed on a fiduciary and custodial basis, and therefore are not controlled by the State. Funds under management including those relating to the 2009 Victorian Bushfire Appeal Fund are reported in Note 35 Funds under management and within Note 37 Public account disclosure.

(E) Scope and presentation of financial statements

Consolidated comprehensive operating statement

Revenues and expenses in the consolidated comprehensive operating statement are classified according to whether they arise from transactions or from other economic flows. This classification is consistent with that required under AASB 1049.

Transactions and other economic flows are defined by the Australian System of Government Finance Statistics: Concepts, Sources and Methods 2005 Cat. No. 5514.0 (the GFS manual, refer to Note 1(A)). Note 30 Reconciliations identifies and reconciles unconverged differences between GFS and the AASs.

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

Other economic flows are changes arising from market remeasurements. They include gains and losses from disposals, revaluations and impairment of non-financial physical and intangible assets; actuarial gains and losses arising from defined benefit superannuation plans; fair value changes of financial instruments and agricultural assets; and depletion of natural assets (non-produced) from their use or removal.

The net result is equivalent to profit or loss derived in accordance with AASs.

Key fiscal aggregates presented in the statement include:

• net result from transactions – net operating balance;

• total change in net worth; and

• net lending/(borrowing).



Consolidated balance sheet

Assets and liabilities are presented in a manner consistent with the GFS manual and the Uniform Presentation Framework 2008.

Current and non-current assets and liabilities (non-current being those assets or liabilities expected to be recovered or settled more than 12 months after the reporting period) are disclosed in the notes, where relevant.

Key fiscal aggregates presented:

• net financial worth;

• net financial liabilities; and

• net debt.

Consolidated cash flow statement

Cash flows are classified according to whether they arise from operating activities, investing activities, or financing activities. This classification is consistent with the requirements under AASB 107 Statement of Cash Flows. Investing activities are split between investing for liquidity management purposes or for policy purposes.

For cash flow statement presentation purposes, cash and cash equivalents include bank overdrafts, which are included as current borrowings on the balance sheet.

The key fiscal aggregate presented is the cash surplus/(deficit).

Consolidated statement of changes in equity

The statement of changes in equity presents reconciliations of non-owner and owner changes in equity from opening balances at the beginning of the reporting period to the closing balances at the end of the reporting period. It also shows separately changes due to amounts recognised in the ‘Comprehensive result’ and ‘Transactions with owner in its capacity as owner’.

Rounding

All amounts in the financial statements have been rounded to the nearest $100 000 except in Note 37 Public account disclosure which is rounded to the nearest $1000.

(F) Revenue from transactions

Revenue from transactions is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured at fair value.

Taxation revenue

State taxation revenue is recognised upon the earlier of either the receipt by the State of a taxpayer’s self assessment or the time when the taxpayer’s obligation to pay arises, pursuant to the issue of an assessment.

Upfront concession fees are recognised progressively over the term of the concession deed.



Interest revenue

Interest revenue includes interest received on bank term deposits and other investments and the unwinding over time of the discount on financial assets. Interest revenue is recognised using the effective interest method which allocates the interest revenue over the relevant period.

Net realised and unrealised gains and losses on the revaluation of investments do not form part of revenue from transactions, but are reported either as part of revenue from other economic flows in the net result or as unrealised gains or losses taken direct to equity, forming part of the total change in net worth in the comprehensive result.

Dividends, income tax equivalent and rate equivalent revenue

General government sector dividends, income tax equivalent and rate equivalent revenue, represents revenue received from other sectors of government. Such revenue for the general government sector is recognised when the right to receive the payment is established, and is eliminated on consolidation into the financial statements of the State. Dividends earned from non-state sources are also reflected in the financial statements.

Sales of goods and services

Revenue from supply of services Revenue from supply of services is recognised by reference to the stage of completion of the services being performed. The revenue is recognised when:

• the amount of the revenue, stage of completion and transaction costs incurred can be reliably measured; and

• it is probable that the economic benefits associated with the transaction will flow to the State.

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

Revenue from the sale of goods Revenue from the sale of goods is recognised when:

• the State no longer has any of the significant risks and rewards of ownership of the goods transferred to the buyer;

• the State no longer has continuing managerial involvement to the degree usually associated with ownership, or effective control over the goods sold;

• the amount of revenue, and the costs incurred or to be incurred in respect of the transactions, can be reliably measured; and

• it is probable that the economic benefits associated with the transaction will flow to the State.

Sale of goods and supply of services also includes regulatory fees which are recognised at the time the regulatory fee is billed.



Grants

Revenue from grants is recognised when the State obtains control over the underlying assets.

Grants mainly comprise contributions provided by the Commonwealth to assist the State in meeting general or specific service delivery obligations, primarily for the purpose of aiding in the financing of the operations of the recipient, capital purposes and/or for on-passing to other recipients. Grants also include grants from other jurisdictions.

Other revenue

Other revenue includes non-property rental, fines, assets received free of charge, royalties, donations and other miscellaneous non-operating revenue.

Fair value of assets and services received free of charge or for nominal consideration Contributions of resources received free of charge or for nominal consideration are recognised at fair value when the State obtains control over them, irrespective of whether these contributions are subject to restrictions or conditions over their use. Contributions in the form of services are only recognised when a fair value can be reliably determined and the services would have been purchased if not received as a donation.

(G) Expenses from transactions

Expenses from transactions are recognised as they are incurred, and reported in the financial year to which they relate.

Employee expenses

Refer to the section in Note 1(M) regarding ‘Other employee benefits’ and Note 38.

Depreciation

All infrastructure assets, buildings, plant and equipment and other non-financial physical assets (excluding items under operating leases, assets held for sale, land and investment properties) that have finite useful lives are depreciated. Depreciation is generally calculated on a straight-line basis, at rates that allocate the asset’s value, less any estimated residual value, over its estimated useful life. Refer to Note 1(K) for the depreciation policy for leasehold improvements.

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

The following are typical estimated useful lives for the different asset classes for current and prior years.

Asset class Useful life Dwellings 40 to 50 years Other buildings 30 to 60 years Road pavement 60 years Bridges 90 years Plant, equipment and vehicles 3 to 10 years Cultural assets (with finite useful lives) 100 years Water infrastructure – storage facilities 25 to 300 years Water infrastructure – other 25 to 100 years Rail infrastructure 2 to 50 years Other infrastructure 10 to 32 years


Note 1: Summary of significant accounting policies (continued) Land, earthworks, land under declared roads, and core cultural assets, which are considered to have an indefinite life, are not depreciated. Depreciation is not recognised in respect of these assets because their service potential has not, in any material sense, been consumed during the reporting period.

Intangible produced assets with finite useful lives are depreciated as an expense from transactions on a systematic (typically straight-line) basis over the asset’s useful life. Depreciation begins when the asset is available for use, that is, when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

For capitalised software development costs, typical useful lives range from between three and five years.

All intangible assets are tested for impairment whenever there is an indication that the asset may be impaired (refer to Note 1(H)).

The consumption of intangible non-produced assets with finite useful lives is not classified as a transaction, but as amortisation and included in the net result as an other economic flow.

Intangible assets with indefinite useful lives are not depreciated or amortised, but are tested annually for impairment.

Interest expense

Refer to Note 1(M).

Other operating expenses

Other operating expenses generally represent the day-to-day running costs incurred in the normal course of operations and includes:

• supplies and services costs which are recognised as an expense in the reporting period in which they are incurred. The carrying amounts of any inventories held for distribution are expensed when distributed; and

• bad and doubtful debts.

Grants and other transfers

Grants and other transfers to third parties are recognised as an expense in the reporting period in which they are paid or payable. They include transactions such as: grants, subsidies, personal benefit payments made in cash to individuals; other transfer payments made to local government, non-government schools and community groups; and for the general government sector, grants and transfer payments to PNFCs and PFCs.

(H) Other economic flows included in net result

Other economic flows measure the change in volume or value of assets or liabilities that do not result from transactions.

Net gain/(loss) on disposal of non-financial assets

Any gain or loss on the disposal of non-financial assets is recognised at the date of disposal and is determined after deducting from the proceeds the carrying value of the asset at that time.



Impairment of non-financial assets

Goodwill and intangible assets with indefinite useful lives (and intangible assets not yet available for use) are tested annually for impairment (as described below) and whenever there is an indication that the asset may be impaired.

All other non-financial physical assets are assessed annually for indications of impairment, except for:

• inventories (refer Note 1(K));

• certain biological assets related to agricultural activity (refer Note 1(L));

• investment properties that are measured at fair value (refer Note 1(L));

• non-financial assets held for sale (refer Note 1(K)); and

• assets arising from construction contracts (refer Note 1(K)).

If there is an indication of impairment, the assets concerned are tested as to whether their carrying value exceeds their recoverable amount. Where an asset’s carrying value exceeds its recoverable amount, the difference is written-off as an other economic flow, except to the extent that the write-down can be debited to an asset revaluation surplus amount applicable to that class of asset.

If there is an indication that there has been a change in the estimate of an asset’s recoverable amount since the last impairment loss was recognised, the carrying amount shall be increased to its recoverable amount. This reversal of the impairment loss occurs only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised in prior years.

It is deemed that, in the event of the loss or destruction of an asset, the future economic benefits arising from the use of the asset will be replaced unless a specific decision to the contrary has been made. The recoverable amount for most assets is measured at the higher of depreciated replacement cost and fair value less costs to sell. Recoverable amount for assets held primarily to generate net cash inflows is measured at the higher of the present value of future cash flows expected to be obtained from the asset and fair value less costs to sell.

Refer to Note 1(K) in relation to the recognition and measurement of non-financial assets.

Net gain/(loss) on financial assets or liabilities at fair value

Net gain/(loss) on financial instruments Net gain/(loss) on financial instruments includes:

• realised and unrealised gains and losses from revaluations of financial instruments at fair value through profit or loss;

• impairment and reversal of impairment for financial instruments at amortised cost; and

• disposal of financial assets and derecognition of financial liabilities.

Revaluations of financial instruments at fair value through profit or loss Refer to Note 1(I).

Net actuarial gains/(losses) on superannuation defined benefit plans

Refer to Note 1(M).



Other gains/(losses) from other economic flows

Other gains/(losses) from other economic flows include the gains or losses from:

• the revaluation of the present value of the long service leave liability due to changes in the bond interest rates;

• valuation changes associated with the indemnity for the electricity supply arrangements to the smelters of Alcoa of Australia Ltd; and

• valuation changes associated with land under roads (refer to Note 15).

(I) Financial instruments

Financial instruments arise out of contractual agreements that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Due to the nature of the State’s activities, certain financial assets and financial liabilities arise under statute rather than a contract. Such financial assets and financial liabilities do not meet the definition of financial instruments in AASB 132 Financial Instruments: Presentation. For example, statutory receivables arising from taxes, fines and penalties do not meet the definition of financial instruments as they do not arise under contract. However, guarantees issued by the treasury on behalf of the State are financial instruments because although authorised under statute, the terms and conditions for each financial guarantee may vary and are subject to an agreement.

Where relevant, for note disclosure purposes, a distinction has been made between those financial assets and financial liabilities that meet the definition of financial instruments in accordance with AASB 132 and those that do not.

The following refers to financial instruments unless otherwise stated.

Categories of non-derivative financial instruments

Loans and receivables Loans and receivables are financial instrument assets with fixed and determinable payments that are not quoted on an active market. These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial measurement, loans and receivables are measured at amortised cost using the effective interest method, less any impairment.

Loans and receivables category includes cash and deposits, term deposits with maturity greater than three months, trade receivables, loans and other receivables, but not statutory receivables.

Available-for-sale financial assets Available-for-sale financial instrument assets are those designated as available-for-sale or not classified in any other category of financial instrument asset.

Such assets are initially recognised at fair value. Subsequent to initial recognition, they are measured at fair value with gains and losses arising from changes in fair value, recognised in ‘Other economic flows – other movements in equity’ until the investment is disposed. Movements resulting from impairment and foreign currency changes are recognised in the net result as other economic flows. On disposal, the cumulative gain or loss previously recognised in ‘Other economic flows – other movements in equity’ is transferred to other economic flows in the net result.

Fair value is determined in the manner described in Note 32 Financial instruments. Available-for-sale category includes certain equity investments and those debt securities that are designated as available-for-sale.



Held-to-maturity financial assets If the State has the positive intent and ability to hold nominated investments to maturity, then such financial assets may be classified as held-to-maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition held-to-maturity financial assets are measured at amortised cost using the effective interest method, less any impairment losses.

The State makes limited use of this classification because any sale or reclassification of more than an insignificant amount of held-to-maturity investments not close to their maturity, would result in the whole category being reclassified as available-for-sale. The State would also be prevented from classifying investment securities as held-to-maturity for the current and the following two financial years.

The held-to-maturity category includes certain term deposits and debt securities for which the State intends to hold to maturity.

Financial assets and liabilities at fair value through profit and loss Financial assets are categorised as fair value through profit or loss at trade date if they are classified as held for trading or designated as such upon initial recognition. Financial instrument assets are designated at fair value through profit or loss on the basis that the financial assets form part of a group of financial assets that are managed by the State based on their fair values, and have their performance evaluated in accordance with documented risk management and investment strategies.

The State’s public borrowings, mainly raised through the Treasury Corporation of Victoria, are designated at fair value through profit or loss on trade date on the basis that the financial liability forms a group of financial liabilities which are managed on a fair value basis in accordance with documented risk strategies.

Financial instruments at fair value through profit or loss are initially measured at fair value and attributable transaction costs are expensed as incurred. Subsequently, any changes in fair value are recognised in the net result as other economic flows. Any dividend or interest on a financial asset is recognised in the net result from transactions.

Financial assets and liabilities at fair value through profit or loss includes the majority of the State’s equity investments, debt securities, and borrowings.

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

Financial instrument liabilities measured at amortised cost include all of the State’s payables, deposits held and advances received, and interest-bearing arrangements other than those designated at fair value through profit or loss.



Derivative financial instruments

Derivative financial instruments are classified as held for trading financial assets and liabilities. They are initially recognised at fair value on the date on which a derivative contract is entered into. Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. Any gains or losses arising from changes in the fair value of derivatives after initial recognition, are recognised in the consolidated comprehensive operating statement as an other economic flow included in the net result.

Offsetting financial instruments

Financial instrument assets and liabilities are offset and the net amount presented in the consolidated balance sheet when, and only when, the State has a legal right to offset the amounts and intend either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Reclassification of financial instruments

Subsequent to initial recognition and under rare circumstances, non-derivative financial instruments assets that have not been designated at fair value through profit or loss upon recognition, may be reclassified out of the fair value through profit or loss category, if they are no longer held for the purpose of selling or repurchasing in the near term.

Financial instrument assets that meet the definition of loans and receivables may be reclassified out of the fair value through profit and loss category into the loans and receivables category, where they would have met the definition of loans and receivables had they not been required to be classified as fair value through profit and loss. In these cases, the financial instrument assets may be reclassified out of the fair value through profit and loss category, if there is the intention and ability to hold them for the foreseeable future or until maturity.

Available-for-sale financial instrument assets that meet the definition of loans and receivables may be reclassified into the loans and receivables category if there is the intention and ability to hold them for the foreseeable future or until maturity.

(J) Financial assets

Cash and deposits

Cash and deposits, including cash equivalents, comprise cash on hand and cash at bank, deposits at call and those highly liquid investments with an original maturity of three months or less, which are held for the purpose of meeting short term cash commitments rather than for investment purposes, and which are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

Advances paid

Advances paid represent inter-sector loans and advances, initially measured at fair value and subsequently at amortised cost, made by the Victorian general government sector to the PNFC and PFC sectors, for policy rather than liquidity management purposes. They exclude equity contributions, and are eliminated on consolidation of the State’s position.



Investments, loans and placements

Investments are classified using the following categories:

• financial assets at fair value through profit or loss;

• loans and receivables;

• held-to-maturity; and

• available-for-sale financial assets.

This classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition.

Any dividend or interest earned on the financial asset is recognised in the consolidated comprehensive operating statement as a transaction.

Receivables

Receivables consist of:

• contractual receivables, such as debtors in relation to goods and services and accrued investment revenue; and

• statutory receivables, such as taxes, fines and goods and services tax input tax credits recoverable.

Contractual receivables are classified as financial instruments and categorised as loans and receivables (refer to Note 1(I) for recognition and measurement). Statutory receivables, are recognised and measured similarly to contractual receivables (except for impairment), but are not classified as financial instruments because they do not arise from a contract.

Receivables are subject to impairment testing as described below. A provision for doubtful receivables is recognised when there is objective evidence that the debts may not be collected, and bad debts are written-off when identified.

Investments accounted for using the equity method

Associates are those entities over which the State exercises significant influence, but not control.

Investments in associates are accounted for in the consolidated financial statements using the equity method. Under this method, the State’s share of the post acquisition profits or losses of associates is recognised in the net result as other economic flows. The share of post acquisition movements in revaluation surpluses and any other reserves is recognised in both the comprehensive operating statement and the statement of changes in equity. The cumulative post acquisition movements are adjusted against the cost of the investment.

Joint ventures are contractual arrangements between the State or a subsidiary entity and one or more other parties to undertake an economic activity that is subject to joint control. Joint control only exists when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control (the venturers).

Interests in jointly controlled entities are accounted for in the consolidated financial statements using the equity method, as applied to investments in associates.



Investments in jointly controlled assets and operations

In respect of its interest in jointly controlled assets, the State recognises in the consolidated financial statements:

• its share of jointly controlled assets;

• any liabilities that it had incurred;

• its share of liabilities incurred jointly by the joint venture;

• any income earned from the selling or using of its share of the output from the joint venture; and

• any expenses incurred in relation to being an investor in the joint venture.

For jointly controlled operations the State recognises: the assets that it controls and the liabilities that it incurs; expenses that it incurs; and its share of income that it earns from selling outputs of the joint venture.

Investments in other sector entities

Refer to Note 1(D).

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

• the rights to receive cash flows from the asset have expired; or

• the State retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass through’ arrangement; or

• the State has transferred its rights to receive cash flows from the asset and either:

(a) has transferred substantially all the risks and rewards of the asset, or

(b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the State has neither transferred nor retained substantially all the risks and rewards or transferred control, the asset is recognised to the extent of the State’s continuing involvement in the asset.

Impairment of financial assets

At the end of each reporting period, the State assesses whether there is objective evidence that a financial instrument asset or group of financial instrument assets is impaired. All financial instrument assets, except those measured at fair value through profit or loss, are subject to annual review for impairment. Receivables are assessed for bad and doubtful debts on a regular basis. Those bad debts considered as written-off by mutual consent are classified as a transaction expense. Bad debts not written-off by mutual consent and the allowance for doubtful receivables are classified as other economic flows in the net result.


Note 1: Summary of significant accounting policies (continued) The amount of the allowance is the difference between the financial instrument asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate.

In assessing impairment of statutory (non-contractual) financial assets which are not financial instruments, professional judgement is applied in assessing materiality using estimates, averages and other computational methods in accordance with AASB 136 Impairment of Assets.

(K) Non-financial assets

Inventories

Inventories include goods and other property held either for sale, or for distribution at zero or nominal cost, or for consumption in the ordinary course of business operations.

Inventories held for distribution are measured at cost, adjusted for any loss of service potential. All other inventories, including land held for sale, are measured at the lower of cost and net realisable value. Where inventories are acquired for no cost or nominal consideration, they are measured at current replacement cost at the date of acquisition.

Cost includes an appropriate portion of fixed and variable overhead expenses. Cost is assigned to land held for sale (undeveloped, under development and developed) and to other high value, low volume inventory items on a specific identification of cost basis. Cost for all other inventory is measured on the basis of weighted average cost.

Bases used in assessing loss of service potential for inventories held for distribution include current replacement cost and technical or functional obsolescence. Technical obsolescence occurs when an item still functions for some or all of the tasks it was originally acquired to do, but no longer matches existing technologies. Functional obsolescence occurs when an item no longer functions the way it did when it was first acquired.

Non-financial assets held for sale

Non-financial assets (including disposal group assets) are treated as current and classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when:

• the asset is available for immediate sale in the current condition; and

• the sale is highly probable and the asset’s sale is expected to be completed within 12 months from the date of classification.

These non-financial assets, related liabilities and financial assets are measured at the lower of carrying amount and fair value less costs to sell, and are not subject to depreciation or amortisation.

Land, buildings, infrastructure, plant and equipment

All non-financial physical assets, are measured initially at cost and subsequently revalued at fair value less accumulated depreciation and impairment. Where an asset is aquired for no or nominal cost, the cost is its fair value at the date of acquisition.

The initial cost for non-financial physical assets under a finance lease (refer to Note 1(N)) is measured at an amount equal to the fair value of the leased asset or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease.


Note 1: Summary of significant accounting policies (continued) Non-financial physical assets such as national parks, other Crown land and heritage assets are measured at fair value with regard to the property’s highest and best use after due consideration is made for any legal or constructive restrictions imposed on the asset, public announcements or commitments made in relation to the intended use of the asset. Theoretical opportunities that may be available in relation to the asset are not taken into account until it is virtually certain that the restrictions will no longer apply.

The fair value of cultural assets and collections, heritage assets and other non-financial physical assets that the State intends to preserve because of their unique historical, cultural or environmental attributes, is measured at the replacement cost of the asset less, where applicable, accumulated depreciation (calculated on the basis of such cost to reflect the already consumed or expired future economic benefits of the asset) and any accumulated impairment. These policies and any legislative limitations and restrictions imposed on their use and/or disposal may impact their fair value.

Road network assets (including earthworks of the declared road networks) are measured at fair value, determined by reference to the asset’s depreciated replacement cost.

Land under declared roads acquired prior to 1 July 2008 is measured at fair value. Land under declared roads acquired on or after 1 July 2008 is measured initially at cost of acquisition and subsequently at fair value. The fair value methodology applied by Valuer-General Victoria, is based on discounted site values and sales evidence, to represent the equivalent en globo land values, for application to the land under the arterial road network, including related reservations.

Infrastructure assets of water, rail and port entities within the PNFC sector are measured at fair value.

The fair value of infrastructure systems and plant, equipment and vehicles, is normally determined by reference to the asset’s depreciated replacement cost, or where the infrastructure is held by a for-profit entity, the fair value may be derived from estimates of the present value of future cash flows. For plant, equipment and vehicles, existing depreciated historical cost is generally a reasonable proxy for depreciated replacement cost because of the short lives of the assets concerned.

Certain assets are acquired under finance leases, which may form part of a service concession arrangement. Refer to Notes 1(N) and 1(R) for more information.

The cost of constructed non-financial physical assets includes the cost of all materials used in construction, direct labour on the project, and an appropriate proportion of variable and fixed overheads.

For the accounting policy on impairment of non-financial physical assets, refer to Note 1(H).

Leasehold improvements

The cost of leasehold improvements is capitalised as an asset and depreciated over the shorter of the remaining term of the lease or the estimated useful life of the improvements.

Revaluations of non-financial physical assets

Non-financial physical assets are measured at fair value on a cyclical basis in accordance with the Financial Reporting Directions (FRDs) issued by the Minister for Finance. A full revaluation normally occurs every five years, based upon the asset’s government purpose classification (refer to Note 39 Government purpose classification), but may occur more frequently if fair value assessments indicate material changes in values. Independent valuers are generally used to conduct these scheduled revaluations. Certain infrastructure assets are revalued using specialised advisors. Any interim revaluations are determined in accordance with the requirements of the FRDs.


Note 1: Summary of significant accounting policies (continued) Revaluation increases or decreases arise from differences between an asset’s carrying value and fair value.

Net revaluation increases (where the carrying amount of a class of assets is increased as a result of a revaluation) are recognised in ‘Other economic flows – other movements in equity’ and accumulated in equity under the asset revaluation surplus. However, the net revaluation increase is recognised in the net result to the extent that it reverses a net revaluation decrease in respect of the same class of property, plant and equipment previously recognised as an expense (other economic flows) in the net result.

Net revaluation decreases are recognised immediately as other economic flows in the net result. Net revaluation decrease is recognised in ‘Other economic flows – other movements in equity’ to the extent that a credit balance exists in the asset revaluation surplus in respect of the same class of property, plant and equipment. The net revaluation decrease recognised in ‘Other economic flows – other movements in equity’ reduces the amount accumulated in equity under the asset revaluation surplus.

Revaluation increases and decreases relating to individual assets within a class of property, plant and equipment, are offset against one another within that class but are not offset in respect of assets in different classes. Any asset revaluation surplus is not normally transferred to accumulated funds on derecognition of the relevant asset.

(L) Other non-financial assets

Where an asset is received for no or nominal consideration the cost is the asset’s fair value at the date of acquisition.

Intangible assets

Purchased intangible assets are initially recognised at cost. Subsequently, intangible assets with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses. Costs incurred subsequent to initial acquisition are capitalised when it is expected that additional future economic benefits will flow to the State.

When the recognition criteria in AASB 138 Intangible assets is met, internally generated intangible assets are recognised and measured at cost less accumulated amortisation and impairment.

Refer to Note 1(G) for the policy on the amortisation of produced and non-produced intangible assets and Note 1(H) for impairment of intangible assets.

Investment properties

Investment properties represent properties held to earn rentals or for capital appreciation, or both. Investment properties exclude properties held to meet service delivery objectives of the State.

Investment properties are initially recognised at cost. Costs incurred subsequent to initial acquisition are capitalised when it is probable that future economic benefits in excess of the originally assessed performance of the asset will flow to the State.

Subsequent to initial recognition at cost, investment properties are revalued to fair value with changes in the fair value recognised as other economic flows in the comprehensive operating statement in the period that they arise. These properties are neither depreciated nor tested for impairment.

Rental revenue from the leasing of investment properties is recognised as a transaction in the consolidated comprehensive operating statement on a straight-line basis over the lease term.



Biological assets

Productive trees in commercial native forests and breeding livestock are recognised as biological assets. These biological assets are measured at fair value less costs to sell and are revalued at 30 June each year.

For breeding livestock, fair value is based on the amount that could be expected to be received from the disposal of livestock with similar attributes.

For productive trees, revaluation to fair value is determined using a discounted cash flow method based on expected net future cash flows, discounted by a current market determined rate. After harvest, productive trees are treated as inventories (refer to Note 1(K)).

An increase or decrease in the fair value of these biological assets is recognised in the consolidated comprehensive operating statement as an other economic flow.

Other assets

Prepayments Other non-financial assets include prepayments which represent payments in advance of receipt of goods or services or that part of expenditure made in one accounting period covering a term extending beyond that period.

(M) Liabilities

Deposits held and advances received

Deposits held include deposits, security deposits, and trust fund provisions held on behalf of public or private sector bodies. Advances received include loans and other repayable funds from public sector bodies for policy purposes.

Deposits held and advances received are categorised as financial liabilities at amortised cost (refer to Note 1(I)).

Borrowings

The State (consistent with the paragraphs of AASB 123 Borrowing costs applicable to not-for-profit public sector entities), recognises borrowing costs immediately as an expense, even where they are directly attributable to the acquisition, construction or production of a qualifying asset. All interest-bearing liabilities are initially measured at the fair value of the consideration received less directly attributable transaction costs. The measurement basis subsequent to initial recognition depends on whether the State has categorised its interest-bearing liabilities as either, financial liabilities designated at fair value through profit or loss, or financial liabilities at amortised cost. The classification depends on the nature and purpose of the interest-bearing liabilities. The State determines the classification of its interest-bearing liabilities at initial recognition.



Payables

Payables consist of:

• contractual payables, such as accounts payable, and unearned revenue liability including deferred revenue from concession notes. Accounts payable represent liabilities for goods and services provided to the State prior to the end of the financial year that are unpaid, and arise when the State becomes obliged to make future payments in respect of the purchase of those goods and services; and

• statutory payables, such as goods and services tax and fringe benefits tax payables.

Contractual payables are classified as financial instruments and categorised as financial liabilities at amortised cost (refer to Note 1(I)). Statutory payables are recognised and measured similarly to contractual payables, but are not classified as financial instruments and not included in the category of financial liabilities at amortised cost, because they do not arise from a contract.

Superannuation

Defined benefit superannuation plans provide benefits based on years of service and final average salary. At each reporting date, a liability or asset in respect of defined benefit superannuation obligations is recognised. This is measured as the difference between the present value of accrued liabilities at the reporting date and the net market value of the superannuation plans’ assets at that date.

The present value of accrued liabilities is based upon future payments which are expected to arise due to membership of the superannuation plan. Consideration is given to expected future salary levels and the experience of employee departures. In accordance with prevailing accounting standards, expected future payments are discounted to present values using rates applying to long-term Commonwealth Government Bonds.

The superannuation liability recognised in the consolidated balance sheet also allows for any past service cost that has not yet been recognised in the consolidated comprehensive operating statement.

The 2009-10 Annual Financial Report adopts a revised approach to setting the assumptions used to value the superannuation liability. The key difference is that the inflation assumption is now based upon the relationship between nominal and index linked bond yields of similar duration. This approach ensures that the inflation assumption reflects market expectations and is compatible with the market based discount rate used to value the outstanding liability.

Superannuation interest expense and other superannuation The superannuation expense for transactions is determined on the following basis:

• in relation to defined contribution (i.e. accumulation) superannuation plans, the associated expense is simply the employer contributions that are paid or payable in respect of employees who are members of these plans during the reporting period; and

• for defined benefit plans, the superannuation expense reflects the employer financed component of defined benefits that are expected to accrue over the reporting period (i.e. service cost), along with the superannuation interest expense.



Net actuarial gains/(losses) on superannuation defined benefit plans Net actuarial gains or losses reflect the change in the defined benefit obligation that has arisen due to differences between actual outcomes and the assumptions used to calculate the superannuation expense from transactions.

The effect of any change in actuarial assumptions during the period is also included. Net actuarial gains or losses are fully recognised in the period in which they occur in the net result as other economic flows.

Other employee benefits

Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave for services rendered to the reporting date.

(i) Wages and salaries, annual leave and sick leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave are recognised in the provision for employee benefits, classified as current liabilities. Those liabilities which are expected to be settled within 12 months of the reporting period, are measured at their nominal values.

Those liabilities that are not expected to be settled within 12 months are also recognised in the provision for employee benefits as current liabilities, but are measured at present value of the amounts expected to be paid when the liabilities are settled, using the remuneration rate expected to apply at the time of settlement.

(ii) Long service leave Liability for long service leave (LSL) is recognised in the provision for employee benefits.

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

The components of this current LSL liability are measured at:

• nominal value – component that the State expects to settle within 12 months; and

• present value – component that the State does not expect to settle within 12 months.

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

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

(iii) Employee benefits on-costs Employee benefits on-costs such as payroll tax, workers’ compensation and superannuation are recognised separately from the provision for employee benefits.



Other provisions

Other provisions are recognised when the State has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be received from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably.

Other provisions include a liability for outstanding insurance claims, which is independently assessed by actuaries. This liability covers claims reported but not yet paid, claims incurred but not yet reported, and the anticipated costs of settling those claims. Because of the inherent uncertainty in the estimate of the outstanding insurance claims, a risk margin is included. The risk margin is set to increase the probability that the liability estimate will be sufficient.

The actuaries take into account projected inflation and other factors to arrive at expected future payments. These are then discounted at the reporting date using a market determined, risk-free discount rate.

Onerous contracts An onerous contract is considered to exist when the unavoidable cost of meeting the contractual obligations exceeds the estimated economic benefits to be received. Present obligations arising under onerous contracts are recognised as a provision to the extent that the present obligation exceeds the estimated economic benefits to be received.

The State’s major onerous contractual obligation is for the supply of electricity to Alcoa of Australia Ltd’s aluminium smelters at Portland and Point Henry. A yearly review of the contract is undertaken to remeasure the liability, taking into account the effects of market changes during the year relating to the National Electricity Market and assumptions including aluminium prices, with reference to electricity prices.

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised as an other economic flow in the consolidated comprehensive operating statement.



(N) Leases

A lease is a right to use an asset for an agreed period of time in exchange for payment.

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

Finance leases

State as lessor Amounts due from lessees under finance leases are recorded as receivables. Finance lease receivables are initially recorded at amounts equal to the present value of the minimum lease payments receivable plus the present value of any unguaranteed residual value expected to accrue at the end of the lease term. Finance lease receipts are apportioned between periodic interest revenue and reduction of the lease receivable over the term of the lease in order to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.

State as lessee At the commencement of the lease term, finance leases are initially recognised as assets and liabilities at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payment, each determined at the inception of the lease. The leased asset is accounted for as a non-financial physical asset and depreciated over the shorter of the estimated useful life of the asset or the term of the lease.

Minimum finance lease payments are apportioned between the reduction of the outstanding lease liability and the periodic finance expense which is calculated using the interest rate implicit in the lease and charged directly to the consolidated comprehensive operating statement. Contingent rentals associated with finance leases are recognised as an expense in the period in which they are incurred.

Operating leases

State as lessor Rental revenue from operating leases is recognised on a straight-line basis over the term of the relevant lease.

All incentives for the agreement of a new or renewed operating lease are recognised as an integral part of the net consideration agreed for the use of the leased asset, irrespective of the incentive’s nature or form or the timing of payments.


Note 1: Summary of significant accounting policies (continued) In the event that lease incentives are given to the lessee, the aggregate cost of incentives are recognised as a reduction of rental revenue over the lease term, on a straight-line basis unless another systematic basis is more representative of the time pattern over which the economic benefit of the leased asset is diminished.

State as lessee Operating lease payments, including any contingent rentals, are recognised as an expense from transactions in the consolidated comprehensive operating statement on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern of the benefits derived from the use of the leased asset. The leased asset is not recognised in the balance sheet.

All incentives for the agreement of a new or renewed operating lease are recognised as an integral part of the net consideration agreed for the use of the leased asset, irrespective of the incentive’s nature or form or the timing of payments.

In the event that lease incentives are received to enter into operating leases, the aggregate benefit of the lease incentives are recognised as a reduction of rental expense over the lease term on a straight-line basis, unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

(O) Budgetary information for the Victorian general government sector

Note 31 Explanations of material variances between budget and actual outcomes presents the original and revised published budget estimates for the Victorian general government sector, and explains material variances between the budget estimates and actual outcomes as presented in these annual financial statements.

(P) Commitments

Commitments for future expenditure include operating and capital commitments arising from contracts. These commitments are disclosed by way of a note (refer to Note 33) at their nominal value and inclusive of the GST payable. In addition, where it is considered appropriate and provides additional relevant information to users, the net present values of significant individual projects are stated. These future expenditures cease to be disclosed as commitments once the related liabilities are recognised in the consolidated balance sheet.

(Q) Contingent assets and contingent liabilities

Contingent assets and contingent liabilities are not recognised in the balance sheet but are disclosed by way of a note (refer to Note 34) and, if quantifiable, are measured at nominal value. Contingent assets and liabilities are presented inclusive of GST receivable or payable respectively.

(R) Service concession arrangements

The State sometimes enters into certain arrangements with private sector participants to design and construct or upgrade assets used to provide public services. These arrangements are typically complex and usually include the provision of operational and maintenance services for a specified period of time. These arrangements are often referred to as either public private partnerships (PPPs) or service concession arrangements (SCAs).


Note 1: Summary of significant accounting policies (continued) These SCAs usually take one of two main forms. In the more common form, the State pays the operator over the term of the arrangement, subject to specified performance criteria being met. At the date of commitment to the principal provisions of the arrangement, these estimated periodic payments are allocated between a component related to the design and construction or upgrading of the asset and components related to the ongoing operation and maintenance of the asset. The former component is accounted for as a lease payment in accordance with the lease policy (see Note 1(N)). The remaining components are accounted for as commitments for operating costs which are expensed in the comprehensive operating statement as they are incurred.

The other, less common form of SCA, is one in which the State grants to an operator, for a specified period of time, the right to collect fees from users of the SCA asset, in return for which the operator constructs the asset and has the obligation to supply agreed upon services, including maintenance of the asset for the period of the concession. These private sector entities typically lease land, and sometimes state works, from the State and construct infrastructure. At the end of the concession period, the land and state works, together with the constructed facilities, will be returned to the State.

Significant service concession arrangements include the CityLink network, which has a nominal term of 33.5 years expiring 15 January 2034 and EastLink, which is also a tollway, with a nominal term of 35 years expiring 30 November 2043.

There is currently no authoritative accounting guidance applicable to grantors (the State) on the recognition and measurement of the right of the State to receive assets from such concession arrangements. Due to the lack of such guidance, there has been no change to existing policy and those assets are not currently recognised.

(S) Accounting for the goods and services tax

Revenues, expenses and assets are recognised net of the amount of associated goods and services tax (GST), except where the GST incurred is not recoverable from the taxation authority. In this case the GST payable is recognised as part of the cost of acquisition of an asset or part of an item of expense.

Receivables and payables are stated inclusive of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the consolidated balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as an operating cash flow.

Commitments and contingent assets and liabilities are also stated inclusive of GST.

(T) Foreign currency transactions/balances

All foreign currency transactions during the financial year are brought to account using the exchange rate in effect at the date of the transaction. Foreign monetary items existing at the end of the reporting period are translated at the closing rate at the date of the end of the reporting period. Non-monetary assets carried at fair value that are denominated in foreign currencies are translated to the functional currency at the rates prevailing at the date when the fair value was determined.

Foreign currency translation differences are recognised in other economic flows in the consolidated comprehensive operating statement and accumulated in a separate component of equity, in the period in which they arise.



(U) Australian Accounting Standards issued that are not yet effective

The following AASs have been issued by the AASB but are not yet effective. They become effective for the first consolidated financial statements for reporting periods commencing after the operative date as follows:

• AASB 2009-5 Amendments to Australian Accounting Standards – Arising from the Annual Improvements Projects [AASB 5, 8, 101, 107, 117, 118, 136 & 139], operative from 1 January 2010. This Standard makes mainly editorial amendments for clarification, except for amendments to AASB 139 Financial Instruments: Recognition and Measurement relating to:

− application of hedged accounting to transactions between segments within the same group; and

− reclassification of hedging losses from ‘Other economic flows – other movements in equity’ to net result;

• AASB 2010-1 Amendments to Australian Accounting Standards – Limited Exemption from Comparative AASB 7 Disclosures for First-time Adopters [AASB 1 & AASB 7], operative from 1 July 2010. This amending Standard provides an exemption from disclosing comparatives for first time adopters of the updated version of AASB 7 Financial Instruments: Disclosures (due to AASB 2009-2 amendments). This exemption is also available to existing users when transitioning to the revised AASB 7;

• AASB 2009-12 Amendments to Australian Accounting Standards [AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052], operative from 1 January 2011. This Standard mainly makes editorial amendments to align with recent changes made to equivalent international standards (IASBs). Additionally, the amendment to AASB 8 Operating Segments requires a determination of whether a government and the entities under its control, are considered a single customer for the purposes of certain operating segment disclosures;

• AASB 2009-14 Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement [AASB Interpretation 14], operative from 1 January 2011. This amending Standard removes the option in Interpretation 14 AASB 119 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, to use present value in measuring the reduction in future contributions for employees;

• AASB 9 Financial Instruments, operative from 1 January 2013. This Standard simplifies requirements for the classification and measurement of financial assets and replaces these requirements in AASB 139;

• AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 [AASBs 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 121, 127, 128, 131, 132, 136, 139, 1023, 1038, and Interpretations 10 & 12], operative from 1 January 2013. This Standard makes consequential amendments to applicable AASs related to AASB 9 Financial Instruments; and

• AASB 1053 Application of Different Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements, operative from 1 July 2013. These Standards prescribe the reduced disclosure requirements for entities that apply Tier 2 financial reporting. The Standards do not change the recognition or measurement of assets or liabilities, and do not affect the consolidated financial reports of governments.

The impacts of the above AASs on future financial statements is still being assessed.



(V) Events after the balance sheet date

Assets, liabilities, revenue or expenses may arise from past transactions or other past events. Adjustments are made to amounts recognised in the financial statements for events which occur after the balance date and before the date the statements are authorised for issue, where those events provide information about conditions which existed at the reporting date. If required, note disclosure is made about events between the balance date and the date the statements are authorised for issue where the events relate to conditions which arose after the balance sheet date, and which may have a material impact on the results of subsequent years (refer to Note 36).

(W) Correction of prior year errors

The errors as described below have been corrected by restating each of the affected financial statement line items for the prior year.

Asset derecognitions

The ongoing reconciliation of Crown land parcels identified the need for certain land asset derecognitions related to either movements in Crown land parcels in prior financial years or duplicated records in non-financial asset systems. Apart from the impact on the prior year operating results of these errors, some of these items were also included in recent valuations recorded in prior years.

Consequently, the previous year expenses were understated, and the asset revaluation surplus was overstated.

All derecognitions in the current financial year have been based on the correct date of the transactions.

The net impact of these errors is:

• 2008-09 opening balances

− an overstatement of retained earnings of $148.3 million;

− an overstatement of asset revaluation surplus of $91.2 million; and

− an overstatement of property, plant and equipment of $239.5 million;

• 2008-09 closing balances

− an understatement of net loss on non-financial assets of $9.0 million;

− an overstatement of retained earnings of $157.3 million; and

− an overstatement of property, plant and equipment of $248.5 million.


Note 2: Disaggregated comprehensive operating statement for the period ended 30 June

($ million) General Public non-financial

government sector corporations 2010 2009 2010 2009 Revenue from transactions Taxation revenue 13 740.5 12 626.9 .. .. Interest 333.5 63.7 378.2 100.3

28.9 Dividends and income tax equivalent and rate equivalent revenue

485.6 490.4 23.1

4 030.9 Sales of goods and services 5 289.5 4 940.5 3 922.1 Grants 22 717.8 2 933.3 18 970.0 2 009.9

601.4 Other revenue 2 018.4 1 878.9 507.1 7 658.1 Total revenue 44 585.3 39 284.8 6 562.4

Expenses from transactions 857.6 Employee expenses 15 404.8 14 296.9 775.2

1.0 Superannuation interest expense 866.7 609.7 0.7 85.6 Other superannuation 1 527.8 1 404.2 84.6

Depreciation 1 869.7 1 496.1 1 515.8 1 004.0 534.7 Interest expense 843.3 642.4 490.6

Grants and other transfers 464.9 9 174.5 7 366.3 249.8 Other operating expenses (a) 3 691.8 3 714.7 14 254.9 13 198.4

131.9 Other property expenses .. .. 61.1 7 263.5 Total expenses 43 941.7 39 033.7 6 380.7

394.6 Net result from transactions – net operating balance 643.6 251.2 181.8 Other economic flows included in net result

( 8.8) Net gain/(loss) on disposal of non-financial assets ( 40.4) 62.2 4.6 ( 132.4) Net gain/(loss) on financial assets or liabilities at fair value 64.0 ( 83.8) (1 118.9)

14.4 Net actuarial gain/(loss) of superannuation defined benefits plans

(1 450.2) (7 510.1) ( 62.4)

50.9 Share of net profit/(loss) from associates/joint venture entities, excluding dividends

( 1.4) ( 74.4) 44.1

Other gains/(losses) from other economic flows (a) 140.7 (4 628.8) (1 017.9) 395.9 64.9 Total other economic flows included in net result (6 056.8) (8 624.0) ( 736.7)

459.4 Net result (5 413.1) (8 372.8) ( 554.9) Other economic flows – other movements in equity

Net gain/(loss) on financial assets at fair value 15.2 8.7 10.0 ( 18.8) Revaluations of non-financial assets 3 416.7 1 316.8 2 854.8 18 017.3

2 513.9 Net gain/(loss) on equity investments in other sector entities at proportional share of the carrying amount of net assets

14 237.7 .. ..

Transfers to accumulated funds/other movements in equity 344.1 19 109.4 ( 14.8) ( 39.0) Total other economic flows – other movements in equity 6 289.8 34 672.7 2 849.9 17 959.5 Comprehensive result – total change in net worth 876.7 26 299.8 3 309.3 17 404.5 FISCAL AGGREGATES

394.6 Net operating balance 643.6 251.2 181.8 Net acquisition of non-financial assets

Purchases of non-financial assets 4 661.2 3 146.8 4 262.8 4 225.8 Less: Sales of non-financial assets ( 187.4) ( 268.2) ( 129.3) ( 75.7)

(1 496.1) Less: Depreciation and amortisation (1 869.7) (1 515.8) (1 004.0) Plus: Change in inventories 19.1 28.2 ( 14.7) 100.0

268.2 Plus: Other movements in non-financial assets 233.1 44.6 326.3 Less: Net acquisition of non-financial assets 2 856.4 1 435.6 2 891.0 3 572.4 Net lending/(borrowing) (2 212.8) (1 184.4) (2 496.4) (3 390.6) Note: (a) Reclassification of discount movement associated with insurance claims expense from ‘transactions expense’ to ‘other economic flows’ has




Public financial

corporations

Inter-sector eliminations

Consolidated 2010 2009 2010 2009 2010 2009

.. .. ( 205.9) ( 183.3) 13 534.6 12 443.6

1 769.0 1 602.2 (1 183.3) ( 890.7) 982.9 1 190.0 392.3

387.2 ( 484.1) ( 488.9) 422.7 411.7

3 280.4 3 086.1 (1 576.6) (1 621.8) 11 024.2 10 326.9 99.0 123.3 (3 143.4) (2 380.5) 22 606.6 18 722.6 22.0 19.0 ( 50.5) ( 50.5) 2 591.3 2 354.5

5 562.8 5 217.8 (6 643.8) (5 615.7) 51 162.4 45 449.4

267.5 257.6 ( 311.6) ( 292.7) 16 218.3 15 037.0 .. .. .. .. 867.7 610.4

23.9 24.8 .. .. 1 637.4 1 513.6 26.7 24.2 .. .. 3 392.5 2 544.0

1 332.3 1 166.5 (1 183.3) ( 889.4) 1 527.0 1 410.1 106.4 130.3 (3 113.0) (2 472.7) 6 632.8 5 273.8

3 908.9 3 795.5 (1 563.5) (1 524.3) 20 292.0 19 184.3 11.0 8.5 ( 143.0) ( 69.6) .. ..

5 676.7 5 407.4 (6 314.3) (5 248.6) 50 567.6 45 573.1 ( 114.0) ( 189.6) ( 329.5) ( 367.1) 594.7 ( 123.8)

( 0.4) ( 0.2) .. .. ( 49.5) 66.5 255.6 (2 819.6) .. .. 187.2 (4 022.2)

..

.. .. .. (1 435.8) (7 572.5)

..

.. .. .. 49.6 ( 30.4)

( 566.3) 194.6 30.6 ( 979.0) (5 023.8) (1 406.4) ( 311.1) (2 625.2) 30.6 ( 979.0) (6 272.4) (12 965.0) ( 425.1) (2 814.8) ( 298.9) (1 346.1) (5 677.7) (13 088.8)

.. .. .. .. 25.1 ( 10.1) 1.2 ( 1.5) 496.6 1 108.4 6 769.3 20 441.0

..

.. (2 513.9) (14 237.7) .. ..

0.1 .. ( 64.0) ( 7.2) 265.3 19 063.2 1.3 ( 1.5) (2 081.4) (13 136.6) 7 059.7 39 494.0

( 423.8) (2 816.4) (2 380.3) (14 482.7) 1 382.0 26 405.3

( 114.0) ( 189.6) ( 329.5) ( 367.1) 594.7 ( 123.8)

19.0 62.7 .. .. 8 943.1 7 435.2 ( 1.9) ( 1.8) .. .. ( 318.6) ( 345.6)

( 26.7) ( 24.2) .. .. (3 392.5) (2 544.0) .. .. .. .. 4.5 128.2 .. .. .. .. 501.3 370.9

( 9.6) 36.7 .. .. 5 737.7 5 044.6 ( 123.6) ( 226.3) ( 329.5) ( 367.1) (5 143.0) (5 168.4)

Note 2: Disaggregated balance sheet as at 30 June ($ million)

General Public non-financial government sector corporations

2010 2009 2010 2009 Assets Financial assets

Cash and deposits 3 221.3 2 846.0 678.1 715.9 Advances paid 278.0 269.0 89.4 96.1 Investments, loans and placements 2 629.0 2 550.6 1 696.1 1 509.1 Receivables 2 883.6 2 783.3 1 137.3 1 260.9 Investments in general government sector entities using

the equity method .. .. .. ..

Investments accounted for using the equity method – other

35.1 30.0 498.1 447.1

Investments in other sector entities 64 508.7 60 634.8 .. .. 73 555.8 69 113.6 4 098.9 4 029.2 Total financial assets

Non-financial assets Inventories 268.4 249.3 661.3 676.0 Non-financial assets held for sale 91.5 74.2 16.6 6.0 Land, buildings, infrastructure, plant and equipment 89 419.7 87 409.7 74 253.1 68 511.3 Other non-financial assets 771.0 682.1 810.2 569.2

90 550.7 88 415.2 75 741.2 69 762.5 Total non-financial assets Total assets 164 106.4 157 528.9 79 840.1 73 791.7

Liabilities Deposits held and advances received (a) 479.4 317.1 360.6 334.9 Borrowings (a) 13 612.5 10 640.1 8 946.6 7 387.5 Payables 4 849.0 4 164.0 1 337.4 1 425.1 Superannuation 22 534.1 20 672.3 63.5 82.9 Other employee benefits 4 357.9 4 277.2 268.7 233.5 Other provisions 718.0 784.4 4 686.7 4 491.5 Total liabilities 46 551.0 40 855.1 15 663.5 13 955.4 Net assets 117 555.5 116 673.8 64 176.6 59 836.3 Accumulated surplus/(deficit) 43 263.9 48 424.8 6 084.1 5 886.6 Other reserves 74 247.0 68 209.5 58 092.5 53 949.7 Non-controlling interest 44.5 39.5 .. .. Net worth 117 555.5 116 673.8 64 176.6 59 836.3

FISCAL AGGREGATES Net financial worth 27 004.8 28 258.5 (11 564.6) (9 926.2) Net financial liabilities 37 503.9 32 376.3 11 564.6 9 926.2 Net debt 7 963.6 5 291.7 6 843.7 5 401.2 Note: (a) Certain items previously classified as borrowings have been re-classified as deposits held and advances received, in line with the GFS

framework.



Inter-sector eliminations Consolidated

2010 2009 2010 2009 2010 2009

3 688.2 3 062.1 (2 876.2) (2 307.0) 4 711.5 4 317.0 1 424.0 1 250.2 ( 263.7) ( 239.3) 1 527.7 1 375.9

25 008.5 23 156.4 (4 034.1) (2 255.2) 25 299.4 24 960.9 18 291.9 14 678.0 (17 254.5) (13 799.8) 5 058.3 4 922.4

..

.. .. .. .. ..

..

.. .. .. 533.2 477.1

.. .. (64 508.7) (60 634.8) .. .. 48 412.6 42 146.6 (88 937.2) (79 236.1) 37 130.1 36 053.4

.. .. .. .. 929.7 925.3 .. .. .. .. 108.1 80.2

77.4 62.3 ( 4.1) ( 4.1) 163 746.1 155 979.1 1 968.3 1 982.9 (1 994.8) (2 018.1) 1 554.7 1 216.1 2 045.8 2 045.2 (1 998.9) (2 022.3) 166 338.7 158 200.6

50 458.4 44 191.8 (90 936.1) (81 258.4) 203 468.8 194 254.0

4 911.4 4 525.6 (4 272.7) (3 026.2) 1 478.8 2 151.4 25 651.1 21 080.3 (19 629.8) (14 981.9) 28 580.3 24 126.0 1 532.9 1 367.8 ( 743.7) ( 826.8) 6 975.6 6 130.1

.. .. .. .. 22 597.7 20 755.1 60.1 58.5 .. .. 4 686.7 4 569.2

17 970.8 16 361.1 (3 616.3) (3 118.4) 19 759.2 18 518.6 50 126.3 43 393.3 (28 262.5) (21 953.4) 84 078.2 76 250.4

332.1 798.5 (62 673.6) (59 305.0) 119 390.6 118 003.6 ( 688.0) ( 117.7) ( 360.2) ( 304.8) 48 299.9 53 888.9 1 020.1 916.2 (62 313.4) (59 000.2) 71 046.2 64 075.2

.. .. .. .. 44.5 39.5 332.1 798.5 (62 673.6) (59 305.0) 119 390.6 118 003.6

(1 713.6) (1 246.7) (60 674.7) (57 282.7) (46 948.1) (40 197.1) 1 713.6 1 246.7 (3 834.0) (3 352.1) 46 948.1 40 197.1 441.7 (1 862.8) (16 728.5) (13 206.7) (1 479.5) (4 376.5)


Note 2: Disaggregated cash flow statement for the period ended 30 June ($ million)


2010 2009 2010 2009 Cash flows from operating activities Receipts

Taxes received 13 871.5 12 451.4 .. .. Grants (a) 22 716.8 18 970.2 2 970.0 1 990.5 Sales of goods and services (b) 6 158.8 5 512.6 4 401.3 4 319.8 Interest received 323.8 389.1 60.2 98.1 Dividends and income tax equivalent and rate

equivalent receipts 471.9 470.8 29.0 23.1

Other receipts 1 611.7 1 427.8 300.8 276.7 Total receipts 45 154.4 39 221.8 7 761.2 6 708.2

Payments Payments for employees (15 335.9) (14 115.2) ( 819.0) ( 762.3) Superannuation (1 982.8) (1 778.5) ( 86.0) ( 96.8) Interest paid ( 767.4) ( 571.8) (1 564.4) (1 434.9) Grants and subsidies (a) (9 233.3) (7 298.3) ( 398.9) ( 181.6) Goods and services (b) (14 194.7) (13 072.6) (2 949.9) (2 987.5) Other payments ( 436.9) ( 404.7) ( 238.4) ( 174.4) Total payments (41 951.0) (37 241.1) (6 056.6) (5 637.4) Net cash flows from operating activities 3 203.4 1 980.7 1 704.6 1 070.7

Cash flows from investing activities Purchases of non-financial assets (4 661.2) (3 146.8) (4 262.8) (4 225.8) Sales of non-financial assets 187.4 268.2 129.3 75.7 Cash flows from investments in non-financial assets (4 473.9) (2 878.6) (4 133.5) (4 150.1) Net cash flows from investments in financial assets for

policy purposes (c) (1 236.6) (1 168.5) ( 1.8) ( 39.1)

Sub-total (5 710.5) (4 047.1) (4 135.3) (4 189.2) Net cash flows from investments in financial assets for

liquidity management purposes ( 1.0) ( 375.7) ( 407.3) 213.9

Net cash flows from investing activities (5 711.5) (4 422.8) (4 542.6) (3 975.3) Cash flows from financing activities

Advances received (net) (d) ( 0.3) ( 1.8) 17.6 227.9 Net borrowings (d) 2 892.6 2 487.2 1 544.8 1 423.0 Deposits received (net) ( 8.3) ( 57.2) 8.1 ( 15.3) Other financing (net) (c) .. .. 1 230.2 1 062.4 Net cash flows from financing activities 2 884.0 2 428.2 2 800.7 2 698.1 Net increase/(decrease) in cash and cash equivalents 375.9 ( 13.9) ( 37.3) ( 206.5) Cash and cash equivalents at beginning of reporting

period 2 845.5 2 859.3 715.2 921.7

Cash and cash equivalents at end of reporting period 3 221.3 2 845.5 677.9 715.2 FISCAL AGGREGATES

Net cash flows from operating activities 3 203.4 1 980.7 1 704.6 1 070.7 Dividends paid .. .. ( 248.4) ( 193.2) Net cash flows from investments in non-financial assets (4 473.9) (2 878.6) (4 133.5) (4 150.1) Cash surplus/(deficit) (1 270.5) ( 897.9) (2 677.2) (3 272.5) Notes: (a) Grants in the PFC sector have been disclosed on a gross basis in 2010. (Some grants were presented on a net basis in the prior year.) (b) These items are inclusive of goods and services tax. (c) Investment from the general government sector received by the PNFC and PFC sectors for policy purposes have been reclassified as

‘other financing (net)’. (d) Certain items previously classified as borrowings have been re-classified as advances received (net), in line with the GFS framework.



Inter-sector eliminations Consolidated

2010 2009 2010 2009 2010 2009

.. .. ( 205.9) ( 183.3) 13 665.6 12 268.1 99.0 123.3 (3 281.9) (1 821.6) 22 503.9 19 262.3

3 705.6 3 637.6 (1 576.6) (1 621.8) 12 689.1 11 848.1 1 547.8 1 418.6 (1 120.6) ( 881.8) 811.2 1 024.0 392.3

387.2 ( 470.6) ( 469.6) 422.6 411.5

48.2 ( 525.3) ( 82.6) ( 82.2) 1 878.1 1 096.9 5 793.0 5 041.3 (6 738.1) (5 060.3) 51 970.5 45 911.1

( 265.9) ( 251.2) 311.6 292.7 (16 109.3) (14 836.0) ( 23.9) ( 24.8) .. .. (2 092.8) (1 900.2)

(1 225.9) (1 081.5) 2 186.4 1 825.8 (1 371.3) (1 262.3) ( 106.4) ( 130.3) 3 184.5 1 847.2 (6 554.0) (5 763.0)

(3 411.7) (3 234.2) 474.7 903.7 (20 081.5) (18 390.6) ( 11.7) ( 50.0) 246.2 222.3 ( 440.7) ( 406.8)

(5 045.4) (4 772.1) 6 403.3 5 091.7 (46 649.7) (42 559.0) 747.5 269.2 ( 334.8) 31.4 5 320.8 3 352.1

( 19.0) ( 62.7) .. .. (8 943.1) (7 435.2)

1.9 1.8 .. .. 318.6 345.6 ( 17.1) ( 60.9) .. .. (8 624.5) (7 089.6)

( 210.9)

( 238.9) 1 454.1 1 495.0 4.8 42.6

( 228.0) ( 299.8) 1 454.1 1 495.0 (8 619.7) (7 046.9) (4 860.8)

(3 970.6) 5 328.0 4 033.5 58.8 ( 98.8)

(5 088.9) (4 270.3) 6 782.1 5 528.5 (8 560.9) (7 145.8)

( 402.2) ( 524.3) (1 246.4) 296.0 (1 631.3) ( 2.1) 4 624.2 4 158.9 (4 647.9) (4 010.2) 4 413.7 4 064.7 788.0 411.9 .. 13.2 787.8 352.7 ( 42.6) ( 150.0) (1 122.2) (1 140.2) 65.4 ( 227.7)

4 967.4 3 896.5 (7 016.4) (4 841.1) 3 635.7 4 187.6 626.1 ( 104.6) ( 569.2) 718.8 395.5 393.9

3 062.1

3 166.7 (2 307.0) (3 025.8) 4 315.8 3 921.9

3 688.2 3 062.1 (2 876.2) (2 307.0) 4 711.4 4 315.8

747.5 269.2 ( 334.8) 31.4 5 320.8 3 352.1 ( 59.2) ( 150.0) 307.6 343.2 .. .. ( 17.1) ( 60.9) .. .. (8 624.5) (7 089.6) 671.2 58.4 ( 27.2) 374.6 (3 303.7) (3 737.5)


Note 2: Disaggregated statement of changes in equity for the period ended 30 June

($ million)

2010 Equity at

1 July

Total comprehensive

result


capacity as owner Dividends Equity at 30 June

General government sector Accumulated surplus/(deficit) 48 424.8 (5 413.1) .. .. 43 011.7 Other movements in equity .. 252.3 .. .. 252.3 Adjustment for change in

accounting policy .. .. .. .. ..

Non-controlling interest 39.5 .. 5.0 .. 44.5 Physical asset revaluation surplus 29 776.6 3 416.7 .. .. 33 193.2 Net movements in other reserves 788.1 107.0 .. .. 895.0 Accumulated net gain on

equity investments in other sector entities

37 644.8 2 513.9 .. .. 40 158.8

116 673.8 876.7 5.0 .. 117 555.5 PNFC sector

Accumulated surplus/(deficit) 5 886.6 459.4 .. ( 248.4) 6 097.6 Other movements in equity .. ( 13.5) .. .. ( 13.5) Contributed capital 22 437.7 .. 1 279.4 .. 23 717.0 Non-controlling interest .. .. .. .. .. Physical asset revaluation surplus 30 630.3 2 854.8 .. .. 33 485.0 Net movements in other reserves 881.8 8.6 .. .. 890.4 59 836.3 3 309.3 1 279.4 ( 248.4) 64 176.6

PFC sector Accumulated surplus/(deficit) ( 117.7) ( 425.1) .. ( 59.2) ( 601.9) Other movements in equity .. ( 86.1) .. .. ( 86.1) Contributed capital 162.4 .. 16.6 .. 179.0 Non-controlling interest .. .. .. .. .. Physical asset revaluation surplus 10.0 1.2 .. .. 11.2 Net movements in other reserves 743.8 86.2 .. .. 829.9 798.5 ( 423.8) 16.6 ( 59.2) 332.1 Eliminations (2 380.3) (1 296.0) 307.6 (59 305.0) (62 673.6) Total whole of government 118 003.6 1 382.0 5.0 .. 119 390.6


Note 2: Disaggregated statement of changes in equity for the period ended 30 June (continued)

($ million)

2009 Equity at

1 July

Total comprehensive

result


capacity as owner Dividends Equity at 30 June

General government sector Accumulated surplus/(deficit) 37 686.9 (8 372.8) .. .. 29 314.0 First time recognition of land

under roads .. 18 682.5 .. .. 18 682.5

Other movements in equity .. 428.3 .. .. 428.3 Non-controlling interest 32.0 .. 7.5 .. 39.5 Physical asset revaluation

surplus 28 459.7 1 316.8 .. .. 29 776.6

Net movements in other reserves

780.7 7.4 .. .. 788.1

Accumulated net gain on equity investments in other sector entities

23 407.1 14 237.7 .. .. 37 644.8

90 366.4 26 299.8 7.5 .. 116 673.8 PNFC sector

Accumulated surplus/(deficit) 6 684.7 ( 554.9) .. ( 193.2) 5 936.5 Other movements in equity .. ( 49.9) .. .. ( 49.9) Dividends .. .. .. .. .. Contributed capital 20 904.9 .. 1 532.7 .. 22 437.7 Non-controlling interest .. .. .. .. .. Physical asset revaluation

surplus 12 612.9 18 017.3 .. .. 30 630.3


889.7 ( 7.9) .. .. 881.8

41 092.3 17 404.5 1 532.7 ( 193.2) 59 836.3 PFC sector

Accumulated surplus/(deficit) 3 450.9 (2 814.8) .. ( 150.0) 486.0 Other movements in equity .. ( 603.7) .. .. ( 603.7) Dividends .. .. .. .. .. Contributed capital 162.4 .. .. .. 162.4 Non-controlling interest .. .. .. .. .. Physical asset revaluation

surplus 11.5 ( 1.5) .. .. 10.0


140.0 603.7 .. .. 743.8

3 764.9 (2 816.4) .. ( 150.0) 798.5 Eliminations (43 632.7) (14 482.7) (1 532.7) 343.2 (59 305.0) Total whole of government 91 590.8 26 405.3 7.5 .. 118 003.6


Note 3: Taxation revenue ($ million)

General State of Victoria government sector

2010 2009 2010 2009 Taxes on employers’ payroll and labour force 4 001.5 3 927.3 4 055.8 3 979.7 Taxes on property Taxes on immovable property Land tax 1 148.8 1 207.7 1 177.7 1 237.6 Congestion levy 47.2 44.1 47.2 44.1 Metropolitan improvement levy 122.8 107.0 122.8 107.0 Property owner contributions to fire brigades 34.4 41.4 34.4 41.4 Total taxes on immovable property 1 353.1 1 400.2 1 381.9 1 430.1 Financial and capital transactions Land transfer duty 3 603.9 2 801.0 3 603.9 2 801.0 Other property duties 7.0 8.3 7.0 8.3 Financial accommodation levy .. .. 51.8 30.2 Total financial and capital transactions 3 610.8 2 809.4 3 662.7 2 839.6 Total taxes on property 4 963.9 4 209.5 5 044.6 4 269.6 Taxes on the provision of goods and services Gambling taxes Private lotteries 356.0 359.8 356.0 359.8 Electronic gaming machines 985.0 1 011.6 985.0 1 011.6 Casino 151.1 140.8 151.1 140.8 Racing 129.3 129.1 129.3 129.1 Other 10.3 7.3 10.3 7.3 Total gambling taxes 1 631.6 1 648.6 1 631.6 1 648.6 Levies on statutory corporations .. .. 69.4 69.4 Taxes on insurance 1 402.8 1 235.4 1 402.8 1 235.4 Total taxes on the provision of goods and services 3 034.4 2 884.0 3 103.8 2 953.4 Taxes on the use of goods and performance of activities Motor vehicle taxes Vehicle registration fees 862.7 807.6 864.2 808.9 Duty on vehicle registrations and transfers 572.7 514.9 572.7 514.9 Total motor vehicle taxes 1 435.4 1 322.5 1 436.9 1 323.8 Franchise taxes 23.3 11.8 23.3 11.8 Other 76.2 88.5 76.2 88.5 Total taxes on the use of goods and performance of

activities 1 534.9 1 422.8 1 536.4 1 424.1

Total taxation revenue 13 534.6 12 443.6 13 740.5 12 626.9


Note 4: Dividends and income tax equivalent and rate equivalent revenue

($ million) General

State of Victoria government sector 2010 2009 2010 2009 Dividends from PFC sector .. .. 59.2 150.0 Dividends from PNFC sector .. .. 248.4 193.2 Dividends from non-public sector 396.6 394.3 1.5 1.4 Dividends 396.6 394.3 309.1 344.6 Income tax equivalent from PFC sector .. .. 10.0 6.7 Income tax equivalent from PNFC sector .. .. 161.9 134.5 Income tax equivalent and rate equivalent revenue .. .. 171.9 141.2 Local government rate equivalent revenue .. .. 4.6 4.5 Other dividends (a) 26.1 17.4 .. .. Total dividends and income tax equivalent and rate

equivalent revenue 422.7 411.7 485.6 490.4

Note: (a) Dividends from Snowy Hydro received by SECV – refer to Note 18.

Note 5: Sale of goods and services ($ million)


2010 2009 2010 2009 Motor vehicle regulatory fees 121.2 112.7 121.2 112.7 Other regulatory fees 356.0 332.8 340.5 315.9 Sale of insurance services 2 732.4 2 587.2 .. .. Other sales of goods and services 7 587.7 6 797.8 3 648.7 3 173.4 Rental 65.1 70.0 46.5 50.0 Refunds and reimbursements 161.8 426.4 71.7 329.6 Inter-sector capital asset charge .. .. 1 060.9 959.0 Total sale of goods and services 11 024.2 10 326.9 5 289.5 4 940.5

Note 6: Grants ($ million)


2010 2009 2010 2009 General purpose grants 10 043.3 9 319.0 10 043.3 9 319.0 Specific purpose grants for on-passing 3 099.4 2 232.8 3 099.4 2 232.8 Other specific purpose grants 9 453.1 7 169.7 9 448.0 7 159.6 Total 22 595.8 18 721.6 22 590.6 18 711.4 Other contributions and grants 10.8 1.1 127.1 258.5 Total grants 22 606.6 18 722.6 22 717.8 18 970.0


Note 7: Other revenue ($ million)


2010 2009 2010 2009 Fair value of assets received free of charge or for

nominal consideration 432.5 330.6 161.6 131.3

Fines Non-traffic statutory and court fines 110.1 90.4 106.8 89.1 Police traffic camera office and on the spot fine 431.3 381.4 431.3 381.4 Total fines 541.4 471.8 538.1 470.5 Royalties 49.0 50.3 46.7 48.1 Donations and gifts 267.5 289.1 261.7 269.3 Other non-property rental 85.1 82.4 28.2 23.8 Other miscellaneous revenue 1 215.7 1 130.2 982.1 936.0 Total other revenue 2 591.3 2 354.5 2 018.4 1 878.9

Note 8: Superannuation

Expense

Superannuation expense includes employer contributions to defined contribution superannuation schemes for the benefit of existing employees, and the actuarially determined expense for defined benefit superannuation plan.

Liability

The liability for employee superannuation entitlements is the responsibility of the State’s public sector superannuation plans. These plans are not consolidated in the Financial Report for the State of Victoria, as they are not ‘controlled’ by the State. However, the major proportion of the superannuation liability is the responsibility of the State and is recognised accordingly.

Each year, an actuarial valuation of members’ accrued benefits is undertaken as at the reporting date. Accrued benefits are measured as the net present value of estimated future benefit payments to members arising from their membership of the plan up to the reporting date. The deficit of accrued benefits over the net market value of scheme assets has been recognised as a liability in the balance sheet.

Of the $22.6 billion superannuation liability recognised on the State’s balance sheet, more than 99.7 per cent is recorded in the general government sector. The superannuation liabilities of agencies for which the State is not responsible, such as universities, are not reflected in the balance sheet.


Note 8: Superannuation (continued)

(a) Expense relating to superannuation recognised in the operating statement ($ million)

State of Victoria 2010 2009

Defined benefit plans Interest cost (a) 1 899.4 1 878.4 Expected return on plan assets (net of expenses) (a) (1 031.7) (1 267.9) Superannuation interest expense 867.7 610.4 Current service cost (a) 686.9 647.9 Amortisation of past service cost (a) ( 10.2) ( 14.5) Actuarial (gains)/losses (b) 1 435.8 7 572.5 Total expense recognised in respect of defined benefit plans 2 980.2 8 816.3

Defined contribution plans Employer contributions to defined contribution plans (a) 896.0 822.4 Other (including pensions) (a) 64.7 57.7 Total expense recognised in respect of defined contribution plans 960.7 880.2 Total superannuation expense recognised in operating statement 3 940.9 9 696.5 Represented by: Superannuation expense from transactions 2 505.1 2 124.0 Superannuation expense from other economic flows 1 435.8 7 572.5 Notes: (a) Superannuation expense from transactions. (b) Superannuation expense from other economic flows.

(b) Reconciliation of the present value of the defined benefit obligation ($ million)


Opening balance of defined benefit obligation 34 797.1 30 026.6 Current service cost 686.9 647.9 Interest cost 1 899.4 1 878.4 Contributions by plan participants 231.3 235.5 Actuarial (gains)/losses 2 425.4 3 879.0 Benefits paid (1 954.4) (1 870.3) Closing balance of defined benefit obligation 38 085.7 34 797.1

(c) Reconciliation of the fair value of superannuation plan assets ($ million)


Opening balance of plan assets 14 041.9 17 092.5 Expected return on plan assets 1 031.7 1 267.9 Actuarial gains/(losses) 989.6 (3 693.5) Employer contributions 1 147.9 1 009.8 Contributions by plan participants 231.3 235.5 Benefits paid (including tax paid) (1 954.4) (1 870.3) Closing balance of plan assets 15 488.0 14 041.9



(d) Reconciliation of the superannuation liability ($ million)


ESSS (including SSF) Defined benefit obligation 33 348.7 30 603.5 Tax liability (a) 2 480.2 2 057.9 Plan assets (13 893.2) (12 676.4) Unrecognised past service cost (b) .. 10.2 Net liability/(asset) 21 935.7 19 995.1 Other funds (c) Defined benefit obligation 2 250.8 2 098.9 Tax liability (a) 6.0 26.6 Plan assets (1 594.8) (1 365.5) Unrecognised past service cost (b) .. .. Net liability/(asset) 662.0 760.0

Total superannuation Defined benefit obligation 35 599.5 32 702.4 Tax liability (a) 2 486.2 2 084.5 Plan assets (15 488.0) (14 041.9) Unrecognised past service cost (b) .. 10.2 Superannuation liability 22 597.7 20 755.1

Represented by: Current liability 580.6 582.1 Non-current liability 22 017.0 20 173.0 Notes: (a) The tax liability represents the present value of expected future tax payments, relating to both investment tax and contributions tax. (b) Past service cost arises due to a change in benefits payable. This cost is recognised as an expense over the period until the benefits

become vested. Unrecognised past service cost represents the amount of past service cost yet to be recognised as an expense. (c) Other funds include constitutionally protected schemes, the Parliamentary Contributory Superannuation Fund and the State’s share of

liabilities of the Defined Benefit Scheme of the Health Super Fund.

The above table shows the financial position of the State’s share of liabilities in defined benefit schemes for which it is responsible.



Superannuation assumptions

Per cent per annum

Victorian statutory superannuation funds Actuary Financial assumptions 2010 2009 Mercer (a) Expected return on assets (b) Emergency Services and State 8.00 8.00

Super Discount rate (c) 5.30 5.70 Wages growth (d) 4.00 4.00 Inflation rate 2.50 2.50

Mercer (a) Discount rate (c) Constitutionally Protected 5.30 5.70 Schemes Wages growth (d) 4.00 4.00 Inflation rate n/a n/a

Mercer (a) Expected return on assets (b) Parliamentary Contributory 8.00 8.00 Superannuation Fund (e) Discount rate (c) 5.30 5.70 Wages growth (d) 4.00 4.00 Inflation rate n/a n/a

Mercer (a) Expected return on assets (b) Health Super Fund 6.20 6.20 Discount rate (c) 5.30 5.70 Wages growth (d) 4.00 4.00 Inflation rate 2.50 2.50 Notes: (a) Mercer (Australia) Pty Ltd. (b) The expected return on assets stated is gross of tax. This rate is adjusted in the calculation process to reflect the assumed rate of tax

payable by each scheme. (c) In accordance with accounting standards, the discount rate is based on a long-term Commonwealth bond rate. The rate stated above is

an annual effective rate, gross of tax. (d) Wages growth in this table are actuarial assumptions and do not reflect the Government’s wages policy. (e) Parliamentary salaries are determined in relation to equivalent salaries in the Commonwealth Parliament.

The expected return on assets, as shown above, is determined by weighting the expected long-term return for each asset class by the target allocation of assets to each class, as depicted in the table below.

Target asset allocation

Per cent Asset class 2010 2009 Domestic equity 26.8 26.8 International equity 25.5 25.6 Domestic debt assets 19.3 19.3 International debt assets .. .. Property 10.9 10.7 Cash 4.2 4.3 Other (inc. private equity, hedge funds and infrastructure) 13.3 13.4 Total 100.0 100.0


Note 9: Depreciation ($ million)


2010 2009 2010 2009 Buildings 1 035.1 695.8 769.5 485.2 Plant, equipment and infrastructure systems 1 599.6 1 201.8 491.9 478.7 Road networks 403.7 390.6 402.2 389.1 Other assets 14.7 17.4 14.7 13.9 Leased plant and equipment 147.0 98.3 37.3 34.9 Leasehold buildings 94.7 58.5 89.9 53.6 Intangible produced assets (a) 97.7 81.4 64.2 60.4 Total depreciation 3 392.5 2 544.0 1 869.7 1 515.8 Note: (a) Amortisation of intangible non-produced assets is included under other economic flows.

Note 10: Interest expense ($ million)


2010 2009 2010 2009 Interest on short-term interest-bearing liabilities 42.8 82.6 27.5 53.4 Interest on long-term interest-bearing liabilities 1 141.8 819.8 606.2 399.5 Finance charges on finance leases 234.4 283.7 145.0 128.6 Discount interest on payables 108.0 224.0 64.7 60.9 Total interest expense 1 527.0 1 410.1 843.3 642.4

Note 11: Other operating expenses ($ million)


2010 2009 2010 2009 Purchase of supplies and consumables 8 837.7 8 780.3 7 420.1 7 088.8 Cost of goods sold 213.5 206.6 46.9 76.1 Finance expenses and fees 383.2 332.9 27.0 20.0 Purchase of services 5 823.2 5 095.3 5 279.1 4 662.2 Insurance claims expense 3 032.1 2 908.5 28.0 13.8 Maintenance 1 197.8 1 133.1 726.4 680.8 Operating lease payments 300.1 292.8 226.6 225.9 Other 504.6 434.9 500.8 430.7 Total other operating expenses (a) 20 292.0 19 184.3 14 254.9 13 198.4 Note: (a) Reclassification of discount movement associated with insurance claims expense from ‘transactions expense’ to ‘other economic flows’ has



Note 12: Grants and other transfers ($ million)


2010 2009 2010 2009 Current grants expense

Commonwealth Government 132.3 98.6 131.9 98.2 Local government on-passing 622.8 729.1 622.8 728.9 Private sector and not-for-profit on-passing 3 239.5 3 004.9 3 221.9 2 988.3 Other private sector and not for profit 909.0 130.8 807.2 128.2 Grants within the Victorian Government .. .. 3 026.6 2 254.5 Grants to other state governments 20.9 46.4 20.6 46.4 Total current grants and other transfers 4 924.5 4 009.8 7 831.0 6 244.6

Capital grants expense Local government on-passing 133.6 78.1 133.5 78.0 Private sector and not-for-profit on-passing 1 335.6 461.9 970.4 315.7 Other private sector and not-for-profit 236.2 643.0 235.9 642.7 Grants within the Victorian Government .. .. 2.2 5.6 Other grants 2.8 81.0 1.5 79.7 Total capital grants and other transfers 1 708.3 1 263.9 1 343.5 1 121.7 Total grants and other transfers 6 632.8 5 273.7 9 174.5 7 366.3

Note 13: Total expenses by government purpose classification ($ million)


2010 2009 2010 2009 General public services 5 047.8 4 641.3 742.9 708.9 Public order and safety 4 095.8 4 068.4 4 296.3 4 252.7 Education 11 717.2 10 386.6 11 780.0 10 443.7 Health 11 469.1 10 366.7 11 732.1 10 577.5 Social security and welfare 3 104.5 2 935.6 3 260.6 3 015.4 Housing and community amenities 5 903.1 4 837.6 3 799.8 2 927.4 Recreation and culture 1 368.9 1 313.5 827.6 804.4 Fuel and energy 23.8 501.0 20.8 19.0 Agriculture, forestry, fishing, and hunting 568.9 525.6 515.2 506.7 Mining, manufacturing, and construction 32.9 20.3 33.0 20.4 Transport and communications 4 394.1 3 688.0 4 659.7 4 060.3 Other economic affairs 583.9 464.7 594.1 471.1 Other purposes 2 257.7 1 824.0 1 679.5 1 226.1 Total expenses from transactions (a) 50 567.6 45 573.1 43 941.7 39 033.7 Note: (a) Note 39 provides definitions and descriptions of government purpose classifications.


Note 14: Net gain/(loss) on disposal of non-financial assets ($ million)


2010 2009 2010 2009 Proceeds from disposal of physical assets 318.0 333.8 187.1 266.8 Written down value of assets sold/(disposed) ( 367.6) ( 267.3) ( 227.5) ( 204.7) Net gain/(loss) on disposal of non-financial assets ( 49.5) 66.5 ( 40.4) 62.2

Note 15: Other gains/(losses) from other economic flows ($ million)


2010 2009 2010 2009 Net gain/(loss) from revaluation of biological assets 6.0 ( 6.6) 5.5 ( 5.2) Net (increase)/decrease in provision for doubtful

receivables ( 104.9) ( 177.3) ( 103.1) ( 175.8)

Amortisation of intangible non-produced assets ( 22.8) ( 10.8) ( 10.1) ( 5.3) Net swap interest revenue/(expense) 223.7 ( 495.1) .. .. Net (increase)/decrease in bad debts ( 138.5) ( 125.3) ( 126.3) ( 113.9) Other gains/(losses) (a) (4 987.2) ( 591.3) (4 394.8) ( 717.6) Total other gains/(losses) from other economic flows (b) (5 023.8) (1 406.4) (4 628.8) (1 017.9) Notes: (a) Consistent with AASB1051 Land Under Roads, the State has recognised land under roads acquired prior to 1 July 2008 at fair

value. At 30 June 2009, the methodology applied was based on discounting the values for relevant municipal areas applied to land area under the arterial road network, including related reservations. At 30 June 2010, this approach was changed, resulting in a write-down of $4 billion to the value of land under roads.

(b) Reclassification of discount movement associated with insurance claims expense from ‘transactions expense’ to ‘other economic flows’ has required re-presentation of the 2008-09 results.


Note 16: Advances paid and investments, loans and placements ($ million)


2010 2009 2010 2009 Current advances paid and investments, loans and placements Loans and advances receivable 141.2 150.7 12.5 23.0 Equities and managed investment schemes 135.1 259.5 123.9 230.6 Australian dollar term deposits 603.8 1 066.6 1 823.5 1 774.2 Foreign currency term deposits 0.1 12.5 .. .. Debt securities (a) 5 927.6 5 669.0 10.4 15.7 Derivative financial instruments 1 718.6 2 509.9 4.1 6.2 Provision for diminution .. .. .. .. Total current advances paid and investments, loans

and placements 8 526.5 9 668.3 1 974.4 2 049.7

Non-current advances paid and investments, loans and placements Loans and advances receivable 1 386.5 1 225.2 265.5 246.0 Equities and managed investment schemes 9 896.7 8 620.2 464.4 387.2 Australian dollar term deposits 173.4 118.4 175.6 114.1 Foreign currency term deposits .. .. .. .. Debt securities (a) 6 170.6 5 890.6 27.0 22.6 Derivative financial instruments 673.3 814.2 .. .. Provision for diminution .. .. .. .. Total non-current advances paid and investments,

loans and placements 18 300.6 16 668.6 932.6 769.8

Total advances paid and investments, loans and placements (b)

26 827.1 26 336.8 2 907.0 2 819.5

Notes: (a) Debt securities of the State include $12 047 million (2009: $11 412 million) designated at fair value through profit or loss. (b) There are no other financial assets that are past due but not impaired as at the reporting date. There are no other financial assets that

would otherwise be past due or impaired whose terms have been renegotiated.


Note 17: Receivables ($ million)


2010 2009 2010 2009 Contractual

Sales of goods and services 1 319.5 1 208.4 752.7 674.8 Accrued investment income 86.7 72.1 113.2 90.1 Other receivables 1 090.7 1 201.1 439.3 422.9 Provision for doubtful contractual receivables ( 116.2) ( 120.9) ( 50.6) ( 54.4)

Statutory Sales of goods and services 696.1 568.5 .. .. Taxes receivables 890.8 969.3 904.8 983.3 Fines and regulatory fees 821.3 738.4 821.3 738.4 GST input tax credits recoverable 653.3 619.3 286.8 262.0 Provision for doubtful statutory receivables ( 383.8) ( 333.9) ( 383.8) ( 333.9) Total receivables 5 058.3 4 922.4 2 883.6 2 783.3 Represented by: Current receivables 4 316.6 4 163.3 2 821.1 2 720.3 Non-current receivables 741.7 759.1 62.5 63.0

Ageing analysis of contractual receivables – State of Victoria ($ million)

Not past due Past due and not impaired Impaired Total State of Victoria and not Less than 1-3 mths 3 mths- More than 2010 impaired 1 mth 1 yr 1 yr Sale of goods and

services 829.3 216.0 113.3 114.7 43.4 2.9 1 319.5

Accrued investment income

77.4 9.1 .. 0.2 .. .. 86.7

Other receivables 848.6 31.6 13.8 34.1 46.3 0.2 974.5 1 755.3 256.6 127.1 148.9 89.6 3.1 2 380.7 2009 Sale of goods and

services (a) 768.8 195.7 101.8 100.3 38.2 3.6 1 208.4


66.7 5.0 0.1 0.2 .. .. 72.1

Other receivables (a) 848.4 94.6 11.7 145.6 100.7 .. 1 201.1 1 684.0 295.3 113.7 246.0 138.9 3.6 2 481.5 Note: (a) The 2009 balance differs from that presented in the 2008-09 Financial Report to more correctly reflect clarification of contractual

receivables.


Note 17: Receivables (continued)

Ageing analysis of contractual receivables – general government sector ($ million)

General government Not past due Past due and not impaired Impaired Total sector and not Less than 1-3 mths 3 mths- More than 2010 impaired 1 mth 1 yr 1 yr Sale of goods and

services 488.2 132.6 54.4 44.8 32.1 0.7 752.7


111.3 1.7 .. 0.3 .. .. 113.2

Other receivables 272.7 20.8 13.3 33.3 48.5 .. 388.7 872.2 155.0 67.7 78.4 80.6 0.7 1 254.6 2009 Sale of goods and

services 428.1 105.9 60.3 48.3 31.3 1.0 674.8


88.4 0.9 0.6 0.2 .. .. 90.1

Other receivables 160.8 14.8 1.0 148.4 98.0 .. 422.9 677.2 121.5 62.0 196.8 129.2 1.0 1 187.8

Movement in provision for doubtful contractual receivables ($ million)


2010 2009 2010 2009 Balance at start of the year 120.9 109.1 54.4 51.0 Reversal of unused provision recognised in the

comprehensive operating statement ( 2.4) ( 4.5) ( 0.7) ( 3.0)

Increase in provision recognised in the comprehensive operating statement

7.5 9.1 4.0 6.2

Receivables written off during the year as uncollectible ( 9.9) 7.2 ( 7.1) 0.2 Balance at the end of the year 116.2 120.9 50.6 54.4

Collateral held The State did not hold any collateral against any of its contractual receivables during the current and prior periods.


Note 18: Joint ventures

(a) Investments accounted for using the equity method ($ million)

2010 2009

The Australian Regenerative Medicine Institute 35.0 30.0 Total general government sector 35.0 30.0 Snowy Hydro Ltd 498.5 447.1 Total investments 533.5 477.1

($ million)

Movements in carrying amounts 2010 2009 The Australian Regenerative Medicine Institute Carrying amount at the beginning of the period 30.0 20.0 Share of profit after income tax .. .. Other 5.0 10.0 Share of increment on revaluation of property, plant and equipment .. .. Carrying amount at the end of the period 35.0 30.0 Snowy Hydro Ltd Carrying amount at the beginning of the period 447.1 403.1 Share of profit/(loss) after income tax 77.4 61.5 Dividends received/receivable ( 26.1) ( 17.4) Share of increment on revaluation of property, plant and equipment .. .. Carrying amount at the end of the period 498.5 447.1

The Australian Regenerative Medicine Institute The following tables provide information on Victoria’s investment of The Australian Regenerative Medicine Institute:

($ million)

Balance sheet 2010 2009 Current assets .. 0.1 Non-current assets 35.0 29.9 Current liabilities .. .. Non-current liabilities .. .. Net Assets 35.0 30.0

($ million)

Commitments 2010 2009 Capital expenditure commitments .. 5.0 Operating lease commitments .. .. .. 5.0

The Government’s ownership interest of the Australian Regenerative Medicine Institute at 30 June 2010 was 25 per cent (2009: 21 per cent).


Note 18: Joint ventures (continued)

Snowy Hydro Ltd Snowy Hydro Ltd is a public company, incorporated and listed in Australia, which owns and operates the Snowy Mountain Hydro Electric Scheme as an independent electricity generator in the National Electricity Market.

The following tables provide information on Victoria’s share of Snowy Hydro Limited: ($ million)

Balance sheet 2010 2009 Current assets 81.8 70.2 Non-current assets 618.6 622.2 Current liabilities 137.4 180.8 Non-current liabilities 64.9 64.4 Net assets 498.1 447.1

($ million)

Revenue and profit 2010 2009 Revenue from ordinary activities 226.8 207.5 Profit from ordinary activities before income tax 110.4 87.0 Income Tax expense relating to ordinary activities 33.0 25.6 Net result 77.4 61.5

($ million)

Commitments 2010 2009 Capital expenditure commitments 18.4 15.7 Operating lease commitments 21.9 19.2 Other commitments 1.9 1.3 42.2 36.2 The Victorian Government’s ownership interest of Snowy Hydro Ltd at 30 June 2010 was 29 per cent (2009: 29 per cent).



(b) Jointly controlled assets Royal Melbourne Showgrounds The State entered into a joint venture agreement with the Royal Agricultural Society of Victoria (RASV) in October 2003 to redevelop the Royal Melbourne Showgrounds. The agreement came into effect on 30 June 2005. Two joint venture structures have been established, an unincorporated joint venture to carry out and deliver the joint venture project, and an incorporated joint venture entity, Showgrounds Nominees Pty Ltd to hold the assets of the joint venture and to enter into agreements on behalf of the State and RASV.

In June 2006, Showgrounds Nominees Pty Ltd entered into a development and operations agreement (on behalf of the State and RASV) with the concessionaire, PPP Solutions (Showgrounds) Nominee Pty Ltd to design, construct, finance and maintain the new facilities at the Showgrounds. The project operation term is 25 years from the date of commercial acceptance of completed works which occurred in August 2006.

The State of Victoria’s interest in the unincorporated joint venture at 30 June 2010 was 50 per cent (2009: 50 per cent).

The State’s interest in the jointly controlled assets and liabilities is shown below. The amounts are included in the consolidated financial statements under their respective categories.

($ million) General

State of Victoria government sector Balance sheet: 2010 2009 2010 2009 Current assets 6.2 6.2 6.2 6.2 Non-current assets 110.1 112.9 110.1 112.9 Current liabilities ( 2.4) ( 2.3) ( 2.4) ( 2.3) Non-current liabilities ( 52.2) ( 53.0) ( 52.2) ( 53.0) Net assets 61.8 63.8 61.8 63.8



Biosciences Research Centre In April 2008, the State entered into a joint venture agreement with LaTrobe University (LTU) to establish a world class research facility on the University’s campus at Bundoora. A similar structure to the Showgrounds joint venture has been adopted comprising an unincorporated joint venture to carry out and deliver the joint venture project, and an incorporated joint venture entity, Biosciences Research Centre Pty Ltd to hold the assets of the joint venture and to enter into agreements on behalf of the State and LTU.

The State’s contribution to the joint venture is $227.3 million (expressed in May 2009 dollars), while LTU’s contribution is $60.4 million (expressed in May 2009 dollars).

On 30 April 2009, Biosciences Research Centre Pty Ltd entered into a project agreement (on behalf of the State and LTU) with the concessionaire to design, construct, finance and maintain the Biosciences Research Centre facility over the project’s operating term. The project operation term is 25 years from the date of commercial acceptance of completed works which is expected to occur in the third quarter of 2011.

Refer to Note 33 for details of commitments and Note 34 for details of contingent liabilities, relating to the Biosciences Research Centre.

($ million) General

State of Victoria government sector Balance sheet: 2010 2009 2010 2009 Current assets 0.3 1.3 0.3 1.3 Non-current assets .. 8.5 .. 8.5 Current liabilities ( 0.3) ( 1.3) ( 0.3) ( 1.3) Non-current liabilities .. .. .. .. Net assets .. 8.5 .. 8.5



Murray-Darling Basin Authority On 26 March 2008, the Commonwealth and the basin states – New South Wales, Victoria, Queensland, South Australia and the Australian Capital Territory – signed a Memorandum of Understanding for Murray-Darling Basin Reform. The Murray-Darling Basin Authority (MDBA) was created by the Water Act 2007 and was established on 3 March 2008, however agreement to the proportional share of assets between the states and Commonwealth did not occur until 2008-09. The functions undertaken by the MDBC were transferred to the MDBA and the existing MDBC dissolved, with a new Ministerial Council, Basin Officials Committee and Basin Community Committee established for the MDBA. The date of transition was 14 December 2008.

As a result, the State’s equity investment in the MDBA was derecognised, with an associated increase in financial and non-financial asset values, but mainly in buildings, plant and equipment classifications in the balance sheet, reflecting the State’s direct interest in certain MDBA assets. The venturers have a joint interest in the infrastructure assets themselves and water rights (as opposed to an interest in an entity controlling/holding the assets). The share in the individually controlled assets was transferred at transition in the original proportions of the share of the entity held by the individual jurisdictions as follows: New South Wales 26.67 per cent; South Australia 26.67 per cent, Victoria 26.67 per cent; the Commonwealth Government 20 per cent.

($ million) General

State of Victoria government sector Balance sheet: 2010 2009 2010 2009 Current assets 100.5 126.8 100.5 126.8 Non-current assets 617.5 537.2 617.5 537.2 Current liabilities .. .. .. .. Non-current liabilities .. .. .. .. Net assets 718.0 664.0 718.0 664.0

Note 19: Investments in other sector entities ($ million)

2010 2009 Balance of investment in PNFC and PFC sectors at beginning of period 60 634.8 44 857.1 Net contributions to other sectors by owner 1 360.0 1 540.0 Revaluation gain/(loss) for period (a) 2 513.9 14 237.7 Total investments in other sector entities 64 508.7 60 634.8 Note: (a) The revaluation relates to the fair valuation of infrastructure assets in the transport and water sectors in 2009 and valuation

refinements for these sectors in 2010.


Note 20: Inventories ($ million)


2010 2009 2010 2009 At cost

Raw materials 8.6 14.2 7.9 8.5 Work in progress 90.1 68.8 75.9 40.1 Finished goods 84.6 60.1 11.6 12.5 Consumable stores 123.5 100.2 100.9 81.6 Land and other assets held as inventory (a) 607.7 643.9 71.3 85.9

At net realisable value Raw materials .. 5.7 .. .. Finished goods 8.9 6.5 0.1 0.1 Consumable stores 5.6 17.2 .. 12.0 Land and other assets held as inventory 0.8 8.7 0.8 8.7 Total inventories 929.7 925.3 268.4 249.3 Note: (a) Including inventory held for distribution.

Reconciliation of movements in land and other assets held as inventory ($ million)


2010 2009 2010 2009 Opening balance 652.6 566.9 94.6 105.1 Acquisitions 105.2 97.2 10.0 2.6 Assets transferred ( 23.1) ( 5.9) ( 22.5) ( 8.7) Revaluations .. .. .. .. Disposals ( 126.3) ( 5.6) ( 10.0) ( 4.4) Closing balance 608.5 652.6 72.1 94.6

Note 21: Non-financial assets held for sale ($ million)


2010 2009 2010 2009 Land 75.4 44.6 62.6 43.9 Buildings 22.3 19.1 22.3 19.1 Infrastructure, plant, equipment and vehicles 6.6 9.2 6.1 9.2 Other 3.9 7.3 0.5 2.0 Total non-financial assets held for sale 108.1 80.2 91.5 74.2


Note 22: Land, buildings, infrastructure, plant and equipment

(a) Total land, buildings, infrastructure, plant and equipment ($ million)

Public Administration General

State of Victoria government sector 2010 2009 2010 2009 Buildings (written down value) 1 734.6 1 589.7 506.1 432.7 Land and national parks 1 094.8 1 021.4 608.8 562.5 Infrastructure systems (written down value) 46.3 46.2 39.8 40.8 Plant, equipment and vehicles (written down value) 344.5 286.0 208.2 189.6 Roads (written down value) 17.1 26.5 .. .. Earthworks .. .. .. .. Cultural assets (written down value) 117.6 116.9 117.6 116.9 Total land, buildings, infrastructure, plant and

equipment 3 354.9 3 086.7 1 480.5 1 342.6

Community Housing General

State of Victoria government sector 2010 2009 2010 2009 Buildings (written down value) 7 835.9 7 579.0 .. .. Land and national parks 9 584.9 9 583.6 .. .. Infrastructure systems (written down value) .. .. .. .. Plant, equipment and vehicles (written down value) 1.3 2.5 .. .. Roads (written down value) .. .. .. .. Earthworks .. .. .. .. Cultural assets (written down value) .. .. .. .. Total land, buildings, infrastructure, plant and

equipment 17 422.1 17 165.0 .. ..

Total General

State of Victoria government sector 2010 2009 2010 2009 Buildings (written down value) 30 910.9 29 287.4 19 563.8 18 024.5 Land and national parks 53 196.8 55 098.4 36 797.4 39 467.3 Infrastructure systems (written down value) 44 199.2 39 126.4 1 177.3 964.8 Plant, equipment and vehicles (written down value) 5 944.7 5 713.7 2 442.7 2 265.4 Roads (written down value) 18 589.6 16 857.7 18 561.9 16 820.5 Earthworks 6 479.2 5 486.8 6 479.2 5 486.8 Cultural assets (written down value) 4 425.8 4 408.8 4 397.3 4 380.4 Total land, buildings, infrastructure, plant and

equipment (a) 163 746.1 155 979.1 89 419.7 87 409.7

Note: (a) Consistent with AASB1051 Land Under Roads, the State has recognised land under roads acquired prior to 1 July 2008 at fair

value. At 30 June 2009, the methodology applied was based on discounting the values for relevant municipal areas applied to land area under the arterial road network, including related reservations. At 30 June 2010, this approach was changed, resulting in a write-down of $4 billion to the value of land under roads.


Education Health and Welfare

State of Victoria General

government sector General

State of Victoria government sector 2010 2009 2010 2009 2010 2009 2010 2009

7 550.3 6 381.2 7 550.3 6 381.2 7 100.0 6 921.0 7 100.0 6 921.0 7 098.8 7 068.3 7 098.8 7 068.3 1 774.6 1 741.3 1 774.6 1 741.3

11.7 7.6 11.7 7.6 .. .. .. .. 344.3 310.9 344.3 310.9 906.5 947.0 906.5 947.0

.. .. .. .. .. .. .. ..

.. .. .. .. .. .. .. .. 15.6 15.6 15.6 15.6 4.7 4.6 4.7 4.6

15 020.8

13 783.6 15 020.8 13 783.6 9 785.8 9 613.9 9 785.8 9 613.9

Transportation and Communication Public Safety and Environment




1 905.2 604.0 634.0 4 962.7 4 911.3 3 803.4 3 655.6 1 727.2 21 270.1 22 752.2 17 466.0 19 872.0 12 373.6 12 931.5 9 849.2 10 223.1 14 744.5 13 033.7 472.4 292.9 29 396.7 26 038.9 653.4 623.5 3 274.4 2 985.3 49.2 52.4 1 073.7 1 182.0 934.5 765.5

17 910.5 16 169.1 17 910.5 16 169.1 662.0 662.1 651.4 651.4 6 479.2 5 486.8 6 479.2 5 486.8 .. .. .. ..

2.3 1.4 1.8 0.9 4 285.6 4 270.3 4 257.7 4 242.4 65 408.3

62 333.8 42 983.1 42 508.0 52 754.3 49 996.0 20 149.6 20 161.5


Note 22: Land, buildings, infrastructure, plant and equipment (continued)

(b) Land and buildings ($ million)


State of Victoria government sector 2010 2009 2010 2009 Buildings 2 151.1 1 989.2 650.6 557.1 Accumulated depreciation ( 416.5) ( 399.5) ( 144.5) ( 124.4) Buildings (written down value) 1 734.6 1 589.7 506.1 432.7 Land 1 094.8 1 021.4 608.8 562.5 National Parks and other ‘land only’ holdings .. .. .. .. Land and National Parks 1 094.8 1 021.4 608.8 562.5 Total land and buildings 2 829.4 2 611.1 1 114.8 995.2


State of Victoria government sector 2010 2009 2010 2009 Buildings 7 988.3 7 584.3 .. .. Accumulated depreciation ( 152.3) ( 5.3) .. .. Buildings (written down value) 7 835.9 7 579.0 .. .. Land 9 584.9 9 583.6 .. .. National Parks and other ‘land only’ holdings .. .. .. .. Land and national parks 9 584.9 9 583.6 .. .. Total land and buildings 17 420.8 17 162.6 .. ..

Total General

State of Victoria government sector 2010 2009 2010 2009 Buildings 35 957.7 33 759.4 22 046.1 20 204.2 Accumulated depreciation (5 046.9) (4 471.9) (2 482.3) (2 179.7) Buildings (written down value) 30 910.9 29 287.4 19 563.8 18 024.5 Land 51 056.6 52 958.2 34 657.3 37 327.1 National Parks and other ‘land only’ holdings 2 140.2 2 140.2 2 140.2 2 140.2 Land and national parks 53 196.8 55 098.4 36 797.4 39 467.3 Total land and buildings 84 107.7 84 385.8 56 361.2 57 491.7






7 981.2 6 610.6 7 981.2 6 610.6 8 491.4 8 324.3 8 491.4 8 324.3 ( 430.9) ( 229.4) ( 430.9) ( 229.4) (1 391.4) (1 403.3) (1 391.4) (1 403.3) 7 550.3 6 381.2 7 550.3 6 381.2 7 100.0 6 921.0 7 100.0 6 921.0 7 098.8 7 068.3 7 098.8 7 068.3 1 774.6 1 741.3 1 774.6 1 741.3

.. .. .. .. .. .. .. .. 7 098.8 7 068.3 7 098.8 7 068.3 1 774.6 1 741.3 1 774.6 1 741.3

14 649.2 13 449.5 14 649.2 13 449.5 8 874.6 8 662.4 8 874.6 8 662.4





3 708.0 3 817.3 615.3 670.0 5 637.9 5 433.7 4 307.6 4 042.2 (1 980.7) (1 912.1) ( 11.3) ( 36.0) ( 675.1) ( 522.4) ( 504.3) ( 386.6) 1 727.2 1 905.2 604.0 634.0 4 962.7 4 911.3 3 803.4 3 655.6

21 270.1 22 752.2 17 466.0 19 872.0 10 233.4 10 791.3 7 709.0 8 082.9 .. .. .. .. 2 140.2 2 140.2 2 140.2 2 140.2

21 270.1 22 752.2 17 466.0 19 872.0 12 373.6 12 931.5 9 849.2 10 223.1 22 997.3 24 657.5 18 070.0 20 506.0 17 336.3 17 842.8 13 652.5 13 878.7



(c) Plant, equipment and vehicles, and infrastructure systems ($ million)


State of Victoria government sector 2010 2009 2010 2009 Infrastructure systems 50.2 48.3 40.8 41.5 Accumulated depreciation ( 3.9) ( 2.2) ( 1.0) ( 0.7) Leased infrastructure systems .. .. .. .. Accumulated depreciation .. .. .. .. Infrastructure systems (written down value) 46.3 46.2 39.8 40.8 Plant, equipment and vehicles 582.2 529.0 298.2 265.9 Accumulated depreciation ( 238.5) ( 243.8) ( 90.8) ( 77.1) Leased plant, equipment and vehicles 1.0 1.0 1.0 1.0 Accumulated depreciation ( 0.2) ( 0.2) ( 0.2) ( 0.2) Plant, equipment and vehicles (written down value) 344.5 286.0 208.2 189.6 Total plant, equipment and vehicles, and

infrastructure systems 390.8 332.2 248.0 230.4


State of Victoria government sector 2010 2009 2010 2009 Infrastructure systems .. .. .. .. Accumulated depreciation .. .. .. .. Leased infrastructure systems .. .. .. .. Accumulated depreciation .. .. .. .. Infrastructure systems (written down value) .. .. .. .. Plant, equipment and vehicles 8.5 12.4 .. .. Accumulated depreciation ( 7.2) ( 10.0) .. .. Leased plant, equipment and vehicles .. .. .. .. Accumulated depreciation .. .. .. .. Plant, equipment and vehicles (written down value) 1.3 2.5 .. .. Total plant, equipment and vehicles, and

infrastructure systems 1.3 2.5 .. ..

Total General

State of Victoria government sector 2010 2009 2010 2009 Infrastructure systems 53 321.3 47 664.3 1 515.0 1 278.4 Accumulated depreciation (9 246.6) (8 651.4) ( 337.6) ( 313.6) Leased infrastructure systems 157.8 156.2 .. .. Accumulated depreciation ( 33.3) ( 42.8) .. .. Infrastructure systems (written down value) 44 199.2 39 126.4 1 177.3 964.8 Plant, equipment and vehicles 9 790.7 9 271.2 5 090.0 4 754.0 Accumulated depreciation (5 455.5) (5 160.4) (2 724.9) (2 605.9) Leased plant, equipment and vehicles 2 061.2 1 990.8 195.3 197.8 Accumulated depreciation ( 451.6) ( 387.9) ( 117.8) ( 80.5) Plant, equipment and vehicles (written down value) 5 944.7 5 713.7 2 442.7 2 265.4 Total plant, equipment and vehicles, and

infrastructure systems 50 143.9 44 840.0 3 620.1 3 230.2



State of Victoria General government

sector General

State of Victoria government sector 2010 2009 2010 2009 2010 2009 2010 2009 11.7 7.6 11.7 7.6 .. .. .. ..

.. .. .. .. .. .. .. ..

.. .. .. .. .. .. .. ..

.. .. .. .. .. .. .. .. 11.7 7.6 11.7 7.6 .. .. .. ..

1 024.6 992.3 1 024.6 992.3 2 030.4 2 026.9 2 030.4 2 026.9 ( 682.5) ( 681.6) ( 682.5) ( 681.6) (1 140.5) (1 104.9) (1 140.5) (1 104.9)

2.4 0.3 2.4 0.3 29.6 34.2 29.6 34.2 ( 0.2) ( 0.1) ( 0.2) ( 0.1) ( 12.9) ( 9.2) ( 12.9) ( 9.2)

344.3 310.9 344.3 310.9 906.5 947.0 906.5 947.0 356.0

318.6 356.0 318.6 906.5 947.0 906.5 947.0


State of Victoria General General

government sector State of Victoria government sector 2010 2009 2010 2009 2010 2009 2010 2009

22 242.9 19 916.7 472.4 297.8 31 016.4 27 691.6 990.0 931.5 (7 501.7) (6 886.7) .. ( 4.9) (1 740.9) (1 762.5) ( 336.6) ( 308.0)

5.2 5.1 .. .. 152.6 151.1 .. .. ( 1.8) ( 1.4) .. .. ( 31.4) ( 41.3) .. ..

14 744.5 13 033.7 472.4 292.9 29 396.7 26 038.9 653.4 623.5 4 097.7 3 654.7 128.2 124.9 2 047.3 2 055.8 1 608.8 1 344.0

(2 354.9) (2 154.8) ( 79.0) ( 72.5) (1 031.7) ( 965.3) ( 732.0) ( 669.8) 1 865.3 1 792.6 .. .. 162.9 162.7 162.3 162.2 ( 333.6) ( 307.2) .. .. ( 104.8) ( 71.2) ( 104.5) ( 71.0) 3 274.4 2 985.3 49.2 52.4 1 073.7 1 182.0 934.5 765.5

18 018.9

16 019.0 521.6 345.3 30 470.4 27 220.9 1 588.0 1 389.0

Infrastructure systems provide essential services used in the delivery of final services or products. They are generally a complex interconnected network of individual assets and mainly include sewerage systems, water storage and supply systems, and public transport assets owned by the State.



(d) Road networks and earthworks ($ million)


State of Victoria government sector 2010 2009 2010 2009 Roads 19.6 29.9 .. .. Accumulated depreciation ( 2.9) ( 4.4) .. .. Road infrastructure 0.4 1.0 .. .. Accumulated depreciation .. .. .. .. Roads (written down value) 17.1 26.5 .. .. Earthworks .. .. .. .. Total road networks and earthworks 17.1 26.5 .. ..


State of Victoria government sector 2010 2009 2010 2009 Roads .. .. .. .. Accumulated depreciation .. .. .. .. Road infrastructure .. .. .. .. Accumulated depreciation .. .. .. .. Roads (written down value) .. .. .. .. Earthworks .. .. .. .. Total road networks and earthworks .. .. .. ..

Total General

State of Victoria government sector 2010 2009 2010 2009 Roads 23 201.2 19 905.2 23 176.0 19 867.1 Accumulated depreciation (9 531.4) (7 857.5) (9 528.0) (7 852.2) Road infrastructure 7 747.9 7 347.8 7 739.6 7 342.2 Accumulated depreciation (2 828.2) (2 537.8) (2 825.6) (2 536.5) Roads (written down value) 18 589.6 16 857.7 18 561.9 16 820.5 Earthworks 6 479.2 5 486.8 6 479.2 5 486.8 Total road networks and earthworks 25 068.8 22 344.5 25 041.1 22 307.3






.. .. .. .. .. .. .. ..

.. .. .. .. .. .. .. ..

.. .. .. .. .. .. .. ..

.. .. .. .. .. .. .. ..

.. .. .. .. .. .. .. ..

.. .. .. .. .. .. .. ..

.. .. .. .. .. .. .. ..





23 176.0 19 867.1 23 176.0 19 867.1 5.7 8.2 .. .. (9 528.0) (7 852.2) (9 528.0) (7 852.2) ( 0.5) ( 0.9) .. .. 6 962.4 6 565.1 6 962.4 6 565.1 785.1 781.7 777.1 777.1

(2 699.9) (2 410.7) (2 699.9) (2 410.7) ( 128.3) ( 127.0) ( 125.7) ( 125.7) 17 910.5 16 169.1 17 910.5 16 169.1 662.0 662.1 651.4 651.4 6 479.2 5 486.8 6 479.2 5 486.8 .. .. .. ..

24 389.7 21 655.9 24 389.7 21 655.9 662.0 662.1 651.4 651.4

The roads component of the above table represents road pavement and road works in progress. All land under roads is included under the category of ‘Land’ in Note 22(b). Road infrastructure mainly includes sound barriers, bridges and traffic signal control systems.



(e) Cultural assets ($ million)


State of Victoria government sector 2010 2009 2010 2009 Cultural assets 131.0 126.1 131.0 126.1 Accumulated depreciation ( 13.3) ( 9.2) ( 13.3) ( 9.2) Total cultural assets 117.6 116.9 117.6 116.9


State of Victoria government sector 2010 2009 2010 2009 Cultural assets .. .. .. .. Accumulated depreciation .. .. .. .. Total cultural assets .. .. .. ..

Total General

State of Victoria government sector 2010 2009 2010 2009 Cultural assets 4 546.6 4 517.5 4 518.1 4 489.1 Accumulated depreciation ( 120.8) ( 108.7) ( 120.8) ( 108.7) Total cultural assets 4 425.8 4 408.8 4 397.3 4 380.4





State of Victoria government sector 2010 2009 2010 2009 2010 2009 2010 2009 44.0 44.2 44.0 44.2 4.7 4.6 4.7 4.6

( 28.4) ( 28.6) ( 28.4) ( 28.6) .. .. .. .. 15.6 15.6 15.6 15.6 4.7 4.6 4.7 4.6




State of Victoria government sector 2010 2009 2010 2009 2010 2009 2010 2009 2.3 1.9 1.8 1.4 4 364.6 4 340.7 4 336.7 4 312.9

.. ( 0.5) .. ( 0.5) ( 79.0) ( 70.5) ( 79.0) ( 70.5) 2.3 1.4 1.8 0.9 4 285.6 4 270.3 4 257.7 4 242.4



(f) Reconciliation of movements Reconciliation of movements in land and buildings

($ million) General

State of Victoria government sector 2010 2009 2010 2009 Opening balance 84 385.8 59 574.9 57 491.7 36 673.6 Acquisitions 4 215.8 2 610.9 3 353.7 1 433.3 Reclassification ( 253.2) ( 182.8) 53.6 ( 13.7) Revaluation (1 341.9) 4 849.7 (2 350.7) 1 564.7 Disposals (1 765.9) ( 317.0) (1 319.3) ( 264.9) Assets recognised for the first time (a) 1.8 18 682.5 .. 18 682.5 Impairment ( 5.0) ( 78.1) ( 8.5) ( 45.0) Depreciation (1 129.8) ( 754.3) ( 859.4) ( 538.7) Closing balance 84 107.7 84 385.8 56 361.2 57 491.7 Note: (a) For 2009, assets recognised for the first time includes land under roads.

Reconciliation of movements in plant, equipment and vehicle, and other infrastructure systems

($ million) General

State of Victoria government sector 2010 2009 2010 2009 Opening balance 44 840.0 24 834.9 3 230.2 2 431.3 Acquisitions 4 406.6 5 689.0 909.5 1 477.2 Reclassification 224.9 190.2 ( 40.7) 24.7 Revaluation (a) 2 389.3 15 349.9 130.5 84.8 Disposals ( 172.8) ( 307.3) ( 162.1) ( 186.5) Increase in leased motor vehicles 80.9 236.4 ( 4.2) ( 88.7) Assets recognised for the first time 148.1 139.6 86.8 .. Impairment ( 26.6) 7.5 ( 0.7) 1.0 Depreciation (1 746.6) (1 300.2) ( 529.2) ( 513.6)

50 143.9 3 620.1 Closing balance 44 840.0 3 230.2 Note: (a) The revaluation relates to the fair valuation of infrastructure assets in the transport and water sectors in 2009.

Reconciliation of movements in road networks and earthworks ($ million)


2010 2009 2010 2009 Opening balance 22 344.5 21 828.0 22 307.3 21 754.5 Acquisitions 1 057.1 963.3 1 056.3 961.1 Reclassification 0.1 ( 33.2) .. .. Revaluation 1 991.3 ( 3.3) 2 000.9 .. Disposals ( 5.1) ( 19.2) ( 5.6) ( 19.2) Road infrastructure recognised for the first time 84.6 .. 84.3 .. Impairment .. ( 0.6) .. .. Depreciation ( 403.7) ( 390.6) ( 402.2) ( 389.1) Closing balance 25 068.8 22 344.5 25 041.1 22 307.3



Reconciliation of movements in cultural assets ($ million)


2010 2009 2010 2009 Opening balance 4 408.8 4 329.9 4 380.4 4 305.5 Acquisitions 25.8 20.1 25.7 16.1 Reclassification 2.8 3.3 3.9 3.3 Revaluation 1.3 67.2 0.9 67.2 Disposals 1.0 0.6 0.2 0.6 Assets recognised for the first time 0.9 0.7 0.9 0.7 Impairment .. 0.8 .. 0.8 Depreciation ( 14.7) ( 13.9) ( 14.7) ( 13.9) Closing balance 4 425.8 4 408.8 4 397.3 4 380.4

Note 23: Other non-financial assets ($ million)


2010 2009 2010 2009 Intangible produced assets 1 099.7 879.3 655.6 502.3 Accumulated depreciation ( 376.2) ( 315.1) ( 291.9) ( 229.2) Intangible non-produced assets 533.8 241.2 81.1 68.7 Accumulated amortisation ( 159.4) ( 52.8) ( 43.6) ( 20.4) Total intangibles 1 097.8 752.6 401.3 321.3 Investment properties 34.0 26.8 26.5 21.1 Biological assets 49.3 47.0 31.8 27.0 Other assets 373.6 389.7 311.5 312.8 Total other non-financial assets 1 554.7 1 216.1 771.0 682.1

Reconciliation of movement in intangibles, investment properties and biological assets ($ million)


2010 2009 2010 2009 Opening balance 826.4 603.0 369.4 294.1 Acquisitions 342.6 270.7 161.5 141.8 Reclassification 33.6 5.6 1.4 12.7 Revaluation 1.3 0.2 .. 0.4 Disposals ( 4.0) ( 22.6) ( 3.5) ( 13.7) Assets recognised for the first time 97.4 65.2 4.5 0.1 Impairment 4.3 0.2 0.4 .. Amortisation and depreciation (a) ( 120.5) ( 95.8) ( 74.2) ( 65.8) Closing balance (b) 1 181.1 826.4 459.5 369.4 Notes: (a) For produced and non-produced assets. (b) Reconciliation does not include movements of ‘other’ assets.


Note 24: Assets classified by government purpose classification

(a) Purchases of non-financial assets(a) ($ million)


2010 2009 2010 2009 General public services 377.9 198.0 339.4 166.7 Public order and safety 448.2 333.2 448.2 333.2 Education 1 404.9 556.5 1 404.9 556.5 Health 443.4 495.7 443.4 495.7 Social security and welfare 90.7 167.4 90.7 167.4 Housing and community amenities 3 614.9 2 976.7 187.2 267.1 Recreation and culture 239.9 382.4 96.0 73.2 Fuel and energy 8.1 4.5 1.1 0.9 Agriculture, forestry, fishing, and hunting 0.1 ( 34.1) 27.1 16.6 Mining, manufacturing, and construction 0.1 ( 3.1) 0.1 ( 3.1) Transport and communications 2 297.5 2 337.4 1 605.8 1 052.0 Other economic affairs 16.6 20.2 16.6 20.2 Other purposes 0.7 0.3 0.7 0.3 Total purchases of non-financial assets 8 943.1 7 435.2 4 661.2 3 146.8 Note: (a) Note 39 provides definitions and descriptions of government purpose classifications.

(b) Total assets(a)

($ million) General

State of Victoria government sector 2010 2009 2010 2009 General public services 974.0 809.0 582.8 453.5 Public order and safety 5 895.9 5 640.4 5 895.9 5 640.4 Education 14 960.4 13 878.9 14 960.4 13 878.9 Health 9 694.3 9 429.8 9 694.3 9 429.8 Social security and welfare 670.7 602.0 670.7 602.0 Housing and community amenities 56 845.3 53 761.2 7 981.9 8 486.3 Recreation and culture 10 952.1 10 841.5 7 085.7 6 740.0 Fuel and energy 14.5 19.6 2.4 1.9 Agriculture, forestry, fishing, and hunting 416.7 411.0 381.5 381.8 Mining, manufacturing, and construction .. .. .. .. Transport and communications 65 639.6 62 551.3 43 019.9 42 544.7 Other economic affairs 278.7 253.0 278.7 253.0 Other purposes 3.0 2.9 3.0 2.9 Not allocated by purpose (b) 37 123.6 36 053.4 73 549.2 69 113.6 Total asset 203 468.8 194 254.0 164 106.4 157 528.9 Notes: (a) Note 39 provides definitions and descriptions of government purpose classifications. (b) Includes financial assets which are not able to be allocated by purpose.


Note 25: Borrowings ($ million)


2010 2009 2010 2009 Current borrowings

Domestic borrowings 3 505.3 977.9 729.6 622.1 Foreign currency borrowings 1 667.4 2 304.3 .. .. Finance lease liabilities 182.6 106.0 138.6 61.9 Derivative financial instruments 1 818.6 2 590.0 5.3 7.4 Total current borrowings 7 173.9 5 978.2 873.5 691.4 Non-current borrowings Domestic borrowings 18 539.9 15 238.6 11 131.3 8 287.2 Foreign currency borrowings 130.2 123.8 .. .. Finance lease liabilities 2 495.0 2 591.3 1 607.5 1 660.4 Derivative financial instruments 241.3 194.0 0.2 1.1 Total non-current borrowings 21 406.4 18 147.8 12 739.0 9 948.8 Total borrowings (a) 28 580.3 24 126.0 13 612.5 10 640.1 Note: (a) Certain items previously classified as borrowings have been re-classified as deposits held and advances paid, in line with the

Government Finance Statistics framework.

Note 26: Other employee benefits ($ million)


2010 2009 2010 2009 Current

Accrued salaries and wages (a) 1 404.4 1 461.7 1 266.5 1 346.4 Long service leave 2 773.7 2 652.5 2 618.2 2 504.9 Total current employee benefits 4 178.1 4 114.2 3 884.7 3 851.3

Non-current Long service leave 508.6 455.0 473.2 425.8 Total non-current employee benefits 508.6 455.0 473.2 425.8 Total other employee benefits 4 686.7 4 569.2 4 357.9 4 277.2 Note: (a) Includes accrued annual leave, payroll tax and other similar on costs.


Note 27: Other provisions ($ million)


2010 2009 2010 2009 Provision for insurance claims

Victorian WorkCover Authority 1 710.5 1 640.4 .. .. Transport Accident Commission 958.8 858.1 .. .. Victorian Managed Insurance Authority 177.7 233.3 .. .. Other agencies 59.6 73.0 57.4 71.2 Current provision for insurance claims 2 906.6 2 804.8 57.4 71.2 Onerous contracts 100.8 152.0 .. .. Other provisions 328.7 359.9 209.1 204.1 Total current other provisions 3 336.1 3 316.7 266.5 275.4

Non-current provision for insurance claims Victorian WorkCover Authority 7 264.5 6 674.5 .. .. Transport Accident Commission 6 712.3 5 878.9 .. .. Victorian Managed Insurance Authority 1 140.0 1 069.1 .. .. Other agencies 148.6 198.4 148.2 198.1 Non-current provision for insurance claims 15 265.5 13 820.8 148.2 198.1 Onerous contracts 792.8 1 057.5 .. .. Other provisions 364.9 323.5 303.3 311.0 Total non-current other provisions 16 423.1 15 201.9 451.5 509.1 Total other provisions 19 759.2 18 518.6 718.0 784.4

Reconciliation of movements in insurance claims ($ million)


2010 2009 2010 2009 Opening balance 16 625.7 15 228.9 269.3 311.5 Effect of changes in assumptions and claims experience 975.8 541.6 ( 8.8) ( 17.8) Cost of prior year claims (unwinding of discount) 293.9 458.1 ( 13.7) 13.8 Increase in claims incurred (a) 2 990.9 2 854.0 26.9 11.5 Claim payments during the year (a) (2 505.7) (2 311.0) ( 54.9) ( 49.8) Other ( 208.6) ( 146.0) ( 13.3) .. Closing balance 18 172.1 16 625.7 205.6 269.3 Note: (a) Claim payments and claims incurred during the year are net of recoveries.

Reconciliation of movements in onerous contracts provision ($ million)


2010 2009 2010 2009 Opening balance 1 209.5 1 254.3 .. .. Receipts 215.5 269.2 .. .. Payments ( 327.9) ( 410.2) .. .. Discount interest (a) .. .. .. .. (Gain)/loss on restatement of the liability ( 203.6) 96.2 .. .. Closing balance 893.6 1 209.5 .. .. Note: (a) The net change in the present value of assets and liabilities between reporting periods has been recognised as discount interest.


Note 27: Other provisions (continued)

2010 Weighted Financial

Financial average assumptions assumptions used Prudential expected term used (not later (later than 1 year) (a) than 1 year) (a) Entity Actuary margin to settlement

Victorian WorkCover Authority

Pricewaterhouse Coopers Actuarial Ltd

5.4 years inflation rate inflation rate 8.5 per cent 4.00 per cent 3.75- 4.00 per cent discount rate discount rate 4.49 per cent 4.52 – 5.77 per

cent Transport Accident Commission


13.4 yrs inflation rate inflation rate 10.5 per cent 5.00 per cent 4.50 per cent discount rate discount rate 4.5 per cent 5.75 per cent

17.3 per cent of the net outstanding claims liability and claims handling expense

weighted average inflation rate = 7.9 per cent

Victorian Managed Insurance Authority

Finity Consulting Pty Ltd

5.7 years weighted average inflation rate = 7.9 per cent

(Public Healthcare Program)

weighted average discount rate = 5.1 per cent







(General Government Program)

weighted average

discount rate = 4.7 per cent







(Dust Diseases & Workers Compensation or Run-off Program)



Note: (a) The inflation rate assumptions are based on the anticipated rise in costs relevant to a particular entity.


Note 27: Other provisions (continued)

2009

Entity Actuary

Weighted average expected term to settlement

Financial assumptions used (not later than 1 year) (a)

Financial assumptions used (later than 1 year) (a)

Prudential margin

Victorian WorkCover Authority


5.4 years inflation rate inflation rate 8.5 per cent 3.30 – 3.80 per cent

3.25 – 3.75 per cent

discount rate discount rate 3.44 per cent 4.82 – 6.17 per

cent Transport Accident Commission


13.5 yrs inflation rate inflation rate 7.5 per cent 4.00 per cent 4.50 per cent discount rate discount rate 3.4 per cent 6.0 per cent




Ernst & Young Actuarial Business Consultants Pty Ltd



(Public Healthcare Program)



25 per cent of the net outstanding claims liability and claims handling expense


Ernst & Young Actuarial Business Consultants Pty Ltd



(General Government Program)


25 per cent of the net outstanding claims liability and claims handling expense



am actuaries Pty Ltd


(Run-off Program) weighted average discount rate = 5.9 per cent


Note: (a) The inflation rate assumptions are based on the anticipated rise in costs relevant to a particular entity.


Note 28: Reserves, accumulated surplus/(deficit) and non-controlling interests

(a) Reserves ($ million)


2010 2009 2010 2009 Property, plant and equipment revaluation surplus 68 430.8 61 661.6 33 193.2 29 776.6 Available-for-sale investments 25.4 11.9 28.3 13.5 Revaluation reserve for investments in PFC and PNFC

entities .. .. 40 158.8 37 644.8

Other reserves 2 590.0 2 401.7 866.7 774.6 Total reserves 71 046.2 64 075.2 74 247.0 68 209.5

Movements in reserves Property, plant and equipment revaluation surplus

($ million) General

State of Victoria government sector 2010 2009 2010 2009 Balance at beginning of reporting period 61 661.6 41 220.6 29 776.6 28 459.7 Revaluation – associate .. ( 227.4) .. ( 227.4) Revaluation – joint venture 0.1 91.5 0.1 91.5 Revaluation – other 6 769.2 20 576.9 3 416.6 1 452.8 Balance at the end of the reporting period 68 430.8 61 661.6 33 193.2 29 776.6

Available-for-sale investments revaluation surplus ($ million)


2010 2009 2010 2009 Balance at beginning of reporting period 11.9 6.0 13.5 3.0 Revaluation 20.3 ( 63.2) 18.4 ( 41.4) Transferred to profit or loss for the period ( 7.3) 69.1 ( 3.6) 51.9 Balance at the end of the reporting period 25.3 11.9 28.3 13.5


Note 28: Reserves, accumulated surplus/(deficit) and non-controlling interests (continued)

Revaluation surplus for investments in PFC and PNFC entities ($ million)


2010 2009 2010 2009 Balance at beginning of reporting period .. .. 37 644.8 23 407.1 Revaluation – PFC entities .. .. ( 483.0) (2 966.4) Revaluation – PNFC entities .. .. 2 996.9 17 204.1 Balance at the end of the reporting period .. .. 40 158.8 37 644.8

Other reserves ($ million)


2010 2009 2010 2009 Balance at beginning of reporting period 2 401.7 1 804.5 774.6 777.7 Transfers to/(from) accumulated surplus 188.3 597.2 92.1 ( 3.1) Balance at the end of the reporting period 2 590.0 2 401.7 866.7 774.6

(b) Accumulated surplus/(deficit) ($ million)


2010 2009 2010 2009 Balance at beginning of reporting period 53 888.9 48 527.8 48 424.8 37 686.9 Net result for the period (5 677.7) (13 088.8) (5 413.1) (8 372.8) Assets recognised for the first time – policy adjustments .. 18 682.5 .. 18 682.5 Transfers to/(from) reserves 88.7 ( 232.6) 252.3 428.3 Balance at the end of the reporting period 48 299.9 53 888.9 43 263.9 48 424.8

(c) Non-controlling interest ($ million)


2010 2009 2010 2009 Balance at beginning of reporting period 39.5 32.0 39.5 32.0 Net contributions during the year (a) 5.0 7.5 5.0 7.5 Balance at the end of the reporting period 44.5 39.5 44.5 39.5 Note: (a) Non-controlling interest share of contributed capital in the Australian Synchroton Holding Company at 30 June 2010. Existing

shareholders contributed additional cash of $5.0 million for the 2009-10 year.


Note 29: Cash flow information

(a) Reconciliation of cash and cash equivalents ($ million)


2010 2009 2010 2009 Cash 1 524.2 1 586.0 1 350.8 1 290.3 Deposits at call 3 187.3 2 731.0 1 870.5 1 555.6 Cash and cash equivalents 4 711.5 4 317.0 3 221.3 2 846.0 Bank overdraft ( 0.2) ( 1.2) .. ( 0.5) Balances as per cash flow statement 4 711.4 4 315.8 3 221.3 2 845.5

(b) Reconciliation of net result to net cash flows from operating activities ($ million)


2010 2009 2010 2009 Net result (5 677.7) (13 088.8) (5 413.1) (8 372.8)

Non-cash movements Depreciation and amortisation 3 415.3 2 554.8 1 879.8 1 521.1 Revaluation of investments ( 105.3) 2 539.7 ( 28.3) 21.9 Assets (received)/provided free of charge ( 426.4) ( 242.5) ( 158.6) ( 44.3) Assets not previously recognised ( 20.2) ( 144.4) ( 19.3) ( 144.3) Revaluation of assets 4 504.8 254.2 4 558.9 229.7 Discount/premium on other financial assets/borrowings ( 106.9) ( 66.8) 7.5 8.8 Bad/doubtful debts .. .. 0.2 .. Foreign currency dealings ( 0.5) 0.3 ( 0.5) 0.3 Unrealised gains/losses on borrowings 686.0 254.2 .. .. Discounting of assets and liabilities .. .. .. ..

Movements included in investing and financing activities Net gain/loss from sale of investments (1 057.8) 1 627.5 ( 34.8) 137.1 Net gain/loss from sale of plant and equipment 49.5 ( 66.8) 40.4 ( 62.4) Realised gains/losses on borrowings 17.1 127.1 0.9 ..

Movements in assets and liabilities Increase/(decrease) in provision for doubtful debts 45.4 144.6 46.1 136.1 Increase/(decrease) in payables 928.8 666.8 523.7 688.8 Increase/(decrease) in employee benefits 117.4 327.9 80.7 303.9 Increase/(decrease) in superannuation 1 848.1 7 796.3 1 861.9 7 745.5 Increase/(decrease) in other provisions 1 249.0 1 491.0 ( 65.8) 115.2 Increase/(decrease) in other liabilities .. .. .. .. (Increase)/decrease in receivables ( 150.2) ( 798.6) ( 70.2) ( 300.5) (Increase)/decrease in other non-financial assets 4.4 ( 24.5) ( 6.1) ( 3.2) Net cash flows from operating activities 5 320.8 3 352.1 3 203.4 1 980.7


Note 30: Reconciliations

(a) Reconciliation to GFS net operating balance(a) ($ million)


2010 2009 2010 2009 Net result from transactions – net operating balance 643.6 251.2 394.6 181.8 Convergence differences: PNFC/PFC dividends .. .. 248.4 193.2 plus total convergence difference: .. .. ( 248.4) ( 193.2) GFS Net operating balance 643.6 251.2 146.2 ( 11.4) Note: (a) Determined in accordance with the ABS GFS Manual.

(b) Reconciliation to GFS total change in net worth(a)


government sector corporations 2010 2009 2010 2009 Comprehensive result – total change in net worth 876.7 26 299.8 3 309.3 17 404.5 Convergence differences: Relating to net operating balance – PNFC/PFC

dividends 248.4 193.2

Relating to other economic flows: (b) Doubtful receivables of the GG sector (c) 46.2 135.4 .. .. Doubtful receivables of the PNFC/PFC sector ( 1.3) ( 0.4) Future tax benefits of the PNFC/PFC sector ( 5.4) ( 44.4) Deferred tax liability of the PNFC/PFC sector 496.6 1 139.2 Net gain on equity investments in other sector

entities measured at proportional share of the carrying amount of net assets/(liabilities) (d)(e)

520.3 82.8 (4 047.6) (18 692.2)

plus total convergence differences 566.5 218.1 (3 309.3) (17 404.5) GFS Total change in net worth 1 443.2 26 518.0 .. .. Notes: (a) Determined in accordance with the ABS GFS Manual. (b) Excludes transactions with owners as owner, therefore excluding Non-controlling Interest. (c) The convergence difference arises because GFS does not recognise doubtful receivables, whereas the operating statement recognises it and

classifies doubtful receivables as other economic flows. (d) The convergence difference arises because the amount of net assets (and therefore the change in carrying amount of net assets) of other sector

entities determined under GFS principles and rules differs from the carrying amount of net assets (and therefore carrying amount of net assets) of the subsidiaries recognised in the balance sheet. The difference is therefore the total change in net worth impacting either through the net operating balance or other economic flows. The components are doubtful receivables.

(e) Net gain on equity investments in other sector entities includes doubtful receivables, future tax benefits and deferred tax liability of the PNFC and PFC sectors.


Public financial

corporations

Eliminations State of Victoria 2010 2009 2010 2009 2010 2009

( 114.0) ( 189.6) ( 329.5) ( 367.1) 594.7 ( 123.8)

59.2 150.0 ( 307.6) ( 343.2) .. .. ( 59.2) ( 150.0) 307.6 343.2 .. ..

( 173.2) ( 339.6) ( 21.9) ( 23.9) 594.7 ( 123.8)


Eliminations State of Victoria

2010 2009 2010 2009 2010 2009 ( 423.8) (2 816.4) (2 380.3) (14 482.7) 1 382.0 26 405.3

59.2

150.0 ( 307.6) ( 343.2) .. ..

.. .. .. .. 46.2 135.4

0.4 8.8 .. .. ( 0.9) 8.4 28.7 (1 021.4) ( 23.4) 1 065.8 .. .. 1.3 0.9 ( 497.9) (1 140.2) .. ..

334.2

3 678.1 3 193.1 14 931.3 .. ..

423.8 2 816.4 2 364.3 14 513.8 45.2 143.8 .. .. ( 16.0) 31.0 1 427.2 26 549.0


Note 30: Reconciliations (continued)

(c) Reconciliation to GFS net lending/(borrowing)(a)


government sector corporations 2010 2009 2010 2009 Net lending/(borrowing) (2 212.8) (1 184.4) (2 496.4) (3 390.6) Convergence differences: Relating to net operating balance – PNFC/PFC

dividends .. .. 248.4 193.2

plus total convergence difference: .. .. 248.4 193.2 GFS Net lending/(borrowing) (2 212.8) (1 184.4) (2 744.8) (3 583.8) Note: (a) Determined in accordance with the ABS GFS Manual.



Eliminations State of Victoria

2010 2009 2010 2009 2010 2009 ( 123.6) ( 226.3) ( 329.5) ( 367.1) (5 143.0) (5 168.4)

59.2

150.0 ( 307.6) ( 343.2) .. ..

59.2 150.0 ( 307.6) ( 343.2) .. .. ( 182.7) ( 376.2) ( 21.9) ( 23.9) (5 143.0) (5 168.4)


Note 30: Reconciliations (continued)

(d) Reconciliation to GFS net worth(a) ($ million)


2010 2009 2010 2009 Net worth 117 555.5 116 673.8 64 176.6 59 836.3 Convergence differences: Relating to net operating balance – PNFC/PFC

dividends 248.4 193.2

Non-controlling interest ( 44.5) ( 39.5) .. .. Doubtful receivables of the GG sector (b) 434.4 388.2 Doubtful receivables of the PNFC/PFC sector .. .. 18.0 19.3 Future tax benefits of the PNFC/PFC sector .. .. ( 156.0) ( 150.6) Deferred tax liability of the PNFC/PFC sector .. .. 3 613.0 3 116.4 Investments in other sector entities (c) (d) 1 687.1 1 166.8 Shares and other contributed capital .. .. (67 900.0) (63 014.6) plus total convergence difference: 2 077.0 1 515.5 (64 176.6) (59 836.3) GFS Net worth 119 632.5 118 189.3 .. .. Notes: (a) Determined in accordance with the ABS GFS Manual. (b) The convergence difference in accounts receivable arises because GFS does not recognise doubtful receivables, whereas a provision for

doubtful receivables is recognised in the balance sheet. (c) The convergence difference arises because the amount of net assets (and therefore the change in carrying amount of net assets) of other

sector entities determined under GFS principles and rules differs from the carrying amount of net assets. (d) Investments in other sector entities for general government sector include doubtful receivables, future tax benefits and deferred tax

liability of the PNFC and PFC sectors.

(e) Reconciliation to GFS cash surplus/(deficit)(a) ($ million)


2010 2009 2010 2009 Cash surplus/(deficit) (1 270.5) ( 897.9) (2 677.2) (3 272.5) Convergence differences: Less: Acquisitions under finance leases and similar

arrangements ( 74.5) ( 453.4) ( 0.5) ( 128.1)

GFS cash surplus/(deficit) (1 345.0) (1 351.3) (2 677.7) (3 400.6) Note: (a) Determined in accordance with the ABS GFS Manual.


Public financial

corporations


332.1 798.5 (62 673.6) (59 305.0) 119 390.6 118 003.6

59.2 150.0 ( 307.6) ( 343.2) .. .. .. .. .. .. ( 44.5) ( 39.5) 434.4 388.2

47.6 47.2 .. .. 65.6 66.5 (1 838.8) (1 867.5) 1 994.8 2 018.1 .. ..

3.3 2.0 (3 616.3) (3 118.4) .. .. (1 687.1) (1 166.8) .. ..

1 396.6

869.8 66 503.4 62 144.8 .. ..

( 332.1) ( 798.5) 62 887.2 59 534.6 455.5 415.3 .. .. 213.6 229.6 119 846.1 118 418.8

Public financial

corporations


671.2 58.4 ( 27.2) 374.6 (3 303.7) (3 737.5)

..

.. .. .. ( 74.9) ( 581.5)

671.2 58.4 ( 27.2) 374.6 (3 378.7) (4 318.9)


Note 31: Explanations of material variances between budget and actual outcomes

The following tables and notes explain material variances between the general government sector original budget as published in Chapter 1 of 2009-10 Budget Paper No. 4 Statement of Finances, and actual outcomes. The tables also include the revised budget estimates as published in Appendix C of 2010-11 Budget Paper No. 4 Statement of Finances. As stated in Note 1(K), the budget data is sourced from the estimated financial statements, which were reviewed by the Auditor-General, but not subject to an audit.

For the general government sector comprehensive operating statement, variances are considered to be material where the variance exceeds the greater of 10 per cent of the original budget estimates or $15 million. In regard to the other statements, the high-level causes of major variances in the key aggregates, where material, have been explained.

(a) Consolidated comprehensive operating statement ($ million)

General government sector Revised

Notes Original Budget

Revised Budget

2010 Actual

Budget Variance %

Budget Variance %

Revenue from transactions Taxation revenue (a) 13 273.7 13 642.1 13 740.5 466.8 4 98.5 1 Interest revenue (b) 434.1 348.5 333.5 ( 100.6) -23 ( 15.0) -4 Dividends and income tax

equivalent and rate equivalent revenue

(c) 379.4 459.2 485.6 106.2 28 26.5 6

Sales of goods and services

(d) 5 044.1 5 427.9 5 289.5 245.4 5 ( 138.5) -3

Grants (e) 21 554.1 22 111.3 22 717.8 1 163.6 5 606.4 3 Other revenue (f) 1 702.9 1 756.5 2 018.4 315.5 19 261.8 15 Total revenue from

transactions 42 388.3 43 745.5 44 585.3 2 197.0 5 839.8 2

Expenses from transactions Employee expenses (g) 15 276.5 15 395.8 15 404.8 128.3 1 8.9 0 Superannuation interest

expense (h) 659.2 866.7 866.7 207.6 31 .. ..

Other superannuation (i) 1 599.3 1 542.0 1 527.8 ( 71.5) -4 ( 14.1) -1 Depreciation (j) 1 646.4 1 888.4 1 869.7 223.3 14 ( 18.7) -1 Interest expense (k) 713.8 830.1 843.3 129.5 18 13.1 2 Grants and other transfers (l) 8 442.3 8 464.5 9 174.5 732.2 9 710.1 8 Other operating expenses

(a) (m) 13 821.3 14 363.1 14 254.9 433.5 3 ( 108.2) -1

Total expenses from transactions

42 158.8 43 350.6 43 941.7 1 782.9 4 591.1 1

Net result from transactions – Net operating balance

229.5 394.9 643.6 414.1 180 248.7 63

Other economic flows included in net result Net gain/(loss) on disposal

of non-financial assets 54.1 80.7 ( 40.4) ( 94.4) -175 ( 121.0) -150


16.1 19.7 64.0 47.9 298 44.3 225


(n) .. 781.9 (1 450.2) (1 450.2) n.a. (2 232.1) -285


(a) Consolidated comprehensive operating statement (continued) ($ million)

General government sector Revised


Revised Budget

2010 Actual

Budget Variance %

Budget Variance %

Share of net profit/(loss) from associates/joint venture entities, excluding dividends

.. ( 1.4) ( 1.4) n.a. ( 1.4) 0

Other gains/(losses) from other economic flows (a)

(b)

(o) ( 56.9) 222.2 (4 628.8) (4 571.9) 8036 (4 851.0) -2183

13.2 Total other economic flows included in net result

1 104.5 (6 056.8) (6 070.0) n.a. (7 161.2) -648

Net result 242.8 1 499.4 (5 413.1) (5 655.9) n.a. (6 912.6) -461 Other economic flows – Other movements in equity Net gain/(loss) on financial

assets at fair value .. .. 15.2 15.2 n.a. 15.2 0

Revaluations of non-financial assets

(p) 3 168.2 1 879.4 3 416.7 248.5 8 1 537.3 82

Net gain/(loss) on equity investments in other sector entities at proportional share of the carrying amount of net assets

(q) 244.5 1 089.9 2 513.9 2 269.5 928 1 424.0 131


(r) ( 5.9) 286.1 344.1 350.0 -5941 58.0 20

3 406.8 Total other economic flows – Other movements in equity

3 255.4 6 289.8 2 883.1 n.a. 3 034.4

Comprehensive result – Total change in net worth

3 649.5 4 754.8 876.7 (2 772.8) n.a. (3 878.1) -82

Source: 2009-10 Budget Paper No. 4

Notes: (a) Reclassification of unilaterally determined bad debts expenses from ‘transactions’ to ‘other economic flows’ has required re-presentation

of previously published 2009-10 Budget, consistent with new accounting standard requirements. (b) Consistent with AASB1051 Land Under Roads, the State has recognised land under roads acquired prior to 1 July 2008 at fair

value. At 30 June 2009, the methodology applied was based on discounting the values for relevant municipal areas applied to land area under the arterial road network, including related reservations. At 30 June 2010, this approach was adopted using current data resulting in a write-down of $4 billion to the value of land under roads.


Note 31: Explanations of material variances between budget and actual outcomes (continued)

Revenue from transactions Revenue from transactions is $2.2 billion higher than the original published budget. The main reasons for this variance are discussed below.

(a) Taxation revenue was $467 million higher than originally estimated, the main drivers of the variation include:

− land transfer duty was $409 million higher than expected, reflecting a greater than expected rebound in the property market following the downturn in the market 2008-09;

− duty on motor vehicles was $89 million higher, consistent with better than expected economic conditions as well as industry factors such as the Commonwealth Government’s small and general business tax breaks;

− insurance contributions to fire brigades was $86 million higher, due to upward revisions to statutory contributions in preparation for the 2009-10 bushfire season and to respond to recommendations of the 2009 Victorian Bushfires Royal Commission’s Interim Report;

− non-life insurance duty was $41 million higher, consistent with industry reports of higher than expected insurance premium growth; and

− the Growth Areas Infrastructure Contribution (GAIC) was $85 million lower, due to a delay in the passing of legislation to enable collection and some downward variations for land tax and payroll tax.

(b) Interest revenue earned was $101 million lower, primarily due to interest rates on which the original budget estimates were based being higher than the actual interest rates experienced during 2009-10.

(c) The higher dividends and income tax equivalent receipts of $106 million largely reflects better than expected profitability of the water sector due to higher prices and higher distributions from the Port of Melbourne Corporation, driven by higher profits from an increase in trade volume.

(d) Revenue from the sales of goods and services was some $245 million higher than the original budget, primarily driven by:

− a change in arrangements for fare collections under new rail contracts that came into operation on 30 November 2009. Under the new arrangements, all fare revenue is now received by the State and then paid to rail operators as opposed to being received directly by the rail operators, as was previously the case;

− higher than originally estimated TAFE enrolments that have increased fee revenue; and

− regulatory fees related to Working With Children background check, warrants issued by the courts for the collection of private debts and liquor licensing renewals were higher than originally budgeted.

− This was offset by the funding arrangements for the desalination plant, whereby payments from Melbourne Water Corporation, previously recognised as revenue, will be recognised as revenue in the year the desalination plant is commissioned.



(e) The primary factors resulting in the higher than budgeted grants revenue of $1.2 billion are:

− GST grants revenue was $628 million higher than budgeted, reflecting growth in national pool collections, in part due to stronger than expected growth in the national economy; and

− other grants from the Commonwealth Government was $610 million higher due to:

− the boost to the first homes owners grant, which was $248 million higher than originally anticipated;

− the increase in grants of $173 million related to the Building the Education Revolution (BER) program for non-government schools;

− an additional grant for roads projects of $230 million; and

− offset by slightly lower than expected grants for social housing.

(f) Other current revenue was $315 million higher than original published budget: The main factors were:

− higher value of assets received free of charge of $57 million from the Murray-Darling Basin Authority (MDBA) following the new agreement for the management of the MDBA assets;

− additional revenue of $65 million mainly related to TAFE sector activities for land received free of charge from Swinburne University and the University of Melbourne and revenue earned from car parking, the hiring out of facilities, bookshop receipts and childcare; additional revenue was also received through Major Projects Victoria for project management fees and land sales revenue associated with the Kew Residential Development.;

− receipt of the Yarra Park car park as assets received free of charge, worth $75 million, from the City of Melbourne; and

− increased unclaimed monies of $48 million paid into the Consolidated Fund.

Expenses from transactions The main drivers of the higher than published budgeted expenses of $1.8 billion are outlined below:

(g) Employee expenses were $128 million higher than originally budgeted due to new policy decisions since the 2009-10 Budget. This includes additional funding in response to the 2009-10 bushfires, a boost to child protection services, and additional police numbers.

(h) Superannuation interest expense was $208 million higher than the original budget, primarily due to movements in the interest rate that was used in calculating the superannuation liability and interest expense since the original budget.

(i) Other superannuation expenses was $71 million lower than the original budget, primarily due to reduction in service costs.

(j) The increase in the depreciation expense of $223 million mainly reflects a revaluation of hospital assets late in 2008-09, resulting in an increase in depreciation expense in 2009-10 of $292 million, which was not anticipated. This is partially offset by $45 million lower than budgeted depreciation expense resulting from the re-phasing of some capital projects.



(k) Interest expense increased by $129 million compared to original budget, mainly due to:

− the drawing down of borrowings ahead of originally forecast; and

− finance lease interest relating to the Royal Womens Hospital and Casey Hospital lease arrangements. This was reflected in the revised budget in 2010-11 Budget.

(l) Grants and transfer payments are $732 million higher than the original budget with the major contributing factors being:

− higher than anticipated payments of $348 million to first home owners associated with a boost in the Commonwealth’s grant to the first homes owners and anticipation of the wind up of the program increasing demand;

− increased spending on non-government sector housing associations of $259 million; and

− higher than expected grants payments on-passed to non-government schools for the Building Education Revolution (BER) program of $173 million.

(m) Increased other operating expenses of $434 million mainly reflects the impact of new policy decisions since the 2009-10 Budget. The initiatives mainly related to bushfire response, preparedness, reconstruction and recovery worth $235 million and drought response initiatives worth $104 million.

Other economic flows included in net result Total other economic flows included in the net result have decreased by $6.0 billion since the original published budget. This movement is driven by the following factors:

(n) An actuarial loss on superannuation of $1.5 billion, primarily relating to changes in bond rates that underlie the assumptions that are used to value the superannuation liability.

(o) Revaluation of non-financial assets of $4.6 billion mainly attributable to the reduced value of land under roads of $4.0 billion, due to a review of the underlying valuation methodology by VicRoads in conjunction with the Valuer-General, the write down of the former Melbourne Convention Centre of $100 million and the write down of Crown land worth $436 million as the Government continues the audit of the State’s asset register.

Other economic flows – other movements in equity Total other economic flows – other movements in equity are some $2.9 billion higher than the published budget. This is predominantly driven by the following:

(p) Revaluations of non-financial assets were $249 million lower than budget, reflecting actual cyclic revaluations by the Valuer-General mainly related to and transport assets.

(q) The higher than originally estimated net gain on investment in other sector entities of $2.3 billion is due to the unbudgeted fair revaluation of infrastructure assets in the PNFC sector particularly rail and water entities.

(r) Higher than budgeted transfers to accumulated funds/other movements in equity of $350 million, which is predominantly driven by the transfer of equity in line with machinery of government changes associated with the Southern Cross Station.




(b) Consolidated balance sheet ($ million)

General government sector

Original Budget

Revised Budget

2010 Actual

Variance to Original

Budget %

Revised Budget

Variance % Assets Financial assets Cash and deposits 2 743.6 2 266.0 3 221.3 477.7 17 955.4 42.2 Advances paid 666.8 282.7 278.0 ( 388.8) -58 ( 4.7) -1.7 Investments, loans and

placements 2 568.3 2 576.4 2 629.0 60.6 2 52.6 2.0

Receivables 2 676.3 2 555.9 2 883.6 207.3 8 327.7 12.8 Investments accounted for

using the equity method 32.9 35.0 35.1 2.2 7 0.1 0.3

Investments in other sector entities

44 396.1 63 467.2 64 508.7 20 112.6 45 1 041.5 1.6

Total financial assets 53 084.1 71 183.1 73 555.8 20 471.7 39 2 372.6 3.3 Non-financial assets Inventories 234.0 251.2 268.4 34.4 15 17.2 6.8 Non-financial assets

held-for-sale 31.0 60.5 91.5 60.6 196 31.0 51.3

Land, buildings, infrastructure, plant and equipment

74 569.2 92 287.0 89 419.7 14 850.5 20 (2 867.3) -3.1

Other non-financial assets 507.6 672.5 771.0 263.4 52 98.6 14.7 Total non-financial assets 75 341.7 93 271.2 90 550.7 15 209.0 20 (2 720.5) -2.9 Total assets 128 425.8 164 454.3 164 106.4 35 680.6 28 ( 347.9) -0.2 Liabilities Deposits held 386.5 313.8 477.0 90.5 23 163.2 52.0 Advances received 1.2 2.0 2.5 1.3 107 0.4 21.5 Borrowings 15 509.8 13 519.9 13 612.5 (1 897.3) -12 92.6 0.7 Payables 4 180.6 3 695.1 4 849.0 668.4 16 1 153.9 31.2 Superannuation 24 726.1 20 268.5 22 534.1 (2 192.0) -9 2 265.6 11.2 Other employee benefits 4 546.6 4 444.0 4 357.9 ( 188.7) -4 ( 86.1) -1.9 Other provisions 645.2 762.4 718.0 72.8 11 ( 44.4) -5.8 Total liabilities 49 996.0 43 005.7 46 551.0 (3 445.0) -7 3 545.3 8.2 Net assets 78 429.8 121 448.6 117 555.5 39 125.6 50 (3 893.1) -3.2 Accumulated surplus/(deficit) 25 765.2 50 178.3 43 263.9 17 498.7 68 (6 914.4) -13.8 Reserves 52 592.6 71 210.8 74 247.0 21 654.4 41 3 036.3 4.3 Non-controlling interest 72.0 59.5 44.5 ( 27.5) -38 ( 15.0) -25.2 Net worth 78 429.8 121 448.6 117 555.5 39 125.6 50 (3 893.1) -3.2 FISCAL AGGREGATES Net financial worth 3 088.1 28 177.4 27 004.8 23 916.7 Net financial liabilities 41 308.0 35 289.8 37 503.9 (3 804.1) Net debt 9 918.7 8 710.7 7 963.6 (1 955.1) Source: 2009-10 Budget Paper No. 4


(a) Non-financial assets Non-financial assets were $15.2 billion higher than the original budget. The predominant driver of this increase is the recognition of $14.6 billion of land under roads in 2008-09 that was not included in the original budget.

(b) Net financial worth Net financial worth is total financial assets less total liabilities. Net financial worth was $25.6 billion higher than the original budget, primarily driven by:

• higher general government sector investments in the PNFC sector as a result of revaluations of infrastructure assets in the sector that occurred in 2008-09, that were not reflected in the original budget; and

• lower financial liabilities as explained below under note (c) Net financial liabilities.

(c) Net financial liabilities Net financial liabilities are total liabilities less all financial assets (excluding investments in other sectors). Net financial liabilities were $3.8 billion lower than the original budget. The decrease in net financial liabilities during the year was driven by the following factors:

• lower than originally budgeted borrowing requirement due to the higher than anticipated net result from transactions used to fund the capital program and some rescheduling of projects in the education and transport sectors;

• lower than originally budgeted superannuation liability due to an increase in the discount rate; and

• an offset of higher aggregate financial assets of $360 million. This included higher than originally estimated receivables of $209 million, which were driven by the following factors:

− higher than budgeted taxation receivables of $274 million, in the May 2009-10 Budget, particularly in relation to land tax and, to a lesser extent, land transfer duty receivables in 2008-09, which were not anticipated at the time of the 2009-10 Budget;

− increase in the fines and regulatory fees receivable of $90 million; and

− an offset of $214 million for the decrease in the provision for doubtful debts due to the changed methodology in 2008-09 for writing off debts from five to three years in the Department of Justice.

(d) Net debt Net debt is determined by deducting liquid financial assets from gross debt. This fiscal aggregate measures the level of liquid assets, which would be readily available to redeem debt in a period of financial downturn. Net debt has improved by $1.9 billion when compared with the original published budget. The improvement was driven by a lower borrowing requirement for the year, driven by a combination of the following factors:

• higher than expected net result from transactions used to fund the capital program;

• lower than expected capital expenditure, particularly related to the education and transport sectors; and

• Peninsula Link, which is now recognised as a Partnerships Victoria Initiative and will therefore be incorporated in net debt when the project is complete.




(c) Consolidated cash flow statement ($ million)



Revised Budget

2010 Actual


Budget %

Revised Budget

Variance % Cash flows from operating activities Receipts Taxes received 13 431.6 13 991.9 13 871.5 440.0 3 ( 120.4) -1 Grants 21 554.1 22 111.3 22 716.8 1 162.7 5 605.5 3 Sales of goods and

services 5 573.7 5 975.1 6 158.8 585.0 10 183.7 3

Interest received 400.1 313.8 323.8 ( 76.3) -19 10.0 3 Dividends and income

tax equivalent and rate equivalent receipts

389.0 461.1 471.9 82.9 21 10.8 2

Other receipts 1 518.7 1 426.3 1 611.7 93.0 6 185.3 13 Total receipts 42 867.1 44 279.5 45 154.4 2 287.3 5 874.9 2 Payments Payments for employees (15 087.3) (15 228.1) (15 335.9) ( 248.5) 2 ( 107.8) 1 Superannuation (1 971.7) (2 030.5) (1 982.8) ( 11.1) 1 47.6 -2 Interest paid ( 675.5) ( 766.5) ( 767.4) ( 91.8) 14 ( 0.9) n.a. Grants and subsidies (8 442.3) (8 504.5) (9 233.3) ( 791.0) 9 ( 728.8) 9 Goods and services (14 002.9) (14 681.0) (14 194.7) ( 191.8) 1 486.2 -3 Other payments ( 376.0) ( 426.7) ( 436.9) ( 60.9) 16 ( 10.3) 2 Total payments (40 555.8) (41 637.1) (41 951.0) (1 395.2) 3 ( 313.9) 1 Net cash flows from

operating activities (a) 2 311.3 2 642.4 3 203.4 892.0 39 561.0 21

Cash flows from investing activities Purchases of

non-financial assets (5 228.6) (4 853.8) (4 661.2) 567.4 -11 192.6 -4

Sales of non-financial assets

222.8 270.8 187.4 ( 35.4) -16 ( 83.5) -31

Cash flows from investments in non-financial assets

(b) (5 005.8) (4 583.0) (4 473.9) 531.9 -11 109.1 -2

Net cash flows from investments in financial assets for policy purposes

(c) (1 954.8) (1 429.7) (1 236.6) 718.2 -37 193.1 -14

Sub-total (6 960.6) (6 012.7) (5 710.5) 1 250.2 -18 302.3 -5 Net cash flows from

investments in financial assets for liquidity management purposes

( 75.0) ( 6.1) ( 1.0) 73.9 -99 5.1 -83

Net cash flows from investing activities

(7 035.6) (6 018.8) (5 711.5) 1 324.1 -19 307.3 -5

Cash flows from financing activities Advances received (net) ( 0.7) ( 0.7) ( 0.3) 0.4 -62 0.4 -62 Net borrowings 4 462.7 2 797.7 2 892.6 (1 570.2) -35 94.9 3 Deposits received (net) .. ( 0.6) ( 8.3) ( 8.3) n.a. ( 7.8) 1347 Net cash flows from

financing activities 4 462.0 2 796.4 2 884.0 (1 578.1) -35 87.6 3

Net increase/(decrease) in cash and cash equivalents

( 262.2) ( 580.0) 375.9 638.1 -243 955.9 -165

(c) Consolidated cash flow statement (continued) ($ million)



Revised Budget

2010 Actual


Budget %

Revised Budget

Variance % .. ( 157.7) 3 003.2 Cash and cash

equivalents at beginning of reporting period

2 845.5 2 845.5 n.a. n.a.

Cash and cash equivalents at end of reporting period

2 741.0 2 265.5 3 221.3 480.4 18 955.9 42

Source: 2009-10 Budget Paper No. 4



Net cash flows from operating activities (a) The major variations between the actual outcomes and the original published budget for net

cash flows from operations are largely consistent with drivers of the movements explained in the operating statement. A reconciliation of the net result to net cash from operating activities is provided at Note 29(b).

Net cash flows from investing activities Total net investment in fixed assets was $1.3 billion lower than the original budget. This is driven by the following factors:

(b) investments in non-financial assets by the general government sector was $532 million lower than the original published budget mainly due to:

− rephasing of capital expenditure related to the BER, trade training centres and Victorian Schools Plan; and

− new Partnerships Victoria arrangement for Peninsula Link, which adjusts the cashflow profile for the project.

(c) general government capital investment in other sectors for policy purposes was $718 million lower than the original estimate. This was primarily driven by slightly lower than originally expected Commonwealth grants for social housing as well as increase in the amount of social housing delivered by non-government housing associations, compared to direct general government investment as was previously expected. In addition some rail related payments have been rescheduled.


Consolidated statement of changes in equity for the period ended 30 June

($ million)

General government sector Equity at

1 July

Total comprehensive

result



2009-10 Original budget Accumulated surplus/(deficit) 25 528.4 242.8 .. 25 771.1 Other movements in equity .. ( 5.9) .. ( 5.9) Minority interest 52.0 .. 20.0 72.0 Property, plant and equipment

revaluation reserve 28 962.9 3 168.2 .. 32 131.1

Net movements in other reserves 789.8 .. .. 789.8 Accumulated net gain on equity

investments in other sector entities 19 427.2 244.5 .. 19 671.7

Total equity at end of the period 74 760.3 3 649.5 20.0 78 429.8 2009-10 Actual Accumulated surplus/(deficit) 48 424.8 (5 413.1) .. 43 011.7 Other movements in equity .. 252.3 .. 252.3 Non-controlling interest 39.5 .. 5.0 44.5 Physical asset revaluation surplus 29 776.6 3 416.7 .. 33 193.2 Net movements in other reserves 788.1 107.0 .. 895.0 Accumulated net gain on equity


Total equity at end of the year 116 673.8 876.7 5.0 117 555.5 Variance to original budget Accumulated surplus/(deficit) 22 896.4 (5 655.9) .. 17 240.5 Other movements in equity .. 258.2 .. 258.2 Non-controlling interest ( 12.5) .. ( 15.0) ( 27.5) Physical asset revaluation surplus 813.7 248.5 .. 1 062.1 Net movements in other reserves ( 1.8) 107.0 .. 105.2 Accumulated net gain on equity


Total equity at end of the year 41 913.5 (2 772.8) ( 15.0) 39 125.6

The major variations between the actual outcomes and the original published budget for the statement of changes in equity are largely addressed in the explanations provided previously.



Note 32: Financial instruments1

Financial risk management objectives and policies The State’s principal financial instruments comprise of:

• cash assets;

• receivables (excluding statutory receivables);

• term deposits;

• investments in equities and managed investment schemes;

• debt securities;

• payables (excluding statutory payables);

• borrowings;

• finance lease payables; and

• derivatives.

The main purposes for the State to hold financial instruments are:

• to fund the State’s capital expenditure program;

• to meet long-term insurance and superannuation liabilities;

• to manage financial risk; and

• for liquidity management purposes.

1 Some tables or certain line items under this note may not reconcile to the primary statements as only financial instruments that are contractual in nature are included in this note. Balances that are derived from statute, such as statutory receivables, are excluded from this note.

Note 32: Financial instruments (continued)

(a) Carrying amounts of financial instruments by category ($ million)


2010 2009 2010 2009 Financial assets

Cash and deposits 4 711.5 4 317.0 3 221.3 2 846.0 Designated at fair value through the operating statement (a) 21 550.6 20 411.2 259.8 325.0 Held-for-trading at fair value through the operating

statement 2 433.3 3 229.4 61.3 54.0

Loans and receivables (a) 4 556.9 4 678.5 2 578.0 2 893.7 Available-for-sale (a) 483.0 366.7 390.4 282.0 Held-to-maturity 183.9 132.7 872.1 452.6 Total financial assets (b) 33 919.3 33 135.4 7 382.9 6 853.3 Financial liabilities Designated at fair value through the operating statement 26 966.6 20 538.0 1 459.3 190.7 Held-for-trading at fair value through the operating

statement 1 801.2 2 780.6 1.2 3.6

At amortised cost 8 086.5 7 265.1 17 367.3 13 965.3 Total financial liabilities (c) 36 854.3 30 583.8 18 827.7 14 159.6 Notes: (a) The balance in 2009 differs from that disclosed in the 2008-09 Financial Report to reflect the reclassification of certain items. (b) The State’s total financial assets exclude statutory receivables of $2 677.7 million (2009: $2 561.8 million). (c) The State’s total financial liabilities exclude statutory taxes payable of $180.4 million (2009: $119.0 million).

As part of its normal operations, the State is exposed to a number of financial risks including market risk (e.g. interest rate risk, foreign currency risk, and equity price risk), credit risk and liquidity risk through transactions involving its financial instruments. As a whole, the State’s financial risk management program seeks to manage these risks and the associated volatility on its financial performance.

Responsible and prudent financial risk management is carried out individually by the State’s consolidated entities, in accordance with the State’s risk management framework, developed by the Department of Treasury and Finance (DTF) and established by the Treasurer. The State’s risk management framework comprises the following key components:

• the Treasurer is responsible for the approval and establishment of the prudential framework containing policies and guidelines on financial risk management;

• the Senior Executive Group of DTF is responsible for providing advice to the Government on the management of the State’s financial risks;

• DTF’s Risk Management Committee is responsible for monitoring the balance sheet and risk management frameworks of the State’s financial and non-financial risks, and advising or making recommendations to the Senior Executive Group;

• the Treasury Corporation of Victoria (TCV) is the State’s central borrowing authority and financing advisor. An independent prudential supervisor and prudential auditor are appointed by the Treasurer to monitor TCV’s compliance with its prudential framework;

• the Victorian Funds Management Corporation (VFMC) acts as the State’s central investment fund manager through the provision of expertise in investment strategy development and delivery of funds management services in accordance with each entity’s investment objectives; and


Note 32: Financial instruments (continued) • the State’s entities with gross debt or investments equal to or greater than $20 million, such as

the PFCs and some government business enterprises, are responsible for setting their own financial risk policy and objectives in accordance with the Treasurer’s prudential framework. All entities are responsible for the day to day operational management of their financial instruments and associated risks in accordance with the Treasury Management Guidelines.

The prudential framework covers areas such as financial management objectives, responsibility structure and delegation, and policies and guidance on market risk, credit risk, liquidity risk and operational risk. The CEOs and executives of the State’s consolidated entities are responsible for advising their boards, who in turn notify DTF and other stakeholders of any breach by the entities of the prudential standards set by the Treasurer or policies set by their respective boards, including the strategy to remediate the breach.

A number of the State’s entities enter into derivative financial instruments in accordance with the Treasurer’s prudential framework, in order to manage their exposure to movements in interest rates and foreign currency exchange rates.

These derivative financial instruments, which include interest rate swaps and futures and forward foreign exchange contracts, are used to manage the risks inherent in either borrowings, financial asset investments or cash flow denominated in foreign currency. Derivative financial instruments are not used to add leverage to the State’s financial position.

(b) Breakdown of interest revenue ($ million)


2010 2009 2010 2009 Interest revenue from financial assets not at fair value

through the operating statement 266.8 332.3 210.0 221.7

Interest revenue from financial asset at fair value through the operating statement

716.1 855.7 123.5 154.7

Interest revenue from impaired financial assets 0.1 2.1 0.1 1.9 Total 982.9 1 190.1 333.5 378.2 (c) Breakdown of interest and fee expense items (a)

($ million) General

State of Victoria government sector 2010 2009 2010 2009 Interest expense from financial liabilities not at fair value

through the operating statement 94.4 469.8 92.0 189.7

Interest expense from financial liabilities at fair value through the operating statement

1 339.4 760.3 687.7 424.1

Fee expenses from financial liabilities not at fair value through the operating statement

1.5 9.5 0.6 8.4

Fee expenses from financial liabilities at fair value through the operating statement

72.5 170.5 32.8 20.3

Total 1 507.8 1 410.1 813.1 642.4 Note: (a) These items do not include accounts that relate to discount interest on non-financial assets. Therefore, figures in this table cannot be

reconciled to the primary statements.



(d) Net gain or loss by category of financial instruments The net gains or losses on financial assets and liabilities held at 30 June 2010 are determined as follows:

• for loans and receivables and available for sale investments, the net gain or loss is calculated by taking the interest revenue, plus or minus foreign exchange gains or losses arising from revaluation of the financial assets, and minus any impairment recognised in the net result;

• for financial liabilities measured at amortised cost, the net gain or loss is calculated by taking the interest expense, plus or minus foreign exchange gains or losses arising from the revaluation of financial liabilities measured at amortised cost; and

• for financial assets and liabilities that are held for trading or designated at fair value through profit or loss, the net gain or loss is calculated by taking the movement in the fair value of the financial asset or liability.

($ million) General

State of Victoria government sector 2010 2009 2010 2009 Financial assets Cash and deposits 141.6 180.3 151.0 165.7 Designated at fair value through the operating statement 969.1 (3 239.9) 9.0 ( 23.9) Held-for-trading at fair value through the operating

statement ( 136.2) ( 334.8) 17.1 ( 15.3)

Loans and receivables 85.6 115.2 21.3 30.8 Available-for-sale 6.3 10.4 6.4 9.8 1 066.2 (3 268.7) 204.7 167.1 Financial liabilities Designated at fair value through the operating statement ( 703.0) ( 381.3) 0.9 .. Held-for-trading at fair value through the operating

statement .. .. .. ..

At amortised cost ( 51.3) ( 245.8) ( 92.0) ( 128.8) Total ( 754.4) ( 627.1) ( 91.1) ( 128.8)



(e) Interest rate risk Interest rate risk management The State is exposed to interest rate risk through borrowings and investments in interest bearing financial assets, such as deposits and debt securities.

Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market interest rates. The majority of the exposure to interest rate risk on the whole of state balance sheet arises from fair value interest rate risk. Exposure to such risk relates primarily to the State’s long-term debt obligations with fixed interest rates, which are measured at fair value. This exposure is partially offset by fixed interest investments held to fund the State’s insurance and superannuation liabilities.

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Only a small portion of the State’s financial instruments are exposed to cash flow interest rate risk. Exposure to such risk arises from financial assets and financial liabilities with floating interest rates, which are measured at amortised cost.

The State’s policy for the management of interest rate risk on borrowings is to achieve relative certainty of interest cost while seeking to minimise net borrowing cost within portfolio risk management guidelines. Generally, this is achieved by undertaking fixed rate borrowings with relatively even maturity profiles.

TCV manages the State’s interest risk exposure from borrowings through daily quantification of the risk which assesses the potential loss that the State might incur under various market scenarios. Interest rate risk is managed within an approved limit structure in accordance with TCV’s prudential policy and risk management framework, which requires consistency with the Australian Prudential Regulatory Authority prudential statements for banks.


Note 32: Financial instruments (continued) Derivative instruments such as interest rate swaps and futures contracts are used to either change the interest rate between fixed and floating rates of interest or between different floating rates of interest. Disclosed is the notional amounts and periods of expiry for the State’s interest rate derivatives.

Interest rate derivative financial instruments ($ million)

2010 Interest rate swaps Exchange State of Victoria Floating- traded futures Maturities Indexed for-floating Pay fixed Receive fixed contracts Less than 1 year .. .. 686.0 690.0 4 187.9 1 year but less than 2 years .. .. 295.0 60.0 .. 2 year but less than 3 years .. .. 137.0 498.0 .. 3 years but less than 4 years .. .. 20.0 16.0 .. 4 years but less than 5 years .. .. 193.9 135.0 .. 5 years or more .. .. 820.4 212.8 .. Total .. .. 2 152.3 1 611.8 4 187.9

($ million) 2009 Interest rate swaps Exchange State of Victoria Floating- traded futures Maturities Indexed for-floating Pay fixed Receive fixed contracts Less than 1 year .. .. 190.0 221.0 1 855.8 1 year but less than 2 years .. .. 276.0 325.0 .. 2 year but less than 3 years .. .. 30.0 60.0 .. 3 years but less than 4 years .. .. 187.0 255.0 .. 4 years but less than 5 years .. .. 20.0 50.0 .. 5 years or more .. .. 797.2 322.8 .. Total .. .. 1 500.2 1 233.8 1 855.8

($ million) 2010 Interest rate swaps Exchange General government sector Floating- traded futures Maturities Indexed for-floating Pay fixed Receive fixed contracts Less than 1 year .. .. .. .. .. 1 year but less than 2 years .. .. .. .. .. 2 year but less than 3 years .. .. .. .. .. 3 years but less than 4 years .. .. .. .. .. 4 years but less than 5 years .. .. .. .. .. 5 years or more .. .. .. .. .. Total .. .. .. .. ..


Note 32: Financial instruments (continued) ($ million)

2009 Interest rate swaps Exchange General government sector Floating- traded futures Maturities Indexed for-floating Pay fixed Receive fixed contracts Less than 1 year .. .. .. .. .. 1 year but less than 2 years .. .. .. .. .. 2 year but less than 3 years .. .. .. .. .. 3 years but less than 4 years .. .. .. .. .. 4 years but less than 5 years .. .. .. .. .. 5 years or more .. .. .. .. .. Total .. .. .. .. ..

At 30 June 2010, after taking into account the effect of interest rate swaps, approximately 99.9 per cent (2009: 94.1 per cent) of the State’s borrowings are at fixed rates of interest. There has been no change in the State’s exposure to interest rate risk or the manner in which it manages and measures the risk from the previous reporting period.

Interest rate exposure Disclosed is the State’s exposure to interest rate risk on classes of financial assets and financial liabilities.

Interest rate sensitivity analysis The State has analysed the possible effects of feasible changes in interest rates on its financial position and result using the following assumptions:

• the exposure to interest rates for both derivative and non-derivative instruments at the reporting date, and the stipulated change taking place at the beginning of the financial year, are held constant throughout the reporting period; and

• based on historic movements, and in particular, management’s knowledge and experience of the recent volatility in global financial markets, the State has assessed that it may be exposed to a reasonably possible increase or decrease of 100 basis points in interest rates (2009: 100 basis points).

With all other variables held constant, the impact of a 100 basis point increase or decrease on the net result and net assets at 30 June 2010 is a $765.4 million increase/$831.3 million decrease (2009: $531.2 million increase/$574.7 million decrease).

The State’s sensitivity to interest rates is mainly attributable to the revaluation of fixed interest borrowings at fair value and the revaluation of the insurance and superannuation liabilities, however this does not impact on the net result from transactions.



(f) Interest rate exposure ($ million)

2010 Less than 1 year but State of Victoria Floating 1 year less than

2 years Financial assets

Cash and deposits 4 148.6 451.1 .. Receivables 25.6 23.2 3.1 Advances paid 677.4 111.5 79.5 Term deposits 32.6 683.3 40.8 Derivative financial instruments .. 1 688.0 3.4 Equities and managed investment schemes 429.7 158.0 2.0 Debt securities 4 274.6 5 817.0 875.3 Total financial assets 9 588.6 8 932.2 1 004.0 Financial liabilities Payables and advances 882.7 897.0 .. Derivative financial instruments 96.7 1 620.9 2.8 Interest-bearing liabilities 10.5 5 124.3 666.5 Finance lease liabilities 0.1 133.2 171.8 Total financial liabilities 990.0 7 775.4 841.1

($ million) 2009 Less than 1 year but State of Victoria Floating 1 year less than

2 years Financial assets Cash and deposits 3 870.3 261.3 .. Receivables (a) 47.9 11.7 2.3 Advances paid 44.8 115.9 79.2 Term deposits 49.9 1 066.3 45.1 Derivative financial instruments 78.6 2 315.7 13.2 Equities and managed investment schemes 523.8 17.8 72.7 Debt securities 4 109.7 5 434.7 1 049.8 Total financial assets 8 724.9 9 223.4 1 262.2 Financial liabilities Payables and advances (b) 1 234.3 549.0 0.2 Derivative financial instruments 25.4 2 539.9 9.0 Interest-bearing liabilities (b) 18.6 3 225.9 2 804.6 Finance lease liabilities 247.8 101.6 103.1 Total financial liabilities 1 526.0 6 416.3 2 916.9 Notes: (a) The balance in 2009 differs from that disclosed in the 2008-09 Financial Report to more correctly present contractual receivables

financial assets. (b) Advances have been re-classified from interest-bearing liabilities to payables and advances.


Interest Rate, Fixed Maturities 2 years but 3 years but 4 years but 5 years Non-interest

less than 3 years

less than 4 years

less than 5 years

or more bearing Total

.. .. .. .. 111.9 4 711.5

1.2 1.2 0.7 7.7 2 317.9 2 380.7 89.4 67.1 59.8 395.2 47.8 1 527.7 2.4 4.8 2.2 2.0 9.2 777.3

17.2 5.5 5.5 175.8 496.4 2 391.9 1.9 0.4 0.8 1.0 9 438.1 10 031.9

281.8 78.8 85.1 683.7 1.9 12 098.3 393.9 157.9 154.1 1 265.4 12 423.2 33 919.3

.. .. .. .. 6 494.3 8 274.0

4.6 2.2 9.3 163.2 160.2 2 059.8 3 094.0 82.0 2 927.5 11 938.0 .. 23 842.8 136.7 132.9 135.8 1 967.3 .. 2 677.7

3 235.3 217.1 3 072.5 14 068.4 6 654.5 36 854.4

Interest Rate, Fixed Maturities

2 years but 3 years but 4 years but 5 years Non-interest less than

3 years less than

4 years less than

5 years or more bearing Total

.. .. .. .. 185.5 4 317.0

1.0 1.0 4.6 3.0 2 410.1 2 481.6 83.7 112.1 74.1 837.8 28.3 1 375.9 11.1 2.2 0.3 5.3 17.4 1 197.5 3.9 12.4 2.1 196.1 702.2 3 324.1

24.8 10.7 7.4 6.2 8 216.4 8 879.8 348.3 93.8 56.7 455.3 11.2 11 559.5 472.9 232.2 145.1 1 503.7 11 571.0 33 135.4

.. .. .. .. 4 674.3 6 457.7

0.4 5.5 0.2 172.8 30.7 2 783.9 193.4 2 824.9 30.0 9 547.5 .. 18 644.8 120.9 83.0 77.9 1 963.0 .. 2 697.3 314.8 2 913.5 108.0 11 683.3 4 705.0 30 583.8



(f) Interest rate exposure (continued) ($ million)

2010 Less than 1 year but General government sector Floating 1 year less than

2 years Financial assets Cash and deposits 2 739.7 367.7 .. Receivables 12.4 4.0 .. Advances Paid .. .. .. Term deposits 99.7 1 843.2 36.6 Derivative financial instruments .. .. .. Equities and managed investment schemes 426.1 158.0 2.0 Debt securities 32.5 0.5 0.2 Total financial assets 3 310.4 2 373.5 38.8 Financial liabilities Payables and advances (a) 23.9 6.3 .. Derivative financial instruments .. .. .. Interest-bearing liabilities 14.3 699.7 5 645.2 Finance Lease liabilities 0.1 89.8 97.4 Total financial liabilities 38.3 795.8 5 742.6

($ million) 2009 Less than 1 year but General government sector Floating 1 year less than

2 years Financial assets Cash and deposits 2 485.8 245.7 .. Receivables 15.2 0.8 .. Advances Paid 0.1 6.4 4.7 Term deposits 24.2 1 786.0 51.0 Derivative financial instruments .. .. .. Equities and managed investment schemes 447.5 17.8 71.4 Debt securities 23.5 5.4 .. Total financial assets 2 996.3 2 062.2 127.0 Financial liabilities Payables and advances (a) 43.1 3.7 .. Derivative financial instruments 2.3 .. .. Interest-bearing liabilities (a) 14.3 416.1 450.5 Finance Lease liabilities 247.7 61.6 57.6 Total financial liabilities 307.5 481.4 508.1 Note: (a) Certain items previously classified as advances have been more correctly classified as deposits held, in line with the Government Finance

Statistics framework.



Interest Rate, Fixed Maturities 2 years but 3 years but 4 years but 5 years Non-interest

less than 3 years

less than 4 years

less than 5 years

or more bearing Total

.. .. .. .. 114.0 3 221.3 .. .. .. .. 1 238.1 1 254.6 .. .. .. 246.1 31.9 278.0

2.4 4.8 2.2 1.9 8.3 1 999.2 .. .. .. .. 4.1 4.1

1.9 .. 0.8 .. ( 0.6) 588.3 0.5 .. 0.1 0.5 3.1 37.5 4.8 4.8 3.0 248.6 1 399.0 7 382.9

.. .. .. 14.6 5 170.5 5 215.2 .. .. .. .. 5.5 5.5

5 425.6 2.0 2.5 71.6 .. 11 860.9 62.0 57.8 60.3 1 378.7 .. 1 746.1

5 487.6 59.8 62.8 1 464.9 5 176.0 18 827.7

Interest Rate, Fixed Maturities

2 years but 3 years but 4 years but 5 years Non-interest less than

3 years less than

4 years less than

5 years or more bearing Total

.. .. .. .. 114.5 2 846.0 .. .. .. .. 1 171.8 1 187.8

4.7 4.8 5.1 206.8 36.4 269.0 5.1 2.2 0.3 2.9 16.6 1 888.3

.. .. .. .. 6.2 6.2 24.8 10.7 7.4 6.2 32.1 617.8 0.3 0.5 .. .. 8.6 38.3

34.9 18.2 12.8 215.9 1 386.1 6 853.3

.. .. .. .. 3 472.5 3 519.4

.. .. .. .. 6.2 8.6 557.6 603.3 701.7 6 165.8 .. 8 909.3 64.3 29.0 23.5 1 238.6 .. 1 722.3

622.0 632.3 725.1 7 404.4 3 478.7 14 159.5


(g) Foreign currency risk The State is also exposed to foreign currency risk through investments in foreign currency denominated financial assets, such as equities and deposits.

The State is exposed to movements in the United States dollar, Canadian dollar, Japanese yen, Swiss francs, the Euro, British pound and the New Zealand dollar.

The carrying amount of the State’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows:

Australian dollar equivalent of foreign currency denominated monetary assets and liabilities ($ million)


2010 2009 2010 2009 Monetary assets

Cash and deposits 279.6 183.5 .. .. Term deposits 0.1 12.5 .. .. Debt securities 33.4 9.2 .. .. Total monetary assets (a) 313.1 205.3 .. ..

Monetary liabilities Borrowings (1 797.6) (2 428.1) .. .. Total monetary liabilities (1 797.6) (2 428.1) .. .. Note: (a) In addition the State held $3 078.4 million (2009: $2 979.1 million) of equities and managed investment schemes denominated in

foreign currencies.

The Victorian Funds Management Corporation (VFMC), the State’s fund manager, applies a consolidated approach in managing the foreign currency exposure in accordance with investment risk management plans as approved by the Treasurer. VFMC’s approach is to hedge approximately 50 per cent of the foreign currency exposure arising from international equities, and to fully hedge other offshore assets such as infrastructure, property and hedge funds.

The foreign currency risk may be managed using forward exchange contracts, swaps, options and other derivatives, authorised by the State.

At 30 June 2010, the State had hedged 100 per cent (2009: 100 per cent) of foreign denominated interest bearing liabilities and 99.9 per cent (2009: 92.1 per cent) of its foreign denominated monetary assets. There has been no material change in the State’s exposure to foreign currency risk or the manner in which it manages and measures the risk from the previous reporting period.

Foreign currency sensitivity analysis The State has analysed the possible effects of feasible change in exchange rates against the Australian dollar on its financial position and result using the following assumptions:

• exposure to the pool of foreign currencies for both derivative and non-derivative instruments at the reporting date, and the stipulated change taking place at the beginning of the financial year are held constant throughout the reporting period; and,

• based on historic movements, future expectations and management’s knowledge and experience of the foreign currency markets, the State has assessed that it may be exposed to a increase or decrease of 15 per cent against the Australian dollar (2009: 15 per cent).


Note 32: Financial instruments (continued) With all other variables held constant, the impact of a 15 per cent increase or decrease in exchange rates on economic flows and net assets at 30 June 2010 is $15.2 million decrease/$27.5 million increase (2009: $51.5 million decrease/$68.0 million increase).

The State’s exposure to direct foreign currency risk has no material impact on the net result from transactions.

(h) Equity price risk Equity price risk management The State is exposed to equity price risk from Australian and international investments in equities and managed investment schemes. Such investments are allocated and traded to match investment objectives appropriate to the State’s liabilities. The State limits its equity price risk through diversification of its investment portfolio. This is determined by VFMC and reflected in the Investment Risk Management Plan approved by the Treasurer, and in accordance with the Borrowing and Investments Powers Act 1987 (BIP Act) and the prudential supervisory policies and framework of the State.

Equity price sensitivity analysis The State has analysed the possible effects of feasible changes in equity prices on its financial position and result using the following assumptions:

• exposure to equity securities for both derivative and non-derivative instruments at the reporting date, and the stipulated change taking place at the beginning of the financial year are held constant throughout the reporting period;

• based on historic movements, future expectations and management’s knowledge and experience of the volatility of the equity markets, the State has assessed that it may be exposed to a reasonably possible increase or decrease of 15 per cent to equity prices (2009: increase of 15 per cent or decrease of 10 per cent); and

• with all other variables held constant, the impact of a 15 per cent increase or decrease in listed equities on economic flows and net assets at 30 June 2010 is $434.0 million increase/$322.9 million decrease (2009: $349.8 million increase/$207.2 million decrease) and from unlisted equities is $670.7 million increase/$855.9 million decrease (2009: $556.3 million increase/$393.1 million decrease).

The State’s exposure to equity price sensitivity has no direct impact on the net result from transactions.

There has been no material change in the State’s exposure to equity price risk or the manner in which it manages and measures the risk from the previous reporting period.

(i) Credit risk Credit risk refers to the possibility that a borrower will default on its financial obligations as and when they fall due. The State’s exposure to credit risk mainly arises through its investments in fixed interest instruments. Most of the State’s investments and derivatives are centrally managed by TCV and VFMC. Limits are set both in terms of the quality and amount of credit exposure in accordance with the BIP Act and the prudential supervisory policies and framework of the State.

The State does not have any significant credit risk exposure to any single counterparty or to any group of counterparties having similar characteristics.

The State’s maximum exposure to credit risk, without taking account of the value of any collateral obtained at the reporting date, in relation to each class of recognised financial asset, is the carrying amount of those assets as recognised in the balance sheet.

There has been no material change to the State’s credit risk profile in 2009-10.



(j) Liquidity risk Liquidity risk arises from being unable to meet financial obligations as they fall due. The State is exposed to liquidity risk mainly through the maturity of its external borrowings raised by TCV and the requirement to fund cash deficits. Liquidity management policy has three main components as follows.

Short term liquidity management and control The State’s central treasury, TCV, is responsible for ensuring that the State’s liquidity requirements can be met at all times. On a daily basis, the minimum level of prudential liquidity assets held by TCV is 3 per cent of total liabilities, subject to a minimum of $500 million. At least 60 per cent of the minimum prudential liquidity requirement must comprise primary liquidity assets and the remainder comprising secondary liquidity assets.

Primary liquidity assets comprise cash, Commonwealth Government paper and semi government paper. Secondary liquidity assets comprise bank bills, bank negotiable certificates of deposits, bank floating rate notes, bank transferable certificates of deposit, and the securities of foreign governments and government agencies. In addition, the State’s short term liquidity requirement is that primary and secondary liquidity assets are required to be, at a minimum, equal to the daily liquidity requirement determined by time weighting cash flows (both interest and principal) for a six month time horizon.

Long-term liquidity management monitoring The State’s policy on long-term management of liquidity primarily focuses on the diversification of maturities.

Managing a liquidity crisis In the event of a liquidity crisis, the State has in place liquidity crisis management plans to manage liquidity conditions. These are in the nature of a check list, designed to establish a set of protocols to devise a market response during a crisis. Each crisis scenario is likely to be unique, and as such the action plans can only form a starting point for any given situation.

Maturity analysis of financial liabilities Disclosed are details of the State’s maturity analysis for its derivative and non-derivative financial liabilities. The table includes both interest and principal cash flows, and has been based on the undiscounted cash flows of financial liabilities based on the earliest date on which the State may be required to pay.




(k) Undiscounted maturity analysis of financial liabilities ($ million)

Carrying Nominal Contractual maturity State of Victoria amount amount (a) 0-3 mths 3 mths-1 yr 1-2 yrs 2-5 yrs 5+ yrs 2010 Payables and advances 8 274.0 8 274.0 5 885.8 1 345.2 230.6 565.3 247.1 Interest-bearing liabilities: Domestic borrowings 22 045.2 28 926.8 3 032.2 1 573.6 1 682.3 8 509.2 14 129.5 Foreign currency

borrowings 1 797.6 1 970.7 1 301.3 495.0 2.7 8.1 163.7

Finance lease liabilities 2 677.7 5 141.2 45.9 200.2 258.5 867.0 3 769.6 Derivative financial

liabilities 2 059.8 2 248.3 1 317.2 587.4 21.5 46.4 275.7

Total 36 854.3 46 561.0 11 582.4 4 201.4 2 195.6 9 995.9 18 585.7 2009 Payables and advances (b) 6 457.7 6 457.7 4 886.4 854.6 251.0 84.6 381.0 Interest-bearing liabilities: Domestic borrowings (b) 16 216.6 22 088.2 1 003.9 858.5 3 542.8 4 890.2 11 792.9 Foreign currency

borrowings 2 428.1 2 480.8 2 256.2 51.8 2.6 7.9 162.2

Finance lease liabilities (c) 2 697.4 4 840.7 66.9 182.5 264.4 713.6 3 613.2 Derivative financial

liabilities (d) 2 783.9 2 983.8 2 527.7 79.6 23.7 39.7 313.1

Total 30 583.8 38 851.2 10 741.1 2 027.0 4 084.5 5 736.0 16 262.5

Notes: (a) Represents undiscounted nominal amount. (b) Advances have been re-classified from domestic borrowings to payables and advances. (c) The balance in 2009 differs from that disclosed in the 2008-09 Financial Report to more correctly present finance lease liabilities. (d) Maturity profile has been revised reflecting updated data.

($ million) Carrying Nominal Contractual maturity General government sector

amount amount (a) 0-3 mths 3 mths-1 yr 1-2 yrs 2-5 yrs 5+ yrs

2010 Payables and advances 5 215.3 5 215.3 4 114.1 934.5 41.4 42.4 82.8 Interest-bearing liabilities: Domestic borrowings 11 860.9 11 825.2 1 065.1 468.5 692.5 2 111.8 7 487.4 Foreign currency

borrowings .. .. .. .. .. ..


liabilities 5.5 1.8 1.6 .. 0.2 .. ..

Total 18 827.7 21 218.8 5 228.0 1 552.5 953.5 2 744.6 10 740.2 2009 Payables and advances 3 518.8 3 518.8 3 082.8 239.8 39.4 49.6 107.1 Interest-bearing liabilities: Domestic borrowings 8 909.9 8 298.5 12.9 443.0 442.0 1 880.1 5 520.5 Foreign currency

borrowings .. .. .. .. .. ..


liabilities 8.6 1.8 0.6 .. 1.0 0.2 ..

Total 14 159.6 15 650.5 3 135.0 817.5 668.9 2 399.2 8 629.9 Note: (a) Represents undiscounted nominal amount.

Note 32: Financial instruments (continued) Finance lease liabilities are payable as follows.

($ million) General

State of Victoria government sector 2010 2009 2010 2009 Less than 1 year 246.1 221.4 196.8 173.4 1 year but less than 5 years 1 125.5 878.2 809.8 655.8 5 years or more 3 769.6 3 741.1 3 169.9 3 002.3 Minimum lease payments 5 141.2 4 840.7 4 176.6 3 831.4 Future finance charges 2 463.5 2 143.3 2 430.5 2 109.1 Total finance lease liabilities 2 677.7 2 697.4 1 746.0 1 722.3 (l) Fair value of financial instruments The fair values of the State’s financial assets and liabilities are determined as follows:

• the fair value of financial assets and financial liabilities with standard terms and conditions and traded in an active liquid market are determined with reference to quoted market prices. Financial instruments in this category include investments in equities, managed investment schemes and debt securities;

• the fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis, using prices from observable current market transactions; and

• the fair value of derivative instruments, such as interest rate futures contracts, are calculated using quoted prices. Where such prices are not available, use is made of discounted cash flow analysis using the applicable yield curve for the duration of the instrument for non-optional derivatives, and option pricing models for optional derivatives.

Except as detailed in the following table, the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair values.

Fair value of financial instruments at amortised cost ($ million)

2010 2009

State of Victoria Carrying amount

Fair value

Carrying amount

Fair value

Financial assets Non-current receivables 741.7 394.3 759.1 523.2 Financial liabilities Finance lease liabilities 2 677.7 1 994.7 2 697.4 2 042.1

($ million) 2010 2009

General government sector Carrying amount

Fair value

Carrying amount

Fair value

Financial assets Non-current receivables 759.1 51.3 759.1 38.4 Financial liabilities Finance lease liabilities 1 746.0 1 525.6 1 722.3 1 211.9




Credit quality of financial assets that are neither past due nor impaired ($ million)

Other Other

State of Victoria (AAA credit

rating) (min BBB

credit rating) (not rated) (a) Total 2010 Financial assets Cash and deposits 2 566.7 633.3 1 511.5 4 711.5 Receivables 418.4 66.9 1 270.0 1 755.3 Advances paid 0.9 0.8 1 526.0 1 527.7 Term deposits 315.7 247.7 213.9 777.3 Debt securities 4 160.7 7 698.8 238.8 12 098.3 Total financial assets 7 462.3 8 647.6 4 760.3 20 870.2 2009 Financial assets Cash and deposits 2 104.5 1 236.3 976.2 4 317.0 Receivables 514.4 72.5 1 097.0 1 684.0 Advances paid 1.3 1.4 1 373.2 1 375.9 Term deposits 479.5 527.8 190.2 1 197.5 Debt securities 4 354.7 5 760.6 1 444.2 11 559.5 Total financial assets 7 454.4 7 598.6 5 080.9 20 133.9 Note: (a) Certain financial assets are not rated due to the unavailability of accessing third party rating data.

($ million)

Government Agencies

Government Agencies


(AAA credit rating)

(min BBB credit rating)

(AAA credit rating)

(min BBB credit rating)

Other (not rated) (a) Total

2010 Financial assets Cash and deposits 1 146.2 .. 1 210.5 329.1 535.6 3 221.3 Receivables 114.2 .. 92.8 3.0 662.2 872.2 Advances paid 246.1 .. 0.9 .. 31.0 278.0 Term deposits 1 148.3 .. 292.2 244.6 314.0 1 999.2 Debt securities .. .. 31.9 4.2 1.3 37.5 Total financial assets 2 654.7 .. 1 628.3 580.9 1 544.2 6 408.2 2009 Financial assets Cash and deposits 720.2 .. 1 316.5 365.9 443.4 2 846.0 Receivables 144.0 .. 111.5 11.6 410.1 677.2 Advances paid 261.6 .. 1.3 0.6 5.5 269.0 Term deposits 692.0 .. 461.8 197.3 537.2 1 888.3 Debt securities .. .. 18.2 4.4 15.7 38.3 Total financial assets 1 817.8 .. 1 909.4 579.8 1 411.8 5 718.8 Note: (a) Certain financial assets are not rated due to the unavailability of accessing third party rating data.



Financial assets measured at fair value ($ million)

Carrying amount as at

Fair value measurement at end of reporting period using :

State of Victoria 30 June Level 1 (a) Level 2 (b) Level 3 (c)

2010 Financial assets Derivative assets 2 391.9 18.7 2 343.5 29.7 Equities and managed investment schemes 10 031.9 3 898.2 5 997.4 136.2 Debt securities at fair value 12 098.3 1 700.9 10 312.4 84.9 Total financial assets 24 522.0 5 617.9 18 653.3 250.8 2009 Financial assets Derivative assets 3 324.1 1.0 3 279.9 43.2 Equities and managed investment schemes 8 879.8 3 655.1 5 222.3 2.4 Debt securities at fair value 11 559.5 1 494.5 9 832.5 232.6 Total financial assets 23 763.5 5 150.6 18 334.6 278.2 Notes: (a) Quoted prices (unadjusted) in active markets for identical assets or liabilities. (b) Inputs based on observable market data (either directly using prices or indirectly derived from prices). (c) Inputs not based on observable market data.

($ million) Carrying

amount as at Fair value measurement at

end of reporting period using :

General government sector 30 June Level 1 (a) Level 2 (b) Level 3 (c)

2010 Financial assets Derivative assets 4.1 4.1 .. .. Equities and managed investment schemes 588.3 366.4 87.2 134.6 Debt securities at fair value 37.5 36.2 .. 1.3 Total financial assets 629.8 406.7 87.2 135.9 2009 Financial assets Derivative assets 6.2 6.2 .. .. Equities and managed investment schemes 617.8 614.2 2.8 0.8 Debt securities at fair value 38.3 38.3 .. .. Total financial assets 662.3 658.7 2.8 0.8 Notes: (a) Quoted prices (unadjusted) in active markets for identical assets or liabilities. (b) Inputs based on observable market data (either directly using prices or indirectly derived from prices). (c) Inputs not based on observable market data.

Note 33: Commitments ($ million)

State of General State of General Victoria government Victoria government

sector sector 2010 (a) 2010 (a) 2009 2009 Nominal value Nominal value Nominal value Nominal value

Capital expenditure commitments Land and buildings 2 357.2 1 721.6 1 160.2 984.4 Plant, equipment and vehicles 2 032.1 1 651.7 787.0 262.3 Infrastructure systems (b) 699.6 5.4 2 588.2 429.5 Road Networks and Earthworks (b) 1 562.4 1 562.4 804.8 801.8 Other 1 384.5 1 303.7 408.1 398.1 Total capital expenditure

commitments 8 035.8 6 244.7 5 748.3 2 876.1

Operating and lease commitments Rail services 8 342.5 8 342.5 3 485.7 3 485.7 Bus services 5 213.6 5 213.6 3 020.7 3 020.7 Other 4 351.4 2 692.9 3 488.8 2 912.5 Total operating and lease

commitments 17 907.5 16 249.0 9 995.1 9 418.9

Other commitments IT Services (Vic Police) .. .. 38.4 38.4 Debt collection services (Traffic

Camera Office) 223.7 223.7 246.3 246.3

Traffic camera services (Traffic Camera Office)

201.1 201.1 228.3 228.3

Victorian Neurotrauma Initiative program

22.7 22.7 19.5 19.5

Snowy Joint Government Enterprise 30.0 30.0 45.0 45.0 Major sporting events 92.4 92.4 93.8 93.8 New ticketing solution (myki) 326.3 .. 408.1 .. OneLink transit transition amendment

deed 49.1 .. 79.4 ..

Regional Rail Link 14.0 14.0 .. .. Other 772.6 535.2 693.4 858.8 Total other commitments 1 731.9 1 119.1 1 852.1 1 530.0 Sub-total of Commitments 27 675.3 23 612.8 17 595.6 13 825.0 Notes: (a) The 2009-10 figures are inclusive of GST. (b) All commitments associated with road networks have been re-classified from Infrastructure systems to Road Networks and

Earthworks.


Note 33: Commitments (continued) ($ million)

State of Victoria 2010 (a) 2010 (a)

Net present value

Nominal value

Public private partnerships Health Services – Mildura Hospital 33.8 37.3 Central Highlands Water 104.2 123.7 Barwon Water 123.9 247.1 Coliban Water 49.2 137.7 Melbourne Water 21.8 29.7 Private Prisons 1 198.3 1 354.4 County Court 54.4 61.5 Melbourne Convention Centre 240.5 581.6 Southern Cross Station 185.5 524.7 Partnerships Victoria in Schools 221.2 685.3 Royal Women’s Hospital 189.8 469.4 Royal Children’s Hospital 1 983.4 4 011.4 Casey Hospital 37.7 58.8 Biosciences Research Centre 228.9 803.5 Royal Melbourne Showgrounds 37.8 105.4 Victorian Desalination Plant (b) 4 590.2 15 808.6 Peninsula Link 1 056.9 3 016.8 Emergency Service Telecommunications 73.6 75.8 Total public private partnerships 10 430.9 28 132.6 Total commitments (inclusive of GST) .. 55 807.9 Less GST recoverable from the the Australian Tax Office .. 5 073.4 Total Commitments (exclusive of GST) .. 50 734.5 Notes: (a) The 2009-10 figures are inclusive of GST. (b) The net present value represents the estimated fair value of the plant at the date of commissioning plus the related fixed operating and

maintenance costs. It excludes charges for water consumption, as the State has no obligation to purchase water under the contractual arrangements.


General State of Victoria General government sector government sector

2010 (a) 2010 (a) 2009 2009 2009 2009 Net present

value Nominal

value Net present

value Nominal

value Net present

value Nominal

value

33.8 37.3 34.9 39.4 34.9 39.4 .. .. 106.1 120.2 .. .. .. .. 99.9 220.4 .. .. .. .. 51.3 130.3 .. .. .. .. 20.8 29.2 .. ..

1 198.3 1 354.4 201.8 223.7 201.8 223.7 54.4 61.5 53.1 61.2 53.1 61.2

240.5 581.6 219.0 544.8 219.0 544.8 185.5 524.7 174.5 498.0 174.5 498.0 221.2 685.3 256.0 795.7 256.0 795.7 189.8 469.4 252.5 438.8 252.5 438.8

1 983.4 4 011.4 1 099.1 3 741.9 1 099.1 3 741.9 37.7 58.8 37.1 56.2 37.1 56.2

228.9 803.5 219.5 726.0 219.5 726.0 37.8 105.4 38.3 101.8 38.3 101.8

4 590.2 15 808.6 .. .. .. .. 1 056.9 3 016.8 .. .. .. ..

73.6 75.8 114.9 123.5 114.9 123.5 10 131.8 27 594.4 2 978.8 7 851.3 2 700.7 7 351.1

.. 51 207.2 .. 25 446.8 .. 21 176.1

.. 4 655.2 .. ..

.. 46 552.0 .. ..


Note 33: Commitments (continued) Commitments are payable as follows.

($ million)

State of Victoria General General

State of Victoria government sector government sector Nominal values 2010 (a) 2010 (a) 2009 2009 Capital expenditure commitments payable Less than 1 year 5 317.2 3 771.1 3 997.9 2 045.0 1 year but less than 5 years 2 033.5 1 788.4 1 731.1 811.8 5 years or more 685.1 685.1 19.3 19.3 Total capital expenditure

commitments 8 035.8 6 244.7 5 748.3 2 876.1

Operating and lease commitments payable Less than 1 year 4 117.1 3 647.2 2 327.1 2 218.8 1 year but less than 5 years 9 196.4 8 594.0 4 499.7 4 276.4 5 years or more 4 594.0 4 007.8 3 168.4 2 923.7 Total operating and lease

commitments 17 907.5 16 249.0 9 995.1 9 418.9

Public private partnership commitments Less than 1 year 214.9 197.3 209.1 182.9 1 year but less than 5 years 3 150.1 3 043.7 857.0 736.0 5 years or more 24 767.6 24 353.4 6 785.1 6 432.2 Total public private

partnership commitments 28 132.6 27 594.4 7 851.3 7 351.1

Total other commitments payable Less than 1 year 710.8 487.8 572.0 407.0 1 year but less than 5 years 896.3 613.9 764.9 711.3 5 years or more 124.8 17.4 515.2 411.7 Total other commitments 1 731.9 1 119.1 1 852.1 1 530.0 Total commitments

(inclusive of GST) 55 807.9 51 207.2 25 446.8 21 176.1

Note: (a) The 2009-10 figures are inclusive of GST.


Note 34: Contingent assets and contingent liabilities (State of Victoria)

Contingent assets

A contingent asset is a possible asset that arises from past events, whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.

These can be classified into either quantifiable, where the potential economic benefit is known, or non-quantifiable. Table below contains quantifiable contingent assets as at 30 June 2010.

Quantifiable contingent assets

($ million) State of Victoria

2010 2009 General government 260.6 52.6 Public non-financial corporations 64.9 129.6 Public financial corporations .. .. Eliminations for whole of government .. .. Total contingent assets 325.5 182.2 Guarantees, indemnities and warranties 40.6 72.4 Legal proceedings and disputes .. 1.1 Other 284.9 108.8 Total contingent assets 325.5 182.2 Source: Department of Treasury and Finance

Non-quantifiable contingent assets

CityLink compensable enhancement claims

The Melbourne CityLink concession deed contains compensable enhancement provisions that enable the Victorian Government to claim 50 per cent of additional revenue derived by CityLink Melbourne Limited (CML) as a result of certain events that particularly benefit CityLink, including changes to the adjoining road network.

Compensable enhancement claims have previously been lodged by Victorian Government relating to works to improving traffic flows on the Westgate Freeway (between Lorimer and Montague Streets), and the Tullamarine Freeway (in the vicinity of the intersection with Bulla Road). The claims were lodged on 20 May 2005 and 29 September 2006 respectively, and are still outstanding.

Revenue sharing from the Monash CityLink West Gate upgrade

On 25 July 2006, CML, Transurban Infrastructure Management Ltd (TIML) and the Victorian Government entered into the M1 Corridor redevelopment deed.

Under the terms of this deed, the Victorian Government will upgrade the Monash and West Gate Freeways, while CML will upgrade the Southern Link section of CityLink. The Victorian Government will become entitled to 50 per cent of the additional CityLink revenue created by the Monash CityLink West Gate upgrade after CML recovers its construction and additional operating costs relating to works on the Southern Link.

The method used to calculate the additional CityLink revenue generated from the upgrade is to be based on comparing actual CityLink revenue against agreed trends. The actual calculation of the additional CityLink revenue will take place three full financial years after completion of the upgrade.


Note 34: Contingent assets and contingent liabilities (State of Victoria) (continued)

Contingent asset arising from Goods and Services tax

In November 2009, the Commissioner of Taxation appealed a decision made in October 2009 to allow Department Of Transport to claim input tax credits for certain transport related subsidies. The commissioner has sought leave to appeal that decision to the High Court and as at 30 June 2010 the contingent asset was unquantifiable.

Contingent liabilities

A contingent liability is:

• a possible obligation that arises from past events, whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or

• a present obligation that arises from past events but is not recognised because: − it is not probable that an outflow of resources embodying economic benefits will be

required to settle the obligation; or

− the amount of the obligation cannot be measured with sufficient reliability.

As with contingent assets, contingent liabilities are also classified as either quantifiable or non-quantifiable.

The table below contains quantifiable contingent liabilities as at June 2010.

Quantifiable contingent liabilities

($ million) State of Victoria

2010 2009 General government 9 425.7 7 409.9 Public non-financial corporations 439.9 362.7 Public financial corporations 350.5 0.5 Eliminations for whole of government 8 077.0 6 220.2 Total contingent liabilities 2 139.1 1 552.9 Guarantees, indemnities and warranties 1 220.9 772.2 Legal proceedings and disputes 355.8 385.0 Other 562.5 395.7 Total contingent liabilities 2 139.1 1 552.9



Non-quantifiable contingent liabilities

There are other commitments, made by government, which are not quantifiable at this time, arising from:

• indemnities provided in relation to transactions, including financial arrangements and consultancy services, as well as for directors and administrators;

• performance guarantees, warranties, letters of comfort and the like; • deeds in respect of certain obligations; and • unclaimed monies, which may be subject to future claims by the general public against the State. An overview of the more significant non-quantifiable liabilities follows.

Asset sales

Potential exposures are associated with the sale of a number of assets and services where the purchaser was provided with various indemnities and warranties.

Royal Melbourne Showgrounds redevelopment

The State, through the Department of Primary Industries (DPI), and the Royal Agricultural Society of Victoria (RASV) formed an unincorporated joint venture for the purposes of undertaking the redevelopment of the Royal Melbourne Showgrounds (the Showgrounds), with the State and the RASV each holding 50 per cent interest in the joint venture. The joint venture participants then established an incorporated entity, Showgrounds Nominees Pty Ltd, to enter into contractual arrangements with the private sector party.

The project is a public private partnership delivered under the Victorian Government’s Partnerships Victoria (PV) framework. It involves a partnership with a private sector consortium (concessionaire), which was responsible for the design, construction and financing of the Showgrounds redevelopment and continues to be responsible for maintaining and providing facility management services at the Showgrounds for a period of 25 years, commencing from August 2006.

Under the PV contract, the State supports the underlying payment obligations of the joint venture participants for Showgrounds Nominees Pty Ltd to meet its obligations to pay the service fee to the concessionaire. Any actual financial support provided by the State on behalf of the RASV under the PV contract will be treated as a loan, which will be repaid by the RASV by the end of the 25 year contract term. Repayment by the RASV may take the form of the transfer to the State of part or whole of the RASV’s participating interest in the joint venture.

Separately and similarly, under another agreement between the State and RASV, the State supports certain obligations of the RASV that may arise out of a suite of joint venture agreements between the State and the RASV, or between the joint venture and a third party. In accordance with this agreement, the State will meet certain RASV obligations in the form of a loan, up to a maximum of $20 million, if requested by the RASV when the RASV does not have the financial capacity to pay. RASV must repay any such loan by the end of the 25 year term and may do so by transferring to the State part or whole of its interest in the joint venture.



National Electricity Code Administrator

As part of the wind up of the National Electricity Code Administrator (NECA), the State has undertaken to indemnify the actions of the NECA Directors for a period of seven years upon completion of their tenure in 2015.

Australian Energy Market Operator Ltd

In order for the State Electricity Commission of Victoria (SECV) to participate in the national electricity market administered by Australian Energy Market Operator Ltd (AEMO), a guarantee must be provided to AEMO by an acceptable financial institution. TCV has provided such a guarantee whereby it undertakes to pay to AEMO on demand any and all amounts to an aggregate amount not exceeding $147.4 million as security for the obligations of SECV to AEMO. The guarantee is issued pursuant to Section 9(1) of the Treasury Corporation of Victoria Act 1992 and is approved by the Treasurer. The guarantee is fully supported by an indemnity from SECV and by non-withdrawable deposits which SECV is obliged to maintain with TCV at an amount of 101 per cent of the amount guaranteed.

Public transport rail partnership agreements

The Director of Public Transport (the Director), on behalf of the Crown, entered into partnership contractual arrangements with franchisees to operate metropolitan rail transport services in the State, operative from 30 November 2009 until 30 November 2017. The following summarises the major contingent liabilities arising from those arrangements.

Contingent liabilities on early termination or expiry of partnership agreement

Franchise assets: to maintain continuity of services, the assets, at early termination or expiry of the franchise agreement, will revert to the Director or a successor. In the case of some assets, a reversion back to the Director would entail those assets purchased.

Unfunded superannuation: at the early termination or expiry of the contract, the Director will assume any unfunded superannuation amounts (apart from contributions the franchisee is required to pay over the contract term) to the extent that the State becomes the successor operator.

OneLink Transit Systems performance bonus

The State recognises a contingent liability relating to the performance bonus component of the contract with OneLink Transit Systems. It is more likely than not that system and equipment availability and overall performance achievements in 2010-11 through to the end of the contract may be higher than the originally set forecast level for performance bonus payments, given a pro-active maintenance regime that may result in better than expected equipment reliability. At this time, it is not possible to accurately predict the amount of potential performance bonus payments as this will be impacted by variables, such as patronage growth, equipment performance and vandalism. In particular, performance of these variables will be impacted by the reliability of equipment which is nearing the end of its design life.



Kamco performance related payments

A contingent liability exists in relation to performance-related payments associated with and incorporated into the new ticketing solution (myki) contract with Kamco (Keane Australia Micropayments Consortium Pty Ltd).

Contingent liability arising from goods and services tax

CityLink Melbourne Limited and the Victorian Government have approached the Australian Taxation Office seeking clarification as to the applicability of Goods and Services Tax legislation in respect of services and supplies provided under the Melbourne CityLink concession deed. Discussions with the Australian Taxation Office are continuing.

Contingent liabilities arising from litigation

The Department of Transport is defending, on behalf of the State, a claim for damages relating to the development and management of an intermodal freight terminal in Gippsland in which the plaintiff is seeking damages of $44.7 million. The information usually required by AASB 137 Provisions, Contingent Liabilities, and Contingent Assets is not disclosed on the grounds that it can be expected to prejudice seriously the outcome of the litigation.

VicTrack

VicTrack is the legal owner of Victoria’s railway land, property and much of its rolling stock. Given the nature of the land and property now vested in VicTrack and its historical use, some is subject to environmental contamination or may not comply with building code regulations.

An action plan has been prepared to address environmental contamination at a number of high priority sites, however, VicTrack has not reliably established future expenditure levels that may be required to address environmental issues, including remediation activities. As there is uncertainty regarding the actual quantum of expenditure, no provision for these costs has been included in the financial statements.

Native Title

A number of claims have been filed with the Federal Court under the Native Title Act 1993 (Cwth) that affect Victoria. While many such claims are being processed through the legal system, the Government has committed itself to resolving claims through mediation, where possible. It is not feasible at this time to quantify any future liability.



Department of Education and Early Childhood Development

Indemnities are provided by the Department of Education and Early Childhood Development (DEECD) to:

• the Commonwealth in various funding contracts entered with the Commonwealth throughout the year. Each indemnity is limited to $10 million for personal injuries and property damages, and $50 million for damages arising out of internet usage;

• teachers, volunteer workers, school chaplains and school councils. The indemnity for teachers is only in relation to negligence claims by students, provided the teacher was not intoxicated, or engaged in a criminal offence, or engaged in outrageous conduct, and was incurred in the course of the teacher’s employment.

• members of school councils. The Education and Training Reform Act 2006 provides a comprehensive indemnity to members of school councils for any legal liability, whether in contract, negligence, and defamation, etc.

The Government also provides an indemnity for persons employed under the Public Administration Act 2004. In relation to Victorian Public Service (VPS) employees under the Public Administration Act 2004, the Department has an additional obligation under the VPS Agreement to indemnify in relation to the costs of employment related legal proceedings.

The Biosciences Research Centre

The Biosciences Research Centre (BRC) project is a joint initiative between the Victorian Government, through the Department of Primary Industries (DPI), and La Trobe University (La Trobe). The project is being delivered as a public private partnership in accordance with the Victorian Government’s Partnerships Victoria (PV) framework. DPI and La Trobe have formed an unincorporated joint venture for the purposes of undertaking the BRC project. The State holds 75 per cent participating interest and La Trobe holds 25 per cent participating interest in the joint venture. The facility that is being constructed will be known as AgriBio, the Centre for AgriBioscience.

The project involves a partnership between the joint venture and the private sector consortium, Plenary Research Pty Ltd (the concessionaire), which is responsible for the design, construction, commissioning and financing of AgriBio and the provision of contracted services required for the maintenance and operation of the facility. The joint venture participants established an incorporated entity known as Biosciences Research Centre Pty Ltd for the purposes of entering into the contractual arrangements with the concessionaire. Construction of AgriBio commenced in May 2009, the new facility is expected to be commissioned in late 2011 and fully operational in 2012. Under the PV contract, the service fee payment obligations of Biosciences Research Centre Pty Ltd (on behalf of the joint venture participants) are supported by the State of Victoria. In accordance with the contract, the State supports the underlying payment obligations of the joint venture participants, including La Trobe, to the joint venture company, thereby enabling the joint venture company to meet its obligations to pay the service fee to the concessionaire pursuant to the contract. Any actual financial support provided by the State to La Trobe under the PV contract will be treated as a loan to be repaid by La Trobe by the end of the 25 year contract term. Repayment by La Trobe may take the form of the transfer to the State of part or whole of the La Trobe’s participating interest in the joint venture.



Royal Children’s Hospital

The Royal Children’s Hospital Foundation (RCHF) has entered into a funding agreement with the Commonwealth Government for the provision of $21 million to undertake the Australian Early Development Index Project. RCHF has entered into this agreement at the request of the Royal Children’s Hospital (RCH). In consideration of RCHF entering into the funding agreement, RCH has agreed to be responsible for the obligations and liabilities imposed on RCHF under the funding agreement, including but not limited to the indemnity granted by RCHF to the Commonwealth of Australia under clause 19 of the funding agreement.

HIH Insurance

The State’s quantifiable direct exposures arising from the collapse of the HIH Insurance Group (HIH) are included in the liabilities shown in the financial statements of the entities directly responsible for them. The State’s obligations in respect of its builders’ warranty insurance rescue package are also shown as direct liabilities of the relevant government entities.

The State also retains some unquantifiable contingent exposures arising from the collapse. These contingent exposures arise primarily through the possibility that the State may be involved in litigation in which it would be entitled to recover damages from third parties. If these third parties were insured by HIH, recovery in full may not be possible.

Land remediation – environmental concerns

In addition to properties for which remediation costs have been provided in these financial statements, certain other properties have been identified as potentially contaminated sites. The State does not admit any liability in respect of these sites. However, remedial expenditure may be incurred to restore the sites to an acceptable environmental standard in the event of future developments taking place.

Victorian Managed Insurance Authority – insurance cover

The Victorian Managed Insurance Authority (VMIA) was established in 1996 as an insurer for departments and participating bodies (predominantly in the general government sector). VMIA provides its client bodies with a range of insurance cover, including for property, public and products liability, professional indemnity and contract works. VMIA re-insures in the private market for losses above $50 million arising out of any one event, up to a maximum of $750 million for public liability and for losses above $50 million arising out of any one event, up to a maximum of $1.5 billion for property. The risk of losses above these re-insured levels is borne by the State.

Effective from 31 March 2010, pursuant to a direction from the Minister for Finance under Section 25A of the Victorian Managed Insurance Authority Act 1996, the Victorian Managed Insurance Authority will underwrite domestic building insurance.

Domestic building insurance

In mid-April 2002, the State agreed to provide temporary (to 30 June 2002) re-insurance support to domestic building insurance provider Dexta Corporation following the withdrawal of some of its commercial re-insurance support. While this support was subsequently extended to policies issued before 30 September 2002, the Government determined there would be no further extension.



The State received re-insurance premiums for this participation and may be required to contribute to payment of re-insured claims, as well as paying management fees. The precise timing and value of these receipts and payments is uncertain, as claims may be made by home owners for up to six and a half years after the arrangement ceases. These claims may also take an additional several years to be processed through the legal system.

Receipts and payments will be contingent on the volume of insurance underwritten and re-insured by 30 September 2002. Based on Dexta’s previous levels of activity, the central estimate of the State’s gross exposure (i.e. before premium receipts) is not more than $6 million. While the State expects, like the commercial re-insurers who are party to the agreement, to at least break even on these arrangements, the State retains an unquantifiable contingent liability that claims may exceed the central estimate.

On 13 March 2002, Victoria and New South Wales jointly announced a series of reforms to domestic building insurance arrangements. This announcement included a commitment to provide a catastrophe fund capable of supporting claims above $10 million. To meet this commitment, the two states offered re-insurance arrangements to all builders’ warranty insurers covering claims in respect of any one builder in excess of $10 million, with each state re-insuring claims relating to properties in that state. South Australia has since also become involved in these arrangements. Since domestic building insurance commenced, there have been no losses by an insurer to any one builder that exceed this amount.

Victoria has re-insurance agreements giving effect to these arrangements with three insurers. The agreements require the insurers to pay the re-insurance premiums to Victoria (and to any other state that is also a party to such an agreement) that are estimated to be sufficient for the State to at least break even on these arrangements. However, the State retains an unquantifiable contingent liability for additional claims.

Effective from 31 March 2010, pursuant to a direction from the Minister for Finance under Section 25A of the Victorian Managed Insurance Authority Act 1996, the Victorian Managed Insurance Authority will underwrite domestic building insurance.

Gambling licences

In 1992, a gaming operator’s licence was issued to the Trustees of the Will and Estate of the late George Adams, now trading as Tatts Group. In 1994, the State issued a wagering and gaming licence to TABCORP Holdings Limited (TABCORP). These licences expire in 2012. The Gambling Regulation Act 2003 specifies end of licence arrangements which include compensation provisions for the licensees predicated on the current licensing arrangements being rolled over for a further period beyond 2012.

On 10 April 2008, the Government announced a new regulatory model for the post-2012 licences. The main changes include:

• separating the wagering and gaming licence to instead license wagering on a stand alone basis; and

• changing the current gaming operator duopoly to a system where venue operators are licensed to own and operate gaming machines in their own right.

After considering the end of licence arrangements in the Gambling Regulation Act 2003, the Government has formed the view that neither Tatts Group nor TABCORP will be entitled to compensation after the expiration of their current licences. The Government does not intend to alter or amend the provisions in the Gambling Regulation Act 2003 that deal specifically with the end of licence arrangements for Tatts Group and TABCORP.



Melbourne Park redevelopment

The State Government has entered into an agreement with Tennis Australia and the Melbourne and Olympic Park Trust to provide for the Australian Open to remain at Melbourne Park until 2036. At the same time the Government provided for Stage 1 of the redevelopment of Melbourne Park in the 2010-11 Budget (total estimated investment of $363 million). The agreement also provided a number of conditions, including that further improvements will be made to Melbourne Park or that a Rights Fee will be paid to Tennis Australia, if further works do not proceed, for the Australian Open to remain at Melbourne Park.

Note 35: Funds under management ($ million)


2010 2009 2010 2009 Investments, real estate, personal and other assets 917.9 875.5 .. .. Cash and investments in common and premium funds 807.1 753.5 .. .. Residential tenancies bond money 544.8 494.1 544.8 494.1 Funds under management by the Senior Master of the

Supreme Court 1 143.6 1 021.2 1 143.6 1 021.2

Funds under management by Legal Services Board 484.6 398.1 484.6 398.1 Funds under management for The Victorian Bushfire

Appeal Fund (a)

130.1 238.2 130.1 238.2

Other funds held .. .. .. .. Total funds under management 4 028.1 3 780.7 2 303.2 2 151.6 Note: (a) The Victorian Government has collected appeal proceeds on behalf of the Red Cross Victorian Bushfire Appeal Fund. The purpose of

the trust is for the receipt of donations and other contributions, and their disbursement for assistance to individuals and communities in towns, suburbs and rural areas affected by the 2009 Victorian bushfires. Contributions will, inter alia, include funds provided by the Victorian, Commonwealth and other jurisdictions, as well as the general public, for the above purpose.

Note 36: Subsequent event

Recent Victorian floods

In September 2010, significant rain caused flooding across parts of Victoria. As at the date of the publication of this report, the full financial impact of this event on the State of Victoria is yet to be determined.


Note 37: Public account disclosure

(a) Consolidated Fund receipts and payments for the year ended 30 June ($ thousand)

2010 2009 Receipts Taxation 13 656 000 12 314 224 Fines and regulatory fees (a) 563 716 353 906 Grants received 18 974 807 16 169 334 Sales of goods and services 926 404 819 965 Interest received 22 938 11 873 Public authority income 471 241 500 281 Other receipts 3 595 965 3 348 490 Total cash inflows from operating activities 38 211 071 33 518 074 Total cash inflows from investing and financing activities 3 121 938 2 867 686 Total consolidated fund receipts 41 333 009 36 385 760 Payments Special appropriations Special appropriations (excl. Section 33, Financial Management Act,

No. 18 of 1994) 3 118 657 2 678 652

Section 28 Financial Management Act, No. 18 of 1994 (Appropriation for borrowing against future appropriations)

6 649 24 772

Section 33, Financial Management Act, No. 18 of 1994 132 659 158 747 Total special appropriations 3 257 965 2 862 171

Annual appropriations 26 836 399 28 591 928 Provision of outputs

Section 32 Financial Management Act, No. 18 of 1994 (prior year unspent appropriations brought forward)

594 189 344 080

Section 29 Financial Management Act, No. 18 of 1994 (appropriation of annotated receipts)

3 450 998 2 391 932

Advance to Treasurer to be sanctioned 506 929 713 131 Section 35 Financial Management Act, No. 18 of 1994 (temporary

advances) 169 238 ..

Total provision of outputs 33 313 283 30 285 542

1 565 323 1 722 023 Additions to net asset base Section 32 Financial Management Act, No. 18 of 1994 (prior year

unspent appropriations brought forward) 393 462 298 775

Section 29 Financial Management Act, No. 18 of 1994 (appropriation of annotated receipts)

1 314 564 439 189

Advance to Treasurer to be sanctioned 81 387 115 881 Section 35 Financial Management Act, No. 18 of 1994 (temporary

advances) .. 167 000

Total additions to net asset base 3 511 436 2 586 168

Payments made on behalf of the State 1 437 944 1 130 380 Section 32 Financial Management Act, No. 18 of 1994 (prior year

unspent appropriations brought forward) 6 062 ..

Advance to Treasurer to be sanctioned 206 246 56 642 Total payments made on behalf of State 1 650 252 1 187 022


(a) Consolidated Fund receipts and payments for the year ended 30 June (continued) ($ thousand)

2010 2009 Other Contribution by the State under agreements pursuant to Section 25 of

the Murray-Darling Basin Act 1993 27 938 27 053

Victorian Law Reform Commission - pursuant to Section 17(b) of the Victorian Law Reform Commission Act 2000

1 313 964

Payment to Regional Infrastructure Development Fund pursuant to Section 4 of the Regional Infrastructure Development Fund Act 1999

77 200 41 000

Total annual appropriations 38 581 423 34 127 749 Applied appropriations remaining unspent relating to the 2008-09

appropriations ( 462 069) ( 377 517)

Total payments 41 377 318 36 612 403 Consolidated fund balance 1 July ( 324 777) ( 98 135) Add total receipts for year 41 333 009 36 385 760 Less total payments for year (41 377 318) (36 612 403) Consolidated fund balance 30 June ( 369 086) ( 324 777) Notes: Reconciliation of unspent appropriations: Applied appropriations unspent at end of year 3 327 304 2 997 894 add payments made during the year under the Financial

Management Act, No. 18 of 1994, Section 33 132 659 158 747

Subtotal 3 459 963 3 156 641 less applied appropriations unspent at beginning of year (2 997 894) (2 779 124) Current year appropriations remaining unspent as at 30 June 462 069 377 517 Note: (a) The 2009 amount is net of a $121 million adjustment for receivables.


(b) Consolidated Fund gross receipts for the year ended 30 June ($ thousand)

Estimate Actual Actual 2010 2010 2009 Operating activities Taxation Payroll tax 4 538 808 4 532 266 4 457 431 Land tax 1 218 030 1 154 550 1 411 479 Congestion levy 43 111 47 152 53 729 Stamp duty Land transfer duty 3 252 490 3 684 942 2 332 700 Stamp duties 3 803 3 056 4 056 Financial accommodation levy 54 227 51 832 33 336 Levies on statutory corporations 73 700 69 420 69 420 Gambling Private lotteries 400 582 399 321 420 953 Electronic gaming machines 1 004 597 1 061 260 1 003 880 Casino taxes 144 432 151 058 140 829 Racing 133 085 129 336 129 109 Other gambling 9 318 10 251 7 289 Insurance 823 798 864 744 798 867 Motor Vehicle Road Safety Act (registration fees) 872 161 873 038 820 351 Stamp duty on vehicle transfers 483 912 572 673 515 497 Franchise fees Liquor 12 051 23 253 11 797 Other taxes 29 522 27 850 103 501 Total taxation 13 097 626 13 656 000 12 314 224 Fines and regulatory fees Fines (a) 383 382 302 065 113 434 Regulatory fees 252 054 261 651 240 473 Total 635 436 563 716 353 906

Grants received Education and Early Childhood Development 117 329 4 050 334 563 Health (b) .. 136 727 .. Human Services 213 173 68 910 3 280 202 Innovation, Industry and Regional Development 10 000 5 910 11 180 Justice .. 815 3 758 Planning and Community Development .. 1 000 1 000 Premier and Cabinet .. 19 840 Primary Industries 10 700 9 541 39 455 Sustainability and Environment .. 7 162 204 735 Transport .. .. 382 097 Treasury and Finance 17 413 214 18 740 673 11 911 504 Total grants received 17 764 416 18 974 807 16 169 334 Sales of goods and services 853 345 926 404 819 965 Interest received 41 009 22 938 11 873

Public authority receipts Public authority dividends 255 103 307 592 343 180 Income tax equivalent receipts 127 451 159 039 152 561 Local government tax equivalent receipts 6 247 4 610 4 541 Total public authority receipts 388 801 471 241 500 281


(b) Consolidated Fund gross receipts for the year ended 30 June (continued) ($ thousand)

Estimate Actual Actual 2010 2010 2009

Other receipts Land rent received 14 350 20 451 19 995 Royalties received 48 610 46 220 47 781 Capital assets charge 3 157 475 3 155 403 2 931 340 Other (6 596) 373 891 349 375 Total other receipts 3 213 839 3 595 965 3 348 490 Total cash inflows from operating activities 35 994 472 38 211 071 33 518 074 Cash inflows from investing and financing activities Loans to government agencies .. 34 681 (34 681) Proceeds from investments .. 1 085 6 427 Other loans 655 3 160 34 853 Loans from TCV .. .. .. Other 148 442 3 083 012 2 861 088 Total cash inflows from investing and financing activities 149 097 3 121 938 2 867 686 Total consolidated fund receipts 36 143 569 41 333 009 36 385 760 Note: (a) The 2009 amount includes a $121 million adjustment for receivables. (b) On 12 August 2009, an administrative restructure was announced resulting in the establishment of the Department of Health. The

effective date of this machinery of government change is 1 October 2009, transferring health related functions and appropriations from the Department of Human Services. As this is the first reporting period of operation for the Department of Health, there are no prior period comparatives.


(c) The Trust Fund cash flow statement for the year ended 30 June ($ thousand)

2010 2009 Cash flows from operating activities Receipts Taxation 175 279 160 852 Regulatory fees and fines 44 196 53 336 Grants received 3 706 579 3 109 261 Sale of goods and services 571 424 299 191 Interest received 117 109 154 667 Net transfers from the consolidated fund 10 744 968 10 009 519 Other receipts 254 861 559 144 Payments Employee benefits (131 075) (101 387) Superannuation (9 527) (7 232) Interest paid (17 085) (19 408) Grants paid (12 259 331) (11 156 541) Supplies and consumables (3 048 530) (2 592 787) Net cash flows from operating activities 148 869 468 614 Cash flows from investing activities Net proceeds from customer loans 2 518 ( 465) Proceeds from sale of property, plant and equipment 58 825 57 863 Purchases of property, plant and equipment (83 938) (35 671) Other investing activities (65 742) (100 358) Net cash flows from investing activities (88 337) (78 631) Cash flows from financing activities Net repayments of borrowings 86 492 (237 038) Net cash flows from financing activities 86 492 (237 038) Net increase in trust fund cash and deposits (a) 147 023 152 946 Note: (a) Includes funds raised for the Victorian Bushfire Appeal after the 2009 Victorian bushfires. The Victorian Government holds in

trust the donations received for the Red Cross Victorian Bushfire Appeal Fund.


(d) Trust Fund reconciliation of cash flows to balances held ($ thousand)

Balances Net Balances held at movement held at 30 June 2010 for year 30 June 2009 Cash and deposits Cash balances outside the Public Account 27 518 (211 824) 239 342 Deposits held with the Public Account - specific trusts 95 342 9 923 85 419 Deposits held with the Public Account - general trusts 1 288 .. 1 288 Other balances held in the Public Account on behalf of

trust accounts 1 823 228 348 925 1 474 304

Total cash and deposits 1 947 375 147 023 1 800 352 Investments Investments held with the Public Account - specific trusts 881 429 24 973 856 456 Total investments 881 429 24 973 856 456 Total trust fund balances 2 828 805 171 996 2 656 808 Less funds held outside the Public Account Cash 27 518 (211 824) 239 342 Total trust fund balances held outside the Public Account 27 518 (211 824) 239 342 Total trust funds held within the Public Account (a) (b) 2 801 287 383 820 2 417 466 Notes: (a) Includes funds raised for the Victorian Bushfire Appeal after the 2009 Victorian bushfires. The Victorian Government holds in

trust the donations received for the Red Cross Victorian Bushfire Appeal Fund. (b) See Note 37 (f) for details of securities and investments held with the Public Account on behalf of trust accounts.

(e) Trust Fund summary for the year ended 30 June ($ thousand)

Balances Balances held 2010 held 2009

State Government funds Accounts established to receive levies imposed by Parliament and

record the expenditure thereof 184 397 193 943

Accounts established to receive monies provided in the annual budget and record the expenditure thereof

838 063 716 370

Specific purpose operating accounts established for various authorities etc. 206 635 175 497 Suspense and clearing accounts to facilitate accounting procedures 506 310 405 657 Treasury Trust Fund 197 552 162 669 Agency and deposit accounts 562 829 468 468 Total State Government funds 2 495 786 2 122 603

Joint Commonwealth and State funds 72 465 94 417 Commonwealth Government funds Commonwealth Grants passed on to individuals and organisations 21 489 43 280 Total Commonwealth Government funds 21 489 43 280 Prizes, scholarships, research and private donations 211 547 157 166 Total trust fund 2 801 287 2 417 466


(f) Details of securities held and included in the balances at 30 June ($ thousand)

2010 2009 Funds held at 30 June Trust accounts Amounts invested on behalf of specific trust accounts 976 771 941 855 Amounts invested on behalf of general trust accounts 1 288 1 288 General trust accounts 1 823 228 1 474 324 Total trust accounts 2 801 287 2 417 466 General consolidated fund account balance .. .. Total funds held 2 801 287 2 417 466 Represented by:

Stocks and securities held with/in - Australian Consolidated Inscribed Stock and Victorian Government Bonds 1 288 1 288 Managed Investments 11 748 100 728 Treasury Corporation of Victoria 965 023 841 127 978 058 943 143

Cash and investments held with/in - Treasury Corporation of Victoria 929 000 597 000 Cash at bank balances held in Australia 334 666 273 858 1 263 666 870 858 Total stock, securities, cash and investments 2 241 725 1 814 001 Add cash advanced pursuant to Sections 36 and 37 of the Financial

Management Act, No. 18 of 1994 190 476 278 688

Temporary Advance to the Consolidated Fund pursuant to Section 38 of the Financial Management Act, No. 18 of 1994

369 086 324 777

Total funds held 2 801 287 2 417 466

(g) Amounts paid into working accounts pursuant to Section 23 of the Financial Management Act 1994 for the year ended 30 June

($ thousand) 2010 2009

Appropriation transfer equivalent to consolidated fund receipts 7 937 7 337 Interest received on credit balances 146 173 State subsidy contribution .. .. Other income .. 20 Total amounts paid into working accounts 8 083 7 530

(h) Allocations pursuant to Section 28 of the Financial Management Act 1994 for the year ended 30 June

($ thousand) 2010 2009

Section 28 allocations (Appropriation for borrowing against future appropriation) Department of Primary Industries Additions to the net asset base 2 945 .. Department of Sustainability and Environment Provision of outputs 3 704 .. Additions to the net asset base .. 17 331 Addition to the net asset base – Victorian Water Trust .. 7 441 Total Section 28 allocations 6 649 24 772


(i) Transfers pursuant to Sections 30 and 31 of the Financial Management Act 1994 for the year ended 30 June 2010

($ thousand) Decrease Increase

Section 30 Transfers (transfers between items of departmental appropriations) Department of Education and Early Childhood Development

Provision of outputs (Section 29 of the Financial Management Act, No. 18 of 1994 applies)

158 546 ..

Additions to the net asset base (Section 29 of the Financial Management Act, No. 18 of 1994 applies)

.. 158 546

Department of Health Provision of outputs (Section 29 of the Financial Management Act, No. 18 of

1994 applies) .. 140 615


140 615 ..

Department of Human Services Provision of outputs (Section 29 of the Financial Management Act, No. 18 of

1994 applies) .. 1 956


1 956 ..

Department of Innovation, Industry and Regional Development Provision of outputs (Section 29 of the Financial Management Act, No. 18 of

1994 applies) .. 10 560


10 560 ..

Department of Justice Provision of outputs (Section 29 of the Financial Management Act, No. 18 of

1994 applies) 41 090 ..


.. 40 708

Victorian Law Reform Commission – pursuant to Section 17 (b) of the Victorian Law Reform Commission Act 2000

.. 382

Department of Planning and Community Development Provision of outputs (Section 29 of the Financial Management Act, No. 18 of

1994 applies) 192 ..


.. 192

Payments made on behalf of the State .. .. Department of Premier and Cabinet

Provision of outputs (Section 29 of the Financial Management Act, No. 18 of 1994 applies)

2 036 ..


.. 2 036

Department of Primary Industries Provision of outputs (Section 29 of the Financial Management Act, No. 18 of

1994 applies) 561 ..


.. 561

Department of Sustainability and Environment Provision of outputs (Section 29 of the Financial Management Act, No. 18 of

1994 applies) .. 1 824


1 824 ..

Provision of outputs – Victorian Water Trust (Section 29 of the Financial Management Act, No. 18 of 1994 applies)

.. 989

Additions to the net asset base – Victorian Water Trust (Section 29 of the Financial Management Act, No. 18 of 1994 applies)

989 ..


(i) Transfers pursuant to Sections 30 and 31 of the Financial Management Act 1994 for the year ended 30 June 2010 (continued)

($ thousand) Decrease Increase

Department of Transport Provision of outputs (Section 29 of the Financial Management Act, No. 18 of

1994 applies) .. 18 770


18 770 ..

Department of Treasury and Finance Provision of outputs (Section 29 of the Financial Management Act, No. 18 of

1994 applies) .. ..


.. ..

Payments made on behalf of the State .. .. Total Section 30 transfers 377 139 377 139 Section 31 Transfers (transfers between items of Parliament appropriations)

Parliamentary Services Provision of outputs (Section 29 of the Financial Management Act, No. 18 of

1994 applies) .. ..

Legislative Assembly Provision of outputs (Section 29 of the Financial Management Act, No. 18 of

1994 applies) .. ..

Legislative Council Provision of outputs (Section 29 of the Financial Management Act, No. 18 of

1994 applies) .. ..

Investigatory Committees Provision of outputs (Section 29 of the Financial Management Act, No. 18 of

1994 applies) .. ..

Total Section 31 transfers .. ..


(j) Appropriation of revenue and asset sales proceeds pursuant to Section 29 of the Financial Management Act 1994 for the year ended 30 June 2010

($ thousand) Source Department Outputs Commonwealth Other Total Education and Early Childhood Development 1 306 1 612 635 17 703 1 631 643 Health 270 029 470 853 635 741 517 Human Services 76 028 1 577 940 2 314 1 656 282 Innovation, Industry and Regional Development 5 000 379 927 .. 384 927 Justice 146 082 44 381 25 962 216 425 Planning and Community Development 1 000 0 586 1 586 Premier and Cabinet 483 3 900 .. 4 383 Primary Industries 67 446 76 914 318 144 678 Sustainability and Environment 116 684 93 048 7 867 217 599 Transport 721 610 899 .. 611 620 Treasury and Finance 5 220 1 151 .. 6 371 Parliament 20 830 .. .. 20 830 Total appropriation 710 829 4 871 646 55 385 5 637 860

(k) Section 32 Carryovers – Financial Management Act 1994 for the year ended 30 June 2010

Amounts approved for carryover from 2008-09 pursuant to Section 32 of the Financial Management Act 1994

($ thousand)

Department Provision

of outputs Additions to

net assets

Payments made on

behalf of State Other Total

carryover Education and Early Childhood

Development 205 967 199 958 .. .. 405 925

Health (a) 41 728 71 956 113 684 Human Services 6 752 0 .. .. 6 752 Innovation, Industry and Regional

Development 64 031 15 227 .. .. 79 258

Justice 37 156 10 909 .. .. 48 065 Planning and Community

Development 8 968 11 853 .. .. 20 821

Premier and Cabinet .. 754 .. .. 754 Primary Industries 24 449 14 418 .. .. 38 867 Sustainability and Environment 41 072 24 261 168 .. 65 501 Transport 176 590 133 035 .. .. 309 625 Treasury and Finance 21 010 4 165 5 894 .. 31 069 Parliament 6 249 .. .. .. 6 249 Total carryovers by department 633 972 486 536 6 062 .. 1 126 570 Note: (a) On 12 August 2009, an administrative restructure was announced resulting in the establishment of the Department of Health. The

effective date of this machinery of government change is 1 October 2009, transferring health related functions and appropriations from the Department of Human Services including carryover from 2008-09 to be applied in the 2009-10 year.


Amounts applied against carryover of appropriations in 2009-10 pursuant to Section 32 of the Financial Management Act 1994

($ thousand)

Department Provision

of outputs Additions to

net assets

Payments made on



Development 102 967 199 958 .. .. 302 925

Health (a) 113 684 113 684 Human Services 6 752 .. .. .. 6 752 Innovation, Industry and Regional

Development 55 546 4 803 .. .. 60 349


Development 8 967 11 853 .. .. 20 820

Premier and Cabinet .. 754 .. .. 754 Primary Industries 24 449 13 232 .. .. 37 681 Sustainability and Environment 41 072 24 261 168 .. 65 501 Transport 176 340 127 691 .. .. 304 031 Treasury and Finance 21 010 .. 5 894 .. 26 904 Parliament 6 249 .. .. .. 6 249 Total expenditure by department 594 189 393 462 6 062 .. 993 713 Note: (a) On 12 August 2009, an administrative restructure was announced resulting in the establishment of the Department of Health. The

effective date of this machinery of government change is 1 October 2009, transferring health related functions and appropriations from the Department of Human Services including carryover from 2008-09 to be applied in the 2009-10 year.

Amounts approved for carryover to 2010-11 pursuant to Section 32 of the Financial Management Act 1994

($ thousand)

Department Provision of

outputs Additions to

net assets

Payments made on



Development 163 839 838 319 .. .. 1 002 158

Health (a) 67 390 .. 67 390 Human Services 13 800 11 648 .. .. 25 448 Innovation, Industry and Regional

Development 66 517 15 729 .. .. 82 246


Development 20 668 6 960 .. .. 27 628

Premier and Cabinet 9 135 2 518 9 259 .. 20 912 Primary Industries 21 155 4 252 .. .. 25 407 Sustainability and Environment 7 094 9 573 .. .. 16 667 Transport 239 371 432 518 .. .. 671 889 Treasury and Finance 9 529 12 523 5 184 .. 27 236 Parliament 4 238 .. .. .. 4 238 Total carryovers by department 705 904 1 354 259 14 443 .. 2 074 605 Note: (a) On 12 August 2009, an administrative restructure was announced resulting in the establishment of the Department of Health. The

effective date of this machinery of government change is 1 October 2009, transferring health related functions and appropriations from the Department of Human Services.


(l) Payments from Advance to Treasurer for the year ended 30 June 2010 ($ thousand)

Department Purpose 2009-10 Education and Early Schools enrolment based funding: 2008-09 10 654 Childhood Development Additional support for community service organisations 206 Early childhood facilities in bushfire affected areas 5 453 Continued support for non-government schools 17 500 School modernisation projects 5 026 School improvement projects 12 365 Bendigo school regeneration 3 679 Craig Family Centre upgrade 500 Kindergarten enrolment based funding 6 040 School capital program 4 762 Schools enrolment based funding: 2009-10 25 013 91 198 Health Additional support for public holiday costs 17 052 Gembrook Cemetery 200 Elective surgery boost 15 000 Additional support for community service organisations 493 Box Hill Hospital redevelopment 1 300 The Alfred Burns Unit 1 060 Alcohol and drugs rehabilitation services (Tandana Place) 100 35 205 Human Services Responding to critical needs in Child Protection system 11 704 Additional support for community service organisations 4 705 Victorian bushfires statewide plan for reconstruction and recovery

funding 14 162

Victorian bushfires recovery: Red Cross Outreach Program 600 Additional support for public holiday costs 1 351 VicRelief and Foodbank – Drought assistance 1 600 Northern Futures – Community support in Lara and Corio 85 Concessions program 21 000 Bushfire Emergency Relief Grants 4 100 March 2010 severe weatherstorm 635 59 942 Innovation, Industry and

Regional Development 2009 Commonwealth Projects – operating costs associated with

Commonwealth funded TAFE assets 10 070

Retrenched workers program 8 365 Marketing Melbourne campaign 2 500 Youth Compact 26 100 TAFE teachers multiple business agreement supplementation 4 120 Finalisation of the Melbourne Exhibition Centre and Maritime

Precinct Development 12 727

Carbon markets 1 069 International Education Strategy 2 187 Industry Transition Fund 2 500 69 638 Justice Ambulance Victoria regional call taking and dispatch 2 550 2012 Gambling licences tender process 2 000 Bushfire response and preparedness activities 9 965 Additional 120 police 7 775 Victoria Police – Safe streets 2 791 Bushfire response and preparedness activities – asset 2 081 27 162


(l) Payments from Advance to Treasurer for the year ended 30 June 2010 (continued) ($ thousand)

Department Purpose 2009-10 Planning and Community Adult and Community Further Education (ACFE) Skills 2 342 Development Respect Agenda 131 McAdam Park Motor Sports Complex 1 270 Public libraries grants program 485 Local Government Inspectorate 2 042 Victorian bushfire recovery: Murrindindi Shire Council Assistance 1 700 Glen Eira Sports and Aquatic Centre 2 000 Municipal Association of Victoria bushfire preparations 500 Youth Compact 450 Victorian bushfire recovery: Callignee Community Centre 1 500 Melbourne Park redevelopment 11 500 Statewide electronic planning applications online 850 Victorian Institute of Sport pool 3 500 Footscray Central Activities District land development 2 604 Youth Guarantee 1 603 Commonwealth Games team support 150 Forest Hill College synthetic surface 235 32 862 Premier and Cabinet Victorian bushfires clean up 17 280 Bushfires Statewide Plan 19 450 Samoa/Tonga tsunami appeal donation 500 Establishment of Department of Health 5 000 Victoria 175 Anniversary program 668 International Students – Walk for Harmony 75 Jewish Museum of Australia redevelopment 400 43 373 Primary Industries Queensland fruit fly and potato cyst nematode control 4 348 Brown Coal Innovation Australia 4 000 European house borer and electric ant eradication programs 620 Farmland stabilisation 500 Drought response package 15 214 Victoria’s carbon capture and storage (CCS) program – CCS

flagships project pre-feasibility studies 3 300

Exceptional circumstances interest rate subsidies 1 573 Mexican feather grass control 700 30 255 Sustainability and Supplementary funding for the Murray-Darling Basin Authority 160 Environment Alpine resort support payments 5 590 Bushfire preparedness 35 085 Bushfire Royal Commission proposed action programs 21 610 Solar Hot Water Rebate for 2009-10 6 851 Statewide plan for bushfire reconstruction and recovery 5 210 Water rate rebates for farmers in drought affected regions 9 000 Grassland reserves to protect endangered species 500 Keeping Lakes Entrance open 2 365 Bushfire suppression 10 000 Valuer-General operating costs 874 St Kilda Triangle legal costs 486 Stevenson Road landfill remediation program 14 500 Water allocation for recreational lakes – Lake Wendouree 1 328 113 559 Transport New metropolitan rail contracts 65 167 Release of Taxi Licenses Strategy 1 486 VicRoads registration and licensing information system – Stage 1 6 507 Truck Action Plan 1 800 Melbourne metro planning and design 10 000 84 960


(l) Payments from Advance to Treasurer for the year ended 30 June 2010 (continued) ($ thousand)

Department Purpose 2009-10 Treasury and Finance Natural disaster relief funding arrangements 55 000 VicForests fire salvage program 9 459 First Home Bonus Scheme 103 772 Land Tax and Stamp Duty relief – 2009 bushfires 3 216 Land Transfer Duty – Pensioners exemption and concession 3 639 Treasury Corporation of Victoria 31 000 206 086 Parliament Support Parliament’s ongoing operations 322 322 Total Payments from Advance to Treasurer 794 562


(m) Payments from advances pursuant to Section 35 of the Financial Management Act 1994 for the year ended 30 June 2010

($ thousand) Department Purpose 2010 Health Depreciation expense 169 238 169 238 Total payments from advances pursuant to Section 35 of the Financial Management

Act, No. 18 of 1994 169 238

(n) Unused advances carried forward to 2009-10 pursuant to Section 35(4) of the Financial Management Act 1994

There have been no amounts carried forward to 2009-10 under Section 35(4) of the Financial Management Act, No. 18 of 1994.

(o) Parliamentary authority – Parliament ($ thousand)

Parliamentary Amounts Amounts authority applied applied 2010 2010 2009 Legislative Assembly Special appropriations Audit Act, No. 2 of 1994 – Audit of the Office of the

Auditor-General 17 17 15

Constitution Act, No. 8750 – Clerk of the Parliaments 2 2 2 Constitution Act, No. 8750 – Legislative Assembly 550 550 550 Parliamentary Salaries and Superannuation Act, No. 7723 –

Salaries and Allowances 13 376 13 376 12 816

Parliamentary Salaries and Superannuation Act, No. 7723 – Section 13(1)(c) Contributions

11 880 11 880 12 420

Total special appropriations 25 824 25 824 25 803

Annual appropriations Provision of outputs Provision of outputs – net application 4 234 4 216 4 191 Advance to Treasurer 106 106 .. Total provision of outputs – gross application 4 340 4 322 4 191 Total annual appropriations – gross application 4 340 4 322 4 191 Total Parliamentary authority 30 165 30 146 29 994


(p) Parliamentary authority – Parliament ($ thousand)

Parliamentary Amounts Amounts authority applied applied 2010 2010 2009 Legislative Council Special appropriations Audit Act, No. 2 of 1994 – Audit of the Office of the

Auditor-General 17 17 15

Constitution Act, No. 8750 – Legislative Council 200 200 200 Parliamentary Salaries and Superannuation Act, No. 7723 –

Salaries and Allowances 6 991 6 991 6 854

Parliamentary Salaries and Superannuation Act, No. 7723, Section 13 (1)(c) – Contributions

6 120 6 120 5 580

Total special appropriations 13 327 13 327 12 649 Annual appropriations Provision of outputs Provision of outputs – net application 2 724 2 716 2 693 Advance to Treasurer 68 68 .. Total provision of outputs – gross application 2 792 2 784 2 693 Total annual appropriations gross application 2 792 2 784 2 693 Total Parliamentary authority 16 120 16 111 15 343

(q) Parliamentary authority – Parliament ($ thousand)

Parliamentary Amounts Amounts authority applied applied 2010 2010 2009

Parliamentary Investigatory Committees Annual appropriations Provision of outputs

Provision of outputs – net application 6 370 6 349 6 291 Advance to Treasurer 148 148 .. Total provision of outputs – gross application 6 518 6 497 6 291 Total annual appropriations – gross application 6 518 6 497 6 291 Total Parliamentary authority 6 518 6 497 6 291


(r) Parliamentary authority – Parliament ($ thousand)


Parliamentary Services Annual appropriations Provision of outputs

Provision of outputs – net application 69 054 64 828 61 445 Section 32 Financial Management Act, No. 18 of 1994 5 889 5 889 3 811 Advance to Treasurer .. .. 358 Total provision of outputs – gross application 74 943 70 717 65 614

Additions to the net asset base

Section 32 Financial Management Act, No. 18 of 1994 .. .. 4 422 Total additions to net asset base – gross application .. .. 4 422

Total annual appropriations – gross application 74 943 70 717 70 036

Total Parliamentary authority (excl. FMA Section 33) 74 943 70 717 70 036 Amounts issued under the authority of the Financial

Management Act, No. 18 of 1994, Section 33 (Special Appropriation) relating to prior year appropriations

6 150 6 150 ..

Total Parliamentary authority 81 093 76 867 70 036

(s) Parliamentary authority – Parliament ($ thousand)


Auditor-General Special appropriations

Constitution Act No. 8750 – Auditor-General’s salary 445 445 410 Total special appropriations (excl. FMA Section 33) 445 445 410 Annual appropriations

Provision of outputs Provision of outputs – net application 13 666 13 433 11 641 Section 29 Financial Management Act, No. 18 of 1994 20 830 20 830 19 317 Section 32 Financial Management Act, No. 18 of 1994 360 360 .. Advance to Treasurer .. .. 55 Total provision of outputs – gross application 34 856 34 623 31 013 Total annual appropriations – gross application 34 856 34 623 31 013 Total Parliamentary authority (excl. FMA Section 33) 35 300 35 067 31 423 Amounts issued under the authority of the Financial


.. .. 1 346



(t) Parliamentary authority – Education and Early Childhood Development and Early Childhood Development

($ thousand) Parliamentary Amounts Amounts authority applied applied 2010 2010 2009

Special appropriations Education and Early Childhood Development Act, No. 6240,

Section 34 – Volunteer Workers Compensation 179 179 250

FMA No.18/1994 s10 – Approp of Cwlth grants etc 261 313 261 313 .. Total special appropriations (excl. FMA Section 33) 261 491 261 491 250 Annual appropriations

Provision of outputs Provision of outputs – net application 7 242 754 7 104 394 6 821 200 Section 29 Financial Management Act, No. 18 of 1994 128 333 73 199 173 820 Section 32 Financial Management Act, No. 18 of 1994 205 967 102 967 58 502 Advance to Treasurer 62 383 62 383 76 028 Total provision of outputs – gross application 7 639 437 7 342 944 7 129 550 Additions to the net asset base Additions to the net asset base – net application 268 621 .. 75 208 Section 29 Financial Management Act, No. 18 of 1994 1 503 310 898 818 206 620 Section 32 Financial Management Act, No. 18 of 1994 199 958 199 958 45 005 Advance to Treasurer 28 815 28 815 .. Total additions to the net asset base – gross application 2 000 705 1 127 591 326 834 Total annual appropriations – gross application 9 640 142 8 470 535 7 456 384 Total Parliamentary authority (excl. FMA Section 33) 9 901 633 8 732 026 7 456 634 Amounts issued under the authority of the Financial


.. .. 4 088

Total Parliamentary authority 9 901 633 8 732 026 7 460 722


(u) Parliamentary authority – Health (a) ($ thousand)


Special appropriations Casino Control Act No. 47 of 1991, Sections 114 and 114 (b) 15 471 15 471 .. Financial Management Act, No.18 of 1994, Section 10 66 530 66 530 Gambling Regulation Act No. 114 of 2003 Section 3.6.4

Contributions – Hospitals and Charities Fund 89 719 89 719 ..

Gambling Regulation Act No. 114 of 2003 Section 3.6.11 Contributions – Hospitals and Charities Fund/Mental Hospitals Fund

437 891 437 891 ..

Gambling Regulation Act No. 114 of 2003 Sections 4.4.11 and 4.6.8 Contributions – Hospitals and Charities Fund

104 391 104 391 ..


233 159 233 159 ..


1 211 1 211 ..

Total special appropriations (excl. FMA Section 33) 948 371 948 371 .. Annual appropriations

Provision of outputs Provision of outputs – net application 5 999 244 5 960 154 .. Section 29 Financial Management Act, No. 18 of 1994 741 517 713 217 .. Section 32 Financial Management Act, No. 18 of 1994 113 684 113 684 .. Section 35 Financial Management Act, No. 18 of 1994

(temporary advances) 169 238 169 238

Advance to Treasurer 35 205 35 205 .. Total provision of outputs – gross application 7 058 888 6 991 498 .. Additions to the net asset base Additions to the net asset base – net application 68 838 .. .. Section 32 Financial Management Act, No. 18 of 1994 .. .. .. Total additions to the net asset base – gross application 68 838 .. .. Total Annual Appropriations Gross Application 7 127 726 6 991 498 .. Total Parliamentary authority (excl. FMA Section 33) 8 076 098 7 939 870 .. Amounts issued under the authority of the Financial


7 781 7 781 ..

Total Parliamentary authority 8 083 879 7 947 651 .. Note: (a) On 12 August 2009, an administrative restructure was announced resulting in the establishment of the Department of Health. The

effective date of this machinery of government change is 1 October 2009, transferring health related functions and appropriations from the Department of Human Services. As this is the first reporting period of operation for the Department of Health, there are no prior period comparatives.


(v) Parliamentary authority – Human Services (a) ($ thousand)


Special appropriations Casino Control Act No. 47 of 1991, Sections 114 and 114 (b) 8 427 8 427 23 076 Financial Management Act, No.18 of 1994, Section 10 44 070 44 070 146 478 Gambling Regulation Act No. 114 of 2003 Section 3.6.4

Contributions – Hospitals and Charities Fund 25 869 25 869 116 198


190 852 190 852 655 272

Gambling Regulation Act No. 114 of 2003 Sections 4.4.11 and 4.6.8 Contributions – Hospitals and Charities Fund

32 708 32 708 133 552


131 206 131 206 341 237


200 200 1 630

Total special appropriations (excl. FMA Section 33) 433 332 433 332 1 417 443 Annual appropriations

Provision of outputs Provision of outputs – net application 4 658 635 4 627 895 9 664 783 Section 29 Financial Management Act, No. 18 of 1994 1 332 030 1 332 030 1 326 030 Section 32 Financial Management Act, No. 18 of 1994 6 752 6 752 40 591 Advance to Treasurer 59 942 59 942 156 950 Total provision of outputs – gross application 6 057 358 6 026 618 11 188 354 Additions to the net asset base Additions to the net asset base – net application 49 859 33 110 63 005 Section 29 Financial Management Act, No. 18 of 1994 324 252 321 811 228 Section 32 Financial Management Act, No. 18 of 1994 .. .. 44 592 Total additions to the net asset base – gross application 374 111 354 921 107 825 Total Annual Appropriations Gross Application 6 431 469 6 381 539 11 296 179 Total Parliamentary authority (excl. FMA Section 33) 6 864 800 6 814 870 12 713 623 Amounts issued under the authority of the Financial


.. .. 10 606

Total Parliamentary authority 6 864 800 6 814 870 12 724 229 Note: (a) On 12 August 2009, an administrative restructure was announced resulting in the establishment of the Department of Health. The

effective date of this machinery of government change is 1 October 2009, transferring health related functions and appropriations from the Department of Human Services.


(w) Parliamentary authority – Innovation, Industry and Regional Development ($ thousand)

Parliamentary Amounts Amounts authority applied applied 2010 2010 2009 Annual appropriations Provision of outputs Provision of outputs – net application 1 562 366 1 447 729 1 357 067 Section 29 Financial Management Act, No. 18 of 1994 384 927 384 927 173 621 Section 32 Financial Management Act, No. 18 of 1994 64 031 55 546 23 887 Advance to Treasurer 69 638 69 638 71 977 Total provision of outputs – gross application 2 080 962 1 957 840 1 626 553

Additions to the net asset base Additions to the net asset base – net application 133 852 26 310 4 395 Section 32 Financial Management Act, No. 18 of 1994 15 227 4 803 7 195 Advance to Treasurer .. .. 16 451 Total additions to the net asset base – gross application 149 079 31 113 28 041 Payments made on behalf of the State Payments made on behalf of the State – net application 54 000 54 000 27 000 Total for payments made on behalf of the State – gross

application 54 000 54 000 27 000

Other Payment to Regional Infrastructure Development Fund

pursuant to Section 4 of the Regional Infrastructure Development Fund Act 1999

77 200 77 200 41 000

Total other 77 200 77 200 41 000 Total annual appropriations – gross application 2 361 241 2 120 153 1 722 593 Total Parliamentary authority (excl. FMA Section 33) 2 361 241 2 120 153 1 722 593 Amounts issued under the authority of the Financial


.. .. ..



(x) Parliamentary authority – Justice ($ thousand)


Special appropriations Constitution Act, No. 8750 – Chief Justice 499 499 494 Constitution Act, No. 8750 – Judges of the Court of Appeal 4 037 4 037 3 931 Constitution Act, No. 8750 – President, Court of Appeal 410 410 413 Constitution Act, No. 8750 – Judges Supreme Court 14 265 14 265 13 248 County Court Act, No. 6230 – Judges 21 532 21 532 22 032 Crown Proceedings Act, No. 6232 2 163 2 163 2 510 Juries Act No.53 of 2000, Sec. 59 – Compensation to Jurors .. .. 297 Electoral Act, No. 23 of 2002, Section 181- Electoral

Expenses 19 577 19 577 30 185

Electoral Act, No. 23 of 2002, Section 215 – Entitlement 53 53 43 Eastlink Project Act No 39 of 2004, Sec. 26 333 333 28 Magistrates Court Act, No. 51 of 1989 37 138 37 138 35 577 Melbourne City Link Act, No. 107 of 1995, Section 14 (4) 2 100 2 100 1 798 Victims of Crime Assistance Act, No. 81 of 1996 – Tribunal 2 488 2 488 2 095 Victims of Crime Assistance Act, No. 81 of 1996 -Criminal

Injuries Compensation 39 557 39 557 30 601

Emergency Management Act No 30/1986 Sec.32 – Volunteer Workers Compensation

31 31 ..

Victorian State Emergency Services Volunteer Workers Compensation – Act No. 51 of 2005

799 799 240

Total special appropriations (excl. FMA Section 33) 144 983 144 983 143 491 Annual appropriations

Provision of outputs Provision of outputs – net application 3 418 290 3 284 196 3 037 350 Section 29 Financial Management Act, No. 18 of 1994 190 464 190 464 139 208 Section 32 Financial Management Act, No. 18 of 1994 37 156 37 156 84 962 Advance to Treasurer 25 081 25 081 26 860 Total provision of outputs – gross application 3 670 991 3 536 897 3 288 381 Additions to the net asset base Additions to the net asset base – net application 230 531 150 300 83 109 Section 29 Financial Management Act, No. 18 of 1994 25 962 25 962 4 522 Section 32 Financial Management Act, No. 18 of 1994 10 909 10 909 20 625 Advance to Treasurer 2 081 2 081 .. Total additions to the net asset base – gross application 269 482 189 251 108 256 Payments made on behalf of the State Payments made on behalf of the State – net application 50 262 43 370 43 118 Total for payments made on behalf of the State – gross

application 50 262 43 370 43 118

Other

Victorian Law Reform Commission – pursuant to Section 17 (b) of the Victorian Law Reform Commission Act 2000

1 314 1 313 964

Total Other 1 314 1 313 964 Total annual appropriations gross application 3 992 049 3 770 830 3 440 719 Total Parliamentary authority (excl. FMA Section 33) 4 137 032 3 915 814 3 584 210 Amounts issued under the authority of the Financial


29 618 29 618 21 567



(y) Parliamentary authority – Planning and Community Development ($ thousand)

Parliamentary Amounts Amounts authority applied applied 2010 2010 2009 Special appropriations Gambling Regulation Act No. 114 of 2003, Section 3.6.12

Contribution to Community Support Fund 97 374 97 374 100 904

Total special appropriations (excl. FMA Section 33) 97 374 97 374 100 904 Annual appropriations

Provision of outputs Provision of outputs – net application 423 901 395 258 413 763 Section 29 Financial Management Act, No. 18 of 1994 1 000 1 000 1 000 Section 32 Financial Management Act, No. 18 of 1994 8 968 8 967 1 317 Advance to Treasurer 14 128 14 128 13 227 Total provision of outputs – gross application 447 998 419 353 429 306

Additions to the net assets base Additions to the net asset base – net application 103 326 72 515 113 973 Section 29 Financial Management Act, No. 18 of 1994 586 586 .. Section 32 Financial Management Act, No. 18 of 1994 11 853 11 853 9 235 Advance to Treasurer 18 734 18 734 3 520 Total additions to the net asset base – gross application 134 499 103 688 126 728 Payments made on behalf of the State Payments made on behalf of the State – net application 500 497 690 Total for payments made on behalf of the State – gross

application 500 497 690

Total annual appropriations – gross application 582 997 523 538 556 724 Total Parliamentary authority (excl. FMA Section 33) 680 371 620 912 657 629 Amounts issued under the authority of the Financial


1 914 1 914 11 669



(z) Parliamentary authority – Premier and Cabinet ($ thousand)

Parliamentary Amounts Amounts authority applied applied 2010 2010 2009 Special appropriations Constitution Act, No. 8750 – Executive Council 50 50 50 Constitution Act, No. 8750 – Governor’s Salary 362 362 345 Ombudsman Act, No. 8414 456 456 424 Parliamentary Salaries and Superannuation Act, No. 7723 5 830 5 830 5 680 Total special appropriations (excl. FMA Section 33) 6 698 6 698 6 498 Annual appropriations

Provision of outputs Provision of outputs – net application 524 795 513 832 475 194 Section 29 Financial Management Act, No. 18 of 1994 4 383 883 464 Section 32 Financial Management Act, No. 18 of 1994 .. .. 6 710 Advance to Treasurer 43 373 43 373 67 394 Total provision of outputs – gross application 572 551 558 087 549 762 Additions to the net asset base Additions to the net asset base – net application 22 764 14 986 3 824 Section 32 Financial Management Act, No. 18 of 1994 754 754 2 223 Advance to Treasurer .. 200 Total additions to the net asset base – gross application 23 518 15 740 6 247 Payments made on behalf of the State Payments made on behalf of the State – net application 40 000 30 741 .. Total payments made on behalf of the State – gross

application 40 000 30 741 ..

Total annual appropriations – gross application 636 069 604 569 556 009 Total Parliamentary authority (excl. FMA Section 33) 642 767 611 267 562 507 Amounts issued under the authority of the Financial


2 200 2 200 ..



(aa) Parliamentary authority – Primary Industries ($ thousand)

Parliamentary Amounts Amounts authority applied applied 2010 2010 2009 Special appropriations Financial Management Act, No. 18 of 1994, Section 28 2 945 2 945 .. Total special appropriations (excl. FMA Section 33) 2 945 2 945 .. Annual appropriations Provision of outputs Provision of outputs – net application 333 136 314 955 286 978 Section 29 Financial Management Act, No. 18 of 1994 144 360 132 059 140 430 Section 32 Financial Management Act, No. 18 of 1994 24 449 24 449 41 997 Advance to Treasurer 30 255 30 255 49 951 Total provision of outputs – gross application 532 200 501 718 519 355 Additions to the net asset base Additions to the net asset base – net application 83 382 540 8 426 Section 29 Financial Management Act, No. 18 of 1994 318 268 .. Section 32 Financial Management Act, No. 18 of 1994 14 418 13 232 1 420 Total additions to the net asset base – gross application 98 118 14 039 9 846 Total annual appropriations – gross application 630 318 515 757 529 201 Total Parliamentary authority (excl. FMA Section 33) 633 263 518 702 529 201 Amounts issued under the authority of the Financial


5 063 5 063 ..



(ab) Parliamentary authority – Sustainability and Environment ($ thousand)

Parliamentary Amounts Amounts authority applied applied 2010 2010 2009 Special appropriations Financial Management Act, No. 18 of 1994, Section 10 .. .. 220 000 Financial Management Act, No. 18 of 1994, Section 28 3 704 3 704 24 772 Total special appropriations (excl. FMA Section 33) 3 704 3 704 244 772 Annual appropriations Provision of outputs Provision of outputs – net application 842 118 764 435 853 112 Section 29 Financial Management Act, No. 18 of 1994 167 498 167 498 119 548 Section 32 Financial Management Act, No. 18 of 1994 40 416 40 416 40 856 Advance to Treasurer 105 088 105 088 180 405 Victorian Water Trust – net application 2 413 2 322 11 638 Section 32 Financial Management Act, No. 18 of 1994 –

Victorian Water Trust 656 656 2 443

Pursuant to Section 15 of the Environment Protection Act 1970 – net application

33 331 33 331 32 259

Section 29 Financial Management Act, No. 18 of 1994 – Environment Protection Authority

3 592 3 592 3 986

Advance to Treasurer – Environment Protection Authority .. .. 3 158 Total provision of outputs – gross application 1 195 112 1 117 338 1 247 404 Additions to the net asset base Additions to the net asset base – net application 232 088 209 231 205 773 Section 29 Financial Management Act, No. 18 of 1994 46 509 36 930 144 599 Section 32 Financial Management Act, No. 18 of 1994 18 859 18 859 6 480 Advance to the Treasurer 8 311 8 311 8 297 Victorian Water Trust – net application 11 475 11 475 71 124 Section 32 Financial Management Act, No. 18 of 1994 –

Victorian Water Trust 5 402 5 402 8 206

Total additions to the net asset base – gross application 322 644 290 207 444 479 Other Contribution by the State under agreements pursuant to

Section 25 of the Murray-Darling Basin Act 1993 27 938 27 938 27 053

Section 32 Financial Management Act, No. 18 of 1994 – Section 25 of the Murray-Darling Basin Act 1993

168 168 ..

Advance to the Treasurer – Section 25 of the Murray-Darling Basin Act 1993

160 160 ..

Total Other 28 266 28 266 27 053 Total annual appropriations – gross application 1 546 022 1 435 812 1 718 936 Total Parliamentary authority (excl. FMA Section 33) 1 549 725 1 439 515 1 963 708 Amounts issued under the authority of the Financial


12 248 12 248 13 267



(ac) Parliamentary authority – Transport ($ thousand)


Special appropriations Financial Management Act, No. 18 of 1994, Section 10 .. .. 488 Transport Act No. 9921 of 1983, Section 213 (a) 1 303 1 303 1 819 Total special appropriations (excl. FMA Section 33) 1 303 1 303 2 308

Annual appropriations Provision of outputs

Provision of outputs – net application 3 903 511 3 798 741 3 568 609 Section 29 Financial Management Act, No. 18 of 1994 581 430 424 930 289 601 Section 32 Financial Management Act, No. 18 of 1994 176 590 176 340 37 153 Advance to Treasurer 61 513 61 513 66 036 Total provision of outputs – gross application 4 723 045 4 461 524 3 961 399 Additions to the net asset base Additions to the net asset base – net application 1 833 832 1 175 758 936 485 Section 29 Financial Management Act, No. 18 of 1994 30 190 30 190 83 219 Section 32 Financial Management Act, No. 18 of 1994 133 035 127 691 149 372 Section 35 Financial Management Act, No. 18 of 1994

(temporary advances) .. .. 167 000

Advance to Treasurer 23 447 23 447 82 913 Total additions to the net asset base – gross application 2 020 504 1 357 086 1 418 989 Total annual appropriations – gross application 6 743 549 5 818 610 5 380 388 Total Parliamentary authority (excl. FMA Section 33) 6 744 851 5 819 913 5 382 696 Amounts issued under the authority of the Financial


55 742 55 742 76 203



(ad) Parliamentary authority – Treasury and Finance ($ thousand)

Parliamentary Amounts Amounts authority applied applied 2010 2010 2009 Special appropriations Constitution Act, No. 8750 – Governor’s Pension 1 634 1 634 147 Constitution Act, No. 8750 – Supreme Court Judges 8 905 8 905 6 090 County Court Act, No. 6230 – Judges 12 443 12 443 7 875 Financial Management Act, No. 18 of 1994, Section 10 360 405 360 405 209 075 Financial Management Act, No. 18 of 1994, Section 39 –

Interest on Advances 8 148 8 148 34 517

Liquor Control Reform Act, No. 94 of 1988, Section 177 (2) 2 928 2 928 2 773 State Electricity Commission Act 1958, Section 85B(2) –

Indemnity 10 336 10 336 ..

State Superannuation Act, No. 50 of 1988, Section 90 (2) – Contributions

564 495 564 495 450 694

State Owned Enterprises Act, No. 94 of 1994, Section 88 – State equivalent taxation payments

681 681 30 655

Taxation (Interest on Overpayments) Act, No. 35 of 1986, Section 11

3 764 3 764 453

Treasury Corporation of Victoria Act No. 80 of 1992, Section 38 – Debt Retirement

211 769 211 769 6 616

Total special appropriations (excl. FMA Section 33) 1 185 508 1 185 508 748 896 Annual appropriations

Provision of outputs Provision of outputs – net application 264 998 253 145 228 185 Section 29 Financial Management Act, No. 18 of 1994 6 371 6 371 4 908 Section 32 Financial Management Act, No. 18 of 1994 21 010 21 010 1 851 Advance to Treasurer .. .. 732 Total provision of outputs – gross application 292 379 280 525 235 675 Additions to the net asset base Additions to the net asset base – net application 44 054 27 799 .. Section 32 Financial Management Act, No. 18 of 1994 4 165 .. .. Advance to Treasurer .. .. 4 500 Total additions to the net asset base – gross application 48 219 27 799 4 500 Payments made on behalf of the State Payments made on behalf of the State – net application 1 347 817 1 309 336 1 059 572 Section 32 Financial Management Act, No. 18 of 1994 5 894 5 894 .. Advance to the Treasurer 206 086 206 086 56 642 Total for payments made on behalf of the State – gross

application 1 559 797 1 521 316 1 116 214

Advance to Treasurer to meet urgent claims that may arise

before Parliamentary sanction is obtained, which will afterwards be submitted for Parliamentary authority

899 743 794 562 885 655

Payments approved under Advance to Treasurer and brought to account under the relevant departments

(899 743) (794 562) (885 655)

Total annual appropriations gross application 1 900 395 1 829 640 1 356 390 Total Parliamentary authority (excl. FMA Section 33) 3 085 903 3 015 148 2 105 286 Amounts issued under the authority of the Financial


11 943 11 943 20 000



(ae) Government guarantee Details of payments made in fulfilment of any guarantee by the Government

There has been no money paid during 2009-10 in fulfillment of any guarantee by the Government. Money received or recovered in respect of any guarantee payments

There has been no money recovered during 2009-10 in respect of any guarantee payments.


Note 38: Glossary of technical terms The following is a summary of the major technical terms used in this report.

ABS GFS manual

The ABS publication Australian System of Government Finance Statistics: Concepts, Sources and Methods as updated from time to time.

Advances paid

Loans acquired for policy rather than liquidity management purposes. These include long and short-term loans, non-marketable debentures and long and short-term promissory agreements (bond and bills) issued to public sector units for achieving government policy objectives.

Borrowings

Borrowings refers to interest bearing liabilities mainly raised from public borrowings raised through the Treasury Corporation of Victoria and finance leases and other interest bearing arrangements. Borrowings exclude liabilities raised from other government entities (including finance lease arrangements), which are classified as advances received.

Biological assets

Biological assets may comprise of commercial forests and also any living animal, plant or agricultural produce that is the harvested product of biological assets.

Capital grants

Transactions in which the ownership of an asset (other than cash and inventories) is transferred from one institutional unit to another, in which cash is transferred to enable the recipient to acquire another asset or in which the funds realised by the disposal of another asset are transferred, for which no economic benefits of equal value are receivable or payable in return.

Cash surplus/deficit

Net cash flows from operating activities plus net cash flows from acquisition and disposal of non-financial assets (less dividends paid for the PNFC and PFC sectors).

Cash surplus/deficit – ABS GFS version

Equal to the cash surplus deficit (above) less the value of assets acquired under finance leases and similar arrangements.

Change in net worth

Change in net worth (comprehensive result) is revenue from transactions less expenses from transactions plus other economic flows and measures the variation in a government’s accumulated assets and liabilities.

Comprehensive result

The net result of all items of income and expense recognised for the period. It is the aggregate of operating result and other movements in equity.


Note 38: Glossary of technical terms (continued)

Effective interest method

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

Current grants

Amounts payable or receivable for current purposes for which no economic benefits of equal value are receivable or payable in return.

Employee expenses

These expenses include all costs related to employment including wages and salaries, fringe benefits tax, leave entitlements, redundancy payments, defined benefits superannuation plans and defined contribution superannuation plans.

Financial asset

A financial asset is any asset that is:

(a) cash; (b) an equity instrument of another entity; (c) a contractual right:

− to receive cash or another financial asset from another entity; or

− to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity; or

(d) a contract that will or may be settled in the entity’s own equity instruments and is:

− a non-derivative for which the entity is or may be obliged to receive a variable number of the entity’s own equity instruments; or

− a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments.

Fiscal aggregates

Analytical balances that are useful for macroeconomic analysis purposes, including assessing the impact of a government and its sectors on the economy. AASB 1049 prescribes: net operating balance, net lending/borrowing (fiscal balance), change in net worth (comprehensive result), net worth, and cash surplus/deficit. Additional fiscal aggregates not included in AASB 1049 are net debt, net financial worth, net financial liabilities.

Government units

Legal entities established by political processes which have legislative, judicial or executive authority over other institutional units within a given area and which:

• provide goods and services to the community and/or individuals free of charge or at prices that are not economically significant; and

• redistribute income and wealth by means of taxes and other compulsory transfers.



Government Finance Statistics

Government Finance Statistics (GFS) enables policymakers and analysts to study developments in the financial operations, financial position and liquidity situation of the Government. More details about the GFS can be found in the Australian Bureau of Statistics (ABS) GFS Manual Australian System of Government Finance Statistics: Concepts, Sources and Methods 2005.


The general government sector comprises all government departments, offices and other bodies engaged in providing services free of charge or at prices significantly below their cost of production. General government services include those which are mainly non-market in nature, those which are largely for collective consumption by the community and those which involve the transfer or redistribution of income. These services are financed mainly through taxes, other compulsory levies and user charges. A listing of all entities comprising the general government sector is included in Note 39.

Grants

Transactions in which one unit provides goods, services, assets (or extinguishes a liability) or labour to another unit without receiving approximately equal value in return. Grants can either be of a current or capital nature (see current grants and capital grants).

While grants to governments may result in the provision of some goods or services to the transferor, they do not give the transferor a claim to receive directly benefits of approximately equal value. Receipt and sacrifice of approximately equal value may occur, but only by coincidence. For example, governments are not obliged to provide commensurate benefits, in the form of goods or services, to particular taxpayers in return for their taxes. For this reason, grants are referred to by the AASB as involuntary transfers and are termed non-reciprocal transfers.

Grants can be paid as general purpose grants which refers to grants which are not subject to conditions regarding their use. Alternatively, they may be paid as specific purpose grants which are paid for a particular purpose and/or have conditions attached regarding their use.

Grants for on passing

All grants paid to one institutional sector (e.g. a state based general government entity) to be passed on to another institutional sector (e.g. local government or a private non-profit institution).

Institutional unit

An economic entity that is capable, in its own right, of owning assets, incurring liabilities and engaging in economic activities and in transactions with other entities.

Intangible produced assets

Refer to produced assets in this glossary.

Intangible non-produced assets

Refer to non-produced assets in this glossary.

Interest expense

Costs incurred in connection with the borrowing of funds. It includes interest on advances, loans, overdrafts, bonds and bills, deposits, interest components of finance lease repayments, and amortisation of discounts or premiums in relation to borrowings.



Key fiscal aggregates

Referred to as analytical balances in the ABS GFS Manual, key fiscal aggregates are data identified as useful for macroeconomic analysis purposes, including assessing the impact of a government and its sectors on the economy. They are:

• opening net worth;

• net operating balance;

• net lending/(borrowing);

• change in net worth due to revaluations;

• change in net worth due to other changes in the volume of assets;

• total change in net worth;

• closing net worth; and

• cash surplus/(deficit).

Net acquisition of non-financial assets (from transactions)

Purchases (and other acquisitions) of non-financial assets less sales (or disposals) of non-financial assets less depreciation plus changes in inventories and other movements in non-financial assets. Includes only those increases or decreases in non-financial assets resulting from transactions and therefore excludes write offs, impairment write downs and revaluations.

Net cash flows from investments in financial assets (liquidity management purposes)

Net cash flows from investments in financial assets (liquidity management purposes) is cash receipts from liquidation or repayment of investments in financial assets for liquidity management purposes less cash payments for such investments. Investment for liquidity management purposes means making funds available to others with no policy intent and with the aim of earning a commercial rate of return.

Net cash flows from investments in financial assets (policy purposes)

Net cash flows from investments in financial assets (policy purposes) is cash receipts from the repayment and liquidation of investments in financial assets for policy purposes less cash payments for acquiring financial assets for policy purposes.

Acquisition of financial assets for policy purposes is distinguished from investments in financial assets (liquidity management purposes) by the underlying government motivation for acquiring the assets. Acquisition of financial assets for policy purposes is motivated by government policies such as encouraging the development of certain industries or assisting citizens affected by natural disaster.

Net debt

Net debt equals sum of deposits held, advances received, government securities, loans and other borrowing less the sum of cash and deposits, advances paid and investments, loans and placements, and investment in general government sector entities using the equity method.



Net financial liabilities

Total liabilities less financial assets, other than equity in PNFCs and PFCs. This measure is broader than net debt as it includes significant liabilities, other than borrowings (e.g. accrued employee liabilities such as superannuation and long service leave entitlements). For the PNFC and PFC sectors, it is equal to negative net financial worth.

Net financial worth

Net financial worth is equal to financial assets minus liabilities. It is a broader measure than net debt as it incorporates provisions made (such as superannuation, but excluding depreciation and bad debts) as well as holdings of equity. Net financial worth includes all classes of financial assets and liabilities, only some of which are included in net debt.

Net gain on equity investments in other sector entities

Net gain on equity investments in other sector entities measured at proportional share of the carrying amount of net assets/(liabilities) comprises the net gains relating to the equity held by the general government sector in other sector entities. It arises from a change in the carrying amount of net assets of the subsidiaries. The net gains are measured based on the proportional share of the subsidiary’s carrying amount of net assets/(liabilities) before elimination of inter sector balances.

Net lending/borrowing

The financing requirement of government, calculated as the net operating balance less the net acquisition of non-financial assets. It also equals transactions in financial assets less transactions in liabilities. A positive result reflects a net lending position and a negative result reflects a net borrowing position.

Net operating balance

This is calculated as revenue from transactions less expenses from transactions.

Net result

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

Net result from transactions/net operating balance

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

Net worth

Assets less liabilities, which is an economic measure of wealth.

Non-financial assets

Non-financial assets are all assets that are not financial assets. It includes inventories, land, buildings, infrastructure, road networks, land under roads, plant and equipment, cultural and heritage assets, intangibles and biological assets such as commercial forests.



Non-financial public sector

The non-financial public sector (NFPS) represents the consolidated transactions and assets and liabilities of the general government and PNFC sectors. In compiling statistics for the non-financial public sector, transactions and debtor creditor relationships between sub sectors are eliminated to avoid double counting.

Non-produced assets

Non-produced assets are assets needed for production that have not themselves been produced. They include land, subsoil assets, and certain intangible assets. Non-produced intangibles are intangible assets needed for production that have not themselves been produced. They include constructs of society such as patents.

Non-profit institution

A legal or social entity that is created for the purpose of producing or distributing goods and services but is not permitted to be a source of income, profit or other financial gain for the units that establish, control or finance it.

Other economic flows

Other economic flows are changes in the volume or value of an asset or liability that do not result from transactions. In simple terms, other economic flows are changes arising from market remeasurements. They include gains and losses from disposals, revaluations and impairments of non-current physical and intangible assets; actuarial gains and losses arising from defined benefit superannuation plans; fair value changes of financial instruments and agricultural assets; and depletion of natural assets (non-produced) from their use or removal.

Other superannuation expense

Includes all superannuation expenses from transactions except superannuation interest cost. Generally includes current service cost, which is the increase in entitlements associated with the employment services provided by employees in the current period. Superannuation actuarial gains/(losses) are excluded as they are considered other economic flows.

Payables

Includes short and long-term trade debt and accounts payable, grants and interest payable.

Produced assets

Produced assets include buildings, plant and equipment, inventories, cultivated assets and certain intangible assets. Intangible produced assets may include computer software, motion picture films and research and development costs (which does not include the start up costs associated with capital projects).

Public financial corporation sector

PFCs are bodies primarily engaged in the provision of financial intermediation services or auxiliary financial services. They are able to incur financial liabilities on their own account (e.g. taking deposits, issuing securities or providing insurance services). The public financial corporation sector includes the Treasury Corporation of Victoria and the Transport Accident Commission. Estimates are not published for the public financial corporation sector. A listing of all PFCs controlled by the Victorian Government is included in Note 39.



Public non-financial corporation sector

The public non-financial corporation (PNFC) sector comprises bodies mainly engaged in the production of goods and services (of a non-financial nature) for sale in the market place at prices that aim to recover most of the costs involved (e.g. water and port authorities). In general, PNFCs are legally distinguishable from the governments which own them. A listing of all PNFCs controlled by the Victorian Government is included in Note 39.

Quasi corporation

An unincorporated enterprise that functions as if it were a corporation, has the same relationship with its owner as a corporation, and keeps a separate set of accounts.

Receivables

Includes short and long-term trade credit and accounts receivable, grants, taxes and interest receivable.

Sale of goods and services

Refers to revenue from the direct provision of goods and services, and includes fees and charges for services rendered, sales of goods and services, fees from regulatory services and work done as an agent for private enterprises. It also includes rental income under operating leases and on produced assets such as buildings and entertainment, but excludes rent income from the use of non-produced assets such as land. User charges includes sale of goods and services revenue.

Superannuation interest expense

The expense resulting from the increase in the liability due to the fact that, for all participants in the scheme, retirement (and death) is one year nearer, and so one fewer discount factors must be used to calculate the present value of the benefits for each future year. Interest cost is the increase during a period in the present value of a defined benefit obligation which arises because the benefits are one period closer to settlement. The cost is measured net of the actuarial return on plan assets of defined benefit schemes calculated using an actuarially determined long-term rate of return.

Superannuation

Includes all superannuation expenses from transactions except superannuation interest cost. It generally includes current service cost, which is the increase in entitlements associated with the employment services provided by employees in the current period. Superannuation actuarial gains/losses are excluded as they are considered other economic flows.

Taxation revenue

Taxation revenue represents revenue received from the State’s taxpayers and includes: payroll tax; land tax; duties levied principally on conveyances and land transfers; gambling taxes levied mainly on private lotteries, electronic gaming machines, casino operations and racing; insurance duty relating to compulsory third party, life and non-life policies; insurance company contributions to fire brigades; motor vehicle taxes, including registration fees and duty on registrations and transfers, levies (including the environmental levy) on statutory corporations in other sectors of government; and other taxes, including landfill levies, licence and concession fees.



Transactions

Transactions are those economic flows that are considered to arise as a result of policy decisions, usually an interaction between two entities by mutual agreement. They also include flows within an entity such as depreciation where the owner is simultaneously acting as the owner of the depreciating asset and as the consumer of the service provided by the asset.

Taxation is regarded as mutually agreed interactions between the Government and taxpayers. Transactions can be in kind (e.g. assets provided/given free of charge or for nominal consideration) or where the final consideration is cash. In simple terms, transactions arise from the policy decisions of the Government.


Note 39: Government purpose classification The Government Purpose Classification (GPC) classifies expenses and acquisition of non-financial assets of the public sector in terms of the purposes for which the transactions are made. The major groups reflect the broad objectives of government and the groups and subgroups detail the means by which these broad objectives are achieved.

General public services

Include legislative and executive affairs, financial and fiscal affairs, external affairs, foreign economic aid, general research, general economic and social services, general statistical services and government superannuation benefits.

Public order and safety

Includes police and fire protection services, law courts and legal services, prisons and corrective services, and control of domestic animals and livestock.

Education

Includes primary and secondary education, university and other higher education, technical and further education, preschool and special education and transportation of students.

Health

Includes general hospitals, repatriation hospitals, mental health institutions, nursing homes, special hospitals, hospital benefits, medical clinics and practitioners, dental clinics and practitioners, maternal and infant health, ambulance services, medical benefits, school and other public health services, pharmaceuticals, medical aids and appliances and health research.

Social security and welfare

Includes sickness benefits; benefits to ex-servicemen and their dependants; invalid and other permanent disablement benefits; old age benefits, widows, deserted wives, divorcees and orphans benefits; unemployment benefits; family and child benefits; sole parents benefits; family and child welfare; and aged and handicapped welfare.

Housing and community amenities

Includes housing and community development, water supply, household garbage and other sanitation, sewerage, urban stormwater drainage, protection of the environment and street lighting.

Recreation and culture

Includes public halls and civic centres, swimming pools and beaches, national parks and wildlife, libraries, creative and performing arts, museums, art galleries, broadcasting and film production.

Fuel and energy

Includes coal, petroleum, gas, nuclear affairs and electricity.

Agriculture, forestry, fishing and hunting

Includes agricultural land management, agricultural water resources management, agricultural support schemes, agricultural research and extension services, forestry, fishing and hunting.


Note 39: Government purpose classification (continued)

Mining, manufacturing and construction

Includes activities relating to prospecting, mining and mineral resources development; manufacturing activities and research into manufacturing methods, materials and industrial management; and activities associated with the building and construction industry.

Transport and communications

Includes road construction, road maintenance, parking, water transport, rail transport, air transport, pipelines, multi-mode urban transit systems and communications.

Other economic affairs

Includes storage, saleyards, markets, tourism and area promotion and labour and employment affairs.

Other purposes

Includes public debt transactions, general purpose inter-government transactions and natural disaster relief.


Note 40: Controlled entities The following is a list of significant controlled entities which have been consolidated for the purposes of the financial report. Minor wholly owned subsidiaries of these controlled entities are not separately disclosed in the listing below.

For further details on consolidation policy, refer to Note 1(D) Basis of consolidation in the summary of significant accounting policies. The list provides the names of significant controlled entities in the PNFC and PFC sectors which have been accounted for as equity investments, measured at the proportionate share of the carrying amount of their net assets, refer also Note 1(D). Unless otherwise noted below, all such entities are wholly-owned.

Entities included as investments in other sectors

Public Public General non-financial financial

Controlled entities government corporation corporation Department of Education and Early Childhood

Development * Victorian Curriculum and Assessment Authority * Victorian Institute of Teaching * Victorian Registration and Qualifications Authority * Department of Health (a) (e) * Health Purchasing Victoria * Hospitals, Health and Ambulance Services including: Albury Wodonga Health (f) * Alexandra District Hospital * Alfred Health * Alpine Health * Ambulance Victoria * Austin Health * Bairnsdale Regional Health Service * Ballarat Health Services * Barwon Health * Bass Coast Regional Health * Beaufort and Skipton Health Service * Beechworth Health Service * Benalla and District Memorial Hospital * Bendigo Health Care Group * Boort District Health * Casterton Memorial Hospital * Castlemaine Health (b) * Central Gippsland Health Service * Cobram District Health * Cohuna District Hospital * Colac Area Health * Dental Health Services Victoria * Djerriwarrh Health Services * Dunmunkle Health Services * East Grampians Health Service * East Wimmera Health Service * Eastern Health * Echuca Regional Health * Edenhope and District Memorial Hospital * Gippsland Southern Health Service * Goulburn Valley Health * Heathcote Health (b) * Hepburn Health Service *


Note 40: Controlled entities (continued)



Controlled entities government corporation corporation Hesse Rural Health Service * Heywood Rural Health * Inglewood and District Health Service * Kerang and District Hospital * Kooweerup Regional Health Service * Kyabram and District Health Services * Kyneton District Health Service * Latrobe Regional Hospital * Lorne Community Hospital * Maldon Hospital * Mallee Track Health and Community Services * Mansfield District Hospital * Maryborough District Health Service * Melbourne Health * Moyne Health Services * Nathalia District Hospital * Northeast Health Wangaratta * Northern Health * Numurkah District Health Service * Omeo District Health * Orbost Regional Health * Otway Health and Community Services * Peninsula Health * Peter MacCallum Cancer Institute * Portland District Health * Robinvale District Health Services * Rochester and Elmore District Health Service * Rural Northwest Health * Seymour District Memorial Hospital * South Gippsland Hospital * South West Healthcare * Southern Health * Stawell Regional Health * Swan Hill District Health * Tallangatta Health Service * Terang and Mortlake Health Service * The Kilmore and District Hospital * The Royal Children’s Hospital * The Royal Victorian Eye and Ear Hospital * The Royal Women’s Hospital * Timboon and District Healthcare Service * Upper Murray Health and Community Services * Victorian Assisted Reproductive Treatment Authority (b) * Victorian Institute of Forensic Mental Health * West Gippsland Healthcare Group * West Wimmera Health Service * Western District Health Service * Western Health * Wimmera Health Care Group * Yarram and District Health Service * Yarrawonga District Health Service * Yea and District Memorial Hospital *





Controlled entities government corporation corporation Dental Practice Board of Victoria * Medical Practitioners Board of Victoria * Medical Radiation Practitioners Board of Victoria * Mental Health Review Board * Nurses Board of Victoria * Pharmacy Board of Victoria * Psychosurgery Review Board * Registration Boards including: Chinese Medicine Registration Board of Victoria * Chiropractors Registration Board of Victoria * Optometrists Registration Board of Victoria * Osteopaths Registration Board of Victoria * Physiotherapists Registration Board of Victoria * Podiatrists Registration Board of Victoria * Psychologists Registration Board of Victoria * Victorian Health Promotion Foundation * Cemeteries including: Ballarat General Cemeteries Trust * Bendigo Cemeteries Trust * Greater Metropolitan Cemeteries Trust(f) * The Mildura Cemetery Trust * Southern Metropolitan Cemeteries Trust(f) * Trustees of the Geelong Cemeteries Trust *

* Department of Human Services The Queen Elizabeth Centre * Tweddle Child and Family Health Service * Director of Housing (PNFC) *

* Department of Innovation Industry and Regional Development

Australian Synchrotron Holding Company (c) * Film Victoria * Melbourne Central City Studios Pty Ltd * Regional Development Victoria * Tourism Victoria * Victorian Skills Commission * TAFEs including: Bendigo Regional Institute of TAFE * Box Hill Institute of TAFE * Central Gippsland Institute of TAFE * Chisholm Institute of TAFE * Driver Education Centre Australia Ltd * East Gippsland Institute of TAFE * Gordon Institute of TAFE * Goulburn Ovens Institute of TAFE * Holmesglen Institute of TAFE * International Fibre Centre Limited * Kangan Batman Institute of TAFE * Northern Melbourne Institute of TAFE * Royal Melbourne Institute of Technology

(TAFE Division) *





Controlled entities government corporation corporation South West Institute of TAFE * Sunraysia Institute of TAFE * Swinburne University of Technology (TAFE Division) * University of Ballarat (TAFE Division) * Victoria University TAFE Division * William Angliss Institute of TAFE * Wodonga Institute of TAFE * Australian Grand Prix Corporation * Emerald Tourist Railway Board * Fed Square Pty Ltd * Melbourne Convention and Exhibition Trust * Melbourne Market Authority (d) * Victorian Major Events Company Limited *

* Department of Justice Country Fire Authority * Emergency Services Telecommunications Authority * Judicial College of Victoria * Legal Services Board * Legal Services Commissioner * Metropolitan Fire and Emergency Services Board * Office of Police Integrity * Office of Public Prosecutions * Office of the Victorian Privacy Commissioner * Sentencing Advisory Council * Victoria Legal Aid * Victoria Police (Office of the Chief Commissioner

of Police) *

Victoria State Emergency Service Authority * Victorian Commission for Gambling Regulation * Victorian Electoral Commission * Victorian Equal Opportunity and Human Rights

Commission *

Victorian Institute of Forensic Medicine * Victorian Law Reform Commission * Victorian Professional Standards Council * Greyhound Racing Victoria * Harness Racing Victoria * * Department of Planning and Community

Development Adult Community and Further Education Board * Adult Multicultural Education Services * Architects Registration Board of Victoria * Building Commission * Centre for Adult Education * Growth Areas Authority * Heritage Council * Melbourne Cricket Ground Trust * Plumbing Industry Commission * Shrine of Remembrance Trustees * Victorian Aboriginal Heritage Council * Victorian Institute of Sport Limited *





Controlled entities government corporation corporation Victorian Institute of Sport Trust * Victorian Veterans Council * Melbourne and Olympic Parks Trust * Queen Victoria Women’s Centre * State Sport Centres Trust * Victorian Urban Development Authority (VicUrban) * * Department of Premier and Cabinet Australian Centre for the Moving Image * Library Board of Victoria * Melbourne Recital Centre Limited * Museums Board of Victoria * National Gallery of Victoria, Council of Trustees * Ombudsman Victoria * State Services Authority * Victorian Multicultural Commission * Geelong Performing Arts Centre Trust * Victorian Arts Centre Trust * VITS Languagelink (h) * Department of Primary Industries (e) * Energy Safe Victoria * Veterinary Practitioners Registration Board of Victoria * Agriculture Victoria Services Pty Ltd * Dairy Food Safety Victoria * Murray Valley Citrus Board * Murray Valley Wine Grape Industry Development

Committee *

Northern Victorian Fresh Tomato Industry Development

Committee *

Phytogene Pty Ltd * PrimeSafe * VicForests (g) * Victorian Strawberry Industry Development Committee *

* Department of Sustainability and Environment Catchment Management Authorities including: Corangamite Catchment Management Authority * East Gippsland Catchment Management Authority * Glenelg Hopkins Catchment Management Authority * Goulburn Broken Catchment Management Authority * Mallee Catchment Management Authority * North Central Catchment Management Authority * North East Catchment Management Authority * Port Phillip and Westernport Catchment

Management Authority *

West Gippsland Catchment Management Authority * Wimmera Catchment Management Authority * Environment Protection Authority * Office of the Commissioner for Environmental

Sustainability *

Parks Victoria * Royal Botanic Gardens Board *





Controlled entities government corporation corporation State Owned Enterprise for Irrigation Modernisation in

Northern Victoria *

Surveyors Registration Board of Victoria * Sustainability Victoria * Trust for Nature (Victoria) * Alpine Resorts Management Board including: Alpine Resorts Co-ordinating Council * Falls Creek Alpine Resort Management Board * Lake Mountain Alpine Resort Management Board * Mount Baw Baw Alpine Resort Management Board * Mount Buller and Mount Stirling Alpine Resort

Management Board *

Mount Hotham Alpine Resort Management Board * Phillip Island Nature Park Board of Management Inc. * Waste Management Groups including: Barwon Regional Waste Management Group * Calder Regional Waste Management Group * Central Murray Regional Waste Management Group * Desert Fringe Regional Waste Management Group * Gippsland Regional Waste Management Group * Goulburn Valley Regional Waste Management Group * Grampians Regional Waste Management Group * Highlands Regional Waste Management Group * Metropolitan Waste Management Group * Mildura Regional Waste Management Group * Mornington Peninsula Regional Waste Management

Group *

Northern East Victorian Regional Waste Management

Group *

South Western Regional Waste Management Group * Water Authorities including: Barwon Region Water Corporation * Central Gippsland Region Water Corporation * Central Highlands Region Water Corporation * Coliban Region Water Corporation * East Gippsland Region Water Corporation * Gippsland and Southern Rural Water Corporation * Goulburn Valley Region Water Corporation * Goulburn-Murray Rural Water Corporation * Grampians Wimmera-Mallee Water Corporation * Lower Murray Urban and Rural Water Corporation * Melbourne Water Corporation * North East Region Water Corporation * South Gippsland Region Water Corporation * Wannon Region Water Corporation * Western Region Water Corporation * Westernport Region Water Corporation * Zoological Parks and Gardens Board of Victoria *





Controlled entities government corporation corporation Department of Transport (e) * Roads Corporation * Linking Melbourne Authority (b) * Port of Hastings Corporation * Port of Melbourne Corporation * Transport Ticketing Authority * V/Line Passenger Corporation * Victorian Rail Track * Victorian Regional Channels Authority *

* Department of Treasury and Finance CenITex * Domestic (HIH) Indemnity Fund and Housing Guarantee

Claims *

Essential Services Commission * Victorian Competition and Efficiency Commission * City West Water Limited * South East Water Limited * State Electricity Commission of Victoria (shell) * Victorian Plantations Corporation (shell) * Yarra Valley Water Limited * Rural Finance Corporation of Victoria * State Trustees Limited * Transport Accident Commission * Treasury Corporation of Victoria * Victorian Funds Management Corporation * Victorian Managed Insurance Authority * Victorian WorkCover Authority *

* Parliament of Victoria Victorian Auditor-General’s Office * Notes: (a) Entities moved from the Department of Human Services to the Department of Health, effective 1 October 2009, as a result of the

machinery of government transfer (b) Entity name changes:

– on 1 January 2010 the Infertility Treatment Authority became the Victorian Assisted Reproductive Treatment Authority; – on 1 July 2010 the Southern and Eastern Integrated Transport Authority became the Linking Melbourne Authority; – on 1 July 2009 the Mt Alexander Hospital became the Castlemaine Health; and – on 1 March 2010 the McIvor Heath and Community Services became Heathcote Health

(c) The Victorian Government has a controlling interest in the Australian Synchrotron Holding Company and holds approximately 76 per cent of the issued shares.

(d) Entity moved from Department of Primary Industries to the Department of Innovation Industry and Regional Development: - Melbourne Market Authority, effective 1 July 2009. (e) Entity ceased operations during 2009-10 include:

– Southern Cross Station Authority (abolished 31 July 2009); – Victorian Energy Networks Corp (VENCorp) (ceased 1 July 2009); and – Yarra Bend Park Trust (ceased 17 Dec 2009).

Merged into the Southern Metropolitan Cemeteries Trust: – the trustees of the Necropolis Springvale; and – Cheltenham and Regional Cemeteries Trust.


Note 40: Controlled entities (continued) Notes (continued): Merged into the Greater Metropolitan Cemeteries Trust:

– Fawkner Crematorium and Memorial Park; – Altona Memorial Park; – Andersons’s Creek Cemetery Trust; – Keilor Cemetery Trust; – Lilydale Cemetery Trust; – Preston Cemetery Trust; – Templestowe Cemetery Trust; and – Wyndham Cemeteries Trust. Merged into Robinvale District Health Services: – Manangatang and District Hospital.

(f) Entities commenced operations during 2009-10 include: – Southern Metropolitan Cemeteries Trust; – Greater Metropolitan Cemeteries Trust; and – Albury Wodonga Health.

(g) Entity moved from Department of Treasury and Finance to the Department of Primary Industries – VicForests, effective 27 April 2010. (h) Entity moved from Department of Planning and Community Development to the Department of Premier and Cabinet: – VITS Languagelink, effective 31 March 2009 comes under Victorian Multicultural Commission.


CHAPTER 5 – SUPPLEMENTARY UNIFORM PRESENTATION FRAMEWORK TABLES

THE ACCRUAL GFS PRESENTATION

The Government Finance Statistics (GFS) system employed by the Australian Bureau of Statistics (ABS) is designed to provide statistics relating to all Australian public sector entities. The statistics show consolidated transactions of the various institutional sectors of government from an economic viewpoint, providing details of the revenue, expenses, payments, receipts, assets and liabilities. It includes only those transactions over which a government exercises control under its legislative or policy framework and excludes from the calculation of net operating balance both revaluations (holding gains or losses) arising from a change in market prices, and other changes in the volume of assets that result from discoveries, depletion and destruction of assets.

GENERAL ACCEPTED ACCOUNTING PRINCIPLES/GOVERNMENT FINANCE STATISTICS HARMONISATION In October 2007, the Australian Accounting Standards Board issued a new standard AASB 1049 Whole of government and general government sector financial reporting, applicable from 1 July 2008. The objective as set out by the Financial Reporting Council in December 2002 is ‘to achieve an Australian accounting standard for a single set of government reports which are auditable, comparable between jurisdictions, and in which the outcome statements are directly comparable with the relevant budget statements’. This new standard incorporates the major elements of the GFS framework, including the presentation formats and key fiscal aggregates, into a standard based on GAAP.

A revised Uniform Presentation Framework (UPF) was agreed by the Australian Loan Council in March 2008, based on AASB 1049, and similarly applicable from the reporting period commencing 1 July 2008. The combined new standard and revised UPF were applied in Victoria for the first time to the general government sector estimated financial statements in the 2008-09 Budget Paper No. 4 and are now mandatory for annual financial reports. In addition to the audited Annual Financial Report presented in Chapter 4, the following statements are also required to be presented under the UPF.


Financial statements for non-financial public sector

Table 5.1: Non-financial public sector comprehensive operating statement

($ million) 2010 2009

Revenue from transactions Taxation revenue 13 547.9 12 456.9 Interest 381.6 473.7 Dividends and income tax equivalent and rate equivalent revenue 99.6 181.2 Sales of goods and services 8 323.5 7 768.2 Grants 22 712.5 18 849.6 Other revenue 2 569.2 2 335.5 Total revenue from transactions 47 634.3 42 065.1

Expenses from transactions Employee expenses 16 221.2 15 032.9 Superannuation interest expense 867.7 610.4 Other superannuation 1 613.4 1 488.8 Depreciation and amortisation 3 365.8 2 519.8 Interest expense 1 362.3 1 128.3 Other operating expenses 16 802.8 15 651.6 Grants and other transfers 6 634.0 5 419.3 Total expenses from transactions 46 867.3 41 851.0 Net result from transactions - net operating balance 767.0 214.1

Other economic flows included in net result Net gain/(loss) on sale of non-financial assets ( 49.2) 66.8 Net loss on financial assets or liabilities at fair value ( 68.4) (1 202.7) Net actuarial losses of superannuation defined benefits (1 435.8) (7 572.5) Share of net profit/(loss) from associates/joint venture entities, excluding

dividends 49.6 ( 30.4)

Other gains/(losses) from other economic flows (4 488.1) ( 621.9) Total other economic flows included in net result (5 991.9) (9 360.7) Net result (5 224.9) (9 146.7)

Other economic flows – other movements in equity Net (loss) on financial assets at fair value 25.1 ( 10.1) Revaluations of non-financial assets 6 768.1 20 442.5 Net gain/(loss) on equity investments in other sector entities at proportional share ( 483.0) (2 966.4) of the carrying amount of net assets Transfers to accumulated funds/other movements in equity 265.2 19 063.2 Total other economic flows – other movements in equity 6 575.4 36 529.2 Comprehensive result – total change in net worth 1 350.6 27 382.5 FISCAL AGGREGATES Net operating balance 767.0 214.1

Net acquisition of non-financial assets Purchases of non-financial assets 8 924.0 7 372.5 Less: Sales of non-financial assets ( 316.7) ( 343.9) Less: Depreciation and amortisation (3 365.8) (2 519.8) Plus: Change in inventories 4.5 128.2 Plus: Other movements in non-financial assets 501.3 370.9 Less: Net acquisition of non-financial assets from transactions 5 747.3 5 008.0 Net lending/(borrowing) (4 980.3) (4 793.9) Source: Department of Treasury and Finance


Table 5.2: Non-financial public sector balance sheet

($ million) 2010 2009


Cash and deposits 3 899.5 3 561.9 Advances paid 113.3 125.8 Investments, loans and placements 4 321.9 4 059.7 Receivables 3 646.3 3 544.7 Investments accounted for using the equity method 533.2 477.1 Investments in other sector entities 313.8 780.2 Total financial assets 12 828.0 12 549.4

Non-financial assets Inventories 929.7 925.3 Non-financial assets held for sale 108.1 80.2 Land, buildings, infrastructure, plant and equipment 163 671.0 155 919.1 Other non-financial assets 1 425.2 1 100.8 Total non-financial assets 166 134.0 158 025.3 Total assets 178 962.0 170 574.7

Liabilities Deposits held and advances received 587.8 417.6 Borrowings 22 557.6 18 026.2 Payables 5 620.5 4 881.0 Superannuation 22 597.7 20 755.1 Other employee benefits 4 626.5 4 510.7 Other provisions 1 791.7 2 159.5 Total liabilities 57 781.9 50 750.2 Net assets 121 180.1 119 824.5 Accumulated surplus/(deficit) 6 118.5 11 168.6 Other reserves 115 017.1 108 616.4 Non-controlling interest 44.5 39.5 Net worth 121 180.1 119 824.5

FISCAL AGGREGATES Net financial worth (44 953.9) (38 200.8) Net financial liabilities 45 267.7 38 981.0 Net debt 14 810.7 10 696.4 Source: Department of Treasury and Finance


Table 5.3: Non-financial public sector cash flow statement

($ million) 2010 2009


Taxes received 13 678.9 12 281.4 Grants 22 609.9 19 389.3 Sales of goods and services (a) 9 563.1 8 738.0 Interest received 368.3 472.4 Dividends and income tax equivalent and rate equivalent receipts 99.5 227.7 Other receipts 1 862.0 1 658.6 Total receipts 48 181.6 42 767.4

Payments Payments for employees (16 113.8) (14 838.2) Superannuation (2 068.9) (1 875.4) Interest paid (1 255.3) (1 042.9) Grants and subsidies (6 555.2) (5 908.6) Goods and services (a) (17 088.1) (15 842.7) Other payments ( 440.7) ( 406.8) Total payments (43 522.0) (39 914.6) Net cash flows from operating activities 4 659.6 2 852.8

Cash flows from investing activities Purchases of non-financial assets (8 924.0) (7 372.5) Sales of non-financial assets 316.7 343.9 Cash flows from investments in non-financial assets (8 607.3) (7 028.7) Net cash flows from investments in financial assets for policy purposes (b) 189.6 287.3 Sub-total (8 417.8) (6 741.4) Net cash flows from investments in financial assets for liquidity management

purposes (b) ( 405.3) ( 161.8)

Net cash flows from investing activities (8 823.1) (6 903.1) Cash flows from financing activities

Advances received (net) (c) ( 0.5) ( 8.1) Net borrowings 4 437.4 4 138.3

( 0.2) Deposits received (net) (c) ( 72.4) Other financing (net) (b) 65.4 ( 227.7) Net cash flows from financing activities 4 502.0 3 830.0 Net increase/(decrease) in cash and cash equivalents 338.6 ( 220.3) Cash and cash equivalents at beginning of reporting period 3 560.7 3 781.0 Cash and cash equivalents at end of reporting period 3 899.3 3 560.7

FISCAL AGGREGATES Net cash flows from operating activities 4 659.6 2 852.8 Net cash flows from investments in non-financial assets (8 607.3) (7 028.7) Cash surplus/(deficit) (3 947.7) (4 175.9) Source: Department of Treasury and Finance

Notes: (a) These items are inclusive of goods and services tax. (b) Net cashflows from investments from the general government sector received by other sectors have been reclassified as ‘other

financing (net)’. (c) Certain items previously classified as advances and deposits received have been more correctly classified, in line with Government

Finance Statistics Framework.


Table 5.4: Non-financial public sector statement of changes in equity

($ million) Equity at

1 July Total

comprehensive result

Transactions with owners in their

capacity as owners

Equity at 30 June

2008-09 Accumulated surplus/(deficit) 45 939.9 (9 146.7) .. 36 793.2 First time recognition of land under roads (a) 18 682.5 18 682.5 Other movements in equity .. 371.1 .. 371.1 Adjustment for change in accounting

policy .. .. .. ..

Non-controlling interest 32.0 .. 7.5 39.5 Physical asset revaluation reserve 41 209.0 20 442.5 .. 61 651.5 Net movements in other reserves 1 670.4 ( 0.6) .. 1 669.9 Accumulated net gain (loss) on equity

investments in other sector entities 3 583.2 (2 966.4) .. 616.8

Total equity at end of the period 92 434.5 27 382.5 7.5 119 824.5 2009-2010

Accumulated surplus/(deficit) 55 846.8 (5 224.9) .. 50 622.0 Other movements in equity .. 174.7 .. 174.7

0.0 0.0.. Adjustment for change in accounting policy

..

39.5 5.0 44.5 Non-controlling interest Physical asset revaluation reserve 61 651.5 6 768.1 .. 68 419.6 Net movements in other reserves 1 669.9 115.6 .. 1 785.5 Accumulated net gain (loss) on equity

investments in other sector entities 616.8 ( 483.0) .. 133.8

Total equity at end of the period 119 824.5 1 350.6 5.0 121 180.1 Source: Department of Treasury and Finance

Note: (a) Comprises recognition of land under roads for the first time in 2008-09.

Table 5.5: Non-financial public sector derivation of GFS cash surplus/(deficit)

($ million) 2010 2009

Cash surplus/(deficit) (3 947.7) (4 175.9) Less: Acquisitions under finance leases and similar arrangements ( 74.9) ( 581.5) GFS Cash surplus/(deficit) (a) (4 022.7) (4 757.4) Source: Department of Treasury and Finance

Note: (a) Determined in accordance with ABS GFS manual.


5.6: General government sector detail expenses by function

($ million) 2009-10 2008-09

General public services 742.9 708.9 Other general public services 742.9 708.9 Public order and safety 4 296.3 4 252.7 Police and fire protection services 2 559.8 2 636.8 Police services 1 753.1 1 628.1 Fire protection services 806.7 1 008.7 Law courts and legal services 904.5 834.8 Prisons and corrective services 565.6 541.8 Other public order and safety 266.5 239.4 Education 11 780.0 10 443.7 Primary and secondary education 8 896.7 7 811.0 Primary education 4 366.7 3 829.5 Secondary education 4 520.3 3 972.1 Primary and secondary education NEC (a) 9.7 9.5 Tertiary education 1 924.7 1 719.0 Technical and further education 1 924.7 1 719.0 Pre-school education and education not definable by level 625.9 591.5 Pre-school education 181.7 170.8 Special education 444.1 420.6 Transportation of students 296.3 282.6 Transportation of non-urban school children 213.2 205.9 Transportation of other students 83.2 76.7 Education NEC (a) 36.4 39.6 Health 11 732.1 10 577.5 Acute care institutions 8 961.4 8 062.9 Admitted patient services in acute care institutions 7 241.1 6 678.7 Non-admitted patient services in acute care institutions 1 720.4 1 384.2 Mental health institutions 62.3 45.5 Nursing homes for the aged 378.2 296.1 Community health services 1 744.8 1 549.8 Community health services (excluding community mental health) 624.7 552.0 Community mental health 598.2 506.0 Patient transport 521.9 491.8 Public health services 325.3 390.0 Pharmaceuticals, medical aids and appliances 178.9 118.4 Health research 78.3 112.2 Health administration NEC (a) 2.9 2.6 Social security and welfare 3 260.6 3 015.4 Welfare services 3 260.6 3 015.4 Family and child services 709.0 650.2 Welfare services for the aged 775.9 698.7 Welfare services for people with a disability 1 261.5 1 183.8 Welfare services NEC (a) 514.2 482.7 Housing and community amenities 3 799.8 2 927.4 Housing and community development 2 487.5 1 645.1

1 189.6 Housing 956.9 Community development 1 297.9 688.2 Water supply 170.5 218.6 Sanitation and protection of the environment 396.7 366.1 Other community amenities 745.1 697.6


5.6: General government sector detail expenses by function (continued)

($ million) 2009-10 2008-09

Recreation and culture 827.6 804.4 Recreation facilities and services 360.0 324.9 National parks and wildlife 78.2 75.5 Recreation facilities and services NEC (a) 281.9 249.3 Cultural facilities and services 467.6 479.6 Fuel and energy 20.8 19.0 Fuel affairs and services 3.8 3.3 Gas 3.8 3.3 Electricity and other energy 17.0 15.7 Agriculture, forestry, fishing and hunting 515.2 506.7 Agriculture 331.6 347.6 Forestry, fishing and hunting 183.6 159.1 Mining and mineral resources other than fuels; manufacturing; and

construction 33.0 20.4

Mining and mineral resources other than fuels 33.0 20.4 Transport and communications 4 659.7 4 060.3 Road transport 1 979.2 1 903.9 Road maintenance 432.9 430.0 Road Construction 543.1 519.7 Road transport NEC (a) 1 003.1 954.2 Water transport 17.5 15.7 Urban water transport services 17.5 15.7 Rail transport 2 407.7 1 965.5 Urban rail transport services 1 815.1 1 392.6 Non-urban rail transport freight services 19.2 25.8 Non-urban rail transport passenger services 573.4 547.2 Other transport 255.4 175.1 Multi-mode urban transport 17.8 17.0 Other transport NEC (a) 237.6 158.1 Other economic affairs 594.1 471.1 Storage, sale yards and markets Tourism and area promotion 142.9 114.1 Labour and employment affairs 103.0 83.2 Other labour and employment affairs 103.0 83.2 Other economic affairs 348.2 273.7 Other purposes 1 679.5 1 226.1 Public debt transactions 1 646.1 1 194.3 Other purposes NEC (a) 33.4 31.8 Total 43 941.7 39 033.7 Source: Department of Treasury and Finance

Notes: (a) NEC: Not elsewhere classified.


VICTORIA’S 2009-10 LOAN COUNCIL ALLOCATION As required under the Uniform Presentation Framework, Victoria is required to publish the Loan Council Allocation (LCA) estimates. The LCA is a measure of each government’s net call on financial markets in a given financial year to meet its budget obligations. The method of public release is the responsibility of each individual jurisdiction. Victoria discloses its LCA information through the Financial Report for the State of Victoria, Budget Paper No. 4, Statement of Finances and Budget Update.

Table 5.7 compares Victoria’s 2009-10 LCA nomination as published in the 2009-10 Budget with the 2009-10 outcome.

Table 5.7: Loan Council Allocation 2009-10

($ million) 2009-10 2009-10

Nomination Actual 1 270.5General government cash deficit (+)/surplus(-) 703.0

Public non-financial corporation sector cash deficit (+)/surplus(-) 4 120.2 2 677.2 Non-financial public sector cash deficit (+)/surplus(-) (a) 4 822.7 3 947.7 Acquisitions under finance leases and similar arrangements .. 74.9 ABS GFS cash deficit(+)/surplus(-) 4 822.7 4 022.7 Net cash flows from investments in financial assets for policy purposes (b) ( 2.6) 189.6 Memorandum items (c) 328.0 150.0 Loan Council allocation 5 153.3 3 983.1 Tolerance limit (2 per cent of non-financial public sector cash receipts from

operating activities) (d) 858.6 858.6


Notes: (a) The sum of the surplus/deficit of the general government and public non-financial corporation sector does not directly equal the

non-financial public sector surplus due to inter-sectoral transfers, which are netted out in the calculation of the non-financial public sector figure. Surplus (+)/deficit (-) excludes finance lease acquisitions.

(b) The non-financial public sector surplus/deficit relating to 2009-10 includes net cash flows from investments in financial assets for policy purposes. These amounts are excluded from the surplus/deficit when calculating the LCA.

(c) Memorandum items are used to adjust the ABS deficit to include in LCAs certain transactions, such as operating leases that have many of the characteristics of public sector borrowings but do not constitute formal borrowings. They are also used, where appropriate, to deduct from the ABS deficit certain transactions that Loan Council has agreed should not be included in LCAs (e.g. the over/under funding of employers’ emerging costs under public sector superannuation schemes, or borrowings by entities such as statutory marketing authorities).

(d) A tolerance limit equal to 2 per cent of ‘total non-financial public sector cash receipts from operating activities’ applies to a jurisdiction’s LCA nomination, and any subsequent revisions to the LCA during the year. The tolerance limit applying to Victoria in 2009-10 is $858.6 million (2 per cent of $42 928.6 million – sourced from 2008-09 Budget Update).

As part of the Loan Council arrangements, the Council has agreed that if at any time a jurisdiction finds that it is likely due to prevailing circumstances or developments to exceed its tolerance limit, in either direction, it is required to provide an explanation to the Council and, in line with the emphasis of increased transparency, to make the explanation public. Victoria’s 2009-10 LCA outcome (a deficit of $4.0 billion) exceeded the tolerance limit estimated for Victoria as part of the nomination process. The $1.2 billion variance in the LCA between nomination and outcome is primarily driven by a $1.4 billion improvement in the PNFC sector cash deficit.


In the interests of transparency, the State is required to disclose the details of infrastructure projects with private sector involvement and to report the full contingent exposure, if any. Exposure is to be measured by the Government’s termination liabilities in the case of private sector default and disclosed as a footnote to, rather than a component, of LCAs. The amount payable will not exceed the fair market value of the project (which is usually calculated by an independent valuer) less any costs incurred by government as a result of the default.

Listed below are details of the public private partnership (PPP) projects contracted during the 2009-10 financial year.

Victorian Desalination Plant The Victorian Desalination Plant Project is a key step in the implementation of the State’s Water Plan: Our Water Our Future – The Next Stage of the Government’s Water Plan, announced in June 2007. The Project will supply up to 150 gigalitres (GL) of water a year to Melbourne, Geelong and, via other connections, South Gippsland and Western Port towns, with the capacity to upgrade to supply up to 200 GL in future. Construction on the project, which is being delivered as a PPP project under the Partnerships Victoria policy, commenced in September 2009.

The contract was executed with the AquaSure consortium to design, build, finance, operate and maintain the facility on 30 July 2009 and financial close was achieved on 2 September 2009. The term of the contract is approximately 30 years from the date of financial close.

Peninsula Link The Peninsula Link Project is a major initiative of the Victorian Transport Plan, and involves the delivery of 27 kilometres of freeway standard road between the Frankston Freeway-EastLink Interchange at Carrum Downs and the Mornington Peninsula Freeway at Mount Martha. Once completed, Peninsula Link will reduce travel times between Carrum Downs and Mount Martha to around 17 minutes, a saving of up to 40 minutes.

Construction of Peninsula Link, which is being delivered as a PPP project under the Partnerships Victoria policy, commenced in February 2010.

The contract was executed with the Southern Way consortium to design, build, finance, operate and maintain the facility on 20 January 2010 and financial close was achieved on 8 February 2010. The term of the contract is approximately 25 years from the date of commercial acceptance.

Ararat Prison

In July 2008 it was announced that the new 350-bed medium-security Ararat Prison would be procured as a Partnerships Victoria project, adjacent to the existing Ararat prison. The prison is a key part of the progressive upgrade of Victoria’s correctional system and will provide upgraded correctional services to meet future projected prisoner growth.

The contract was executed with the Aegis Correctional Partnership consortium to design, build, finance and maintain the facilities on 3 May 2010 and financial close was achieved on 27 May 2010. The term of the contract is 25 years from the date for commercial acceptance.



APPENDIX A – GENERAL GOVERNMENT SECTOR QUARTERLY FINANCIAL REPORT

Table A.1: Operating statement for the past five quarters

($ million) 2008-09 2009-10 Jun Sept Dec Mar Jun

Revenue from transactions Taxation revenue 2 861.6 3 068.2 3 091.2 4 253.3 3 327.8 Interest revenue 71.9 79.9 85.1 65.2 103.2 Dividends and income tax equivalent and

rate equivalent revenue 128.4 19.6 157.0 32.0 277.1

Sales of goods and services 1 455.8 1 268.6 1 391.0 1 288.3 1 341.5 Grants 5 586.8 4 864.6 6 110.1 5 318.2 6 424.9 Other revenue 683.1 467.8 440.0 456.1 654.5 Total revenue from transactions 10 787.6 9 768.7 11 274.3 11 413.2 12 129.1

Expenses from transactions Employee expenses 3 676.9 3 639.6 3 907.8 3 801.5 4 055.8 Superannuation interest expense 152.0 166.1 270.8 213.7 216.1 Other superannuation 384.9 398.3 344.3 376.6 408.6 Depreciation 413.5 375.6 506.8 450.4 537.0 Interest expense 245.3 180.3 218.2 205.1 239.7 Grants and other transfers 2 219.9 1 869.8 2 617.8 2 537.3 2 149.6 Other operating expenses 4 013.6 3 157.4 3 378.4 3 432.8 4 286.2 Total expenses from transactions 11 106.0 9 787.2 11 244.1 11 017.4 11 893.0 Net result from transactions – net operating

balance ( 318.5) ( 18.5) 30.2 395.8 236.1

Other economic flows included in net result Net gain/(loss) on disposal of non-financial

assets 48.8 5.2 31.7 16.8 ( 94.1)


( 28.3) 5.5 21.4 ( 1.2) 38.2


3 865.4 330.7 1 525.1 (1 073.9) (2 232.1)

Share of net profit/(loss) from associates/ joint venture entities, excluding dividends

( 74.3) .. .. .. ( 1.4)

Other gains/(losses) from other economic flows

( 451.3) ( 55.7) 93.9 ( 75.1) (4 591.9)

Total other economic flows included in net result

3 360.3 285.7 1 672.1 (1 133.3) (6 881.3)

Net result 3 041.9 267.3 1 702.3 ( 737.5) (6 645.2)

Financial Report 2009-10 Appendix A 223

Table A.1: Operating statement for the past five quarters (continued)

($ million) 2008-09 2009-10 Jun Sept Dec Mar Jun Other economic flows – other movements in equity Net gain/(loss) on financial assets at fair value 12.6 5.3 10.2 3.4 ( 3.7) Revaluations of non-financial assets 1 438.8 ( 289.9) 254.8 ( 21.2) 3 473.0 Net gain/(loss) on equity investments in other

sector entities at proportional share of the carrying amount of net assets

19 657.8 .. 1 391.9 ( 296.7) 1 418.7


19 003.6 263.5 107.8 ( 240.3) 213.1

Total other economic flows – other movements in equity

40 112.8 ( 21.2) 1 764.7 ( 554.8) 5 101.1

Comprehensive result – total change in net worth

43 154.7 246.1 3 467.1 (1 292.3) (1 544.1)

FISCAL AGGREGATES Net operating balance ( 318.5) ( 18.5) 30.2 395.8 236.1 Less: Net acquisition of non-financial assets

from transactions 784.4 297.5 932.0 ( 130.7) 1 757.5

Net lending/(borrowing) (1 102.9) ( 316.0) ( 901.8) 526.5 (1 521.5)

224 Appendix A Financial Report 2009-10

Table A.2: Balance sheet as at the end of the quarter

($ million) 2008-09 2009-10 Jun Sept Dec Mar Jun


Cash and deposits 2 846.0 2 199.1 2 186.2 2 347.6 3 221.3 Advances paid 269.0 303.8 305.8 276.0 278.0 Investments, loans and placements 2 550.6 2 780.2 2 806.5 2 807.8 2 629.0 Receivables 2 783.3 2 379.0 2 575.3 3 574.0 2 883.6 Investments accounted for using equity

method – other 30.0 30.0 29.2 29.7 35.1

Investments in other sector entities 60 634.8 60 947.0 62 571.2 62 571.2 64 508.7 Total financial assets 69 113.6 68 639.0 70 474.2 71 606.4 73 555.8

Non-financial assets Inventories 249.3 257.0 333.3 270.5 268.4 Non-financial assets held for sale 74.2 70.2 66.6 61.4 91.5 Land, buildings, infrastructure, plant and

equipment 87 409.7 87 625.9 88 409.9 88 459.8 89 419.7

Other non-financial assets 682.1 871.0 884.2 809.6 771.0 Total non-financial assets 88 415.2 88 824.2 89 694.0 89 601.4 90 550.7 Total assets 157 528.9 157 463.2 160 168.2 161 207.7 164 106.4

Liabilities Deposits held and advances received (a) 317.1 330.1 406.4 374.1 479.4 Borrowings (a) 10 640.1 11 639.4 12 326.2 12 979.4 13 612.5 Payables 4 164.0 3 235.7 3 149.9 3 581.1 4 849.0 Superannuation 20 672.3 20 413.8 19 008.7 20 177.1 22 534.1 Other employee benefits 4 277.2 4 121.4 4 087.5 4 207.3 4 357.9 Other provisions 784.4 802.9 800.6 794.2 718.0 Total liabilities 40 855.1 40 543.3 39 779.2 42 113.2 46 551.0 Net assets 116 673.8 116 919.9 120 388.9 119 094.6 117 555.5 Accumulated surplus/(deficit) 48 424.8 48 956.3 50 763.0 49 773.5 43 263.9 Other reserves 68 209.5 67 924.1 69 584.4 69 281.6 74 247.0 Non-controlling interest 39.5 39.5 41.5 39.5 44.5 Net worth 116 673.8 116 919.9 120 388.9 119 094.6 117 555.5 FISCAL AGGREGATES Net financial worth 28 258.5 28 095.7 30 694.9 29 493.2 27 004.8 Net financial liabilities 32 376.3 32 851.3 31 876.3 33 078.0 37 503.9 Net debt 5 291.7 6 686.4 7 434.1 7 922.1 7 963.6 Note: (a) Certain items previously classified as borrowings have been re-classified as deposits held and advances received, in line with the GFS

framework.

Financial Report 2009-10 Appendix A 225

Table A.3: Statement of cash flows for the past five quarters

($ million) 2008-09 2009-10 Jun Sep Dec Mar Jun


Taxes received 3 433.1 3 430.7 3 279.6 3 238.5 3 922.8 Grants 5 561.2 4 632.4 6 097.0 5 670.4 6 316.9 Sales of goods and services (a) 1 696.9 1 496.7 1 391.6 1 394.2 1 876.3 Interest received 77.7 82.3 80.6 64.2 96.7 Dividends and income tax equivalent and

rate equivalent receipts 66.4 17.6 198.6 28.9 226.8

Other receipts 377.9 511.1 144.8 200.1 755.7 Total receipts 11 213.2 10 170.7 11 192.2 10 596.2 13 195.2

Payments Payments for employees (3 387.1) (3 794.5) (3 916.2) (3 675.5) (3 949.7) Superannuation ( 462.2) ( 492.1) ( 495.1) ( 495.9) ( 499.7) Interest paid ( 190.7) ( 167.5) ( 195.1) ( 189.2) ( 215.6) Grants and subsidies (2 094.3) (2 092.4) (2 585.5) (2 505.5) (2 049.9) Goods and services (a) (3 620.1) (3 911.4) (3 173.6) (3 219.7) (3 890.0) Other payments ( 92.5) ( 126.1) ( 115.2) ( 111.5) ( 84.2) Total payments (9 847.0) (10 584.0) (10 480.7) (10 197.3) (10 689.1) Net cash flows from operating activities 1 366.1 ( 413.2) 711.6 399.0 2 506.0 Cash flows from investing activities Purchases of non-financial assets (1 229.6) ( 688.6) (1 443.4) ( 361.3) (2 168.0) Sales of non-financial assets 157.7 23.0 86.1 24.6 53.6 Cash flows from investments in non-financial

assets (1 071.9) ( 665.6) (1 357.2) ( 336.7) (2 114.4)

Net cash flows from investments in financial assets for policy purposes (b)

( 244.2) ( 360.6) ( 133.1) ( 521.2) ( 221.7)

Sub-total (1 316.2) (1 026.2) (1 490.3) ( 857.9) (2 336.1) Net cash flows from investments in financial

assets for liquidity management purposes (b)

( 120.0) ( 218.0) ( 0.6) 0.7 216.7

Net cash flows from investing activities (1 436.2) (1 244.2) (1 490.8) ( 857.1) (2 119.3) Cash flows from financing activities Advances received (net) (c) ( 1.9) .. ( 0.1) 0.4 ( 0.5) Net borrowings (c) 1 287.8 835.6 852.4 651.9 552.8 Deposits received (net) 2.3 13.0 76.5 ( 32.7) ( 65.1) Net cash flows from financing activities 1 288.3 848.6 928.7 619.5 487.2 Net increase/(decrease) in cash and cash

equivalents 1 218.3 ( 808.8) 149.4 161.4 873.9

Cash and cash equivalents at beginning of reporting period

1 627.2 2 845.5 2 036.6 2 186.1 2 347.5

Cash and cash equivalents at end of reporting period

2 845.5 2 036.6 2 186.1 2 347.5 3 221.3

FISCAL AGGREGATES Net cash flows from operating activities 1 366.1 ( 413.2) 711.6 399.0 2 506.0 Net cash flows from investments in

non-financial assets (1 071.9) ( 665.6) (1 357.2) ( 336.7) (2 114.4)

Cash surplus/(deficit) 294.2 (1 078.8) ( 645.7) 62.3 391.7 Notes: (a) These items are inclusive of goods and services tax (b) Variance from past publication (June 2009) due to reclassification of ‘Share of profit (excluding dividends) of Joint Ventures using the

equity method’. (c) Certain items previously classified as borrowings have been re-classified as deposits held, in line with the GFS framework.

226 Appendix A Financial Report 2009-10

APPENDIX B – FINANCIAL MANAGEMENT ACT 1994 – COMPLIANCE INDEX

The Financial Management Act 1994 requires the Minister to prepare an audited annual Financial Report for tabling in the Parliament. This report has been prepared in accordance with applicable Australian Accounting Standards and the Financial Management Act 1994.

The Financial Management Act 1994 also requires the annual Financial Report to meet certain requirements. The following compliance index explains how these requirements are met, together with appropriate references in this document.

Requirement Comments/Reference Financial Management

Act 1994 Reference Section 24(1) The Minister must prepare an annual

Financial Report for each financial year. Refer to Chapter 4

Manner is in accordance with Australian Accounting Standards and Ministerial Directions. Form is consolidated comprehsive operating statement, consolidated balance sheet, consolidated cash flow statement, consolidated statement of changes in equity and accompanying notes. Refer to Chapter 4

Section 24(2) The annual Financial Report:

(a) must be prepared in the manner and form determined by the Minister, having regard to appropriate financial reporting frameworks;

Consolidated balance sheet, page 42 (b) must present fairly the financial position of the State and the Victorian general government sector at the end of the financial year; and

(i) the transactions on the Public Account;

Refer Chapter 4, Note 37 pages 166 – 194

(ii) the transactions of the Victorian general government sector; and

Refer Chapter 4, consolidated comprehesive operating statement page 41, consolidated cash flow statement page 43 and selected notes

(iii) other financial transactions of the State;

Refer Chapter 4, consolidated comprehesive operating statement page 41, consolidated cash flow statement page 43 and Notes 2 – 37, pages 72 – 194

in respect of the financial year;

Refer Chapter 4, Note 37 Table (g), page 172

(c) must include details of amounts paid into Working Accounts under Section 23;

(d) must include details of amounts allocated to departments during the financial year under Section 28;

Refer Chapter 4, Note 37 Table (h), page 172

Financial Report 2009-10 Appendix B 227

Requirement Comments/Reference Financial Management Act 1994 Reference

Refer Chapter 4, Note 37 Table (j), page 175

(e) must include details of money credited under Section 29 to an item in a Schedule to an appropriation Act for that financial year;

Refer Chapter 4, Note 37 Table (i), pages 173 – 174

(f) must include particulars of amounts transferred in accordance with determinations under Section 30 or 31;

(g) must include details of;

Refer Chapter 4, Note 37 Table (k), page 175

(i) amounts appropriated in respect of the financial year as a result of a determination under section 32 in respect of unused appropriation for the preceding financial year;

Refer Chapter 4, Note 37 Table (k), pages 175 – 176

(ii) the application during the financial year of amounts referred to in sub-paragraph (i); and

Refer Chapter 4, Note 37 Table (k), pages 175 – 176

(iii) amounts appropriated in respect of the next financial year as a result of a determination under section 32 in respect of unused appropriation for the financial year;

(h) must include;

Refer Chapter 4, Note 37 Table (m), page 180

(i) details of expenses and obligations met from money advanced to the Minister under Section 35(1) during the financial year; and

Refer Chapter 4, Note 37 Table (n), page 180

(ii) a statement of the reasons for carrying forward any part of an unused advance to the next financial year under Section 35(4);

Refer Chapter 4, Note 37 Table (l), pages 177 – 179

(i) must include details of payments made during the financial year out of money advanced to the Treasurer in an annual Appropriation Act for that year to meet urgent claims;

(j) must include details of;

Refer Chapter 4, Note 37, Table (ae), page 194

(i) payments made during the financial year in fulfilment of any guarantee by the Government under any Act; and

Refer Chapter 4, Note 37, Table (ae), page 194

(ii) money received or recovered by the Minister or Treasurer during the financial year in respect of any guarantee payments;

228 Appendix B Financial Report 2009-10

Requirement Comments/Reference Financial Management Act 1994 Reference

(k) must include details, as at the end of the financial year, of;

Refer Chapter 4, Note 34 pages 157 – 165, Note 8 pages 82 – 85 and consolidated balance sheet page 42

(i) the liabilities (including contingent liabilities under guarantees and indemnities or in respect of superannuation payments and all other contingent liabilities) and assets of the State; and

(ii) prescribed assets and prescribed liabilities of prescribed bodies;

Refer Chapter 4, Note 2 pages 72 – 79, Refer Chapter 5, Table 5.2 page 215

(l) must be audited by the

Auditor-General. Refer Report of the Auditor-General, pages 38 – 39

Section 26(1) The Minister must prepare a quarterly financial report for each quarter of each financial year.

Refer Appendix A, pages 223 – 226

Section 26(2) A quarterly financial report comprises:

Refer Appendix A, Table A.1 pages 223 – 224

(a) a statement of financial performance of the Victorian general government sector for the quarter;

Refer Appendix A, Table A.2 page 225 Section 26(2) (b) a statement of financial position of the Victorian general government sector at the end of the quarter;

(c) a statement of cash flows of the Victorian general government sector for the quarter; and

Refer Appendix A, Table A.3 page 226

Refer Chapter 4, Note 1 pages 46 – 71 (d) a statement of the accounting policies on which the statements required by paragraphs (a), (b) and (c) are based.

Refer to Appendix A for agreed form, pages 223 – 226

Section 26(2A) A quarterly financial report must be prepared in the manner and form determined by the Minister, having regard to appropriate financial reporting frameworks.

Refer to Chapter 4, consolidated comprehensive operating statement page 41, consolidated balance sheet page 42, consolidated cash flow statement page 43 and selected notes

Section 26(3A) The quarterly financial report for the quarter ending on 30 June in a financial year must include, in addition to the statements referred to in sub-Section (2)(a) to (d) for that quarter, those statements for the period of 12 months ending on that 30 June.

Financial Report 2009-10 Appendix B 229

230 Appendix B Financial Report 2009-10

APPENDIX C – SCOPE AND STYLE CONVENTIONS

Scope of the Financial Report for the State of Victoria • The state financial outcome reflects the consolidation of all entities that are controlled by the

Victorian State Government. Entities included in the state outcome include all government departments and other organisations which are legally constituted bodies that are controlled by the state.

• The reporting structure for the entities reported in the Annual Financial Report for the State of Victoria is based on that used in the System of National Accounts (SNA), and classifies each entity into either the general government sector, the public non-financial corporation sector or the public financial corporation sector. The chart below provides an overview of this reporting structure as applied in Victoria.

Chart A.1: Entity framework for the State of Victoria

General Government Public Non-Financial Corporations

Public Financial Corporations

Departments Statutory Authorities and other agencies controlled by Government

Non - Financial Public Sector

State of Victoria


• The general government sector comprises all government departments, offices and other government bodies engaged in providing public services free of charge or at prices significantly below the cost of production. Some of these entities may also earn revenue from commercial activities, however such revenue represents less than half of their total revenue.

• The public non-financial corporation sector provides goods and services (of a non-financial nature) within a competitive market, such as water authorities.

• The public financial corporation sector comprises entities primarily engaged in the provision of financial services, including the Treasury Corporation of Victoria and the Transport Accident Commission.

Financial Report 2009-10 Appendix C 231

Style conventions Figures in the tables and in the text have been rounded. Discrepancies in tables between totals and sums of components reflect rounding. Percentage variations in all tables are based on the underlying unrounded amounts.

The notation used in the tables is as follows:

n.a. not available or not applicable

.. zero, or rounded to zero

(xxx.x) negative numbers

200x year period (Chapter 4)

200x – 0x year period (other than in Chapter 4)

The Annual Financial Report is based on the style set in the example of a general purpose financial report for a government in illustrative example A of AASB 1049 Whole of Government and General Government Sector Financial Reporting. The styles used in other chapters of this document are generally consistent with those used in other publications relating to the annual budget papers.

232 Appendix C Financial Report 2009-10

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