Presented by
and
for the information of Honourable Members
_______________________
Ordered to be printed
_______________________
September 2010
No. 374, Session 2006-10

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
i

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 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

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
40
35
30
25
20
15
15
12
9
6
10
5
3
0 0
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Other l i a bi l i ti es (net) (LHS)
Supera nnua ti on l i a bi l i ty (LHS)
Net debt (LHS)
Net fi na nci a l l i a bi l i ti es to GSP (%) (RHS)
Net debt pl us s upera nnua ti on l i a bi 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
6
5
4
3
2
1
0
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Source: Department of Treasury and Finance
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

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
Net result from transactions
(operating surplus)
Infrastructure
Short term
At least $100 million in each year.
Implement strategic infrastructure projects.
Long term
Maintain a substantial net result from transactions
(operating surplus) that allows for the delivery of the
Government’s infrastructure objectives.
Deliver world-class infrastructure to maximise economic, social and environmental benefits.
Provide improved service delivery to all Victorians.
Service delivery Implement 2006 election commitments.
Taxation
Net financial liabilities
Implement reforms. Provide a fair and efficient tax system that is competitive with other states.
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

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)
Total revenue
Total expense
Net result from transactions – Net operating balance
Source: Department of Treasury and Finance
Note:
(a) Revised 2009-10 estimate published in the 2010-11 Budget in May 2010.
2009-10 2009-10
Actual Revised
(a)
44 585.3 43 745.5
43 941.7 43 350.6
643.6 394.9
%
Change Change
839.8
591.1
248.7
1.9
1.4
63.0
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.
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.
Financial Report 2009-10 Chapter 1 7

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.
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)
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2000-01 2002-03 2004-05 2006-07 2008-09
NSW Vi c Ql d WA Aus t
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.
8 Chapter 1 Financial Report 2009-10

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)
6.0
5.5
5.0
4.5
4.0
2000-01 2002-03 2004-05 2006-07 2008-09
NSW Vic Qld WA Aust
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.
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.
Financial Report 2009-10 Chapter 1 9

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.
10 Chapter 1 Financial Report 2009-10

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
3000
2900
2800
2700
2600
2500
2400
2300
2200
Jun-03
6.5
6.0
5.5
5.0
4.5
4.0
Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09
3.5
Jun-10
Employed persons (LHS) Unemployment rate (RHS)
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.
Financial Report 2009-10 Chapter 1 11

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.
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.
Financial Report 2009-10 Chapter 2 13

Table 2.1: Summary operating statement for the period ending 30 June 2010
Revenue
Taxation revenue
Interest
Dividends, income tax and rate equivalent revenue
Sale of goods and services
Grants
Other revenue
Total revenue
Expenses
Employee expenses
Superannuation (a)
Depreciation and amortisation
Interest expense
Other operating expenses
Grants and other transfers
Total expenses
Net result from transactions - Net operating balance
Total other economic flows included in net result
($ million)
2008-09
Actual
2009-10 2009-10 Budget %
Actual Revised Variance Change
490.4
12 626.9 13 740.5 13 642.1
378.2 333.5
485.6 459.2
98.5
348.5 ( 15.0)
26.5
0.7
( 4.3)
5.8
4 940.5
18 970.0
1 878.9
5 289.5
22 717.8
2 018.4
5 427.9 ( 138.5)
22 111.3
1 756.5
606.4
261.8
39 284.8 44 585.3 43 745.5
2 013.9
1 515.8
2 394.5
1 869.7
14 296.9 15 404.8 15 395.8
839.8
8.9
2 408.7 ( 14.1)
1 888.4 ( 18.7)
642.4 843.3 830.1 13.1
13 198.4 14 254.9 14 363.1 ( 108.2)
7 366.3 9 174.5 8 464.5 710.1
39 033.7 43 941.7 43 350.6
251.2 643.6 394.9
591.1
248.7
(8 624.0) (6 056.8) 1 104.5 (7 161.2) 648.4
Net result
Source: Department of Treasury and Finance
(8 372.8) (5 413.1) 1 499.4 (6 912.6) 461.0
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.
( 2.6)
2.7
14.9
1.9
0.1
( 0.6)
( 1.0)
1.6
( 0.8)
8.4
1.4
63.0
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.
14 Chapter 2 Financial Report 2009-10

Chart 2.1: Total revenue by category for the 2009-10 financial year compared with the revised budget estimate
24
22
20
18
16
14
12
10
8
6
4
2
0
Ta xa ti on revenue
Interes t
2009-10 Actua l
Di vi dends a nd i ncome ta x a nd ra te equi va l ent revenue
Sa l e of goods a nd s ervi ces
Gra nts
2009-10 Revi s ed budget
Source: Department of Treasury and Finance
Other revenue
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.
Financial Report 2009-10 Chapter 2 15

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)
Taxes on employers’ payroll and labour force
Taxes on immovable property
Land tax
Congestion levy
Metropolitan improvement levy
Property owner contributions to fire brigades
Total taxes on immovable property
Financial and capital transactions
Land transfer duty
Other property duties
Financial accommodation levy
Total financial and capital transactions
Gambling taxes
Private lotteries
Electronic gaming machines
Casino
Racing
Other
Total gambling taxes
Levies on statutory corporations
Taxes on insurance
Motor vehicle taxes
Vehicle registration fees
Duty on vehicle registrations and transfers
Total motor vehicle taxes
Franchise taxes
Other taxes
Total taxation
Source: Department of Treasury and Finance
2009-10 2009-10 Budget
Actual Revised Varianc
4 055.8 4 022.9 e
32.9
1 177.7 1 218.6 ( 41.0)
47.2
122.8
34.4
44.9
121.6
34.4
2.3
1.2
0.0
1 381.9 1 419.4 ( 37.5)
3 603.9 3 498.0 105.9
7.0
51.8
8.6
53.4
( 1.6)
( 1.6)
3 662.7 3 560.0 102.7
356.0
985.0
151.1
129.3
10.3
369.4
990.6
154.4
132.1
9.3
( 13.4)
( 5.7)
( 3.4)
( 2.8)
0.9
1 631.6 1 655.9 ( 24.3)
69.4 73.7
1 402.8 1 400.9
( 4.3)
1.9
864.2 843.4 20.8
572.7 563.9
1 436.9 1 407.3
23.3
76.2
26.3
75.7
8.8
29.6
( 3.0)
0.5
13 740.5 13 642.1 98.5
%
Change
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
0.8
( 3.4)
5.1
0.9
0.0
( 1.5)
( 5.8)
0.1
2.5
1.6
2.1
( 11.5)
0.7
0.7
( 2.6)
3.0
( 19.1)
( 3.0)
2.9
( 3.6)
( 0.6)
( 2.2)
( 2.1)
10.2
 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.
16 Chapter 2 Financial Report 2009-10

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.
Financial Report 2009-10 Chapter 2 17

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.
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
16
14
12
10
8
6
4
2
0
Empl oyee expens es
Supera nnua ti on i nteres t expens e
Other Depreci a ti on s upera nnua ti on a nd a morti s a ti on
Interes t expens e
Other opera ti ng expens es
Gra nts a nd other tra ns fers
2009-10 Actua l 2009-10 Revi s ed budget
Source: Department of Treasury and Finance
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.
18 Chapter 2 Financial Report 2009-10

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.
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.
Financial Report 2009-10 Chapter 2 19

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)
Net result from transactions – net operating balance
Net lending/(borrowing)
Comprehensive result – total change in net worth
Cash surplus/(deficit)
Source: Department of Treasury and Finance
2008-09 2009-10 2009-10
Actual Actual Revised
251.2 643.6 394.9
(1 184.4) (2 212.8) (2 485.3)
26 299.8 876.7 4 754.8
( 897.9) (1 270.5) (1 940.6)
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.
20 Chapter 2 Financial Report 2009-10

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
Assets
Financial assets
Non-financial assets
Investments in other sector entities
Public non-financial corporations
Public financial corporation
Total assets
Liabilities
Superannuation
Borrowings
Other liabilities
Total liabilities
Net assets
Source: Department of Treasury and Finance
8 478.8
88 415.2
59 836.3
798.5
157 528.9
20 672.3
10 640.1
9 542.7
40 855.1
116 673.8
($ million)
Actual Actual
2009 Movement
Actual Budget Revised
2010 Variance 2009-10
568.2 9 047.0 1 331.1 7 715.9
2 135.4 90 550.7 (2 720.5) 93 271.2
4 340.3 64 176.6 2 617.9 61 558.6
( 466.4) 332.1 (1 576.4) 1 908.6
6 577.6 164 106.4 ( 347.9) 164 454.3
1 861.9 22 534.1 2 265.6 20 268.5
2 972.3 13 612.5 92.6 13 519.9
861.6 10 404.4 1 187.0 9 217.3
5 695.9 46 551.0 3 545.3 43 005.7
881.7 117 555.5 (3 893.1) 121 448.6
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.
Financial Report 2009-10 Chapter 2 21

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)
Net worth
Net financial worth
Net financial liabilities
Net debt
Source: Department of Treasury and Finance
2008-09 2009-10 2009-10
Actual Actual Revised
116 673.8 117 555.5 121 448.6
28 258.5 27 004.8 28 177.4
32 376.3 37 503.9 35 289.8
5 291.7 7 963.6 8 710.7
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.
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.
22 Chapter 2 Financial Report 2009-10

Table 2.6: General government net debt and net financial liabilities as at 30 June
2010
Assets
Cash and deposits
Advances paid (a)
Investments, loans and placements
Total
Liabilities
Deposits held and advances received
Borrowings
($ million)
Actual
2009 movement
2 846.0
269.0
2 550.6
5 665.5
317.1
10 640.1
Total
Net debt
10 957.2
5 291.7
Superannuation liabilities 20 672.3
Net debt plus superannuation liabilities 25 964.0
Other liabilities (net) (b)
Net financial liabilities
6 412.3
32 376.3
Actual Actual Budget Revised
2010 Variance 2009-10
375.4 3 221.3
9.1 278.0
78.4 2 629.0
462.8 6 128.3
162.3 479.4
2 972.3 13 612.5
3 134.7 14 091.9
2 671.9
593.9
7 963.6
1 861.9 22 534.1
4 533.8 30 497.7
7 006.2
5 127.7 37 503.9
955.4 2 266.0
( 39.7)
52.6
968.3
163.6
317.7
2 576.4
5 160.0
315.8
92.6 13 519.9
256.2 13 835.7
( 712.1)
2 265.6 20 268.5
1 553.5 28 944.2
660.6
8 675.7
6 345.6
2 214.1 35 289.8
Net debt to GSP
Net debt plus superannuation liabilities to GSP
Net financial liabilities to GSP
Source: Department of Treasury and Finance
1.8
8.9
11.1
(per cent)
2.5
9.7
11.9
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.
Financial Report 2009-10 Chapter 2 23

Chart 2.3: General government sector net financial liabilities
25
20
15
10
5
40
35
30
15
12
9
6
3
0 0
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Other l i a bi l i ti es (net) (LHS)
Supera nnua ti on l i a bi l i ty (LHS)
Net debt (LHS)
Net fi na nci a l l i a bi l i ti es to GSP (%) (RHS)
Net debt pl us s upera nnua ti on l i a bi l i ty to GSP (%) (RHS)
Source: Department of Treasury and Finance
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.
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.
24 Chapter 2 Financial Report 2009-10

Table 2.7: Application of cash resources
($ million)
Net result from transactions – net operating balance
Add back: Non-cash revenues and expenses (net) (a)
Net cash flow from operating activities
Less:
Net investment in fixed assets
Expenditure on approved projects
Sale of non-financial assets
Net investment in fixed assets
Finance leases
Other investment activities (net)
Decrease/(increase) in net debt
Source: Department of Treasury and Finance
2009-10 2009-10
Actual Revised
643.6 394.9
2 559.8 2 247.5
3 203.4 2 642.4
5 897.8 6 283.6
( 187.4) ( 270.8)
5 710.5 6 012.7
74.5
90.3
74.7
( 26.0)
(2 671.9) (3 418.9)
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
6
5
4
3
2
1
0
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Source: Department of Treasury and Finance
Financial Report 2009-10 Chapter 2 25

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.
26 Chapter 2 Financial Report 2009-10

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 Report 2009-10 Chapter 3 27

Table 3.1: 2009-10 Summary operating statement – State of Victoria
Revenue
Taxation revenue
Interest
Dividends, income tax and rate equivalent revenue
Sales of goods and services
Grants
Other revenue
Total revenue
($ million)
Expenses
Employee expenses
Superannuation (a)
Depreciation and amortisation
Interest expense
Other operating expenses
Grants and other transfers
Other property expenses
2008-09 2009-10 %
Actual Actual Change Change
12 443.6 13 534.6 1 091.0
1 190.0
411.7
982.9 ( 207.1)
422.7 11.0
10 326.9 11 024.2 697.3
18 722.6 22 606.6 3 884.0
2 354.5 2 591.3 236.8
45 449.4 51 162.4 5 713.0
8.8
(17.4)
2.7
6.8
20.7
10.1
12.6
15 037.0 16 218.3 1 181.3
2 124.0
2 544.0
1 410.1
19 184.3 20 292.0 1 107.7
5 273.8 6 632.8 1 359.0
..
2 505.1
3 392.5
1 527.0
..
381.1
848.6
116.8
..
Total expenses 45 573.1 50 567.6 4 994.5
Net result from transactions – net operating balance
(b)
( 123.8) 594.7 718.5
7.9
17.9
33.4
8.3
5.8
25.8
..
11.0 n.a.
Total other economic flows included in net result
Net result
(12 965.0) (6 272.4) 6 692.6
(13 088.8) (5 677.7) 7 411.1 n.a. n.a.
Source: Department of Treasury and Finance
Notes:
(a) Includes superannuation interest expense and other superannuation expenses.
(b) 2008-09 actual restated.
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.
28 Chapter 3 Financial Report 2009-10

Chart 3.1: Net result from transactions by sector
800
600
400
200
0
- 200
General government Public non-financial corporations
Public financial corporations
2008-09 2009-10
Source: Department of Treasury and Finance
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.
Financial Report 2009-10 Chapter 3 29

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 $1.5 billion relating to actuarial losses on superannuation (refer to Chapter 2).
Table 3.2: Summary balance sheet – State of Victoria
($ million)
Assets
Financial assets
Non-financial assets
Total assets
Liabilities
Superannuation
Borrowings
Other liabilities
Total liabilities
Net assets
Source: Department of Treasury and Finance
Actual
2008-09
Actual Actual
2009-10 movement
36 053.4 37 130.1
158 200.6 166 338.7
194 254.0 203 468.8
20 755.1
24 126.0
31 369.3
22 597.7
28 580.3
32 900.3
76 250.4 84 078.2
118 003.6 119 390.6
1 076.7
8 138.1
9 214.8
1 842.5
4 454.3
1 530.9
7 827.8
1 387.0
30 Chapter 3 Financial Report 2009-10

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
140
120
100
80
60
40
20
0
General government Public non-financial corporations
2008-09
Public financial corporations
2009-10
Whole of state
Source: Department of Treasury and Finance
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.
Financial Report 2009-10 Chapter 3 31

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.
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.
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.
32 Chapter 3 Financial Report 2009-10

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
15 5
12 4
9
6
3
2
3 1
0
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
0
Non-financial public sector net debt (LHS) Non-financial public sector net debt to GSP (RHS) (c)
Source: Department of Treasury and Finance
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.
Financial Report 2009-10 Chapter 3 33

Table 3.3: Non-financial public sector net debt and net financial liabilities as at
30 June 2010
Assets
Cash and deposits
Advances paid
Investments, loans and placements
Total
Liabilities
Deposits held and advances received
Borrowings
Total
Net debt
Superannuation liability
Net debt plus superannuation liabilities
Other liabilities (net) (a)
Net financial liabilities
Net debt to GSP
Net debt plus superannuation liabilities to GSP
Net financial liabilities to GSP
Source: Department of Treasury and Finance
($ million)
Opening Actual Actual %
1 July 2009 30 June 2010 movement Change
3 561.9
125.8
4 059.7
7 747.4
417.6
18 026.2
18 443.8
10 696.4
20 755.1
31 451.6
7 529.4
38 981.0
3 899.5
113.3
4 321.9
8 334.7
587.8
22 557.6
23 145.4
14 810.7
22 597.7
37 408.4
7 859.3
45 267.7
337.6
( 12.5)
262.3
587.3
170.2
4 531.4
4 701.6
4 114.3
1 842.5
5 956.8
330.0
6 286.8
9.5
(9.9)
6.5
7.6
40.8
25.1
25.5
38.5
8.9
18.9
4.4
16.1
(per cent)
3.7 4.7
10.8
13.4
11.9
14.4
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.
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.
34 Chapter 3 Financial Report 2009-10

Table 3.4: Indicators of financial condition – State of Victoria
2003
(a)
(per cent)
2004 2005
(a) (a)
2006
(b)
2007
(b)
2008
(c)
2009
(c)
2010
(c)
Financial Sustainability
Long-term borrowings to total assets
Total borrowings to total assets
Superannuation liabilities to total assets
Actual Actual Actual Actual Actual Actual Actual Actual
10.1
13.6
13.2
8.9
13.0
10.8
9.4
11.8
8.6
8.7
12.3
9.9
9.2
11.3
7.1
8.4
12.0
8.7
9.3
12.4
10.7
10.5
14.0
11.1
Total liabilities to total assets
Long-term borrowings to GSP
Total borrowings to GSP
Superannuation liabilities to GSP
Net debt plus superannuation
48.3
5.2
7.1
6.8
8.4
44.1
4.4
6.4
5.3
6.7
39.2
4.9
6.2
4.5
7.9
41.3
4.7
6.6
5.3
7.0
38.1
4.9
6.0
3.8
5.3
38.8
4.4
6.4
4.6
39.3
6.2
8.3
7.1
41.3
6.8
9.1
7.2
6.0 10.8 11.9 liability to GSP (d)
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
Current assets to current liabilities 100.3 100.9 111.5 121.0 91.7 95.6 -(e) -(e)
Financial flexibility (f)
2.9 2.7 2.8 2.7 2.7 2.6 3.1 3.0 Borrowing costs to income from transactions
Superannuation expenses to income from transactions
Superannuation expenses and borrowing costs to income from transactions
8.4
11.3
1.0
3.7
1.8
4.5
5.3
8.0
4.3
6.9
4.0
6.6
4.7
7.8
4.9
7.9
Assets
Growth in non-current physical assets (g)
Net asset investment to noncurrent physical assets
7.4
4.4
9.7
4.2
13.9
4.5
5.1
4.3
5.3
4.9
11.0
5.1
41.1
6.4
5.0
5.5
Source: Department of Treasury and Finance
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.
Financial Report 2009-10 Chapter 3 35

Financial Report 2009-10 Chapter 4 37

38
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 7000Facsimile 61 3 8601 7010Email comments@audit.vic.gov.auWebsite www.audit.vic.gov.au
___________ ___________________________
Auditing in the Public Interest
Chapter 4 Financial Report 2009-10

Independent Audit Report (continued)
Matters Relating to the Electronic Presentation of the Audited Financial Report
T his 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 AuditorGeneral’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
10 September 2010
D D R Pearson
2
Level 24, 35 Collins Street, Melbourne Vic. 3000
Telephone 61 3 8601 7000Facsimile 61 3 8601 7010Email comments@audit.vic.gov.auWebsite www.audit.vic.gov.au
___________ ___________________________
Auditing in the Public Interest
Financial Report 2009-10 Chapter 4 39

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
Deputy Secretary
Budget and Financial Management
Authorised for issue on:
10 September 2010
Grant Hehir
Secretary
40 Chapter 4 Financial Report 2009-10

Consolidated comprehensive operating statement for the period ended 30 June
($ million)
Revenue from transactions
Taxation revenue
Interest revenue
Dividends and income tax equivalent and rate equivalent revenue
Sales of goods and services
Grants
Other revenue
Total revenue from transactions
Expenses from transactions
Employee expenses
Superannuation interest expense
Other superannuation
Depreciation
Interest expense
Grants and other transfers
Other operating expenses (a)
Total expenses from transactions
Notes
3
4
5
6
7
8
8
9
10
12
11
13
Net result from transactions – net operating balance
Other economic flows included in net result
Net gain/(loss) on disposal of non-financial assets
Net gain/(loss) on financial assets or liabilities at fair value
Net actuarial gain/(loss) of superannuation defined benefits plans
Share of net profit/(loss) from associates/ joint venture entities, excluding dividends
Other gains/(losses) from other economic flows
(a)
14
8
15
Total other economic flows included in net result
Net result
Other economic flows – other movements in equity
Net gain/(loss) on financial assets at fair value
Revaluations of non-financial assets
Net gain/(loss) on equity investments in other sector entities at proportional share of the carrying amount of net assets
Transfers to accumulated funds/other movements in equity
Total other economic flows – other movements in equity
Comprehensive result – total change in net worth
KEY FISCAL AGGREGATES
Net operating balance
Less: Net acquisition of non-financial assets from transactions
Net lending/(borrowing)
The accompanying notes form part of these Financial Statements
2
State of Victoria
2010 2009
General government sector
2010
13 534.6 12 443.6 13 740.5
982.9
422.7
1 190.0
411.7
333.5
485.6
2009
12 626.9
378.2
490.4
11 024.2 10 326.9 5 289.5
22 606.6 18 722.6 22 717.8
2 591.3 2 354.5 2 018.4
4 940.5
18 970.0
1 878.9
51 162.4 45 449.4 44 585.3 39 284.8
16 218.3 15 037.0 15 404.8
867.7 610.4 866.7
1 637.4
3 392.5
1 527.0
6 632.8
1 513.6
2 544.0
1 410.1
5 273.8
1 527.8
1 869.7
843.3
9 174.5
14 296.9
609.7
1 404.2
1 515.8
642.4
7 366.3
20 292.0 19 184.3 14 254.9 13 198.4
50 567.6 45 573.1 43 941.7 39 033.7
594.7 ( 123.8) 643.6 251.2
( 49.5)
187.2 (4 022.2)
49.6
66.5
( 30.4)
(5 677.7) (13 088.8) (5 413.1) (8 372.8)
25.1 ( 10.1)
6 769.3 20 441.0
.. ..
265.3
7 059.7
1 382.0
19 063.2
39 494.0
26 405.3
594.7 ( 123.8)
5 737.7 5 044.6
( 40.4)
64.0
(1 435.8) (7 572.5) (1 450.2)
( 1.4)
(5 023.8) (1 406.4) (4 628.8)
(6 272.4) (12 965.0) (6 056.8)
15.2
3 416.7
2 513.9
344.1
6 289.8
876.7
643.6
2 856.4
(5 143.0) (5 168.4) (2 212.8)
62.2
( 83.8)
(7 510.1)
( 74.4)
(1 017.9)
(8 624.0)
8.7
1 316.8
14 237.7
19 109.4
34 672.7
26 299.8
251.2
1 435.6
(1 184.4)
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.
Financial Report 2009-10 Chapter 4 41

Consolidated balance sheet as at 30 June
Assets
Financial assets
Cash and deposits
Advances paid
Investments, loans and placements
Receivables
Investments accounted for using the equity method
Investments in other sector entities
Total financial assets
Non-financial assets
Inventories
Non-financial assets held for sale
Land, buildings, infrastructure, plant and equipment
Other non-financial assets
Total non-financial assets
Total assets
Liabilities
Deposits held and advances received
(a)
Borrowings (a)
Payables
Superannuation
Other employee benefits
Other provisions
Total liabilities
Net assets
Accumulated surplus/(deficit)
Reserves
Non-controlling interest
Net worth
($ million)
Notes
16
16
17
18
State of Victoria
2010
5 058.3
533.2
2009
4 922.4
477.1
General government sector
2010 2009
4 711.5 4 317.0 3 221.3
1 527.7 1 375.9 278.0
25 299.4 24 960.9 2 629.0
2 883.6
35.1
2 846.0
269.0
2 550.6
2 783.3
30.0
19
20
21
22 163 746.1 155 979.1 89 419.7 87 409.7
23
.. .. 64 508.7
37 130.1 36 053.4 73 555.8
929.7
108.1
925.3
80.2
268.4
91.5
60 634.8
69 113.6
249.3
74.2
166 338.7 158 200.6 90 550.7 88 415.2
24(b) 203 468.8 194 254.0 164 106.4 157 528.9
25
8
26
27
1 554.7 1 216.1
1 478.8
6 975.6
4 686.7
2 151.4
28 580.3 24 126.0 13 612.5 10 640.1
6 130.1
22 597.7 20 755.1 22 534.1 20 672.3
4 569.2
19 759.2 18 518.6
771.0
479.4
4 849.0
4 357.9
718.0
682.1
317.1
4 164.0
4 277.2
784.4
84 078.2 76 250.4 46 551.0 40 855.1
119 390.6 118 003.6 117 555.5 116 673.8
28
28
48 299.9 53 888.9 43 263.9 48 424.8
71 046.2 64 075.2 74 247.0 68 209.5
28 44.5 39.5 44.5 39.5
119 390.6 118 003.6 117 555.5 116 673.8
FISCAL AGGREGATES
Net financial worth
Net financial liabilities
Net debt
The accompanying notes form part of these Financial Statements
(46 948.1) (40 197.1) 27 004.8 28 258.5
46 948.1 40 197.1 37 503.9 32 376.3
(1 479.5) (4 376.5) 7 963.6 5 291.7
Note:
(a) Certain items previously classified as borrowings have been re-classified as deposits held and advances received, in line with the GFS framework.
42 Chapter 4 Financial Report 2009-10

Consolidated cash flow statement for the period ended 30 June
Cash flows from operating activities
Receipts
Taxes received
Grants
Sales of goods and services (a)
Interest received
Dividends and income tax equivalent and rate equivalent receipts
Other receipts
Total receipts
Payments
Payments for employees
Superannuation
Interest paid
Grants and subsidies
Goods and services (a)
Other payments
Total payments
Net cash flows from operating activities
Cash flows from investing activities
Purchases of non-financial assets
Sales of non-financial assets
Cash flows from investments in non-financial assets
Net cash flows from investments in financial assets for policy purposes (b)
Sub-total
Net cash flows from investments in financial assets for liquidity management purposes
Net cash flows from investing activities
Cash flows from financing activities
Advances received (net) (c)
Net borrowings
(c)
Deposits received (net)
Other financing (net) (b)
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the financial year
Cash and cash equivalents at end of the financial year
($ million)
Notes
State of Victoria
2010 2009
General government sector
2010 2009
13 665.6 12 268.1 13 871.5 12 451.4
22 503.9 19 262.3 22 716.8 18 970.2
12 689.1
811.2
422.6
11 848.1
1 024.0
411.5
6 158.8
323.8
471.9
5 512.6
389.1
470.8
(6 554.0) (5 763.0) (9 233.3) (7 298.3)
(20 081.5) (18 390.6) (14 194.7) (13 072.6)
( 440.7) ( 406.8) ( 436.9) ( 404.7)
(46 649.7) (42 559.0) (41 951.0) (37 241.1)
29(b)
29(a)
1 878.1
51 970.5
318.6
4.8
(8 619.7) (7 046.9) (5 710.5) (4 047.1)
58.8
(8 560.9) (7 145.8) (5 711.5) (4 422.8)
(1 631.3)
4 413.7
787.8
65.4
( 0.3)
2 892.6
( 8.3)
..
( 1.8)
2 487.2
( 57.2)
..
3 635.7 4 187.6 2 884.0 2 428.2
395.5
4 315.8
4 711.4
1 096.9
45 911.1
345.6
( 98.8)
( 2.1)
4 064.7
352.7
( 227.7)
393.9
3 921.9
4 315.8
1 611.7
45 154.4
(16 109.3) (14 836.0) (15 335.9) (14 115.2)
(2 092.8) (1 900.2) (1 982.8) (1 778.5)
(1 371.3) (1 262.3) ( 767.4) ( 571.8)
5 320.8 3 352.1 3 203.4 1 980.7
(8 943.1) (7 435.2) (4 661.2) (3 146.8)
187.4
( 1.0)
375.9
2 845.5
3 221.3
1 427.8
39 221.8
268.2
(8 624.5) (7 089.6) (4 473.9) (2 878.6)
42.6 (1 236.6) (1 168.5)
( 375.7)
( 13.9)
2 859.3
2 845.5
FISCAL AGGREGATES
Net cash flows from operating activities
Net cash flows from investments in non-financial assets
Cash surplus/(deficit)
The accompanying notes form part of these financial statements
5 320.8 3 352.1 3 203.4 1 980.7
(8 624.5) (7 089.6) (4 473.9) (2 878.6)
(3 303.7) (3 737.5) (1 270.5) ( 897.9)
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.
Financial Report 2009-10 Chapter 4 43

Consolidated statement of changes in equity for the period ended 30 June
State of Victoria
2010
Accumulated surplus/(deficit)
Other movements in equity
Adjustment for change in accounting policy
Non-controlling interest
Physical asset revaluation surplus
Net movements in other reserves
Total equity at end of the year
2009
Accumulated surplus/(deficit)
First time recognition of land under roads
Other movements in equity
Non-controlling interest
Physical asset revaluation surplus
Net movements in other reserves
Total equity at end of the year
Equity at
1 July
53 888.9
..
..
($ million)
Total comprehensiv e result
(5 677.7)
88.7
..
Transactions with owner in its capacity as owner
Equity at
30 June
.. 48 211.2
..
..
88.7
..
39.5
61 661.6
2 413.6
118 003.6
48 527.8
..
..
32.0
41 220.6
1 810.5
91 590.8
..
6 769.3
201.8
1 382.0
(13 088.8)
18 682.5
( 232.6)
..
20 441.0
603.1
26 405.3
5.0 44.5
.. 68 430.8
.. 2 615.4
5.0 119 390.6
.. 35 439.0
.. 18 682.5
.. ( 232.6)
7.5 39.5
.. 61 661.6
.. 2 413.6
7.5 118 003.6
General government sector
2010
Accumulated surplus/(deficit)
Other movements in equity
Non-controlling interest
Physical asset revaluation surplus
Net movements in other reserves
Accumulated net gain on equity investments in other sector entities
Total equity at end of the period
Equity at
1 July
48 424.8
..
39.5
29 776.6
788.1
37 644.8
116 673.8
2009
Accumulated surplus/(deficit)
First time recognition of land under roads
Other movements in equity
Non-controlling interest
Physical asset revaluation surplus
Net movements in other reserves
Accumulated net gain on equity investments in other sector entities
Total equity at end of the period
37 686.9
..
32.0
28 459.7
780.7
23 407.1
The accompanying notes form part of these Financial Statements
..
90 366.4
Total comprehensiv e result
(5 413.1)
252.3
..
Transactions with owner in its capacity as owner
Equity at
30 June
.. 43 011.7
..
5.0
252.3
44.5
3 416.7
107.0
2 513.9
.. 33 193.2
.. 895.0
.. 40 158.8
876.7
(8 372.8)
18 682.5
428.3
..
1 316.8
7.4
14 237.7
26 299.8
5.0 117 555.5
.. 29 314.0
.. 18 682.5
..
7.5
428.3
39.5
.. 29 776.6
.. 788.1
.. 37 644.8
7.5 116 673.8
44 Chapter 4 Financial Report 2009-10

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
Financial Report 2009-10 Chapter 4 45

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.
46 Chapter 4 Financial Report 2009-10

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.
Financial Report 2009-10 Chapter 4 47

(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.
48 Chapter 4 Financial Report 2009-10

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).
Financial Report 2009-10 Chapter 4 49

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.
50 Chapter 4 Financial Report 2009-10

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.
Financial Report 2009-10 Chapter 4 51

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
Dwellings
Other buildings
Road pavement
Bridges
Plant, equipment and vehicles
Cultural assets (with finite useful lives)
Water infrastructure – storage facilities
Water infrastructure – other
Rail infrastructure
Other infrastructure
Useful life
40 to 50 years
30 to 60 years
60 years
90 years
3 to 10 years
100 years
25 to 300 years
25 to 100 years
2 to 50 years
10 to 32 years
52 Chapter 4 Financial Report 2009-10

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.
Financial Report 2009-10 Chapter 4 53

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).
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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(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.
Financial Report 2009-10 Chapter 4 67

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).
68 Chapter 4 Financial Report 2009-10

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.
Financial Report 2009-10 Chapter 4 69

(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.
70 Chapter 4 Financial Report 2009-10

(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.
Financial Report 2009-10 Chapter 4 71

($ million)
Revenue from transactions
Taxation revenue
Interest
Dividends and income tax equivalent and rate equivalent revenue
Sales of goods and services
Grants
Other revenue
Total revenue
Expenses from transactions
Employee expenses
Superannuation interest expense
Other superannuation
Depreciation
Interest expense
Grants and other transfers
Other operating expenses (a)
Other property expenses
Total expenses
General government sector
2010 2009
13 740.5 12 626.9
333.5
485.6
378.2
490.4
5 289.5
866.7
843.3
..
4 940.5
22 717.8 18 970.0
2 018.4 1 878.9
44 585.3 39 284.8
15 404.8 14 296.9
609.7
1 527.8 1 404.2
1 869.7 1 515.8
642.4
9 174.5 7 366.3
14 254.9 13 198.4
..
43 941.7 39 033.7
Net result from transactions – net operating balance
Other economic flows included in net result
Net gain/(loss) on disposal of non-financial assets
Net gain/(loss) on financial assets or liabilities at fair value
Net actuarial gain/(loss) of superannuation defined benefits plans
Share of net profit/(loss) from associates/joint venture entities, excluding dividends
Other gains/(losses) from other economic flows (a)
Total other economic flows included in net result
643.6
( 40.4)
64.0
( 1.4)
251.2
62.2
( 83.8)
(1 450.2) (7 510.1)
( 74.4)
(4 628.8) (1 017.9)
(6 056.8) (8 624.0)
Net result
Other economic flows – other movements in equity
Net gain/(loss) on financial assets at fair value
Revaluations of non-financial assets
Net gain/(loss) on equity investments in other sector entities at proportional share of the carrying amount
(5 413.1) (8 372.8)
15.2
3 416.7
8.7
1 316.8
2 513.9 14 237.7 of net assets
Transfers to accumulated funds/other movements in equity 344.1 19 109.4
Total other economic flows – other movements in equity
Comprehensive result – total change in net worth
6 289.8 34 672.7
876.7 26 299.8
Public non-financial corporations
2010 2009
..
63.7
28.9
..
100.3
23.1
4 030.9
2 933.3
601.4
7 658.1
857.6
1.0
85.6
1 496.1
534.7
464.9
3 691.8
131.9
7 263.5
3 922.1
2 009.9
507.1
6 562.4
775.2
0.7
84.6
1 004.0
490.6
249.8
3 714.7
61.1
6 380.7
394.6 181.8
( 8.8) 4.6
( 132.4) (1 118.9)
14.4 ( 62.4)
50.9
140.7
64.9
..
( 14.8)
44.1
395.9
( 736.7)
459.4 ( 554.9)
10.0 ( 18.8)
2 854.8 18 017.3
..
( 39.0)
2 849.9 17 959.5
3 309.3 17 404.5
FISCAL AGGREGATES
Net operating balance
Net acquisition of non-financial assets
Purchases of non-financial assets
Less: Sales of non-financial assets
Less: Depreciation and amortisation
Plus: Change in inventories
Plus: Other movements in non-financial assets
Less: Net acquisition of non-financial assets
Net lending/(borrowing)
643.6
19.1
233.1
251.2
28.2
44.6
4 661.2 3 146.8
394.6
4 262.8
( 14.7)
268.2
181.8
4 225.8
( 187.4) ( 268.2) ( 129.3) ( 75.7)
(1 869.7) (1 515.8) (1 496.1) (1 004.0)
100.0
326.3
2 856.4 1 435.6 2 891.0 3 572.4
(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 required re-presentation of the 2009 results.
72 Chapter 4 Financial Report 2009-10

..
1 769.0
392.3
3 280.4
99.0
22.0
5 562.8
Public financial corporations
2010 2009
..
1 602.2
387.2
267.5
..
23.9
26.7
1 332.3
106.4
3 908.9
11.0
5 676.7
3 086.1
123.3
19.0
5 217.8
257.6
..
24.8
24.2
1 166.5
3
130.3
795.5
8.5
5 407.4
( 114.0)
( 0.4)
255.6
..
..
( 566.3)
( 189.6)
( 0.2)
(2 819.6)
..
..
194.6
( 311.1)
( 425.1)
..
1.2
..
0.1
1.3
(2 625.2)
(2 814.8)
..
( 1.5)
..
..
( 1.5)
(2 816.4) ( 423.8)
( 114.0)
19.0
( 1.9)
( 26.7)
..
..
( 9.6)
( 123.6)
( 189.6)
62.7
( 1.8)
( 24.2)
..
..
36.7
( 226.3)
Financial Report 2009-10
30.6
30.6
( 298.9)
..
496.6
(2 513.9)
( 64.0)
(2 081.4)
(2 380.3)
( 329.5)
..
..
..
..
..
..
( 329.5)
Inter-sector eliminations
2010 2009
(1
(
( 205.9)
183.3)
484.1)
( 183.3)
( 890.7)
( 488.9)
(1 576.6)
(3 143.4)
( 50.5)
(6 643.8)
( 311.6)
..
..
..
(1 183.3)
(3 113.0)
(1 563.5)
( 143.0)
(6 314.3)
( 329.5)
..
..
..
(1 621.8)
(2 380.5)
( 50.5)
(5 615.7)
( 292.7)
..
..
..
( 889.4)
(2 472.7)
(1 524.3)
( 69.6)
(5 248.6)
( 367.1)
..
..
..
.. ..
( 979.0)
( 979.0)
(1 346.1)
..
1 108.4
(14 237.7)
( 7.2)
(13 136.6)
(14 482.7)
( 367.1)
..
..
..
..
..
..
( 367.1)
Chapter 4
(5 023.8)
(6 272.4)
(5 677.7)
25.1
6 769.3
..
265.3
7 059.7
1 382.0
594.7
8 943.1
( 318.6)
(3 392.5)
4.5
501.3
5 737.7
(5 143.0)
Consolidated
2010
13 534.6
982.9
422.7
2009
12 443.6
1 190.0
411.7
11 024.2
22 606.6
2 591.3
51 162.4
16 218.3
867.7
1 637.4
3 392.5
1 527.0
6 632.8
20 292.0
..
50 567.6
594.7
( 49.5)
187.2
(1 435.8)
49.6
10 326.9
18 722.6
2 354.5
45 449.4
15 037.0
610.4
1 513.6
2 544.0
1 410.1
5 273.8
19 184.3
..
45 573.1
( 123.8)
66.5
(4 022.2)
(7 572.5)
( 30.4)
(1 406.4)
(12 965.0)
(13 088.8)
( 10.1)
20 441.0
..
19 063.2
39 494.0
26 405.3
( 123.8)
7 435.2
( 345.6)
(2 544.0)
128.2
370.9
5 044.6
(5 168.4)
73

($ million)
Assets
Financial assets
Cash and deposits
Advances paid
Investments, loans and placements
Receivables
Investments in general government sector entities using the equity method
Investments accounted for using the equity method – other
Investments in other sector entities
General government sector
2010 2009
3 221.3
278.0
2 629.0
2 883.6
..
2 846.0
269.0
2 550.6
2 783.3
..
35.1
64 508.7
30.0
60 634.8
Public non-financial corporations
2010
498.1
678.1
89.4
1 696.1
1 137.3
..
2009
715.9
96.1
1 509.1
1 260.9
..
447.1
Total financial assets
Non-financial assets
73 555.8 69 113.6 4 098.9 4 029.2
Inventories
Non-financial assets held for sale
268.4
91.5
249.3
74.2
661.3
16.6
676.0
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
Total non-financial assets
Total assets
Liabilities
Deposits held and advances received
(a)
Borrowings
(a)
Payables
Superannuation
Other employee benefits
Other provisions
Total liabilities
90 550.7
479.4
4 357.9
718.0
88 415.2
317.1
13 612.5 10 640.1
4 849.0 4 164.0
22 534.1 20 672.3
4 277.2
784.4
..
75 741.2
360.6
8 946.6
1 337.4
63.5
268.7
4 686.7
..
69 762.5
164 106.4 157 528.9 79 840.1 73 791.7
334.9
7 387.5
1 425.1
82.9
233.5
4 491.5
46 551.0 40 855.1 15 663.5 13 955.4
Net assets
Accumulated surplus/(deficit)
Other reserves
Non-controlling interest
Net worth
117 555.5 116 673.8 64 176.6 59 836.3
43 263.9 48 424.8 6 084.1 5 886.6
74 247.0 68 209.5 58 092.5 53 949.7
44.5 39.5 .. ..
117 555.5 116 673.8 64 176.6 59 836.3
FISCAL AGGREGATES
Net financial worth
Net financial liabilities
Net debt
27 004.8 28 258.5 (11 564.6) (9 926.2)
37 503.9
7 963.6
32 376.3
5 291.7
11 564.6
6 843.7
9 926.2
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.
74 Chapter 4 Financial Report 2009-10

50 458.4
4 911.4
25 651.1
1 532.9
..
60.1
17 970.8
50 126.3
332.1
( 688.0)
1 020.1
..
332.1
3 688.2
1 424.0
25 008.5
18 291.9
..
..
..
48 412.6
..
..
77.4
1 968.3
2 045.8
Public financial corporations
2010 2009
3 062.1
1 250.2
23 156.4
14 678.0
..
..
..
42 146.6
..
..
62.3
1 982.9
2 045.2
44 191.8
4 525.6
21 080.3
1 367.8
..
58.5
16 361.1
43 393.3
798.5
( 117.7)
916.2
..
798.5
(1 713.6)
1 713.6
441.7
(1 246.7)
1 246.7
(1 862.8)
Inter-sector eliminations
2010 2009
(2 876.2)
( 263.7)
(4 034.1)
(17 254.5)
..
(2 307.0)
( 239.3)
(2 255.2)
(13 799.8)
..
..
(64 508.7)
(88 937.2)
..
..
( 4.1)
(1 994.8)
(1 998.9)
(90 936.1)
(4 272.7)
(19 629.8)
( 743.7)
..
..
(3 616.3)
(28 262.5)
(62 673.6)
( 360.2)
(62 313.4)
..
(62 673.6)
(60 674.7)
(3 834.0)
(16 728.5)
..
(60 634.8)
(79 236.1)
..
..
( 4.1)
(2 018.1)
(2 022.3)
(81 258.4)
(3 026.2)
(14 981.9)
( 826.8)
..
..
(3 118.4)
(21 953.4)
(59 305.0)
( 304.8)
(59 000.2)
..
(59 305.0)
(57 282.7)
(3 352.1)
(13 206.7)
Consolidated
2010
4 711.5
1 527.7
25 299.4
5 058.3
..
2009
4 317.0
1 375.9
24 960.9
4 922.4
..
533.2 477.1
..
37 130.1
929.7
108.1
163 746.1
1 554.7
166 338.7
203 468.8
1 478.8
28 580.3
6 975.6
22 597.7
4 686.7
19 759.2
84 078.2
119 390.6
48 299.9
71 046.2
44.5
119 390.6
(46 948.1)
46 948.1
(1 479.5)
..
36 053.4
925.3
80.2
155 979.1
1 216.1
158 200.6
194 254.0
2 151.4
24 126.0
6 130.1
20 755.1
4 569.2
18 518.6
76 250.4
118 003.6
53 888.9
64 075.2
39.5
118 003.6
(40 197.1)
40 197.1
(4 376.5)
Financial Report 2009-10 Chapter 4 75

($ million)
Cash flows from operating activities
Receipts
Taxes received
Grants
(a)
Sales of goods and services (b)
Interest received
Dividends and income tax equivalent and rate equivalent receipts
Other receipts
Total receipts
Payments
Payments for employees
Superannuation
Interest paid
Grants and subsidies
(a)
Goods and services (b)
Other payments
Total payments
General government sector
2010
471.9
2009
13 871.5 12 451.4
22 716.8 18 970.2
6 158.8 5 512.6
323.8 389.1
470.8
Public non-financial corporations
2010
..
29.0
2009
..
2 970.0 1 990.5
4 401.3 4 319.8
60.2 98.1
23.1
1 611.7 1 427.8 300.8 276.7
45 154.4 39 221.8
(15 335.9) (14 115.2)
(1 982.8) (1 778.5)
7 761.2 6 708.2
( 819.0) ( 762.3)
( 86.0) ( 96.8)
( 767.4) ( 571.8) (1 564.4) (1 434.9)
(9 233.3) (7 298.3) ( 398.9) ( 181.6)
(14 194.7) (13 072.6) (2 949.9) (2 987.5)
( 436.9) ( 404.7) ( 238.4) ( 174.4)
(41 951.0) (37 241.1) (6 056.6) (5 637.4)
Net cash flows from operating activities
Cash flows from investing activities
Purchases of non-financial assets
Sales of non-financial assets
Cash flows from investments in non-financial assets
Net cash flows from investments in financial assets for policy purposes (c)
3 203.4 1 980.7
187.4 268.2
(4 473.9) (2 878.6)
(1 236.6) (1 168.5)
1 704.6 1 070.7
(4 661.2) (3 146.8) (4 262.8) (4 225.8)
129.3
( 1.8)
75.7
(4 133.5) (4 150.1)
( 39.1)
Sub-total
Net cash flows from investments in financial assets for liquidity management purposes
Net cash flows from investing activities
Cash flows from financing activities
Advances received (net)
Net borrowings (d)
Deposits received (net)
Other financing (net) (c)
(d)
(5 710.5) (4 047.1)
( 1.0) ( 375.7)
(4 135.3) (4 189.2)
( 407.3) 213.9
(5 711.5) (4 422.8) (4 542.6) (3 975.3)
( 0.3) ( 1.8)
2 892.6 2 487.2
( 8.3)
..
( 57.2)
..
17.6
8.1
1 230.2
227.9
1 544.8 1 423.0
( 15.3)
1 062.4
Net cash flows from financing activities 2 884.0 2 428.2
Net increase/(decrease) in cash and cash equivalents 375.9 ( 13.9)
Cash and cash equivalents at beginning of reporting period
2 845.5 2 859.3
Cash and cash equivalents at end of reporting period 3 221.3 2 845.5
2 800.7
( 37.3)
715.2
677.9
2 698.1
( 206.5)
921.7
715.2
FISCAL AGGREGATES
Net cash flows from operating activities
Dividends paid
Net cash flows from investments in non-financial assets
Cash surplus/(deficit)
3 203.4 1 980.7 1 704.6 1 070.7
.. .. ( 248.4) ( 193.2)
(4 473.9) (2 878.6) (4 133.5) (4 150.1)
(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.
76 Chapter 4 Financial Report 2009-10

Public financial corporations
2010
..
99.0
3 705.6
1 547.8
392.3
48.2
2009
..
123.3
3 637.6
1 418.6
387.2
( 525.3)
5 793.0
( 265.9)
( 23.9)
(1 225.9)
( 106.4)
(3 411.7)
( 11.7)
(5 045.4)
5 041.3
( 251.2)
( 24.8)
(1 081.5)
( 130.3)
(3 234.2)
( 50.0)
(4 772.1)
747.5
( 19.0)
1.9
( 17.1)
( 210.9)
( 228.0)
(4 860.8)
269.2
( 62.7)
1.8
( 60.9)
( 238.9)
( 299.8)
(3 970.6)
(5 088.9)
( 402.2)
4 624.2
788.0
( 42.6)
4 967.4
626.1
3 062.1
3 688.2
(4 270.3)
( 524.3)
4 158.9
411.9
( 150.0)
3 896.5
( 104.6)
3 166.7
3 062.1
747.5
( 59.2)
( 17.1)
671.2
269.2
( 150.0)
( 60.9)
58.4
Inter-sector eliminations
2010 2009
( 205.9)
(3 281.9)
(1 576.6)
(1 120.6)
( 470.6)
( 183.3)
(1 821.6)
(1 621.8)
( 881.8)
( 469.6)
( 82.6)
(6 738.1)
311.6
..
2 186.4
3 184.5
474.7
246.2
6 403.3
( 334.8)
..
..
..
1 454.1
( 82.2)
(5 060.3)
292.7
..
1 825.8
1 847.2
903.7
222.3
5 091.7
31.4
..
..
..
1 495.0
1 454.1
5 328.0
6 782.1
(1 246.4)
(4 647.9)
..
(1 122.2)
(7 016.4)
( 569.2)
(2 307.0)
1 495.0
4 033.5
5 528.5
296.0
(4 010.2)
13.2
(1 140.2)
(4 841.1)
718.8
(3 025.8)
(2 876.2)
( 334.8)
307.6
..
( 27.2)
(2 307.0)
31.4
343.2
..
374.6
Consolidated
2010
13 665.6
22 503.9
12 689.1
811.2
422.6
2009
12 268.1
19 262.3
11 848.1
1 024.0
411.5
1 878.1
51 970.5
(16 109.3)
(2 092.8)
(1 371.3)
(6 554.0)
(20 081.5)
( 440.7)
(46 649.7)
5 320.8
(8 943.1)
318.6
(8 624.5)
4.8
1 096.9
45 911.1
(14 836.0)
(1 900.2)
(1 262.3)
(5 763.0)
(18 390.6)
( 406.8)
(42 559.0)
3 352.1
(7 435.2)
345.6
(7 089.6)
42.6
(8 619.7)
58.8
(8 560.9)
(1 631.3)
4 413.7
787.8
65.4
3 635.7
395.5
4 315.8
(7 046.9)
( 98.8)
(7 145.8)
( 2.1)
4 064.7
352.7
( 227.7)
4 187.6
393.9
3 921.9
4 711.4
5 320.8
..
(8 624.5)
(3 303.7)
4 315.8
3 352.1
..
(7 089.6)
(3 737.5)
Financial Report 2009-10 Chapter 4 77

($ million)
Equity at
1 July
48 424.8
Total comprehensiv e result
(5 413.1)
Transactions with owner in its capacity as owner
..
Dividend s
Equity at
30 June
.. 43 011.7
2010
General government sector
Accumulated surplus/(deficit)
Other movements in equity
Adjustment for change in accounting policy
Non-controlling interest
Physical asset revaluation surplus
Net movements in other reserves
Accumulated net gain on equity investments in other sector entities
PNFC sector
Accumulated surplus/(deficit)
Other movements in equity
Contributed capital
Non-controlling interest
Physical asset revaluation surplus
Net movements in other reserves
PFC sector
Accumulated surplus/(deficit)
Other movements in equity
Contributed capital
Non-controlling interest
Physical asset revaluation surplus
Net movements in other reserves
Eliminations
Total whole of government
..
..
39.5
29 776.6
788.1
37 644.8
116 673.8
5 886.6
..
22 437.7
..
30 630.3
881.8
59 836.3
( 117.7)
..
162.4
..
10.0
743.8
798.5
(59 305.0)
118 003.6
252.3
..
..
3 416.7
107.0
2 513.9
876.7
459.4
( 13.5)
..
..
2 854.8
8.6
3 309.3
( 425.1)
( 86.1)
..
..
1.2
86.2
( 423.8)
(2 380.3)
1 382.0
..
..
5.0
..
..
..
..
..
252.3
..
.. 44.5
.. 33 193.2
.. 895.0
.. 40 158.8
5.0 .. 117 555.5
.. ( 248.4) 6 097.6
..
1 279.4
..
..
..
.. ( 13.5)
.. 23 717.0
.. ..
.. 33 485.0
.. 890.4
1 279.4 ( 248.4) 64 176.6
.. ( 59.2) ( 601.9)
..
16.6
..
..
..
16.6
(1 296.0)
5.0
..
..
..
..
..
( 86.1)
179.0
..
11.2
829.9
( 59.2) 332.1
307.6 (62 673.6)
.. 119 390.6
78 Chapter 4 Financial Report 2009-10

2009
General government sector
Accumulated surplus/(deficit)
First time recognition of land under roads
Other movements in equity
Non-controlling interest
Physical asset revaluation surplus
Net movements in other reserves
Accumulated net gain on equity investments in other sector entities
PNFC sector
Accumulated surplus/(deficit)
Other movements in equity
Dividends
Contributed capital
Non-controlling interest
Physical asset revaluation surplus
Net movements in other reserves
PFC sector
Accumulated surplus/(deficit)
Other movements in equity
Dividends
Contributed capital
Non-controlling interest
Physical asset revaluation surplus
Net movements in other reserves
Eliminations
Total whole of government
Equity at
1 July
37 686.9
..
..
32.0
28 459.7
780.7
23 407.1
90 366.4
6 684.7
..
..
20 904.9
..
12 612.9
889.7
41 092.3
3 450.9
..
..
162.4
..
11.5
140.0
3 764.9
(43 632.7)
91 590.8
($ million)
Total comprehensiv e result
(8 372.8)
18 682.5
428.3
..
1 316.8
7.4
14 237.7
26 299.8
( 554.9)
( 49.9)
..
..
..
18 017.3
( 7.9)
17 404.5
(2 814.8)
( 603.7)
..
..
..
( 1.5)
603.7
(2 816.4)
(14 482.7)
26 405.3
Transactions with owner in its capacity as owner
..
Dividend s
Equity at
30 June
.. 29 314.0
..
..
7.5
..
..
..
7.5
..
..
..
.. 29 776.6
..
..
.. 116 673.8
.. ( 193.2)
..
..
1 532.7
..
..
..
..
..
..
..
.. 30 630.3
..
..
..
..
..
18 682.5
428.3
39.5
788.1
37 644.8
5 936.5
( 49.9)
..
22 437.7
..
881.8
1 532.7 ( 193.2) 59 836.3
.. ( 150.0)
..
..
..
..
..
..
.. ( 603.7)
..
.. ( 150.0)
(1 532.7)
7.5
486.0
..
162.4
..
10.0
743.8
798.5
343.2 (59 305.0)
.. 118 003.6
Financial Report 2009-10 Chapter 4 79

Taxes on employers’ payroll and labour force
Taxes on property
Taxes on immovable property
Land tax
Congestion levy
Metropolitan improvement levy
Property owner contributions to fire brigades
Total taxes on immovable property
Financial and capital transactions
Land transfer duty
Other property duties
Financial accommodation levy
Total financial and capital transactions
Total taxes on property
Taxes on the provision of goods and services
Gambling taxes
Private lotteries
Electronic gaming machines
Casino
Racing
Other
Total gambling taxes
Levies on statutory corporations
Taxes on insurance
Total taxes on the provision of goods and services
Taxes on the use of goods and performance of activities
Motor vehicle taxes
Vehicle registration fees
Duty on vehicle registrations and transfers
Total motor vehicle taxes
Franchise taxes
Other
Total taxes on the use of goods and performance of activities
Total taxation revenue
($ million)
State of Victoria
2010 2009
General government sector
2010 2009
4 001.5 3 927.3 4 055.8 3 979.7
1 148.8 1 207.7 1 177.7 1 237.6
47.2 44.1 47.2 44.1
122.8
34.4
107.0
41.4
122.8
34.4
107.0
41.4
1 353.1 1 400.2 1 381.9 1 430.1
3 603.9 2 801.0 3 603.9 2 801.0
7.0
..
8.3
..
7.0
51.8
8.3
30.2
3 610.8 2 809.4 3 662.7 2 839.6
4 963.9 4 209.5 5 044.6 4 269.6
129.3
10.3
356.0 359.8
985.0 1 011.6
151.1 140.8
129.1
7.3
129.3
10.3
356.0 359.8
985.0 1 011.6
151.1 140.8
129.1
7.3
1 631.6 1 648.6 1 631.6 1 648.6
.. .. 69.4 69.4
1 402.8 1 235.4 1 402.8 1 235.4
3 034.4 2 884.0 3 103.8 2 953.4
862.7
572.7
807.6
514.9
864.2
572.7
808.9
514.9
1 435.4 1 322.5 1 436.9 1 323.8
23.3
76.2
11.8
88.5
23.3
76.2
11.8
88.5
1 534.9 1 422.8 1 536.4 1 424.1
13 534.6 12 443.6 13 740.5 12 626.9
80 Chapter 4 Financial Report 2009-10

($ million)
Dividends from PFC sector
Dividends from PNFC sector
Dividends from non-public sector
Dividends
Income tax equivalent from PFC sector
Income tax equivalent from PNFC sector
Income tax equivalent and rate equivalent revenue
Local government rate equivalent revenue
Other dividends (a)
Total dividends and income tax equivalent and rate equivalent revenue
Note:
(a) Dividends from Snowy Hydro received by SECV – refer to Note 18.
State of Victoria
2010 2009
..
..
396.6
..
..
394.3
396.6
..
..
..
..
26.1
422.7
394.3
..
..
..
..
17.4
411.7
General government sector
2010 2009
59.2
248.4
1.5
150.0
193.2
1.4
309.1
10.0
161.9
171.9
4.6
..
485.6
344.6
6.7
134.5
141.2
4.5
..
490.4
($ million)
Motor vehicle regulatory fees
Other regulatory fees
Sale of insurance services
Other sales of goods and services
Rental
Refunds and reimbursements
Inter-sector capital asset charge
Total sale of goods and services
State of Victoria
2010 2009
General government sector
2010 2009
121.2
356.0
112.7
332.8
2 732.4 2 587.2
121.2
340.5
..
112.7
315.9
..
7 587.7 6 797.8 3 648.7 3 173.4
65.1 70.0 46.5 50.0
161.8
..
426.4 71.7
.. 1 060.9
329.6
959.0
11 024.2 10 326.9 5 289.5 4 940.5
General purpose grants
Specific purpose grants for on-passing
Other specific purpose grants
Total
Other contributions and grants
Total grants
($ million)
State of Victoria
2010 2009
General government sector
2010 2009
10 043.3 9 319.0 10 043.3 9 319.0
3 099.4 2 232.8 3 099.4 2 232.8
9 453.1 7 169.7 9 448.0 7 159.6
22 595.8 18 721.6 22 590.6 18 711.4
10.8 1.1 127.1 258.5
22 606.6 18 722.6 22 717.8 18 970.0
Financial Report 2009-10 Chapter 4 81

Total other revenue
($ million)
State of Victoria
2010 2009
432.5 330.6
General government sector
2010 2009
161.6 131.3 Fair value of assets received free of charge or for nominal consideration
Fines
Non-traffic statutory and court fines
Police traffic camera office and on the spot fine
Total fines
Royalties
Donations and gifts
Other non-property rental
Other miscellaneous revenue
110.1
431.3
541.4
49.0
267.5
90.4
381.4
471.8
50.3
289.1
85.1 82.4
1 215.7 1 130.2
106.8
431.3
538.1
46.7
261.7
28.2
982.1
89.1
381.4
470.5
48.1
269.3
23.8
936.0
2 591.3 2 354.5 2 018.4 1 878.9
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.
82 Chapter 4 Financial Report 2009-10

(a) Expense relating to superannuation recognised in the operating statement
($ million)
Defined benefit plans
Interest cost (a)
Expected return on plan assets (net of expenses) (a)
Superannuation interest expense
Current service cost (a)
Amortisation of past service cost (a)
Actuarial (gains)/losses (b)
Total expense recognised in respect of defined benefit plans
Defined contribution plans
Employer contributions to defined contribution plans (a)
Other (including pensions) (a)
Total expense recognised in respect of defined contribution plans
Total superannuation expense recognised in operating statement
Represented by:
Superannuation expense from transactions
Superannuation expense from other economic flows
Notes:
(a) Superannuation expense from transactions.
(b) Superannuation expense from other economic flows.
State of Victoria
2010 2009
1 899.4 1 878.4
(1 031.7) (1 267.9)
867.7 610.4
686.9
( 10.2)
647.9
( 14.5)
1 435.8 7 572.5
2 980.2 8 816.3
896.0
64.7
822.4
57.7
960.7 880.2
3 940.9 9 696.5
2 505.1 2 124.0
1 435.8 7 572.5
(b) Reconciliation of the present value of the defined benefit obligation
($ million)
Opening balance of defined benefit obligation
Current service cost
Interest cost
Contributions by plan participants
Actuarial (gains)/losses
Benefits paid
Closing balance of defined benefit obligation
State of Victoria
2010 2009
34 797.1 30 026.6
686.9 647.9
1 899.4 1 878.4
231.3 235.5
2 425.4 3 879.0
(1 954.4) (1 870.3)
38 085.7 34 797.1
(c) Reconciliation of the fair value of superannuation plan assets
($ million)
Opening balance of plan assets
Expected return on plan assets
Actuarial gains/(losses)
Employer contributions
Contributions by plan participants
Benefits paid (including tax paid)
Closing balance of plan assets
State of Victoria
2010 2009
14 041.9 17 092.5
1 031.7 1 267.9
989.6 (3 693.5)
1 147.9 1 009.8
231.3 235.5
(1 954.4) (1 870.3)
15 488.0 14 041.9
Financial Report 2009-10 Chapter 4 83

(d) Reconciliation of the superannuation liability
($ million)
ESSS (including SSF)
Defined benefit obligation
Tax liability (a)
Plan assets
Unrecognised past service cost (b)
Net liability/(asset)
Other funds (c)
Defined benefit obligation
Tax liability (a)
Plan assets
Unrecognised past service cost (b)
Net liability/(asset)
Total superannuation
Defined benefit obligation
Tax liability (a)
Plan assets
Unrecognised past service cost (b)
Superannuation liability
Represented by:
Current liability
Non-current liability
State of Victoria
2010 2009
33 348.7 30 603.5
2 480.2 2 057.9
(13 893.2) (12 676.4)
.. 10.2
21 935.7 19 995.1
2 250.8 2 098.9
6.0 26.6
(1 594.8) (1 365.5)
.. ..
662.0 760.0
35 599.5 32 702.4
2 486.2 2 084.5
(15 488.0) (14 041.9)
.. 10.2
22 597.7 20 755.1
580.6 582.1
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.
84 Chapter 4 Financial Report 2009-10

Superannuation assumptions
Victorian statutory superannuation funds
Emergency Services and State
Super
Constitutionally Protected
Schemes
Parliamentary Contributory
Superannuation Fund (e)
Health Super Fund
Actuary Financial assumptions
Mercer (a) Expected return on assets
(b)
Discount rate (c)
Wages growth (d)
Inflation rate
Mercer (a) Discount rate (c)
Wages growth (d)
Inflation rate
Mercer (a) Expected return on assets
(b)
Discount rate (c)
Wages growth (d)
Inflation rate
Mercer (a) Expected return on assets
(b)
2010
Per cent per annum
2009
8.00
5.30
4.00
2.50
5.30
4.00 n/a
8.00
5.30
4.00 n/a
6.20
8.00
5.70
4.00 n/a
6.20
Discount rate (c)
Wages growth (d)
Inflation rate
5.30
4.00
2.50
5.70
4.00
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.
5.70
4.00
2.50
5.70
4.00 n/a
8.00
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
Asset class
Domestic equity
International equity
Domestic debt assets
International debt assets
Property
Cash
Other (inc. private equity, hedge funds and infrastructure)
Total
Per cent
2010 2009
26.8
25.5
19.3
..
10.9
4.2
13.3
100.0
26.8
25.6
19.3
..
10.7
4.3
13.4
100.0
Financial Report 2009-10 Chapter 4 85

($ million)
Buildings
Plant, equipment and infrastructure systems
Road networks
Other assets
Leased plant and equipment
Leasehold buildings
Intangible produced assets (a)
State of Victoria
2010
403.7
14.7
147.0
94.7
97.7
2009
1 035.1 695.8
1 599.6 1 201.8
390.6
17.4
98.3
58.5
81.4
General government sector
2010
769.5
491.9
402.2
14.7
37.3
89.9
64.2
2009
485.2
478.7
389.1
13.9
34.9
53.6
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.
($ million)
Interest on short-term interest-bearing liabilities
Interest on long-term interest-bearing liabilities
Finance charges on finance leases
Discount interest on payables
Total interest expense
State of Victoria
2010 2009
42.8
1 141.8
234.4
82.6
819.8
283.7
108.0 224.0
1 527.0 1 410.1
General government sector
2010 2009
27.5
606.2
145.0
64.7
843.3
53.4
399.5
128.6
60.9
642.4
($ million)
Purchase of supplies and consumables
Cost of goods sold
Finance expenses and fees
Purchase of services
Insurance claims expense
Maintenance
Operating lease payments
Other
State of Victoria
2010
8 837.7
213.5
2009
8 780.3
206.6
General government sector
2010 2009
7 420.1
46.9
7 088.8
76.1
383.2 332.9 27.0 20.0
5 823.2 5 095.3 5 279.1 4 662.2
3 032.1 2 908.5 28.0 13.8
1 197.8
300.1
504.6
1 133.1
292.8
434.9
726.4
226.6
500.8
680.8
225.9
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 required re-presentation of the 2009 results.
86 Chapter 4 Financial Report 2009-10

($ million)
Current grants expense
Commonwealth Government
Local government on-passing
Private sector and not-for-profit on-passing
Other private sector and not for profit
Grants within the Victorian Government
Grants to other state governments
Total current grants and other transfers
Capital grants expense
Local government on-passing
Private sector and not-for-profit on-passing
Other private sector and not-for-profit
Grants within the Victorian Government
Other grants
Total capital grants and other transfers
Total grants and other transfers
State of Victoria
2010 2009
General government sector
2010 2009
132.3
..
20.9
98.6
622.8 729.1 622.8 728.9
3 239.5 3 004.9 3 221.9 2 988.3
909.0 130.8 807.2 128.2
..
46.4
131.9
3 026.6
20.6
98.2
2 254.5
46.4
4 924.5 4 009.8 7 831.0 6 244.6
133.6
1 335.6
236.2
..
2.8
78.1
461.9
643.0
..
81.0
133.5
970.4
235.9
2.2
1.5
78.0
315.7
642.7
5.6
79.7
1 708.3 1 263.9 1 343.5 1 121.7
6 632.8 5 273.7 9 174.5 7 366.3
($ million)
General public services
Public order and safety
Education
Health
Social security and welfare
Housing and community amenities
Recreation and culture
Fuel and energy
Agriculture, forestry, fishing, and hunting
Mining, manufacturing, and construction
Transport and communications
Other economic affairs
Other purposes
General government
State of Victoria
2010 2009
5 047.8 4 641.3 sector
2010
742.9
2009
708.9
4 095.8 4 068.4 4 296.3 4 252.7
11 717.2 10 386.6 11 780.0 10 443.7
11 469.1 10 366.7 11 732.1 10 577.5
3 104.5 2 935.6 3 260.6 3 015.4
5 903.1 4 837.6 3 799.8 2 927.4
1 368.9
23.8
1 313.5
501.0
827.6
20.8
804.4
19.0
568.9
32.9
525.6
20.3
515.2
33.0
506.7
20.4
4 394.1 3 688.0 4 659.7 4 060.3
583.9 464.7 594.1 471.1
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.
Financial Report 2009-10 Chapter 4 87

($ million)
Proceeds from disposal of physical assets
Written down value of assets sold/(disposed)
Net gain/(loss) on disposal of non-financial assets
State of Victoria
2010 2009
General government sector
2010 2009
318.0 333.8 187.1 266.8
( 367.6) ( 267.3) ( 227.5) ( 204.7)
( 49.5) 66.5 ( 40.4) 62.2
($ million)
Net gain/(loss) from revaluation of biological assets
Net (increase)/decrease in provision for doubtful receivables
Amortisation of intangible non-produced assets
Net swap interest revenue/(expense)
Net (increase)/decrease in bad debts
Other gains/(losses) (a)
Total other gains/(losses) from other economic flows
(b)
State of Victoria
2010
6.0
( 104.9) ( 177.3) ( 103.1) ( 175.8)
( 22.8)
2009
( 6.6)
( 10.8)
223.7 ( 495.1)
General government sector
2010
5.5
( 10.1)
..
2009
( 5.2)
( 5.3)
..
( 138.5) ( 125.3) ( 126.3) ( 113.9)
(4 987.2) ( 591.3) (4 394.8) ( 717.6)
(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.
88 Chapter 4 Financial Report 2009-10

($ million)
State of Victoria
2010 2009
General government sector
2010 2009
Current advances paid and investments, loans and placements
Loans and advances receivable 141.2
Equities and managed investment schemes
Australian dollar term deposits
Foreign currency term deposits
135.1
603.8
0.1
150.7
259.5
1 066.6
12.5
12.5
123.9
1 823.5
..
23.0
230.6
1 774.2
..
Debt securities (a)
Derivative financial instruments
Provision for diminution
5 927.6 5 669.0
1 718.6 2 509.9
.. ..
10.4
4.1
..
15.7
6.2
..
Total current advances paid and investments, loans 8 526.5 9 668.3 1 974.4 2 049.7 and placements
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
Australian dollar term deposits
Foreign currency term deposits
Debt securities (a)
Derivative financial instruments
9 896.7
173.4
..
8 620.2
118.4
..
6 170.6 5 890.6
673.3 814.2
464.4
175.6
..
27.0
..
387.2
114.1
..
22.6
..
Provision for diminution
Total non-current advances paid and investments, loans and placements
Total advances paid and investments, loans and placements
(b)
.. ..
18 300.6 16 668.6
26 827.1 26 336.8
..
932.6
2 907.0
..
769.8
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.
Financial Report 2009-10 Chapter 4 89

($ million)
Contractual
Sales of goods and services
Accrued investment income
Other receivables
Provision for doubtful contractual receivables
Statutory
Sales of goods and services
Taxes receivables
Fines and regulatory fees
GST input tax credits recoverable
Provision for doubtful statutory receivables
Total receivables
Represented by:
Current receivables
Non-current receivables
State of Victoria
2010 2009
General government sector
2010 2009
1 319.5 1 208.4
86.7 72.1
1 090.7 1 201.1
( 116.2) ( 120.9)
696.1
890.8
821.3
653.3
568.5
969.3
738.4
619.3
752.7
113.2
439.3
( 50.6)
..
904.8
821.3
286.8
674.8
90.1
422.9
( 54.4)
..
983.3
738.4
262.0
( 383.8) ( 333.9) ( 383.8) ( 333.9)
5 058.3 4 922.4 2 883.6 2 783.3
4 316.6 4 163.3 2 821.1 2 720.3
741.7 759.1 62.5 63.0
Ageing analysis of contractual receivables – State of Victoria
State of Victoria
2010
Sale of goods and services
Accrued investment income
Other receivables
2009
Sale of goods and services (a)
Accrued investment income
Other receivables (a)
Not past due
($ million)
Past due and not impaired and not Less than 1-3 mths 3 mths- impaired
829.3
1 mth
216.0
1 yr
113.3 114.7
Impaired
More than
1 yr
43.4
Total
2.9 1 319.5
77.4
848.6
1 755.3
768.8
66.7
848.4
1 684.0
9.1
31.6
256.6
195.7
5.0
94.6
295.3
..
0.1
0.2
13.8 34.1
127.1 148.9
101.8 100.3
0.2
11.7 145.6
113.7 246.0
..
46.3
89.6
38.2
..
100.7
138.9
..
0.2 974.5
3.1 2 380.7
3.6 1 208.4
..
86.7
72.1
.. 1 201.1
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.
90 Chapter 4 Financial Report 2009-10

Ageing analysis of contractual receivables – general government sector
General government sector
Not past due
($ million)
Past due and not impaired and not Less than 1-3 mths 3 mths-
Impaired impaired
488.2
1 mth
132.6 54.4
1 yr
44.8
More than
1 yr
32.1 0.7
Total
752.7
2010
Sale of goods and services
Accrued investment income
Other receivables
2009
Sale of goods and services
Accrued investment income
Other receivables
111.3
272.7
872.2
428.1
88.4
160.8
677.2
1.7
20.8
155.0
105.9
0.9
14.8
121.5
..
0.6
0.3
13.3 33.3
67.7 78.4
60.3 48.3
0.2
1.0 148.4
62.0 196.8
..
48.5
80.6
31.3
..
98.0
129.2
.. 113.2
.. 388.7
0.7 1 254.6
1.0 674.8
.. 90.1
.. 422.9
1.0 1 187.8
Movement in provision for doubtful contractual receivables
($ million)
Balance at start of the year
Reversal of unused provision recognised in the comprehensive operating statement
Increase in provision recognised in the comprehensive operating statement
Receivables written off during the year as uncollectible
Balance at the end of the year
State of Victoria
2010 2009
120.9
( 2.4)
109.1
( 4.5)
7.5
( 9.9)
116.2
9.1
7.2
120.9
General government sector
2010 2009
54.4
( 0.7)
51.0
( 3.0)
4.0
( 7.1)
50.6
6.2
0.2
54.4
Collateral held
The State did not hold any collateral against any of its contractual receivables during the current and prior periods.
Financial Report 2009-10 Chapter 4 91

(a) Investments accounted for using the equity method
($ million)
The Australian Regenerative Medicine Institute
Total general government sector
Snowy Hydro Ltd
Total investments
($ million)
Movements in carrying amounts
The Australian Regenerative Medicine Institute
Carrying amount at the beginning of the period
Share of profit after income tax
Other
Share of increment on revaluation of property, plant and equipment
Carrying amount at the end of the period
Snowy Hydro Ltd
Carrying amount at the beginning of the period
Share of profit/(loss) after income tax
Dividends received/receivable
Share of increment on revaluation of property, plant and equipment
Carrying amount at the end of the period
2010
35.0
35.0
498.5
533.5
2010
30.0
..
5.0
..
35.0
447.1
77.4
( 26.1)
..
498.5
2009
30.0
30.0
447.1
477.1
The Australian Regenerative Medicine Institute
The following tables provide information on Victoria’s investment of The Australian Regenerative
Medicine Institute:
($ million)
Balance sheet
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net Assets
2010
..
35.0
..
..
35.0
2009
0.1
29.9
..
..
30.0
($ million)
Commitments
Capital expenditure commitments
Operating lease commitments
2010
..
..
..
The Government’s ownership interest of the Australian Regenerative Medicine Institute at 30 June
2010 was 25 per cent (2009: 21 per cent).
2009
5.0
..
5.0
2009
20.0
..
10.0
..
30.0
403.1
61.5
( 17.4)
..
447.1
92 Chapter 4 Financial Report 2009-10

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
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
($ million)
Revenue and profit
Revenue from ordinary activities
Profit from ordinary activities before income tax
Income Tax expense relating to ordinary activities
Net result
2010
81.8
618.6
137.4
64.9
498.1
2010
226.8
110.4
33.0
77.4
2009
70.2
622.2
180.8
64.4
447.1
2009
207.5
87.0
25.6
61.5
($ million)
Commitments
Capital expenditure commitments
Operating lease commitments
Other commitments
2010
18.4
21.9
1.9
42.2
The Victorian Government’s ownership interest of Snowy Hydro Ltd at 30 June 2010 was 29 per cent (2009: 29 per cent).
2009
15.7
19.2
1.3
36.2
Financial Report 2009-10 Chapter 4 93

(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)
Balance sheet:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
State of Victoria
2010 2009
6.2
110.1
( 2.4)
( 52.2)
61.8
6.2
112.9
( 2.3)
( 53.0)
63.8
General government sector
2010 2009
6.2
110.1
( 2.4)
( 52.2)
61.8
6.2
112.9
( 2.3)
( 53.0)
63.8
94 Chapter 4 Financial Report 2009-10

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)
Balance sheet:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
State of Victoria
2010 2009
0.3
..
( 0.3)
..
..
1.3
8.5
( 1.3)
..
8.5
General government sector
2010 2009
0.3
..
( 0.3)
..
..
1.3
8.5
( 1.3)
..
8.5
Financial Report 2009-10 Chapter 4 95

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)
Balance sheet:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
State of Victoria
2010 2009
100.5
617.5
..
..
126.8
537.2
..
..
718.0 664.0
General government sector
2010
100.5
617.5
..
..
2009
126.8
537.2
..
..
718.0 664.0
Balance of investment in PNFC and PFC sectors at beginning of period
Net contributions to other sectors by owner
Revaluation gain/(loss) for period
(a)
Total investments in other sector entities
($ million)
2010 2009
60 634.8 44 857.1
1 360.0 1 540.0
2 513.9 14 237.7
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.
96 Chapter 4 Financial Report 2009-10

($ million)
At cost
Raw materials
Work in progress
Finished goods
Consumable stores
Land and other assets held as inventory (a)
At net realisable value
Raw materials
Finished goods
Consumable stores
Land and other assets held as inventory
Total inventories
Note:
(a) Including inventory held for distribution.
State of Victoria
2010
8.6
90.1
84.6
123.5
607.7
..
8.9
5.6
0.8
2009
14.2
68.8
60.1
100.2
643.9
5.7
6.5
17.2
8.7
General government sector
2010 2009
7.9
75.9
11.6
100.9
71.3
..
0.1
..
0.8
8.5
40.1
12.5
81.6
85.9
..
0.1
12.0
8.7
929.7 925.3 268.4 249.3
Reconciliation of movements in land and other assets held as inventory
($ million)
Opening balance
Acquisitions
Assets transferred
Revaluations
Disposals
Closing balance
State of Victoria
2010 2009
652.6 566.9
105.2 97.2
( 23.1)
..
( 5.9)
..
( 126.3) ( 5.6)
608.5 652.6
General government sector
2010 2009
94.6
10.0
( 22.5)
..
( 10.0)
72.1
105.1
2.6
( 8.7)
..
( 4.4)
94.6
($ million)
Land
Buildings
Infrastructure, plant, equipment and vehicles
Other
Total non-financial assets held for sale
State of Victoria
2010 2009
75.4
22.3
6.6
3.9
108.1
44.6
19.1
9.2
7.3
80.2
General government sector
2010 2009
62.6
22.3
6.1
0.5
91.5
43.9
19.1
9.2
2.0
74.2
Financial Report 2009-10 Chapter 4 97

(a) Total land, buildings, infrastructure, plant and equipment
($ million)
Buildings (written down value)
Land and national parks
Infrastructure systems (written down value)
Plant, equipment and vehicles (written down value)
Roads (written down value)
Earthworks
Cultural assets (written down value)
Total land, buildings, infrastructure, plant and equipment
Public Administration
State of Victoria
2010 2009
General government sector
2010 2009
1 734.6 1 589.7
1 094.8 1 021.4
46.3 46.2
506.1
608.8
39.8
432.7
562.5
40.8
344.5
17.1
..
117.6
286.0
26.5
..
116.9
208.2
..
..
117.6
189.6
..
..
116.9
3 354.9 3 086.7 1 480.5 1 342.6
Buildings (written down value)
Land and national parks
Infrastructure systems (written down value)
Plant, equipment and vehicles (written down value)
Roads (written down value)
Earthworks
Cultural assets (written down value)
Total land, buildings, infrastructure, plant and equipment
Community Housing
State of Victoria
2010 2009
General government sector
2010 2009
7 835.9 7 579.0
9 584.9 9 583.6
..
1.3
..
..
..
..
2.5
..
..
..
17 422.1 17 165.0
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
Total
Buildings (written down value)
Land and national parks
Infrastructure systems (written down value)
Plant, equipment and vehicles (written down value)
Roads (written down value)
Earthworks
Cultural assets (written down value)
Total land, buildings, infrastructure, plant and equipment (a)
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.
State of Victoria
2010 2009
General government sector
2010 2009
30 910.9 29 287.4 19 563.8 18 024.5
53 196.8 55 098.4 36 797.4 39 467.3
44 199.2 39 126.4 1 177.3 964.8
5 944.7 5 713.7 2 442.7 2 265.4
18 589.6 16 857.7 18 561.9 16 820.5
6 479.2 5 486.8 6 479.2 5 486.8
4 425.8 4 408.8 4 397.3 4 380.4
163 746.1 155 979.1 89 419.7 87 409.7
98 Chapter 4 Financial Report 2009-10

Education
State of Victoria
2010 2009
General government sector
2010 2009
Health and Welfare
State of Victoria
2010 2009
General government
2010
sector
2009
7 550.3
7 098.8
11.7
344.3
..
..
15.6
15 020.8
6 381.2
7 068.3
7.6
310.9
..
..
15.6
7 550.3
7 098.8
11.7
344.3
..
..
15.6
6 381.2
7 068.3
7.6
310.9
..
..
15.6
13 783.6 15 020.8 13 783.6
7 100.0
1 774.6
..
906.5
..
..
4.7
9 785.8
6 921.0
1 741.3
..
947.0
..
..
4.6
9 613.9
7 100.0
1 774.6
..
906.5
..
..
4.7
9 785.8
6 921.0
1 741.3
..
947.0
..
..
4.6
9 613.9
Transportation and Communication Public Safety and Environment
State of Victoria
2010
1 727.2
21 270.1 22 752.2 17 466.0 19 872.0 12 373.6 12 931.5
14 744.5 13 033.7
3 274.4 2 985.3
472.4
49.2
292.9
52.4
29 396.7
1 073.7
26 038.9
1 182.0
17 910.5
6 479.2
2.3
65 408.3
2009
1 905.2
16 169.1
5 486.8
General government sector
2010
604.0
17 910.5
6 479.2
2009
634.0
16 169.1
5 486.8
State of Victoria
2010
4 962.7
662.0
..
2009
4 911.3
662.1
..
2010
General government sector
3 803.4
2009
3 655.6
9 849.2 10 223.1
653.4
934.5
623.5
765.5
651.4
..
651.4
..
1.4 1.8 0.9 4 285.6 4 270.3 4 257.7 4 242.4
62 333.8 42 983.1 42 508.0 52 754.3 49 996.0 20 149.6 20 161.5
Financial Report 2009-10 Chapter 4 99

(b) Land and buildings
($ million)
Buildings
Accumulated depreciation
Buildings (written down value)
Land
National Parks and other ‘land only’ holdings
Land and National Parks
Total land and buildings
Public Administration
State of Victoria
2010 2009
General government sector
2010 2009
2 151.1 1 989.2 650.6 557.1
( 416.5) ( 399.5) ( 144.5) ( 124.4)
1 734.6 1 589.7 506.1 432.7
1 094.8
..
1 021.4
..
608.8
..
562.5
..
1 094.8 1 021.4 608.8
2 829.4 2 611.1 1 114.8
562.5
995.2
Buildings
Accumulated depreciation
Buildings (written down value)
Land
National Parks and other ‘land only’ holdings
Land and national parks
Total land and buildings
Community Housing
State of Victoria
2010 2009
7 988.3 7 584.3
( 152.3) ( 5.3)
7 835.9 7 579.0
9 584.9 9 583.6
.. ..
9 584.9 9 583.6
General government sector
2010
..
..
..
..
..
..
2009
..
..
..
..
..
..
17 420.8 17 162.6 .. ..
Buildings
Accumulated depreciation
Buildings (written down value)
Land
National Parks and other ‘land only’ holdings
Land and national parks
Total land and buildings
Total
State of Victoria
2010 2009
General government sector
2010 2009
35 957.7 33 759.4 22 046.1 20 204.2
(5 046.9) (4 471.9) (2 482.3) (2 179.7)
30 910.9 29 287.4 19 563.8 18 024.5
51 056.6 52 958.2 34 657.3 37 327.1
2 140.2 2 140.2 2 140.2 2 140.2
53 196.8 55 098.4 36 797.4 39 467.3
84 107.7 84 385.8 56 361.2 57 491.7
100 Chapter 4 Financial Report 2009-10

Education
State of Victoria
2010 2009
General government sector
2010 2009
Health and Welfare
General
State of Victoria
2010 2009 government sector
2010 2009
7 981.2
( 430.9)
7 550.3
7 098.8
..
6 610.6
( 229.4)
6 381.2
7 068.3
..
7 981.2
( 430.9)
7 550.3
7 098.8
..
6 610.6
( 229.4)
6 381.2
7 068.3
..
7 098.8 7 068.3 7 098.8 7 068.3
14 649.2 13 449.5 14 649.2 13 449.5
8 491.4
(1 391.4)
7 100.0
1 774.6
..
1 774.6
8 874.6
8 324.3
(1 403.3)
6 921.0
1 741.3
..
1 741.3
8 662.4
8 491.4
(1 391.4)
7 100.0
1 774.6
..
1 774.6
8 874.6
8 324.3
(1 403.3)
6 921.0
1 741.3
..
1 741.3
8 662.4
Transportation and Communication Public Safety and Environment
State of Victoria
2010 2009
General government sector
2010 2009
State of Victoria
2010 2009
3 708.0 3 817.3
(1 980.7) (1 912.1)
615.3
( 11.3)
670.0
( 36.0)
5 637.9
( 675.1)
5 433.7
( 522.4)
1 727.2 1 905.2 604.0 634.0 4 962.7 4 911.3
21 270.1 22 752.2 17 466.0 19 872.0 10 233.4 10 791.3
General government sector
2010
4 307.6
( 504.3)
3 803.4
7 709.0
2009
4 042.2
( 386.6)
3 655.6
8 082.9
.. .. .. .. 2 140.2 2 140.2
21 270.1 22 752.2 17 466.0 19 872.0 12 373.6 12 931.5
2 140.2
9 849.2
2 140.2
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
Financial Report 2009-10 Chapter 4 101

(c) Plant, equipment and vehicles, and infrastructure systems
($ million)
Infrastructure systems
Accumulated depreciation
Leased infrastructure systems
Accumulated depreciation
Infrastructure systems (written down value)
Plant, equipment and vehicles
Accumulated depreciation
Leased plant, equipment and vehicles
Accumulated depreciation
Plant, equipment and vehicles (written down value)
Total plant, equipment and vehicles, and infrastructure systems
Public Administration
State of Victoria
2010 2009
General government sector
2010 2009
50.2
( 3.9)
..
..
46.3
48.3
( 2.2)
..
..
46.2
582.2 529.0
( 238.5) ( 243.8)
1.0 1.0
( 0.2)
344.5
( 0.2)
286.0
390.8 332.2
40.8
( 1.0)
..
..
39.8
298.2
( 90.8)
1.0
( 0.2)
208.2
248.0 230.4
41.5
( 0.7)
..
..
40.8
265.9
( 77.1)
1.0
( 0.2)
189.6
Infrastructure systems
Accumulated depreciation
Leased infrastructure systems
Accumulated depreciation
Infrastructure systems (written down value)
Plant, equipment and vehicles
Accumulated depreciation
Leased plant, equipment and vehicles
Accumulated depreciation
Plant, equipment and vehicles (written down value)
Total plant, equipment and vehicles, and infrastructure systems
Community Housing
State of Victoria
General government sector
2010
..
2009
..
2010
..
2009
..
..
..
..
..
8.5
..
..
..
..
12.4
..
..
..
..
..
..
..
..
..
..
( 7.2)
..
..
1.3
1.3
( 10.0)
..
..
2.5
2.5
..
..
..
..
..
..
..
..
..
..
Infrastructure systems
Accumulated depreciation
Leased infrastructure systems
Accumulated depreciation
Infrastructure systems (written down value)
Plant, equipment and vehicles
Accumulated depreciation
Leased plant, equipment and vehicles
Accumulated depreciation
Plant, equipment and vehicles (written down value)
Total plant, equipment and vehicles, and infrastructure systems
Total
State of Victoria
2010 2009
General government sector
2010 2009
53 321.3 47 664.3 1 515.0 1 278.4
(9 246.6) (8 651.4) ( 337.6) ( 313.6)
157.8
( 33.3)
156.2
( 42.8)
..
..
..
..
44 199.2 39 126.4 1 177.3 964.8
9 790.7 9 271.2 5 090.0 4 754.0
(5 455.5) (5 160.4) (2 724.9) (2 605.9)
2 061.2 1 990.8 195.3
( 451.6) ( 387.9) ( 117.8)
197.8
( 80.5)
5 944.7 5 713.7 2 442.7 2 265.4
50 143.9 44 840.0 3 620.1 3 230.2
102 Chapter 4 Financial Report 2009-10

Education
State of Victoria
2010 2009
General government sector
2010 2009
11.7
..
..
..
11.7
1 024.6
( 682.5)
2.4
( 0.2)
344.3
356.0
7.6
..
..
..
7.6
992.3
( 681.6)
0.3
( 0.1)
310.9
318.6
11.7
..
..
..
11.7
1 024.6
( 682.5)
2.4
( 0.2)
344.3
356.0
7.6
..
..
..
7.6
..
..
..
..
..
Health and Welfare
State of Victoria
2010 2009
..
..
..
..
..
General government sector
2010
..
..
..
..
..
2009
992.3 2 030.4 2 026.9 2 030.4 2 026.9
( 681.6) (1 140.5) (1 104.9) (1 140.5) (1 104.9)
0.3 29.6 34.2 29.6 34.2
( 0.1)
310.9
( 12.9)
906.5
( 9.2)
947.0
( 12.9)
906.5
( 9.2)
947.0
318.6 906.5 947.0 906.5
..
..
..
..
..
947.0
Transportation and Communication
State of Victoria
2010
1 865.3
( 333.6)
3 274.4
18 018.9
2009
22 242.9 19 916.7
(7 501.7) (6 886.7)
5.2
( 1.8)
5.1
( 1.4)
14 744.5 13 033.7
4 097.7 3 654.7
(2 354.9) (2 154.8)
1 792.6
( 307.2)
2 985.3
16 019.0
General government sector
2010
472.4
..
..
..
472.4
128.2
( 79.0)
..
..
49.2
521.6
2009
297.8 31 016.4 27 691.6
292.9
124.9
( 72.5)
..
..
Public Safety and Environment
State of Victoria
2010 2009
( 4.9) (1 740.9) (1 762.5)
..
..
152.6
( 31.4)
151.1
( 41.3)
29 396.7
2 047.3
(1 031.7)
162.9
( 104.8)
26 038.9
2 055.8
( 965.3)
162.7
( 71.2)
52.4 1 073.7 1 182.0
345.3 30 470.4 27 220.9
General government
2010
990.0
( 336.6)
..
..
653.4
1 608.8
( 732.0)
162.3
( 104.5)
934.5
1 588.0
sector
2009
931.5
( 308.0)
..
..
623.5
1 344.0
( 669.8)
162.2
( 71.0)
765.5
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.
Financial Report 2009-10 Chapter 4 103

(d) Road networks and earthworks
($ million)
Roads
Accumulated depreciation
Road infrastructure
Accumulated depreciation
Roads (written down value)
Earthworks
Total road networks and earthworks
Public Administration
State of Victoria
2010 2009
General government sector
2010 2009
19.6
( 2.9)
0.4
..
17.1
..
17.1
29.9
( 4.4)
1.0
..
26.5
..
26.5
..
..
..
..
..
..
..
..
..
..
..
..
..
..
Roads
Accumulated depreciation
Road infrastructure
Accumulated depreciation
Roads (written down value)
Earthworks
Total road networks and earthworks
Community Housing
State of Victoria
2010 2009
General government sector
2010 2009
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
Roads
Accumulated depreciation
Road infrastructure
Accumulated depreciation
Roads (written down value)
Earthworks
Total road networks and earthworks
Total
State of Victoria
2010 2009
General government sector
2010 2009
23 201.2 19 905.2 23 176.0 19 867.1
(9 531.4) (7 857.5) (9 528.0) (7 852.2)
7 747.9 7 347.8 7 739.6 7 342.2
(2 828.2) (2 537.8) (2 825.6) (2 536.5)
18 589.6 16 857.7 18 561.9 16 820.5
6 479.2 5 486.8 6 479.2 5 486.8
25 068.8 22 344.5 25 041.1 22 307.3
104 Chapter 4 Financial Report 2009-10

Education
State of Victoria
2010 2009
General government sector
2010 2009
Health and Welfare
State of Victoria
2010 2009
General government sector
2010 2009
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
Transportation and Communication
State of Victoria
2010 2009
General government sector
2010 2009
23 176.0 19 867.1 23 176.0 19 867.1
(9 528.0) (7 852.2) (9 528.0) (7 852.2)
6 962.4 6 565.1 6 962.4 6 565.1
(2 699.9) (2 410.7) (2 699.9) (2 410.7)
17 910.5 16 169.1 17 910.5 16 169.1
6 479.2 5 486.8 6 479.2 5 486.8
24 389.7 21 655.9 24 389.7 21 655.9
Public Safety and Environment
State of Victoria
2010 2009
General government sector
2010 2009
5.7
( 0.5)
785.1
( 128.3)
662.0
..
662.0
8.2
( 0.9)
781.7
( 127.0)
662.1
..
662.1
..
..
777.1
( 125.7)
651.4
..
651.4
..
..
777.1
( 125.7)
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.
Financial Report 2009-10 Chapter 4 105

(e) Cultural assets
($ million)
Cultural assets
Accumulated depreciation
Total cultural assets
Public Administration
State of Victoria
2010 2009
General government sector
2010 2009
131.0
( 13.3)
117.6
126.1
( 9.2)
116.9
131.0
( 13.3)
117.6
126.1
( 9.2)
116.9
Cultural assets
Accumulated depreciation
Total cultural assets
Community Housing
State of Victoria
2010 2009
General government sector
2010 2009
..
..
..
..
..
..
..
..
..
..
..
..
Cultural assets
Accumulated depreciation
Total cultural assets
State of Victoria
2010 2009
Total
General government sector
2010 2009
4 546.6 4 517.5 4 518.1 4 489.1
( 120.8) ( 108.7) ( 120.8) ( 108.7)
4 425.8 4 408.8 4 397.3 4 380.4
106 Chapter 4 Financial Report 2009-10

Education
State of Victoria
2010 2009
General government sector
2010 2009
Health and Welfare
State of Victoria
2010 2009
General government sector
2010 2009
44.0
( 28.4)
15.6
44.2
( 28.6)
15.6
44.0
( 28.4)
15.6
44.2
( 28.6)
15.6
4.7
..
4.7
4.6
..
4.6
4.7
..
4.7
4.6
..
4.6
Transportation and Communication
State of Victoria
2010 2009
2.3
..
2.3
1.9
( 0.5)
1.4
General government sector
2010
1.8
2009
1.4
..
1.8
( 0.5)
0.9
Public Safety and Environment
State of Victoria
2010 2009
4 364.6
( 79.0)
4 285.6
4 340.7
( 70.5)
4 270.3
General government sector
2010
4 336.7
2009
4 312.9
( 79.0)
4 257.7
( 70.5)
4 242.4
Financial Report 2009-10 Chapter 4 107

(f) Reconciliation of movements
Reconciliation of movements in land and buildings
($ million)
Opening balance
Acquisitions
Reclassification
Revaluation
Disposals
Assets recognised for the first time
(a)
Impairment
Depreciation
Closing balance
Note:
(a) For 2009, assets recognised for the first time includes land under roads.
State of Victoria
2010 2009
General government sector
2010 2009
84 385.8 59 574.9 57 491.7 36 673.6
4 215.8 2 610.9 3 353.7 1 433.3
( 253.2) ( 182.8) 53.6 ( 13.7)
(1 341.9) 4 849.7 (2 350.7) 1 564.7
(1 765.9) ( 317.0) (1 319.3) ( 264.9)
1.8 18 682.5
( 5.0) ( 78.1)
.. 18 682.5
( 8.5) ( 45.0)
(1 129.8) ( 754.3) ( 859.4) ( 538.7)
84 107.7 84 385.8 56 361.2 57 491.7
Reconciliation of movements in plant, equipment and vehicle, and other infrastructure systems
($ million)
Opening balance
Acquisitions
Reclassification
Revaluation (a)
Disposals
Increase in leased motor vehicles
Assets recognised for the first time
Impairment
Depreciation
Closing balance
State of Victoria
2010 2009
General government sector
2010 2009
44 840.0 24 834.9 3 230.2 2 431.3
4 406.6 5 689.0
224.9 190.2
909.5
( 40.7)
1 477.2
24.7
2 389.3 15 349.9 130.5 84.8
( 172.8) ( 307.3) ( 162.1) ( 186.5)
80.9
148.1
( 26.6)
236.4
139.6
7.5
( 4.2)
86.8
( 0.7)
( 88.7)
..
1.0
(1 746.6) (1 300.2) ( 529.2) ( 513.6)
50 143.9 44 840.0 3 620.1 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)
Opening balance
Acquisitions
Reclassification
Revaluation
Disposals
Road infrastructure recognised for the first time
Impairment
Depreciation
Closing balance
State of Victoria
2010 2009
General government sector
2010 2009
22 344.5 21 828.0 22 307.3 21 754.5
1 057.1
0.1
1 991.3
963.3 1 056.3
( 33.2) ..
( 3.3) 2 000.9
961.1
..
..
( 5.1)
84.6
( 19.2)
..
( 5.6)
84.3
( 19.2)
..
.. ( 0.6) .. ..
( 403.7) ( 390.6) ( 402.2) ( 389.1)
25 068.8 22 344.5 25 041.1 22 307.3
108 Chapter 4 Financial Report 2009-10

Reconciliation of movements in cultural assets
($ million)
Opening balance
Acquisitions
Reclassification
Revaluation
Disposals
Assets recognised for the first time
Impairment
Depreciation
Closing balance
State of Victoria
2010 2009
General government sector
2010 2009
4 408.8 4 329.9 4 380.4 4 305.5
25.8
2.8
1.3
1.0
0.9
..
20.1
3.3
67.2
0.6
0.7
0.8
25.7
3.9
0.9
0.2
0.9
..
16.1
3.3
67.2
0.6
0.7
0.8
( 14.7) ( 13.9) ( 14.7) ( 13.9)
4 425.8 4 408.8 4 397.3 4 380.4
($ million)
Intangible produced assets
Accumulated depreciation
Intangible non-produced assets
Accumulated amortisation
Total intangibles
Investment properties
Biological assets
Other assets
Total other non-financial assets
State of Victoria
2010 2009
General government sector
2010 2009
1 099.7 879.3 655.6 502.3
( 376.2) ( 315.1) ( 291.9) ( 229.2)
533.8
( 159.4)
241.2
( 52.8)
81.1
( 43.6)
68.7
( 20.4)
1 097.8
34.0
49.3
752.6
26.8
47.0
373.6 389.7
1 554.7 1 216.1
401.3
26.5
31.8
311.5
771.0
321.3
21.1
27.0
312.8
682.1
Reconciliation of movement in intangibles, investment properties and biological assets
($ million)
Opening balance
Acquisitions
Reclassification
Revaluation
Disposals
Assets recognised for the first time
Impairment
Amortisation and depreciation
(a)
Closing balance
(b)
Notes:
(a) For produced and non-produced assets.
(b) Reconciliation does not include movements of ‘other’ assets.
State of Victoria
2010 2009
826.4
342.6
33.6
1.3
( 4.0)
97.4
4.3
( 120.5)
1 181.1
603.0
270.7
5.6
0.2
( 22.6)
65.2
0.2
( 95.8)
826.4
General government sector
2010 2009
369.4
161.5
1.4
..
( 3.5)
4.5
0.4
( 74.2)
459.5
294.1
141.8
12.7
0.4
( 13.7)
0.1
..
( 65.8)
369.4
Financial Report 2009-10 Chapter 4 109

(a) Purchases of non-financial assets (a)
($ million)
General public services
Public order and safety
Education
Health
Social security and welfare
Housing and community amenities
Recreation and culture
Fuel and energy
Agriculture, forestry, fishing, and hunting
Mining, manufacturing, and construction
Transport and communications
Other economic affairs
Other purposes
Total purchases of non-financial assets
Note:
(a) Note 39 provides definitions and descriptions of government purpose classifications.
State of Victoria
2010
377.9
448.2
1 404.9
443.4
2009
198.0
General government sector
2010
339.4
333.2 448.2
556.5 1 404.9
495.7 443.4
2009
166.7
333.2
556.5
495.7
90.7 167.4
3 614.9 2 976.7
239.9 382.4
8.1
0.1
4.5
( 34.1)
90.7
187.2
96.0
1.1
27.1
167.4
267.1
73.2
0.9
16.6
0.1 ( 3.1) 0.1 ( 3.1)
2 297.5 2 337.4 1 605.8 1 052.0
16.6 20.2 16.6 20.2
0.7 0.3 0.7 0.3
8 943.1 7 435.2 4 661.2 3 146.8
(b) Total assets (a)
($ million)
General public services
Public order and safety
Education
Health
Social security and welfare
Housing and community amenities
Recreation and culture
Fuel and energy
Agriculture, forestry, fishing, and hunting
Mining, manufacturing, and construction
Transport and communications
Other economic affairs
Other purposes
Not allocated by purpose (b)
Total asset
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.
State of Victoria
2010
974.0
2009
809.0
General government sector
2010
582.8
2009
453.5
5 895.9 5 640.4 5 895.9 5 640.4
14 960.4 13 878.9 14 960.4 13 878.9
9 694.3 9 429.8 9 694.3 9 429.8
670.7 602.0 670.7 602.0
56 845.3 53 761.2 7 981.9 8 486.3
10 952.1 10 841.5 7 085.7 6 740.0
14.5
416.7
19.6
411.0
2.4
381.5
1.9
381.8
.. .. .. ..
65 639.6 62 551.3 43 019.9 42 544.7
278.7
3.0
253.0
2.9
278.7
3.0
253.0
2.9
37 123.6 36 053.4 73 549.2 69 113.6
203 468.8 194 254.0 164 106.4 157 528.9
110 Chapter 4 Financial Report 2009-10

($ million)
Current borrowings
Domestic borrowings
Foreign currency borrowings
Finance lease liabilities
Derivative financial instruments
Total current borrowings
Non-current borrowings
Domestic borrowings
Foreign currency borrowings
Finance lease liabilities
Derivative financial instruments
Total non-current borrowings
State of Victoria
2010 2009
3 505.3 977.9
1 667.4 2 304.3
General government sector
2010 2009
182.6 106.0
1 818.6 2 590.0
7 173.9 5 978.2
729.6
..
138.6
5.3
873.5
622.1
..
61.9
7.4
691.4
18 539.9 15 238.6 11 131.3 8 287.2
130.2 123.8 .. ..
2 495.0 2 591.3 1 607.5 1 660.4
241.3 194.0 0.2 1.1
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.
($ million)
Current
Accrued salaries and wages (a)
Long service leave
Total current employee benefits
Non-current
Long service leave
Total non-current employee benefits
Total other employee benefits
Note:
(a) Includes accrued annual leave, payroll tax and other similar on costs.
State of Victoria
2010 2009
General government sector
2010 2009
1 404.4 1 461.7 1 266.5 1 346.4
2 773.7 2 652.5 2 618.2 2 504.9
4 178.1 4 114.2 3 884.7 3 851.3
508.6 455.0 473.2 425.8
508.6 455.0 473.2 425.8
4 686.7 4 569.2 4 357.9 4 277.2
Financial Report 2009-10 Chapter 4 111

($ million)
Provision for insurance claims
Victorian WorkCover Authority
Transport Accident Commission
Victorian Managed Insurance Authority
Other agencies
Current provision for insurance claims
Onerous contracts
Other provisions
Total current other provisions
Non-current provision for insurance claims
Victorian WorkCover Authority
Transport Accident Commission
Victorian Managed Insurance Authority
Other agencies
Non-current provision for insurance claims
Onerous contracts
Other provisions
Total non-current other provisions
Total other provisions
Reconciliation of movements in insurance claims
State of Victoria
2010 2009
1 710.5 1 640.4
958.8 858.1
177.7
59.6
233.3
73.0
2 906.6 2 804.8
General government sector
2010 2009
..
..
..
57.4
57.4
..
..
..
71.2
71.2
100.8
328.7
152.0
359.9
..
209.1
..
204.1
3 336.1 3 316.7
7 264.5 6 674.5
6 712.3 5 878.9
1 140.0 1 069.1
148.6 198.4
15 265.5 13 820.8
792.8 1 057.5
364.9 323.5
16 423.1 15 201.9
19 759.2 18 518.6
266.5
..
..
..
148.2
148.2
..
303.3
451.5
718.0
275.4
..
..
..
198.1
198.1
..
311.0
509.1
784.4
($ million)
Opening balance
Effect of changes in assumptions and claims experience
Cost of prior year claims (unwinding of discount)
Increase in claims incurred (a)
Claim payments during the year (a)
Other
Closing balance
Note:
(a) Claim payments and claims incurred during the year are net of recoveries.
State of Victoria
2010 2009
16 625.7 15 228.9
975.8 541.6
293.9 458.1
2 990.9 2 854.0
(2 505.7) (2 311.0)
( 208.6) ( 146.0)
18 172.1 16 625.7
Reconciliation of movements in onerous contracts provision
General government sector
2010 2009
269.3
( 8.8)
311.5
( 17.8)
( 13.7)
26.9
( 54.9)
( 13.3)
205.6
13.8
11.5
( 49.8)
..
269.3
($ million)
Opening balance
Receipts
Payments
Discount interest (a)
(Gain)/loss on restatement of the liability
Closing balance
State of Victoria
2010
1 209.5
215.5
2009
1 254.3
269.2
( 327.9) ( 410.2)
..
( 203.6)
893.6
..
96.2
1 209.5
General government sector
2010
..
..
..
..
..
..
Note:
(a) The net change in the present value of assets and liabilities between reporting periods has been recognised as discount interest.
2009
..
..
..
..
..
..
112 Chapter 4 Financial Report 2009-10

2010
Entity
Victorian
WorkCover
Authority
Transport
Accident
Commission
Victorian
Managed
Insurance
Authority
Actuary
Pricewaterhouse
Coopers Actuarial
Ltd
Pricewaterhouse
Coopers Actuarial
Ltd
Finity Consulting
Pty Ltd
(Public
Healthcare
Program)
Weighted average expected term to settlement
5.4 years
13.4 yrs
5.7 years
Financial assumptions used (not later than 1 year)
(a) inflation rate
4.00 per cent discount rate
4.49 per cent inflation rate
5.00 per cent discount rate
4.5 per cent weighted average inflation rate =
7.9 per cent weighted average discount rate
= 5.1 per cent
Financial assumptions used
(later than 1 year)
(a)
Prudential margin inflation rate
3.75- 4.00 per cent
8.5 per cent discount rate
4.52 – 5.77 per cent inflation rate
4.50 per cent discount rate
10.5 per cent
5.75 per cent weighted weighted average discount rate = 5.1 per cent
17.3 per average inflation rate = 7.9 per cent cent of the net outstanding claims liability and claims handling expense
Victorian
Managed
Insurance
Authority
Victorian
Managed
Insurance
Authority
Finity Consulting
Pty Ltd
(General
Government
Program)
Finity Consulting
Pty Ltd
(Dust Diseases &
Workers
Compensation or
Run-off Program)
1.8 years
13.3 years weighted average inflation rate =
3.5 per cent weighted average discount rate
= 4.7 per cent weighted average inflation rate =
6.0 per cent weighted average discount rate
= 5.5 per cent weighted average inflation
28.4 per cent of the rate = 3.5 per cent weighted net outstanding claims average discount rate = 4.7 per cent liability and claims handling expense weighted average inflation rate = 6.0 per cent
30.5 per cent of the net weighted average discount rate = 5.5 per cent outstanding claims liability and claims handling expense
Note:
(a) The inflation rate assumptions are based on the anticipated rise in costs relevant to a particular entity.
Financial Report 2009-10 Chapter 4 113

2009
Actuary
Pricewaterhouse
Coopers
Actuarial Ltd
Weighted average expected term to settlement
5.4 years
Financial assumptions used (not later than 1 year) (a) inflation rate
3.30 – 3.80 per cent discount rate
3.44 per cent
Financial assumptions used
(later than 1 year)
(a) Entity
Victorian
WorkCover
Authority
Transport
Accident
Commission
Victorian
Managed
Insurance
Authority
Victorian
Managed
Insurance
Authority
Pricewaterhouse
Coopers
Actuarial Ltd
Ernst & Young
Actuarial
Business
Consultants Pty
Ltd
(Public
Healthcare
Program)
Ernst & Young
Actuarial
Business
Consultants Pty
Ltd
(General
Government
Program)
13.5 yrs
5.9 years
1.8 years inflation rate
4.00 per cent discount rate
3.4 per cent weighted average inflation rate =
8.0 per cent weighted average discount rate =
5.5 per cent weighted average inflation rate =
3.8 per cent weighted average discount rate =
5.3 per cent
Victorian
Managed
Insurance
Authority am actuaries Pty
Ltd
(Run-off
Program)
14.2 years weighted average inflation rate =
6.6 per cent weighted average discount rate =
5.9 per cent weighted average inflation rate = 6.6 per cent 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. inflation rate
3.25 – 3.75 per cent discount rate
4.82 – 6.17 per cent inflation rate
4.50 per cent discount rate
6.0 per cent weighted average inflation rate = 8.0 per cent weighted average discount rate = 5.5 per cent weighted average inflation rate = 3.8 per cent weighted average discount rate = 5.3 per cent
Prudential margin
8.5 per cent
7.5 per cent
22.5 per cent of the net outstanding claims liability and claims handling expense
25 per cent of the net outstanding claims liability and claims handling expense
25 per cent of the net outstanding claims liability and claims handling expense
114 Chapter 4 Financial Report 2009-10

(a) Reserves
($ million)
Property, plant and equipment revaluation surplus
Available-for-sale investments
Revaluation reserve for investments in PFC and PNFC entities
Other reserves
Total reserves
General government
State of Victoria
2010 2009 sector
2010 2009
68 430.8 61 661.6 33 193.2 29 776.6
25.4
..
11.9 28.3 13.5
.. 40 158.8 37 644.8
2 590.0 2 401.7 866.7 774.6
71 046.2 64 075.2 74 247.0 68 209.5
Movements in reserves
Property, plant and equipment revaluation surplus
($ million)
Balance at beginning of reporting period
Revaluation – associate
Revaluation – joint venture
Revaluation – other
Balance at the end of the reporting period
State of Victoria
2010 2009
General government sector
2010 2009
61 661.6 41 220.6 29 776.6 28 459.7
.. ( 227.4) .. ( 227.4)
0.1 91.5 0.1 91.5
6 769.2 20 576.9 3 416.6 1 452.8
68 430.8 61 661.6 33 193.2 29 776.6
Available-for-sale investments revaluation surplus
($ million)
Balance at beginning of reporting period
Revaluation
Transferred to profit or loss for the period
Balance at the end of the reporting period
State of Victoria
2010 2009
11.9
20.3
( 7.3)
6.0
( 63.2)
69.1
25.3 11.9
General government sector
2010
13.5
2009
3.0
18.4
( 3.6)
( 41.4)
51.9
28.3 13.5
Financial Report 2009-10 Chapter 4 115

Revaluation surplus for investments in PFC and PNFC entities
($ million)
Balance at beginning of reporting period
Revaluation – PFC entities
Revaluation – PNFC entities
Balance at the end of the reporting period
General government
State of Victoria
2010
..
2009 sector
2010 2009
.. 37 644.8 23 407.1
..
..
.. ( 483.0) (2 966.4)
.. 2 996.9 17 204.1
.. .. 40 158.8 37 644.8
Other reserves
($ million)
Balance at beginning of reporting period
Transfers to/(from) accumulated surplus
Balance at the end of the reporting period
State of Victoria
2010 2009
2 401.7 1 804.5
188.3 597.2
2 590.0 2 401.7
General government sector
2010 2009
774.6
92.1
866.7
777.7
( 3.1)
774.6
(b) Accumulated surplus/(deficit)
($ million)
Balance at beginning of reporting period
Net result for the period
Assets recognised for the first time – policy adjustments
Transfers to/(from) reserves
Balance at the end of the reporting period
State of Victoria
General government sector
2010 2009 2010 2009
53 888.9 48 527.8 48 424.8 37 686.9
(5 677.7) (13 088.8) (5 413.1) (8 372.8)
.. 18 682.5 .. 18 682.5
88.7 ( 232.6) 252.3 428.3
48 299.9 53 888.9 43 263.9 48 424.8
(c) Non-controlling interest
($ million)
Balance at beginning of reporting period
Net contributions during the year (a)
State of Victoria
2010 2009
39.5
5.0
32.0
7.5
General government sector
2010 2009
39.5
5.0
32.0
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.
116 Chapter 4 Financial Report 2009-10

(a) Reconciliation of cash and cash equivalents
($ million)
Cash
Deposits at call
Cash and cash equivalents
Bank overdraft
Balances as per cash flow statement
State of Victoria
2010 2009
General government sector
2010 2009
1 524.2
3 187.3
1 586.0 1 350.8
2 731.0 1 870.5
1 290.3
1 555.6
4 711.5 4 317.0 3 221.3 2 846.0
( 0.2) ( 1.2) .. ( 0.5)
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)
Net result
Non-cash movements
Depreciation and amortisation
Revaluation of investments
Assets (received)/provided free of charge
Assets not previously recognised
Revaluation of assets
Discount/premium on other financial assets/borrowings
Increase/(decrease) in payables
Increase/(decrease) in employee benefits
Increase/(decrease) in superannuation
Increase/(decrease) in other provisions
Increase/(decrease) in other liabilities
(Increase)/decrease in receivables
(Increase)/decrease in other non-financial assets
Net cash flows from operating activities
State of Victoria
2010
3 415.3
( 105.3)
( 106.9)
Bad/doubtful debts
Foreign currency dealings
Unrealised gains/losses on borrowings
Discounting of assets and liabilities
Movements included in investing and financing activities
..
( 0.5)
686.0
..
Net gain/loss from sale of investments
Net gain/loss from sale of plant and equipment
Realised gains/losses on borrowings
Movements in assets and liabilities
Increase/(decrease) in provision for doubtful debts
(1 057.8)
49.5
17.1
45.4
2009
( 66.8)
..
0.3
254.2
..
1 627.5
( 66.8)
127.1
144.6
General government sector
2010
2 554.8 1 879.8
2 539.7 ( 28.3)
7.5
0.2
( 0.5)
..
..
( 34.8)
40.4
0.9
46.1
2009
(5 677.7) (13 088.8) (5 413.1) (8 372.8)
1 521.1
21.9
( 426.4) ( 242.5) ( 158.6)
( 20.2) ( 144.4)
4 504.8 254.2
( 19.3) ( 144.3)
4 558.9
( 44.3)
229.7
8.8
..
0.3
..
..
137.1
( 62.4)
..
136.1
928.8
117.4
1 848.1
1 249.0
..
666.8
327.9
1 491.0
..
( 150.2) ( 798.6)
4.4 ( 24.5)
523.7
80.7
7 796.3 1 861.9
( 65.8)
..
( 70.2)
( 6.1)
688.8
303.9
7 745.5
115.2
..
( 300.5)
( 3.2)
5 320.8 3 352.1 3 203.4 1 980.7
Financial Report 2009-10 Chapter 4 117

(a) Reconciliation to GFS net operating balance (a)
($ million)
Convergence differences:
PNFC/PFC dividends
General government sector
2010
Net result from transactions – net operating balance 643.6
..
2009
251.2
..
Public non-financial corporations
2010
394.6
2009
181.8
248.4 193.2 plus total convergence difference:
GFS Net operating balance
..
643.6
..
251.2
( 248.4)
146.2
( 193.2)
( 11.4)
Note:
(a) Determined in accordance with the ABS GFS Manual.
(b) Reconciliation to GFS total change in net worth (a)
($ million)
Comprehensive result – total change in net worth
Convergence differences:
Relating to net operating balance – PNFC/PFC dividends
Relating to other economic flows: (b)
Doubtful receivables of the GG sector (c)
Doubtful receivables of the PNFC/PFC sector
Future tax benefits of the PNFC/PFC sector
Deferred tax liability of the PNFC/PFC sector
Net gain on equity investments in other sector entities measured at proportional share of the carrying amount of net assets/(liabilities) (d)(e) plus total convergence differences
GFS Total change in net worth
General government sector
2010
876.7 26 299.8 3 309.3
46.2
520.3
2009
135.4
Public non-financial corporations
2010 2009
248.4
..
( 1.3)
( 5.4)
496.6
17 404.5
193.2
..
( 0.4)
( 44.4)
1 139.2
82.8 (4 047.6) (18 692.2)
566.5 218.1 (3 309.3) (17 404.5)
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.
118 Chapter 4 Financial Report 2009-10

Public financial corporations
2010 2009
( 114.0) ( 189.6)
59.2
( 59.2)
( 173.2)
150.0
( 150.0)
( 339.6)
Public financial corporations
2010
( 423.8)
2009
(2 816.4)
59.2
..
0.4
28.7
1.3
334.2
423.8
..
150.0
..
8.8
(1 021.4)
0.9
3 678.1
2 816.4
..
Eliminations
2010
( 329.5)
2009
( 367.1)
( 307.6)
307.6
( 21.9)
( 343.2)
343.2
( 23.9)
Eliminations
2010
(2 380.3)
2009
(14 482.7)
( 307.6) ( 343.2)
( 23.4)
( 497.9)
3 193.1
..
..
1 065.8
(1 140.2)
14 931.3
..
..
2 364.3
( 16.0)
14 513.8
31.0
State of Victoria
2010
594.7
2009
( 123.8)
..
..
594.7
..
..
( 123.8)
State of Victoria
2010
1 382.0
2009
26 405.3
.. ..
46.2
( 0.9)
..
..
..
135.4
8.4
..
..
..
45.2
1 427.2
143.8
26 549.0
Financial Report 2009-10 Chapter 4 119

(c) Reconciliation to GFS net lending/(borrowing) (a)
Net lending/(borrowing)
Convergence differences:
Relating to net operating balance – PNFC/PFC dividends plus total convergence difference:
GFS Net lending/(borrowing)
Note:
(a) Determined in accordance with the ABS GFS Manual.
($ million)
General government sector
2010 2009
Public non-financial corporations
2010
(2 212.8) (1 184.4) (2 496.4)
.. .. 248.4
2009
(3 390.6)
193.2
.. .. 248.4
(2 212.8) (1 184.4) (2 744.8)
193.2
(3 583.8)
120 Chapter 4 Financial Report 2009-10

Public financial corporations
2010 2009
( 123.6)
59.2
59.2
( 182.7)
( 226.3)
150.0
150.0
( 376.2)
Eliminations
2010
( 329.5)
( 307.6)
2009
( 367.1)
( 343.2)
( 307.6)
( 21.9)
( 343.2)
( 23.9)
State of Victoria
2010
(5 143.0)
..
2009
(5 168.4)
..
..
(5 143.0)
..
(5 168.4)
Financial Report 2009-10 Chapter 4 121

(d) Reconciliation to GFS net worth (a)
Net worth
Convergence differences:
Relating to net operating balance – PNFC/PFC dividends
Non-controlling interest
Doubtful receivables of the GG sector (b)
Doubtful receivables of the PNFC/PFC sector
Future tax benefits of the PNFC/PFC sector
Deferred tax liability of the PNFC/PFC sector
Investments in other sector entities (c) (d)
Shares and other contributed capital plus total convergence difference:
GFS Net worth
($ million)
General government sector
2010 2009 2010
117 555.5 116 673.8 64 176.6
Public non-financial corporations
248.4
2009
59 836.3
193.2
( 44.5)
434.4
..
..
..
1 687.1
..
( 39.5)
388.2
..
..
..
..
18.0
( 156.0)
3 613.0
..
19.3
( 150.6)
3 116.4
1 166.8
.. (67 900.0) (63 014.6)
2 077.0 1 515.5 (64 176.6) (59 836.3)
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)
Cash surplus/(deficit)
Convergence differences:
($ million)
General government sector
2010 2009
Less: Acquisitions under finance leases and similar arrangements
GFS cash surplus/(deficit)
Public non-financial corporations
2010
(1 270.5) ( 897.9) (2 677.2) (3 272.5)
( 74.5) ( 453.4) ( 0.5) ( 128.1)
(1 345.0) (1 351.3) (2 677.7)
2009
(3 400.6)
Note:
(a) Determined in accordance with the ABS GFS Manual.
122 Chapter 4 Financial Report 2009-10

Public financial corporations
2010
332.1
2009
798.5
59.2
..
47.6
(1 838.8)
3.3
1 396.6
150.0
..
47.2
(1 867.5)
2.0
869.8
( 332.1)
..
( 798.5)
..
Eliminations
2010
(62 673.6)
2009
(59 305.0)
( 307.6)
..
..
( 343.2)
..
..
1 994.8
(3 616.3)
(1 687.1)
66 503.4
2 018.1
(3 118.4)
(1 166.8)
62 144.8
62 887.2
213.6
59 534.6
229.6
Public financial corporations
2010
671.2
..
671.2
2009
58.4
..
58.4
Eliminations
2010
( 27.2)
..
2009
374.6
..
( 27.2) 374.6
State of Victoria
2010
119 390.6
2009
118 003.6
..
( 44.5)
434.4
65.6
..
( 39.5)
388.2
66.5
..
..
..
..
..
..
..
..
455.5
119 846.1
415.3
118 418.8
State of Victoria
2010
(3 303.7)
( 74.9)
2009
(3 737.5)
( 581.5)
(3 378.7) (4 318.9)
Financial Report 2009-10 Chapter 4 123

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
$15 million. In regard to the other statements, the high-level causes of major variances in the key aggregates, where material, have been explained.
(a) Consolidated comprehensive operating statement
Revenue from transactions
Taxation revenue
Interest revenue
Dividends and income tax equivalent and rate equivalent revenue
Sales of goods and services
Grants
Other revenue
Notes
($ million)
General government sector
Original
Budget
Revised
Budget
2010
Actual
(a) 13 273.7 13 642.1 13 740.5
(b)
(c)
(d)
434.1
379.4
5 044.1
348.5
459.2
5 427.9
333.5
485.6
5 289.5
BudgetVa riance
466.8
( 100.6)
106.2
245.4
Total revenue from transactions
Expenses from transactions
Employee expenses
Superannuation interest expense
Other superannuation
Depreciation
Interest expense
(h)
(i)
(j)
(k)
42 388.3 43 745.5
659.2
1 599.3
866.7
1 542.0
1 646.4 1 888.4
713.8 830.1
44 585.3
(g) 15 276.5 15 395.8 15 404.8
866.7
1 527.8
1 869.7
843.3
Grants and other transfers
Other operating expenses
(l) 8 442.3 8 464.5 9 174.5
(m) 13 821.3 14 363.1 14 254.9
2 197.0
128.3
207.6
( 71.5)
223.3
129.5
732.2
433.5
(a)
(e) 21 554.1 22 111.3 22 717.8 1 163.6
(f) 1 702.9 1 756.5 2 018.4 315.5
%
Revised
Budget
Variance
4
-23
28
5
5
19
5
1
31
-4
14
18
9
3
98.5
%
1
( 15.0) -4
26.5 6
( 138.5)
606.4
261.8
839.8
8.9
..
( 14.1)
710.1
-3
3
15
2
0
..
-1
( 18.7) -1
13.1 2
8
( 108.2) -1
Total expenses from transactions
Net result from transactions – Net operating balance
42 158.8 43 350.6
229.5
Other economic flows included in net result
Net gain/(loss) on disposal of non-financial assets
54.1
16.1 Net gain/(loss) on financial assets or liabilities at fair value
Net actuarial gain/(loss) of superannuation defined benefits plans
(n) ..
394.9
80.7
19.7
43 941.7
643.6
( 40.4)
64.0
1 782.9
414.1
47.9
4
180
( 94.4) -175
298
781.9 (1 450.2) (1 450.2) n.a.
591.1
248.7
1
63
( 121.0) -150
44.3 225
(2 232.1) -285
124 Chapter 4 Financial Report 2009-10

Share of net profit/(loss) from associates/joint venture entities, excluding dividends
Other gains/(losses) from other economic flows (a) (b)
Total other economic flows included in net result
Notes
(o)
Original
Budget
( 56.9)
($ million)
General government sector
Revised
Budget
..
2010
Actual
( 1.4)
BudgetV ariance %
( 1.4) n.a.
3 406.8 3 255.4 6 289.8 2 883.1 n.a.
Revised
Budget
Variance
( 1.4)
3 034.4
%
0
222.2 (4 628.8) (4 571.9) 8036 (4 851.0) -218
3
13.2 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
Revaluations of (p)
..
3 168.2
..
1 879.4
15.2
3 416.7
15.2 n.a.
248.5 8
15.2
1 537.3
0
82 non-financial assets
Net gain/(loss) on equity investments in other sector entities at proportional share of the carrying amount of net assets
Transfers to accumulated funds/other movements in equity
(q)
(r)
244.5
( 5.9)
1 089.9
286.1
2 513.9
344.1
2 269.5 928
350.0 -5941
1 424.0 131
58.0 20
Total other economic flows – Other movements in equity
Comprehensive result –
Total change in net worth
Source: 2009-10 Budget Paper No. 4
3 649.5 4 754.8 876.7 (2 772.8) n.a. (3 878.1) -82
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.
Financial Report 2009-10 Chapter 4 125

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.
126 Chapter 4 Financial Report 2009-10

(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.
Financial Report 2009-10 Chapter 4 127

(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.
128 Chapter 4 Financial Report 2009-10

(b) Consolidated balance sheet
Assets
Financial assets
Cash and deposits
Advances paid
Investments, loans and placements
Receivables
Investments accounted for using the equity method
Investments in other sector entities
Total financial assets
Non-financial assets
Inventories
Non-financial assets held-for-sale
Land, buildings, infrastructure, plant and equipment
Other non-financial assets
Total non-financial assets
Total assets
Liabilities
Deposits held
Advances received
Borrowings
Payables
Superannuation
Other employee benefits
Other provisions
Total liabilities
Net assets
Accumulated surplus/(deficit)
Reserves
Non-controlling interest
Net worth
FISCAL AGGREGATES
Net financial worth
Net financial liabilities
Net debt
Source: 2009-10 Budget Paper No. 4
($ million)
General government sector
Original
Budget
2 743.6
666.8
2 568.3
Revised
Budget
2 266.0
282.7
2 576.4
2010
Actual
Variance to
Original
Budget %
3 221.3 477.7 17
278.0 ( 388.8) -58
2 629.0 60.6 2
Revised
Budget
Variance %
955.4 42.2
( 4.7) -1.7
52.6 2.0
2 676.3
32.9
2 555.9
35.0
2 883.6
35.1
207.3
2.2
44 396.1 63 467.2 64 508.7 20 112.6
74 569.2 92 287.0 89 419.7 14 850.5
8
7
45
327.7 12.8
0.1 0.3
1 041.5 1.6
53 084.1 71 183.1 73 555.8 20 471.7 39 2 372.6 3.3
234.0 251.2 268.4 34.4 15 17.2 6.8
31.0 60.5 91.5 60.6 196 31.0 51.3
20 (2 867.3) -3.1
507.6 672.5 771.0 263.4 52 98.6 14.7
75 341.7 93 271.2 90 550.7 15 209.0 20 (2 720.5) -2.9
128 425.8 164 454.3 164 106.4 35 680.6
386.5
1.2
313.8
2.0
477.0
2.5
90.5
1.3
28 ( 347.9) -0.2
23
107
15 509.8 13 519.9 13 612.5 (1 897.3) -12
163.2 52.0
0.4 21.5
92.6 0.7
4 180.6
24 726.1 20 268.5 22 534.1 (2 192.0)
4 546.6
3 695.1
4 444.0
4 849.0 668.4 16
4 357.9 ( 188.7)
-9 2 265.6 11.2
-4
1 153.9 31.2
( 86.1) -1.9
645.2 762.4 718.0 72.8
49 996.0 43 005.7 46 551.0 (3 445.0)
11
-7
( 44.4) -5.8
3 545.3 8.2
78 429.8 121 448.6 117 555.5 39 125.6 50 (3 893.1) -3.2
25 765.2 50 178.3 43 263.9 17 498.7 68 (6 914.4) -13.8
52 592.6 71 210.8 74 247.0 21 654.4
72.0 59.5 44.5 ( 27.5)
41
-38
3 036.3 4.3
( 15.0) -25.2
78 429.8 121 448.6 117 555.5 39 125.6 50 (3 893.1) -3.2
3 088.1 28 177.4 27 004.8 23 916.7
41 308.0 35 289.8 37 503.9 (3 804.1)
9 918.7 8 710.7 7 963.6 (1 955.1)
Financial Report 2009-10 Chapter 4 129

(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.
130 Chapter 4 Financial Report 2009-10

(c) Consolidated cash flow statement
($ million)
General government sector
Variance
Original
Budget
Revised
Budget
2010
Actual to Original
Budget Notes
Cash flows from operating activities
Receipts
Taxes received
Grants
Sales of goods and services
Interest received
Dividends and income tax equivalent and rate equivalent receipts
Other receipts
Total receipts
Payments
Payments for employees
Superannuation
Interest paid
Grants and subsidies
Goods and services
Other payments
13 431.6
21 554.1
5 573.7
400.1
389.0
13 991.9 13 871.5
22 111.3 22 716.8
5 975.1
313.8
461.1
6 158.8
323.8
471.9
1 518.7 1 426.3 1 611.7
42 867.1 44 279.5 45 154.4
(15 087.3) (15 228.1) (15 335.9)
(1 971.7) (2 030.5) (1 982.8)
( 675.5) ( 766.5) ( 767.4)
(8 442.3) (8 504.5) (9 233.3)
(14 002.9) (14 681.0) (14 194.7)
( 376.0) ( 426.7) ( 436.9)
440.0
1 162.7
585.0
( 76.3)
82.9
93.0
2 287.3
( 248.5)
( 11.1)
( 91.8)
( 791.0)
( 191.8)
( 60.9)
-19
21
%
Revised
Budget
Variance
3 ( 120.4)
5 605.5
10 183.7
10.0
10.8
3
2
6
5
185.3
874.9
13
2
2 ( 107.8) 1
1
14
9
47.6 -2
( 0.9) n.a.
( 728.8) 9
1
16
486.2
( 10.3)
-3
2
%
-1
3
3
Total payments
Net cash flows from operating activities
(a)
Cash flows from investing activities
Purchases of non-financial assets
Sales of non-financial assets
(40 555.8) (41 637.1) (41 951.0) (1 395.2)
2 311.3 2 642.4 3 203.4 892.0
(5 228.6)
222.8
(4 853.8) (4 661.2)
270.8 187.4
567.4
( 35.4)
3
39
-11
-16
( 313.9)
561.0
192.6
( 83.5)
1
21
-4
-31
109.1 -2 Cash flows from investments in non-financial assets
(b) (5 005.8) (4 583.0) (4 473.9) 531.9 -11
Net cash flows from investments in financial assets for policy purposes
Sub-total
(c) (1 954.8) (1 429.7) (1 236.6) 718.2 -37
Net cash flows from investments in financial assets for liquidity management purposes
Net cash flows from investing activities
Cash flows from financing activities
Advances received (net)
Net borrowings
Deposits received (net)
(6 960.6) (6 012.7) (5 710.5)
( 75.0)
( 0.7)
4 462.7
..
( 6.1)
( 0.7)
( 1.0)
(7 035.6) (6 018.8) (5 711.5)
( 0.3)
1 250.2
73.9
1 324.1
-18
-99
-19
0.4 -62
2 797.7 2 892.6 (1 570.2) -35
( 0.6) ( 8.3) ( 8.3) n.a.
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
4 462.0
( 262.2)
2 796.4 2 884.0 (1 578.1) -35
( 580.0) 375.9 638.1 -243
193.1
302.3
5.1
307.3
94.9
87.6
-14
-5
-83
-5
0.4 -62
3
( 7.8) 1347
3
955.9 -165
Financial Report 2009-10 Chapter 4 131

General government sector
Original
Budget
3 003.2
($ million)
Revised
Budget
2010
Actual
Variance to Original
Budget %
2 845.5 2 845.5 ( 157.7) n.a.
Revised
Budget
Variance %
..
n.a. Cash and cash equivalents at beginning of reporting period
Cash and cash equivalents at end of reporting period
Source: 2009-10 Budget Paper No. 4
Notes
2 741.0 2 265.5 3 221.3 480.4 18 955.9 42
132 Chapter 4 Financial Report 2009-10

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.
Financial Report 2009-10 Chapter 4 133

Consolidated statement of changes in equity for the period ended 30 June
General government sector
2009-10 Original budget
Accumulated surplus/(deficit)
Other movements in equity
Minority interest
Property, plant and equipment revaluation reserve
Net movements in other reserves
Accumulated net gain on equity investments in other sector entities
Total equity at end of the period
2009-10 Actual
Accumulated surplus/(deficit)
Other movements in equity
Non-controlling interest
Physical asset revaluation surplus
Net movements in other reserves
Accumulated net gain on equity investments in other sector entities
Total equity at end of the year
Variance to original budget
Accumulated surplus/(deficit)
Other movements in equity
Non-controlling interest
Physical asset revaluation surplus
Net movements in other reserves
Accumulated net gain on equity investments in other sector entities
Total equity at end of the year
($ million)
Equity at
1 July
25 528.4
..
52.0
28 962.9
Total comprehensiv e result
242.8
( 5.9)
..
3 168.2
Transactions with owner in its capacity as owner
Equity at
30 June
.. 25 771.1
..
20.0
( 5.9)
72.0
.. 32 131.1
789.8
19 427.2
74 760.3
48 424.8
..
39.5
29 776.6
788.1
37 644.8
116 673.8
22 896.4
..
( 12.5)
813.7
( 1.8)
18 217.6
41 913.5
..
244.5
3 649.5
(5 413.1)
252.3
..
3 416.7
107.0
2 513.9
876.7
(5 655.9)
258.2
..
248.5
107.0
2 269.5
(2 772.8)
.. 789.8
.. 19 671.7
20.0 78 429.8
.. 43 011.7
.. 252.3
5.0 44.5
.. 33 193.2
.. 895.0
.. 40 158.8
5.0 117 555.5
.. 17 240.5
.. 258.2
( 15.0) ( 27.5)
.. 1 062.1
.. 105.2
.. 20 487.1
( 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.
134 Chapter 4 Financial Report 2009-10

1
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.
Financial Report 2009-10 Chapter 4 135

(a) Carrying amounts of financial instruments by category
($ million)
Financial assets
Cash and deposits
Designated at fair value through the operating statement (a)
Held-for-trading at fair value through the operating statement
Loans and receivables (a)
Available-for-sale (a)
Held-to-maturity
Total financial assets (b)
Financial liabilities
Designated at fair value through the operating statement
Held-for-trading at fair value through the operating statement
At amortised cost
Total financial liabilities (c)
State of Victoria
2010 2009
General government sector
2010
4 711.5 4 317.0 3 221.3
21 550.6 20 411.2 259.8
2009
2 846.0
325.0
2 433.3 3 229.4 61.3
4 556.9 4 678.5 2 578.0
483.0 366.7
183.9 132.7
390.4
872.1
33 919.3 33 135.4 7 382.9
26 966.6 20 538.0 1 459.3
1 801.2 2 780.6 1.2
54.0
2 893.7
282.0
452.6
6 853.3
190.7
3.6
8 086.5 7 265.1 17 367.3 13 965.3
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
136 Chapter 4 Financial Report 2009-10

 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)
Interest revenue from financial assets not at fair value through the operating statement
Interest revenue from financial asset at fair value through the operating statement
Interest revenue from impaired financial assets
Total
State of Victoria
2010 2009
266.8 332.3
716.1 855.7
0.1 2.1
982.9 1 190.1
(c) Breakdown of interest and fee expense items (a)
General government sector
2010 2009
210.0 221.7
123.5
0.1
333.5
154.7
1.9
378.2
($ million)
Interest expense from financial liabilities not at fair value through the operating statement
Interest expense from financial liabilities at fair value through the operating statement
Fee expenses from financial liabilities not at fair value through the operating statement
Fee expenses from financial liabilities at fair value through the operating statement
State of Victoria
2010
94.4
1 339.4
1.5
72.5
2009
469.8
760.3
9.5
170.5
General government sector
2010
92.0
687.7
0.6
32.8
2009
189.7
424.1
8.4
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.
Financial Report 2009-10 Chapter 4 137

(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)
Financial assets
Cash and deposits
Designated at fair value through the operating statement
Held-for-trading at fair value through the operating statement
Loans and receivables
Available-for-sale
Financial liabilities
Designated at fair value through the operating statement
Held-for-trading at fair value through the operating statement
At amortised cost
Total
State of Victoria
2010 2009
141.6 180.3
969.1 (3 239.9)
General government sector
2010 2009
151.0
9.0
165.7
( 23.9)
( 136.2) ( 334.8)
85.6
6.3
115.2
10.4
1 066.2 (3 268.7)
( 703.0) ( 381.3)
.. ..
( 51.3) ( 245.8)
( 754.4) ( 627.1)
17.1
21.3
6.4
204.7
0.9
..
( 92.0)
( 91.1)
( 15.3)
30.8
9.8
167.1
..
..
( 128.8)
( 128.8)
138 Chapter 4 Financial Report 2009-10

(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.
Financial Report 2009-10 Chapter 4 139

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
2010
State of Victoria
Maturities
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
($ million)
Indexe d
Interest rate swaps
Floating- for-floatin g
Pay fixed
Exchange
traded futures
Receive fixed contracts
..
..
..
..
..
..
..
.. 686.0
.. 295.0
.. 137.0
.. 20.0
.. 193.9
.. 820.4
.. 2 152.3
690.0
60.0
498.0
16.0
135.0
212.8
1 611.8
4 187.9
..
..
..
..
..
4 187.9
2009
State of Victoria
Maturities
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
($ million)
Interest rate swaps
Floating-
Indexed for-floatin g
Pay fixed
Exchange
traded futures
Receive fixed contracts
..
..
..
..
..
..
..
..
..
..
190.0
276.0
30.0
.. 187.0
..
..
20.0
797.2
.. 1 500.2
221.0
325.0
60.0
255.0
50.0
322.8
1 233.8
1 855.8
..
..
..
..
..
1 855.8
2010
General government sector
Maturities
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
($ million)
..
Interest rate swaps
Floating-
Indexed for-floatin g
..
..
..
..
..
..
..
..
..
..
..
..
..
Pay fixed
..
..
..
..
..
..
..
Exchange
traded futures
Receive contracts fixed
..
..
..
..
..
..
..
..
..
..
..
..
.. ..
140 Chapter 4 Financial Report 2009-10

2009
General government sector
Maturities
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
($ million)
Interest rate swaps
Floating-
Indexed for-floatin g
Pay fixed
Exchange
traded futures
Receive fixed contracts
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
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.
Financial Report 2009-10 Chapter 4 141

(f) Interest rate exposure
($ million)
2010
State of Victoria
Financial assets
Cash and deposits
Receivables
Advances paid
Term deposits
Derivative financial instruments
Equities and managed investment schemes
Debt securities
Total financial assets
Financial liabilities
Payables and advances
Derivative financial instruments
Interest-bearing liabilities
Finance lease liabilities
Total financial liabilities
($ million)
2009
State of Victoria
Floating
Less than 1 year but
1 year less than
2 years
4 148.6
25.6
677.4
32.6
9 588.6
451.1
23.2
111.5
683.3
.. 1 688.0
429.7 158.0
4 274.6 5 817.0
8 932.2
..
3.1
79.5
40.8
3.4
2.0
875.3
1 004.0
882.7 897.0
96.7 1 620.9
10.5 5 124.3
0.1 133.2
990.0 7 775.4
..
2.8
666.5
171.8
841.1
Financial assets
Cash and deposits
Receivables (a)
Advances paid
Term deposits
Derivative financial instruments
Equities and managed investment schemes
Debt securities
Total financial assets
Floating
Less than 1 year but
1 year less than
2 years
3 870.3
47.9
261.3
11.7
44.8
49.9
78.6
523.8
4 109.7
115.9
1 066.3
2 315.7
17.8
5 434.7
..
2.3
79.2
45.1
13.2
72.7
1 049.8
8 724.9 9 223.4 1 262.2
Financial liabilities
Payables and advances (b)
Derivative financial instruments
Interest-bearing liabilities (b)
Finance lease liabilities
Total financial liabilities
1 234.3 549.0
25.4 2 539.9
18.6 3 225.9
247.8 101.6
1 526.0 6 416.3
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.
0.2
9.0
2 804.6
103.1
2 916.9
142 Chapter 4 Financial Report 2009-10

Interest Rate, Fixed Maturities
2 years but 3 years but 4 years but less than
3 years less than
4 years less than
5 years
..
1.2
89.4
2.4
17.2
1.9
281.8
..
1.2
67.1
4.8
5.5
0.4
78.8
..
0.7
59.8
2.2
5.5
0.8
85.1
393.9 157.9 154.1
..
4.6
3 094.0
136.7
3 235.3
..
2.2
82.0
132.9
217.1
..
9.3
2 927.5
135.8
3 072.5
3 years
Interest Rate, Fixed Maturities
2 years but less than
3 years but less than
4 years
4 years but less than
5 years
..
1.0
83.7
..
1.0
112.1
..
4.6
74.1
11.1
3.9
24.8
348.3
472.9
2.2
12.4
10.7
93.8
232.2
0.3
2.1
7.4
56.7
145.1
..
0.4
193.4
120.9
314.8
..
5.5
2 824.9
83.0
2 913.5
..
0.2
30.0
77.9
108.0
5 years Non-interest or more bearing
..
7.7
395.2
2.0
175.8
1.0
683.7
1 265.4
..
163.2
11 938.0
1 967.3
14 068.4
111.9
2 317.9
47.8
9.2
496.4
9 438.1
1.9
12 423.2
6 494.3
160.2
..
..
6 654.5
Total
4 711.5
2 380.7
1 527.7
777.3
2 391.9
10 031.9
12 098.3
33 919.3
8 274.0
2 059.8
23 842.8
2 677.7
36 854.4
5 years Non-interest or more bearing
..
3.0
837.8
5.3
196.1
6.2
455.3
1 503.7
..
172.8
9 547.5
1 963.0
11 683.3
185.5
2 410.1
28.3
17.4
702.2
8 216.4
11.2
11 571.0
4 674.3
30.7
..
..
4 705.0
Total
4 317.0
2 481.6
1 375.9
1 197.5
3 324.1
8 879.8
11 559.5
33 135.4
6 457.7
2 783.9
18 644.8
2 697.3
30 583.8
Financial Report 2009-10 Chapter 4 143

(f) Interest rate exposure (continued)
($ million)
2010
General government sector
Financial assets
Cash and deposits
Receivables
Advances Paid
Term deposits
Derivative financial instruments
Equities and managed investment schemes
Debt securities
Total financial assets
Financial liabilities
Payables and advances
(a)
Derivative financial instruments
Interest-bearing liabilities
Finance Lease liabilities
Total financial liabilities
($ million)
2009
General government sector
Less than 1 year but
Floating 1 year less than
2 years
2 739.7
12.4
367.7
4.0
.. ..
99.7 1 843.2
..
426.1
32.5
..
158.0
0.5
3 310.4 2 373.5 38.8
..
..
..
36.6
..
2.0
0.2
23.9
..
14.3
0.1
38.3
6.3
..
699.7
89.8
795.8
5 645.2
97.4
5 742.6
..
..
Financial assets
Cash and deposits
Receivables
Advances Paid
Term deposits
Derivative financial instruments
Equities and managed investment schemes
Debt securities
Total financial assets
Financial liabilities
Payables and advances
(a)
Derivative financial instruments
Interest-bearing liabilities
(a)
Finance Lease liabilities
Total financial liabilities
43.1
2.3
14.3
247.7
307.5
3.7
..
416.1
61.6
481.4
..
..
450.5
57.6
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.
144 Chapter 4 Financial Report 2009-10

Interest Rate, Fixed Maturities
2 years but 3 years but 4 years but less than
3 years less than
4 years less than
5 years
..
..
..
2.4
..
1.9
0.5
4.8
..
..
..
4.8
..
..
..
4.8 3.0
..
..
..
2.2
..
0.8
0.1
..
..
5 425.6
62.0
5 487.6
..
..
2.0
57.8
59.8
..
..
2.5
60.3
62.8
Interest Rate, Fixed Maturities
2 years but less than
3 years
3 years but less than
4 years
4 years but less than
5 years
..
..
4.7
5.1
..
24.8
0.3
34.9
..
..
4.8
2.2
..
10.7
0.5
18.2
..
..
5.1
0.3
..
7.4
..
12.8
..
..
557.6
64.3
622.0
..
..
603.3
29.0
632.3
..
..
701.7
23.5
725.1
5 years Non-interest or more bearing
..
..
246.1
1.9
..
..
0.5
248.6
14.6
..
71.6
1 378.7
1 464.9
114.0
1 238.1
31.9
8.3
4.1
( 0.6)
3.1
1 399.0
5 170.5
5.5
..
..
5 176.0
Total
3 221.3
1 254.6
278.0
1 999.2
4.1
588.3
37.5
7 382.9
5 215.2
5.5
11 860.9
1 746.1
18 827.7
5 years Non-interest or more bearing
..
..
206.8
2.9
..
6.2
..
215.9
..
..
6 165.8
1 238.6
7 404.4
114.5
1 171.8
36.4
16.6
6.2
32.1
8.6
1 386.1
3 472.5
6.2
..
..
3 478.7
Total
2 846.0
1 187.8
269.0
1 888.3
6.2
617.8
38.3
6 853.3
3 519.4
8.6
8 909.3
1 722.3
14 159.5
Financial Report 2009-10 Chapter 4 145

(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)
Monetary assets
Cash and deposits
Term deposits
Debt securities
Total monetary assets (a)
Monetary liabilities
Borrowings
Total
monetary liabilities
State of Victoria
2010 2009
279.6
0.1
33.4
313.1
183.5
12.5
9.2
205.3
(1
797.6)
(2
428.1)
(1 797.6) (2 428.1)
General government sector
2010 2009
..
..
..
..
..
..
..
..
..
..
..
..
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).
146 Chapter 4 Financial Report 2009-10

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.
Financial Report 2009-10 Chapter 4 147

(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.
148 Chapter 4 Financial Report 2009-10

(k) Undiscounted maturity analysis of financial liabilities
State of Victoria
2009
Payables and advances
(b)
Carrying
6 457.7
($ million)
Nominal Contractual maturity amount amount (a) 0-3 mths 3 mths-1 yr 1-2 yrs
2010
Payables and advances 8 274.0
Interest-bearing liabilities:
Domestic borrowings 22 045.2
8 274.0
28 926.8
5 885.8
3 032.2
1 797.6 1 970.7 1 301.3 Foreign currency borrowings
Finance lease liabilities
Derivative financial
2 677.7
2 059.8
5 141.2
2 248.3
45.9
1 317.2 liabilities
Total 36 854.3 46 561.0 11 582.4
6 457.7 4 886.4
1 345.2
1 573.6 1 682.3
495.0
200.2
587.4
230.6
2.7
258.5
21.5
4 201.4 2 195.6
854.6 251.0
2-5 yrs
565.3
8.1
867.0
46.4
5+ yrs
247.1
8 509.2 14 129.5
163.7
3 769.6
275.7
9 995.9 18 585.7
84.6 381.0
Interest-bearing liabilities:
Domestic borrowings (b) 16 216.6 22 088.2 1 003.9
Foreign currency 2 428.1 2 480.8 2 256.2 borrowings
Finance lease liabilities 2 697.4 4 840.7 66.9
(c)
858.5 3 542.8 4 890.2 11 792.9
51.8 2.6 7.9 162.2
182.5 264.4 713.6 3 613.2
Derivative financial liabilities (d)
Total
2 783.9 2 983.8 2 527.7
30 583.8 38 851.2 10 741.1
79.6 23.7 39.7 313.1
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)
General government sector
Carrying Nominal Contractual maturity 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
Interest-bearing liabilities:
Domestic borrowings
Foreign currency borrowings
Finance lease liabilities
Derivative financial liabilities
5 215.3 4 114.1
11 860.9 11 825.2 1 065.1
.. .. ..
1 746.0
5.5
4 176.6
1.8
47.3
1.6
934.5 41.4 42.4 82.8
468.5 692.5 2 111.8 7 487.4
.. .. ..
149.5
..
219.4
0.2
590.5
..
3 169.9
..
Total
Domestic borrowings
Foreign currency borrowings
Finance lease liabilities
Derivative financial liabilities
18 827.7
2009
Payables and advances 3 518.8
Interest-bearing liabilities:
8 909.9
..
1 722.3
8.6
21 218.8
3 518.8
8 298.5
..
3 831.4
1.8
5 228.0
3 082.8
12.9
..
38.7
0.6
Total 14 159.6 15 650.5 3 135.0
Note:
(a) Represents undiscounted nominal amount.
1 552.5 953.5 2 744.6 10 740.2
239.8 39.4 49.6 107.1
443.0 442.0 1 880.1 5 520.5
.. .. ..
134.7
..
817.5
186.4
1.0
668.9
469.4
0.2
2 399.2
3 002.3
..
8 629.9
Financial Report 2009-10 Chapter 4 149

Finance lease liabilities are payable as follows.
($ million)
Less than 1 year
1 year but less than 5 years
5 years or more
Minimum lease payments
Future finance charges
Total finance lease liabilities
State of Victoria
2010 2009
General government sector
2010
246.1
1 125.5
221.4
878.2
196.8
809.8
3 769.6 3 741.1 3 169.9
2009
173.4
655.8
3 002.3
5 141.2 4 840.7 4 176.6
2 463.5 2 143.3 2 430.5
2 677.7 2 697.4 1 746.0
3 831.4
2 109.1
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)
State of Victoria
Financial assets
Non-current receivables
Financial liabilities
Finance lease liabilities
2010
Carrying amount
Fair value
2009
Carrying amount
Fair value
741.7 394.3 759.1 523.2
2 677.7 1 994.7 2 697.4 2 042.1
($ million)
General government sector
Financial assets
Non-current receivables
Financial liabilities
Finance lease liabilities
2010
Carrying amount
Fair value
2009
Carrying amount
Fair value
759.1 51.3 759.1 38.4
1 746.0 1 525.6 1 722.3 1 211.9
150 Chapter 4 Financial Report 2009-10

Credit quality of financial assets that are neither past due nor impaired
State of Victoria
2010
Financial assets
Cash and deposits
Receivables
Advances paid
Term deposits
Debt securities
Total financial assets
($ million)
(AAA credit
Other
(min BBB rating) credit rating)
2 566.7
418.4
633.3
66.9
0.9
315.7
4 160.7
0.8
247.7
7 698.8
7 462.3 8 647.6
Other
(not rated)
(a)
Total
1 511.5 4 711.5
1 270.0 1 755.3
1 526.0 1 527.7
213.9 777.3
238.8 12 098.3
4 760.3 20 870.2
2009
Financial assets
Cash and deposits
Receivables
Advances paid
Term deposits
Debt securities
Total financial assets
2 104.5
514.4
1.3
479.5
4 354.7
7 454.4
Note:
(a) Certain financial assets are not rated due to the unavailability of accessing third party rating data.
1 236.3
72.5
1.4
527.8
5 760.6
7 598.6
976.2 4 317.0
1 097.0 1 684.0
1 373.2 1 375.9
190.2 1 197.5
1 444.2 11 559.5
5 080.9 20 133.9
General government sector
2010
Financial assets
Cash and deposits
Receivables
Advances paid
Term deposits
Debt securities
Total financial assets
2009
Financial assets
Cash and deposits
Receivables
Advances paid
Term deposits
Debt securities
Total financial assets
Government
Agencies
(AAA credit rating)
1 146.2
114.2
246.1
1 148.3
..
2 654.7
($ million)
Government
Agencies
(min BBB credit rating)
(AAA credit rating)
..
..
..
..
..
1 210.5
92.8
0.9
292.2
31.9
.. 1 628.3
(min BBB credit rating)
329.1
3.0
..
244.6
4.2
580.9
Other (not rated) (a) Total
535.6 3 221.3
662.2 872.2
31.0 278.0
314.0 1 999.2
1.3 37.5
1 544.2 6 408.2
720.2
144.0
261.6
692.0
..
1 817.8
..
..
..
..
..
..
1 316.5
111.5
1.3
461.8
18.2
1 909.4
Note:
(a) Certain financial assets are not rated due to the unavailability of accessing third party rating data.
365.9
11.6
0.6
197.3
4.4
579.8
443.4 2 846.0
410.1 677.2
5.5 269.0
537.2 1 888.3
15.7 38.3
1 411.8 5 718.8
Financial Report 2009-10 Chapter 4 151

Financial assets measured at fair value
State of Victoria
2010
Financial assets
Derivative assets
Equities and managed investment schemes
($ million)
Carrying amount as at
Fair value measurement at end of reporting period using :
30 June Level 1
(a)
Level 2 (b) Level 3 (c)
2 391.9
10 031.9
18.7
3 898.2
2 343.5
5 997.4
29.7
136.2
Debt securities at fair value
Total financial assets
12 098.3
24 522.0
1 700.9 10 312.4
5 617.9 18 653.3
84.9
250.8
2009
Financial assets
Derivative assets
Equities and managed investment schemes
Debt securities at fair value
Total financial assets
3 324.1
8 879.8
11 559.5
23 763.5
1.0 3 279.9
3 655.1 5 222.3
1 494.5 9 832.5
5 150.6 18 334.6
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.
43.2
2.4
232.6
278.2
General government sector
2010
Financial assets
Derivative assets
Equities and managed investment schemes
Debt securities at fair value
Total financial assets
($ million)
Carrying amount as at
Fair value measurement at end of reporting period using:
30 June Level 1
(a)
Level 2 (b) Level 3 (c)
4.1
588.3
37.5
629.8
4.1
366.4
36.2
406.7
..
87.2
..
87.2
..
134.6
1.3
135.9
2009
Financial assets
Derivative assets
Equities and managed investment schemes
Debt securities at fair value
Total financial assets
6.2
617.8
38.3
662.3
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.
6.2
614.2
38.3
658.7
..
2.8
..
2.8
..
0.8
..
0.8
152 Chapter 4 Financial Report 2009-10

Capital expenditure commitments
Land and buildings
Plant, equipment and vehicles
Infrastructure systems (b)
Road Networks and Earthworks (b)
Other
Total capital expenditure commitments
Operating and lease commitments
Rail services
Bus services
Other
Total operating and lease commitments
($ million)
State of
Victoria
General government
2010 (a)
Nominal value
2 357.2
2 032.1
699.6
1 562.4
1 384.5
8 035.8
8 342.5
5 213.6
4 351.4
17 907.5 sector
2010 (a)
Nominal value
1 721.6
1 651.7
5.4
1 562.4
1 303.7
6 244.7
8 342.5
5 213.6
2 692.9
16 249.0
State of
Victoria
2009
Nominal value
1 160.2
787.0
2 588.2
804.8
408.1
5 748.3
3 485.7
3 020.7
3 488.8
9 995.1
General government sector
2009
Nominal value
984.4
262.3
429.5
801.8
398.1
2 876.1
3 485.7
3 020.7
2 912.5
9 418.9
Other commitments
IT Services (Vic Police)
Debt collection services (Traffic
Camera Office)
Traffic camera services (Traffic
Camera Office)
Victorian Neurotrauma Initiative program
Snowy Joint Government Enterprise
Major sporting events
New ticketing solution (myki)
OneLink transit transition amendment deed
Regional Rail Link
Other
Total other commitments
..
223.7
201.1
22.7
30.0
92.4
326.3
49.1
14.0
772.6
1 731.9
..
223.7
201.1
22.7
30.0
92.4
..
..
14.0
535.2
1 119.1
38.4
246.3
228.3
19.5
45.0
93.8
408.1
79.4
..
693.4
1 852.1
38.4
246.3
228.3
19.5
45.0
93.8
..
..
..
858.8
1 530.0
Sub-total of Commitments 27 675.3 23 612.8 17 595.6
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.
13 825.0
Financial Report 2009-10 Chapter 4 153

($ million)
Public private partnerships
Health Services – Mildura Hospital
Central Highlands Water
Barwon Water
Coliban Water
Melbourne Water
Private Prisons
County Court
Melbourne Convention Centre
Southern Cross Station
Partnerships Victoria in Schools
Royal Women’s Hospital
Royal Children’s Hospital
Casey Hospital
Biosciences Research Centre
Royal Melbourne Showgrounds
Victorian Desalination Plant (b)
Peninsula Link
Emergency Service Telecommunications
Total public private partnerships
Total commitments (inclusive of GST)
Less GST recoverable from the the Australian Tax Office
Total Commitments (exclusive of GST)
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.
State of Victoria
2010 (a) 2010 (a)
Net present Nominal value value
33.8
104.2
123.9
37.3
123.7
247.1
49.2
21.8
137.7
29.7
1 198.3 1 354.4
54.4
240.5
185.5
221.2
61.5
581.6
524.7
685.3
189.8 469.4
1 983.4 4 011.4
37.7 58.8
228.9
37.8
803.5
105.4
4 590.2 15 808.6
1 056.9 3 016.8
73.6 75.8
10 430.9 28 132.6
.. 55 807.9
.. 5 073.4
.. 50 734.5
154 Chapter 4 Financial Report 2009-10

General government sector
2010 (a)
Net present value
2010 (a)
Nominal
value
33.8
..
..
..
..
1 198.3
54.4
240.5
185.5
221.2
189.8
1 983.4
37.7
228.9
37.8
4 590.2
1 056.9
73.6
10 131.8
.. 51 207.2
37.3
..
..
..
..
1 354.4
61.5
581.6
524.7
685.3
469.4
4 011.4
58.8
803.5
105.4
15 808.6
3 016.8
75.8
27 594.4
..
..
4 655.2
46 552.0
2009
Net present value
34.9
106.1
99.9
51.3
20.8
201.8
53.1
219.0
174.5
256.0
252.5
1 099.1
37.1
219.5
38.3
..
..
114.9
2 978.8
..
..
..
State of Victoria
2009
Nominal value
39.4
120.2
220.4
130.3
29.2
223.7
61.2
544.8
498.0
795.7
438.8
3 741.9
56.2
726.0
101.8
..
..
123.5
7 851.3
25 446.8
General government sector
2009
Net present value
2009
Nominal
value
34.9
..
..
..
..
201.8
53.1
219.0
174.5
256.0
252.5
1 099.1
37.1
219.5
38.3
..
..
114.9
2 700.7
.. 21 176.1
39.4
..
..
..
..
223.7
61.2
544.8
498.0
795.7
438.8
3 741.9
56.2
726.0
101.8
..
..
123.5
7 351.1
..
..
Financial Report 2009-10 Chapter 4 155

Commitments are payable as follows.
Nominal values
State of
Victoria
2010 (a)
Capital expenditure commitments payable
Less than 1 year 5 317.2
1 year but less than 5 years
5 years or more
2 033.5
685.1
($ million)
General government sector
2010 (a)
3 771.1
1 788.4
685.1
6 244.7 Total capital expenditure commitments
Operating and lease commitments payable
Less than 1 year 4 117.1
1 year but less than 5 years
5 years or more
8 035.8
9 196.4
4 594.0
3 647.2
8 594.0
4 007.8
16 249.0 Total operating and lease commitments years
5 years or more
17 907.5
Public private partnership commitments
Less than 1 year
1 year but less than 5
214.9
3 150.1
24 767.6
197.3
3 043.7
24 353.4
27 594.4 Total public private partnership commitments
28 132.6
Total other commitments payable
Less than 1 year
1 year but less than 5 years
5 years or more
710.8
896.3
124.8
Total other commitments
Total commitments
(inclusive of GST)
1 731.9
55 807.9
487.8
613.9
17.4
1 119.1
51 207.2
Note:
(a) The 2009-10 figures are inclusive of GST.
State of
Victoria
2009
3 997.9
1 731.1
General government sector
2009
2 045.0
811.8
19.3
5 748.3
2 327.1
4 499.7
3 168.4
9 995.1
209.1
857.0
6 785.1
7 851.3
572.0
764.9
515.2
1 852.1
25 446.8
19.3
2 876.1
2 218.8
4 276.4
2 923.7
9 418.9
182.9
736.0
6 432.2
7 351.1
407.0
711.3
411.7
1 530.0
21 176.1
156 Chapter 4 Financial Report 2009-10

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
General government
Public non-financial corporations
Public financial corporations
Eliminations for whole of government
Total contingent assets
Guarantees, indemnities and warranties
Legal proceedings and disputes
Other
Total contingent assets
Source: Department of Treasury and Finance
Non-quantifiable contingent assets
($ million)
2010
State of Victoria
2009
260.6
64.9
..
..
325.5
52.6
129.6
..
..
182.2
40.6
..
284.9
325.5
72.4
1.1
108.8
182.2
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.
Financial Report 2009-10 Chapter 4 157

(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)
General government
Public non-financial corporations
Public financial corporations
Eliminations for whole of government
Total contingent liabilities
Guarantees, indemnities and warranties
Legal proceedings and disputes
Other
Total contingent liabilities
2010
9 425.7
439.9
350.5
8 077.0
2 139.1
State of Victoria
2009
7 409.9
362.7
0.5
6 220.2
1 552.9
1 220.9
355.8
562.5
2 139.1
772.2
385.0
395.7
1 552.9
158 Chapter 4 Financial Report 2009-10

(continued)
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.
Financial Report 2009-10 Chapter 4 159

(continued)
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.
160 Chapter 4 Financial Report 2009-10

(continued)
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.
Financial Report 2009-10 Chapter 4 161

(continued)
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.
162 Chapter 4 Financial Report 2009-10

(continued)
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.
Financial Report 2009-10 Chapter 4 163

(continued)
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.
164 Chapter 4 Financial Report 2009-10

(continued)
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 $363 million). The agreement also provided a number of conditions, including that further improvements will be made to Melbourne Park or that a Rights Fee will be paid to Tennis Australia, if further works do not proceed, for the Australian
Open to remain at Melbourne Park.
($ million)
Investments, real estate, personal and other assets
Cash and investments in common and premium funds
Residential tenancies bond money
Funds under management by the Senior Master of the Supreme Court
Funds under management by Legal Services Board
Funds under management for The Victorian Bushfire
Appeal Fund
(a)
Other funds held
Total funds under management
State of Victoria
2010 2009
917.9 875.5
807.1 753.5
544.8 494.1
1 143.6 1 021.2
484.6 398.1
130.1 238.2
General government sector
2010 2009
..
..
..
..
544.8
1 143.6
484.6
130.1
494.1
1 021.2
398.1
238.2
.. ..
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.
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.
Financial Report 2009-10 Chapter 4 165

(a) Consolidated Fund receipts and payments for the year ended 30 June
($ thousand)
Receipts
Taxation
Fines and regulatory fees (a)
Grants received
Sales of goods and services
Interest received
Public authority income
Other receipts
Total cash inflows from operating activities
Total cash inflows from investing and financing activities
Total consolidated fund receipts
2010 2009
13 656 000 12 314 224
563 716 353 906
18 974 807 16 169 334
926 404
22 938
819 965
11 873
471 241
3 595 965
500 281
3 348 490
38 211 071 33 518 074
3 121 938 2 867 686
41 333 009 36 385 760
Payments
Special appropriations
Special appropriations (excl. Section 33, Financial Management
Act, No. 18 of 1994)
Section 28 Financial Management Act, No. 18 of 1994
(Appropriation for borrowing against future appropriations)
Section 33, Financial Management Act, No. 18 of 1994
Total special appropriations
Annual appropriations
Provision of outputs
Section 32 Financial Management Act, No. 18 of 1994 (prior year unspent appropriations brought forward)
Section 29 Financial Management Act, No. 18 of 1994
(appropriation of annotated receipts)
Advance to Treasurer to be sanctioned
Section 35 Financial Management Act, No. 18 of 1994 (temporary advances)
Total provision of outputs
Additions to net asset base
Section 32 Financial Management Act, No. 18 of 1994 (prior year unspent appropriations brought forward)
Section 29 Financial Management Act, No. 18 of 1994
(appropriation of annotated receipts)
Advance to Treasurer to be sanctioned
Section 35 Financial Management Act, No. 18 of 1994 (temporary advances)
Total additions to net asset base
Payments made on behalf of the State
Section 32 Financial Management Act, No. 18 of 1994 (prior year unspent appropriations brought forward)
Advance to Treasurer to be sanctioned
Total payments made on behalf of State
3 118 657
6 649
132 659
3 257 965
158 747
2 862 171
28 591 928 26 836 399
594 189 344 080
3 450 998
506 929
169 238
2 678 652
24 772
2 391 932
713 131
..
33 313 283 30 285 542
1 722 023 1 565 323
393 462 298 775
1 314 564
81 387
..
3 511 436
1 437 944
6 062
206 246
1 650 252
439 189
115 881
167 000
2 586 168
1 130 380
..
56 642
1 187 022
166 Chapter 4 Financial Report 2009-10

(a) Consolidated Fund receipts and payments for the year ended 30 June (continued)
($ thousand)
Other
Contribution by the State under agreements pursuant to Section
25 of the Murray-Darling Basin Act 1993
Victorian Law Reform Commission - pursuant to Section 17(b) of the Victorian Law Reform Commission Act 2000
Payment to Regional Infrastructure Development Fund pursuant to
Section 4 of the Regional Infrastructure Development Fund Act
1999
Total annual appropriations
Applied appropriations remaining unspent relating to the 2008-09 appropriations
Total payments
2010
27 938
1 313
77 200
2009
27 053
964
41 000
38 581 423 34 127 749
( 462 069) ( 377 517)
Consolidated fund balance 1 July
Add total receipts for year
Less total payments for year
Consolidated fund balance 30 June
Notes:
Reconciliation of unspent appropriations:
Applied appropriations unspent at end of year add payments made during the year under the Financial
Management Act, No. 18 of 1994, Section 33
Subtotal less applied appropriations unspent at beginning of year
Current year appropriations remaining unspent as at 30 June
Note:
(a) The 2009 amount is net of a $121 million adjustment for receivables.
41 377 318 36 612 403
( 324 777) ( 98 135)
41 333 009 36 385 760
(41 377 318) (36 612 403)
( 369 086) ( 324 777)
3 327 304
132 659
2 997 894
158 747
3 459 963 3 156 641
(2 997 894) (2 779 124)
462 069 377 517
Financial Report 2009-10 Chapter 4 167

(b) Consolidated Fund gross receipts for the year ended 30 June
($ thousand)
Operating activities
Taxation
Payroll tax
Land tax
Congestion levy
Stamp duty
Land transfer duty
Stamp duties
Financial accommodation levy
Levies on statutory corporations
Gambling
Private lotteries
Electronic gaming machines
Casino taxes
Racing
Other gambling
Insurance
Motor Vehicle
Road Safety Act (registration fees)
Stamp duty on vehicle transfers
Franchise fees
Liquor
Other taxes
Total taxation
Fines and regulatory fees
Fines (a)
Regulatory fees
Total
Estimate
2010
Actual
2010
Actual
2009
4 538 808 4 532 266 4 457 431
1 218 030 1 154 550 1 411 479
43 111 47 152 53 729
3 252 490 3 684 942 2 332 700
3 803
54 227
3 056
51 832
4 056
33 336
73 700 69 420 69 420
400 582 399 321 420 953
1 004 597 1 061 260 1 003 880
144 432 151 058 140 829
133 085
9 318
129 336
10 251
129 109
7 289
823 798
872 161
483 912
12 051
29 522
864 744
873 038
572 673
23 253
27 850
798 867
820 351
515 497
11 797
103 501
13 097 626 13 656 000 12 314 224
383 382 302 065 113 434
252 054
635 436
261 651
563 716
240 473
353 906
Grants received
Education and Early Childhood Development
Health (b)
Human Services
Innovation, Industry and Regional Development
Justice
Planning and Community Development
Premier and Cabinet
Primary Industries
Sustainability and Environment
Transport
Treasury and Finance
Total grants received
Sales of goods and services
Interest received
Public authority receipts
Public authority dividends
Income tax equivalent receipts
Local government tax equivalent receipts
Total public authority receipts
117 329
..
213 173
10 000
4 050
136 727
334 563
..
68 910 3 280 202
5 910 11 180
..
..
..
815
1 000
19
3 758
1 000
840
10 700
..
9 541
7 162
39 455
204 735
.. .. 382 097
17 413 214 18 740 673 11 911 504
17 764 416 18 974 807 16 169 334
853 345
41 009
255 103
127 451
6 247
388 801
926 404
22 938
307 592
159 039
4 610
471 241
819 965
11 873
343 180
152 561
4 541
500 281
168 Chapter 4 Financial Report 2009-10

(b) Consolidated Fund gross receipts for the year ended 30 June (continued)
($ thousand)
Other receipts
Land rent received
Royalties received
Capital assets charge
Other
Total other receipts
Total cash inflows from operating activities
Estimate
2010
14 350
48 610
Actual
2010
20 451
46 220
Actual
2009
19 995
47 781
3 157 475 3 155 403 2 931 340
(6 596) 373 891 349 375
3 213 839 3 595 965 3 348 490
35 994 472 38 211 071 33 518 074
Cash inflows from investing and financing activities
Loans to government agencies
Proceeds from investments
Other loans
Loans from TCV
Other
..
..
655
34 681
1 085
3 160
(34 681)
6 427
34 853
.. .. ..
148 442 3 083 012 2 861 088
Total cash inflows from investing and financing activities
Total consolidated fund receipts
149 097 3 121 938 2 867 686
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.
Financial Report 2009-10 Chapter 4 169

(c) The Trust Fund cash flow statement for the year ended 30 June
Cash flows from operating activities
Receipts
Taxation
Regulatory fees and fines
Grants received
Sale of goods and services
Interest received
Net transfers from the consolidated fund
Other receipts
($ thousand)
2010 2009
175 279
44 196
160 852
53 336
3 706 579
571 424
117 109
3 109 261
299 191
154 667
10 744 968 10 009 519
254 861 559 144
Payments
Employee benefits
Superannuation
Interest paid
Grants paid
Supplies and consumables
Net cash flows from operating activities
Cash flows from investing activities
Net proceeds from customer loans
Proceeds from sale of property, plant and equipment
Purchases of property, plant and equipment
Other investing activities
Net cash flows from investing activities
(131 075)
(9 527)
148 869
2 518
58 825
(83 938)
(65 742)
(88 337)
(101 387)
(7 232)
(17 085) (19 408)
(12 259 331) (11 156 541)
(3 048 530) (2 592 787)
468 614
( 465)
57 863
(35 671)
(100 358)
(78 631)
Cash flows from financing activities
Net repayments of borrowings
Net cash flows from financing activities
Net increase in trust fund cash and deposits (a)
86 492
86 492
147 023
(237 038)
(237 038)
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.
170 Chapter 4 Financial Report 2009-10

(d) Trust Fund reconciliation of cash flows to balances held
($ thousand)
Cash and deposits
Cash balances outside the Public Account
Deposits held with the Public Account - specific trusts
Deposits held with the Public Account - general trusts
Other balances held in the Public Account on behalf of trust accounts
Total cash and deposits
Investments
Investments held with the Public Account - specific trusts
Total investments
Total trust fund balances
Less funds held outside the Public Account
Cash
Total trust fund balances held outside the Public
Account
Total trust funds held within the Public Account (a) (b)
Balances Net Balances held at movement
30 June 2010 held at for year 30 June 2009
27 518
95 342
1 288
(211 824)
9 923
..
1 823 228 348 925
239 342
85 419
1 288
1 474 304
1 947 375 147 023
881 429 24 973
881 429 24 973
2 828 805 171 996
27 518 (211 824)
27 518 (211 824)
1 800 352
856 456
856 456
2 656 808
239 342
239 342
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)
State Government funds
Accounts established to receive levies imposed by Parliament and record the expenditure thereof
Accounts established to receive monies provided in the annual budget and record the expenditure thereof
Specific purpose operating accounts established for various authorities etc.
Suspense and clearing accounts to facilitate accounting procedures
Treasury Trust Fund
Agency and deposit accounts
Total State Government funds
Joint Commonwealth and State funds
Commonwealth Government funds
Commonwealth Grants passed on to individuals and organisations
Total Commonwealth Government funds
Prizes, scholarships, research and private donations
Total trust fund
Balances Balances held 2010 held 2009
184 397 193 943
838 063
206 635
506 310
197 552
562 829
2 495 786
72 465
21 489
21 489
211 547
2 801 287
716 370
175 497
405 657
162 669
468 468
2 122 603
94 417
43 280
43 280
157 166
2 417 466
Financial Report 2009-10 Chapter 4 171

(f) Details of securities held and included in the balances at 30 June
($ thousand)
Funds held at 30 June
Trust accounts
Amounts invested on behalf of specific trust accounts
Amounts invested on behalf of general trust accounts
General trust accounts
Total trust accounts
General consolidated fund account balance
Total funds held
2010 2009
976 771 941 855
1 288 1 288
1 823 228 1 474 324
2 801 287 2 417 466
.. ..
2 801 287 2 417 466
1 288 1 288
Represented by:
Stocks and securities held with/in -
Australian Consolidated Inscribed Stock and Victorian Government
Bonds
Managed Investments
Treasury Corporation of Victoria
Cash and investments held with/in -
Treasury Corporation of Victoria
Cash at bank balances held in Australia
Total stock, securities, cash and investments
Add cash advanced pursuant to Sections 36 and 37 of the Financial
Management Act, No. 18 of 1994
Temporary Advance to the Consolidated Fund pursuant to Section 38 of the Financial Management Act, No. 18 of 1994
Total funds held
11 748 100 728
965 023 841 127
978 058 943 143
929 000 597 000
334 666 273 858
1 263 666 870 858
2 241 725 1 814 001
190 476 278 688
369 086 324 777
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)
Appropriation transfer equivalent to consolidated fund receipts
Interest received on credit balances
State subsidy contribution
Other income
Total amounts paid into working accounts
2010
7 937
146
..
..
8 083
2009
7 337
173
..
20
7 530
(h) Allocations pursuant to Section 28 of the Financial Management Act 1994 for the year ended 30 June
($ thousand)
Section 28 allocations
(Appropriation for borrowing against future appropriation)
Department of Primary Industries
Additions to the net asset base
Department of Sustainability and Environment
Provision of outputs
Additions to the net asset base
Addition to the net asset base – Victorian Water Trust
Total Section 28 allocations
2010
2 945
3 704
..
..
6 649
2009
..
17 331
7 441
..
24 772
172 Chapter 4 Financial Report 2009-10

(i) Transfers pursuant to Sections 30 and 31 of the Financial Management Act 1994 for the year ended 30 June 2010
($ thousand)
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)
Additions to the net asset base (Section 29 of the Financial Management
Act, No. 18 of 1994 applies)
Department of Health
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of 1994 applies)
Additions to the net asset base (Section 29 of the Financial Management
Act, No. 18 of 1994 applies)
Department of Human Services
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of 1994 applies)
Additions to the net asset base (Section 29 of the Financial Management
Act, No. 18 of 1994 applies)
Department of Innovation, Industry and Regional Development
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of 1994 applies)
Additions to the net asset base (Section 29 of the Financial Management
Act, No. 18 of 1994 applies)
Department of Justice
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of 1994 applies)
Additions to the net asset base (Section 29 of the Financial Management
Act, No. 18 of 1994 applies)
Victorian Law Reform Commission – pursuant to Section 17 (b) of the
Victorian Law Reform Commission Act 2000
Department of Planning and Community Development
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of 1994 applies)
Additions to the net asset base (Section 29 of the Financial Management
Act, No. 18 of 1994 applies)
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)
Additions to the net asset base (Section 29 of the Financial Management
Act, No. 18 of 1994 applies)
Department of Primary Industries
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of 1994 applies)
Additions to the net asset base (Section 29 of the Financial Management
Act, No. 18 of 1994 applies)
Department of Sustainability and Environment
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of 1994 applies)
Additions to the net asset base (Section 29 of the Financial Management
Act, No. 18 of 1994 applies)
Provision of outputs – Victorian Water Trust (Section 29 of the Financial
Management Act, No. 18 of 1994 applies)
Additions to the net asset base – Victorian Water Trust (Section 29 of the
Financial Management Act, No. 18 of 1994 applies)
Decrease Increase
158 546 ..
.. 158 546
.. 140 615
140 615
..
1 956
1 956
.. 10 560
10 560
41 090 ..
.. 40 708
..
192
..
..
2 036
..
561
..
..
1 824
..
989
..
..
..
382
..
192
..
..
2 036
..
561
1 824
..
989
..
Financial Report 2009-10 Chapter 4 173

(i) Transfers pursuant to Sections 30 and 31 of the Financial Management Act 1994 for the year ended 30 June 2010 (continued)
($ thousand)
Department of Transport
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of 1994 applies)
Additions to the net asset base (Section 29 of the Financial Management
Act, No. 18 of 1994 applies)
Department of Treasury and Finance
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of 1994 applies)
Additions to the net asset base (Section 29 of the Financial Management
Act, No. 18 of 1994 applies)
Payments made on behalf of the State
Total Section 30 transfers
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
Decrease Increase
.. 18 770
18 770
..
..
.. ..
377 139 377 139
.. ..
..
..
..
..
..
..
..
..
..
..
..
174 Chapter 4 Financial Report 2009-10

(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
Department
Education and Early Childhood
Development
Health
Human Services
Innovation, Industry and Regional
Development
Justice
Planning and Community Development
Premier and Cabinet
Primary Industries
Sustainability and Environment
Transport
Treasury and Finance
Parliament
Total appropriation
($ thousand)
Source
Outputs Commonwealth
1 306 1 612 635
270 029
76 028
5 000
146 082
1 000
483
67 446
116 684
721
5 220
20 830
710 829
470 853
1 577 940
379 927
44 381
0
3 900
76 914
93 048
610 899
1 151
..
4 871 646
Other Total
17 703 1 631 643
635 741 517
2 314 1 656 282
.. 384 927
25 962 216 425
586 1 586
.. 4 383
318 144 678
7 867 217 599
.. 611 620
.. 6 371
.. 20 830
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
Education and Early Childhood
Development
Health (a)
Human Services
Innovation, Industry and Regional
Development
Justice
Planning and Community
Development
Premier and Cabinet
Primary Industries
Sustainability and Environment
Transport
Treasury and Finance
Parliament
Total carryovers by department
Provision of outputs
205 967
41 728
6 752
64 031
37 156
8 968
..
24 449
41 072
176 590
21 010
6 249
633 972
Additions to net assets
199 958
71 956
0
15 227
10 909
11 853
754
14 418
24 261
133 035
4 165
..
486 536
Payments made on behalf of State
..
..
..
..
..
..
..
168
..
5 894
..
6 062
Other
.. 405 925
..
..
..
..
..
..
..
..
Total carryover
113 684
6 752
79 258
48 065
20 821
754
38 867
65 501
.. 309 625
.. 31 069
6 249
.. 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.
Financial Report 2009-10 Chapter 4 175

Amounts applied against carryover of appropriations in 2009-10 pursuant to Section 32 of the Financial Management Act 1994
($ thousand)
Department
Education and Early Childhood
Development
Health (a)
Human Services
Innovation, Industry and
Regional Development
Justice
Planning and Community
Development
Premier and Cabinet
Primary Industries
Sustainability and Environment
Transport
Treasury and Finance
Parliament
Provision of outputs
102 967
113 684
6 752
55 546
37 156
8 967
..
24 449
41 072
176 340
21 010
6 249
Total expenditure by department 594 189
Additions to net assets
199 958
..
4 803
10 909
11 853
754
13 232
24 261
127 691
..
..
393 462
Payments made on behalf of State Other
.. ..
Total carryover
302 925
..
..
..
..
168
..
5 894
..
6 062
..
..
..
113 684
6 752
.. 60 349
..
..
48 064
20 820
..
..
..
754
37 681
65 501
.. 304 031
..
..
26 904
6 249
.. 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
Education and Early Childhood
Development
Health (a)
Human Services
Innovation, Industry and
Regional Development
Justice
Planning and Community
Development
Premier and Cabinet
Primary Industries
Sustainability and Environment
Transport
Treasury and Finance
Parliament
Total carryovers by department
Provision of outputs
163 839
67 390
13 800
66 517
83 167
20 668
9 135
21 155
7 094
239 371
9 529
4 238
705 904
Additions to net assets
838 319
..
11 648
15 729
20 220
6 960
2 518
4 252
9 573
432 518
12 523
..
1 354 259
Payments made on behalf of State Other
..
Total carryover
.. 1 002 158
..
..
9 259
..
..
..
5 184
..
14 443
..
..
..
..
..
..
67 390
25 448
82 246
103 387
27 628
..
..
..
..
20 912
25 407
16 667
671 889
..
..
27 236
4 238
.. 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.
176 Chapter 4 Financial Report 2009-10

(l) Payments from Advance to Treasurer for the year ended 30 June 2010
($ thousand)
Department Purpose
Education and Early Schools enrolment based funding: 2008-09
Childhood Development Additional support for community service organisations
Early childhood facilities in bushfire affected areas
Continued support for non-government schools
School modernisation projects
School improvement projects
Bendigo school regeneration
Health
Craig Family Centre upgrade
Kindergarten enrolment based funding
School capital program
Schools enrolment based funding: 2009-10
Additional support for public holiday costs
Human Services
Gembrook Cemetery
Elective surgery boost
Additional support for community service organisations
Box Hill Hospital redevelopment
The Alfred Burns Unit
Alcohol and drugs rehabilitation services (Tandana Place)
Responding to critical needs in Child Protection system
Additional support for community service organisations
Victorian bushfires statewide plan for reconstruction and recovery funding
Victorian bushfires recovery: Red Cross Outreach Program
Additional support for public holiday costs
VicRelief and Foodbank – Drought assistance
Northern Futures – Community support in Lara and Corio
Concessions program
Bushfire Emergency Relief Grants
March 2010 severe weatherstorm
Innovation, Industry and
Regional Development
2009 Commonwealth Projects – operating costs associated with Commonwealth funded TAFE assets
Retrenched workers program
Marketing Melbourne campaign
Youth Compact
TAFE teachers multiple business agreement supplementation
Finalisation of the Melbourne Exhibition Centre and Maritime
Precinct Development
Carbon markets
International Education Strategy
Industry Transition Fund
Justice Ambulance Victoria regional call taking and dispatch
2012 Gambling licences tender process
Bushfire response and preparedness activities
Additional 120 police
Victoria Police – Safe streets
Bushfire response and preparedness activities – asset
600
1 351
1 600
85
21 000
4 100
635
59 942
10 070
8 365
2 500
26 100
4 120
12 727
1 069
2 187
2 500
69 638
2 550
2 000
9 965
7 775
2 791
2 081
27 162
2009-10
10 654
206
5 453
17 500
5 026
12 365
3 679
500
6 040
4 762
25 013
91 198
17 052
200
15 000
493
1 300
1 060
100
35 205
11 704
4 705
14 162
Financial Report 2009-10 Chapter 4 177

(l) Payments from Advance to Treasurer for the year ended 30 June 2010
(continued)
Sustainability and
Environment
Transport
($ thousand)
Department Purpose
Planning and Community Adult and Community Further Education (ACFE) Skills
Development Respect Agenda
McAdam Park Motor Sports Complex
Public libraries grants program
Local Government Inspectorate
Victorian bushfire recovery: Murrindindi Shire Council Assistance
Glen Eira Sports and Aquatic Centre
Municipal Association of Victoria bushfire preparations
Youth Compact
Victorian bushfire recovery: Callignee Community Centre
Melbourne Park redevelopment
Statewide electronic planning applications online
Victorian Institute of Sport pool
Footscray Central Activities District land development
Youth Guarantee
Commonwealth Games team support
Forest Hill College synthetic surface
Premier and Cabinet
Primary Industries
Victorian bushfires clean up
Bushfires Statewide Plan
Samoa/Tonga tsunami appeal donation
Establishment of Department of Health
Victoria 175 Anniversary program
International Students – Walk for Harmony
Jewish Museum of Australia redevelopment
Queensland fruit fly and potato cyst nematode control
Brown Coal Innovation Australia
European house borer and electric ant eradication programs
Farmland stabilisation
Drought response package
Victoria’s carbon capture and storage (CCS) program – CCS flagships project pre-feasibility studies
Exceptional circumstances interest rate subsidies
Mexican feather grass control
Supplementary funding for the Murray-Darling Basin Authority
Alpine resort support payments
Bushfire preparedness
Bushfire Royal Commission proposed action programs
Solar Hot Water Rebate for 2009-10
Statewide plan for bushfire reconstruction and recovery
Water rate rebates for farmers in drought affected regions
Grassland reserves to protect endangered species
Keeping Lakes Entrance open
Bushfire suppression
Valuer-General operating costs
St Kilda Triangle legal costs
Stevenson Road landfill remediation program
Water allocation for recreational lakes – Lake Wendouree
New metropolitan rail contracts
Release of Taxi Licenses Strategy
VicRoads registration and licensing information system – Stage 1
Truck Action Plan
Melbourne metro planning and design
1 573
700
30 255
160
5 590
35 085
21 610
6 851
5 210
9 000
500
2 365
10 000
874
486
14 500
1 328
113 559
65 167
1 486
6 507
1 800
10 000
84 960
17 280
19 450
500
5 000
668
75
400
43 373
4 348
4 000
620
500
15 214
3 300
2009-10
2 342
131
1 270
485
2 042
1 700
2 000
500
450
1 500
11 500
850
3 500
2 604
1 603
150
235
32 862
178 Chapter 4 Financial Report 2009-10

(l) Payments from Advance to Treasurer for the year ended 30 June 2010
(continued)
Purpose
Natural disaster relief funding arrangements
VicForests fire salvage program
First Home Bonus Scheme
Land Tax and Stamp Duty relief – 2009 bushfires
Land Transfer Duty – Pensioners exemption and concession
Treasury Corporation of Victoria
($ thousand)
Department
Treasury and Finance
Parliament Support Parliament’s ongoing operations
Total Payments from Advance to Treasurer
2009-10
55 000
9 459
103 772
3 216
3 639
31 000
206 086
322
322
794 562
Financial Report 2009-10 Chapter 4 179

(m) Payments from advances pursuant to Section 35 of the Financial Management
Act 1994 for the year ended 30 June 2010
($ thousand)
Department
Health
Purpose
Depreciation expense
Total payments from advances pursuant to Section 35 of the Financial
Management Act, No. 18 of 1994
2010
169 238
169 238
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)
Legislative Assembly
Special appropriations
Audit Act, No. 2 of 1994 – Audit of the Office of the
Auditor-General
Constitution Act, No. 8750 – Clerk of the Parliaments
Constitution Act, No. 8750 – Legislative Assembly
Parliamentary Salaries and Superannuation Act, No.
7723 – Salaries and Allowances
Parliamentary Salaries and Superannuation Act, No.
7723 – Section 13(1)(c) Contributions
Total special appropriations
Parliamentary Amounts Amounts authority applied applied
2010
17
2010
17
2009
15
2
550
13 376
11 880
2
550
13 376
11 880
2
550
12 816
12 420
Annual appropriations
Provision of outputs
Provision of outputs – net application
Advance to Treasurer
Total provision of outputs – gross application
Total annual appropriations – gross application
Total Parliamentary authority
25 824 25 824
4 234
106
4 340
4 216
106
4 322
4 340 4 322
30 165 30 146
25 803
4 191
..
4 191
4 191
29 994
180 Chapter 4 Financial Report 2009-10

(p) Parliamentary authority – Parliament
($ thousand)
Legislative Council
Special appropriations
Audit Act, No. 2 of 1994 – Audit of the Office of the
Auditor-General
Constitution Act, No. 8750 – Legislative Council
Parliamentary Salaries and Superannuation Act, No.
7723 – Salaries and Allowances
Parliamentary Salaries and Superannuation Act, No.
7723, Section 13 (1)(c) – Contributions
Total special appropriations
Annual appropriations
Provision of outputs
Provision of outputs – net application
Advance to Treasurer
Total provision of outputs – gross application
Total annual appropriations gross application
Total Parliamentary authority
(q) Parliamentary authority – Parliament
($ thousand)
Parliamentary Investigatory Committees
Annual appropriations
Provision of outputs
Provision of outputs – net application
Advance to Treasurer
Total provision of outputs – gross application
Total annual appropriations – gross application
Total Parliamentary authority
Parliamentary Amounts Amounts authority
2010 applied
2010 applied
2009
17 17 15
200
6 991
200
6 991
200
6 854
6 120
13 327
2 724
68
2 792
2 792
16 120
6 120
13 327
2 716
68
2 784
2 784
16 111
5 580
12 649
2 693
..
2 693
2 693
15 343
Parliamentary Amounts Amounts authority applied applied
2010 2010 2009
6 370
148
6 349
148
6 291
..
6 518
6 518
6 518
6 497
6 497
6 497
6 291
6 291
6 291
Financial Report 2009-10 Chapter 4 181

(r) Parliamentary authority – Parliament
($ thousand)
Parliamentary Services
Annual appropriations
Provision of outputs
Provision of outputs – net application
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total provision of outputs – gross application
Additions to the net asset base
Section 32 Financial Management Act, No. 18 of 1994
Total additions to net asset base – gross application
Total annual appropriations – gross application
Total Parliamentary authority (excl. FMA Section 33)
Amounts issued under the authority of the Financial
Management Act, No. 18 of 1994, Section 33 (Special
Appropriation) relating to prior year appropriations
Total Parliamentary authority
(s) Parliamentary authority – Parliament
($ thousand)
Auditor-General
Special appropriations
Constitution Act No. 8750 – Auditor-General’s salary
Total special appropriations (excl. FMA Section 33)
Annual appropriations
Provision of outputs
Provision of outputs – net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total provision of outputs – gross application
Total annual appropriations – gross application
Total Parliamentary authority (excl. FMA Section 33)
Amounts issued under the authority of the Financial
Management Act, No. 18 of 1994, Section 33 (Special
Appropriation) relating to prior year appropriations
Total Parliamentary authority
Parliamentary Amounts Amounts authority applied applied
2010 2010 2009
69 054
5 889
..
64 828
5 889
..
61 445
3 811
358
74 943
..
..
74 943
74 943
6 150
70 717
..
..
70 717
70 717
6 150
65 614
4 422
4 422
70 036
70 036
..
81 093
Parliamentary Amounts Amounts authority applied applied
2010
445
445
2010
445
445
2009
410
410
13 666
20 830
360
..
34 856
34 856
35 300
..
13 433
20 830
360
..
34 623
34 623
35 067
..
11 641
19 317
..
55
31 013
31 013
31 423
1 346
35 300
76 867
35 067
70 036
32 769
182 Chapter 4 Financial Report 2009-10

(t) Parliamentary authority – Education and Early Childhood Development and Early
Childhood Development
($ thousand)
Special appropriations
Education and Early Childhood Development Act, No.
6240, Section 34 – Volunteer Workers Compensation
FMA No.18/1994 s10 – Approp of Cwlth grants etc
Total special appropriations (excl. FMA Section 33)
Parliamentary Amounts Amounts authority applied applied
2010
179
2010
179
2009
250
261 313 261 313
261 491 261 491
..
250
Annual appropriations
Provision of outputs
Provision of outputs – net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total provision of outputs – gross application
Additions to the net asset base
Additions to the net asset base – net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total additions to the net asset base – gross application
Total annual appropriations – gross application
Total Parliamentary authority (excl. FMA Section 33)
Amounts issued under the authority of the Financial
Management Act, No. 18 of 1994, Section 33 (Special
Appropriation) relating to prior year appropriations
205 967 102 967
62 383 62 383
7 242 754 7 104 394 6 821 200
128 333 73 199 173 820
58 502
76 028
7 639 437 7 342 944 7 129 550
268 621 .. 75 208
1 503 310 898 818
199 958 199 958
28 815 28 815
206 620
45 005
..
2 000 705 1 127 591
9 640 142 8 470 535
326 834
7 456 384
9 901 633 8 732 026 7 456 634
.. .. 4 088
Total Parliamentary authority 9 901 633 8 732 026 7 460 722
Financial Report 2009-10 Chapter 4 183

(u) Parliamentary authority – Health (a)
($ thousand)
Special appropriations
Casino Control Act No. 47 of 1991, Sections 114 and 114 (b)
Financial Management Act, No.18 of 1994, Section 10
Gambling Regulation Act No. 114 of 2003 Section 3.6.4
Contributions – Hospitals and Charities Fund
Gambling Regulation Act No. 114 of 2003 Section 3.6.11
Contributions – Hospitals and Charities Fund/Mental
Hospitals Fund
Gambling Regulation Act No. 114 of 2003 Sections 4.4.11 and 4.6.8 Contributions – Hospitals and Charities Fund
Gambling Regulation Act No. 114 of 2003 Section 5.4.6
Contributions – Hospitals and Charities Fund/Mental
Hospitals Fund
Gambling Regulation Act No. 114 of 2003 Section 6.3.3
Contributions – Hospitals and Charities Fund/Mental
Hospitals Fund
Total special appropriations (excl. FMA Section 33)
Parliamentary Amounts Amounts authority applied applied
2010 2010 2009
15 471 15 471
66 530 66 530
89 719 89 719
..
..
437 891 437 891
104 391 104 391
233 159 233 159
1 211 1 211
..
..
..
..
948 371 948 371 ..
Annual appropriations
Provision of outputs
Provision of outputs – net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Section 35 Financial Management Act, No. 18 of 1994
(temporary advances)
Advance to Treasurer
Total provision of outputs – gross application
Additions to the net asset base
Additions to the net asset base – net application
Section 32 Financial Management Act, No. 18 of 1994
Total additions to the net asset base – gross application
Total Annual Appropriations Gross Application
Total Parliamentary authority (excl. FMA Section 33)
5 999 244 5 960 154
741 517 713 217
113 684 113 684
169 238 169 238
35 205 35 205
7 058 888 6 991 498
68 838
..
68 838
..
..
..
7 127 726 6 991 498
8 076 098 7 939 870
7 781 7 781 Amounts issued under the authority of the Financial
Management Act, No. 18 of 1994, Section 33 (Special
Appropriation) relating to prior year appropriations
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.
..
..
..
..
..
..
..
..
..
..
..
..
184 Chapter 4 Financial Report 2009-10

(v) Parliamentary authority – Human Services (a)
($ thousand)
Special appropriations
Casino Control Act No. 47 of 1991, Sections 114 and 114
(b)
Financial Management Act, No.18 of 1994, Section 10
Gambling Regulation Act No. 114 of 2003 Section 3.6.4
Contributions – Hospitals and Charities Fund
Gambling Regulation Act No. 114 of 2003 Section 3.6.11
Contributions – Hospitals and Charities Fund/Mental
Hospitals Fund
Gambling Regulation Act No. 114 of 2003 Sections 4.4.11 and 4.6.8 Contributions – Hospitals and Charities Fund
Gambling Regulation Act No. 114 of 2003 Section 5.4.6
Contributions – Hospitals and Charities Fund/Mental
Hospitals Fund
Gambling Regulation Act No. 114 of 2003 Section 6.3.3
Contributions – Hospitals and Charities Fund/Mental
Hospitals Fund
Total special appropriations (excl. FMA Section 33)
Parliamentary Amounts Amounts authority
2010 applied
2010 applied
2009
8 427 8 427 23 076
44 070
25 869
32 708
131 206 131 206
200
44 070
25 869
190 852 190 852
32 708
200
146 478
116 198
655 272
133 552
341 237
1 630
433 332 433 332 1 417 443
Annual appropriations
Provision of outputs
Provision of outputs – net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total provision of outputs – gross application
4 658 635 4 627 895 9 664 783
1 332 030 1 332 030 1 326 030
6 752
59 942
6 752
59 942
40 591
156 950
6 057 358 6 026 618 11 188 354
Additions to the net asset base
Additions to the net asset base – net application
Section 29
Section 32
Financial Management Act, No. 18 of 1994
Financial Management Act, No. 18 of 1994
Total additions to the net asset base – gross application
Total Annual Appropriations Gross Application
Total Parliamentary authority (excl. FMA Section 33)
49 859 33 110
324 252 321 811
.. ..
374 111 354 921
63 005
228
44 592
107 825
6 431 469 6 381 539 11 296 179
6 864 800 6 814 870 12 713 623
.. .. 10 606 Amounts issued under the authority of the Financial
Management Act, No. 18 of 1994, Section 33 (Special
Appropriation) relating to prior year appropriations
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.
Financial Report 2009-10 Chapter 4 185

(w) Parliamentary authority – Innovation, Industry and Regional Development
($ thousand)
Annual appropriations
Provision of outputs
Provision of outputs – net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total provision of outputs – gross application
Parliamentary Amounts authority
2010 applied
2010
Amounts applied
2009
1 562 366 1 447 729 1 357 067
384 927 384 927
64 031 55 546
173 621
23 887
69 638 69 638 71 977
2 080 962 1 957 840 1 626 553
Additions to the net asset base
Additions to the net asset base – net application
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total additions to the net asset base – gross application
Payments made on behalf of the State
Payments made on behalf of the State – net application
Total for payments made on behalf of the State – gross application
Other
Payment to Regional Infrastructure Development Fund pursuant to Section 4 of the Regional Infrastructure
Development Fund Act 1999
133 852
15 227
..
149 079
54 000
54 000
77 200
26 310
4 803
..
31 113
54 000
54 000
77 200
4 395
7 195
16 451
28 041
27 000
27 000
41 000
Total other
Total annual appropriations – gross application
Total Parliamentary authority (excl. FMA Section 33)
Amounts issued under the authority of the Financial
Management Act, No. 18 of 1994, Section 33 (Special
Appropriation) relating to prior year appropriations
77 200 77 200 41 000
2 361 241 2 120 153 1 722 593
2 361 241 2 120 153 1 722 593
.. .. ..
Total Parliamentary authority 2 361 241 2 120 153 1 722 593
186 Chapter 4 Financial Report 2009-10

(x) Parliamentary authority – Justice
($ thousand)
Special appropriations
Constitution Act, No. 8750 – Chief Justice
Constitution Act, No. 8750 – Judges of the Court of Appeal
Constitution Act, No. 8750 – President, Court of Appeal
Constitution Act, No. 8750 – Judges Supreme Court
County Court Act, No. 6230 – Judges
Crown Proceedings Act, No. 6232
Juries Act No.53 of 2000, Sec. 59 – Compensation to Jurors
Electoral Act, No. 23 of 2002, Section 181- Electoral
Expenses
Electoral Act, No. 23 of 2002, Section 215 – Entitlement
Eastlink Project Act No 39 of 2004, Sec. 26
Magistrates Court Act, No. 51 of 1989
Melbourne City Link Act, No. 107 of 1995, Section 14 (4)
Victims of Crime Assistance Act, No. 81 of 1996 – Tribunal
Victims of Crime Assistance Act, No. 81 of 1996 -Criminal
Injuries Compensation
Emergency Management Act No 30/1986 Sec.32 –
Volunteer Workers Compensation
Victorian State Emergency Services Volunteer Workers
Compensation – Act No. 51 of 2005
Total special appropriations (excl. FMA Section 33)
Parliamentary Amounts Amounts authority
2010 applied
2010 applied
2009
499
4 037
410
14 265
21 532
2 163
..
19 577
499
4 037
410
14 265
21 532
2 163
..
19 577
494
3 931
413
13 248
22 032
2 510
297
30 185
53
333
37 138
2 100
2 488
39 557
31
799
53
333
37 138
2 100
2 488
39 557
31
799
144 983 144 983
43
28
35 577
1 798
2 095
30 601
..
240
143 491
Annual appropriations
Provision of outputs
Provision of outputs – net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total provision of outputs – gross application
Additions to the net asset base
Additions to the net asset base – net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total additions to the net asset base – gross application
Payments made on behalf of the State
Payments made on behalf of the State – net application
Total for payments made on behalf of the State – gross application
Other
Victorian Law Reform Commission – pursuant to Section 17
(b) of the Victorian Law Reform Commission Act 2000
Total Other
Total annual appropriations gross application
Total Parliamentary authority (excl. FMA Section 33)
Amounts issued under the authority of the Financial
Management Act, No. 18 of 1994, Section 33 (Special
Appropriation) relating to prior year appropriations
3 418 290 3 284 196 3 037 350
190 464
37 156
25 081
190 464
37 156
25 081
139 208
84 962
26 860
3 670 991 3 536 897 3 288 381
230 531 150 300
25 962 25 962
10 909
2 081
10 909
2 081
269 482 189 251
83 109
4 522
20 625
..
108 256
50 262 43 370
50 262 43 370
43 118
43 118
1 314 1 313 964
1 314 1 313
3 992 049 3 770 830
964
3 440 719
4 137 032 3 915 814 3 584 210
29 618 29 618 21 567
Total Parliamentary authority 4 166 650 3 945 431 3 605 777
Financial Report 2009-10 Chapter 4 187

(y) Parliamentary authority – Planning and Community Development
($ thousand)
Special appropriations
Gambling Regulation Act No. 114 of 2003, Section 3.6.12
Contribution to Community Support Fund
Total special appropriations (excl. FMA Section 33)
Parliamentar y authority
2010
97 374
97 374
Amounts Amounts applied
2010
97 374
97 374 applied
2009
100 904
100 904
Annual appropriations
Provision of outputs
Provision of outputs – net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total provision of outputs – gross application
Additions to the net assets base
Additions to the net asset base – net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total additions to the net asset base – gross application
Payments made on behalf of the State
Payments made on behalf of the State – net application
Total for payments made on behalf of the State – gross application
423 901 395 258
1 000
8 968
1 000
8 967
14 128 14 128
447 998 419 353
103 326
586
11 853
18 734
72 515
586
11 853
18 734
134 499 103 688
500
500
497
497
413 763
1 000
1 317
13 227
429 306
113 973
..
9 235
3 520
126 728
690
690
Total annual appropriations – gross application
Total Parliamentary authority (excl. FMA Section 33)
Amounts issued under the authority of the Financial
Management Act, No. 18 of 1994, Section 33 (Special
Appropriation) relating to prior year appropriations
582 997 523 538
680 371 620 912
1 914 1 914
556 724
657 629
11 669
Total Parliamentary authority 682 285 622 826 669 298
188 Chapter 4 Financial Report 2009-10

(z) Parliamentary authority – Premier and Cabinet
($ thousand)
Special appropriations
Constitution Act, No. 8750 – Executive Council
Constitution Act, No. 8750 – Governor’s Salary
Ombudsman Act, No. 8414
Parliamentary Salaries and Superannuation Act, No.
7723
Total special appropriations (excl. FMA Section 33)
Parliamentar Amounts y authority applied
2010 2010
50
362
456
5 830
50
362
456
5 830
6 698 6 698
Annual appropriations
Provision of outputs
Provision of outputs – net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total provision of outputs – gross application
Additions to the net asset base
Additions to the net asset base – net application
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total additions to the net asset base – gross application
Payments made on behalf of the State
Payments made on behalf of the State – net application
Total payments made on behalf of the State – gross application
..
43 373
524 795 513 832
4 383 883
..
43 373
572 551 558 087
22 764 14 986
754 754
..
23 518
40 000
40 000
15 740
30 741
30 741
Total annual appropriations – gross application
Total Parliamentary authority (excl. FMA Section 33)
Amounts issued under the authority of the Financial
Management Act, No. 18 of 1994, Section 33 (Special
Appropriation) relating to prior year appropriations
636 069 604 569
642 767 611 267
2 200 2 200
Total Parliamentary authority 644 967 613 467
Amounts applied
2009
50
345
424
5 680
6 498
475 194
464
6 710
67 394
549 762
3 824
2 223
200
6 247
..
..
556 009
562 507
..
562 507
Financial Report 2009-10 Chapter 4 189

(aa) Parliamentary authority – Primary Industries
($ thousand)
Special appropriations
Financial Management Act, No. 18 of 1994, Section 28
Total special appropriations (excl. FMA Section 33)
Annual appropriations
Provision of outputs
Provision of outputs – net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total provision of outputs – gross application
Additions to the net asset base
Additions to the net asset base – net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Total additions to the net asset base – gross application
Total annual appropriations – gross application
Total Parliamentary authority (excl. FMA Section 33)
Amounts issued under the authority of the Financial
Management Act, No. 18 of 1994, Section 33 (Special
Appropriation) relating to prior year appropriations
Total Parliamentary authority
Parliamentary Amounts Amounts authority applied applied
2010 2010 2009
2 945
2 945
2 945
2 945
..
..
333 136 314 955 286 978
144 360 132 059 140 430
24 449
30 255
24 449 41 997
30 255 49 951
532 200 501 718 519 355
83 382 540 8 426
318
14 418
268
13 232
..
1 420
98 118 14 039
630 318 515 757 529 201
9 846
633 263 518 702 529 201
5 063 5 063 ..
638 326 523 765 529 201
190 Chapter 4 Financial Report 2009-10

(ab) Parliamentary authority – Sustainability and Environment
($ thousand)
Special appropriations
Financial Management Act, No. 18 of 1994, Section 10
Financial Management Act, No. 18 of 1994, Section 28
Total special appropriations (excl. FMA Section 33)
Parliamentary Amounts Amounts authority applied applied
2010 2010 2009
..
3 704
3 704
.. 220 000
3 704 24 772
3 704 244 772
Annual appropriations
Provision of outputs
Provision of outputs – net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Victorian Water Trust – net application
Section 32 Financial Management Act, No. 18 of 1994 –
Victorian Water Trust
Pursuant to Section 15 of the Environment Protection Act
1970 – net application
Section 29 Financial Management Act, No. 18 of 1994 –
Environment Protection Authority
Advance to Treasurer – Environment Protection Authority
Total provision of outputs – gross application
Additions to the net asset base
Additions to the net asset base – net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Advance to the Treasurer
Victorian Water Trust – net application
Section 32 Financial Management Act, No. 18 of 1994 –
Victorian Water Trust
Total additions to the net asset base – gross application
Other
Contribution by the State under agreements pursuant to
Section 25 of the Murray-Darling Basin Act 1993
Section 32 Financial Management Act, No. 18 of 1994 –
Section 25 of the Murray-Darling Basin Act 1993
Advance to the Treasurer – Section 25 of the
Murray-Darling Basin Act 1993
Total Other
Total annual appropriations – gross application
Total Parliamentary authority (excl. FMA Section 33)
Amounts issued under the authority of the Financial
Management Act, No. 18 of 1994, Section 33 (Special
Appropriation) relating to prior year appropriations
842 118 764 435 853 112
167 498 167 498 119 548
40 416 40 416 40 856
105 088 105 088 180 405
2 413
656
2 322
656
11 638
2 443
33 331
3 592
33 331 32 259
3 592 3 986
.. .. 3 158
1 195 112 1 117 338 1 247 404
232 088 209 231 205 773
46 509 36 930 144 599
18 859
8 311
11 475
5 402
18 859
8 311
6 480
8 297
11 475 71 124
5 402 8 206
322 644 290 207 444 479
27 938 27 938 27 053
168
160
168
160
..
..
28 266 28 266 27 053
1 546 022 1 435 812 1 718 936
1 549 725 1 439 515 1 963 708
12 248 12 248 13 267
Total Parliamentary authority 1 561 974 1 451 764 1 976 975
Financial Report 2009-10 Chapter 4 191

(ac) Parliamentary authority – Transport
($ thousand)
Special appropriations
Financial Management Act, No. 18 of 1994, Section 10
Transport Act No. 9921 of 1983, Section 213 (a)
Total special appropriations (excl. FMA Section 33)
Annual appropriations
Provision of outputs
Provision of outputs – net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total provision of outputs – gross application
Additions to the net asset base
Additions to the net asset base – net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Section 35 Financial Management Act, No. 18 of 1994
(temporary advances)
Advance to Treasurer
Total additions to the net asset base – gross application
Total annual appropriations – gross application
Total Parliamentary authority (excl. FMA Section 33)
Amounts issued under the authority of the Financial
Management Act, No. 18 of 1994, Section 33 (Special
Appropriation) relating to prior year appropriations
Parliamentary Amounts Amounts authority
2010 applied
2010 applied
2009
..
1 303
1 303
..
1 303
1 303
488
1 819
2 308
3 903 511 3 798 741 3 568 609
581 430 424 930
176 590 176 340
61 513 61 513
289 601
37 153
66 036
4 723 045 4 461 524 3 961 399
1 833 832 1 175 758
30 190 30 190
133 035
..
127 691
..
936 485
83 219
149 372
167 000
23 447 23 447
2 020 504 1 357 086
82 913
1 418 989
6 743 549 5 818 610 5 380 388
6 744 851 5 819 913 5 382 696
55 742 55 742 76 203
Total Parliamentary authority 6 800 593 5 875 655 5 458 899
192 Chapter 4 Financial Report 2009-10

(ad) Parliamentary authority – Treasury and Finance
($ thousand)
Special appropriations
Constitution Act, No. 8750 – Governor’s Pension
Constitution Act, No. 8750 – Supreme Court Judges
County Court Act, No. 6230 – Judges
Financial Management Act, No. 18 of 1994, Section 10
Financial Management Act, No. 18 of 1994, Section 39 –
Interest on Advances
Liquor Control Reform Act, No. 94 of 1988, Section 177 (2)
State Electricity Commission Act 1958, Section 85B(2) –
Indemnity
State Superannuation Act, No. 50 of 1988, Section 90 (2) –
Contributions
State Owned Enterprises Act, No. 94 of 1994, Section 88 –
State equivalent taxation payments
Taxation (Interest on Overpayments) Act, No. 35 of 1986,
Section 11
Treasury Corporation of Victoria Act No. 80 of 1992, Section
38 – Debt Retirement
Total special appropriations (excl. FMA Section 33)
Parliamentary Amounts Amounts authority applied applied
2010 2010 2009
1 634
8 905
12 443
1 634
8 905
12 443
147
6 090
7 875
360 405 360 405 209 075
8 148 8 148 34 517
2 928
10 336
2 928
10 336
2 773
..
564 495 564 495 450 694
681
3 764
681 30 655
3 764
211 769 211 769
453
6 616
1 185 508 1 185 508 748 896
Annual appropriations
Provision of outputs
Provision of outputs – net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total provision of outputs – gross application
Additions to the net asset base
Additions to the net asset base – net application
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total additions to the net asset base – gross application
Payments made on behalf of the State
Payments made on behalf of the State – net application
Section 32 Financial Management Act, No. 18 of 1994
Advance to the Treasurer
Total for payments made on behalf of the State – gross application
Advance to Treasurer to meet urgent claims that may arise before Parliamentary sanction is obtained, which will afterwards be submitted for Parliamentary authority
Payments approved under Advance to Treasurer and brought to account under the relevant departments
Total annual appropriations gross application
Total Parliamentary authority (excl. FMA Section 33)
Amounts issued under the authority of the Financial
Management Act, No. 18 of 1994, Section 33 (Special
Appropriation) relating to prior year appropriations
264 998 253 145 228 185
6 371
21 010
6 371
21 010
4 908
1 851
.. .. 732
292 379 280 525 235 675
44 054
4 165
..
27 799
..
..
..
..
4 500
48 219 27 799 4 500
1 347 817 1 309 336 1 059 572
5 894 5 894 ..
206 086 206 086 56 642
1 559 797 1 521 316 1 116 214
899 743 794 562 885 655
(899 743) (794 562) (885 655)
1 900 395 1 829 640 1 356 390
3 085 903 3 015 148 2 105 286
11 943 11 943 20 000
Total Parliamentary authority 3 097 846 3 027 091 2 125 286
Financial Report 2009-10 Chapter 4 193

(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.
194 Chapter 4 Financial Report 2009-10

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.
Financial Report 2009-10 Chapter 4 195

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.
196 Chapter 4 Financial Report 2009-10

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.
General government sector
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.
Financial Report 2009-10 Chapter 4 197

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.
198 Chapter 4 Financial Report 2009-10

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.
Financial Report 2009-10 Chapter 4 199

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.
200 Chapter 4 Financial Report 2009-10

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.
Financial Report 2009-10 Chapter 4 201

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.
202 Chapter 4 Financial Report 2009-10

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.
Financial Report 2009-10 Chapter 4 203

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.
204 Chapter 4 Financial Report 2009-10

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.
Controlled entities
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
General government
Entities included as investments in other sectors
Public Public non-financial corporation financial corporation
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Financial Report 2009-10 Chapter 4 205

Controlled entities
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
General government
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Entities included as investments in other sectors
Public Public non-financial corporation financial corporation
206 Chapter 4 Financial Report 2009-10

Controlled entities
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)
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
General government
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Entities included as investments in other sectors
Public Public non-financial corporation financial corporation
*
*
*
*
*
*
*
*
*
*
*
Financial Report 2009-10 Chapter 4 207

Controlled entities
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
General government
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Entities included as investments in other sectors
Public Public non-financial corporation financial corporation
*
*
*
*
*
*
*
*
208 Chapter 4 Financial Report 2009-10

Controlled entities
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
General government
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Entities included as investments in other sectors
Public Public non-financial corporation financial corporation
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Financial Report 2009-10 Chapter 4 209

Controlled entities
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
General government
*
*
*
*
Entities included as investments in other sectors
Public non-financial corporation
Public financial corporation
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
210 Chapter 4 Financial Report 2009-10

Controlled entities
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
*
*
*
*
General government
*
*
*
Entities included as investments in other sectors
Public Public non-financial corporation financial corporation
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
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.
Financial Report 2009-10 Chapter 4 211

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.
212 Chapter 4 Financial Report 2009-10

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.
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 Report 2009-10 Chapter 5 213

Table 5.1: Non-financial public sector comprehensive operating statement
($ million)
Revenue from transactions
Taxation revenue
Interest
Dividends and income tax equivalent and rate equivalent revenue
Sales of goods and services
Grants
Other revenue
Total revenue from transactions
Expenses from transactions
Employee expenses
Superannuation interest expense
Other superannuation
Depreciation and amortisation
Interest expense
Other operating expenses
Grants and other transfers
Total expenses from transactions
Net result from transactions - net operating balance
Other economic flows included in net result
Net gain/(loss) on sale of non-financial assets
Net loss on financial assets or liabilities at fair value
Net actuarial losses of superannuation defined benefits
Share of net profit/(loss) from associates/joint venture entities, excluding dividends
Other gains/(losses) from other economic flows
Total other economic flows included in net result
Net result
Other economic flows – other movements in equity
Net (loss) on financial assets at fair value
Revaluations of non-financial assets
Net gain/(loss) on equity investments in other sector entities at proportional share of the carrying amount of net assets
Transfers to accumulated funds/other movements in equity
Total other economic flows – other movements in equity
Comprehensive result – total change in net worth
FISCAL AGGREGATES
Net operating balance
Net acquisition of non-financial assets
Purchases of non-financial assets
Less: Sales of non-financial assets
Less: Depreciation and amortisation
Plus: Change in inventories
Plus: Other movements in non-financial assets
Less: Net acquisition of non-financial assets from transactions
Net lending/(borrowing)
Source: Department of Treasury and Finance
2010 2009
13 547.9 12 456.9
381.6
99.6
473.7
181.2
8 323.5 7 768.2
22 712.5 18 849.6
2 569.2 2 335.5
47 634.3 42 065.1
16 221.2 15 032.9
867.7 610.4
1 613.4 1 488.8
3 365.8 2 519.8
1 362.3 1 128.3
16 802.8 15 651.6
6 634.0 5 419.3
46 867.3 41 851.0
767.0 214.1
( 49.2) 66.8
( 68.4) (1 202.7)
(1 435.8) (7 572.5)
49.6 ( 30.4)
(4 488.1) ( 621.9)
(5 991.9) (9 360.7)
(5 224.9) (9 146.7)
25.1 ( 10.1)
6 768.1 20 442.5
( 483.0) (2 966.4)
265.2 19 063.2
6 575.4 36 529.2
1 350.6 27 382.5
767.0 214.1
8 924.0 7 372.5
( 316.7) ( 343.9)
(3 365.8) (2 519.8)
4.5
501.3
128.2
370.9
5 747.3 5 008.0
(4 980.3) (4 793.9)
214 Chapter 5 Financial Report 2009-10

Table 5.2: Non-financial public sector balance sheet
($ million)
Assets
Financial assets
Cash and deposits
Advances paid
Investments, loans and placements
Receivables
Investments accounted for using the equity method
Investments in other sector entities
Total financial assets
Non-financial assets
Inventories
Non-financial assets held for sale
Land, buildings, infrastructure, plant and equipment
Other non-financial assets
Total non-financial assets
Total assets
Liabilities
Deposits held and advances received
Borrowings
Payables
Superannuation
Other employee benefits
Other provisions
Total liabilities
Net assets
Accumulated surplus/(deficit)
Other reserves
Non-controlling interest
Net worth
FISCAL AGGREGATES
Net financial worth
Net financial liabilities
Net debt
Source: Department of Treasury and Finance
2010 2009
3 899.5 3 561.9
113.3 125.8
4 321.9 4 059.7
3 646.3 3 544.7
533.2 477.1
313.8 780.2
12 828.0 12 549.4
929.7 925.3
108.1 80.2
163 671.0 155 919.1
1 425.2 1 100.8
166 134.0 158 025.3
178 962.0 170 574.7
587.8 417.6
22 557.6 18 026.2
5 620.5 4 881.0
22 597.7 20 755.1
4 626.5 4 510.7
1 791.7 2 159.5
57 781.9 50 750.2
121 180.1 119 824.5
6 118.5 11 168.6
115 017.1 108 616.4
44.5 39.5
121 180.1 119 824.5
(44 953.9) (38 200.8)
45 267.7 38 981.0
14 810.7 10 696.4
Financial Report 2009-10 Chapter 5 215

Table 5.3: Non-financial public sector cash flow statement
($ million)
Cash flows from operating activities
Receipts
Taxes received
Grants
Sales of goods and services (a)
Interest received
Dividends and income tax equivalent and rate equivalent receipts
Other receipts
Total receipts
Payments
Payments for employees
Superannuation
Interest paid
Grants and subsidies
Goods and services (a)
Other payments
Total payments
Net cash flows from operating activities
Cash flows from investing activities
Purchases of non-financial assets
Sales of non-financial assets
Cash flows from investments in non-financial assets
Net cash flows from investments in financial assets for policy purposes (b)
Sub-total
Net cash flows from investments in financial assets for liquidity management purposes (b)
Net cash flows from investing activities
Cash flows from financing activities
Advances received (net) (c)
Net borrowings
Deposits received (net) (c)
Other financing (net) (b)
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of reporting period
Cash and cash equivalents at end of reporting period
FISCAL AGGREGATES
Net cash flows from operating activities
Net cash flows from investments in non-financial assets
Cash surplus/(deficit)
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.
2010 2009
13 678.9 12 281.4
22 609.9 19 389.3
9 563.1 8 738.0
368.3
99.5
472.4
227.7
1 862.0 1 658.6
48 181.6 42 767.4
(16 113.8) (14 838.2)
(2 068.9) (1 875.4)
(1 255.3) (1 042.9)
(6 555.2) (5 908.6)
(17 088.1) (15 842.7)
( 440.7) ( 406.8)
(43 522.0) (39 914.6)
4 659.6 2 852.8
(8 924.0) (7 372.5)
316.7 343.9
(8 607.3) (7 028.7)
189.6 287.3
(8 417.8) (6 741.4)
( 405.3) ( 161.8)
(8 823.1) (6 903.1)
( 0.5) ( 8.1)
4 437.4 4 138.3
(
0.2)
( 72.4)
65.4 ( 227.7)
4 502.0 3 830.0
338.6 ( 220.3)
3 560.7 3 781.0
3 899.3 3 560.7
4 659.6 2 852.8
(8 607.3) (7 028.7)
(3 947.7) (4 175.9)
216 Chapter 5 Financial Report 2009-10

Table 5.4: Non-financial public sector statement of changes in equity
2008-09
Accumulated surplus/(deficit)
First time recognition of land under roads (a)
Other movements in equity
Adjustment for change in accounting policy
Non-controlling interest
Physical asset revaluation reserve
Net movements in other reserves
Accumulated net gain (loss) on equity investments in other sector entities
Total equity at end of the period
2009-2010
Accumulated surplus/(deficit)
Other movements in equity
Adjustment for change in accounting policy
Non-controlling interest
Physical asset revaluation reserve
Net movements in other reserves
Accumulated net gain (loss) on equity investments in other sector entities
Total equity at end of the period
Source: Department of Treasury and Finance
($ million)
Equity at
1 July
Total comprehensiv e result
45 939.9
..
..
32.0
41 209.0
1 670.4
3 583.2
92 434.5
55 846.8
..
..
39.5
61 651.5
1 669.9
616.8
119 824.5
Note:
(a) Comprises recognition of land under roads for the first time in 2008-09.
(9 146.7)
18 682.5
371.1
..
..
20 442.5
( 0.6)
(2 966.4)
27 382.5
(5 224.9)
174.7
0.0
6 768.1
115.6
( 483.0)
1 350.6
Transactions with owners in their capacity as
Equity at
30 June owners
.. 36 793.2
18 682.5
..
..
371.1
..
7.5 39.5
.. 61 651.5
.. 1 669.9
.. 616.8
7.5 119 824.5
.. 50 622.0
..
..
174.7
0.0
5.0 44.5
.. 68 419.6
.. 1 785.5
.. 133.8
5.0 121 180.1
Table 5.5: Non-financial public sector derivation of GFS cash surplus/(deficit)
($ million)
Cash surplus/(deficit)
Less: Acquisitions under finance leases and similar arrangements
GFS Cash surplus/(deficit) (a)
Source: Department of Treasury and Finance
Note:
(a) Determined in accordance with ABS GFS manual.
2010 2009
(3 947.7) (4 175.9)
( 74.9) ( 581.5)
(4 022.7) (4 757.4)
Financial Report 2009-10 Chapter 5 217

5.6: General government sector detail expenses by function
($ million)
General public services
Other general public services
Public order and safety
Police and fire protection services
Police services
Fire protection services
Law courts and legal services
Prisons and corrective services
Other public order and safety
Education
Primary and secondary education
Primary education
Secondary education
Primary and secondary education NEC (a)
Tertiary education
Technical and further education
Pre-school education and education not definable by level
Pre-school education
Special education
Transportation of students
Transportation of non-urban school children
Transportation of other students
Education NEC (a)
Health
Acute care institutions
Admitted patient services in acute care institutions
Non-admitted patient services in acute care institutions
Mental health institutions
Nursing homes for the aged
Community health services
Community health services (excluding community mental health)
Community mental health
Patient transport
Public health services
Pharmaceuticals, medical aids and appliances
Health research
Health administration NEC (a)
Social security and welfare
Welfare services
Family and child services
Welfare services for the aged
Welfare services for people with a disability
Welfare services NEC (a)
Housing and community amenities
Housing and community development
Housing
Community development
Water supply
Sanitation and protection of the environment
Other community amenities
2009-10 2008-09
742.9
742.9
708.9
708.9
4 296.3 4 252.7
2 559.8 2 636.8
1 753.1 1 628.1
806.7 1 008.7
904.5 834.8
565.6
266.5
541.8
239.4
11 780.0 10 443.7
8 896.7 7 811.0
4 366.7 3 829.5
4 520.3 3 972.1
9.7 9.5
1 924.7 1 719.0
1 924.7 1 719.0
625.9 591.5
181.7
444.1
296.3
213.2
83.2
170.8
420.6
282.6
205.9
76.7
36.4 39.6
11 732.1 10 577.5
8 961.4 8 062.9
7 241.1 6 678.7
1 720.4 1 384.2
62.3
378.2
45.5
296.1
1 744.8 1 549.8
624.7
598.2
521.9
325.3
178.9
78.3
2.9
552.0
506.0
491.8
390.0
118.4
112.2
2.6
3 260.6 3 015.4
3 260.6 3 015.4
709.0 650.2
775.9 698.7
1 261.5 1 183.8
514.2 482.7
3 799.8 2 927.4
2 487.5 1 645.1
1
189.6
1 297.9
170.5
956.9
688.2
218.6
396.7
745.1
366.1
697.6
218 Chapter 5 Financial Report 2009-10

5.6: General government sector detail expenses by function (continued)
($ million)
Recreation and culture
Recreation facilities and services
National parks and wildlife
Recreation facilities and services NEC (a)
Cultural facilities and services
Fuel and energy
Fuel affairs and services
Gas
Electricity and other energy
Agriculture, forestry, fishing and hunting
Agriculture
Forestry, fishing and hunting
Mining and mineral resources other than fuels; manufacturing; and construction
Mining and mineral resources other than fuels
Transport and communications
Road transport
Road maintenance
Road Construction
Road transport NEC (a)
Water transport
Urban water transport services
Rail transport
Urban rail transport services
Non-urban rail transport freight services
Non-urban rail transport passenger services
Other transport
Multi-mode urban transport
Other transport NEC (a)
Other economic affairs
Storage, sale yards and markets
Tourism and area promotion
Labour and employment affairs
Other labour and employment affairs
Other economic affairs
Other purposes
Public debt transactions
Other purposes NEC (a)
Total
Source: Department of Treasury and Finance
Notes:
(a) NEC: Not elsewhere classified.
2009-10 2008-09
827.6
360.0
78.2
281.9
467.6
20.8
3.8
3.8
17.0
515.2
331.6
183.6
33.0
804.4
324.9
75.5
249.3
479.6
19.0
3.3
3.3
15.7
506.7
347.6
159.1
20.4
33.0 20.4
4 659.7 4 060.3
1 979.2 1 903.9
432.9
543.1
1 003.1
17.5
17.5
430.0
519.7
954.2
15.7
15.7
2 407.7 1 965.5
1 815.1 1 392.6
19.2 25.8
573.4
255.4
547.2
175.1
17.8
237.6
594.1
142.9
103.0
103.0
348.2
17.0
158.1
471.1
114.1
83.2
83.2
273.7
1 679.5 1 226.1
1 646.1 1 194.3
33.4 31.8
43 941.7 39 033.7
Financial Report 2009-10 Chapter 5 219

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)
General government cash deficit (+)/surplus(-)
Public non-financial corporation sector cash deficit (+)/surplus(-)
Non-financial public sector cash deficit (+)/surplus(-) (a)
Acquisitions under finance leases and similar arrangements
ABS GFS cash deficit(+)/surplus(-)
Net cash flows from investments in financial assets for policy purposes
(b)
Memorandum items (c)
Loan Council allocation
Tolerance limit (2 per cent of non-financial public sector cash receipts from operating
activities) (d)
Source: Department of Treasury and Finance
2009-10 2009-10
Nomination Actual
703.0 1
270.5
4 120.2 2 677.2
4 822.7 3 947.7
.. 74.9
4 822.7 4 022.7
( 2.6)
328.0
189.6
150.0
5 153.3 3 983.1
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.
220 Chapter 5 Financial Report 2009-10

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.
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.
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.
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.
Financial Report 2009-10 Chapter 5 221

Table A.1: Operating statement for the past five quarters
Revenue from transactions
Taxation revenue
Interest revenue
Dividends and income tax equivalent and rate equivalent revenue
Sales of goods and services
Grants
Other revenue
Total revenue from transactions
Expenses from transactions
Employee expenses
Superannuation interest expense
Other superannuation
Depreciation
Interest expense
Grants and other transfers
Other operating expenses
($ million)
2008-09
Jun Sept
2009-10
Dec Mar Jun
2 861.6 3 068.2 3 091.2 4 253.3 3 327.8
71.9
128.4
79.9
19.6
85.1
157.0
65.2
32.0
103.2
277.1
1 455.8
5 586.8
683.1
10 787.6
152.0
384.9
413.5
245.3
4 013.6
1 268.6
4 864.6
467.8
166.1
398.3
375.6
180.3
3 157.4
1 391.0
6 110.1
440.0
270.8
344.3
506.8
218.2
3 378.4
1 288.3
5 318.2
456.1
213.7
376.6
450.4
205.1
3 432.8
1 341.5
6 424.9
654.5
9 768.7 11 274.3 11 413.2 12 129.1
3 676.9 3 639.6 3 907.8 3 801.5 4 055.8
216.1
408.6
537.0
239.7
2 219.9 1 869.8 2 617.8 2 537.3 2 149.6
4 286.2
11 106.0 9 787.2 11 244.1 11 017.4 11 893.0
( 318.5) ( 18.5) 30.2 395.8 236.1
Total expenses from transactions
Net result from transactions – net operating balance
Other economic flows included in net result
Net gain/(loss) on disposal of non-financial assets
Net gain/(loss) on financial assets or liabilities at fair value
Net actuarial gain/(loss) of superannuation defined benefits plans
Share of net profit/(loss) from associates/ joint venture entities, excluding dividends
Other gains/(losses) from other economic flows
Total other economic flows included in net result
Net result
48.8
( 28.3)
3 865.4
( 74.3)
( 451.3)
3 360.3
3 041.9
5.2
5.5
330.7
..
( 55.7)
285.7
267.3
31.7
21.4
1 525.1 (1 073.9) (2 232.1)
..
93.9
1 672.1 (1 133.3) (6 881.3)
1 702.3
16.8
( 1.2)
..
( 94.1)
38.2
( 1.4)
( 75.1) (4 591.9)
( 737.5) (6 645.2)
Financial Report 2009-10 Appendix A 223

Table A.1: Operating statement for the past five quarters (continued)
Other economic flows – other movements in equity
Net gain/(loss) on financial assets at fair
($ million)
2008-09
Jun
12.6 value
Revaluations of non-financial assets
Net gain/(loss) on equity investments in other sector entities at proportional share of the carrying amount of net assets
Transfers to accumulated funds/other movements in equity
1 438.8
19 657.8
19 003.6
Sept
5.3
( 289.9)
263.5
2009-10
Dec
10.2
254.8
107.8
Mar
3.4
( 240.3)
Jun
( 3.7)
( 21.2) 3 473.0
.. 1 391.9 ( 296.7) 1 418.7
213.1
40 112.8 ( 21.2) 1 764.7 ( 554.8) 5 101.1 Total other economic flows – other movements in equity
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
Less: Net acquisition of non-financial assets from transactions
Net lending/(borrowing)
( 318.5)
784.4
(1 102.9)
( 18.5)
297.5
( 316.0)
30.2 395.8 236.1
932.0 ( 130.7) 1 757.5
( 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
Assets
Financial assets
Cash and deposits
Advances paid
Investments, loans and placements
Receivables
Investments accounted for using equity method – other
Investments in other sector entities
Total financial assets
Non-financial assets
Inventories
Non-financial assets held for sale
Land, buildings, infrastructure, plant and equipment
Other non-financial assets
Total non-financial assets
Total assets
Liabilities
Deposits held and advances received (a)
Borrowings (a)
Payables
Superannuation
Other employee benefits
Other provisions
Total liabilities
Net assets
($ million)
2008-09
Jun
2 846.0 2 199.1 2 186.2 2 347.6 3 221.3
30.0
Sept
30.0
2009-10
Dec
29.2
Mar
29.7
Jun
269.0 303.8 305.8 276.0 278.0
2 550.6 2 780.2 2 806.5 2 807.8 2 629.0
2 783.3 2 379.0 2 575.3 3 574.0 2 883.6
35.1
60 634.8 60 947.0 62 571.2 62 571.2 64 508.7
69 113.6 68 639.0 70 474.2 71 606.4 73 555.8
249.3
74.2
257.0
70.2
333.3
66.6
270.5
61.4
268.4
91.5
87 409.7 87 625.9 88 409.9 88 459.8 89 419.7
682.1 871.0 884.2 809.6 771.0
88 415.2 88 824.2 89 694.0 89 601.4 90 550.7
157 528.9 157 463.2 160 168.2 161 207.7 164 106.4
317.1 330.1 406.4 374.1 479.4
10 640.1 11 639.4 12 326.2 12 979.4 13 612.5
4 164.0 3 235.7 3 149.9 3 581.1 4 849.0
20 672.3 20 413.8 19 008.7 20 177.1 22 534.1
4 277.2 4 121.4 4 087.5 4 207.3 4 357.9
784.4 802.9 800.6 794.2 718.0
40 855.1 40 543.3 39 779.2 42 113.2 46 551.0
116 673.8 116 919.9 120 388.9 119 094.6 117 555.5
Accumulated surplus/(deficit)
Other reserves
Non-controlling interest
Net worth
48 424.8 48 956.3 50 763.0 49 773.5 43 263.9
68 209.5 67 924.1 69 584.4 69 281.6 74 247.0
39.5 39.5 41.5 39.5 44.5
116 673.8 116 919.9 120 388.9 119 094.6 117 555.5
FISCAL AGGREGATES
Net financial worth
Net financial liabilities
Net debt 5 291.7
28 258.5 28 095.7 30 694.9 29 493.2 27 004.8
32 376.3 32 851.3 31 876.3 33 078.0 37 503.9
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
Cash flows from operating activities
Receipts
Taxes received
Grants
Sales of goods and services (a)
Interest received
Dividends and income tax equivalent and rate equivalent receipts
Other receipts
Total receipts
Payments
Payments for employees
Superannuation
Interest paid
Grants and subsidies
Goods and services (a)
Other payments
Total payments
Net cash flows from operating activities
Cash flows from investing activities
Purchases of non-financial assets
Sales of non-financial assets
($ million)
2008-09
Jun Sep
2009-10
Dec Mar Jun
3 433.1 3 430.7 3 279.6 3 238.5 3 922.8
5 561.2 4 632.4 6 097.0 5 670.4 6 316.9
1 696.9 1 496.7 1 391.6 1 394.2 1 876.3
77.7
66.4
82.3
17.6
80.6
198.6
64.2
28.9
96.7
226.8
377.9
( 92.5)
511.1
( 126.1)
144.8
( 115.2)
200.1
( 111.5)
755.7
11 213.2 10 170.7 11 192.2 10 596.2 13 195.2
(3 387.1) (3 794.5) (3 916.2) (3 675.5) (3 949.7)
( 462.2) ( 492.1) ( 495.1) ( 495.9) ( 499.7)
( 190.7) ( 167.5) ( 195.1) ( 189.2) ( 215.6)
(2 094.3) (2 092.4) (2 585.5) (2 505.5) (2 049.9)
(3 620.1) (3 911.4) (3 173.6) (3 219.7) (3 890.0)
( 84.2)
(9 847.0) (10 584.0) (10 480.7) (10 197.3) (10 689.1)
1 366.1 ( 413.2)
157.7 23.0
711.6
86.1
399.0 2 506.0
(1 229.6) ( 688.6) (1 443.4) ( 361.3) (2 168.0)
24.6 53.6
(1 071.9) ( 665.6) (1 357.2) ( 336.7) (2 114.4) Cash flows from investments in non-financial assets
Net cash flows from investments in financial assets for policy purposes
(b)
Sub-total
Net cash flows from investments in financial assets for liquidity management purposes
(b)
Net cash flows from investing activities
Cash flows from financing activities
Advances received (net)
(c)
Net borrowings
(c)
Deposits received (net)
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of reporting period
Cash and cash equivalents at end of reporting period
( 244.2)
( 120.0)
1 627.2
2 845.5
( 360.6)
( 218.0)
2 845.5
2 036.6
( 133.1)
(1 316.2) (1 026.2) (1 490.3)
( 0.6)
( 521.2)
0.7
2 186.1
2 347.5
( 221.7)
( 857.9) (2 336.1)
216.7
(1 436.2) (1 244.2) (1 490.8) ( 857.1) (2 119.3)
( 1.9)
1 287.8
2.3
1 288.3
1 218.3
..
835.6
13.0
848.6
( 808.8)
( 0.1)
852.4
76.5
928.7
149.4
2 036.6
2 186.1
0.4
651.9
( 32.7)
619.5
161.4
( 0.5)
552.8
( 65.1)
487.2
873.9
2 347.5
3 221.3
FISCAL AGGREGATES
Net cash flows from operating activities
Net cash flows from investments in non-financial assets
Cash surplus/(deficit)
1 366.1 ( 413.2) 711.6 399.0 2 506.0
(1 071.9) ( 665.6) (1 357.2) ( 336.7) (2 114.4)
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

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.
Financial
Management
Act 1994 Reference
Section 24(1)
Requirement Comments/Reference
Section 24(2)
The Minister must prepare an annual
Financial Report for each financial year.
The annual Financial Report:
(a) must be prepared in the manner and form determined by the
Minister, having regard to appropriate financial reporting frameworks;
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
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;
(ii) the transactions of the
Victorian general government sector; and
(iii) other financial transactions of the State; in respect of the financial year;
Refer Chapter 4, Note 37 pages 166 – 194
Refer Chapter 4, consolidated comprehesive operating statement page 41, consolidated cash flow statement page 43 and selected notes
Refer Chapter 4, consolidated comprehesive operating statement page 41, consolidated cash flow statement page 43 and Notes 2 –
37, pages 72 – 194
(c) must include details of amounts paid into Working Accounts under
Section 23;
Refer Chapter 4, Note 37 Table (g), page 172
Financial Report 2009-10 Appendix B 227

Financial
Management
Act 1994 Reference
Requirement Comments/Reference
(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
(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 (j), page 175
(f) must include particulars of amounts transferred in accordance with determinations under Section 30 or 31;
Refer Chapter 4, Note 37 Table (i), pages 173 – 174
(g) must include details of;
(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), page 175
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
(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;
Refer Chapter 4, Note 37 Table (k), pages 175 – 176
(h) must include;
(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 (m), 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 (n), page 180
(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;
Refer Chapter 4, Note 37 Table (l), pages 177 – 179
(j) must include details of;
228 Appendix B Financial Report 2009-10

Financial
Management
Act 1994 Reference
Requirement Comments/Reference
(i) payments made during the financial year in fulfilment of any guarantee by the
Government under any Act; and
(ii) money received or recovered by the Minister or Treasurer during the financial year in respect of any guarantee payments;
Refer Chapter 4, Note 37,
Table (ae), page 194
Refer Chapter 4, Note 37,
Table (ae), page 194
Financial Report 2009-10 Appendix B 229

Financial
Management
Act 1994 Reference
Section 26(1)
Section 26(2)
Section 26(2)
Section 26(2A)
Section 26(3A)
Requirement Comments/Reference
(k) must include details, as at the end of the financial year, of;
(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 34 pages
157 – 165, Note 8 pages 82 – 85 and consolidated balance sheet page 42
Refer Chapter 4, Note 2 pages
72 – 79, Refer Chapter 5, Table 5.2 page 215
(l) must be audited by the
Auditor-General.
The Minister must prepare a quarterly financial report for each quarter of each financial year.
Refer Report of the
Auditor-General, pages 38 – 39
Refer Appendix A, pages 223 – 226
A quarterly financial report comprises:
(a) a statement of financial performance of the Victorian general government sector for the quarter;
Refer Appendix A, Table A.1 pages 223 – 224
(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
(d) a statement of the accounting policies on which the statements required by paragraphs (a), (b) and (c) are based.
Refer Appendix A, Table A.2 page 225
Refer Appendix A, Table A.3 page 226
Refer Chapter 4, Note 1 pages 46 –
71
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 Appendix A for agreed form, pages 223 – 226
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.
Refer to Chapter 4, consolidated comprehensive operating statement page 41, consolidated balance sheet page 42, consolidated cash flow statement page 43 and selected notes
230 Appendix B Financial Report 2009-10

 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
State of Victoria
Non - Financial Public Sector
General Government
Public Non-Financial
Corporations
Public Financial
Corporations
Departments Statutory Authorities and other agencies controlled by Government
Source: Department of Treasury and Finance



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

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)
200x negative numbers 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