Financial Report
for the State of Victoria
2006-07
Presented by
John Lenders MP
Treasurer of the State of Victoria
and
Tim Holding MP
Minister for Finance, WorkCover
and the Transport Accident Commission
for the information of Honourable Members
_______________________
Ordered to be printed
_______________________
VICTORIAN GOVERNMENT PRINTER
October 2007
No. 47 Session 2006-2007
TABLE OF CONTENTS
Highlights................................................................................................................................. 1
Chapter 1 – Financial Objectives and Economic Conditions ............................................... 7
Financial strategy ................................................................................................................................... 8
Economic conditions and outcomes ..................................................................................................... 15
Chapter 2 – General Government Sector Outcome ............................................................ 17
Financial position .................................................................................................................................. 24
General government sector infrastructure investments ....................................................................... 25
Net debt and net financial liabilities ...................................................................................................... 27
Chapter 3 – State of Victoria Outcome ................................................................................ 31
State overview – Operating result ........................................................................................................ 32
Financial position .................................................................................................................................. 43
Cash flows ............................................................................................................................................ 47
Net debt and net financial liabilities ...................................................................................................... 48
Chapter 4 – Annual Financial Report ................................................................................... 53
Report of the Auditor-General .............................................................................................................. 54
Certification by the Department of Treasury and Finance .................................................................... 56
Notes to the Financial Statements ....................................................................................................... 61
Chapter 5 – Uniform Presentation of Government Finance Statistics ............................. 181
The accrual GFS presentation ........................................................................................................... 181
Institutional sectors ............................................................................................................................. 182
Victoria’s 2006-07 Loan Council Allocation ........................................................................................ 200
Appendix A – General Government Sector Quarterly Financial Report .......................... 203
Quarterly Financial Report for the Victorian General Government Sector ......................................... 203
Appendix B – Financial Management Act 1994 – Compliance Index ............................... 207
Appendix C – Scope and Style Conventions ..................................................................... 211
i
HIGHLIGHTS
The 2006-07 Financial Report for the State of Victoria demonstrates that the Government continues to
achieve its key financial objectives against all established measures, including delivering an operating
surplus of at least $100 million, maintaining net financial liabilities at prudent levels and delivering world
class infrastructure to maximise economic, social and environmental benefits.
The solid economic performance of Victoria and strong growth nationally provided the State with strong
levels of one-off income in 2006-07, which resulted from:

increased investment returns and taxes from WorkCover and the Transport Accident Commission;

higher land transfer duty revenue, influenced by unanticipated property sales generated by changes to
Commonwealth superannuation rules;

growth in the GST pool, largely as a result of stronger than expected consumption subject to the
GST; and

stronger than expected growth in employment and property prices, resulting in higher payroll and
land tax incomes.
This strong income has enabled the Government to reduce the percentage of general government net debt
to Gross State Product (GSP) to 1.1 per cent at 30 June 2007, $300 million lower than the revised budget.
In turn, this lower than expected debt enabled the Government to bring forward and commit new capital
funding including $600 million on the food bowl modernisation project (as part of Our Water Our
Future) to upgrade irrigation infrastructure in the Goulburn irrigation district.
Over three quarters of the General Government’s total infrastructure spending was financed by cash
generated by this solid performance from operating activities. Overall, net infrastructure investment
spending in 2006-07 was a record $3 282 million as indicated by Chart H.1 below. On average, in
June 2007 each Victorian was supported in real terms by $11 427 of public infrastructure, up from
$11 253 in June 2006.
Financial Report 2006-07
Highlights
1
Chart H.1: General government net infrastructure investment(a)
3 500
3 000
$ million
2 500
2 000
1 500
1 000
500
0
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
Source: Department of Treasury and Finance
Note:
(a) Includes purchases of property, plant and equipment, less asset sales, plus net contributions to other sectors
for capital purposes.
The Victorian Economy
The Victorian economy continues to grow solidly despite a number of challenges. Growth of Victorian
GSP is expected to be around 2.75 per cent in 2006-07, with the drought significantly reducing economic
activity. The Victorian labour market in 2006-07 also continued its strong performance evident over the
last few years. Employment growth was strong, the unemployment rate was at historically low levels and
the labour force participation rate was at near record highs.
The Government is supporting this growth by continuing to provide a tax system that is competitive with
other States. As shown in Chart H.2, Victoria’s taxation revenue as a percentage of nominal GSP was
below that of New South Wales and was around the Australian average.
2
Highlights
Financial Report 2006-07
Chart H.2: Taxation revenue as a share of nominal GSP
7.00
percent of nominal GSP
6.50
6.00
5.50
5.00
4.50
4.00
3.50
1999-00
2000-01
New South Wales
2001-02
Victoria
2002-03
Queensland
2003-04
2004-05
Western Australia
2005-06
2006-07
Australian average
Sources: Australian Bureau of Statistics, Department of Treasury and Finance and various State budgets
Due to favourable market conditions providing strong investment returns, the Victorian WorkCover
Authority has been able to deliver a net profit of $1.17 billion, with a record funding ratio of 134 per
cent. This funding ratio supports the Government’s decision, announced in the 2007-08 Budget, to
further reduce WorkCover premiums by 10 per cent from 1 July 2007.
General government sector outcome
As a result of Victoria’s solid economic growth and unanticipated boost in income, the Government
achieved a net result from transactions of $1 365 million in the general government sector for 2006-07,
compared with the revised estimate of $622 million published in the 2007-08 Budget in May 2007, and
the 2005-06 outcome of $825 million. However, if revenue that is not expected to continue into future
years is excluded, this net result from transactions would have been around $865 million. This enabled
the Government to bring forward and commit to new capital funding.
Including superannuation actuarial adjustments and revaluations, the 2006-07 net result for the general
government sector was $4 870 million. This net result reflects higher than expected gains on
superannuation arising from strong investment markets in the last quarter of the financial year, as well as
an increase in the bond rate that underpins the discount rate used to value the superannuation liability.
The Government is maintaining modest and sustainable levels of net financial liabilities, consistent with
its triple-A credit rating. General government net financial liabilities were $12.8 billion (or 5.2 per cent
of GSP) at 30 June 2007, $1.9 billion lower than the previous year, as detailed in Chart H.3 below. This
reduction is primarily due to a decrease in the superannuation liability, which largely reflects strong
investment market performance and an increase in the discount rate used to value the liability.
Financial Report 2006-07
Highlights
3
25
15
20
12
15
9
10
6
5
3
0
0
1999
2000
2001
2002
2003
2004
2005
2006
per cent of GSP
$ billion (current prices)
Chart H.3: General government net financial liabilities as at 30 June(a)
2007
Net debt (excl. Grow ing Victoria) (b) (LHS)
A-IFRS reported superannuation transitional adj. (c) (LHS)
Reported superannuation liability (LHS) (d)
Net Financial Liabilities to GSP (A-IFRS) (%) (RHS)
Net Financial Liabilities to GSP (%) (RHS)
Source: Department of Treasury and Finance
Notes:
(a) General Government net financial liabilities are calculated as the sum of net debt and superannuation
liability.
(b) Net debt is calculated as gross debt less liquid financial assets. From 2001-05, Growing Victoria investments
are excluded as an offset to gross debt on the grounds that these investments were earmarked for
infrastructure projects and were therefore not available to redeem gross debt.
(c) For comparative purposes, the transitional valuation adjustment has been highlighted for superannuation
liabilities in 2004-05.
(d) Superannuation liabilities between 2000 and 2004 are calculated under the previous Australian accounting
standards, whereas in 2005, 2006 and 2007 the A-IFRS standard AASB 119 has been applied.
Net debt for the general government sector was $2 652 million as at 30 June 2007 (1.1 per cent of GSP),
an increase of $882 million from 1 July 2006. This increase mainly reflected the building of
infrastructure which was funded by a mix of operating cash flows and borrowings.
Victoria’s triple-A credit rating was reaffirmed by international credit rating agencies Moody’s Investors
Service (in January 2007) and by Standards & Poor’s (in September 2007). Both agencies cited
Victoria’s strong fiscal position, lower debt and prudent financial management as key factors behind the
triple-A credit rating.
4
Highlights
Financial Report 2006-07
State of Victoria outcome
Chapter 3 discusses the 2006-07 results compared with 2005-06 actual results for the broader State of
Victoria public sector, which includes the general government, public non-financial corporations and
public financial corporations sectors. These sectors include various water, rail and port authorities, and
government-owned finance and insurance bodies.
The net result from transactions for the State of Victoria for 2006-07 was $1 247 million, an increase of
$696 million compared with 2005-06.
Including actuarial adjustments and revaluations, the 2006-07 net result was $7 232 million. This
reflected actuarial gains on superannuation defined benefit plans in the general government sector and
revaluation of financial assets associated with long-term electricity supply contracts between the State
Electricity Commission of Victoria and the Portland and Point Henry aluminium smelters.
The net asset position in the State Balance Sheet improved by $9 424 million or 12.3 per cent in 2006-07,
to $86 148 million. This outcome was mainly due to an increase in the value of capital stock in the
general government and public non-financial corporations sectors, and an increase in financial assets
within the public financial corporation sector.
Net financial liabilities for the non-financial public sector have decreased 16.6 per cent from
$17 680 million at June 2006 to $14 746 million at June 2007. This reduction is largely attributable to the
decrease in the superannuation liability resulting from strong investment performance and an increase in
the discount rate used to value the liability.
Net debt for the non-financial public sector which is made up of the general government sector and the
public non-financial corporations decreased from $4 746 million at June 2006 to $4 593 million at
June 2007 or from 2.0 per cent to 1.9 per cent of GSP.
Financial Report 2006-07
Highlights
5
CHAPTER 1 – FINANCIAL OBJECTIVES AND ECONOMIC
CONDITIONS

The Government achieved its financial objectives against all measures in 2006-07, including
delivering an operating surplus of at least $100 million in the year.

The solid performance of the Victorian economy and strong growth nationally provided the State
with an unexpected boost in income in 2006-07. This higher-than-expected income was achieved
through:
–
increased investment returns and taxes from WorkCover and the Transport Accident
Commission;
–
higher land transfer duty revenue, influenced by unanticipated property sales generated by
changes to Commonwealth superannuation rules;
–
growth in the GST pool, largely as a result of stronger than expected consumption subject to
the GST;
–
stronger than expected growth in employment, resulting in higher payroll tax income; and
–
stronger than expected land tax revenue, partly reflecting the implementation of trust
provisions.

This strong income in 2006-07 has enabled the Government to reduce general government net debt
to 1.1 per cent of Gross State Product (GSP), $300 million lower than the revised Budget estimate.
In turn, this lower than expected debt enabled the Government to bring forward and commit new
capital funding, including $600 million on the food bowl modernisation project (as part of Our
Water Our Future) to upgrade irrigation infrastructure in the Goulburn irrigation district.

The Government increased infrastructure spending in 2006-07 to $3 282 million. On average, in
June 2007 each Victorian was supported in real terms by $11 427 of public infrastructure, up from
$11 253 in June 2006.

The Government continues to provide a tax system that is competitive with other States. In
2006-07, Victoria’s taxation revenue as a percentage of nominal GSP was below that of
New South Wales and around the Australian average.

Net financial liabilities were $12.8 billion (5.2 per cent of GSP) as at 30 June 2007, $1.9 billion
lower than the previous year. The decrease was primarily due to a reduction in the superannuation
liability, largely driven by strong investment market performance and a rise in the discount rate
used to value the liability.

Victoria’s economy continues to grow solidly despite a number of challenges. Growth of Victorian
GSP is expected to be around 2.75 per cent in 2006-07, with the drought significantly reducing
economic activity.

The Victorian labour market in 2006-07 continued the strong performance evident over the past
few years. Employment growth was strong, the unemployment rate was at historically low levels
and the labour force participation rate was at near record highs.
Financial Report 2006-07
Chapter 1
7
FINANCIAL STRATEGY
The Government’s financial policy objectives and strategies are specified in the Financial Management
Act 1994. The Act outlines a set of sound financial management principles. These are to:

manage financial risks faced by the State prudently, 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 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 short and long-term financial objectives are summarised in Table 1.1. Progress made
in 2006-07 against each of the five financial objectives is discussed in the following sections of
Chapter 1.
Table 1.1: 2006-07 Financial objectives
Objective
Operating surplus
Long-term
Maintain a substantial budget
operating surplus
Short-term
Operating surplus of at least
$100 million in each year
Infrastructure
Deliver world-class infrastructure Implement strategic infrastructure
to maximise economic, social and projects
environmental benefits
Service delivery
Provide improved service delivery Implement 2006 election
to all Victorians
commitments
Taxation
Provide a fair and efficient tax
system that is competitive with
other States
Implement reforms
Net financial liabilities
Maintain State government net
financial liabilities at prudent
levels
Maintain a triple-A credit rating
While the focus of this chapter is on progress made during 2006-07, some trend analysis back to
1999-2000 is included to provide a broader context.
8
Chapter 1
Financial Report 2006-07
Objective one: Operating surplus
The general government sector achieved its financial objective in delivering an operating surplus of at
least $100 million. The net result from transactions is considered to be the most robust measure of the
Government’s financial management under A-IFRS. Other operating statement measures are discussed in
Chapter 2.
Table 1.2 shows that the 2006-07 net result from transactions was estimated at $622 million in the
2007-08 Budget, while the actual net result from transactions was $1 365 million.
Table 1.2: Income and expenses from transactions
($ million)
Income from transactions
Expenses from transactions
Net result from transactions
Source: Department of Treasury and Finance
2006-07
Actual
34 885.7
33 521.1
2006-07
Revised (a)
33 351.4
32 729.5
1 364.7
621.9
Change % Change
1 534.3
4.6
791.6
2.4
742.8
119.4
Note:
(a) Revised 2006-07 estimate published in the 2007-08 Budget in May 2007.
The higher than estimated result primarily reflects higher than expected total income, generated by the
ongoing solid performance of the Victorian and national economies. In particular:

income tax and rate equivalent revenue from the Transport Accident Commission and the Victorian
WorkCover Authority was $390 million above expectations, largely due to greater than anticipated
capital gains on realised investments and larger than estimated insurance actuarial releases. It is not
currently anticipated that such significant payments will be made in future years;

higher land transfer duty revenue ($112 million) apparently reflecting the impact of extra activity
generated by property owners taking advantage of changes to Commonwealth superannuation rules
prior to 30 June 2007;

higher land tax revenue ($99 million) reflecting unexpected revenue following the introduction of
special trust provisions and from compliance activity;

stronger growth in the GST pool ($65 million) than originally forecast by the Commonwealth
Government, largely as a result of stronger than expected consumption subject to the GST; and

stronger than expected growth in employment resulting in higher than expected taxation income from
payroll tax ($25 million).
These sources resulted in $690 million of income additional to that which was expected in the 2006-07
revised estimates. The increase in income for Victoria in 2006-07 has enabled the Government to bring
forward and commit new capital funding, including $600 million on the food bowl modernisation project
(as part of Our Water Our Future) to upgrade irrigation infrastructure in the Goulburn irrigation district.
Objective two: Infrastructure
The Government’s commitment to deliver world-class infrastructure to enhance social, economic and
environmental benefits across the State continued in 2006-07.
Chart 1.1 shows that the real capital stock per capita has trended upward over the period 30 June 2000 to
30 June 2007. The real capital stock rose from $11 253 per capita in June 2006 to $11 427 per capita in
June 2007. This represents growth in the real capital stock per capita of 1.5 per cent.
Financial Report 2006-07
Chapter 1
9
Chart 1.1: General Government real capital stock per capita as at 30 June(a)
$ per capita (2006-07 prices)
11 500
11 000
10 500
10 000
2000
2002
2001
2003
2004
2005
2006
2007
Source: Department of Treasury and Finance
Note:
(a) Includes capital stock revaluations in the respective years, which were excluded from similar charts shown in
previous years.
This significant boost to Victoria’s infrastructure has been made possible by Victoria’s strong financial
position. Cash surpluses from operating activities together with modest and sustainable levels of net debt
have enabled the Government to pursue its program of significantly upgrading and modernising
infrastructure.
The 2006-07 Budget provided for record capital spending, with new asset funding totalling $3.3 billion in
total estimated investment (TEI). The 2006-07 Budget provided for record levels of investment in
transport and education.
During 2006-07, the largest expenditure on capital works occurred on the following projects:

projects across health, aged care and community services projects ($754 million);

Calder Highway upgrade (Kyneton to Ravenswood) ($134 million);

Pakenham Bypass ($115 million);

Geelong Bypass ($114 million);

Western Bypass (Deer Park Bypass including Leakes Road interchange) ($76 million);

Wimmera Mallee Pipeline ($139 million);

Melbourne Recital Centre and Melbourne Theatre Company ($45 million);

school modernisation programs ($161 million); and

new and replacement schools programs ($60 million).
10
Chapter 1
Financial Report 2006-07
In 2006-07, the Government also invested in a range of new asset initiatives that were announced in the
2006-07 Budget Update, including:

interconnecting the Warranga Channel with the Ballarat Urban Water Supply System, with a TEI of
$71 million. This pipeline will link the Goulburn system to the Ballarat water system, providing
Ballarat with access to a more reliable and secure supply of water;

the purchase of 14 centre (trailer) cars for the V’Locity regional rail fleet ($65 million TEI), to enable
train configurations to be more flexible and better match fluctuations in demand for regional rail
services;

maintenance of the country passenger rail network ($61 million TEI), to ensure that the integrity of
the infrastructure is retained;

building works and equipment in government secondary colleges ($50 million TEI), to encourage
students to take up apprenticeships and trades;

a package of road upgrades in drought-affected communities was brought forward to commence in
2006-07, with a TEI of $24 million;

construction of a local truck bypass in Port Melbourne, with a TEI of $16 million. The works include
an upgrade of Graham Street north of Williamstown Road and Plummer Street between Graham and
Prohasky Streets, and an extension of Prohasky Street to connect into the West Gate Freeway; and

the continuation of works to rectify brickwork in the facades at the Royal Melbourne Hospital
($16 million TEI).
Objective three: Service delivery
The Government is continuing to improve quality, access and equity in service delivery to all Victorians
and is continuing to meet the commitments made in Growing Victoria Together (refer 2007-08 Budget
Paper No. 3, Service Delivery, for the Growing Victoria Together progress report and the Government’s
election commitments implementation report card).
In addition, in August 2006 the Government released an action plan to deliver real and practical benefits
to small business: Time to Thrive – Supporting the changing face of Victorian small business.
The Government’s investment in key service delivery areas is returning dividends. Examples of
improved service delivery during 2006-07 include:

Victorian Certificate of Applied Learning (VCAL) student enrolments increased to 12 326, which
was 1 326 above the target of 11 000. In addition, the satisfactory completion rate was 68.7 per cent
compared with a target of 50 per cent;

Vocational Education and Training in Schools (VET) student enrolments were 38 237 compared with
a target of 31 000. In addition, 95 per cent of students progressed to further education, training or
work compared with a target progression rate of 90 per cent;

Dental Health Strategy has resulted in a decrease in waiting times for non-urgent denture and general
care to 23 months, a decrease of 30 per cent for non-urgent dentures and 21 per cent for general care
since June 2004;

the Department of Primary Industries conducted 1 483 extension groups (to improve business and
farming skills for primary producers) during the year, compared with a target of 800. This increase
reflects the additional demand for drought related workshops;

during the fire season, there were more than 1 000 fires controlled across the State with a total burnt
area exceeding 1.2 million hectares. This is well above the 30 year average of approximately
640 fires and 130 000 hectares;

streamlining of processes in the Neighbourhood Houses in Action program resulted in the average
number of coordination hours funded per week increasing from 17.9 hours in 2005-06 to 24.9 hours,
an increase of over 39 per cent; and
Financial Report 2006-07
Chapter 1
11

savings recorded by the Melbourne 2006 Commonwealth Games Corporation (M2006) being
reinvested into Victorian sport for a series of sporting and other community-related grant legacy
programs. In 2006-07, a package of 23 sport and recreation initiatives were developed. In addition,
this reinvestment has included funding contributions towards:
–
Sport Infrastructure Minor Facilities grants;
–
the 2007 World Swimming Championships Corporation; and
–
Melbourne Sports and Aquatic Centre pool works.
Objective four: Taxation
A key financial objective of the Government has been to provide a fair and efficient tax system that is
competitive with other States and with the Australian average.
The reform of Victoria’s taxation system is part of a wider reform agenda led by the Government which
aims to lift productivity and workplace participation through reforms embracing human capital,
competition and best practice regulation.
In the 2006-07 Budget, the Government continued significant reform of Victoria’s taxation system which
will provide net tax relief to Victorian taxpayers of $734 million over four years. The measures
announced were:

reducing the payroll tax rate from 5.25 per cent to 5 per cent over three years;

additional land tax reforms through moderation of the progressiveness of the land tax scale through
the middle rates, and increasing the land tax tax-free threshold to $200 000; and

full stamp duty concession being made available to pensioners or concession cardholders purchasing
property valued up to $300 000, with a partial concession available up to $400 000.
These reforms were in addition to the abolition of rental business duty from 1 January 2007 (at a cost of
around $65 million per year) announced in the 2005-06 Budget.
The 2007-08 Budget provided further reform of Victoria’s taxation system, including the following
measures (some of which were implemented in 2006-07) estimated to be worth $965 million over the
next four years:

harmonising payroll tax legislation with New South Wales from 1 July 2007, including common
definitions and exemptions, but excluding rates and thresholds;

additional land tax reform worth $508 million over four years;

land transfer stamp duty rebates for homebuyers in respect of principal places of residence; and

reducing by around 40 per cent the stamp duty rate on new passenger motor vehicles valued between
$35 000 and $57 009.
Victoria’s preferred measure of tax competitiveness is State taxation expressed as a share of nominal
GSP. This measure relates the level of taxation revenue to economic activity. Taxation revenue as a share
of nominal GSP for the eight years to 2006-07 for Victoria, New South Wales, Queensland, Western
Australia and the Australian average is shown in Chart 1.2.
Victoria’s taxation as a share of nominal GSP fell sharply in 2000-01 as Victoria abolished several taxes
as part of the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations
(IGA) when the GST was introduced on 1 July 2000.
In 2006-07, taxation revenue as a share of nominal GSP was 4.77 per cent, which is 0.57 percentage
points (or $1 389 million) below New South Wales and around the Australian average.
12
Chapter 1
Financial Report 2006-07
Chart 1.2: Taxation revenue as a share of nominal GSP
7.00
percent of nominal GSP
6.50
6.00
5.50
5.00
4.50
4.00
3.50
1999-00
2000-01
New South Wales
Western Australia
2001-02
2002-03
2003-04
Victoria
Australian average
2004-05
2005-06
2006-07
Queensland
Sources: Australian Bureau of Statistics, Department of Treasury and Finance and various state budgets.
There are two other measures of tax competitiveness which are often cited by some other States:

Victoria’s taxation revenue per capita in 2006-07 was $2 265, which was lower than the per capita
tax burden in New South Wales (by $328), Western Australia (by $436) and the Australian average
(by $68); and

Commonwealth Grants Commission (CGC) data used to determine GST shares for 2006-07 show
that Victoria’s taxation raising effort was slightly (1.9 per cent) above the national average. However,
the tax relief measures announced in the 2007-08 Budget should move Victoria closer to the national
average.
Objective five: Net financial liabilities
Victoria’s balance sheet remained very strong in 2006-07. Victoria’s triple-A credit rating was reaffirmed
by international credit rating agencies Moody’s Investors Service (in January 2007) and Standard &
Poor’s (in September 2007). Both agencies cited Victoria’s strong fiscal position, low debt levels and
prudent financial management as the key factors behind the triple-A credit rating.
The 2006-07 result reinforces these positive factors as:

general government net debt of $2.7 billion (1.1 per cent of GSP) in June 2007 remains lower than
the level in June 1999 ($4.8 billion or 3.1 per cent of GSP). During 2006-07, net debt increased from
$1.8 billion (0.8 per cent of GSP) to $2.7 billion (1.1 per cent of GSP) reflecting the Government’s
commitment to building world-class social and economic infrastructure, funded by a mix of
operating cash flows and debt; and
Financial Report 2006-07
Chapter 1
13

general government net financial liabilities (the sum of net debt and superannuation liabilities)
decreased in 2006-07 from $14.7 billion to $12.8 billion, a decrease from 6.3 per cent of GSP to
5.2 per cent of GSP (see Chart 1.3). The decrease during 2006-07 was mainly due to a reduction in
the superannuation liability, primarily driven by strong investment market performance and a rise in
the discount rate used to value the liability, partially offset by a rise in net debt.
It should be noted that the reported value of financial liabilities increased with the introduction of
reporting on an A-IFRS basis from 1 July 2005. This increase was due to a change in the applicable
discount rate that must be used to value superannuation liabilities. Chart 1.3 highlights general
government net financial liabilities.
25
15
20
12
15
9
10
6
5
3
0
0
1999
2000
2001
2002
2003
2004
2005
2006
per cent of GSP
$ billion (current prices)
Chart 1.3: General government net financial liabilities as at 30 June(a)(b)
2007
Net debt (excl. Grow ing Victoria) (b) (LHS)
A-IFRS reported superannuation transitional adj. (c) (LHS)
Reported superannuation liability (LHS) (d)
Net Financial Liabilities to GSP (A-IFRS) (%) (RHS)
Net Financial Liabilities to GSP (%) (RHS)
Source: Department of Treasury and Finance
Notes:
(a) General government net financial liabilities are calculated as the sum of net debt and superannuation
liability.
(b) Net debt is calculated as gross debt less liquid financial assets. In the relevant years, Growing Victoria
Together investments are excluded as an offset to gross debt on the grounds that these investments are
earmarked for infrastructure projects and are therefore not available to redeem gross debt.
(c) To demonstrate the underlying change in measurement, the transitional adjustment is shown for
superannuation liabilities in 2004-05.
(d) Superannuation liabilities between 2000 and 2004 are calculated under the previous Australian accounting
standards, whereas in 2005, 2006 and 2007 the A-IFRS standard AASB 119 has been applied.
14
Chapter 1
Financial Report 2006-07
ECONOMIC CONDITIONS AND OUTCOMES
International economy
The global economy performed strongly over the past year, buoyed particularly by strength in Asia and
Europe, offset by weaker US growth. The strong global economy continued to provide a favourable
environment for domestic growth.
Australian economy
The national economy appears to have gained momentum over the course of 2006-07. Gross domestic
product (GDP) grew by 3.3 per cent in 2006-07, up from 2.9 per cent in 2005-06. Non-farm GDP growth
has been even stronger with the farm sector contracting significantly as a result of the drought. Stronger
inflation and import growth suggest the continued presence of capacity constraints in the economy.
Victorian economy
Consistent with the continued solid growth of the Victorian economy, Victorian GSP is expected to have
grown by around 2.75 per cent in 2006-07. Economic growth was, however, significantly affected by the
drought. This was observed in falls in rural exports and a reduction of 77 per cent in winter crop
production in 2006-07. Department of Treasury and Finance modelling suggests that the drought reduced
Victorian GSP growth by around 0.5 to 1.0 percentage points.
State final demand
Victorian State final demand grew by 3.1 per cent in 2006-07, in line with 2007-08 Budget estimates.
Consumer spending in Victoria continued to grow solidly, buoyed by ongoing strength in the labour
market, rising wealth and positive consumer sentiment. While business investment growth eased from the
very strong rates of the past few years, investment remains at an historically high share of the economy
and is adding to the productive capacity of the Victorian economy. Following two years of contraction,
dwelling investment recorded a small rise in 2006-07. Residential dwelling approvals and
commencements remain at levels below underlying demand requirements, resulting in significant pent-up
demand.
International trade
Victoria’s merchandise exports rose solidly in 2006-07, despite the impact of the drought on cereal and
dairy exports. Solid export performance was observed for road vehicles, beverages and pharmaceuticals.
The growth rate in Victorian merchandise imports was steady from the previous year, at 5.5 per cent in
2006-07.
Labour market
The Victorian labour market has continued the strong performance evident over the past few years (see
Chart 1.4). Employment grew by 2.7 per cent (or 68 000 people) in 2006-07, which was the strongest
growth of any state after resource-rich Queensland, while the unemployment rate averaged 4.8 per cent
over the year, the lowest since 1989-90. Labour force participation also increased over the year to a
record high, averaging 64.6 per cent. The rise in labour force participation has been broadly based, but
most pronounced for the 45 year old and over female cohorts. With the labour market at an historically
tight juncture, future strong growth in employment will be contingent on further increases in the labour
force participation rate. The Victorian regional labour market also performed strongly over 2006-07, with
employment rising, the unemployment rate falling, and the participation rate rising strongly.
Financial Report 2006-07
Chapter 1
15
9
65.0
8
64.5
7
64.0
6
63.5
5
63.0
4
62.5
3
62.0
1996-97
1998-99
2000-01
Participation rate (RHS)
2002-03
per cent
per cent
Chart 1.4: Victorian unemployment rate and participation rate
2006-07
2004-05
Unemployment rate (LHS)
Source: Australian Bureau of Statistics
Wages and inflation
Despite the tight labour market there are few signs of accelerating wage pressure in Victoria, with little
evidence of spill-overs from strong wage growth in the resource-related industries of mining and
construction. In 2006-07, Victorian wage growth of 3.6 per cent was consistent with the 3.5 per cent
forecast made for the 2007-08 Budget.
Inflation in Melbourne was 2.7 per cent in 2006-07, slightly lower than the 3.0 per cent estimated at
Budget time. However, the June quarter inflation result was stronger than expected, driven by a
broad-based rise in prices, but in particular due to strong increases in rents and food prices. Offsetting
these upward pressures, however, is downward pressure from imported manufactured prices.
Population
Recent strong population growth in Victoria has been buoyed by higher overseas migration, less
interstate outflows and a slightly higher birth rate. Reflecting recent changes to the Australian Bureau of
Statistics definition of overseas migration and historical revisions in light of the 2006 Census release, it is
likely that Victoria’s population growth in 2006-07 will be above the 1.2 per cent forecast at Budget
time, and only below the growth rates of the resources-rich States of WA and Queensland. This growth
rate is also well above the latest available data for population growth in the OECD as a whole, which is
below 1 per cent.
16
Chapter 1
Financial Report 2006-07
CHAPTER 2 – GENERAL GOVERNMENT SECTOR OUTCOME







The general government sector achieved its financial objectives against all key measures in
2006-07, in particular delivering an operating surplus of at least $100 million and keeping debt at
prudent levels.
The solid performance of the Victorian economy and strong growth nationally provided the State
with an unexpected boost in income in 2006-07. This higher-than-expected income was achieved
by:
–
higher than expected income tax equivalent receipts as growth in investment markets
continued longer and stronger than forecast;
–
higher land transfer duty revenue, influenced by unanticipated property sales generated by
changes to Commonwealth superannuation rules;
–
unexpected additional Commonwealth funding as a result of stronger growth in the GST
pool;
–
stronger than expected growth in employment, resulting in higher payroll tax incomes; and
–
stronger than expected land tax revenue partly reflecting the implementation of trust
provisions.
The increase in income has enabled the Government to reduce the percentage of general
government net debt to Gross State Product (GSP) to 1.1 per cent, $300 million lower than that
estimated in the 2007-08 Budget. In turn, this lower than expected debt enabled the Government to
bring forward and commit new capital funding including $600 million on the food bowl
modernisation project (as part of Our Water Our Future) to upgrade irrigation infrastructure in the
Goulburn irrigation district.
Over three quarters of the Government’s total infrastructure spending was financed by cash
generated by solid performance from operating activities. Overall infrastructure investment
spending in 2006-07 was a record $3 282 million.
Net financial liabilities were $12 789 million (5.2 per cent of GSP) as at 30 June 2007,
$1 876 million lower than the previous year. This reduction is primarily due to a decrease in the
superannuation liability.
The net result from transactions was estimated to be $622 million when the 2007-08 Budget was
prepared. As a result of the favourable conditions described above, the net result from transactions
increased to $1 365 million, allowing the Government to fund additional infrastructure works and
reduce the percentage of net debt to GSP. Excluding revenue that is not expected to continue into
future years, this result from transactions would have been around $865 million.
Including actuarial adjustments and revaluations, the 2006-07 net result was $4 870 million
compared with the revised Budget estimate of $2 107 million. In addition to the factors driving the
increase in the net result from transactions, the higher than expected net result reflects additional
gains on superannuation that arose due to a strengthening of investment markets in the last quarter
of the financial year, as well as an increase in the bond rate that underpins the discount rate used to
value the superannuation liability. Based upon long term expectations of investment markets, it is
unlikely that the investment performance in 2006-07 will be replicated in 2007-08.
The general government sector is largely responsible for the delivery of government policy as set out in
the annual State Budget. For each financial year, the Government sets out its financial objectives,
estimated financial statements and policy priorities for the coming year in the budget papers.
Financial Report 2006-07
Chapter 2
17
Chapter 1 of this report presented the Government’s progress against its financial objectives. This chapter
compares the 2006-07 actual outcomes for the general government sector with the revised 2006-07
estimates published in the 2007-08 Budget in May 2007.
Financial Performance
The net result from transactions reflects the financial decisions controlled by government and excludes
remeasurement items such as actuarial adjustments and revaluations. This is the primary reason why the
net result from transactions is a more appropriate measure of the Government’s financial management
and gives the clearest representation of Victoria’s underlying budget position.
Table 2.1: Summary operating statement
($ million)
Income from transactions
Taxation
Dividends, income tax and rate equivalent revenue
Grants
Sale of goods and services and other income (a)
Total income from transactions
Expenses from transactions
Employee benefits
Superannuation
Supplies and services and other expenses (b)
Total expenses from transactions
Net result from transactions
Income/(expenses) from other economic flows
Actuarial gains/(losses) of superannuation defined benefit
plans
Other gains/(losses and expenses) from other economic
flows (c)
Total other economic flows
Net result
Source: Department of Treasury and Finance
2006-07
Actual
2006-07
Revised
Change % Change
11 701.8
1 422.3
15 600.9
6 160.7
34 885.7
11 471.5
1 041.5
15 278.4
5 560.0
33 351.4
230.3
380.8
322.5
600.6
1 534.3
2.0
36.6
2.1
10.8
4.6
12 187.2
1 642.9
19 691.0
33 521.1
1 364.7
12 226.0
1 686.1
18 817.4
32 729.5
621.9
( 38.8)
( 43.2)
873.6
791.6
742.8
(0.3)
(2.6)
4.6
2.4
119.4
3 190.1
1 486.8
1 703.3
114.6
315.5
( 2.0)
317.5
n.a.
3 505.7
4 870.3
1 484.8
2 106.7
2 020.8
2 763.6
136.1
131.2
Notes:
(a) Includes fines and regulatory fees, fair value of assets received free of charge and interest.
(b) Includes depreciation and amortisation, finance costs, capital asset charge and grants and transfer payments.
(c) Other gains/(losses and expenses) from other economic flows includes net gain/(loss) from disposal of
physical assets and share of net profits of associates and joint venture partnerships.
Table 2.1 shows that the 2006-07 revised estimate of the net result from transactions was $622 million,
while the actual net result from transactions was $1 365 million.
The higher than estimated result from transactions primarily reflects the increase in income from the
favourable conditions in the Victorian and national economies. In particular, the additional income of
around $500 million from land transfer duty and Income Tax Equivalent (ITE) revenue is not expected to
continue at this level in future years. Excluding revenue that is not expected to continue, the 2006-07 net
result from transactions would have been around $865 million.
Alternative measures of financial performance
Alternative measures of financial performance are set out in Table 2.2. This includes Government
Finance Statistics (GFS) measures used by the Australian Bureau of Statistics, and the net result.
18
Chapter 2
Financial Report 2006-07
Table 2.2: Summary of alternative measures of financial performance
($ million)
2006-07
Actual
1 364.7
( 234.1)
253.4
4 870.3
2006-07
Revised
621.9
( 931.6)
14.6
2 106.7
A-IFRS Net result from transaction/ GFS net operating balance
GFS net lending/(borrowing)
Cash surplus/(deficit) (a)
Net result
Source: Department of Treasury and Finance
Note:
(a) Cash surplus as defined in AASB 1049 Financial Reporting of General Government Sectors by Governments.
The GFS net operating balance is identical to the net result from transactions. Both measures exclude the
effects of revaluation (holding gains or losses) arising from changes in market prices and other changes
in the volume of assets. The GFS net operating balance is the conceptual basis of presentation for most
State budgets. The use of this measure allows comparability with other States, and it is the budget
measure closest to the expected harmonisation of GFS and the generally accepted accounting principles
(GAAP) reporting standards.
GFS net borrowing is equal to the GFS net operating balance less net acquisitions of non-financial assets.
As net lending takes into account total spending on fixed assets during the period, rather than just the
current year’s expense (through depreciation), the 2006-07 net borrowings of $234 million is lower than
the GFS net operating balance.
Cash surplus, as defined in the new accounting standard AASB 1049 scheduled for implementation in
2008-09, is equal to net cash flows from operating activities less net cash investment in non-financial
assets. The cash surplus in 2006-07 was $253 million. Although both net lending and the cash surplus
include the immediate impact of expenditure on fixed assets, the cash surplus in 2006-07 exceeds net
lending as a result of removing non cash revenues and expenses (including the imputed superannuation
interest cost), and allowing for cash contributions made to the superannuation liability (see Chapter 5 for
more details).
The overall net result (transactions plus other economic flows) was $4 870 million (refer to Table 2.1).
The variance between the 2006-07 revised estimate and 2006-07 actual outcome is mainly due to:
higher than expected investment returns for the State’s superannuation funds, which increased the
actuarial gain from superannuation by approximately $300 million; and

an increase in the Commonwealth bond rate that underpins the discount rate used to value the
superannuation liability, which further increased the actuarial gain from superannuation by around
$1 400 million relative to the revised estimates.
There have also been various significant valuation gains on other assets and liabilities. These are
discussed later in this chapter under other economic flows.

Income from transactions
Total income from transactions for 2006-07 was $34 886 million, some $1 534 million (or 4.6 per cent)
higher than the revised estimate (see Table 2.1). This is driven by a range of factors discussed below.
Taxation
In 2006-07 taxation revenue was $11 702 million, an increase of $230 million (or 2.0 per cent) above the
2006-07 revised estimate. The increase in taxation revenue is mainly attributed to stronger than expected
land transfer duty revenues, payroll and land tax. Other taxation revenues were broadly on track with the
revised estimates. This is shown in Table 2.3.
Financial Report 2006-07
Chapter 2
19
As discussed in Chapter 1, the Government’s preferred measure of tax competitiveness is State taxation
expressed as a share of nominal GSP. This measure relates the level of taxation revenue to economic
capacity. In 2006-07, Victoria’s taxation revenue is estimated at 4.77 per cent of nominal GSP, which is a
decrease on 2000-01, when it was 4.97 per cent.
Table 2.3: Taxation
($ million)
Payroll tax
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
Rental business duty
Other property duties
Financial accommodation levy
Total financial and capital transactions
Levies on statutory corporations
Gambling taxes
Private lotteries
Electronic gaming machines
Casino
Racing
Other
Total gambling taxes
Taxes on insurance
Motor vehicle taxes
Vehicle registration fees
Duty on vehicle registrations and transfers
Total motor vehicle taxes
Other taxes
Total taxation
Source: Department of Treasury and Finance
2006-07
Actual
3 478.7
2006-07
Revised
3 454.2
989.1
37.8
95.5
39.6
1 162.0
890.0
37.8
97.3
39.7
1 064.8
99.1
..
( 1.7)
( 0.1)
97.2
11.1
( 0.1)
( 1.8)
( 0.3)
9.1
2 961.4
34.3
9.3
16.0
3 021.0
60.2
2 849.6
39.0
9.3
16.2
2 914.1
60.4
111.8
( 4.7)
..
( 0.1)
107.0
( 0.2)
3.9
( 12.0)
0.3
( 0.8)
3.7
( 0.3)
330.1
932.4
117.8
122.2
5.9
1 508.4
1 094.9
319.6
947.5
119.9
121.6
5.6
1 514.2
1 082.8
10.5
( 15.1)
( 2.1)
0.6
0.3
( 5.8)
12.2
3.3
( 1.6)
( 1.7)
0.5
5.4
( 0.4)
1.1
727.7
552.2
1 279.8
96.7
11 701.8
737.4
556.5
1 293.9
87.2
11 471.5
( 9.7)
( 4.4)
( 14.1)
9.5
230.3
( 1.3)
( 0.8)
( 1.1)
10.9
2.0
Change % Change
24.5
0.7
Major variations from the 2006-07 revised estimates were:

payroll tax revenue was $3 479 million in 2006-07, $25 million (or 0.7 per cent) higher than the
revised estimate, largely reflecting stronger than expected employment growth during the latter part
of 2006-07;

taxes on immovable property in 2006-07 were $1 162 million, $97 million (or 9.1 per cent) higher
than the revised estimate. This was mainly due to higher land tax revenue reflecting unexpected
revenue following the introduction of special trust provisions and from compliance activity; and

taxes on financial and capital transactions in 2006-07 were $3 021 million, some $107 million (or
3.7 per cent) higher than the revised estimate. This was mainly due to higher land transfer revenue,
which was boosted by the unanticipated extra sale of properties generated by property owners taking
advantage of changes to Commonwealth superannuation rules that lapsed on 30 June 2007. This
revenue associated with the superannuation concessions is a one-off gain which is not incorporated
into the longer term permanent land transfer taxation base.
20
Chapter 2
Financial Report 2006-07
Dividends, income tax and rate equivalent revenue
Table 2.4 shows that in 2006-07 dividends, income tax and rate equivalent revenue was $1 422 million,
which was $381 million (or 36.6 per cent) higher than the 2006-07 revised estimate, mainly due to the
significantly higher than anticipated Income Tax Equivalent (ITE) payments from the Transport Accident
Commission and the Victorian WorkCover Authority. The ITE payments were influenced by greater than
forecast capital gains on realised investments and larger than estimated insurance actuarial releases. The
ITE revenue is not expected to continue at this level in future years.
Table 2.4: Dividends, income tax and rate equivalent revenue
($ million)
Dividends
Income tax and rate equivalent revenue
Total dividends, income tax and rate equivalent
revenue
Source: Department of Treasury and Finance
2006-07
Actual
554.3
868.0
1 422.3
2006-07
Revised
563.2
478.2
1 041.5
Change % Change
( 8.9)
( 1.6)
389.7
81.5
380.8
36.6
Grants income
As highlighted in Table 2.5, total grants received were $15 601 million in 2006-07, $323 million (or
2.1 per cent) higher than the 2006-07 revised estimate, with increases in general purpose grants and
specific purpose grants (for both operating and capital purposes).
Table 2.5: Grants
($ million)
Operating grants
General purpose grants
Specific purpose grants for on-passing
Other specific purpose grants
Total operating grants
Capital grants
Specific purpose grants for on-passing
Other specific purpose grants
Total capital grants
Total grants
Source: Department of Treasury and Finance
2006-07
Actual
2006-07
Revised
8 583.6
1 771.0
4 291.1
14 645.7
8 519.0
1 740.5
4 272.7
14 532.2
64.6
30.5
18.4
113.5
0.8
1.8
0.4
0.8
174.6
780.6
955.3
15 600.9
137.1
609.2
746.2
15 278.4
37.5
171.5
209.0
322.5
27.4
28.2
28.0
2.1
Change % Change
General purpose grants were $8 584 million in 2006-07, which is $65 million (or 0.8 per cent) higher
than the 2006-07 revised estimate. This unexpected surplus relates to stronger growth in the GST pool
than originally forecast by the Commonwealth Government, as a result of stronger than expected
consumption subject to the GST together with an increase in Victoria’s share of GST revenue as the
State’s share of the Australian population increased.
Total specific purpose grants (operating and capital), including grants for on-passing, were
$7 017 million, some $258 million (or 3.8 per cent) higher than the 2006-07 revised estimates. Major
increases in specific purpose grants compared with the 2006-07 revised estimates were:

increased funding for ‘investing in our schools’ capital program for government schools and
operational and capital grants for non-government schools;

the declaration of additional drought areas in Victoria, which resulted in additional Commonwealth
funding for the exceptional circumstances drought relief program;
Financial Report 2006-07
Chapter 2
21

additional Commonwealth funding for roads and rail programs; and

increased funding for the Wimmera Mallee Pipeline project.
The additional specific purpose grants revenue contributed to increased expenditure above the 2006-07
Budget estimates.
Sale of goods and services and other income
Table 2.6 shows that in 2006-07, sales of goods and services and other income (comprising regulatory
fees and fines, fair value of assets received free of charge, interest, capital asset charge and other
miscellaneous income) was $6 161 million, some $601 million (or 10.8 per cent) higher than the 2006-07
revised estimate.
Table 2.6 Sale of goods and services and other income
($ million)
Sale of goods and services
Interest
Other income (a)
Total sale of goods and services and other income
Source: Department of Treasury and Finance
2006-07
Actual
2 863.3
422.7
2 874.7
6 160.7
2006-07
Revised
2 590.6
323.9
2 645.5
5 560.0
Change % Change
272.8
10.5
98.8
30.5
229.1
8.7
600.6
10.8
Note:
(a) Other income includes regulatory fees and fines, fair value of assets received free of charge, capital asset
charge and other miscellaneous income.
The major components contributing to the higher than expected outcome in 2006-07 include:



Titles Office registration fees, reflecting continuing strong property market activity during 2006-07;
revenue from a number of general government agencies (Education, Human Services, Infrastructure,
Innovation, Industry and Regional Development) and other general government agencies; and
unclaimed moneys which includes unclaimed share dividends, salaries and wages, rents, bonds,
debentures, interest, unpresented cheques, trust moneys, and superannuation benefits and unclaimed
Tattersalls and TABCORP prizes. This revenue source is difficult to forecast.
The increases were partly offset by lower than expected fines and regulatory fees revenue, mainly due to
longer than anticipated implementation of the Fixed Digital Safety Camera program.
Interest
Interest revenue in 2006-07 was $423 million, which was $99 million (or 30.5 per cent) higher than the
2006-07 revised estimate of $324 million. The increase largely reflects agencies such as hospitals and
schools earning greater interest revenue from increased cash balances.
Expenses from transactions
As shown previously in Table 2.1, general government sector expenses from transactions for 2006-07
were $33 521 million, some $792 million (2.4 per cent) higher than the revised estimate of
$32 730 million published in the 2007-08 Budget. The main components contributing to the higher than
expected outcome include:


22
higher spending on supplies and services related to maintenance in schools and TAFE Institutes,
increased fire suppression and drought related activities, and higher service delivery spending by
hospitals and ambulance services from their own source revenue; and
increased ‘other expenses’ associated with the one-off write-off of traffic camera fines and waiver of
associated fees related to the Fairer and Firmer Fines initiative.
Chapter 2
Financial Report 2006-07
Other economic flows
The difference between the net result and the net result from transactions is due to other economic flows,
which includes 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 adds substantial volatility to the net result through movements in factors such as
bond rates and investment returns, over which the Government has no direct control.
Income from other economic flows for 2006-07 was $3 506 million, $2 021 million higher than the
2006-07 revised estimate in the 2007-08 Budget. This is largely due to:

higher than expected investment returns on superannuation scheme assets in the latter part of
2006-07, which contributed to an actuarial gain; and

an increase in the Commonwealth bond rate that underpins the discount rate used to value the
superannuation liability. The higher discount rate reduced the underlying value of the superannuation
liability and in turn increased the gain from other economic flows.
It should be noted that a major impact on other economic flows in 2006-07 was a $206 million gain
associated with the State’s indemnity to the State Electricity Commission of Victoria (SECV) relating to
the Electricity Supply Agreements with the aluminium smelters at Point Henry and Portland, and
resulting from sustained high current and forecast aluminium prices. This is in addition to the $44 million
in net smelter receipts paid to the SECV during the year leading to a net present value of the general
government’s indemnity to the SECV at 30 June 2007 of $263 million compared with $425 million at
30 June 2006.
Superannuation expense
Under the A-IFRS reporting format, superannuation expenses are allocated between transactions and
other economic flows:

superannuation expenses relating to service cost (the cost of employer funded benefits that are
expected to accrue in respect of defined benefit scheme members over the reporting period), interest
cost and the expected return on assets are included in expenses from transactions, along with
employer contributions to defined contribution (accumulation) superannuation schemes; and

any variations between the actual experience of defined benefit superannuation schemes and the
actuarial valuation assumptions, together with the impact of any changes to actuarial assumptions,
are reported as actuarial gains or losses, under other economic flows.
Actuarial gains and losses on superannuation are highly volatile, with potentially large movements
arising from month to month, as a result of changes in financial markets, or changes in the
Commonwealth bond rate which underpins the discount rate used to value the superannuation liability.
Changes in the reported value of the superannuation liability arising from movements in the discount rate
have no impact on the amount of cash required to fund this liability.
The State’s superannuation schemes invest in a range of asset classes, including cash, fixed interest,
property and equities. Together with ongoing employer and government contributions, these assets and
the earnings they generate are used to fund superannuation benefits as they fall due. During 2006-07,
investment earnings on assets invested by the State’s superannuation schemes were significantly higher
than expected. In particular, the Emergency Services Superannuation Scheme achieved a return on assets
of around 17 per cent (compared with an assumed long term return of 8 per cent).
This return is higher than that expected at the time of preparing the revised estimates in the 2007-08
Budget and increased the actuarial gain from superannuation in 2006-07 by approximately $300 million.
The actuarial gain from superannuation was further increased by an increase in the Commonwealth bond
rate that underpins the discount rate used to value the superannuation liability. The higher discount rate
increased the actuarial gain from superannuation by around $1 400 million relative to the revised
estimates.
Financial Report 2006-07
Chapter 2
23
FINANCIAL POSITION
Table 2.7: Balance Sheet
($ million)
Assets
Capital stock (a)
Financial assets (b)
Other assets
Total assets
Liabilities
Superannuation
Borrowings
Other liabilities
Total liabilities
Net assets
Source: Department of Treasury and Finance
Opening
1 July 2006
Actual
30 June 2007
Actual
movement
56 350.6
5 462.9
2 565.9
64 379.4
59 840.3
5 705.5
3 528.6
69 074.4
3 489.7
242.6
962.6
4 695.0
12 896.5
6 180.4
7 777.4
26 854.3
37 525.1
10 137.7
7 194.3
8 256.5
25 588.5
43 485.8
(2 758.8)
1 013.9
479.1
(1 265.8)
5 960.7
Notes:
(a) Capital stock includes land and buildings, plant and equipment, roads and earthworks, cultural and other
assets.
(b) Financial assets include cash assets, investments, loans and placements.
Total assets
As shown in Table 2.7, the general government sector total assets increased by $4 695 million, to
$69 074 million as at 30 June 2007. The increase in total assets was mainly due to the movement in
capital stock and other assets as discussed below.
Capital stock
Capital stock (comprising land and buildings, plant, equipment and infrastructure systems, roads and
earthworks, and cultural and other assets) rose by $3 490 million to 30 June 2007. The movement in
capital stock mainly reflects:

revaluations of parks, hospitals, police stations, courts and prisons;

recognition of the Southern Cross Station; and

increased capital investment resulting from the completion of a number of asset investment projects
(see Infrastructure Investments below).
Financial assets
Financial assets include cash assets, investments, loans and placements. General government financial
assets increased by $243 million. The increase in cash reflects continued strong operating cash inflows
during the year which were predominantly used to fund over three quarters of the Government’s
substantial infrastructure program.
Other assets
Other assets include receivables, prepayments, inventories, assets held for sale and other current assets.
Other assets for the general government sector increased by $963 million. The movement is mainly
driven by higher than expected receivables related to normal operating activities of departments, higher
than expected income tax equivalent receivables and the recognition of a receivable asset associated with
the agreement to encash future CityLink concession notes.
24
Chapter 2
Financial Report 2006-07
Total liabilities
Total general government liabilities decreased by $1 266 million to $25 589 million as at 30 June 2007,
largely due to movements in the superannuation liability – as discussed below.
Superannuation liability
The State’s total superannuation liability fell by $2 759 million to $10 138 million in 2006-07,
$1 762 million more than projected in the revised estimates. This unexpected decrease is due to the
factors previously outlined in this chapter.
Borrowings
Borrowings have increased by $1 014 million to $7 194 million. The majority of this increase relates to
servicing the State’s infrastructure program. The increase in borrowings also reflects the recognition of
the Southern Cross Station finance lease.
Other liabilities
Other liabilities, comprising employee entitlements, outstanding provisions, payables and other liabilities
increased by $479 million. The movement is mainly attributable to recognition of unearned income
associated with the agreement to encash future CityLink concession notes, partly offset by a reduction in
the amount payable to the SECV under the State’s indemnity agreement with SECV for the supply of
electricity to the aluminium smelters at Point Henry and Portland, due to much higher current and
forecast aluminium prices.
GENERAL GOVERNMENT SECTOR INFRASTRUCTURE INVESTMENTS
As shown in Table 2.8, over three quarters of the 2006-07 infrastructure program was financed by cash
generated by operating activities, with the remainder financed by borrowings.
The increase in net debt of $882 million was $300 million less than anticipated in the revised budget,
primarily due to stronger cash flows generated by the unanticipated increase in operating activities.
Operating cash flows are an important source for funding the Government’s infrastructure program.
Table 2.8 Application of cash resources
($ million)
Net result from transactions
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 (b)
Proceeds from asset sales
Net investment in fixed assets
Finance leases
Other investment activities (net)
Decrease/(increase) in net debt
Source: Department of Treasury and Finance
2006-07
Actual
1 364.7
1 475.5
2 840.1
2006-07
Revised
621.9
2 003.5
2 625.4
3 507.3
( 225.8)
3 281.5
360.3
80.7
( 882.4)
3 580.3
( 163.5)
3 416.8
386.9
3.6
(1 181.9)
Notes:
(a) Includes depreciation and non cash movements in liabilities such as superannuation and employee benefits.
(b) Includes purchases of property, plant and equipment plus contributions to other sectors for capital purposes.
Financial Report 2006-07
Chapter 2
25
Net infrastructure investment in the general government sector (purchases of property, plant and
equipment, capital contributions to other sectors of government, less asset sales) was $3 282 million. As
shown in Table 2.9 this includes net contributions to other sectors of government of $695 million, mainly
in the public non-financial sector (PNFCs) for the purchase of new land and buildings, and plant and
equipment related to rail infrastructure, New Ticketing Solution , housing and water, including the
Wimmera Mallee Pipeline construction and the Goldfields Superpipe. More details about the PNFC
infrastructure investments can be found in Chapter 3.
Table 2.9: Infrastructure investment
($ million)
Purchase of non-financial assets
Parliament
Education
Human Services
Infrastructure
Innovation, Industry and Regional Development
Justice
Premier and Cabinet
Primary Industries
Sustainability and Environment
Treasury and Finance
Victorian Communities
Regulatory bodies and other part budget funded agencies
Not allocated to departments
Total purchase of non-financial assets
Less proceeds from asset sales
Net contribution to other sectors of government
Net investment in fixed assets
Source: Department of Treasury and Finance
2006-07
Actual
2006-07
Revised
10.7
433.9
753.8
857.8
84.1
237.2
83.9
63.6
96.8
49.4
45.7
95.8
..
2 812.5
( 225.8)
694.8
3 281.5
7.3
597.4
566.3
878.6
63.0
271.1
68.5
7.0
151.9
66.3
34.9
125.7
( 63.6)
2 774.2
( 163.5)
806.1
3 416.8
Infrastructure investment in the general government sector was largely in the areas of roads, health,
education and justice. Key investments included:

new and replacement schools, modernising and refurbishing existing educational facilities, the
construction of specialist educational facilities, land for future educational facilities and the provision
of additional equipment, including computers for schools and training institutions;

health, aged care and community services, including the completion of Stage 2 of the Grace
McKellar Centre Redevelopment, Goulburn Valley Health Redevelopment in Shepparton,
Yarrawonga District Health Service Redevelopment, Beaufort & Skipton Health Service
Redevelopment, the Royal Melbourne Hospital Energy Infrastructure Redevelopment and the
Monash Medical Centre Emergency Department Redevelopment in Clayton. Work has continued on
other significant projects including the Knox Development, Box Hill Hospital, Royal Children’s
Hospital Redevelopment (Stage 1), Northern Hospital Redevelopment (Stage 2A), Geelong Hospital
Radiotherapy Service and the Health Information and Communication Technology (ICT) Strategy;

a significant increase in road infrastructure spending, including $114 million for the Geelong Ring
Road bypass, $134 million for the Calder Highway upgrades, $115 million in the Pakenham Bypass
and $76 million for the Western Bypass; and

courts, corrections, police stations and road safety, including redevelopment of the Supreme and
County courts, a new court complex at Moorabbin, new police stations across Victoria, in particular
in Mildura, Bendigo and the Latrobe Valley, completion of the Neighbourhood Justice Centre in
Collingwood, and new in-car-video technology for police.
26
Chapter 2
Financial Report 2006-07
In addition, the Australian Synchrotron was completed and significant progress was made on the
development of the Melbourne Recital Centre and Melbourne Theatre Company Theatre.
The Government’s net infrastructure investment is reflected in Chart 2.1, which demonstrates
significantly increased annual expenditure on net infrastructure investment by the general government
sector since 1999-2000. General government net infrastructure investment has risen from $1.0 billion in
1999-00 to $3.3 billion in 2006-07, with an average of around $2.3 billion over the seven years to
2006-07. In the same period, real capital stock has grown by 18 per cent.
Chart 2.1: General government net infrastructure investment(a)
3 500
3 000
$ million
2 500
2 000
1 500
1 000
500
0
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
Source: Department of Treasury and Finance
Note:
(a) Includes purchases of property, plant and equipment, less asset sales, plus net contributions to other sectors
for capital purposes.
NET DEBT AND NET FINANCIAL LIABILITIES
The Government’s commitment to sound financial management includes maintaining the State’s net
financial position at prudent levels, in order to achieve its objective of maintaining Victoria’s triple-A
credit rating. Key measures of the State’s financial position are net debt and net financial liabilities of the
general government sector and the non-financial public sector. Table 2.10 highlights these key measures
for the general government sector, while Chapter 3 contains an analysis of the non-financial public
sector.
Victoria’s triple-A long-term local currency and foreign currency debt ratings were re-affirmed by
Moody’s Investors and Service in January 2007 and Standard & Poor’s in September 2007. Both rating
agencies cited Victoria’s strong balance sheet, low debt level and record of prudent financial
management as key reasons for their affirmations.
Financial Report 2006-07
Chapter 2
27
Table 2.10: General government net debt and net financial liabilities
($ million)
Assets
Cash and deposits
Advances paid
Investments, loans and placements
Total
Liabilities
Deposits held
Advances received and borrowings
Total
Net debt
Superannuation liabilities
Net financial liabilities
Source: Department of Treasury and Finance
Opening
1 July 2006
Actual
30 June 2007
Actual
movement
2 698.2
69.9
2 162.1
4 930.2
3 017.7
61.3
2 058.3
5 137.3
319.6
( 8.6)
( 103.8)
207.1
519.8
6 179.5
6 699.4
1 769.1
12 896.5
14 665.6
595.2
7 193.7
7 788.9
2 651.5
10 137.7
12 789.3
75.3
1 014.2
1 089.5
882.4
(2 758.8)
(1 876.4)
Net debt, which is the standard measure used to assess general government indebtedness, 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 $882 million to $2 652 million at 30 June 2007 (1.1 per cent of GSP). The increase in net
debt reflects increased infrastructure expenditure, which is funded by a mix of operating cash flows and
debt.
Net financial liabilities are the sum of the superannuation liability and net debt. As shown in Table 2.10,
net financial liabilities decreased by $1 876 million in 2006-07, from $14 666 million as at 1 July 2006
(6.0 per cent of GSP) to $12 789 million as at 30 June 2007 (5.2 per cent of GSP). The decrease in net
financial liabilities during the year was mainly due to a reduction in the superannuation liability,
primarily driven by strong investment market performance and a rise in the discount rate used to value
the liability, offset by a rise in net debt.
Chart 2.2 shows the trend in financial liabilities. The level of net financial liabilities was significantly
increased by an opening balance adjustment of $4 800 million in 2005 due to the adoption of A-IFRS
(this is shown in light shading). This increase in the reported superannuation liability that arose on the
introduction of A-IFRS is due only to a change in valuation methodology. The amount of cash that is
required to finance the superannuation liability is unaffected by this change. Consequently, if the
valuation adjustment is excluded, the chart shows that the underlying liability and its ratio to GSP has
progressively fallen since 1999.
28
Chapter 2
Financial Report 2006-07
25
15
20
12
15
9
10
6
5
3
0
0
1999
2000
2001
2002
2003
2004
2005
2006
per cent of GSP
$ billion (current prices)
Chart 2.2: General government net financial liabilities as at 30 June(a)
2007
Net debt (excl. Grow ing Victoria) (b) (LHS)
A-IFRS reported superannuation transitional adj. (c) (LHS)
Reported superannuation liability (LHS) (d)
Net Financial Liabilities to GSP (A-IFRS) (%) (RHS)
Net Financial Liabilities to GSP (%) (RHS)
Source: Department of Treasury and Finance
Notes:
(a) General Government net financial liabilities are calculated as the sum of net debt and superannuation
liability.
(b) Net debt is calculated as gross debt less liquid financial assets. In the relevant years, Growing Victoria
Together investments are excluded as an offset to gross debt on the grounds that these investments are
earmarked for infrastructure projects and are therefore not available to redeem gross debt.
(c) To demonstrate the underlying change in measurement, the transitional adjustment is shown for
superannuation liabilities in 2004-05.
(d) Superannuation liabilities between 2000 and 2004 are calculated under the previous Australian accounting
standards, whereas in 2005, 2006 and 2007 A-IFRS standard AASB 119 has been applied.
Financial Report 2006-07
Chapter 2
29
CHAPTER 3 – STATE OF VICTORIA OUTCOME

This Chapter compares the 2006-07 actual and the 2005-06 actual results for the State of Victoria,
a very broad grouping including government financial and non-financial corporations, as well as
the departments and agencies making up the general government sector.

The net result from transactions for the State of Victoria for 2006-07 was $1 247 million, an
increase of $696 million (or 126.4 per cent) compared with 2005-06. This result was largely driven
by operations in the general government sector and public non-financial corporations sector. The
net result from transactions reflects the financial decisions primarily controlled by Government,
and excludes remeasurement items such as actuarial adjustments and revaluations.

Including actuarial adjustments and revaluations, the 2006-07 net result was $7 232 million,
$1 356 million higher than the net result of $5 876 million for 2005-06. Along with the factors that
contributed to the change in the net result from transactions, this reflects actuarial gains on
superannuation defined benefit plans in the general government sector and revaluation of financial
assets associated with long-term electricity supply contracts to Portland and Point Henry
aluminium smelters.

The net asset position for the State improved by $9 424 million or 12.3 per cent in 2006-07 to
$86 148 million. This outcome was mainly due to an increase in the value of capital stock in the
general government and public non-financial corporations sectors, and an increase in financial
assets within the public financial corporation sector.

Net financial liabilities for the non-financial public sector have decreased 16.6 per cent from
$17 680 million at June 2006 to $14 746 million at June 2007. The variation is largely attributable
to the decrease in the superannuation liability that resulted from better than expected investment
performance and an increase in the discount rate used to value the liability.

Net debt for the non-financial public sector decreased marginally from $4 746 million at
June 2006 to $4 593 million at June 2007.
This chapter provides a comparison of the 2006-07 and the 2005-06 actual financial results for the State
of Victoria (the State). The State comprises the general government sector, the public non-financial
corporations sector, which includes the various water, rail and port authorities, and the public financial
corporations sector, which includes government owned bodies such as Treasury Corporation of Victoria
(TCV), Rural Finance Corporation (RFC) and Victorian Funds Management Corporation (VFMC) and
insurance bodies such as the Transport Accident Commission (TAC), Victorian WorkCover Authority
(VWA) and the Victorian Managed Insurance Authority (VMIA). It is important to note that due to
transactions occurring between the sectors, not all variations in each sector will affect the overall State
outcome.
This chapter includes a summary discussion of material movements in each of the individual sectors
contributing to the overall outcome for the State. The actual results for a number of indicators of financial
condition for 2006-07 and key trends over the past eight years are also provided.
The detailed audited financial statements and associated notes covering the outcome for the State are
provided in Chapter 4. The financial statements for each of the sectors contributing to the State’s
outcome are provided in Note 2 of the Financial Statements in Chapter 4.
Financial Report 2006-07
Chapter 3
31
STATE OVERVIEW – OPERATING RESULT
Table 3.1: 2006-07 Summary operating statement
($ million)
Income from transactions
Taxation
Dividends, income tax and rate equivalent revenue
Grants
Sale of goods and services and other income (a)
Total income from transactions
Expenses from transactions
Employee benefits
Superannuation
Supplies and services and other expenses (b)
Total expenses from transactions
Net result from transactions
2005-06
2006-07
Change % Change
10 752.3
520.5
14 542.1
11 603.1
37 418.1
11 554.9
680.7
15 493.2
12 253.2
39 982.0
802.6
160.2
951.0
650.0
2 564.0
7.5
30.8
6.5
5.6
6.9
12 247.3
1 985.1
22 634.9
36 867.4
550.7
12 985.8
1 706.0
24 043.2
38 735.0
1 247.0
738.5
( 279.1)
1 408.3
1 867.7
696.3
6.0
(14.1)
6.2
5.1
126.4
Income/(expenses) from other economic flows
Actuarial gains/(losses) of superannuation defined benefit
2 435.0
3 196.1
761.1
plans
Other gains/(losses and expenses) from other economic
2 890.7
2 789.0
( 101.7)
flows (c)
Total other economic flows
5 325.7
5 985.1
659.4
Net result
5 876.4
7 232.1
1 355.7
Notes:
(a) Includes fines and regulatory fees, fair value of assets received free of charge and interest.
(b) Includes depreciation and amortisation, finance costs, and grants and transfer payments.
(c) Other gains/(losses and expenses) from other economic flows includes net gain/(loss) from disposal of
physical assets and share of net profits of associates and joint venture partnerships.
31.3
(3.5)
12.4
23.1
The 2006-07 net result from transactions for the State, as shown in Table 3.1, is $1 247 million,
$696 million (or 126.4 per cent) higher compared with $551 million in 2005-06. The 2005-06 net result
from transactions has been restated from the $1 056 million figure published in the 2005-06 Financial
Report. An adjustment for insurance claims expense was made to recognise the valuation component as
an other economic flow consistent with the treatment in 2006-07.
The 2006-07 result reflects growth in income mainly due to the unexpected strength of the Victorian and
national economies, and the continued strength of equity markets leading to higher investment returns.
This was partially offset by growth in expenses.
The general government sector accounts for most of the operations driving the net result from
transactions, which are directly influenced by the policy decisions of the Government. However, other
activities contributing to the State’s 2006-07 result are due to operations in the public non-financial
corporations sector and the public financial corporations sector which are engaged in commercial
activities.
32
Chapter 3
Financial Report 2006-07
Chart 3.1 shows the net result from transactions for each of the three sectors contributing to the 2006-07
result.
Chart 3.1: Summary net result from transactions for 2006-07 by sector
1 500
$ million
1 000
500
0
- 500
-1 000
General Government
Public Non-Financial
Corporations
2005-06
Public Financial
Corporations (a)
2006-07
Source: Department of Treasury and Finance
Note:
(a) The net result from transactions is a deficit due to a change in accounting policy that reclassified insurance
revaluations and adjustments as other economic flows rather than transactions. However, the net result is still
a strong positive result due to growth in external dividends.
Financial Report 2006-07
Chapter 3
33
The following sections discuss the movements in income and expenses for the State, as well as key
movements in each sector.
Income from transactions
Total income from transactions for the State in 2006-07 was $39 982 million, a $2 564 million (or 6.9 per
cent) increase from 2005-06. Chart 3.2 attributes this increase to additional grants income ($951 million),
taxation ($803 million), and sales of goods and services and other income ($650 million).
Chart 3.2: Income from transactions by category
18 000
16 000
14 000
$ million
12 000
10 000
8 000
6 000
4 000
2 000
0
Taxation
Dividends, income tax
and rate equivalent
revenue
2005-06
Grants income
Sales of goods and
services and other
income (a)
2006-07
Source: Department of Treasury and Finance
Note:
(a) Other income comprises fines and regulatory fees, fair value of assets received free of charge or for nominal
consideration, interest and other income.
34
Chapter 3
Financial Report 2006-07
Taxation
In 2006-07, taxation revenue was $11 555 million, an increase of $803 million (or 7.5 per cent) from
2005-06, reflecting the strength of the Victorian economy offset by the impact of changes to Victoria’s
taxation system associated with the Government’s commitment to provide a competitive tax system.
Table 3.2 shows the change by taxation categories.
Table 3.2: Taxation – Consolidated Whole of State
Payroll tax
Taxes on immovable property
Land tax
Congestion levy
Metropolitan improvement levy
Property owner contributions to fire brigades
Total taxes on immovable property
Financial and capital transactions
Land transfer duty
Rental business duty
Other property duties
Debits tax (a)
Total financial and capital transactions
Gambling taxes
Private lotteries
Electronic gaming machines
Casino
Racing
Other
Total gambling taxes
Taxes on insurance
Motor vehicle taxes
Vehicle registration fees
Duty on vehicle registrations and transfers
Total motor vehicle taxes
Other taxes
Total taxation
Source: Department of Treasury and Finance
($ million)
2005-06
3 260.5
2006-07
3 437.5
Change
177.0
% Change
5.4%
762.3
19.1
93.8
38.4
913.6
961.2
37.8
95.5
39.6
1 134.1
198.9
18.7
1.7
1.2
220.5
26.1%
97.8%
1.9%
3.1%
24.1%
2 671.2
56.9
8.0
22.3
2 758.4
2 961.4
34.3
9.3
..
3 005.0
290.1
( 22.5)
1.3
( 22.3)
246.6
10.9%
-39.6%
16.1%
-100.0%
8.9%
316.2
911.1
113.7
114.0
5.0
1 459.9
1 048.3
330.1
932.4
117.8
122.2
5.9
1 508.4
1 094.9
13.9
21.2
4.1
8.2
0.9
48.4
46.6
4.4%
2.3%
3.6%
7.2%
18.9%
3.3%
4.4%
693.8
546.9
1 240.7
70.9
10 752.3
726.2
552.2
1 278.4
96.7
11 554.9
32.4
5.2
37.6
25.8
802.6
4.7%
1.0%
3.0%
36.4%
7.5%
Note:
(a) Debits tax was abolished on 1 July 2005. Revenue in 2005-06 represents carryover amounts from 2005.
Financial Report 2006-07
Chapter 3
35
The major year-on-year taxation variations were:

Payroll tax was $177 million (or 5.4 per cent) higher than in 2006-07, reflecting increases in
employment due to the continuing strength in the Victorian economy. The underlying increase was
partly offset by reductions in the payroll tax rate from 5.25 per cent to 5.15 per cent on 1 July 2006
and a further reduction to 5.05 per cent on 1 January 2007;

Taxes on immovable property were $221 million (or 24.1 per cent) higher in 2006-07. Land tax
revenue was $199 million (or 26.1 per cent) higher, reflecting land value growth in taxable
properties, abnormal carry forward in revenue from 2005-06 to 2006-07 due to a delay in the issue of
land tax assessments for trusts, additional revenue following the introduction of special trust
provisions and increased revenue from compliance activities. The underlying increase was partly
offset by the impact of the land tax relief measures announced in the 2006-07 Budget. Congestion
levy revenue was $19 million (or 97.8 per cent) higher in 2006-07 than in 2005-06 due to the rate
being increased from $400 to $800 per taxable car parking space from 1 January 2007;

Financial and capital transactions were $247 million (or 8.9 per cent) higher in 2006-07. Land
transfer revenue was $290 million (or 10.9 per cent) higher in 2006-07, reflecting continuing growth
in residential property values, particularly in the high end of the residential market, as well as
strength in non-residential market activity. Revenue in 2006-07 also appears to have been boosted by
the unanticipated activity generated by property owners who took advantage of changes to
Commonwealth superannuation rules prior to 30 June 2007. A partial offset to the increase in
revenue was the reduction in land transfer duty rates for contracts entered into from 1 January 2007
with respect to principal places of residence. The increase in land transfer revenue was also partially
offset by the abolition of rental business duty from 1 January 2007;

Gambling taxes were $48 million (or 3.3 per cent) higher in 2006-07 than in the previous year,
reflecting growth in household final consumption expenditure, which was significantly offset by
restrained discretionary expenditure by households due to high petrol prices and interest rate
increases;

Insurance taxes were $47 million (or 4.5 per cent) higher in 2006-07 than in the preceding year,
reflecting continuing economic growth and continued investment in the State’s emergency services,
including modernising state-wide emergency services communications and funding increased
demands on fire services to respond to new types of major incidents. Insurance companies are
required to contribute to funding fire services in Victoria. The level of required contributions by
insurance companies is a percentage of the approved annual budget of the Victorian fire services;

Motor vehicle taxes were $38 million (or 3.0 per cent) higher in 2006-07 than in the previous year,
largely reflecting growth in the number of registered vehicles, combined with ongoing indexation of
registration fees in line with movement in the consumer price index; and

Other taxes were $26 million (or 36.4 per cent) higher in 2006-07, largely reflecting concession fees
paid in advance by Transurban in respect of Melbourne City Link, which are progressively
recognised as income.
Grants income
Grants income for the State in 2006-07 was $15 493 million, an increase of $951 million (or 6.5 per cent)
compared with 2005-06. Chart 3.3 shows the change by grant category, with the largest increase in
general purpose and other specific purpose grants.
36
Chapter 3
Financial Report 2006-07
Chart 3.3: Grants to Victoria (by type)
10 000
9 000
8 000
$ million
7 000
6 000
5 000
4 000
3 000
2 000
1 000
0
General purpose Specific purpose
grants
grants for onpassing
Other specific
purpose grants
Specific purpose
capital grants for
on-passing
2005-06
Other specific
purpose capital
grants
2006-07
Source: Department of Treasury and Finance
General purpose grants in 2006-07 totalled $8 584 million, which is $463 million (or 5.7 per cent) higher
than in 2005-06. GST grants increased by $651 million (or 8.2 per cent) reflecting strong growth in the
GST pool due to the strength of the national economy, together with an increase in Victoria’s share of
GST revenue, generated by improved relativity from the Commonwealth Grants Commission.
The increase in GST grants in 2006-07 was partly offset by the abolition of National Competition Policy
payments by the Commonwealth Government. In 2005-06, National Competition Policy payments were
$188 million.
Total (operating and capital) specific purpose grants (excluding grants for on-passing) were
$4 964 million in 2006-07, $365 million (or 7.9 per cent) higher than the previous year. Major increases
in 2006-07 compared with 2005-06 were:

additional recurrent and capital funding for government schools and TAFE institutes, reflecting
additional funding under the Investing in Our Schools program and indexation in accordance with
movements in the Average Government School Recurrent Cost (AGSRC) Index and the Building
Price Index;

additional human services funding, including the hospital funding grant which increased in line with
population and demand growth and cost indexation, immunisation programs and funding for the
Pathways Home program;

additional funding for roads and rail;

increased funding for the exceptional circumstances drought relief program due to the declaration of
additional drought areas in Victoria; and

increased commitments from the State and Commonwealth Governments in 2006-07 for the
Wimmera Mallee Pipeline project.
Financial Report 2006-07
Chapter 3
37
These increases were partly offset by decreases reflecting 2005-06 grants that were non-recurring in
2006-07.
Total specific purpose grants for on-passing were $1 946 million which was $123 million (or 6.8 per
cent) above the level in 2005-06. The increase reflects:

increased operating and capital grants for non-government schools reflecting indexation in line with
AGSRC and growth in enrolments; and

CPI and population growth indexation of financial assistance grants for local government.
Sales of goods and services and other income
In 2006-07, sales of goods and services and other income (comprising regulatory fees and fines, fair
value of assets received free of charge, interest revenue and other miscellaneous income) was
$12 253 million, $650 million (or 5.6 per cent) higher than in 2005-06.
Major increases between 2005-06 and 2006-07 include:

agencies earning higher than expected interest revenue from increased cash balances;

increased Titles Office registration fees reflecting continuing strong property market activity during
2006-07; and

while there have been continued improvements in driver behaviour arising from greater community
awareness of the operation and location of safety cameras, there has been an increase in revenue from
fines largely due to the commencement of the new Point to Point safety camera network on the
Western Ring Road and Hume Highway; the continued roll out of the red light and speed camera
network; and the effect of the annual indexation of fees, fines and charges.
Dividends, income tax and rate equivalent revenue
Dividend income increased by $160 million to $681 million largely due to increased external dividends
received by the insurance sector as a result of a higher investment asset base during the year and strong
corporate profitability.
Expenses from transactions
Total expenses from transactions for the State in 2006-07 were $38 735 million, a $1 868 million (or
5.1 per cent) increase compared with 2005-06.
Chart 3.4 shows the level of each expense category in 2005-06 and 2006-07. The growth in expenses in
2006-07 reflects the impact of new policy decisions announced by the Government, growth in the
delivery of services, the effect of the larger than average fire season and drought relief activities.
A discussion of the movements in the individual sectors is also provided later in this chapter.
38
Chapter 3
Financial Report 2006-07
Chart 3.4: Expenses from transactions by category
17 500
15 000
$ million
12 500
10 000
7 500
5 000
2 500
0
Employee
benefits
Finance costs
Grants and
transfer
payments
2005-06
Supplies and
services
Superannuation
Depreciation /
amortisation and
other
2006-07
Source: Department of Treasury and Finance
Employee benefits
Employee benefits for the State in 2006-07 were $12 986 million, an increase of $739 million (or 6.0 per
cent) compared with 2005-06. Major increases were due to:

the impact of previous salary award decisions for health and teaching staff, and increases in teaching
and non-teaching staff in schools;

the effects of the unusually severe fire season; and

new policy initiatives.
Grants and transfer payments
Grants and transfer payments for the State in 2006-07 were $4 450 million, an increase of $310 million
(or 7.5 per cent) compared with 2005-06. This reflects increased expenditure associated with higher
Commonwealth funding for non-government schools due to increased enrolments, and increased grants
and payments provided to households and individuals.
Supplies and services
Supplies and services for the State in 2006-07 were $16 104 million, an increase of $816 million (or
5.3 per cent) compared with 2005-06. Major increases between 2005-06 and 2006-07 include:

increased maintenance expenditure on schools and TAFE institutes;

increased hospital spending and the growth in the delivery of services;

increased expenditure due to the effect of the unusually severe fire season and drought relief
activities; and

implementation of new initiatives.
Financial Report 2006-07
Chapter 3
39
Superannuation
The superannuation expense from transactions includes employer contributions to defined contribution
schemes and the employer cost in respect of defined benefit schemes. However, this excludes the impact
of any variations between actual experience and actuarial assumptions, as well as any changes in
actuarial assumptions, which are reported as actuarial gains and losses under other economic flows.
The superannuation expense for the State (excluding the component characterised as ‘other economic
flows’) was $1 706 million in 2006-07, a decrease of $279 million (or 14.1 per cent) compared with
2005-06. The lower expense in 2006-07 represents a return to 2004-05 levels as the 2005-06 expense was
affected by a one-off recalibration of the Commonwealth Government’s share of liabilities of Victoria’s
defined benefit superannuation schemes for employees of universities.
Other economic flows and net result
As shown in Table 3.1 above, the main difference between the net result from transactions and the net
result is the inclusion of other economic flows.
Other economic flows include actuarial adjustments and investment gains over which the Government
has no direct control. The separation of these remeasurement items from the net result from transactions
provides a more robust representation of Victoria’s financial performance.
Combining other economic flows with the net result from transactions produces a net result for the State
of $7 232 million for 2006-07, an increase of $1 356 million compared with 2005-06.
This result was largely driven by actuarial gains associated with defined benefit superannuation plans due
to:

better than expected investment performance on the assets invested by the State’s superannuation
scheme; and

an increase in the bond rate that underpins the discount rate that is required to be used to value
superannuation liabilities under A-IFRS. A higher discount rate reduces the present value of the
superannuation liability, giving rise to an actuarial gain.
As noted above, under A-IFRS, the State’s superannuation liability is valued using a discount rate that is
based on a long-term Commonwealth government bond rate. Changes in this discount rate can cause
significant fluctuations in the value of the superannuation liability which, in turn, give rise to actuarial
gains and losses. However, it is important to note changes in the reported value of the superannuation
liability that arise due to movements in the discount rate have no impact on the amount of cash required
to fund this liability.
The general government sector net result was $4 870 million in 2006-07, a $949 million increase from
the 2005-06 net result. A detailed discussion of the result for the general government sector is provided in
Chapter 2.
The public non-financial corporations sector net result was $598 million in 2006-07, $37 million higher
than the 2005-06 outcome of $561 million. This result was driven by the year-on-year increase in net
result from transactions of the sector which is explained below, and partially offset by a reduction in
other economic flows mainly related to movements related to the State Electricity Commission of
Victoria (SECV). These movements include an increase in the provision of payments by the SECV for
the Electricity Supply Agreements with the Aluminium Smelters at Point Henry and Portland and are
primarily related to a high electricity pool price. This increase is almost offset by a corresponding
increase in receivables from the electricity hedge, which aims to fix and offset the electricity pool price
exposure in supplying electricity to the smelters.
The public financial corporations sector net result was $2 279 million in 2006-07, $654 million higher
than the result of $1 625 million in 2005-06. The result was driven by growth in external dividends,
predominantly with TAC and VWA driven by a high asset base and strong corporate profitability.
Detailed figures for each sector are tabulated in Note 2 of Chapter 4.
40
Chapter 3
Financial Report 2006-07
Net result from transactions by sector
The 2006-07 net result from transactions for the State was $1 247 million. This result is the combined
effect of movements within the three sectors making up the State of Victoria. However, due to
transactions occurring between the sectors, not all variations within each sector will affect the overall
State outcome. The following section summarises the major influences on the net result from transactions
for each individual sector.
General government sector
The general government sector net result from transactions was $1 365 million, $540 million higher than
the 2005-06 outcome of $825 million. This result reflects growth in income offset by some growth in
expenses. Growth in total income reflects the unexpected strength of the Victorian and national economy
and continued strength of equity markets, offset by the impact of changes to Victoria’s taxation system
associated with the Government’s commitment to provide a tax system that is competitive with other
States.
The growth in expenses in 2006-07 relative to 2005-06 reflects the impact of new policy decisions,
growth in service delivery, the effect of the unusually severe fire season and drought relief activities.
More detailed discussion of the movements in the general government sector is provided in Chapter 2.
Public non-financial corporations sector
The net result from transactions for the public non-financial corporations sector was $626 million in
2006-07, an increase of $181 million compared with the 2005-06 outcome of $445 million. The result
reflects the net impact of $310 million increase in revenue, partially offset by $129 million increase in
expenses.
The major factors contributing to the sector result include:

an increase of $201 million in the net result from transactions of the Director of Housing (DOH),
largely associated with an additional $300 million in grants revenue to enable DOH to provide grants
to housing associations to replace 1 200 public housing units with 1 550 new social housing
properties. This amount is offset by an increase in expense of $83 million primarily due to an
increase in rental operations payment to DTF of $50 million (this payment was foregone in 2005-06)
and an increase in grants paid to private sector housing associations of $24 million to fund housing
projects;

an increase of $39 million in the net result from transactions of Victorian Energy Networks
Corporation (VENCorp), largely associated with an increase in revenue derived from higher prices in
the National Electricity Market. However, VENCorp operates on a full cost recovery basis and the
increased revenue will result in lower fees to industry in 2007-08;

an increase of $70 million in the net result from transactions of the public non-financial corporations
within the Department for Victorian Communities portfolio. This mainly reflects a reduction in
expenditure and operational activities associated with the Melbourne 2006 Commonwealth Games
which concluded in March 2006; and

a decrease of $66 million in the net result from transactions of the metropolitan water sector. This is
primarily due to lower water demand and higher operating expenditure associated with real increases
in input costs, unscheduled maintenance works, climatic conditions and additional health and
environmental standards compliance costs.
Financial Report 2006-07
Chapter 3
41
Public financial corporations sector
The net result from transactions for the public financial corporations sector was a deficit of $229 million
in 2006-07, an improvement of $258 million on the 2005-06 negative outcome of $487 million, driven
predominantly by a rise in external dividends as discussed above.
The sector’s deficit in the net result from transactions is affected by the level of insurance income and
claims expense for the year which are classified as transactions, and the level of external dividend
revenue, comparative to the overall income earned on investments. This is because the two largest effects
on the overall net result for the sector, gains on investments and revaluations of existing claims liability,
are both classified as gains/losses from other economic flows. Because of the classification of these two
impacts ‘below the line’, the expectation is that the PFC sector will usually record a deficit on the net
result from transactions. The majority of earnings for the sector will either be realised or unrealised
revaluation impacts, with only a comparatively minor amount classified as transactions from dividends
received. Combining the net result from transaction with other gains from other economic flows produces
an overall operating surplus for both years.
Tables 3.3 and 3.4 below provide the details of the impact of internal and external factors on the TAC
and VWA financial results over the last five years. The impact on the result from internal factors shows
that the performance of TAC and VWA from insurance operations has been relatively stable over the
period. External factors which entities cannot influence such as fluctuations in investment markets,
economic assumptions and discount rates contribute to the volatility in overall results for the entities.
Table 3.3: Transport Accident Commission financial result from 2002-03 to 2006-07
Impact on profit from internal factors
Impact on profit from external factors
Difference between actual investment
returns and long-term expected returns
Change in inflation assumptions and
discount rate
Tax and Other
Net Profit
Source: Department of Treasury and Finance
($ million)
2006-07
380
2005-06
437
2004-05
364
2003-04
298
2002-03
507
438
428
373
300
(201)
152
(34)
(108)
171
(255)
(279)
691
(227)
604
(164)
465
(179)
590
..
51
Table 3.4: Victorian WorkCover Authority financial result from 2002-03 to 2006-07
Impact on profit from internal factors
Impact on profit from external factors
Difference between actual investment
returns and long-term expected returns
Change in inflation assumptions and
discount rate
Tax and Other
Net Profit
($ million)
2006-07
729
2005-06
476
2004-05
747
2003-04
718
2002-03
505
743
720
481
391
(437)
160
204
(157)
55
(383)
(461)
1 171
(397)
1 003
(296)
775
58
1 222
..
(315)
Source: Department of Treasury and Finance
42
Chapter 3
Financial Report 2006-07
FINANCIAL POSITION
Net assets
The State’s consolidated statement of financial position for the 2006-07 financial year shows net assets of
the State increased by $9 424 million (or 12.3 per cent) in 2006-07, to $86 148 million, compared with
$76 724 million in 2005-06.
Chart 3.5 shows the variation in net assets by sector. A discussion of movements in each sector is
provided later in this chapter, following analysis of the State outcome.
Chart 3.5: Net assets by sector as at 30 June
100 000
90 000
80 000
$ million
70 000
60 000
50 000
40 000
30 000
20 000
10 000
0
General Government
Public Non-Financial
Corporations
2006
Public Financial
Corporations
Whole of State
2007
Source: Department of Treasury and Finance
As shown in Chart 3.5 and Table 3.5, the growth in net assets for the State has largely occurred in the
general government sector, due to the significant growth in capital stock and a decrease in the State’s
superannuation liability.
Financial Report 2006-07
Chapter 3
43
Table 3.5: Summary of Balance Sheet as at 30 June
($ million)
Actual
2006
Actual
2007
Actual
movement
Assets
Capital stock (a)
95 305.4 100 342.9
5 037.5
Financial assets (b)
30 357.7
32 888.3
2 530.5
Other assets (c)
5 137.5
6 285.4
1 147.8
Total assets
130 800.7 139 516.6
8 715.9
Liabilities
Superannuation
12 934.2
10 153.3
(2 780.9)
Borrowings
16 053.9
15 751.6
( 302.4)
Other liabilities
25 088.2
27 463.7
2 375.5
Total liabilities
54 076.3
53 368.6
( 707.7)
Net assets
76 724.4
86 148.0
9 423.6
Notes:
(a) Capital stock includes land and buildings, plant, equipment and infrastructure, roads and earthworks,
intangibles, cultural and other assets.
(b) Financial assets include cash assets, investments, loans and placements.
(c) Other assets include receivables, prepayments, inventories and non-current assets held for sale.
Assets
Chart 3.6 shows the movements in each of the asset categories for the State in 2006-07 compared with
2005-06. The section below explains these changes.
Chart 3.6 State assets by category as at 30 June
60 000
50 000
$ million
40 000
30 000
20 000
10 000
0
Cash
Other financial Receivables,
assets
prepayments
and
inventories
2006
Land and
buildings
Plant,
equipment
and
infrastructure
Roads
Other
2007
Source: Department of Treasury and Finance
44
Chapter 3
Financial Report 2006-07
Capital stock
As Chart 3.6 shows capital stock (which includes land and buildings, plant, equipment and infrastructure,
roads and other assets) for the State increased by $5 038 million during 2006-07. This significant
increase reflects the impact of new asset investment and property revaluations in the general government
and public non-financial corporations sectors.
The value of capital stock in the general government sector increased by $3 490 million. This growth
largely reflects additional investment in infrastructure and revaluation of land and buildings. More
detailed discussion on the increase in capital stock in the general government sector is provided in
Chapter 2.
The value of capital stock in the public non-financial corporations sector increased by $1 535 million.
This was largely a result of new investment in plant, equipment and infrastructure in the water and rail
sectors, with the remaining growth attributable to building revaluations.
Financial assets
The State’s financial assets have increased by $2 531 million during 2006-07, of which $1 837 million
was due to an increase of financial assets in the public financial corporations sector, predominantly with
TAC and VWA. The rise was driven by strong investment market performance over the year. Financial
assets in SECV also increased compared with June 2006 due to the increase in the receivable of the
electricity hedge.
Other assets
Other assets (which includes receivables, prepayments and inventories) for the State increased by
$1 148 million during 2006-07. The increase was driven mainly by higher than expected receivables
related to normal operating activities and the recognition of a receivable asset associated with the
agreement to encash future City Link concession notes.
Liabilities
Total liabilities for the State are $708 million lower at 30 June 2007 compared with 30 June 2006. As
shown in Table 3.5, both superannuation liabilities ($2 781 million) and borrowings ($302 million) have
decreased during the year. This was offset by a $2 376 million increase in other provisions. Chart 3.7
shows the movements in each of the liability categories for the State in 2006-07 compared to 2005-06.
The State’s total superannuation liability (predominantly in the general government sector) decreased
from $12 934 million at 30 June 2006 to $10 153 million at 30 June 2007. This reduction was due
primarily to:

increased investment returns on the assets of the State’s superannuation schemes ($1 551 million
decrease); and

an increase in the discount rate used to value superannuation liabilities ($1 645 million decrease).
These factors were partially offset by the accrual of benefits during the reporting period.
The movement in other provisions is attributable to an increase in provisions for payments to SECV
under the smelter onerous contracts resulting from high electricity pool prices, and the recognition of an
unearned revenue liability associated with the agreement to encash future CityLink concession notes.
Financial Report 2006-07
Chapter 3
45
Chart 3.7: State liabilities by category as at 30 June
18 000
16 000
14 000
$ million
12 000
10 000
8 000
6 000
4 000
2 000
0
Payables
Interest-bearing
liabilities
Employee
benefits
2006
Superannuation Other provisions Other liabilities
2007
Source: Department of Treasury and Finance
Financial position by sector
General government sector
As shown in Chart 3.5, general government sector net assets have increased by $5 961 million compared
with 2005-06. This variation mainly reflects growth in capital stock as a result of investment in
infrastructure and revaluations of buildings and roads, combined with a reduction in total liabilities for
the sector resulting from a decrease in the State’s superannuation liability. Chapter 2 provides a detailed
explanation of net asset movements for the general government sector in 2006-07.
Public non-financial corporations sector
Public non-financial corporations sector net assets were $35 796 million in 2006-07, an increase of
$1 276 million compared with 2005-06. An increase in total assets of $2 708 million was partly offset by
an increase in total liabilities of $1 432 million.
The key driver of the increase in total assets for the sector was a $1 535 million growth in capital stock,
including:

$484 million increase in the metropolitan water sector largely related to increases in capital
expenditure to support population growth, asset renewals, and rehabilitation and compliance with
regulatory obligations and Environment Protection Authority requirements. These requirements
included reducing sewer spills and undertaking recycling projects to diversify supply in response to
drought and climate change;

$472 million increase in the regional/rural water authorities intended to increase and improve the
delivery of sustainable water supplies and the use of recycled water throughout Victoria. Projects
include the Wimmera Mallee Pipeline project, the Goldfields Superpipe and the Gippsland Water
Factory;

$348 million increase for VicTrack largely associated with the ongoing purchase of rolling stock
(trams and trains) and infrastructure assets; and
46
Chapter 3
Financial Report 2006-07

$160 million increase in the value of fixed assets of public non-financial corporations in the
Department of Victorian Communities portfolio mainly due to revaluations of buildings in the
Melbourne and Olympic Parks Trust, States Sport Centres Trust and Queen Victoria Women’s
Centre Trust.
The increase in total assets also includes an increase in the financial assets of the SECV of $960 million.
This is related to an increase in the value of the receivables associated with the transaction to hedge the
electricity price. The aim of the hedge is to fix the electricity pool price exposure in supplying electricity
to the smelters at Point Henry and Portland.
Total liabilities increased by $1 432 million. The most significant change is an increase in current and
non-current other provisions of $857 million. This primarily relates to an increase in provisions for
payments to SECV under the smelter onerous contracts resulting from high electricity pool prices. This
increase is mainly offset by the increase in the receivable of the electricity hedge as mentioned above.
Public financial corporations sector
The public financial corporations sector comprises mainly financial assets and liabilities which are used
to provide financial intermediation and insurance services to both the Victorian government and the
wider community. The financial assets and liabilities are subject to changes in value due to movements in
debt and equity market prices, and may be quite volatile from year-to-year.
The net asset position of the public financial corporations sector increased by $1 922 million to
$4 996 million as at 30 June 2007.
The rise in net assets predominantly reflects an increase of $1 837 million in financial assets, largely in
the State’s insurance entities which has been driven by strong investment returns.
This increase was partially offset by an increase in other liabilities, mainly represented by a $410 million
increase in income tax equivalent payments (ITEs) due. The increase in ITEs was driven by greater than
anticipated capital gains on realised investments and larger than estimated insurance actuarial releases.
The ITE revenue is not expected to continue at this level in future years.
CASH FLOWS
After removing non-cash impacts such as asset revaluations, the change in operating receipts and
payments for the State broadly reflect the same factors underpinning the operating income and expense
movements already discussed in this chapter.
The consolidated statement of cash flows for the year ended 30 June 2007, provided in Chapter 4, shows
that the cash and deposits for the State were $2 544 million, an increase of $31 million compared with the
30 June 2006 balance of $2 513 million.
Financial Report 2006-07
Chapter 3
47
NET DEBT AND NET FINANCIAL LIABILITIES
Table 3.6: Non-financial public sector net debt and net financial liabilities as at 30 June
($ million)
2006
2007
3 233.5
206.6
3 227.8
6 668.0
3 614.8
174.3
4 368.8
8 157.8
381.2
( 32.3)
1 141.0
1 489.9
11.8
(15.6)
35.3
22.3
604.3
4.9
10 804.8
11 414.0
708.8
4.4
12 037.5
12 750.7
104.5
( 0.5)
1 232.7
1 336.7
17.3
(10.2)
11.4
11.7
4 592.9
10 153.3
14 746.2
(per cent)
7.58
6.01
( 153.2)
(2 780.9)
(2 934.1)
(3.2)
(21.5)
(16.6)
Assets
Cash and deposits
Advances paid
Investments, loans and placements
Total
Liabilities
Deposits held
Advances received
Borrowings
Total
Net debt
Superannuation liability
Net financial liabilities
4 746.1
12 934.2
17 680.3
Net financial liabilities to GSP
Source: Department of Treasury and Finance
Change % Change
As shown in Table 3.6, the non-financial public sector’s net debt decreased by $153 million from
$4 746 million at July 2006 to $4 593 million at June 2007.
Net debt, which is the standard measure used to assess Government’s indebtedness, 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.
The decrease in the State’s net debt was primarily due to an upward revaluation of financial assets
associated with long-term electricity supply contracts to Portland and Point Henry aluminium smelters,
offset by a rise in borrowings due to the recognition of a finance lease for Southern Cross Station and an
increase in borrowings from the water authorities. Capital expenditure in the water sector focused on
network growth, infrastructure upgrade and recycling projects.
Table 3.7 displays non-financial public sector and general government net debt as a percentage of GSP
from 1999 to 2007.
Table 3.7: Net debt as at 30 June
2004
2005
2006 (a)
2007
3.6
3.7
3.7
4.7
4.6
2.1
1.6
1.5
1.8
2.7
Non-financial public sector net
4.0
3.2
2.7
1.9
1.9
1.7
debt to GSP (b)
General government net debt
3.1
2.4
1.9
1.3
1.1
0.8
to GSP (b)
Notes:
(a) 2006 data has been revised for A-IFRS adjustments.
(b) Historical figures are varied to reflect revisions to ABS estimates of the economy.
1.6
2.0
1.9
0.7
0.8
1.1
48
Financial Report 2006-07
Non-financial public sector net
debt
General government net debt
1999
2000
2001 2002 2003
$ billion
6.1
5.2
4.6
3.5
4.8
3.9
3.3
2.4
(per cent)
Chapter 3
Chart 3.8 provides a picture of the net debt trends over the past eight years for the non-financial public
sector and general government sector.
Net financial liabilities for the non-financial public sector decreased from $17 680 million at June 2006
to $14 746 million at June 2007. The decrease was due to a reduction in the superannuation liability,
which was driven by strong investment market performance and a rise in the discount rate used to value
the liability (see liabilities section of Chapter 3), and a decline in net debt (as explained earlier).
6.0
6.0
5.0
5.0
4.0
4.0
3.0
3.0
2.0
2.0
1.0
1.0
0.0
2000
2001
2002
2003
2004
2005
2006 (a)
per cent
$ billion
Chart 3.8: Net debt as at 30 June
0.0
2007 Year
Non-financial public sector net debt
General government net debt
Non-financial public sector net debt to GSP (b)
General government net debt to GSP (b)
Source: Department of Treasury and Finance
Notes:
(a) 2006 data has been revised for A-IFRS adjustments.
(b) Historical figures are varied to reflect revisions to ABS estimates of the economy.
Superannuation liability
The State’s liability in respect of Victoria’s public sector defined benefit superannuation schemes
represents the present value of future benefits that scheme members have accrued during past service
which are not covered by scheme assets. The unfunded liabilities primarily accrued when superannuation
was funded on a pay-as-you-go basis prior to 1995. That is, the State only funded superannuation benefits
when they became payable rather than as they accrued. This approach was consistent with the funding of
public sector superannuation funds in most other jurisdictions. Since 1995, the State has met the accruing
cost of superannuation and is funding the existing liability by way of annual payments from the
Consolidated Fund.
As shown in Table 3.6, the State’s superannuation liability decreased by $2 781 million during 2006-07
to $10 153 million as at 30 June 2007. This reduction is explained by the same factors that contributed to
the decrease in the general government sector superannuation liability which are discussed in Chapter 2.
Chart 3.9 shows the State’s superannuation liability in 2006-07, along with movements in this liability
since 30 June 2000. As a proportion of GSP, the superannuation liability has declined from 7.6 per cent
in 2000 to 4.1 per cent in 2007.
Financial Report 2006-07
Chapter 3
49
It should be noted that, over this period, the valuation of the reported superannuation liability has been
significantly affected by the introduction of A-IFRS. Under A-IFRS, a lower discount rate is required to
be used to value the superannuation liability, significantly increasing the reported value of the liability.
However, as stated previously, it is important to note that changes in the reported value of the
superannuation liability that arise due to movements in the discount rate have no impact on the amount of
cash required to fund this liability. The Government continues to maintain a target of fully funding its
superannuation liability by 2035. The payments required under the full funding framework are
determined assuming that assets earn the long term investment return assumed by the actuary as this
produces more realistic estimates of the amounts required.
Chart 3.9: Superannuation liability
16
15
14
$ billion
10
9
8
6
6
4
per cent of GSP
12
12
3
2
0
0
2000
2001
2002
2003
2004
2005
2006
2007
A-IFRS superannuation transitional adj. (b) (LHS)
Reported superannuation liability (a) (LHS)
Reported superannuation liability to GSP (A-IFRS) (%) (RHS)
Reported superannuation liability to GSP (%) (RHS)
Source: Department of Treasury and Finance
Notes:
(a) Superannuation liability between 2000 and 2004 are calculated under the previous Australian accounting
standards, whereas from 2005 onwards the A-IFRS standard AASB 119 has been applied.
(b) For comparative purposes, the transitional adjustment applied to the valuation of the superannuation liability
in 2004-05 has also been separately identified.
50
Chapter 3
Financial Report 2006-07
Indicators of financial condition
Key indicators of financial condition for the State of Victoria are shown in Table 3.8.
Financial sustainability
During 2006-07, the State continued a long-term trend of reducing borrowings as a proportion of assets
and GSP. The ratio of long-term borrowings to total assets fell from 12.7 per cent at 30 June 2000 to
9.2 per cent at 30 June 2007. This fall was driven by strong asset growth, supported by investment in
infrastructure assets and upward revaluation of physical assets. The increase in this borrowings ratio
between 2006 (8.7 per cent) and 2007 (9.2 per cent) was due to the restructuring of a portion of TCV’s
short-term debt into long-term debt in 2007. Total borrowings to GSP fell from 8.7 per cent as at
30 June 2000 to 6.4 per cent as at 30 June 2007, underpinned by the Government’s commitment to sound
financial management and a growing Victorian economy.
The ratio of current assets to current liabilities remains broadly stable, moving from 94.3 per cent at
30 June 2000 to 91.4 per cent at 30 June 2007.
The ratio of superannuation liabilities to total assets fell from 13.6 per cent at 30 June 2000 to 7.3 per
cent at 30 June 2007. Similarly, superannuation liabilities as a percentage of GSP fell from 7.8 per cent at
30 June 2000 to 4.1 per cent at 30 June 2007 driven by strong investment market conditions.
The reduction in the superannuation liabilities, along with continued growth in infrastructure assets and
the revaluation of assets largely influenced the reduction in the ratio of total liabilities to total assets from
54.5 per cent as at 30 June 2000 to 38.3 per cent as at 30 June 2007. Total liabilities as a percentage of
GSP fell from 31.0 per cent at 30 June 2000 to 21.7 per cent at 30 June 2007.
Financial flexibility
The ratio of borrowing costs to income from transactions has declined from 3.6 per cent at 30 June 2000
to 2.7 per cent at 30 June 2007. This fall is primarily driven by higher growth in income from
transactions compared with borrowing costs.
The ratio of superannuation expenses to income from transactions fell from 8.3 per cent at 30 June 2000
to 5.3 per cent at 30 June 2007 due to investment market performance and growth in revenue.
Assets
The Government’s continued commitment to infrastructure investment across the State has contributed to
non-current physical assets (including land, buildings, roads and cultural assets) growing at over 5 per
cent in 2007 compared with 4.3 per cent in 2000. Details of the Government’s infrastructure investment
program are provided earlier in this chapter and in Chapter 2.
Financial Report 2006-07
Chapter 3
51
Table 3.8: Indicators of financial condition – State of Victoria
($ million)
2000
2001
2002
2003
Actual Actual Actual Actual
. .
(per cent)
Financial Sustainability
Long-term borrowings to total
assets
Total borrowings to total assets
Superannuation liabilities to
total assets
Total liabilities to total assets
Long-term borrowings to GSP
Total borrowings to GSP
Superannuation liabilities to
GSP
Total liabilities to GSP
Current assets to current
liabilities
Financial flexibility
Borrowing costs to income from
transactions (b)
Superannuation expenses to
income from transactions (b)
Superannuation expenses and
borrowing costs to income
from transactions (b)
2004
Actual
.
2005 2006 (a)
Actual Actual
.
2007
Actual
12.7
10.9
11.1
10.1
8.9
9.4
8.7
9.2
15.5
13.6
15.6
12.5
13.5
13.8
13.6
13.2
13.0
10.8
11.8
8.6
12.3
9.9
11.3
7.3
54.5
7.2
8.7
7.8
53.6
6.0
8.7
6.9
49.1
5.9
7.2
7.4
48.3
5.3
7.2
7.0
44.1
4.7
6.9
5.7
39.2
5.3
6.7
4.8
41.3
4.9
6.9
5.5
38.3
5.2
6.4
4.1
31.0
94.3
29.8
96.3
26.2
100.3
25.7
100.9
23.5
111.5
22.0
121.0
23.2
92.6
21.7
91.7
3.6
4.3
2.8
2.9
2.7
2.8
2.7
2.7
8.3
5.0
8.6
8.4
1.0
1.8
5.3
5.3
11.9
9.2
11.4
11.3
3.7
4.5
8.0
6.9
4.9
7.6
7.4
9.7
13.9
5.1
5.2
3.4
3.7
4.4
4.2
4.5
4.3
4.9
Assets
Growth in non-current physical
4.3
assets (c)
Net asset investment to
3.7
non-current physical assets
Source: Department of Treasury and Finance
Notes:
(a) 2000-2005 ratios are calculated under A-GAAP. Ratios from 2006 onwards are calculated under A-IFRS.
(b) Between 2000-2005 under A-GAAP, 'income from transactions' is total revenue and 'superannuation
expenses' is total superannuation expense, whereas from 2006 under A-IFRS 'income from transactions' and
'superannuation expense' represent only those transactions that are directly under the Government's control.
(c) 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.
52
Chapter 3
Financial Report 2006-07
CHAPTER 4 – ANNUAL FINANCIAL REPORT
This chapter contains the audited 2006-07 Financial Report for the State of
Victoria and the Victorian general government sector.
Financial Report 2006-07
Chapter 4
53
REPORT OF THE AUDITOR-GENERAL
54
Chapter 4
Financial Report 2006-07
Financial Report 2006-07
Chapter 4
55
CERTIFICATION BY THE DEPARTMENT OF TREASURY AND FINANCE
The Financial Report for the State of Victoria has been prepared by the Department of Treasury and
Finance through the consolidation of audited financial information provided by the Victorian public
sector reporting entities listed herein.
In our opinion, the Annual Financial Report:
(a)
presents fairly the financial performance and the cash flows of the State and the Victorian
general government sector for the year ended 30 June 2007 and the financial position of the State
and the Victorian general government sector as at 30 June 2007; and
(b)
has been prepared in accordance with Australian Accounting Standards (including Australian
equivalents to International Financial Reporting Standards, A-IFRS), in particular AAS 31
Financial Reporting by Governments, other mandatory professional reporting requirements 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
Stein Helgeby
Deputy Secretary
Budget and Financial Management
Grant Hehir
Secretary
Authorised for issue on
27 September 2007
56
Chapter 4
Financial Report 2006-07
Consolidated operating statement for the year ended 30 June 2007
($ million)
Notes
Income from transactions
Taxation
Fines and regulatory fees
Dividends and income tax equivalent and rate
equivalent revenue
Interest
Grants
Sale of goods and services
Fair value of assets received free of charge or
for nominal consideration
Other income
Total income from transactions
Expenses from transactions
Employee benefits
Superannuation
Depreciation and amortisation
Finance costs
Grants and transfer payments
Supplies and services (a)
Other expenses
Total expenses from transactions
Net result from transactions
State of Victoria
General government
sector
2007
2006
2007
2006
3
4
5
11 554.9
789.2
680.7
10 752.3
736.2
520.5
11 701.8
765.2
1 422.3
10 885.4
713.8
1 009.2
6
7
8
1 100.5
15 493.2
8 703.6
200.7
1 063.6
14 542.1
8 244.2
198.7
422.7
15 600.9
2 863.3
21.8
390.5
14 624.3
2 526.3
32.0
1 459.1
39 982.0
1 360.5
37 418.1
2 087.6
34 885.7
1 790.4
31 972.0
12 985.8
1 706.0
2 217.2
1 059.7
4 449.9
16 104.1
212.4
38 735.0
1 247.0
12 247.3
1 985.1
2 135.6
1 015.8
4 140.3
15 288.1
55.1
36 867.4
550.7
12 187.2
1 642.9
1 334.7
479.2
6 706.0
10 971.2
200.0
33 521.1
1 364.7
11 473.5
1 917.2
1 279.3
473.6
5 794.8
10 165.4
43.7
31 147.5
824.5
( 51.8)
3 196.1
( 74.0)
2 435.0
( 29.8)
3 190.1
( 53.3)
2 420.9
35.6
148.0
5.2
132.3
2 939.5
1 893.4
21.7
7.0
( 134.3)
923.3
318.4
590.4
5 985.1
7 232.1
5 325.7
5 876.4
3 505.7
4 870.3
3 097.2
3 921.7
9
10 (a)
11
12
13
14
15
Income/(expenses) from other economic
flows
Net gain/(loss) from disposal of physical assets
16
Actuarial gains/(losses) of superannuation
10 (a)
defined benefit plans
Share of net profits/(losses) of associates and
17
joint venture entities
Net gains/(losses) on financial assets at fair
value
Other gains/(losses) from other economic
18
flows (a)
Total other economic flows
Net result
The accompanying notes form part of these financial statements
Note:
(a) Published figures for 2005-06 have been adjusted for insurance claims expense to recognise the valuation
component ($505.6 million) as an other economic flow consistent with the treatment in 2006-07.
Financial Report 2006-07
Chapter 4
57
Consolidated balance sheet as at 30 June 2007
($ million)
Notes
Current assets
Cash and cash equivalents
Receivables
Prepayments
Inventories
Other financial assets
31
19
20
21
Non-current assets classified as held for sale
Total current assets
Non-current assets
Receivables
Investments accounted for using the equity
method
Other financial assets
Property, plant and equipment
Intangibles
Other assets
Total non-current assets
Total assets
Current liabilities
Payables
Interest-bearing liabilities
Employee benefits
Superannuation
Other provisions
Other liabilities
Total current liabilities
Non-current liabilities
Payables
Interest-bearing liabilities
Employee benefits
Superannuation
Other provisions
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
22
19
17
21
23
24
25
State of Victoria
General
government sector
2007
2006
2007
2006
2 622.0
3 551.9
180.8
707.8
7 221.0
14 283.4
66.5
14 349.9
2 582.8
2 660.4
165.8
700.8
7 623.5
13 733.3
59.4
13 792.7
3 017.7
2 909.5
99.6
125.2
1 531.9
7 683.9
51.9
7 735.9
2 698.2
1 877.3
102.6
135.8
1 700.2
6 514.0
59.2
6 573.3
1 778.4
1 036.1
1 551.1
978.7
342.3
629.5
391.0
602.6
22 009.3 19 172.7
99 678.0 94 742.4
424.8
298.8
240.1
264.3
125 166.7 117 008.0
139 516.6 130 800.7
526.4
59 399.3
235.0
206.0
61 338.5
69 074.4
462.0
55 953.8
159.6
237.1
57 806.1
64 379.4
4 139.9
2 954.2
3 470.8
340.1
3 050.3
1 686.7
15 642.0
3 637.6
4 656.1
2 886.2
5.3
2 463.5
1 240.3
14 889.0
2 631.4
1 088.2
3 245.2
335.0
214.3
507.9
8 022.1
2 415.5
311.0
2 701.1
..
155.3
413.2
5 996.0
41.0
12 797.3
410.0
9 813.2
14 075.0
590.0
37 726.6
53 368.6
86 148.0
126.7
11 397.9
792.7
12 928.9
13 509.4
431.8
39 187.3
54 076.3
76 724.4
242.1
6 106.0
375.6
9 802.7
543.4
496.5
17 566.5
25 588.5
43 485.8
526.6
5 869.4
728.1
12 896.5
580.6
257.1
20 858.3
26 854.3
37 525.1
Equity
Reserves
30
34 906.3
Accumulated funds
30
51 241.7
Total equity
86 148.0
The accompanying notes form part of these financial statements.
32 493.4
44 231.0
76 724.4
26
27
10 (d)
28
29
26
27
10 (d)
28
29
Note:
Refer to Note 33 for commitments and Note 34 for contingent assets and contingent liabilities.
58
Chapter 4
Financial Report 2006-07
Consolidated statement of recognised income and expense for the year
ended 30 June 2007
($ million)
Notes
Gain on revaluation of property plant and equipment
Revaluation writeback of property plant and equipment
Share of revaluation of property, plant and equipment of associates
and joint ventures
Available-for-sale investments:
Gain/(loss) taken to equity
Transferred to profit or loss for the period
Net income recognised directly in equity
Net result for the period
Total recognised income and expense for the period
The accompanying notes form part of these financial statements.
Financial Report 2006-07
Chapter 4
.
30
State of Victoria
2007
2006
2 120.5
11.1
21.5
1 922.0
0.4
91.4
39.9
( 1.5)
2 191.5
7 232.1
9 423.5
47.7
( 22.1)
2 039.3
5 876.4
7 915.7
59
Consolidated cash flow statement for the year ended 30 June 2007
($ million)
Notes
State of Victoria
General
government sector
2007
2006
2007
2006
Cash flows from operating activities
Receipts
Taxation
11 121.9
10 841.8
11 264.4 10 974.3
Fines and regulatory fees
696.4
576.6
677.9
560.5
Grants
15 287.2
14 530.8
15 601.5 14 619.7
Sale of goods and services (a)
7 046.7
6 260.9
3 591.9
3 240.8
Interest received
369.8
35.3
419.7
373.8
Dividends and income tax equivalent and rate
22.5
26.1
1 429.1
1 231.9
equivalent revenue
Other receipts
1 651.3
1 657.0
1 957.6
1 796.0
Total receipts
36 196.0
33 928.5
34 942.1 32 796.9
Payments
Employee benefits
(12 586.1) (11 820.1) (11 995.5) (11 251.9)
Superannuation
(1 269.1) (1 943.6) (1 211.6) (1 887.6)
Interest paid
( 237.5)
( 28.3)
( 450.6)
( 430.9)
Grants and transfer payments
(4 250.3) (4 186.9) (6 674.2) (5 918.9)
Supplies and services (a)
(13 790.5) (12 141.6) (11 770.2) (10 686.9)
Other payments
..
20.0
..
20.0
Total payments
(32 133.5) (30 100.4) (32 102.0) (30 156.3)
Net cash flows from operating activities
31 (b)
4 062.5
3 828.1
2 840.1
2 640.6
Cash flows from investing activities
Purchase of non-financial assets
(4 864.6) (4 126.1) (2 812.5) (2 301.4)
Proceeds from sale of non-financial assets
283.4
226.8
225.8
158.8
Net (purchase)/disposal of investments
9.7
590.1
139.0
468.7
Net customer loans (granted)/repaid
33.9
54.8
8.4
35.7
Net contribution to other sectors of
..
..
( 694.8)
51.2
government
Net cash flows from investing activities
(4 537.5) (3 254.4) (3 134.1) (1 587.1)
Cash flows from financing activities
Net borrowings
( 77.4)
21.2
613.7
( 175.5)
Net cash flows from financing activities
( 77.4)
21.2
613.7
( 175.5)
Net cash flows from public financial
31 (c)
583.6
17.5
..
..
corporations
Net increase/(decrease) in cash and cash
31.2
612.4
319.7
878.1
equivalents
Cash and cash equivalents at beginning of
2 512.6
1 900.2
2 695.0
1 816.9
reporting period
Cash and cash equivalents at end of
31 (a)
2 543.8
2 512.6
3 014.6
2 695.0
reporting period
The accompanying notes form part of these financial statements.
Note:
(a) These items are inclusive of goods and services tax.
60
Chapter 4
Financial Report 2006-07
NOTES TO THE FINANCIAL STATEMENTS
Note 1:
Note 2:
Note 3:
Note 4:
Note 5:
Note 6:
Note 7:
Note 8:
Note 9:
Note 10:
Note 11:
Note 12:
Note 13:
Note 14:
Note 15:
Note 16:
Note 17:
Note 18:
Note 19:
Note 20:
Note 21:
Note 22:
Note 23:
Note 24:
Note 25:
Note 26:
Note 27:
Note 28:
Note 29:
Note 30:
Note 31:
Note 32:
Note 33:
Note 34:
Note 35:
Note 36:
Note 37:
Note 38:
Statement of significant accounting policies .......................................................... 62
Disaggregated information .................................................................................... 80
Taxation ................................................................................................................ 84
Fines and regulatory fees ..................................................................................... 84
Dividends and income tax equivalent and rate equivalent revenue ....................... 85
Grants ................................................................................................................... 85
Sale of goods and services ................................................................................... 85
Fair value of assets received free of charge or for nominal consideration ............. 86
Other income from transactions ............................................................................ 86
Superannuation .................................................................................................... 87
Depreciation and amortisation .............................................................................. 91
Finance costs........................................................................................................ 91
Grants and transfer payments ............................................................................... 91
Supplies and services ........................................................................................... 92
Total expenses from transactions by sector .......................................................... 92
Net gain/(loss) from disposal of physical assets .................................................... 93
Investments accounted for using the equity method.............................................. 93
Other gains/(losses) from other economic flows.................................................... 97
Receivables .......................................................................................................... 97
Inventories ............................................................................................................ 98
Other financial assets ........................................................................................... 99
Non-current assets classified as held for sale ....................................................... 99
Property, plant and equipment ............................................................................ 100
Intangibles .......................................................................................................... 110
Other assets ....................................................................................................... 110
Interest-bearing liabilities .................................................................................... 111
Employee benefits .............................................................................................. 112
Other provisions .................................................................................................. 112
Other liabilities .................................................................................................... 116
Reserves and accumulated funds ....................................................................... 116
Cash flow information ......................................................................................... 117
Financial instruments .......................................................................................... 119
Commitments...................................................................................................... 129
Contingent assets and liabilities .......................................................................... 131
Funds under management .................................................................................. 137
Subsequent events ............................................................................................. 137
Public Account disclosure ................................................................................... 138
Controlled Entities ............................................................................................... 172
Financial Report 2006-07
Chapter 4
61
Note 1:
Statement of significant accounting policies
The Annual Financial Report represents the audited general purpose consolidated financial report of the
Government of Victoria (the State) and the Victorian general government sector.
(A) Statement of compliance framework
This financial report is a general purpose financial report which has been prepared in accordance with the
Financial Management Act 1994 (FMA), applicable Accounting Standards, in particular, Australian
Accounting Standard AAS 31 Financial Reporting by Governments, Australian Accounting Standards
Board (AASB) Interpretations and other mandatory professional requirements. The financial report has
been prepared on a not-for-profit basis and, accordingly, in compliance with Australian Accounting
Standards including Australian equivalents to International Financial Reporting Standards (A-IFRS). The
consolidated entity has, where relevant, applied those paragraphs applicable to not-for-profit entities.
(B) Basis of accounting and measurement
The accrual basis of accounting has been employed in the preparation of financial statements whereby
assets, liabilities, equity, income 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 currency of the Victorian Government.
In the application of A-IFRS, 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 judgements. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that
period, or in the period of the revision and future periods if the revision affects both current and future
periods. Judgements made by management in the application of A-IFRS 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.
The report has been prepared in accordance with the historical cost convention. Plant, equipment,
vehicles, and certain infrastructure assets held by water and rail entities, are valued at historical cost.
Exceptions to the historical cost convention include:

non-current physical assets (principally land, buildings and road networks) which subsequent to
acquisition, are measured at valuation and are reassessed with sufficient regularity to ensure the
carrying amount does not materially differ from their fair value;

productive trees in commercial native forests, which are recognised at their net market value;

derivative financial instruments, investment properties after initial recognition, and interest bearing
liabilities of the State, which are measured at fair value through profit and loss;

available-for-sale investments, which are measured at fair value with movements reflected in equity
until the asset is derecognised; and

certain liabilities, most notably unfunded superannuation and some insurance claim provisions,
which are calculated with regard to actuarial assessments.
Cost is based on the fair values of the consideration given in exchange for assets.
62
Chapter 4
Financial Report 2006-07
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.
The accounting policies set out below have been applied in preparing the financial statements for the year
ended 30 June 2007 and the comparative information presented for the year ended 30 June 2006.
(C) Reporting entity
The State of Victoria reporting entity, referred to in this report as ‘the State’, includes government
departments, public non-financial corporations, public financial corporations 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. Disaggregated
information is presented in Note 2.
System of National Accounts
(i)
General government (GG)
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.
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 income and are financed mainly through taxes and other
compulsory levies.
(ii)
Public non-financial corporations (PNFC)
The primary function of entities within the government public non-financial corporations 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.
(iii)
Public financial corporations (PFC)
The government-controlled public financial corporations 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.
(D) Basis of consolidation
The consolidated financial statements incorporate assets and liabilities of all reporting entities that are
controlled by the State as at 30 June 2007 and their income and expenses for the reporting period.
Local government authorities, universities and denominational hospitals do not form part of the State of
Victoria economic entity and, therefore, are not consolidated.
Financial Report 2006-07
Chapter 4
63
Where control of an entity is obtained during the financial period, its results are included in the
consolidated operating statement from the date on which control commenced. Where control ceases
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 this financial report.
In the process of reporting the State as a single economic entity, all material transactions and balances
between government controlled entities are eliminated.
Consistent with the requirements of AAS 31, 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.
Details of significant entities consolidated by the State are shown in Note 38 in this Annual Financial
Report.
(E) Presentation of the operating statement
Income and expenses in the operating statement are classified according to whether or not they arise from
‘transactions’ or ‘other economic flows’. This classification is consistent with that which will be required
under AASB 1049 Financial Reporting of General Government Sectors by Governments.
‘Transactions’ and ‘other economic flows’ are defined by the Australian System of Government Finance
Statistics: Concepts, Sources and Methods 2005 Cat. No. 5514.0 published by the Australian Bureau of
Statistics (ABS).
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, 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 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.
‘Other economic flows’ 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. In simple terms, other economic flows are
changes arising from market re-measurements.
Net result is equivalent to profit or loss derived in accordance with A-IFRS.
(F) Income from transactions
Income is recognised to the extent that it is probable that the economic benefits will flow to the entity and
the income can be reliably measured.
Taxation
State taxation and fee revenue is recognised upon the earlier of either the receipt by the State of a
taxpayer’s self assessment or the time the taxpayer’s obligation to pay arises, pursuant to the issue of an
assessment.
The types of taxation revenue raised by the State include:

payroll tax;

land tax;

duties levied principally on conveyances and land transfers and rental business;

gambling taxes levied mainly on private lotteries, electronic gaming machines, casino operations and
racing;
64
Chapter 4
Financial Report 2006-07

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; and

other taxes, including landfill levies, licence fees and progressive recognition of upfront concession
fees paid by Transurban in respect of Melbourne City Link.
In addition, taxation for the general government sector includes levies on statutory corporations
(including the environmental levy) which are eliminated on consolidation into the whole of the State.
Fines and regulatory fees
Revenue is recognised at the time the fine is issued or the regulatory fee is billed. Drivers licence fees are
included in regulatory fees.
Dividends, income tax equivalent and rate equivalent revenue
Dividends are recognised as revenue when the right to receive payment is established. In addition,
income tax equivalent revenue for the general government sector represents revenue received from the
other sectors of government, which is eliminated on consolidation into the whole of the State.
Interest revenue
Interest revenue includes interest received, discount interest on financial assets and interest on bank term
deposits and other investments. Interest revenue is recognised on a time proportionate basis that takes
into account the effective yield on the financial asset. Net realised and unrealised gains and losses on the
revaluation of investments do not form part of income from transactions, but are reported as part of
income from other economic flows in the operating statement or as unrealised gains or losses taken direct
to equity in the statement of recognised income and expense.
Grants revenue
Grants mainly comprise funds 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. Revenue is recognised when the State obtains control over these funds.
Sale of goods and services
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the
goods have passed to the buyer and the revenue can be reliably measured.
Revenue from rendering of services is recognised on a stage of completion basis and is measured by
reference to the labour hours or as a percentage of total services to be performed.
Fair value of assets received free of charge or for nominal consideration
Revenue arising from assets received free of charge or for nominal consideration is measured at the fair
value of the assets and is recognised when the State gains control of the assets or the right to receive the
assets concerned.
(G) Expenses from transactions
Expenses are recognised when they are incurred, and reported in the financial year to which they relate.
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Employee benefits
These expenses include all costs related to employment (other than superannuation which is accounted
for separately) including wages and salaries, fringe benefits tax, leave entitlements and redundancy
payments.
Superannuation
Superannuation expense is determined on the following basis:

for defined contribution plans, the amount recognised as an expense reflects the State’s contribution,
paid or accrued, in respect of the reporting period; and

for defined benefit plans, the expense relates to service cost (the cost of employer financed benefits
that are expected to accrue for defined benefit members during the reporting period), interest cost and
the expected return on assets. This excludes the impact of actuarial gains and losses, which are not
classified as transactions and therefore are reported separately as other economic flows.
Depreciation
All infrastructure assets, buildings, plant and equipment and other non-current physical assets (excluding
items under operating leases, assets held for sale and investment properties) that have a limited useful life
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. Leasehold improvements
are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the
straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at
the end of each annual reporting period.
The following are typical estimated useful lives for the different asset classes for both current and prior
years:
Asset class
Dwellings
Other buildings
Road pavement
Bridges
Plant, equipment and vehicles
Cultural assets
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
Land, earthworks associated with the declared road network, and core cultural assets which are
considered to have an indefinite life, are not depreciated. Depreciation is not recognised in respect of
these assets as their service potential has not, in any material sense, been consumed during the reporting
period.
Amortisation
Intangible assets with finite useful lives are amortised on a systematic (typically straight-line) basis over
the asset’s useful life. Intangible assets with indefinite useful lives are not amortised, but are tested for
impairment annually or whenever there is an indication that the asset may be impaired.
Finance costs
Finance costs (other than swap interest which is classified as an other economic flow) are recognised as
expenses in the period in which they are incurred, and include:

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
amortisation of discounts or premiums relating to borrowings;

amortisation of ancillary costs incurred in connection with the arrangement of borrowings;

finance lease charges; and

the increase in financial liabilities and provisions due to the unwinding of discount to reflect the
passage of time.
Grants and transfer payments
Grants and transfer payments 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 and other transfer
payments made to local government, non-government schools, and community groups. For the general
government sector, they also include grants paid to public non-financial corporations and public financial
corporations.
Supplies and services
Supplies and services generally represent cost of goods sold and the day-to-day running costs, including
maintenance costs, incurred in the normal operation of the State. These items are recognised as an
expense in the reporting period in which they are incurred. The carrying amount of any inventories held
for distribution is expensed when distributed.
(H) Income (expense) from other economic flows
Other economic flows measure the change in volume or value of assets or liabilities that do not result
from transactions. This includes realised or unrealised gains and losses from disposals, revaluations and
impairment of non-current physical assets and intangible assets; actuarial gains and losses from
superannuation defined benefit plans; fair value changes of financial instruments and agricultural assets;
foreign exchange gains or losses; net swap interest paid; and depletion of natural resources.
Net gain/(loss) from disposal of physical assets
Any gain or loss on disposal of physical 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.
Actuarial gains/(losses) on superannuation defined benefit plans
Actuarial gains or losses reflect movements in the superannuation liability resulting from differences
between the assumptions used to calculate the superannuation expense from transactions and actual
experience. Actuarial gains or losses are recognised in the operating statement in the period in which they
occur.
Gains/(losses) from disposal of investments
Any gains or losses on disposal of financial assets are recognised at the expected date of disposal and are
determined after deducting from the proceeds the carrying value of the asset at that time.
(I) Assets
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, cash at bank, deposits at call and those highly liquid
investments with short periods to maturity, 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.
For cash flow statement presentation purposes, cash and cash equivalents include bank overdrafts, which
are included as current borrowings on the balance sheet.
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Prepayments
Prepayments represent payments in advance of receipt of goods or services or an expenditure made in
one accounting period covering a term extending beyond that period.
Receivables
Receivables consist predominantly of debtors in relation to goods and services, taxes and fines, accrued
investment income, and GST input tax credits recoverable. Receivables and loans are recognised initially
at fair value and subsequently recorded at amortised cost, using the effective interest method, less any
accumulated impairment losses.
The effective interest method is a method of calculating 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.
A provision for doubtful receivables is made when there is objective evidence that the debt may not be
collectable. Bad debts are written off when identified.
Investments and other financial assets
Investments are recognised and derecognised on trade date where purchase or sale of an investment is
under a contract whose terms require delivery of the investment within the timeframe established by the
market concerned, and are initially measured at fair value, net of transaction costs.
The State classifies its other financial investments in the following categories: financial assets at fair
value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale
financial assets. The classification depends on the purpose for which the investments were acquired.
Management determines the classification of its investments at initial recognition.
The State assesses at each balance sheet date whether loans and receivables, financial assets held for sale,
or financial assets held-to-maturity is impaired.
Other financial assets measured at fair value through profit or loss
Investments held for trading purposes are stated at fair value, with any resultant gain or loss recognised in
profit or loss.
Held-to-maturity investments
Where the State has the positive intent and ability to hold investments to maturity, they are stated at
amortised cost less impairment losses.
Loans and receivables
Trade receivables, loans and other receivables are recorded at amortised cost, using the effective interest
method, less impairment.
The effective interest method is a method of calculating 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.
Available-for-sale investments
Other investments held by the State are classified as being available-for-sale and are stated at fair value.
Gains and losses arising from changes in fair value are recognised directly in equity until the investment
is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously
recognised in equity is included in profit or loss for the period.
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Inventories
Supplies and consumables, work in progress and finished goods are valued at the lower of cost and net
realisable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are
assigned to inventory on hand by the method most appropriate to each particular class of inventory, with
the majority being valued on a first in first out basis. Net realisable value represents the estimated selling
price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Inventories held for distribution are valued at the lower of cost and current replacement cost.
Cost is assigned to land 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.
Property, plant and equipment
Land and buildings are measured initially at cost and subsequently revalued at the amounts for which
assets could be exchanged between knowledgeable willing parties in an arm’s length transaction (that is,
fair value).
Land in National parks or underlying State forests and other Crown land is measured 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.
Road network assets (including earthworks of the declared road networks but excluding land under
roads) are measured at fair value, determined by reference to the asset’s depreciated replacement cost.
Land under roads is not recognised.
Cultural depreciated assets and collections, heritage assets and other non-current physical assets that the
State intends to preserve because of their unique historical, cultural or environmental attributes, are
measured at the cost of replacing 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.
Plant, equipment, vehicles, water infrastructure assets and rail infrastructure assets are measured at cost
less accumulated depreciation and impairment.
Biological Assets
Commercial native forests are measured at their fair value less estimated point of sale costs. The fair
value is determined as the difference between the net present value of cash flows expected to be
generated by the commercial native forests (discounted at a current market determined rate, which
reflects the risks associated with the forests) less the fair value of the land on which the commercial
native forests are growing.
Leases
A distinction is made between finance leases, which transfer substantially all the risks and rewards
incidental to ownership of the leased assets from the lessor to the lessee, and operating leases, where the
lessor effectively retains all such risks and rewards.
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.
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Finance leases are recognised as assets and liabilities at amounts equal to the fair value of the lease
property or, if lower, the present value of the minimum lease payment, each determined at the inception
of the lease. The leased asset is depreciated over the shorter of the estimated useful life of the asset or the
term of the lease. Minimum lease payments are allocated between the principal component of the lease
liability, and the interest expense calculated by using the interest rate implicit in the lease, and charged
directly to the operating statement. Contingent rentals associated with finance leases are recognised as an
expense in the period in which they are incurred.
Operating lease payments are recognised as an expense in the operating statement on a straight line basis
over the lease term unless another systematic basis is more representative of the time pattern of the
benefits derived from the use of the leased asset.
The aggregate cost (or benefit) associated with operating lease incentives are recognised as a reduction of
rental income (or rental expense) on a straight line basis over the lease term.
The cost of leasehold improvements is capitalised as an asset and depreciated over the remaining term of
the lease or the estimated useful life of the improvements, whichever is the shorter.
Restrictive nature of cultural and heritage assets, Crown land and infrastructure
Certain agencies in the Victorian general government sector hold cultural assets, heritage assets, Crown
land and infrastructure which are deemed worthy of preservation because of the social rather than
financial benefits they provide to the community.
The nature of the assets means that there are certain limitations and restrictions imposed on their use
and/or disposal.
Investments in associated entities and joint ventures
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 consolidated operating statement and its share of post acquisition movements in
reserves is recognised in consolidated reserves. 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 operations and jointly controlled assets are accounted for by recognising in
the State’s financial statements, its share of the assets, liabilities and any revenue and expenses of such
joint ventures.
Interests in jointly controlled entities are accounted for in the consolidated financial statements using the
equity method, as applied to investments in associates.
Intangible assets
Intangible assets represent identifiable non-monetary assets without physical substance.
Intangible assets are recognised at cost. Costs incurred subsequent to initial acquisition are capitalised
when it is expected that additional future economic benefits will flow to the State.
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Intangible assets with finite useful lives are amortised on a systematic basis over the asset’s useful life,
and carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation
commences 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. The amortisation period and the
amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of
each annual reporting period. In addition, an assessment is made at each reporting date to determine
whether there are indicators that the intangible asset concerned is impaired.
Intangible assets with indefinite useful lives are not amortised. The useful lives of intangible assets that
are not being amortised are reviewed each period to determine whether events and circumstances
continue to support an indefinite useful life assessment for that asset. All intangible assets with indefinite
useful lives are also tested for impairment annually or whenever there is an indication that the intangible
asset may be impaired.
Where assets are tested for impairment, any excess of the carrying amount over the recoverable amount
is recognised as an impairment loss.
Research and development costs
Expenditure on research activities, or development expenditure where no internally-generated intangible
asset can be recognised, is recognised as an expense in the period as incurred.
An internally-generated intangible asset arising from development (or from the development phase of an
internal project) is recognised if, and only if, all of the following are demonstrated:

the technical feasibility of completing the intangible asset so that it will be available for use or sale;

the intention to complete the intangible asset and use or sell it;

the ability to use or sell the intangible asset;

how the intangible asset will generate probable future economic benefits;

the availability of adequate technical, financial and other resources to complete the development and
to use or sell the intangible asset; and

the ability to measure reliably the expenditure attributable to the intangible asset during its
development.
Internally-generated intangible assets are measured at cost less accumulated amortisation and
impairment, and are amortised on a straight-line basis over their useful lives. For capitalised software
development costs, typical useful lives range between 3 and 5 years.
Investment property
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 of Victoria.
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 operating statement in the period that they arise.
The properties are not depreciated.
Rental income from the leasing of investment properties is recognised in the operating statement on a
straight-line basis over the lease term.
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Non-current assets classified as held for sale
Non-current assets and disposal groups are 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 sale is highly probable and the asset’s sale (or disposal group sale) is expected to be
completed within one year from the date of classification.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying
amount and fair value less costs to sell, and are not subject to depreciation.
Impairment of assets
Goodwill and intangible assets with indefinite useful lives are tested annually as to whether their carrying
value exceeds their recoverable amount. All other assets are assessed annually for indications of
impairment, except for:

inventories;

assets arising from construction contracts;

assets arising from employee benefits;

deferred tax assets;

financial assets;

investment property that is measured at fair value;

certain biological assets related to agricultural activity;

certain deferred acquisition costs and intangible assets arising from an insurer’s contractual rights;
and

non-current assets classified as held for sale.
If there is an indication of possible 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 by a charge to the operating statement, except to the extent that the
write-down can be debited to an asset revaluation reserve account applicable to that class of asset.
It is deemed that in the event of the loss 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. The 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.
Revaluations
Non-current physical assets other than those that are carried at cost are re-valued in accordance with the
financial reporting directions of the Minister for Finance. These are re-valued with sufficient regularity to
ensure that the carrying amount of each asset does not differ materially from its fair value. This
revaluation process normally occurs every five years, based on the asset’s Government Purpose
Classification. Revaluation increments or decrements arise from differences between an asset’s carrying
value and fair value.
Revaluation increments are credited directly to equity in the revaluation reserve, except that, to the extent
that an increment reverses a revaluation decrement in respect of that class of asset previously recognised
as an expense in the net result, the increment is recognised as income (other economic flows) in
determining the net result.
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Revaluation decrements are recognised immediately as other economic flows in the operating statement,
except that, to the extent that a credit balance exists in the revaluation reserve in respect of the same class
of assets, they are debited to the revaluation reserve.
Revaluation increments and decrements relating to individual assets within a class of property, plant and
equipment are offset against one another within the same class of non-current assets but are not offset in
respect of assets in different classes.
Revaluation reserves are not normally transferred to accumulated funds on derecognition of the relevant
asset.
(J) Liabilities
Payables
Payables consist predominantly of creditors and other sundry liabilities. Payables are carried at amortised
cost and 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 these goods and services.
Interest-bearing liabilities
The State’s interest-bearing liabilities mainly represent funds raised from the following sources:

the residual amount outstanding for loans raised in previous years by the Commonwealth
Government on behalf of the State;

public borrowings mainly raised through the Treasury Corporation of Victoria; and

finance leases and other interest-bearing arrangements.
All loans and borrowings are initially recognised at the fair value of the consideration received less
directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings held for trading by the State are
subsequently measured at fair value through profit or loss.
For the general government sector and the public non-financial corporations sector, interest-bearing loans
and borrowings are subsequently 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. These liabilities are generally eliminated
on consolidation. Gains and losses are recognised in profit or loss when the liabilities are derecognised.
Provisions
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 cashflows estimated to settle the present obligation,
its carrying amount is the present value of those cashflows.
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.
Employee benefits
Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave and
long service leave when it is probable that settlement will be required and they are capable of being
measured reliably.
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Provisions made in respect of employee benefits are measured based on their expected settlement.
Provisions which are expected to be settled within 12 months are measured at their nominal values using
the remuneration rate expected to apply at the time of settlement. Provisions which are not expected to be
settled within 12 months are measured as the present value of the estimated future cash outflows to be
made by the State in respect of services provided by employees up to reporting date.
Regardless of the expected timing of settlement, provisions made in respect of employee benefits are
classified as a current liability unless there is an unconditional right to defer the settlement of the liability
for at least 12 months after the reporting date, in which case it would be classified as a non-current
liability. This non-current liability includes long service leave entitlements accrued for employees with
less than seven years of continuous service (refer Note 27).
Employee benefit on-costs are recognised and included with long service leave employee benefits.
Superannuation
A liability or asset in respect of defined benefit superannuation is recognised and is measured as the
difference between the present value of accrued liabilities at the reporting date and the net market value
of the superannuation scheme’s assets at that date. The present value of accrued liabilities is based on
expected future payments which arise from membership of the schemes to the reporting date.
Consideration is given to expected future wage and salary levels, experience of employee departures and
periods of service. Expected future payments are discounted using the rates on long term Commonwealth
Bonds.
The superannuation liability recognised in the balance sheet also allows for any past service cost that has
not yet been recognised in the operating statement.
Insurance claims
The outstanding claims liability is independently assessed by actuaries. It covers claims reported but not
yet paid, claims incurred but not yet reported, and the anticipated direct and indirect costs of settling
those claims. 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 where the State has a contract under which the unavoidable
cost of meeting the contractual obligations exceed the economic benefits estimated to be received.
Present obligations arising under onerous contracts are recognised as a provision to the extent that the
present obligation exceeds the economic benefits estimated to be received.
The major onerous contractual obligation is for the supply of electricity to Victoria’s aluminium smelters
at Portland and Point Henry. A yearly review of the contract is undertaken to restate 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.
Other liabilities
Other liabilities, other than derivative financial instruments, include unearned/prepaid income, goods and
services tax and fringe benefits tax payables, and are initially recognised at fair value and subsequently
remeasured at amortised cost. Unearned income liability includes deferred revenue from concession
notes.
Liabilities for derivative financial instruments are carried at fair value.
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(K) Right to receive assets
The State has entered into a number of concession arrangements with independent private sector entities.
These private sector entities typically lease land and sometimes state works, from the State and construct
infrastructure. During the concession period, the operator has the right to obtain revenue from services
that utilise the infrastructure and has the obligation to supply agreed upon services, including
maintenance of the asset. At the end of the concession period, the land and state works, together with the
constructed facilities, will be returned to the State. In the literature these are sometimes referred to as
Build, Own, Operate, Transfer arrangements or, more commonly, as public-private partnerships.
Significant arrangements include the City Link network, which charges tolls to motorists during the
concession period, which has a nominal term of 33.5 years expiring 15 January 2034, and East Link,
which will also be a tollway with a nominal term of 35 years expiring 30 November 2043.
In February 2007, the AASB approved an accounting interpretation on service concession arrangements.
This Interpretation applies only to private sector operators, and is applicable for financial reporting
periods commencing 1 July 2008.
The AASB intends to consider how public sector grantors should account for service concession
arrangements, and has appointed an advisory panel to make recommendations.
Due to the lack of accounting guidance directly applicable to the recognition and measurement by the
State of assets arising from certain service concession arrangements, there has been no change to existing
policy and those assets are not currently recognised.
(L) Derecognition of financial assets and financial liabilities
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.
Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or 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, and the difference
in the respective carrying amounts is recognised as an other economic flow in the operating statement.
(M) Accounting for the goods and services tax (GST)
Income, expenses and assets are recognised net of GST, except where the amount of GST incurred is not
recoverable, in which case it is recognised as part of the cost of acquisition of an asset or part of an item
of expense. GST receivable from and payable to the Australian Taxation Office is included in receivables
and other liabilities.
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The GST inclusive amount of a receipt or payment is recognised on a gross basis in the statement of cash
flows in accordance with AASB 107 Statement of Cash Flows.
(N) Events after the reporting date
Assets, liabilities, income or expenses arise from past transactions or other past events. Adjustments are
made to amounts recognised in the financial statements for events which occur after the reporting date
and before the date the statements are authorised for issue, where those events provide information about
conditions which existed at the reporting date. 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 reporting date and which may have a material impact on the results of subsequent years.
(O) Disaggregated information
In Note 2, the State’s consolidated financial information has been disaggregated among the following
sectors:

general government (GG);

public non-financial corporations (PNFC); and

public financial corporations (PFC).
This information is provided as there is dissimilarity between general government activities and those of
the public entities in the public non-financial corporations and the public financial corporations sectors.
Disclosure of this information is to assist users of this financial report in determining the effects of
differing activities on the financial position of the State. It will also assist users in identifying 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.
(P) Commitments
Commitments include those operating, capital and other outsourcing commitments arising from
non-cancellable contractual or statutory sources and are stated at their nominal value. Where it is
considered appropriate and provides additional relevant information to users, the net present values of
significant individual projects are also stated.
(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 and, if quantifiable, are measured at nominal value.
Contingent assets and contingent liabilities are:

possible assets or liabilities that arise from past events, which will be confirmed only by the
occurrence or non-occurrence of future events not wholly within the control of the entity; or

assets or liabilities which fail either or both of the recognition criteria. These are where the asset or
liability is not probable and the asset or liability cannot be reliably measured.
(R) Foreign currency balances/transactions
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 at reporting date are translated at the
exchange rate existing at reporting date. Non-monetary assets and liabilities carried at fair value that are
denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was
determined. Exchange differences are recognised in profit and loss in the period in which they arise.
76
Chapter 4
Financial Report 2006-07
(S) Derivative financial instruments
A derivative is a financial instrument whose value changes in response to the change in an underlying
variable such as the interest rate, commodity or security price, or index, that requires little or no initial
net investment, and that is settled at a future date.
Risk management
Certain state-controlled entities enter into derivative financial instruments to manage the financial risks
inherent in the State’s financial asset and liability management activities. Those entities principally use
interest rate swaps, forward rate agreements, interest rate options and exchange-traded futures contracts
to manage the risks relating to the State’s interest rate exposures.
Currency swaps and foreign currency forward contracts are also entered into by certain entities controlled
by the State to manage the currency risks relating to offshore funding and investment programs and to
ensure that there is no material residual currency exposure.
Basis of valuation
Derivative financial instruments are initially recognised at fair value on the date on which a derivative
contract is entered into and are subsequently remeasured to fair value. 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, except for those that qualify as
cash flow hedges, are taken directly to net profit or loss for the year.
The fair value of forward currency contracts is calculated by reference to current forward exchange rates
for contracts with similar maturity profiles. The fair value of interest rate swap contracts is determined by
reference to market values for similar instruments.
(T) Rounding
All amounts in the financial report have been rounded to the nearest hundred thousand dollars unless
otherwise stated. Figures in the financial report may not add due to rounding.
(U) Transactions between wholly-owned public sector entities
Consistent with AASB Interpretation 1038, Contributions by Owners Made to Wholly owned Public
Sector Entities, transactions between wholly-owned public sector entities that satisfy the definition of
contributions by owners are treated as contributions and distributions of capital. These transactions
between the sectors are netted out in the balance sheet for the whole of the State.
(V) New accounting standards and interpretations
Land under roads
Under AASB 1045 Land Under Roads: Amendments to AAS 27A (Amendments to the Transitional
Provisions in AAS 27), AAS 29A (Amendments to the Transitional Provisions in AAS 29) and AAS 31A
(Amendments to the Transitional Provisions in AAS 31), an entity may elect until the end of the first
reporting period ending on or after 31 December 2007 not to recognise land under roads as assets. When
this exemption lapses, entities will be required under AASB 116 Property, Plant and Equipment to
recognise for reporting periods commencing from 1 July 2008 land under roads if, and only if, its fair
value as at the date of acquisition can be reliably measured. The extent to which this can be achieved and
the resulting impact is still being evaluated.
Financial Report 2006-07
Chapter 4
77
Service Concessions
In February 2007, the AASB approved Australian Interpretation 12 Service Concession Arrangements,
applicable only to private sector operators from the 2008-09 reporting period, and AASB 2007-2 that
made consequential reference changes to affected standards. The AASB is still to consider how public
sector grantors should account for service concession arrangements, and has appointed an advisory panel
to make recommendations. Due to lack of applicable accounting guidance on the recognition and
measurement by the State of assets arising from certain service concession arrangements, there has been
no change in policy and these assets are currently not recognised. The impact of any change in policy
arising from the AASB deliberations is not known or reasonably estimable.
AASB 7 Financial Instruments Disclosures and AASB 2005-10 Amendments to
Australian Accounting Standards
These standards are applicable to annual reporting periods beginning on or after 1 January 2007. The
State has not adopted the standards early. Application of the standards will not affect any of the amounts
recognised in the State’s financial statements, but will affect disclosures made in relation to financial
instruments.
GAAP/GFS Convergence
In September 2006, the AASB issued Accounting Standard AASB 1049 Financial Reporting of General
Government Sectors by Governments to converge Australian Generally Accepted Accounting Principles
(GAAP) and Government Finance Statistics (GFS) reporting. This Standard, applying this converged
approach to financial reports for the General Government Sector, is applicable from 1 July 2008. The
effect of any changes to recognition or measurement requirements as a result of this new standard is
being evaluated.
The AASB is also currently developing a standard for the convergence of GAAP and GFS on a whole of
government basis. Exposure Draft 155 was issued in June 2007, with the intention that a resultant
accounting standard also be applicable for reporting periods beginning on or after 1 July 2008. The effect
of any changes to recognition or measurement requirements as a result of this proposed standard is also
being evaluated.
Review of Public Sector Accounting Standards
The AASB has reviewed AAS 29 Financial Reporting by Departments and AAS 31 Financial Reporting
by Government and as a result issued for comment ED156 Proposals Arising from the Short-Term
Review of the Requirements in AAS 27, AAS 29 and AAS 31 which outlines proposals encompassing:


the creation of three new topic-based Standards to cover:
–
Administered Items;
–
Land Under Roads – Transitional Requirements; and
–
Disaggregated Disclosures.
the allocation of other matters currently contained in AAS 29 and AAS 31 to existing topic based
standards.
The impact of any resultant new or revised standards is yet to be evaluated.
78
Chapter 4
Financial Report 2006-07
Borrowing costs
In May 2007, The AASB agreed on AASB 123 Borrowing Costs in respect of both for-profit entities and
not-for-profit entities for application to annual reporting periods beginning on or after 1 January 2009.
The impact of this Standard is still being evaluated.
AASB 101 Presentation of Financial Statements (revised)
The AASB has removed Australian specific requirements from revised AASB 101, including the
Australian illustrative formats of the income statement, balance sheet and statement of changes in equity
which entities were previously ‘encouraged’ to adopt in preparing their financial statements. This
standard is applicable to reporting periods beginning on or after 1 January 2007 and should not
significantly affect presentation.
Financial Report 2006-07
Chapter 4
79
Note 2:
Disaggregated information
Disaggregated operating statement for the year ended 30 June 2007
($ million)
General
government sector
2007
2006
Income from transactions
Taxation
Fines and regulatory fees
Dividends and income tax equivalent and rate equivalent
revenue
Interest
Grants
Sale of goods and services
Fair value of assets received free of charge or for nominal
consideration
Other income
Total income from transactions
Expenses from transactions
Employee benefits
Superannuation
Depreciation and amortisation
Finance costs
Capital assets charge
Grants and transfer payments
Supplies and services (a)
Other expenses
Total expenses from transactions
Net result from transactions
Public non-financial
corporations
2007
2006
11 701.8
765.2
1 422.3
10 885.4
713.8
1 009.2
..
19.8
21.6
..
16.1
25.3
422.7
15 600.9
2 863.3
21.8
390.5
14 624.3
2 526.3
32.0
107.1
2 052.3
3 375.0
182.0
129.1
1 691.0
3 309.8
186.7
2 087.6
34 885.7
1 790.4
31 972.0
252.5
6 010.3
342.7
5 700.6
12 187.2
1 642.9
1 334.7
479.2
..
6 706.0
10 971.2
200.0
33 521.1
1 364.7
11 473.5
1 917.2
1 279.3
473.6
..
5 794.8
10 165.4
43.7
31 147.5
824.5
630.0
41.3
867.1
358.4
842.3
107.5
2 525.6
12.5
5 384.6
625.7
621.4
50.8
841.6
368.3
777.6
108.9
2 475.6
11.4
5 255.7
445.0
Income/(expenses) from other economic flows
.
.
.
.
Net gain/(loss) from disposal of physical assets
( 29.8)
( 53.3)
( 21.3)
( 20.4)
Actuarial gains/(losses) of superannuation defined benefit
3 190.1
2 420.9
5.9
14.1
plans
Share of net profits of associates and joint venture
5.2
132.3
30.4
15.8
entities
Net gains/(losses) on financial assets at fair value
21.7
7.0
1 267.8
236.3
Other gains/(losses) from other economic flows (a)
318.4
590.4 (1 310.2)
( 129.3)
Total other economic flows
3 505.7
3 097.2
( 27.3)
116.4
Net result
4 870.3
3 921.7
598.3
561.4
Note:
(a) Published figures for 2005-06 have been adjusted for insurance claims expense to recognise the valuation
component ($505.6m) as an other economic flow consistent with the treatment in 2006-07.
80
Chapter 4
Financial Report 2006-07
Public financial
corporations (a)
2007
2006
Inter-sector eliminations
Consolidated
2007
2006
2007
2006
..
4.2
658.2
..
6.2
494.5
( 146.9)
..
(1 421.4)
( 133.1)
..
(1 008.6)
11 554.9
789.2
680.7
10 752.3
736.2
520.5
1 285.5
..
2 988.3
..
1 278.1
5.7
2 937.4
..
( 714.8)
(2 160.0)
( 523.1)
( 3.1)
( 734.1)
(1 778.8)
( 529.4)
( 20.0)
1 100.5
15 493.2
8 703.6
200.7
1 063.6
14 542.1
8 244.2
198.7
27.9
4 964.2
26.8
4 748.8
( 908.9)
(5 878.2)
( 799.4)
(5 003.3)
1 459.1
39 982.0
1 360.5
37 418.1
209.8
21.8
15.4
954.1
..
7.7
3 983.9
..
5 192.8
( 228.5)
193.4
17.1
14.7
946.3
..
7.1
4 057.2
..
5 235.7
( 487.0)
( 41.2)
..
..
( 732.0)
( 842.3)
(2 371.2)
(1 376.6)
..
(5 363.4)
( 514.8)
( 41.0)
..
..
( 772.4)
( 777.6)
(1 770.5)
(1 410.1)
..
(4 771.6)
( 231.8)
12 985.8
1 706.0
2 217.2
1 059.7
..
4 449.9
16 104.1
212.4
38 735.0
1 247.0
12 247.3
1 985.1
2 135.6
1 015.8
..
4 140.3
15 288.1
55.1
36 867.4
550.7
.
( 0.7)
..
.
( 0.3)
..
.
..
..
.
..
..
.
( 51.8)
3 196.1
.
( 74.0)
2 435.0
..
..
..
..
35.6
148.0
1 650.4
857.5
2 507.1
2 278.6
1 650.1
462.3
2 112.1
1 625.1
( 0.4)
..
( 0.4)
( 515.2)
..
..
..
( 231.8)
2 939.5
( 134.3)
5 985.1
7 232.1
1 893.4
923.3
5 325.7
5 876.4
Financial Report 2006-07
Chapter 4
81
Note 2:
Disaggregated information (continued)
Disaggregated balance sheet as at 30 June 2007
($ million)
Current assets
Cash and cash equivalents
Receivables
Prepayments
Inventories
Other financial assets
Non-current assets classified as held for sale
Total current assets
Non-current assets
Receivables
Investments accounted for using the equity method
Other financial assets
Property, plant and equipment
Intangibles
Other assets
Total non-current assets
Total assets
Current liabilities
Payables
Interest-bearing liabilities
Employee benefits
Superannuation
Other provisions
Other liabilities
Total current liabilities
Non-current liabilities
Payables
Interest-bearing liabilities
Employee benefits
Superannuation
Other provisions
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Reserves
Accumulated funds
Total equity
82
Chapter 4
General
government sector
2007
2006
Public non-financial
corporations
2007
2006
3 017.7
2 909.5
99.6
125.2
1 531.9
7 683.9
51.9
7 735.9
2 698.2
1 877.3
102.6
135.8
1 700.2
6 514.0
59.2
6 573.3
593.9
534.9
55.0
582.5
1 395.2
3 161.5
14.6
3 176.2
532.3
532.2
34.9
565.1
707.9
2 372.3
0.2
2 372.5
342.3
629.5
526.4
59 399.3
235.0
206.0
61 338.5
69 074.4
391.0
602.6
462.0
55 953.8
159.6
237.1
57 806.1
64 379.4
308.1
406.6
915.4
40 235.2
160.0
121.2
42 146.4
45 322.6
526.1
376.2
357.8
38 748.3
127.0
106.4
40 241.8
42 614.3
2 631.4
1 088.2
3 245.2
335.0
214.3
507.9
8 022.1
2 415.5
311.0
2 701.1
..
155.3
413.2
5 996.0
896.1
501.5
179.3
5.1
559.4
91.1
2 232.4
641.1
439.8
139.4
5.3
200.4
67.5
1 493.5
242.1
6 106.0
375.6
9 802.7
543.4
496.5
17 566.5
25 588.5
43 485.8
526.6
5 869.4
728.1
12 896.5
580.6
257.1
20 858.3
26 854.3
37 525.1
13.2
4 338.6
27.4
10.5
1 104.4
1 799.8
7 293.8
9 526.1
35 796.4
12.2
4 106.2
58.8
32.4
606.3
1 784.3
6 600.3
8 093.7
34 520.6
24 584.4
18 901.4
43 485.8
22 540.4
14 984.7
37 525.1
10 175.8
25 620.6
35 796.4
9 810.1
24 710.5
34 520.6
Financial Report 2006-07
Public financial corporations
Inter-sector eliminations
Consolidated
2007
2006
2007
2006
2007
2006
1 448.8
1 444.1
26.2
..
5 580.1
8 499.2
..
8 499.2
1 025.5
1 386.6
28.2
..
6 390.9
8 831.2
..
8 831.2
(2 438.5)
(1 336.7)
..
..
(1 286.2)
(5 061.3)
..
(5 061.3)
(1 673.1)
(1 135.7)
..
..
(1 175.4)
(3 984.3)
..
(3 984.3)
2 622.0
3 551.9
180.8
707.8
7 221.0
14 283.4
66.5
14 349.9
2 582.8
2 660.4
165.8
700.8
7 623.5
13 733.3
59.4
13 792.7
9 053.2
..
20 589.6
47.7
29.9
463.2
30 183.6
38 682.8
8 627.9
..
18 365.0
43.6
12.2
454.7
27 503.4
36 334.6
(7 925.2)
..
( 22.1)
( 4.1)
..
( 550.4)
(8 501.8)
(13 563.1)
(7 993.9)
..
( 12.2)
( 3.3)
..
( 534.0)
(8 543.3)
(12 527.6)
1 778.4
1 036.1
22 009.3
99 678.0
424.8
240.1
125 166.7
139 516.6
1 551.1
978.7
19 172.7
94 742.4
298.8
264.3
117 008.0
130 800.7
717.3
5 622.9
46.3
..
2 276.6
1 579.2
10 242.3
686.3
7 273.6
45.8
..
2 107.9
850.8
10 964.4
( 104.9)
(4 258.4)
..
..
..
( 491.4)
(4 854.7)
( 105.3)
(3 368.3)
..
..
..
( 91.3)
(3 564.8)
4 139.9
2 954.2
3 470.8
340.1
3 050.3
1 686.7
15 642.0
3 637.6
4 656.1
2 886.2
5.3
2 463.5
1 240.3
14 889.0
0.1
10 489.4
7.0
..
12 427.2
520.9
23 444.6
33 686.9
4 995.9
0.2
9 430.2
5.8
..
12 322.5
537.7
22 296.4
33 260.8
3 073.8
( 214.4)
(8 136.8)
..
..
..
(2 227.1)
(10 578.3)
(15 433.0)
1 869.8
( 412.3)
(8 008.0)
..
..
..
(2 147.4)
(10 567.6)
(14 132.5)
1 604.9
41.0
12 797.3
410.0
9 813.2
14 075.0
590.0
37 726.6
53 368.6
86 148.0
126.7
11 397.9
792.7
12 928.9
13 509.4
431.8
39 187.3
54 076.3
76 724.4
146.1
4 849.8
4 995.9
142.9
2 930.9
3 073.8
..
1 869.8
1 869.8
..
1 604.9
1 604.9
34 906.3
51 241.7
86 148.0
32 493.4
44 231.0
76 724.4
Financial Report 2006-07
Chapter 4
83
Note 3:
Taxation
($ million)
State of Victoria
General
government sector
2007
2006
3 478.7
3 301.5
2007
2006
Payroll tax
3 437.5
3 260.5
Taxes on immovable property
Land tax
961.2
762.3
989.1
780.1
Congestion levy
37.8
19.1
37.8
19.1
Metropolitan improvement levy
95.5
93.8
95.5
93.8
Property owner contributions to fire brigades
39.6
38.4
39.6
38.4
Total taxes on immovable property
1 134.1
913.6
1 162.0
931.4
Financial and capital transactions
Land transfer duty
2 961.4
2 671.2
2 961.4
2 671.2
Rental business duty
34.3
56.9
34.3
56.9
Other property duties
9.3
8.0
9.3
8.0
Debits tax (a)
..
22.3
..
22.3
Financial accommodation levy
..
..
16.0
13.1
Total financial and capital transactions
3 005.0
2 758.4
3 021.0
2 771.4
Levies on statutory corporations
..
..
60.2
60.2
Gambling taxes
Private lotteries
330.1
316.2
330.1
316.2
Electronic gaming machines
932.4
911.1
932.4
911.1
Casino
117.8
113.7
117.8
113.7
Racing
122.2
114.0
122.2
114.0
Other
5.9
5.0
5.9
5.0
Total gambling taxes
1 508.4
1 459.9
1 508.4
1 459.9
Taxes on insurance
1 094.9
1 048.3
1 094.9
1 048.3
Motor vehicle taxes
Vehicle registration fees
726.2
693.8
727.7
694.8
Duty on vehicle registrations and transfers
552.2
546.9
552.2
546.9
Total motor vehicle taxes
1 278.4
1 240.7
1 279.8
1 241.8
Other taxes
96.7
70.9
96.7
70.9
Total taxation
11 554.9 10 752.3 11 701.8 10 885.4
Note:
(a) Debits tax was abolished on 1 July 2005. Revenue in 2006 represents carryover amounts from previous years.
Note 4:
Fines and regulatory fees
($ million)
State of Victoria
2007
406.5
104.8
277.9
789.2
Fines
Motor vehicle regulatory fees
Other regulatory fees
Total fines and regulatory fees
84
Chapter 4
2006
386.2
118.9
231.1
736.2
General
government sector
2007
2006
405.6
383.3
104.8
118.9
254.8
211.6
765.2
713.8
Financial Report 2006-07
Note 5:
revenue
Dividends and income tax equivalent and rate equivalent
($ million)
State of Victoria
Dividends
Income tax equivalent and rate equivalent revenue
Total dividends and income tax equivalent and rate
equivalent revenue
2007
680.7
..
680.7
2006
520.5
..
520.5
General
government sector
2007
2006
554.3
593.2
868.0
416.0
1 422.3
1 009.2
Dividends and income tax equivalents of the general government sector are sourced from government
business enterprises.
Note 6:
Grants
($ million)
State of Victoria
Operating grants
General purpose grants
Specific purpose grants for on-passing
Other specific purpose grants
Total operating grants
Capital grants
Specific purpose grants for on-passing
Other specific purpose grants
Total capital grants
Total grants
General
government sector
2007
2006
2007
2006
8 583.6
1 771.0
4 279.2
14 633.8
8 120.3
1 662.6
4 127.7
13 910.6
8 583.6
1 771.0
4 291.1
14 645.7
8 120.3
1 662.6
4 136.8
13 919.7
174.6
684.7
859.3
15 493.2
159.9
471.7
631.5
14 542.1
174.6
780.6
955.3
15 600.9
159.9
544.8
704.6
14 624.3
Specific purpose grants for on passing represent grants made by the Commonwealth Government to State
Governments that are then passed on to third parties, such as non-government schools and local
governments.
Note 7:
Sale of goods and services
($ million)
State of Victoria
Sale of goods
Provision of services
Total sale of goods and services
Financial Report 2006-07
2007
422.9
8 280.7
8 703.6
Chapter 4
2006
321.2
7 923.0
8 244.2
General
government sector
2007
2006
47.4
30.0
2 815.9
2 496.3
2 863.3
2 526.3
85
Note 8: Fair value of assets received free of charge or for nominal
consideration
($ million)
State of Victoria
Plant and equipment
Land and buildings
Other
Total fair value of assets received free of charge or
for nominal consideration
Note 9:
2007
4.2
20.3
176.3
200.7
2006
1.0
11.5
186.1
198.7
General
government sector
2007
2006
1.4
2.2
9.9
19.2
10.6
10.7
21.8
32.0
Other income from transactions
($ million)
State of Victoria
General
government sector
2007
2006
842.3
777.4
39.8
30.5
20.9
17.1
172.6
181.0
82.9
..
3.0
2.1
926.0
782.2
2 087.6
1 790.4
2007
2006
Inter-sector capital asset charge
..
..
Royalties
41.9
32.7
Rents
70.2
65.3
Donations and gifts
185.5
195.6
Forgiveness of liability
82.9
..
Other non-property rental
4.3
3.1
Other miscellaneous income (a)
1 074.3
1 063.8
Total other income
1 459.1
1 360.5
Note:
(a) Other miscellaneous income mainly comprises:
 $926.0 million sourced from the general government sector, represented by own source revenue for
schools, hospitals and art institutions, unclaimed monies and refunds received by various departments
(2006: $782.2 million);
 $120.4 million sourced from the public non-financial corporations sector, represented by contributions
from developers to water authorities (2006: $251.3 million); and
 within the public financial corporations sector, revenue of $27.9 million recovered from self insurers by
the Victorian WorkCover Authority (2006: $18.1 million).
86
Chapter 4
Financial Report 2006-07
Note 10: Superannuation
Superannuation expense
Superannuation expense includes employer contributions to defined contribution superannuation schemes
for the benefit of existing employees, and the actuarially determined expense for defined benefit
superannuation schemes.
Superannuation liability
The liability for employee superannuation entitlements is the responsibility of the State’s public sector
superannuation schemes. These schemes 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 unfunded
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 scheme 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 $10.1 billion superannuation liability recognised on the State’s balance sheet, more than 99 per
cent is recorded in the general government sector.
The superannuation liabilities of agencies for which the State is not responsible, such as universities, are
not reflected in the balance sheet.
(a)
Superannuation expense recognised in the operating statement
($ million)
State of Victoria
2007
2006
Defined benefit plans
Current service cost (a)
Recognition of past service cost (a)
Interest cost (a)
Expected return on plan assets (net of expenses) (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
Notes:
(a) Superannuation expense from transactions.
(b) Superannuation expense from other economic flows.
Financial Report 2006-07
Chapter 4
680.4
..
1 712.0
(1 293.4)
( 14.5)
(3 196.1)
(2 111.5)
658.2
179.4
1 525.4
(1 043.5)
( 14.5)
(2 435.0)
(1 129.9)
578.6
42.9
621.5
(1 490.0)
640.4
39.7
680.1
( 449.8)
87
Note 10: Superannuation (continued)
(b)
Reconciliation of the present value of the defined benefit obligation
($ million)
Opening balance of defined benefit obligation
Current service cost
Interest cost
Recognition of past service cost
Contributions by plan participants
Actuarial (gains)/losses
Benefits paid
Closing balance of defined benefit obligation
(c)
State of Victoria
2007
2006
30 352.3 30 185.4
680.4
658.2
1 712.0
1 525.4
..
222.2
157.9
245.6
(1 644.8)
( 940.2)
(1 643.9) (1 544.2)
29 614.0 30 352.3
Reconciliation of the fair value of superannuation plan assets
($ million)
State of Victoria
2007
2006
17 471.9 14 908.9
1 293.4
1 043.5
..
42.7
1 551.3
1 494.7
669.3
1 280.8
157.9
245.6
(1 643.9) (1 544.2)
19 499.9 17 471.9
Opening balance of plan assets
Expected return on plan assets
Recognition of past service cost
Actuarial gains/(losses)
Employer contributions
Contributions by plan participants
Benefits paid (including tax paid)
Closing balance of plan assets
88
Chapter 4
Financial Report 2006-07
Note 10: Superannuation (continued)
(d)
Reconciliation of the superannuation liabilities
($ million)
State of Victoria
2007
2006
ESSS
Defined benefit obligation
27 027.1 27 790.3
Tax liability (a)
834.3
818.0
Plan assets
(18 019.3) (16 200.4)
Unrecognised past service cost (b)
39.2
53.7
Net liability/(asset)
9 881.3 12 461.6
Other funds (c)
Defined benefit obligation
1 744.8
1 728.7
Tax liability (a)
7.9
15.3
Plan assets
(1 480.7) (1 271.5)
Unrecognised past service cost (b)
..
..
Net liability/(asset)
272.0
472.5
Total unfunded superannuation
Defined benefit obligation
28 771.9 29 519.0
Tax liability (a)
842.2
833.3
Plan assets
(19 499.9) (17 471.9)
Unrecognised past service cost (b)
39.2
53.7
Unfunded superannuation liability
10 153.3 12 934.1
Represented by:
Current liability
340.1
5.3
Non-current liability
9 813.2 12 928.9
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.
Financial Report 2006-07
Chapter 4
89
Note 10: Superannuation (continued)
Superannuation assumptions
Victorian statutory
superannuation funds
Actuary
Emergency Services and State Mercer (a)
Super
Constitutionally Protected
Schemes
Parliamentary Contributory
Superannuation Fund (f)
Mercer (a)
Health Super Fund
Mercer (a)
Financial assumptions
Expected return on assets (b)
Discount rate (c)
Wages growth (d)
Inflation rate (e)
Discount rate (c)
Wages growth (d)
Inflation rate (e)
Expected return on assets (b)
Discount rate (c)
Wages growth (d)
Inflation rate (e)
Expected return on assets (b)
Discount rate (c)
Wages growth (d)
Inflation rate (e)
Per cent per annum
2007
8.00
6.35
4.00
2.50
6.35
4.00
n/a
8.00
6.35
4.00
n/a
6.00
6.35
4.00
2.50
2006
8.00
5.88
4.00
2.50
5.88
4.00
n/a
8.00
5.88
4.00
n/a
6.00
5.88
4.00
2.50
Notes:
(a) Mercer Human Resource Consulting 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. This rate is used to calculate the liability at 30 June 2007
and is not necessarily the same as the rate assumed for the 2006-07 year.
(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) The inflation rate assumptions are based on the anticipated rise in costs relevant to a particular scheme.
(f)
Parliamentary salaries are determined by reference to equivalent salaries in the Commonwealth Parliament.
The expected return on assets, as shown above, is determined by weighting the expected long-term return
for each asset 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
90
Chapter 4
Per cent
2007
2006
34.6
33.7
28.7
26.0
8.7
12.6
5.2
3.7
9.8
6.5
11.1
8.7
1.9
8.8
100.0
100.0
Financial Report 2006-07
Note 11: Depreciation and amortisation
($ million)
State of Victoria
Depreciation
Buildings
Plant, equipment and vehicles, and infrastructure systems
Road networks
Other assets
Total depreciation
Amortisation
Leased plant and equipment
Leasehold improvements
Intangible produced assets
Total amortisation
Total depreciation and amortisation
General
government sector
2007
2006
2007
2006
596.1
1 016.8
335.0
66.5
2 014.5
585.4
993.3
300.4
50.3
1 929.4
365.2
423.7
332.4
65.6
1 187.0
360.0
437.2
297.3
49.8
1 144.3
81.4
65.3
56.0
202.7
2 217.2
82.9
47.1
76.2
206.2
2 135.6
44.4
61.3
41.9
147.7
1 334.7
46.0
42.8
46.2
135.0
1 279.3
Note 12: Finance costs
($ million)
State of Victoria
2007
674.6
74.2
176.5
22.2
112.1
1 059.7
Interest on long-term interest-bearing liabilities
Interest on short-term interest-bearing liabilities
Finance charges on finance leases
Discount interest on payables
Fees and other finance costs
Total finance costs
2006
693.8
81.2
137.5
53.3
50.0
1 015.8
General
government sector
2007
2006
320.2
331.5
21.3
10.2
86.8
43.8
24.5
59.6
26.4
28.5
479.2
473.6
Note 13: Grants and transfer payments
($ million)
State of Victoria
Commonwealth Government
Local Government
Private sector
Grants within the Victorian Government
Other
Total grants and transfer payments
Financial Report 2006-07
2007
96.4
589.9
3 748.1
..
15.6
4 449.9
Chapter 4
2006
67.4
552.3
3 502.9
..
17.8
4 140.3
General
government sector
2007
2006
95.9
67.2
589.9
552.3
3 663.6
3 429.6
2 341.0
1 727.9
15.5
17.8
6 706.0
5 794.8
91
Note 14: Supplies and services
($ million)
State of Victoria
General
government sector
2007
2006
5 823.9
5 393.3
4 177.1
3 926.2
30.8
26.6
703.9
535.4
188.9
239.6
31.9
33.4
14.6
10.9
10 971.2 10 165.4
2007
2006
Purchase of supplies and consumables
7 539.5
6 615.7
Purchase of services
4 604.9
4 597.3
Insurance claims expense (a)
2 605.1
2 866.7
Maintenance
1 067.7
874.5
Operating lease payments
239.9
296.0
Assets and other resources provided free of charge
32.1
26.8
Other
14.8
10.9
Total supplies and services
16 104.1 15 288.1
Note:
(a) Published figures for 2005-06 have been adjusted for insurance claims expense to recognise the valuation
component ($505.6 million) as an other economic flow consistent with the treatment in 2006-07.
Supplies and services represent the day to day running costs incurred in the normal operation of
controlled entities.
Audit fees charged by the Victorian Auditor General’s Office for the financial audit of Victorian public
sector entities amounted to $15.7 million. (2006: $16.9 million).
Note 15: Total expenses from transactions by sector
($ million)
2007
2006
Expenses from transactions
Parliament
107.6
105.7
Education
8 921.8
9 044.4
Human Services
12 727.4
11 594.7
Infrastructure
4 071.3
3 636.2
Innovation, Industry and Regional Development
1 174.1
413.2
Justice
3 243.1
2 925.5
Premier and Cabinet
518.4
510.9
Primary Industries
531.8
412.0
Sustainability and Environment
1 319.0
1 053.8
Treasury and Finance
1 834.0
2 186.1
Victorian Communities
850.0
1 047.7
Regulatory bodies and other part budget funded agencies
1 516.1
1 140.9
Eliminations within general government (a)
(3 293.5)
(2 923.7)
Total general government sector (b)
33 521.1
31 147.5
Public non-financial corporations
5 384.6
5 255.7
Public financial corporations (c)
5 192.8
5 235.7
Eliminations for whole of government (a)
(5 363.4)
(4 771.6)
Total expenses from transactions
38 735.0
36 867.4
Notes:
(a) Mainly comprises payroll tax, capital asset charge and inter-departmental and inter-agency transfers.
(b) For individual departments, 2007 includes the impact of the machinery of government changes effective
1 January 2007.
(c) Published figures for 2005-06 have been adjusted for insurance claims expense to recognise the valuation
component ($505.6 million) as an other economic flow consistent with the treatment in 2006-07.
92
Chapter 4
Financial Report 2006-07
Note 16: Net gain/(loss) from disposal of physical assets
($ million)
State of Victoria
Proceeds from disposal of physical assets
Written down value of assets sold/(disposed)
Net gain/(loss) from disposal of physical assets
2007
271.4
( 323.2)
( 51.8)
2006
199.7
( 273.7)
( 74.0)
General
government sector
2007
2006
211.8
130.9
( 241.6)
( 184.2)
( 29.8)
( 53.3)
Note 17: Investments accounted for using the equity method
($ million)
Investments Accounted for Using the Equity Method comprise the State's
share in:
State of Victoria
2007
406.6
614.4
15.0
1 036.0
Snowy Hydro Ltd
Murray-Darling Basin Commission
The Australian Regenerative Medicine Institute
Total investments
2006
376.1
587.6
15.0
978.7
($ million)
Movements in carrying amounts
State of Victoria
2007
2006
Snowy Hydro Ltd
Carrying amount at the beginning of the period
Share of profits after income tax
Dividends received / receivable
Share of increment on revaluation of property, plant and equipment
Carrying amount at the end of the period
Murray-Darling Basin Commission
Carrying amount at the beginning of the period
Share of profits after income tax
Share of increment on revaluation of property, plant and equipment
Carrying amount at the end of the period
The Australian Regenerative Medicine Institute
Carrying amount at the beginning of the period
Joint venture undertaken during the year
Share of profits after income tax
Share of increment on revaluation of property, plant and equipment
Carrying amount at the end of the period
Financial Report 2006-07
Chapter 4
376.1
44.7
( 14.3)
360.3
36.1
( 20.3)
406.6
376.1
587.5
5.4
21.5
614.4
363.9
132.2
91.4
587.5
15.0
..
..
..
15.0
..
15.0
..
..
15.0
93
Note 17: Investments accounted for using the equity method (continued)
(a)
Snowy Hydro Ltd
Snowy Hydro Ltd is incorporated and listed in Australia. Snowy Hydro Ltd is a public company, which
owns and operates the Snowy Mountain Hydro-Electric Scheme as an independent electricity generator
within the National Electricity Market.
($ million)
State of Victoria
2007
2006
68.9
42.4
628.7
618.0
51.6
105.2
239.4
179.1
406.6
376.1
Balance sheet:
Current assets
Non current assets
Current liabilities
Non current liabilities
Net Assets
($ million)
State of Victoria
2007
2006
47.2
41.7
Revenue and profit:
Revenue from ordinary activities
Profit from ordinary activities before income tax
67.6
56.6
Income tax expense relating to ordinary activities
23.8
19.1
Net Result (a)
43.8
37.5
Note:
(a) The net result differs from the profit after income tax amount as stated on the previous page, as this figure
only includes items from ordinary activities.
($ million)
State of Victoria
2007
2006
14.7
26.5
20.0
18.7
2.7
0.3
37.4
45.5
Capital expenditure commitments
Operating lease commitments
Other commitments
State of Victoria’s ownership interest of Snowy Hydro Ltd at 30 June 2007 was 29 per cent (2006: 29 per
cent).
94
Chapter 4
Financial Report 2006-07
Note 17: Investments accounted for using the equity method (continued)
(b)
Murray-Darling Basin Commission
The Murray-Darling Basin Commission is the executive arm of the Murray-Darling Basin Ministerial
Council. The Commission is responsible for managing the River Murray and the Menindee Lakes system
of the lower Darling River, as well as advising the Ministerial Council on matters related to the use of the
water, land and other environmental resources of the Murray-Darling Basin.
($ million)
State of Victoria
2007
2006
144.8
142.4
476.0
453.0
6.3
8.0
..
..
614.5
587.5
Balance sheet:
Current assets
Non current assets
Current liabilities
Non current liabilities
Net Assets
($ million)
State of Victoria
2007
2006
102.8
567.1
Revenue and profit:
Revenue from ordinary activities
Profit from ordinary activities before income tax
Income tax expense relating to ordinary activities
Net Result
5.4
..
5.4
132.1
..
132.1
($ million)
State of Victoria
2007
2006
0.1
..
4.9
0.2
4.7
5.5
9.7
5.6
Capital expenditure commitments
Operating lease commitments
Other commitments
State of Victoria’s ownership interest of Murray-Darling Basin Commission at 30 June 2007 was
26.7 per cent (2006: 26.7 per cent).
Financial Report 2006-07
Chapter 4
95
Note 17: Investments accounted for using the equity method (continued)
(c)
The Australian Regenerative Medicine Institute
The Australian Regenerative Medicine Institute was established at Monash University and is funded by
the Victorian Government. The institute conducts biomedical research in developing effective treatments
and regenerative medicine for incurable diseases.
($ million)
State of Victoria
2007
2006
6.8
15.0
8.2
..
..
..
..
..
15.0
15.0
Balance sheet:
Current assets
Non current assets
Current liabilities
Non current liabilities
Net Assets
($ million)
State of Victoria
2007
2006
..
..
Revenue and profit:
Revenue from ordinary activities
Profit from ordinary activities before income tax
Income tax expense relating to ordinary activities
Net Result
..
..
..
..
..
..
($ million)
State of Victoria
2007
2006
20.0
..
..
..
20.0
..
Capital expenditure commitments
Operating lease commitments
State of Victoria’s ownership interest of The Australian Regenerative Medicine Institute at 30 June 2007
was 50 per cent (2006: 50 per cent).
The State’s share of contingent liabilities of its associates and joint venture arrangements are disclosed in
Note 34.
96
Chapter 4
Financial Report 2006-07
Note 18: Other gains/(losses) from other economic flows
($ million)
State of Victoria
General
government sector
2007
2006
( 0.5)
2.7
34.2
( 17.7)
2007
2006
Net gain/(loss) from revaluation of biological assets
( 0.4)
0.7
Net (increase)/decrease in provision for doubtful
30.1
( 19.8)
receivables
Amortisation of intangible non-produced assets
( 7.5)
( 6.9)
( 3.4)
( 3.1)
Gains/ (losses) on outstanding insurance claims (a)
578.3
505.6
13.4
..
Net swap interest
3.3
..
..
..
Other gains/(losses)
( 738.1)
443.8
274.7
608.5
Total other gains/(losses) from other economic flows
( 134.3)
923.3
318.4
590.4
Note:
(a) Published figures for 2005-06 have been adjusted for insurance claims expense to recognise the valuation
component ($505.6m) as an other economic flow consistent with the treatment in 2006-07.
Note 19: Receivables
($ million)
State of Victoria
Current receivables
Sale of goods and services
Taxes receivable
Fines and regulatory fees
Accrued investment income
Loans
Other receivables
GST input tax credits recoverable
Provision for doubtful receivables
Total current receivables
Non-current receivables
Sale of goods and services
Taxes receivable
Loans
Other receivables
Provision for doubtful receivables
Total non-current receivables
Total receivables
Financial Report 2006-07
2007
2006
1 028.0
995.4
618.7
175.1
90.8
697.7
314.7
( 368.6)
3 551.9
905.1
532.9
732.8
183.3
117.3
328.1
294.4
( 433.6)
2 660.4
.
64.5
219.6
884.3
393.4
( 10.7)
1 551.1
4 211.5
66.6
182.1
992.7
547.2
( 10.1)
1 778.4
5 330.3
Chapter 4
General
government sector
2007
2006
617.2
1 003.2
617.5
511.6
2.9
219.0
255.3
( 317.2)
2 909.5
.
17.5
182.1
58.1
91.9
( 7.3)
342.3
3 251.8
448.2
536.4
732.8
102.7
12.0
165.7
252.6
( 373.2)
1 877.3
.
15.7
219.6
57.6
105.7
( 7.6)
391.0
2 268.3
97
Note 20: Inventories
($ million)
State of Victoria
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.
General
government sector
2007
2006
2007
2006
12.3
28.1
39.3
107.6
498.0
13.6
12.2
40.3
89.8
510.4
6.5
2.7
9.5
80.0
18.2
7.3
2.7
15.1
78.2
27.6
5.6
5.6
8.8
2.6
707.8
5.7
20.5
7.8
0.6
700.8
..
0.1
5.7
2.6
125.2
..
0.1
4.8
..
135.8
Reconciliation of movements in land and other assets held as inventory
($ million)
State of Victoria
2007
2006
510.8
533.1
29.0
0.1
1.4
3.3
2.4
( 24.3)
( 43.1)
( 1.3)
500.5
510.8
Opening balance
Acquisitions
Assets transferred
Revaluations
Disposals
Closing balance
98
Chapter 4
Financial Report 2006-07
Note 21: Other financial assets
($ million)
State of Victoria
Current other financial assets
Shares
Australian dollar term deposits
Foreign currency term deposits
Debt securities and other placements
Derivative financial instruments
Provision for diminution
Total current other financial assets
Non-current other financial assets
Shares
Australian dollar term deposits
Foreign currency term deposits
Debt securities and other placements
Derivative financial instruments
Provision for diminution
Total non-current other financial assets
Total other financial assets
Represented by:
Assets at fair value through profit and loss
Assets loans and receivable (at amortised cost)
Available-for-sale financial assets
Held-to-maturity financial assets
Total other financial assets
General
government sector
2007
2006
2007
2006
80.8
1 147.3
63.9
4 798.0
1 130.9
..
7 221.0
52.3
883.5
51.6
6 210.2
425.9
..
7 623.5
65.5
1 082.0
..
384.3
..
..
1 531.9
39.2
1 347.9
..
313.1
..
..
1 700.2
11 026.0
78.3
..
10 093.6
811.3
..
22 009.3
29 230.2
10 143.0
73.1
..
8 684.5
272.1
..
19 172.7
26 796.2
46.7
83.1
..
396.6
..
..
526.4
2 058.3
38.4
66.3
..
357.2
..
..
462.0
2 162.1
28 031.3
458.9
740.0
..
29 230.2
24 479.7
1 605.1
711.4
..
26 796.2
Note 22: Non-current assets classified as held for sale
($ million)
State of Victoria
Land
Buildings
Infrastructure, plant, equipment and vehicles
Other
Total non-current assets classified as held for sale
Financial Report 2006-07
2007
33.6
21.3
1.3
10.3
66.5
Chapter 4
2006
31.5
25.5
2.4
..
59.4
General
government sector
2007
2006
31.3
31.5
17.8
25.5
1.1
2.2
1.8
..
51.9
59.2
99
Note 23: Property, plant and equipment
(a)
Total property, plant and equipment
($ million)
Public Administration
State of Victoria
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 property, plant and equipment
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 property, plant and equipment
100
Chapter 4
2007
1 107.8
587.9
3.0
82.1
33.1
..
66.8
1 880.7
2006
970.5
699.1
..
94.0
26.9
..
262.7
2 053.2
General
government sector
2007
2006
467.4
500.6
233.4
260.1
..
..
34.3
45.6
..
..
..
..
66.8
262.7
801.9
1 069.0
Transportation &
Communications
State of Victoria
General
government sector
2007
2006
2007
2006
1 310.3
723.9
672.1
87.7
3 417.4
3 341.3
1 122.6
1 037.4
3 557.6
3 150.8
99.6
59.8
1 846.2
1 880.9
44.9
82.9
13 821.0 13 394.6 13 803.6 13 373.9
4 494.7
4 426.2
4 494.7
4 426.2
1.8
2.3
1.2
1.4
28 449.0 26 920.0 20 238.7 19 069.2
Financial Report 2006-07
Education
State of Victoria
2007
5 926.0
5 018.6
..
335.1
..
..
14.8
11 294.4
2006
5 821.5
4 978.8
..
400.1
..
..
10.6
11 211.0
General
government sector
2007
2006
5 926.0
5 821.5
5 018.6
4 978.8
..
..
335.1
400.1
..
..
..
..
14.8
10.6
11 294.4
11 211.0
Public Safety &
Environment
State of Victoria
General
government sector
2007
2006
2007
2006
4 661.7
4 280.6
3 471.7
2 998.2
14 076.1
12 495.0
11 818.5
10 498.7
15 162.9
14 407.6
96.3
95.8
1 137.9
1 139.8
821.4
840.4
598.5
597.4
588.8
588.8
..
..
..
..
3 440.3
3 211.4
3 416.5
3 191.7
39 077.4
36 131.8
20 213.2
18 213.7
Financial Report 2006-07
Health Welfare &
Community
State of Victoria
General
government sector
2007
2006
2007
2006
11 276.6
10 869.2
4 826.2
4 516.2
6 901.9
6 843.6
1 231.8
1 167.6
..
..
..
..
793.8
709.7
789.0
703.4
..
..
..
..
..
..
..
..
4.2
3.8
4.2
3.8
18 976.5
18 426.3
6 851.1
6 391.0
Total
State of Victoria
2007
24 282.4
30 001.8
18 723.5
4 195.2
14 452.5
4 494.7
3 527.8
99 678.0
Chapter 4
2006
22 665.7
28 357.8
17 558.4
4 224.4
14 019.0
4 426.2
3 490.9
94 742.4
General
government sector
2007
2006
15 363.3
13 924.2
19 424.9
17 942.5
195.9
155.6
2 024.6
2 072.4
14 392.4
13 962.7
4 494.7
4 426.2
3 503.5
3 470.3
59 399.3
55 953.8
101
Note 23: Property, plant and equipment (continued)
(b)
Land and buildings
($ million)
Public Administration
State of Victoria
2007
1 201.6
( 93.9)
1 107.8
587.9
..
587.9
1 695.7
Buildings
Accumulated depreciation
Buildings (written down value)
Land
National parks and other 'land only' holdings
Land and national parks
Total land and buildings
2006
1 074.0
( 103.5)
970.5
699.1
..
699.1
1 669.6
General
government sector
2007
2006
550.1
572.7
( 82.7)
( 72.1)
467.4
500.6
233.4
260.1
..
..
233.4
260.1
700.8
760.7
Transportation &
Communications
State of Victoria
General
government sector
2007
2006
2007
2006
1 506.2
885.9
695.5
107.3
( 195.9)
( 162.0)
( 23.4)
( 19.6)
1 310.3
723.9
672.1
87.7
3 417.4
3 341.3
1 122.6
1 037.4
..
..
..
..
3 417.4
3 341.3
1 122.6
1 037.4
4 727.7
4 065.2
1 794.6
1 125.1
Buildings
Accumulated depreciation
Buildings (written down value)
Land
National parks and other 'land only' holdings
Land and national parks
Total land and buildings
Reconciliation of movements in land and buildings
($ million)
State of Victoria
2007
2006
51 023.6 48 937.4
2 412.8
1 722.5
( 229.8)
379.1
2 097.7
806.1
( 302.4)
( 233.0)
..
90.8
( 56.3)
( 46.7)
( 661.5)
( 632.5)
54 284.2 51 023.6
Opening balance
Acquisitions
Reclassification
Revaluation
Disposals
Assets recognised for the first time
Impairment
Depreciation and amortisation
Closing balance
102
Chapter 4
Financial Report 2006-07
Education
State of Victoria
2007
6 271.8
( 345.8)
5 926.0
5 018.6
..
5 018.6
10 944.6
2006
6 038.0
( 216.5)
5 821.5
4 978.8
..
4 978.8
10 800.3
General
government sector
2007
2006
6 271.8
6 038.0
( 345.8)
( 216.5)
5 926.0
5 821.5
5 018.6
4 978.8
..
..
5 018.6
4 978.8
10 944.6
10 800.3
Public Safety &
Environment
State of Victoria
General
government sector
2007
2006
2007
2006
4 933.6
4 623.9
3 674.5
3 252.2
( 271.8)
( 343.3)
( 202.8)
( 254.0)
4 661.7
4 280.6
3 471.7
2 998.2
11 782.1
10 517.5
9 524.5
8 521.3
2 294.0
1 977.5
2 294.0
1 977.5
14 076.1
12 495.0
11 818.5
10 498.7
18 737.8
16 775.6
15 290.2
13 497.0
Financial Report 2006-07
Health Welfare &
Community
State of Victoria
General
government sector
2007
2006
2007
2006
12 423.2
11 552.3
5 710.5
5 067.4
(1 146.6)
( 683.1)
( 884.4)
( 551.1)
11 276.6
10 869.2
4 826.2
4 516.2
6 901.9
6 843.6
1 231.8
1 167.6
..
..
..
..
6 901.9
6 843.6
1 231.8
1 167.6
18 178.5
17 712.8
6 058.0
5 683.8
Total
State of Victoria
2007
26 336.4
(2 054.0)
24 282.4
27 707.8
2 294.0
30 001.8
54 284.2
Chapter 4
2006
24 174.1
(1 508.4)
22 665.7
26 380.4
1 977.5
28 357.8
51 023.5
General
government sector
2007
2006
16 902.3
15 037.6
(1 539.1)
(1 113.4)
15 363.3
13 924.2
17 130.9
15 965.0
2 294.0
1 977.5
19 424.9
17 942.5
34 788.2
31 866.8
103
Note 23: Property, plant and equipment (continued)
(c)
Plant, equipment and vehicles, and infrastructure systems
($ million)
Public Administration
State of Victoria
2006
..
..
..
..
..
256.8
( 178.9)
33.0
( 17.0)
94.0
94.0
General
government sector
2007
2006
..
..
..
..
..
..
..
..
..
..
96.9
93.6
( 63.4)
( 64.0)
1.5
32.9
( 0.6)
( 16.9)
34.3
45.6
34.3
45.6
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 infrastructure systems
2007
4.0
( 1.0)
..
..
3.0
260.4
( 179.1)
1.6
( 0.7)
82.1
85.2
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 infrastructure systems
Transportation &
Communications
State of Victoria
General
government sector
2007
2006
2007
2006
4 102.7
3 580.0
101.1
60.8
( 547.8)
( 431.8)
( 1.5)
( 1.1)
3.6
3.2
..
..
( 0.8)
( 0.5)
..
..
3 557.6
3 150.8
99.6
59.8
1 376.2
1 288.3
104.3
140.6
( 340.7)
( 257.0)
( 59.4)
( 65.8)
904.7
1 012.3
..
107.7
( 93.9)
( 162.7)
..
( 99.6)
1 846.2
1 880.9
44.9
82.9
5 403.8
5 031.7
144.4
142.7
Reconciliation of movements in plant, equipment and vehicles, and other infrastructure
systems
($ million)
State of Victoria
2007
2006
21 782.8 20 617.3
2 691.2
2 318.6
( 78.7)
289.1
..
( 60.2)
( 159.2)
( 173.3)
( 211.6)
( 114.1)
1.0
1.4
( 8.5)
( 19.7)
(1 098.2) (1 076.3)
22 918.8 21 782.8
Opening balance
Acquisitions
Reclassification
Revaluations
Disposals
Decrease in leased motor vehicles
Assets recognised for the first time
Impairment
Depreciation and amortisation
Closing balance
104
Chapter 4
Financial Report 2006-07
Education
State of Victoria
2007
..
..
..
..
..
1 003.0
( 673.5)
7.9
( 2.3)
335.1
335.1
2006
..
..
..
..
..
1 294.0
( 904.7)
14.5
( 3.7)
400.1
400.1
General
government sector
2007
2006
..
..
..
..
..
..
..
..
..
..
1 003.0
1 294.0
( 673.5)
( 904.7)
7.9
14.5
( 2.3)
( 3.7)
335.1
400.1
335.1
400.1
Public Safety &
Environment
State of Victoria
General
government sector
2007
2006
2007
2006
19 974.7
18 917.0
112.0
103.6
(4 933.8)
(4 637.4)
( 15.6)
( 7.8)
151.1
151.1
..
..
( 29.2)
( 23.1)
..
..
15 162.9
14 407.6
96.3
95.8
1 979.9
1 850.2
1 319.5
1 239.0
( 996.2)
( 894.1)
( 652.1)
( 581.9)
207.9
204.8
207.4
204.3
( 53.7)
( 21.3)
( 53.4)
( 21.0)
1 137.9
1 139.8
821.4
840.4
16 300.8
15 547.3
917.7
936.2
Health Welfare &
Community
State of Victoria
General
government sector
2007
2006
2007
2006
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
1 835.3
1 664.3
1 817.6
1 640.3
(1 050.7)
( 965.9)
(1 037.9)
( 948.1)
16.5
17.0
16.5
17.0
( 7.2)
( 5.7)
( 7.2)
( 5.7)
793.8
709.7
789.0
703.4
793.8
709.7
789.0
703.4
Total
State of Victoria
2007
24 081.4
(5 482.6)
154.7
( 30.0)
18 723.5
6 454.7
(3 240.2)
1 138.5
( 157.8)
4 195.2
22 918.8
2006
22 496.9
(5 069.2)
154.3
( 23.6)
17 558.4
6 353.7
(3 200.6)
1 281.7
( 210.4)
4 224.4
21 782.8
General
government sector
2007
2006
213.0
164.4
( 17.1)
( 8.9)
..
..
..
..
195.9
155.6
4 341.3
4 407.4
(2 486.3)
(2 564.5)
233.2
376.5
( 63.5)
( 147.0)
2 024.6
2 072.4
2 220.5
2 228.0
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 2006-07
Chapter 4
105
Note 23: Property, plant and equipment (continued)
(d)
Road networks and earthworks
($ million)
Public Administration
State of Victoria
2007
37.6
( 4.5)
..
..
33.1
..
33.1
Roads
Accumulated depreciation
Road infrastructure
Accumulated depreciation
Roads (written down value)
Earthworks
Total road networks and earthworks
2006
31.2
( 4.3)
..
..
26.9
..
26.9
General
government sector
2007
2006
..
..
..
..
..
..
..
..
..
..
..
..
..
..
Transportation &
Communications
State of Victoria
General
government sector
2007
2006
2007
2006
16 755.5 16 113.5 16 750.6 16 108.8
(6 298.1) (6 030.0) (6 298.1) (6 030.0)
5 294.7
5 171.3
5 277.5
5 151.6
(1 931.2) (1 860.3) (1 926.4) (1 856.5)
13 821.0 13 394.6 13 803.6 13 373.9
4 494.7
4 426.2
4 494.7
4 426.2
18 315.7 17 820.8 18 298.3 17 800.0
Roads
Accumulated depreciation
Road infrastructure
Accumulated depreciation
Roads (written down value)
Earthworks
Total road networks and earthworks
Reconciliation of movements in road networks and earthworks
($ million)
State of Victoria
2007
2006
18 445.1 17 055.1
852.0
456.3
( 5.2)
0.3
25.3
1 255.3
( 27.2)
( 5.2)
( 7.8)
( 16.3)
( 335.0)
( 300.4)
18 947.3 18 445.1
Opening balance
Acquisitions
Reclassification
Revaluation
Disposals
Impairment
Depreciation
Closing balance
106
Chapter 4
Financial Report 2006-07
Education
State of Victoria
2007
2006
..
..
..
..
..
..
..
..
..
..
..
..
..
..
General
government sector
2007
2006
..
..
..
..
..
..
..
..
..
..
..
..
..
..
Public Safety &
Environment
State of Victoria
General
government sector
2007
2006
2007
2006
0.2
8.0
..
..
..
( 0.3)
..
..
673.2
673.2
683.7
674.2
( 85.4)
( 84.5)
( 84.4)
( 84.4)
598.5
597.4
588.8
588.8
..
..
..
..
598.5
597.4
588.8
588.8
Health Welfare &
Community
State of Victoria
General
government sector
2007
2006
2007
2006
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
Total
State of Victoria
2007
16 793.4
(6 302.6)
5 978.4
(2 016.7)
14 452.5
4 494.7
18 947.3
2006
16 152.7
(6 034.5)
5 845.5
(1 944.8)
14 019.0
4 426.2
18 445.1
General
government sector
2007
2006
16 750.6
16 108.8
(6 298.1)
(6 030.0)
5 950.7
5 824.8
(2 010.8)
(1 940.9)
14 392.4
13 962.7
4 494.7
4 426.2
18 887.1
18 388.8
The roads component of the above table represents the existing road pavement and road works in
progress. Land under roads and on road reserves are not recognised as assets in the balance sheet,
consistent with the transitional provisions of Accounting Standard AASB 1045 Land under roads. Road
infrastructure mainly includes sound barriers, bridges and traffic signal control systems. Also refer to the
relevant sections of Note 1 for additional information.
Financial Report 2006-07
Chapter 4
107
Note 23: Property, plant and equipment (continued)
(e)
Cultural assets
($ million)
Public Administration
State of Victoria
2007
67.7
( 0.9)
66.8
Cultural assets
Accumulated depreciation
Total cultural assets (written down value)
2006
272.5
( 9.8)
262.7
General
government sector
2007
2006
67.7
272.5
( 0.9)
( 9.8)
66.8
262.7
Transportation &
Communications
State of Victoria
General
government sector
2007
2006
2007
2006
1.9
2.3
1.4
1.4
( 0.2)
( 0.2)
..
..
1.8
2.3
1.2
1.4
Cultural assets
Accumulated depreciation
Total cultural assets (written down value)
Reconciliation of movements in cultural assets
($ million)
State of Victoria
2007
2006
3 490.9
3 548.7
54.6
30.6
0.2
37.3
( 3.7)
( 76.8)
..
( 0.1)
..
1.4
( 0.7)
..
( 13.6)
( 50.3)
3 527.8
3 490.9
Opening balance
Acquisitions
Reclassification
Revaluations
Disposals
Assets recognised for the first time
Impairment
Depreciation
Closing balance
108
Chapter 4
Financial Report 2006-07
Education
State of Victoria
2007
40.3
( 25.5)
14.8
2006
40.3
( 29.7)
10.6
General
government sector
2007
2006
40.3
40.3
( 25.5)
( 29.7)
14.8
10.6
Public Safety &
Environment
State of Victoria
General
government sector
2007
2006
2007
2006
3 497.7
3 262.3
3 473.9
3 242.2
( 57.4)
( 50.9)
( 57.4)
( 50.5)
3 440.3
3 211.4
3 416.5
3 191.7
Health Welfare &
Community
State of Victoria
General
government sector
2007
2006
2007
2006
4.2
3.8
4.2
3.8
..
..
..
..
4.2
3.8
4.2
3.8
Total
State of Victoria
2007
3 611.7
( 84.0)
3 527.8
2006
3 581.3
( 90.4)
3 490.9
General
government sector
2007
2006
3 587.4
3 560.2
( 84.0)
( 90.0)
3 503.5
3 470.3
Cultural assets are non-current physical assets that the State intends to preserve because of their unique
historical, cultural or environmental attributes. These assets include items such as the Royal Botanical
Gardens Herbarium, State Library, Government House, Parliament House, historic houses, monuments,
certain museum exhibits, art collections, archival collections and other items of cultural significance.
Financial Report 2006-07
Chapter 4
109
Note 24: Intangibles
($ million)
State of Victoria
2007
595.1
( 213.4)
85.8
( 42.6)
424.8
Intangibles produced assets
Accumulated amortisation
Intangibles non-produced assets
Accumulated amortisation
Intangibles (written down value)
2006
450.6
( 177.7)
56.3
( 30.4)
298.8
General
government sector
2007
2006
380.2
283.1
( 154.0)
( 127.8)
20.7
14.4
( 11.9)
( 10.1)
235.0
159.6
Reconciliation of movement in intangibles
($ million)
State of Victoria
2007
2006
298.8
247.0
176.5
125.3
37.1
12.2
..
( 9.1)
( 23.9)
( 0.5)
( 63.5)
( 76.2)
424.9
298.8
Opening balance
Acquisitions
Reclassification
Revaluations
Disposals
Amortisation
Closing balance
Intangible assets comprise identifiable non monetary assets without physical substance, including
software, patents, copyrights, exclusive rights and tradeable water rights.
Note 25: Other assets
($ million)
State of Victoria
Non-current other assets
Investment properties
Biological assets
Other assets
Total non-current other assets
2007
2006
37.2
96.7
106.2
240.1
33.6
88.0
142.7
264.3
General
government sector
2007
2006
19.2
80.6
106.2
206.0
13.4
81.0
142.7
237.1
Reconciliation of movements in investment properties and biological assets
($ million)
State of Victoria
2007
2006
121.5
137.9
6.6
0.6
( 2.2)
( 17.1)
12.2
0.3
( 3.0)
( 0.2)
..
..
( 1.3)
..
..
..
133.9
121.5
Opening balance
Acquisitions
Reclassification
Revaluations
Disposals
Assets recognised for the first time
Impairment
Depreciation and amortisation
Closing balance
110
Chapter 4
Financial Report 2006-07
Note 26: Interest-bearing liabilities
($ million)
State of Victoria
Current interest-bearing liabilities
Domestic borrowings
Foreign currency borrowings
Finance lease liabilities
Total current interest-bearing liabilities
Non-current interest-bearing liabilities
Domestic borrowings
Finance lease liabilities
Total non-current interest-bearing liabilities
Total interest-bearing liabilities
General
government sector
2007
2006
2007
2006
2 296.3
532.2
125.8
2 954.2
4 332.2
167.6
156.2
4 656.1
1 021.8
..
66.4
1 088.2
213.2
..
97.7
311.0
10 876.9
1 920.4
12 797.3
15 751.6
9 794.2
1 603.6
11 397.9
16 053.9
5 058.5
1 047.5
6 106.0
7 194.3
5 190.3
679.1
5 869.4
6 180.4
Domestic and foreign currency borrowings are payable as follows:
($ million)
State of Victoria
2007
2006
2 241.6
4 499.9
4 717.5
3 685.4
6 746.4
6 108.9
13 705.4 14 294.1
Less than 1 year
1 year but less than 5 years
5 years or more
Total domestic and foreign currency borrowings
Finance lease liabilities are payable as follows:
($ million)
State of Victoria
2007
2006
286.1
284.1
1 056.4
800.3
2 681.9
2 115.9
4 024.3
3 200.4
(1 978.2) (1 440.5)
2 046.2
1 759.8
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
Financial Report 2006-07
Chapter 4
111
Note 27: Employee benefits
($ million)
State of Victoria
2007
Current employee benefits
Accrued salaries and wages (a)
1 202.9
Long service leave
2 267.9
Total current employee benefits
3 470.8
Non-current employee benefits
Accrued salaries and wages (a)
..
Long service leave
410.0
Total non-current employee benefits
410.0
Total employee benefits
3 880.8
Note:
(a) Includes accrued annual leave, payroll tax and other similar on-costs.
2006
General
government sector
2007
2006
1 056.0
1 830.2
2 886.2
1 102.1
2 143.1
3 245.2
971.7
1 729.3
2 701.1
39.5
753.3
792.7
3 678.9
..
375.6
375.6
3 620.9
20.0
708.1
728.1
3 429.2
Current employee benefits are defined in AASB 101 Presentation of Financial Statements, as the amount for which the State of Victoria does not have an unconditional right to defer settlement beyond 12 months, mostly in relation to long service leave.
Of the total current liability, $x xxx.x million is expected to be paid within the next 12 months (2006: $1,319.5 million). The amount which relates to the general government sector is $xx million (2006: $1 215.7 million).
Note 28: Other provisions
($ million)
State of Victoria
Current provision for insurance claims
Victorian WorkCover Authority
Transport Accident Commission
Victorian Managed Insurance Authority
Other agencies
Current provision for insurance claims
Onerous contracts - aluminium smelters
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 - aluminium smelters
Other provisions
Total non-current other provisions
Total other provisions
General
government sector
2007
2006
2007
2006
1 458.2
731.0
86.8
81.8
2 357.8
436.7
255.8
3 050.3
1 390.8
680.3
61.2
34.5
2 166.7
119.9
176.9
2 463.5
..
..
..
79.5
79.5
..
134.9
214.3
..
..
..
60.9
60.9
..
94.3
155.3
6 586.8
5 143.1
691.1
299.7
12 720.7
1 078.1
276.2
14 075.0
17 125.3
6 823.7
5 046.7
605.2
166.7
12 642.3
603.0
264.1
13 509.4
15 972.9
..
..
..
299.1
299.1
..
244.3
543.4
757.7
..
..
..
323.0
323.0
..
257.6
580.6
735.9
The provisions for insurance claims, which are independently assessed by actuaries, represent the
estimated amounts payable as at 30 June in respect of claims reported but not yet paid, claims incurred
but not reported and the anticipated direct and indirect costs of settling those claims.
112
Chapter 4
Financial Report 2006-07
Note 28: Other provisions (continued)
Reconciliation of movements in insurance claims
($ 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
2007
2006
14 809.0 14 200.0
( 560.6)
( 447.4)
259.0
468.9
2 420.5
2 414.7
(1 878.1) (1 835.9)
28.6
8.7
15 078.5 14 809.0
Reconciliation of movements in onerous contracts provision
($ million)
State of Victoria
2007
2006
722.9
1 107.7
207.4
253.0
( 467.1)
( 311.0)
23.8
58.7
1 027.9
( 385.5)
1 514.9
722.9
Opening balance
Receipts
Payments
Discount interest (a)
(Gain)/loss on restatement of the liability
Closing balance
Note:
(a) The net change in the present value of assets and liabilities between reporting periods has been recognised as
discount interest.
Financial Report 2006-07
Chapter 4
113
Note 28: Other provisions (continued)
Insurance claims assumptions
The provision for insurance claims as at 30 June for the State’s insurance and risk management entities
have been adopted by the respective Boards of these entities, after appropriate consideration of the
actuarial advice provided by the independent actuaries. A summary of the assumptions used to derive
these estimates is shown below:
2007
Entity
Actuary
Weighted
average
expected term
to settlement
Financial
assumptions used
(not later than
1 year) (a)
Financial
assumptions
used (later than
1 year) (a)
Prudential
margin
Victorian
WorkCover
Authority
Pricewaterhouse
Coopers Actuarial
Ltd
5.3 years
inflation rate
4 per cent
inflation rate
3.7 - 4 per cent
8.5 per cent
discount rate
6.5 per cent
inflation rate
4.5 per cent
discount rate
6.2 - 6.6 per cent
inflation rate
4.5 per cent
discount rate
6.5 per cent
weighted average
inflation rate =
8.5 per cent
discount rate
6.2 per cent
weighted average
inflation rate =
8.5 per cent
weighted average
discount rate =
6.4 per cent
weighted average
inflation rate =
4.4 per cent
weighted average
discount rate =
6.4 per cent
weighted average
inflation rate =
4.4 per cent
weighted average
discount rate =
6.4 per cent
weighted average
inflation rate =
7.0 per cent
weighted average
discount rate =
6.4 per cent
weighted average
inflation rate =
7.0 per cent
weighted average
discount rate =
6.3 per cent
weighted average
discount rate =
6.3 per cent
Transport
Accident
Commission
Victorian
Managed
Insurance
Authority
Victorian
Managed
Insurance
Authority
Victorian
Managed
Insurance
Authority
Pricewaterhouse
Coopers Actuarial
Ltd
12.7 years
Ernst & Young
7.3 years
Actuarial Business
Consultants Pty
Ltd
(Public Healthcare
Program)
Ernst & Young
2.4 years
Actuarial Business
Consultants Pty
Ltd
(General
Government
Program)
am actuaries Pty Ltd 13.1 years
(Run-off Program)
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
Note:
(a) The inflation rate assumptions are based on the anticipated rise in costs relevant to a particular entity.
114
Chapter 4
Financial Report 2006-07
Note 28: Other provisions (continued)
Insurance claims assumptions (continued)
2006
Entity
Actuary
Weighted
average
expected term
to settlement
Financial
assumptions used
(not later than
1 year)
Financial
assumptions
used (later than
1 year)
Prudential
margin
Victorian
WorkCover
Authority
Pricewaterhouse
Coopers
5.2 years
inflation rate
4 per cent
inflation rate
4 per cent
8.5 per cent
discount rate
5.8 - 6 per cent
inflation rate
4.7 per cent
discount rate
5.8 - 6 per cent
inflation rate
4.6 per cent
discount rate
5.9 per cent
weighted average
inflation rate =
8.3 per cent
discount rate
5.9 per cent
weighted average
inflation rate =
8.3 per cent
weighted average
discount rate =
5.9 per cent
weighted average
inflation rate =
4.5 per cent
weighted average
discount rate =
5.9 per cent
weighted average
inflation rate =
4.5 per cent
weighted average
discount rate =
5.9 per cent
Weighted average
inflation rate =
6.8 per cent
weighted average
discount rate =
5.9 per cent
Weighted average 25 per cent of the
inflation rate =
net outstanding
6.8 per cent
claims liability
and claims
Weighted average
handling
discount rate =
expense
5.9 per cent
Transport
Accident
Commission
Victorian
Managed
Insurance
Authority
Victorian
Managed
Insurance
Authority
Victorian
Managed
Insurance
Authority
Pricewaterhouse
Coopers
12.6 years
Ernst & Young
4.4 years
Actuarial Business
Consultants Pty
Ltd
(Public insurance
program)
Ernst & Young
3.5 years
Actuarial Business
Consultants Pty
Ltd
(General insurance
program)
am actuaries Pty Ltd 13.4 years
(Run-off program)
Weighted average
discount rate =
5.9 per cent
Financial Report 2006-07
Chapter 4
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
115
Note 29: Other liabilities
($ million)
State of Victoria
General
government sector
2007
2006
2007
2006
Current other liabilities
Accrued taxes payable (a)
110.3
110.9
79.8
87.5
Unearned income
1 018.8
871.3
428.1
325.7
Derivative financial instruments
557.6
258.1
..
..
Total current other liabilities
1 686.7
1 240.3
507.9
413.2
Non-current other liabilities
Unearned income
534.5
323.7
496.5
257.1
Derivative financial instruments
55.6
108.1
..
..
Total non-current other liabilities
590.0
431.8
496.5
257.1
Total other liabilities
2 276.7
1 672.0
1 004.4
670.3
Note:
(a) Current accrued taxes payable represent goods and services taxes payable to the Australian Taxation Office.
Note 30: Reserves and accumulated funds
(a)
Reserves
($ million)
Property, plant and equipment revaluation reserve
Available-for-sale investments
Other reserves
Total reserves
State of Victoria
2007
2006
33 173.3 30 925.8
65.0
26.6
1 668.0
1 541.0
34 906.3 32 493.4
Movements in reserves
Property, plant and equipment revaluation reserve
($ million)
Balance at beginning of reporting period
Revaluation - associate
Revaluation - joint venture
Transfers (to)/from accumulated funds
Revaluation - other
Balance at the end of the reporting period
State of Victoria
2007
2006
30 925.8 29 036.8
..
..
21.5
91.4
94.3
( 124.9)
2 131.6
1 922.4
33 173.3 30 925.8
Available-for-sale investments revaluation reserve
($ million)
Balance at beginning of reporting period
Revaluation
Other
Balance at the end of the reporting period
116
Chapter 4
State of Victoria
2007
2006
26.6
1.1
39.9
21.5
( 1.5)
4.0
65.0
26.6
Financial Report 2006-07
Note 30: Reserves and accumulated funds (continued)
Other reserves
($ million)
State of Victoria
2007
2006
1 541.0
1 482.4
127.1
58.5
1 668.0
1 541.0
Balance at beginning of reporting period
Transfers to/(from) accumulated funds
Balance at the end of the reporting period
(b)
Accumulated funds
($ million)
State of Victoria
2007
2006
44 231.0 38 288.3
7 232.1
5 876.4
( 221.4)
66.3
51 241.7 44 231.0
Balance at beginning of reporting period
Net result for the period
Transfers to/(from) reserves
Balance at the end of the reporting period
Note 31: Cash flow information
(a)
Reconciliation of cash and cash equivalents
($ million)
State of Victoria
Cash
Public financial corporations
Other sectors
Deposits at call
Public financial corporations
Other sectors
Cash and cash equivalents
Bank overdrafts
Balances as per cash flow statement
Financial Report 2006-07
General
government sector
2007
2006
2007
2006
240.2
1 080.4
50.0
876.9
..
908.1
..
730.1
1 208.6
92.7
2 622.0
( 78.2)
2 543.8
975.5
680.4
2 582.8
( 70.3)
2 512.6
..
2 109.6
3 017.7
( 3.1)
3 014.6
..
1 968.0
2 698.2
( 3.2)
2 695.0
Chapter 4
117
Note 31: Cash flow information (continued)
(b)
Reconciliation of net cash flows from operating activities to net result (excluding
public financial corporations)
($ million)
State of Victoria
(excl. Public Financial
Corporations)
2007
2006
3 849.5
4 251.3
2007
4 870.3
2006
3 921.7
2 127.8
( 990.9)
160.5
( 82.1)
85.7
6.5
1 338.1
( 10.7)
10.3
( 78.5)
29.2
5.8
1 282.4
( 128.8)
10.0
( 82.1)
62.7
6.5
73.4
( 93.8)
29.6
( 17.1)
53.0
( 7.5)
( 15.6)
246.4
233.7
(2 410.5)
( 391.7)
( 28.6)
623.5
32.5
3 828.1
( 55.7)
( 122.8)
191.7
(2 758.8)
21.1
333.6
( 966.9)
21.0
2 840.1
( 11.1)
( 403.0)
221.5
(2 391.3)
( 12.5)
29.2
121.8
( 32.2)
2 640.6
2007
2006
554.0
2.7
( 733.3)
654.0
2 610.5
(3 121.4)
( 33.6)
992.7
( 2.9)
( 818.5)
486.3
2 440.0
(3 233.0)
( 135.5)
Net result
Non-cash movements
Depreciation and amortisation
2 209.0
Revaluation of investments
( 38.3)
Assets (received)/provided free of charge
( 166.2)
Assets not previously recognised
( 78.5)
Revaluation of other assets
75.0
Discount/(premium) on other financial
5.8
assets/interest-bearing liabilities
Movements included in investing and financing activities
Net revenue from sale of property, plant and equipment
50.9
Net revenue from sale of investments
( 55.5)
Movements in assets and liabilities
Increase/(decrease) in provision of doubtful debts
( 54.9)
Increase/(decrease) in payables
254.9
Increase/(decrease) in employee benefits
200.1
Increase/(decrease) in superannuation
(2 780.9)
Increase/(decrease) in other provisions
873.7
Increase/(decrease) in other liabilities
378.1
(Increase)/decrease in receivables
( 644.9)
(Increase)/decrease in other assets
( 15.1)
Net cash flows from operating activities
4 062.5
(c)
General
government sector
Net cash flows from public financial corporations
($ million)
Cash flows from operating activities
Interest and bill discounts received
Reinsurance recoveries received
Interest and other costs of finance paid
Dividends received
Fees and commissions received
Cash paid to suppliers and employees
Net cash flows from operating activities
Cash flows from investing activities
Proceeds from the sale of investments
Payments for investments
Customer loans granted
Customer loans repaid
Proceeds from sale of non-financial assets
Purchase of non-financial assets
Net cash flows from investing activities
Cash flows from financing activities
Net increase/(decrease) in interest-bearing liabilities
Dividends paid
Net cash flows from financing activities
Net cash flows from public financial corporations
118
Chapter 4
11 092.1 20 279.3
(9 885.4) (19 926.4)
( 513.1)
( 347.3)
386.8
260.9
1.2
0.9
( 47.4)
( 16.0)
1 034.2
251.4
( 417.1)
..
( 417.1)
583.6
( 108.8)
10.4
( 98.4)
17.5
Financial Report 2006-07
Note 32: Financial instruments
Financial risk management objectives and policies
The State’s principal financial instruments, other than derivatives, comprise loans, domestic and foreign
currency long term liabilities, finance leases, cash, Australian and foreign currency term deposits, debt
securities and other placements.
The main purpose of these financial instruments is to raise finance for the State’s operations and to
effectively manage the State’s funds. The State has various other financial assets and liabilities such as
receivables and payables, which arise directly from its operations. Certain State-controlled entities also
enter into derivative transactions – which are outlined below.
It is not the State’s policy to enter into or trade financial instruments, including derivative financial
instruments, for speculative purposes. The main risks arising from the State’s financial instruments are
fair value and cash flow interest rate risks, liquidity risk, foreign currency risk and credit risk. Each of
these risks are reviewed and managed, as summarised below.
Details of the significant accounting policies and methods adopted, including the criteria for recognition,
the basis of measurement and the basis on which income and expenses are recognised, in respect of each
class of financial asset, financial liability and equity instrument are disclosed in Note 1 to the financial
statements.
(A)
Derivative financial instruments
A number of public financial corporations (mainly the Treasury Corporation of Victoria (TCV),
Transport Accident Commission (TAC), and the Victorian WorkCover Authority (VWA)) enter into
derivative financial instruments in the normal course of business in order to hedge exposure to
movements in interest and foreign currency exchange rates.
These instruments, including exchange traded futures and options, swaps, forward rate agreements,
forward foreign exchange contracts, interest rate and foreign exchange options, are used to manage the
risks inherent in borrowing and financial asset management. Derivatives are not used to add leverage to
the State’s financial position or for speculative purposes. There are no material derivative financial
instruments used by the State as cash flow hedges.
These entities actively use bank bill futures, bond futures contracts and interest rate swaps to add value
through market timing and to produce liquid and cost effective adjustments to the maturity profiles of
debt and investment portfolios for likely movements in interest rates.
As derivative financial instruments held by general government sector agencies after consolidation are
not material in amount, this note presents financial instruments information on a whole of government
basis only.
As at 30 June 2007, the table below shows the notional principal amounts and periods of expiry of the
State’s derivative financial instruments. The fair value amount of derivatives on the State’s balance sheet
(assets and liabilities) is shown in Table 4.2 Interest rate risk.
Details of the types of derivatives used by the State are as follows:
Forwards and futures
Forwards and futures contracts are contractual agreements to buy or sell a specified currency, commodity
or financial instrument at a specific price and date in the future. Forwards are customised contracts
transacted in the over-the-counter market. Foreign currency and interest rate futures are transacted in
standardised amounts on regulated exchanges and are subject to daily cash margin requirements. Forward
rate agreements are effectively tailor-made interest rate futures that fix a forward rate of interest on a
notional loan for an agreed period of time starting on a specified future date.
Financial Report 2006-07
Chapter 4
119
Swaps
Swaps are contractual agreements between two parties to exchange interest or foreign currency
differentials based on a specific notional amount. For interest rate swaps, counterparties generally
exchange fixed and floating rate interest payments based on a notional value in a single currency. For
currency swaps, fixed or floating interest payments as well as notional amounts are exchanged in
different currencies.
Options
Options are contractual agreements that convey the right, but not the obligation for the purchaser, either
to buy or sell a specified amount of a commodity or financial instrument at a fixed price, either at a fixed
future date or at any time within a specified period. Refer below for details.
Table 4.1: Derivative financial instruments
2007
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
2006
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
120
($ million)
Held for trading
Interest rate Exchange traded
swaps
futures contracts
433.0
711.8
2 019.2
..
..
..
410.0
..
54.5
..
819.1
..
3 735.9
711.8
Fair value hedges
Interest rate
Exchange traded
swaps
futures contracts
..
..
..
..
..
..
..
..
..
..
..
..
..
..
Held for trading
Interest rate Exchange traded
swaps
futures contracts
4 184.1
3 342.5
366.7
..
1 573.0
..
..
..
206.6
..
457.5
..
6 787.9
3 342.5
Fair value hedges
Interest rate
Exchange traded
swaps
futures contracts
..
..
..
..
..
..
..
..
..
..
..
..
..
..
Chapter 4
Financial Report 2006-07
(B)
Interest rate risk
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. The majority of the State’s exposure to interest rate risk
arises from fair value interest rate risk (refer below) – only a small portion of the State’s financial
instruments are exposed to cash flow interest risk. Such risk arises from financial assets and financial
liabilities with floating interest rates.
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 State’s exposure to interest rate risk 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.
The State’s policy for the management of interest rate risk on general government and public
non-financial corporations’ borrowings is to achieve relative certainty of interest cost while seeking to
minimise net borrowing costs within portfolio risk management guidelines. Generally, this is achieved by
undertaking fixed rate borrowings with relatively even maturity profiles.
The State’s borrowings are mainly managed by TCV, the State’s central borrowing authority. Interest
rate risk inherent in the State’s borrowings is monitored on a regular basis.
Interest rate risk inherent in TCV’s asset and liability management activities is monitored on a daily basis
against Board approved limits using the Value at Risk methodology. Value at Risk is a measure of the
estimated loss faced by TCV within a certain level of confidence over a given holding period under
normal market conditions.
Public financial corporations, in particular TAC and VWA, also use derivative financial instruments to
manage the interest rate risk on their investment portfolio. Derivative instruments such as interest rate
swaps and forward rate agreements are used to either change the interest rate between fixed and floating
rates of interest or between different floating rates of interest. These swaps are designated to hedge
underlying debt obligations. Refer below to Hedging activities for details of the hedging relationships put
in place to manage the interest rate risk.
At 30 June 2007, after taking into account the effect of interest rate swaps, approximately 95.8 per cent
of the State’s borrowings are at a fixed rate of interest.
The State’s exposure to interest rate risk and the effective weighted average interest rate for classes of
financial assets and liabilities is set out in Table 4.2.
Financial Report 2006-07
Chapter 4
121
Table 4.2: Interest rate risk
2007
Weighted average
effective
interest rate
Floating
%
$ million
Financial assets
Cash and cash equivalents
Receivables
Deposits
Derivative financial instruments
Traded investments
Non-traded investments
Total financial assets
6.29
6.24
5.89
6.57
4.76
6.76
2 039.3
166.1
394.2
..
380.2
432.2
3 412.1
Financial liabilities
Payables and advances
Derivative financial instruments
Interest-bearing liabilities
Total financial liabilities
6.17
6.59
8.39
415.4
..
619.3
1 034.7
2006
Weighted average
effective
interest rate
%
Floating
$ million
Financial assets
Cash and cash equivalents
Receivables
Deposits
Derivative financial instruments
Traded investments
Non-traded investments
Total financial assets
5.18
7.28
4.69
6.05
5.28
5.25
2 328.5
114.9
264.4
..
507.5
394.4
3 609.7
Financial liabilities
Payables
Derivative financial instruments
Interest-bearing liabilities
Total financial liabilities
4.48
6.05
6.09
94.2
..
84.1
178.4
122
Chapter 4
Financial Report 2006-07
Less than
1 year
$ million
Interest Rate, Fixed Maturities
1 year but 2 years but 3 years but 4 years but
5 years
less than
less than
less than
less than
or more
2 years
3 years
4 years
5 years
$ million
$ million
$ million
$ million
$ million
Non-interest
bearing
Total
$ million
$ million
427.4
78.6
850.1
537.2
1 244.2
3 043.0
6 180.5
..
65.1
27.4
10.3
252.6
729.3
1 084.7
..
64.9
1.0
0.4
466.6
939.6
1 472.5
..
65.5
2.4
2.5
697.1
405.4
1 173.0
..
62.4
0.5
0.4
477.3
298.4
839.0
..
606.5
5.2
33.5
2 434.4
899.4
3 979.0
155.3
4 599.9
8.6
1 357.9
12 279.3
1 944.8
20 345.9
2 622.0
5 708.9
1 289.5
1 942.2
18 231.9
8 692.2
38 486.6
73.4
550.3
2 053.2
2 676.9
0.3
18.0
2 310.2
2 328.5
0.4
0.5
92.5
93.5
..
10.5
1 944.3
1 954.8
..
1.6
188.1
189.7
0.1
21.8
8 510.1
8 532.1
3 691.3
10.4
33.8
3 735.5
4 180.9
613.1
15 751.6
20 545.6
Interest Rate, Fixed Maturities
5 years
Non-interest
or more
bearing
$ million
$ million
Less than
1 year
$ million
1 year but
less than 5 years
$ million
249.1
83.9
715.0
257.3
5 906.7
39.9
7 251.8
..
242.5
12.7
10.6
3 661.2
3.1
3 930.2
..
514.5
5.1
30.4
3 036.3
2.9
3 589.1
5.3
3 700.0
11.1
399.7
11 411.1
126.9
15 654.1
2 582.8
4 655.8
1 008.2
697.9
24 522.8
567.2
34 034.8
58.9
253.6
4 078.3
4 390.9
10.6
13.4
4 221.9
4 246.0
..
3.5
7 539.4
7 543.0
3 600.5
95.6
130.1
3 826.3
3 764.3
366.2
16 053.9
20 184.5
Financial Report 2006-07
Chapter 4
Total
$ million
123
(C)
Credit risk
Credit risk arises due to the potential for a counterparty to default under the terms of a derivative
contract.
The State’s maximum exposure to credit risk 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.
The State controls credit risk arising under derivative contracts through credit rating limits for
counterparties and monitoring procedures consistent with the approved policy of each public financial
corporation. Collateral or other security may be required to support financial instruments.
Most derivative financial instruments are transacted by Victorian public financial corporations, where the
liabilities are guaranteed by the Treasurer of Victoria. The State has a concentration of credit risk with
these corporations as the State’s principal borrowing and investing authorities. These corporations
manage credit risks by avoiding concentration of exposures to any one counterparty and having a wide
range of approved counterparties.
With respect to credit risk arising from other financial assets of the State, which comprise cash and cash
equivalents, available-for-sale assets and receivables, the State’s exposure to credit risk arises from
default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.
(D)
Liquidity risk
Liquidity risk arises from being unable to meet financial obligations as they fall due. The State manages
liquidity through rigorous cash flow and maturities planning and monitoring, and through holding high
quality liquid assets and dealing in highly liquid markets.
(E)
Foreign exchange risk
Certain interest bearing liabilities and financial assets are denominated in foreign currencies. The
currency risk arising from the State’s offshore funding program is managed using currency swaps,
forward foreign exchange contracts and foreign exchange options. It is the State’s policy to negotiate the
terms of the hedge derivatives to match the terms of the hedged item to maximise hedge effectiveness.
Refer to ‘Hedging activities’ below for details of the hedging relationships put in place to manage the
foreign exchange risk.
At 30 June 2007, the State had hedged its total foreign denominated interest bearing liabilities and 40 per
cent of its foreign denominated financial assets which existed at the balance sheet date.
(F)
Hedging activities
Cash flow hedges
Interest rate swaps are not used by State controlled entities responsible for managing the financing risk of
the State, as cash flow hedges.
Fair value hedges
Fair value hedges are used by the State-controlled entities responsible for managing the financing risks of
the State to protect it against changes in the fair value of financial assets and financial liabilities due to
movements in exchange rates and interest rates. These entities use forward foreign exchange contracts
and currency swaps to hedge against specifically identified currency risks. Interest rate swaps and
forward rate agreements are used to either change the interest rate between fixed and floating rates of
interest or between different floating rates of interest on their investment portfolio.
124
Chapter 4
Financial Report 2006-07
(G)
Cross currency swap contracts
Cross currency swap contracts include cash flows on a quarterly, semi annual or annual basis. The
maturity of these swaps range from less than six months to greater than five years. Currency swaps have
been entered into on underlying interest bearing liabilities in foreign currency to Australian dollar cash
flows and have been designated as fair value hedges. As at 30 June, the table below sets out the fair value
amounts and periods of expiry of cross currency swaps outstanding.
Table 4.3: Cross currency swaps designated as fair values hedges
($ million)
Maturity
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
Financial Report 2006-07
Chapter 4
2007
2006
..
..
..
..
..
..
..
63.7
..
..
..
..
..
63.7
125
(H)
Forward foreign exchange contracts
The objective of forward foreign exchange contracts is to partially hedge the currency exposure of
financial assets and interest bearing liabilities denominated in foreign currencies. These contracts have
been designated as fair value hedges. Details of foreign exchange contracts by maturity and currency
outstanding at balance date (Australian dollar equivalents) are as follows:
Table 4.4: Foreign exchange contracts designated as fair values hedges
2007
Buy
Weighted
Sell
Weighted
Australian Dollars average contract Australian Dollars average contract
($ million)
rate
($ million)
rate
US Dollars
Less than 1 year
1 year but less than 2 years
2 years but less than 5 years
165.4
5.1
17.3
0.8423
0.7481
0.7274
1 580.5
16.2
17.3
0.8279
0.7481
0.7274
Canadian Dollars
Less than 1 year
1 year but less than 2 years
2 years but less than 5 years
5.9
..
..
0.9000
..
..
84.5
..
..
0.9086
..
..
Japanese Yen
Less than 1 year
1 year but less than 2 years
2 years but less than 5 years
24.6
..
..
100.0900
..
..
305.1
6.3
..
99.7154
99.8720
..
Swiss Francs
Less than 1 year
1 year but less than 2 years
2 years but less than 5 years
6.0
..
..
1.0100
..
..
60.8
1.7
..
1.0111
1.0350
..
Euro
Less than 1 year
1 year but less than 2 years
2 years but less than 5 years
34.7
..
..
0.6200
..
..
517.7
2.9
..
0.6176
0.6260
..
British Pounds
Less than 1 year
1 year but less than 2 years
2 years but less than 5 years
16.9
..
..
0.4200
..
..
249.1
2.9
..
0.4195
0.4220
..
NZ Dollars
Less than 1 year
1 year but less than 2 years
2 years but less than 5 years
0.1
..
..
1.1200
..
..
6.6
..
..
1.1400
..
..
Other Currencies
Less than 1 year
1 year but less than 2 years
2 years but less than 5 years
17.7
..
..
..
..
..
112.6
0.7
..
..
..
..
293.7
..
2 965.0
..
Total
Note:
For year 2007, NZ dollars which previously formed as part of other currencies have been added in as a separate
group.
126
Chapter 4
Financial Report 2006-07
Table 4.5: Foreign exchange contracts designated as fair values hedges
2006
US Dollars
Less than 1 year
1 year but less than 2 years
2 years but less than 5 years
Buy
Weighted
Sell
Weighted
Australian Dollars average contract Australian Dollars average contract
($ million)
rate
($ million)
rate
.
.
.
217.7
0.7356
1 310.2
0.7455
..
..
..
..
..
..
..
..
Canadian Dollars
Less than 1 year
1 year but less than 2 years
2 years but less than 5 years
8.3
..
..
0.8291
..
..
49.8
..
..
0.8341
..
..
Japanese Yen
Less than 1 year
1 year but less than 2 years
2 years but less than 5 years
39.1
..
..
84.0024
..
..
287.7
..
..
83.8460
..
..
Swiss Francs
Less than 1 year
1 year but less than 2 years
2 years but less than 5 years
9.7
..
..
0.9118
..
..
57.3
..
..
0.9142
..
..
Euro
Less than 1 year
1 year but less than 2 years
2 years but less than 5 years
37.2
..
..
0.5796
..
..
292.8
..
..
0.5894
..
..
British Pounds
Less than 1 year
1 year but less than 2 years
2 years but less than 5 years
24.1
..
..
0.4005
..
..
154.3
..
..
0.4069
..
..
Other Currencies
Less than 1 year
1 year but less than 2 years
2 years but less than 5 years
22.3
..
..
1.2100
..
..
352.4
..
..
1.1900
..
..
358.3
..
2 504.4
..
Total
Financial Report 2006-07
Chapter 4
127
(I)
Foreign exchange options
There are no foreign exchange options by maturity outstanding at balance date.
(J)
Fair values
Methods of valuing financial instruments
The following methods and assumptions are used to determine the fair values of the State’s financial
assets and liabilities.
(i)
financial instruments traded in an organised financial market (traded securities) – current quoted
market bid price for an asset or offer price for a liability adjusted for any transaction costs necessary
to realise the asset or settle the liability. Quoted market prices are available for listed shares,
options, debentures and other equity and debt securities; and
(ii) financial instruments not readily traded in an organised financial market – the present value of
contractual future cash flows. Cash flows are discounted using standard valuation techniques at the
applicable market yield having regard to the timing of the cash flows. The carrying amounts of bank
term deposits, accounts receivable, accounts payable and dividends payable approximate net fair
value.
Fair values of financial instruments are determined on the following basis:

cash, deposit investments, cash equivalents and non-interest bearing financial assets and liabilities
(trade debtors, other receivables, payables and advances) are valued at cost, which approximates net
market value;

interest bearing liabilities are valued at the net present value of expected future cash flows discounted
at current market interest rates;

interest rate swaps are valued at the difference between the net values of the future cash flows
receivable and payable, discounted at current market interest rates;

interest rate options are valued at prices obtained from the Treasury Corporation of Victoria to close
out the existing positions; and

foreign exchange contracts and futures contracts are valued at market prices as at 30 June.
As at reporting date, the book values of the State’s financial assets and liabilities equate to the fair value
of such financial assets and liabilities, as depicted in the balance sheet.
128
Chapter 4
Financial Report 2006-07
Note 33: Commitments
($ million)
Net present value
2007
Capital expenditure commitments
Land and buildings
Plant, equipment and vehicles
Infrastructure systems and road networks
Road Networks and Earthworks
Other
Total capital expenditure commitments
Operating and lease commitments
Rail services (a)
Bus services
Other
Total operating and lease commitments
Public private partnerships (b)
Health Services - Mildura Hospital
Central Highlands Water
Coliban Water
Melbourne Water
Grampians Wimmera Mallee Water (c)
Private Prisons
New County Court
Melbourne Convention Centre Development
Southern Cross Station Authority (formerly Spencer Street
Station Authority)
Royal Women's Hospital
Total public private partnerships
Nominal Value
2007
2006
740.7
323.0
1 107.3
6.8
574.3
2 752.1
796.6
242.2
882.9
6.4
591.1
2 519.2
3 454.6
614.9
3 122.9
7 192.4
2 544.9
1 106.1
2 335.9
5 986.9
227.5
42.5
518.9
147.6
51.4
149.4
139.9
33.5
47.4
266.0
54.0
1 685.6
505.9
56.9
154.4
248.7
35.5
49.3
120.0
57.0
1 685.6
1 798.1
421.5
1 593.9
1 073.2
4 006.2
1 073.2
5 278.7
34.9
80.0
87.5
33.5
Other commitments
IT Services (Vic Police)
113.4
136.3
Road safety infrastructure program
700.0
800.0
Debt collection services (Traffic Camera Office)
35.2
133.8
Victorian Neurotrauma Initiative program
55.0
60.0
Snowy Joint Government Enterprise
60.0
75.4
Major sporting events
133.1
148.1
New Ticketing Solution (Smartcard)
505.5
513.6
OneLink Transit Transition Amendment Deed
62.0
..
Other
137.1
198.3
Total other commitments
1 801.3
2 065.4
Total commitments
15 752.0 15 850.2
Notes:
(a) In August 2007, the Government announced that it will competitively tender the metropolitan train and tram
franchise arrangements. To facilitate this process the Government will seek to extend the existing contracts
with Connex and Yarra Trams for a further 12 months until November 2009. The financial impact of this
extension is not reflected in the commitments note as no agreement has been reached.
(b) Public private partnership and other commitments for the 2005-06 year have been adjusted to reflect the
correct classification of the water projects.
(c) Net present value not available at time of publication.
Financial Report 2006-07
Chapter 4
129
Other commitments refer to service level agreements and commitments that do not fall within the above
three categories.
Commitments are payable as follows:
($ million)
State of Victoria
2007
2006
Capital expenditure commitments payable
Less than 1 year
2 049.8
1 819.3
1 year but less than 5 years
692.7
697.7
5 years or more
9.5
2.2
Total capital expenditure commitments
2 752.1
2 519.2
Operating and lease commitments payable
Less than 1 year
2 376.4
1 year but less than 5 years
3 191.1
5 years or more
1 624.9
Total operating and lease commitments
7 192.4
5 986.9
Public private partnership commitments
Less than 1 year
116.5
1 year but less than 5 years
721.3
5 years or more
3 168.4
Total public private partnership commitments (a)
4 006.2
5 278.7
Total other commitments payable
Less than 1 year
333.4
1 year but less than 5 years
643.1
5 years or more
824.7
Total other commitments
1 801.3
2 065.4
Total commitments
15 752.0 15 850.2
Note:
(a) Public private partnership and other commitments for the 2005-06 year have been adjusted to reflect the
correct classification of the water projects.
130
Chapter 4
Financial Report 2006-07
Note 34: Contingent assets and liabilities
Contingent assets
A contingent asset is a possible asset that arises from past events and 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.
Quantifiable contingent assets
($ million)
State of Victoria
2007
2006
250.2
208.7
78.2
67.6
..
..
328.5
276.3
General government
Public non-financial corporations
Public financial corporations
Total contingent assets
Guarantees, indemnities and warranties
58.3
29.3
Potential extension/early termination of contractual arrangements (a)
119.3
100.0
Legal proceedings and disputes
17.0
6.1
Other (b)
133.9
140.9
Total contingent assets
328.5
276.3
Notes:
(a) Included under ‘potential early termination of contractual arrangements’ are any additional costs arising to
the Director of Public Transport on early termination of the public transport partnership agreements. The
operator must, to the extent of the performance bonds, indemnify the Director for any losses, damages or
costs incurred by him as a result of early termination. If the operator does not do so, the Director has the
right to draw on the operator’s performance bonds for the amount of losses, damages or costs. The expected
value of these bonds is $100 million.
(b) ‘Other’, includes the EastLink project of $92 million (as per below) and $17 million relating to Water
Authorities. The remaining amounts in ‘Other’ relate to smaller individual contingencies.
EastLink
On 14 October 2004, the State entered into a concession deed with ConnectEast to design, construct,
finance and operate EastLink (formerly known as the Mitcham Frankston Project). Various performance
bonds provided under the concession deed can be drawn by the State in circumstances where the
concessionaire (ConnectEast) or one of its contractors fails to meet its obligations. These bonds include a
construction bond ($87 million) and an operation phase bond ($5 million). In the event of certain default
events, there is potential for the $5 million to increase to $20 million.
Non-quantifiable contingent assets
Public transport partnership agreements
On 19 February 2004, the Director of Public Transport, on behalf of the Crown, entered into contractual
arrangements with Connex and Yarra Trams to operate rail transport services in the State. The major
contingent asset arising from those arrangements is profit sharing in which the Director is entitled to
receive payment from Connex and Yarra Trams should franchisee profits exceed defined thresholds.
Should the access charge regime for train rail access be reset, then the Director may receive income in
respect of any increased rate as a result of the reset. The Department of Infrastructure has also initiated
proceedings to recover clean-up costs associated with marine pollution incidents from various entities.
Financial Report 2006-07
Chapter 4
131
City Link compensable enhancement claims
The Melbourne City Link Concession Deed contains compensable enhancement provisions that enable
the Victorian Government to claim 50 per cent of additional revenue derived by City Link Melbourne
Limited as a result of certain events that particularly benefit City Link, including changes to the adjoining
road network.
On 20 May 2005, the Victorian Government lodged a compensable enhancement claim relating to works
to improve the traffic flow on the Westgate Freeway between Lorimer and Montague Streets. The claim
remains outstanding at this time.
Under the Monash-Westgate Freeways Improvement project, the Victorian Government’s share of
revenue uplifts will commence three full financial years after the completion of the upgrade.
EastLink
As indicated above, on 14 October 2004, the State entered into a concession deed with ConnectEast to
design, construct, finance and operate EastLink. In addition to the quantifiable contingent assets listed
above, there is a non-quantifiable contingent asset relating to the Hand Over Bond through which
ConnectEast has an obligation, in certain limited circumstances, to provide the State with a bond to cover
project rectification costs to the end of the concession period in 2043.
Pacific National acquisition of infrastructure lease
With respect to the acquisition of Pacific National’s regional rail infrastructure lease, the Asset Sale and
Surrender Agreement provides for an adjustment of the purchase price to reflect the completion accounts
at the date of acquisition.
Contingent liabilities
A contingent liability is:


a possible obligation that arises from past events and 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.
132
Chapter 4
Financial Report 2006-07
Quantifiable contingent liabilities
($ million)
State of Victoria
2007
2006
1 005.7
1 260.6
219.3
299.5
290.9
301.7
1 515.8
1 861.8
General government
Public non-financial corporations
Public financial corporations
Total contingent liabilities
Guarantees, indemnities and warranties
743.8
797.3
Potential extension/early termination of contractual arrangements (a)
..
579.5
Legal proceedings and disputes
390.9
388.3
Other
381.1
96.8
Total contingent liabilities
1 515.8
1 861.8
Note:
(a) Under ‘potential early termination of contractual arrangements’ is a contractual agreement of $579.5 million
relating to the cost of correctional services beyond the contract period. The State has the option to re tender
for the provision of correctional services every three years, after the initial five year period for each contract.
Non-quantifiable contingent liabilities
A number of potential obligations, which are non-quantifiable at this time, have been recognised by the
Government 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 moneys which may be subject to future claims by the general public against the State.
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
A contingent liability exists for any claims which may be made against the Showgrounds Nominees Pty
Ltd arising from joint venture dealings as outlined in the Development and Operations Agreement for the
Royal Melbourne Showgrounds.
An undertaking has been given by the joint venture parties to meet the unindexed service fees payable to
the Concessionaire (Developer) as and when they fall due.
Under the State Support Deed – Core Land, the State undertakes to ensure the performance of the
payment obligations in favour of the Concessionaire and the performance of the joint venture financial
obligations in favour of the security trustee.
Under the State Commitment to the Royal Agricultural Society (RAS), the State has agreed to support
certain obligations of the RAS which may arise out of the Joint Venture Agreement. In accordance with
the terms in the State Commitment to the RAS, the State will pay (in the form of a loan), the amount
requested by the RAS. If any outstanding loan amount remains unpaid at the date, which is 25 years after
the commencement of the operation term under the Development and Operation Agreement, the RAS
will be obliged to satisfy and discharge each such outstanding loan amount. This may take the form of
the transfer to the State of the whole of the RAS’ participating interest in the joint venture.
Financial Report 2006-07
Chapter 4
133
Public transport rail partnership agreements
The Director of Public Transport, on behalf of the Crown, entered into new partnership contractual
arrangements with franchisees to operate rail transport services in the State, operative from
18 April 2004. The following summarises the major contingent liabilities arising from those
arrangements.
Contingent liabilities arising during the agreement period
There are a number of contingent liabilities arising from the new Partnership Agreements between the
Director of Public Transport and Connex and Yarra Trams, which were signed on 19 February 2004.
These possible liabilities refer to payments to be made by the Director of Public Transport to Connex and
Yarra Trams should certain events occur:
Farebox risk sharing: The Director is obliged to make payments should farebox receipts fall below
defined thresholds.
New ticketing revenue guarantee payment: Franchisees have an option to elect to permanently move to a
revenue guarantee payment regime should implementation matters or new ticket fare structures
associated with the introduction of the new ticketing system cause a real reduction in the farebox.
New ticketing system start up: The State is obliged to pay any additional labour costs associated with
training and deployment of staff in relation to the establishment of the new ticketing system.
Regional Fast Rail: The Director is required to meet the incremental costs incurred by Connex associated
with the introduction of Regional Fast Rail.
Connex and Mainco indemnity
The Department has indemnified Connex and Mainco (including agents and contractors) against any loss
caused by Regional Rail Link while undertaking Regional Fast Rail within the Connex network.
The Director indemnifies VicTrack and the Southern Cross Station Authority from any claim brought by
the franchisees under the Infrastructure Lease.
Contingent liabilities on early termination or expiry of franchise agreement
Franchise assets: To maintain continuity of services the Director at early termination or expiry of the
franchise agreement will:
for new rolling stock – either acquire the new rolling stock at predetermined values or have the lease
payment obligations transferred to the Director or a successor franchise; and

for franchise assets – either purchase the assets or have the assets transferred to the successor.
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.

In August 2007, the Government announced that it will competitively tender the metropolitan train and
tram franchises. To facilitate this process the government will seek to extend the existing contracts with
Connex and Yarra Trams for a further 12 months until November 2009.
Contingent liabilities arising from potential changes to existing conditions
Change in Victorian law: Franchisees may make a claim against the Director for any net losses incurred
as a result of a change in Victorian law which directly relates to the franchise business.
Latent Defects: The Director is responsible for leased infrastructure defects above a threshold amount.
Pre existing contamination: The Director is responsible for all costs associated with pre existing
contamination clean up. The Director also indemnifies the franchisee from and against all losses,
damages, actions suits, claims, demands, costs and expenses associated with pre existing contamination.
Native Title: The Director is liable for payments of any valid compensation claim to Native Title holders
made under any Native Title law in respect of the land defined in the infrastructure leases entered into
with franchisees.
134
Chapter 4
Financial Report 2006-07
National Express receivership
In December 2002, the Government appointed receivers and managers to the National Express train and
tram franchises, in order to protect Government interest, ensure continuation of services up to the
commencement of new franchise agreements, and deal with any subsequent termination issues.
The Treasurer, under the Receivership Deed of Indemnity, has agreed to indemnify the receivers for
debts properly incurred by them in the course of receivership. The Treasurer has also agreed to
remunerate the receivers in accordance with the rates set out in the deed.
Melbourne City Link
An outstanding claim exists from Transurban City Link Limited pursuant to the Melbourne City Link
Concession Deed, relating to an alleged Material Adverse Effect in respect of the construction of
Wurundjeri Way. Expert determination found in favour of the State; however, the claim has now been
appealed to arbitration, which is yet to proceed. VicRoads is defending this claim and is unable to assess
the likelihood of success at this time.
EastLink
On 14 October 2004, the State entered into a Concession Deed with ConnectEast to design, construct,
finance and operate EastLink. The major non-quantifiable contingent liability arising from the concession
deed relates to the Key Risk Management Regime. The Regime relates to the occurrence of certain
circumstances that may have a detrimental impact on the concessionaire's ability to achieve its forecast
returns. It identifies the areas that enable the concessionaire to claim redress from the State. These may
include acts of prevention, failure to support a principal road interface, changes in state law, Native Title
and the environmental effects statement.
Native Title
A number of claims have been filed with the Federal Court under the Native Title Act 1993 that affect
Victoria. While many such claims are being processed through the legal system, the Government has
committed itself to resolving claims through mediation, where possible. It is not feasible at this time to
quantify any future liability.
Department of Education contracts with the Commonwealth
Indemnities are provided by the Department of Education to the Commonwealth in funding contracts
entered with the Commonwealth throughout the year. Each indemnity is limited to $10 million for
personal injuries and property damage, and $50 million for damages arising out of internet usage.
HIH Insurance
The State’s quantifiable direct exposures arising from the collapse of the HIH Insurance Group are
included in the liabilities shown in the financial statements of the agencies directly responsible for them
(such as the Victorian WorkCover Authority and the Victorian Managed Insurance Authority (VMIA)),
and are consolidated in the financial statements of the State.
The State’s obligations in respect of its builders’ warranty insurance rescue package are direct liabilities
of the State itself. They do not form part of the liabilities of the VMIA which manages claims on behalf
of the State, this responsibility having been transferred to VMIA from the Housing Guarantee Fund
Limited, under the House Contracts Guarantee (Amendment) Act 2005.
The State also retains some unquantifiable contingent exposures arising from the collapse of the HIH
Insurance Group. 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.
Financial Report 2006-07
Chapter 4
135
Land remediation – environmental concerns
A number of Victorian government 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 VMIA was established in 1996 as a captive 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 provides insurance to its clients up to specified limits. The risk of losses above these
specified limits is borne by the State. VMIA generally reinsures in the private market for losses above its
maximum self retention of $50 million arising out of any one event up to a maximum for each type of
cover (e.g. $1 250 million for property and $750 million for public liability).
Victorian Managed Insurance Authority – public healthcare insurances
VMIA insures the public healthcare system for a range of insurances, including medical indemnity risks.
The Government has indemnified VMIA for losses on its public sector medical indemnity portfolio that
exceed 120 per cent of claims estimates to be incurred in any one policy year.
Victorian Managed Insurance Authority – asbestos related disease claims
VMIA insures co-defendants to claims arising as a result of exposure by third parties to asbestos. These
third parties may have an entitlement to payment as a result of insurance policies taken out by their
employer with insurers, one of which may be VMIA.
In the event a co-defendant or its insurer is unable to settle a claim by reason of insolvency, VMIA’s
share of a settlement will increase by a percentage of the insolvent party’s obligation. A contingent
liability exists to the extent that the insolvency of a co-defendant or its insurer may not be known by
VMIA at balance date.
Gambling licences
In 1994, the State sold a wagering licence and a gaming licence to TABCORP Holdings Limited
(TABCORP) for $597 million. The Gambling Regulation Act 2003 requires the State to provide a refund
to TABCORP in 2012 of an amount equal to the licence value of the former licences or the premium
payment paid by the new licensee, whichever is the lesser. While this creates an obligation on the State to
refund the licence value to TABCORP, it will be offset by the premium payment from the issue of any
new licences. In 1992, a gaming operator’s licence was issued to the Trustees of the Will and Estate of
the late George Adams (the licensee). The Gambling Regulation Act 2003 entitles the licensee to be paid,
at the end of its current licence period in 2012, an amount equal to the value of its current licence or the
premium payment paid by the new licensee, whichever is the lesser. This entitlement is contingent on the
licensee not being granted a new licence.
The Government is currently reviewing gambling licences and a public submission and consultation
process is being conducted for the review of the electronic gaming machine, Club Keno and wagering
licences and funding arrangements for the racing industry post-2012. The Government has provisionally
indicated an announcement on the post-2012 licence structures, funding arrangements and the timing and
approach to the awarding of licences will be made in late 2007.
136
Chapter 4
Financial Report 2006-07
Builders’ warranty
On 13 March 2002, Victoria and New South Wales jointly announced a series of reforms to Builders’
warranty 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
reinsurance arrangements to all builders’ warranty insurers covering claims in respect of any one builder
in excess of $10 million, with each State reinsuring claims relating to properties in that State. South
Australia has since also become involved in these arrangements. Since builders’ warranty insurance
commenced, there have been no losses by an insurer to any one builder that exceed this amount.
Victoria entered into a reinsurance agreement giving effect to these arrangements in December 2002
(effective from 1 January 2003) with one insurer. In late 2006, a subsequent agreement with a second
insurer came into effect. Discussions have commenced regarding a similar agreement with a third insurer.
These agreements require each insurer to pay reinsurance premiums to Victoria (and to any other State
that is also a party to such an agreement) that are estimated to be sufficient for the State to at least break
even on these arrangements. However, the State retains an unquantifiable contingent liability for
additional claims.
Homesafe Equities Pty Ltd
The State has established a scheme to issue indemnities to homeowners whose homes are covered by
builders warranty bonds issued by Homesafe Equities Pty Ltd (Homesafe) between 1 July 2003 and
26 April 2004 to the extent of the indemnity provided to each homeowner by Homesafe under the
Homesafe bondholder’s builders warranty bond. This indemnity expires on 28 September 2007.
The State’s obligation in respect of its builders’ warranty insurance rescue package for Homesafe
Equities Pty Ltd are direct liabilities of the State itself. They do not form part of the liabilities of the
Victorian Managed Insurance Authority, which manages claims on behalf of the State.
Note 35: Funds under management
($ million)
State of Victoria
2007
2006
774.7
706.1
723.4
681.3
392.9
354.4
801.2
703.4
208.3
197.7
2 900.5
2 642.9
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
Other funds held (a)
Total funds under management
Note:
(a) ASIC, under Class order 98/105 is no longer giving relief to Trustee Companies and therefore State Trustees
Limited has to report both the assets and liabilities managed for clients in the financial statements. This figure
includes the client assets and liabilities under management. The prior year figure has been adjusted to
account for a reassessment of values.
These funds are held in trust for certain controlled entities’ clients and are therefore not included in the
balance sheet.
Note 36: Subsequent events
We are unaware of any event subsequent to reporting date which may have a material impact on the
financial statements of the State.
Financial Report 2006-07
Chapter 4
137
Note 37: Public Account disclosure
Table 4.6: Consolidated Fund receipts and payments for the year ended 30 June
($ thousands)
Receipts
Taxation
Fines and regulatory fees
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
Payments
Special appropriations
Special appropriations (excl. Financial Management Act, No. 18 of 1994
Section 33)
Section 28 Financial Management Act, No. 18 of 1994 (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
Section 35 Financial Management Act, No. 18 of 1994 (temporary
advances)
Total payments made on behalf of State
138
Chapter 4
2007
2006
11 162 482
476 077
13 033 816
687 460
53 402
1 015 611
3 129 108
29 557 956
122 388
29 680 344
10 896 512
401 587
12 212 826
651 069
87 868
1 162 253
2 727 075
28 139 191
650 730
28 789 921
1 737 763
2 371 337
41 767
..
92 086
1 871 616
152 100
2 523 438
23 390 199
300 031
21 964 151
338 227
1 914 142
1 641 763
417 331
80 113
239 979
54 402
26 101 816
24 238 522
665 412
275 897
761 075
172 172
334 663
137 634
38 618
59 277
..
69 985
1 373 868
1 140 866
1 109 841
..
1 145 210
..
13 016
..
32 171
..
1 122 857
1 177 381
Financial Report 2006-07
Note 37: Public Account disclosure (continued)
Table 4.6: Consolidated Fund receipts and payments for the year ended 30 June
(continued)
($ thousands)
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 2006-07
appropriations
Total payments
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
add payments made during the year under the Financial Management
Act, No. 18 of 1994, Section 10
Subtotal
less applied appropriations unspent at beginning of year
Current year appropriations remaining unspent as at 30 June
Financial Report 2006-07
Chapter 4
2007
2006
25 043
24 614
1 035
1 003
92 000
35 000
28 716 620
( 443 191)
26 617 386
(335 967)
30 145 045
28 804 856
579 562
29 680 344
(30 145 045)
114 861
594 497
28 789 921
(28 804 856)
579 562
2 586 402
92 086
2 235 298
152 100
..
..
2 678 488
(2 235 298)
443 191
2 387 398
(2 051 430)
335 967
139
Note 37: Public Account disclosure (continued)
Table 4.7: Consolidated Fund gross receipts for the year ended 30 June
($ thousands)
Estimate
2007
Actual
2007
Actual
2006
3 815 290
747 760
38 800
3 889 744
1 017 618
47 836
3 698 164
738 134
9 415
2 473 900
47 475
16 375
..
60 400
2 434 462
39 200
16 946
57
60 236
2 659 597
59 853
12 413
22 250
60 236
355 700
1 006 400
118 100
119 000
3 500
755 300
376 617
936 636
119 045
122 792
5 902
725 533
362 674
907 257
116 020
113 296
5 358
704 743
751 628
591 500
727 753
553 439
697 253
546 903
7 400
190 900
11 099 428
7 464
81 203
11 162 482
7 660
175 287
10 896 512
540 609
476 077
401 587
650 612
3 037 896
326 020
5 000
49 641
..
20 400
117 539
8 469 200
..
..
12 676 308
712 880
3 052 884
339 840
5 065
52 166
399
118 273
162 752
8 589 558
..
..
13 033 816
591 667
2 894 539
299 969
177
51 700
478
39 413
82 195
8 179 435
73 254
..
12 212 826
687 565
59 845
687 460
53 402
651 069
87 868
769 694
193 340
2 660
965 694
553 433
459 364
2 814
1 015 611
592 600
567 231
2 422
1 162 253
Operating activities
Taxation
Payroll tax
Land tax
Congestion levy
Stamp duty
Land transfer duty
Stamp duties
Financial accommodation levy
Financial transaction taxes
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
Grants received
Education
Human Services
Infrastructure
Innovation, Industry and Regional Development
Justice
Premier and Cabinet
Primary Industries
Sustainability and Environment
Treasury and Finance
Victorian Communities
Parliament
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
140
Chapter 4
Financial Report 2006-07
Note 37: Public Account disclosure (continued)
Table 4.7: Consolidated Fund gross receipts for the year ended 30 June (continued)
($ thousands)
Other receipts
Land rent received
Royalties received
Capital assets charge
Other
Total other receipts
Total cash inflows from operating activities
Estimate
2007
Actual
2007
Actual
2006
14 871
62 808
2 607 257
176 835
2 861 771
20 144
39 629
2 615 193
454 141
3 129 108
16 426
30 178
2 441 782
238 689
2 727 075
28 891 221
29 557 956
28 139 191
..
28 131
608
48 078
76 817
..
19 563
( 19)
102 844
122 388
..
673 626
1 040
(23 936)
650 730
28 968 038
29 680 344
28 789 921
Cash inflows from investing and financing activities
Loans to government agencies
Proceeds from investments
Other loans
Other
Total cash inflows from investing and financing
activities
Total consolidated fund receipts
Financial Report 2006-07
Chapter 4
141
Note 37: Public Account disclosure (continued)
Table 4.8: The Trust Fund cash flow statement for the year ended 30 June
($ thousands)
2007
2006
135 926
34 558
2 390 664
338 202
125 640
8 717 777
133 493
131 976
53 616
2 461 261
264 316
101 999
8 085 771
181 395
(85 542)
(5 799)
( 29 679)
(9 425 098)
(2 117 663)
( 22)
212 457
(88 818)
(6 649)
(24 870)
(8 725 358)
(2 285 244)
(211)
149 182
(4 909)
49 360
(113 115)
(157 094)
(225 758)
(794)
22 736
(12 397)
(76 432)
(66 887)
Cash flows from financing activities
Net repayments of borrowings
Net cash flows from financing activities
Net increase in trust fund cash and deposits
739 922
739 922
726 621
63 652
63 652
145 948
142
Financial Report 2006-07
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
Payments
Employee entitlements
Superannuation
Interest paid
Grants paid
Supplies and consumables
Other payments
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
Chapter 4
Note 37: Public Account disclosure (continued)
Table 4.9: Trust Fund reconciliation of cash flows to balances held
($ thousands)
Balances
held at
30 June 2007
Net
Balances
movement
held at
for year 30 June 2006 (b)
Cash and deposits
Cash balances outside the Public Account
3 400
406
2 994
Deposits held with the Public Account - specific trusts
36 429
18 621
17 808
Deposits held with the Public Account - general trusts
1 288
..
1 288
Other balances held in the Public Account on behalf of
1 967 412
707 594
1 259 818
trust accounts
Total cash and deposits
2 008 529
726 621
1 281 908
Investments
Investments held with the Public Account - specific trusts
636 670
65 370
571 301
Total investments
636 670
65 370
571 301
Total trust fund balances
2 645 199
791 990
1 853 209
Less funds held outside the Public Account
Cash
3 400
406
2 994
Total trust fund balances held outside the Public
3 400
406
2 994
Account
Total trust funds held within the Public Account (a)
2 641 800
791 585
1 850 215
Notes:
(a) See Table 4.11 for details of securities and investments held with the Public Account on behalf of trust
accounts.
(b) The figures as at 30 June 2006 differ from those published previously due to a minor adjustment which does
not affect the current year's balances.
Financial Report 2006-07
Chapter 4
143
Note 37: Public Account disclosure (continued)
Table 4.10: Trust Fund summary for the year ended 30 June
($ thousands)
Balances
held 2007
Balances
held 2006
120 496
106 047
722 594
950 999
89 568
802 727
130 515
448 841
2 314 740
95 885
2 024
120 459
398 623
1 674 037
216 954
95 387
Commonwealth Government funds
Commonwealth Grants passed on to individuals and organisations
5 386
4 905
Total Commonwealth Government funds
5 386
4 905
104 720
75 866
2 641 800
1 850 195
State Government funds
Accounts established to receive levies imposed by Parliament and record the
expenditure thereof
Accounts established to receive moneys 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
Prizes, scholarships, research and private donations
Total trust fund
144
Chapter 4
Financial Report 2006-07
Note 37: Public Account disclosure (continued)
Table 4.11: Details of securities held and Included in the balances at 30 June
($ thousands)
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
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
Managed investments
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
Total funds held
2007
2006
673 079
1 288
1 967 432
2 641 800
114 861
2 756 661
589 069
1 288
1 259 838
1 850 195
579 562
2 429 757
1 288
100 546
572 534
674 367
1 288
104 146
484 923
590 357
1 042 000
..
189 119
1 231 119
1 905 486
851 175
1 505 000
..
20 563
1 525 563
2 115 919
313 838
2 756 661
2 429 757
Table 4.12: Amounts paid into working accounts pursuant to Section 23 of the Financial
Management Act 1994 for the year ended 30 June
($ thousands)
Appropriation transfer equivalent to consolidated fund receipts
Interest received on credit balances
State subsidy contribution
Other income
Total amounts paid into working accounts
Financial Report 2006-07
Chapter 4
2007
8 138
539
2 770
134
11 580
2006
11 154
628
5 747
75
17 604
145
Note 37: Public Account disclosure (continued)
Table 4.13: Allocations pursuant to Section 28 of the Financial Management Act 1994 for
the year ended 30 June 2007
($ thousands)
Section 28 allocations
(Borrowing against future appropriations)
Department of Premier and Cabinet
Additions to the net asset base
Department of Sustainability and Environment
Additions to the net asset base (Section 29 of the Financial Management Act,
No. 18 of 1994 applies)
Addition to the net asset base - Victorian Water Trust (Section 29 of the Financial
Management Act, No. 18 of 1994 applies)
Total Section 28 allocations
146
Chapter 4
2007
2006
11 767
..
29 691
..
309
..
41 767
..
Financial Report 2006-07
Note 37: Public Account disclosure (continued)
Table 4.14: Transfers pursuant to Sections 30 and 31 of the Financial Management
Act 1994 for the year ended 30 June 2007
($ thousands)
Decrease
Section 30 Transfers
(transfers between items of departmental appropriations)
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 Infrastructure
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of
1994 applies)
Additions to the net asset base
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
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)
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
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
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)
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
Department for Victorian Communities
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of
1994 applies)
Additions to the net asset base
Payments made on behalf of the State
Total Section 30 transfers
Financial Report 2006-07
Chapter 4
Increase
33 057
33 057
29 385
29 385
1 360
1 360
18 705
9 424
9 281
2 852
2 852
4 700
4 700
3 665
3 665
6 605
6 605
3 642
5 309
1 667
2 582
2 600
108 238
18
108 238
147
Note 37: Public Account disclosure (continued)
Table 4.14: Transfers pursuant to Sections 30 and 31 of the Financial Management
Act 1994 for the year ended 30 June 2007 (continued)
($ thousands)
Decrease
Section 31 Transfers
(transfers between items of Parliament appropriations)
Department of Parliamentary Services
Provision of outputs
Additions to the net asset base
Total Section 31 transfers
Increase
970
970
970
970
Table 4.15: Appropriation of certain revenue and asset proceeds pursuant to Section 29
of the Financial Management Act 1994 for the year ended 30 June 2007
($ thousands)
Department
Education
Human Services
Infrastructure
Innovation, Industry and Regional Development
Justice
Premier and Cabinet
Primary Industries
Sustainability and Environment
Treasury and Finance
Victorian Communities
Parliament
Total appropriation
148
Chapter 4
Source
Outputs Commonwealth
Other
Total
1 430
295 378
23 127
319 935
265 689
882 812
4 646 1 153 147
784
325 902
..
326 686
..
65
..
65
103 852
2 634
5 862
112 348
969
..
..
969
73 995
105 611
..
179 605
48 180
146 752
914
195 846
3 369
..
..
3 369
605
..
..
605
15 749
..
..
15 749
514 622
1 759 154
34 548 2 308 324
Financial Report 2006-07
Note 37: Public Account disclosure (continued)
Table 4.16: Section 32 Carryovers - Financial Management Act 1994 for the year ended
30 June 2007
(a)
Amounts approved for carryover from 2006 pursuant to Section 32 of the
Financial Management Act 1994
Department
Education
Human Services
Infrastructure
Innovation, Industry and Regional
Development
Justice
Premier and Cabinet
Primary Industries
Sustainability and Environment
Treasury and Finance
Victorian Communities
Parliament
Total carryovers by department
(b)
($ thousands)
Provision of
Additions to
Payments
outputs
net assets made on behalf
of State
7 866
..
..
44 014
89 540
..
146 086
179 564
..
9 470
8 480
..
740
8 300
31 081
28 528
200
55 319
2 212
333 816
333
7 554
3 131
..
2 413
14 413
3 800
309 228
..
..
..
..
..
..
..
..
Other
Total
carryover
..
..
..
..
7 866
133 554
325 650
17 950
..
..
..
..
..
..
..
..
1 073
15 854
34 212
28 528
2 613
69 732
6 012
643 044
Amounts applied against carryover of appropriations in 2007 pursuant to
Section 32 of the Financial Management Act 1994
Department
Education
Human Services
Infrastructure
Innovation, Industry and Regional
Development
Justice
Premier and Cabinet
Primary Industries
Sustainability and Environment
Treasury and Finance
Victorian Communities
Parliament
Total expenditure by department
Financial Report 2006-07
($ thousands)
Provision of
Additions to
Payments
outputs
net assets made on behalf
of State
7 866
..
..
44 014
89 540
..
140 597
159 373
..
9 470
8 480
..
740
8 300
31 081
28 528
200
27 023
2 212
300 031
..
7 554
3 131
..
..
7 819
..
275 897
Chapter 4
..
..
..
..
..
..
..
..
Other
Total
carryover
..
..
..
..
7 866
133 554
299 970
17 950
..
..
..
..
..
..
..
..
740
15 854
34 212
28 528
200
34 842
2 212
575 928
149
Note 37: Public Account disclosure (continued)
(c)
Amounts approved for carryover to 2008 pursuant to Section 32 of the Financial
Management Act 1994
Department
Education
Human Services
Infrastructure
Innovation, Industry and Regional
Development
Justice
Premier and Cabinet
Primary Industries
Sustainability and Environment
Treasury and Finance
Victorian Communities
Parliament
Total carryovers by department
150
($ thousands)
Provision of Additions to
Payments
outputs
net assets made on behalf
of State
35 400
58 530
..
53 020
13 616
..
115 615
187 628
..
38 634
7 964
..
59 508
5 740
57 771
48 881
478
14 371
3 902
433 320
Chapter 4
14 988
2 774
1 453
7 231
701
7 173
5 289
307 347
..
..
..
..
3 900
..
..
3 900
Other
Total
carryover
..
..
..
..
93 930
66 636
303 243
46 598
..
..
..
..
..
..
..
..
74 496
8 514
59 224
56 112
5 079
21 544
9 191
744 567
Financial Report 2006-07
Note 37: Public Account disclosure (continued)
Table 4.17: Payments from Advance to the Treasurer for the year ended 30 June 2007
Department
Human Services
($ thousands)
Purpose
Additional Disability Support
Children's Sexual Assault Counselling Services
COAG Health Workforce Reform
Disability Support Services
Grants to Non-Government Organisations to Improve Disability
Facilities
Grants to Non-Government Organisations to Improve Mental
Health and Drug and Alcohol Facilities
Health Workforce Recruitment and Retention
Hospital Futures
Non-Government Organisations Price Indexation
Royal Children's Hospital
Support for Non-Government Organisations
Infrastructure
Country Rail Network Maintenance - Passenger Initiative
Maintenance of Rail Freight Network
Mildura rail corridor - Freight upgrade
Return of the Regional Rail network to State Ownership
Upgrade of Passenger Services Network
Walking and Cycling Infrastructure Program
Innovation, Industry
and Regional Development
Bushfires Recovery Taskforce
Drought Assistance - South West Region
Grand Plaza Project, Docklands
Grants to local government for minor works & local
infrastructure
Jetstar International
LPG Communication Strategy
National Collaborative Research Infrastructure Scheme
Regional Infrastructure Development Fund (RIDF) - Regional
Industry Investment Program
South Wharf Sheds
Australian Synchrotron operating costs
Team Melbourne project
Investment Support Program (ISP)
Justice
Premier and Cabinet
Financial Report 2006-07
2006-07 Bushfire Season - CFA supplementation
FINA World Swimming Championships - Victoria Police
security
Fire Package - Community awareness & engagement
campaign
Funding of Temporary Beds in the Prisons System
Melbourne Sailor's Welfare Fund closure
Office of Police Integrity - Telecommunications Intercept
Operations and Monitoring
Racing Industry Development Program
Additional Staffing for Ombudsman
Counter Terrorism - Research & Development
FINA World Swimming Championships - Cultural Program
Land for the New Jewish Community Centre
Monash University – Global Terrorism Research Centre
View of Geelong Painting by Eugene von Guerard
Chapter 4
2007
3 500
750
2 760
6 000
15 000
15 000
2 960
12 000
5 861
12 161
3 300
79 292
23 040
6 100
2 218
7 700
30 000
400
69 458
1 009
50
5 000
13 500
500
323
7 850
10 000
7 771
4 983
300
26 921
78 207
2 200
6 501
849
3 000
60
451
2 000
15 060
75
50
2 300
2 250
150
733
5 558
151
Note 37: Public Account disclosure (continued)
Table 4.17: Payments from Advance to the Treasurer for the year ended 30 June 2007
(continued)
Department
Primary Industries
($ thousands)
Purpose
Additional Rural Financial Counsellors
Bushfires Recovery Taskforce
Costs associated with leasing of acquaculture sites
Drought - extension of Commonwealth exceptional
circumstance
Drought communications
Drought initiatives
European House Borer control
Exceptional Circumstances - Business interest rate subsidies
for Goulburn Valley Farmers
Extension of 50 percent municipal rates subsidy
Focused Extension - farm planning response
Future farm planning
High efficiency gas heater rebate
Locusts control in Northern Victoria
Realignment of DPI staff capabilities
Stock containment areas
Stock slaughter program
Supplementary re-establishment grants
Water tank subsidies
Sustainability and
Environment
2006-07 Fire Suppression
Additional Water Cartage Points
Annual Review Process - Water projects
Bendigo Pipeline
Bushfires Recovery Taskforce
Early deployment of bushfire resources - air crane
Fire Ready Victoria for rural and isolated communities
Green Wedge Management Plans
Gunjitmara Native Title
Large Scale Water Options Analysis for Melbourne
Maritime Heritage Study
Melbourne 2030 Five Year Audit
Municipal Pools Assistance Program
Northern Grid - Promoting Interconnections
Port of Lakes Entrance dredging costs
Pumping Waranga Basin
Regional Town Development Plans
Saving the soil - improving soil stability and conservation
Using Groundwater to Secure Urban Water Supplies
Water Rates Subsidies
Water Supply Options Analysis for Geelong
Water Supply Points
Wimmera Mallee Pipeline - Fire Fighting Facilities
Treasury and Finance
Domestic Building Indemnity Funds claims
SRO administered grants (Unclaimed Monies)
Victorian Communities
Australian Formula One Grand Prix 2007 Event
Total Payments from Advance to Treasurer
152
Chapter 4
2007
600
637
435
5 214
50
2 151
345
2 000
1 500
500
650
444
2 494
2 640
500
1 000
465
3 266
24 892
101 169
3 000
2 300
5 000
3 960
3 860
625
350
90
2 900
100
400
1 100
2 000
1 300
4 300
150
500
1 000
40 000
1 250
1 000
1 240
177 594
2 033
8 983
11 016
7 888
7 888
468 965
Financial Report 2006-07
Note 37: Public Account disclosure (continued)
Table 4.18: Payments from Advances pursuant to Section 35 of the Financial
Management Act 1994 for the year ended 30 June 2007
Department
Infrastructure
($ thousands)
Purpose
Counter Terrorism - Radio re-broadcasting system
Counter Terrorism - Rail Trolleys
Rail Safety Critical Issues
Regional Rolling Stock Requirements
Innovation, Industry and
Regional Development
Investment Support Program (ISP)
Justice
Air Ambulance and Police Air Wing co-location
Counter Terrorism - Emergency Management
exercise group equipment
Office of Police Integrity - Telecommunications
Intercept Operations and Monitoring
Victoria Police - Melbourne Metropolitan Radio
Victoria Police - Motor Vehicle Leasing
Victoria Police - Police cell upgrades
Premier and Cabinet
ACMI Ground Floor Planning and Redevelopment
Works
Arts Centre Precinct
State Crisis Centre
Primary Industries
Australian Energy Market Commission
National Heritage Trust
Sawlogs for Salinity / Tackling Weeds and Pests in
High Risk Rural Areas
Sustainability and
Environment
2006-07 Fire Suppression
Alpine Resorts - Poor 2006 Snow Season
Australian Paper
Bald Hills Wind Farm
Bendigo Pipeline
Bushfire Recovery Initiatives
Improvement initiatives - Catchment Management
Authorities
Interconnect Warranga Channel with Ballarat Urban
Water Supply
Legal Costs assistance for Land Valuation Litigation
Northern Grid - Promoting Interconnections
St Kilda Triangle Legal Costs
Total Payments from Advance Pursuant to
Section 35 of the Financial Management Act,
No. 18 of 1994
Financial Report 2006-07
Chapter 4
2007
300
400
2 939
22 288
25 927
16 666
16 666
225
118
932
5 000
3 920
304
10 498
1 600
300
360
2 260
1 800
388
150
2 338
39 577
2 552
2 500
300
25 000
957
5 000
2 850
800
750
1 415
81 702
139 391
153
Note 37: Public Account disclosure (continued)
Table 4.19: Unused advances carried forward to 2006-07 pursuant to Section 35(4) of the
Financial Management Act 1994
There have been no amounts carried forward to 2006-07 under Section 35(4) of the Financial
Management Act, No. 18 of 1994.
Table 4.20: Parliamentary authority - Parliament
($ thousands)
Parliamentary
authority
2007
Amounts
applied
2007
Amounts
applied
2006
13
13
12
200
5 420
200
5 420
200
5 850
..
..
..
5 632
5 632
6 062
2 651
..
..
2 651
2 648
..
..
2 648
2 567
..
..
2 567
..
..
..
..
..
..
..
..
..
..
..
..
Total annual appropriations gross application
2 651
2 648
2 567
Total Parliamentary authority
8 283
8 280
8 629
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
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
154
Chapter 4
Financial Report 2006-07
Note 37: Public Account disclosure (continued)
Table 4.20: Parliamentary authority – Parliament (continued)
($ thousands)
Parliamentary
authority
2007
Amounts
applied
2007
Amounts
applied
2006
13
13
12
2
550
11 923
2
550
11 923
2
550
11 062
..
..
..
12 488
12 488
11 626
4 114
..
..
4 114
4 108
..
..
4 108
3 957
..
..
3 957
..
..
..
..
..
..
..
..
..
4 114
4 108
3 957
16 602
16 595
15 583
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
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
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
Financial Report 2006-07
Chapter 4
155
Note 37: Public Account disclosure (continued)
Table 4.20: Parliamentary authority – Parliament (continued)
($ thousands)
Parliamentary
authority
2007
Amounts
applied
2007
Amounts
applied
2006
Parliamentary Investigatory Committees
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
5 710
..
..
5 710
5 705
..
..
5 705
5 485
..
71
5 557
Total annual appropriations - gross application
5 710
5 705
5 557
Total Parliamentary authority
5 710
5 705
5 557
156
Chapter 4
Financial Report 2006-07
Note 37: Public Account disclosure (continued)
Table 4.20: Parliamentary authority – Parliament (continued)
($ thousands)
Parliamentary
authority
2007
Amounts
applied
2007
Amounts
applied
2006
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
56 594
1 436
..
58 030
53 029
1 436
..
54 465
49 388
1 584
53
51 025
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 net asset base - gross application
7 640
3 800
11 440
5 782
..
5 782
300
3 800
4 100
Total annual appropriations - gross application
69 470
60 247
55 125
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
69 470
..
60 247
..
55 125
368
Total Parliamentary authority
69 470
60 247
55 493
Financial Report 2006-07
Chapter 4
157
Note 37: Public Account disclosure (continued)
Table 4.20: Parliamentary authority – Parliament (continued)
($ thousands)
Parliamentary
authority
2007
Amounts
applied
2007
Amounts
applied
2006
Auditor-General
Special appropriations
Constitution Act No. 8750 - Auditor General's salary
Total special appropriations (excl. FMA Section 33)
410
410
410
410
321
321
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
11 280
15 749
776
..
27 805
10 942
15 749
776
..
27 467
10 472
14 996
760
..
26 228
Total annual appropriations - gross application
27 805
27 467
26 228
Total parliamentary authority (excl. FMA Section 33)
28 215
27 877
26 549
1 661
1 661
..
29 876
29 538
26 549
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
158
Chapter 4
Financial Report 2006-07
Note 37: Public Account disclosure (continued)
Table 4.21: Parliamentary authority - Education
($ thousands)
Parliamentary
authority
2007
Amounts
applied
2007
Amounts
applied
2006
250
250
250
250
250
250
Special appropriations
Education Act, No. 6240, Section 34 - Volunteer Workers
Compensation
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
6 353 062 6 284 474 6 403 214
99 109
99 109
93 988
7 866
7 866
41 546
..
..
61 520
6 460 037 6 391 449 6 600 269
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)
Total additions to the net asset base - gross application
100 206
220 826
..
..
33 188
220 826
..
..
..
113 965
4 001
..
321 032
254 013
117 966
Total annual appropriations - gross application
6 781 069 6 645 463 6 718 234
Total parliamentary authority (excl. FMA Section 33)
6 781 319 6 645 713 6 718 484
Amounts issued under the authority of the Financial
Management Act, No. 18 of 1994, Section 33 (Special
Appropriation) relating to prior year appropriations
56 457
Total Parliamentary authority
Financial Report 2006-07
56 457
24 829
6 837 776 6 702 170 6 743 313
Chapter 4
159
Note 37: Public Account disclosure (continued)
Table 4.22: Parliamentary authority - Human Services
($ thousands)
Parliamentary
authority
2007
Amounts
applied
2007
Amounts
applied
2006
17 779
5 219
82 012
17 779
5 219
82 012
17 812
6 416
82 221
613 276
613 276
602 745
124 644
124 644
116 596
327 756
327 756
314 255
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)
1 756
1 756
1 529
1 172 442
1 172 442
1 141 574
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
8 506 886
1 133 681
44 014
79 292
9 763 873
8 476 679
1 110 868
44 014
79 292
9 710 853
7 895 000
1 061 271
86 031
1 883
9 044 185
308 350
19 466
89 540
..
173 907
15 191
89 540
..
290 433
15 484
72 923
..
417 355
278 637
378 840
Total Annual Appropriations Gross Application
10 181 229
9 989 491
9 423 026
Total parliamentary authority (excl. FMA Section 33)
11 353 671
11 161 933
10 564 600
..
..
17 498
11 353 671
11 161 933
10 582 098
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)
Total additions to the net asset base - gross application
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
160
Chapter 4
Financial Report 2006-07
Note 37: Public Account disclosure (continued)
Table 4.23: Parliamentary authority - Infrastructure
($ thousands)
Parliamentary
authority
2007
Amounts
applied
2007
Amounts
applied
2006
11 831
1 700
13 531
11 831
1 700
13 531
..
1 570
1 570
3 324 530
326 686
146 086
..
3 205 215
323 086
140 597
..
2 986 315
201 654
69 267
51 402
36 440
3 833 742
36 440
3 705 338
2 932
3 311 571
431 660
..
179 564
25 927
251 411
..
159 373
25 927
180 054
..
51 207
37 289
33 018
670 169
33 018
469 729
..
268 550
18 500
18 500
18 500
18 500
35 900
35 900
4 522 411
4 535 942
4 193 567
4 207 098
3 616 020
3 617 590
18 500
18 500
50 000
4 554 442
4 225 598
3 667 590
Special appropriations
Financial Management Act, No. 18 of 1994, Section 10
Transport Act No. 9921 of 1983, Section 213 (a)
Total special appropriations
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 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
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
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
Financial Report 2006-07
Chapter 4
161
Note 37: Public Account disclosure (continued)
Table 4.24: Parliamentary authority – Innovation, Industry and Regional Development
($ thousands)
Parliamentary
authority
2007
Amounts
applied
2007
Amounts
applied
2006
810 943
65
9 470
16 666
775 309
65
9 470
16 666
236 365
177
43 460
..
78 207
915 351
78 207
879 717
104 736
384 739
15 923
8 480
..
4 959
8 480
..
37 883
7 726
15 000
24 403
13 439
60 609
92 000
92 000
35 000
92 000
92 000
35 000
Total annual appropriations - gross application
1 031 754
985 156
480 348
Total Parliamentary authority (excl. FMA Section 33)
1 031 754
985 156
480 348
..
..
..
1 031 754
985 156
480 348
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
Section 35 Financial Management Act, No. 18 of 1994
(temporary advances)
Total additions to the net asset base - gross application
Other
Payment to Regional Infrastructure Development Fund pursuant
to Section 4 of the Regional Infrastructure Development Fund
Act 1999
Total other
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
162
Chapter 4
Financial Report 2006-07
Note 37: Public Account disclosure (continued)
Table 4.25: Parliamentary authority – Justice
($ thousands)
Parliamentary
authority
2007
Amounts
applied
2007
Amounts
applied
2006
410
3 881
348
9 896
17 408
1 450
..
36 758
7 418
2 017
28 131
1 374
1 701
27 100
410
3 881
348
9 896
17 408
1 450
413
3 529
540
9 304
15 722
1 885
36 758
7 418
2 017
28 131
1 374
1 701
27 100
24 135
..
2 683
24 500
1 369
1 665
28 507
..
..
239
446
446
568
138 339
138 339
115 061
2 720 880
106 486
740
8 965
2 660 728
106 486
740
8 965
2 381 904
94 079
32 267
..
12 460
2 849 532
12 460
2 789 380
21 415
2 529 665
129 019
5 862
333
1 533
114 364
5 862
..
1 533
90 921
4 410
..
13 800
600
137 347
600
122 359
..
109 130
46 400
2 000
48 400
44 953
2 000
46 953
51 894
..
51 894
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
Discharged Servicemen's Preference Act, No. 4989
Electoral Act, No. 23 of 2002, Section 181- Electoral Expenses
Electoral Act, No. 23 of 2002, Section 215 - Entitlement
Financial Management Act, No. 18 of 1994, Section 10
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
Victorian State Emergency Services Volunteer Workers
Compensation - Act No. 57 of 1987
Victorian State Emergency Services Volunteer Workers
Compensation - Act No. 51 of 2005
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
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 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
Payments made on behalf of the State
Payments made on behalf of the State - net application
Advance to Treasurer
Total for payments made on behalf of the State - gross
application
Financial Report 2006-07
Chapter 4
163
Note 37: Public Account disclosure (continued)
Table 4.25: Parliamentary authority – Justice (continued)
($ thousands)
Parliamentary
authority
2007
Amounts
applied
2007
Amounts
applied
2006
1 046
1 035
1 003
1 046
1 035
1 003
Total annual appropriations gross application
3 036 326
2 959 727
2 691 692
Total parliamentary authority (excl. FMA Section 33)
3 174 665
3 098 066
2 806 753
2 614
2 614
37 785
3 177 279
3 100 680
2 844 538
Other
Victorian Law Reform Commission - pursuant to Section 17 (b)
of the Victorian Law Reform Commission Act 2000
Total Other
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
164
Chapter 4
Financial Report 2006-07
Note 37: Public Account disclosure (continued)
Table 4.26: Parliamentary authority – Premier and Cabinet
($ thousands)
Parliamentary
authority
2007
Amounts
applied
2007
Amounts
applied
2006
33
309
11 767
348
5 339
17 795
33
309
11 767
348
5 339
17 795
50
186
..
320
4 977
5 533
447 547
969
8 300
5 558
462 374
437 975
940
8 300
5 558
452 773
408 329
478
2 855
9 096
420 758
9 579
7 554
2 260
6 814
7 554
2 260
21 274
3 678
2 274
19 393
16 628
27 226
..
..
..
..
..
..
Total annual appropriations - gross application
481 767
469 401
447 984
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
499 562
4 342
487 196
4 342
453 517
8 366
Total Parliamentary authority
503 905
491 538
461 883
Special appropriations
Constitution Act, No. 8750 - Executive Council
Constitution Act, No. 8750 - Governor's Salary
Financial Management Act, No. 18 of 1994, Section 28
Ombudsman Act, No. 8414
Parliamentary Salaries and Superannuation Act, No. 7723
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 32 Financial Management Act, No. 18 of 1994
Section 35 Financial Management Act, No. 18 of 1994
(temporary advances)
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
Financial Report 2006-07
Chapter 4
165
Note 37: Public Account disclosure (continued)
Table 4.27: Parliamentary authority – Primary Industries
($ thousands)
Parliamentary
authority
2007
Amounts
applied
2007
Amounts
applied
2006
..
..
..
..
..
..
287 187
179 605
31 081
2 338
254 645
154 253
31 081
2 338
250 136
74 133
36 320
..
24 892
525 103
24 892
467 209
3 000
363 588
157 514
3 131
160 645
7 908
3 131
11 039
4 889
1 100
5 989
18 400
18 400
18 400
18 400
..
..
Total annual appropriations - gross application
704 148
496 647
369 577
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
704 148
..
496 647
..
369 577
2 492
Total Parliamentary authority
704 148
496 647
372 069
Special appropriations
Financial Management Act, No. 18 of 1994, Section 10
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
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
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
166
Chapter 4
Financial Report 2006-07
Note 37: Public Account disclosure (continued)
Table 4.28: Parliamentary authority – Sustainability and Environment
($ thousands)
Parliamentary
authority
2007
Amounts
applied
2007
Amounts
applied
2006
..
30 000
30 000
..
30 000
30 000
5 510
..
5 510
738 745
94 301
28 528
52 144
695 080
91 120
28 528
52 144
639 996
85 841
2 756
3 000
172 594
17 884
..
172 594
15 416
..
28 231
12 938
125
31 465
31 115
29 343
8 756
8 665
6 799
1 144 418 1 094 662
809 029
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)
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
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
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
Victorian Water Trust - net application
Section 32 Financial Management Act, No. 18 of 1994 - Victorian
Water Trust
Section 35 Financial Management Act, No. 18 of 1994 (temporary
advances)
Advance to the Treasurer
Total additions to the net asset base - gross application
50 192
92 789
..
22 395
..
43 417
92 785
..
21 777
..
47 528
3 775
..
37 735
..
29 557
29 557
..
5 000
199 933
5 000
192 536
..
89 039
1 100
1 100
..
..
..
..
25 043
25 043
24 614
25 043
25 043
24 614
Total annual appropriations - gross application
1 370 494 1 312 242
922 682
Total parliamentary authority (excl. FMA Section 33)
1 400 494 1 342 242
928 192
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
Contribution by the State under agreements pursuant to Section
25 of the Murray-Darling Basin Act 1993
Total Other
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
Financial Report 2006-07
Chapter 4
..
..
1 400 494 1 342 242
928 192
167
Note 37: Public Account disclosure (continued)
Table 4.29: Parliamentary authority – Treasury and Finance
($ thousands)
Special appropriations
Business Franchise Fees (Petroleum Products) Act, No. 9272 of
1979 Section 17 (2)
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)
Mint Act, No. 6323, Section 3
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)
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
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
Section 32 Financial Management Act, No. 18 of 1994
Section 35 Financial Management Act, No. 18 of 1994
(temporary advances)
Advance to the Treasurer
Total for payments made on behalf of the State - gross
application
168
Chapter 4
Parliamentary
authority
2007
Amounts
applied
2007
Amounts
applied
2006
37 928
37 928
35 034
771
5 762
7 231
..
258
771
5 762
7 231
..
258
565
4 941
6 344
26 187
105
3 027
..
..
3 027
..
..
2 340
..
125 000
29 035
29 035
777 371
349
349
..
1 045
1 045
1 000
210 810
210 810
606
296 215
296 215
979 492
211 612
3 369
200
215 182
211 134
3 369
200
214 703
178 988
3 125
311
182 425
40 611
..
2 413
..
43 024
..
..
..
..
..
19 300
..
..
..
19 300
1 031 478 1 027 571
..
..
..
..
1 040 125
..
..
11 016
11 016
1 042 494 1 038 587
32 171
1 072 296
Financial Report 2006-07
Note 37: Public Account disclosure (continued)
Table 4.29: Parliamentary authority – Treasury and Finance (continued)
($ thousands)
Parliamentary
authority
2007
482 080
Amounts
applied
2007
468 965
Amounts
applied
2006
272 149
Payments approved under Advance to Treasurer and brought to
account under the relevant Departments
(482 080) (468 965)
(272 149)
Total annual appropriations gross application
1 300 700 1 253 290
1 274 020
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
1 596 915 1 549 505
3 621
3 621
2 253 512
9 161
Total Parliamentary authority
1 600 537 1 553 127
2 262 673
Advance to Treasurer to meet urgent claims that may arise
before Parliamentary sanction is obtained, which will
afterwards be submitted for Parliamentary authority
Financial Report 2006-07
Chapter 4
169
Note 37: Public Account disclosure (continued)
Table 4.30: Parliamentary authority – Victorian Communities
($ thousands)
Parliamentary
authority
2007
Amounts
applied
2007
Amounts
applied
2006
..
..
92 427
..
..
92 427
22
13 366
90 951
92 427
92 427
104 339
289 269
605
55 319
7 888
353 081
265 997
432
27 023
7 888
301 340
469 753
5 222
20 945
7 041
502 961
52 558
14 413
..
1 885
7 819
..
30 759
27 737
1 622
..
66 971
..
9 705
..
60 118
418
418
417
417
17 291
17 291
Total annual appropriations - gross application
420 470
311 462
580 369
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
512 897
4 890
403 889
4 890
684 708
1 600
Total Parliamentary authority
517 787
Note:
(a) Discharged Servicemen’s Preference Act No. 4989 was repealed in August 2006.
408 779
686 308
Special appropriations
Discharged Servicemen's Preference Act No. 4989, Section 14 (a)
Financial Management Act, No. 18 of 1994, Section 10
Gambling Regulation Act No. 114 of 2003, Section 3.6.12
Contribution to Community Support Fund
Total special appropriations
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 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
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
170
Chapter 4
Financial Report 2006-07
Note 37: Public Account disclosure (continued)
Table 4.31: Government Guarantee
Details of payments made in fulfilment of any guarantee by the Government
There have been no payments made during 2006-07 in fulfilment of any guarantee by the
Government.
Money received or recovered in respect of any guarantee payments
There has been no money recovered during 2006-07 in respect of any guarantee payments.
Financial Report 2006-07
Chapter 4
171
Note 38: Controlled Entities
The following is a list of significant controlled entities which have been consolidated for the purposes of
the Annual 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) ‘Basic of Consolidation’ in the statement
of significant accounting policies.
Controlled Entities
Department of Education
Driver Education Centre Australia Ltd
International Fibre Centre Limited
Victorian Curriculum and Assessment Authority
Victorian Institute of Teaching
Victorian Qualifications Authority
Department of Human Services
Health Purchasing Victoria
Infertility Treatment Authority
Hospitals and Ambulance Services including:
Alexandra District Ambulance Service
Alexandra District Hospital
Alpine Health
Ambulance Services Victoria Metropolitan
Region
Austin Health
Bairnsdale Regional Health Service
Ballarat Health Services
Barwon Health
Bass Coast Regional Health
Bayside Health
Beaufort and Skipton Health Service
Beechworth Health Service
Benalla and District Memorial Hospital
Bendigo Health Care Group
Boort District Hospital
Casterton Memorial Hospital
Central Gippsland Health Service
Cobram District Hospital
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
Hepburn Health Service
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
172
Chapter 4
General
government
*
*
*
*
*
*
Public non-financial
corporations
Public financial
corporations
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Financial Report 2006-07
Controlled Entities
Kyneton District Health Service
Latrobe Regional Hospital
Lorne Community Hospital
Maldon Hospital
Mallee Track Health and Community Services
Manangatang and District Hospital
Mansfield District Hospital
Maryborough District Health Service
McIvor Health and Community Services
Melbourne Health
Moyne Health Services
Mt Alexander Hospital
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 Ambulance Victoria
Rural Northwest Health
Seymour District Memorial Hospital
South Gippsland Hospital
South West Healthcare
Southern Health
Stawell Regional Health
Swan Hill District Hospital
Tallangatta Health Service
Terang and Mortlake Health Service
The Kilmore and District Hospital
The Queen Elizabeth Centre
The Royal Children's Hospital
The Royal Victorian Eye and Ear Hospital
The Royal Women's Hospital
Timboon and District Healthcare Service
Tweddle Child and Family Health Service
Upper Murray Health and Community Services
Victorian Institute of Forensic Mental Health
West Gippsland Healthcare Group
West Wimmera Health Service
Western District Health Service
Western Health
Wimmera Health Care Group
Wodonga Regional Health Service
Yarram and District Health Service
Yarrawonga District Health Service
Yea and District Memorial Hospital
Mental Health Review Board
Psychosurgery Review Board
Registration Boards including:
Chinese Medicine Registration Board of
Victoria
Chiropractors Registration Board of Victoria
Financial Report 2006-07
General
government
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Public non-financial
corporations
Public financial
corporations
*
*
Chapter 4
173
Controlled Entities
Dental Practice Board of Victoria
Medical Practitioners Board of Victoria
Nurses Board of Victoria
Optometrists Registration Board of Victoria
Osteopaths Registration Board of Victoria
Pharmacy Board of Victoria
Physiotherapists Registration Board of Victoria
Podiatrists Registration Board of Victoria
Psychologists Registration Board of Victoria
Victorian Health Promotion Foundation
Victorian Relief Committee
Cemeteries including:
Anderson’s Creek Cemetery Trust
Ballarat General Cemeteries Trust
Bendigo Cemeteries Trust
Fawkner Crematorium and Memorial Park
Keilor Cemetery Trust
Necropolis Springvale, Trustees of the
Preston Cemetery Trust
Templestowe Cemetery Trust
The Cheltenham and Regional Cemeteries
Trust
The Lilydale Cemeteries Trust
The Mildura Cemetery Trust
The Trustee of the Altona Memorial Park
Trustees of the Geelong Cemeteries Trust
Wyndham Cemeteries Trust
Director of Housing (PNFC)
General
government
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Department of Innovation Industry and
Regional Development
TAFEs including:
Bendigo Regional Institute of TAFE (a)
Box Hill Institute of TAFE (a)
Central Gippsland Institute of TAFE (a)
Chisholm Institute of TAFE (a)
East Gippsland Institute of TAFE (a)
Gordon Institute of TAFE (a)
Goulburn Ovens Institute of TAFE (a)
Holmesglen Institute of TAFE (a)
Institute of Land and Food Resources (TAFE
Division) (a)
Kangan Batman Institute of TAFE (a)
Northern Melbourne Institute of TAFE (a)
*
Chapter 4
Public financial
corporations
*
*
*
*
*
*
*
*
*
Department of Infrastructure
Roads Corporation
Southern and Eastern Integrated Transport
Authority
Southern Cross Station Authority
Port of Hastings Corporation
Port of Melbourne Corporation
Public Transport Ticketing Body
V/Line Passenger Corporation
Victorian Rail Track
Victorian Regional Channels Authority
Victorian Urban Development Authority
(VicUrban)
174
Public non-financial
corporations
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Financial Report 2006-07
Controlled Entities
Royal Melbourne Institute of Technology
(TAFE Division) (a)
South West Institute of TAFE (a)
Sunraysia Institute of TAFE (a)
Swinburne University of Technology (TAFE
Division) (a)
University of Ballarat (TAFE Division) (a)
Victoria University TAFE Division (a)
William Angliss Institute of TAFE (a)
Wodonga Institute of TAFE (a)
Film Victoria (a)
Prince Henry’s Institute of Medical Research
Regional Development Victoria
Tourism Victoria
Victorian Learning and Employment Skills
Commission (a)
Australian Grand Prix Corporation
Emerald Tourist Railway Board
Fed Square Pty Ltd
Melbourne Convention and Exhibition Trust
Victorian Major Events Company Limited (a)
General
government
*
Public financial
corporations
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Department of Justice
Country Fire Authority
Emergency Services Telecommunications
Authority
Equal Opportunity Commission
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 Public Advocate
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 Institute of Forensic Medicine
Victorian Law Reform Commission
Victorian Professional Standards Council
Greyhound Racing Victoria
Harness Racing Victoria
*
*
*
Department of Premier and Cabinet
Australian Centre for the Moving Image
Library Board of Victoria
Melbourne Recital Centre Limited (b)
Museums Board of Victoria
National Gallery of Victoria, Council of Trustees
Office of the Ombudsman
State Services Authority
Geelong Performing Arts Centre Trust
Victorian Arts Centre Trust
*
*
*
*
*
*
*
*
Financial Report 2006-07
Public non-financial
corporations
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Chapter 4
175
Controlled Entities
Department of Primary Industries
Energy Safe Victoria (a)
Veterinary Practitioners Registration Board of
Victoria
Agriculture Victoria Services Pty Ltd
Dairy Food Safety Victoria
Melbourne Market Authority
Murray Valley Citrus Board
Murray Valley Wine Grape Industry Development
Committee
Northern Victorian Fresh Tomato Industry
Development Committee
Phytogene Pty Ltd
PrimeSafe
Victorian Energy Networks Corporation
(VENCorp) (a)
Victorian Strawberry Industry Development
Committee
Department of Sustainability and
Environment
Architects Registration Board of Victoria
Building Commission
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
Heritage Council
Growth Areas Authority (b)
Office of the Commissioner for Environmental
Sustainability
Parks Victoria
Plumbing Industry Commission
Royal Botanic Gardens Board
Surveyors Registration Board of Victoria
Sustainability Victoria
Trust for Nature (Victoria)
Alpine Resort Management Board including:
Alpine Resorts Co-ordinating Council
Falls Creek Alpine Resort Management Board
Lake Mountain Alpine Resort Management
Board
176
Chapter 4
General
government
*
*
*
Public non-financial
corporations
Public financial
corporations
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Financial Report 2006-07
Controlled Entities
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
(formerly Eastern Regional Waste
Management Group, Northern Regional
Waste Management Group, South Eastern
Regional Waste Management Group and
Western Regional Waste Management
Group) (b)(c)
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 Authority
Central Gippsland Region Water Authority
Central Highlands Region Water Authority
Coliban Region Water Authority
East Gippsland Region Water Authority
First Mildura Irrigation Trust
Gippsland and Southern Rural Water
Authority
Goulburn Valley Region Water Authority
Goulburn-Murray Rural Water Authority
Grampians Wimmera-Mallee Water Authority
Lower Murray Urban and Rural Water
Authority
Melbourne Water Corporation
North East Region Water Authority
South Gippsland Region Water Authority
Wannon Region Water Authority
Western Region Water Authority
Westernport Region Water Authority
Yarra Bend Park Trust
Zoological Parks and Gardens Board of Victoria
Financial Report 2006-07
General
government
Public non-financial
corporations
*
Public financial
corporations
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Chapter 4
177
Controlled Entities
Department of Treasury and Finance
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)
VicFleet Pty Ltd
VicForests
Victorian Plantations Corporation (shell)
Yarra Valley Water Limited
Rural Finance Corporation of Victoria
State Trustees Limited
Transport Accident Commission
Treasury Corporation of Victoria
Tricontinental Holdings Ltd and Controlled
Entities (c)
Victorian Funds Management Corporation
Victorian Managed Insurance Authority
Victorian WorkCover Authority
Department for Victorian Communities
2007 World Swimming Championships
Corporation
Adult Community and Further Education Board
Adult Multicultural Education Services (a)
Centre for Adult Education (a)
Shrine of Remembrance Trustees
Victorian Institute of Sport Limited
Victorian Institute of Sport Trust
Victorian Veterans Council
Melbourne 2006 Commonwealth Games
Corporation
Melbourne and Olympic Parks Trust
Queen Victoria Women’s Centre Trust
State Sport Centres Trust
VITS Languagelink
Parliament of Victoria
Victorian Auditor-General's Office
General
government
*
*
Public non-financial
corporations
Public financial
corporations
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
(a)
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Notes:
(a) Machinery of government changes announced during 2006-07:
Entities moved from Department of Education to the Department of Innovation, Industry and Regional
Development:
 Bendigo Regional Institute of TAFE
 Box Hill Institute of TAFE
 Central Gippsland Institute of TAFE
 Chisholm Institute of TAFE
 East Gippsland Institute of TAFE
 Gordon Institute of TAFE
 Goulburn Ovens Institute of TAFE
 Holmesglen Institute of TAFE
 Institute of Land and Food Resources (TAFE Division)
 Kangan Batman Institute of TAFE
 Northern Melbourne Institute of TAFE
 Royal Melbourne Institute of Technology (TAFE Division)
178
Chapter 4
Financial Report 2006-07
Notes (continued):
 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
 Victorian Learning and Employment Skills Commission
Entities moved from Department of Premier and Cabinet to Department of Innovation, Industry and Regional
Development:
 Film Victoria
 Victorian Major Events Company Limited
Entities moved from Department of Infrastructure to the Department of Primary Industries:
 Energy Safe Victoria
 Victorian Energy Networks Corporation (VENCorp)
Entities moved from Department of Education to the Department for Victorian Communities:
 Adult Community and Further Education Board
 Adult Multicultural Education Services
 Centre for Adult Education
(b) Entities commenced operations during 2006-2007:
 Melbourne Recital Centre Limited as of 2 March 2007
 Growth Areas Authority as of 1 September 2006
 Metropolitan Waste Management Group as of 1 October 2006
(c) Entities ceased operations during 2006-2007 include:
 Eastern Regional Waste Management Group as of 1 October 2006
 Northern Regional Waste Management Group as of 1 October 2006
 South Eastern Regional Waste Management Group as of 1 October 2006
 Western Regional Waste Management Group as of 1 October 2006.
 Tricontinental Holdings Ltd and Controlled Entities as of 31 December 2006
Financial Report 2006-07
Chapter 4
179
180
Chapter 4
Financial Report 2006-07
CHAPTER 5 – UNIFORM PRESENTATION OF GOVERNMENT
FINANCE STATISTICS
THE ACCRUAL GFS PRESENTATION
The Government Finance Statistics (GFS) system employed by the Australian Bureau of Statistics (ABS)
is designed to provide statistics relating to all Australian public sector entities. The statistics show
consolidated transactions of the various institutional sectors of government from an economic viewpoint,
providing details of the revenue, expenses, payments, receipts, assets and liabilities. It includes only
those transactions over which a government exercises control under its legislative or policy framework
and excludes from the calculation of net operating balance both revaluations (holding gains or losses)
arising from a change in market prices, and other changes in the volume of assets that result from
discoveries, depletion and destruction of assets.
GAAP/GFS harmonisation
In September 2006, the Australian Accounting Standards Board (AASB) issued a new standard
AASB 1049 Financial Reporting of General Government Sectors by Government, applicable from
1 July 2008. Early adoption of the standard is permitted. 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 for reporting the general government sector implements the first of three stages of the
strategy to create a single standard for general government sector entities, the general government sector
itself, and for all other government entities. The second stage involving the implementation for whole of
government sectors is expected to be announced some time later in the 2007 calendar year, while the
third stage relates to departments and other general government agencies.
For the first time, an accounting standard will require that, in addition to complying with all other
relevant accounting standards, the report for the general government sector must also include key fiscal
aggregates determined in a manner consistent with the ABS GFS Manual. Any differences between
‘pure’ GFS and the amounts presented under GAAP must also be reconciled.
Given the complexities of implementing the new standard, timing factors, and the expected impact on a
newly harmonised whole of government reporting standard which has not yet been developed, Victoria
has decided that it will not adopt the new standard early. However, major components of the standard
such as the recognition of ‘transactions’ and ‘other economic flows’ in the operating statement on a GFS
basis, have already been incorporated into the estimated financial statements in Chapter 1 of the 2007-08
Budget Paper No. 4 and in the financial statements for the general government sector, included in
Chapter 4 of this publication. In addition, the Australian Loan Council has agreed to revise the Accrual
Uniform Presentation Framework consistent with GAAP/GFS harmonisation principles included in
AASB 1049. This revised framework is expected to be available for implementation in the 2008-09
Budget.
Financial Report 2006-07
Chapter 5
181
Operating statement
The operating statement is designed to capture the composition of GFS revenues and GFS expenses and
the net cost of a government’s activities within a financial year. It shows the full cost of resources
consumed by government in achieving its objectives, and how these costs are met from various revenue
sources.
Unlike a standard accounting operating statement, the GFS operating statement reports two major fiscal
measures: the GFS net operating balance and GFS net lending. The GFS net operating balance is
calculated as GFS revenue minus GFS expenses. GFS net lending, or fiscal balance, includes net capital
formation but excludes depreciation, thereby giving a measure of a jurisdiction’s call on financial
markets.
Balance sheet
The balance sheet records a government’s stocks of financial and non-financial assets and liabilities. This
statement, discloses the resources over which a government maintains control.
The GFS balance sheet differs from the standard accounting presentation in that it provides information
on financial and non-financial assets, and does not distinguish between current and non-current assets
and liabilities.
Cash flow statement
The cash flow statement records a government’s cash receipts and payments and shows how a
government obtains and expends cash.
The GFS cash flow statement reports two major fiscal measures: the net increase in cash held and the
cash surplus. Net increase in cash held is the sum of net cash flows from all operating, investing and
financing activities. The GFS cash flow statement measures the cash surplus/deficit excluding finance
leases and similar arrangements consistent with the International Monetary Fund definition. However, the
Australian GFS measure continues to adjust for non-cash finance leased capital formation. This is a
follow on from the old GFS cash series which ended in 1998-99. In the Australian context, this
presentation of non-cash items in the cash flow statement is being reviewed as part of the GAAP/GFS
harmonisation process.
INSTITUTIONAL SECTORS
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.
Public non-financial corporations sector
The public non-financial corporations sector was formerly known as the public trading enterprises sector.
It 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, public non-financial corporations are legally distinguishable from the
governments which own them.
182
Chapter 5
Financial Report 2006-07
Non-financial public sector
The non-financial public sector represents the consolidated transactions and assets and liabilities of the
general government and public non-financial corporations sectors. In compiling statistics for the
non-financial public sector, transactions and debtor-creditor relationships between sub-sectors are
eliminated to avoid double counting.
Public financial corporations
Public financial corporations 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 corporations
sector includes the Treasury Corporation of Victoria and the Transport Accident Commission. Estimates
are not published for the public financial corporations sector.
Financial Report 2006-07
Chapter 5
183
Operating statement by institutional sector
Table 5.1: General government sector operating statement
($ million)
2005-06
Actual
2006-07
Revised
2006-07
Actual
GFS revenue
Taxation revenue
Current grants and subsidies
Capital grants
Sales of goods and services
Interest income
Other
Total revenue
10 885
13 920
705
3 731
390
2 340
31 972
11 471
14 532
746
3 869
324
2 408
33 351
11 702
14 646
955
4 177
423
2 983
34 886
GFS expenses
Employee expenses
Depreciation
Other operating expenses
Superannuation interest expense
Other interest expense
Other property expenses
Current transfers
Capital transfers
Total expenses
13 128
1 279
9 983
480
452
..
5 484
342
31 148
13 708
1 412
9 917
419
445
..
6 449
381
32 729
13 617
1 335
10 954
419
459
..
6 450
287
33 521
825
622
1 365
2 302
- 159
1 279
7
393
1 263
- 439
2 774
- 164
1 412
1
354
1 553
- 932
2 812
- 226
1 335
-3
350
1 599
- 234
GFS net operating balance
Less: Net acquisition of non-financial assets
Purchases of non-financial assets
Sales of non-financial assets
Less: Depreciation
Plus: Change in inventories
Plus: Other movements in non-financial assets (a)
Total net acquisition of non-financial assets
GFS net lending (+) / borrowing (-) (b)
Source: Department of Treasury and Finance
Notes:
(a) Other movements in non-financial assets have been adjusted for 2005-06 to reflect the reclassification of
finance leases.
(b) GFS net lending also equals net transactions in financial assets less net transactions in liabilities.
184
Chapter 5
Financial Report 2006-07
Table 5.2: Public non-financial corporations operating statement
($ million)
2005-06
Actual
2006-07
Revised
2006-07
Actual
GFS revenue
Sales of goods and services
Current grants and subsidies
Capital grants
Interest income
Other
Total revenue
3 351
1 515
176
129
529
5 701
3 294
2 062
210
95
433
6 095
3 421
1 827
225
107
430
6 010
GFS expenses
Employee expenses
Depreciation
Other operating expenses
Superannuation interest expense
Other interest expense
Property expenses
Current transfers
Capital transfers
Total expenses
649
842
3 082
2
356
485
126
48
5 591
652
859
3 457
..
359
345
100
73
5 845
651
867
3 215
-1
345
365
104
65
5 612
110
250
398
1 825
- 68
842
2
323
1 239
-1 130
2 171
- 58
859
20
141
1 415
-1 165
2 052
- 58
867
21
180
1 328
- 930
GFS net operating balance
Less: Net acquisition of non-financial assets
Purchases of non-financial assets
Sales of non-financial assets
Less: Depreciation
Plus: Change in inventories
Plus: Other movements in non-financial assets (a)
Total net acquisition of non-financial assets
GFS net lending (+) / borrowing (-) (b)
Source: Department of Treasury and Finance
Notes:
(a) Other movements in non-financial assets have been adjusted for 2005-06 to reflect the reclassification of
finance leases.
(b) GFS net lending also equals net transactions in financial assets less net transactions in liabilities.
Financial Report 2006-07
Chapter 5
185
Table 5.3: Non-financial public sector operating statement
($ million)
2005-06
Actual
2006-07
Revised
2006-07
Actual
GFS revenue
Taxation revenue
Current grants and subsidies
Capital grants
Sales of goods and services
Interest income
Other
Total revenue
10 762
13 911
704
6 250
466
2 412
34 505
11 331
14 532
749
6 276
395
2 503
35 787
11 565
14 634
958
6 726
506
3 070
37 460
GFS expenses
Employee expenses
Depreciation
Other operating expenses
Superannuation interest expense
Other interest expense
Other property expenses
Current transfers
Capital transfers
Total expenses
13 777
2 121
12 221
482
749
..
3 822
355
33 527
14 359
2 271
12 420
419
780
..
4 118
445
34 814
14 269
2 202
13 321
419
780
..
4 261
350
35 601
978
.
4 129
- 227
2 121
8
708
2 497
-1 519
973
.
4 942
- 221
2 271
20
495
2 965
-1 992
1 859
.
4 865
- 283
2 202
18
527
2 924
-1 064
GFS net operating balance
Less: Net acquisition of non-financial assets
Purchases of non-financial assets
Sales of non-financial assets
Less: Depreciation
Plus: Change in inventories
Plus: Other movements in non-financial assets (a)
Total net acquisition of non-financial assets
GFS net lending (+) / borrowing (-) (b)
Source: Department of Treasury and Finance
Notes:
(a) Other movements in non-financial assets have been adjusted for 2005-06 to reflect the reclassification of
finance leases.
(b) GFS net lending also equals net transactions in financial assets less net transactions in liabilities.
186
Chapter 5
Financial Report 2006-07
Table 5.4: Public financial corporations operating statement
($ million)
2005-06
Actual
2006-07
Actual
GFS revenue
Current grants and subsidies
Capital grants
Sales of goods and services
Interest income
Other
Total revenue
6
..
2 949
1 278
516
4 749
..
..
3 000
1 286
679
4 964
GFS expenses
Employee expenses
Depreciation
Other operating expenses (a)
Superannuation interest expense
Other interest expense
Other property expenses
Current transfers
Capital transfers
Total expenses
201
15
3 437
..
945
887
7
..
5 491
221
15
3 248
..
953
1 073
8
..
5 519
GFS net operating balance
Less: Net acquisition of non-financial assets
Purchases of new non-financial assets
Sales of non-financial assets
Less: Depreciation
Plus: Change in inventories
Plus: Other movements in non-financial assets
- 743
- 555
39
-1
15
..
..
69
-1
15
..
..
Total net acquisition of non-financial assets
GFS net lending (+) / borrowing (-) (b)
Source: Department of Treasury and Finance
23
- 766
53
- 607
Notes:
(a) 2005-06 Other operating expenses adjusted to reflect change in insurance expense classifications.
(b) GFS net lending also equals net transactions in financial assets less net transactions in liabilities.
Financial Report 2006-07
Chapter 5
187
Table 5.5: General government sector balance sheet
($ million)
as at 30 June
Assets
Financial assets
Cash and deposits
Advances paid
Investments, loans and placements
Other non-equity assets
Equity (a)
Total financial assets
Non-financial assets
Land and fixed assets
Other non-financial assets
Total non-financial assets
Total assets
Liabilities
Deposits held
Advances received
Borrowing
Superannuation liability
Other employee entitlements and provisions
Other non-equity liabilities
Total liabilities
Net worth
Net financial worth (b)
Net debt (c)
Source: Department of Treasury and Finance
2006
Actual
2007
Revised
2007
Actual
2 698
70
2 162
2 579
38 261
45 770
1 521
70
1 881
2 575
39 238
45 286
3 018
61
2 058
3 515
41 476
50 128
54 185
2 463
56 648
102 418
58 030
2 471
60 501
105 787
57 302
2 815
60 117
110 245
520
4
6 175
12 896
4 170
3 088
26 854
75 564
18 916
1 769
519
4
5 901
11 899
4 299
2 974
25 595
80 192
19 690
2 951
595
4
7 190
10 138
4 382
3 280
25 589
84 657
24 540
2 652
Notes:
(a) Equity figure has been adjusted in 2005-06 to correctly reflect the State’s minority interest in joint ventures.
(b) Net financial worth equals total financial assets minus total liabilities.
(c) Net debt equals the sum of deposits held, advances received and borrowings, minus the sum of cash and
deposits, advances paid, and investments, loans and placements.
188
Chapter 5
Financial Report 2006-07
Table 5.6: Public non–financial corporations balance sheet
($ million)
as at 30 June
Assets
Financial assets
Cash and deposits
Advances paid
Investments, loans and placements
Other non-equity assets
Equity
Total financial assets
Non-financial assets
Land and fixed assets
Other non-financial assets
Total non-financial assets
Total assets
Liabilities
Deposits held
Advances received
Borrowing
Superannuation liability
Other employee entitlements and provisions
Other non-equity liabilities
Total liabilities
Shares and other contributed capital
Net worth
Net financial worth (a)
Net debt (b)
Source: Department of Treasury and Finance
2006
Actual
2007
Revised
2007
Actual
532
137
1 066
940
376
3 051
826
133
846
934
376
3 116
594
113
2 311
749
407
4 173
39 334
248
39 582
42 633
40 664
299
40 963
44 079
40 850
318
41 169
45 342
84
1
4 631
38
2 654
685
8 094
34 539
..
-39 582
2 982
64
..
5 148
42
2 649
620
8 522
35 556
..
-40 963
3 407
114
1
4 849
16
3 636
911
9 526
35 816
..
-41 169
1 946
Notes:
(a) Net financial worth equals total financial assets minus total liabilities, and shares and other contributed
capital.
(b) Net debt equals the sum of deposits held, advances received and borrowings, minus the sum of cash and
deposits, advances paid, and investments, loans and placements.
Financial Report 2006-07
Chapter 5
189
Table 5.7: Non–financial public sector balance sheet
($ million)
as at 30 June
Assets
Financial assets
Cash and deposits
Advances paid
Investments, loans and placements
Other non-equity assets
Equity (a)
Total financial assets
Non-financial assets
Land and fixed assets
Other non-financial assets
Total non-financial assets
Total assets
Liabilities
Deposits held
Advances received
Borrowing
Superannuation liability
Other employee entitlements and provisions
Other non-equity liabilities
Total liabilities
Net worth
Net financial worth (b)
Net debt (c)
Source: Department of Treasury and Finance
2006
Actual
2007
Revised
2007
Actual
3 234
207
3 228
3 047
4 097
13 813
2 347
204
2 727
2 991
4 058
12 326
3 615
174
4 369
4 200
6 067
18 425
93 517
2 632
96 149
109 962
98 693
2 677
101 371
113 697
98 150
3 046
101 197
119 621
604
5
10 805
12 934
5 176
3 339
32 864
77 098
-19 051
4 746
583
4
11 047
11 941
5 206
3 089
31 870
81 827
-19 544
6 356
709
4
12 037
10 153
6 252
3 951
33 107
86 514
-14 682
4 593
Notes:
(a) Equity figure has been adjusted in 2005-06 to correctly reflect the State’s minority interest in joint ventures.
(b) Net financial worth equals total financial assets minus total liabilities.
(c) Net debt equals the sum of deposits held, advances received and borrowings, minus the sum of cash and
deposits, advances paid, and investments, loans and placements.
190
Chapter 5
Financial Report 2006-07
Table 5.8: Public financial corporations balance sheet
($ million)
as at 30 June
2006
Actual
2007
Actual
Assets
Financial assets
Cash and deposits
Advances paid
Investments, loans and placements
Other non-equity assets
Equity
Total financial assets
1 025
8 650
24 756
1 410
..
35 841
1 449
9 066
26 170
1 466
..
38 151
Non-financial assets
Land and fixed assets
Other non-financial assets
Total non-financial assets
Total assets
44
495
539
36 380
48
519
567
38 718
66
2 274
14 710
..
15 071
1 139
33 261
3 119
..
- 539
-17 380
55
2 182
14 533
..
15 710
1 206
33 687
5 031
..
- 567
-19 914
Liabilities
Deposits held
Advances received
Borrowing
Superannuation liability
Other employee entitlements and provisions
Other non-equity liabilities
Total liabilities
Shares and other contributed capital
Net worth
Net financial worth (a)
Net debt (b)
Source: Department of Treasury and Finance
Notes:
(a) Net financial worth equals total financial assets minus total liabilities, and shares and other contributed
capital.
(b) Net debt equals the sum of deposits held, advances received and borrowings, minus the sum of cash and
deposits, advances paid, and investments, loans and placements.
Financial Report 2006-07
Chapter 5
191
Table 5.9: General government sector cash flow statement(a)
($ million)
Cash receipts from operating activities
Taxes received
Receipts from sales of goods and services
Grants/subsidies received
Other receipts
Total receipts
Cash payments from operating activities
Payment for goods and services
Grants and subsidies paid
Interest paid
Other payments
Total payments
Net cash flows from operating activities
Net cash flows from investing in non-financial assets
Sales of non-financial assets
Purchases of non-financial assets
Total cash flows from investing in non-financial assets
Net cash flows from investments in financial assets for policy
purposes
Net cash flows from investments in financial assets for liquidity
Net cash flows from financing activities
Advances received (net)
Borrowings (net)
Distributions Paid
Net cash flows from financing activities
Net increase in cash held
Surplus (+) /deficit (-) excluding acquisitions under finance
leases (b)
Acquisitions under finance leases
Surplus (+) /deficit (-) including finance leases
Source: Department of Treasury and Finance
2005-06
Actual
2006-07
Revised
2006-07
Actual
10 974
4 409
14 620
2 804
32 807
11 597
3 899
15 279
2 601
33 376
11 264
5 327
15 602
2 750
34 943
-23 765
-5 302
- 409
- 691
-30 167
2 641
-23 499
-6 100
- 431
- 721
-30 751
2 625
-25 012
-5 969
- 430
- 692
-32 103
2 840
159
-2 302
-2 143
164
-2 774
-2 611
226
-2 812
-2 587
87
- 807
- 687
469
288
139
-5
- 171
..
- 175
878
-1
- 672
..
- 673
-1 177
-1
614
..
614
319
498
15
253
403
95
387
- 372
361
- 107
Notes:
(a) Some 2005-06 amounts have changed due to reclassifications of accounts to meet ABS definitions.
(b) Net cash flows from operating activities less investments in non-financial assets.
192
Chapter 5
Financial Report 2006-07
Table 5.10: Public non-financial corporations sector cash flow statement(a)
($ million)
Cash receipts from operating activities
Receipts from sales of goods and services
Grants/subsidies received
Other receipts
Total receipts
Cash payments from operating activities
Payment for goods and services
Grants and subsidies paid
Interest paid
Other payments
Total payments
Net cash flows from operating activities
Net cash flows from investing in non-financial assets
Sales of non-financial assets
Purchases of non-financial assets
Total cash flows from investing in non-financial assets
Net cash flows from investments in financial assets for policy
purposes
Net cash flows from investments in financial assets for liquidity
purposes
Net cash flows from financing activities
Advances received (net)
Borrowings (net)
Distributions paid
Total net cash flows from financing activities
Net increase in cash held
Surplus (+) /deficit (-) excluding acquisitions under finance
leases (b)
Acquisition of assets under finance leases and similar arrangements
Surplus (+) /deficit (-) including finance leases
Source: Department of Treasury and Finance
2005-06
Actual
2006-07
Revised
2006-07
Actual
3 526
1 821
405
5 752
3 269
2 291
364
5 924
3 604
2 074
372
6 050
-3 097
- 169
- 300
- 920
-4 486
1 266
-3 185
- 212
- 331
-1 094
-4 822
1 102
-2 986
- 165
- 316
-1 002
-4 469
1 581
68
-1 825
-1 757
58
-2 171
-2 113
58
-2 052
-1 994
564
807
679
108
74
- 250
- 12
245
- 401
- 168
14
..
666
- 242
424
294
..
295
- 247
48
62
- 891
-1 253
- 661
144
-1 036
..
-1 253
..
- 661
Notes:
(a) Some 2005-06 amounts have changed due to reclassifications of accounts to meet ABS definitions.
(b) Net cash flows from operating activities less investments in non-financial assets and distributions paid.
Financial Report 2006-07
Chapter 5
193
Table 5.11: Non-financial public sector cash flow statement(a)
($ million)
Cash receipts from operating activities
Taxes received
Receipts from sales of goods and services
Grants/subsidies received
Other receipts
Total receipts
Cash payments from operating activities
Payment for goods and services
Grants and subsidies paid
Interest paid
Other payments
Total payments
Net cash flows from operating activities
Net cash flows from investing in non-financial assets
Sales of non-financial assets
Purchases of non-financial assets
Total cash flows from investing in non-financial assets
Net cash flows from investments in financial assets for policy
purposes
Net cash flows from investments in financial assets for liquidity
purposes
Net cash flows from financing activities
Advances received (net)
Borrowings (net)
Other financing (net)
Total net cash flows from financing activities
Net increase in cash held
Surplus (+) /deficit (-) excluding acquisitions under finance
leases (b)
Acquisition of assets under finance leases and similar arrangements
Surplus (+) /deficit (-) including finance leases
Source: Department of Treasury and Finance
2005-06
Actual
2006-07
Revised
2006-07
Actual
10 852
7 103
14 610
2 806
35 370
11 453
6 280
15 282
2 671
35 686
11 132
8 060
15 387
2 573
37 152
-26 859
-3 580
- 709
- 683
-31 830
3 541
-26 698
-3 977
- 762
- 766
-32 202
3 484
-28 119
-3 678
- 746
- 435
-32 978
4 174
227
-4 129
-3 902
221
-4 942
-4 721
283
-4 865
-4 581
622
-3
-8
577
361
- 111
- 17
74
-1
-7
-1
909
- 17
..
..
40
878
-7
- 886
908
381
- 378
-1 237
- 407
547
- 926
387
-1 624
361
- 768
Notes:
(a) Some 2005-06 amounts have changed due to reclassifications of accounts to meet ABS definitions.
(b) Net cash flows from operating activities less investments in non-financial asset and other financing (net).
194
Chapter 5
Financial Report 2006-07
Table 5.12: Public financial corporations sector cash flow statement(a)
($ million)
Cash receipts from operating activities
Taxes received
Receipts from sales of goods and services
Grants/subsidies received
Other receipts
Total receipts
Cash payments from operating activities
Payment for goods and services (b)
Grants and subsidies paid
Interest paid
Other payments
Total payments
Net cash flows from operating activities
Net cash flows from investing in non-financial assets
Sales of non-financial assets
Purchases of non-financial assets
Total cash flows from investing in non-financial assets
Net cash flows from investments in financial assets for policy purposes
Net cash flows from investments in financial assets for liquidity purposes
Net cash flows from financing activities
Advances received (net)
Borrowings (net)
Distributions paid
Other Financing (Net)
Total net cash flows from financing activities
Net increase in cash held
Surplus (+) /deficit (-) excluding acquisitions under finance leases
Acquisitions under finance leases
Surplus (+) /deficit (-) including finance leases
Source: Department of Treasury and Finance
(c)
2005-06
Actual
2006-07
Actual
..
3 324
6
1 219
4 548
..
3 398
..
1 463
4 862
-3 392
-7
- 925
474
-3 851
697
-3 255
- 317
- 887
673
-3 785
1 076
1
- 39
- 38
1
- 69
- 68
- 671
412
- 112
1 044
- 396
966
- 583
20
8
408
- 681
307
-1 128
- 14
-1 517
423
76
..
76
- 120
..
- 120
Notes:
(a) Some 2005-06 amounts have changed due to reclassifications of accounts to meet ABS definitions.
(b) 2005-06 Other operating expenses adjusted to reflect change in insurance expense classifications.
(c) Net cash flows from operating activities less investments in non-financial assets and distributions paid.
Financial Report 2006-07
Chapter 5
195
Table 5.13: General government sector expenses by function
($ million)
2005-06
Actual
483
..
483
2006-07
Actual
150
..
150
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
3 236
1 998
1 405
593
671
408
159
3 771
2 241
1 453
788
852
474
204
Education
Primary and secondary education
Primary education
Secondary education
Primary and secondary education n.e.c.
Tertiary education
University education
Technical and further education
Tertiary education n.e.c.
Pre-school education and education not definable by level
Pre-school education
Special education
Other education not definable by level
Transportation of students
Transportation of non-urban school children
Transportation of other students
Education n.e.c
8 301
6 238
2 643
3 547
48
1 449
2
1 446
..
392
118
274
..
223
180
43
..
8 941
6 720
3 483
3 229
8
1 457
..
1 457
..
495
132
363
..
233
189
44
37
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 n.e.c
8 366
6 504
5 384
1 120
34
243
1 189
395
409
385
234
80
58
23
8 997
6 956
5 768
1 188
40
253
1 313
444
446
423
254
102
77
3
Social security
Social security
Welfare services
Family and child services
Welfare services for the aged
Welfare services for people with a disability
Welfare services n.e.c
Social security and welfare n.e.c.
2 427
..
2 427
523
558
943
404
..
2 534
..
2 534
525
586
987
436
..
General Public Services
Government superannuation benefits
Other general public services (a)
196
Chapter 5
Financial Report 2006-07
Table 5.13: General government sector expenses by function
($ million)
Housing and Community Amenities
Housing and community development
Housing
Community development
Water supply
Sanitation and protection of the environment
Other community amenities
Recreation and Culture
Recreation facilities and services
National parks and wildlife
Recreation facilities and services n.e.c.
Cultural facilities and services
Broadcasting and film production
Recreation and culture n.e.c.
Fuel and Energy
Fuel affairs and services
Coal/Petroleum/Nuclear affairs and services n.e.c.
Gas
Electricity and other energy
Fuel and energy n.e.c.
Agriculture, Forestry, Fishing and Hunting
Agriculture (a)
Forestry, fishing and hunting
Mining and mineral resources other than fuels; manufacturing; and
construction
Mining and mineral resources other than fuels (a)
Manufacturing
Construction
Transport and Communications
Road transport
Aboriginal community road transport services/Road rehabilitation
Road maintenance
Road Rehabilitation
Road Construction
Road transport n.e.c.
Water transport
Other water transport services
Urban water transport services
Rail transport
Urban rail transport services
Non-urban rail transport freight services
Non-urban rail transport passenger services
Air transport
Pipelines
Other transport
Multi-mode urban transport
Other transport n.e.c.
Communication
Financial Report 2006-07
Chapter 5
2005-06
Actual
1 953
1 013
749
264
165
240
536
2006-07
Actual
2 390
1 330
936
394
232
290
538
831
554
46
508
277
..
..
638
344
58
286
294
..
..
63
3
..
3
14
47
85
3
..
3
15
66
335
184
151
482
318
164
22
20
22
..
..
20
..
..
3 161
1 377
..
351
..
368
657
12
..
12
1 634
1 175
5
455
..
..
89
8
81
49
3 612
1 604
..
376
469
758
14
..
14
1 827
1 218
6
603
..
..
114
8
106
53
197
Table 5.13: General government sector expenses by function
($ million)
Other Economic Affairs
Storage, sale yards and markets
Tourism and area promotion
Labour and employment affairs
Vocational training
Other labour and employment affairs
Other economic affairs
Other Purposes
Public debt transactions
General purpose inter-government transactions
Natural disaster relief
Other purposes n.e.c.
Total
Source: Department of Treasury and Finance
2005-06
Actual
396
..
53
50
27
22
293
2006-07
Actual
379
1 574
1 574
..
..
..
1 522
1 496
..
..
26
31 148
33 521
62
30
11
19
287
Note:
(a) 2005-06 amount has been adjusted to reflect reclassifications of accounts to meet ABS definitions.
Table 5.14: General government purchase of non-financial assets by function
($ million)
General public services
Defence
Public order and safety
Education
Health
Social security
Housing and community amenities
Recreation and culture
Fuel and energy
Agriculture, forestry, fishing and hunting (a)
Mining and mineral resources other than fuels; manufacturing; and construction
Transport and communications
Other economic affairs
Other purposes (b)
Total
Source: Department of Treasury and Finance
(a)
2005-06
Actual
41
..
389
512
611
84
- 277
543
2
40
..
429
46
- 120
2 301
2006-07
Actual
141
..
286
494
696
47
91
180
11
62
..
786
17
2
2 812
Notes:
(a) 2005-06 amounts have been adjusted to reclassify expenditure on mining and mineral resources other than
fuel.
(b) 2005-06 amount has been adjusted to reflect reclassifications of accounts to meet ABS definitions.
198
Chapter 5
Financial Report 2006-07
Table 5.15: General government sector taxes
($ million)
Taxes on employers' payroll and labour force
Taxes on property
Land taxes
Stamp duties on financial and capital transactions
Financial institutions' transaction taxes
Other
Total
Taxes on the provision of goods and services
Excises and levies
Taxes on gambling
Taxes on insurance
Total
Taxes on the use of goods and performance of activities
Motor vehicle taxes
Franchise taxes
Other
Total
Total GFS taxation revenue
Source: Department of Treasury and Finance
2005-06
Actual
2006-07
Revised
2006-07
Actual
3 302
3 454
3 479
780
2 749
22
151
3 703
890
2 914
..
175
3 979
989
3 021
..
173
4 183
60
1 460
1 048
2 568
.
1 242
8
63
1 313
10 885
60
1 514
1 083
2 657
.
1 294
8
80
1 381
11 471
60
1 508
1 095
2 664
.
1 280
7
89
1 376
11 702
Table 5.16: Reconciliation between AAS 31 net result from transactions and GFS cash
position
($ million)
General government net result from transactions
equals: General government net operating balance (GFS)
Less: Gross fixed capital formation
Plus: Depreciation
Less: Change in inventories
GFS net lending(+)/borrowing(-) (a)
Plus:
Superannuation expense (difference between operating statement,
including nominal interest, and cash flow statement)
Other non-cash items
GFS cash surplus(+)/deficit(-)
Less: Net contributions to other sectors of government
Other non-cash items
Decrease (+)/increase (-) in general government net debt
Source: Department of Treasury and Finance
2005-06
Actual
825
2006-07
Revised
622
2006-07
Actual
1 365
2 536
1 279
7
- 439
2 965
1 412
1
- 932
2 937
1 335
-3
- 234
30
490
431
504
95
- 87
470
- 288
70
- 372
807
3
-1 182
- 304
- 107
687
88
- 882
Note:
(a) GFS net lending also equals net transactions in financial assets less net transactions in liabilities.
Financial Report 2006-07
Chapter 5
199
VICTORIA’S 2006-07 LOAN COUNCIL ALLOCATION
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 5.17 compares Victoria’s 2006-07 LCA as published in the 2006-07 Budget with the 2006-07
outcome.
Table 5.17: Loan Council Allocation 2006-07
($ million)
General government sector cash (+) deficit / (-) surplus
Public non-financial corporation sector cash (+) deficit / (-) surplus
Non-financial public sector cash (+) deficit / (-) surplus (a)
Less: Net cash flows from investments
in financial assets for policy purposes
Plus: Memorandum items (b)
Loan Council Allocation
Tolerance limit (2 per cent of non-financial public sector cash receipts from
operating activities) (c)
Source: Department of Treasury and Finance
2006-07
Budget
- 157
1 510
1 353
2006-07
Actual
107
661
768
..
2
1 355
678
-8
40
816
678
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 intersectoral transfers, which are netted out in
the calculation of the non-financial public sector figure. Surplus (+)/deficit(-) includes finance lease
acquisitions.
(b) 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).
(c) A tolerance limit equal to 2 per cent of ‘total non-financial public sector cash receipts from operating
activities’ (2005-06 Budget Update) applies to jurisdictions’ LCA nomination and revised LCA at budget
time, and between the budget time LCA and LCA outcome. The tolerance limit applying to Victoria in 2006-07
is $678 million (2 per cent of $33 877 million – sourced from 2005-06 Budget Update).
As part of the Loan Council arrangements, Loan Council has agreed that if at any time a jurisdiction
finds that it is likely to exceed its tolerance limit, in either direction, it is required to provide an
explanation to Loan Council and, in line with the emphasis of the increased transparency, to make the
explanation public. The 2006-07 actual LCA (deficit of $816 million) remained within the tolerance
limit.
200
Chapter 5
Financial Report 2006-07
The change of $538 million in the LCA between 2006-07 Budget and 2006-07 Actual is mainly due to:

recognition of finance lease ($361 million) relating to Southern Cross Station and higher than
expected net infrastructure investments ($255 million) driven by the commencement of a number of
capital works program, partially offset by an increase in other receipts in the general government
sector; and

a reduction in the public non-financial corporations sector deficit of $849 million. This reduction
mainly reflects an increase in net cash flows from operating activities due to an increase in grants and
subsidies ($396 million) to the Director of Housing (as stated earlier in Chapter 3), reduction in
purchases of non-financial assets ($255 million) driven by timing of net infrastructure investments,
and decrease in distributions paid ($199 million) due to timing of dividend payments.
In the interests of transparency, the State is required to disclose the details of infrastructure projects with
private sector involvement and to report full contingent exposure, if any. Exposure is to be measured by
the government’s termination liabilities in a 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 net
present value of the project (which is usually calculated by an independent valuer) less any costs incurred
by government as a result of the default.
The 2006-07 Budget Papers identified a project that was expected to commence in 2006-07 as a
Partnerships Victoria project. In the interest of transparency, the State discloses details of such projects
with private sector involvement. This project was commenced in 2006-07 and details about the project
are provided below.
Barwon Water – Biosolids Management Project
The objective of this project is to manage the biosolids removed during the sewage treatment process at
Black Rock Sewage Treatment Plant and other treatment plants in the Barwon Water region.
Management of biosolids includes a treatment process to ensure that the final product is suitable for
beneficial re-use in accordance with EPA requirements.
The project contract includes an obligation for government to make a payment to the contractor should
government terminate the contract for default. The quantum of the payment is not expected to exceed the
remaining balance of the approved project funding at any time.
On 31 August 2007, Barwon Water entered into a contract with Pleanary Environment to design, build,
finance and operate the Barwon Water Biosolids Management Project.
Financial Report 2006-07
Chapter 5
201
APPENDIX A – GENERAL GOVERNMENT
QUARTERLY FINANCIAL REPORT
SECTOR
QUARTERLY FINANCIAL REPORT FOR THE VICTORIAN GENERAL
GOVERNMENT SECTOR
Financial Report 2006-07
Appendix A
203
Table A.1: Operating Statement for the last five quarters
($ million)
2005-06
June
2 654.1
196.7
311.5
131.7
3 792.9
660.3
20.4
484.2
8 251.7
2 977.0
603.0
398.0
141.5
1 389.3
2 872.1
26.7
8 407.6
( 155.9)
( 20.6)
( 576.0)
132.3
0.7
603.7
139.9
( 16.0)
204
Sept.
Income from transactions
Taxation
Fines and regulatory fees
Dividends and income tax equivalent and
rate equivalent revenue
Interest
Grants
Sale of goods and services
Fair value of assets received free of charge
or for nominal consideration
Other income
Total income from transactions
Expenses from transactions
Employee benefits
Superannuation
Depreciation and amortisation
Finance costs
Grants and transfer payments
Supplies and services
Other expenses
Total expenses from transactions
Net result from transactions
Income/(expenses) from other economic
flows
Net gain/(loss) from disposal of physical
assets
Actuarial gains/(losses) of superannuation
defined benefit plans
Share of net profits/(losses) of associates
and joint venture entities
Net gains/(losses) on financial assets at fair
value
Other gains/(losses) from other economic
flows
Total other economic flows
Net result
Appendix A
2006-07
Dec.
Mar.
June
2 727.6
152.3
89.9
2 714.0
225.7
768.6
3 419.0
199.8
24.1
2 841.1
187.4
539.7
81.8
3 688.8
627.3
0.3
119.3
3 957.1
695.6
1.9
100.0
3 806.8
687.3
6.5
121.6
4 148.2
853.1
13.2
465.5
7 833.5
406.4
8 888.8
459.5
8 703.1
756.2
9 460.4
2 920.3
425.9
331.1
118.7
1 414.5
2 351.9
0.2
7 562.6
270.9
3 101.0
414.1
337.2
122.9
1 526.9
2 721.1
26.3
8 249.6
639.2
3 041.4
423.7
342.7
112.0
1 629.6
3 143.6
( 15.7)
8 677.3
25.7
3 124.4
379.1
323.6
125.6
2 135.0
2 754.5
189.2
9 031.5
428.9
( 8.1)
( 4.3)
( 4.6)
( 12.7)
( 698.2)
1 748.2
436.7
1 703.4
..
..
..
5.2
( 0.8)
17.0
4.6
1.0
( 24.6)
( 73.0)
( 22.1)
438.0
( 731.7)
( 460.9)
1 687.9
2 327.1
414.6
440.3
2 135.0
2 563.9
Financial Report 2006-07
Table A.2: Balance Sheet as at the end of the quarter
($ million)
2005-06
June
2 698.2
1 877.3
102.6
135.8
1 700.2
6 514.0
59.2
6 573.3
391.0
602.6
462.0
55 953.8
159.6
237.1
57 806.1
64 379.4
2 415.5
311.0
2 701.1
..
155.3
413.2
5 996.0
526.6
5 869.4
728.1
12 896.5
580.6
257.1
20 858.3
26 854.3
37 525.1
Sept.
Current assets
Cash and cash equivalents
Receivables
Prepayments
Inventories
Other financial assets
Non-current assets classified as held for
sale
Total current assets
Non-current assets
Receivables
Investments accounted for using the equity
method
Other financial assets
Property, plant and equipment
Intangibles
Other assets
Total non-current assets
Total assets
Current liabilities
Payables
Interest-bearing liabilities
Employee benefits
Superannuation
Other provisions
Other liabilities
Total current liabilities
Non-current liabilities
Payables
Interest-bearing liabilities
Employee benefits
Superannuation
Other provisions
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
Financial Report 2006-07
2006-07
Dec.
Mar.
June
1 971.0
1 650.4
375.4
139.7
1 988.1
6 124.6
37.9
2 443.8
1 518.5
164.0
139.5
2 028.6
6 294.5
36.3
1 731.7
2 425.7
197.8
137.3
2 050.5
6 543.0
36.3
3 017.7
2 909.5
99.6
125.2
1 531.9
7 683.9
51.9
6 162.5
6 330.8
6 579.3
7 735.9
334.8
602.6
400.0
602.6
398.1
602.6
342.3
629.5
461.5
56 127.6
186.6
234.8
57 947.9
64 110.5
471.9
57 056.3
199.0
236.4
58 966.3
65 297.0
470.4
57 600.7
213.5
240.8
59 526.1
66 105.4
526.4
59 399.3
235.0
206.0
61 338.5
69 074.4
1 948.2
304.3
2 537.5
0.1
169.3
405.9
5 365.3
1 855.4
732.9
2 769.1
..
184.4
453.5
5 995.3
2 975.3
301.9
2 687.4
..
186.4
446.4
6 597.4
2 631.4
1 088.2
3 245.2
335.0
214.3
507.9
8 022.1
524.2
5 873.2
836.2
13 729.9
585.9
255.7
21 805.2
27 170.5
36 939.9
574.6
5 780.4
726.0
12 094.4
597.2
256.0
20 028.5
26 023.8
39 273.3
558.2
5 989.7
727.3
11 778.9
598.4
250.4
19 902.9
26 500.3
39 605.1
242.1
6 106.0
375.6
9 802.7
543.4
496.5
17 566.5
25 588.5
43 485.8
Appendix A
205
Table A.3: Statement of cash flows for the past five quarters
($ million)
2005-06
June (a)
2 984.1
172.2
3 541.3
1 154.7
114.6
326.9
303.6
8 597.4
(2 801.5)
(1 052.5)
( 100.5)
( 966.2)
(3 302.0)
20.0
(8 202.7)
394.7
( 799.2)
74.3
1 608.4
( 8.3)
262.9
1 138.1
( 148.5)
( 148.5)
1 384.2
1 310.7
2 695.0
Sept.
Cash flows from operating activities
Receipts
Taxation
Fines and regulatory fees
Grants
Sale of goods and services
Interest received
Dividends and income tax equivalent and
rate equivalent revenue
Other receipts
Total receipts
Payments
Employee benefits
Superannuation
Interest paid
Grants and transfer payments
Supplies and services
Other payments
Total payments
Net cash flows from operating activities
Cash flows from investing activities
Purchase of non-financial assets
Proceeds from sale of non-financial assets
Net (purchase)/disposal of investments
Net customer loans (granted)/repaid
Net contribution to other sectors of
government
Net cash flows from investing activities
Cash flows from financing activities
Net borrowings
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
2006-07
Dec.
Mar.
June
2 873.9
67.2
3 685.0
626.0
82.5
40.1
2 772.9
264.8
3 966.8
1 147.0
118.3
821.2
2 751.6
110.3
3 731.4
617.1
100.7
( 14.8)
2 866.0
235.6
4 218.3
1 201.8
118.2
582.7
706.3
8 081.1
386.4
9 477.3
470.2
7 766.5
394.7
9 617.2
(2 976.0)
( 290.7)
( 115.9)
(1 654.8)
(2 832.5)
..
(7 869.9)
211.2
(2 979.6)
( 301.5)
( 119.9)
(1 411.4)
(3 239.6)
..
(8 052.0)
1 425.4
(3 121.6)
( 302.5)
( 112.5)
(1 365.7)
(2 382.4)
..
(7 284.7)
481.8
(2 918.2)
( 316.9)
( 102.4)
(2 242.3)
(3 315.7)
..
(8 895.4)
721.8
( 571.8)
25.9
( 289.1)
4.0
( 60.8)
( 748.5)
41.7
( 32.1)
3.7
( 125.4)
( 814.4)
33.0
( 15.4)
( 9.9)
( 155.0)
( 677.8)
125.2
475.6
10.6
( 353.5)
( 891.8)
( 860.7)
( 961.8)
( 419.9)
( 47.6)
( 47.6)
( 728.1)
( 92.4)
( 92.4)
472.3
( 232.1)
( 232.1)
( 712.1)
985.7
985.7
1 287.6
2 695.0
1 966.8
2 439.1
1 727.1
1 966.8
2 439.1
1 727.1
3 014.6
Note:
(a) The 2005-06 figures differ from those published in the 2005-06 Annual Financial Report due to changes in
classification.
206
Appendix A
Financial Report 2006-07
APPENDIX B – FINANCIAL MANAGEMENT ACT 1994 –
COMPLIANCE INDEX
The Financial Management Act 1994 requires the Minister to prepare an audited Annual Financial
Report for tabling in the Parliament. The Annual Financial 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 Reference
Section 24(1)
Section 24(2)
Requirement
Comments/Reference
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
(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;
Balance Sheet, page 58
(iii) other financial transactions of the
State –
Manner is in accordance with
Australian Accounting Standards
and Ministerial Directions. Form is
Operating Statement, Balance
Sheet, Cash Flow Statement,
Statement of Recognised Income
and Expense and accompanying
notes.
Refer to Chapter 4
Refer Chapter 4, Note 37
pages 138 – 171
Refer Chapter 4, Operating
Statement page 57, Cash Flow
Statement page 60, Notes 3 – 18
pages 84 – 97, Note 31 pages 117
– 118 and Note 38 pages 172 – 179
Refer Chapter 4, Operating
Statement page 57, Cash Flow
Statement page 60 and
Notes 2 – 38, pages 80 – 179
in respect of the financial year;
(c) must include details of amounts paid into
Working Accounts under Section 23;
Refer Chapter 4, Note 37
Table 4.12, page 145
(d) must include details of amounts allocated
to departments during the financial year
under Section 28;
Refer Chapter 4, Note 37
Table 4.13, page 146
Financial Report 2006-07
Appendix B
207
Financial
Management
Act Reference
Requirement
Comments/Reference
(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 4.6,
pages 138 – 139 and Table 4.15,
page 148
(f) must include particulars of amounts
transferred in accordance with
determinations under Section 30 or 31;
Refer Chapter 4, Note 37
Table 4.14, pages 147 – 148
(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;
(ii) the application during the financial
year of amounts referred to in subparagraph (i);
(iii) amounts appropriated in respect of
the next financial year as a result of a
determination under section 32 in
respect of unused appropriation for
the financial year;
(h) must include –
(i) details of expenses and obligations
met from money advanced to the
Minister under Section 35(1) during
the financial year;
(ii) a statement of the reasons for
carrying forward any part of an
unused advance to the next financial
year under Section 35(4);
(i) must include details of payments made
during the financial year out of money
advanced to the Treasurer in an annual
appropriation Act for that year to meet
urgent claims;
(j) must include details of (i) payments made during the financial
year in fulfilment of any guarantee by
the Government under any Act;
(ii) money received or recovered by the
Minister or Treasurer during the
financial year in respect of any
guarantee payments;
(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
208
Appendix B
Refer Chapter 4, Note 37
Table 4.16(a), page 149
Refer Chapter 4, Note 37
Table 4.16(b), page 149
Refer Chapter 4, Note 37
Table 4.16(c), page 150
Refer Chapter 4, Note 37
Table 4.18, page 153
Refer Chapter 4, Note 37
Table 4.19, page 154
Refer Chapter 4, Note 37
Table 4.17, pages 151 – 152
Refer Chapter 4, Note 37, Table
4.31, page 171
Refer Chapter 4, Note 37, Table
4.31, page 171
Refer Chapter 4, Note 34
pages 131 – 137, Note 10 pages 87
– 90 and Balance Sheet page 58
Financial Report 2006-07
Financial
Management
Act Reference
Requirement
Comments/Reference
(ii) prescribed assets and prescribed
liabilities of prescribed bodies;
(l) must be audited by the Auditor-General.
Section 26(1)
The Minister must prepare a quarterly
financial report for each quarter of each
financial year.
Section 26(2)
A quarterly financial report comprises –
(a) a statement of financial performance of
the Victorian general government sector
for the quarter;
Section 26(2)
Refer Chapter 4, Note 2 pages 80 –
83, Refer Chapter 5, Table 5.5
page 188, Table 5.6 page 189,
Table 5.7 page 190 and Table 5.8
page 191
Refer Auditor-General’s Opinion,
pages 54 – 55
Refer Appendix A,
pages 203 – 206
Refer Appendix A, Table A.1
page 204
(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 205
Section 26(2A)
A quarterly financial report must be prepared
in the manner and form determined by the
Minister, having regard to appropriate
financial reporting frameworks.
Manner is a financial report for the
general government sector. Form is
Operating Statement, Balance
Sheet, Cash Flow Statement,
Statement of Recognised Income
and Expense. Refer to Appendix A
Section 26(3A)
The quarterly financial report for the quarter
ending on 30 June in a financial year must
include, in addition to the statements referred
to in sub-Section (2)(a) to (d) for that quarter,
those statements for the period of 12 months
ending on that 30 June.
Refer to Chapter 4
Financial Report 2006-07
Refer Appendix A, Table A.3
page 206
Refer Chapter 4, Note 1 pages 62 –
79
Appendix B
209
APPENDIX C – SCOPE AND STYLE CONVENTIONS
Scope of the Financial Report for the State of Victoria



The State financial outcome reflects the consolidation of all entities that are controlled by the
Victorian State Government. Entities included in the State outcome include all government
departments and other organisations which are a legally constituted body 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 1 (SNA), and classifies each entity
into either the general government sector, the public non-financial corporations sector or the public
financial corporations sector. The chart below provides an overview of this reporting structure as
applied in Victoria.
Further details on entities that make up each of the sectors is provided in Chapter 4 (refer Notes 1
and 38).
Chart 1: Entity framework for the State of Victoria
State of Victoria
Non - Financial Public Sector
General Government
Departments
Public Non-Financial
Corporations
Public Financial
Corporations
Statutory Authorities and other agencies controlled by Government
Source: Department of Treasury and Finance

The general government sector is the largest of the sectors, accounting for approximately 87 per cent
of State expenses in 2006-07, and forms the basis of the Budget published in May each year. As
shown in Chart 1, the 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, it
represents less than half of their total revenue. A comparison between the actual result for this sector
and the revised 2006-07 estimates is discussed in detail in Chapter 2.
1
System of National Accounts 1993, was released under the auspices of the Commission of the European
Communities, International Monetary Fund, Organisation for Economic Co-operation and Development, United
Nations and World Bank.
Financial Report 2006-07
Appendix C
211


The public non-financial corporations sector provide goods and services (of a non-financial nature)
within a competitive market. Some examples of these entities include various water authorities and
Victorian Rail Track (VicTrack).
The public financial corporations sector comprises entities primarily engaged in the provision of
financial services including the Treasury Corporation of Victoria and the Transport Accident
Commission. The 2006-07 financial outcome for all sectors controlled by the Victorian State
Government is discussed in detail in Chapter 3.
Style conventions
Figures in the tables and in the text have been rounded. Discrepancies in tables between totals and sums
of components reflect rounding. Percentage variations in all tables are based on the underlying
unrounded amounts.
The notation used in the tables is as follows:
n.a.
not available or not applicable
..
zero, or rounded to zero
(xxx.x)
negative numbers
200x
year period (Chapter 4)
200x – 0x
year period (other than in Chapter 4)
The notation used in the text is as follows:
-xxx.x
negative numbers in Appendices (and all references to negative percentages
within text)
The Annual Financial Report is based on the style set in the example of a general purpose financial report
for a government in the appendix to Australian Accounting Standard 31 Financial Reporting by
Governments. The styles used in other chapters of this document are generally consistent with those used
in other publications relating to the annual Budget Papers.
212
Appendix C
Financial Report 2006-07