Financial Report
for the State of Victoria
2007-08
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 2008
No. 139 Session 2006-08
TABLE OF CONTENTS
Overview .................................................................................................................................. 1
Chapter 1: Financial objectives and economic conditions .................................................. 7
Financial strategy ....................................................................................................................................8
Economic conditions and outcomes .....................................................................................................15
Chapter 2: General government sector outcome ............................................................... 19
Financial performance ..........................................................................................................................20
Financial position ..................................................................................................................................28
General government sector infrastructure investment ..........................................................................30
Net financial liabilities ............................................................................................................................32
Chapter 3: State of Victoria outcome .................................................................................. 35
Public non-financial corporations sector ...............................................................................................36
Public financial corporations sector ......................................................................................................40
State of Victoria .....................................................................................................................................43
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 .............................. 199
The accrual GFS presentation ............................................................................................................199
Uniform presentation framework .........................................................................................................200
Victoria’s 2007-08 Loan Council Allocation ........................................................................................219
Appendix A: General government sector quarterly financial report ............................... 221
Appendix B: Financial Management Act 1994 – Compliance index ................................ 225
Appendix C: Scope and style conventions ....................................................................... 229
i
ii
OVERVIEW
The Victorian Government is committed to sound financial management, to ensure that Victoria
maintains a strong financial position. A strong financial position and economy are critical to the
achievement of the government’s policy objectives, set out in Growing Victoria Together.
The government’s financial policy objectives and strategies, also articulated in Growing Victoria
Together, are:

maintaining a substantial budget operating surplus that allows for the delivery of the
government’s infrastructure objectives;

delivering world-class infrastructure to maximise economic, social and environmental
benefits;

providing improved service delivery to all Victorians;

providing a fair and efficient tax system that is competitive with other states; and

maintaining state government net financial liabilities at prudent levels.
The 2007-08 Financial Report is an important measure of the government’s financial
management performance against these objectives. It presents the financial outcomes for the
budget and non-budget components of the State of Victoria, and compares end-of-year financial
outcomes with the revised budget. It also incorporates the final Quarterly Financial Report for
2007-08, which covers the general government sector only.
The report demonstrates that the government achieved its financial objectives, including
delivering an operating surplus of at least $100 million and maintaining net financial liabilities
at prudent levels, while delivering world class infrastructure to maximise economic, social and
environmental benefits. The government also met the financial objective, introduced in the
2008-09 Budget, of delivering an operating surplus equivalent to at least one per cent of
revenue.
The report also demonstrates that the Victorian economy continues to perform solidly, and that
sound financial management has enabled the government to provide more services and new
infrastructure, while maintaining the state’s strong fiscal position. This achievement is
particularly notable in the context of increasing financial market instability emanating from the
United States, since July 2007.
In addition to demonstrating the government’s sound financial management, the report
underscores the diverse strengths of the Victorian economy.
The Victorian economy recorded solid economic growth in 2007-08, despite a number of
challenges stemming from global financial volatility, high oil prices and higher interest rates.
Victoria’s gross state product is expected to have grown by a solid 3.25 per cent in 2007-08,
underpinned by a strong 4.2 per cent rise in state final demand.
Victoria’s labour market continued to perform strongly in 2007-08, with strong employment
growth, unemployment at historically low levels and participation at record high levels.
Business investment grew at a double-digit rate in 2007-08.
Financial Report 2007-08
Overview
1
The outlook for future growth is arguably more uncertain, as high oil prices, financial
uncertainty and subdued world economic growth take effect.
Victoria’s growing population necessitates greater ongoing investment in infrastructure and
service delivery, and the government continued to use sound financial management to deliver
world-class infrastructure across the state in 2007-08, significantly adding to Victoria’s real
capital stock.
General government net infrastructure investment
4 500
4 000
3 500
$ million
3 000
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 2007-08
Source: Department of Treasury and Finance
Between 1999-2000 to 2007-08, the government has invested over $21 billion in infrastructure.
At the same time, the government has also provided greater, high-quality services to more
Victorians. These services have delivered better educational outcomes for school-aged children,
significantly improved health outcomes, improved Victoria’s public transport system, and
reduced crime rates, making our community safer.
Another key financial objective of the government is to provide a fair and efficient tax system
that is competitive with other states. Victoria’s competitiveness and productivity growth depend
on reforms and initiatives that reduce business costs and red tape, and support business
innovation and growth.
Victoria’s preferred measure of tax competitiveness is state taxation revenue expressed as a
share of nominal GSP, which aligns the level of taxation revenue to economic activity.
In 2007-08, taxation revenue as a share of nominal GSP was 4.84 per cent, which is
0.34 percentage points (or $897 million) below New South Wales, and broadly consistent with
the Australian average.
2
Overview
Financial Report 2007-08
Taxation revenue as a share of nominal GSP(a)
7.0
per cent of nominal GSP
6.5
6.0
5.5
5.0
4.5
4.0
3.5
1999-00
2001-02
NSW
2003-04
Vic
2005-06
Qld
2007-08
Aust
Sources: Australian Bureau of Statistics, Department of Treasury and Finance and various state budgets.
Note:
(a) For 2007, actual taxation outcomes used for Victoria, budget estimates used for other jurisdictions and
Australian average.
General government sector outcome
The general government sector achieved its financial objective for 2007-08 of delivering an
operating surplus of at least $100 million. The government achieved a net result from
transactions of $1 482 million, compared with a revised estimated result of $996 million in the
2008-09 Budget.
The higher than estimated result reflects higher than expected total income generated by the
ongoing solid performance of the Victorian economy. In particular, higher than anticipated third
party revenue was received from health services (for example, donations, bequests, and
increased patient treatment funded from private health insurance), TAFE institutes and
VicRoads construction activity. Dividends, income tax and rate equivalent revenue was also
$80 million higher than expected, but taxation revenue was $135 million lower than expected.
The higher than expected general government sector outcome also reflects a small net increase
in expenses derived from increased service delivery and third party revenue, offset by lower than
expected expenses derived from factors including an unexpectedly moderate fire season and
lower depreciation expenses from asset projects.
The government is maintaining modest and sustainable levels of net financial liabilities,
consistent with both its triple-A credit rating while maintaining its commitment to the provision
of improved services and infrastructure. General government net financial liabilities as at
30 June 2008 were $20 462 million, or 7.7 per cent of gross state product.
Financial Report 2007-08
Overview
3
Net debt for the general government sector increased by $145 million over the year to
30 June 2008, to a total of $2 182 million, or 0.8 per cent of gross state product. The increase in
net debt has been used to finance infrastructure investment in excess of the cash operating
surplus, consistent with the government’s budget strategy.
25
15
20
12
15
9
10
6
5
3
0
0
1999
2000
2001
2002
2003
2004
2005
2006
2007
per cent of GSP
$ billion
General government net financial liabilities as at 30 June
2008
Other liabilities (net) (LHS)
Superannuation liability (A-IFRS) (LHS)
Net debt (excl. Grow ing Victoria) (LHS)
Net financial liabilities to GSP (%) (RHS)
Net debt plus superannuation liability to GSP (%) (RHS)
Source: Department of Treasury and Finance
Victoria’s triple-A credit rating was reaffirmed by international credit rating agencies Standard
& Poor’s, in May 2008, and Moody’s Investors Service, in April 2008. Both agencies cited
Victoria’s strong fiscal position, modest debt levels and prudent financial management as the
key factors behind the triple-A credit rating.
In addition, Victoria was ranked as the most fiscally transparent state in Australia, by Access
Economics, in April 2008. Victoria achieved the ranking A+, the first and only state in Australia
to do so, demonstrating the state’s leadership in open and accountable government.
State of Victoria outcome
The net result from transactions for the State of Victoria for 2007-08 was $1 452 million, an
increase of $236 million compared with 2006-07. This result was strongly influenced by the
outcomes of the general government sector.
The state’s consolidated statement of financial position for the 2007-08 financial year shows net
assets increased by $5 323 million or 6.2 per cent to $91 650 million. This reflects additional
investment in new infrastructure and revaluation of the existing stock of non-financial assets,
partly offset by falls in the value of financial assets.
4
Overview
Financial Report 2007-08
Net debt for the non-financial public sector, which is made up of the general government sector
and the public non-financial corporations remained stable, falling from $3 978 million at
June 2007 to $3 890 million at June 2008. Net debt as a proportion of gross state product fell
marginally from 1.6 to 1.5 per cent.
Net debt and superannuation liabilities of the non-financial public sector increased by
$2 956 million to $16 849 million, a rise of 21.3 per cent.
Net financial liabilities for the non-financial public sector increased by $3 753 million to
$23 228 million, or 8.7 per cent of gross state product. These increases predominantly reflect an
increase in the valuation of the net superannuation liability as a result of falls in both the
Australian and international equity markets.
Financial Report 2007-08
Overview
5
CHAPTER 1: FINANCIAL OBJECTIVES AND ECONOMIC
CONDITIONS

The government achieved its financial objectives against all measures in 2007-08,
including delivering an operating surplus of at least $100 million in the year.

Victoria’s economy recorded solid growth in 2007-08, despite the adverse challenges
arising from global financial volatility, record high oil prices and rising interest rates.
Growth in Victoria’s gross state product (GSP) is expected to be a solid 3.25 per cent in
2007-08, however in the current climate slower growth is expected.

The labour market continued to perform strongly in 2007-08, with employment increasing
by 2.7 per cent in the year, firmly in line with Budget forecasts. The unemployment rate
fell to near 30-year lows and the participation rate was at near record highs. Yet despite
the tight labour market, annual wage growth was relatively stable at 3.8 per cent.

Good financial management has enabled the government to fund its substantial
infrastructure program and continue to provide much-needed services for the Victorian
community, while maintaining a triple-A credit rating and state taxes at competitive
levels. The strong income growth in 2007-08 also allowed the injection of additional cash
funds into the State’s superannuation schemes.

Net infrastructure spending in 2007-08 in the general government sector increased to a
record $3 927 million. In June 2008 each Victorian was supported in real terms by
$12 341 of public infrastructure, up from $12 202 in June 2007, an additional $139 per
person.

The government continues to provide a tax system that is competitive with other states,
with taxation reform announced in both the 2007-08 and 2008-09 Budgets keeping
Victoria’s taxation revenue as a percentage of nominal GSP below that of New South
Wales.

General government net debt plus superannuation liabilities were $15.1 billion
(5.7 per cent of GSP) as at 30 June 2008, $3.2 billion higher than the previous year. The
increase predominantly reflected a $3.0 billion increase in the valuation of the net
superannuation liability as a result of falls in both the Australian and international equity
markets.

General government net financial liabilities were $20.5 billion (7.7 per cent of GSP) as at
30 June 2008, $4.1 billion higher than the previous year. Apart from the increase in the
superannuation liability, the increase over the year also reflects a $0.5 billion reduction in
income tax equivalent receivables from the public financial corporations sector.
Financial Report 2007-08
Chapter 1
7
FINANCIAL STRATEGY
The Financial Management Act 1994 requires the government to operate in accordance with 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 financial effects on future
generations; and

provide full, accurate and timely disclosure of financial information relating to the activities
of the government and its agencies.
The government’s short and long-term financial objectives as outlined in the 2007-08 Budget are
summarised in Table 1.1. Progress made in 2007-08 against each of the five financial objectives
is discussed in the following sections.
Table 1.1: 2007-08 Financial objectives and strategies
Objective
Operating surplus
Short-term target
Long-term target
At least $100 million in each year (a) Maintain a substantial budget operating
surplus
Infrastructure
Implement strategic infrastructure
projects
Deliver world-class infrastructure to
maximise economic, social and
environmental benefits
Service delivery
Implement the 2006 election
commitments
Provide improved service delivery to all
Victorians
Taxation
Implement reforms
Provide a fair and efficient tax system that
is competitive with other States
Net financial liabilities Maintain a triple-A credit rating
Maintain State government net financial
liabilities at prudent levels
Source: Department of Treasury and Finance
Note:
(a) In the 2008-09 Budget the government announced a new annual operating surplus target of at least
1 per cent of operating revenue each year.
Objective One: Operating Surplus
The general government sector achieved its financial objective of delivering an operating
surplus of at least $100 million this financial year. The net result from transactions is considered
to be the most robust measure of the government’s financial performance under Australian
Accounting Standards. The net result from transactions reflects the financial effect of
government decisions and other factors controlled by government, and exclude actuarial
adjustments and revaluations. By excluding these items, the net result from transactions provides
a clear representation of the State’s underlying financial performance. Other operating statement
measures are discussed in Chapter 2.
8
Chapter 1
Financial Report 2007-08
Table 1.2 shows that the 2007-08 general government net result from transactions was estimated
at $996 million in the 2008-09 Budget, while the actual net result from transactions was
$1 482 million.
Table 1.2: Income and expenses from transactions
($ million)
Income from transactions
Expenses from transactions
Net result from transactions
Source: Department of Treasury and Finance
2007-08
Actual
37 340.3
35 858.6
2007-08
Revised (a)
36 788.1
35 792.1
Change
552.2
66.5
% Change
1.5
0.2
1 481.7
996.0
485.7
48.8
Note:
(a) Revised 2007-08 estimate published in the 2008-09 Budget in May 2008.
The higher than estimated result reflects higher than expected total income, generated by the
ongoing solid performance of the Victorian economy. In particular, higher than anticipated third
party revenue was received from health services (for example, donations, bequests, and
increased patient treatment funded from private health insurance), TAFE institutes and
VicRoads construction activity. Dividends, income tax and rate equivalent revenue was also
$80 million higher than expected. This increased revenue was partly offset by lower taxation
revenue, which was $135 million below the 2007-08 revised estimate figure in the
2008-09 Budget.
The general government sector also recorded a small net increase in expenses derived from
increased service delivery and third party revenue, offset by lower than expected expenses
derived from factors including an unexpectedly moderate fire season and lower depreciation
expenses from asset projects.
Objective Two: Infrastructure
The government’s commitment to deliver world-class infrastructure to enhance social, economic
and environmental benefits across the state continued in 2007-08, with the government
recording its highest ever level of capital expenditure. Victoria’s growing population
necessitates greater ongoing investment in important infrastructure. The provision of an
effective infrastructure base is a key driver of economic growth because it facilitates the
efficient trade and transportation of goods, services and people; supports the delivery of quality
services; and provides facilities that ensure the future development of the state. From 1999-2000
to 2007-08, the government has invested over $21 billion in the delivery of world-class
infrastructure, representing an average investment of over $2.3 billion a year.
Chart 1.1 shows the general government real capital stock per capita as at 30 June 2008. The real
capital stock has steadily trended upward over the past nine years, increasing from $12 202 in
30 June 2007 to $12 341 in 30 June 2008.
Financial Report 2007-08
Chapter 1
9
Chart 1.1: General Government real capital stock per capita as at 30 June(a)
12 500
$ per capita (2007-08 prices)
12 000
11 500
11 000
10 500
10 000
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: Department of Treasury and Finance
Note:
(a) Includes the revaluation of the capital stock, consistent with the 2007-08 and 2008-09 Budget presentation.
Victoria’s continued strong fiscal position has enabled the government to significantly boost
Victoria’s capital assets. The 2007-08 Budget provided funding for new asset investment
projects with a total estimated investment (TEI) of $2.9 billion. This included the biggest school
capital program in Victoria’s history to build, modernise and regenerate schools throughout the
state, and over $450 million spent on various hospital, ambulance and community health capital
works programs.
During 2007-08, significant capital expenditure occurred on the following projects:

Victorian Schools Plan-School and school-ICT projects ($208 million from TEI of
$964 million);

Wimmera Mallee pipeline ($307 million including $169 million from the Commonwealth);

Rectangular Sports Stadium ($79 million from TEI of $212 million);

Transit Cities – Revitalising Central Dandenong ($75 million from TEI of $243 million); and

Melbourne Recital Centre/Melbourne Theatre Company (MRC/MTC) project ($61 million
from TEI of $128 million).
The government also approved a range of new asset initiatives that were announced in the
2007-08 Budget Update, including funding towards:

10
stage 1 of the upgrade of the Goulburn and Murray irrigation systems in the Food Bowl
Modernisation Project (general government contribution of $600 million);
Chapter 1
Financial Report 2007-08

the procurement of metropolitan and regional train rolling stock (TEI of $291 million); and

Fast-tracking the construction of the Wimmera-Mallee pipeline (general government
contribution of $99 million) as well as establishing two new pipelines between Geelong and
Melbourne (general government contribution of $20 million) and between Hamilton and the
Grampians (general government contribution of $10 million).
Objective Three: Service Delivery
The government is continuing to improve the quality, access and equity of services provided to
all Victorians and is continuing to meet the commitments made in Growing Victoria Together,
and the 2007-08 Budget initiatives.
Following the 2007-08 Budget, the government announced further funding for a range of new
initiatives in response to the impact of the drought and floods. These initiatives included:

over $136 million for drought relief, including the provision of water rebates for irrigators
($55 million), On-Farm Productivity Grants ($10 million) and a Catchment Management
Authority Drought Employment Program ($10 million); and

over $70 million for the Gippsland Flood Recovery Package, which includes funding to
rebuild flood-damaged roads and bridges (over $30 million), clean-up works undertaken by
the Department of Sustainability and Environment and local Catchment Management
Authorities ($20 million), and new local government infrastructure projects to improve
streetscapes and upgrade community halls ($3 million).
The government’s investment in key service delivery areas is reaping benefits. Examples of
improved service delivery during 2007-08 include:

Victorian Certificate of Applied Learning (VCAL) student enrolments increased to 14 093,
which was 2 093 above the target of 12 000. In addition, the satisfactory completion rate was
69.4 per cent compared with a target of 50 per cent;

Vocational Education and Training (VET) in Schools student enrolments were 55 249,
compared with a target of 45 000. In addition, 95 per cent of students progressed to further
education, training or work compared with a target progression rate of 90 per cent;

since 1999-2000, over 300 000 additional hospital patients are now being treated each year,
hospitals are employing 8 000 more nurses and 1 800 more doctors, and more assistance is
being provided to people with a disability. Over the same period, the government has
boosted hospital funding by $3.3 billion;

implementation of significant improvements in the public transport system, including the
$115 million Craigieburn rail extension and a new station at Roxburgh Park, improving
service delivery in response to a record 201 million passenger trips in 2007-08; and

increased community safety, with the number of police officers and recruits increasing from
9 432 in June 1999 to 11 277 in June 2008. The crime rate has fallen by 24.5 per cent since
2000-01.
Financial Report 2007-08
Chapter 1
11
Objective Four: Taxation
A key financial objective of the government is to provide a fair and efficient tax system that is
competitive with other states. Victoria’s competitiveness and productivity growth depend upon
reforms and initiatives that reduce business costs and red tape to support business innovation
and growth.
In the 2006-07 Budget Update and 2007-08 Budget, the government continued significant
reform of Victoria’s taxation system which will provide net tax relief to Victorian taxpayers of
$835 million over five years. The measures announced were:

reducing the rate of stamp duty on new passenger vehicles priced between $35 000 and
$57 009 by 40 per cent; and

cutting the top rate of land tax from 3 per cent to 2.5 per cent, cutting the middle rate by
one-third and increasing the tax-free threshold from $200 000 to $225 000.
These reforms were in addition to bringing forward to 1 January 2007 the reduction in the
payroll tax rate from 5.15 per cent to 5.05 per cent, which was scheduled to apply from
1 July 2007.
The 2008-09 Budget provided for further reform of Victoria’s taxation system, including the
following measures (some of which were implemented in 2007-08) estimated to be worth more
than $1 billion:

cutting the top land tax rate from 2.5 per cent to 2.25 per cent;

making an adjustment to land tax thresholds of around 10 per cent;

making an adjustment to stamp duty on land transfer thresholds of around 10 per cent
(saving taxpayers $332 million over four years);

increasing the pensioner and concession cardholder stamp duty concession so that a full
concession is provided to eligible purchases valued up to $330 000. A partial concession is
provided to eligible purchases valued between $330 000 and $440 000; and

introducing a stamp duty exemption for homes transferred into special disability trusts.
Victoria’s preferred measure of tax competitiveness is state taxation revenue expressed as a
share of nominal GSP, as it aligns the level of taxation revenue to economic activity. Taxation
revenue as a share of nominal GSP for Victoria, New South Wales and Queensland, as well as
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 2007-08, taxation revenue as a share of nominal GSP was 4.84 per cent, which is
0.34 percentage points (or $897 million) below New South Wales and broadly consistent with
the Australian average.
Along with tax relief, businesses have also benefited from significant reductions in WorkCover
insurance premiums. The 10 per cent reduction in WorkCover premiums in the 2007-08 Budget
saved employers $167 million, while the 5 per cent reduction detailed in the 2008-09 Budget is
expected to save Victorian employers an additional $88 million in 2008-09.
12
Chapter 1
Financial Report 2007-08
Chart 1.2: Taxation revenue as a share of nominal GSP(a)
7.0
per cent of nominal GSP
6.5
6.0
5.5
5.0
4.5
4.0
3.5
1999-00
2001-02
NSW
2003-04
Vic
2005-06
Qld
2007-08
Aust
Sources: Australian Bureau of Statistics, Department of Treasury and Finance and various state budgets.
Note:
(a) For 2007, actual taxation outcomes used for Victoria, budget estimates used for other jurisdictions and
Australian average.
Another measure of tax competitiveness that is often cited by some other states is taxation
revenue per head of population. In 2007-08, Victoria's taxation per capita was $2 452, which
was lower than the per capita tax burden in New South Wales (by $214), Western Australia (by
$608) and the Australian average (by $63). Making interstate comparisons of tax
competitiveness is a difficult issue and the above chart does not include the impact of various
other considerations. For example, unlike some other states, Victoria does not have access to
mining royalty revenue. Revenue of this type may enable other states to reduce their taxation
revenue and appear more tax competitive.
Objective Five: Net Financial Liabilities
The government is maintaining modest and sustainable levels of net financial liabilities,
consistent with both its triple-A credit rating and its commitment to the provision of improved
services and infrastructure. Victoria’s balance sheet remained strong in 2007-08. Victoria’s
triple-A credit rating was reaffirmed by international credit rating agencies Moody’s Investors
Service (April 2008) and Standard & Poor’s (May 2008). Both agencies cited Victoria’s strong
fiscal position, modest debt levels and prudent financial management as the key factors
supporting the triple-A credit rating.
The 2007-08 result reinforces these positive factors as:

general government net debt of $2.2 billion (0.8 per cent of GSP) in June 2008 remains
lower than the level in June 1999 ($4.8 billion or 3.0 per cent of GSP). During 2007-08, net
debt increased by $145 million reflecting investment in infrastructure modestly exceeding
the cash operating surplus;
Financial Report 2007-08
Chapter 1
13

general government net debt plus superannuation liabilities in 2007-08 was $15.1 billion, or
5.7 per cent of GSP, $3.2 billion higher than the previous year, but significantly lower than
the level in June 1999 (10.3 per cent of GSP). The increase in 2007-08 reflects an increase in
the superannuation liability due to lower than expected investment returns on superannuation
scheme assets; and

net financial liabilities were $20.5 billion (7.7 per cent of GSP) as at 30 June 2008,
$4.1 billion higher than the previous year (see Chart 1.3). Apart from the $3.0 billion
increase in the superannuation liability, the increase over the year largely reflects a
$0.5 billion reduction in income tax equivalent receivables from the public financial
corporations sector.
25
15
20
12
15
9
10
6
5
3
0
0
1999
2000
2001
2002
2003
2004
2005
2006
2007
per cent of GSP
$ billion
Chart 1.3: General government net financial liabilities as at 30 June(a)
2008
Other liabilities (net) (LHS)
Superannuation liability (A-IFRS) (LHS)
Net debt (excl. Grow ing Victoria) (LHS)
Net financial liabilities to GSP (%) (RHS)
Net debt plus superannuation liability to GSP (%) (RHS)
Source: Department of Treasury and Finance
Note:
(a) Superannuation liabilities between 2001 and 2004 are calculated under the previous Australian accounting
standards, whereas from 2005 onwards AASB 119 has been applied.
14
Chapter 1
Financial Report 2007-08
Measures of the Victorian Government’s financial position
There are a number of indicators that have been used by analysts and commentators, and by
government itself, when analysing the financial strength of the Victorian Government. These
measures can be calculated for individual sectors (such as general government), or for broader
classifications of the public sector (such as the non-financial public sector).
Net debt is the sum of those financial liabilities containing a contractual obligation to service
and repay less those financial assets that have a high level of liquidity. The rationale is that, in
a period of financial difficulty, liquid assets would be readily available to redeem debt. In
earlier collections of financial statistics on governments, this was the primary indicator of
fiscal health. As a measure, it is also less subject to variability in its method of calculation or
volatility arising from the application of discount rates.
Net debt plus superannuation liabilities as the name suggests, adds the net superannuation
liability arising from government’s defined benefit superannuation schemes to net debt. This
broader measure of government’s financial commitments was previously referred to in
Victorian publications as ‘net financial liabilities’. Due to changes in classifications arising
from revised Uniform Presentation Frameworks applicable from 2008-09, this shorthand title
now refers to a different aggregate (see below). Victoria has provided this measure for
transparency and continuity reasons.
Net financial liabilities is the broadest aggregate analysed in Victorian Government
publications, adopted under the revised Uniform Presentation Framework. It is defined as total
liabilities less all financial assets (excluding equity).
ECONOMIC CONDITIONS AND OUTCOMES
The global economic environment became significantly weaker throughout 2007-08. The
United States sub-prime mortgage crisis hit early in the year, and soon developed into a much
broader and ongoing international financial crisis. This slowed growth in the United States and
other developed economies. However, uncomfortably high inflation, resulting from rising global
food prices and record high oil prices, has limited the scope for policymakers to stimulate
demand using expansionary monetary policy. Emerging economies, such as India and China,
have continued to grow strongly, albeit at a slightly slower pace.
The Australian economy performed solidly throughout 2007-08, with national gross domestic
product (GDP) increasing 3.7 per cent in the year. The nation continues to benefit from booming
demand for commodities, with the corresponding rise in Australia’s terms of trade supporting
strong income growth. The labour market has been solid, with the unemployment rate near
generational lows. However, this strong growth – after 16 consecutive years of expansion – has
led to rising inflationary pressures well above the Reserve Bank of Australia’s (RBA) target
band. The RBA’s stance on monetary policy tightened significantly over 2007-08, and tighter
financial conditions contributed another 55 basis points to mortgage rates, which reached their
highest level in over a decade.
Victoria’s economy remains resilient, despite these ongoing international and domestic
challenges, with activity underpinned by a rapidly growing population and the need to expand
the economy’s capital stock. Victoria’s GSP is estimated to have grown by 3.25 per cent in
2007-08, reflecting broad-based growth. State final demand increased by 4.2 per cent in the
year, broadly consistent with the 2008-09 Budget forecast.
Business investment grew at a double-digit rate in 2007-08, supported by non-residential
building construction. Consumption growth was robust in the second half of 2007, but eased in
Financial Report 2007-08
Chapter 1
15
the first half of 2008 due to the impact of higher interest rates and petrol prices. Agricultural
output partially recovered from drought conditions in 2007-08. The latest Australian Bureau of
Agricultural and Resource Economics estimate for Victorian winter crop production in 2007-08
was 3.8 million tonnes, 108 per cent higher than the drought-affected 2006-07 crop, but still
below the five-year average. The dairy industry recorded lower volumes in 2007-08 due to
reduced herds, but did benefit from very strong global dairy prices.
Victoria’s labour market continued to perform strongly in 2007-08, with unemployment
continuing to trend downwards (see Chart 1.4). The unemployment rate averaged 4.5 per cent in
2007-08, employment grew by 2.7 per cent and the participation rate reached a record high,
averaging 65.0 per cent in 2007-08.
This strong labour market performance is underpinned by buoyant population growth. The
87 600 (1.7 per cent) increase in the year ending March quarter 2008 was the greatest absolute
and percentage increase in Victoria’s population in at least 35 years. Growth continues to be
supported by net overseas migration, which accounts for more than 60 per cent of Victoria’s
population growth, although in 2007 Victoria also recorded the greatest number of births since
1973.
65.5
9
65.0
8
64.5
7
64.0
6
63.5
5
63.0
4
62.5
3
62.0
2
61.5
1
61.0
0
1997-98
1999-00
2001-02
Participation rate (LHS)
2003-04
2005-06
per cent
per cent
Chart 1.4: Victorian unemployment rate and participation rate
2007-08
Unemployment rate (RHS)
Source: Australian Bureau of Statistics
Inflation became a greater concern throughout 2007-08, with Melbourne’s consumer price index
exceeding expectations by increasing by 3.6 per cent in the year. Rising global commodity
prices and domestic capacity constraints have been the key drivers of higher inflation. Wage
growth has been more stable, and was 3.8 per cent in 2007-08, consistent with the government’s
forecasts. However, higher wages growth remains a risk in an environment of heightened
inflationary expectations and a tight labour market.
16
Chapter 1
Financial Report 2007-08
Looking towards 2008-09, growth in the Victorian economy should remain solid, although there
are downside risks to the forecast 3 per cent expansion in GSP. Weaker global growth in
response to the ongoing financial crisis will impact adversely on export growth. High interest
rates and falling wealth are likely to constrain consumer spending and dwelling investment.
Forward indicators of business investment are positive, although business confidence has
softened. Reflecting this weaker and more uncertain economic environment, the RBA cut
interest rates in September 2008, and financial markets expect further cuts over the coming year.
The government will continue to monitor the national and international economic and financial
environment.
Financial Report 2007-08
Chapter 1
17
CHAPTER 2: GENERAL GOVERNMENT SECTOR OUTCOME

The general government sector achieved its 2007-08 financial objective of delivering an
operating surplus of at least $100 million. The government achieved a net result from
transactions of $1 482 million, compared with a revised estimated net result of
$996 million in the 2008-09 Budget.

The higher than estimated result reflects higher than expected total income generated by
the ongoing solid performance of the Victorian economy. In particular, higher than
anticipated third party revenue was received from health services (for example, donations,
bequests, and increased patient treatment funded from private health insurance), TAFE
institutes and VicRoads construction activity. Dividends, income tax and rate equivalent
revenue was also $80 million higher than expected, but taxation revenue was $135 million
lower than expected.

The higher than expected general government sector outcome also reflects a small net
increase in expenses derived from increased service delivery and third party revenue,
offset by lower than expected expenses derived from factors including an unexpectedly
moderate fire season and lower depreciation expenses from asset projects.

Higher than expected income enabled the government to fund infrastructure investment
from operating cash flows, and also allowed the injection of additional cash funds into the
state’s defined benefit superannuation schemes, allowing future cash payments to be
reduced. Overall, net infrastructure investment spending in 2007-08 was a record
$3.9 billion.

Net debt plus superannuation liabilities was $15.1 billion as at 30 June 2008, $3.2 billion
higher than the previous year. The increase predominately reflected a $3 billion increase in
the valuation of the net superannuation liability due to the impact on superannuation
investments of recent volatility in financial markets.

Net financial liabilities rose $4.1 billion to $20.5 billion in 2007-08. Apart from the
increase in the superannuation liability of $3 billion, other financial assets declined by
$0.6 billion, mainly due to a decrease in receivables.

Total assets rose by $5.6 billion in 2007-08, which more than offset the rise in total
liabilities of $3.7 billion. The government’s strong governance arrangements helped
reduce the impact on the state’s financial position of the continuing financial market
volatility.
Financial Report 2007-08
Chapter 2
19
The general government sector consists of government departments, offices and other bodies
engaged in providing services free of charge or at prices significantly below their cost of
production. It excludes government-owned corporations and other bodies set up to engage in
market activities, which form part of the public financial corporations and public non-financial
corporations sectors.
The general government sector is largely responsible for the delivery of government policy as
set out in the annual State Budget. Each year the government announces its financial objectives,
estimated financial statements, and policy priorities for the coming year in the budget papers. In
the annual Financial Report, the government announces its actual financial results for the year
just ended and compares these with the revised estimates published in the current year’s budget
papers, providing an analysis of any significant variances.
Chapter one of this report presented the government’s progress against its financial objectives.
This chapter analyses the financial performance of the general government sector as reflected in
its financial statements. Chapter three discusses the performance of government-owned
corporations and other bodies.
Information in this chapter is presented in four sections. The first section provides an analysis of
the general government sector’s financial performance as presented in the operating statement,
which summarises the sector’s revenues and expenses for the financial year. The second section
discusses the sector’s financial position as presented in the balance sheet, which summarises the
sector’s assets and liabilities. The third and fourth sections analyse the sector’s infrastructure
investment and net financial liabilities respectively.
FINANCIAL PERFORMANCE
The net result from transactions, which equals revenue from transactions less expenses from
transactions, reflects the financial decisions within the control of government. It excludes items
such as actuarial adjustments and revaluations that result from fluctuations in market values
rather than from the activities of government. The net result from transactions is therefore a
useful measure of the government’s financial management performance.
20
Chapter 2
Financial Report 2007-08
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
2007-08
Actual
2007-08
Revised
Change % Change
12 862.9
759.9
17 210.1
6 507.5
37 340.3
12 997.4
679.8
17 180.7
5 930.3
36 788.1
( 134.5)
80.1
29.4
577.2
552.2
(1.0)
11.8
0.2
9.7
1.5
13 033.8
1 648.0
21 176.9
35 858.6
1 481.7
13 025.9
1 613.0
21 153.2
35 792.1
996.0
7.9
35.0
23.7
66.5
485.7
0.1
2.2
0.1
0.2
48.8
(3 378.1)
(2 782.7)
( 595.4)
21.4
20.9
( 59.9)
80.8
(134.9)
(3 357.2)
(1 875.5)
(2 842.6)
(1 846.7)
( 514.6)
( 28.8)
18.1
1.6
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. Also includes net
gain/(loss) on financial instruments at fair value.
Table 2.1 shows that the 2007-08 net result from transactions was $1 482 million, compared
with the revised estimate published in the 2008-09 Budget Papers of $996 million.
The higher than estimated result reflects higher than expected total income, generated by the
ongoing solid performance of the Victorian economy. In particular, higher than anticipated third
party revenue was received from health services (for example, donations, bequests, and
increased patient treatment funded from private health insurance), fees from international
students to TAFE institutes and from VicRoads construction activity. Dividends, income tax and
rate equivalent revenue was also $80 million higher than expected, although taxation revenue
was $135 million below expectations.
The higher than expected general government sector outcome also reflects a small net increase
in expenses derived from increased service delivery and third party revenue, offset by lower than
expected expenses derived from factors including an unexpectedly moderate fire season and
lower depreciation expenses from asset projects.
Financial Report 2007-08
Chapter 2
21
Taxation
Table 2.2: Taxation
($ 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
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
2007-08
Actual
3 844.8
2007-08
Revised
3 824.1
865.4
40.2
102.6
41.5
1 049.8
871.0
37.6
101.8
40.8
1 051.2
( 5.6)
2.6
0.8
0.7
( 1.4)
( 0.6)
6.8
0.8
1.8
( 0.1)
3 705.6
8.3
20.5
3 734.4
61.5
3 874.5
9.8
20.9
3 905.2
61.6
( 168.9)
( 1.5)
( 0.4)
( 170.8)
( 0.1)
( 4.4)
( 15.5)
( 1.9)
( 4.4)
( 0.2)
345.8
1 001.2
117.3
123.6
6.6
1 594.6
1 155.7
337.3
992.3
127.1
122.6
7.0
1 586.3
1 148.8
8.5
8.9
( 9.8)
1.0
( 0.4)
8.3
6.9
2.5
0.9
( 7.7)
0.8
( 6.0)
0.5
0.6
770.2
572.8
1 343.0
79.1
12 862.9
781.7
565.1
1 346.7
73.4
12 997.4
( 11.5)
7.7
( 3.7)
5.7
( 134.5)
( 1.5)
1.4
( 0.3)
7.8
( 1.0)
Change % Change
20.7
0.5
Taxation revenue for 2007-08 was 1 per cent or $135 million below the 2007-08 revised
estimate. Land transfer duty was 4.4 per cent or $169 million lower then expected, although this
was partially offset by higher than expected revenue from other taxes.
Payroll tax
Payroll tax was consistent with the revised budget figure.
Taxes on immovable property
For the year ending 30 June 2008, land tax revenue totalled $865.4 million, which was
consistent with the revised budget forecast of $871.0 million.
Land tax revenue fell by 12.5 per cent or $124 million in 2007-08 from $989.1 million in
2006-07 due to measures introduced in the 2007-08 Budget that included cutting the top and
middle land tax rates and increasing the tax free threshold.
22
Chapter 2
Financial Report 2007-08
Financial and capital transactions
Stamp duty on land transfer revenue was $3 706 million in 2007-08, $169 million or 4.4 per cent
lower than the revised budget estimate of $3 875 million. The variance principally reflects lower
than expected revenue per transaction consistent with reported declines in property prices.
Property prices softened sooner than anticipated at Budget time. This, combined with a modest
decline in transaction volumes in the June quarter, resulted in the revised budget being more
positive than the market.
Gambling taxes
Total gambling taxation revenue for 2007-08 was broadly consistent with the revised estimates,
with lower than expected casino taxation revenue being offset by higher than expected revenue
from lotteries and other gambling revenue lines. The small year-on-year increase in the
electronic gaming machines revenue line mainly reflects the increase in the Health Benefit Levy
from $3 033.33 per machine to $4 333.33 per machine on 1 July 2007.
Table 2.3: Dividends, income tax and rate equivalent revenue
($ million)
Dividends
Income tax and rate equivalent revenue
Total dividends, income tax and rate equivalent
revenue
Source: Department of Treasury and Finance
2007-08
Actual
360.0
399.9
759.9
2007-08
Revised
358.5
321.3
679.8
Change % Change
1.5
0.4
78.6
24.5
80.1
11.8
Dividends and income tax equivalent receipts are $80.1 million or 11.8 per cent above the
revised estimate, largely as a result of higher than budgeted income tax equivalent receipts from
the Transport Accident Commission and the Victorian WorkCover Authority. In times of
financial market volatility it is extremely difficult to estimate the level of income tax equivalents
of public financial corporations with large investment portfolios.
Grants income
Table 2.4: Grants
($ 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
Financial Report 2007-08
2007-08
Actual
2007-08
Revised
Change % Change
9 263.1
1 877.0
4 842.5
15 982.6
9 399.0
1 865.5
4 717.1
15 981.5
( 135.9)
11.5
125.4
1.1
(1.4)
0.6
2.7
..
186.5
1 041.0
1 227.5
17 210.1
145.7
1 053.5
1 199.2
17 180.7
40.8
( 12.5)
28.3
29.4
28.0
(1.2)
2.4
0.2
Chapter 2
23
General purpose grants
General purpose grants revenue, mainly comprising GST revenue, was 1.4 per cent or
$136 million less than the revised estimate, due to a decline in the GST pool as national
consumption slowed in the latter half of 2007-08. This was offset by additional specific purpose
grants as described below.
Specific purpose grants
Total specific purpose grants (operating and capital), including grants for on-passing, were
$165 million higher than forecast, mainly due to higher than expected grants from the
Commonwealth in the health, sustainability and environment, and primary industries sectors,
including Exceptional Circumstances Relief Payments, Disability Capital Works for Supported
Accommodation, and grants for hospitals.
Total grants
Total grants revenue was broadly consistent with the revised estimate published in the
2008-09 Budget. However, compared to 2006-07, total grants revenue was approximately
ten per cent higher due mainly to higher consumption and an increase in prices flowing into
higher GST revenue.
Sale of goods and services and other income
Table 2.5 shows that, in 2007-08, 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) totalled $6 508 million, 9.7 per cent higher than the
2007-08 revised estimate.
Table 2.5: Sales of goods and services and other income
($ 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
2007-08
Actual
3 081.4
451.6
2 974.4
6 507.5
2007-08
Revised
2 832.2
372.9
2 725.2
5 930.3
Change % Change
249.2
8.8
78.7
21.1
249.2
9.1
577.2
9.7
Note:
(a) Includes fines and regulatory fees, fair value of assets received free of charge and other income.
Sale of goods and services
Major items contributing to the higher than expected sales of goods and services revenue in
2007-08 included:

increased third party revenue from the provision of services to patients with private health
cover; increased third party revenue from the provision of pathology, radiology and other
health services; increased ambulance services revenue; and aged residential income from the
Commonwealth and residents;

increased contributions from the Transport Accident Commission, Victorian WorkCover
Authority and the Commonwealth for the provision of hospital and ambulance services for
the treatment of compensable patients;
24
Chapter 2
Financial Report 2007-08

an increase in Land Titles Office registration fees as a result of higher than anticipated
activity in the property market for the first nine months of the year;

increased third party revenue to schools from the provision of services including schooling
for international students, hire of schools facilities and equipment, and outside school hours
care. This revenue is used by schools to fund operating costs and to purchase items such as
books and specialist equipment and to hold instrumental music classes and extra-curricular
activities;

an increase in revenue to TAFE Institutes primarily from fees from international students, as
a result of an increase in overseas student enrolment numbers in 2007 of approximately
30 per cent;

increased third party revenue from VicRoads construction activity, particularly relating to
on-ramps and access roads related to the EastLink project; and

higher than expected increase in public transport ticket revenues as a result of a 12.7 per cent
increase in patronage during 2007-08.
Interest
Interest revenue in 2007-08 was $452 million, which is $79 million or 21 per cent higher than
the revised estimate of $373 million. This was mainly due to increased cash balances held by
agencies attributable to increased income.
Other income
Other income was higher than the revised estimate due mainly to the following factors:

higher research grants and clinical trial income from the private sector, and donations and
bequests to health services;

an increase in revenue from regulatory fees, mainly due to an increase in court orders for
prior year toll infringements issued by the Infringements Court;

higher than expected non-Traffic Statutory and Court Fines revenue mainly due to Victorian
Electoral Commission (VEC) fines flowing from the last State election; and

higher than anticipated sponsorship and membership of Arts agencies.
Partially offsetting the above factors, traffic camera fines revenue was $22 million or 6 per cent
lower than the revised estimate and $2 million lower than the actual result for 2006-07. This was
mainly due to increased public awareness of cameras, and higher than scheduled camera
downtime arising from increased maintenance requirements and delays transitioning to the new
traffic camera services contract.
Regulatory fee income collected by the Environment Protection Authority has also increased by
$18 million from 2006-07 as prescribed industrial waste levy rates increased significantly on
1 July 2007 to reduce the volume of waste going to landfill.
Expenses from transactions
Table 2.1 shows that expenses for the general government sector for 2007-08 totalled
$35 859 million, which is consistent with the 2007-08 revised budget figure.
Financial Report 2007-08
Chapter 2
25
Employee benefits
Expenditure on employee benefits was consistent with the revised budget estimate. The figure
reflects part-year impacts of the new enterprise bargaining agreements for teachers, nurses,
disability workers and other employees, partially offset in the case of the teachers EBA by
under-expenditure due to industrial action during the negotiation process.
Supplies and services and other expenses
Supplies and services expenses for 2007-08 were $12 561 million, which is consistent with the
revised estimate. This figure reflects: slightly lower than expected purchases of supplies and
consumables due to changes in prevailing circumstances, including a less intensive fire season;
offset by higher than expected spending on schools maintenance; and higher than budgeted
assets provided free of charge. Assets provided free of charge include land given by VicRoads to
EastLink; Docklands land, buildings and other assets transferred from VicUrban to the
Melbourne City Council as part of the municipal transfer; land transferred by the Department of
Sustainability and Environment to the Melbourne Olympic Park Trust for construction of the
new Rectangular Stadium; and VicTrack land in Albury-Wodonga donated by VicTrack to the
Australian Rail Track Corporation for the Albury-Wodonga bypass.
Grants expenditure was higher than anticipated for 2007-08 due to the National Rental
Affordability Scheme payments made in late June, payments for major projects such as
Victorian Water Trust Goulburn Broken and the Central Goulburn Project, and additional water
rebate grants. This higher expenditure was partly offset by delays in payments to private
organisations from the Victorian Property Fund pending building completion of affordable
housing projects and rephasing of Problem Gambling Research payments caused by changing
project milestones.
Other expenses for 2007-08 totalled $224 million, which is 36 per cent higher than the revised
budget figure of $165 million, mostly due to the recognition of bad debts resulting from fine
related enforcement activities. Outstanding debts will continue to be vigorously pursued through
all legal means, however prudent accounting requires that recognition be made for such debts.
Superannuation expense
The state’s superannuation expense is split between transactions and other economic flows as
follows:

the components of the superannuation expense that relate 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 as 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 as a result of investment market performance and changes in the
Commonwealth bond rate that underpins the discount rate used to value the superannuation
liability. In relation to movements in the discount rate, it is important to note that changes in the
reported value of the superannuation liability that arise from movements in the discount rate do
not affect the amount of cash required to fund the liability.
26
Chapter 2
Financial Report 2007-08
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 2007-08, investment earnings on assets invested by the state’s superannuation
schemes were significantly lower than expected. However, this follows a number of years of
higher than expected investment returns and given the long term nature of superannuation
investment, long-term performance is of greater significance than short-term volatility. To
illustrate this point: the Emergency Services Superannuation Scheme experienced a negative
return on investment in 2007-08, but the average annual return over the last five years of
10.9 per cent is still higher than the long term expected return of eight per cent per annum.
Other economic flows
The difference between the net result and the net result from transactions is due to other
economic flows, which include the provision for doubtful debts and revaluation gains and losses
on assets and liabilities; in particular, actuarial gains and losses related to the superannuation
liability. These actuarial gains and losses arise due to factors such as movements in bond rates
and investment returns over which the Government has no direct control.
Including actuarial adjustments and revaluations, the 2007-08 net result was a deficit of
$1 876 million. This was consistent with the revised estimate of a deficit of $1 847 million, with
higher income offset by higher superannuation losses.
Net expenses from other economic flows for 2007-08 are $3 357 million, which is $515 million
or 18 per cent more than the 2007-08 revised estimate of $2 843 million. This was largely due to
lower than expected investment returns on superannuation scheme assets in the latter part of
2007-08, which increased the associated actuarial loss on superannuation assets. This was
partially offset by an increase in the Commonwealth bond rate that underpins the discount rate
used to calculate the value of the superannuation liability in today’s terms. The increase in this
discount rate reduced the underlying value of the superannuation liability by $1 006 million
relative to the 2007-08 revised estimate, which in turn decreased the actuarial loss on
superannuation. The impact of all these items resulted in an actuarial loss on superannuation of
$3 378 million, $595 million higher than the revised estimate in the 2008-09 Budget.
Alternative measures of financial performance
Alternative measures of the general government sector’s financial performance are set out in
Table 2.6. The GFS net operating balance is the conceptual basis of the GFS presentation for
most state budgets and in Victoria is equivalent to the net result from transactions, so this
measure provides a useful comparison of Victoria’s financial performance with other states.
Table 2.6: Summary of alternative measures of financial performance
($ million)
A-GAAP Net result from transaction/ GFS net operating balance
GFS net lending/(borrowing)
Cash surplus/(deficit), excluding finance leases
Net result
Source: Department of Treasury and Finance
2007-08
Actual
1 481.7
413.0
1 286.2
(1 875.5)
2007-08
Revised
996.0
24.3
1 140.1
(1 846.7)
Both the GFS net operating balance and the net result from transactions exclude the effect of
revaluation arising from changes in market prices and changes in the volume of assets.
Financial Report 2007-08
Chapter 2
27
GFS net lending/(borrowing) is the sum of the net operating balance less net acquisitions of
non-financial assets, and was higher than expected for 2007-08 as the net result from
transactions was higher than expected, as is described under Table 2.6 above.
Cash surplus is equal to net cash flows from operating activities less net cash investment in
non-financial assets. The cash surplus in 2007-08 was $1 286 million, which is $146.1 million or
13 per cent higher than expected, due to lower than expected investments in non-financial assets,
partly offset by decreased net cash flows from operating activities.
The net result was higher than expected by $28.8 million or 1.6 per cent, with the higher than
expected net result from transactions offset by superannuation losses from defined benefit
schemes.
FINANCIAL POSITION
Table 2.7: Summary balance sheet
($ million)
Opening
Actual
1 July 2007 30 June 2008
Assets
Capital stock (a)
Financial assets (b)
Other assets
Total assets
Liabilities
Superannuation
Interest-bearing liabilities
Other liabilities
Total liabilities
Net assets
Source: Department of Treasury and Finance
Actual
movement
59 781.6
5 705.5
3 528.6
69 015.7
65 619.3
5 965.1
3 077.1
74 661.6
5 837.7
259.6
( 451.5)
5 645.9
9 899.7
7 194.3
8 256.5
25 350.5
43 665.2
12 926.8
7 801.9
8 364.2
29 092.9
45 568.6
3 027.1
607.7
107.7
3 742.4
1 903.4
Notes:
(a) Capital stock includes property, plant and equipment, intangible assets and other non-current assets.
(b) Financial assets include cash assets, other financial assets and investments accounted for using the equity
method.
Total assets
Total assets rose by $5 646 million in 2007-08, with an increase in the capital stock and the
value of financial assets more than exceeding a decline in other assets. The rise in total assets
more than offset a rise of $3 742 million in total liabilities, resulting in net assets increasing by
$1 903 million. The impact of recent financial market volatility on the general government
sector was most evident in its impact on the superannuation liability, which increased by
$3 027 million from 2006-07. The state’s strong corporate governance arrangements and highly
capitalised financial institutions have helped to minimise the overall impact on financial
markets.
Capital stock
Capital stock rose by $5 838 million in 2007-08. This mainly reflected net new investment, with
the remainder reflecting the impact of valuation changes on the existing capital stock. Further
details on the general government sector’s infrastructure investment are contained in the next
section of this chapter.
28
Chapter 2
Financial Report 2007-08
Financial assets
Financial assets include cash assets, investments, loans and placements. General government
financial assets rose by $260 million in 2007-08. This rise mainly reflects an increase in term
deposits held by departments due to prevailing market conditions, as well as continued strong
operating cash flows during the year, although these were used to fund a substantial portion of
the government’s infrastructure program.
Other assets
Other assets include such items as inventories, receivables and prepayments made. Other assets
fell by $452 million over 2007-08. This reflects a decline in the level of receivables, which
include income tax equivalents from public financial corporations, and receivables associated
with the agreement to encash future City Link concession notes.
Total liabilities
Total liabilities rose by $3 742 million over 2007-08 to $29.1 billion, leaving net assets of the
general government sector (excluding equity investments in other sectors) at $45.6 billion. The
increase in total liabilities was predominantly due to the increase in the superannuation liability,
reflecting the impact of recent financial market volatility on the value of superannuation assets.
Interest-bearing liabilities rose by $608 million to assist in funding the government’s
infrastructure investment and liquidity requirements, consistent with the government’s budget
strategy.
Superannuation liability
The general government sector’s total superannuation liability increased by $3 027 million to
$12 927 million as at 30 June 2008, which is consistent with the revised estimate of
$12 939 million. Along with the standard accrual of benefits during 2007-08, the increase in the
superannuation liability during the period was driven by:

lower than expected investment returns on superannuation scheme assets, which resulted in
an unexpected increase in the liability of $3 billion for the year; and

other items of scheme experience, including adjustments to allow for membership
movements, salary increases and expected future taxation, which resulted in an unexpected
increase in the liability of approximately $700 million during 2007-08.
However, these increases were partially offset by:

an increase in the Commonwealth bond rate that underpins the discount rate used to value
the superannuation liability. The increase in this discount rate during 2007-08 reduced the
underlying value of the superannuation liability by approximately $300 million; and

an additional top-up payment of $400 million that the government made as at 30 June 2008.
This was in addition to the scheduled top-up payment of $335 million that was made during
2007-08.
Financial Report 2007-08
Chapter 2
29
GENERAL GOVERNMENT SECTOR INFRASTRUCTURE INVESTMENT
As shown in Table 2.8, 86 per cent of the 2007-08 infrastructure program was financed by cash
generated by operating activities, with the remainder financed by borrowings.
Table 2.8: Application of cash resources
($ 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
2007-08
Actual
1 481.7
2 395.8
3 877.5
2007-08
Revised
996.0
2 925.7
3 921.7
4 104.0
( 177.0)
3 926.9
253.3
( 157.7)
( 145.0)
4 355.4
( 212.1)
4 156.0
..
22.4
( 256.7)
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.
The increase in net debt of $145 million was primarily due to increased expenditure on the
general government sector’s capital program, which is funded by cash generated by operating
activities as well as by borrowings. The government recorded its highest ever level of capital
expenditure in 2007-08 and this high level of infrastructure investment is forecast to continue in
2008-09.
Table 2.9: Infrastructure investment
($ million)
Purchase of non-financial assets
Education
Human Services
Innovation, Industry and Regional Development
Justice
Planning and Community Development
Premier and Cabinet
Primary Industries
Sustainability and Environment
Transport
Treasury and Finance
Parliament
Regulatory bodies and other part budget funded agencies
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
30
Chapter 2
2007-08
Actual
2007-08
Revised
489.3
674.2
71.4
157.9
20.9
84.5
25.0
95.0
937.4
27.5
6.4
178.8
2 768.4
( 177.0)
1 335.6
3 926.9
620.5
670.4
219.7
169.0
18.8
101.8
15.9
118.6
922.0
8.7
11.2
117.0
2 993.6
( 212.1)
1 374.4
4 156.0
Financial Report 2007-08
Infrastructure investment in the general government sector for 2007-08 mainly focused on
transport, health, and education. Key investments included:

major transport projects including instalment payments for the procurement of new regional
and metropolitan rolling stock; and expenditure associated with the Geelong Ring Road, the
Monash-Westgate Improvement Project, the Calder Highway upgrade, the Safer Roads
Improvement Program, Palmers Road upgrade, and ancillary works for EastLink;

health, aged care and community services, including:

-
the completion of the Knox Development in Wantirna, the Alfred Hospital Psychiatric
Intensive Care Unit in Prahran, the Royal Women's Hospital in Parkville, the Maroondah
Hospital Redevelopment in Ringwood East and the Polwarth Nursing Home
redevelopment in Colac;
-
several state-wide projects including: the Disability Services Strategic Replacement and
Refurbishment Program (SRRP) for Shared Supported Accommodation, the Residential
Aged Care Strategy, Stage 1 of the Metropolitan Food Services Redevelopment and the
State-wide infrastructure renewal program for acute hospitals;
-
work on a number of other significant capital projects including the Western Hospital
Redevelopment (Stage 1) in Footscray, the Warrnambool Hospital Redevelopment, the
Rochester and Elmore District Health Service Redevelopment in Rochester, and the
Placement and Support Residential Facility Renewal Strategy; and
construction of new schools and specialist educational facilities, modernisation of existing
schools, and land acquisition for future education facilities.
Total purchase of non-financial assets for 2007-08 was $2 768.4 million, which was lower than
the revised budget figure of $2 993.6 million by 7.5 per cent. Factors contributing to this
variance include: the Department of Education and Early Childhood Development’s capital
program, relating to lower than budgeted expenditure on school replacement, ICT and
modernisation projects, as well as lower than budgeted Commonwealth receipts for the Investing
in Our Schools program; and the Department of Innovation, Industry and Regional
Development’s capital program, relating mainly to lower than planned expenditure on the TAFE
capital program.
Financial Report 2007-08
Chapter 2
31
Chart 2.1: General government net infrastructure investment
4 500
4 000
3 500
$ million
3 000
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
2007-08
Source: Department of Treasury and Finance
NET FINANCIAL LIABILITIES
The government’s commitment to sound financial management includes maintaining the state’s
financial position at prudent levels in order to maintain Victoria’s triple-A credit rating. Key
measures of the state’s financial position are net debt, and net debt plus superannuation
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 for the non-financial public sector.
Net financial liabilities rose by $4.1 billion during 2007-08, to $20.5 billion, or 7.7 per cent of
gross state product. This increase included a $3.0 billion increase in the superannuation liability,
as well as a $0.6 billion decline in other financial assets.
Victoria’s triple-A long-term local currency and foreign currency debt ratings were re-affirmed
by Moody’s Investors Service in April 2008 and Standard & Poor’s in May 2008. Both credit
ratings agencies cited Victoria’s strong balance sheet, low debt level and record of prudent
financial management as key reasons for their affirmations.
32
Chapter 2
Financial Report 2007-08
Table 2.10: General government net debt and net financial liabilities as at 30 June (a)
($ million)
Opening
Actual
Actual
1 July 2007 30 June 2008 movement % Change
Assets
Cash and deposits
Advances paid
Investments, loans and placements
Total
Liabilities
Deposits held
Advances received
Borrowings
Total
Net debt
Superannuation liabilities
Net debt plus superannuation liabilities
Other liabilities (net) (b)
Net financial liabilities
3 017.7
675.8
2 058.3
5 751.8
2 975.0
726.1
2 322.0
6 023.1
( 42.7)
50.3
263.8
271.3
(1.4)
7.4
12.8
4.7
595.2
4.6
7 189.1
7 788.9
2 037.0
9 899.7
11 936.8
4 456.4
16 393.2
(per cent)
Net debt to GSP
0.8
Net debt plus superannuation liabilities to GSP
4.8
Net financial liabilities to GSP
6.6
Source: Department of Treasury and Finance
371.5
35.5
7 798.1
8 205.2
2 182.0
12 926.8
15 108.8
5 352.8
20 461.6
( 223.7)
30.9
609.1
416.3
145.0
3 027.1
3 172.1
896.3
4 068.4
(37.6)
669.9
8.5
5.3
7.1
30.6
26.6
20.1
24.8
0.8
5.7
7.7
Notes:
(a) See Table 5.5: General government sector balance sheet (GFS basis).
(b) Other net liabilities includes other employee entitlements and provisions and other non-equity liabilities, less
other non-equity assets.
Net debt, which is the standard measure used to assess general government indebtedness, is
determined by deducting liquid financial assets from gross debt. Liquid financial assets are
deducted because they are readily available when necessary to redeem debt.
Net debt increased by $145 million over the year to 30 June 2008 to a total of $2 182 million, or
0.8 per cent of gross state product. The increase in net debt reflects that the cost of the sector’s
infrastructure investment modestly exceeded the cash operating surplus, and the balance was
financed through a small rise in debt levels.
Chart 2.2 shows the trend in net financial liabilities. The superannuation liability was
significantly increased in 2005 by an opening balance adjustment of $4.8 billion due to the
adoption of the Australian equivalent to International Financial Reporting Standards, referred to
as A-IFRS. As previously explained, the increase in 2007-08 is the result of the recent volatility
in financial markets impacting on superannuation investments.
Financial Report 2007-08
Chapter 2
33
25
15
20
12
15
9
10
6
5
3
0
per cent of GSP
$ billion
Chart 2.2: General government net financial liabilities as at 30 June(a)
0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Other liabilities (net) (LHS)
Superannuation liability (A-IFRS) (LHS)
Net debt (excl. Grow ing Victoria) (LHS)
Net financial liabilities to GSP (%) (RHS)
Net debt plus superannuation liability to GSP (%) (RHS)
Source: Department of Treasury and Finance
Note:
(a) Superannuation liabilities between 2001 and 2004 are calculated under the previous Australian accounting
standards, whereas from 2005 onwards AASB 119 has been applied.
34
Chapter 2
Financial Report 2007-08
CHAPTER 3: STATE OF VICTORIA OUTCOME

This chapter provides a comparison of the 2007-08 and the 2006-07 actual financial
results for the public non-financial corporations sector, the public financial corporations
sector and for the State of Victoria.

The net result from transactions for the public non-financial corporations sector decreased
by $266 million to $360 million in 2007-08. The decline is the result of the growth in
income being more than offset by the increase in expenditure, particularly capital asset
charge and supplies and services.

The net result from transactions for the public financial corporations sector improved by
$979 million to a surplus of $750 million in 2007-08. The improvement is largely due to a
reduction in the income tax expense flowing from the decline in financial asset values.

The net result for the public financial corporations sector was a deficit of $1 070 million, a
turnaround of $3 349 million on last year’s surplus of $2 279 million. This was largely due
to the reduction in investment asset values of the sector arising from ongoing financial
market volatility.

The State of Victoria recorded a net result from transactions of $1 452 million. Combining
other economic flows with the net result from transactions produces a net deficit of
$3 107 million. The net deficit was largely driven by actuarial losses associated with
defined benefit superannuation plans, and losses incurred on financial instruments held by
Transport Accident Commission, Victorian WorkCover Authority and Victorian Managed
Insurance Authority.

Cash used to fund investment in infrastructure projects increased by $373 million to
$5 238 million in 2007-08. Of the total amount, $1 586 million relates to water authorities
and the development of infrastructure to increase and improve the delivery of water.

Net debt plus superannuation liabilities was $16.9 billion as at 30 June 2008, $3.0 billion
higher than the previous year. The increase predominately reflects the increase in the net
superannuation liability arising from the decline in the value of superannuation assets
invested by the defined superannuation benefit schemes.

Net financial liabilities rose by $3.8 billion to $23.2 billion in 2007-08. Apart from the
valuation effects on the superannuation liability, there was a reduction in other liabilities
(net). This largely reflects differences in the timing of invoices issued and paid both by
and to government, which fluctuates on balance date from year to year.
Financial Report 2007-08
Chapter 3
35
This chapter provides a comparison of the 2007-08 and 2006-07 actual financial results for the
State of Victoria. The state comprises the general government sector, the public non-financial
corporations (PNFC) sector, which includes the various water, rail and port authorities, and the
public financial corporations (PFC) sector, which includes insurance and other government
owned financial bodies. 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 builds on the discussion contained in Chapter 2 for the general government sector
with a summary discussion of material movements in the PNFC and PFC sectors contributing to
the overall outcome for the state. The actual results for a number of indicators of financial
condition for 2007-08 and key trends over the past 8 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.
PUBLIC NON-FINANCIAL CORPORATIONS SECTOR
The PNFC sector comprises a wide range of entities that provide goods and services (of a
non-financial nature) to the public while meeting commercial principles through cost recovery
via user charges and fees. The most significant of the Victorian PNFCs are those providing
water, housing, transport and port services.
Following the implementation of competition reform during the 1990s, a number of Victorian
PNFCs pay dividends, income tax equivalents, and financial accommodation levies to the
general government sector, ensuring a level playing field with the private sector. Some entities
are provided with transfers from the general government sector to support their operations where
warranted for reasons of public policy, or where market failure means that full cost recovery is
not feasible. The PNFC sector comprises over one third of the total public sector on a whole of
state basis when measured in terms of total assets.
36
Chapter 3
Financial Report 2007-08
Operating Statement
Table 3.1: Summary operating statement – public non-financial corporations
($ million)
Income from transactions
Dividends, income tax and rate equivalent revenue
Interest
Grants
Sale of goods and services
Other income (a)
Total income from transactions
Expenses from transactions
Employee benefits (b)
Depreciation and amortisation
Finance costs
Supplies and services (including capital asset charge)
Grants and transfer payments
Other expenses
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
Actual
2006-07
Actual
2007-08
21.6
107.1
2 052.3
3 375.0
454.3
6 010.3
7.2
112.9
1 958.0
3 536.1
677.0
6 291.0
( 14.4)
5.8
( 94.3)
161.0
222.7
280.8
(66.8)
5.4
(4.6)
4.8
49.0
4.7
671.3
867.1
358.4
3 367.9
107.5
12.5
5 384.6
625.7
769.9
918.8
381.6
3 695.1
152.6
13.0
5 931.0
360.1
98.6
51.7
23.2
327.1
45.1
0.6
546.4
( 265.6)
14.7
6.0
6.5
9.7
42.0
4.7
10.1
(42.5)
5.9
( 19.9)
( 25.8)
n.a.
( 33.3)
638.6
671.9
n.a.
( 27.3)
598.3
618.7
978.8
646.1
380.5
n.a.
63.6
Change % Change
Notes:
(a) Other income includes fines and regulatory fees, fair value of assets received free of charge or for nominal
value, and other income.
(b) Employee benefits includes superannuation related expenses.
(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.
The net result from transactions for the PNFC sector was $360 million in 2007-08, a decrease of
$266 million (or 42.5 per cent) compared with the 2006-07 outcome of $626 million.
Income from transactions
Total income from transactions for the PNFC sector in 2007-08 was $6 291 million, a
$281 million (or 4.7 per cent) increase from 2006-07.
Sales of goods and services
Revenue from the sales of goods and services increased by $161 million (or 4.8 per cent) in
2007-08. Contributing to this increase were:

$32 million increase from the Port of Melbourne Corporation (PoMC), largely reflected by
higher trade volumes;
Financial Report 2007-08
Chapter 3
37

$28 million increase in sales of goods and services from VicForests, due to higher unit prices
and sales volume; and

$26 million increase in sales of goods and services from V/Line Passenger Corporation as a
result of increased passenger numbers.
Grants income
Revenue from grants decreased by $94 million (or 4.6 per cent). The main recipients of the
grants, the Director of Housing and Victorian Rail Track (VicTrack), recorded a decrease of
$255 million and $5 million respectively. The Director of Housing received a one-off additional
grant of $300 million in 2006-07 consistent with a government decision to continue the
development of social housing stock, resulting in a decline in 2007-08. Other major variances
include:

A $54 million increase in grants income in the water sector to fund water infrastructure
investment and development; and

An increase of $22 million by VicUrban for the Revitalising Central Dandenong project.
Other income
Other income increased by $223 million (or 49.0 per cent) to $677 million in 2007-08. This is
largely due to a one-off receipt of land free of charge by Melbourne and Olympic Parks Trust
from the Department of Sustainability and Environment for the construction of the Rectangular
Sports Stadium, and an increase in revenue received by V/Line Passenger Corporation for
reimbursement of maintenance costs incurred in the acquired Regional Network Access
business.
Expenses from transactions
Total expenses from transactions for the PNFC sector in 2007-08 were $5 931 million, a
$546 million (or 10.1 per cent) increase from 2006-07. The main components contributing to the
year-on-year variances are as follows:

Supplies and services (including capital asset charge) were $327 million (or 9.7 per cent)
higher in 2007-08. This consists of a higher capital asset charge incurred by VicTrack due to
an increased asset base, increased expenditure on operating supplies and consumables by
V/Line Passenger Corporation due to the acquisition of the Regional Network Access
business in May 2007, increased expenditure by VicUrban due to higher cost of sales, and
increased harvest and haulage costs by VicForests;

Depreciation and amortisation is $52 million (or 6.0 per cent) higher in 2007-08, due to an
increase in total assets as a result of higher capital expenditure; and

Grants and transfer payments increased by $45 million (or 42.0 per cent) to $153 million in
2007-08, due primarily to an increase in grants provided by the Director of Housing to
housing associations for the development of social housing stock.
Other economic flows
Other gains and losses from other economic flows increased by $672 million to a gain of
$639 million in 2007-08. This is due to both a gain in the value of the derivative financial asset,
and a reduction in the onerous contract liability for the State Electricity Commission of
Victoria (SECV). This is associated with the management of the contracts to supply electricity to
the aluminium smelters at Portland and Point Henry for Alcoa.
38
Chapter 3
Financial Report 2007-08
Financial Position
Table 3.2: Summary balance sheet as at 30 June – public non-financial corporations
($ million)
Actual
2007
Assets
Capital stock (a)
Financial assets (b)
Other assets (c)
Total assets
Liabilities
Superannuation
Interest-bearing liabilities
Provisions
Other liabilities
Total liabilities
Net assets
Source: Department of Treasury and Finance
Actual
Actual
2008 movement
40 516.4
3 311.0
1 495.1
45 322.6
45 707.5
4 328.0
1 478.7
51 514.1
5 191.1
1 017.0
( 16.5)
6 191.6
15.6
4 840.1
1 663.7
3 006.7
9 526.1
35 796.4
32.0
5 607.3
1 399.8
3 382.7
10 421.9
41 092.3
16.5
767.2
( 263.9)
376.0
895.7
5 295.8
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.
(c) Other assets include receivables, prepayments and inventories.
Net assets were $41 092 million in 2007-08, an increase of $5 296 million (or 14.8 per cent)
compared with 2006-07. An increase in total assets of $6 192 million was partly offset by an
increase in total liabilities of $896 million.
The key driver of the increase in total assets was a $5 191 million growth in capital stock,
including:

$2 106 million increase for the Director of Housing largely associated with the revaluation
of land and buildings;

$1 448 million increase in the water sector as a result of increased capital expenditure and
the completion of several projects to upgrade existing assets and capacity, to improve the
delivery of sustainable water supplies and to comply with regulatory obligations and
Environment Protection Authority requirements;

$648 million increase for VicTrack largely associated with instalment payments made for
purchases of rolling stock, capital works on the Caulfield-Dandenong Rail Corridor, and
revaluation of land; and

$542 million increase for Port of Melbourne Corporation largely due to revaluation of assets.
The most significant change in total liabilities is an increase in interest-bearing liabilities of
$767 million largely to fund capital expenditure on water infrastructure.
Financial Report 2007-08
Chapter 3
39
PUBLIC FINANCIAL CORPORATIONS SECTOR
The PFC sector comprises entities that provide financial services in accordance with commercial
principles. Victoria’s PFCs can be categorised into two broad types:

those that provide services to the general public and businesses. This includes the Transport
Accident Commission (TAC), Victorian WorkCover Authority (VWA), Rural Finance
Corporation (RFC), and State Trustees Limited (STL); and

those that provide services predominantly to other government entities. This includes
Treasury Corporation of Victoria (TCV), Victorian Managed Insurance Authority (VMIA),
and Victorian Funds Management Corporation (VFMC).
Operating Statement
Table 3.3: 2007-08 Summary operating statement – public financial corporations
($ million)
Income from transactions
Dividends, income tax and rate equivalent revenue
Interest
Grants
Sale of goods and services
Other income (a)
Total income from transactions
Expenses from transactions
Employee benefits (b)
Depreciation and amortisation
Finance costs
Supplies and services:
Income tax expense/(credit)
Other supplies and services (including capital asset
charge)
Grants and transfer payments
Other expenses
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
Actual
2006-07
Actual
2007-08
658.2
1 285.5
..
2 988.3
32.1
4 964.2
566.5
1 464.9
..
3 049.8
32.0
5 113.2
( 91.8)
179.4
..
61.5
( 0.1)
149.0
(13.9)
14.0
..
2.1
(0.3)
3.0
231.6
15.4
954.1
260.9
18.6
1 122.7
29.3
3.2
168.5
12.7
20.7
17.7
747.1
3 236.9
( 517.1)
3 470.9
(1 264.1)
234.0
(169.2)
7.2
7.7
( 0.1)
5 192.8
( 228.5)
6.9
..
4 363.0
750.3
( 0.8)
0.1
( 829.8)
978.8
(10.1)
(116.1)
(16.0)
(428.3)
..
..
..
..
2 507.1
(1 820.4)
(4 327.5)
(172.6)
2 507.1
2 278.6
(1 820.4)
(1 070.1)
(4 327.5)
(3 348.7)
(172.6)
(147.0)
Change % Change
Notes:
(a) Other income includes fines and regulatory fees, fair value of assets received free of charge or for nominal
value, and other income.
(b) Employee benefits includes superannuation related expenses.
(c) Other gains/(losses and expenses) from other economic flows includes net gain/(loss) from disposal of
physical assets, net gain/(loss) on financial instruments at fair value, and share of net profits of associates
and joint venture partnerships.
40
Chapter 3
Financial Report 2007-08
The net result from transactions for the PFC sector was a surplus of $750 million in 2007-08, an
improvement of $979 million relative to the 2006-07 outcome of negative $229 million. The
result reflects the net impact of a $149 million increase in revenue, and an $830 million decrease
in expenses, largely due to a reduction in the income tax expense flowing from a decline in
financial asset values.
Income from transactions
Total income from transactions for the PFC sector increased by $149 million (or 3.0 per cent) to
$5 113 million in 2007-08. The major factors contributing to the increase include:

Interest income increased by $179 million or (14.0 per cent) to $1 465 million in 2007-08.
This mainly comprises of increased interest revenue earned by VWA, TAC and TCV as a
result of higher cash and fixed interest holdings; and

Sale of goods and services income increased by $62 million (or 2.1 per cent) to
$3 050 million in 2007-08. This is due to an increase in the insurance premiums received by
TAC as a result of the premiums being indexed to the Consumer Price Index (CPI).
Expenses from transactions
Total expenses from transactions for the PFC sector decreased by $830 million (or 16.0 per cent)
to $4 363 million in 2007-08. The main components contributing to the year-on-year variances
include:

Income tax expense decreased by $1 264 million in 2007-08 largely as a result of a reduction
in the income tax expense due to a decline in financial asset values of the TAC and VWA.
This was partly offset by:

Other supplies and services (including capital asset charge) increased by $234 million (or
7.2 per cent) to $3 471 million. This is largely due to a $150 million increase in insurance
claim expense incurred by TAC, VWA, VMIA and a $60 million increase in operating
supplies and consumables; and

Finance costs which increased by $169 million (or 17.7 per cent) to $1 123 million in
2007-08. The majority of these costs were incurred by TCV as a result of increased
borrowings from the bond and short-term money markets.
Net result
In 2007-08, the net result was a deficit of $1 070 million, a turnaround of $3 349 million on last
year’s surplus of $2 279 million. This was entirely due to the reduction in investment asset
values of the sector arising from ongoing financial market volatility. Declines in asset values are
excluded from net result from transactions (which recorded a surplus in 2007-08), as they are
treated as other economic flows.
Financial Position
The PFC sector comprises mainly financial assets and liabilities which are used to provide
financial intermediation and insurance services to both the Victorian Government and the wider
community. The financial assets and liabilities are subject to changes in value due to movements
in debt and equity market prices, and may be quite volatile from year-to-year.
Financial Report 2007-08
Chapter 3
41
The past year has seen some of the most dramatic movements in asset prices for a generation.
Nevertheless the financial position of the state’s PFCs has remained favourable, and they all
remain financially secure. This in part reflects the high levels of capitalisation of the state’s
insurers prior to the commencement of the downturn in financial markets.
TCV is Victoria’s central funding authority. Its primary function is to lend to, and accept
deposits from, government agencies. It funds these operations by issuing debt in financial
markets. In order to minimise interest rate risk exposure only a portion of the state’s debt is
subject to refinancing in any one year.
Table 3.4: Summary of balance sheet as at 30 June – public financial corporations
($ million)
Actual
2007
Assets
Capital stock (a)
Financial assets (b)
Other assets (c)
Total assets
Liabilities
Superannuation
Interest-bearing liabilities
Provisions
Other liabilities
Total liabilities
Net assets
Source: Department of Treasury and Finance
Actual
Actual
2008 movement
540.7
27 618.6
10 523.5
38 682.8
960.2
27 236.1
10 948.0
39 144.4
419.5
( 382.4)
424.5
461.6
..
16 112.3
14 703.9
2 870.7
33 686.9
4 995.9
..
18 273.1
14 919.4
2 187.0
35 379.5
3 764.9
..
2 160.8
215.5
( 683.8)
1 692.6
(1 231.0)
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.
(c) Other assets include receivables, prepayments and inventories.
The net asset position of the PFC sector decreased by $1 231 million to $3 765 million as at
30 June 2008. Total assets increased by $462 million, more than offset by an increase in total
liabilities of $1 693 million.
The key drivers of the growth in total liabilities were borrowings and provisions, due to:

an overall increase in interest-bearing liabilities of $2 161 million, mainly raised through
TCV to fund capital expenditure; and

an increase of $216 million in provisions, which relates mainly to insurance claims of the
TAC and VMIA.
42
Chapter 3
Financial Report 2007-08
STATE OF VICTORIA
Table 3.5: 2007-08 Summary operating statement
($ million)
Income from transactions
Taxation
Dividends, income tax and rate equivalent revenue
Interest
Grants
Sales of goods and services
Other income (a)
Total income from transactions
Expenses from transactions
Employee benefits
Superannuation
Depreciation and amortisation
Finance costs
Capital asset charge and supplies and services
Grants and transfer payments
Other expenses
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 (b)
Total other economic flows
Net result
Source: Department of Treasury and Finance
Actual
2006-07
Actual
2007-08
Change % Change
11 554.9
680.7
1 100.5
15 493.2
8 703.6
2 449.0
39 982.0
12 697.5
576.1
1 292.6
17 108.5
9 122.2
2 758.3
43 555.1
1 142.6
( 104.6)
192.0
1 615.3
418.6
309.3
3 573.1
9.9
(15.4)
17.4
10.4
4.8
12.6
8.9
12 985.8
1 706.0
2 217.2
1 059.7
16 134.2
4 449.9
212.4
38 765.2
1 216.8
13 926.9
1 738.6
2 353.7
1 151.7
18 178.6
4 516.0
237.2
42 102.8
1 452.3
941.1
32.5
136.5
92.1
2 044.4
66.1
24.8
3 337.6
235.5
7.2
1.9
6.2
8.7
12.7
1.5
11.7
8.6
19.4
3 434.1
(3 398.0)
(6 832.0)
(198.9)
3 017.3
(1 160.9)
(4 178.2)
(138.5)
6 451.4
7 668.2
(4 558.9) (11 010.3)
(3 106.6) (10 774.8)
(170.7)
(140.5)
Notes:
(a) Other income includes fines and regulatory fees, fair value of assets received free of charge or for nominal
value, and other income.
(b) 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.
Financial Report 2007-08
Chapter 3
43
Chart 3.1: Summary net result from transactions for 2007-08 by sector
1 600
1 400
1 200
$ million
1 000
800
600
400
200
0
- 200
- 400
General Government
Public Non-Financial
Corporations
2006-07
Public Financial
Corporations
2007-08
Source: Department of Treasury and Finance
Operating Statement
The 2007-08 net result from transactions for Victoria is $1 452 million, $236 million
(or 19.4 per cent) higher than compared with 2006-07.
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 result are due to operations in the PNFC and PFC sectors as
discussed previously in the chapter.
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 exclusion of these items from the net result from
transactions provides a more robust representation of Victoria’s financial performance. This is
the primary reason why the net result from transactions is a more appropriate measure of the
government’s financial management and gives a clearer representation of Victoria’s underlying
position.
Combining other economic flows with the net result from transactions produces a net deficit for
the state of $3 107 million for 2007-08, a decrease of $10 775 million compared to 2006-07.
This result was largely driven by actuarial losses associated with defined benefit superannuation
plans. These losses were primarily due to lower than expected investment performance on the
assets invested by Victoria’s superannuation schemes, offset partially by the impact of an
increase in the bond rate that underpins the discount rate that is required to be used to value
superannuation liabilities. A higher discount rate reduces the present value of the superannuation
liability thus giving rise to an actuarial gain.
44
Chapter 3
Financial Report 2007-08
Other losses from other economic flows were largely due to losses incurred on financial
instruments held by VWA, TAC and VMIA.
As noted above, Victoria’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. Including the impact that movements in the
discount rate have on the superannuation liability under other economic flows ensures that this
source of volatility does not distort Victoria’s measure of financial performance.
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.
Cash flows used to fund investing activities are generated by cash flows from operating and
financing activities. Where the cash surplus from operating activities does not meet the needs of
investing activities, borrowings are used to fund the shortfall (classified as financing activities).
The cash flow surplus provides the government with the ability to finance infrastructure
spending with internally generated cash flows, rather than relying on borrowings.
Infrastructure investment
The consolidated statement of cash flows in Chapter 4 shows purchases of non-financial assets
for 2007-08 were $5 238 million, which demonstrates the amount of cash used to fund
investment in infrastructure projects that were completed and in progress during the year. This is
an increase of $373 million on the 2006-07 amount. Of the total amount, $1 586 million relates
to water authorities and the development of infrastructure to increase and improve the delivery
of water.
Financial Position
Table 3.6: Summary of balance sheet as at 30 June
($ million)
Actual
2007
Actual
Actual
2008 movement
Assets
Capital stock (a)
100 284.3 111 330.5 11 046.3
Financial assets (b)
32 888.3 31 838.7 (1 049.5)
Other assets (c)
6 285.4
6 589.4
304.0
Total assets
139 457.9 149 758.7 10 300.8
Liabilities
Superannuation
9 915.3 12 958.8
3 043.5
Interest-bearing liabilities
15 751.6 17 489.8
1 738.2
Provisions
17 125.3 16 984.6
( 140.7)
Other liabilities
10 338.4 10 675.3
336.9
Total liabilities
53 130.6 58 108.6
4 978.0
Net assets
86 327.3 91 650.1
5 322.8
Source: Department of Treasury and Finance
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.
(c) Other assets include receivables, prepayments and inventories.
Financial Report 2007-08
Chapter 3
45
The state’s consolidated statement of financial position for the 2007-08 financial year shows net
assets increased by $5 323 million (or 6.2 per cent) to $91 650 million, compared with
$86 327 million in 2006-07.
Chart 3.2 shows the variation in net assets by sector, which shows the growth in net assets for
Victoria has largely occurred in the general government sector (discussed in Chapter 2) and the
PNFC sector, discussed previously in this chapter.
Chart 3.2: 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
2007
Public Financial
Corporations
Whole of State
2008
Source: Department of Treasury and Finance
46
Chapter 3
Financial Report 2007-08
Net Debt and Net Financial Liabilities
Table 3.7: Non-financial public sector net debt and net financial liabilities as at 30 June
($ million)
Opening
Actual
1 July 2007 30 June 2008
Assets
Cash and deposits
Advances paid
Investments, loans and placements
Total
Liabilities
Deposits held
Advances received
Borrowings
Total
Net debt
Superannuation liability
Net debt plus superannuation liabilities
Other liabilities (net) (b)
Net financial liabilities
Net debt to GSP
Net debt plus superannuation liabilities to
GSP
Net financial liabilities to GSP
Source: Department of Treasury and Finance
(a)
Actual
movement
% Change
3 614.8
788.8
4 368.8
8 772.3
3 896.7
822.7
5 325.3
10 044.6
281.9
33.9
956.5
1 272.3
7.8
4.3
21.9
14.5
708.8
8.8
12 033.1
12 750.7
3 978.4
9 915.3
13 893.7
5 581.2
19 474.9
(per cent)
1.6
5.6
487.3
41.9
13 405.8
13 934.9
3 890.3
12 958.8
16 849.1
6 378.6
23 227.8
( 221.6)
33.1
1 372.7
1 184.2
( 88.1)
3 043.5
2 955.5
797.4
3 752.9
(31.3)
376.0
11.4
9.3
(2.2)
30.7
21.3
14.3
19.3
7.9
8.7
1.5
6.3
Notes:
(a) See Table 5.7: Non-financial public sector balance sheet (GFS basis).
(b) Other net liabilities includes other employee entitlements and provisions and other non-equity liabilities less
other non-equity assets.
Table 3.7 summarises a number of items from the statement of financial position for the
non-financial public sector (NFPS). The NFPS comprises the general government sector and
public non-financial corporation sectors (i.e. it excludes the public financial corporations sector).
Under the Uniform Presentation Framework adopted by all Australian jurisdictions, this is the
broadest sector classification for which data is presented. It is also the sector for which budget
and forward estimates are published each year, and forms the basis of analysis and interstate
comparisons by the international credit rating agencies.
Financial Report 2007-08
Chapter 3
47
Table 3.8: Net debt as at 30 June
Non-financial public
sector net debt
General government
net debt
1999
2000
2001
6.1
5.2
4.6
4.8
3.9
3.3
Non-financial public
3.9
3.1
sector net debt to
GSP (b)
General government
3.0
2.4
net debt to GSP (b)
Source: Department of Treasury and Finance
2.6
1.8
2002 2003
($ billion)
3.1
3.2
2004
2005 2006 (a)
2007
2008
3.3
3.3
4.2
4.0
3.9
1.7
1.2
1.1
1.2
2.0
2.2
(per cent)
1.6
1.6
1.5
1.6
1.8
1.6
1.5
0.6
0.7
0.5
0.8
0.8
2.0
1.0
0.8
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.
Table 3.8 and Chart 3.3 (over) show the trend in net debt, and net debt as a proportion of GSP
since 2001 for both the general government and non-financial public sectors. They highlight the
current strength of the state’s financial position, with net debt of the NFPS as a proportion of
total economy as low as at any time over the past 7 years. Although there has been a general
downturn in equity prices since July 2007 and extending beyond the balance date of
30 June 2008, the state does not have material exposures to assets whose value needs revising
due to impairment. The reduction in asset values relate to direct exposure to equity markets,
rather than exposure to securitised investments. As investments are held for the long term it is
expected that their value will recover, as equity markets recover over time.
Net debt plus superannuation liabilities rose by $3.0 billion to $16.9 billion in June 2008. The
change predominantly reflects the increase in the net superannuation liability arising from the
decline in the value of superannuation assets invested by the defined superannuation benefit
schemes. Further comment on the impact of this change is provided later in this chapter.
The international ratings agencies, Standard & Poor’s and Moody’s Investor Services consider a
range of financial indicators in assessing a state’s rating. A key indicator is NFPS net debt plus
superannuation liabilities to total operating revenue. For Victoria, this rate increased from
37.1 per cent in 2006-07 to 41.8 per cent in 2007-08 and remains well within the ratio required
to maintain a triple-A rating.
48
Chapter 3
Financial Report 2007-08
Chart 3.3: Net debt as at 30 June
7.0
5.0
6.0
4.0
3.0
4.0
3.0
per cent
$ billion
5.0
2.0
2.0
1.0
1.0
0.0
0.0
1999
2000
2001
2002
2003
2004
2005
2006 (a)
2007
2008 Year
Non-financial public sector net debt (LHS)
General government net debt (LHS)
Non-financial public sector net debt to GSP (RHS) (b)
General government net debt to GSP (RHS) (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.
Using the broader aggregate of net financial liabilities, this rose from $19.5 billion in June 2007
(7.9 per cent of GSP), to $23.2 billion in June 2008 (8.7 per cent of GSP), an increase of
$3.8 billion (see Table 3.7). Apart from the valuation effects on the superannuation liability,
there was a reduction in other liabilities (net). This largely reflects differences in the timing of
invoices issued and paid both by and to government, which fluctuates on balance date from year
to year.
Superannuation liability
The state’s superannuation liability is in respect of public sector defined benefit schemes and
represents the present value of future benefits that scheme members have accrued during past
service offset by the value of scheme assets. As discussed in Chapter 2 and earlier in this
chapter, the value of scheme assets declined during 2007-08 as a result of the financial market
volatility during the year. As many of the assets are held long term to meet superannuation
needs, the value of these investments is anticipated to recover.
In 2000, the state adopted a strategy that was aimed at fully funding the liabilities of the State
Superannuation Fund (SSF) by 2035. The increase in the state’s superannuation liability that
resulted from a fall in the value of the assets held by the state’s public sector superannuation
schemes, means that higher payments may be required to achieve this. However, given the
lengthy period over which the liability is to be funded and the well established full funding
framework, the state remains well placed to meet the 2035 full funding target date. Furthermore,
the state contributed an additional $400 million to the SSF in 2007-08. This was on top of the
scheduled payment of $350 million and is in addition to regular employer contributions that are
made to meet accruing benefits.
Financial Report 2007-08
Chapter 3
49
25
15
20
12
15
9
10
6
5
3
0
0
1999
2000
2001
2002
2003
2004
2005
2006
2007
per cent of GSP
$ billion
Chart 3.4: Net financial liabilities
2008
Other liabilities (net) (LHS)
Unfunded superannuation (A-IFRS) (LHS)
Net debt (excl. Grow ing Victoria) (LHS)
Net financial liabilities to GSP (% RHS)
Net debt plus superannuation liability to GSP (%) (RHS)
Source: Department of Treasury and Finance
Key indicators of financial condition for the State of Victoria are shown in Table 3.9 (over),
which shows data from 2001 to 2008. The item ‘net debt and superannuation liability’ is,
however, based on the NFPS, rather than whole of state basis.
Financial sustainability
During 2007-08 long-term borrowings as a proportion of total assets and GSP continued its
trend decline, although there was a slight increase in the ratios for total borrowings. The ratio of
long-term borrowing to total assets fell from 10.9 per cent in June 2001 to 8.3 per cent in 2008.
This reflects the strong asset growth including both the investment in new infrastructure and
upward revaluation of existing assets as well as timing effects due to the refinancing of maturing
government securities. As a result of financial market volatility, and the need to provide
sufficient liquidity to meet the Government’s payment to the ESSS at the end of the year, there
was an increase in the level of short term borrowings as at 30 June 2008. This in turn meant that
the ratio of total borrowings to GSP increased from 6.4 per cent in 2007 to 6.6 per cent in 2008.
However, the ratio remains below that of 8.4 per cent recorded in 2001.
As discussed earlier, superannuation liabilities rose as a proportion of GSP due to decline in the
value of superannuation assets held to assist meeting scheme requirements. Consequently, net
debt plus superannuation liabilities also rose as a proportion of GSP, despite net debt of the
NFPS being virtually unchanged.
Financial flexibility
The ratio of borrowing costs to income from transactions fell from 2.7 per cent to 2.6 per cent in
2008. Although interest rates did increase during 2007-08, the long term maturity structure of
the borrowings assists in shielding the state from interest rate volatility.
Superannuation expenses relative to income from transactions fell during 2007-08 and remain
lower than in 2001. This mainly reflects a rise in income of the state.
50
Chapter 3
Financial Report 2007-08
Table 3.9: Indicators of financial condition – State of Victoria
2001
Actual
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
Net debt plus superannuation
liability to GSP
Net debt plus superannuation
liability to revenue
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)
(per cent)
2002
2003
Actual Actual
2004
Actual
2005
Actual
2006 (a)
Actual
2007
Actual
2008
Actual
10.9
11.1
10.1
8.9
9.4
8.7
9.2
8.3
15.6
13.5
13.6
13.0
11.8
12.3
11.3
11.7
12.5
13.8
13.2
10.8
8.6
9.9
7.1
8.7
53.6
5.8
49.1
5.7
48.3
5.1
44.1
4.5
39.2
5.1
41.3
4.8
38.1
5.2
38.8
4.7
8.4
6.7
6.9
7.1
7.1
6.7
6.6
5.5
6.5
4.7
6.8
5.5
6.4
4.0
6.6
4.9
9.3
8.7
8.3
7.0
8.3
7.2
5.6
6.3
62.0
57.6
56.1
48.5
57.3
49.5
37.1
41.8
28.7
96.3
25.2
100.3
24.7
100.9
22.4
111.5
21.3
121.0
22.9
92.6
21.5
91.7
21.9
95.6
4.3
2.8
2.9
2.7
2.8
2.7
2.7
2.6
5.0
8.6
8.4
1.0
1.8
5.3
4.3
4.0
9.2
11.4
11.3
3.7
4.5
8.0
6.9
6.6
7.6
7.4
9.7
13.9
5.1
5.3
11.0
3.7
4.4
4.2
4.5
4.3
4.9
5.3
Assets
Growth in non-current
4.9
physical assets (c)
Net asset investment to
3.4
non-current physical assets
Source: Department of Treasury and Finance
Notes:
(a) 2000-2005 ratios are calculated under A-GAAP. 2006 and forward ratios 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 in 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 is not comparable with 2005. Assets in 2005 are 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.
Assets
The government is committed to infrastructure investment across the state. Growth in
non-current physical assets (including land, buildings, water, transport and cultural assets)
increased from 4.9 per cent in 2001 to 11 per cent in 2007-08. Details of the government’s
infrastructure investment program have been provided elsewhere in this report.
Financial Report 2007-08
Chapter 3
51
CHAPTER 4: ANNUAL FINANCIAL REPORT
This chapter contains the audited 2007-08 Financial Report for the State of
Victoria and the Victorian general government sector.
Financial Report 2007-08
Chapter 4
53
REPORT OF THE AUDITOR-GENERAL
54
Chapter 4
Financial Report 2007-08
Financial Report 2007-08
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 2008 and the financial position of
the state and the Victorian general government sector as at 30 June 2008; and
(b)
has been prepared in accordance with Australian Accounting Standards, 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
23 September 2008
56
Chapter 4
Financial Report 2007-08
Consolidated operating statement for the year ended 30 June 2008
($ million)
Notes
Income from transactions
Taxation
3
Fines and regulatory fees
4
Dividends and income tax equivalent and rate
5
equivalent revenue
Interest
32(b)
Grants
6
Sale of goods and services
7
Fair value of assets received free of charge or
8
for nominal consideration
Other income
9
Total income from transactions
Expenses from transactions
Employee benefits
Superannuation
10(a)
Depreciation and amortisation
11
Finance costs
12, 32(c)
Grants and transfer payments
13
Supplies and services (a)
14
Other expenses
Total expenses from transactions
15
Net result from transactions
Income/(expenses) from other economic flows
Net gain/(loss) from disposal of physical
16
assets
Actuarial gains/(losses) of superannuation
10(a)
defined benefit plans (a)
Share of net profits/(losses) of associates and
17
joint venture entities
Net gain/(loss) on financial instruments at fair
value (b)
Other gains/(losses) from other economic
18
flows (a) (b)
Total other economic flows
Net result
The accompanying notes form part of these financial statements.
State of Victoria
General
government sector
2008
2007
2008
2007
12 697.5
871.9
576.1
11 554.9
789.2
680.7
12 862.9
854.3
759.9
11 701.8
765.2
1 422.3
1 292.6
17 108.5
9 122.2
361.7
1 100.5
15 493.2
8 703.6
200.7
451.6
17 210.1
3 081.4
76.7
422.7
15 600.9
2 863.3
21.8
1 524.7
43 555.1
1 459.1
39 982.0
2 043.4
37 340.3
2 087.6
34 885.7
13 926.9
1 738.6
2 353.7
1 151.7
4 516.0
18 178.6
237.2
42 102.8
1 452.3
12 985.8
1 706.0
2 217.2
1 059.7
4 449.9
16 134.2
212.4
38 765.2
1 216.8
13 033.8
1 648.0
1 416.2
460.0
6 515.0
12 561.5
224.2
35 858.6
1 481.7
12 187.2
1 642.9
1 334.7
479.2
6 706.0
11 001.3
200.0
33 551.2
1 334.5
11.1
( 51.8)
16.0
( 29.8)
(3 398.0)
3 434.1
(3 378.1)
3 428.1
7.1
35.6
10.6
5.2
(1 452.0)
3 228.9
( 34.8)
21.7
272.9
( 195.4)
29.1
546.7
(4 558.9)
(3 106.6)
6 451.4
7 668.2
(3 357.2)
(1 875.5)
3 972.0
5 306.5
Notes:
(a) Note 36 provides details of adjustments to correct prior period errors.
(b) 2006-07 figures for gains/(losses) from financial instruments at fair value that were previously included in
Other gains/(losses) from other economic flows, have been re-classified due to the implementation of AASB 7.
Financial Report 2007-08
Chapter 4
57
Consolidated balance sheet as at 30 June 2008
($ 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 (a)
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 (a)
Other provisions
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
22
19
17 (a)
21
23
24
25
26
27
10 (d)
28
29
26
27
10 (d)
28
29
Equity
Reserves (a)
30 (a)
Accumulated funds (a)
30 (b)
Minority Interest
30 (c)
Total equity
The accompanying notes form part of these financial statements.
State of Victoria
General
government sector
2008
2007
2008
2007
3 924.6
3 988.2
145.1
797.1
8 144.3
16 999.3
80.1
17 079.4
2 622.0
3 551.9
180.8
707.8
7 221.0
14 283.4
66.5
14 349.9
2 975.0
2 521.2
87.0
221.1
1 816.3
7 620.6
70.8
7 691.4
3 017.7
2 909.5
99.6
125.2
1 531.9
7 683.9
51.9
7 735.9
1 578.9
1 071.2
1 778.4
1 036.1
177.0
668.1
342.3
629.5
18 698.7 22 009.3
110 627.1 99 619.4
509.4
424.8
194.1
240.1
132 679.3 125 108.0
149 758.7 139 457.9
505.7
65 224.2
237.8
157.4
66 970.2
74 661.6
526.4
59 340.6
235.0
206.0
61 279.8
69 015.7
4 053.4
5 032.1
3 856.7
438.8
2 822.1
1 670.7
17 873.8
4 139.9
2 954.2
3 470.8
340.1
3 050.3
1 686.7
15 642.0
2 600.4
1 544.1
3 615.8
417.0
184.3
507.2
8 868.9
2 631.4
1 088.2
3 245.2
335.0
214.3
507.9
8 022.1
130.9
12 457.7
384.6
12 520.0
14 162.5
579.0
40 234.7
58 108.6
91 650.1
41.0
12 797.3
410.0
9 575.2
14 075.0
590.0
37 488.6
53 130.6
86 327.3
153.3
6 257.8
357.4
12 509.8
481.1
464.6
20 224.1
29 092.9
45 568.6
242.1
6 106.0
375.6
9 564.7
543.4
496.5
17 328.5
25 350.5
43 665.2
43 031.0
48 587.1
32.0
91 650.1
34 674.2
51 653.1
..
86 327.3
Notes:
Refer to Note 33 for commitments and Note 34 for contingent assets and contingent liabilities.
(a) Note 36 provides details of adjustments to correct prior period errors.
58
Chapter 4
Financial Report 2007-08
Consolidated statement of recognised income and expense for the year
ended 30 June 2008
($ million)
Notes
Gain on revaluation of property plant and
equipment (a)
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
Other
Net income recognised directly in equity
30
Net result for the period
Total recognised income and expense for
the period
The accompanying notes form part of these financial statements.
State of Victoria
General
government sector
2008
2007
2008
2007
8 424.6
2 007.8
3 792.3
1 793.1
9.0
11.1
( 1.7)
10.1
23.0
21.5
23.0
21.5
( 60.1)
1.1
( 0.3)
8 397.4
(3 106.6)
5 290.8
39.9
( 1.5)
..
2 078.8
7 668.2
9 747.0
( 35.7)
1.0
..
3 778.9
(1 875.5)
1 903.5
15.0
( 1.6)
..
1 838.1
5 306.5
7 144.6
Note:
(a) Note 36 provides details of adjustments to correct prior period errors.
Financial Report 2007-08
Chapter 4
59
Consolidated cash flow statement for the year ended 30 June 2008
($ million)
Notes
State of Victoria
General
government sector
2008
2007
2008
2007
Cash flows from operating activities
Receipts
Taxation
13 053.9 11 121.9 13 213.2 11 264.4
Fines and regulatory fees
607.2
696.4
596.3
677.9
Grants
16 904.9 15 287.2 17 209.7 15 601.5
Sale of goods and services (a)
6 876.2
7 046.7
3 277.9
3 591.9
Interest received
383.4
369.8
441.0
419.7
Dividends and income tax equivalent and rate
9.7
22.5
766.3
1 429.1
equivalent revenue
Other receipts
1 671.6
1 651.3
2 460.7
1 957.6
Total receipts
39 506.9 36 196.0 37 965.0 34 942.1
Payments
Employee benefits
(13 339.4) (12 586.1) (12 681.4) (11 995.5)
Superannuation
(2 069.5) (1 269.1) (1 999.0) (1 211.6)
Interest paid
( 203.9)
( 237.5)
( 466.7)
( 450.6)
Grants and transfer payments
(4 256.3) (4 250.3) (6 435.3) (6 674.2)
Supplies and services (a)
(15 374.5) (13 790.5) (12 505.1) (11 770.2)
Total payments
(35 243.6) (32 133.5) (34 087.5) (32 102.0)
Net cash flows from operating activities
31 (b)
4 263.3
4 062.5
3 877.5
2 840.1
Cash flows from investing activities
Purchase of non-financial assets
(5 237.7) (4 864.6) (2 768.4) (2 812.5)
Proceeds from sale of non-financial assets
241.3
283.4
177.0
225.8
Net (purchase)/disposal of investments
1 003.7
9.7
( 338.2)
139.0
Net customer loans (granted)/repaid
0.1
33.9
( 16.2)
8.4
Net contribution to other sectors of
..
.. (1 335.6)
( 694.8)
government
Net cash flows from investing activities
(3 992.6) (4 537.5) (4 281.4) (3 134.1)
Cash flows from financing activities
Net borrowings
( 407.8)
( 77.4)
248.6
613.7
Net cash flows from financing activities
( 407.8)
( 77.4)
248.6
613.7
Net cash flows from public financial
31 (c)
1 502.8
583.6
..
..
corporations
Net increase/(decrease) in cash and cash
1 365.6
31.2
( 155.3)
319.7
equivalents
Cash and cash equivalents at beginning of
2 543.8
2 512.6
3 014.6
2 695.0
reporting period
Cash and cash equivalents at end of
31 (a)
3 909.4
2 543.8
2 859.3
3 014.6
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 2007-08
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:
Note 39:
Statement of significant accounting policies.......................................................... 62
Disaggregated information .................................................................................... 86
Taxation ............................................................................................................... 90
Fines and regulatory fees ..................................................................................... 90
Dividends and income tax equivalent and rate equivalent revenue ....................... 91
Grants .................................................................................................................. 91
Sale of goods and services ................................................................................... 91
Fair value of assets received free of charge or for nominal consideration ............. 92
Other income from transactions ............................................................................ 92
Superannuation .................................................................................................... 92
Depreciation and amortisation .............................................................................. 96
Finance costs ....................................................................................................... 96
Grants and transfer payments .............................................................................. 97
Supplies and services ........................................................................................... 97
Total expenses from transactions by sector .......................................................... 98
Net gain/(loss) from disposal of physical assets.................................................... 98
Investments in joint ventures ................................................................................ 99
Other gains/(losses) from other economic flows ................................................. 103
Receivables ........................................................................................................ 104
Inventories .......................................................................................................... 106
Other financial assets ......................................................................................... 107
Non-current assets classified as held for sale ..................................................... 107
Property, plant and equipment ............................................................................ 108
Intangibles .......................................................................................................... 119
Other assets ....................................................................................................... 120
Interest-bearing liabilities .................................................................................... 120
Employee benefits .............................................................................................. 121
Other provisions ................................................................................................. 121
Other liabilities .................................................................................................... 125
Reserves and accumulated funds....................................................................... 125
Cash flow information ......................................................................................... 127
Financial instruments .......................................................................................... 129
Commitments ..................................................................................................... 143
Contingent assets and liabilities .......................................................................... 145
Funds under management .................................................................................. 151
Correction of prior period errors .......................................................................... 152
Subsequent events ............................................................................................. 154
Public Account disclosure ................................................................................... 155
Controlled Entities .............................................................................................. 189
Financial Report 2007-08
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 and
Interpretations of the Australian Accounting Standards Board (AASB), including those
standards formerly referred to as Australian equivalents to International Accounting Standards.
In particular, the financial report applies Australian Accounting Standard AAS 31 Financial
Reporting by Governments. 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 Australian Accounting Standards (AASs), management is required to make
judgements, estimates and assumptions about carrying values of assets and liabilities that are not
readily apparent from other sources. The estimates and associated assumptions are based on
professional judgements derived from historical experience and various other factors that are
believed to be reasonable under the circumstances, the results of which form the basis of
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 AASs
that have significant effects on the financial statements and estimates, with a risk of material
adjustments in the next year, are disclosed throughout the notes to the financial statements.
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 that the carrying amounts do not materially differ from their fair values;

productive trees in commercial native forests, which are recognised at their net market value;

derivative financial instruments, managed investment schemes, certain debt securities,
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 2007-08
Note 1:
Statement of significant accounting policies (continued)
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 2008 and the comparative information presented for the year ended
30 June 2007.
(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.
Financial Report 2007-08
Chapter 4
63
Note 1:
(D)
Statement of significant accounting policies (continued)
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 2008 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.
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 Financial Reporting by Governments, 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 39 in this 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 Whole of Government and General Government
Sector Financial Reporting.
‘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.
Transactions are those economic flows that are considered to arise as a result of policy
decisions, usually interactions between two entities by mutual agreement, and also flows within
an entity, such as depreciation where the owner is simultaneously acting as the owner of the
depreciating asset and as the consumer of the service provided by the asset. Taxation is regarded
as mutually agreed interactions between the government and taxpayers. Transactions can be
in-kind (e.g. assets provided/given free of charge or for nominal consideration) or where the
final consideration is cash.
‘Other economic flows’ are changes arising from market re-measurements. They include gains
and losses from disposals, revaluations and impairments of non-current physical and intangible
assets; actuarial gains and losses arising from defined benefit superannuation plans; fair value
changes of financial instruments and agricultural assets; and depletion of natural assets
(non-produced) from their use or removal.
Net result is equivalent to profit or loss derived in accordance with AASs.
64
Chapter 4
Financial Report 2007-08
Note 1:
(F)
Statement of significant accounting policies (continued)
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 revenue is recognised upon the earlier of either the receipt by the state of a
taxpayer’s self assessment or the time when the taxpayer’s obligation to pay arises, pursuant to
the issue of an assessment.
The types of taxation revenue raised by the state include:

payroll tax;

land tax;

duties levied principally on conveyances, land transfers and rental business;

gambling taxes levied mainly on private lotteries, electronic gaming machines, casino
operations and racing;

insurance duty relating to compulsory third party, life and non-life policies;

insurance company contributions to fire brigades;

motor vehicle taxes, including registration fees and duty on registrations and transfers; 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 financial
report of the state.
Fines and regulatory fees
Revenue is recognised at the time when 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
financial report 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.
Financial Report 2007-08
Chapter 4
65
Note 1:
Statement of significant accounting policies (continued)
Grants revenue
Grants mainly comprise funds provided by the Commonwealth Government 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. Income 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 supplied 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.
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 are therefore reported
separately as other economic flows.
66
Chapter 4
Financial Report 2007-08
Note 1:
Statement of significant accounting policies (continued)
Depreciation and amortisation
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 (with finite useful lives)
Water infrastructure – storage facilities
Water infrastructure – other
Rail infrastructure
Other infrastructure
Useful life
40 to 50 years
30 to 60 years
60 years
90 years
3 to 10 years
100 years
25 to 300 years
25 to 100 years
2 to 50 years
10 to 32 years
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.
Intangible produced assets with finite useful lives are amortised as an expense from transactions
on a systematic (typically straight-line) basis over the asset’s useful life. Amortisation begins
when the asset is available for use, that is, when it is in the location and condition necessary for
it to be capable of operating in the manner intended by management. 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.
Amortisation of intangible non-produced assets is not classified as a transaction and it is
included in the net result as an other economic flow.
Finance costs
Finance costs (other than swap interest which is classified as an other economic flow) are
recognised in the period in which they are incurred, and include:

interest on outstanding borrowings;

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.
Financial Report 2007-08
Chapter 4
67
Note 1:
Statement of significant accounting policies (continued)
Grants and other 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, and personal benefit payments made in cash to individuals. 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 which generally represent cost of goods sold and the day-to-day running
costs, including maintenance costs, incurred in the normal operation of government.
These items are recognised as an expense in the reporting period in which they are incurred. The
carrying amounts of any inventories held for distribution are expensed when distributed.
Other expenses
Bad and doubtful debts are assessed on a regular basis. Those bad debts considered as written
off by mutual consent are classified as a transaction expense. The allowance for doubtful
receivables is adjusted as an other economic flow.
(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, intangible assets, and financial
instruments; actuarial gains and losses from superannuation defined benefit plans; gains and
losses from revaluations of agricultural assets; foreign exchange gains or losses; net swap
interest paid or received; and depletion of natural resources.
Net gain/(loss) from disposal of non-financial assets
Any gain or loss on disposal of non-financial assets is recognised at the date of disposal and is
determined after deducting from the proceeds the carrying value of the asset at that time.
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.
Net gain/(loss) on financial instruments at fair value
Financial assets designated at fair value through profit or loss and held-for-trading are stated at
fair value, and the resultant gain or loss is reported as gain/(loss) on financial instruments at fair
value. The gain/(loss) on financial instruments at fair value excludes dividends or interest earned
on financial assets, which is reported as part of income from transactions.
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Note 1:
(I)
Statement of significant accounting policies (continued)
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.
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 that are
contractual are classified as financial instruments. Taxes receivable and other statutory
receivables are not classified as financial instruments.
Receivables and loans are recognised initially at fair value, net of transaction costs, and are
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.
Other financial assets
The state’s ‘other financial assets’ mainly include equity instruments, managed investment
schemes, term deposits, debt securities, and derivative financial instruments.
The state classifies its ‘other financial assets’ using the following categories: financial assets
designated at fair value through profit or loss; financial assets held-for-trading; loans and
receivables; held-to-maturity investments; and available-for-sale financial assets. The
classification depends on the nature and purpose of financial assets. Management determines the
classification of its ‘other financial assets’ at initial recognition.
Investments are recognised and de-recognised 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.
All ‘other financial assets’ are initially recognised at fair value net of transaction costs, except
for those financial assets designated at fair value through profit or loss or held-for-trading which
are initially measured at fair value. The measurement basis subsequent to initial recognition
depends on the category in which the financial asset has been classified.
Financial Report 2007-08
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69
Note 1:
Statement of significant accounting policies (continued)
Financial assets designated at fair value through profit or loss
The designation of a financial asset at fair value through profit or loss on initial recognition is
determined on the basis that the financial asset forms part of a group of financial assets which is
managed and its performance evaluated by the state on a fair value basis in accordance with
documented risk strategies. Financial assets initially designated at fair value through profit or
loss are subsequently stated at fair value, with any resultant gain or loss recognised in profit or
loss for the period.
Financial assets held-for-trading
Derivative financial instruments with positive fair values are classified as financial assets
held-for-trading. Refer to Note 1(T) for the state’s policy on derivative financial instruments,
including policy on subsequent measurement.
Held-to-maturity investments
Quoted or non-quoted investments with fixed or determinable payments and fixed maturities,
where the state has the positive intent and ability to hold to maturity, are classified as
held-to-maturity. Held-to-maturity investments are subsequently stated at amortised cost using
the effective interest method, less any accumulated impairment losses.
Loans and receivables
Non-quoted investments with fixed or determinable payments, such as term deposits and
unquoted debt securities, are classified as loans and receivables and subsequently recorded at
amortised cost using the effective interest method, less impairment.
The effective interest method is a method that allocates interest income of the financial asset
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 financial assets
Other financial investments held by the state are classified as being available for sale and are
subsequently 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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Statement of significant accounting policies (continued)
Impairment of financial assets
The state assesses at each balance date whether there is objective evidence that a financial asset
or group of financial assets is impaired. All financial assets, except those measured at fair value
through profit and loss, are subject to an annual review for impairment.
An allowance for doubtful receivables is made when there is objective evidence that the entity
may not be able to collect all amounts due. Bad debts are written off when identified.
The amount of the allowance is the difference between the financial asset’s carrying amount and
the present value of estimated future cash flows, discounted at the effective interest rate. The
amount of the impairment loss is recognised in the consolidated operating statement under other
economic flows.
If, with the exception of available-for-sale equity instruments, the amount of the impairment loss
decreases in a subsequent period and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously recognised impairment loss is
reversed through the profit or loss. This reversal is made to the extent that the carrying amount
of the investment at the date the impairment does not exceed what the amortised cost would
have been, had the impairment not been recognised. In respect of available-for-sale equity
instruments, any subsequent increase in fair value after an impairment loss is recognised directly
in equity.
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.
Inventories
Inventories include goods and other property held either for sale, or for distribution at zero or
nominal cost, or for consumption in the ordinary course of business operations.
Inventories held for distribution are valued at cost, adjusted when applicable for any loss of
service potential.
Other 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.
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.
Financial Report 2007-08
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Note 1:
Statement of significant accounting policies (continued)
Property, plant and equipment
Land and buildings are measured initially at cost and subsequently re-valued at the amounts for
which assets could be exchanged between knowledgeable willing parties in an arm’s length
transaction.
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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Statement of significant accounting policies (continued)
Finance leases are recognised as assets and liabilities at amounts equal to the fair value of the
leased property or, if lower, the present value of the minimum lease payment, each determined
at the inception of the lease. The leased asset is 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 is 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 its share of the assets, liabilities and any revenue and expenses of such joint
ventures in the state’s financial statements.
Interests in jointly controlled entities are accounted for in the consolidated financial statements
using the equity method, as applied to investments in associates.
Financial Report 2007-08
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Note 1:
Statement of significant accounting policies (continued)
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.
Intangible assets with finite useful lives are amortised on a systematic basis over the assets’
useful lives, 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 are indications that the intangible assets 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 three and five years.
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Statement of significant accounting policies (continued)
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.
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 re-valued 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.
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 asset (or disposal group) is available for immediate sale in its current condition; and

the sale is highly probable and the asset’s sale (or disposal group’s sale) is expected to be
completed within one year from the date of classification.
An asset classified as held for sale is measured at the lower of carrying amount and fair value
less costs to sell, and is not subject to depreciation.
Impairment of non-financial 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.
Financial Report 2007-08
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Note 1:
Statement of significant accounting policies (continued)
If there is an indication of possible impairment, the assets concerned are tested to determine
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 assets 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.
Revaluation decrements are recognised immediately as other economic flows in the operating
statement, except 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 de-recognition of the
relevant asset.
(J)
Liabilities
Payables
Payables consist predominantly of creditors and other sundry liabilities. Accounts payable
represents 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.
Payables are recognised initially at fair value, net of transaction costs and subsequently
measured at amortised cost.
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Statement of significant accounting policies (continued)
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.
The state classifies its interest-bearing liabilities using the following categories: financial
liabilities designated at fair value through profit or loss; and financial liabilities at amortised
cost. The classification depends on the nature and purpose of the interest-bearing liabilities.
Management determines the classification of its interest-bearing liabilities at initial recognition.
All interest-bearing liabilities are initially recognised at the fair value of the consideration
received less directly attributable transaction costs. The measurement basis subsequent to initial
recognition depends on the category in which the financial liability has been classified.
Financial liabilities designated at fair value through profit or loss
The state’s public borrowings mainly raised through the Treasury Corporation of Victoria are
designated at fair value through profit or loss on the basis that the financial liability forms a
group of financial liabilities which is managed by the state on a fair value basis in accordance
with documented risk strategies.
Financial liabilities designated at fair value through profit or loss are subsequently stated at fair
value, with any resultant gain or loss recognised in profit or loss for the period.
Financial liabilities at amortised cost
All of the state’s finance leases and other interest-bearing arrangements 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.
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 cash flows estimated to
settle the present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be
received from a third party, the receivable is recognised as an asset if it is virtually certain that
recovery will be received and the amount of the receivable can be measured reliably.
Financial Report 2007-08
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Note 1:
Statement of significant accounting policies (continued)
Employee benefits
Provision is made for benefits accruing to employees in respect of wages and salaries, annual
leave and long service leave for services rendered up to the reporting date.
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 the 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 defined benefit superannuation liability or asset 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 based on long-term Commonwealth bonds.
Any past service cost that has not yet been recognised in the operating statement is included in
the superannuation liability.
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.
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Statement of significant accounting policies (continued)
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 exceeds the estimated economic benefits
to be received. Present obligations arising under onerous contracts are recognised as a provision
to the extent that the present obligation exceeds the estimated economic benefits to be received.
The state’s major onerous contractual obligation is for the supply of electricity to 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,
net of transaction costs, and subsequently remeasured at amortised cost. Unearned income
liability includes deferred revenue from concession notes.
Refer to Note 1(T) for the state’s policy on derivative financial instruments.
(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.
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, has a nominal term of 33.5 years expiring 15 January 2034, and EastLink,
which is a tollway with a nominal term of 35 years expiring 30 November 2043.
There is currently no accounting guidance applicable to Grantors on the recognition and
measurement of the right of the state to receive assets from such concession arrangements.
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.
Financial Report 2007-08
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79
Note 1:
(L)
Statement of significant accounting policies (continued)
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.
Where the state has neither transferred nor retained substantially all the risks and rewards or
transferred control, the asset is recognised to the extent of the state’s continuing involvement in
the asset.
Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged,
cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange
or modification is treated as a derecognition of the original liability and the recognition of a new
liability. The difference in the respective carrying amounts is recognised as an ‘other economic
flow’ in the operating statement.
(M)
Reclassification of financial assets and financial liabilities
A financial asset or financial liability is reclassified when, as a result of change in intention or
ability, it is no longer appropriate to measure the asset or liability at amortised cost and therefore
must be reclassified to fair value, or vice versa.
(N)
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 as part of an item of expense. GST input tax credits receivable from, and payable to the
Australian Taxation Office, are included in receivables and other liabilities.
The GST inclusive amount of a receipt or payment is recognised on a gross basis in the cash
flow statement in accordance with AASB 107 Statement of Cash Flows.
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(O)
Statement of significant accounting policies (continued)
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.
(P)
Disaggregated information
In Note 2, the state’s consolidated financial information has been disaggregated amongst 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.
(Q)
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.
(R)
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.
Financial Report 2007-08
Chapter 4
81
Note 1:
(S)
Statement of significant accounting policies (continued)
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.
(T)
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.
Derivative financial instruments are classified as held-for-trading financial assets and liabilities.
They are initially recognised at fair value on the date on which a derivative contract is entered
into 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, are taken directly to profit or loss and
reported in the net gain/(loss) on financial instruments at fair value in other economic flows.
(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 state’s balance sheet.
(V)
New accounting standards and interpretations
Land under roads
A new pronouncement AASB 1051 Land Under Roads provides the option to recognise or not
recognise land under roads acquired before the end of the first reporting period ending on or
after 31 December 2007 (i.e. land under roads acquired up to 30 June 2008). Any such land
under roads acquired subsequently must initially be measured at the cost of acquisition, and may
be re-measured at fair value. This clarifies the situation under transitional provisions in AAS 31
and 31A.
82
Chapter 4
Financial Report 2007-08
Note 1:
Statement of significant accounting policies (continued)
Service concessions
In February 2007, the AASB approved Interpretation 12 Service Concession Arrangements
effective for financial reporting periods beginning on or after 1 January 2009, which is only
applicable to private sector operators and explicitly excludes providing guidance on the
accounting to be applied by public sector grantors.
To address how public sector grantors should account for service concession arrangements, the
AASB constituted a panel to provide advice. That panel made its recommendations to the Board
on 14 December 2007. The AASB decided:
(a)
that the requirements of Interpretation 12 are not obligatory for public sector grantors;
however
(b)
grantors are required to consider Interpretation 12 when developing their accounting policy
under the hierarchy for selecting accounting policies set out in AASB 108 Accounting
Policies, Changes in Accounting Estimates and Errors.
The AASB has issued an Invitation to Comment (ITC16) on the International Public Sector
Accounting Standards Board (IPSASB) Consultation Paper Accounting and Financial Reporting
for Service Concession Arrangements. Responses were due to the AASB by 30 June 2008. The
action to be taken by the IPSASB after consideration of responses, and whether the
AASB would support any resulting standard, is uncertain.
As a result of the above and the continuing uncertainty and lack of applicable accounting
guidance on the recognition and measurement by the state of assets arising from some service
concession arrangements, there has been no change in the state’s policy and those assets are
currently not recognised.
GAAP/GFS convergence
In October 2007, the AASB issued AASB 1049 Whole of Government and General Government
Sector Financial Reporting to converge Australian generally accepted accounting principles
(GAAP) and Government Finance Statistics (GFS) reporting. This Standard is applicable to the
general government and whole of government from 1 July 2008.
Under AASB 1049, separate financial reports are required to be prepared for whole of
government and the general government sector.
Financial Report 2007-08
Chapter 4
83
Note 1:
Statement of significant accounting policies (continued)
Some of the major features required by this new standard in relation to the presentation of these
financial statements include:

an extended operating statement incorporating the former statement of recognised income
and expense (‘comprehensive operating statement’);

items being presented by liquidity order in the balance sheet;

the inclusion of various GFS concepts, including key fiscal aggregates, as an integrated part
of the financial statements;

application of GFS principles and rules where Australian Accounting Standards allow for
optional treatments;

where original budgeted financial statements (typically for the General Government (GG)
sector) have been presented to Parliament, presentation of the original budgeted financial
statements and explanation of variances between actual and budget amounts; and

a glossary of terms included in the notes.
AASB 1049 will introduce a number of changes to the content of the financial statements as
follows:
Comprehensive operating statement:
The comprehensive operating statement will include items previously included in the statement
of recognised income and expense. Income and expenses in the comprehensive operating
statement are classified according to whether or not they arise from ‘transactions’ or ‘other
economic flows’.
Balance sheet:
Items of assets and liabilities in the balance sheet will be ranked in liquidity order and
aggregated into financial and non-financial assets. They will be classified according to GFS
terminology, but retain measurement and disclosure rules under accounting standards. Current
versus non-current assets and liabilities will be disclosed in the notes, where relevant.
Cash flow:
The cash flow statement will classify flows by operating, investing and financing activities in
accordance with AASB 107 Cash Flow Statements. Investing activities will be split between
investing for liquidity management purposes and for policy purposes.
Under AASB 1049 the GG sector report only consolidates entities that are within the GG sector,
using the consolidation procedures within AASB 127 Consolidated and Separate Financial
Statements.
84
Chapter 4
Financial Report 2007-08
Note 1:
Statement of significant accounting policies (continued)
Other sectors of government, that is the PFC and PNFC sectors, are accounted for as an equity
investment measured at the government’s proportional share of the carrying amount of net assets
of the PNFC sector and PFC sector entities before consolidation eliminations. Where the
carrying amount of the entity’s net assets before consolidation eliminations is less than zero the
amount is not included.
AASB 1049 requires that where Australian Accounting Standards allow optional treatments
within their scope only those treatments that align with the principles or rules in the ABS GFS
Manual shall be applied.
Review of Public Sector Accounting Standards
In December 2007, the AASB completed its short term review of AAS 29 Financial Reporting
by Departments and AAS 31 Financial Reporting by Government. In essence, three new
standards were issued, with the remaining requirements within AAS 29 and 31 being relocated
to existing topic-based standards. The newly issued topic-based standards are as follows:

AASB 1050 Administered Items;

AASB 1051 Land under Roads; and

AASB 1052 Disaggregated Disclosures.
These changes come into effect for reporting periods commencing 1 July 2008. It is not
expected that there will be any impacts upon the preparation of financial reports as a result of
these changes.
Borrowing costs
In May 2007, the AASB agreed on amendments to 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. These amendments removed the option of recognising
borrowing costs immediately as an expense, to the extent that they are directly attributable to the
acquisition, construction or production of a qualifying asset.
As GFS reporting will continue to require borrowing costs on qualifying assets to be treated as
current period interest expense an inconsistency will arise between future GAAP and GFS
reporting requirements.
(W)
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.
Financial Report 2007-08
Chapter 4
85
Note 2:
Disaggregated information
Disaggregated operating statement for the year ended 30 June 2008
($ million)
General government
sector
2008
2007
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
12 862.9
854.3
11 701.8
765.2
..
10.1
..
19.8
759.9
451.6
17 210.1
3 081.4
1 422.3
422.7
15 600.9
2 863.3
7.2
112.9
1 958.0
3 536.1
21.6
107.1
2 052.3
3 375.0
76.7
2 043.4
37 340.3
21.8
2 087.6
34 885.7
287.5
379.3
6 291.0
182.0
252.5
6 010.3
13 033.8
1 648.0
1 416.2
460.0
..
6 515.0
12 561.5
224.2
35 858.6
1 481.7
12 187.2
1 642.9
1 334.7
479.2
..
6 706.0
11 001.3
200.0
33 551.2
1 334.5
702.9
67.0
918.8
381.6
893.8
152.6
2 801.3
13.0
5 931.0
360.1
630.0
41.3
867.1
358.4
842.3
107.5
2 525.6
12.5
5 384.6
625.7
( 29.8)
( 4.0)
( 21.3)
3 428.1
( 19.9)
5.9
5.2
( 3.5)
30.4
21.7
546.7
3 972.0
5 306.5
808.7
( 162.5)
618.7
978.8
1 267.8
(1 310.2)
( 27.3)
598.3
Income/(expenses) from other economic flows
Net gain/(loss) from disposal of physical assets
16.0
Actuarial gains/(losses) of superannuation defined
benefit plans (a)
(3 378.1)
Share of net profits of associates and joint venture
entities
10.6
Net gains/(losses) on financial instruments at fair
value
( 34.8)
Other gains/(losses) from other economic flows (a)
29.1
Total other economic flows
(3 357.2)
Net result
(1 875.5)
Note:
(a) Note 36 provides details of adjustments to correct prior period errors.
86
Chapter 4
Public non-financial
corporations
2008
2007
Financial Report 2007-08
Public financial
corporations
2008
2007
Inter-sector eliminations
Consolidated
2008
2007
2008
2007
..
7.5
..
4.2
( 165.4)
..
( 146.9)
..
12 697.5
871.9
11 554.9
789.2
566.5
1 464.9
..
3 049.8
658.2
1 285.5
..
2 988.3
( 757.5)
( 736.8)
(2 059.6)
( 545.1)
(1 421.4)
( 714.8)
(2 160.0)
( 523.1)
576.1
1 292.6
17 108.5
9 122.2
680.7
1 100.5
15 493.2
8 703.6
..
24.5
5 113.2
..
27.9
4 964.2
( 2.6)
( 922.5)
(5 189.5)
( 3.1)
( 908.9)
(5 878.2)
361.7
1 524.7
43 555.1
200.7
1 459.1
39 982.0
237.4
23.6
18.6
1 122.7
..
6.9
2 953.8
..
4 363.0
750.3
209.8
21.8
15.4
954.1
..
7.7
3 983.9
..
5 192.8
( 228.5)
( 47.2)
..
..
( 812.5)
( 893.8)
(2 158.4)
( 137.9)
..
(4 049.8)
(1 139.7)
( 41.2)
..
..
( 732.0)
( 842.3)
(2 371.2)
(1 376.6)
..
(5 363.4)
( 514.8)
13 926.9
1 738.6
2 353.7
1 151.7
..
4 516.0
18 178.6
237.2
42 102.8
1 452.3
12 985.8
1 706.0
2 217.2
1 059.7
..
4 449.9
16 134.2
212.4
38 765.2
1 216.8
( 0.9)
( 0.7)
..
..
11.1
( 51.8)
..
..
..
..
(3 398.0)
3 434.1
..
..
..
..
7.1
35.6
(2 225.9)
406.3
(1 820.4)
(1 070.1)
1 939.7
568.1
2 507.1
2 278.6
..
..
..
(1 139.8)
( 0.4)
..
( 0.4)
( 515.2)
(1 452.0)
272.9
(4 558.9)
(3 106.6)
3 228.9
( 195.4)
6 451.4
7 668.2
Financial Report 2007-08
Chapter 4
87
Note 2:
Disaggregated information (continued)
Disaggregated balance sheet as at 30 June 2008
($ million)
General government
sector
2008
2007
Current assets
Cash and cash equivalents
Receivables
Prepayments
Inventories
Other financial assets
2 975.0
2 521.2
87.0
221.1
1 816.3
7 620.6
70.8
7 691.4
3 017.7
2 909.5
99.6
125.2
1 531.9
7 683.9
51.9
7 735.9
Public non-financial
corporations
2008
2007
921.7
771.3
32.6
576.0
1 271.3
3 573.0
9.4
3 582.3
593.9
534.9
55.0
582.5
1 395.2
3 161.5
14.6
3 176.2
Non-current assets classified as held for sale
Total current assets
Non-current assets
Receivables
177.0
342.3
89.3
308.1
Investments accounted for using the equity method
668.1
629.5
403.1
406.6
Other financial assets (b)
505.7
526.4
1 731.9
915.4
Property, plant and equipment (a)
65 224.2
59 340.6
45 356.3
40 235.2
Intangibles
237.8
235.0
208.2
160.0
Other assets
157.4
206.0
143.0
121.2
Total non-current assets
66 970.2
61 279.8
47 931.8
42 146.4
Total assets
74 661.6
69 015.7
51 514.1
45 322.6
Current liabilities
Payables
2 600.4
2 631.4
979.4
896.1
Interest-bearing liabilities
1 544.1
1 088.2
650.6
501.5
Employee benefits
3 615.8
3 245.2
195.0
179.3
Superannuation (a)
417.0
335.0
21.8
5.1
Other provisions
184.3
214.3
316.9
559.4
Other liabilities
507.2
507.9
142.2
91.1
Total current liabilities
8 868.9
8 022.1
2 305.8
2 232.4
Non-current liabilities
Payables
153.3
242.1
11.2
13.2
Interest-bearing liabilities (b)
6 257.8
6 106.0
4 956.7
4 338.6
Employee benefits
357.4
375.6
21.1
27.4
Superannuation (a)
12 509.8
9 564.7
10.2
10.5
Other provisions
481.1
543.4
1 083.0
1 104.4
Other liabilities
464.6
496.5
2 033.9
1 799.8
Total non-current liabilities
20 224.1
17 328.5
8 116.1
7 293.8
Total liabilities
29 092.9
25 350.5
10 421.9
9 526.1
Net assets
45 568.6
43 665.2
41 092.3
35 796.4
Equity
Reserves (a)
29 240.4
24 352.3
13 502.7
10 175.8
Accumulated funds (a)
16 296.2
19 312.9
27 589.6
25 620.6
Minority Interest
32.0
..
..
..
Total equity
45 568.6
43 665.2
41 092.3
35 796.4
Notes:
(a) Note 36 provides details of adjustments to correct prior period errors.
(b) Elimination methodology for these items within the Public Financial Corporations sector has changed
between 2007 and 2008, with no effect on the consolidated balances.
88
Chapter 4
Financial Report 2007-08
Public financial
corporations
2008
2007
Inter-sector eliminations
Consolidated
2008
2007
2008
2007
3 166.7
1 918.1
25.5
..
7 600.0
12 710.2
..
12 710.2
1 448.8
1 444.1
26.2
..
5 580.1
8 499.2
..
8 499.2
(3 138.8)
(1 222.4)
..
..
(2 543.3)
(6 904.6)
..
(6 904.6)
(2 438.5)
(1 336.7)
..
..
(1 286.2)
(5 061.3)
..
(5 061.3)
3 924.6
3 988.2
145.1
797.1
8 144.3
16 999.3
80.1
17 079.4
2 622.0
3 551.9
180.8
707.8
7 221.0
14 283.4
66.5
14 349.9
9 004.5
..
16 469.4
50.7
63.4
846.1
26 434.1
39 144.4
9 053.2
..
20 589.6
47.7
29.9
463.2
30 183.6
38 682.8
(7 691.9)
..
( 8.4)
( 4.1)
..
( 952.4)
(8 656.8)
(15 561.4)
(7 925.2)
..
( 22.1)
( 4.1)
..
( 550.4)
(8 501.8)
(13 563.1)
1 578.9
1 071.2
18 698.7
110 627.1
509.4
194.1
132 679.3
149 758.7
1 778.4
1 036.1
22 009.3
99 619.4
424.8
240.1
125 108.0
139 457.9
1 019.2
8 223.8
45.9
..
2 320.9
1 056.8
12 666.7
717.3
5 622.9
46.3
..
2 276.6
1 579.2
10 242.3
( 545.7)
(5 386.4)
..
..
..
( 35.5)
(5 967.6)
( 104.9)
(4 258.4)
..
..
..
( 491.4)
(4 854.7)
4 053.4
5 032.1
3 856.7
438.8
2 822.1
1 670.7
17 873.8
4 139.9
2 954.2
3 470.8
340.1
3 050.3
1 686.7
15 642.0
0.2
10 049.3
6.1
..
12 598.5
58.7
22 712.8
35 379.5
3 764.9
0.1
10 489.4
7.0
..
12 427.2
520.9
23 444.6
33 686.9
4 995.9
( 33.8)
(8 806.1)
..
..
..
(1 978.2)
(10 818.1)
(16 785.8)
1 224.4
( 214.4)
(8 136.8)
..
..
..
(2 227.1)
(10 578.3)
(15 433.0)
1 869.8
130.9
12 457.7
384.6
12 520.0
14 162.5
579.0
40 234.7
58 108.6
91 650.1
41.0
12 797.3
410.0
9 575.2
14 075.0
590.0
37 488.6
53 130.6
86 327.3
151.6
3 613.3
..
3 764.9
146.1
4 849.8
..
4 995.9
136.3
1 088.0
..
1 224.4
..
1 869.8
..
1 869.8
43 031.0
48 587.1
32.0
91 650.1
34 674.2
51 653.1
..
86 327.3
Financial Report 2007-08
Chapter 4
89
Note 3:
Taxation
($ million)
State of Victoria
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
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
Note 4:
2008
3 797.7
2007
3 437.5
General
government sector
2008
2007
3 844.8
3 478.7
830.3
40.2
102.6
41.5
1 014.6
961.2
37.8
95.5
39.6
1 134.1
865.4
40.2
102.6
41.5
1 049.8
989.1
37.8
95.5
39.6
1 162.0
3 705.6
8.3
..
3 713.8
..
2 961.4
43.7
..
3 005.0
..
3 705.6
8.3
20.5
3 734.4
61.5
2 961.4
43.7
16.0
3 021.0
60.2
345.8
1 001.2
117.3
123.6
6.6
1 594.6
1 155.7
330.1
932.4
117.8
122.2
5.9
1 508.4
1 094.9
345.8
1 001.2
117.3
123.6
6.6
1 594.6
1 155.7
330.1
932.4
117.8
122.2
5.9
1 508.4
1 094.9
769.1
572.8
1 341.9
79.1
12 697.5
726.2
552.2
1 278.4
96.7
11 554.9
770.2
572.8
1 343.0
79.1
12 862.9
727.7
552.2
1 279.8
96.7
11 701.8
Fines and regulatory fees
($ million)
State of Victoria
2008
436.9
105.7
329.3
871.9
Fines
Motor vehicle regulatory fees
Other regulatory fees
Total fines and regulatory fees
90
Chapter 4
2007
406.5
104.8
277.9
789.2
General
government sector
2008
2007
434.3
405.6
105.7
104.8
314.3
254.8
854.3
765.2
Financial Report 2007-08
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
2008
576.1
..
576.1
2007
680.7
..
680.7
General
government sector
2008
2007
360.0
554.3
399.9
868.0
759.9
1 422.3
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
2008
2007
2008
2007
9 263.1
1 877.0
4 834.1
15 974.2
8 583.6
1 771.0
4 279.2
14 633.8
9 263.1
1 877.0
4 842.5
15 982.6
8 583.6
1 771.0
4 291.1
14 645.7
186.5
947.8
1 134.2
17 108.5
174.6
684.7
859.3
15 493.2
186.5
1 041.0
1 227.5
17 210.1
174.6
780.6
955.3
15 600.9
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 2007-08
2008
458.4
8 663.8
9 122.2
Chapter 4
2007
422.9
8 280.7
8 703.6
General
government sector
2008
2007
48.6
47.4
3 032.9
2 815.9
3 081.4
2 863.3
91
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:
2008
8.0
100.2
253.5
361.7
2007
4.2
20.3
176.3
200.7
General
government sector
2008
2007
0.4
1.4
0.9
9.9
75.4
10.6
76.7
21.8
Other income from transactions
($ million)
State of Victoria
General
government sector
2008
2007
893.8
842.3
42.5
39.8
20.4
20.9
211.2
172.6
..
82.9
3.1
3.0
872.6
926.0
2 043.4
2 087.6
2008
2007
Inter-sector capital asset charge
..
..
Royalties
44.4
41.9
Rents
76.3
70.2
Donations and gifts
228.3
185.5
Forgiveness of liability
..
82.9
Other non-property rental
4.6
4.3
Other miscellaneous income (a)
1 171.2
1 074.3
Total other income
1 524.7
1 459.1
Note:
(a) Other miscellaneous income mainly comprises:
–
$872.6 million sourced from the general government sector, represented by own source revenue for
schools, TAFEs, hospitals and art institutions, unclaimed monies and refunds received by various
departments (2007: $926.0 million);
–
$302.8 million sourced from the public non-financial corporations sector, mainly from reimbursements
and contributions from developers to water authorities (2007: $186.9 million); and
–
within the public financial corporations sector, revenue of $24.5 million recovered from self insurers by
the Victorian WorkCover Authority (2007: $27.9 million).
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 superannuation liability is the responsibility of the state and is recognised accordingly.
92
Chapter 4
Financial Report 2007-08
Note 10: Superannuation (continued)
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 $13.0 billion superannuation liability recognised on the state’s balance sheet, more than
99 per cent is recorded in the general government sector.
The superannuation liabilities of agencies for which the state is not responsible, such as
universities, are not reflected in the balance sheet.
(a)
Superannuation expense recognised in the operating statement
($ million)
State of Victoria
2008
2007
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
a) Superannuation expense from transactions
b) Superannuation expense from other economic flows
Total superannuation expense
(b)
652.8
..
1 782.0
(1 450.6)
( 14.5)
3 398.0
4 367.7
680.4
..
1 712.0
(1 293.4)
( 14.5)
(3 434.1)
(2 349.5)
722.7
46.2
768.9
5 136.6
578.6
42.9
621.5
(1 728.0)
1 738.6
3 398.0
5 136.6
1 706.0
(3 434.1)
(1 728.0)
Reconciliation of the present value of the defined benefit obligation
($ million)
State of Victoria
2008
2007
29 376.0 30 352.3
652.8
680.4
1 782.0
1 712.0
..
..
240.6
157.9
392.5 (1 882.8)
(2 417.3) (1 643.9)
30 026.6 29 376.0
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
Financial Report 2007-08
Chapter 4
93
Note 10: Superannuation (continued)
(c)
Reconciliation of the fair value of superannuation plan assets
($ million)
State of Victoria
2008
2007
19 499.9 17 471.9
1 450.6
1 293.4
(3 005.5)
1 551.3
1 324.2
669.3
240.6
157.9
(2 417.3) (1 643.9)
17 092.5 19 499.9
Opening balance of plan assets
Expected return on plan assets
Actuarial gains/(losses)
Employer contributions
Contributions by plan participants
Benefits paid (including tax paid)
Closing balance of plan assets
(d)
Reconciliation of the superannuation liabilities
($ million)
State of Victoria
2008
2007
ESSS
Defined benefit obligation
27 124.7 27 027.1
Tax liability (a)
1 132.5
596.3
Plan assets
(15 697.4) (18 019.3)
Unrecognised past service cost (b)
24.7
39.2
Net liability/(asset)
12 584.5
9 643.3
Other funds (c)
Defined benefit obligation
1 757.1
1 744.8
Tax liability (a)
12.2
7.9
Plan assets
(1 395.0) (1 480.7)
Unrecognised past service cost (b)
..
..
Net liability/(asset)
374.3
272.0
Total unfunded superannuation
Defined benefit obligation
28 881.8 28 771.9
Tax liability (a)
1 144.7
604.2
Plan assets
(17 092.4) (19 499.9)
Unrecognised past service cost (b)
24.7
39.2
Unfunded superannuation liability
12 958.8
9 915.3
Represented by:
Current liability
438.8
340.1
Non-current liability
12 520.0
9 575.2
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.
94
Chapter 4
Financial Report 2007-08
Note 10: Superannuation (continued)
Superannuation assumptions
Victorian statutory superannuation Actuary
funds
Emergency Services and State
Super
Mercer (a)
Constitutionally Protected
Schemes
Mercer (a)
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
Expected return on assets (b)
Discount rate (c)
Wages growth (d)
Inflation rate
Expected return on assets (b)
Discount rate (c)
Wages growth (d)
Inflation rate (e)
Per cent per annum
2008
8.00
6.54
4.00
2.50
6.54
4.00
n/a
8.00
6.54
4.00
n/a
6.00
6.54
4.00
2.50
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
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 2008
and is not necessarily the rate assumed for 2007-08.
(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 growths in this table are actuarial assumptions and do not reflect the Government’s wages policy.
(e) This is the long-term inflation assumption based on the expected rate of increase in the benefits payable by
each scheme. In the short-term, inflation of 3.5 per cent and 3.0 per cent a year has been assumed for 2009
and 2010 respectively.
(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 class by the target allocation of assets to each class, as depicted in the
table below.
Target asset allocation
Asset class
Per cent
2008
2007
30.3
34.6
26.1
28.7
15.8
8.7
2.4
5.2
10.5
9.8
9.4
11.1
5.5
1.9
100.0
100.0
Domestic equity
International equity
Domestic debt assets
International debt assets
Property
Cash
Other (inc. private equity, hedge funds and infrastructure)
Total
Financial Report 2007-08
Chapter 4
95
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
2008
2007
2008
2007
669.4
1 055.4
350.6
72.0
2 147.5
596.1
1 016.8
335.0
66.5
2 014.5
439.5
402.9
347.8
71.2
1 261.4
365.2
423.7
332.4
65.6
1 187.0
73.0
55.2
77.9
206.2
2 353.7
81.4
65.3
56.0
202.7
2 217.2
35.7
52.0
67.2
154.9
1 416.2
44.4
61.3
41.9
147.7
1 334.7
Note 12: Finance costs
($ million)
State of Victoria
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
96
Chapter 4
2008
734.1
87.8
176.5
..
153.4
1 151.7
2007
674.6
74.2
176.5
22.2
112.1
1 059.7
General
government sector
2008
2007
310.3
320.2
28.2
21.3
90.9
86.8
0.8
24.5
29.9
26.4
460.0
479.2
Financial Report 2007-08
Note 13: Grants and transfer payments
($ million)
State of Victoria
2008
79.8
603.9
3 811.5
..
20.9
4 516.0
Commonwealth Government
Local Government
Private sector
Grants within the Victorian Government
Other
Total grants and transfer payments
2007
96.4
589.9
3 748.1
..
15.6
4 449.9
General
government sector
2008
2007
79.5
95.9
603.9
589.9
3 673.8
3 663.6
2 137.0
2 341.0
20.9
15.5
6 515.0
6 706.0
Note 14: Supplies and services
($ million)
State of Victoria
General
government sector
2008
2007
6 089.4
5 779.8
4 550.4
4 221.2
22.0
30.8
757.9
703.9
233.2
188.9
532.0
62.1
376.6
14.6
12 561.5 11 001.3
2008
2007
Purchase of supplies and consumables
8 015.0
7 539.5
Purchase of services
5 071.5
4 604.9
Insurance claims expense
2 744.1
2 605.1
Maintenance
1 151.4
1 067.7
Operating lease payments
287.1
239.9
Assets and other resources provided free of charge (a)
531.5
62.2
Other
378.1
14.8
Total supplies and services
18 178.6 16 134.2
Note:
(a) Included in this item is the transfer of 575 properties with a total carrying value of $155.1 million previously
held by the Director of Housing and leased to Registered Housing Associations, to freehold ownership by
those agencies, at zero consideration. The state, through the Director of Housing, has a registerable interest
in the properties.
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 $17.9 million. (2007: $15.7 million).
Financial Report 2007-08
Chapter 4
97
Note 15: Total expenses from transactions by sector
($ million)
2008
2007
Expenses from transactions
Education and Early Childhood Development (formerly Education)
8 742.9
8 921.8
Human Services
13 453.5 12 727.4
Innovation, Industry and Regional Development
2 172.3
1 174.1
Justice
3 445.3
3 243.1
Planning and Community Development (formerly Victorian Communities)
968.3
850.0
Premier and Cabinet
558.2
518.4
Primary Industries
642.0
531.8
Sustainability and Environment
1 413.4
1 349.2
Transport (formerly Infrastructure)
4 506.8
4 071.3
Treasury and Finance
1 718.4
1 834.0
Parliament
122.7
107.6
Regulatory bodies and other part budget funded agencies
1 675.1
1 516.1
Eliminations within general government (a)
(3 560.3) (3 293.5)
Total general government sector (b)(c)(d)
35 858.6 33 551.2
Public non-financial corporations
5 931.0
5 384.6
Public financial corporations
4 363.0
5 192.8
Eliminations for whole of government (a)
(4 049.8) (5 363.4)
Total expenses from transactions
42 102.8 38 765.2
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) For individual departments, 2008 includes the impact of the machinery of government changes effective
1 September 2007.
(d) The machinery of government changes announced on 24 April 2008 have been reflected in the name changes
shown in the above table, however the accounting adjustments for these changes do not come into effect until
after 30 June 2008.
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
98
Chapter 4
2008
236.2
( 225.1)
11.1
2007
271.4
( 323.2)
( 51.8)
General
government sector
2008
2007
160.2
211.8
( 144.2)
( 241.6)
16.0
( 29.8)
Financial Report 2007-08
Note 17: Investments in joint ventures
Investments accounted for using the equity method
($ million)
State of Victoria
2008
2007
403.1
406.6
648.1
614.4
20.0
15.0
1 071.2
1 036.0
Snowy Hydro Ltd
Murray-Darling Basin Commission
The Australian Regenerative Medicine Institute
Total investments
($ million)
Movements in carrying amounts
State of Victoria
2008
2007
Snowy Hydro Ltd
Carrying amount at the beginning of the period
Share of profit/(loss) after income tax
Dividends received / receivable
Share of increment on revaluation of property, plant and equipment
Carrying amount at the end of the period
Murray-Darling Basin Commission
Carrying amount at the beginning of the period
Share of profit after income tax
Other
Share of increment on revaluation of property, plant and equipment
Carrying amount at the end of the period
The Australian Regenerative Medicine Institute
Carrying amount at the beginning of the period
Share of profit after income tax
Other
Share of increment on revaluation of property, plant and equipment
Carrying amount at the end of the period
Financial Report 2007-08
Chapter 4
406.6
( 3.5)
..
..
403.1
376.1
44.7
( 14.3)
..
406.6
614.4
10.6
..
23.0
648.0
587.5
5.4
..
21.5
614.4
15.0
..
5.0
..
20.0
15.0
..
..
..
15.0
99
Note 17: Investments in joint ventures (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
2008
2007
62.6
68.9
632.1
628.7
98.6
51.6
193.1
239.4
403.1
406.6
Balance sheet:
Current assets
Non current assets
Current liabilities
Non current liabilities
Net Assets
($ million)
State of Victoria
2008
2007
189.0
47.2
Revenue and profit:
Revenue from ordinary activities
Profit from ordinary activities before income tax
( 13.6)
67.6
Income Tax expense relating to ordinary activities
( 10.1)
23.8
Net Result (a)
( 3.5)
43.8
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
2008
2007
7.3
14.7
22.1
20.0
0.2
2.7
29.5
37.4
Commitments
Capital expenditure commitments
Operating lease commitments
Other commitments
State of Victoria’s ownership interest of Snowy Hydro Ltd at 30 June 2008 was 29 per cent
(2007: 29 per cent).
100
Chapter 4
Financial Report 2007-08
Note 17: Investments in joint ventures (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
2008
2007
140.5
144.8
519.7
476.0
12.1
6.3
..
..
648.1
614.5
Balance sheet:
Current assets
Non current assets
Current liabilities
Non current liabilities
Net Assets
($ million)
State of Victoria
2008
2007
46.2
102.8
Revenue and profit:
Revenue from ordinary activities
Profit from ordinary activities before income tax
Income Tax expense relating to ordinary activities
Net Result
10.6
..
10.6
5.4
..
5.4
($ million)
State of Victoria
2008
2007
22.0
0.1
4.1
4.9
11.5
4.7
37.6
9.7
Commitments
Capital expenditure commitments
Operating lease commitments
Other commitments
State of Victoria’s ownership interest of Murray-Darling Basin Commission at 30 June 2008
was 26.7 per cent (2007: 26.7 per cent). Refer to Note 37 that discloses an event subsequent to
balance date relating to this joint venture.
Financial Report 2007-08
Chapter 4
101
Note 17: Investments in joint ventures (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
2008
2007
4.1
6.8
15.9
8.2
..
..
..
..
20.0
15.0
Balance sheet:
Current assets
Non current assets
Current liabilities
Non current liabilities
Net Assets
($ million)
State of Victoria
2008
2007
..
..
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
2008
2007
15.0
20.0
..
..
15.0
20.0
Commitments
Capital expenditure commitments
Operating lease commitments
State of Victoria’s ownership interest of The Australian Regenerative Medicine Institute at
30 June 2008 was 20 per cent (2007: 45 per cent).
Jointly controlled assets
(a)
The Royal Melbourne Showgrounds
The state entered into a joint venture agreement with the Royal Agricultural Society (RAS) in
October 2003 to redevelop the Royal Melbourne Showgrounds. The agreement came into effect
on 30 June 2006. Two joint venture structures have been established, an unincorporated joint
venture to carry out and deliver the joint venture project, and an incorporated joint venture
entity, Showgrounds Nominees Pty Ltd to hold the assets of the joint venture and to enter into
agreements on behalf of the state and RAS.
In June 2006, Showgrounds Nominees Pty Ltd entered into a Development and Operations
Agreement (on behalf of the state and RAS) with the Concessionaire, PPP Solutions
(Showgrounds) Nominee Pty Ltd to design, construct, finance and maintain the new facilities at
the Showgrounds. The project operation term is 25 years from the date of commercial
acceptance of completed works which occurred in August 2006.
102
Chapter 4
Financial Report 2007-08
Note 17: Investments in joint ventures (continued)
State of Victoria’s interest in the unincorporated joint venture at 30 June 2008 was 50 per cent
(2007: 50 per cent).
The state’s interest in the jointly controlled assets and liabilities is shown below. The amounts
are included in the consolidated financial statements under their respective categories.
($ million)
State of Victoria
2008
2007
2.8
7.9
120.2
116.3
2.2
2.3
53.7
51.6
67.0
70.3
Balance sheet:
Current assets
Non current assets
Current liabilities
Non current liabilities
Net Assets
Commitments
($ million)
State of Victoria
2008
2007
Jointly controlled entities' capital expenditure commitments
Not longer than 1 year
Total
34.0
34.0
351.0
351.0
The state’s share of contingent liabilities of its associates and joint venture arrangements are
disclosed in Note 34.
Note 18: Other gains/(losses) from other economic flows
($ million)
State of Victoria
General
government sector
2008
2007
( 36.7)
( 0.5)
36.2
34.2
2008
2007
Net gain/(loss) from revaluation of biological assets
( 36.3)
( 0.4)
Net (increase)/decrease in provision for doubtful
32.7
30.1
receivables (a)
Amortisation of intangible non-produced assets
( 8.4)
( 7.5)
( 4.1)
( 3.4)
Gains/ (losses) on outstanding insurance claims
412.4
578.3
14.5
13.4
Net swap interest
9.4
3.3
..
..
Other gains/(losses)
( 136.9)
( 799.2)
19.2
503.0
Total other gains/(losses) from other economic flows
272.9
( 195.4)
29.1
546.7
Note:
(a) The total impairment amount for the state including both the above doubtful receivables expense and bad
debts expenses included in expenses from transactions is $269.9 million (2007: $242.5 million).
Financial Report 2007-08
Chapter 4
103
Note 19: Receivables
($ million)
State of Victoria
Current receivables
Contractual
Sale of goods and services
Accrued investment income
Loans
Other receivables
Provision for doubtful contractual receivables (a)
Statutory
Taxes receivable
Fines and regulatory fees
GST input tax credits recoverable
Provision for doubtful statutory receivables
(a)
Total current receivables
Non-current receivables
Contractual
Sale of goods and services
Loans
Other receivables
Provision for doubtful contractual receivables (a)
Statutory
Taxes receivable
Provision for doubtful statutory receivables (a)
General
government sector
2008
2007
2008
2007
1 317.9
145.3
117.0
961.9
( 100.6)
2 441.4
1 028.0
175.1
90.8
697.7
( 91.1)
1 900.6
716.8
82.4
20.9
268.6
( 45.9)
1 042.8
617.2
511.6
2.9
219.0
( 40.0)
1 310.6
756.0
641.3
351.4
( 201.9)
1 546.8
3 988.2
995.4
618.7
314.7
( 277.5)
1 651.3
3 551.9
769.9
641.3
268.9
( 201.9)
1 478.4
2 521.2
1 003.2
617.5
255.3
( 277.2)
1 598.9
2 909.5
69.6
1 071.9
391.4
( 8.5)
1 524.4
66.6
992.7
547.2
( 10.1)
1 596.3
16.1
56.7
54.9
( 5.1)
122.5
17.5
58.1
91.9
( 7.3)
160.2
54.5
..
54.5
1 578.9
5 567.1
182.1
..
182.1
1 778.4
5 330.3
54.5
..
54.5
177.0
2 698.2
182.1
..
182.1
342.3
3 251.8
Total non-current receivables
Total receivables
Note:
(a) The balance of the provision for doubtful contractual receivables for the state of $109.1 million
(2007: $101.2 million) together with the balance of the provision for doubtful statutory receivables of
$201.9 million (2007: $277.5 million) equals to $311.0 million (2007: $378.7 million).
104
Chapter 4
Financial Report 2007-08
Note 19: Receivables (continued)
Ageing analysis of contractual receivables
Not past due
State of Victoria
and not
2008
impaired
Sale of goods and services
926.6
Accrued investment income
142.2
Loans
1 176.4
Other receivables
1 043.5
3 288.7
2007
Sale of goods and services
672.0
Accrued investment income
173.8
Loans
1 053.3
Other receivables
1 143.4
3 042.5
($ million)
Past due and not impaired
Impaired
Less than 1-3 mths 3 mths- More than
1 mth
1 yr
1 yr
162.0
147.4
115.7
29.7
6.0
2.2
0.1
0.8
..
..
0.4
0.2
5.9
3.9
2.1
48.0
9.5
157.7
94.4
0.2
212.6
157.3
280.1
127.9
8.3
173.7
0.7
0.5
57.4
232.2
111.2
..
0.1
7.1
118.5
113.1
0.6
1.7
33.8
149.1
21.0
..
27.7
3.0
51.8
3.7
..
0.2
0.2
4.0
Total
1 387.4
145.3
1 188.9
1 353.3
4 074.9
1 094.6
175.1
1 083.5
1 244.9
3 598.1
Movement in provision for doubtful contractual receivables
($ million)
Balance at start of the year
Reversal of unused provision recognised in the Operating Statement
Increase in provision recognised in the Operating Statement
Receivables written off during the year as uncollectible
Balance at the end of the year
State of Victoria
2008
2007
101.2
94.1
( 3.1)
( 4.3)
12.1
11.4
( 1.1)
..
109.1
101.2
Collateral held
The state did not hold any collateral against any of its contractual receivables during either 2008
or 2007.
Financial Report 2007-08
Chapter 4
105
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
2008
2007
2008
2007
18.2
39.1
48.8
96.4
558.2
12.3
28.1
39.3
107.6
498.0
12.5
1.8
13.0
78.0
96.4
6.5
2.7
9.5
80.0
18.2
5.7
8.4
13.6
8.7
797.1
5.6
5.6
8.8
2.6
707.8
..
0.1
10.8
8.7
221.1
..
0.1
5.7
2.6
125.2
Reconciliation of movements in land and other assets held as inventory
($ million)
State of Victoria
2008
2007
500.5
510.8
105.0
29.0
86.7
1.4
..
2.4
( 125.4)
( 43.1)
566.9
500.5
Opening balance
Acquisitions
Assets transferred
Revaluations
Disposals
Closing balance
106
Chapter 4
Financial Report 2007-08
Note 21: Other financial assets
($ million)
State of Victoria
General
government sector
2008
2007
2008
2007
Current other financial assets
Equities and managed investment schemes (a)(b)
301.8
282.0
278.9
410.6
Australian dollar term deposits
838.9
1 147.3
1 525.7
1 082.0
Foreign currency term deposits
14.7
63.9
..
..
Debt securities (b)(c)
6 228.5
4 596.8
11.8
39.2
Derivative financial instruments
760.4
1 130.9
..
..
Provision for diminution
..
..
..
..
Total current other financial assets
8 144.3
7 221.0
1 816.3
1 531.9
Non-current other financial assets
Equities and managed investment schemes (a)(b)
10 025.0 13 541.5
402.5
387.0
Australian dollar term deposits
83.0
78.3
78.4
83.1
Foreign currency term deposits
..
..
..
..
Debt securities (b)(c)
6 938.5
7 578.2
24.8
56.3
Derivative financial instruments
1 652.2
811.3
..
..
Provision for diminution
..
..
..
..
Total non-current other financial assets
18 698.7 22 009.3
505.7
526.4
Total other financial assets (d)
26 843.0 29 230.2
2 322.0
2 058.3
Notes:
(a) Renamed from ‘Shares’ to ‘Equities and managed investment schemes’ due to transfer of amounts related to
managed investment schemes from the old ‘Debt securities and other placements’.
(b) 2006-07 figures have been adjusted to reflect transfer of managed investment schemes from ‘Debt securities’
to ‘Equities and managed investment schemes’.
(c) Debt securities of the state include $13,026 million (2007: $11,971.3 million) designated at fair value through
profit or loss.
(d) There are no other financial assets that are past due but not impaired as at the reporting date. There are no
other financial assets that would otherwise be past due or impaired whose terms have been renegotiated.
Collateral held
The state did not hold any collateral against any of its other financial assets during either 2008 or
2007.
Note 22: Non-current assets classified as held for sale
($ million)
State of Victoria
Land
Buildings
Infrastructure, plant, equipment and vehicles
Other
Total non-current assets classified as held for sale
Financial Report 2007-08
2008
47.9
13.4
9.7
9.2
80.1
Chapter 4
2007
33.6
21.3
1.3
10.3
66.5
General
government sector
2008
2007
47.7
31.3
13.4
17.8
9.7
1.1
..
1.8
70.8
51.9
107
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
2008
1 081.3
832.5
2.5
197.0
31.4
..
121.9
2 266.6
General
government sector
2008
2007
382.2
467.4
412.0
233.4
..
..
151.1
34.3
..
..
..
..
121.9
66.8
1 067.1
801.9
2007
1 107.8
587.9
3.0
82.1
33.1
..
66.8
1 880.7
Community Housing
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
2008
7 254.0
6 965.0
..
2.5
..
..
..
14 221.5
General
government sector
2008
2007
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
2007
6 450.2
5 670.1
..
3.3
..
..
..
12 123.6
Total
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
108
Chapter 4
2008
26 313.1
33 261.9
20 526.5
4 367.7
16 582.2
5 245.8
4 329.9
110 627.1
2007
24 282.4
29 943.2
18 723.5
4 195.2
14 452.5
4 494.7
3 527.8
99 619.4
General
government sector
2008
2007
16 259.9 15 363.3
20 413.7 19 366.3
359.1
195.9
2 131.5
2 024.6
16 508.7 14 392.4
5 245.8
4 494.7
4 305.5
3 503.5
65 224.2 59 340.6
Financial Report 2007-08
Education
State of Victoria
2008
6 316.0
7 007.0
36.3
366.6
..
..
14.3
13 740.2
2007
5 926.0
5 018.6
..
335.1
..
..
14.8
11 294.4
General government
sector
2008
2007
6 316.0
5 926.0
7 007.0
5 018.6
36.3
..
366.6
335.1
..
..
..
..
14.3
14.8
13 740.2
11 294.4
Transportation &
Communications
State of Victoria
General government
sector
2008
2007
2008
2007
1 536.2
1 310.3
646.1
672.1
4 135.4
3 417.4
1 333.2
1 122.6
4 142.4
3 557.6
226.9
99.6
1 904.3
1 846.2
44.4
44.9
15 961.8
13 821.0
15 930.1
13 803.6
5 245.8
4 494.7
5 245.8
4 494.7
1.6
1.8
1.1
1.2
32 927.5
28 449.0
23 427.4
20 238.7
Financial Report 2007-08
Health & Welfare
State of Victoria
2008
5 378.5
1 464.7
..
821.3
..
..
4.6
7 669.2
2007
4 826.4
1 231.8
..
790.5
..
..
4.2
6 852.9
General government
sector
2008
2007
5 378.3
4 826.2
1 464.7
1 231.8
..
..
819.8
789.0
..
..
..
..
4.6
4.2
7 667.5
6 851.1
Public Safety &
Environment
State of Victoria
General government
sector
2008
2007
2008
2007
4 747.1
4 661.7
3 537.4
3 471.7
12 857.2
14 017.4
10 196.9
11 759.8
16 345.4
15 162.9
95.9
96.3
1 076.0
1 137.9
749.5
821.4
589.0
598.5
578.6
588.8
..
..
..
..
4 187.6
3 440.3
4 163.7
3 416.5
39 802.2
39 018.7
19 322.0
20 154.5
Chapter 4
109
Note 23: Property, plant and equipment (continued)
(b)
Land and buildings
($ million)
Public Administration
State of Victoria
Buildings
Accumulated depreciation
Buildings (written down value)
Land
National parks and other 'land only' holdings
Land and national parks
Total land and buildings
2008
1 447.0
( 365.7)
1 081.3
832.5
..
832.5
1 913.8
General
government sector
2008
2007
477.2
550.1
( 95.0)
( 82.7)
382.2
467.4
412.0
233.4
..
..
412.0
233.4
794.2
700.8
2007
1 201.6
( 93.9)
1 107.8
587.9
..
587.9
1 695.7
Community Housing
State of Victoria
Buildings
Accumulated depreciation
Buildings (written down value)
Land
National parks and other 'land only' holdings
Land and national parks
Total land and buildings
2008
7 258.0
( 4.0)
7 254.0
6 965.0
..
6 965.0
14 219.0
General
government sector
2008
2007
..
..
..
..
..
..
..
..
..
..
..
..
..
..
2007
6 712.4
( 262.2)
6 450.2
5 670.1
..
5 670.1
12 120.3
Total
State of Victoria
Buildings
Accumulated depreciation
Buildings (written down value)
Land
National parks and other 'land only' holdings
Land and national parks
Total land and buildings
110
Chapter 4
2008
28 316.5
(2 003.4)
26 313.1
31 121.7
2 140.2
33 261.9
59 574.9
2007
26 336.4
(2 054.0)
24 282.4
27 649.2
2 294.0
29 943.2
54 225.6
General
government sector
2008
2007
17 758.8 16 902.3
(1 498.8) (1 539.1)
16 259.9 15 363.3
18 273.5 17 072.3
2 140.2
2 294.0
20 413.7 19 366.3
36 673.6 34 729.6
Financial Report 2007-08
Education
State of Victoria
2008
6 365.4
( 49.5)
6 316.0
7 007.0
..
7 007.0
13 322.9
2007
6 271.8
( 345.8)
5 926.0
5 018.6
..
5 018.6
10 944.6
General government
sector
2008
2007
6 365.4
6 271.8
( 49.5)
( 345.8)
6 316.0
5 926.0
7 007.0
5 018.6
..
..
7 007.0
5 018.6
13 322.9
10 944.6
Transportation &
Communications
State of Victoria
General government
sector
2008
2007
2008
2007
1 714.0
1 506.2
668.3
695.5
( 177.7)
( 195.9)
( 22.3)
( 23.4)
1 536.2
1 310.3
646.1
672.1
4 135.4
3 417.4
1 333.2
1 122.6
..
..
..
..
4 135.4
3 417.4
1 333.2
1 122.6
5 671.7
4 727.7
1 979.3
1 794.6
Financial Report 2007-08
Health & Welfare
State of Victoria
2008
6 390.1
(1 011.6)
5 378.5
1 464.7
..
1 464.7
6 843.2
2007
5 710.8
( 884.4)
4 826.4
1 231.8
..
1 231.8
6 058.2
General government
sector
2008
2007
6 389.8
5 710.5
(1 011.5)
( 884.4)
5 378.3
4 826.2
1 464.7
1 231.8
..
..
1 464.7
1 231.8
6 843.0
6 058.0
Public Safety &
Environment
State of Victoria
General government
sector
2008
2007
2008
2007
5 142.0
4 933.6
3 857.9
3 674.5
( 395.0)
( 271.8)
( 320.6)
( 202.8)
4 747.1
4 661.7
3 537.4
3 471.7
10 717.1
11 723.4
8 056.7
9 465.8
2 140.2
2 294.0
2 140.2
2 294.0
12 857.2
14 017.4
10 196.9
11 759.8
17 604.3
18 679.1
13 734.2
15 231.5
Chapter 4
111
Note 23: Property, plant and equipment (continued)
(c)
Plant, equipment and vehicles, and infrastructure systems
($ million)
Public Administration
State of Victoria
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
2008
2.5
..
..
..
2.5
407.7
( 211.6)
1.1
( 0.2)
197.0
199.5
General
government sector
2008
2007
..
..
..
..
..
..
..
..
..
..
231.4
96.9
( 81.2)
( 63.4)
1.0
1.5
( 0.2)
( 0.6)
151.1
34.3
151.1
34.3
2007
4.0
( 1.0)
..
..
3.0
260.4
( 179.1)
1.6
( 0.7)
82.1
85.2
Community Housing
State of Victoria
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
2008
..
..
..
..
..
12.1
( 9.6)
..
..
2.5
2.5
General
government sector
2008
2007
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
2007
..
..
..
..
..
11.4
( 8.1)
..
..
3.3
3.3
Total
State of Victoria
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
112
Chapter 4
2008
26 278.7
(5 871.4)
155.6
( 36.4)
20 526.5
6 776.9
(3 333.4)
1 096.7
( 172.6)
4 367.7
24 894.2
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
General
government sector
2008
2007
379.0
213.0
( 19.9)
( 17.1)
..
..
..
..
359.1
195.9
4 474.3
4 341.3
(2 484.4) (2 486.3)
188.5
233.2
( 47.0)
( 63.5)
2 131.5
2 024.6
2 490.6
2 220.5
Financial Report 2007-08
Education
State of Victoria
2008
36.3
..
..
..
36.3
1 034.1
( 667.6)
0.2
( 0.1)
366.6
402.9
2007
..
..
..
..
..
1 003.0
( 673.5)
7.9
( 2.3)
335.1
335.1
General government
sector
2008
2007
36.3
..
..
..
..
..
..
..
36.3
..
1 034.1
1 003.0
( 667.6)
( 673.5)
0.2
7.9
( 0.1)
( 2.3)
366.6
335.1
402.9
335.1
Transportation &
Communications
State of Victoria
General government
sector
2008
2007
2008
2007
4 763.6
4 102.7
230.1
101.1
( 624.6)
( 547.8)
( 3.2)
( 1.5)
4.4
3.6
..
..
( 1.1)
( 0.8)
..
..
4 142.4
3 557.6
226.9
99.6
1 491.6
1 376.2
111.0
104.3
( 369.6)
( 340.7)
( 66.6)
( 59.4)
907.7
904.7
..
..
( 125.4)
( 93.9)
..
..
1 904.3
1 846.2
44.4
44.9
6 046.6
5 403.8
271.3
144.4
Health & Welfare
State of Victoria
2008
..
..
..
..
..
1 842.6
(1 039.1)
25.9
( 8.1)
821.3
821.3
2007
..
..
..
..
..
1 823.9
(1 042.6)
16.5
( 7.2)
790.5
790.5
General government
sector
2008
2007
..
..
..
..
..
..
..
..
..
..
1 836.0
1 817.6
(1 034.0)
(1 037.9)
25.9
16.5
( 8.1)
( 7.2)
819.8
789.0
819.8
789.0
Public Safety &
Environment
State of Victoria
General government
sector
2008
2007
2008
2007
21 476.3
19 974.7
112.6
112.0
(5 246.8)
(4 933.8)
( 16.7)
( 15.6)
151.1
151.1
..
..
( 35.3)
( 29.2)
..
..
16 345.4
15 162.9
95.9
96.3
1 988.7
1 979.9
1 261.8
1 319.5
(1 035.8)
( 996.2)
( 635.1)
( 652.1)
161.8
207.9
161.4
207.4
( 38.7)
( 53.7)
( 38.6)
( 53.4)
1 076.0
1 137.9
749.5
821.4
17 421.3
16 300.8
845.5
917.7
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 2007-08
Chapter 4
113
Note 23: Property, plant and equipment (continued)
(d)
Road networks and earthworks
($ million)
Public Administration
State of Victoria
Roads
Accumulated depreciation
Road infrastructure
Accumulated depreciation
Roads (written down value)
Earthworks
Total road networks and earthworks
2008
35.8
( 5.0)
0.6
..
31.4
..
31.4
General
government sector
2008
2007
..
..
..
..
..
..
..
..
..
..
..
..
..
..
2007
37.6
( 4.5)
..
..
33.1
..
33.1
Community Housing
State of Victoria
Roads
Accumulated depreciation
Road infrastructure
Accumulated depreciation
Roads (written down value)
Earthworks
Total road networks and earthworks
2008
..
..
..
..
..
..
..
General
government sector
2008
2007
..
..
..
..
..
..
..
..
..
..
..
..
..
..
2007
..
..
..
..
..
..
..
Total
State of Victoria
Roads
Accumulated depreciation
Road infrastructure
Accumulated depreciation
Roads (written down value)
Earthworks
Total road networks and earthworks
114
Chapter 4
2008
19 579.4
(7 544.8)
6 986.7
(2 439.1)
16 582.2
5 245.8
21 828.0
2007
16 793.4
(6 302.6)
5 978.4
(2 016.7)
14 452.5
4 494.7
18 947.3
General
government sector
2008
2007
19 521.0 16 750.6
(7 544.2) (6 298.1)
6 964.1
5 950.7
(2 432.2) (2 010.8)
16 508.7 14 392.4
5 245.8
4 494.7
21 754.5 18 887.1
Financial Report 2007-08
Education
State of Victoria
2008
..
..
..
..
..
..
..
2007
..
..
..
..
..
..
..
General government
sector
2008
2007
..
..
..
..
..
..
..
..
..
..
..
..
..
..
Transportation &
Communications
State of Victoria
General government
sector
2008
2007
2008
2007
19 535.1
16 755.5
19 521.0
16 750.6
(7 538.8)
(6 298.1)
(7 544.2)
(6 298.1)
6 309.2
5 294.7
6 290.8
5 277.5
(2 343.6)
(1 931.2)
(2 337.5)
(1 926.4)
15 961.8
13 821.0
15 930.1
13 803.6
5 245.8
4 494.7
5 245.8
4 494.7
21 207.6
18 315.7
21 175.8
18 298.3
Health & Welfare
State of Victoria
2008
..
..
..
..
..
..
..
2007
..
..
..
..
..
..
..
General government
sector
2008
2007
..
..
..
..
..
..
..
..
..
..
..
..
..
..
Public Safety &
Environment
State of Victoria
General government
sector
2008
2007
2008
2007
8.5
0.2
..
..
( 1.0)
..
..
..
677.0
683.7
673.3
673.2
( 95.4)
( 85.4)
( 94.7)
( 84.4)
589.0
598.5
578.6
588.8
..
..
..
..
589.0
598.5
578.6
588.8
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 1051 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 2007-08
Chapter 4
115
Note 23: Property, plant and equipment (continued)
(e)
Cultural assets
($ million)
Public Administration
State of Victoria
Cultural assets
Accumulated depreciation
Total cultural assets (written down value)
2008
126.6
( 4.8)
121.9
General
government sector
2008
2007
126.6
67.7
( 4.8)
( 0.9)
121.9
66.8
2007
67.7
( 0.9)
66.8
Community Housing
State of Victoria
Cultural assets
Accumulated depreciation
Total cultural assets (written down value)
2008
..
..
..
General
government sector
2008
2007
..
..
..
..
..
..
2007
..
..
..
Total
State of Victoria
Cultural assets
Accumulated depreciation
Total cultural assets (written down value)
116
Chapter 4
2008
4 423.0
( 93.1)
4 329.9
2007
3 611.7
( 84.0)
3 527.8
General
government sector
2008
2007
4 398.6
3 587.4
( 93.1)
( 84.0)
4 305.5
3 503.5
Financial Report 2007-08
Education
State of Victoria
2008
39.6
( 25.3)
14.3
2007
40.3
( 25.5)
14.8
Health & Welfare
General government
sector
2008
2007
39.6
40.3
( 25.3)
( 25.5)
14.3
14.8
Transportation &
Communications
State of Victoria
General government
sector
2008
2007
2008
2007
1.9
1.9
1.4
1.4
( 0.3)
( 0.2)
( 0.3)
( 0.2)
1.6
1.8
1.1
1.2
State of Victoria
2008
4.6
..
4.6
2007
4.2
..
4.2
General government
sector
2008
2007
4.6
4.2
..
..
4.6
4.2
Public Safety &
Environment
State of Victoria
General government
sector
2008
2007
2008
2007
4 250.3
3 497.7
4 226.4
3 473.9
( 62.7)
( 57.4)
( 62.7)
( 57.4)
4 187.6
3 440.3
4 163.7
3 416.5
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, historic houses, monuments, certain museum exhibits, art
collections, archival collections and other items of cultural significance.
Financial Report 2007-08
Chapter 4
117
Note 23: Property, plant and equipment (continued)
(f)
Reconciliation of movements
Reconciliation of movements in land and buildings
($ million)
State of Victoria
2008
2007
54 225.6 51 023.6
1 580.2
2 412.8
64.9
( 229.8)
5 164.1
2 039.1
( 740.9)
( 302.4)
..
..
5.7
( 56.3)
( 724.6)
( 661.5)
59 574.9 54 225.6
Opening balance
Acquisitions
Reclassification
Revaluation
Disposals
Assets recognised for the first time
Impairment
Depreciation and amortisation
Closing balance
Reconciliation of movements in plant, equipment and vehicles, and other infrastructure systems
($ million)
State of Victoria
2008
2007
22 918.8 21 782.8
3 142.3
2 691.2
( 171.6)
( 78.7)
..
..
( 229.3)
( 159.2)
324.1
( 211.6)
40.8
1.0
( 2.4)
( 8.5)
(1 128.4) (1 098.2)
24 894.2 22 918.8
Opening balance
Acquisitions
Reclassification
Revaluation
Disposals
Increase in leased motor vehicles
Assets recognised for the first time
Impairment
Depreciation and amortisation
Closing balance
Reconciliation of movements in road networks and earthworks
($ million)
Opening balance
Acquisitions
Reclassification
Revaluation
Disposals
Road infrastructure recognised for the first time
Impairment
Depreciation
Closing balance
118
Chapter 4
State of Victoria
2008
2007
18 947.3 18 445.1
881.6
852.0
( 15.1)
( 5.2)
2 508.8
25.3
( 145.0)
( 27.2)
1.1
..
..
( 7.8)
( 350.6)
( 335.0)
21 828.0 18 947.3
Financial Report 2007-08
Note 23: Property, plant and equipment (continued)
(f)
Reconciliation of movements (continued)
Reconciliation of movements in cultural assets
($ million)
State of Victoria
2008
2007
3 527.8
3 490.9
27.1
54.6
1.8
0.2
783.4
( 3.7)
0.3
..
..
..
..
( 0.7)
( 10.4)
( 13.6)
4 329.9
3 527.8
Opening balance
Acquisitions
Reclassification
Revaluation
Disposals
Assets recognised for the first time
Impairment
Depreciation
Closing balance
Note 24: Intangibles
($ million)
State of Victoria
2008
713.1
( 278.8)
124.4
( 49.3)
509.4
Intangibles produced assets
Accumulated amortisation
Intangibles non-produced assets
Accumulated amortisation
Intangibles (written down value)
2007
595.1
( 213.4)
85.8
( 42.6)
424.8
General
government sector
2008
2007
432.6
380.2
( 212.0)
( 154.0)
34.0
20.7
( 16.9)
( 11.9)
237.8
235.0
Reconciliation of movement in intangibles
($ million)
State of Victoria
2008
2007
424.8
298.8
169.7
176.4
8.8
37.1
0.1
..
( 9.1)
( 23.9)
1.0
..
0.4
..
( 86.3)
( 63.5)
509.4
424.8
Opening balance
Acquisitions
Reclassification
Revaluation
Disposals
Assets recognised for the first time
Impairment
Amortisation
Closing balance
Intangible assets comprise identifiable non-monetary assets without physical substance,
including software, patents, copyrights, exclusive rights and tradeable water rights.
Financial Report 2007-08
Chapter 4
119
Note 25: Other assets
($ million)
State of Victoria
Non-current other assets
Investment properties
Biological assets
Other
Total non-current other assets
2008
2007
37.6
56.0
100.5
194.1
37.2
96.7
106.2
240.1
General
government sector
2008
2007
22.5
34.4
100.5
157.4
19.2
80.6
106.2
206.0
Reconciliation of movements in investment properties and biological assets
($ million)
State of Victoria
2008
2007
133.9
121.5
7.2
6.6
( 9.6)
( 2.2)
( 31.7)
12.2
( 7.0)
( 3.0)
2.1
..
( 1.4)
( 1.3)
..
..
93.6
133.9
Opening balance
Acquisitions
Reclassification
Revaluation
Disposals
Assets recognised for the first time
Impairment
Depreciation and amortisation
Closing balance
Note 26: Interest-bearing liabilities
($ million)
State of Victoria
General
government sector
2008
2007
2008
2007
Current interest-bearing liabilities
Domestic borrowings (a)
4 537.1
2 296.3
1 488.5
1 021.8
Foreign currency borrowings (a)
382.5
532.2
..
..
Finance lease liabilities
112.6
125.8
55.6
66.4
Total current interest-bearing liabilities
5 032.1
2 954.2
1 544.1
1 088.2
Non-current interest-bearing liabilities
Domestic borrowings (a)
10 353.6 10 876.9
4 994.3
5 058.5
Foreign currency borrowings (a)
..
..
..
..
Finance lease liabilities
2 104.0
1 920.4
1 263.6
1 047.5
Total non-current interest-bearing liabilities
12 457.7 12 797.3
6 257.8
6 106.0
Total interest-bearing liabilities
17 489.8 15 751.6
7 801.9
7 194.3
Note:
(a) Domestic and foreign currency borrowings of the state include $14,401.0 million (2007: $12,729.5 million)
designated at fair value through profit or loss.
Collateral pledged
The state did not pledge any of its financial assets against outstanding payables nor
interest-bearing liabilities during either 2008 or 2007.
120
Chapter 4
Financial Report 2007-08
Note 27: Employee benefits
($ million)
State of Victoria
2008
Current employee benefits
Accrued salaries and wages (a)
1 445.1
Long service leave
2 411.6
Total current employee benefits
3 856.7
Non-current employee benefits
Accrued salaries and wages (a)
..
Long service leave
384.6
Total non-current employee benefits
384.6
Total employee benefits
4 241.3
Note:
(a) Includes accrued annual leave, payroll tax and other similar on-costs.
2007
General
government sector
2008
2007
1 202.9
2 267.9
3 470.8
1 339.9
2 275.9
3 615.8
1 102.1
2 143.1
3 245.2
..
410.0
410.0
3 880.8
..
357.4
357.4
3 973.3
..
375.6
375.6
3 620.9
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
2008
2007
2008
2007
1 447.0
796.2
77.6
80.5
2 401.2
179.4
241.5
2 822.1
1 458.2
731.0
86.8
81.8
2 357.8
436.7
255.8
3 050.3
..
..
..
78.2
78.2
..
106.1
184.3
..
..
..
79.5
79.5
..
134.9
214.3
6 520.0
5 262.9
811.2
233.7
12 827.7
1 074.9
259.9
14 162.5
16 984.6
6 586.8
5 143.1
691.1
299.7
12 720.7
1 078.1
276.2
14 075.0
17 125.3
..
..
..
233.4
233.4
..
247.7
481.1
665.4
..
..
..
299.1
299.1
..
244.3
543.4
757.7
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.
Financial Report 2007-08
Chapter 4
121
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
2008
2007
15 078.5 14 809.0
( 405.5)
( 560.6)
543.6
259.0
2 388.6
2 420.5
(2 383.6) (1 878.1)
7.3
28.6
15 228.9 15 078.5
Reconciliation of movements in onerous contracts provision
($ million)
2008
1 514.8
202.1
( 406.1)
..
( 56.5)
1 254.3
2007
722.9
207.3
( 467.1)
23.8
1 027.9
1 514.8
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.
122
Chapter 4
Financial Report 2007-08
Note 28: Other provisions (continued)
Insurance claims assumptions
2008
Entity
Actuary
Victorian
WorkCover
Authority
Pricewaterhouse
Coopers Actuarial
Ltd
Transport
Pricewaterhouse
Accident
Coopers Actuarial
Commission Ltd
Victorian
Managed
Insurance
Authority
Victorian
Managed
Insurance
Authority
Victorian
Managed
Insurance
Authority
Weighted
average
expected
term to
settlement
5.4 years
13.1 years
Ernst & Young
6.7 years
Actuarial Business
Consultants Pty Ltd
(Public Healthcare
Program)
Ernst & Young
3.0 years
Actuarial Business
Consultants Pty Ltd
(General
Government
Program)
am actuaries Pty
Ltd
(Run-off Program)
14.5 years
Financial
assumptions used
(not later than 1
year) (a)
Financial
Prudential
assumptions used margin
(later than 1
year) (a)
inflation rate
4.30 – 4.50
per cent
inflation rate
4.00 - 4.25
per cent
discount rate
7.07 per cent
discount rate
6.00 – 6.79
per cent
inflation rate
4.75 per cent
inflation rate
5.75 per cent
discount rate
7.1 per cent
weighted average
inflation rate
8.8 per cent
weighted average
discount rate
6.6 per cent
weighted average
inflation rate
4.8 per cent
weighted average
discount rate
6.6 per cent
weighted average
inflation rate
7.2 per cent
weighted average
discount rate
6.5 per cent
8.5 per cent
7.5 per cent
discount rate
6.2 per cent
weighted average 22.5 per cent
inflation rate
of the net
8.8 per cent
outstanding
claims liability
weighted average and claims
discount rate
handling
6.6 per cent
expense
weighted average 25 per cent of
inflation rate
the net
4.8 per cent
outstanding
claims liability
weighted average and claims
discount rate
handling
6.6 per cent
expense
weighted average 25 per cent of
inflation rate
the net
7.2 per cent
outstanding
claims liability
weighted average and claims
discount rate
handling
6.5 per cent
expense
Note:
(a) The inflation rate assumptions are based on the anticipated rise in costs relevant to a particular entity.
Financial Report 2007-08
Chapter 4
123
Note 28: Other provisions (continued)
Insurance claims assumptions
2007
Entity
Actuary
Victorian
WorkCover
Authority
Pricewaterhouse
Coopers Actuarial
Ltd
Pricewaterhouse
Transport
Coopers Actuarial
Accident
Commission Ltd
Victorian
Managed
Insurance
Authority
Victorian
Managed
Insurance
Authority
Victorian
Managed
Insurance
Authority
Weighted
average
expected term
to settlement
5.3 years
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
13.1 years
Ltd
(Run-off Program)
Financial
assumptions
used (not later
than 1 year) (a)
inflation rate
4 per cent
Financial
assumptions
used (later than
1 year) (a)
inflation rate
3.7 – 4 per cent
discount rate
6.5 per cent
inflation rate
4.5 per cent
discount rate
6.2 – 6.6 per cent
inflation rate
7.5 per cent
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 22.5 per cent
inflation rate
of the net
8.5 per cent
outstanding
claims liability
weighted average and claims
discount rate
handling
6.4 per cent
expense
weighted average 25 per cent of
inflation rate
the net
4.4 per cent
outstanding
claims liability
weighted average and claims
discount rate
handling
6.4 per cent
expense
weighted average 25 per cent of
inflation rate
the net
7.0 per cent
outstanding
claims liability
weighted average and claims
discount rate
handling
6.3 per cent
expense
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
6.3 per cent
124
Chapter 4
Prudential
margin
8.5 per cent
Financial Report 2007-08
Note 29: Other liabilities
($ million)
State of Victoria
General
government sector
2008
2007
2008
2007
Current other liabilities
Accrued taxes payable (a)
75.0
110.3
36.5
79.8
Unearned income
1 115.7
1 018.8
470.7
428.1
Derivative financial instruments
480.1
557.6
..
..
Total current other liabilities
1 670.7
1 686.7
507.2
507.9
Non-current other liabilities
Unearned income
516.9
534.5
464.6
496.5
Derivative financial instruments
62.1
55.6
..
..
Total non-current other liabilities
579.0
590.0
464.6
496.5
Total other liabilities
2 249.8
2 276.7
971.9
1 004.4
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)
State of Victoria
2008
2007
41 220.6 32 941.2
6.0
65.0
1 804.5
1 668.0
43 031.0 34 674.2
Property, plant and equipment revaluation reserve
Available-for-sale investments
Other reserves
Total reserves
Movements in reserves
Property, plant and equipment revaluation reserve
($ million)
State of Victoria
2008
2007
32 941.1 30 806.4
23.0
21.5
..
..
( 177.2)
94.3
8 433.7
2 018.9
41 220.6 32 941.1
Balance at beginning of reporting period
Revaluation – joint venture
Revaluation – associate
Transfers (to)/from accumulated funds
Revaluation – other
Balance at the end of the reporting period
Financial Report 2007-08
Chapter 4
125
Note 30: Reserves, accumulated funds and minority interests (continued)
Available-for-sale investments revaluation reserve
($ million)
State of Victoria
2008
2007
65.0
26.6
( 60.1)
39.9
1.1
( 1.5)
6.0
65.0
Balance at beginning of reporting period
Revaluation
Transferred to profit or loss for the period
Balance at the end of the reporting period
Other reserves
($ million)
State of Victoria
2008
2007
1 668.0
1 541.0
136.5
127.0
1 804.5
1 668.0
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
2008
2007
51 653.2 44 206.3
(3 106.6)
7 668.2
40.7
( 221.3)
48 587.3 51 653.2
Balance at beginning of reporting period
Net result for the period
Transfers to/(from) reserves
Balance at the end of the reporting period
(c)
Minority interest
($ million)
Balance at beginning of reporting period
Net contributions during the year
Balance at the end of the reporting period
126
Chapter 4
State of Victoria
2008
2007
..
..
32.0
..
32.0
..
Financial Report 2007-08
Note 31: Cash flow information
(a)
Reconciliation of cash and cash equivalents
($ million)
State of Victoria
General
government sector
2008
2007
2008
2007
Cash
Public financial corporations
310.4
240.2
..
..
Other sectors
1 305.3
1 080.4
1 144.6
908.1
Deposits at call
Public financial corporations (a)
1 274.5
240.0
..
..
Other sectors (a)
1 034.3
1 061.3
1 830.4
2 109.6
Cash and cash equivalents
3 924.6
2 622.0
2 975.0
3 017.7
Bank overdrafts
( 15.1)
( 78.2)
( 115.6)
( 3.1)
Balances as per cash flow statement
3 909.4
2 543.8
2 859.3
3 014.6
Note:
(a) Due to a change in the distribution of deposits at call between Public Financial Corporations and Other
Sectors, the 2006-07 split of deposits at call has also been amended.
(b)
Reconciliation of net cash flows from operating activities to net result (excluding
public financial corporations)
($ million)
Net result
Non-cash movements
Depreciation and amortisation
Revaluation of investments
Assets (received)/provided free of charge
Assets not previously recognised
Revaluation of other assets
Discount/(premium) on other financial
assets/interest-bearing liabilities
Movements included in investing and financing
activities
Net revenue from sale of property, plant and equipment
Net revenue from sale of investments
Movements in assets and liabilities
Increase/(decrease) in provision of doubtful debts
Increase/(decrease) in payables
Increase/(decrease) in employee benefits
Increase/(decrease) in superannuation
Increase/(decrease) in other provisions
Increase/(decrease) in other liabilities
(Increase)/decrease in receivables
(Increase)/decrease in other assets
Net cash flows from operating activities
Financial Report 2007-08
State of Victoria
(excl. Public
Financial
Corporations)
2008
2007
(1 292.6)
4 285.7
General
government sector
2008
(1 875.5)
2007
5 306.5
2 342.5
( 166.0)
170.3
( 167.6)
377.5
8.4
2 209.0
( 38.3)
( 136.0)
( 403.9)
172.1
5.8
1 420.4
16.4
455.8
( 167.6)
369.4
8.4
1 338.1
( 10.7)
40.5
( 403.9)
126.3
5.8
( 12.1)
( 4.4)
50.9
( 55.5)
( 16.2)
4.3
29.6
( 17.1)
( 69.2)
( 292.3)
361.8
3 043.5
( 357.9)
( 2.9)
277.7
47.0
4 263.3
( 54.9)
254.9
200.1
(3 018.9)
873.7
378.1
( 644.9)
( 15.1)
4 062.5
( 70.0)
( 143.5)
352.4
3 027.1
( 94.1)
( 48.0)
623.0
15.3
3 877.5
( 55.7)
( 122.8)
191.7
(2 996.8)
21.1
333.6
( 966.9)
21.0
2 840.1
Chapter 4
127
Note 31:
Cash flow information (continued)
(c)
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
128
Chapter 4
2008
2007
592.5
..
( 751.1)
610.5
2 656.9
(3 472.2)
( 363.4)
554.0
2.7
( 733.3)
654.0
2 610.5
(3 121.4)
( 33.6)
15 669.6
(15 367.7)
( 661.6)
556.4
1.4
( 55.3)
142.9
11 092.1
(9 885.4)
( 513.1)
386.8
1.2
( 47.4)
1 034.2
1 723.2
..
1 723.2
1 502.8
( 417.1)
..
( 417.1)
583.6
Financial Report 2007-08
Note 32: Financial instruments
(A)
Financial risk management objectives and policies
The state’s principal financial instruments comprise of:

cash assets;

receivables (excluding statutory receivables);

term deposits;

investments in equities and managed investment schemes;

debt securities;

payables (excluding statutory payables);

borrowings;

finance lease payables; and

derivatives.
The main purpose in holding financial instruments is to prudentially manage the state’s financial
risks within government policy parameters.
The carrying amounts of the state’s financial assets and financial liabilities by category are in
Table 4.1.
Table 4.1: Carrying amounts of financial instruments by category
($ million)
State of Victoria
2008
2007
Financial assets
Cash and cash equivalents
3 924.6
2 622.0
Designated at fair value through profit or loss
23 607.5 26 643.6
Held-for-trading at fair value through profit or loss
2 433.4
2 049.3
Loans and receivables
4 074.9
3 598.1
Available-for-sale
587.4
416.2
Held-to-maturity
214.7
121.2
Total financial assets (a)
34 842.5 35 450.3
Financial liabilities
Designated at fair value through profit or loss
15 237.8 13 699.2
Held-for-trading at fair value through profit or loss
577.6
619.4
At amortised cost
6 400.9
6 227.1
Total financial liabilities (b)
22 216.3 20 545.6
Notes:
(a) The state's total financial assets exclude statutory receivables of $1 601.3 million (2007: $1 833.4 million).
(b) The state's total financial liabilities exclude statutory taxes payable of $75 million (2007: $110.3 million).
The state is exposed to a number of financial risks including market risk (eg. interest rate risk,
foreign currency risk, and equity price risk), credit risk and liquidity risk through transactions
involving its financial instruments. As a whole, the state’s financial risk management program
seeks to mitigate these risks and reduce volatility on its financial performance. The state enters
into, or trades financial instruments, to match investment outcomes to liquidity requirements
within a regulated policy framework.
Financial Report 2007-08
Chapter 4
129
Note 32: Financial instruments (continued)
Responsible and prudent financial risk management is carried out individually by the state’s
consolidated entities, in accordance with the state’s risk management framework, developed by
the Department of Treasury and Finance (DTF) and established by the Treasurer. The state’s risk
management framework comprises the following key components:

the Treasurer is responsible for the approval and establishment of the prudential framework
containing policies and guidelines on financial risk management;

the Senior Executive Group of DTF is responsible for the management of the state’s
financial risk and for providing advice to the Treasurer;

DTF’s Balance Sheet Management Committee is responsible for monitoring the balance
sheet and risk management activities of the state and advising or making recommendations
to the Senior Executive Group;

the Treasury Corporation of Victoria (TCV) is the state’s central borrowing authority and
financing advisor. An independent Prudential Supervisor and Prudential Auditor are
appointed by the Treasurer to monitor TCV’s compliance with its prudential framework;

the Victorian Funds Management Corporation (VFMC) acts as the state’s central investment
fund manager through the provision of expertise in investment strategy development and
delivery of funds management services in accordance with each entity’s investment
objectives; and

the state’s entities with gross debt or investments equal to or greater than $20 million, such
as the Public Financial Corporations (PFCs) and some government business enterprises, are
responsible for setting their own financial risk policy and objectives in accordance with the
Treasurer’s prudential framework. All entities are responsible for the day-to-day operational
management of their financial instruments and associated risks in accordance with the
Treasury Management Guideline.
The prudential framework covers areas such as financial management objectives; responsibility
structure and delegation; and policies and guidance on market risk, credit risk, liquidity risk and
operational risk. The CEOs and executives of the state’s consolidated entities are responsible for
advising their Boards, who in turn notify DTF and other stakeholders of any breach by the
entities of the prudential standards set by the Treasurer or policies set by their respective Boards
including the strategy to remediate the breach.
A number of PFCs, the largest of which comprise TCV, Transport Accident Commission
(TAC), and the Victorian WorkCover Authority (VWA), enter into derivative financial
instruments on behalf of the state, in accordance with the Treasurer’s prudential framework, in
order to manage the state’s exposure to movements in interest rates and foreign currency
exchange rates.
These derivative financial instruments, which include interest rate swaps and futures and
forward foreign exchange contracts, are used to manage the risks inherent in either borrowings
or financial asset investments. Derivative financial instruments are not used to add leverage to
the state’s financial position or for speculative purposes.
In addition, a number of PFCs 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.
130
Chapter 4
Financial Report 2007-08
Note 32: Financial instruments (continued)
(B)
Breakdown of Interest items
Table 4.2: Breakdown of interest items
($ million)
Interest income from financial assets not at fair value through P&L
Interest income from financial asset at fair value through P&L
Interest income from impaired financial assets
(C)
State of Victoria
2008
2007
321.6
350.3
970.4
749.9
0.6
0.4
1 292.6
1 100.5
Breakdown of Interest and Fee Expense items
Table 4.3: Breakdown of interest and fee expense items
($ million)
Interest expense from financial liabilities not at fair value through P&L
Interest expense from financial liabilities at fair value through P&L
Fee expenses from financial liabilities not at fair value through P&L
Fee expenses from financial liabilities at fair value through P&L
Financial Report 2007-08
Chapter 4
State of Victoria
2008
2007
214.8
243.6
783.6
704.0
7.1
27.9
146.2
84.2
1 151.7
1 059.7
131
Note 32: Financial instruments (continued)
(D)
Net gain or loss by category of financial instruments held at 30 June
The net gains or losses on financial assets and liabilities held at 30 June are disclosed in
Table 4.4, and are determined as follows:

for cash and cash equivalents, loans and receivables and available-for-sale investments, the
net gain or loss is calculated by taking the interest revenue, plus or minus foreign exchange
gains or losses arising from revaluation of the financial assets, and minus any impairment
recognised in the net result;

for financial liabilities measured at amortised cost, the net gain or loss is calculated by taking
the interest expense, plus or minus foreign exchange gains or losses arising from the
revaluation of financial liabilities measured at amortised cost; and

for financial assets and liabilities that are held-for-trading or designated at fair value through
profit or loss, the net gain or loss is calculated by taking the movement in the fair value of
the financial asset or liability.
Table 4.4: Net gain or loss by category of financial instruments held at 30 June
($ million)
State of Victoria
2008
2007
Financial assets
Cash and cash equivalents
Designated at fair value through profit or loss
Held-for-trading at fair value through profit or loss
Loans and receivables
Available-for-sale
Financial liabilities
Designated at fair value through profit or loss
Held-for-trading at fair value through profit or loss
At amortised cost
(E)
199.1
(1 966.2)
801.8
68.2
18.4
( 878.6)
243.8
724.9
1 258.2
52.1
18.9
2 297.9
( 91.1)
..
( 20.7)
( 111.7)
( 303.8)
..
( 21.7)
( 325.5)
Interest rate risk
Interest rate risk management
The state is exposed to interest rate risk through borrowings and investments in interest-bearing
financial assets, such as deposits and debt securities.
132
Chapter 4
Financial Report 2007-08
Note 32: Financial instruments (continued)
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 which are measured at fair value.
Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. Only a small portion of the state’s financial
instruments are exposed to cash flow interest rate risk. Exposure to such risk arises from
financial assets and financial liabilities with floating interest rates which are measured at
amortised cost.
The state’s policy for the management of interest rate risk on borrowings is to achieve relative
certainty of interest cost while seeking to minimise net borrowing cost within portfolio risk
management guidelines. Generally, this is achieved by undertaking fixed rate borrowings with
relatively even maturity profiles.
TCV manages the state’s interest risk exposure from borrowings through daily quantification of
the risk which assesses the potential loss that the state might incur under various market
scenarios. Interest rate risk is managed within an approved limit structure in accordance with
TCV’s prudential policy and risk management framework, which requires consistency with the
Australian Prudential Regulatory Authority (APRA) prudential statements for banks.
PFCs, in particular TAC and VWA, use derivative financial instruments to economically hedge
the interest rate risk on their investment portfolios. Derivative instruments such as interest rate
swaps and futures contracts are used to either change the interest rate between fixed and floating
rates of interest or between different floating rates of interest. Table 4.5 shows the notional
amounts and periods of expiry for the state’s interest rate derivatives.
Financial Report 2007-08
Chapter 4
133
Note 32: Financial instruments (continued)
Table 4.5: Interest rate derivative financial instruments
($ million)
2008
State of Victoria
Maturities
Less than 1 year
1 year but less than 2 years
2 year but less than 3 years
3 years but less than 4 years
4 years but less than 5 years
5 years or more
Total
2007
State of Victoria
Maturities
Less than 1 year
1 year but less than 2 years
2 year but less than 3 years
3 years but less than 4 years
4 years but less than 5 years
5 years or more
Total
134
Indexed
..
..
..
..
..
..
..
Interest rate swaps
Exchange
Floatingtraded futures
For-floating Pay fixed Receive fixed
contracts
115.0
825.5
1 420.0
3 206.2
..
..
221.0
..
..
275.0
560.0
..
..
..
60.0
..
..
135.0
255.0
..
..
220.0
145.0
..
115.0
1 455.5
2 661.0
3 206.2
Indexed
..
..
..
..
..
409.1
409.1
Interest rate swaps
Exchange
Floatingtraded futures
For-floating Pay fixed Receive fixed
contracts
60.0
245.0
128.0
711.8
..
709.2
1 310.0
..
..
..
..
..
..
75.0
335.0
..
..
4.5
50.0
..
..
180.0
230.0
..
60.0
1 213.7
2 053.0
711.8
Chapter 4
Financial Report 2007-08
Note 32: Financial instruments (continued)
At 30 June 2008, after taking into account the effect of interest rate swaps, approximately
89.7 per cent (2007: 96.1 per cent) of the state’s borrowings are at fixed rates of interest. There
has been no change in the state’s exposure to interest rate risk or the manner in which it manages
and measures the risk from the previous reporting period.
Interest rate exposure
The state’s exposure to interest rate risk on classes of financial assets and financial liabilities is
set out in Table 4.6.
Interest rate sensitivity analysis
The state has undertaken a sensitivity analysis to illustrate the possible impacts on its financial
position and result arising from a reasonably possible change in interest rates using the
following assumptions:

the exposure to interest rates for both derivative and non-derivative instruments at the
reporting date, and the stipulated change taking place at the beginning of the financial year,
are held constant throughout the reporting period; and

based on historic movements, future expectations and management’s knowledge and
experience of the financial markets, the state has assessed that a reasonably possible increase
or decrease in interest rates to which the state is exposed is 50 basis points (2007 – 50 basis
points).
With all other variables held constant, the impact of a 50 basis point increase or decrease on the
net result and net assets at 30 June 2008 is a $66.8 million increase/$71.0 million decrease (2007
$93.0 million increase/$91.0 million decrease).
The state’s sensitivity to interest rates is mainly attributable to the revaluation of fixed interest
borrowings at fair value, due to changes in market interest rates.
Financial Report 2007-08
Chapter 4
135
Note 32:
Financial instruments (continued)
Table 4.6: Interest rate exposure
($ million)
2008
Less than 1 year but
1 year less than
2 years
State of Victoria
Floating
Financial assets
Cash and cash equivalents
Receivables
Term deposits
Derivative financial instruments
Equities and managed investment schemes
Debt securities
Total financial assets
3 476.5
64.5
78.3
..
295.9
3 375.3
7 290.6
357.0
129.7
768.3
462.4
58.4
6 232.5
8 008.3
..
66.5
51.8
2.9
67.9
1 509.3
1 698.4
Financial liabilities
Payables and advances
Derivative financial instruments
Interest-bearing liabilities
Total financial liabilities
44.4
..
1 805.7
1 850.1
92.9
467.6
3 302.4
3 862.9
21.7
3.1
161.7
186.5
2007
Less than 1 year but
1 year less than
2 years
State of Victoria
Floating
Financial assets
Cash and cash equivalents
Receivables
Term deposits
Derivative financial instruments
Equities and managed investment schemes
Debt securities
Total financial assets
2 039.3
166.1
394.2
..
512.6
187.6
3 299.8
427.4
78.6
850.1
537.2
68.0
4 543.4
6 504.8
..
65.1
27.4
10.3
78.6
1 017.2
1 198.6
Financial liabilities
Payables and advances
Derivative financial instruments
Interest-bearing liabilities
Total financial liabilities
415.4
..
619.3
1 034.7
73.4
550.3
2 053.2
2 676.9
0.3
18.0
2 310.2
2 328.5
136
Chapter 4
Financial Report 2007-08
2 years but
less than 3
years
Interest Rate, Fixed Maturities
3 years but
4 years but
less than 4
less than 5
years
years
5 years
or more
Non-interest
bearing
Total
..
68.8
4.5
6.1
15.9
762.4
857.7
..
67.7
0.7
1.0
19.0
325.6
414.0
..
90.0
0.1
7.6
4.7
196.3
298.7
..
655.0
21.1
50.2
3.7
765.5
1 495.6
91.1
2 932.7
11.8
1 882.4
9 861.3
..
14 779.2
3 924.6
4 074.9
936.6
2 412.6
10 326.7
13 167.0
34 842.4
11.5
20.5
2 288.2
2 320.2
11.4
2.9
308.4
322.7
11.2
11.2
2 300.4
2 322.8
38.4
19.2
7 323.0
7 380.6
3 952.8
17.7
..
3 970.5
4 184.3
542.2
17 489.8
22 216.3
Interest Rate, Fixed Maturities
3 years but
4 years but
less than 4
less than 5
years
years
5 years
or more
Non-interest
bearing
Total
2 years but
less than 3
years
..
64.9
1.0
0.4
20.0
1 328.8
1 415.1
..
65.5
2.4
2.5
6.5
1 032.4
1 109.3
..
62.4
0.5
0.4
..
759.7
823.1
..
606.5
5.2
33.5
..
3 225.2
3 870.4
155.3
2 489.1
8.6
1 357.9
13 137.8
80.6
17 229.3
2 622.0
3 598.1
1 289.5
1 942.2
13 823.5
12 175.0
35 450.3
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
8 543.9
8 565.9
3 691.3
10.4
..
3 701.7
4 180.9
613.1
15 751.6
20 545.6
Financial Report 2007-08
Chapter 4
137
Note 32: Financial instruments (continued)
(F)
Foreign currency risk
Foreign currency risk management
The state is exposed to foreign currency risk through investments in foreign currency
denominated financial assets, such as equities and deposits. The state is exposed to movements
in the United States dollar, Canadian dollar, Japanese yen, Swiss francs, the Euro, British pound
and the New Zealand dollar.
The carrying amount of the state’s foreign currency denominated monetary assets and monetary
liabilities at the reporting date is as follows:
Table 4.7: Australian dollar equivalent of foreign currency denominated monetary assets
and liabilities
($ million)
State of Victoria
2008
2007
Monetary assets
Cash and cash equivalents
170.1
0.1
Term deposits
14.7
63.9
Debt securities
36.4
415.8
Total monetary assets (a)
221.2
479.7
Monetary liabilities
Borrowings
( 382.5)
( 532.2)
Total monetary liabilities
( 382.5)
( 532.2)
Note:
(a) In addition, the state also held $3,257.1 million (2007: $1 504.3 million) in equities and managed investment
schemes denominated in foreign currencies.
The Victorian Funds Management Corporation (VFMC) as the state’s fund manager, applies a
consolidated approach in managing the foreign currency exposure in accordance with their
investment risk management plan as approved by the Treasurer. VFMC’s approach is to hedge
50 per cent of the foreign currency exposure arising from international equities, and to fully
hedge other offshore assets such as infrastructure, property and hedge funds.
The foreign currency risk is managed using forward exchange contracts, which are
over-the-counter contracts that fix the future delivery of foreign currencies at a specified
exchange rate.
At 30 June 2008, the state had economically hedged 100 per cent (2007: 100 per cent) of foreign
denominated interest-bearing liabilities and 93 per cent (2007: 40 per cent) of its foreign
denominated financial assets. There has been no change in the state’s exposure to foreign
currency risk or the manner in which it manages and measures the risk from the previous
reporting period.
138
Chapter 4
Financial Report 2007-08
Note 32: Financial instruments (continued)
Foreign currency sensitivity analysis
For exposure to foreign currencies, the state has undertaken a sensitivity analysis, to illustrate
the possible impacts on its financial position and result arising from a reasonably possible
change in exchange rates against the Australian dollar using the following assumptions:

exposure to the pool of foreign currencies for both derivative and non-derivative instruments
at the reporting date, and the stipulated change taking place at the beginning of the financial
year are held constant throughout the reporting period; and,

based on historic movements and future expectations and management’s knowledge and
experience of the foreign currency markets, the state has assessed that a reasonably possible
increase or decrease in the pool of exchange rates would be 10 per cent against the
Australian dollar (2007 - 10 per cent).
With all other variables held constant, the impact of a 10 per cent increase or decrease in
exchange rates on economic flows and net assets at 30 June 2008 is $235.3 million
decrease/$176.2 million increase (2007: $102.0 million decrease/$129.4 million increase).
The state’s exposure to direct foreign currency risk has no impact on the net result from
transactions.
(G)
Equity price risk
Equity price risk management
The state is exposed to equity price risk from Australian and international investments in
equities and managed investment schemes. Such investments are allocated and traded to match
investment objectives appropriate to the state’s liabilities. The state limits its equity price risk
through diversification of its investment portfolio. This is determined by VFMC and reflected in
the Investment Risk Management Plan approved by the Treasurer, and in accordance with the
Borrowing and Investments Powers Act 1987 (BIP Act) and the prudential supervisory policies
and framework of the state.
Equity price sensitivity analysis
For listed and unlisted investments held at the reporting date, the state has undertaken a
sensitivity analysis to illustrate the possible impacts on its financial position and result arising
from a reasonably possible change in equity prices based on the following assumptions:

exposure to equity securities for both derivative and non-derivative instruments at the
reporting date, and the stipulated change taking place at the beginning of the financial year
are held constant throughout the reporting period; and

based on historic movements, future expectations and management’s knowledge and
experience of the equity markets, the state has assessed that a reasonably possible increase or
decrease to equity prices to which the state is exposed is 10 per cent (2007 - 10 per cent).
Financial Report 2007-08
Chapter 4
139
Note 32: Financial instruments (continued)
With all other variables held constant, the impact of a 10 per cent increase or decrease in listed
equities on economic flows and net assets at 30 June 2008 is $293.9 million
increase/$293.1 million decrease (2007: $620.9 million increase/$589.1 million decrease) and
from unlisted equities is $441.3 million increase/$441.3 million decrease (2007: $350.6 million
increase/$350.6 million decrease).
The state’s exposure to equity price sensitivity has no impact on the net result from transactions.
There has been no change in the state’s exposure to equity price risk or the manner in which it
manages and measures the risk from the previous reporting period.
(H)
Credit risk
Credit risk refers to the possibility that a counterparty will default on its financial obligations as
and when they fall due. The state’s exposure to credit risk mainly arises through settlement of
investments and derivative transactions. Most of the state’s investments and derivatives are
centrally executed through TCV and VFMC. Limits are set both in terms of the quality and
amount of credit exposure in accordance with the BIP Act and the prudential supervisory
policies and framework of the state.
The state does not have any significant credit risk exposure to any single counterparty or to any
group of counterparties having similar characteristics.
The state’s maximum exposure to credit risk without taking account of the value of any
collateral obtained at the reporting date, in relation to each class of recognised financial asset, is
the carrying amount of those assets as recognised in the Balance Sheet.
(I)
Liquidity risk
Liquidity risk arises from being unable to meet financial obligations as they fall due. The state is
exposed to liquidity risk mainly through its external borrowings raised by TCV. The liquidity
management policy has three main components as follows.
Short-term liquidity management and control
On a daily basis, the minimum level of prudential liquidity assets is 3 per cent of total liabilities,
subject to a minimum of $500 million. At least 60 per cent of the minimum prudential liquidity
requirement must comprise primary liquidity assets and the remainder comprising secondary
liquidity assets. Primary liquidity assets comprise cash, Commonwealth government paper and
semi-government paper. Secondary liquidity assets comprise bank bills, bank negotiable
certificates of deposits, bank floating rate notes, bank transferable certificates of deposit and the
securities of foreign governments and government agencies. In addition, the state’s short term
liquidity requirement is that primary and secondary liquidity assets are required to be, at a
minimum, equal to the daily liquidity requirement determined by time-weighting cash flows
(both interest and principal) for a six month time horizon.
Long-term liquidity management monitoring
The state’s policy on long-term management of liquidity primarily focuses on the diversification
of maturities.
140
Chapter 4
Financial Report 2007-08
Note 32: Financial instruments (continued)
Managing a liquidity crisis
In the event of a liquidity crisis, the state has in place liquidity crisis management plans to
manage liquidity conditions. These are in the nature of a ‘check list’, designed to establish a set
of protocols to devise a market response during a crisis. Each crisis scenario is likely to be
unique, and as such the action plans can only form a starting point for any given situation.
Maturity analysis of financial liabilities
Table 4.8 details the state’s remaining contractual maturities for its derivative and non-derivative
financial liabilities. The table includes both interest and principal cash flows, and has been
drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date
on which the state may be required to pay.
Table 4.8: Undiscounted maturity analysis of financial liabilities
State of Victoria
2008
Payables
Interest-bearing
liabilities:
Domestic borrowings
Foreign currency
borrowings
Finance lease liabilities
Derivative financial
liabilities
2007
Payables
Interest-bearing
liabilities:
Domestic borrowings
Foreign currency
borrowings
Finance lease liabilities
Derivative financial
liabilities
Note:
(a)
Carrying
amount
($ million)
Nominal
Contractual Maturity
amount (a) 0-3 mths 3 mths-1 yr 1-2 yrs 2-5 yrs
5+ yrs
4 184.3
4 184.3
3 318.3
735.1
28.8
77.2
24.9
14 890.7
382.5
17 644.8
384.9
2 898.9
384.9
567.4
..
659.6
..
6 216.1
..
7 302.9
..
2 216.7
542.2
3 582.4
8.8
46.9
2.7
146.7
0.9
201.1
0.8
577.0
2.3
2 610.8
2.1
22 216.3
25 805.2
6 651.7
1 450.0
890.3
6 872.6
9 940.7
4 180.9
4 180.9
3 435.3
704.5
11.4
18.4
11.3
13 173.2
532.2
16 397.8
532.2
1 614.2
532.2
849.9 2 829.0
..
..
3 539.0
..
7 565.6
..
2 046.2
613.1
3 500.5
10.5
45.9
7.3
605.6
1.1
2 483.7
2.0
20 545.6
24 621.8
5 635.0
159.1
..
206.2
..
1 713.6 3 046.6
4 164.1 10 062.6
Represents undiscounted nominal amount.
Financial Report 2007-08
Chapter 4
141
Note 32: Financial instruments (continued)
Table 4.9: Finance lease liabilities are payable as follows:
($ million)
State of Victoria
2008
2007
193.6
205.0
778.1
811.8
2 610.8
2 483.7
3 582.4
3 500.5
(1 365.7) (1 454.3)
2 216.7
2 046.2
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
(J)
Fair value of financial instruments
The fair values of the state’s financial assets and liabilities are determined as follows:

the fair value of financial assets and financial liabilities with standard terms and conditions
and traded in an active liquid market are determined with reference to quoted market prices.
Financial instruments in this category include investments in equities, managed investment
schemes and debt securities;

the fair value of other financial assets and financial liabilities (excluding derivative
instruments) are determined in accordance with generally accepted pricing models based on
discounted cash flow analysis, using prices from observable current market transactions; and

the fair value of derivative instruments, such as interest rate futures contracts, are calculated
using quoted prices. Where such prices are not available, use is made of discounted cash
flow analysis using the applicable yield curve for the duration of the instrument for
non-optional derivatives, and option pricing models for optional derivatives.
Except as detailed in the following table, the carrying amounts of financial assets and financial
liabilities recorded at amortised cost in the financial statements approximate their fair values:
Table 4.10: Fair value of financial instruments held at amortised cost
($ million)
2008
State of Victoria
Financial assets
Non-current receivables
Financial liabilities
Finance lease liabilities
142
Chapter 4
2007
Carrying
amount
Carrying
amount
Fair
value
Fair
value
1 524.4
1 394.6
1 596.3
1 441.3
2 216.7
2 174.0
2 046.2
1 921.6
Financial Report 2007-08
Note 33: Commitments
($ million)
2008
2007
Net present
Nominal Net present
Nominal
value
Value
value
Value
Capital expenditure commitments
Land and buildings
Plant, equipment and vehicles
Infrastructure systems and road networks
Road Networks and Earthworks
Other
Total capital expenditure commitments
..
..
..
..
..
..
866.0
922.5
2 701.3
3.7
881.2
5 374.7
..
..
..
..
..
..
740.7
323.0
1 107.3
6.8
574.3
2 752.1
Operating and lease commitments
Rail services
Bus services
Other (a)
Total operating and lease commitments
..
..
..
..
3 207.8
3 800.7
3 681.3
10 689.8
..
..
..
..
3 454.6
614.9
3 005.7
7 075.2
37.7
62.5
57.3
39.0
21.8
..
172.4
57.0
656.4
152.6
45.7
124.5
77.6
135.2
31.4
22.7
199.1
63.7
1 685.6
529.4
34.9
80.0
..
87.5
33.5
..
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
203.6
1 016.4
2 476.6
449.9
3 741.9
7 106.8
421.5
..
1 593.9
1 073.2
..
4 006.2
Public private partnerships
Health Services – Mildura Hospital
Central Highlands Water
Barwon Water
Coliban Water
Melbourne Water
Grampians Wimmera Mallee Water (b)
Private Prisons
New County Court
Melbourne Convention Centre development
Southern Cross Station Authority (formerly Spencer
Street Station Authority)
Royal Women's Hospital
Royal Children's Hospital
Total public private partnerships
Other commitments
IT Services (Vic Police)
..
76.1
..
Road safety infrastructure program
..
640.0
..
Debt collection services (Traffic Camera Office)
..
281.2
..
Traffic camera services (Traffic Camera Office)
..
130.1
..
Victorian Neurotrauma Initiative program
..
45.0
..
Snowy Joint Government Enterprise
..
45.0
..
Major sporting events
..
165.9
..
New Ticketing Solution (Smartcard)
..
574.1
..
OneLink transit transition amendment deed
..
78.3
..
Other
..
326.5
..
Total other commitments
..
2 362.2
..
Total commitments
..
25 533.6
..
Notes:
(a) Prior year figures have been amended from $3 122.9 million to reflect a number of property lease
commitments existing at balance date that were extended beyond the contract term.
(b) Net present value not available at date of publication for Grampians Wimmera Mallee Water.
113.4
700.0
35.2
..
55.0
60.0
133.1
505.5
62.0
137.1
1 801.3
15 634.8
Other commitments refer to service level agreements and commitments that do not fall within
the above three categories.
Financial Report 2007-08
Chapter 4
143
Note 33: Commitments (continued)
Commitments are payable as follows:
($ million)
State of Victoria
2008
2007
Capital expenditure commitments payable
Less than 1 year
3 274.6
2 049.8
1 year but less than 5 years
2 004.6
692.7
5 years or more
95.5
9.5
Total capital expenditure commitments
5 374.7
2 752.1
Operating and lease commitments payable
Less than 1 year
2 531.5
2 377.8
1 year but less than 5 years
5 005.7
3 135.1
5 years or more
3 152.6
1 562.3
Total operating and lease commitments (a)
10 689.8
7 075.2
Public private partnership commitments
Less than 1 year
144.8
116.5
1 year but less than 5 years
615.7
721.3
5 years or more
6 346.3
3 168.4
Total public private partnership commitments
7 106.8
4 006.2
Total other commitments payable
Less than 1 year
626.3
333.4
1 year but less than 5 years
1 087.7
643.1
5 years or more
648.1
824.7
Total other commitments
2 362.2
1 801.3
Total commitments
25 533.6
15 634.8
Note:
(a) Prior year figures have been amended to reflect a number of property lease commitments existing at balance
date that were extended beyond the contract term.
144
Chapter 4
Financial Report 2007-08
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
2008
2007
116.7
250.2
131.9
78.2
..
..
248.6
328.5
General government
Public non-financial corporations
Public financial corporations
Total contingent assets
Guarantees, indemnities and warranties
89.2
58.3
Potential extension/early termination of contractual arrangements (a)
..
119.3
Legal proceedings and disputes
2.7
17.0
Other (b)
156.7
133.9
Total contingent assets
248.6
328.5
Notes:
(a) The potential early termination of contractual arrangements of $119.3 million recognised in 2006-07
representing any additional costs arising to the Director of Public Transport on early termination of the
public transport partnership agreements is not recognised as a contingent asset in 2007-08 as the right to
draw on these performance bonds has not been triggered and has expired.
(b) ‘Other’ includes the EastLink project of $92 million. 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. 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.
Financial Report 2007-08
Chapter 4
145
Note 34: Contingent assets and liabilities (continued)
Non-quantifiable contingent assets
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.
On 29 September 2006, the Victorian Government lodged a compensable enhancement claim
relating to works to improve the traffic flow in the vicinity of the intersection of Bulla Road and
the Tullamarine Freeway.
Under the Monash Westgate Freeways Improvement project, the Victorian Government’s share
of revenue uplifts will be calculated and paid three years after the completion of the project.
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 to the state, in certain limited
circumstances, to provide a bond to cover project rectification costs to the end of the concession
period in 2043.
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.
146
Chapter 4
Financial Report 2007-08
Note 34: Contingent assets and liabilities (continued)
Quantifiable contingent liabilities
($ million)
General government
Public non-financial corporations
Public financial corporations
Total contingent liabilities
State of Victoria
2008
2007
871.2
1 005.7
358.9
219.3
275.5
290.9
1 505.7
1 515.8
Guarantees, indemnities and warranties
Potential extension/early termination of contractual arrangements
Legal proceedings and disputes
Other
Total contingent liabilities
765.9
..
356.7
383.0
1 505.7
743.8
..
390.9
381.1
1 515.8
Non-quantifiable contingent liabilities
A number of potential obligations, which are non-quantifiable at this time, have been identified
by the Government as arising from:

indemnities provided in relation to transactions, including financial arrangements and
consultancy services, as well as for directors and administrators;

performance guarantees, warranties, letters of comfort, and the like;

deeds in respect of certain obligations; and

unclaimed monies which may be subject to future claims by the general public against the
state.
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 relative to 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 indexed service fees payable to the Concessionaire
(Developer) under the Development and Operations Agreement as and when they fall due,
subject to the Concessionaire's achievement of defined service standards at the Showgrounds
and relevant abatement if there are service failures.
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.
Financial Report 2007-08
Chapter 4
147
Note 34: Contingent assets and liabilities (continued)
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 meet certain RAS
obligations, in the form of a loan, if requested by the RAS when the RAS does not have
financial capacity to pay and provided the RAS has materially complied with all its material
obligations under the Project Objectives Agreement, RAS Events Agreement and other
Joint Venture project documents. If any outstanding loan amount remains unpaid at a date which
is 25 years after the commencement of the operation term under the Development and Operation
Agreement (commencement being 2006), 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.
The state has also entered into an agreement through the state Support Deed - Non-Core Land
with Showgrounds Retail Developments Pty Ltd and the RAS whereby the state agrees to
support certain payment obligations of the Royal Agricultural Society of Victoria Limited that
may arise under the Non-Core Development Agreement. In March 2007, Showgrounds Retail
Developments Pty Ltd subsequently assigned all its rights and obligations under these
agreements, via an Assignment Deed, to Coles Group Property Developments Ltd.
National Electricity Code Administrator
As part of the wind-up of the National Electricity Code Administrator (NECA), the state of
Victoria has undertaken to indemnify the actions of the NECA Directors for a period of seven
years upon completion of their tenure.
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 to November 2009. The following summarises the major contingent
liabilities arising from those arrangements.
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 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.
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 interests, 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.
148
Chapter 4
Financial Report 2007-08
Note 34: Contingent assets and liabilities (continued)
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 currently proceeding. 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 and Early Childhood Development
Indemnities are provided by the Department of Education and Early Childhood Development 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.
Indemnities are also provided for teachers, volunteer workers, school chaplains and school
councils. The indemnity for teachers protects them against liability for personal injuries to
students.
The Education Act 1958 provides a comprehensive indemnity to members of school councils for
any legal liability, whether in contract, negligence, defamation, etc.
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 The Domestic
Building (HIH) Indemnity Fund from the Housing Guarantee Fund Limited, under the House
Contracts Guarantee (Amendment) Act 2005. This fund is managed by the VMIA on behalf of
the state, and its Financial Report is published annually with the VMIA annual report.
Financial Report 2007-08
Chapter 4
149
Note 34: Contingent assets and liabilities (continued)
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.
Land remediation - environmental concerns
In addition to properties for which remediation costs have been provided in these Financial
Statements, certain other properties have been identified as potentially contaminated sites. The
state does not admit any liability in respect of these sites. However, remedial expenditure may
be incurred to restore the sites to an acceptable environmental standard.
Victorian Managed Insurance Authority - property and public liability
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 reinsures in the private market for losses above
$50 million arising out of any one event, up to a maximum for each type of cover (e.g.
$1 500 million for property and $750 million for public liability). The risk of losses above these
reinsured levels and below $50 million is borne by the VMIA on behalf of the state.
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.
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 has reinsurance agreements giving effect to these arrangements with three insurers.
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.
Biosolids drying facility
A contract has been entered into to design, build, finance and operate a biosolids drying facility,
being a long-term biosolids management solution for Barwon Water. Works approval delays
have been experienced by the contractor who is entitled to be compensated by Barwon Water for
the delays encountered. Negotiations are currently taking place between Barwon Water and the
contractor in relation to the amount of compensation. As negotiations are currently active,
reliable estimates of costs are not available.
150
Chapter 4
Financial Report 2007-08
Note 34: Contingent assets and liabilities (continued)
Gambling licences
In 1992, a gaming operator’s licence was issued to the Trustees of the Will and Estate of the late
George Adams, now trading as Tatts Group. In 1994, the state issued a wagering and gaming
licence to TABCORP Holdings Limited (TABCORP). These licences expire in 2012 and the
end-of-licence arrangements are specified in the Gambling Regulation Act 2003.
These end-of-licence arrangements include compensation provisions for the licensees predicated
on the current licensing arrangements being rolled over for a further period beyond 2012.
On 10 April 2008, the Government announced a new regulatory model for the post-2012
licences. Subject to legislative amendment, the main changes include:

separating the wagering and gaming licence to license wagering instead, on a stand-alone
basis; and

transitioning from the current gaming operator duopoly to a system where venue operators
are licensed to own and operate gaming machines in their own right.
After considering the end-of-licence arrangements in the Gambling Regulation Act 2003, the
government has formed the view that neither Tatts Group nor TABCORP will be entitled to
compensation after the expiration of their current licences.
The government does not intend to alter or amend the provisions in the Gambling Regulation
Act 2003 that deal specifically with the end-of-licence arrangements for Tatts Group and
TABCORP.
Note 35: Funds under management
($ million)
State of Victoria
2008
2007
787.0
774.7
688.1
723.4
436.1
392.9
828.8
801.2
385.9
..
212.1
208.3
3 337.9
2 900.5
Investments, real estate, personal and other assets
Cash and investments in common and premium funds
Residential tenancies bond money
Funds under management by the Senior Master of the Supreme Court
Funds under management by the Legal Services Board (a)
Other funds held (b)
Total funds under management
Notes:
(a)
In prior years, the Legal Services Board funds under management were reported by the board as controlled
assets of the state.
(b) The Australian Securities and Investments Commission (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.
These funds are held in trust for certain controlled entities’ clients and are therefore not included
in the balance sheet.
Financial Report 2007-08
Chapter 4
151
Note 36: Correction of prior period errors
The errors described below have been corrected by restating each line item in the affected
financial statements for the prior year.
Asset recognition and de-recognition at outdated values in the Department of
Sustainability and Environment.
During the preparation of schedules for the 2007-08 asset revaluation process for crown land
(public safety and environment), the Department of Sustainability and Environment identified
that certain recognitions and de-recognitions in crown land in previous financial years had been
based on outdated valuations.
As a result, net income from other economic flows was understated from certain land not
previously recognised through the operating statement (partly offset by an overstatement in
income from other economic flows where certain land values were not written down). In
addition, expense from transactions for the previous year was understated for land provided free
of charge.
In addition to the impact on the operating statement and balance sheet, property, plant and
equipment (land) revaluation reserve in previous financial years was overstated. The net impact
of these errors is:
2006-07 opening balances

an overstatement of retained earnings of $24.7 million ;

an overstatement of asset revaluation reserve of $119.4 million ; and

an overstatement of property, plant and equipment of $144.1 million.
2006-07

an understatement of income from other economic flows of $228.3 million;

an understatement of resources provided free of charge of $30.2 million;

an overstatement of asset revaluation reserve of $112.7 million; and

an understatement of property, plant and equipment (land) of $85.5 million.
All recognitions and de-recognitions in the current financial year have been based on corrected
valuations.
Superannuation adjustment due to an overstatement of the fund’s future tax liability
value at 30 June 2007.
The state’s liability for defined benefit superannuation includes a component that relates to the
expected cost of future taxation on the contributions and assets backing the benefit obligations,
which is known as the tax liability. The external actuary advised the Department of Treasury and
Finance of an error in relation to the calculation of the tax liability of the State Superannuation
Fund section of the Emergency Services Superannuation Scheme as at 30 June 2007.
The effect of this error on the 2006-07 superannuation figures is that the non-current
superannuation liability was overstated by $238.0 million and the actuarial gain on
superannuation defined benefit plans (income from other economic flows) was understated by a
similar amount.
152
Chapter 4
Financial Report 2007-08
Note 36: Correction of prior period errors (continued)
The net impact of the above errors on the financial statements for the State of Victoria and the
general government sector is shown in the following tables.
Consolidated operating statement 2006-07
Expenses from transactions
Supplies and services
Net result from transactions
($ million)
State of Victoria
Restated Previously Difference
disclosed
General government sector
Restated Previously Difference
disclosed
16 134.2
1 216.8
11 001.3
1 334.5
16 104.1
1 247.0
30.2
( 30.2)
10 971.2
1 364.7
30.2
( 30.2)
Income/(expenses) from other
economic flows
Actuarial gains/(losses) of
3 434.1
3 196.1
238.0
3 428.1
3 190.1
238.0
superannuation defined benefit
plans
Other gains/(losses) from other
( 195.4)
( 423.7)
228.3
546.7
318.4
228.3
economic flows (a)
Net result
7 668.2
7 232.1
436.1
5 306.5
4 870.3
436.1
Note:
(a) Comparative figure adjusted for reclassification between financial assets at fair value and other economic
flows in 2007-08.
Consolidated balance sheet as at 30 June 2007
($ million)
State of Victoria
Restated Previously Difference
disclosed
Non-current assets
Property, plant and equipment
Total assets
Non-current liabilities
Superannuation
Total liabilities
Net assets
Equity
Reserves
Accumulated funds
Total equity
Financial Report 2007-08
99 619.4 99 678.0
139 457.9 139 516.6
General government sector
Restated Previously Difference
disclosed
( 58.7)
( 58.7)
59 340.6
69 015.7
59 399.3
69 074.4
( 58.7)
( 58.7)
9 564.7
25 350.5
43 665.2
9 802.7
25 588.5
43 485.8
( 238.0)
( 238.0)
179.3
9 575.2
53 130.6
86 327.3
9 813.2
53 368.6
86 148.0
( 238.0)
( 238.0)
179.3
34 674.2
51 653.1
86 327.3
34 906.3
51 241.7
86 148.0
( 232.1)
411.5
179.3
Chapter 4
153
Note 36: Correction of prior period errors (continued)
Consolidated statement of recognised income and expense for the year ended
30 June 2007
Gain on revaluation of property
plant and equipment
Net income recognised directly
in equity
Net result for the period
Total recognised income and
expense for the period
($ million)
State of Victoria
Restated Previously Difference
disclosed
2 007.8
2 120.5
( 112.7)
General government sector
Restated Previously Difference
disclosed
1 793.1
1 905.9
( 112.8)
2 078.8
2 191.5
( 112.7)
1 838.1
1 950.9
( 112.8)
7 668.2
9 747.0
7 232.1
9 423.5
436.1
323.5
5 306.5
7 144.6
4 870.3
6 821.2
436.1
323.4
Note 37: Subsequent events
Murray-Darling Basin Commission
The state’s interest in the Murray-Darling Basin Commission (MDBC) is equity accounted as a
joint venture entity.
On 26 March 2008, the Commonwealth and the Basin States - New South Wales, Victoria,
Queensland, South Australia and the Australian Capital Territory - signed a Memorandum of
Understanding for Murray-Darling Basin Reform. An Intergovernmental Agreement, setting out
the arrangements for implementing this Memorandum of Understanding, was signed at the
Council of Australian Governments meeting on 3 July 2008.
The Murray-Darling Basin Authority (MDBA) was created by the Water Act 2007 and
commenced operations on 3 March 2008. The functions currently undertaken by the MDBC are
to be transferred to the MDBA and the existing MDBC dissolved, with a new Ministerial
Council, Basin Officials Committee and Basin Community Committee established for the
MDBA. The actual transition date is subject to legislative changes taking effect, but is planned
to be achieved by 1 November 2008.
Work regarding transition arrangements for MDBC assets and liabilities continues in relation to
the nature of each jurisdiction’s interests. The final accounting implications resulting from this
event are still to be confirmed.
The state is not aware of any other circumstances that have arisen, or information that has
become available, since 30 June 2008 in relation to the MDBC/MDBA that qualifies for
inclusion as a post balance date event.
154
Chapter 4
Financial Report 2007-08
Note 38: Public Account disclosure
Table 4.11: Consolidated Fund receipts and payments for the year ended 30 June
($ thousand)
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
Financial Report 2007-08
Chapter 4
2008
2007
13 047 957
473 011
14 422 120
751 990
20 383
1 204 911
2 893 330
32 813 701
603 332
33 417 033
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
2 345 437
1 737 763
30 561
41 767
201 995
2 577 993
92 086
1 871 616
25 412 214
397 840
23 390 199
300 031
2 138 731
1 914 142
379 413
..
417 331
80 113
28 328 198
26 101 816
958 831
295 467
665 412
275 897
521 140
334 663
38 539
152 503
38 618
59 277
1 966 481
1 373 868
1 027 701
3 900
1 109 841
..
2 637
..
13 016
..
1 034 237
1 122 857
155
Note 38: Public Account disclosure (continued)
Table 4.11: Consolidated Fund receipts and payments for the year ended 30 June
(continued)
($ thousand)
2008
2007
25 880
25 043
957
1 035
91 000
92 000
31 446 753
( 394 717)
28 716 620
( 443 191)
33 630 029
30 145 045
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
114 861
33 417 033
(33 630 029)
( 98 135)
579 562
29 680 344
(30 145 045)
114 861
2 779 124
201 995
2 586 402
92 086
Subtotal
less applied appropriations unspent at beginning of year
Current year appropriations remaining unspent as at 30 June
2 981 119
(2 586 402)
394 717
2 678 488
(2 235 298)
443 191
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 2007-08
appropriations
Total payments
156
Chapter 4
Financial Report 2007-08
Note 38: Public Account disclosure (continued)
Table 4.12: Consolidated Fund gross receipts for the year ended 30 June
($ thousand)
Estimate
2008
Actual
2008
Actual
2007
4 001 953
765 560
38 700
4 270 015
857 774
49 409
3 889 744
1 017 618
47 836
2 858 251
4 547
20 638
..
61 600
3 615 235
11 158
22 240
..
61 482
2 434 462
39 200
16 946
57
60 236
368 700
941 400
130 800
129 400
5 900
770 900
389 636
1 005 733
117 299
123 641
6 579
754 301
376 617
936 636
119 045
122 792
5 902
725 533
783 137
559 304
778 279
573 829
727 753
553 439
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
7 700
7 605
7 464
119 390
403 741
81 203
11 567 880 13 047 957 11 162 482
Fines and regulatory fees
Grants received
Education and Early Childhood Development
Human Services
Innovation, Industry and Regional Development
Justice
Planning and Community Development
Premier and Cabinet
Primary Industries
Sustainability and Environment
Transport
Treasury and Finance
Parliament
Total grants received
567 101
476 077
634 190
676 181
712 880
3 256 103
3 456 757
3 052 884
5 000
16 028
5 065
53 720
53 173
52 166
..
16
..
..
..
399
36 950
148 677
118 273
98 832
359 394
162 752
394 740
439 483
339 840
9 124 800
9 272 411
8 589 558
..
..
..
13 604 334 14 422 120 13 033 816
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
Financial Report 2007-08
473 011
Chapter 4
713 563
37 012
751 990
20 383
687 460
53 402
683 035
314 679
2 800
1 000 514
357 545
843 236
4 130
1 204 911
553 433
459 364
2 814
1 015 611
157
Note 38: Public Account disclosure (continued)
Table 4.12: Consolidated Fund gross receipts for the year ended 30 June (continued)
($ thousand)
Other receipts
Land rent received
Royalties received
Capital assets charge
Other
Total other receipts
Total cash inflows from operating activities
Estimate
2008
Actual
2008
Actual
2007
14 871
41 149
2 779 846
274 385
3 110 251
19 267
41 819
2 767 442
64 802
2 893 330
20 144
39 629
2 615 193
454 141
3 129 108
30 600 655 32 813 701 29 557 956
Cash inflows from investing and financing activities
Proceeds from investments
Other loans
Loans from TCV
Other
Total cash inflows from investing and financing activities
Total consolidated fund receipts
158
1 000
631
..
151 408
153 039
..
498
550 000
52 834
603 332
19 563
( 19)
..
102 844
122 388
30 753 694 33 417 033 29 680 344
Chapter 4
Financial Report 2007-08
Note 38: Public Account disclosure (continued)
Table 4.13: The Trust Fund cash flow statement for the year ended 30 June
($ thousand)
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 benefits
Superannuation
Interest paid
Grants paid
Supplies and consumables
Other payments
Net cash flows from operating activities
2008
2007
181 357
24 208
2 465 232
316 729
155 426
9 284 729
182 516
135 926
34 558
2 390 664
338 202
125 640
8 717 777
133 493
(95 217)
(85 542)
(6 682)
(5 799)
( 20 587)
(29 679)
(9 923 918) (9 425 098)
(2 416 161) (2 117 663)
..
(22)
147 632
212 457
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
825
58 621
(58 015)
(136 416)
(134 984)
(4 909)
49 360
(113 115)
(157 094)
(225 758)
Cash flows from financing activities
Net repayments of borrowings
Net cash flows from financing activities
Net increase in trust fund cash and deposits
(373 770)
(373 770)
( 361 122)
739 922
739 922
726 621
Financial Report 2007-08
Chapter 4
159
Note 38: Public Account disclosure (continued)
Table 4.14: Trust Fund reconciliation of cash flows to balances held
($ thousand)
Balances
held at
30 June 2008
Net
movement
for year
Balances
held at
30 June 2007
Cash and deposits
Cash balances outside the Public Account
3 356
( 44)
3 400
Deposits held with the Public Account - specific trusts
49 348
12 918
36 429
Deposits held with the Public Account - general trusts
1 288
..
1 288
Other balances held in the Public Account on behalf of
1 593 415
( 373 997)
1 967 412
trust accounts
Total cash and deposits
1 647 406
( 361 122)
2 008 529
Investments
Investments held with the Public Account - specific trusts
843 120
206 450
636 670
Total investments
843 120
206 450
636 670
Total trust fund balances
2 490 527
( 154 673)
2 645 199
Less funds held outside the Public Account
Cash
3 356
( 44)
3 400
Total trust fund balances held outside the Public
3 356
( 44)
3 400
Account
Total trust funds held within the Public Account (a)
2 487 171
( 154 629)
2 641 800
Note:
(a) See Table 4.16 for details of securities and investments held with the Public Account on behalf of trust
accounts.
160
Chapter 4
Financial Report 2007-08
Note 38: Public Account disclosure (continued)
Table 4.15: Trust Fund summary for the year ended 30 June
($ thousand)
Balances
held 2008
Balances
held 2007
164 369
120 496
708 043
722 594
141 029
604 423
154 772
484 193
2 256 828
89 568
802 727
130 515
448 841
2 314 740
112 456
216 954
Commonwealth Government funds
Commonwealth Grants passed on to
individuals and organisations
15 822
5 386
Total Commonwealth Government funds
15 822
5 386
102 064
104 720
2 487 171
2 641 800
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
Financial Report 2007-08
Chapter 4
161
Note 38: Public Account disclosure (continued)
Table 4.16: Details of securities held and included in the balances at 30 June
($ thousand)
Funds held at 30 June
Trust accounts
Amounts invested on behalf of specific trust accounts
Amounts invested on behalf of general trust accounts
General trust accounts
Total trust accounts
General consolidated fund account balance
Total funds held
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
Temporary Advance to the Consolidated Fund pursuant to Section 38 of the
Financial Management Act, No. 18 of 1994
Total funds held
162
Chapter 4
2008
2007
892 448
1 288
1 593 435
2 487 171
..
2 487 171
673 079
1 288
1 967 432
2 641 800
114 861
2 756 661
1 288
97 851
794 616
893 755
1 288
100 546
572 534
674 367
637 000
..
316 873
953 873
1 847 628
541 408
1 042 000
..
189 119
1 231 119
1 905 486
851 175
98 135
..
2 487 171
2 756 661
Financial Report 2007-08
Note 38: Public Account disclosure (continued)
Table 4.17: Amounts paid into working accounts pursuant to Section 23 of the Financial
Management Act 1994 for the year ended 30 June 2008
($ thousand)
Appropriation transfer equivalent to consolidated fund receipts
Interest received on credit balances
State subsidy contribution
Other income
Total amounts paid into working accounts
2008
11 571
266
2 824
38
14 698
2007
8 138
539
2 770
134
11 580
Table 4.18: Allocations pursuant to Section 28 of the Financial Management Act 1994 for
the year ended 30 June 2008
($ thousand)
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
Addition to the net asset base – Victorian Water Trust
Total Section 28 allocations
Financial Report 2007-08
Chapter 4
2008
2007
..
11 767
30 000
561
30 561
29 691
309
41 767
163
Note 38: Public Account disclosure (continued)
Table 4.19: Transfers pursuant to Sections 30 and 31 of the Financial Management Act
1994 for the year ended 30 June 2008
($ thousand)
Decrease
Section 30 Transfers
(transfers between items of departmental appropriations)
Department of Education and Early Childhood Development
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of
1994 applies)
Additions to the net asset base (Section 29 of the Financial Management Act,
No. 18 of 1994 applies)
Department of Human Services
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of
1994 applies)
Additions to the net asset base (Section 29 of the Financial Management Act,
No. 18 of 1994 applies)
Department of Innovation, Industry and Regional Development
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of
1994 applies)
Additions to the net asset base
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
Victorian Law Reform Commission
Department of Planning and Community Development
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of
1994 applies)
Additions to the net asset base
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 Transport
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of
1994 applies)
Additions to the net asset base
164
Chapter 4
Increase
55 852
55 852
94 790
94 790
..
..
..
..
13 816
13 765
51
5 425
5 425
20 518
20 518
10 228
10 228
4 621
4 621
2 752
2 752
3 443
3 443
Financial Report 2007-08
Note 38: Public Account disclosure (continued)
Table 4.19: Transfers pursuant to Sections 30 and 31 of the Financial Management Act
1994 for the year ended 30 June 2008 (continued)
($ thousand)
Decrease
Department of Treasury and Finance
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of
1994 applies)
Additions to the net asset base (Section 29 of the Financial Management Act,
No. 18 of 1994 applies)
Payments made on behalf of the State
Total Section 30 transfers
Section 31 Transfers
(transfers between items of Parliament appropriations)
Parliamentary Services
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of
1994 applies)
Parliamentary Investigatory Committees
Provision of outputs (Section 29 of the Financial Management Act, No. 18 of
1994 applies)
Total Section 31 transfers
Financial Report 2007-08
Chapter 4
Increase
4 085
3 227
858
215 530
215 530
359
359
359
359
165
Note 38: Public Account disclosure (continued)
Table 4.20: Appropriation of receipts pursuant to Section 29 of the Financial
Management Act 1994 for the year ended 30 June 2008
($ thousand)
Department
Education and Early Childhood Development
Human Services
Innovation, Industry and Regional Development
Justice
Planning and Community Development
Premier and Cabinet
Primary Industries
Sustainability and Environment
Transport
Treasury and Finance
Parliament
Total appropriation
Source
Other
Total
9 558
242 057
8 669 1 301 080
..
..
1 234
122 496
2 600
2 600
..
485
..
199 541
2 300
419 496
..
440 285
..
5 626
..
17 910
24 361 2 751 577
Outputs Commonwealth
1 695
230 804
276 514
1 015 897
..
..
117 965
3 298
..
..
485
..
64 602
134 939
57 801
359 394
803
439 483
5 626
..
17 910
..
543 401
2 183 815
Table 4.21: Section 32 Carryovers - Financial Management Act 1994 for the year ended
30 June 2008
(a)
Amounts approved for carryover from 2007 pursuant to Section 32 of the
Financial Management Act 1994
Department
($ thousand)
Provision of Additions to
outputs
net assets
Payments
made on
behalf of State
58 530
..
Other
Total
carryover
Education and Early Childhood
35 400
..
93 930
Development
Human Services
53 020
13 616
..
..
66 636
Innovation, Industry and Regional
39 289
7 964
..
..
47 253
Development (a)
Justice (a)
59 508
14 655
..
..
74 163
Planning and Community
18 269
21 395
..
..
39 664
Development (a)
Premier and Cabinet (a)
5 740
2 765
..
..
8 505
Primary Industries
57 771
1 453
..
..
59 224
Sustainability and Environment (a)
45 140
7 231
..
..
52 371
Transport (a)
111 803
166 027
..
..
277 830
Treasury and Finance
478
701
3 900
..
5 079
Parliament (a)
3 902
1 858
..
..
5 760
Total carryovers by department
430 320
296 195
3 900
..
730 415
Note:
(a) Published figures for 2006-07 have been adjusted due to timing differences and Machinery of Government
changes.
166
Chapter 4
Financial Report 2007-08
Note 38: Public Account disclosure (continued)
(b)
Amounts applied against carryover of appropriations in 2008 pursuant to
Section 32 of the Financial Management Act 1994
Department
Education and Early Childhood
Development
Human Services
Innovation, Industry and Regional
Development
Justice
Planning and Community
Development
Premier and Cabinet
Primary Industries
Sustainability and Environment
Transport
Treasury and Finance
Parliament
Total expenditure by department
(c)
($ thousand)
Provision of Additions to
Payments
outputs net assets made on behalf
of State
35 400
58 530
..
Other
Total
carryover
..
93 930
53 020
37 924
13 616
7 964
..
..
..
..
66 636
45 888
59 508
18 269
14 655
21 395
..
..
..
..
74 163
39 664
4 995
57 771
45 139
81 433
478
3 902
397 840
2 765
1 453
7 231
166 000
..
1 858
295 467
..
..
..
..
3 900
..
3 900
..
..
..
..
..
..
..
7 760
59 224
52 370
247 433
4 378
5 760
697 207
Amounts approved for carryover to 2009 pursuant to Section 32 of the Financial
Management Act 1994
Department
Education and Early Childhood
Development
Human Services
Innovation, Industry and Regional
Development
Justice
Planning and Community
Development
Premier and Cabinet
Primary Industries
Sustainability and Environment
Transport
Treasury and Finance
Parliament
Total carryovers by department
Financial Report 2007-08
($ thousand)
Provision of Additions to
outputs
net assets
58 502
45 005
Payments
made on
behalf of
State
..
40 591
23 125
54 841
2 913
..
..
..
..
95 432
26 038
84 983
1 318
20 626
9 556
..
..
..
..
105 609
10 874
6 710
41 996
43 299
38 492
1 898
3 811
344 725
5 900
1 420
14 686
157 399
4 047
4 549
320 942
..
..
..
..
..
..
..
..
..
..
..
..
..
..
12 610
43 416
57 985
195 891
5 945
8 360
665 667
Chapter 4
Other
Total
carryover
..
103 507
167
Note 38: Public Account disclosure (continued)
Table 4.22: Payments from Advance to Treasurer for the year ended 30 June 2008
Department
Education and Early Childhood
Development
Innovation, Industry and
Regional Development
Justice
($ thousand)
Purpose
Maintenance funding for schools
2008
7 172
7 172
2 150
50 000
12 911
65 061
998
414
600
520
Service Victoria
Victorian Peak Computing Facility
Investment Support Program
Gippsland Flood Recovery Package
Level Crossing Safety Policy
Post 2012 Gambling Licences Review
Separate Director Police Integrity and Expand
Specialist Investigations Monitoring Role
VicPol - Maritime Security
VicSES for declared events in 2007-08
Departmental Relocation Costs
Planning and Community
Development
Days in the Diocese events
Drought Response Package
Heritage Works Package
MCG Concourse Extension
National Competition Policy payment
Restoration of Newman College
VFL Training Grounds Upgrades
Youth Guarantee
AFL Training Grounds Upgrades
Eltham Basketball Stadium
Premier and Cabinet
Arts Centre Maintenance
Australian Institute for Public Policy
Restoration of St Paul's Cathedral
Water Plan Information
China Earthquake Relief
Strategic Policy Advice Output
Office of the Ombudsman
Primary Industries
Australian Energy Market Commission
Drought Response Package
Equine Influenza Response
Fruit Fly Outbreak Response
Future Farming Strategy
Gippsland Flood Recovery Package
Structural Adjustment of Western Zone Rock Lobster
Fishery
Victorian Renewable Energy Target Administration
Costs
3 666
1 764
1 455
9 417
3 687
9 569
750
9 500
889
2 500
4 000
2 862
10 500
500
44 757
4 000
8 000
500
250
500
617
415
14 282
800
12 806
8 155
1 148
119
1 222
5 000
3 100
32 351
168
Chapter 4
Financial Report 2007-08
Note 38: Public Account disclosure (continued)
Table 4.22: Payments from Advance to Treasurer for the year ended 30 June 2008
(continued)
Department
Sustainability and Environment
($ thousand)
Purpose
Alpine Resorts Support Costs
Bays and Maritime Business Case
Desalination Project Development Costs
Drought Response Package
Environmental Contribution Levy - Living Murray
Initiative commitments
Eradication costs for invasive species - Electric Ant
Eradication Program
Bush Fire Response and Preparedness
Food Bowl Modernisation Project
Gippsland Flood Recovery Package
Hepburn Springs Bathhouse re-tendering costs
Murray-Darling Basin Commission contribution
indexation
Our Water Our Future
Land Victoria litigation costs
Solar Hot Water Rebates for Regional Victoria
Streamline Planning through Electronic Applications
and Referrals project
St Kilda Triangle legal costs
Water Augmentation projects - Hamilton to
Grampians
Transport
Maintenance of Rail Freight Network
EastLink Land Acquisition
Treasury and Finance
Land acquisition near the Blackburn Lake Sanctuary
Efficient Technology and Administrative Services
Parliament
Additional funding for the Victorian Auditor-General's
Office
Total payments from Advance to Treasurer
Financial Report 2007-08
Chapter 4
2008
1 487
5 000
38 333
68 250
35 000
403
38 310
10 513
10 000
358
164
7 160
800
450
2 572
872
1 000
220 672
10 528
13 675
24 203
1 584
523
2 106
568
568
420 589
169
Note 38: Public Account disclosure (continued)
Table 4.23: Payments from advances pursuant to Section 35 of the Financial
Management Act 1994 for the year ended 30 June 2008
Department
Education and Early Childhood
Development
Justice
($ thousand)
Purpose
Partnerships Victoria in Schools tendering costs
Counter Terrorism equipment
EastLink Road Safety Cameras
Level Crossing Safety Package
Police Air Wing Relocation
Upgrading of Police Cells
Primary Industries
Victorian Renewable Energy Target Administration
Costs
Sustainability and
Environment
Foodbowl Modernisation Project
Wimmera Mallee Pipeline Construction
Transport
Gippsland Flood Recovery Package
Level Crossing Safety Package
Noble Park Train Station Upgrade
Regional Rolling Stock Procurement
Total payments from advances pursuant to
Section 35 of the Financial Management Act,
No. 18 of 1994
170
Chapter 4
2008
2 000
2 000
136
7 313
410
2 375
1 070
11 305
1 100
1 100
76 000
41 000
117 000
4 800
2 445
350
13 504
21 099
152 504
Financial Report 2007-08
Note 38: Public Account disclosure (continued)
Table 4.24: Unused advances carried forward to 2007-08 pursuant to Section 35(4) of the
Financial Management Act 1994
There have been no amounts carried forward to 2007-08 under Section 35(4) of the Financial
Management Act, No. 18 of 1994.
Table 4.25: Parliamentary authority - Parliament
($ thousand)
Parliamentary
authority
2008
Amounts
applied
2008
Amounts
applied
2007
13
13
13
200
6 109
200
6 109
200
5 420
210
210
..
6 532
6 532
5 632
2 667
..
..
2 667
2 647
..
..
2 647
2 648
..
..
2 648
..
..
..
..
..
..
..
..
..
..
..
..
Total annual appropriations gross application
2 667
2 647
2 648
Total Parliamentary authority
9 199
9 179
8 280
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
Financial Report 2007-08
Chapter 4
171
Note 38: Public Account disclosure (continued)
Table 4.25 : Parliamentary authority - Parliament (continued)
($ thousand)
Legislative Assembly
Special appropriations
Audit Act, No. 2 of 1994 - Audit of the Office of the
Auditor-General
Constitution Act, No. 8750 - Clerk of the Parliaments
Constitution Act, No. 8750 - Legislative Assembly
Parliamentary Salaries and Superannuation Act, No. 7723 Salaries and Allowances
Parliamentary Salaries and Superannuation Act, No. 7723 Section 13(1)(c ) Contributions
Total special appropriations
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
172
Chapter 4
Parliamentary
authority
2008
Amounts
applied
2008
Amounts
applied
2007
13
13
13
2
550
11 722
2
550
11 722
2
550
11 923
230
230
..
12 517
12 517
12 488
4 111
..
..
4 111
4 084
..
..
4 084
4 108
..
..
4 108
..
..
..
..
..
..
..
..
..
4 111
4 084
4 108
16 628
16 600
16 595
Financial Report 2007-08
Note 38: Public Account disclosure (continued)
Table 4.25: Parliamentary authority - Parliament (continued)
($ thousand)
Parliamentary
authority
2008
Amounts
applied
2008
Amounts
applied
2007
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
6 162
..
..
6 162
6 127
..
..
6 127
5 705
..
..
5 705
Total annual appropriations - gross application
6 162
6 127
5 705
Total Parliamentary authority
6 162
6 127
5 705
Financial Report 2007-08
Chapter 4
173
Note 38: Public Account disclosure (continued)
Table 4.25: Parliamentary authority - Parliament (continued)
($ thousand)
Parliamentary
authority
2008
Amounts
applied
2008
Amounts
applied
2007
62 160
3 564
65 724
56 817
3 564
..
60 381
53 029
1 436
..
54 465
5 420
1 858
7 278
871
1 858
2 729
5 782
..
5 782
Total annual appropriations - gross application
73 002
63 110
60 247
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
73 002
..
63 110
..
60 247
..
Total Parliamentary authority
73 002
63 110
60 247
Parliamentary Services
Annual appropriations
Provision of outputs
Provision of outputs - net application
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total provision of outputs - gross application
Additions to the net asset base
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
174
Chapter 4
Financial Report 2007-08
Note 38: Public Account disclosure (continued)
Table 4.25: Parliamentary authority - Parliament (continued)
($ thousand)
Parliamentary
authority
2008
Amounts
applied
2008
Amounts
applied
2007
Auditor-General
Special appropriations
Constitution Act No. 8750 - Auditor-General's salary
Total special appropriations (excl. FMA Section 33)
431
431
431
431
410
410
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
11 618
17 910
338
568
30 434
11 614
17 910
338
568
30 430
10 942
15 749
776
..
27 467
Total annual appropriations - gross application
30 434
30 430
27 467
Total parliamentary authority (excl. FMA Section 33)
30 865
30 861
27 877
1 918
1 918
1 661
32 783
32 779
29 538
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 2007-08
Chapter 4
175
Note 38: Public Account disclosure (continued)
Table 4.26: Parliamentary authority - Education and Early Childhood Development
($ thousand)
Parliamentary
authority
2008
Amounts
applied
2008
Amounts
applied
2007
250
250
250
5 617
5 867
5 617
5 867
..
250
6 317 213
120 981
35 400
7 172
6 480 766
6 258 711
120 981
35 400
7 172
6 422 265
6 284 474
99 109
7 866
..
6 391 449
160 520
121 076
58 530
2 000
75 440
121 076
58 530
2 000
33 188
220 826
..
..
342 126
257 046
254 013
Total annual appropriations - gross application
6 822 892
6 679 310
6 645 463
Total parliamentary authority (excl. FMA Section 33)
6 828 759
6 685 177
6 645 713
26 735
26 735
56 457
6 855 494
6 711 912
6 702 170
Special appropriations
Education and Early Childhood Development Act, No. 6240,
Section 34 - Volunteer Workers Compensation
FMA No.18/1994 s10-Approp of Cwlth grants etc
Total special appropriations (excl. FMA Section 33)
Annual appropriations
Provision of outputs
Provision of outputs - net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total provision of outputs - gross application
Additions to the net asset base
Additions to the net asset base - net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Section 35 Financial Management Act, No. 18 of 1994
(temporary advances)
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
176
Chapter 4
Financial Report 2007-08
Note 38: Public Account disclosure (continued)
Table 4.27: Parliamentary authority - Human Services
($ thousand)
Parliamentary
authority
2008
Amounts
applied
2008
Amounts
applied
2007
22 092
18 516
117 901
22 092
18 516
117 901
17 779
5 219
82 012
635 658
635 658
613 276
126 601
126 601
124 644
348 115
348 115
327 756
1 578
1 578
1 756
1 270 462
1 270 462
1 172 442
9 360 965 9 302 464
1 280 711 1 261 977
53 020
53 020
..
..
10 694 696 10 617 461
8 476 679
1 110 868
44 014
79 292
9 710 853
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)
Annual appropriations
Provision of outputs
Provision of outputs - net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total provision of outputs - gross application
Additions to the net asset base
Additions to the net asset base - net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Section 35 Financial Management Act, No. 18 of 1994
(temporary advances)
Total additions to the net asset base - gross application
174 626
20 369
13 616
..
132 574
7 067
13 616
..
173 907
15 191
89 540
..
208 611
153 257
278 637
Total Annual Appropriations Gross Application
10 903 307 10 770 718
9 989 491
Total parliamentary authority (excl. FMA Section 33)
12 173 769 12 041 180
11 161 933
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 2007-08
136 748
136 748
..
12 310 517 12 177 928
11 161 933
Chapter 4
177
Note 38: Public Account disclosure (continued)
Table 4.28: Parliamentary authority - Innovation, Industry and Regional Development
($ thousand)
Parliamentary
authority
2008
Amounts
applied
2008
Amounts
applied
2007
1 334 243
..
39 289
..
1 310 979
..
37 924
..
775 309
65
9 470
16 666
65 061
1 438 594
65 061
1 413 964
78 207
879 717
2 913
7 964
..
..
7 964
..
4 959
8 480
..
10 877
7 964
13 439
91 000
91 000
92 000
91 000
91 000
92 000
Total annual appropriations - gross application
1 540 471
1 512 928
985 156
Total Parliamentary authority (excl. FMA Section 33)
1 540 471
1 512 928
985 156
2 500
2 500
..
1 542 971
1 515 428
985 156
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
178
Chapter 4
Financial Report 2007-08
Note 38: Public Account disclosure (continued)
Table 4.29: Parliamentary authority - Justice
($ thousand)
Parliamentary
authority
2008
Amounts
applied
2008
Amounts
applied
2007
408
4 234
396
12 822
20 928
784
..
16 116
408
4 234
396
12 822
20 928
784
410
3 881
348
9 896
17 408
1 450
16 116
36 758
79
..
33 498
1 777
2 044
23 833
79
..
33 498
1 777
2 044
23 833
7 418
2 017
28 131
1 374
1 701
27 100
..
..
..
327
327
446
117 246
117 246
138 339
2 915 812
121 263
59 508
..
2 830 786
121 263
59 508
..
2 660 728
106 486
740
8 965
8 328
3 104 911
8 328
3 019 884
12 460
2 789 380
29 650
1 234
14 655
11 305
9 024
1 234
14 655
11 305
114 364
5 862
..
1 533
1 089
57 933
1 089
37 307
600
122 359
46 400
..
46 400
46 214
..
46 214
44 953
2 000
46 953
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 2007-08
Chapter 4
179
Note 38: Public Account disclosure (continued)
Table 4.29: Parliamentary authority - Justice (continued)
($ thousand)
Parliamentary
authority
2008
Amounts
applied
2008
Amounts
applied
2007
959
957
1 035
959
957
1 035
Total annual appropriations gross application
3 210 202
3 104 362
2 959 727
Total parliamentary authority (excl. FMA Section 33)
3 327 449
3 221 608
3 098 066
7 691
7 691
2 614
3 335 140
3 229 299
3 100 680
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
180
Chapter 4
Financial Report 2007-08
Note 38: Public Account disclosure (continued)
Table 4.30: Parliamentary authority - Planning and Community Development
($ thousand)
Parliamentary
authority
2008
Amounts
applied
2008
Amounts
applied
2007
..
..
..
..
96 923
..
96 923
..
92 427
96 923
96 923
92 427
347 091
..
18 269
43 868
409 228
345 763
..
18 269
43 868
407 900
265 997
432
27 023
7 888
301 340
109 374
2 600
21 395
..
101 767
650
21 395
..
1 885
..
7 819
..
..
133 369
..
123 812
..
9 705
400
889
1 289
400
889
1 289
417
Total annual appropriations - gross application
543 885
533 001
311 462
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
640 809
1 700
629 924
1 700
403 889
4 890
Total Parliamentary authority
642 509
631 624
408 779
Special appropriations
Discharged Servicemen's Preference Act No. 4989,
Section 14
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 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 2007-08
Chapter 4
417
181
Note 38: Public Account disclosure (continued)
Table 4.31: Parliamentary authority - Premier and Cabinet
($ thousand)
Parliamentary
authority
2008
Amounts
applied
2008
Amounts
applied
2007
48
326
..
383
5 532
6 288
48
326
..
383
5 532
6 288
33
309
11 767
348
5 339
17 795
441 718
485
5 740
14 282
462 225
434 098
485
4 995
14 282
453 860
437 975
940
8 300
5 558
452 773
56 304
2 765
..
32 424
2 765
..
6 814
7 554
2 260
59 069
35 189
16 628
..
..
..
..
..
..
Total annual appropriations - gross application
521 294
489 049
469 401
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
527 582
8 000
495 337
8 000
487 196
4 342
Total Parliamentary authority
535 582
503 337
491 538
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
182
Chapter 4
Financial Report 2007-08
Note 38: Public Account disclosure (continued)
Table 4.32: Parliamentary authority - Primary Industries
($ thousand)
Parliamentary
authority
2008
Amounts
applied
2008
Amounts
applied
2007
..
..
..
..
..
..
322 727
199 541
57 771
..
302 255
177 048
57 771
..
254 645
154 253
31 081
2 338
32 351
612 390
32 351
569 425
24 892
467 209
28 191
1 453
1 100
1
1 453
1 100
7 908
3 131
30 744
2 554
11 039
27 900
27 900
27 900
27 900
18 400
18 400
Total annual appropriations - gross application
671 034
599 879
496 647
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
671 034
2 688
599 879
2 688
496 647
..
Total Parliamentary authority
673 722
602 567
496 647
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
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 2007-08
Chapter 4
183
Note 38: Public Account disclosure (continued)
Table 4.33: Parliamentary authority - Sustainability and Environment
($ thousand)
Special appropriations
Financial Management Act, No. 18 of 1994, Section 10
Financial Management Act, No. 18 of 1994, Section 28
Total special appropriations (excl. FMA Section 33)
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 32 Financial Management Act, No. 18 of 1994 Environmental Protection Authority
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
Payments made on behalf of the State
Payments made on behalf of the State - net application
Environment Protection Authority Advance to Treasurer
Total for payments made on behalf of the State - gross
application
184
Chapter 4
Parliamentary
authority
2008
Amounts
applied
2008
Amounts
applied
2007
14 600
30 561
45 161
14 600
30 561
45 161
..
30 000
30 000
771 122
97 367
42 322
..
737 738
89 243
42 321
..
695 080
91 120
28 528
52 144
183 058
8 862
2 468
183 058
6 419
2 468
172 594
15 416
..
32 854
32 854
31 115
350
350
4 482
4 482
8 665
1 142 885
1 098 934
1 094 662
131 740
317 647
6 613
25 892
618
125 255
317 647
6 613
17 686
618
43 417
92 785
..
21 777
..
117 000
117 000
29 557
37 450
636 960
37 450
622 270
5 000
192 536
..
164
164
..
164
164
..
..
..
Financial Report 2007-08
Note 38: Public Account disclosure (continued)
Table 4.33: Parliamentary authority - Sustainability and Environment (continued)
($ thousand)
Parliamentary
authority
2008
Amounts
applied
2008
Amounts
applied
2007
25 880
25 880
25 043
25 880
25 880
25 043
Total annual appropriations - gross application
1 805 889
1 747 248
1 312 242
Total parliamentary authority (excl. FMA Section 33)
1 851 050
1 792 408
1 342 242
2 693
2 693
..
1 853 743
1 795 101
1 342 242
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 2007-08
Chapter 4
185
Note 38: Public Account disclosure (continued)
Table 4.34: Parliamentary authority - Transport
($ thousand)
Special appropriations
Financial Management Act, No. 18 of 1994, Section 10
Transport Act No. 9921 of 1983, Section 213 (a)
Total special appropriations
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
186
Chapter 4
Parliamentary
authority
2008
Amounts
applied
2008
Amounts
applied
2007
..
1 767
1 767
..
1 767
1 767
11 831
1 700
13 531
3 566 764
362 342
111 803
..
3 548 606
339 717
81 433
..
3 205 215
323 086
140 597
..
24 203
4 065 113
24 203
3 993 959
36 440
3 705 338
648 792
77 943
166 027
21 099
463 787
73 467
166 000
21 099
251 411
..
159 373
25 927
..
913 861
..
724 353
33 018
469 729
..
..
..
..
18 500
18 500
4 978 974
4 980 740
4 718 312
4 720 078
4 193 567
4 207 098
9 542
9 542
18 500
4 990 282
4 729 620
4 225 598
Financial Report 2007-08
Note 38: Public Account disclosure (continued)
Table 4.35: Parliamentary authority - Treasury and Finance
($ thousand)
Parliamentary
authority
2008
Amounts
applied
2008
Amounts
applied
2007
2 769
2 769
37 928
831
6 596
8 553
831
6 596
8 553
771
5 762
7 231
5 843
5 843
258
3 121
765 122
3 121
765 122
3 027
29 035
7 775
7 775
349
2 680
2 680
1 045
9 513
9 513
210 810
812 804
812 804
296 215
229 747
5 626
478
523
236 374
220 252
5 626
478
523
226 879
211 134
3 369
200
..
214 703
9 504
..
701
..
10 205
..
..
..
..
..
..
..
..
..
..
1 030 378
3 900
..
953 186
3 900
..
1 027 571
..
..
1 584
1 035 861
1 584
958 670
11 016
1 038 587
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)
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
Advance to Treasurer
Total provision of outputs - gross application
Additions to the net asset base
Additions to the net asset base - net application
Section 29 Financial Management Act, No. 18 of 1994
Section 32 Financial Management Act, No. 18 of 1994
Advance to Treasurer
Total additions to the net asset base - gross application
Payments made on behalf of the State
Payments made on behalf of the State - net application
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
Financial Report 2007-08
Chapter 4
187
Note 38: Public Account disclosure (continued)
Table 4.35: Parliamentary authority - Treasury and Finance
($ thousand)
Parliamentary
authority
2008
434 018
Amounts
applied
2008
420 589
Amounts
applied
2007
468 965
Payments approved under Advance to Treasurer and
brought to account under the relevant Departments
(434 018)
(420 589)
(468 965)
Total annual appropriations gross application
1 282 440
1 185 548
1 253 290
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
2 095 244
1 781
1 998 353
1 781
1 549 505
3 621
Total Parliamentary authority
2 097 025
2 000 134
1 553 127
Advance to Treasurer to meet urgent claims that may arise
before Parliamentary sanction is obtained, which will
afterwards be submitted for Parliamentary authority
Table 4.36: Government Guarantee
Details of payments made in fulfilment of any guarantee by the Government
There have been no payments made during 2007-08 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 2007-08 in respect of any guarantee payments.
188
Chapter 4
Financial Report 2007-08
Note 39: Controlled Entities
The following is a list of significant controlled entities which have been consolidated for the
purposes of the Financial Report. Minor wholly owned subsidiaries of these controlled entities
are not separately disclosed in the listing below.
For further details on consolidation policy, refer to Note 1(D) ‘Basis of Consolidation’ in the
statement of significant accounting policies.
Controlled Entities
Department of Education and Early
Childhood Development (a)
Victorian Curriculum and Assessment Authority
Victorian Institute of Teaching
Victorian Registration and Qualifications
Authority
Department of Human Services
Dental Practice Board of Victoria
Health Purchasing Victoria
Hospitals, Health 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
Financial Report 2007-08
General
Government
Public Non-Financial Public Financial
Corporation
Corporation
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Chapter 4
189
Controlled Entities
Hesse Rural Health Service
Heywood Rural Health
Infertility Treatment Authority
Inglewood and District Health Service
Kerang and District Hospital
Kooweerup Regional Health Service
Kyabram and District Health Services
Kyneton District Health Service
Latrobe Regional Hospital
Lorne Community Hospital
Maldon Hospital
Mallee Track Health and Community
Services
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
190
Chapter 4
General
Government
Public Non-Financial Public Financial
Corporation
Corporation
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Financial Report 2007-08
Controlled Entities
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
Medical Practitioners Board of Victoria
Medical Radiation Practitioners Board of
Victoria (b)
Mental Health Review Board
Nurses Board of Victoria
Pharmacy Board of Victoria
Psychosurgery Review Board
Registration Boards including:
Chinese Medicine Registration Board of
Victoria
Chiropractors Registration Board of Victoria
Optometrists Registration Board of Victoria
Osteopaths Registration Board of Victoria
Physiotherapists Registration Board of
Victoria
Podiatrists Registration Board of Victoria
Psychologists Registration Board of Victoria
Victorian Health Promotion Foundation
Cemeteries including:
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 Trustee of the Altona Memorial Park
The Cheltenham and Regional Cemeteries
Trust
The Lilydale Cemeteries Trust
The Mildura Cemetery Trust
Trustees of the Geelong Cemeteries Trust
Wyndham Cemeteries Trust
Director of Housing (PNFC)
Department of Innovation, Industry and
Regional Development
Australian Synchrotron Holding Company (b)
Driver Education Centre Australia Ltd
Film Victoria
International Fibre Centre Limited
Prince Henry’s Institute of Medical Research
Financial Report 2007-08
General
Government
Public Non-Financial Public Financial
Corporation
Corporation
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Chapter 4
191
Controlled Entities
Regional Development Victoria
TAFE's including:
Bendigo Regional Institute of TAFE
Box Hill Institute of TAFE
Central Gippsland Institute of TAFE
Chisholm Institute of TAFE
East Gippsland Institute of TAFE
Faculty of Land and Food Resources (c)
Gordon Institute of TAFE
Goulburn Ovens Institute of TAFE
Holmesglen Institute of TAFE
Kangan Batman Institute of TAFE
Northern Melbourne Institute of TAFE
Royal Melbourne Institute of Technology
(TAFE Division)
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
Tourism Victoria
Victorian Skills Commission (c)
Australian Grand Prix Corporation
Emerald Tourist Railway Board
Fed Square Pty Ltd
Melbourne Convention and Exhibition Trust
Victorian Major Events Company Limited
Department of Justice
Country Fire Authority
Emergency Services Telecommunications
Authority
Equal Opportunity and Human Rights
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
192
Chapter 4
General
Government
Public Non-Financial Public Financial
Corporation
Corporation
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Financial Report 2007-08
Controlled Entities
Victorian Institute of Forensic Medicine
Victorian Law Reform Commission
Victorian Professional Standards Council
Greyhound Racing Victoria
Harness Racing Victoria
General
Government
*
*
*
*
*
Department of Planning and Community
Development (a)
Adult Community and Further Education Board
Adult Multicultural Education Services
Architects Registration Board of Victoria (a)
Building Commission (a)
Centre for Adult Education
Growth Areas Authority (a)
Heritage Council (a)
Melbourne Cricket Ground Trust
Plumbing Industry Commission (a)
Shrine of Remembrance Trustees (a)
Victorian Institute of Sport Limited (a)
Victorian Institute of Sport Trust (a)
Victorian Veterans Council (a)
Melbourne and Olympic Parks Trust (a)
Queen Victoria Women’s Centre (a)
State Sport Centres Trust (a)
Victorian Urban Development Authority
(VicUrban) (a)
VITS Languagelink (a)
*
Department of Premier and Cabinet
Australian Centre for the Moving Image
Library Board of Victoria
Melbourne Recital Centre Limited
Museums Board of Victoria
National Gallery of Victoria, Council of Trustees
Office of the Ombudsman
State Services Authority
Geelong Performing Arts Centre Trust
Victorian Arts Centre Trust
*
*
*
*
*
*
*
*
Department of Primary Industries
Energy Safe Victoria
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
*
*
*
Financial Report 2007-08
Public Non-Financial Public Financial
Corporation
Corporation
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Chapter 4
193
Controlled Entities
Victorian Energy Networks Corporation
(VENCorp)
Victorian Strawberry Industry Development
Committee
Department of Sustainability and
Environment
Catchment Management Authorities including:
Corangamite Catchment Management
Authority
East Gippsland Catchment Management
Authority
Glenelg Hopkins Catchment Management
Authority
Goulburn Broken Catchment Management
Authority
Mallee Catchment Management Authority
North Central Catchment Management
Authority
North East Catchment Management
Authority
Port Phillip and Westernport Catchment
Management Authority
West Gippsland Catchment Management
Authority
Wimmera Catchment Management Authority
Environment Protection Authority
Office of the Commissioner for Environmental
Sustainability
Parks Victoria
Royal Botanic Gardens Board
State Owned Enterprise for Irrigation
Modernisation in Northern Victoria (b)
Surveyors Registration Board of Victoria
Sustainability Victoria
Trust for Nature (Victoria)
Alpine Resorts Management Board including:
Alpine Resorts Co-ordinating Council
Falls Creek Alpine Resort Management
Board
Lake Mountain Alpine Resort Management
Board
Mount Baw Baw Alpine Resort Management
Board
Mount Buller and Mount Stirling Alpine
Resort Management Board
Mount Hotham Alpine Resort Management
Board
Phillip Island Nature Park Board of
Management Inc.
194
Chapter 4
General
Government
Public Non-Financial Public Financial
Corporation
Corporation
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Financial Report 2007-08
Controlled Entities
Waste Management Groups including:
Barwon Regional Waste Management Group
Calder Regional Waste Management Group
Central Murray Regional Waste
Management Group
Desert Fringe Regional Waste Management
Group
Gippsland Regional Waste Management
Group
Goulburn Valley Regional Waste
Management Group
Grampians Regional Waste Management
Group
Highlands Regional Waste Management
Group
Metropolitan Waste Management Group
Mildura Regional Waste Management Group
Mornington Peninsula Regional Waste
Management Group
Northern East Victorian Regional Waste
Management Group
South Western Regional Waste
Management Group
Water Corporations including:
Barwon Region Water Corporation
Central Gippsland Region Water Corporation
Central Highlands Region Water Corporation
Coliban Region Water Corporation
East Gippsland Region Water Corporation
First Mildura Irrigation Trust
Gippsland and Southern Rural Water
Corporation
Goulburn Valley Region Water Corporation
Goulburn-Murray Rural Water Corporation
Grampians Wimmera-Mallee Water
Corporation
Lower Murray Urban and Rural Water
Corporation
Melbourne Water Corporation
North East Region Water Corporation
South Gippsland Region Water Corporation
Wannon Region Water Corporation
Western Region Water Corporation
Westernport Region Water Corporation
Yarra Bend Park Trust
Zoological Parks and Gardens Board of Victoria
Department of Transport (a)
Roads Corporation
Southern and Eastern Integrated Transport
Authority
Southern Cross Station Authority
Port of Hastings Corporation
Port of Melbourne Corporation
Financial Report 2007-08
General
Government
Public Non-Financial Public Financial
Corporation
Corporation
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Chapter 4
195
Controlled Entities
Public Transport Ticketing Body
V/Line Passenger Corporation
Victorian Rail Track
Victorian Regional Channels Authority
General
Government
Public Non-Financial Public Financial
Corporation
Corporation
*
*
*
*
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)
VicForests
Victorian Plantations Corporation (shell)
Yarra Valley Water Limited
Rural Finance Corporation of Victoria
State Trustees Limited
Transport Accident Commission
Treasury Corporation of Victoria
Victorian Funds Management Corporation
Victorian Managed Insurance Authority
Victorian WorkCover Authority
*
*
Parliament of Victoria
Victorian Auditor-General's Office
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Notes:
(a) Machinery of government changes announced during 2007-08:
– Department of Education and Early Childhood Development (formerly Department of Education) as of
14 August 2007.
– Department of Planning and Community Development (formerly Department for Victorian Communities)
as of 14 August 2007.
– Department of Transport (formerly Department of Infrastructure) as of 24 April 2008.
– Entities moved from Department of Sustainability to Department of Planning and Community
Development:
Architects Registration Board;
Building Commission;
Growth Areas Authority;
Heritage Council; and
Plumbing Industry Commission.
– Entities moved from Department for Victorian Communities to Department of Planning and Community
Development:
Shrine of Remembrance Trustees;
Victorian Institute of Sport Limited;
Victorian Institute of Sport Trust;
Victorian Veterans Council;
Melbourne and Olympic Parks Trust;
Queen Victoria Women’s Centre;
State Sport Centres Trust; and
VITS Languagelink.
– Entities moved from Department of Infrastructure to Department of Planning and Community
Development:
Victorian Urban Development Authority (VicUrban).
196
Chapter 4
Financial Report 2007-08
Notes (continued):
(b) Entities commenced operations during 2007-2008 include:
– Medical Radiation Practitioners Board as of 1 July 2007;
– Australian Synchrotron Holding Company as of 12 November 2007; and
– State Owned Enterprise for Irrigation Modernisation in Northern Victoria as of 20 December 2007.
(c) Entity name changes:
– On 3 March 2008 Institute of Land and Food Resources (TAFE Division) became Faculty of Land and
Food Resources; and
– On 1 July 2007 the Victorian Learning and Employment Skills Commission became Victorian Skills
Commission.
Entities ceased operations during 2007-2008:
– Medical Radiation Technologists Board as of 1 July 2007;
– Victorian Relief Committee as of 19 March 2008; and
– 2007 World Swimming Championships Corporation as of 31 August 2007.
Financial Report 2007-08
Chapter 4
197
198
Chapter 4
Financial Report 2007-08
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 October 2007, the Australian Accounting Standards Board issued a new standard AASB 1049
Whole of government and general government sector financial reporting, applicable from
1 July 2008. The objective as set out by the Financial Reporting Council in December 2002 is
‘to achieve an Australian accounting standard for a single set of government reports which are
auditable, comparable between jurisdictions, and in which the outcome statements are directly
comparable with the relevant budget statements’. This new standard incorporates the major
elements of the GFS framework, including the presentation formats and key fiscal aggregates,
into a standard based on GAAP.
A revised Uniform Presentation Framework was agreed by the Australian Loan Council in
March 2008, based on AASB 1049, and similarly applicable from the reporting period
commencing 1 July 2008. The combined new standard and revised Uniform Presentation
Framework were applied in Victoria for the first time to the general government sector estimated
financial statements in the 2008-09 Budget Paper No. 4 and will become mandatory for future
annual financial reports. The following presentation has been prepared for the last time under the
GFS-based Uniform Presentation Framework.
Financial Report 2007-08
Chapter 5
199
UNIFORM PRESENTATION FRAMEWORK
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 will create a harmonisation difference when reporting under
AASB 1049.
200
Chapter 5
Financial Report 2007-08
Institutional sectors of government
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.
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.
Financial Report 2007-08
Chapter 5
201
Financial statements by institutional sector
Table 5.1: General government sector operating statement
($ million)
2006-07
Actual
2007-08
Revised
2007-08
Actual
GFS revenue
Taxation revenue
Current grants and subsidies
Capital grants
Sales of goods and services
Interest income
Other
Total revenue
11 702
14 646
955
4 177
423
2 983
34 886
12 997
16 007
1 174
4 122
373
2 116
36 788
12 863
16 021
1 189
4 488
452
2 327
37 340
GFS expenses
Employee expenses
Depreciation
Other operating expenses
Superannuation interest expense
Other interest expenses
Other property expenses
Current transfers
Capital transfers (a)
Total expenses
13 617
1 335
10 954
419
459
..
6 450
317
33 551
14 500
1 457
12 144
330
460
..
6 021
880
35 792
14 557
1 416
12 070
330
438
..
6 149
898
35 859
1 335
996
1 482
2 812
- 226
1 335
- 11
320
1 562
- 227
2 994
- 212
1 457
-2
- 351
972
24
2 768
- 177
1 416
96
- 202
1 069
413
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 (b)
Plus: Other movements in non-financial assets (a)
Total net acquisition of non-financial assets
GFS net lending (+) / borrowing (-) (c)
Source: Department of Treasury and Finance
Notes:
(a) Note 36 in Chapter 4 provides details of adjustments to correct prior period errors.
(b) Change in inventories has been adjusted for 2006-07 to reflect the reclassification of land and other fixed
assets held as inventory.
(c) GFS net lending also equals net transactions in financial assets less net transactions in liabilities.
202
Chapter 5
Financial Report 2007-08
Table 5.2: Public non financial corporations operating statement
($ million)
2006-07
Actual
2007-08
Revised
2007-08
Actual
GFS revenue
Sales of goods and services
Current grants and subsidies
Capital grants
Interest income
Other
Total revenue
3 421
1 827
225
107
430
6 010
3 463
1 691
259
88
420
5 921
3 656
1 719
239
113
565
6 291
GFS expenses
Employee expenses
Depreciation
Other operating expenses
Superannuation interest expense
Other interest expense
Property expenses
Current transfers
Capital transfers
Total expenses
651
867
3 215
-1
345
365
104
65
5 612
751
919
3 555
..
389
211
91
112
6 028
744
919
3 585
1
363
300
91
121
6 124
398
- 107
167
2 052
- 58
867
17
180
1 325
- 926
3 203
- 75
919
39
145
2 393
- 2 500
2 659
- 64
919
-7
286
1 955
- 1 789
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 (a)
Plus: Other movements in non-financial assets
Total net acquisition of non-financial assets
GFS net lending (+) / borrowing (-) (b)
Source: Department of Treasury and Finance
Notes:
(a) Change in inventories has been adjusted for 2006-07 to reflect the reclassification of land and other fixed
assets held as inventory.
(b) GFS net lending also equals net transactions in financial assets less net transactions in liabilities.
Financial Report 2007-08
Chapter 5
203
Table 5.3: Non financial public sector operating statement
($ million)
2006-07
Actual
2007-08
Revised
2007-08
Actual
GFS revenue
Taxation revenue
Current grants and subsidies
Capital grants
Sales of goods and services
Interest income
Other
Total revenue
11 565
14 634
958
6 726
506
3 070
37 460
12 850
16 001
1 178
6 686
461
2 311
39 487
12 709
16 014
1 194
7 202
564
2 663
40 347
GFS expenses
Employee expenses
Depreciation
Other operating expenses
Superannuation interest expense
Other interest expenses
Other property expenses
Current transfers
Capital transfers (a)
Total expenses
14 269
2 202
13 321
419
780
..
4 261
380
35 631
15 251
2 375
14 709
330
849
..
4 155
916
38 586
15 301
2 335
14 625
331
802
..
4 208
1 005
38 606
1 829
.
4 865
- 283
2 202
7
497
2 883
- 1 054
901
.
6 199
- 287
2 375
37
- 206
3 366
- 2 466
1 741
.
5 428
- 241
2 335
89
84
3 024
- 1 283
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 (b)
Plus: Other movements in non-financial assets (a)
Total net acquisition of non-financial assets
GFS net lending (+) / borrowing (-) (c)
Source: Department of Treasury and Finance
Notes:
(a) Note 36 in Chapter 4 provides details of adjustments to correct prior period errors.
(b) Change in inventories has been adjusted for 2006-07 to reflect the reclassification of land and other fixed
assets held as inventory.
(c) GFS net lending also equals net transactions in financial assets less net transactions in liabilities.
204
Chapter 5
Financial Report 2007-08
Table 5.4: Public financial corporations operating statement
($ million)
2006-07
Actual
2007-08
Actual
GFS revenue
Current grants and subsidies
Capital grants
Sales of goods and services
Interest income
Other
Total revenue
..
..
3 000
1 286
679
4 964
..
..
3 063
1 465
585
5 113
GFS expenses
Employee expenses
Depreciation
Other operating expenses
Superannuation interest expense
Other interest expenses
Other property expenses
Current transfers
Capital transfers
Total expenses
221
15
3 248
..
953
1 073
8
..
5 519
249
19
3 483
..
1 122
- 352
7
..
4 528
- 555
586
69
-1
15
..
..
53
- 607
58
-1
19
..
..
38
547
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 (b)
Plus: Other movements in non-financial assets
Total net acquisition of non-financial assets
GFS net lending (+) / borrowing (-) (a)
Source: Department of Treasury and Finance
Notes:
(a) GFS net lending also equal net transactions in financial assets less net transactions in liabilities.
(b) Change in inventories has been adjusted for 2006-07 to reflect the reclassification of land and other fixed
assets held as inventory.
Financial Report 2007-08
Chapter 5
205
Table 5.5: General government sector balance sheet
($ million)
as at 30 June
Assets
Financial assets
Cash and deposits
Advances paid (b)
Investments, loans and placements
Other non-equity assets
Equity (b) (c)
Total financial assets
Non-financial assets
Land and fixed assets
Other non-financial assets
Total non-financial assets (d)
Total assets
Liabilities
Deposits held
Advances received
Borrowings
Superannuation liability (d)
Other employee entitlements and provisions
Other non-equity liabilities
Total liabilities
Net worth
Net financial worth (e)
Net debt (f)
Source: Department of Treasury and Finance
(c)
2007
Actual (a)
2008
Revised
2008
Actual
3 018
676
2 058
3 515
42 538
51 805
2 126
675
2 240
2 668
45 578
53 287
2 975
726
2 322
2 873
45 961
54 857
59 763
295
60 058
111 863
65 792
299
66 091
119 378
65 759
239
65 998
120 856
595
5
7 189
9 900
4 379
3 283
25 351
86 513
26 454
2 037
595
27
6 712
12 939
4 495
3 327
28 095
91 283
25 192
2 294
372
36
7 798
12 927
4 639
3 354
29 125
91 731
25 732
2 182
Notes:
(a) Certain 2006-07 items have been reclassified to better align with ABS definitions.
(b) In the 2006-07 figure, the investment in Murray-Darling Basin Commission has been reclassified from equity
to advances paid to reflect its inclusion in net debt.
(c) 2006-07 equity has been adjusted to correctly reflect the removal of future income tax and deferred tax
liability on PFC/PNFCs balance sheet to comply with the GFS presentation.
(d) Note 36 in Chapter 4 provides details of adjustments to correct prior period errors.
(e) Net financial worth equals total financial assets minus total liabilities.
(f) 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.
206
Chapter 5
Financial Report 2007-08
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 (b)
Total non-financial assets
Total assets
Liabilities
Deposits held
Advances received
Borrowings
Superannuation liability
Other employee entitlements and provisions (b)
Other non-equity liabilities
Total liabilities
Shares and other contributed capital (b)
Net worth
Net financial worth (c)
Net debt (d)
Source: Department of Treasury and Finance
2007
Actual (a)
2008
Revised
2008
Actual
594
113
2 311
749
407
4 173
649
100
1 888
539
375
3 551
922
97
3 003
784
403
5 208
40 980
101
41 081
45 255
45 109
99
45 208
48 760
46 113
107
46 219
51 428
114
4
4 846
16
1 870
917
7 767
37 488
..
- 41 081
1 946
111
4
5 971
14
1 304
833
8 237
40 523
..
- 45 208
3 449
116
7
5 609
32
1 616
1 065
8 445
42 983
..
- 46 219
1 710
Notes:
(a) Certain 2006-07 items have been reclassified to better align with ABS definitions.
(b) 2006-07 equity has been adjusted to correctly reflect the removal of future income tax and deferred tax
liability on PFC/PNFCs balance sheet to comply with the GFS presentation.
(c) Net financial worth equals total financial assets minus total liabilities and shares and other contributed
capital.
(d) 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 2007-08
Chapter 5
207
Table 5.7: Non-financial public sector balance sheet
($ million)
as at 30 June
Assets
Financial assets
Cash and deposits
Advances paid (b)
Investments, loans and placements
Other non-equity assets
Equity (b) (c)
Total financial assets
Non-financial assets
Land and fixed assets
Other non-financial assets
Total non-financial assets (d)
Total assets
Liabilities
Deposits held
Advances received
Borrowings
Superannuation liability (d)
Other employee entitlements and provisions
Other non-equity liabilities
Total liabilities
Net worth
Net financial worth (e)
Net debt (f)
Source: Department of Treasury and Finance
2007
Actual (a)
2008
Revised
2008
Actual
3 615
789
4 369
4 200
5 457
18 429
2 775
775
4 128
3 159
5 430
16 267
3 897
823
5 325
3 777
3 381
17 203
100 742
396
101 138
119 567
110 901
398
111 299
127 566
111 870
346
112 216
129 418
709
9
12 033
9 915
6 249
3 954
32 869
86 698
- 14 440
3 978
707
27
12 682
12 953
5 798
3 920
36 087
91 480
- 19 820
5 738
487
42
13 406
12 959
6 254
4 324
37 472
91 946
- 20 270
3 890
Notes:
(a) Certain 2006-07 items have been reclassified to better align with ABS definitions.
(b) In the 2006-07 figure, the investment in Murray-Darling Basin Commission has been reclassified from equity
to advances paid to reflect its inclusion in net debt.
(c) 2006-07 equity has been adjusted to correctly reflect the removal of future income tax and deferred tax
liability on PFC/PNFCs balance sheet to comply with the GFS presentation.
(d) Note 36 in Chapter 4 provides details of adjustments due to prior period errors.
(e) Net financial worth equals total financial assets minus total liabilities.
(f) 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.
208
Chapter 5
Financial Report 2007-08
Table 5.8: Public financial corporations balance sheet
($ million)
as at 30 June
2007
Actual (a)
2008
Actual
Assets
Financial assets
Cash and deposits
Advances paid
Investments, loans and placements
Other non-equity assets
Equity
Total financial assets
1 449
9 066
26 170
1 466
..
38 151
3 167
9 020
24 069
1 940
..
38 197
Non-financial assets
Land and fixed assets
Other non-financial assets (b)
Total non-financial assets
Total assets
73
31
104
38 254
108
31
140
38 337
55
2 377
14 338
..
14 757
1 691
33 219
5 035
..
- 104
- 19 914
67
3 520
15 287
..
14 971
1 533
35 378
2 958
..
- 140
- 17 383
Liabilities
Deposits held
Advances received
Borrowings
Superannuation liability
Other employee entitlements and provisions (b)
Other non-equity liabilities
Total liabilities
Shares and other contributed capital (b)
Net worth
Net financial worth (c)
Net debt (d)
Source: Department of Treasury and Finance
Notes:
(a) Certain 2006-07 items have been reclassified to better align with ABS definitions.
(b) 2006-07 equity has been adjusted to correctly reflect the removal of future income tax and deferred tax
liability on PFC/PNFCs balance sheet to comply with the GFS presentation.
(c) Net financial worth equals total financial assets minus total liabilities and shares and other contributed
capital.
(d) 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 2007-08
Chapter 5
209
Table 5.9: General government sector cash flow statement
($ million)
Cash receipts from operating activities
Taxes received
Receipts from sales of goods and services
Grants and 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 (a)
Acquisitions under finance leases and similar arrangements
Surplus (+) /deficit (-) including finance leases
Source: Department of Treasury and Finance
2006-07
Actual
2007-08
Revised
2007-08
Actual
11 264
5 327
15 602
2 750
34 943
13 380
4 259
17 177
2 683
37 499
13 213
4 682
17 210
2 861
37 966
- 25 012
- 5 969
- 430
- 692
- 32 103
2 840
- 26 352
- 5 987
- 443
- 795
- 33 578
3 922
- 26 735
- 6 007
- 445
- 900
- 34 088
3 877
226
- 2 812
- 2 587
212
- 2 994
- 2 782
177
- 2 768
- 2 591
- 687
- 1 374
- 1 352
139
- 190
- 338
-1
614
..
614
319
-1
- 468
..
- 469
- 892
-1
250
..
249
- 155
253
1 140
1 286
361
- 107
..
1 140
254
1 033
Note:
(a) Net cash flow from operating activities less investments in non-financial assets.
210
Chapter 5
Financial Report 2007-08
Table 5.10: Public non financial corporations sector cash flow statement
($ million)
Cash receipts from operating activities
Receipts from sales of goods and services
Grants and subsidies received
Other receipts
Total receipts
Cash payments from operating activities
Payment for goods and services
Grants and subsidies paid
Interest paid
Other payments (a)
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 (a)
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
2006-07
Actual
2007-08
Revised
2007-08
Actual
3 604
2 074
372
6 050
3 432
1 953
372
5 758
3 891
1 964
259
6 114
- 2 986
- 165
- 316
- 992
- 4 459
1 590
- 3 507
- 139
- 385
- 1 042
- 5 073
684
- 3 513
- 264
- 354
- 1 041
- 5 172
942
58
- 2 052
- 1 994
75
- 3 203
- 3 128
64
- 2 659
- 2 595
679
1 395
1 542
- 250
103
113
..
295
- 257
38
62
..
1 216
- 216
1 000
55
-1
540
- 214
326
328
- 661
- 2 659
- 1 867
..
- 661
..
- 2 659
..
- 1 867
Notes:
(a) Certain 2006-07 items have been reclassified to better align with ABS definitions.
(b) Net cash flow from operating activities less investments in non-financial assets and distributions paid.
Financial Report 2007-08
Chapter 5
211
Table 5.11: Non financial public sector cash flow statement
($ million)
Cash receipts from operating activities
Taxes received
Receipts from sales of goods and services
Grants and 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 (a)
Acquisition of assets under finance leases and similar arrangements
Surplus (+) /deficit (-) including finance leases
Source: Department of Treasury and Finance
2006-07
Actual
2007-08
Revised
2007-08
Actual
11 132
8 060
15 387
2 573
37 152
13 233
6 793
16 969
3 025
40 019
13 066
7 631
17 004
2 913
40 613
- 28 119
- 3 678
- 746
- 659
- 33 202
3 950
- 29 787
- 4 151
- 829
- 860
- 35 627
4 392
- 30 217
- 4 104
- 799
- 890
- 36 011
4 602
283
- 4 865
- 4 581
287
- 6 199
- 5 911
241
- 5 428
- 5 186
-8
22
190
- 111
- 87
- 225
-1
909
..
908
157
-1
745
..
744
- 840
-2
790
..
788
169
- 631
-1 519
- 584
361
- 992
..
- 1 519
254
- 838
Note:
(a) Net cash flow from operating activities less investments in non-financial assets and other financing (net).
212
Chapter 5
Financial Report 2007-08
Table 5.12: Public financial corporations sector cash flow statement
($ million)
Cash receipts from operating activities
Taxes received
Receipts from sales of goods and services
Grants and subsidies received
Other receipts
Total receipts
Cash payments from operating activities
Payment for goods and services
Grants and subsidies paid
Interest paid
Other payments (a)
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 (a)
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 and similar arrangements
Surplus (+) /deficit (-) including finance leases
Source: Department of Treasury and Finance
(b)
2006-07
Actual
2007-08
Actual
..
3 398
..
1 463
4 862
..
3 320
..
1 413
4 733
- 3 255
- 317
- 887
263
- 4 195
666
- 3 287
- 320
- 913
205
- 4 316
417
1
- 69
- 68
1
- 58
- 57
- 112
1 044
- 108
290
- 681
298
- 718
- 14
- 1 115
415
1 159
1 053
- 977
3
1 238
1 780
- 120
..
- 120
- 616
..
- 616
Notes:
(a) Certain 2006-07 items have been reclassified to better align with ABS definitions.
(b) Net cash flow from operating activities less investments in non-financial assets and distributions paid.
Financial Report 2007-08
Chapter 5
213
Table 5.13: General government sector expenses by function
($ million)
2006-07
Actual (a)(b)
832
..
832
2007-08
Actual
681
..
681
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
3 771
2 241
1 453
788
852
474
204
3 935
2 229
1 532
697
951
500
256
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
8 941
6 720
3 483
3 229
8
1 457
..
1 457
..
495
132
363
..
233
189
44
37
9 500
7 037
3 627
3 401
10
1 592
..
1 592
..
567
147
420
..
267
197
70
36
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
8 997
6 956
5 768
1 188
40
253
1 313
444
446
423
254
102
77
3
9 739
7 378
6 108
1 270
45
272
1 441
507
467
467
409
109
83
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.
2 534
..
2 534
525
586
987
436
..
2 817
..
2 817
587
657
1 133
439
..
General Public Services
Government superannuation benefits
Other general public services
214
Chapter 5
Financial Report 2007-08
Table 5.13: General government sector expenses by function (continued)
($ million)
Housing and Community Amenities
Housing and community development
Housing
Community development
Water supply
Sanitation and protection of the environment (c)
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
Forestry, fishing and hunting
Mining and mineral resources other than fuels; manufacturing; and
construction
Mining and mineral resources other than fuels
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 2007-08
Chapter 5
2006-07
Actual (a)(b)
2 420
1 330
936
394
232
320
538
2007-08
Actual
2 782
1 461
839
622
226
334
762
682
344
58
286
337
..
..
713
318
64
254
395
..
..
41
3
..
3
15
23
19
3
..
3
16
..
482
318
164
582
423
159
31
27
20
11
..
20
7
..
3 612
1 604
..
376
..
469
758
14
..
14
1 827
1 218
6
603
..
..
114
8
106
53
3 878
1 742
..
416
..
480
847
15
..
15
1 915
1 344
42
529
..
..
132
16
116
73
215
Table 5.13: General government sector expenses by function (continued)
($ 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
2006-07
Actual (a)(b)
368
..
62
30
11
19
276
2007-08
Actual
393
..
67
23
2
21
302
840
814
..
..
26
792
761
..
..
32
33 551
35 858
Notes:
(a) n.e.c means not elsewhere classified.
(b) Certain 2006-07 expenses have been reclassified to better align with ABS functional definitions.
(c) Note 36 in Chapter 4 provides details of adjustments to correct prior period errors.
216
Chapter 5
Financial Report 2007-08
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
Mining and mineral resources other than fuels; manufacturing; and construction
Transport and communications
Other economic affairs
Other purposes
Total
Source: Department of Treasury and Finance
Financial Report 2007-08
Chapter 5
2006-07
Actual
141
..
286
494
696
47
91
180
11
62
..
786
17
2
2 812
2007-08
Actual
78
..
340
577
538
122
120
64
1
15
3
856
53
..
2 768
217
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
2006-07
Actual
2007-08
Revised
2007-08
Actual
3 479
3 824
3 845
989
3 021
..
173
4 183
871
3 905
..
180
4 956
865
3 734
..
184
4 784
60
1 508
1 095
2 664
.
1 280
7
89
1 376
11 702
62
1 586
1 149
2 797
.
1 347
8
66
1 420
12 997
61
1 595
1 156
2 812
.
1 343
8
72
1 422
12 863
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
2006-07
Actual
1 335
2007-08
Revised
996
2007-08
Actual
1 482
2 907
1 335
- 11
- 227
2 430
1 457
-2
24
2 389
1 416
96
413
431
19
- 351
- 311
- 107
687
88
- 882
1 097
1 140
1 374
23
- 257
971
1 033
1 352
- 174
- 145
Note:
(a) GFS net lending also equals net transactions in financial assets less net transactions in liabilities.
218
Chapter 5
Financial Report 2007-08
Victoria’s 2007-08 Loan Council Allocation
As required under the Uniform Presentation Framework, Victoria is required to publish the Loan
Council Allocation (LCA) estimates. The LCA is a measure of each government’s net call on
financial markets in a given financial year to meet its budget obligations. The method of public
release is the responsibility of each individual jurisdiction. Victoria discloses its LCA
information through the Financial Report for the State of Victoria, Budget Paper No. 4,
Statement of Finances and Budget Update.
Table 5.17 compares Victoria’s 2007-08 LCA as published in the 2007-08 Budget with the
2007-08 outcome.
Table 5.17: Loan Council Allocation 2007-08
($ 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
2007-08
Budget
642
1 830
2 475
2007-08
Actual
- 1 033
1 867
838
44
180
2 611
719
190
31
679
719
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 due to intersectoral transfers, which are netted out in the
calculation of the non-financial public sector figures. 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' (2006-07 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 2007-08 is
$719 million (2 per cent of $35 952 million – sourced from 2006-07 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 due to prevailing circumstances or developments to exceed its
tolerance limit, in either direction, it is required to advise the Loan Council accordingly and in
line with the emphasis of the increased transparency, to make the explanation public. Victoria’s
2007-08 LCA outcome (a deficit of $679 million) exceeded the tolerance limit estimated for
Victoria at Budget time.
Financial Report 2007-08
Chapter 5
219
The change of $1 932 million in the LCA between 2007-08 Budget and 2007-08 actual is mainly
due to:
•
an increase in the general government sector cash surplus of $1 675 million. This mainly
reflects increased receipts from taxes, grants and subsidies received offset by a small
increase in purchases of goods and services and grants paid; and

recognition of a finance lease of $249 million relating to the opening of the new Royal
Women’s Hospital in June 2008.
Consistent with the LCA arrangements, Victoria advises Loan Council of these circumstances
through this publication. 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.
Detailed below is the proceeding during the 2007-08 financial year of the Partnerships Victoria
projects which were listed on the LCA as being potentially contracted in 2007-08.
Melbourne Wholesale Markets relocation
It was expected that a contract would be signed in 2007-08 in relation to the Melbourne
Wholesale Markets relocation project, however this project is not currently proceeding as a
Partnerships Victoria project and no contract has been signed.
Royal Children’s Hospital redevelopment
The new Royal Children’s Hospital is the largest hospital redevelopment undertaken by the
State. It will be built in Parkville next door to its current site, which will be reinstated to
parkland except for the research precinct building and the front entry building, which will be
retained. The outcomes of the project will have a major impact on the quality of tertiary health
services to be delivered to children in both metropolitan Melbourne and rural/regional Victoria.
The private sector is contracted to design, construct, finance and maintain the new facilities, as
well as provide a significant range of extra facilities to benefit sick children, their families and
hospital staff. All health services will continue to be publicly operated in accordance with
government policy that core services should be provided directly by the government.
The contract was executed with the Children's Health partnership consortium on
20 November 2007 and financial close was achieved on 4 December 2007. The term of the
contract is 25 years from the date of commercial acceptance.
220
Chapter 5
Financial Report 2007-08
APPENDIX
A:
GENERAL
GOVERNMENT
QUARTERLY FINANCIAL REPORT
SECTOR
Table A.1: Operating Statement for the last five quarters
($ million)
2006-07
June (a)
2 841.1
187.4
539.7
121.6
4 148.2
853.1
13.2
756.2
9 460.4
3 124.4
379.1
323.6
125.6
2 135.0
2 784.7
189.2
9 061.7
398.8
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
( 12.7) Net gain/(loss) from disposal of physical
assets
1 941.4 Actuarial gains/(losses) of superannuation
defined benefit plans
5.2 Share of net profits/(losses) of associates
and joint venture entities
1.0 Net gains/(losses) on financial assets at fair
value
666.3 Other gains/(losses) from other economic
flows
2 601.3 Total other economic flows
3 000.0 Net result
Source: Department of Treasury and Finance
2007-08
Dec.
Mar.
June
3 014.8
212.2
75.9
3 042.3
199.7
388.0
3 837.7
183.7
109.5
2 968.0
258.7
186.5
100.7
3 982.7
706.4
0.3
106.5
4 335.6
817.1
( 0.3)
98.2
4 226.6
769.3
..
146.3
4 665.3
788.6
76.7
527.9
8 621.0
436.1
9 325.0
484.8
9 709.8
594.5
9 684.6
3 098.7
402.5
333.3
111.4
1 530.0
2 671.4
15.5
8 162.8
458.1
3 231.0
429.1
327.5
120.6
1 665.0
2 825.0
12.6
8 610.9
714.1
3 332.3
405.2
346.6
101.7
1 592.4
3 057.6
49.7
8 885.4
824.4
3 371.8
411.2
408.8
126.3
1 727.6
4 007.5
146.4
10 199.5
( 514.9)
( 17.2)
( 14.8)
29.6
18.4
( 232.6)
( 262.6)
(2 287.6)
( 595.4)
..
4.8
0.1
5.7
0.8
( 2.4)
( 8.9)
( 24.4)
( 50.2)
( 33.0)
( 17.4)
129.7
( 299.1)
159.0
( 308.0)
406.1
(2 284.1)
(1 459.8)
( 466.0)
( 980.9)
Note:
(a) Note 36 within Chapter 4 provides details of adjustments due to prior period errors.
Financial Report 2007-08
Appendix A
221
Table A.2: Balance Sheet as at the end of the quarter
($ million)
2006-07
June (a)
3 017.7
2 909.5
99.6
125.2
1 531.9
7 683.9
51.9
Sept.
Current assets
Cash and cash equivalents
Receivables
Prepayments
Inventories
Other financial assets
Non-current assets classified as held for
sale
7 735.9 Total current assets
Non-current assets
342.3 Receivables
629.5 Investments accounted for using the equity
method
526.4 Other financial assets
59 340.6 Property, plant and equipment
235.0 Intangibles
206.0 Other assets
61 279.8 Total non-current assets
69 015.7 Total assets
Current liabilities
2 631.4 Payables
1 088.2 Interest-bearing liabilities
3 245.2 Employee benefits
335.0 Superannuation
214.3 Other provisions
507.9 Other liabilities
8 022.1 Total current liabilities
Non-current liabilities
242.1 Payables
6 106.0 Interest-bearing liabilities
375.6 Employee benefits
9 564.7 Superannuation
543.4 Other provisions
496.5 Other liabilities
17 328.5 Total non-current liabilities
25 350.5 Total liabilities
43 665.2 Net assets
Source: Department of Treasury and Finance
2007-08
Dec.
Mar.
June
2 101.9
2 778.6
286.5
129.0
1 715.8
7 011.9
50.6
2 737.3
1 994.4
253.8
143.7
1 981.4
7 110.6
48.8
2 817.9
2 823.4
169.6
142.3
1 994.0
7 947.2
47.3
2 975.0
2 521.2
87.0
221.1
1 816.3
7 620.6
70.8
7 062.5
7 159.4
7 994.4
7 691.4
341.4
634.5
349.8
639.3
350.2
639.3
177.0
668.1
532.2
59 443.4
234.1
206.0
61 391.7
68 454.2
561.3
59 751.4
234.9
206.1
61 742.8
68 902.3
565.1
59 893.7
232.4
201.6
61 882.2
69 876.6
505.7
65 224.2
237.8
157.4
66 970.2
74 661.6
2 661.9
420.2
3 131.2
335.0
216.2
475.8
7 240.3
2 475.4
294.6
3 321.9
335.0
207.4
438.3
7 072.5
2 564.2
282.1
3 379.7
335.0
177.4
636.6
7 375.1
2 600.4
1 544.1
3 615.8
417.0
184.3
507.2
8 868.9
229.4
6 097.8
373.8
10 050.6
544.4
496.6
17 792.6
25 032.9
43 421.3
344.0
6 019.0
347.1
10 339.2
537.0
513.6
18 100.0
25 172.5
43 729.8
264.6
6 092.4
303.1
12 647.2
538.5
498.4
20 344.1
27 719.2
42 157.4
153.3
6 257.8
357.4
12 509.8
481.1
464.6
20 224.1
29 092.9
45 568.6
Note:
(a) Note 36 within Chapter 4 provides details of adjustments due to prior period errors.
222
Appendix A
Financial Report 2007-08
Table A.3: Statement of cash flows for the past five quarters
($ million)
2006-07
June
Cash flows from operating activities
Receipts
2 866.0 Taxation
235.6 Fines and regulatory fees
4 218.3 Grants
1 201.8 Sale of goods and services
118.2 Interest received
582.7 Dividends and income tax equivalent and
rate equivalent revenue
394.7 Other receipts
9 617.2 Total receipts
Payments
(2 918.2) Employee benefits
( 316.9) Superannuation
( 102.4) Interest paid
(2 242.3) Grants and transfer payments
(3 315.7) Supplies and services
.. Other payments
(8 895.4) Total payments
721.8 Net cash flows from operating activities
Cash flows from investing activities
( 677.8) Purchase of non-financial assets
125.2 Proceeds from sale of non-financial assets
475.6 Net (purchase)/disposal of investments
10.6 Net customer loans (granted)/repaid
( 353.5) Net contribution to other sectors of
government
( 419.9) Net cash flows from investing activities
Cash flows from financing activities
985.7 Net borrowings
985.7 Net cash flows from financing activities
1 287.6 Net increase/(decrease) in cash and cash
equivalents
1 727.1 Cash and cash equivalents at beginning of
reporting period
3 014.6 Cash and cash equivalents at end of
reporting period
Source: Department of Treasury and Finance
Financial Report 2007-08
Sept.
2007-08
Dec.
Mar.
June
3 401.4
108.3
3 998.2
634.9
100.6
72.4
3 156.7
215.4
4 325.6
1 301.4
99.0
403.7
3 125.3
60.8
4 216.8
703.3
100.8
110.0
3 529.7
211.7
4 669.0
638.3
140.6
180.2
390.9
8 706.8
993.8
10 495.6
658.7
8 975.8
417.3
9 786.8
(3 214.6)
( 387.1)
( 110.3)
(1 508.0)
(2 967.7)
..
(8 187.8)
519.0
(3 067.0)
( 403.1)
( 113.1)
(1 785.2)
(3 033.6)
..
(8 402.1)
2 093.6
(3 318.4)
( 384.8)
( 96.0)
(1 549.7)
(2 848.0)
..
(8 197.0)
778.7
(3 081.3)
( 824.0)
( 147.2)
(1 592.3)
(3 655.8)
..
(9 300.6)
486.2
( 388.6)
22.7
( 193.7)
( 0.3)
( 196.3)
( 960.2)
35.9
( 298.4)
( 14.5)
( 214.0)
( 592.0)
61.5
( 29.7)
..
( 196.8)
( 827.6)
57.0
183.6
( 1.4)
( 728.4)
( 756.3)
(1 451.3)
( 757.0)
(1 316.8)
( 680.1)
( 680.1)
( 917.4)
( 6.5)
( 6.5)
635.7
58.9
58.9
80.6
876.3
876.3
45.8
3 014.6
2 097.3
2 733.0
2 813.6
2 097.3
2 733.0
2 813.6
2 859.3
Appendix A
223
APPENDIX B: FINANCIAL MANAGEMENT ACT 1994 –
COMPLIANCE INDEX
The Financial Management Act 1994 requires the Minister to prepare an audited Annual
Financial Report for tabling in the Parliament. This report has been prepared in accordance with
applicable Australian Accounting Standards and the Financial Management Act 1994.
The Financial Management Act 1994 also requires the Annual Financial Report to meet certain
requirements. The following compliance index explains how these requirements are met,
together with appropriate references in this document.
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; and
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 38
pages 155 – 188
Refer Chapter 4, Operating
Statement page 57, Cash Flow
Statement page 60 and selected
notes
Refer Chapter 4, Operating
Statement page 57, Cash Flow
Statement page 60 and
Notes 2 – 39, pages 86 – 197
in respect of the financial year;
Financial Report 2007-08
(c) must include details of amounts
paid into Working Accounts
under Section 23;
Refer Chapter 4, Note 38
Table 4.17, page 163
(d) must include details of amounts
allocated to departments during
the financial year under
Section 28;
Refer Chapter 4, Note 38
Table 4.18, page 163
Appendix B
225
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 38
Table 4.20, page 166
(f) must include particulars of
amounts transferred in
accordance with determinations
under Section 30 or 31;
Refer Chapter 4, Note 38
Table 4.19, pages 164 – 165
(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 sub-paragraph
(i); and
(iii) amounts appropriated in
respect of the next financial
year as a result of a
determination under section
32 in respect of unused
appropriation for the
financial year;
(h) must include (i) details of expenses and
obligations met from money
advanced to the Minister
under Section 35(1) during
the financial year; and
(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;
and
226
Appendix B
Refer Chapter 4, Note 38
Table 4.21(a), page 166
Refer Chapter 4, Note 38
Table 4.21(b), page 167
Refer Chapter 4, Note 38
Table 4.21(c), page 167
Refer Chapter 4, Note 38
Table 4.23, page 170
Refer Chapter 4, Note 38
Table 4.24, page 171
Refer Chapter 4, Note 38
Table 4.22, pages 168 – 169
Refer Chapter 4, Note 38,
Table 4.36, page 188
Financial Report 2007-08
Financial Management
Act Reference
Requirement
Comments/Reference
(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
(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)
Section 26(2A)
Financial Report 2007-08
Refer Chapter 4, Note 38,
Table 4.36, page 188
Refer Chapter 4, Note 34
pages 145 – 151, Note 10
pages 92 – 95 and Balance Sheet
page 58
Refer Chapter 4, Note 2
pages 86 – 89, Refer Chapter 5,
Table 5.5 page 206, Table 5.6
page 207, Table 5.7 page 208 and
Table 5.8 page 209
Refer Auditor-General’s Opinion,
pages 54 – 55
Refer Appendix A,
pages 221 – 223
Refer Appendix A, Table A.1
page 221
(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 222
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.
Refer to Appendix A
Appendix B
Refer Appendix A, Table A.3
page 223
Refer Chapter 4, Note 1
pages 62 – 85
227
Financial Management
Act Reference
Requirement
Comments/Reference
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, Operating
Statement page 57, Balance
Sheet page 59, Cash Flow
Statement page 60 and selected
notes
228
Appendix B
Financial Report 2007-08
APPENDIX C: SCOPE AND STYLE CONVENTIONS
Scope of the Financial Report for the State of Victoria


The state financial outcome reflects the consolidation of all entities that are controlled by the
Victorian State Government. Entities included in the state outcome include all government
departments and other organisations which are legally constituted bodies that are controlled
by the state.
The reporting structure for the entities reported in the annual Financial Report for the State
of Victoria is based on that used in the System of National Accounts 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.
Chart A.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 comprises all government departments, offices and other
government bodies engaged in providing public services free of charge or at prices
significantly below the cost of production. Some of these entities may also earn revenue
from commercial activities, however such revenue represents less than half of their total
revenue.
The public non-financial corporations sector provides goods and services (of a non-financial
nature) within a competitive market, such as water authorities.
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.
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 2007-08
Appendix C
229
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 Chapter 5 (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.
230
Appendix C
Financial Report 2007-08