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Department Objectives
For the 2000-01 financial year the Department of Transport and Regional Services (DOTARS) objective in program delivery was expressed through the outcome statement of Linking Australia through Transport and Regional Services.
DOTARS activities contributing towards this outcome are classified as either departmental or administered. Departmental activities involve the use of assets, liabilities, revenues and expenses controlled or incurred by DOTARS in its own right. Administered activities involve the management or oversight by DOTARS on behalf of the Government of items controlled or incurred by the Government.
In meeting the Departments objective four key result areas have been identified:
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Summary of Significant Accounting Policies
Note 2A - Basis of Accounting
The financial statements are required by section 49 of the Financial Management and Accountability Act 1997 and are a general purpose financial report.
The statements have been prepared in accordance with:
- Schedule 1 of the Financial Management and Accountability (Financial Statements 2000-2001) Orders made by the Finance Minister for the preparation of Financial Statements in relation to financial years ending on 30 June 2001;
- Australian Accounting Standards and Accounting Interpretations issued by Australian Accounting Standards Boards;
- Other authoritative pronouncements of the Boards; and
- The Consensus Views of the Urgent Issues Group.
The statements have been prepared having regard to:
- Statements of Accounting Concepts; and
- The Explanatory Notes to Schedule 1, and Guidance Notes issued by the Departmentof Finance and Administration.
The financial statements have been prepared on an accrual basis and are in accordance with the historical cost convention, except for certain assets which, as noted, are at valuation. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position.
Assets and liabilities are recognised in the Agency Statement of Financial Position when and only when it is probable that future economic benefits will flow and the amounts of the assets or liabilities can be reliably measured. Assets and liabilities arising under agreements equally proportionately unperformed are however not recognised unless required by an Accounting Standard. Liabilities and assets which are unrecognised are reported in the Schedule of Commitments and the Schedule of Contingencies (other than remote contingencies, which are reported at note 33).
Revenues and expenses are recognised in the Agency Statement of Financial Performance when and only when the flow or consumption or loss of economic benefits has occurred and can be reliably measured.
The continued existence of DOTARS in its present form, and with its present outputs and programs, is dependent on the Government's policy and on continuing appropriations by Parliament for the Department's operations and programs.
Note 2B - Changes in Accounting Policy
Amounts appropriated, but not received, from the Special Account of $280,224,172 were recognised as an Administered Receivable of appropriation at 30 June 2000. The balance of this receivable as at 30 June 2001, $217,473,638 has been written down to nil and is included as an expense in the Schedule of Administered Revenues and Expenses (refer note 24B). The Special Account balance remains available for intended purposes, refer note 35C for details.
DOTARS asset recognition threshold has been increased from $2,000 to $5,000 and this change in policy has been implemented with effect from 1 July 2000 with a consequent write down to the Infrastructure, Plant and Equipment class of $1,090,356.
There have been no other material changes in accounting policy during the period.
Note 2C - Agency and Administered Items
Agency assets, liabilities, revenues and expenses are those items that are controlled by the Department. They are used by DOTARS in producing its outputs and include:
- computers, plant and equipment used in providing goods and services;
- liabilities for employee entitlements;
- revenues from appropriations or independent sources in payment for outputs; and
- employee, supplier and depreciation expenses incurred in producing agency outputs.
Administered items are those items incurred in providing programs that are controlled by the Government, but managed, or oversighted, by DOTARS on behalf of the Government. These items include grant payments and levies, fees and fines.
The purpose of the separation of agency and administered items is to enable assessment of the administrative efficiency of DOTARS in providing goods and services.
The basis of accounting described in Note 2A applies to both agency and administered items.
Administered items are distinguished from agency items by shading in the financial statements.
Note 2D - Reporting by Outcomes
Note 16 provides an attribution of DOTARS actual revenues and expenses for 2000-01, to the Output Groups applicable to DOTARS from 2001-02 (as per the 2001-02 Portfolio Budget Statements). The percentages applied in the attribution of expenses are consistent with those used in the development of the budget and rely upon management estimation.
The table at Note 36 is a summary of revenues and expenses applicable to the Administered programmes specified in the Appropriation Acts.
Both notes include intra-government costs that are eliminated in calculating the actual budget outcome for the Government overall.
Note 2E - Revenues from Government
Revenues from Government are revenues relating to the core operating activities of DOTARS. Policies for accounting for revenue from the Government follow.
Agency Appropriations
From 1 July 1999, the Commonwealth Budget has been prepared under an accruals framework.
Appropriations to DOTARS for its outputs are recognised as revenue to the extent they have been received into its bank account or are entitled to be received by the Department at year end.
Appropriations to DOTARS for capital items are recognised directly in equity, to the extent that the appropriation has been received into the Department's bank account.
The appropriations for capital items for 2000-2001 include the re-appropriation to DOTARS of certain unspent amounts from 1999-00.
Administered Appropriations
Appropriations for administered expenses may be unlimited or limited as to amount. Where the appropriation is an annual appropriation and limited as to amount, revenue is recognised to the extent of the lesser of
- The amount appropriated by the Parliament; or
- An amount determined by the Finance Minister - this amount is determined having regard to the expenses incurred for the reporting period.
Where an appropriation is unlimited, revenue is recognised to the extent that expenses have been incurred. Similarly, appropriations credited to administered special accounts are recognised as revenue to the extent that expenses have been incurred.
Appropriations for capital are recognised as the amount appropriated by Parliament and received.
Resources Received Free of Charge
Services received free of charge are recognised in the Operating Statements as revenue when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense.
Contributions of assets at no cost of acquisition or for nominal consideration are recognised at their fair value when the asset qualifies for recognition.
Note 2F - Other Revenue
Revenue from the sale of goods is recognised upon the delivery of goods to customers. Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Dividend revenue is recognised when the right to receive a dividend has been established. Revenue from disposal of non-current assets is recognised when control of the asset has passed to the buyer.
Agency revenue from the rendering of a service is recognised to the stage of completion of contracts or other agreements to provide services.
The stage of completion is determined according to the proportion that costs incurred to date bear to the estimated total costs of the transaction.
Levies, fees and fines are recognised at the time they are imposed upon customers.
All revenues described in this note are revenues relating to the core operating activities of the Agency, whether in its own right or on behalf of the Commonwealth. Details of revenue amounts are given in Note 4B and 23E.
Note 2G - Grants (Administered)
DOTARS administers a number of grant programs on behalf of the Commonwealth.
Grant liabilities are recognised to the extent that (i) the services required to be performed, by the grantee have been performed or (ii) the grant eligibility criteria have been satisfied. A commitment is recorded when the Commonwealth has a binding agreement to make the grants but services have not been performed, or criteria satisfied. Where grant moneys are paid in advance of performance or eligibility, a prepayment is recognised.
Note 2H - Employee Entitlements
Leave
The liability for employee entitlements includes provision for annual leave and long service leave. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken by employees of DOTARS is estimated to be less than the annual entitlement for sick leave.
The liability for annual leave reflects the value of total annual leave entitlements of all employees at 30 June 2001 and is recognised at the nominal amount.
The non-current portion of the liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at 30 June 2001. In determining the present value of the liability, DOTARS has taken into account attrition rates and projected pay increases through promotion and inflation.
Separation and Redundancy
Provision is also made for separation and redundancy payments in circumstances where DOTARS has formally identified positions as excess to requirements and a reliable estimate of the amount of the payments can be determined.
Superannuation
Staff of DOTARS contribute to the Commonwealth Superannuation Scheme or the Public Sector Superannuation Scheme, as well as non-government superannuation funds in certain cases. Employer contributions amounting to $6,338,658 in relation to these schemes have been expensed in these financial statements.
No liability is shown for superannuation in the Statement of Financial Position as the employer contributions fully extinguish the accruing liability which is assumed by the Commonwealth.
Employer Superannuation Productivity Benefit contributions totalled $1,638,183 (1999-00 $1,163,486).
Note 2I - Leases
DOTARS entered into a sale and leaseback operating lease in 1999-2000 for IT equipment. Operating lease payments are charged to the Agency Statement of Financial Performance on a basis which is representative of the pattern of benefits derived from the leased assets. The lessor effectively retains the risks and benefits incidental to ownership.
The carrying amounts of relevant assets were written down to fair value with effect from 1 July 1999 with the consequent loss on sale of $3.4m is being amortised over three years.
The net present value of future net outlays in respect of surplus space under non-cancellable lease agreements is expensed in the period in which the space becomes surplus.
Lease incentives taking the form of 'free' leasehold improvements and rent holidays are recognised as liabilities. These liabilities are reduced by allocating lease payments between rental expense and reduction of the liability over the estimated useful life or the unexpired period of the lease.
Note 2J - Cash
Cash includes notes and coins held, deposits held at call with a bank or financial institution, and term deposits with a bank or financial institutions.
Note 2K - Financial Instruments
Accounting policies for financial instruments are summarised at Note 37.
Note 2L - Acquisition of Assets
Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken.
Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and revenues at their fair value at the date of acquisition, unless acquired as a consequence of restructuring administrative arrangements. In the latter case, assets are initially recognised at the amounts at which they were recognised in the transferor agency's accounts immediately prior to the restructuring.
Note 2M - Property, Plant and Equipment
Asset Recognition Threshold
Purchases of property, plant and equipment are recognised initially at cost in the Statement of Financial Position, except for purchases costing less than $5,000. These are expensed in the year of acquisition.
Items of plant and equipment acquired as part of a leasehold fitout are capitalised in the year of acquisition regardless of historical cost. Leasehold improvements are valued on a project basis and therefore include items of plant and equipment with a unit value of less than $5,000.
Revaluations
Schedule 1 to the Finance Management and Accountability (Financial Statements 2000-2001) Orders requires that land and buildings, plant and equipment be progressively revalued in accordance with the 'deprival' method of valuation in successive 3 year cycles.
DOTARS is implementing this cyclical asset valuation requirement on a geographical basis and in 2000-2001, valuations were completed for assets within the Indian Ocean Territories and Jervis Bay.
Assets in each class acquired after the commencement of the progressive revaluation cycle will be reported on the basis of the value initially recognised on acquisition for the duration of the progressive revaluation then in progress.
The application of the deprival method means DOTARS values its land at its current market buying price and its property, plant and equipment at its depreciated replacement cost. Any assets which would not be replaced or are surplus to requirements are valued at net realisable value. As at 30 June 2001, DOTARS had no such assets in this situation.
All valuations are independent.
Airport Land
The Department has not placed a monetary valuation on freehold land at airports leased by the Commonwealth to private sector interests. This policy takes account of the fact that land at the 20 civilian airports owned by the Commonwealth is subject to lease arrangements whereby the land is leased for 50 years with a 49 year extension option in consideration of upfront payments from the lessors and without any subsequent annual lease payments. For the purpose of financial reporting the land at these airports is therefore assessed as having no deprival value because of the extended period before which any future revenue stream will accrue.
Infrastructure built on the freehold land is an asset of the lessor and is also not reflected in the accompanying financial statements.
Recoverable amount test
Schedule 1 requires the application of the recoverable amount test to agency non-current assets in accordance with AAS 10 Accounting for the Revaluation of Non-Current Assets. The carrying amounts of these non-current assets have been reviewed to determine whether they are in excess of their recoverable amounts. In assessing recoverable amounts, the relevant cash flows have been discounted to their present value.
Revaluations are accounted for by separately stating the gross amount and the related accumulated depreciation of the revalued asset, except for buildings that have been accounted for using the net value.
Depreciation and Amortisation
Depreciable property plant and equipment assets are written-off to their estimated residual values over their estimated useful lives. In all cases, the straight-line method of depreciation is used by DOTARS. Leasehold improvements are amortised on a straight line basis over the lesser of the estimated useful life of the improvements or the unexpired period of the lease.
Depreciation/amortisation rates (useful lives) and methods are reviewed at each balance date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate. Residual values are re-estimated for a change in price only when assets are revalued.
Depreciation and amortisation rates applying to each class of depreciable asset are as follows:
The aggregate amount of depreciation allocated for each class of asset during the reporting period is disclosed in the Notes.
Note 2N - Inventories
Inventories held for resale are valued at the lower of cost and net realisable value.
Inventory not held for resale is valued at cost, unless it is no longer required, in which case it is valued at net realisable value.
Costs incurred in bringing each item of inventory to its present location and condition are assigned as follows:
- raw materials and stores - purchase cost on a 'First In First Out' basis; and
- finished goods and work in progress - cost of direct materials and labour plus attributable costs that are capable of being allocated on a reasonable basis.
Note 2O - Administered Investments
Administered investments in controlled entities are not consolidated because their consolidation is relevant only at the whole-of-government level.
The Commonwealth's investment in other controlled authorities and companies in this portfolio is valued at the aggregate of the Commonwealth's share of the net assets or net liabilities of each entity fixed at 30 June 1997, as adjusted for any subsequent capital injections or withdrawals.
Note 2P - Contingencies
Contingencies are conditions that may give rise to an asset or liability on the occurrence or non-occurrence of uncertain future events. They do not satisfy the recognition criteria for assets or liabilities and are not incorporated into the Statement of Financial Position.
Note 2Q - Taxation
DOTARS is exempt from all forms of Commonwealth taxation except fringe benefits tax and the goods and services tax.
Note 2R- Capital Use Charge (CUC)
A CUC of 12% is imposed by the Commonwealth on the net agency assets of DOTARS. The charge is adjusted to take account of asset gifts and revaluation increments during the financial year.
The format of the Statement of Financial Performance has been revised in 2000-01 to exclude such direct equity adjustments, as the CUC from the face of the statement to comply with Schedule 1 to the Finance Management and Accountability (Financial Statements 2000-2001) Orders.
Note 2S - Foreign Currency
Transactions denominated in a foreign currency are converted at the exchange rate at the date of the transaction.
Note 2T - Insurance
The Commonwealth's insurable risk managed fund, 'Comcover', commenced operations in 1998-99. DOTARS has insured with the fund for assets and other risks. Workers compensation is dealt with via continuing arrangements with Comcare.
Note 2U - Comparative Figures
Comparative figures for 2000-01 have been adjusted to conform with changes in presentation in these financial statements where required. In some instances, the notes include a comparative total only because reclassification or identification at a more detailed level is not practical.
Note 2V - Budget
To assist in meeting the responsibilities of the Government to public accountability, these financial statements present Budget comparatives as presented in the Portfolio Additional Estimates Statements (PAES). The PAES supplement the original Portfolio budget statements for the year to support the Parliament's consideration of DOTARS Budget.
Note 2W - Rounding
Amounts have been rounded to the nearest $1,000 except in relation to the following:
- act of grace payments and waivers;
- remuneration of executives; and
- remuneration of auditors.
Totals are the rounded sums of unrounded figures.
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Events Occurring after Balance Date
No material events occurring after balance date warrant
reporting.
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Operating Revenues
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Operating Expenses
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Borrowing Costs expense
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Transitional Adjustments
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Financial Assets (see note 21)
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Non-Financial Assets
Land and Buildings
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