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Financial statements

Statement of comprehensive income for the year ended 30 June 2019

Notes

2019

$'000

2018

$'000

Original Budget 2019

$'000

NET COST OF SERVICES

Expenses

Employee benefits

1.1A

30 816

26 496

20 082

Suppliers

1.1B

14 412

11 546

31 563

Depreciation and amortisation

2.2A

2 017

1 742

1 680

Impairments

2.2A

49

54

Finance costs

1.1C

41

70

Losses from asset disposals

2

-

Total Expenses

47 337

39 908

53 325

Own-Source Income

Own-source revenue

Other revenue

1.2A

374

213

60

Total own-source revenue

374

213

60

Gains

Gains from sale of assets

-

2

-

Total gains

-

2

-

Total Own-Source Income

374

215

60

Net Cost of Services

46 963

39 693

53 265

Revenue from Government

1.2B

56 994

38 980

53 265

Surplus/(Deficit)

10 031

( 713)

-

OTHER COMPREHENSIVE INCOME

Items not subject to subsequent reclassification to profit and loss

Impairment of assets offset against asset revaluation surplus

2.2A

( 48)

( 167)

-

Total other comprehensive income

( 48)

( 167)

-

Total Comprehensive Income/(Loss)

9 983

( 880)

-

The above statement is to be read in conjunction with the accompanying notes.

STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30 June 2019

Budget Variance Commentary:

Commentary is provided for major variances between the actual amounts and the original budget. Variances are considered to be ‘major’ (or significant) where:

a) for items in the Statement of Financial Position, the variance between budget and actual is greater than +/‐10% of the budget and greater than $250,000 for the line item

b) for items in the Statement of Comprehensive Income, the variance between budget and actual is greater than +/‐2% of expenses.

Variance explanations are also provided where major changes to business activities may not be numerically material, but by their very nature will assist users in understanding underlying business changes that have occurred since the original budget was released.

Where a revised budget has been presented to Parliament, the APVMA may include variance explanations of major variances between the revised budget and actual amounts where they are considered relevant to an assessment of the discharge of accountability and to an analysis of the APVMA's performance.

Statement of Comprehensive Income

Employee benefits are $10.734 million (53.45%) over budget as reported in the Porfolio Budget Statements due to:

a) The original APVMA workforce forecast comprising an increased number of external contractors to manage and complete the business relocation from Canberra to Armidale.

  • This was based on the likelihood that a large percentage of the workforce would have sought redeployment throughout the year, decreasing permanent staff costs and significantly increasing supplier costs to make up for the lack of staffing resources.
  • The outcome was that a majority of permanent staff chose to stay throughout 2018‐19, this coupled with a large number of Section 26 staff from other government agencies, assisting with the relocation effort contributed to the increase in employee costs.

b) A large number of APVMA staff choosing to accept voluntary redundancies which contributed to a number of staffing positions, for a period of time, containing double the personnel.

  • This was caused by better than anticipated success of the Armidale recruitment rounds with the acceptance of a high number of applicants for job positions.
  • A condition of the voluntary redundancy for permanent employees was to ensure that a transfer of organisational knowledge, work practice, and history could take place to ensure that there was no significant loss of corporate knowledge and that regulatory effort could continue in a seamless manner.

Supplier costs were under budget as reported in the Portfolio Budget Statements mainly for the reasons described above.

Depreciation and amortisation reflects increased investment in the Armidale Offices, specifically I.T. Infrastructure and Office Fit‐out.

Revenue from Government was $3.729 million (7.0%) over budget, due to higher than budgeted fees and levies.

Statement of financial position as at 30 June 2019

Notes

2019

$'000

2018

$'000

Original Budget 2019

$'000

ASSETS

Financial Assets

Cash and cash equivalents

2.1A

8 918

2 269

2 500

Trade and other receivables

2.1B

11 738

8 081

5 494

Total financial assets

20 656

10 350

7 994

Non‐Financial Assets

Leasehold improvements

2.2A

2 858

500

201

Property, plant and equipment

2.2A

1 297

818

504

Intangibles

2.2A

4 786

5 980

5 043

Other non‐financial assets

2.2B

408

271

331

Total non‐financial assets

9 349

7 569

6 079

Total Assets

30 005

17 919

14 073

LIABILITIES

Payables

Suppliers

2.3A

2 633

3 023

2 596

Other payables

2.3B

6 474

2 196

948

Total payables

9 107

5 219

3 544

Provisions

Employee provisions

4.1A

3 852

5 678

6 805

Other provisions

2.4A

645

604

553

Total provisions

4 497

6 282

7 358

Total Liabilities

13 604

11 501

10 902

Net Assets

16 401

6 418

3 171

EQUITY

Contributed equity

6 675

6 675

6 675

Retained surplus

8 888

( 1 143)

( 4 557)

Reserves

838

886

1 053

Total Equity

16 401

6 418

3 171

The above statement is to be read in conjunction with the accompanying notes.

STATEMENT OF FINANCIAL POSITION

as at 30 June 2019

Budget Variance Commentary:

Statement of Financial Position

Cash and cash equivalents are above budget due to 2018‐19 appropriations being drawn down before 30 June 2019 to satisfy forward year commitments for enabling technology contractual arrangements and staff termination payments in the first week of the 2019‐20 financial year.

Trade and other receivables (primarily the receivable from the Department of Agriculture) is above budget due to higher industry contribution than anticipated.

The Leasehold improvements are higher than budgeted due to the completion of the Armidale fit‐out and its capitalisation.

Property, plant and equipment is higher than budgeted due to the completion of the Armidale office furniture and equipment acquisitions. The APVMA took early occupation of its Armidale premises and is now operational. The remaining property, plant and equipment in the Canberra office has been assessed for impairment, and is deemed to be of insignificant value.

Investment in current software is on hold as the APVMA transitions to a new enabling information technology (IT) environment. A majority of this is a Software‐as‐a‐Service (SaaS) arrangement, and will not be recorded as intangible assets. This investment in new IT technology will support the APVMA's future business model across all platforms. APVMA has reviewed its non‐financial assets and impaired those that are to become redundant.

Suppliers and other payables are over budget due to accrued liabilities for Canberra staff ceasing employment on 1 July 2019.

Employee provisions are below budget due to both the workforce contraction prior to the relocation to Armidale, and the recruitment of new applicants into the public service in Armidale.

Retained surplus is higher than anticipated due to the recognition of the appropriation revenue drawn down to provide for future commitments.

Statement of changes in equity for the year ended 30 June 2019

Notes

2019

$'000

2018

$'000

Original Budget 2019

$'000

CONTRIBUTED EQUITY

Opening Balance

Balance brought forward from previous period

6 675

6 175

6 675

Adjusted opening balance

6 675

6 175

6 675

Transactions with owners

Contributions by owners

Equity injections

-

-

-

Departmental Capital Budget (DCB) ‐ intangibles

-

500

-

Total transactions with owners

-

500

-

Closing balance as at 30 June

6 675

6 675

6 675

RETAINED SURPLUS

Opening Balance

Balance brought forward from previous period

( 1 143)

( 430)

( 4 557)

Adjusted opening balance

( 1 143)

( 430)

( 4 557)

Comprehensive income

Surplus/(Deficit) for the period

10 031

( 713)

-

Total comprehensive income

10 031

( 713)

-

Closing balance as at 30 June

8 888

( 1 143)

( 4 557)

ASSET REVALUATION RESERVE

Opening Balance

Balance brought forward from previous period

886

1 053

1 053

Adjusted opening balance

886

1 053

1 053

Comprehensive income

Other comprehensive income

2.2A

( 48)

( 167)

-

Total comprehensive income

( 48)

( 167)

-

Closing balance as at 30 June

838

886

1 053

TOTAL EQUITY

Opening Balance

Balance brought forward from previous period

6 418

6 798

3 171

Adjusted opening balance

6 418

6 798

3 171

Comprehensive income

Surplus/(Deficit) for the period

10 031

( 713)

-

Other comprehensive income

( 48)

( 167)

-

Total comprehensive income

9 983

( 880)

-

Transactions with owners

Contributions by owners

Equity injections

-

-

-

Departmental Capital Budget (DCB) ‐ intangibles

-

500

-

Total transactions with owners

-

500

-

Closing balance as at 30 June

16 401

6 418

3 171

The above statement is to be read in conjunction with the accompanying notes.

STATEMENT OF CHANGES IN EQUITY

for the year ended 30 June 2019

Accounting Policy

Equity Injections

Amounts appropriated which are designated as ‘equity injections’ for a particular year (less any formal reductions) and Departmental Capital Budgets (DCBs) are recognised directly in contributed equity in that year.

Other Distributions to Owners

The Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR) requires that distributions to owners be debited to contributed equity unless it is in the nature of a dividend.

Budget Variance Commentary:

Statement of Change in Equity

The APVMA received New Policy Proposal (NPP) funding in the May 2018 budget for its information technology (IT) environment over three years and had continuing Relocation NPP funding. The majority of the IT environment funding was appropriated in the 2018‐19 financial year whilst a significant portion of the relocation NPP was also appropriated in 2018‐19. Whilst the appropriated funds are committed, the cash outflow for these funds (particularly for the IT environment) will occur over the coming financial years as the commitments are realised.

Cash flow statement for the year ended 30 June 2019

Notes

2019

$'000

2018

$'000

Original Budget 2019

$'000

OPERATING ACTIVITIES

Cash received

Agricultural and Veterinary Chemicals (Administration) Act 1992 contribution

27 824

31 932

25 763

Corporate Commonwealth entity payment item

24 902

6 056

26 398

Net GST received

1 427

1 055

( 4)

Interest received

48

34

( 3)

Other cash received

305

165

60

Total cash received

54 506

39 242

52 214

Cash used

Employees

27 846

26 602

19 911

Supplies

16 752

11 975

31 628

Total cash used

44 598

38 577

51 539

Net cash flows from operating activities

9 908

665

675

INVESTING ACTIVITIES

Cash used

Purchase of property, plant and equipment

3 644

376

125

Purchase of intangibles

115

1 434

550

Total cash used

3 759

1 810

675

Net cash flows from or (used by) investing activities

(3 759)

(1 810)

( 675)

FINANCING ACTIVITIES

Cash received

Contributed equity

500

647

-

Total cash received

500

647

-

Net cash flows from or (used by) financing activities

500

647

-

Net increase or (decrease) in cash held

6 649

( 498)

-

Cash and cash equivalents at the beginning of the reporting period

2 269

2 767

2 500

Cash and cash equivalents at the end of the reporting period

2.1A

8 918

2 269

2 500

The above statement is to be read in conjunction with the accompanying notes.

Budget Variance Commentary:

The APVMA received New Policy Proposal funding in the May 2018 budget for its information technology (IT) environment over three financial years, commencing 2018‐2019. The majority of this funding was appropriated in the 2018‐19 financial year. A two pass tender process and successful vendor negotiations took significant time however, whilst the appropiated funds are drawn down and fully committed, the main cash outflow for these funds will occur over the remaining financial years as the commitments are realised.

The APVMA also had a large cash outflow in the first week of the 2019‐20 financial year associated with terminating employee payments. Whilst the cash supports the equity balance at 30 June 2019, it was already committed to its original purpose.

The cash used is shown as employee benefits and supplier expenses in the statement of comprehensive income.

Investment activities have been restricted to the acquisition of new fit‐out, furniture and computer hardware for the Armidale office.

OVERVIEW

Objectives of the Australian Pesticides and Veterinary Medicines Authority

The Australian Pesticides and Veterinary Medicines Authority (APVMA) is an Australian Government controlled not‐for‐profit corporate entity. The APVMA is responsible for the assessment and registration of pesticides and veterinary medicines and for their regulation up to the point of retail sale. The APVMA administers the National Registration Scheme for Agricultural and Veterinary Chemicals (NRS) in partnership with the States and Territories along with the active involvement of other Australian government agencies. Its role is to independently evaluate the safety and performance of chemical products intended for sale, ensuring that the health and safety of people, animals and the environment are protected.

The APVMA was established under the Agricultural and Veterinary Chemicals (Administration) Act 1992. Following the introduction of the Public Governance, Performance and Accountability Act 2013 on 1 July 2014, the APVMA was reclassified as a corporate Commonwealth entity.

Basis of Preparation of the Financial Report

The financial statements are general purpose financial statements and are required by section 42 of the Public Governance, Performance and Accountability Act 2013.

The financial statements and notes have been prepared in accordance with:

a) Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR); and

b) Australian Accounting Standards and Interpretations ‐ Reduced Disclosure Requirements, issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The APVMA financial statements have been prepared on an accrual basis and in accordance with the historical cost convention, except for certain assets at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position. The financial report is presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.

Comparative Information

In the current year, the APVMA has re‐classified general contractor expenses from "Wages and salaries", reported under "Employee benefits", to "Contractors" reported under "Suppliers". This has resulted in a $2.704 million transfer from employee benefits to suppliers in the Statement of Comprehensive Income and Cash Flow Statement in the prior year. This has no impact on the net result reported in the comparative figures and has been done to correctly align the actual cost with the budget.

New Australian Accounting Standards

Adoption of new Australian Accounting Standard Requirements

For 2018‐19 financial year, new standards applicable to all Not‐for‐Profit Commonwealth entities were brought into effect for annual reporting periods beginning on or after 1 July 2018. The APVMA sought professional advice as to the impact of the following standards:

a) AASB 9 Financial Instruments ‐ effective 1 July 2018

b) AASB 15 Revenue from Contracts with Customers ‐ effective 1 July 2019

c) AASB 16 Leases ‐ effective 1 July 2019

d) AASB 1058 Income for Not‐for‐Profit Entities ‐ effective 1 July 2019

The nature of APVMA's financial instruments means that there will be no change in the subsequent measurement of the APVMA's financial assets and financial liabilities. Although there is now an expected credit loss model governing the recognition of the impairment of financial assets, the quality of APVMA's counter parties (i.e. Government Entities) means it is unlikely that AASB9 will have a material impact on the APVMA financial operations.

The professional advice confirms that Industry funds are not derived from a contract with customers under AASB 15, as they are received via a Special Appropriation. The requirements of the new AASB 1058 and amended AASB 1004 Contributionswill not impact the APVMA's appropriation income. AASB 15 will not have a material impact upon the APVMA's other forms of revenue.

The APVMA is not a lessor (nor sub‐lessor) and has two leases as a lessee; the Armidale and Canberra offices.

Under AASB 16, whilst cash flows associated with the Armidale and Canberra office leases will be unaffected and total expenditure charged to the profit and loss over the term of each lease is unchanged, the timing of expenditure is affected. This will result in cumulative charges to the profit and loss leading to a reduction in retained earnings of $1.5 million by 2026‐27 which reverse during the remainder of the lease for no overall net impact.

The expected lease asset for 2019‐20 is $13,519,794.08 whilst the expected lease liability for 2019‐20 is $14,200,310.48.

Taxation

The APVMA is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).

Revenues, expenses and assets are recognised net of GST except:

a) where the amount of GST incurred is not recoverable from the Australian Taxation Office

b) for receivables and payables where applicable.

Events After the Reporting Period

There were no subsequent events between balance date and signing of the financial statements that had the potential to significantly affect the ongoing structure and financial activities of the APVMA.