Independent Auditor's Report

Contents

Certification

Primary financial statements

• Statement of Comprehensive Income
• Statement of Financial Position
• Statement of Changes in Equity
• Cash Flow Statement
• Administered Schedule of Comprehensive Income
• Administered Schedule of Assets and Liabilities
• Administered Reconciliation Schedule
• ​Administered Cash Flow Statement

Overview

Notes to the financial statements:

1. Departmental Financial Performance
1.1 Expenses
1.2 Own-Source Revenue and Gains

2. Income and Expenses Administered on Behalf of the Government
2.1 Administered – Expenses
2.2 Administered – Income

3. Departmental Financial Position
3.1 Financial Assets
3.2 Non-Financial Assets
3.3 Payables
3.4 Interest bearing Liabilities

4. Assets and Liabilities Administered on Behalf of Government
4.1 Administered – Financial Assets
4.2 Administered Financial Liabilities

5. Funding
5.1 Appropriations
5.2 Net Cash Appropriation Arrangements

6. People and Relationships
6.1 Employee Provisions
6.2 Key Management Personnel Remuneration
6.3 Related Party Disclosures

7. Managing Uncertainties
7.1: Contingent Assets and Liabilities
7.2 Financial Instruments
7.3: Administered – Financial Instruments
7.4 Fair Value Measurement
7.5 Administered - Fair Value Measurement

8. Other Information
8.1: Current/non-current distinction for assets and liabilities

Certification

Statement of Comprehensive Income

For the period ending 30 June 2021

Budget Variances Commentary

Variances are considered to be “major” based on the following criteria:

• variance between budget and actual is greater than 10% at item level; and
• variance is greater than 2% of the relevant categories. In the case of the Statement of Comprehensive Income, they are total expenses or total revenue.

Revenue from Government
The variance against revenue from government was due to additional funding provided at the Mid- Year Economic and Fiscal Outlook.

Deficit on Continuing Operations
The deficit on continuing operations was lower than budget, due to additional revenue from Government being provided at the Mid-Year Economic and Fiscal Outlook, and depreciation and amortisation for the year being lower than expected.

Statement of Financial Position

as at 30 June 2021

Budget Variances Commentary
Variances are considered to be “major” based on the following criteria:

• variance between budget and actual is greater than 10% at item level; and
• variance is greater than 2% of the relevant categories. In the case of the Statement of Financial Position, it is total equity.

Trade and other receivables
The variance against trade and other receivable is due to additional revenue from government provided at the Mid-Year Economic and Fiscal Outlook, and subsequently quarantined. Refer to Note 5.1A for further information.

Plant and Equipment
The variance against plant and equipment is due to increased investment in technology and hardware infrastructure to enhance operational efficiency.

Computer Software
The variance against computer software is the result of upgrades to the Case Management System and Website.

Accumulated Deficit
Refer to Statement of Comprehensive Income.

Statement of Changes in Equity

for the period ended 30 June 2021

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

Budget Variances Commentary

Variances are considered to be “major” based on the following criteria:

• variance between budget and actual is greater than 10% at item level; and
• variance is greater than 2% of the relevant categories. In the case of the Statement of Changes in Equity, it is total equity.

Deficit for the Period
Refer to Statement of Comprehensive Income.

Cash Flow Statement

for the period ended 30 June 2021

Budget Variances Commentary

Variances are considered to be “major” based on the following criteria:

• variance between budget and actual is greater than 10% at item level; and
• variance is greater than 2% of the relevant categories. In the case of the Cash Flow Statement, it is total equity.

Operating Activities – Cash used - Suppliers
The variance against operating activities - cash used - suppliers is predominantly due to increased contractor and agency resource.

Investing Activities – Cash used – Purchase of Computer Software
The variance against computer software is the result of upgrades to the Case Management System and Website.

Administered Schedule of Comprehensive Income

for the period ended 30 June 2021

Administered Schedule of Assets and Liabilities

as at 30 June 2021

Administered Reconciliation Schedule

for the period ended 30 June 2021

Administered cash transfers to and from the official public account
Revenue collected by the Fair Work Commission for use by the Government rather than the Fair Work Commission is administered revenue. Collections are transferred to the Official Public Account (OPA) maintained by the Department of Finance. Conversely, cash is drawn from the OPA to make payments under Parliamentary appropriation on behalf of Government. These transfers to and from the OPA are adjustments to the administered cash held by the Fair Work Commission on behalf of the Government and reported as such in the schedule of administered cash flows and in the administered reconciliation schedule.

Administered Cash Flow Statement

for the period ended 30 June 2021

Budget Variances Commentary

Variances are considered to be “major” based on the following criteria:

• variance between budget and actual is greater than 10% at item level; and
• variance is greater than 2% of the relevant categories. In the case of the Cash Flow Statement, it is total equity.

Applications fees received/ Appropriations
Application fees are payable to the Fair Work Commission at the time of lodgement of applications relating to s394, s365, s372, s773 and s789FC of the Fair Work Act 2009. The variance in applications were due to higher than budgeted applications to the Commission.

Overview

Objectives of the Fair Work Commission
The Fair Work Commission is an Australian Government controlled entity. It is a not-for-profit entity. The objective of the Fair Work Commission is to deliver simple, fair and flexible workplace relations for employees and employers through the exercise of powers to set and vary minimum wages and modern awards, facilitate collective bargaining, approve agreements and deal with disputes.

The Basis of Preparation
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 have been prepared in accordance with:

1. Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR); and
2. Australian Accounting Standards and Interpretations – Reduced Disclosure Requirements issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention, except for certain assets and liabilities 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 Statements are presented in Australian dollars.

New Accounting Standards
All new, revised, amending standards and/or interpretations that were issued prior to the sign-off date and are applicable to the current reporting period did not have a material effect on the Fair Work Commission’s financial statements.

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

Reporting of Administered activities
Administered revenues, expenses, assets, liabilities and cash flows are disclosed in the administered schedules and related notes.

Except where otherwise stated, administered items are accounted for on the same basis and using the same polices as for departmental items, including the application of Australian Accounting Standards.

Events after the Reporting Period
Departmental
On 6 July 2021, in accordance with section 51 of the Public Governance, Performance and Accountability Act 2013, access to $1.881m ($1.781m operating and $0.1m capital) of the 2020-21 Appropriation previously quarantined was permanently withheld.

There were no other significant events that had the potential to significantly affect the ongoing structure and financial activities of the Fair Work Commission.

Administered
There were no significant events that had the potential to significantly affect the ongoing structure and financial activities of the Fair Work Commission.

Impact of the COVID-19 Pandemic
The Fair Work Commission has assessed the impact of COVID-19 pandemic on the balances included in its financial statements. The Fair Work Commission has concluded that the COVID-19 has not had a material impact on the financial statements, operations, or effectiveness of internal controls.

1. Departmental Financial Performance

This section analyses the financial performance of Fair Work Commission for the year ended 2021.

1.1 Expenses

1.2 Own-Source Revenue and Gains

2. Income and Expenses Administered on Behalf of the Government

This section analyses the activities that the Fair Work Commission does not control but administers on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental.

2.1 Administered – Expenses

2.2 Administered – Income

Accounting Policy
Application fees are payable to the Fair Work Commission at the time of lodgement of applications relating to s394, s365, s372, s773 and s789FC of the Fair Work Act 2009.

The Fair Work Commission recognises application fees received as a revenue only when a matter has been substantially dealt with by a member of the Commission. (i.e. the Commission has performed its performance obligation).

3. Departmental Financial Position

This section analyses the Fair Work Commission’s assets used to conduct its operations and the operating liabilities incurred as a result.

Employee related information is disclosed in the People and Relationships section.

3.1 Financial Assets

3.2 Non-Financial Assets

3.2A: Reconciliation of the Opening and Closing Balances of Property, Plant and Equipment and Intangibles

The carrying amount of computer software included $67,998 purchased software and $1,890,612 internally generated software.

Revaluations of non-financial assets
All revaluations were conducted in accordance with the revaluation policy stated at Note 7.4. On 30 June 2020, an independent valuer conducted the revaluations.

Contractual commitments for the acquisition of property, plant, equipment and intangible assets
As at the reporting date, the Fair Work Commission has no contractual commitments for the acquisition of leasehold improvements, property, plant and equipment.

Accounting Policy
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. Non-financial assets are initially measured at their fair value plus transaction costs where appropriate.

Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and income at their fair value at the date of acquisition, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amounts at which they were recognised in the transferor’s accounts immediately prior to the restructuring.

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 $2,000, which are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).

The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant to ‘make good’ provisions in property leases taken up by the Fair Work Commission where there exists an obligation to restore the property to its original condition. These costs are included in the value of the Fair Work Commission's leasehold improvements with a corresponding provision for the ‘make good’ recognised.

Lease Right of Use (ROU) Assets
Leased ROU assets are capitalised at the commencement date of the lease and comprise of the initial lease liability amount, initial direct costs incurred when entering into the lease less any lease incentives received. These assets are accounted for by Commonwealth lessees as separate asset classes to corresponding assets owned outright, but included in the same column as where the corresponding underlying assets would be presented if they were owned.

On initial adoption of AASB 16 the Fair Work Commission has adjusted the ROU assets at the date of initial application by the amount of any provision for onerous leases recognised immediately before the date of initial application. Following initial application, an impairment review is undertaken for any right of use lease asset that shows indicators of impairment and an impairment loss is recognised against any right of use lease asset that is impaired. Lease ROU assets continue to be measured at cost after initial recognition in Commonwealth agency, GGS and Whole of Government financial statements.

Revaluations
Following initial recognition at cost, property, plant and equipment (excluding ROU assets) are carried at fair value. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets did not differ materially from the assets’ fair values as at the reporting date. The regularity of independent valuations depended upon the volatility of movements in market values for the relevant assets.

Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reversed a previous revaluation decrement of the same asset class that was previously recognised in the surplus/deficit. Revaluation decrements for a class of assets are recognised directly in the surplus/deficit except to the extent that they reversed a previous revaluation increment for that class.

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount.

Depreciation
Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the Fair Work Commission using, in all cases, the straight-line method of depreciation.

Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate.

Depreciation rates applying to each class of depreciable asset are based on the following useful lives:

The depreciation rates for ROU assets are based on the commencement date to the earlier of the end of the useful life of the ROU asset or the end of the lease term.

Impairment
All assets were assessed for impairment at 30 June 2021. Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount.

The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows, and the asset would be replaced if the Fair Work Commission were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Intangibles
The Fair Work Commission's intangibles comprise internally developed and purchased software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Software is amortised on a straight-line basis over its anticipated useful life. The useful lives of the Fair Work Commission's software are 3 to 10 years (2020: 3 to 10 years).

All software assets were assessed for indications of impairment as at 30 June 2021.

3.3 Payables

3.4 Interest bearing Liabilities

Accounting Policy
For all new contracts entered into, the Fair Work Commission considers whether the contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’.

Once it has been determined that a contract is, or contains a lease, the lease liability is initially measured at the present value of the lease payments unpaid at the commencement date, discounted using the interest rate implicit in the lease, if that rate is readily determinable, or the department’s incremental borrowing rate.

Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification to the lease. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset or profit and loss depending on the nature of the reassessment or modification.

4. Assets and Liabilities Administered on Behalf of Government

This section analyses assets used to conduct operations and the operating liabilities incurred. As a result, the Fair Work Commission does not control but administers on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

4.1 Administered – Financial Assets

As at 30 June 2021, there were no administered financial assets that required disclosure (2020: nil).

4.2 Administered Financial Liabilities

The Fair Work Commission recognises application fees received as a liability in the Administered Schedule of Assets and Liabilities. After a matter has been closed and substantially performed by the Fair Work Commission (i.e. the Fair Work Commission has fulfilled its performance obligation), revenue will be recognised in the Administered Schedule of Comprehensive Income.

5. Funding

This section identifies the Fair Work Commission funding structure.

5.1 Appropriations

5.1A: Annual Appropriations (‘Recoverable GST exclusive’)

Annual Appropriations for 2021

Annual Appropriations for 2020

5.1B: Unspent Annual Appropriations (‘Recoverable GST exclusive’)

5.1C: Special Appropriations (‘Recoverable GST exclusive’)

5.1D: Disclosure by Agent in Relation to Annual and Special Appropriations (‘Recoverable GST exclusive’)

5.2 Net Cash Appropriation Arrangements

Notes:

1. From 2010-11, the Government introduced net cash appropriation arrangements where revenue appropriations for depreciation/amortisation expenses of non-corporate Commonwealth entities and selected corporate Commonwealth entities were replaced with a separate capital budget provided through equity injections. Capital budgets are to be appropriated in the period when cash payment for capital expenditure is required.

2. The inclusion of depreciation/amortisation expenses related to ROU leased assets and the lease liability principal repayment amount reflects the impact of AASB 16 Leases, which does not directly reflect a change in appropriation arrangements.

3. The Net Cash Operating Surplus includes an amount of $1.781m which was received during the 2020-21 financial year and formally reduced on the 6th of July 2021. (Refer Overview section Events after the Reporting Period).

6. People and Relationships

This section describes a range of employment and post-employment benefits provided to our people and our relationships with other key people.

6.1 Employee Provisions

6.1B: Administered – Employee Provisions

As at 30 June 2021, there were no administered employee provisions (2020: nil).

Accounting Policy

Liabilities for short-term employee benefits and termination benefits expected to be settled within twelve months of the end of reporting period are measured at their nominal amounts.

Other long-term employee benefits are measured as net total of the present value of the defined benefit obligation at the end of the reporting period minus the fair value at the end of the reporting period of plan assets (if any) out of which the obligations are to be settled directly.

Leave

The liability for employee benefits includes provision for annual leave, long service leave and Judges Long leave.

Members of the Fair Work Commission, who were Presidential Members under the Workplace Relations Act 1996 and the President of the Fair Work Commission, accrue six months long leave after five years of service as a Presidential Member. In recognition of the nature of Presidential Members’ tenure, a provision is accrued from the first year of service.

The leave liabilities are calculated on the basis of employees’ remuneration at the estimated salary rates that will be applied at the time the leave is taken, including the Fair Work Commission’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

The liability for long service leave has been determined by use of the Australian Government Actuary’s shorthand method using the standard Commonwealth sector probability profile. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Separation and Redundancy

Provision is made for separation and redundancy benefit payments. The Fair Work Commission recognises a provision for termination when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.

Superannuation

The majority of staff and Members of the Fair Work Commission are members of the Public Sector Superannuation Scheme (PSS), or the PSS accumulation plan (PSSap), or other superannuation funds held outside the Australian Government.

The PSS is a defined benefit scheme for the Australian Government. The PSSap is a defined contribution scheme.

The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported in the Department of Finance’s administered schedules and notes.

The Fair Work Commission makes employer contributions to the employees' defined benefit superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the Government. The Fair Work Commission accounts for the contributions as if they were contributions to defined contribution plans. The liability for superannuation recognised as at 30 June 2021 represents outstanding contributions for the final fortnight of the year.

Judge’s Pension

Members of the Fair Work Commission who are Presidential Members under the Workplace Relations Act 1996 and the President of the Fair Work Commission are eligible for pensions under the Judges’ Pension Scheme (JPS) pursuant to the Judges’ Pensions Act 1968. The JPS is an unfunded defined benefit scheme that is governed by the rules set out in the Act.

The Fair Work Commission does not contribute towards the cost of the benefit during such Member’s term of service. Liability and expenses associated with the JPS are recorded as part of the Department of Finance financial statements. The Department of Finance has given the Fair Work Commission drawing rights for the financial year in relation to the special appropriation made under the Judges’ Pensions Act 1968. The Fair Work Commission makes pension payments directly to beneficiaries of the scheme (refer to Note 5.1D).

6.2 Key Management Personnel Remuneration

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. The Fair Work Commission has determined the key management personnel to be the Portfolio Minster, the President and the General Manager. Key management personnel remuneration is reported in the table below:

The total numbers of key management personnel that are included in the above table are 3 (2020: 2).

1. The above key management personnel remuneration excludes the remuneration and other benefits of the Portfolio Minister. The Portfolio Minister's remuneration and other benefits are set by the Remuneration Tribunal and are not paid by the entity.

2. On the 6th of April 2021, the General Manager – Bernadette O’Neill was appointed as a member of the Commission. The remuneration of the Acting General Manager is disclosed in the table above from this date.

6.3 Related Party Disclosures

Related party relationships:

The entity is an Australian Government controlled entity. Related parties to this entity are Key Management Personnel including the Portfolio Minister and Executive.

Transactions with related parties:

Given the breadth of Government activities, related parties may transact with the government sector in the same capacity as ordinary citizens. These transactions have not been separately disclosed in this note.

Giving consideration to relationships with related entities, and transactions entered into during the reporting period by the entity, it has been determined that there are no related party transactions to be separately disclosed (2020: nil).

7. Managing Uncertainties

This section analyses how the Fair Work Commission manages financial risks within its operating environment.

7.1: Contingent Assets and Liabilities

Quantifiable Contingencies

As at 30 June 2021, there were no quantifiable contingent liabilities or assets requiring disclosure (2020: nil).

Unquantifiable Contingencies

As at 30 June 2021, there were no unquantifiable contingent liabilities or assets requiring disclosure (2020: nil).

Quantifiable Administered Contingencies

As at 30 June 2021, there were no quantifiable contingent liabilities or assets requiring disclosure (2020: nil).

Unquantifiable Administered Contingencies

As at 30 June 2021, there were no unquantifiable contingent liabilities or assets requiring disclosure (2020: nil).

Accounting Policy

Contingent liabilities and contingent assets are not recognised in the statement of financial position but are reported in the notes. They may arise from uncertainty as to the existence of a liability or asset or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain and contingent liabilities are disclosed when settlement is greater than remote.

7.2 Financial Instruments

7.3: Administered – Financial Instruments

As at 30 June 2021, there were no administered financial instruments that required disclosure (2020:nil).

7.4 Fair Value Measurement

Accounting Policy

The fair value of non-financial assets has been taken to be the market value of similar assets. The agency’s assets are held for operational purposes and not held for the purposes of deriving a profit. The current use of all controlled assets is considered their highest and best use. The agency procured valuation services from Jones Lang LaSalle Public Sector Valuations Pty Ltd (JLLPSV) for the 2019-20 financial year and relied on valuation models provided by JLLPSV. JLLPSV has provided written assurance to the agency that the valuation models developed are in accordance with AASB 13.

7.4A: Fair Value Measurement

1. No non-financial assets were measured at fair value on a non-recurring basis as at 30 June 2021 (2020: nil).

2. The Fair Work Commission's assets are held for operational purposes and not held for the purposes of deriving a profit. The current use of all non-financial assets is considered their highest and best use.

7.5 Administered - Fair Value Measurement

As at 30 June 2021, there was no administered fair value measurement that required disclosure (2020: nil).

8.1: Current/non-current distinction for assets and liabilities

8.1A: Current/non-current distinction for assets and liabilities

8.1B: Administered – current/non-current distinction for assets and liabilities