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Primary financial statements

STATEMENT OF COMPREHENSIVE INCOME for the period ended 30 June 2019

Notes

2019

2018

Original Budget

$’000

$’000

$’000

NET COST OF SERVICES

Expenses

Employee benefits

1.1A

82,908

80,647

81,770

Suppliers

1.1B

36,227

35,862

35,422

Grants

1,667

1,612

1,669

Depreciation and amortisation

3.2

7,203

10,102

8,085

Losses from asset sales

-

1

-

Total expenses

128,005

128,224

126,946

Own-Source Income

Own-source revenue

Rental income

582

912

500

Other income

1.2A

986

935

600

Total own-source revenue

1,568

1,847

1,100

Gains

Other gains

-

200

-

Total gains

-

200

-

Total own-source income

1,568

2,047

1,100

Net cost of services

(126,437)

(126,177)

(125,846)

Revenue from Government

1.2B

119,692

116,973

117,761

Deficit

(6,745)

(9,204)

(8,085)

OTHER COMPREHENSIVE INCOME

Items not subject to subsequent reclassification to net cost of services

Changes in asset revaluation surplus

-

205

-

Total other comprehensive income

-

205

-

Total comprehensive loss attributable to the Australian Government

(6,745)

(8,999)

(8,085)

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

Budget variance commentary

Statement of Comprehensive Income for the Fair Work Ombudsman and Registered Organisations Commission Entity (FWOROCE)

Depreciation

Lower than budgeted depreciation arose from delays in the finalisation of, and lower than expected expenditure on, capital projects.

Grants

Grant expense was not separately identified in the PBS, but was calculated as a discrete item during the budget phase, based on contracted payments and an estimate of the annual indexation to be applied.

Other Income

Higher than estimated revenue was received from services provided to other Government agencies and court costs awarded to the FWOROCE arising from litigations.

STATEMENT OF FINANCIAL POSITION as at 30 June 2019

2019

2018

Original Budget

Notes

$’000

$’000

$’000

ASSETS

Financial assets

Cash and cash equivalents

3.1A

1,611

1,892

1,868

Trade and other receivables

3.1B

56,154

52,103

59,852

Total financial assets

57,765

53,995

61,720

Non-financial assets

Land and buildings (leasehold improvements)

3.2

17,886

20,978

16,586

Property, plant and equipment

3.2

900

1,550

495

Intangibles

3.2

10,124

8,782

8,294

Prepayments

1,894

1,424

1,081

Total non-financial assets

30,804

32,734

26,456

Total assets

88,569

86,729

88,176

LIABILITIES

Payables

Suppliers

3.3A

6,729

5,877

15,030

Other payables

3.3B

8,345

9,632

593

Total payables

15,074

15,509

15,623

Provisions

Employee provisions

6.1A

24,087

21,584

21,471

Other provisions

3.4

1,086

1,466

5,863

Total provisions

25,173

23,050

27,334

Total liabilities

40,247

38,559

42,957

Net assets

48,322

48,170

45,219

EQUITY

Contributed equity

110,564

103,667

110,882

Reserves

5,981

5,981

5,776

Retained earnings (accumulated deficit)

(68,223)

(61,478)

(71,439)

Total equity

48,322

48,170

45,219

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

Original Budget reflects the figures presented in the 2018-19 PBS.

Budget variance commentary

Statement of Financial Position for FWOROCE

Trade and other receivables

Higher than budgeted capital expenditure payments made in the second half of the 2017-18 financial year reduced the opening appropriation receivable balance at 1 July 2018. The original budget was not able to be amended to reflect these payments prior to the publication of the PBS.

Intangibles and Non-financial assets

Delays in the completion and subsequent recognition of assets from capital projects resulted in a lower than expected depreciation of non-financial assets and a higher than budgeted written down value.

Prepayments

Higher than expected software support payments made in advance have increased prepayments at year end.

Suppliers

The timing of payment of invoices led to a significantly lower creditors balance at 30 June 2019 compared to the budget.

Other payables

Property leases were entered into where significant lease incentives were provided by the property owners. These incentives are recorded as liabilities and released as an offset against expenditure over the term of the relevant lease.

Employee provisions

Lower than expected bond rates have reduced the discounting effect on leave entitlements, resulting in higher than budgeted Employee provisions.

Other provisions

Ongoing higher than budget releases of the provision for onerous leases resulted in a lower balance in Other provisions.

STATEMENT OF CHANGES IN EQUITY for the period ended 30 June 2019

2019

2018

Original Budget

Notes

$’000

$’000

$’000

CONTRIBUTED EQUITY

Opening Balance

Balance carried forward from previous period

103,667

98,384

103,667

Opening balance

103,667

98,384

103,667

Comprehensive Income

Contributions by owners

Equity injection - Appropriations

-

-

-

Departmental capital budget

5.1

6,897

5,283

7,215

Total transactions with owners

6,897

5,283

7,215

Closing balance as at 30 June

110,564

103,667

110,882

ASSET REVALUATION RESERVE

Opening Balance

Balance carried forward from previous period

5,981

5,776

5,776

Opening balance

5,981

5,776

5,776

Comprehensive Income

Revaluation

3.2

-

205

-

Total comprehensive income

-

205

-

Closing balance as at 30 June

5,981

5,981

5,776

RETAINED EARNINGS

Opening Balance

Balance carried forward from previous period

(61,478)

(52,274)

(63,354)

Opening balance

(61,478)

(52,274)

(63,354)

Comprehensive Income

Surplus/(Deficit) for the period

(6,745)

(9,204)

(8,085)

Total comprehensive income

(6,745)

(9,204)

(8,085)

Closing balance as at 30 June

(68,223)

(61,478)

(71,439)

TOTAL EQUITY

Opening Balance

Balance carried forward from previous period

48,170

51,886

46,089

Opening balance

48,170

51,886

46,089

Comprehensive Income

Surplus/(Deficit) for the period

(6,745)

(9,204)

(8,085)

Revaluation

-

205

-

Total comprehensive income

(6,745)

(8,999)

(8,085)

Transactions with owners

Contributions by owners

Equity injection - Appropriations

-

-

-

Departmental capital budget

6,897

5,283

7,215

Total transactions with owners

6,897

5,283

7,215

Closing balance as at 30 June

48,322

48,170

45,219

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

Original Budget reflects the figures presented in the 2018-19 PBS.

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.

Restructuring of administrative arrangements

Net assets received from or relinquished to another government entity under a restructuring of administrative arrangements are adjusted at their book value directly against contributed equity.

Budget variance commentary

Surplus/(Deficit) for the period

Depreciation did not reach budgeted levels due to the lower than planned finalisation of capital projects and combined with higher revenue from sub-lease rental income and receipts for services provided to other agencies to produce the lower deficit result for the year.

CASH FLOW STATEMENT for the period ended 30 June 2019

2019

2018

Original Budget

Notes

$’000

$’000

$’000

OPERATING ACTIVITIES

Cash received

Appropriations

117,305

125,193

118,798

Sales of goods and rendering of services

1,842

1,526

1,893

Net goods and services tax (GST) received

2,794

4,425

-

Other

-

-

500

Total cash received

121,941

131,144

121,191

Cash used

Employees

80,581

80,167

81,770

Suppliers

37,709

40,377

37,421

Section 74 receipts transferred to Official Public Account (OPA)

4,075

3,007

-

Total cash used

122,365

123,551

119,191

Net cash from/(used by) operating activities

(424)

7,593

2,000

INVESTING ACTIVITIES

Cash used

Purchase of non-financial assets

4,803

14,666

9,215

Total cash used

4,803

14,666

9,215

Net cash used by investing activities

(4,803)

(14,666)

(9,215)

FINANCING ACTIVITIES

Cash received

Contributed equity

4,946

7,097

7,215

Total cash received

4,946

7,097

7,215

Net cash from financing activities

4,946

7,097

7,215

Net increase/(decrease) in cash held

(281)

24

-

Cash and cash equivalents at the beginning of the reporting period

1,892

1,868

1,868

Cash and cash equivalents at the end of the reporting period

3.1A

1,611

1,892

1,868

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

Original Budget reflects the figures presented in the 2018-19 PBS.

Budget variance commentary

Operating activities

Section 74 receipts

Variation from the budgeted section 74 receipts was due to receipts for reimbursements of expenditure, such as paid parental leave and leave balances of staff transferred. These are not able to be estimated accurately at the time of producing the PBS.

Investing activities

Purchase of non-financial assets

Lower than planned expenditure on non-financial assets was due to savings made against a number of software projects and fewer than estimated projects being undertaken.

Contributed equity

A lower amount of funds were required to be drawn from cash reserves to fund the lower than expected non-financial asset purchases.

ADMINISTERED SCHEDULE OF COMPREHENSIVE INCOME for the period ended 30 June 2019

2019

2018

Original Budget

Notes

$’000

$’000

$’000

NET COST OF SERVICES

Expenses

Write-down and impairment of assets

2.1

988

2,714

-

Total expenses

988

2,714

-

LESS:

Income

Non-taxation revenue

Fees and fines

2.2A

4,890

8,100

300

Total revenue

4,890

8,100

300

Net contribution by services

3,902

5,386

300

Surplus

3,902

5,386

300

OTHER COMPREHENSIVE INCOME

Total Other Comprehensive Income

-

-

-

Total Comprehensive Income

3,902

5,386

300

The above schedule should be read in conjunction with the accompanying notes.

Original Budget reflects the figures presented in the 2018-19 PBS.

Budget variance commentary

Write down and impariment of assets

The assessment of recoverability of the penalties awarded by the courts against employers and directors of employing entities has resulted in the impairment of the administered debtors established to recognise the court penalties. The amount of unrecoverable court penalties are unable to be accurately estimated when budgets are developed.

Fees and fines

The quantum of penalties handed down by the courts where FWOROCE has brought forward successful litigations are unable to be accurately estimated at the time of establishing budgets.

ADMINISTERED SCHEDULE OF ASSETS AND LIABILITIES as at 30 June 2019

2019

2018

Original Budget

Notes

$’000

$’000

$’000

ASSETS

Financial assets

Trade and other receivables

4.1A

6,284

4,736

2,530

Other financial assets

4.1B

944

1,087

913

Total financial assets

7,228

5,823

3,443

Total assets administered on behalf of Government

7,228

5,823

3,443

LIABILITIES

Payables

Other payables

-

1

-

Total payables

-

1

-

Total liabilities administered on behalf of Government

-

1

-

Net assets

7,228

5,822

3,443

The above schedule should be read in conjunction with the accompanying notes.

Original Budget reflects the figures presented in the 2018-19 PBS.

Budget variance commentary

Trade and other receivables

The quantum of penalties handed down by the courts where FWOROCE has brought forward successful litigations are unable to be accurately estimated at the time of establishing budgets. FWOROCE has been successful in achieving higher penalties than expected during the financial year.

Other financial assets

Penalties handed down by the courts post the end of the financial year are required to be accrued into the financial statements up to the signing date. The quantum of these penalites are unable to be accurately estimated at the time of establishing budgets. Lower penalties than anticipated have been handed down.

ADMINISTERED RECONCILIATION SCHEDULE as at 30 June 2019

2019

2018

$’000

$’000

Opening assets less liabilities as at 1 July

5,822

3,442

Net (cost of)/contribution by services

Income

4,890

8,100

Expenses

(988)

(2,714)

Transfers to/from Australian Government:

Transfers to OPA

(2,604)

(2,735)

Transfers to OPA by other agencies

108

(271)

Closing assets less liabilities as at 30 June

7,228

5,822

The above schedule should be read in conjunction with the accompanying notes.

Accounting policy

Administered cash transfers to and from the OPA

Revenue collected by the agency for use by the Government rather than the agency 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 agency 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 2019

2019

2018

Notes

$’000

$’000

OPERATING ACTIVITIES

Cash received

Fees and fines

2,604

2,735

Total cash received

2,604

2,735

Net cash from operating activities

2,604

2,735

Net increase in cash held

2,604

2,735

Cash and cash equivalents at the beginning of the reporting period

-

-

Cash to the OPA

Administered accounts

(2,604)

(2,735)

Cash and cash equivalents at the end of the reporting period

-

-

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

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ending 30 June 2019

Overview

The Basis of Preparation

The financial statements are general purpose financial statements and are required by section 42 of the PGPA Act.

The financial statements have been prepared in accordance with:

  • Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR)
  • 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 which are reported 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 and values are rounded to the nearest thousand dollars.

New Australian Accounting Standards

Adoption of new Australian Accounting Standard Requirements

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, and are not expected to have a future material effect, on the agency's financial statements.

AASB 9 Financial Instruments became effective on 1 July 2018. Refer to note 7.2 for the respective accounting policy and impact on adoption.

AASB 15 Revenue from Contracts with Customers and AASB 1058 Income of NFP Entities will become effective for the agency for the 2019-20 financial year. Both of these standards have been assessed and neither are expected to result in a material impact on the agency's financial statements.

Taxation

The agency is exempt from all forms of taxation except fringe benefits tax (FBT) and 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 policies as for departmental items, including the application of Australian Accounting Standards.

Events after the Reporting Date

Departmental

No significant events have occurred after the reporting date that are likely to affect either the ongoing structure or financial activities of the agency.

Administered

No significant events have occurred after the reporting date that are likely to affect either the ongoing structure or financial activities of the agency.

1. Financial Performance

This section analyses the financial performance of FWOROCE for the year ended 2019.

1.1 Expenses

2019

2018

$’000

$’000

1.1A: Employee Benefits

Wages and salaries

57,835

56,238

Superannuation:

Defined contribution plans

7,534

7,065

Defined benefit plans

4,027

4,088

Leave and other entitlements

12,010

10,184

Separation and redundancies

1,127

2,625

Other employee expenses

375

447

Total employee benefits

82,908

80,647

Accounting policy

Accounting policies for employee related expenses are contained in the People and Relationships section.

1.1B: Suppliers

Goods and services supplied or rendered

Contractors

10,424

10,211

Legal fees

4,542

4,611

Property outgoings

2,683

2,688

Travel

2,248

2,276

Training

992

1,000

Telecommunications

1,520

1,483

Software licensing, support and maintenance

1,058

579

Consultants

925

626

Other

3,932

3,534

Total goods and services supplied or rendered

28,324

27,008

Goods supplied

1,556

1,341

Services rendered

26,768

25,667

Total goods and services supplied or rendered

28,324

27,008

Other suppliers

Operating lease rentals

7,341

8,185

Workers compensation expenses

562

669

Total other suppliers

7,903

8,854

Total suppliers

36,227

35,862

Leasing commitments

The FWOROCE in its capacity as lessee holds office accommodation leases for varying periods up to ten years. Lease payments are subject to increases as specified in the leases. These increases are a combination of fixed annual adjustments and periodic movements to reflect market rates.

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:

Within 1 year

9,833

8,843

Between 1 to 5 years

39,029

31,760

More than 5 years

12,176

19,142

Total operating lease commitments

61,038

59,745

Accounting policy

Operating lease payments are expensed on a straight-line basis which is representative of the pattern of benefits derived from the leased assets.

1.2 Own-Source Revenue and Gains

Own-Source Revenue

2019

2018

$'000

$’000

1.2A: Other Income

Resources received free of charge - audit fees

75

77

Other income

911

858

Total other income

986

935

Accounting policy

Resources received free of charge

Resources received free of charge are recognised as gains 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 these resources is recognised as an expense. Resources received free of charge are recorded as either revenue or gains depending on their nature.

Contributions of assets at no cost of acquisition or for nominal consideration are recognised as gains at their fair value when the asset qualifies for recognition, unless received from another government entity as a consequence of a restructuring of administrative arrangements.

1.2B: Revenue from Government

Appropriations

Departmental appropriations

119,692

116,973

Total revenue from Government

119,692

116,973

Accounting policy

Revenue from Government

Amounts appropriated for departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as Revenue from Government when the agency gains control of the appropriation, except for certain amounts that relate to activities that are reciprocal in nature, in which case revenue is recognised only when it has been earned. Appropriations receivable are recognised at their nominal amounts.

Funding received or receivable from non-corporate Commonwealth entities (appropriated to the non-corporate Commonwealth entity as a corporate Commonwealth entity payment item for payment to this entity) is recognised as Revenue from Government by the corporate Commonwealth entity unless the funding is in the nature of an equity injection or a loan.

2. Income and Expenses Administered on Behalf of Government

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

2.1 Administered - Expenses

2019

2018

$’000

$’000

Write-Down and Impairment of Assets

Impairment of financial instruments

988

2,714

Total write-down and impairment of assets

988

2,714

Accounting policy

Litigations undertaken by the agency may result in penalties being handed down by the courts against employers and directors of the employing entity. These penalties are held as administered debtors in the accounts of the agency. An assessment of the recoverability of the debt is carried out by the agency's Legal Branch and if a debt is deemed to not be recoverable, a provision is established against the debtor and that associated cost is expensed.

2.2 Administered - Income

Revenue

2019

2018

$’000

$’000

Accounting policy

All administered revenues are revenues relating to ordinary activities performed by the agency on behalf of the Australian Government. As such, administered appropriations are not revenues of the individual agency that oversees distribution of the funds as directed.

2.2A: Fees and Fines

Court-awarded penalties

3,848

7,649

Infringement notices

589

451

Other fees from regulatory services

453

-

Total fees and fines

4,890

8,100

Accounting policy

Revenue comprises court-awarded penalties relating to breaches of either the Workplace Relations Act 1996 or the Fair Work Act. This revenue is recognised at the nominal amount due less any impairment allowance. The collectability of debts is reviewed at each reporting date by the agency's Legal Branch. Impairment allowances are made when some doubt exists as to the collectability of the debt.

3. Financial position

This section analyses the FWOROCE 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

2019

2018

$’000

$’000

3.1A: Cash and Cash Equivalents

Cash on hand or on deposit

1,505

816

Cash held by contracted agents

106

1,076

Total cash and cash equivalents

1,611

1,892

3.1B: Trade and Other Receivables

Goods and services receivable

Goods and services

2,212

1,701

Total goods and services receivables

2,212

1,701

Appropriations receivables

Appropriation receivable

52,155

46,740

Total appropriations receivables

52,155

46,740

Other receivables

GST receivable from the ATO

217

304

Other

1,570

3,358

Total other receivables

1,787

3,662

Total trade and other receivables

56,154

52,103

No provision for impairment is required as at balance date.

Credit terms for goods and services were within 30 days (2018: 30 days).

Accounting policy

Trade and other receivables

Trade receivables, loans and other receivables that are held for the purpose of collecting the contractual cash flows where the cash flows are solely payments of principal and interest, that are not provided at below-market interest rates, are subsequently measured at amortised cost using the effective interest method adjusted for any loss allowance.

Impairment of financial assets

Financial assets are assessed for credit risk on initial recognition and susequently assessed for impairment at the end of each reporting period.

3.2 Non-Financial Assets

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

Reconciliation of the opening and closing balances of property, plant and equipment and intangibles for 2019

Land and buildings (leasehold improvements)

Property, plant and equipment

Intangibles (computer software)*

Total

$’000

$’000

$’000

$’000

As at 1 July 2018

Gross book value

30,838

5,265

35,956

72,059

Accumulated depreciation and amortisation

(9,860)

(3,715)

(27,174)

(40,749)

Total as at 1 July 2018

20,978

1,550

8,782

31,310

Additions

Purchase

187

54

4,562

4,803

Depreciation and amortisation

(3,279)

(704)

(3,220)

(7,203)

Total as at 30 June 2019

17,886

900

10,124

28,910

Total as at 30 June 2019 represented by

Gross book value

31,025

5,313

40,518

76,856

Accumulated depreciation, amortisation and impairment

(13,139)

(4,413)

(30,394)

(47,946)

Total as at 30 June 2019

17,886

900

10,124

28,910

*The carrying amount of computer software comprises internally generated software.

No indicators of impairment were found for land and buildings (leasehold improvements). The agency will continue to review its land and buildings (leasehold improvements) holdings to ensure suitable levels of office space are leased and any opportunities for rationalisation are taken. This may result in some leases not being renewed when they expire. However, the agency has no plans to reduce its presence in capital cities or regional locations.

The FWOROCE has no properties that have leasehold improvements where the lease is due for renewal or cessation within the next 12 months.

No indicators of impairment were found for property, plant and equipment and intangibles.

No other property, plant and equipment and intangibles are expected to be sold or disposed of within the next 12 months.

Revaluations of non-financial assets

In May 2018 AON Pty Ltd, an independent valuer, conducted a valuation assessment of the agency's non-financial assets. As a result of this valuation exercise, the carrying value of land and buildings at 30 June 2018 were increased by $0.205 million.

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 the 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 land and buildings (leasehold improvements), 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 agency where there exists an obligation to restore the property to its original condition at the end of the lease term. These costs are included in the value of the agency's land and buildings (leasehold improvements) assets with a corresponding provision for the 'make good' recognised.

Revaluations

Following initial recognition at cost, land and buildings (leasehold improvements), property, plant and equipment are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. 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 reverse 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 agency using, in all cases, the straight-line method of depreciation. Land and buildings (leasehold improvements) are depreciated on a straight-line basis over the lesser of the estimated useful life of the improvements and the unexpired period of the lease.

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 assets are based on the following useful lives:

2019

2018

Leasehold improvements

Lesser of term and useful life

Lesser of term and useful life

Plant and equipment

5 years

5 years

Computer equipment

3-8 years

3-8 years

Impairment

All assets were assessed for impairment at 30 June 2019. 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 agency were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Derecognition

An item of land and buildings (leasehold improvements), property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Intangibles

The agency’s intangible assets comprise internally developed 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 agency’s software are three years (2017-18: three years).

All software assets were assessed for indications of impairment as at 30 June 2019.

3.3 Payables

2019

2018

$’000

$’000

3.3A: Suppliers

Trade creditors and accruals

3,863

3,357

Operating lease rentals

2,866

2,520

Total suppliers

6,729

5,877

Settlement is usually made net 30 days.

3.3B: Other Payables

Salaries and wages

624

600

Lease incentives

7,721

9,032

Total other payables

8,345

9,632

Accounting policy

Trade and other receivables

Suppliers and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods and services have been received and irrespective of having been invoiced.

3.4 Other Provisions

3.4: Other Provisions

Provision for Onerous leases

Total

$'000

$'000

As at 1 July 2018

1,466

1,466

Releases of provisions

(380)

(380)

Total as at 30 June 2019

1,086

1,086

The agency has a number of agreements for the leasing of office accommodation which are surplus to its requirements. The agency has made a provision to reflect the present value of the expected costs to be incurred that are in excess of the economic benefit expected to be derived from these leases.

4. Assets and Liabilities Administered on Behalf of Government

This section analyses the assets and liabilities that FWOROCE does not control but administers on behalf of Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

4.1 Administered - Financial Assets

4.1A: Trade and Other Receivables

2019

2018

$'000

$'000

Other receivables

Court-awarded penalties

10,110

9,034

Total trade and others receivables (gross)

10,110

9,034

Less Impairment loss allowance

Other receivables - Court-awarded penalties

(3,826)

(4,298)

Total trade and others receivables (net)

6,284

4,736

All receivables are expected to be settled within 12 months.

Accounting policy

Receivables

Where receivables are not subject to concessional treatment, they are carried at amortised cost using the effective interest method. Gains and losses due to impairment, derecognition and amortisation are recognised through profit or loss. Administered receivables represents debts owed to the agency by employers, workers and organisations as a result of court-awarded penalties.

4.1B: Other Financial Assets

Accrued revenue

944

1,087

Total other financial assets

944

1,087

All other financial assets are expected to be settled within 12 months

5. Funding

This section identifies the FWOROCE funding structure.

5.1 Appropriations

5.1A: Annual Appropriations ('Recoverable GST exclusive')

Annual Appropriation for 2019

Annual Appropriation

Adjustments to Appropriation1

Total appropriation

Appropriation Applied in 2019 (current and prior years)

Variance2

$'000

$'000

$'000

$'000

$'000

Departmental

Ordinary annual services

119,692

4,075

123,767

120,303

3,464

Capital Budget

3

7,215

(318)

6,897

4,946

1,951

Total departmental

126,907

3,757

130,664

125,249

5,415

Notes:

1. Adjustments to Appropriation in 2018-19 comprised PGPA Act Section 74 receipts of $4.075 million. In the 2018-19 financial year, the Department of Finance transferred $318,000 of Departmental Capital Budget to the Service Delivery Office as FWOROCE's contribution to the upgrading of the SAP system.

2. The variance between total appropriation and appropriation applied in 2019 relates to payments funded from unspent prior year appropriation items.

3. Departmental Capital Budgets are appropriated through Appropriation Acts (No. 1, 3, 5). They form part of ordinary annual services, and are not separately identified in the appropriation acts.

Annual Appropriation for 2018

Annual Appropriation

Adjustments to Appropriation1

Total appropriation

Appropriation Applied in 2018 (current and prior years)

Variance2

$'000

$'000

$'000

$'000

$'000

Departmental

Ordinary annual services

116,973

3,007

119,980

132,723

(12,743)

Capital Budget3

5,283

-

5,283

7,097

(1,814)

Total departmental

122,256

3,007

125,263

139,820

(14,557)

Notes:

1. Adjustments to Appropriation in 2017-18 comprised PGPA Act Section 74 receipts of $3.007 million.

2. The variance between total appropriation and appropriation applied in 2018 relates to payments funded from unspent prior year appropriation items.

3. Departmental Capital Budgets are appropriated through Appropriation Acts (No. 1, 3, 5). They form part of ordinary annual services, and are not separately identified in the appropriation acts.

5.1B: Unspent Annual Appropriations ('Recoverable GST exclusive')

Departmental

2019

2018

$'000

$'000

Appropriation Act (No 3) 2016-17

-

1,814

Appropriation Act (No. 1) 2017-18

-

45,254

Appropriation Act (No. 2) 2017-18

-

1,564

Appropriation Act (No. 1) 2018-19

51,802

-

Appropriation Act (No. 1) - Capital Budget (DCB) 2018-19

1,964

-

Total

53,766

48,632

Unspent appropriation includes cash and cash equivalents on hand at 30 June.

Represented by:

Appropriations receivable

52,155

46,740

Cash

1,611

1,892

53,766

48,632

5.1C: Special Appropriations ('Recoverable GST exclusive')

Authority

Type

Purpose

Appropriation Applied

2019

2018

$'000

$'000

Fair Work Act 2009 s559(4) Administered

Unlimited

To provide an appropriation where an Act or other law requires or permits the repayment of an amount received by the Commonwealth and apart from this section there is no specific appropriation for the repayment.

417

661

Total special appropriations applied

417

661

5.2 Special Accounts

ROC Special Account1

2019

2018

$'000

$'000

Balance brought forward from previous period

2,208

1,379

Increases

8,750

6,509

Total increases

8,750

6,509

Available for payments

10,958

7,888

Decreases

7,727

5,680

Total decreases

7,727

5,680

Total balance carried to the next period

3,231

2,208

Balance represented by:

Cash held in the agency bank account

-

-

Cash held in the OPA

3,231

2,208

Total balance carried forward to next period

3,231

2,208

1. Appropriation: PGPA Act, section 80.

Establishing Instrument: Fair Work (Registered Organisations) Amendment Act 2016, section 329EA.

Purpose: Paying or discharging the costs, expenses and other obligations incurred by the Commonwealth in the performance of the Commissioner's functions.

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

2019

2018

$’000

$’000

6.1A: Employee Provisions

Leave

23,656

21,541

Separations and redundancies

409

-

Other

22

43

Total employee provisions

24,087

21,584

Accounting policy

Liabilities for short-term employee benefits and termination benefits expected 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 and long service leave. No provision has been made for personal leave as all personal leave is non-vesting and the average personal leave taken in future years by employees of the agency is estimated to be less than the annual entitlement for personal leave.

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 agency’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 estimate of the present value of the long service leave liability takes into account attrition rates and pay increases through promotion and inflation using the shorthand method prescribed in the FRR.

Separation and redundancy

Provision is made for separation and redundancy benefit payments. The agency 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 agency's staff are members of either the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS Accumulation Plan (PSSap) or other superannuation funds held outside the Australian Government.

The CSS and PSS are defined benefit schemes 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 agency makes employer contributions to the employee's defined benefit superannuation schemes at rates determined by an actuary to be sufficient to meet the current cost to the Government. The agency accounts for the contributions as if they were contributions to defined contribution plans.

The superannuation liability recognised at 30 June represents outstanding contributions for the final fortnight of the year.

Accounting judgements and estimates

In the process of applying the accounting policies listed in this note, the agency has made the following judgements that have significant impact on the amounts recorded in the financial statements:- the Australian Government shorthand method has been used to estimate the present value of long service leave liabilities. This involves the estimation of salary growth rates, discount rates, the probability of leave vesting and the amount of leave expected to be settled in service.

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 entity has determined the key management personnel to be the Minister for Employment, Skills, Small and Family Business, the Chief Executive, members of the Corporate Board and the Registered Organisations Commissioner. Key management personnel remuneration is reported in the table below:

2019

2018

$'000

$'000

Short-term employee benefits

1,719

3,663

Post-employment benefits

284

615

Other long-term employee benefits

60

444

Total key management personnel remuneration expenses1

2,063

4,722

Notes: The total number of senior management personnel that are included in the above table are 7 (2018: 16)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. The appointment of a new Chief Executive in July 2018 saw changes to the management structure of the entity, including the dissolution of the former Executive Board and the establishment of a Corporate Board as the primary decision-making body in the entity. The Corporate Board is comprised of the Chief Executive and her four direct reportees.

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, members of the Corporate Board and the Registered Organisations Commissioner.

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.

7. Managing Uncertainties

This section analyses how the FWOROCE manages financial risks within its operating environment.

7.1 Contingent Assets and Liabilities

7.1A Contingent Assets and Liabilities

Unquantifiable contingencies

The agency has provided an indemnity to the Reserve Bank of Australia (the Bank) against any loss or damage arising from any error, mistake, fraud or negligence resulting from the Bank acting in good faith on instructions given to it by the agency and/or due to any failure by the agency to observe any of its obligations in respect to its banking arrangements.

The likelihood of any payment being required under the indemnity is remote and unquantifiable.

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 the likelihood of settlement is greater than remote.

7.1B: Administered - Contingent Assets and Liabilities

Quantifiable Administered Contingencies

At 30 June 2019, the agency has no quantifiable administered contingent assets. (2018: nil)

At 30 June 2019, the agency has no quantifiable administered contingent liabilities. (2018: nil)

Unquantifiable Administered Contingencies

At 30 June 2019, the agency is currently involved in litigation against 70 entities and while the probability of success is high in these matters, it is not possible to accurately estimate the value of any penalties that may be imposed by the courts. (2018: 88)

At 30 June 2019, the agency has no unquantifiable administered contingent liabilities. (2018: nil)

7.2 Categories of Financial Instruments

2019

2018

$'000

$'000

7.2: Categories of Financial Instruments

Financial Assets under AASB 139

Loans and receivables

Cash and cash equivalents

1,892

Goods and services receivables

1,701

Other receivables

3,358

Total loans and receivables

6,951

Total financial assets

6,951

Financial Assets under AASB 9

Financial assets at amortised cost

Cash and cash equivalents

1,611

Goods and services receivables

2,212

Other receivables

1,570

Total financial assets at amortised cost

5,393

Total financial assets

5,393

Financial Liabilities

Financial liabilities measured at amortised cost

Suppliers

6,729

5,877

Total financial liabilities measured at amortised cost

6,729

5,877

Total financial liabilities

6,729

5,877

The agency has no net income or expenses from financial instruments.

Classification of financial assets on the date of initial application of AASB9

AASB 139 Carrying

AASB 9 Carrying

Financial asset class

Note

AASB 139 original

AASB 9 new

amount at 30 June

amount at 1 July

classification

classification

2018

2018

$'000

$'000

Financial Assets

Cash and cash equivalents

3.1A

Held-to-maturity

Amortised Cost

1,892

1,892

Goods and services receivables

3.1B

Held-to-maturity

Amortised Cost

1,701

1,701

Other receivables

3.1B

Held-to-maturity

Amortised Cost

3,358

3,358

Total financial assets

6,951

6,951

Reconciliation of carrying amounts of financial assets on the date of initial application of AASB9

AASB 139 Carrying

AASB 9 Carrying

amount at 30

Reclassification

Remeasurement

amount at 1

June 2018

July 2018

$'000

$'000

$'000

$'000

Financial assets at amortised cost

Cash and cash equivalents

1,892

-

-

1,892

Goods and services receivables

1,701

-

-

1,701

Other receivables

3,358

-

-

3,358

Total amortised cost

6,951

-

-

6,951

1. The change is carrying amount (by category) based on measurement under AASB 139 is $0. The change in measurement on transition to AASB 9 is $0.

Accounting policy

Financial assets

With the implementation of AASB9 Financial Instruments for the first time in 2019, FWOROCE classifies its financial assets in the following category:

· financial assets measured at amortised cost

The classification depends on both FWOROCE's business model for managing financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised when the entity becomes a party to the contract and, as a consequence, has a legal right to receive or a legal obligation to pay cash and derecognised when the contractual rights to the cash flows from the financial asset expire or are transferred upon trade date.

Comparatives have not been restated on initial application.

Financial Assets at Amortised Cost

Financial assets included in this category need to meet two criteria:

(1) the financial asset is held in order to collect the contractual cash flows; and

(2) the cash flows are solely payments of principal and interest (SPPI) on the principal outstanding amount.

Amortised cost is determined using effective interest method.

Effective Interest Method

Income is recognised on an effective interest rate basis for financial assets that are recognised at amortised cost.

Impairment of Financial Assets

Financial assets are assessed for impairment at the end of each reporting period based on Expected Credit Losses, using the general approach which measures the loss allowance based on an amount equal to lifetime expected credit losses where risk has significantly increased, or an amount equal to 12-month expected credit losses if risk has not increased.

The simplified approach for trade, contract and lease receivables is used. This approach always measures the loss allowance as the amount equal to the lifetime expected credit losses.

A write-off constitutes a derecognition event where the write-off directly reduces the gross carrying amount of the financial asset.

Financial liabilities

Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or 'at amortised cost'. Financial liabilities are recognised and derecognised upon ‘trade date’.

Financial Liabilities at Amortised Cost

Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. These liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective interest basis.

Supplier and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

7.3 Fair Value Measurement

7.3 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 AON Pty Ltd for the 2017-18 financial year and relied on valuation models provided by AON. AON provided written assurance to the agency that the valuation models developed are in accordance with AASB 13.

7.3: Fair Value Measurement

Fair value measurements

at the end of the reporting period

2019

2018

$’000

$'000

Non-financial assets

Land and buildings (leasehold improvements)

17,886

20,978

Property, plant and equipment

900

1,550

Total fair value measurements of assets in the Statement of Financial Position

18,786

22,528

There is no significant change in the valuation technique since the prior year.

Other information

8.1 Aggregate Assets and Liabilities

8.1A: Aggregate Assets and Liabilities

2019

2018

$'000

$'000

Assets expected to be recovered in:

No more than 12 months

59,659

55,419

More than 12 months

28,910

31,310

Total assets

88,569

86,729

Liabilities expected to be settled in:

No more than 12 months

17,706

16,898

More than 12 months

22,541

21,661

Total liabilities

40,247

38,559

8.1B: Administered Aggregate Assets and Liabilities

2019

2018

$'000

$'000

Assets expected to be recovered in:

No more than 12 months

7,228

5,823

More than 12 months

-

-

Total assets

7,228

5,823

Liabilities expected to be settled in:

No more than 12 months

-

1

More than 12 months

-

-

Total liabilities

-

1

8.2 Assets Held in Trust

8.2A: Assets Held in Trust

Monetary assets

For the receipt of monies temporarily held in trust or otherwise for the benefit of a person other than the Commonwealth and to repay amounts where an Act or other law requires or permits the repayment of an amount received.

2019

2018

$'000

$'000

Monetary Assets

As at 1 July

2,599

2,265

Receipts

723

995

Payments

(417)

(661)

Total monetary assets held in trust as at 30 June

2,905

2,599

The values above are at fair value.