Budget Variances Commentary

Statement of Comprehensive Income

Employee benefits: The variance of $0.477m (3.83%) is predominately due to Safe Work Australia having a higher number of staff at higher Australian Public Service classification levels.

Supplier expenses: The variance of -$2.068m (-25.82%) is primarily due to contractor delays with significant projects, as well as some projects being performed in-house by agency staff and not outsourced.

Budget Variances Commentary

Statement of Financial Position

Cash and cash equivalent: The variance of $2.275m (17.21%) is primarily a result of Safe Work Australia’s surplus for 2018 ($0.701m) and 2019 ($0.916m).

Employee provision: The variance of -$0.512m (-13.87%) reflects the change in composition of annual leave and long service leave provisions compared with the budgeted amount. This is due to staff turn-over, including voluntary redundancies.

Budget Variances Commentary

Cash Flow Statement

Cash received - Sale of goods and rendering of services: the variance of $1.202m (11.71%) is predominately due to GST reporting in the Portfolio Budget Statements.

Accounting Policy

Accounting policies for employee related expenses are contained in the people and relationships section.

Accounting Policy

The discount rate used is the interest rate implicit in the lease. Leased assets are amortised over the period of the lease. Lease payments are allocated between the principal component and the interest expense.

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

Accounting policy

Revenue from rendering of services – state and territory contributions

State and territory contributions are recognised over the course of the year as work is completed. All contributions are deemed as being earned at the reporting date. Contribution amounts are received in accordance with the

Inter-Governmental Agreement for Regulation and Operational Reform in Occupational Health and Safety.

Other revenue from rendering of services

Other revenue from rendering of services is recognised by reference to the stage of completion of contracts at the reporting date. The revenue is recognised when:

a. the amount of revenue, stage of completion and transaction costs incurred can be reliably measured, and

b. the probable economic benefits associated with the transaction will flow to Safe Work Australia.

The stage of completion of contracts at the reporting date is determined by reference to the proportion of costs incurred to date compared to the estimated total costs of the transaction.

Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any impairment allowance account. Collectability of debts is reviewed at the end of the reporting period. Allowances are made when collectability of the debt is no longer probable.

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 Safe Work Australia 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.

Accounting policy

Cash is recognised at its nominal amount. Cash and cash equivalents include cash on hand, and cash in special accounts.

Accounting policy

Trade and other receivables

Trade and other receivables that have fixed or determinable payments and that are not quoted in an active market are classified as receivables. Receivables are measured at amortised cost using the effective interest method less impairment.

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. 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 buildings, plant and equipment are recognised initially at cost in the statement of financial position, except for purchases costing less than the thresholds listed below for each class of assets, 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).

Leasehold Improvements: $20,000

Plant and Equipment: $2,000

Internally Developed Software: $50,000

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.

Revaluations

Following initial recognition at cost, buildings, 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 reversed a previous revaluation increment for that class. Any accumulated depreciation as at the revaluation date is offset against the gross carrying amount of the asset and the asset is restated to the revalued amount.

Depreciation

Depreciable buildings, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the entity 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:

Leasehold Improvements: Lease term

Plant and Equipment: 3 to 20 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 entity were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

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

De-recognition

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

Accounting policy

Liabilities for short-term employee benefits and termination benefits expected within 12 months of the end of reporting period are measured at their nominal amounts.

Other long-term employee benefits are measured as the 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.

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 entity’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 reference to the Standard Parameters issued by the Department of Finance. 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 entity 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 entity's staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), or 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.

Safe Work Australia 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. Safe Work Australia accounts for the contributions as if they were contributions to defined contribution plans.

Accounting policy

AASB 9 Financial Instruments applies to Safe Work Australia from 1 July 2018. AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement.

The classification and measurement of financial assets under AASB 9 is determined by Safe Work Australia’s business model for managing its financial assets and the contractual cash flow characteristics of those assets.

Financial assets

Safe Work Australia’s financial assets are comprised of trade and other receivables that are held for the purposes of collecting the contracted cash flows.

Safe Work Australia classifies its financial assets as ‘financial assets at amortised cost’.

Safe Work Australia derived no interest income form financial assets in either the current or prior year.

Financial liabilities

Financial liabilities are also measured at amortised cost.

Impairment

Safe Work Australia has assessed the trade receivables at the reporting date to determine whether any indicators of impairment exist in accordance with the requirements of AASB Financial Instruments. Due to the nature of Safe Work Australia’s receivables, a nil loss allowance has been calculated.

Accounting policy

Safe Work Australia engaged the services of the Jones Lang LaSalle Advisory Services Pty Ltd (JLL) to conduct a detailed external valuation of non-financial assets as at 30 June 2019. JLL provided written assurance to Safe Work Australia that the models developed are in accordance with AASB13 Fair Value Measurement, AASB 116 Property, Plant and Equipment, and the Public Governance, Performance and Accountability (Financial Reporting) Rule.

Both the market and cost approach has been utilised to determine the fair value of Safe Work Australia’s assets.

Carrying amounts are reviewed every year to determine if an independent valuation is required. The regularity of independent valuations depends on the volatility of movement in the market value for the relevant assets.