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Notes to and forming part of the financial statements

OVERVIEW

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 (PGPA Act).

The financial statements have been prepared in accordance with:

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

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

The 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

Adoption of New Australian Accounting Standard Requirements

No accounting standard has been adopted earlier than the application date as stated in the standard. All other new, revised, amended standards and/or interpretations that were issued prior to the sign-off date and are applicable to future reporting period(s) are not expected to have a future material impact on the agency's financial statements.

The standards that were issued prior to the sign-off date and adopted for the first time in the current reporting period are detailed below:

Standard/Interpretation

Nature of change in accounting policy, transitional provisions, and adjustment to financial statements

AASB 15 Revenue from Contracts with Customers;

AASB 2016-8 Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not-for-Profit Entities; and

AASB 1058 Income of Not-For-Profit Entities

AASB 15, AASB 2016-8 and AASB 1058 became effective 1 July 2019.

AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including AASB 118 Revenue, AASB 111 Construction Contracts and Interpretation 13 Customer Loyalty Programmes. The core principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

AASB 1058 is relevant in circumstances where AASB 15 does not apply. AASB 1058 replaces most of the not-for-profit (NFP) provisions of AASB 1004 Contributions and applies to transactions where the consideration to acquire an asset is significantly less than fair value principally to enable the entity to further its objectives, and where volunteer services are received.

The details of the changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes to the financial statements.

AASB 16 Leases

AASB 16 became effective on 1 July 2019.

This new standard has replaced AASB 117 Leases, Interpretation 4 Determining whether an Arrangement contains a Lease, Interpretation 115 Operating Leases—Incentives and Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

AASB 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, together with options to exclude leases where the lease term is 12 months or less, or where the underlying asset is of low value. AASB 16 substantially carries forward the lessor accounting in AASB 117, with the distinction between operating leases and finance leases being retained. The details of the changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes to the financial statements.

Application of AASB 15 Revenue from Contracts with Customers / AASB 1058 Income of Not-For-Profit Entities

TEQSA adopted AASB 15 and AASB 1058 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 2019 is not restated, that is, it is presented as previously reported under the various applicable AASB's and related interpretations.

Under the new income recognition model, TEQSA shall first determine whether an enforceable agreement exists and whether the promises to transfer goods or services to the customer are ‘sufficiently specific’. If an enforceable agreement exists and the promises are ‘sufficiently specific’ (to a transaction or part of a transaction), TEQSA applies the general AASB 15 principles to determine the appropriate revenue recognition. If these criteria are not met, TEQSA shall consider whether AASB 1058 applies.

In relation to AASB 15, TEQSA elected to apply the new standard to all new and uncompleted contracts from the date of initial application. TEQSA is required to aggregate the effect of all of the contract modifications that occur before the date of initial application.

In terms of AASB 1058, TEQSA is required to recognise volunteer services at fair value if those services would have been purchased if not provided voluntarily, and the fair value of those services can be measured reliably.

Impact on transition

The impact on transition is summarised below:

1 July 2019

$'000

Departmental

Assets

Cash - third party accounts

115

Total assets

115

Liabilities

Unearned revenue

115

Total liabilities

115

Total adjustment recognised in retained earnings

-

Set out below are the amounts by which each financial statement line item is affected as at and for the year ended 30 June 2020 as a result of the adoption of AASB 15 and AASB 1058. The first column shows amounts prepared under AASB 15 and AASB 1058 and the second column shows what the amounts would have been had AASB 15 and AASB 1058 not been adopted:

AASB 15 / AASB 1058

Previous AAS

Increase / (decrease)

$'000

$'000

$'000

Assets

Cash - third party accounts

115

115

-

Total Assets

115

115

-

Liabilities

Unearned Revenue

115

115

-

Total Liabilities

115

115

-

Retained earnings

-

-

-

Application of AASB 16 Leases

TEQSA adopted AASB 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 2019 is not restated, that is, it is presented as previously reported under AASB 117 and related interpretations.

TEQSA elected to apply the practical expedient to not reassess whether a contract is, or contains a lease at the date of initial application. Contracts entered into before the transition date that were not identified as leases under AASB 117 were not reassessed. The definition of a lease under AASB 16 was applied only to contracts entered into or changed on or after 1 July 2019.

AASB 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard. TEQSA applied the following practical expedients when applying AASB 16 to leases previously classified as operating leases under AASB 117:

  • Apply a single discount rate to a portfolio of leases with reasonably similar characteristics;
  • Exclude initial direct costs from the measurement of right-of-use assets at the date of initial application for leases where the right-of-use asset was determined as if AASB 16 had been applied since the commencement date;
  • Reliance on previous assessments on whether leases are onerous as opposed to preparing an impairment review under AASB 136 Impairment of assets as at the date of initial application; and
  • Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term remaining as of the date of initial application.

As a lessee, TEQSA previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under AASB 16, TEQSA recognises right-of-use assets and lease liabilities for most leases. However, TEQSA has elected not to recognise right-of-use assets and lease liabilities for some leases of low value assets based on the value of the underlying asset when new or for short-term leases with a lease term of 12 months or less.

On adoption of AASB 16, TEQSA recognised right-of-use assets and lease liabilities in relation to leases of office space which had previously been classified as operating leases.

The lease liabilities were measured at the present value of the remaining lease payments, discounted using TEQSA's incremental borrowing rate as at 1 July 2019. TEQSA's incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions.

The right-of-use assets relating to office space were measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.

Impact on transition

On transition to AASB 16, TEQSA recognised additional right-of-use assets and additional lease liabilities, recognising the difference in retained earnings. The impact on transition is summarised below:

1 July 2019

$'000

Departmental

Right-of-use assets - office space

3,591

Lease liabilities

3,758

Retained earnings

963

The following table reconciles TEQSA's minimum lease commitments disclosed in the entity's 30 June 2019 annual financial statements to the amount of lease liabilities recognised on 1 July 2019:

1 July 2019

$'000

Minimum operating lease commitment at 30 June 2019

6,132

Less: short-term leases not recognised under AASB 16

-

Less: low value leases not recognised under AASB 16

-

Less: inclusion of GST at 30 June 2019 disclosures

(613)

Less: inclusion of property related expenses (non lease)

(1,710)

Plus: effect of extension options reasonable certain to be exercised

-

Undiscounted lease payments

3,809

Less: effect of discounting using the incremental borrowing rate as

at the date of initial application

(51)

Lease liabilities recognised at 1 July 2019

3,758

Taxation

The entity 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 policies as for departmental items, including the application of Australian Accounting Standards.

Events After the Reporting Period

Departmental

There were no subsequent events that had the potential to significantly affect the ongoing structure and financial activities of TEQSA.

Administered

There were no subsequent events that had the potential to significantly affect the ongoing structure and financial activities of TEQSA.

1. FINANCIAL PERFORMANCE

This section analyses the financial performance of the Tertiary Education Quality and Standards Agency for the year ended 2020.

1.1 Expenses

2020

2019

$'000

$'000

1.1A: Employee Benefits

Wages and salaries

8,464

6,366

Superannuation

Defined contribution plans

1,003

691

Defined benefit plans

338

324

Leave and other entitlements

1,023

850

Total employee benefits

10,828

8,231

Accounting Policy

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

1.1B: Suppliers

Goods and services supplied or rendered

Consultants

408

372

Contractors

2,791

2,882

Travel

321

420

IT services

979

799

Expert fees

490

598

Legal fees

197

337

Recruitment and training

350

317

Property operating expenses

737

213

Event costs

552

51

Other

652

636

Total goods and services supplied or rendered

7,477

6,625

Goods supplied

620

371

Services rendered

6,857

6,254

Total goods and services supplied or rendered

7,477

6,625

Other suppliers

Workers compensation expenses

68

75

Operating lease rentals1

-

1,271

Total other suppliers

68

1,346

Total suppliers

7,545

7,971

1 TEQSA has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117.

TEQSA has no short term lease commitments as at 30 June 2020.

The above lease disclosures should be read in conjunction with the accompanying notes 1.1C, 1.2B, 3.2A and 3.3C.

Accounting Policy

Short-term leases and leases of low-value assets

TEQSA has elected not to recognise right-of-use assets and lease liabilities for short-term leases of assets that have a lease term of 12 months or less and leases of low-value assets (less than $10,000). TEQSA recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

2020

2019

$'000

$'000

1.1C: Finance Cost

Interest on lease liabilities

30

-

Unwinding of discount

12

80

Total finance costs

42

80

The above lease disclosures should be read in conjunction with the accompanying notes 1.1B, 1.2B, 3.2A and 3.3C.

Accounting Policy

All borrowing costs are expensed as incurred.

1.2 Own-Source Revenue and Gains

2020

2019

$'000

$'000

Own-Source Revenue

1.2A: Revenue from contracts with customers

Rendering of services

741

87

Total revenue from contracts with customers

741

87

Disaggregation of revenue from contracts with customers

Service category:

TEQSA Conference

719

80

Miscellaneous / Other

22

7

741

87

Type of customer:

Australian Government entities (related parties)

8

-

Non-government entities

733

87

741

87

Timing of transfer of goods and services:

Over time

-

-

Point in time

741

87

741

87

Accounting Policy

Revenue from rendering of services is recognised when performance obligations have been satisfied and delivered to the customer in accordance with the contract or agreed-upon milestones.

TEQSA is a not-for-profit, non-corporate Commonwealth entity. TEQSA collects minor miscellaneous fees from freedom of information requests and reimbursements of staff costs to attend sector-based events. TEQSA generates ticket sales revenue associated with the annual TEQSA Conference. Revenue is recognised upon receipt, or at the conclusion of the event.

The transaction price is the total amount of consideration to which the TEQSA expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both.

Receivables for goods and services, which have 30 day terms (2019: 30 days), are recognised at the nominal amounts due less any impairment allowance account. Collectability of debts is reviewed at end of the reporting period. Allowances are made when collectability of the debt is no longer probable.

2020

2019

$'000

$'000

1.2B: Rental Income

Subleasing right-of-use assets

269

266

Total rental income

269

266

Subleasing right-of-use assets

TEQSA in its capacity as lessor sublets office accommodation. The sublease commenced on 21 September 2015 and expires on 28 February 2022.

Lease receipts are subject to a fixed percentage annual increase in accordance with the sublease agreement.

Maturity analysis of subleasing receivables:

Within 1 year

320

315

One to two years

223

329

Two to three years

-

228

Total undiscounted lease payments receivable

543

872

The above lease disclosures should be read in conjunction with the accompanying notes 1.1B, 1.1C, 3.2A and 3.3C.

Note: the total undiscounted lease payments receivable is GST inclusive where relevant.

1.2C: Other Revenue

Resources received free of charge

Remuneration of auditors

46

46

Expert services

15

-

Total other revenue

61

46

Accounting Policy

Resources received free of charge

Resources received free of charge are recognised as revenue when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense. Resources received free of charge are recorded as either revenue or gains depending on their nature.

1.2D: Revenue from Government

Appropriations

Departmental appropriations

17,539

17,938

Total revenue from Government

17,539

17,938

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 TEQSA 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.

2. INCOME AND EXPENSES ADMINISTERED ON BEHALF OF GOVERNMENT

This section analyses the activities that the Tertiary Education Quality and Standards Agency does not control but administered on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

2.1 Administered - Expenses

For the year ended 30 June 2020, no administered expenses had been incurred by TEQSA (2019: Nil).

2.2 Administered - Income

2020

2019

$'000

$'000

Revenue

Non-Taxation Revenue

2.2A: Fees

Fees from regulatory services

1,182

1,969

Total fees

1,182

1,969

Accounting Policy

All administered revenues are revenues relating to ordinary activities performed by TEQSA on behalf of the Australian Government.

Revenue is generated from partial cost recovery arrangements for specific services to higher education providers. Fees are charged on registration and re-registration of providers, accreditation and re-accreditation of courses, and major variations to registrations and accreditations. Administered revenue is recognised on receipt of applications from the higher education providers.

Higher Education Relief Package

In response to the COVID-19 pandemic, the Australian Government have implemented a range of relief measures to lift the financial pressures on higher education providers. The measures include:

● waiver of fees and charges for eligible providers that have been invoiced since 1 January 2020, through to 30 June 2021; and

● refund of eligible payments received since 1 January 2020.

Administered revenue reported for the period is net of refunds made during the year and refunds payable at 30 June 2020.

3. FINANCIAL POSITION

This section analyses the Tertiary Education Quality and Standards Agency 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

2020

2019

$'000

$'000

3.1A: Cash and Cash Equivalents

Cash at bank

207

174

Cash - third party accounts

-

115

Total cash and cash equivalents

207

289

Accounting Policy

Cash and cash equivalents

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

3.1B: Trade and Other Receivables

Goods and services receivables

Goods and services

32

21

Total goods and services receivables

32

21

Appropriations receivables

Appropriation receivable

8,062

9,497

Total appropriations receivables

8,062

9,497

Other receivables

GST receivable from the Australian Taxation Office

183

204

Sublease incentive

45

73

Operating sublease receivable

68

99

Other

12

19

Total other receivables

308

395

Total trade and other receivables (net)

8,402

9,913

Credit terms for goods and services were within 30 days (2019: 30 days).

Accounting Policy

Financial assets

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.

3.2 Non-Financial Assets

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

Buildings1

Plant and

Equipment

Intangibles -

Computer

Software2

Total

$’000

$’000

$’000

$’000

As at 1 July 2019

Gross book value

618

482

3,426

4,526

Accumulated depreciation, amortisation and impairment

-

(57)

(2,428)

(2,485)

Total as at 1 July 2019

618

425

998

2,041

Recognition of right-of-use asset on initial application of AASB 16

3,591

-

-

3,591

Adjusted total as at 1 July 2019

4,209

425

998

5,632

Additions

Purchase

144

72

-

216

Internally developed

-

-

680

680

Depreciation and amortisation

(1,765)

(194)

(379)

(2,338)

Total as at 30 June 2020

2,588

303

1,299

4,190

Total as at 30 June 2020 represented by

Gross book value

4,353

554

4,106

9,013

Accumulated depreciation, amortisation and impairment

(1,765)

(251)

(2,807)

(4,823)

Total as at 30 June 2020

2,588

303

1,299

4,190

Carrying amount of right-of-use assets

2,083

-

-

2,083

1 Buildings include leasehold improvements and lease right-of-use assets.

2The carrying amount of computer software includes $17,426 of purchased software and $1,281,031 of internally generated software.

All items of plant and equipment and intangible assets were assessed for indications of impairment as at 30 June 2020. No indicators of impairment were found.

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

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.

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 TEQSA where there exists an obligation to restore the property to its original condition. These costs are included in the value of TEQSA'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, TEQSA 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 (or an amount not materially different from 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.

TEQSA's leasehold improvements and property, plant and equipment are stated at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation. The fair value measurements of TEQSA's leasehold improvements and plant and equipment was last performed by Jones Lang LaSalle (JLL) in the 2018-19 financial year. JLL have appropriate experience in the fair value measurement of similar assets in the Government sector.

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 is 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 entity using, in all cases, the straight-line method of depreciation. The estimated useful lives, residual values and depreciation 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:

Asset Class

2020

2019

Buildings

Lease term

Lease term

Plant and equipment

3 to 10 years

3 to 10 years

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 2020. 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 TEQSA were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Fair Value

Leasehold improvements and plant and equipment are measured at their estimated fair value in the Statement of Financial Position. Leasehold improvements and plant and equipment held by TEQSA are categorised under Levels 3 and 2 respectively, in accordance with the hierarchies listed in AASB 13. TEQSA's policy is to recognise transfers into and out of the fair value hierarchy levels as at the end of the reporting period.

Level 2 measurements use inputs other than quoted or market prices that are observable for the asset directly or indirectly. Level 3 measurements use inputs to estimate fair value where there are no observable market prices for the assets being valued.

The future economic benefits of TEQSA's leasehold improvements and property, plant and equipment are not primarily dependent on their ability to generate cash flows. TEQSA has not disclosed quantitative information about the significant unobservable inputs for the levels 2 and 3 measurements in these classes.

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

TEQSA's intangibles comprise of 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 TEQSA's software are 3 to 5 years (2019: 3 to 5 years).

All software assets were assessed for indications of impairment as at 30 June 2020.

Accounting Judgements and Estimates

The estimated fair value of leasehold improvements, plant and equipment was last determined by an independent valuer in 2019, and is subject to management assessment on an annual basis.

2020

2019

$'000

$'000

Note 3.2B: Other Non-Financial Assets

Property operating prepayments1

36

178

Goods and services prepayments

122

124

Total other non-financial assets

158

302

No indicators of impairment were found for other non-financial assets.

1 TEQSA has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117.

Accounting Policy

Other non-financial assets

Other non-financial assets consist of prepayments which are expected to be consumed within the next 12 months. Property operating prepayments consists of amounts that are outside the scope of AASB 16.

3.3 Payables

2020

2019

$'000

$'000

3.3A: Suppliers

Trade creditors and accruals

622

628

Total suppliers

622

628

Settlement is usually made within 20 days (2019: 30 days).

3.3B: Other Payables

Salaries and wages

147

75

Superannuation

20

10

Lease incentive1

-

483

Operating lease payable1

-

480

Unearned income

-

115

Other

-

1

Total other payables

167

1,164

1 TEQSA has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117.

Accounting Policy

Accounting policies for payables is contained in the Managing Uncertainties section.

3.3C: Leases

Lease liabilities

2,231

-

Total leases

2,231

-

TEQSA has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117.

The cash outflow for leases for the year ended 30 June 2020 was $1,557,147.

Accounting Policy

Refer to Overview section for accounting policy on leases.

3.4 Other Provisions

3.4A: Other Provisions

Provision for restoration1

Provision for onerous contracts2

Total

$’000

$’000

$’000

As at 1 July 2019

527

298

825

Additional provisions made

-

-

-

Amounts used

-

-

-

Amounts reversed

-

-

-

Unwinding of discount or change in discount rate

11

-

11

AASB 16 transition - adjustment against ROU asset2

-

(298)

(298)

Total as at 30 June 2020

538

-

538

1 TEQSA currently has 1 (2019: 1) agreement for the leasing of office space which requires the premises to be restored to their original condition at the conclusion of the lease. TEQSA has made a provision to reflect the present value of this obligation.

2 At 1 July 2019, TEQSA had one sublease agreement whereby the economic benefit of the rental income derived is less than the operating lease expense incurred. At transition to AASB 16, the balance of the provision has been adjusted against the ROU asset in accordance with the modified retrospective approach.

4. ASSETS AND LIABILITIES ADMINISTERED ON BEHALF OF GOVERNMENT

This section analyses assets used to conduct operations and the operating liabilities incurred which the Tertiary Education Quality and Standards Agency 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 - Assets

As at 30 June 2020, TEQSA held no administered assets (2019: Nil).

4.2 Administered - Liabilities

2020

2019

$'000

$'000

4.2A: Suppliers

Refund liabilities

52

-

Total suppliers

52

-

Settlement is usually made within 20 days (2019: 30 days).

The refund liability at 30 June 2020 represent amounts owed to eligible providers under the Higher Education Relief Package in response to the COVID-19 pandemic.

5. FUNDING

This section identifies the Tertiary Education Quality and Standards Agency funding structure.

5.1 Appropriations

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

Annual Appropriations for 2020

Annual Appropriation1

Adjustments to appropriation2

Total appropriation

Appropriation applied in 2020 (current and prior years)

Variance3

$'000

$'000

$'000

$'000

$'000

Departmental

Ordinary annual services

17,539

1,738

19,277

20,202

(925)

Capital Budget4

846

-

846

737

109

Other services

-

-

-

-

-

Equity Injections

-

-

-

-

-

Total departmental

18,385

1,738

20,123

20,939

(816)

1 In 2019-20, there were no appropriations which have been withheld (Section 51 of the PGPA Act) and quarantined for administration purposes.

2 In 2019-20, adjustments to appropriation comprises of $1.738 million of PGPA Act Section 74 receipts.

3 In 2019-20, the variance between total appropriation and appropriation applied in 2020 for ordinary annual services relates to payments funded from unspent prior year appropriation items.

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

Annual Appropriations for 2019

Annual Appropriation1

Adjustments to appropriation2

Total appropriation

Appropriation applied in 2019 (current and prior years)

Variance3

$'000

$'000

$'000

$'000

$'000

Departmental

Ordinary annual services

17,938

1,360

19,298

17,266

2,032

Capital Budget4

1,646

-

1,646

411

1,235

Other services

-

-

-

-

-

Equity Injections

-

-

-

-

-

Total departmental

19,584

1,360

20,944

17,677

3,267

1 In 2018-19, there were no appropriations which have been withheld (Section 51 of the PGPA Act) and quarantined for administration purposes.

2 In 2018-19, adjustments to appropriation comprises of $1.360 million of PGPA Act Section 74 receipts.

3 In 2018-19, the variance between total appropriation and appropriation applied in 2019 for ordinary annual services relates to payments funded from unspent prior year appropriation items.

4 Departmental and Administered 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.

2020

2019

$'000

$'000

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

Departmental

Appropriation Act (No. 1) - Capital Budget (DCB) 2016-171

-

504

Supply Act (No. 1) - Capital Budget (DCB) 2016-171

-

115

Appropriation Act (No. 1) - Capital Budget (DCB) 2017-18

-

440

Appropriation Act (No. 2) - Equity Injection 2017-18

-

100

Appropriation Act (No. 1) - Operating 2018-19

-

6,866

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

1,449

1,646

Appropriation Act (No. 1) - Operating 2019-20

5,974

-

Supply Act (No. 1) - Capital Budget (DCB) 2019-20

353

-

Appropriation Act (No. 1) - Capital Budget (DCB) 2019-20

493

-

Total departmental

8,269

9,671

1 Funding from budget year 2016-17 lapsed on 1 July 2019 with the repeal of Supply Act (No. 1) 2016-17 and Appropriation Act (No. 1) 2016-17.

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

Appropriation Applied

2020

2019

Authority

Type

Purpose

$'000

$'000

Public Governance, Performance and Accountability Act 2013

Refund

To provide for payments under s.77 of the PGPA Act. All transactions under this Act are recognised as Administered items.

677

6

Total special appropriations applied

677

6

5.2 Regulatory Charging Summary

2020

2019

$000

$'000

Amounts applied

Departmental

Annual appropriations

18,525

17,174

Total amounts applied

18,525

17,174

Expenses

Departmental

16,886

16,408

Total expenses

16,886

16,408

External revenue

Administered

1,182

1,969

Total external revenue

1,182

1,969

Regulatory charging activities:

TEQSA has in place partial regulatory charging for specified services to higher education providers including: registration and re-registration of providers; accreditation and re-accreditation of courses; and major variations to registrations and accreditations.

All fee revenue from regulatory charging activities is administered revenue and is returned to the Consolidated Revenue Fund. TEQSA does not have any administered expenses.

Documentation (Cost Recovery Implementation Statement) for the above activities is available at

https://www.teqsa.gov.au/fees.

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

2020

2019

$'000

$'000

6.1: Employee Provisions

Leave

2,484

2,060

Total employee provisions

2,484

2,060

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. 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 Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR) 24.1(a) using the shorthand method. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Superannuation

TEQSA's staff are members of the Public Sector Superannuation Scheme (PSS), the PSS accumulation plan (PSSap), or other superannuation funds held outside the Australian Government. The PSS is a 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.

TEQSA 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, and accounts for the contributions as if they were contributions to defined contribution plans. The liability for superannuation recognised as at 30 June represents outstanding contributions.

6.2 Key Management Personnel Remuneration

Key Management Personnel (KMP) are those persons having authority and responsibility for planning, directing and controlling the activities of TEQSA, directly or indirectly, including any director (whether executive or otherwise) of TEQSA.

TEQSA has determined KMP to be the Chief Commissioner, Commissioners and the Chief Executive Officer. KMP remuneration is reported in the table below:

2020

2019

$'000

$'000

Short-term employee benefits

903

917

Post-employment benefits

53

48

Other long-term employee benefits

19

14

Total key management personnel remuneration expenses1

975

979

The total number of key management personnel that are included in the above table is 6 (2019: 5).

1 The above KMP 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 TEQSA.

6.3 Related Party Disclosures

Related party relationships:

TEQSA is an Australian Government controlled entity. Related parties to TEQSA are those identified as Key Management Personnel including the Portfolio Minister.

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.

The following transactions with parties related to KMP occurred during the financial year:

● Anthony McClaran (Chief Executive Officer) was a member of the Audit Committee Member of the Australian Accounting Standards Board (AASB) during the reporting period. TEQSA subleases office space to AASB under a MOU arrangement. The value of the transaction for the 2019-20 financial year is $269,004 (2019: $265,887).

None of the above KMP played any role in Agency decisions in relation to their related party transactions noted above.

7. MANAGING UNCERTAINTIES

This section analyses how the Tertiary Education Quality and Standards Agency manages financial risks within its operating environment.

7.1 Contingent Assets and Liabilities

7.1A: Contingent Assets and Liabilities

TEQSA had no departmental contingent assets or liabilities at 30 June 2020 (2019: Nil).

7.1B: Administered - Contingent Assets and Liabilities

TEQSA had no administered contingent assets or liabilities at 30 June 2020 (2019: Nil).

7.2 Financial Instruments

2020

2019

$'000

$'000

7.2A: Categories of Financial Instruments

Financial Assets

Financial assets at amortised cost

Cash and cash equivalents

207

289

Trade and other receivables - goods and services

44

40

Total financial assets at amortised cost

251

329

Total financial assets

251

329

Financial Liabilities

Financial liabilities measured at amortised cost

Trade creditors and accruals

622

628

Total financial liabilities measured at amortised cost

622

628

Total financial liabilities

622

628

7.2A: Categories of Financial instruments - continued

Accounting Policy

Financial assets
With the implementation of AASB 9 Financial Instruments for the first time in 2019, TEQSA classifies its financial assets in the following category:

  • financial assets measured at amortised cost.

The classification depends on both TEQSA's business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised and derecognised 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 other financial liabilities. 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).

8. OTHER INFORMATION

8.1 Aggregate Assets and Liabilities

2020

2019

$'000

$'000

8.1A: Aggregate Assets and Liabilities

Assets expected to be recovered in:

No more than 12 months

8,654

8,686

More than 12 months

4,303

3,859

Total assets

12,957

12,545

Liabilities expected to be settled in:

No more than 12 months

2,572

2,321

More than 12 months

3,470

2,356

Total liabilities

6,042

4,677

8.1B: Administered - Aggregate Assets and Liabilities

Assets expected to be recovered in:

No more than 12 months

-

-

More than 12 months

-

-

Total assets

-

-

Liabilities expected to be settled in:

No more than 12 months

(52)

-

More than 12 months

-

-

Total liabilities

(52)

-