Principal Accounting Officers

1
Principal Accounting Officers Forum17 May 2005
2
Welcome and Introduction

• Mick Jolob
• A/ Director Financial Policy

3
Key Themes

• AIFRS
• Whole of government reporting
• Earlier reporting
• FALAB
• Expense limits
• 2005-06 Resource Agreement

4
CPA Australia
Ian Watt Director Western Australia
5
Agency Reporting Issues 30 June 2005

• Anthony Smith
• Accounting Policy Legislation Branch

6
Todays presentation

• Whats new - Accounting Standards
• Amendments to reporting Treasurers Instructions
  (TIs)
• Changes to AGAAP Models for 2005

7
Whats New Accounting Standards

• Final reporting period under the current
  Australian Accounting Standards regime
• AASB 1047 Disclosing the Impacts of Adopting
  Australian Equivalents to IFRS
• Quantitative disclosures required for 2005 annual
  financial reports
• Relief available in certain circumstances
• Ceases operation upon the adoption of AIFRSs
  (i.e. not applicable to 30 June 2006 reporting)

8
Amendments to reporting TIs

• TI 520 Transfer of Employees
• Guidance on employees transferring as a result of
  restructuring
• TI 822 Borrowings
• Now explicitly includes finance leases as part of
  borrowings

9
Amendments to reporting TIs

• TI 904 Performance Indicators
• Substantially amended in Nov 2004
• Guidelines updated in April 2005 (minor)
• Replaces output measures with audited KPIs
• Output replaced by service TIs updated
• TI 952 General Information in Financial
  Statements
• Remuneration disclosure to include FBT component,
  except where FBT is exempt

10
Amendments to reporting TIs

• TI 1101 Application of Australian Accounting
  Standards
• Budget funded statutory authorities no longer
  required to disclose defined benefit super
  liability information under AASB 1028 where the
  Treasurer has assumed the liability
• TI 1101A Financial Reporting by Departments
• Further guidance to assist in determining
  controlled and administered items

11
Amendments to reporting TIs

• TI 1102 Statements of Financial Performance
• Trading result no longer allowed on the face, but
  continues to be disclosed in the notes
• Sales revenue and cost of sales to be shown on
  the face or in the notes
• Budget funded stat authorities that had their
  super liabilities assumed by the Treasurer
  super expense to be matched by a notional revenue
  Liabilities assumed by the Treasurer

12
Amendments to reporting TIs

• Refer to recently released WAFAB New in this
  Release, Update No. 38 - Treasurers
  Instructions section
• WAFAB available for downloading on the DTF
  website at
• http//www.dtf.wa.gov.au/registration/wafabentry.
  asp

13
Key Changes to Models for 2005

• Trading result
• not allowed on the face of the Statement of
  Financial Performance
• Models updated
• disclosed in the notes (no change)
• Sales revenue and cost of sales line items
  introduced

14
Key Changes to Models for 2005

• Administration expenses deleted
• now forms part of Supplies and Services
  (consistent with Budget Papers)
• includes Administered expenses and revenues note
  for Depts
• Remuneration of Auditor
• Separate disclosure note introduced for Model
  Dept and NCS stat auths

15
Key Changes to Models for 2005

• Superannuation - Model NCS stat auths
• introduced line item Liabilities assumed by the
  Treasurer under Revenues from State Government
  and updated relevant note
• accounting policy note updated

16
Key Changes to Models for 2005

• Statement of Cash Flows
• introduced line items Accommodation and Grants
  and subsidies (consistent with the Budget
  Papers)
• Cash assets transferred from other sources line
  item deleted where DTO or CBO report under the
  heading Cash Flows from State Government

17
Key Changes to Models for 2005

• Disclosing the Impacts of Adopting Australian
  equivalents to IFRS
• Example quantitative disclosure note
• Performance Indicators
• Commentary and example provided in the
  Performance Indicators section of the Model
  Annual Reports

18
Key Changes to Models for 2005

• Outputs replaced by Services
• Models updated accordingly
• Model Dept now refers to Schedule of Expenses
  and Revenues by Service rather than by Outputs
• Model NCS stat auth now refers to Schedule of
  Services Delivered rather than Output
  Information

19
Agency Reporting Issues 30 June 2005

• Questions?

20
Whole of Government Financial Reporting
Requirements

• Isabel Altieri
• A/Assistant Director, Financial Reporting

21
Drivers for Earlier Reporting

• There is a clear trend towards earlier financial
  reporting in other jurisdictions and the private
  sector
• Other States are setting the pace in NSW,
  Victoria and QLD major financial reports for
  2003-04 were released in September/early October
  (one month earlier than WA)
• Constant demand for earlier financial results
  (particularly at year-end) from government,
  media, ratings agencies, etc
• Listed companies are required to lodge
  preliminary final reports with the Australian
  Stock Exchange within two months after the end of
  the financial year
• Final audited reports are due within three months
  of end of financial year

22
Other Jurisdictions
Release of Consolidated Financial Statements (or
equivalent)
23
Financial Administration Legislation Amendment
Bill 2005

• Bill expected to be passed before 30 June 2005
• The timeframe for tabling annual whole of
  government (Consolidated Financial Statements)
  reports will be reduced (over three years) from
  150 days to 90 days after the end of the
  financial year
• Existing time constraints on the submission of
  financial statements to the Auditor General, and
  annual reports to the Ministers, will be
  abolished
• Agencies need to be planning and working towards
  earlier reporting

24
Whole of Government Data Requirements for year
ended 30 June 2005

• Two key reports
• Government Financial Results Report (GFRR)
• Government of Western Australia Consolidated
  Financial Statements (CFS)
• Formal request to agencies (including
  questionnaire) to be sent in mid-June

25
Whole of Government Data Requirements

• Data requirements for 31 July
• Submission of audit quality data in TIMS
• Fixed Asset and Accumulated Depreciation
  schedules
• Completed Questionnaire
• Signed Certification
• TIMS June 2005 views will be available for input
  from the second week in July
• Questionnaire covering
• Changes to accounting policies
• Loan and Contingent liabilities
• Quantitative impact of adopting AIFRS (AASB 1047)

26
Whole of Government Data Requirements

• Financial statements submitted by 31 July will
  not be final audited statements
• Need to be of audit quality
• Any material adjustments arising as a result of
  audit of agencies financial statements, advise
  DTF as soon as possible who will make the
  necessary adjustments

27
Whole of Government data requirements for 2005-06

• Reporting on an AIFRS basis applies from 2005-06
• Dual submission of TIMS financial data
• Actuals 2005-06
• Restated 2004-05 actuals on an AIFRS basis
• Agencies required to submit data for monthly and
  quarterly actuals and comparatives by the 15th
  day of the following month
• June 2004-05 AIFRS comparatives due by 15
  September
• Adherence to these deadlines is critical for
  timely release of reports

28
Whole of Government Financial Reporting
Requirements

• Questions?

29
AIFRS 2005 Comparatives

• Phillip Forward
• Anthony Smith
• John Stanley
• Accounting Policy Legislation Branch

30
2004-05 Financial Statements Restated to AIFRS
Basis

• Submit to OAG by 31 October 2005
• Model Financial Statements
• Balance Sheet
• Income Statement
• Statement of Changes in Equity
• Cash Flow Statement

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Model Financial Statements

• Accounting policies
• Full note disclosure
• Key changes tracked
• Reconciliations
• Equity at 1 July 2004
• Equity at 30 June 2005
• Income Statement for 2004/05
• Cash Flow Statement for 2004/05

32
Balance Sheet Changes

• Disclosures
• Non-current assets held for sale
• Amounts
• Non-current assets held for sale
• Property, plant equipment
• Intangible assets
• Provisions
• Accumulated surplus

33
Income Statement Changes

• Disclosures
• Employee benefits expense
• Loss/gain on disposal of non-current assets
• Extraordinary items
• Amounts
• Employee benefits expense
• Depreciation expense
• Finance costs

34
Cash Flow Statement Changes

• Disclosures
• Employee benefit payments
• Amounts
• Employee benefit payments
• Other payments

35
Statement of Changes in Equity

• Contributed Equity
• Capital contribution
• Other contributions by owners
• Distributions to owners
• Asset Revaluation Reserve
• Changes in accounting policy
• Correction of prior period errors
• Gains (losses) from asset revaluation

36
Statement of Changes in Equity

• Accumulated Surplus
• Net adjustment on transition to AIFRS
• Changes in accounting policy
• Correction of prior period errors
• Surplus (deficit) for the period
• Gains (losses) recognised directly in equity
• Dividends

37
Reconciliations

• Balance Sheet
• Non-current assets held for sale (AASB 5)
• Reclassify, write-down and derecognise
  depreciation(plant equipment)
• Restoration costs (AASB116)
• Recognise asset and depreciation
• Intangible assets (AASB138)
• Reclassify software, write-off research costs
• Provision for employee benefits (AASB 119, 101)
• Reclassify LSL from non-current to current

38
Reconciliations

• Income Statement
• Non-current assets held for sale (AASB 5)
• Derecognise depreciation expense (plant
  equipment)
• Write-down non-current assets held for sale
  tofair value less costs to sell
• Net gain on disposal (AASB116)
• Derecognise costs and proceeds of disposal
• Recognise gain on disposal
• Restoration costs (AASB116)
• Recognise depreciation expense

39
Reconciliations

• Income Statement
• Intangible assets (AASB138)
• Derecognise amortisation expense(research
  expenditure written-off in opening balance sheet)
• Expense research expenditure capitalised in
  2004/05
• Employee benefits expense (AASB 119)
• Reclassify on-costs
• Finance costs (AASB137)
• Reclassify unwinding of discounts
• Extraordinary item (AASB101)
• Reclassify

40
Reconciliations

• Cash Flow Statement
• Employee benefits (AASB 119)
• Reclassify on-costs
• Notes
• For compliance and understanding

41
Changes to AIFRS

• Early adoption
• Disclosures where not early adopted

42
AIFRS 2005 Comparatives Specific Issues

• Classification of leave liabilities
• AASB 101 Presentation of Financial Statements
  has introduced an additional criterion for
  classifying current liabilities where the
  agency does not have an unconditional right to
  defer settlement beyond 12 months of reporting
  date
• Unconditional leave entitlements to be classified
  as current (e.g. annual leave and unconditional
  long service leave)

43
AIFRS 2005 Comparatives Specific Issues

• Classification of leave liabilities
• Not a result of AASB 119 Employee Benefits
• AASB 119 uses the terms short-term and
  long-term for measurement purposes
• AASB 101 uses the terms current and
  non-current for presentation purposes

44
AIFRS 2005 Comparatives Specific Issues

• Employee on-costs
• such as workers comp and payroll tax are not
  employee benefits as defined under AASB 119
• therefore not subject to AASB 119 and not
  included as part of employee benefits expense
• subject to materiality, these on-costs to be
  treated as a separate provision subject to the
  requirements of AASB 137 Provisions, Contingent
  Liabilities and Contingent Assets

45
AIFRS 2005 Comparatives Specific Issues

• Leave entitlements - superannuation contribution
  component
• considered to be employee benefits under AASB
  119 and are not on-costs
• included as part of employee benefit liabilities
  to the extent that it is expected to be paid upon
  settlement of the leave
• not a change from previous AGAAP, but to draw the
  distinction between employee on-costs and
  non-salary employee benefit components

46
AIFRS 2005 Comparatives Specific Issues

• Annual leave
• due within 12 months from reporting date
  measured at undiscounted (nominal) amount
• due later than 12 months from reporting date
  measured at discounted amount (subject to
  materiality)
• all annual leave to be presented in the balance
  sheet as a current liability

47
AIFRS 2005 Comparatives Specific Issues

• Refer to DTF gap analyses at www.dtf.wa.gov.au/ias
  2005 and follow the links on the International
  Accounting Standards tab on the left hand side of
  the web page

48
AIFRS 2005 Comparatives Specific Issues

• Financial Instruments
• Adjustments to first AIFRS reporting period
  2005-06
• No effect on comparatives 2004-05
• Bulk of provisions not relevant to PS agencies

49
AIFRS 2005 Comparatives Specific Issues

• Financial Instruments (contd)
• All derivatives to be measured and recognised
• Identification and measurement of embedded
  derivatives
• How will they be identified on transition?
• Consider relationship to host contract
• Valuation required for measurement
• Changes to contract negotiation process to ensure
  all contracts are reviewed for embedded
  derivatives.

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Contacts

• Financial Policy Division
• Accounting Policy Legislation Branch
• Phillip Forward 9222 9282
• email phil.forward_at_dtf.wa.gov.au
• Anthony Smith 9222 9368
• email anthony.smith_at_dtf.wa.gov.au
• John Stanley 9222 9280
• email john.stanley_at_dtf.wa.gov.au
• Patrick Webster 9222 9229
• email patrick.webster_at_dtf.wa.gov.au

51
AIFRS 2005 Comparatives

• Questions?

52
Outcome Based Management and TI 904
(Performance Indicators)

• Eddie Said
• Financial Policy

53
Outline of Presentation

• Treasurers Instruction 904 (Performance
  Indicators)
• Approval process for OBM changes
• New OBM Guidelines

54
Treasurers Instruction 904

• TI 904 amended in November 2004
• Amendments apply to 2004-05 Annual Reports
• Improvements
• Outcomes emphasised
• Output measures discontinued
• Services includes outputs/programs
• KPI definitions more relevant and useful

55
Approval process for OBM changes

• All changes to agency OBM structures and
  supporting KPIs require Under Treasurer approval
• Outcome Structure Review Group operates under
  delegated authority of the Under Treasurer
• Group ensures that all changes to OBM structures
  improve the relevance and usefulness of
  performance information
• Material changes should be disclosed in annual
  report what and why

56
Cost effectiveness and efficiency

• More options for audited KPIs but no increase
  in reporting requirements
• Effectiveness may include cost effectiveness,
  i.e. relates outcome to the cost of achieving
  outcome
• Estimated change in speed related crashes after
  expenditure on relevant safety campaigns
• Change in value of production per of government
  spend
• Efficiency may include productivity, i.e.
  comparison of output to an input other than cost
• Average number of vehicles monitored per speed
  camera hour
• Cases resolved per officer

57
New OBM Guidelines

• Reflect extensive review and consultation with
  key stakeholders (including agencies, OAG, DPC
  and other jurisdictions)
• Key features include
• Emphasis on outcomes
• Checklists to assist in the development and
  specification of outcomes, services and KPIs
• Examples of the various elements of the OBM
  framework
• Website address www.dtf.wa.gov.au

58
Resource Agreements

• Mick Jolob
• A/Director Financial Policy

59
Resource Agreements

• Agreements signed by Minister, CEO / Chairperson
  (Statutory Authorities) and Treasurer
• Specifies signatories responsibilities for
  achievement of desired outcomes, services and
  financial targets disclosed in the Budget
  Statements
• Focus of 2005-06 Resource Agreement has been
  expanded to include signatories responsibilities
  for
• successful implementation of whole-of-government
  reform initiatives (including procurement and
  corporate services reform)
• Adherence to expense limits

60
Expense limits

• Identified as total cost of services on income
  statement
• Critical element for budget management - impacts
  on Govts expense growth target
• ERC approval is required to exceed expense limits
• 2005-06 Resource Agreement has been strengthened
  by
• Identifying more explicit accountabilities for
  adherence to agreed expense limits and
• Requires breaches of expense limits to be
  reported to ERC
• Exploring legislative mechanisms to ensure
  compliance

61
Financial Administration Legislation Amendment
Bill 2005
Mick Jolob A/Director Financial Policy
62
Key features

• Consolidates Treasurers annual reporting
• Improves timeliness of reporting by Treasurer and
  government agencies
• Changes title of PAO to Chief Finance Officer and
  strengthens role
• Machinery changes
• 27th pay suspense account
• Parliamentary Services Department

63
Whole of Government Reporting - Annual

• Current
• Government Financial Results Report
• key focus of media, ratings agencies, etc.
• legislative deadline of 30 September (GFRA)
• GFS based (accrual)
• unaudited
• Consolidated Financial Statements
• currently receives little attention
• no legislative deadline or requirement
• AAS based (accrual)
• audited
• Treasurers Annual Statements
• currently receives little attention
• legislative deadline of 21 November (FAAA)
• narrow focus on Public Bank Account, rather than
  total public sector
• cash based
• audited

• Proposed
• Annual Report on State Finances
• single report to reduce confusion
• will be directly comparable to budget (GFS) and
  audited (AAS)
• deadline will be phased in over a 3 year period
  to 90 days after end of financial year
• during this phase-in period, Government Financial
  Results Report will continue to be produced and
  released by 30 September
• consistent with best practice in other States

64
Whole of Government Reporting - Quarterly

• Current
• Quarterly Financial Results Report
• focus of media, etc.
• GFS based (accrual)
• requirement of GFRA, but no legislative deadline
• Treasurers Quarterly Statements
• currently receive little attention
• narrow focus on Public Bank Account, rather than
  total public sector
• cash based
• requirement of FAAA, but no legislative deadline

• Proposed
• Quarterly Financial Results Report
• GFS based (accrual)
• legislative deadline of 60 days from end of
  quarter, phased-in over a 3 year period
• Cash based reports under s59 to be discontinued

65
Drivers for earlier reporting

• There is a clear trend towards earlier financial
  reporting in the public and the private sectors
• Constant demand for earlier financial results
  (particularly at year-end) from government,
  media, ratings agencies, etc.
• Other States are setting the pace
• Listed companies are required to lodge final
  audited reports within three months

66
Timing of Treasurers annual report

• 2004-05 financial year
• No change
• 2005-06
• 150 days (target deadline for Consolidated
  Financial Statements)
• Phase in period to be specified in GFRA
  regulations
• 2006-07 to be 120 days
• 2007-08 to be 105 days
• 2008-09 to be 90 days

67
Agency Annual Reporting

• Proposed
• Departments and Statutory Authorities
• audited reports to be tabled in Parliament within
  90 days of year-end, phasedin over a 3 year
  period
• Removal of legislated deadlines for intermediate
  steps (now by agreement)

• Current
• Departments
• to Auditor General by 15 August
• audit opinion by 15 October
• tabled in Parliament by 5 November (128 days
  after year-end)
• Statutory Authorities
• to Auditor General by 31 August
• audit opinion by 30 November
• tabled in Parliament by 21 December (174 days
  after year-end)

68
Earlier Financial Reporting Agencies Proposed
Agencies 2004-05 2005-06 2006-07 2007-08 2008-09
Departments 128 days 128 days 120 days 105 days 90 days
Statutory Authorities 174 days 128 days 120 days 105 days 90 days
69
Principal Accounting Officer

• Role of this position changing from financial
  supervisor to strategic adviser
• Position to be retitled Chief Finance Officer
• Responsibilities of the position to include
• Development of strategic options for future
  financial management and capability of the agency
• Provision of advice on effectiveness of
  information systems and controls and financial
  risks
• Development of agencys financial management
  skills

70
Machinery changes

• 27th pay suspense account
• Amendment permits moneys in the suspense account
  to be returned directly to departments
• Parliamentary Services Department
• Amendment to reflect that the Joint Committees of
  Parliament now operate as the Parliamentary
  Services Department

71
FAAA Replacement Legislation
Mick Jolob A/Director Financial Policy
72
New Framework

• Separation of financial management and audit
  provisions as recommended by CoG
• Financial Management Act
• FAAA Parts I,II and IV, excluding reporting by
  Treasurer
• Auditor General Act
• Part III of existing FAAA, including appointment,
  rights, tenure, opinions and reports
• Scope of mandate and conduct of audits

73
Financial Management Act

• Separation of financial management and audit
• Remove duplication of references to departments
  and statutory authorities
• Provisions cover both departments and statutory
  authorities
• Removal of distinction between Accountable
  Officers and Authorities relating to duties and
  responsibilities

74
Financial Management Act (contd)

• Some detail moved to Treasurers Instructions
  Regulations
• Requirement for accounting manuals and contents
• Specification of moneys to be paid into a bank
  account
• Certifying officer and incurring officer
  requirements

75
Financial Management Act (contd)

• Creation of Public Ledger for Treasurers
  Accounts
• Public ledger consisting of Consolidated Account,
  Treasurers Advance and special purpose accounts
  administered by the Treasurer
• Discontinue departmental operating accounts and
  trust accounts being maintained in Treasurers
  Accounts Banking System
• Treasurers Advance
• Funded by standing appropriation of previous
  years budget (3)
• Removal of requirement for a warrant
• Currently only executed once per year

76
Financial Management Initiatives

• Questions?