Financial statements

The financial statements cover the Adult, Community and Further Education Board as an individual reporting entity under the Education and Training Reform Act 2006. The Board is a statutory authority under the Education and Training Reform Act 2006. It reports separately to Parliament through the Minister for Higher Education, Minister for Training and Skills and Minister for Agriculture.

The Board’s principal address is:

Adult, Community and Further Education Board
Level 3
2 Treasury Place
East Melbourne VIC 3002

A description of the nature of the Board’s operations and its principal activities is included in the report of operations, which does not form part of these financial statements.

Objectives and funding

The Board’s overall objective is to support the expansion of adult community education across all learner groups, qualification levels and industry sectors, and to develop a strong Learn Local provider base that is responsive to industry and community needs. The Board is predominantly funded by accrual‑based parliamentary appropriations.

Basis of preparation

These financial statements are presented in Australian dollars and prepared in accordance with the historical cost convention.

The accrual basis of accounting has been applied in the preparation of these financial statements whereby assets, liabilities, equity, income and expenses are recognised in the reporting period to which they relate, regardless of when cash is received or paid.

Income, expenses and assets are recognised net of GST unless the GST is not recoverable from the taxation authority. In this case, it is recognised as part of the cost of acquisition of the asset or as part of the expense.

Judgements, estimates and assumptions are required to be made about the carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on professional judgements derived from historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

Revisions to accounting estimates are recognised in the period in which the estimate is revised and also in future periods affected by the revision. Judgements and assumptions made by management in the application of Australian Accounting Standards (AASs) that have significant effects on the financial statements and estimates, with a risk of material adjustments in the subsequent reporting period, are disclosed throughout the notes to the financial statements.

Amounts in the financial statements have been rounded to the nearest 1,000 dollars unless otherwise stated. Figures in the financial statements may not equate due to rounding.

Compliance information

These general-purpose financial statements have been prepared in accordance with the Financial Management Act 1994 (FMA), applicable Financial Reporting Directions (FRDs) and applicable AASs, which include interpretations, issued by the Australian Accounting Standards Board (AASB). In particular, they are presented in a manner consistent with the requirements of the AASB 1049 ‘Whole of Government and General Government Sector Financial Reporting’.

Where appropriate, those paragraphs of the AASs applicable to not-for-profit entities have been applied. Accounting policies are selected and applied in a manner that ensures the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.

COVID-19 environment

The Board has continued to consider the impacts of the COVID-19 environment on the Board’s operations, financial position and cash flows during the year. COVID-19 has continued to present challenges to the sector. To support training providers to navigate the economic impacts of COVID-19 and in line with advice from the department, the Board continued to release contracted grant payments as training providers have satisfied their contract requirements through Board-approved modified/alternative activities where necessary.

Management has considered the impacts of COVID-19 on the judgements and assumptions applied to accounting policies. The impacts and assessments have been considered on assets and liabilities which are detailed in Note 6 ‘Receivables’ and Note 9 ‘Financial Instruments’.

Income is recognised to the extent that it is probable that the economic benefits will flow to the entity and the income can be reliably measured.

Grants

State government grants, received by the Board during a reporting period, are recognised as income of that reporting period consistent with AASB 1058 ‘Income of Not-for-Profit Entities’. Income from grants without sufficiently specific performance obligations, or that are not enforceable, is recognised when the Board has an unconditional right to receive cash which coincides with the receipt of grant funding from the department.

Services received free of charge

Contributions of services received free of charge are recognised at fair value when control is obtained over them, irrespective of whether these contributions are subject to restrictions or conditions over their use. In accordance with AASB 1058 ‘Income of Not-for-Profit Entities’ income in the form of services is only recognised when a fair value can be reliably determined, and the services would have been purchased if they had not been received as a donation.

The fair value of services received free of charge is measured based on an allocation of estimated time incurred by department staff in supporting the Board, and includes relevant employee benefits (including oncosts), contractors support and overheads.

Grants and transfer payments

Grants and other transfers to third parties (other than contributions to owners) are recognised as an expense in the reporting period in which they are paid or payable. They include transactions such as grants, subsidies and other transfer payments to educational providers.

Operating expenses

Operating expenses generally represent the day-to-day running costs incurred in the normal operations of the Board. These items are recognised as an expense in the reporting period in which they are incurred.

Services provided free of charge

Contributions of resources provided free of charge are recognised at their fair value once control is obtained over them, irrespective of whether restrictions or conditions are imposed over their use. Contributions in the form of services are only recognised when a fair value can be reliably determined, and the services would have been purchased if they had not been donated.

The fair value of services provided free of charge equals the services received free of charge from the Department of Education in supporting the operation of the Board.

‘Other economic flows included in net result’ are changes in the volume or value of an asset or liability that do not result from transactions. They include:

• gains and losses from disposals and impairments of non-financial physical and intangible assets
• fair value changes of financial instruments
• gains and losses on remeasuring available‑for‑sale financial assets.

Net gain/(loss) on financial instruments

Net gain/(loss) on financial instruments includes:

• realised/unrealised gains and losses from revaluations of financial instruments at fair value
• impairment and reversal of impairment for financial instruments at amortised cost
• disposals of financial assets and derecognition of financial liabilities.

Revaluations of financial instruments at fair value

At the end of each reporting period, the Board assesses whether there is objective evidence that a financial asset or group of financial assets is impaired. Objective evidence includes financial difficulties of the debtor identified and recorded in the Board’s provider risk register and default payments. All financial assets, except for those measured at fair value through profit or loss, are subject to annual review for impairment.

Receivables are assessed for impairment and bad debts on a regular basis. Those bad debts considered as written off through mutual consent are classified as a transaction expense. Bad debts not written off by mutual consent and the impairment of receivables are classified as other economic flows in net result.

Receivables consist of:

• contractual receivables, such as debtors in relation to goods and services
• statutory receivables, such as amounts owing from the Victorian GST.

Contractual receivables are classified as financial instruments. Statutory receivables are not classified as financial instruments because they do not arise from a contract.

Receivables are recognised initially at fair value and subsequently measured at amortised cost, using the effective interest method, less expected credit losses. Expected credit loss is classified as other economic flows in the net result. Contractual receivables are written off when there is no reasonable expectation of recovery and impairment losses are classified as a transaction expense. Subsequent recoveries of amounts previously written off are credited against the same line item.

Details on the Board’s impairment policies, exposure to credit risk, and the calculation of the loss allowance are set out in Note 9 ‘Financial instruments’.

Payables consist of:

• contractual payables, such as accounts payable and expenditure accruals. Contractual payables represent liabilities for goods and services provided to the Board before the end of the financial year that are unpaid and arise when the Board becomes obliged to make future payments in respect of the purchase of those goods and services.
• statutory payables, such as GST.

Contractual payables are classified as financial instruments and categorised as financial liabilities at amortised cost. Statutory payables are recognised and measured similarly to contractual payables but are not classified as financial instruments and not included in the category of financial liabilities at amortised cost, because they do not arise from a contract.

Contingent assets and contingent liabilities are not recognised in the balance sheet, but are disclosed by way of a note and, if quantifiable, are measured at nominal value. Contingent assets and liabilities are presented inclusive of GST receivable or payable respectively. As at 30 June 2022, the Board had no knowledge of any contingent assets or contingent liabilities (2021 – Nil).

Financial risk management objectives and policies

The Board’s principal financial instruments comprise:

• receivables (excluding statutory receivables)
• payables (excluding statutory payables).

The main purpose in holding financial instruments is to prudentially manage the Board’s financial risks within government policy parameters.

The Board’s main financial risks include credit risk and liquidity risk. The Board has overall responsibility for the establishment and oversight of its risk management framework.

Credit risk

Credit risk arises from the contractual financial assets of the Board, which comprise contractual receivables. The Board’s exposure to credit risk arises from potential default of a counterparty on its contractual obligations, resulting in financial loss to the Board.

Credit risk associated with the Board’s contractual receivables is minimal, because the main debtor is the Victorian Government. For debtors other than the government, it is the Board’s policy to deal only with organisations that meet the standard financial viability requirements.

There are no financial assets that have had their terms renegotiated to prevent them from being past due or impaired, and they are stated at the carrying amounts as indicated.

Liquidity risk

Liquidity risk is the risk that the Board would be unable to meet its financial obligations as and when they fall due. The Board’s exposure to liquidity risks is deemed insignificant, as no obligation to allocate funding is entered into without securing appropriate sources to meet the commitments.

Measurement basis and accounting policy

The Board considers the carrying amount of financial instrument assets and liabilities recorded in the financial statements to be a fair approximation of their fair values, because of the short-term nature of the financial instruments and the expectation that they will be paid in full. The fair values and net fair values of financial instrument assets and liabilities are determined as follows:

• The fair value of financial instrument assets and liabilities with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market prices.
• The fair value of other financial instrument assets and liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

Contractual financial assets

The Board applies the AASB 9 ‘Financial Instruments’ simplified approach for all contractual receivables to measure expected credit losses using a lifetime expected loss allowance based on assumptions about the risk of default and expected loss rates. The Board has grouped contractual receivables on shared credit risk characteristics and days past due and selected the expected credit loss rate based on past history, existing market conditions, as well as forward-looking estimates at the end of the financial year.

(i) The expected credit loss considers the impact that COVID-19 had on debtors trading conditions

Ageing analysis of contractual financial liabilities

In accordance with the Ministerial Directions issued by the Assistant Treasurer under the Financial Management Act 1994, the following disclosures are made regarding responsible persons for the reporting period.

The persons who held the positions of Minister and Accountable Officer on the Board are as follows:

Responsible Minister

• The Hon Gayle Tierney MP (1 July 2021 – 30 June 2022)

The following persons acted in the absence of the responsible Minister during the year:

• The Hon Ingrid Stitt MP (3–10 July 2021, and 7–10 January 2022)
• The Hon James Merlino MP (21–22 September 2021, and 11–27 January 2022)

Accountable Officer

• Ms Jeanette Nagorcka (1 July 2021 – 30 June 2022)

The following officers acted in the absence of Ms Jeanette Nagorcka during the year:

• Mr Simon Booth (4–14 January 2022)

Significant transactions with government-related entities

During the year, the Board had the following significant government-related entity transactions:

• receipt of grant funding from the Department of Education and Training ($32.1 million), together with resources received free of charge ($6.0 million), to undertake legislative responsibilities
• payments to the Department of Health and Human Services ($0.2 million) for the support of a grants management system
• payments to the Centre for Adult Education ($0.8 million) and AMES Australia ($1.3 million) for the delivery of educational services.

Key management personnel and related parties

Related parties of the Board include all key management personnel and their close family members and personal business interests (controlled entities, joint ventures and entities they may have significant influence over). Other related parties include Victorian Cabinet ministers (including their close family members) and public sector entities that are controlled and consolidated into the whole of government consolidated financial statements.

Key management personnel of the Board include:

• Board members
• Minister for Higher Education, Minister for Training and Skills and Minister for Agriculture in the Parliament of Victoria
• Accountable Officer.

The compensation detailed below excludes salaries and benefits that the portfolio Minister received. The Minister’s remuneration and allowances are set by the Parliamentary Salaries and Superannuation Act 1968 and are reported in the Department of Parliamentary Services’ Financial Report.

Remuneration of key management personnel

Other than ministers and accountable officers, the number of key management personnel and their total remuneration during the reporting period are shown in the table below. Remuneration comprises employee benefits in all forms of consideration paid, payable or provided by the entity, or on behalf of the entity, in exchange for services rendered, and is disclosed in the following categories:

• Short-term employee benefits include amounts such as wages, salaries, annual leave or sick leave that are usually paid or payable on a regular basis, as well as non-monetary benefits such as allowances and free or subsidised goods or services.
• Post-employment benefits include pensions and other retirement benefits paid or payable on a discrete basis when employment has ceased.
• Other long-term benefits include long service leave, other long service benefits or deferred compensation.
• Termination benefits include termination of employment payments, such as severance packages.

(i) Board members do not fall within employee definitions.

Remuneration of Accountable Officer

The Accountable Officer is an executive officer employed by the Department of Education and Training, with information on remuneration disclosed in the department’s financial statements. The Board recognises the indirect cost associated with the Accountable Officer’s time within the services free of charge recognised in the operating statement.

Retirement benefits of responsible persons

There were no retirement benefits made in connection with retirement of responsible persons of the reporting entity.

Transactions and balances with key management personnel and other related parties

During the reporting period, no responsible person received or was entitled to receive any benefit (other than remuneration disclosed in the financial report) from a contract between the Board and that responsible person or a firm or company of which that responsible person is a member or has a substantial interest.

During the reporting period, Adult Learning Australia undertook maintenance of Learn Local digital assets. During the 2021–22 financial year, a one-year extension was authorised by the department. While Ms Sally Brennan was a Board member of both the Adult, Community and Further Education Board and Adult Learning Australia, there was no consultation with, or involvement from, Board members in the contract amendment or extension.

Outside normal citizen-type transactions, there were no other related-party transactions that involved key management personnel, their close family members or their personal business interests. No provision has been required, nor any expense recognised, for impairment of receivables from related parties. Other related transactions and loans requiring disclosure under the Directions of the Assistant Treasurer have been considered and there are no matters to report.

There is no remuneration of executive officers (other than the Accountable Officer) to be reported for the accounting period, as it was paid by the Department of Education and Training.

The State of Victoria released the ‘Stay Well In Winter’ campaign on Thursday 12 July 2022, requesting employers to consider working from home arrangements, in an effort to control the spread of COVID-19. While these recommendations modified the manner in which entities operate, there are no known significant financial impacts on the Board’s operations, future results and financial position requiring disclosure after the reporting date.

No other matters or circumstances have arisen since the end of the financial year which significantly affected or may affect the operations, the results of operations or the state of affairs of the Board in future financial years.

Commitments for future expenditure include operating and capital commitments arising from contracts. These commitments are not recognised in the balance sheet but are disclosed at their nominal value and inclusive of GST payable. In addition, where it is considered appropriate and provides additional relevant information to users, the net present values of significant individual projects are stated. These future expenditures cease to be disclosed as commitments once the related liabilities are recognised in the balance sheet.

Cash and deposits

The Board does not hold a bank account with any financial institution. Total approved appropriations for the relevant period are transferred by the Department of Education and Training to the Board, in a phased manner throughout the financial year via inter-entity transactions.

Comprehensive operating statement

The comprehensive operating statement comprises 3 components: ‘net result from transactions’ (or ‘net operating balance’), ‘other economic flows included in net result’ and ‘other economic flows – other comprehensive income’. The sum of the first two, together with the net result from discontinued operations, represents the net result.

The ‘net result from transactions’ or ‘net operating balance’ is a key fiscal aggregate and is derived by income from transactions minus expenses from transactions. It is a summary measure of the ongoing sustainability of operations. It excludes gains and losses resulting from changes in price levels and other changes in the volume of assets. It is the component of the change in net worth that is due to transactions and can be attributed directly to government policies.

‘Transactions’ are those economic flows that are considered to result from policy decisions, usually interactions between two entities by mutual agreement. Transactions also include flows within an entity, such as depreciation where the owner is simultaneously acting as the owner of the depreciating asset and as the consumer of the service provided by the asset. Taxation is regarded as mutually agreed interactions between the government and taxpayers.

Transactions can be in kind (for example, assets provided or given free of charge or for nominal consideration) or where the final consideration is cash.

Balance sheet

Assets and liabilities are presented in liquidity order, with assets aggregated into financial assets and non-financial assets.

Current and non-current assets and liabilities (those expected to be recovered or settled beyond 12 months) are disclosed in the notes, where relevant.

Statement of changes in equity

The statement of changes in equity presents reconciliations of each non-owner and owner equity opening balance at the beginning of the reporting period to the closing balance at the end of the reporting period.

It also separately shows the changes due to amounts recognised in the ‘comprehensive result’ and amounts recognised in ‘other economic flows – other movements in equity’ related to ‘transactions with owner in its capacity as owner’.

Cash flow statement

Cash flows are classified according to whether they arise from operating activities, investing activities, or financial activities. This classification is consistent with requirements in AASB 107 ‘Statement of Cash Flows’.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables on the balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities that are recoverable from, or payable to, the taxation authority, are presented as operating cash flow.

Australian Accounting Standards (AASs) issued that are not yet effective

Certain new accounting standards and interpretations have been published but are not mandatory for the 30 June 2022 reporting period. The Board assesses the impact of these new standards to determine their applicability and early adoption where applicable.

As at 30 June 2022, the following standards and interpretations that are applicable to the Board had been issued but were not made mandatory for the financial year ending 30 June 2022. The Board has not and does not intend to adopt these standards early.

In addition to the new standards and amendments outlined in the table above, the AASB has issued a list of other amending standards that are not effective for the 2021–22 reporting period (as listed below). In general, these amending standards include editorial and reference changes that are expected to have insignificant impacts on public sector reporting:

AASB 2020–3 Amendments to Australian Accounting Standards – Annual Improvements 2018–20 and Other Amendments.

AASB 2021–2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definitions of Accounting Estimates.

AASB 2021–6 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies: Tier 2 and Other Australian Accounting Standards.

AASB 2021–7 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128 and Editorial Corrections.