Financial statements

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

The Board’s principal address is: 

Adult, Community and Further Education Board  
Level 32  
35 Collins Street   
Melbourne VIC 3000 

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 in Australian dollars and the historical cost convention is used unless a different measurement basis is specifically disclosed in the note associated with the item measured on a different basis. 

The accrual basis of accounting has been applied in the preparation of these financial statements whereby transactions 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. 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, are disclosed in 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, 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 AASB 1049 ‘Whole of Government and General Government Sector Financial Reporting’. 

Where appropriate, those AAS paragraphs applicable to not-for-profit entities have been applied. Accounting policies selected and applied in these financial statements ensure that 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. Returning to in-person training after COVID-19 has presented some challenges to the sector but training delivery and associated contractual support from the Board are returning to normal. 

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. 

Restructuring of administrative arrangements 

In December 2022 the Victorian Government announced the restructure of some of its activities via machinery of government changes, taking effect from 1 January 2023. These changes included the transfer of responsibility for the Training and Skills and Higher Education portfolios to the newly created Department of Jobs, Skills, Industry and Regions. Although this restructuring did not alter the operation of the Board, it did alter the responsible portfolio Department from the Department of Education and Training to the Department of Jobs, Skills, Industry and Regions. 

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 that 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 departmental 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 after 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 relevant portfolio department in supporting the operation of the Board.  

Net gain/(loss) on financial instruments 

Net gain/(loss) on financial instruments includes impairment and reversal of impairment for financial instruments at amortised cost. 

Financial risk management objectives and policies 

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

The Board’s credit risk 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.  

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, days past due/debtors’ financial health and selected the expected credit loss rate based on past history, existing conditions and forward-looking estimates at the end of the financial year.  

Ageing analysis of contractual financial liabilities 

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 relevant portfolio department 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 issued that are not yet effective 

Certain new accounting standards and interpretations have been issued but are not effective for the 30 June 2023 reporting period. The Board assesses the impact of these new standards to determine their applicability and early adoption where applicable.