The Office of the Fair Work Building Industry Inspectorate (FWBII) is an independent Australian Government controlled entity established by the Fair Work (Building Industry) Act 2012 and is a not-for-profit entity.
FWBII is structured to meet a single outcome:
Outcome 1: Enforce workplace relations laws in the building and construction industry and ensure compliance with those laws by all participants in the building and construction industry through the provision of education, assistance and advice.
FWBII activities contributing toward the outcome are classified as either departmental or administered. Departmental activities involve the use of assets, liabilities, income and expenses controlled or incurred by the FWBII in its own right. Administered activities involve the management or oversight by the FWBII, on behalf of the Government, of items controlled or incurred by the Government.
The continued existence of the FWBII in its present form is dependent on Government policy and on continuing funding by Parliament for the FWBII’s administration.
1.2 Basis of Preparation of the Financial Statements
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:
- Financial Reporting Rules (FRR) for reporting periods ending on or after 1 July 2014; and
- Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.
The financial statements have been prepared on an accruals basis and in accordance with the historical cost convention, except for certain assets that are stated 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 and values are rounded to the nearest thousand dollars unless otherwise specified.
Unless an alternative treatment is specifically required by an accounting standard or the FRR, assets and liabilities are recognised in the statement of financial position when and only when it is probable that future economic benefits will flow to the FWBII or a future sacrifice of economic benefits will be required and the amounts of the assets or liabilities can be reliably measured. However, assets and liabilities arising under executory contracts are not recognised unless required by an accounting standard. Liabilities and assets that are unrecognised are reported in the schedule of commitments or the contingencies note.
Unless alternative treatment is specifically required by an accounting standard, income and expenses are recognised in the statement of comprehensive income when and only when the flow, consumption or loss of economic benefits has occurred and can be reliably measured.
FWBII received appropriation funding through its portfolio department, the Department of Employment, for the period 1 July 2014 to 31 January 2015. Additionally, FWBII operated under financial delegations issued by the Secretary of the Department of Employment for this period. These arrangements were required because the FWBII was not listed as an entity under the PGPA Act 2013 when the Act came into force for all agencies on 1 July 2014.
Subsequent to the identification of this matter, the Minister of Finance lodged the Public Governance, Performance and Accountability Legislation Amendment (Office of the Fair Work Building Industry Inspectorate) Rule 2015 with effect from 1 February 2015. This Rule amended the:
- Public Governance, Performance and Accountability (Consequential and Transitional Provisions) Rule 2014; and
- Public Governance, Performance and Accountability Rule 2014
to include FWBII as a ‘listed entity’ for the purposes of the PGPA Act. FWBII regained access to the appropriation funding made available through the Appropriation Acts and exercised financial delegations through the Accountable Authority of FWBII – the Director.
FWBII has prepared the 2014-15 financial in accordance with the requirements of the PGPA Act. The financial statements reflect all transactions incurred by the agency under the control of the Accountable Authority during the reporting period, including the period where funding was received from the Portfolio Department on the basis that:
- the activities of FWBII continued on a business as usual basis under the direction of the Director;
- there was no stated intention that the agency should restructure;
- there was no transfer of employees under the Public Service Act 1999 to the Department of Employment; and
- the arrangement to receive funding for through the portfolio department was administrative in nature.
The appropriation as made in the 2014-15 Appropriation Acts for FWBII, was reduced by $19.322m, through a determination under Section 51 of the PGPA Act on 3 June 2015, by a delegate of the Minister for Finance. Further details of this reduction are available in Note 23A.
The effect of this reduction in appropriations was offset by funding drawn from the Department of Employment ($19.315m). This has been disclosed as ‘Revenue from Government, in the Schedule of Comprehensive Income, further details are available in Note 5C.
Administered revenues, expenses, assets, liabilities and cash flows reported in the financial statements (and related notes) are accounted for on the same basis and using the same policies as for departmental items, except where otherwise stated at Note 1.20.
1.3 Significant Accounting Judgements and Estimates
No accounting judgements or estimates have been identified that have a significant risk of causing a material adjustment to carrying amounts of assets and liabilities within the next financial period.
1.4 New Australian 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 in the current reporting period.
The following new standard was issued prior to the signing of these statements by the Accoutnable Authority and the Chief Finance Officer, and was applicable to the current reporting period:
AASB 1055 Budgetary Reporting
The purpose of ths Budgetary Reporting standard is to specify budgetary disclosure requirements for public sector entities. In response to adopting this standard, Note 25 provides original budgeted financial statements along with the explanations of major variances between reported actuals and the corresponding budget amounts.
All other new, revised, amending standards and/or interpretations that were issued prior to the sign-off date and are applicable to the current reporting period did not have a material effect, and are not expected to have a future material effect, on the FWBII’s financial statements.
Future Australian Accounting Standard requirements
All new, revised, amending standards and/or interpretations that were issued prior to the sign-off date and are applicable to future reporting periods are not expected to have a future material impact on the FWBII’s finanical statements.
Revenue from the sale of goods is recognised when:
- the risks and rewards of ownership have been transferred to the buyer,
- the FWBII retains no managerial involvement or effective control over the goods,
- the revenue and transaction costs incurred can be reliably measured, and
- it is probable that the economic benefits associated with the transaction will flow to the FWBII.
Revenue from rendering of services is recognised by reference to the stage of completion of contracts at the reporting date. The revenue is recognised when:
- the amount of revenue, stage of completion and transaction costs incurred can be reliably measured; and
- the probable economic benefits associated with the transaction will flow to the FWBII.
The stage of completion of contracts at the reporting date is determined by reference to the proportion that costs incurred to date bear to the estimated total costs of the transaction.
Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any impairment allowance account. Collectability of debts is reviewed at end of the reporting period. Allowances are made when collectability of the debt is no longer probable.
Interest revenue is recognised using the effective interest method as set out in AASB 139 – Financial Instruments: Recognition and Measurement .
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 FWBII 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.
Parental Leave Payments Scheme
The FWBII offsets amounts received under the Parental Leave Payments Scheme (for payments to employees) by amounts paid to employees under that scheme, as these transactions are only incidental to the main revenue generating activities of the FWBII.
Resources Received Free of Charge
Resources received free of charge are recognised as gains when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. The use of these resources is recognised as an expense.
Resources received free of charge are recorded as either revenue or gains depending on their nature.
Contributions of assets at no cost of acquisition or for nominal consideration are recognised as gains at their fair value when the asset qualifies for recognition, unless received from another Government entity as a consequence of a restructuring of administrative arrangements (refer to Note 1.7).
Sale of Assets
Gains from the disposal of assets are recognised when control of the asset has passed to the buyer.
1.7 Transactions with the Government as Owner
Amounts appropriated which are designated as ‘equity injections’ for a year (less any formal reductions) and Departmental Capital Budgets (DCBs) are recognised directly in contributed equity in that year.
Restructuring of Administrative Arrangements
Net assets received from or relinquished to another Government entity under a restructuring of administrative arrangements are adjusted at their book value directly against contributed equity.
Other Distributions to Owners
The FRR require that distributions to owners be debited to contributed equity unless it is in the nature of a dividend.
1.8 Employee Benefits
Liabilities for ‘short-term employee benefits’ (as defined in AASB 119 – Employee Benefits ) and termination benefits expected within twelve months of the end of reporting period are measured at their nominal amounts.
The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.
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.
The liability for employee benefits includes provision for annual leave and long service leave. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken in future years by employees of the FWBII is estimated to be less than the annual entitlement for sick 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 FWBII’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 estimate of the present value of the long service leave liability takes into account attrition rates and pay increases through promotion and inflation using the shorthand method prescribed in the FRR.
Separation and Redundancy
Provision is made for separation and redundancy benefit payments. The FWBII recognises a provision for termination when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.
The FWBII’s staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS Accumulation Plan (PSSap) or other schemes.
The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap is a defined contribution scheme.
The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported in the Department of Finance’s administered schedules and notes.
The FWBII makes employer contributions to the employee’s superannuation schemes at rates determined by an actuary to be sufficient to meet the current cost to the Government. The FWBII 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 for the final fortnight of the year.
A distinction is made between finance leases and operating leases. FWBII does not have any finance leases. Operating lease payments are expensed on a straight-line basis which is representative of the pattern of benefits derived from the leased assets.
1.10 Borrowing Costs
All borrowing costs are expensed as incurred.
1.11 Fair Value Measurement
FWBII deems transfers between levels of the fair value hierarchy to have occurred at the end of the reporting period.
Cash is recognised at its nominal amount. Cash and cash equivalents includes:
- cash on hand,
- demand deposits in bank accounts with an original maturity of 3 months or less that are readily convertible to known amounts of cash and subject to insignificant risk of change in value, and
- cash in special accounts.
1.13 Financial Assets
The FWBII classifies its financial assets in the following categories:
- financial assets at fair value through profit or loss,
- held-to-maturity investments,
- available-for-sale financial assets, and
- loans and receivables.
The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Financial assets are recognised and derecognised upon trade date. The FWBII only holds loans and receivables.
Effective Interest Method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset or, where appropriate, a shorter period.
Income is recognised on an effective interest rate basis except for financial assets that are recognised at fair value through profit or loss.
Loans and Receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate.
Impairment of Financial Assets
Financial assets are assessed for impairment at each reporting period.
Financial assets held at amortised cost – if there is objective evidence that an impairment loss has been incurred for loans and receivables or held to maturity investments held at amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount is reduced by way of an impairment allowance account. The loss is recognised in the Statement of Comprehensive Income.
1.14 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’.
Other Financial Liabilities
Other 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 yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
Suppliers 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).
1.15 Contingent Assets and Contingent Liabilities
Contingent liabilties and contingent assets are not recognised in the statement of financial position but are reported in the notes. They may arise from uncertainty as to the existence of a liability or asset or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain and contingent liabilities are disclosed when the likelihood of settlement is greater than remote.
1.16 Acquisition of Assets
Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value plus transaction costs where appropriate.
Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and income at their fair value at the date of acquisition, unless acquired as a consequence of the restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amounts at which they were recognised in the transferor’s accounts immediately prior to the restructuring.
1.17 Leasehold Improvements, Plant and Equipment
Asset recognition threshold
Purchases of leasehold improvements, plant and equipment are recognised initially at cost in the statement of financial position, except for purchases costing less than:
- $20,000 for leasehold improvements (2014: $20,000); and
- $2,000 for all other classes (2014: $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).
Following initial recognition at cost, leasehold improvements, plant and equipment are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations were conducted with sufficient frequency to ensure that the carrying amounts of assets do not differ materially from the assets’ fair values as at the reporting date. The regularity of independent valuations depends upon the volatility of movements in market values for the relevant assets. The FWBII revalued its leasehold improvement assets at 30 June 2013.
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.
Depreciable leasehold improvements, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the FWBII using, in all cases, the straight-line method of depreciation.
Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate.
Depreciation rates applying to each class of depreciable assets are based on the following useful lives:
|Leasehold improvements||Lease term||Lease term|
|Plant and equipment||1 to 10 years||1 to 10 years|
All assets were assessed for impairment at 30 June 2015. Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount.
The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows, and the asset would be replaced if the FWBII were deprived of the asset, its value in use is taken to be its depreciated replacement cost.
An item of leasehold improvements, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.
The FWBII’s intangibles comprise internally developed software and purchased 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 forecast useful life. The useful lives of the FWBII’s software is 3 to 6 years (2014: 3 to 6 years).
All software assets were assessed for indications of impairment as at 30 June 2015.
The FWBII is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST). Revenues, expenses and assets are recognised net of GST except:
- where the amount of GST incurred is not recoverable from the Australian Taxation Office, and
- for receivables and payables.
1.20 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 below, 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.
Administered Cash Transfers to and from the Official Public Account
Revenue collected by the FWBII for use by the Government, rather than the FWBII, is administered revenue. Collections are transferred to the Official Public Account (OPA) maintained by the Department of Finance. These transfers to the OPA are adjustments to the administered cash held by the FWBII on behalf of the Government and are reported as such in the administered cash flows and in the administered reconciliation schedule.
All administered revenues are revenues relating to the course of ordinary activities performed by the FWBII on behalf of the Australian Government. As such, administered appropriations are not revenues of the individual entity that oversee distribution or expenditure of the funds as directed.
The FWBII can receive monies for court-awarded penalties under the Building and Construction Industry Improvement Act 2005, the Independent Contractors Act 2006 and the Fair Work Act 2009. Court awarded penalties are recognised when the court rules in favour of any claims initiated by the FWBII. Collectability of debts is reviewed at the reporting date. Impairment allowances are made when the collectability of the debt is judged to be less, rather than more, likely.
Loans and Receivables
Where receivables are not subject to concessional treatment, they are carried at amortised cost using the effective interest method. Gains and losses due to impairment, de-recognition and amortisation are recognised through profit or loss.