F1 Financial Management Analysis

General Overview

Objectives

The Education and Training Directorate works in partnership with parents and the community to ensure that all young people in the ACT learn, thrive and are equipped with the skills to lead fulfilling, productive and responsible lives. The Directorate works closely with other government agencies, education and training providers, business and industry to position the ACT as Australia's learning capital.

Services of the Directorate include the provision of public school education and early intervention education programs, regulation of education and care services, registration of non-government schools and home education and the planning and coordination of vocational education and training. High achievement for all students through connected and inclusive learning across all sectors of the education system is achieved through focussing on quality learning, inspirational teaching and leadership, high expectations and high performance, and improvement and innovation in business systems.

Risk Management

The development of the Directorate's annual Strategic Risk Management and Audit Plan identified risks that could impact on the Directorate's operations and objectives. The key risks provided below are medium to long-term risks that are monitored by the Directorate's executive and senior management.

Key risks, including mitigation strategies, are identified below:

  • Implementation of needs based funding for ACT public schools from 2015. The Directorate has commenced the project with appropriate resourcing and committee structures to oversee implementation of the project.
  • The MAZE Information Communication Technology (ICT) business system is an aging system. The Directorate is currently in the process of scoping an upgrade and transformation of the MAZE ICT system. The Directorate has the resourcing and appropriate structures to oversee the development and implementation of this project.
  • Implementation of the National Disability Insurance Scheme. A whole of ACT Government governance structure has been established including a task-force on which the Directorate is represented. An internal steering committee has been established within the Directorate to operate during the transition phase.
  • Compliance with legislative obligations is a priority for the Directorate. A legislative framework has been developed which includes guidance materials, monitoring and training for all Directorate staff.

Accounting Changes

There were a number of changes to Australian Accounting Standards which impact the 2013-14 Financial Statements. There were two significant changes to Australian Accounting Standards and associated disclosure requirements relevant to the Directorate's 2013-14 Financial Statements. In summary:

  • The application of AASB 13 Fair Value Measurement (AASB 13) applies to the valuation of land and buildings at school sites and childcare facilities, with increased disclosure requirements regarding the measurement of assets.
  • The revision of AASB 119 Employee Benefits (AASB 119) to include an amended definition of short-term employee benefits.  Short-term employee benefits are now defined as employee benefits expected to be wholly settled within twelve months after the end of the annual reporting period.  The amended change has been applied to both annual and long service leave. 

The changes to the method for calculating long service leave and annual leave liabilities are not material and therefore prior year comparative numbers have not been re-stated.

Directorate Financial Performance

The Directorate has managed its operations within the 2013-14 budgeted appropriation.  During the financial year, the Directorate achieved savings targets and in addition, internally managed cost pressures associated with workers' compensation premium costs.

The table below provides a summary of the financial operations based on the audited financial statements for 2012-13 and 2013-14.

Table F1.1 Net cost of services

Totals

Actual
2013-14
$m

Amended Budget1
2013-14
 $m
Actual
2012-13
$m
Total expenditure 691.3 698.3 656.9
Total own source revenue 2 40.7 37.8 37.9

Source: Education and Training Directorate
Notes:

  1. The Original Budget was amended to include funding for revised wage parameters provided through the 2013-14 2nd Appropriation Act.
  2. Relates to Total Revenue excluding Government Payment for Outputs.

Net Cost of Services

The Directorate's net cost of services for 2013-14 of $650.6 million was $9.8 million or 1.5 percent lower than the 2013-14 amended budget.  The lower than anticipated cost is primarily due to timing of course completions associated with Productivity Places Program and Vocational Education and Training Skills Reform National Partnerships. This position was further reduced by the revised Commonwealth grants for Universal Access and VET Skills Reform National Partnership Programs due to timing of receipts, combined with lower than anticipated depreciation mainly due to full depreciation of some ICT assets.

The lower than anticipated net cost of services was partially offset by increased costs associated with employee benefits primarily due to a higher than budgeted rate used to estimate the present value of future long service leave payments.

In comparison to 2012-13, the net cost of services increased by $31.6 million or 5.1 percent primarily relating to additional costs associated with enterprise bargaining agreements for teaching and non-teaching staff, an increase in teacher numbers to meet enrolment growth and increased employee benefits mainly due to wage increases and high present value factor to calculate the long service leave.

Operating Result

In 2013-14, the operating deficit for the Directorate was $74.6 million and was $3.6 million or 5.0 percent higher than the amended budget and $14.6 million or 24.0 percent higher than 2012-13.

The higher than anticipated operating deficit against the amended budget primarily relates to increased employee benefits cost as a result of higher than budgeted rate used to estimate the present value of future long service leave payments.  This is partially offset by lower than anticipated depreciation due to full depreciation of some ICT assets.

In comparison to 2012-13, the increase in the operating deficit of $14.6 million or 24 percent primarily relates to high levels of employee benefits mainly due to wage increases associated with the enterprise bargaining agreement and a higher rate used to estimate the present value of future long service leave payments.  This is further increased by expenditure associated with the Digital Education Revolution ICT program and repairs and maintenance through cash expenditure.

Total Revenue

Components of Revenue

The Directorate's revenue for 2013-14 totalled $616.8 million.  The main source of revenue for the Directorate is Government Payment for Outputs which provides 93% of the Directorate's Total Revenue.

Figure F1.1: Component of Revenue 2013-14

Graph showing component of revenue 2013-14

Source: Education and Training Directorate

The Directorate's revenue for 2013-14 totalled $616.8 million, which was $10.5 million or 1.7 percent lower than the amended budget. In comparison to the previous year, revenue increased by $19.8 million or 3.3%.The lower than anticipated revenue of $10.5 million compared to the amended budget primarily relates to the timing of course completions associated with Productivity Places Program and VET Skills Reform National Partnerships.  This position was further reduced by the revised Commonwealth grants for Universal Access and VET Skills Reform National Partnership Programs due to timing of receipts.

This is partially offset by increased revenue associated with higher than anticipated levels of international private students as well as increased revenue relating to Commonwealth Own Purpose programs for service provision.

The increased revenue from 2012-13 is primarily due to funding received for increased wages associated with the enterprise agreements for teaching andnon-teaching staff combined with increased funding for enrolment growth.

Total Expenditure

Components of Expenditure

Expenditure for the Directorate totalled $691.3 million for 2013-14.  As shown in Figure F1.2, the main components of expenditure are employee expenses, including superannuation, comprising 69 percent of total expenditure, depreciation comprising 10 percent of total expenditure and supplies and services and other expenses each comprising 9 percent of total expenditure.

Figure F1.2 Components of Expenditure 2013-14

Components of Expenditure 2013-14

Source: Education and Training Directorate

In 2013-14, total expenditure was $6.9 million or 1.0 per cent lower than the amended budget primarily due to timing of course completions associated with Productivity Places Program and VET Skills Reform National Partnerships.  This position was further reduced by lower than anticipated depreciation due to full depreciation of some ICT assets.
 
The lower than anticipated expenditure was partially offset by increased costs associated with employee benefits primarily due to a higher than budgeted rate used to estimate the present value of future long service leave payments.
 
Total expenditure was $34.4 million or 5.2 percent higher when compared to the previous year.  The increase mainly represented additional costs associated with new enterprise agreements for teaching and non-teaching staff, enrolment growth and increased employee benefits.

Table F1.2: Line item explanation of significant variances from the amended budget – Directorate operating statement   

Significant variances from the amended budget - Revenue Actual
2013-14 $m
Amended Budget
2013-14
$m1
Variance $m
Government payment for outputs2 576.0 589.4 (13.4)
User charges - ACT Government 0.4 0.4 0
User charges - non ACT Governmen3 17.1 15.5 1.6
Interest4 1.7 1.5 0.2
Resources received free of charge 0.5 0.4 0.1
Other revenue5 21.1 20.0 1.1
Total Revenue 616.8 627.2 (10.4)
Significant variances from the amended budget - Expenditure Actual
2013-14
$m
Amended Budget
2013-14
$m1
Variance $m
Employee expenses6 415.4 406.2 9.2
Superannuation expenses 61.3 60.2 1.1
Supplies and services7 64.9 69.3 (4.4)
Depreciation8 ; 65.0 68.6 (3.6)
Grants and purchased services9 ; 22.0 30.9 (8.9)
Other10 62.7 63.0 (0.3)
Total Expenses 691.3 698.2 (6.9)

Souce: Education and Training Directorate

Notes:

  1. The original budget was amended to reflect the second supplementary appropriation associated with non-teaching enterprise agreement.
  2. Lower than anticipated Government Payments for Outputs primarily related to the timing of course completions for the Productivity Places Program and VET Skills Reform National Partnership Programs. The funding for these programs has been transferred to 2014-15.
  3. Higher than anticipated revenue primarily related to increase in international private students and Commonwealth Own Purpose grants relating to the Residence Determination Program.
  4. Higher than anticipated interest primarily related to increased school bank balances.  The increased bank balances resulted from the timing of expenditure associated with National Partnership Programs as schools operate on a calendar year basis.
  5. Higher than anticipated revenue mainly related to regulatory fees collected by the Teacher Quality Institute for teacher registration, and revenue relating to excursions.
  6. Higher than anticipated costs primarily relating to increased employee benefits as a result of a higher than budgeted rate used to estimate the present value of future long service leave payments, and increased long service leave accruals due to staff not accessing accrued entitlements.
  7. Lower than anticipated expenditure mainly due to late receipt of National Partnership Program funding relating to Improving Teacher Quality, combined with timing of expenditure associated with the implementation of the needs based funding model.
  8. Lower than anticipated depreciation mainly due to full depreciation of some ICT assets.  Forward estimates have been adjusted for this impact.
  9. Lower than anticipated grants and purchased services primarily related to the timing of expenditure associated with the Productivity Places Program and Vocational Educational and Skills Reform National Partnership.
  10. Lower than anticipated expenditure mainly related to the timing of schools excursion costs as schools operate on a calendar year basis.

Financial Position

Total Assets

Components of Total Assets

The Directorate held 96 percent of its assets in property, plant and equipment including capital works in progress and 4 percent related to cash and cash equivalents, receivables and other current assets.

Figure F1.3 Total Assets as at 30 June 2014

Graph showing total assets as at 30 June 2014

Source: Education and Training Directorate

Comparison to Budget

In 2013-14, the Directorate's assets totalled $1928.7 million, which was $154.8 million or 7.4 percent lower than the amended budget.  The decrease was primarily due to the impact of asset revaluation combined with timing of expenditure associated with capital works projects.  The timing of expenditure related to capital works projects primarily resulted from delays in awarding construction tenders and scoping and design of childcare projects.

This was partially offset by increased cash at bank due to the timing of expenditure associated with the ICT projects, back payment of wages and salaries relating to non teaching staff and schools expenditure relating to national partnership programs, students with disabilities and professional development.

In comparison to 2012-13, total assets decreased by $129.6 million or 6.3 percent primarily due to the impact of asset revaluation combined with the timing of expenditure associated with the capital works projectsas discussed above.

Financial Position

Components of Total Liabilities

The Directorate's liabilities comprised employee benefits, payables, finance leases and other borrowings. The majority of the Directorate's liabilities related to employee benefits (90 percent) and payables and other liabilities (10 percent).

Figure F1.4: Total liabilities as at 30 June 2014

Graph showing total liabilities as at 30 June 2014

Source: Education and Training Directorate

As at 30 June 2014, the Directorate's liabilities totalled $161.9 million. This was $18.8 million or 13.1 percent higher than the amended budget, primarily relating to an increase in employee benefits associated with the increase in the rate used to estimate the present value of long service leave payments and the impact of increased long service leave accruals.

In comparison to 2012-13, total liabilities increased by $23.5 million or 17 percent primarily associated with employee benefits due to the impact of teaching and non-teaching enterprise agreements and the increase in rate used to estimate the present value of long service leave payments and increased long service leave accruals.

Current Assets to Current Liabilities

As at 30 June 2014, the Directorate's current assets were lower than its current liabilities.  The Directorate does not consider this as a liquidity risk as cash needs are funded through appropriation from the ACT Government on a cash needs basis.

It is important to note that the Directorate's current liabilities primarily relate to employee benefits, and while the majority are classified under a legal entitlement as current, the estimated amount payable within 12 months is significantly smaller and can be achieved within current assets. In addition, in the event of high termination levels requiring significant payment for leave balances, the Directorate is able to meet its obligations through section 16A of the Financial Management Act 1996.

Table F1.3: Line item explanation of significant variances from the amended budget - Directorate balance sheet

Significant Variance from budget
Current assets
Actual
2013-14
$m
Amended Budget
2013-14
$m1
2012-13 
$m
Variance
$m
Cash and cash equivalents2 70.2 51.0 19.2
Receivables3 4.3 4.6 (0.3)
Other current assets4 1.0 2.6 (1.6)
Significant Variance from budget
Non-current assets;
Actual
2013-14
$m
Amended Budget
2013-14
$m1
2012-13
$m 
Variance
$m
Investment 1.8 1.8 0
Property, plant and equipment5 1,834.7 2,005.3 (170.6)
Capital works in progress (WIP)2 ; 16.2 17.9 (1.7)
Significant Variance from budget
Current liabilities
Actual
2013-14
$m
Amended Budget
2013-14
$m1
2012-13 
$m
Variance
$m
Payables7 8.5 8.6 (0.1)
Finance leases 0.1 0.1 0.0
Employee benefits8 132.4 118.7 13.7
Other 5.7 3.9 1.8
Significant Variance from budget
Non-current liabilities
Actual
2013-14
$m
Amended Budget
2013-14
$m1
2012-13 
$m
Variance
$m
Finances leases 0.1 0.0 0.1
Employee benefits8 12.6 11.7  0.9
Other borrowings 2.6 0.1 2.5

Source: Education and Training Directorate 

Notes:

  1. The amended budget was adjusted to reflect the second supplementary appropriation for Coombs P-6 (Primary) School Construction.
  2. Higher than anticipated cash primarily related to the timing of expenditure associated with ICT projects and back payment of wages and salaries relating to non teaching staff.  This is further combined with increased schools bank balances mainly due to the timing of expenditure relating to National Partnerships Programs, students with a disability and professional development noting that schools operate on a calendar year.
  3. Marginally lower than budgeted receivable associated with the input tax credit from the Australian Taxation Office relating to expenditure in June.
  4. Primarily related to the timing of prepayments for vocational educational and training grants.
  5. Lower than budgeted property, plant and equipment is primarily due to a decrease associated with the revaluation of the Directorate's land and building assets and delay of capital works to 2014-15 mainly associated with Trade Training Centres and other capital projects.  The delay of capital works to 2014-15 was primarily due to delay in scoping and design of childcare projects and advance receipt of Commonwealth funds for Trade Training Centre.
  6. Marginally lower than anticipated capital works in progress primarily due to the timing of expenditure associated with Coombs Primary School.
  7. Higher than anticipated payables primarily related to capital works accruals for Information Communication and Technology (ICT) projects due to the timing of invoice receipts.
  8. Higher than anticipated employee benefits was mainly associated with an increase in the discount rate used to calculate the estimates for long service leave and annual leave, and increased long service leave accruals.

Territorial Statement of Revenue and Expenses

Territorial Revenue

Total income received included revenue for expenses on behalf of the Territory, primarily for the provision of grants to non-government schools.

Figure F1.5: Sources of Territorial revenue 

Graph showing sources of Territorial revenue

Source: Education and Training Directorate

Territorial revenue mainly comprised funding for non-government schools from the Commonwealth and ACT Governments.  It also included ACT Government funding for the Secondary Bursary Scheme and Block Release Programs.

Territorial revenue totalled $220.7 million in 2013-14, which was $1.5 million or 1 percent lower than the budget. The lower than anticipated revenue primarily related to the transfer of the Interest Subsidy Scheme funds to 2014-15.

When compared to the same period last year, total revenue increased by $17.8 million or 9 per cent mainly due to higher levels of general recurrent grants for non-government schools reflecting the impact of indexation and enrolment growth.

Territorial Expenditure

Territorial expenditure other than transfers of fees to the Territorial Banking Account comprised of grant payments to non-government schools ($220.0 million), the Bursary Scheme ($0.6 million) and Block Release grants ($0.1 million).

The lower than anticipated expenditure primarily related to the transfer of the Interest Subsidy Scheme funds to 2014-15.

Total expenditure increased by $17.8 million or 9 percent from the corresponding period last year mainly due to higher levels of general recurrent grants for non-government schools reflecting the impact of indexation and enrolment growth.


For further information contact:
Chief Finance Officer
Strategic Finance
(02) 6205 5338