ContentAccountable Officer’s and Chief Finance and Accounting Officer’s Declaration.............................................2Independent Auditor’s Report..........................................................................................................................3Comprehensive operating statement...............................................................................................................5Balance sheet..................................................................................................................................................6Statement of changes in equity.......................................................................................................................7Cash flow statement........................................................................................................................................8Notes to the financial statements.....................................................................................................................9

Note 1. Summary of significant accounting policies.....................................................................................9Note 2. Departmental (controlled) outputs.................................................................................................28Note 3. Administered (non-controlled) items..............................................................................................33Note 4. Income from transactions..............................................................................................................35Note 5. Expenses from transactions..........................................................................................................35Note 6. Other economic flows included in net result..................................................................................37Note 7. Restructuring of administrative arrangements...............................................................................37Note 8. Receivables...................................................................................................................................39Note 9. Investments and other financial assets..........................................................................................40Note 10. Inventories...................................................................................................................................40Note 11. Non-financial physical assets classified as held for sale.................................................................41Note 12. Property, plant and equipment.....................................................................................................42Note 13. Intangible assets..........................................................................................................................46Note 14. Payables......................................................................................................................................46Note 15. Borrowings...................................................................................................................................47Note 16. Provisions....................................................................................................................................48Note 17. Superannuation............................................................................................................................50Note 18. Leases.........................................................................................................................................51Note 19. Commitments for expenditure......................................................................................................52Note 20. Contingent assets and contingent liabilities.................................................................................54Note 21. Financial instruments...................................................................................................................54Note 22. Cash flow information..................................................................................................................63Note 23. Physical asset revaluation surplus...............................................................................................65Note 24. Summary of compliance with annual parliamentary appropriations and special appropriations. 66Note 25. Ex-gratia expenses......................................................................................................................69Note 26. Annotated income agreements....................................................................................................69Note 27. Trust account balances................................................................................................................70Note 28. Responsible persons...................................................................................................................73Note 29. Remuneration of executives and payments to other personnel...................................................74Note 30. Remuneration of auditors............................................................................................................75Note 31. Glossary of terms and style conventions.....................................................................................75

Accountable Officer’s and Chief Finance and Accounting Officer’s DeclarationThe attached financial statements for the Department of Justice and Regulation have been prepared in accordance with Direction 4.2 of the Standing Directions of the Minister for Finance under the Financial Management Act 1994, applicable Financial Reporting Directions, Australian Accounting Standards including Interpretations and other mandatory professional reporting requirements.

We further state that, in our opinion, the information set out in the comprehensive operating statement, balance sheet, statement of changes in equity, cash flow statement and notes forming part of the financial statements, presents fairly the financial transactions during the year ended 30 June 2016 and financial position of the department as at 30 June 2016.

At the time of signing, we are not aware of any circumstance which would render any particulars included in the financial statements to be misleading or inaccurate.

We authorise the attached financial statements for issue on 10 October 2016.

Shaun CondronChief Finance OfficerDepartment of Justice and Regulation

Melbourne10 October 2016

Greg WilsonSecretaryDepartment of Justice and Regulation

Melbourne10 October 2016

Independent Auditor’s ReportTo the Secretary, Department of Justice and Regulation

Level 24, 35 Collins StreetMelbourne VIC 3000Telephone 61 3 8601 7000

Facsimile 61 3 8601 7010Website www.audit.vic.gov.au

VAGOVictorian Auditor-General’s Office

The Financial ReportI have audited the accompanying financial report for the year ended 30 June 2016 of the Department of Justice and Regulation which comprises the comprehensive operating statement, balance sheet, statement of changes in equity, cash flow statement, notes comprising a summary of significant

accounting policies and other explanatory information, and the accountable officer’s and chief finance and accounting officer’s declaration.

The Secretary ‘s Responsibility for the Financial Report

The Secretary of the Department of Justice and Regulation is responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards, and the financial reporting requirements of the Financial Management Act 1994, and for such internal control as the Secretary determines is necessary to enable the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s ResponsibilityAs required by the Audit Act 1994, my responsibility is to express an opinion on the financial report based on the audit, which has been conducted in accordance with Australian Auditing Standards. Those standards require compliance with relevant ethical requirements relating to audit engagements and that the audit be planned and performed to obtain reasonable assurance about whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The audit procedures selected depend on judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, consideration is given to the internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but riot for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the Secretary, as well as evaluating the overall presentation of the financial report.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

IndependenceThe Auditor-General’s independence is established by the Constitution Act 1975. The Auditor-General is not subject to direction by any person about the way in which his powers and responsibilities are to be exercised. In conducting the audit, I and my staff and delegates have complied with the applicable independence requirements of the Australian Auditing Standards and relevant ethical pronouncements.

OpinionIn my opinion, the financial report presents fairly, in all material respects, the financial position of the

Department of Justice and Regulation as at 30 June 2016 and its financial performance and its cash flows for the year then ended in accordance with applicable Australian Accounting Standards, and the financial reporting requirements of the Financial Management Act 1994.

MELBOURNE

11 October 2016

Andrew GreavesAuditor-General

Comprehensive operating statementfor the financial year ended 30 June 2016

Note2016$’000

2015$’000

Income from transactionsOutput appropriations 24(a) 5,506,669 5,129,248Special appropriations 24(b) 3,947 49,171Interest 4(a) 35,308 39,579Grants 4(b) 7,775 3,976Other income (i) 4(c) 63,557 61,304

Total income from transactions (i) 5,617,256 5,283,278

Expenses from transactionsEmployee expenses 5(a) (682,296) (605,223)Depreciation and amortisation (i) 5(b) (108,626) (96,576)Interest expense 5(c) (20,678) (21,542)Grants and other transfers 5(d) (3,906,440) (3,743,721)Capital asset charge (ii) (133,421) (102,213)Supplies and services (i) 5(e) (756,046) (708,534)

Total expenses from transactions (i) (5,607,507) (5,277,809)

Net result from transactions (net operating balance) (i) 9,749 5,469

Other economic flows included in net resultNet gain/(loss) on non-financial assets (iii) 6(a) (2,204) (11,970)Net gain/(loss) on financial instruments (iv) 6(b) 1,421 710Other gains/(losses) from other economic flows 6(c) (1,584) (2,644)

Total other economic flows included in net result (2,367) (13,904)

Net result (i) 7,382 (8,435)

Other economic flows - other comprehensive incomeItems that will not be reclassified to net resultChanges in physical asset revaluation surplus 23 82,784 (5,000)

Total other economic flows - other comprehensive income 82,784 (5,000)

Comprehensive result (i) 90,166 (13,435)(i) The 2014-15 comparative has been adjusted (refer to note 1V).(ii) Further information on the capital asset charge is provided in note 1G.(iii) Includes realised gains/(losses) from impairments and disposals of physical assets and intangible assets.(iv) Includes bad and doubtful debts from other economic flows, and realised and unrealised gains/(losses) from financial instruments.The above comprehensive operating statement should be read in conjunction with the accompanying notes included on pages 74 to 147.

Balance sheetas at 30 June 2016

Note2016

$’0002015$’000

Assets

Financial assetsCash and deposits 22(a) 255,471 280,556Receivables 8 744,956 848,863Investments and other financial assets 9 271,180 233,564

Total financial assets 1,271,607 1,362,983

Non-financial assetsPrepayments 14,373 2,435Inventories 10 7,397 6,932Non-financial physical assets classified as held for sale 11 746 1,608Property, plant and equipment (i) 12 2,134,113 2,202,701Intangible assets 13 11,805 20,649

Total non-financial assets (i) 2,168,434 2,234,325

Total assets (i) 3,440,041 3,597,308

LiabilitiesPayables 14 618,195 724,790Borrowings 15 188,765 200,671Provisions 16 177,966 159,578

Total liabilities 984,926 1,085,039

Net assets (i) 2,455,115 2,512,269

Equity (ii)

Accumulated surplus/(deficit) (i) 1,086,945 1,008,781Physical asset revaluation surplus 23 615,233 603,231Contributed capital (i) 752,937 900,257

Net worth (i) 2,455,115 2,512,269

Commitments for expenditure 19Contingent assets and contingent liabilities 20(i) The 2014-15 comparative has been adjusted (refer to note 1V).(ii) Refer to the Statement of Changes in Equity for movements in the equity amounts.The above balance sheet should be read in conjunction with the accompanying notes included on pages 74 to 147.

Statement of changes in equityfor the financial year ended 30 June 2016

($’000)

Note

Physical asset revaluation

surplus

Accumulated surplus /

(deficit)Contributed

Capital Total

Balance at 1 July 2014 (i) 957,633 667,814 1,084,939 2,710,386Net result for the year (i) 0 (8,435) 0 (8,435)Other comprehensive income for the year 23 (5,000) 0 0 (5,000)

Transfer to accumulated surplus 23 (349,402) 349,402 0 0Transactions with the State in its capacity as owners 0 0 554,612 554,612

Capital contribution passed onto agencies within the Justice Portfolio 0 0 (83,280) (83,280)

Equity transfer within Government 0 0 (26,266) (26,266)Administrative restructure - net assets transferred 7 0 0 (627,203) (627,203)

Prior period adjustment (i) 1V 0 0 (2,545) (2,545)Balance at 30 June 2015 (i) 603,231 1,008,781 900,257 2,512,269

Net result for the year 0 7,382 0 7,382Other comprehensive income for the year (ii) 23 82,784 0 0 82,784

Transfer to accumulated surplus (ii) 23 (70,782) 70,782 0 0Transactions with the State in its capacity as owners 0 0 128,597 128,597

Capital contribution passed onto agencies within the Justice Portfolio 0 0 (27,091) (27,091)

Equity transfer within Government 0 0 (195,390) (195,390)Administrative restructure - net assets transferred 7 0 0 (53,436) (53,436)

Balance at 30 June 2016 615,233 1,086,945 752,937 2,455,115

(i) The 2014-15 comparative has been adjusted (refer to note 1V).(ii) The physical asset revaluation surplus relating to assets transferred to Court Services Victoria under a restructure of administrative arrangements (refer to note 7) and the Victorian Institute of Forensic Medicine under another arrangement has been reclassified to accumulated surplus (refer to note 23). The resulting net change in the physical asset revaluation surplus of $70.782 million in 2015-16 and $349.402 million in 2014-15 does not affect the Comprehensive Operating Statement, but is reflected in the Statement of Changes in Equity. The remaining net change in the physical asset revaluation surplus of $82.784 million in 2015-16 mainly relates to the revaluation of the department’s land and building assets, which does affect and is reflected in the Comprehensive Operating Statement.The above statement of changes in equity should be read in conjunction with the accompanying notes included on pages 74 to 147.

Cash flow statementfor the financial year ended 30 June 2016

Note2016$’000

2015$’000

Cash flows from operating activities

ReceiptsReceipts from Government 5,468,426 5,133,260Receipts from other entities 7,775 3,976Goods and services tax recovered from the ATO (i) 98,687 118,665Interest received 35,446 41,281Dividends received 11,023 10,059Other receipts 62,617 32,902

Total receipts 5,683,974 5,340,143

PaymentsPayments of grants and other transfers (3,906,440) (3,743,720)Payments to suppliers and employees (ii) (1,513,313) (1,385,954)Capital asset charge payments (133,421) (102,213)Interest and other costs of finance paid (20,678) (21,542)

Total payments (ii) (5,573,852) (5,253,429)

Net cash flows from/(used in) operating activities (ii) 22(b) 110,122 86,714

Cash flows from investing activitiesPayments for investments (130,121) (87,229)Proceeds from sale of investments 119,484 103,522Purchases of non-financial assets (ii) (298,910) (411,723)Sales of non-financial assets 4,125 3,281

Net cash flows from/(used in) investing activities (ii) (305,422) (392,149)

Cash flows from financing activitiesOwner contributions by State Government 234,846 457,398Capital contribution passed on to agencies with government (27,091) (83,280)Equity transfers within government (25,777) (27,429)Proceeds from borrowings 6,320 5,314Repayment of borrowings and finance leases (18,083) (16,527)

Net cash flows from/(used in) financing activities 170,215 335,476

Net increase/ (decrease) in cash and cash equivalents (25,085) 30,041Cash and cash equivalents at beginning of financial year 280,556 250,515Cash and cash equivalents at end of financial year 22(a) 255,471 280,556

Reconciliation of non-cash transactions are disclosed in note 22(b).(i) GST received from ATO is presented on a net basis.(ii) The 2014–15 comparative has been adjusted (refer to note 1V)The above cash flow statement should be read in conjunction with the accompanying notes included on pages 74 to 147.

Notes to the financial statementsfor the financial year ended 30 June 2016

Note 1. Summary of significant accounting policiesThese annual financial statements represent the audited general purpose financial statements for the Department of Justice and Regulation (the department) for the year ended 30 June 2016. The purpose of the report is to provide users with information about the department’s stewardship of resources entrusted to it.

(A) Statement of complianceThese general purpose financial statements have been prepared in accordance with the Financial Management Act 1994 (FMA) and applicable Australian Accounting Standards (AAS), including 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 AAS paragraphs applicable to not-for-profit entities have been applied.

Accounting policies are selected and applied in a manner which ensures 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.

To gain a better understanding of the terminology used in these financial statements, a glossary of terms and style conventions can be found in note 31.

These annual financial statements were authorised for issue by the Secretary of the Department of Justice and Regulation on 10 October 2016.

(B) Basis of accounting preparation and measurementThe 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. The only exception is for special appropriation revenue, which is recognised on a cash basis when the amount appropriated for a specific purpose is received by the department.

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 that are affected by the revision. Judgements and assumptions made by management in the application of AASs that have significant effects on the financial statements and estimates relate to: the fair value of land, buildings, plant and equipment (refer to note 1(L)); superannuation expense (refer to note 1(G)); assumptions for employee benefit provisions based on likely tenure of existing staff, patterns of leave

claims, future salary movements and future discount rates (refer to note 1(M)); assumptions for other provisions based on updated mortality and financial (discount rate and indexation)

assumptions (refer to note 1(M)); and the estimated useful life of property, plant and equipment and intangible assets (refer to note 1(G)).

These financial statements are presented in Australian dollars, and prepared in accordance with the historical cost convention except for: non-financial physical assets which, subsequent to acquisition, are measured at a revalued amount

being their fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent impairment losses. Revaluations are made with sufficient regularity to ensure that the carrying amounts do not materially differ from their fair value.

managed investment schemes after initial recognition, which are measured at fair value with changes

reflected in the comprehensive operating statement (fair value through profit or loss).

Consistent with AASB 13 Fair Value Measurement, the department determines the policies and procedures for both recurring fair value measurements such as property, plant and equipment, and financial instruments and for non-recurring fair value measurements such as non-financial physical assets held for sale, in accordance with the requirements of AASB 13 and the relevant Financial Reporting Directions.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value

measurement is directly or indirectly observable; and Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value

measurement is unobservable.

For the purpose of fair value disclosures, the department has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

In addition, the department determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The Valuer-General Victoria (VGV) is the department’s independent valuation agency.

The department, in conjunction with VGV, monitors changes in the fair value of each asset and liability through relevant data sources to determine whether revaluation is required.

(C) Reporting entityThe financial statements cover the department as an individual reporting entity. The department is a government department of the State of Victoria, established pursuant to an order made by the Premier under the Administrative Arrangements Act 1983.

The department is an administrative agency acting on behalf of the Crown.

The financial statements include all the controlled activities of the department.

The office of the Road Safety Camera Commissioner has been consolidated into the department’s financial statements pursuant to a determination, dated 16 July 2012, made by the Minister for Finance under section 53(1)(b) of the Financial Management Act 1994 (Act No.18).

The office of the Fire Services Levy Monitor, which ceased operations on 31 December 2014, has been consolidated into the department’s financial statements pursuant to a determination, dated 23 May 2013, made by the Minister for Finance under section 53(1)(b) of the Financial Management Act 1994 (Act No.18).

A number of entities within the Justice Portfolio, which report separately, receive regular grants or transfer payments from the department (refer note 5). These are: Country Fire Authority Emergency Services Telecommunications Authority Freedom of Information Commissioner (transferred to Department of Premier and Cabinet on 1 January

2015) Independent Broad-based Anti-corruption Commission (transferred to Department of Premier and

Cabinet on 1 January 2015) Metropolitan Fire and Emergency Services Board Office of Public Prosecutions Office of Victorian Privacy Commissioner (ceased operations on 16 September 2014) Office of Commissioner for Privacy and Data Protection (commenced operations on 17 September 2014

and transferred to Department of Premier and Cabinet on 1 January 2015) Sentencing Advisory Council

Victorian Inspectorate (transferred to Department of Premier and Cabinet on 1 January 2015) Victoria Legal Aid Victoria Police Victorian Commission for Gambling and Liquor Regulation Victorian Electoral Commission (transferred to Department of Premier and Cabinet on 1 January 2015) Victorian Equal Opportunity and Human Rights Commission Victorian Institute of Forensic Medicine Victorian Responsible Gambling Foundation Victoria State Emergency Service Authority

The following organisations also form part of the Justice Portfolio and they report separately but do not receive regular grants or transfer payments from the department: Greyhound Racing Victoria Harness Racing Victoria Legal Practitioners Liability Committee Victorian Legal Services Board Victorian Legal Services Commissioner Professional Standards Council Residential Tenancies Bond Authority Victorian Law Reform Commission

A description of the nature of the department’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 department’s key objectives: improving community safety through policing, law enforcement and prevention activities; supporting the rule of law; protecting individual rights and personal identity; promoting community safety through effective management of prisoners and offenders and provision of

opportunities for rehabilitation and reparation; minimising injury and property loss through a coordinated and integrated emergency response; and promoting responsible industry behaviour and an informed community through effective regulation,

education, monitoring and enforcement.

The department is predominantly funded by accrual based parliamentary appropriations for the provision of outputs.

Outputs of the department

Information about the department’s output activities, and the expenses, income, assets and liabilities, which are reliably attributable to those output activities, is set out in the output activities schedule (note 2). Information about expenses, income, assets and liabilities administered by the department are given in the schedule of administered income and expenses and the schedule of administered assets and liabilities (note 3).

(D) Basis of consolidationIn accordance with AASB 10 Consolidated Financial Statements: The financial statements of the department include all reporting entities controlled by the department as

at 30 June 2016; The financial statements of the department also include entities that have a current determination under

section 53(1)(b) of the Financial Management Act 1994 (Act No. 18).

The financial statements exclude bodies within the department’s portfolio that are not controlled by the department and therefore are not consolidated. Bodies and activities that are administered (see explanation below under administered items) are also not controlled and not consolidated.

Where control of an entity is obtained during the financial period, its results are included in the comprehensive operating statement from the date on which control commenced. Where control ceases during a financial period, the entity’s results are included for that part of the period in which control existed. Where dissimilar accounting policies are adopted by entities and their effect is considered material, adjustments are made to ensure consistent policies are adopted in these financial statements.

In the process of preparing financial statements for the department, all material transactions and balances between consolidated entities are eliminated.

Administered items

Certain resources are administered by the department on behalf of the State. While the department is accountable for transactions involving administered items, it does not have the discretion to deploy the resources for its own benefit or the achievement of the department’s objectives. Accordingly, transactions and balances relating to administered items are not recognised as departmental income, expenses, assets or liabilities within the body of the financial statements.

Administered income includes taxes, fees and fines. Administered assets include government income earned but yet to be collected. Administered liabilities include government expenses incurred but yet to be paid.

Except as otherwise disclosed, administered resources are accounted for on an accrual basis using the same accounting policies adopted for recognition of the departmental items in the financial statements. Both controlled and administered items of the department are consolidated into the financial statements of the State. Disclosures related to administered items can be found in note 3.

Funds held in trust

Other trust activities on behalf of parties external to the Victorian Government

The department has responsibility for transactions and balances relating to trust funds on behalf of third parties external to the Victorian Government. Income, expenses, assets and liabilities managed on behalf of third parties are not recognised in these financial statements as they are managed on a fiduciary and custodial basis, and therefore are not controlled by the department or the Victorian Government. These transactions and balances are reported in note 27.

(E) Scope and presentation of financial statements

Comprehensive operating statement

The comprehensive operating statement comprises three components, being ‘net result from transactions’ (or termed as ‘net operating balance’), ‘other economic flows included in net result’, as well as ‘other economic flows – other comprehensive income’. The sum of the former two represents the net result.

The net result is equivalent to profit or loss derived in accordance with Australian Accounting Standards (AAS).

This classification is consistent with the whole of government reporting format and is allowed under AASB 101 Presentation of Financial Statements.

‘Transactions’ are those economic flows that are considered to arise as a result of 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 (e.g. assets provided / given free of charge or for nominal consideration) or where the financial consideration is cash.

‘Other economic flows’ are changes arising from market re-measurements. They include gains and losses from disposals of non-financial assets; revaluations and impairments of non-financial physical and intangible assets; and fair value changes of financial instruments.

Balance sheet

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

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

Statement of changes in equity

The statement of changes in equity presents reconciliations of non-owner and owner changes in equity from opening balance at the beginning of the reporting period to the closing balance at the end of the reporting period. It also shows separately changes due to amounts recognised in the ‘comprehensive result’ and amounts related to ‘transactions with owner in its capacity as owner’.

Cash flow statement

Cash flows are classified according to whether they arise from operating, investing, or financing activities. This classification is consistent with requirements under AASB 107 Statement of cash flows.

For cash flow statement presentation purposes, cash and cash equivalents include bank overdrafts, which are included as borrowings on the balance sheet.

Rounding

Amounts in the financial statements (including the notes) have been rounded to the nearest thousand dollars, unless otherwise stated. Figures in the financial statements may not equate due to rounding.

(F) Income from transactionsIncome 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 at fair value.

Appropriation income

Appropriated income becomes controlled and is recognised by the department when it is appropriated from the consolidated fund by the Victorian Parliament and applied to the purposes defined under the relevant appropriations act. Additionally, the department is permitted under section 29 of the Financial Management Act 1994 to have certain income annotated to the annual appropriation. The income which forms part of a section 29 agreement is recognised by the department and the receipts paid into the consolidated fund as an administered item. At the point of income recognition, section 29 provides for an equivalent amount to be added to the annual appropriation. Examples of receipts which can form part of a section 29 agreement are Commonwealth specific purpose grants, the proceeds from the sale of assets, and income from the sale of products and services.

Where applicable, amounts disclosed as income are net of returns, allowances, duties and taxes. All amounts of income over which the department does not have control are disclosed as administered income in the schedule of administered income and expenses (see note 3). Income is recognised for each of the department’s major activities as follows:

Output appropriations

Income from the outputs the department provides to government is recognised when those outputs have been delivered and the relevant Minister has certified delivery of those outputs in accordance with specified performance criteria.

Special appropriations

Special appropriation revenue is recognised on a cash basis when the amount appropriated for a specific purpose is received by the department. Refer to note 24(b) for a listing of special appropriation funding received by the department and an outline of their specific purposes.

Interest

Interest income includes interest received on bank term deposits and other investments. Interest income is recognised using the effective interest method which allocates the interest over the relevant period.

Net realised and unrealised gains and losses on the revaluation of investments do not form part of income from transactions, but are reported either as part of income from other economic flows in the net result or as unrealised gains and losses taken directly to equity, forming part of the total change in net worth in the comprehensive result.

Grants

Income from grants (other than contribution by owners) is recognised when the department obtains control over the contribution.

Where such grants are payable into the consolidated fund, they are reported as administered income (refer to note 1(D) and (I)). For reciprocal grants (i.e. equal value is given back by the department to the provider), the department is deemed to have assumed control when the department has satisfied its performance obligations under the terms of the grant. For non-reciprocal grants, the department is deemed to have assumed control when the grant is receivable or received. Conditional grants may be reciprocal or non-reciprocal depending on the terms of the grant.

Other income

Other income includes income from fines and regulatory fees, dividends from investments, and fair value of assets received free of charge or for nominal consideration.

Dividends from investments

Dividend income is recognised when the right to receive payment is established.

Fair value of assets received free of charge or for nominal consideration

Contributions of resources received free of charge or for nominal consideration are recognised at their fair value when control is obtained over them, irrespective of whether these contributions are subject to restrictions or conditions over their use.

(G) Expenses from transactionsExpenses from transactions are recognised as they are incurred, and reported in the financial year to which they relate.

Employee expenses

Refer to the section in Note 1(M) regarding employee benefits.

These expenses include all costs related to employment including wages and salaries, superannuation, fringe benefits tax, leave entitlements, redundancy payments and WorkCover premiums.

Superannuation

The amount recognised in the comprehensive operating statement is the employer contributions for members of both defined benefit and defined contribution superannuation plans that are paid or payable during the reporting period.

The Department of Treasury and Finance (DTF) in their annual financial statements, recognises on behalf of the State as the sponsoring employer, the net defined benefit cost related to the members of these plans. Refer to DTF’s annual financial statements for more detailed disclosures in relation to these plans.

Depreciation and amortisation

All buildings, plant and equipment and other non-financial physical assets (excluding items under operating leases, and assets held for sale) that have finite useful lives are depreciated. Depreciation is generally calculated on a straight-line basis, at rates that allocate the asset’s value, less any estimated residual value, over its estimated useful life. Refer to note 1(L) for the depreciation policy for leasehold improvements.

The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, and adjustments made where appropriate.

The following are the useful lives for the different asset classes for current and prior years.

Asset Useful lifeBuildings 5 to 47 years

Leasehold buildings 20 to 34 years

Leasehold improvements 2 to 20 years

Plant and equipment 2 to 25 years

Intangible assets 2 to 7 years

Land and cultural assets, which are considered to have an indefinite life, are not depreciated. Depreciation is not recognised in respect of these assets as their service potential has not, in any material sense, been consumed during the reporting period.

Intangible produced assets with finite useful lives are amortised as an expense from transactions on a systematic (typically straight-line) basis over the asset’s useful life. Amortisation begins when the asset is available for use, that is, when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each annual reporting period.

Interest expense

Interest expense is recognised in the period in which it is incurred. Refer to glossary of terms and style conventions in note 31 for an explanation of interest expense items.

Grants and other transfers

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, personal benefit payments made in cash to individuals, other transfer payments made to State owned agencies, local government, and community groups. Refer to glossary of terms and style conventions in note 31 for an explanation of grants and other transfers.

Capital asset charge

The capital asset charge is calculated on the budgeted carrying amount of applicable non-financial physical assets.

Supplies and services

Supplies and services costs are recognised as an expense in the reporting period in which they are incurred. The carrying amounts of any inventories held for distribution are expensed when distributed.

Bad and doubtful debts

Refer to note 1(K) Impairment of financial assets.

Fair value of assets and services provided free of charge or for nominal consideration

Contributions of resources provided free of charge or for nominal consideration are recognised at their fair value when the transferee obtains control over them, irrespective of whether restrictions or conditions are imposed over the use of the contributions, unless received from another government department or agency as a consequence of a restructuring of administrative arrangements. In the latter case, such a transfer will be recognised at its carrying value.

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 not donated.

The department provides resources and services free of charge to a number of statutory offices and bodies within the Justice portfolio. These contributions are not recognised in the financial statements as their fair values can not be reliably determined and are considered immaterial. Examples of the resources and services that may be provided include the use of the department’s financial systems such as Oracle Financials, Axiom and payroll systems. Services that may be provided include cash management, accounts receivable, payroll, general ledger management and in some cases the provision of IT networks.

Borrowing costs of qualifying assets

In accordance with the paragraphs of AASB 123 Borrowing Costs applicable to not-for-profit public sector entities, the department continues to recognise borrowing costs immediately as an expense, to the extent that they are directly attributable to the acquisition, construction or production of a qualifying asset.

(H) Other economic flows included in net resultOther economic flows measure the change in volume or value of assets or liabilities that do not result from transactions.

Net gain/(loss) on non-financial assets

Net gain/(loss) on non-financial assets and liabilities includes realised and unrealised gains and losses as follows:

Revaluation gains/(losses) of non-financial physical assets

Refer to note 1(L) Revaluations of non-financial physical assets.

Net gain/(loss) on disposal of non-financial assets

Any gain or loss on the disposal of non-financial assets is recognised at the date of disposal and is determined by deducting from the proceeds the carrying value of the asset at that time.

Impairment of non-financial assets

Intangible assets with indefinite useful lives (and intangible assets not yet available for use) are tested annually for impairment (as described below) and whenever there is an indication that the asset may be impaired.

All other assets are assessed annually for indications of impairment, except for non-financial physical assets held for sale, and assets arising from construction contracts.

If there is an indication of impairment, the assets concerned are tested as to whether their carrying value exceeds their possible recoverable amount. Where an asset’s carrying value exceeds its recoverable amount, the difference is written off as an other economic flow, except to the extent that the write-down can be debited to an asset revaluation surplus amount applicable to that class of asset.

If there is an indication that there has been a change in the estimate of an asset’s recoverable amount since the last impairment loss was recognised, the carrying amount shall be increased to its recoverable amount. This reversal of the impairment loss occurs only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised in prior years.

It is deemed that, in the event of the loss or destruction of an asset, the future economic benefits arising from the use of the asset will be replaced unless a specific decision to the contrary has been made. The recoverable amount for most assets is measured at the higher of depreciated replacement cost and fair value less costs to sell. Recoverable amount for assets held primarily to generate net cash inflows is measured at the higher of the present value of future cash flows expected to be obtained from the asset and fair value less costs to sell.

Refer to note 1(L) in relation to the recognition and measurement of non-financial assets.

Net gain/(loss) on financial instruments

Net gain/(loss) on financial instruments includes: realised and unrealised gains and losses from revaluations of financial instruments at fair value; impairment and reversal of impairment for financial instruments at amortised cost (refer to note 1(J));

and disposals of financial assets.

Revaluations of financial instruments at fair value

Refer to note 1(J) Financial instruments.

Other gains/(losses) from other economic flows

Other gains/(losses) from other economic flows include the gains or losses from: the revaluation of the present value of the long service leave liability due to changes in the bond interest

rates; and transfer of amounts from the reserves and/or accumulated surplus to net result due to disposal or

derecognition or reclassification.

(I) Administered incomeAdministered income mainly comprises fines and regulatory fees collected by the department on behalf of the State (see note 3).

(J) Financial instrumentsFinancial instruments arise out of contractual agreements that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Due to the nature of the department’s activities, certain financial assets and financial liabilities arise under statute rather than a contract. Such financial assets and financial liabilities do not meet the definition of financial instruments in AASB 132 Financial Instruments: Presentation. For example, statutory receivables arising from taxes, fines and penalties do not meet the definition of financial instruments as they do not arise under contract. However, guarantees issued by the Treasurer on behalf of the department are financial instruments because, although authorised under statute, the terms and conditions for each financial guarantee may vary and are

subject to an agreement.

Where relevant, for note disclosure purposes, a distinction is made between those financial assets and financial liabilities that meet the definition of financial instruments in accordance with AASB 132 and those that do not.

The following refers to financial instruments unless otherwise stated.

Categories of non-derivative financial instruments

Loans and receivables

Loans and receivables are financial instrument assets with fixed and determinable payments that are not quoted on an active market. These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial measurement, loans and receivables are measured at amortised cost using the effective interest method, less any impairment.

Loans and receivables category includes cash and deposits (refer to note 1(K)), term deposits with maturity greater than three months, trade receivables and loans, but not statutory receivables.

Financial assets at fair value through profit or loss

Financial assets are categorised as fair value through profit or loss at trade date if they are classified as held for trading or designated as such upon initial recognition. Financial instrument assets are designated at fair value through profit or loss on the basis that the financial assets form part of a group of financial assets that are managed by the entity concerned based on their fair values, and have their performance evaluated in accordance with documented risk management and investment strategies.

Financial instruments at fair value through profit or loss are initially measured at fair value and attributable transaction costs are expensed as incurred. Subsequently, any changes in fair value are recognised in the net result as other economic flows. Any dividend or interest on a financial asset is recognised in the net result from transactions.

Financial liabilities at amortised cost

Financial instrument liabilities are initially recognised on the date they are originated. They are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial instruments are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in profit and loss over the period of the interest-bearing liability, using the effective interest rate method (refer to note 31).

Financial instrument liabilities measured at amortised cost include all of the department’s contractual payables, deposits held and advances received, and interest-bearing arrangements other than those designated at fair value through profit or loss.

Offsetting financial instruments

Financial instrument assets and liabilities are offset and the net amount presented in the balance sheet when, and only when, the department concerned has a legal right to offset the amounts and intend either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Reclassification of financial instruments

Subsequent to initial recognition and under rare circumstances, non-derivative financial instrument assets that have not been designated at fair value through profit or loss upon recognition, may be reclassified out of the fair value through profit or loss category, if they are no longer held for the purpose of selling or repurchasing in the near term.

Financial instrument assets that meet the definition of loans and receivables may be reclassified out of the fair value through profit or loss category into the loans and receivables category, where they would have met the definition of loans and receivables had they not been required to be classified as fair value through profit or loss. In these cases, the financial instrument assets may be reclassified out of the fair value through profit or loss category, if there is the intention and ability to hold them for the foreseeable future or until maturity.

(K) Financial assets

Cash and deposits

Cash and deposits, including cash equivalents, comprise cash on hand and cash at bank, deposits at call and highly liquid investments with an original maturity of three months or less, which are held for the

purpose of meeting short term cash commitments rather than for investment purposes, and which are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value.

Receivables

Receivables consist of: contractual receivables, such as debtors in relation to goods and services, and accrued investment

income; and statutory receivables, such as amounts owing from the Victorian Government and GST input tax credits

recoverable.

Contractual receivables are classified as financial instruments and categorised as loans and receivables (refer to note 1(J) for recognition and measurement). Statutory receivables, are recognised and measured similarly to contractual receivables (except for impairment), but are not classified as financial instruments because they do not arise from a contract.

Receivables are subject to impairment testing as described below. A provision for doubtful receivables is recognised when there is objective evidence that the debts may not be collected, and bad debts are written off when identified.

Investments and other financial assets

Financial assets at fair value through profit or loss

The department classified its managed investment schemes at fair value through profit or loss on initial recognition. These financial assets are managed and their performance is evaluated on a fair value basis, in accordance with documented risk management or investment strategy, and information is provided internally to key management personnel.

Financial assets held at fair value through profit or loss are measured initially at fair value excluding any transaction costs that are directly attributable to the acquisition or issue of the financial asset. Subsequent to initial recognition, all instruments held at fair value through profit or loss are measured at fair value with any resultant gain / (loss) recognised in the net result as other economic flows.

Loans and receivables

The department classifies its investments in term deposits with a maturity of greater than 3 months as loans and receivables.

Any dividend or interest earned on the financial asset is recognised in the comprehensive operating statement as a transaction.

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when: the rights to receive cash flows from the asset have expired; or the department retains the right to receive cash flows from the asset, but has assumed an obligation to

pay them in full without material delay to a third party under a ‘pass through’ arrangement; or the department has transferred its rights to receive cash flows from the asset and either:

has transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has

transferred control of the asset.

Where the department has neither transferred nor retained substantially all the risks and rewards or transferred control, the asset is recognised to the extent of the department’s continuing involvement in the asset.

Impairment of financial assets

At the end of each reporting period, the department assesses whether there is objective evidence that a financial asset or group of financial assets is impaired. All financial instrument assets, except those measured at fair value through profit or loss, are subject to annual review for impairment.

Receivables are assessed for bad and doubtful debts on a regular basis. Those bad debts considered as written off by mutual consent are classified as a transaction expense. Bad debts not written off by mutual

consent and allowance for doubtful receivables are classified as other economic flows in the net result.

The amount of the allowance is the difference between the financial asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate.

In assessing impairment of statutory (non-contractual) financial assets, which are not financial instruments, professional judgement is applied in assessing materiality using estimates, averages and other computational methods in accordance with AASB 136 Impairment of Assets.

(L) Non-financial assets

Prepayments

Prepayments represent payments in advance of receipt of goods or services or that part of expenditure made in one accounting period covering a term extending beyond that period.

Inventories

Inventories include goods and other property held either for sale, or for distribution at zero or nominal cost, or for consumption in the ordinary course of business operations.

Inventories held for distribution are measured at cost, adjusted for any loss of service potential. All other inventories are measured at the lower of cost and net realisable value. Where inventories are acquired for no cost or nominal consideration, they are measured at current replacement cost at the date of acquisition.

Cost, includes an appropriate portion of fixed and variable overhead expenses and measured on the basis of a weighted average cost.

Bases used in assessing loss of service potential for inventories held for distribution include current replacement cost and technical or functional obsolescence. Technical obsolescence occurs when an item still functions for some or all of the tasks it was originally acquired to do, but no longer matches existing technologies. Functional obsolescence occurs when an item no longer functions the way it did when it was first acquired.

Non-financial physical assets classified as held for sale

Non-financial physical assets (including disposal group assets) are treated as current and classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use.

This condition is regarded as met only when: the asset is available for immediate use in the current condition; and the sale is highly probable and the asset’s sale is expected to be completed within 12 months from the

date of classification.

These non-financial physical assets, related liabilities and financial assets are measured at the lower of the carrying amount and fair value less costs to sell, and are not subject to depreciation or amortisation.

Property, plant and equipment

All non-financial physical assets are measured initially at cost and subsequently revalued at fair value less accumulated depreciation and impairment. Where an asset is acquired for no or nominal cost, the cost is its fair value at the date of acquisition. Assets transferred as part of a machinery of government change are transferred at their carrying amount.

The initial cost for non-financial physical assets under a finance lease (refer to note 1(N)) is measured at amounts equal to the fair value of the lease asset or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease.

Non-financial physical assets such as Crown land are measured at fair value with regard to the property’s highest and best use after due consideration is made for any legal or constructive restrictions imposed on the asset, public announcements or commitments made in relation to the intended use of the asset. Theoretical opportunities that may be available in relation to the asset are not taken into account until it is virtually certain that the restrictions will no longer apply.

The fair value of plant, equipment and vehicles, is normally determined by reference to the asset’s depreciated replacement cost.

Certain assets are acquired under finance leases, which may form part of a service concession arrangement (i.e. public private partnership). Refer to notes 1(N) Leases and 1(P) Commitments for more

information.

The cost of constructed non-financial physical assets includes the cost of all materials used in construction, direct labour on the project, and an appropriate proportion of variable and fixed overheads.

For the accounting policy on impairment of non-financial physical assets, refer to impairment of non-financial assets under note 1(H) Impairment of non-financial assets.

Leasehold improvements

The cost of leasehold improvements is capitalised as an asset and depreciated over the shorter of the remaining term of the lease or the estimated useful life of the improvements.

Restrictive nature of cultural assets and Crown land

The department holds cultural assets and Crown land, which are deemed worthy of preservation because of the social rather than financial benefits they provide to the community. Consequently, there are certain limitations and restrictions imposed on their use and/or disposal.

Revaluations of non-financial physical assets

Non-financial physical assets are measured at fair value on a cyclical basis, in accordance with the Financial Reporting Directions (FRDs) issued by the Minister for Finance. A full revaluation normally occurs every five years, based on the asset’s government purpose classification, but may occur more frequently if fair value assessments indicate material changes in values. Independent valuers are used to conduct these scheduled revaluations. Any interim revaluations are determined in accordance with the requirements of the FRDs.

Revaluation increases or decreases arise from differences between an asset’s carrying value and fair value.

Net revaluation increases (where the carrying amount of a class of assets is increased as a result of a revaluation) are recognised in ‘Other economic flows - other comprehensive income’, and accumulated in equity under the asset revaluation surplus. However, the net revaluation increase is recognised in the net result to the extent that it reverses a net revaluation decrease in respect of the same class of property, plant and equipment previously recognised as an expense (other economic flows) in the net result.

Net revaluation decreases are recognised in ‘Other economic flows - other comprehensive income’ to the extent that a credit balance exists in the asset revaluation surplus in respect of the same class of property, plant and equipment. Otherwise, the net revaluation decreases are recognised immediately as other economic flows in the net result. The net revaluation decrease recognised in ‘Other economic flows - other comprehensive income’ reduces the amount accumulated in equity under the asset revaluation surplus.

Revaluation increases and decreases relating to individual assets within a class of property, plant and equipment are offset against one another within that class but are not offset in respect of assets in different classes. Any asset revaluation surplus is not normally transferred to accumulated funds on derecognition of the relevant asset.

Intangible assets

Purchased intangible assets are initially recognised at cost. Subsequently, intangible assets with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses. Costs incurred subsequent to initial acquisition are capitalised when it is expected that additional future economic benefits will flow to the State.

When the recognition criteria in AASB 138 Intangible Assets are met, internally generated intangible assets are recognised and measured at cost less accumulated amortisation and impairment.

The department’s intangible assets consist only of software.

Refer to note 1(G) Depreciation and amortisation and (H) Impairment of non-financial assets.

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following are demonstrated: the technical feasibility of completing the intangible asset so that it will be available for use or sale; an intention to complete the intangible asset and use or sell it; the ability to use or sell the intangible asset;

the intangible asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development and to

use or sell the intangible asset; and the ability to measure reliably the expenditure attributable to the intangible asset during its development.

(M) Liabilities

Payables

Payables consist of: contractual payables, such as accounts payable. Accounts payable represent liabilities for goods and

services provided to the department prior to the end of the financial year that are unpaid, and arise when the department becomes obliged to make future payments in respect of the purchase of those goods and services; and

statutory payables, such as goods and services tax and fringe benefits tax payables.

Contractual payables are classified as financial instruments and categorised as financial liabilities at amortised cost (refer to note 1(J)). 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.

Borrowings

All interest bearing liabilities are initially recognised at fair value of the consideration received, less directly attributable transaction costs (refer to note 1(N) Leases).

Subsequent to initial recognition, interest bearing liabilities are measured at amortised cost. Any difference between the initial recognised amount and the redemption value is recognised in the net result over the period of the borrowing using the effective interest method.

Provisions

Provisions are recognised when the department has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows, using discount rate that reflects the time value of money and risks specific to the provision.

When some or all of the economic benefits required to settle a provision are expected to be received from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably.

Other Provisions

Other provisions mainly represent amounts agreed under legal settlement to be paid in future years.

Employee benefits

Provision is made for benefits accruing to employees in respect of annual leave, long service leave, and on-costs for services rendered to the reporting date.

Annual leave

Liabilities for annual leave are recognised in the provision for employee benefits, classified as current liabilities. Those liabilities which are expected to be settled within 12 months of the reporting period, are measured at nominal values.

Those liabilities that are not expected to be settled within 12 months are also recognised in the provision for employee benefits as current liabilities, but are measured at present value of the amounts expected to be paid when the liabilities are settled using the remuneration rate expected to apply at the time of settlement.

Long service leave

Liability for long service leave (LSL) is recognised in the provision for employee benefits. Current liability - unconditional LSL (representing 7 or more years of continuous service for all staff) is

disclosed in the notes to the financial statements as a current liability, even where the department does

not expect to settle the liability within 12 months because it will not have the unconditional right to defer the settlement of the entitlement should an employee take leave within 12 months. The components of this current LSL liability are measured at: nominal value - component that the department expects to settle within 12 months present value - component that the department does not expect to settle within 12 months

Non-current liability - conditional LSL (representing less than 7 years of continuous service for all staff) is disclosed as a non-current liability. There is an unconditional right to defer the settlement of the entitlement until the employee has completed the requisite years of service. This non-current LSL liability is measured at present value using a model provided by the Department of Treasury and Finance (DTF). This model uses a wage inflation rate based on the average of forward estimates of the rates as assumed in the 2015-16 Budget plus 1% for progression and promotion. The values are then discounted using the Reserve Bank of Australia’s indicative Mid Rates of Commonwealth Government Securities. Any gain or loss following revaluation of the present value of non-current LSL liability is recognised as a transaction, except to the extent that a gain or loss arises due to changes in bond interest rates for which it is then recognised as an other economic flow (refer to note 1(H) Other economic flows included in net result).

The probability that staff will remain with the department and become entitled to their long service leave is also factored in the calculation of the provision for long service leave.

Employee benefits on-costs

Employee benefits on-costs such as payroll tax, workers compensation, and superannuation are recognised separately from the provision for employee benefits.

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.

(N) LeasesA lease is a right to use an asset for an agreed period of time in exchange for payment.

Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and rewards incidental to ownership. Leases of property, plant and equipment are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership from the lessor to the lessee. All other leases are classified as operating leases.

Finance leases

Department as lessee

At the commencement of the lease term, finance leases are initially recognised as assets and liabilities at amounts equal to the fair value of the lease property or, if lower, the present value of the minimum lease payment, each determined at the inception of the lease. The lease asset is accounted for as a non-financial physical asset. Where the asset reverts back to the State at the end of the lease term, the asset is depreciated over its estimated useful life. Where the asset does not revert back to the State at the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset or the term of the lease.

Minimum finance lease payments are apportioned between reduction of the outstanding lease liability, and periodic finance expense which is calculated using the interest rate implicit in the lease and charged directly to the comprehensive operating statement. Contingent rentals associated with finance leases are recognised as an expense in the period in which they are incurred. Leases are recognised at the commencement of the lease term.

Operating leases

Department as lessee

Operating lease payments, including any contingent rentals, are recognised as an expense in the comprehensive operating statement on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern of the benefits derived from the use of the leased asset. The leased asset is not recognised in the balance sheet.

(O) Equity

Contributions by owners

Additions to net assets which have been designated as contributions by owners are recognised as contributed capital. Other transfers that are in the nature of contributions or distributions have also been designated as contributions by owners.

Transfers of net assets arising from administrative restructurings are treated as distributions to or contributions by owners.

(P) CommitmentsCommitments for future expenditure include operating and capital commitments arising from contracts. These commitments are disclosed by way of a note (refer to note 19) at their nominal value and inclusive of the goods and services tax (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.

(Q) Contingent assets and contingent liabilitiesContingent assets and contingent liabilities are not recognised in the balance sheet, but are disclosed by way of a note (refer to note 20) and, if quantifiable, are measured at nominal value. Contingent assets and liabilities are presented inclusive of GST receivable or payable respectively.

(R) Service concession arrangements (public private partnerships)The department sometimes enters into certain arrangements with private sector participants to design and construct or upgrade an asset used to provide public services. These arrangements are typically complex and usually include the provision of operational and maintenance services for a specified period of time. These arrangements are often referred to as either public private partnerships (PPPs) or service concession arrangements (SCAs).

These SCAs usually take one of two main forms. In the more common form, the department pays the operator over the period of the arrangement, subject to specified performance criteria being met. At the date of commitment to the principal provisions of the arrangement, these estimated periodic payments are allocated between a component related to the design and construction or upgrading of the asset and components related to the ongoing operation and maintenance of the asset. The former component is accounted for as a lease payment (see note 1(N) Leases). The remaining components are accounted for as commitments (see note 1(P) Commitments) for operating costs which are expensed in the comprehensive operating statement as they are incurred.

The other, less common form of SCA, is one in which the department grants to an operator, for a specified period of time, the right to collect fees from users of the SCA asset, in return for which the operator constructs the asset and has the obligation to supply agreed upon services, including maintenance of the asset for the period of the concession. These private sector entities typically lease land, and sometimes state works, from the State and construct infrastructure. At the end of the concession period, the land and State works, together with the constructed facilities, will be returned to the grantor department.

There is currently no authoritative accounting guidance applicable to grantors (the department) on the recognition and measurement of the right of the department to receive assets from such concession arrangements. Due to the lack of such guidance, there has been no change to existing policy and those assets are not currently recognised.

(S) Accounting for the Goods and Services Tax (GST)Income, expenses and assets are recognised net of the amount of associated GST, except where GST incurred is not recoverable from the taxation authority. In this case, the GST payable is recognised as part of the cost of acquisition of the asset or as part of the expense.

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 in the balance sheet.

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

Commitments and contingent assets and liabilities are also stated inclusive of GST (refer to Note 1(P) and Note 1 (Q)).

(T) Events after the reporting periodAssets, liabilities, income or expenses arise from past transactions or other past events. Where the transactions result from an agreement between the department and other parties, the transactions are only recognised when the agreement is irrevocable at or before the end of the reporting period. Adjustments are made to amounts recognised in the financial statements for events which occur after the reporting period and before the date the financial statements are authorised for issue, where those events provide information about conditions which existed in the reporting period. Note disclosure is made about events between the end of the reporting period and the date the financial statements are authorised for issue where the events relate to conditions which arose after the end of the reporting period and which may have a material impact on the results of subsequent years.

(U) Australian Accounting Standards issued that are not yet effectiveCertain new Australian Accounting Standards (AAS) have been published that are not mandatory for the 30 June 2016 reporting period. DTF assesses the impact of these new standards and advises the department of their applicability and early adoption where applicable.

As at 30 June 2016, the following standards that are applicable to the department had been issued but were not mandatory for the financial year ending 30 June 2016. Standards that are not applicable to the department have been omitted. The department has not early adopted these standards.

Standard Summary

Applicable for annual reporting periods beginning after Impact

AASB 9 Financial instruments

The key changes include the simplified requirements for the classification and measurement of financial assets, a new hedging accounting model and a revised impairment loss model to recognise impairment losses earlier, as opposed to the current approach that recognises impairment only when incurred.

1 Jan 2018 The financial impact of available for sale (AFS) assets will now be reported through other comprehensive income (OCI) and no longer recycled to the profit and loss.While the preliminary assessment has not identified any material impact arising from AASB 9, it will continue to be monitored and assessed.

Standard / Interpretation Summary

Applicable for annual reporting periods beginning after Impact

AASB 15 Revenue from Contracts with Customers

The core principle of AASB 15 requires an entity to recognise revenue when the entity satisfies a performance obligation by transferring a promised good or service to a customer.

1 Jan 2018 The changes in revenue recognition requirements in AASB 15 may result in changes to the timing and amount of revenue recorded in the financial statements. The Standard will also require additional disclosures on service revenue and contract modifications.A potential impact will be the upfront recognition of revenue from licenses that cover multiple reporting periods. Revenue that was deferred and amortised over a period may now need to be recognised immediately as a transitional adjustment against the opening returned earnings if there are no former performance obligations outstanding.

AASB 16 Leases The key changes introduced by AASB 16 include the recognition of most operating leases (which are current not recognised) on balance sheet.

1 Jan 2019 The assessment has indicated that as most operating leases will come on balance sheet, recognition of lease assets and lease liabilities will cause net debt to increase.Depreciation of lease assets and interest on lease liabilities will be

Standard / Interpretation Summary

Applicable for annual reporting periods beginning after Impact

recognised in the income statement with marginal impact on the operating surplus.The amounts of cash paid for the principal portion of the lease liability will be presented within financing activities and the amounts paid for the interest portion will be presented within operating activities in the cash flow statement.No change for lessors.

AASB 2015–16Amendments to Australian accounting standards – extending Related Party Disclosures to not-for-profit public sector – entities [AASB 10, AASB 124 and AASB 1049]

The amendments extend the scope of AASB 124 Related Party Disclosures to not-for-profit public sector entities. A guidance has been included to assist the application of the standard by not-for-profit public sector entities.

1 Jan 2016 The amending standard will result in extended disclosures on the entity’s Key Management Personnel (KMP) and the related party transactions.

(V) Restatement of 2014-15 comparativesCorrection of prior period errors

In prior years, the department incorrectly moved assets in and out of trusts using contributed capital, which resulted in some trusts having insufficient accumulated surpluses. The correct method for moving assets in and out of trusts is to use revenue or expense.

Additionally, in 2014-15, some items of equipment and expense were incorrectly capitalised as part of a building asset.

These errors have been corrected by restating each of the affected line items in the current set of financial statements for the 2014-15 comparative year.

Restated line items from the Comprehensive Operating Statement

2015 Published

Adjustment for prior

period error2015

Restated$’000 $’000 $’000

Income from transactionsOutput appropriations 5,129,248 0 5,129,248Special appropriations 49,171 0 49,171Interest 39,579 0 39,579Grants 3,976 0 3,976Other income 58,759 2,545 61,304

Total income from transactions 5,280,733 2,545 5,283,278

Expenses from transactionsEmployee expenses (605,223) 0 (605,223)Depreciation and amortisation (95,778) (798) (96,576)Interest expense (21,542) 0 (21,542)Grants and other transfers (3,743,721) 0 (3,743,721)Capital asset charge (102,213) 0 (102,213)

2015 Published

Adjustment for prior

period error2015

Restated$’000 $’000 $’000

Supplies and services (699,034) (9,500) (708,534)Total expenses from transactions (5,267,511) (10,298) (5,277,809)

Net result from transactions (net operating balance) 13,222 (7,753) 5,469

Net result (682) (7,753) (8,435)

Comprehensive result (5,682) (7,753) (13,435)

Restated line items from the Balance Sheet

2015 Published

Adjustment for prior

period error2015

Restated$’000 $’000 $’000

Non-financial assetsPrepayments 2,435 0 2,435Inventories 6,932 0 6,932Non-financial physical assets classified as held for sale 1,608 0 1,608Property, plant and equipment 2,212,999 (10,298) 2,202,701Intangible assets 20,649 0 20,649

Total non-financial assets 2,244,623 (10,298) 2,234,325

Total assets 3,607,606 (10,298) 3,597,308

Net assets 2,522,567 (10,298) 2,512,269

EquityAccumulated surplus/(deficit) 1,018,584 (9,803) 1,008,781Physical asset revaluation surplus 603,231 0 603,231Contributed capital 900,752 (495) 900,257

Net worth 2,522,567 (10,298) 2,512,269

Restated line items from the Statement of Changes in Equity

2015 Published

Adjustment for prior

period error2015

Restated$’000 $’000 $’000

Accumulated surplus/(deficit)Balance at 1 July 2014 669,864 (2,050) 667,814Net result for the year (682) (7,753) (8,435)Transfer to accumulated surplus 349,402 0 349,402

Balance at 30 June 2015 1,018,584 (9,803) 1,008,781

Contributed capital

2015 Published

Adjustment for prior

period error2015

Restated$’000 $’000 $’000

Balance at 1 July 2014 1,082,889 2,050 1,084,939Transactions with the State in its capacity as owners 554,612 0 554,612Capital contribution passed onto agencies within the Justice Portfolio (83,280) 0 (83,280)Equity transfer within Government (26,266) 0 (26,266)Administrative restructure - net assets transferred (627,203) 0 (627,203)

Prior period adjustment 0 (2,545) (2,545)

Balance at 30 June 2015 900,752 (495) 900,257

Restated line items from the Cash Flow Statement

2015Published

Adjustmentfor prior

period error2015

Restated$’000 $’000 $’000

Cash flows from operating activitiesPaymentPayments of grants and other transfers (3,743,720) 0 (3,743,720)Payments to suppliers and employees (1,376,454) (9,500) (1,385,954)Capital asset charge payment (102,213) 0 (102,213)Interest and other costs of finance paid (21,542) 0 (21,542)

Total payments (5,243,929) (9,500) (5,253,429)

Net cash flows from/(used in) operating activities 96,214 (9,500) 86,714

Cash flows from investing activitiesPayments for investments (87,229) 0 (87,229)Proceeds from sales of investments 103,522 0 103,522Purchases of non-financial assets (421,223) 9,500 (411,723)

Sales of non-financial assets 3,281 0 3,281

Net cash flows from/(used in) investing activities (401,649) 9,500 (392,149)

Note 2. Departmental (controlled) outputsA description of departmental outputs performed during the year ended 30 June 2016, and the objectives of these outputs, are summarised below.

Policing

Description of output

This output group reports on activities relating to the provision of effective police and law enforcement services that aim to prevent, detect, investigate and prosecute crime, and promote safer road user behaviour. It focuses on activities which enable Victorians to undertake their lawful pursuits confidently, safely and without fear of crime.

Objectives This output group contributes to the department’s objective of improving community safety through

policing, law enforcement and prevention activities.

Infringements and enhancing community safety

Description of output

This output group reports on activities relating to the fair and effective enforcement of judicial fines, court orders and warrants, and processing of traffic and other infringement notices. It also reports on prevention activities aimed at enhancing community safety through the implementation of strategies to support local community engagement in crime prevention activities.

Objectives This output group contributes to the department’s objective of improving community safety through

policing, law enforcement and prevention activities.

Supporting legal processes and law reform

Description of output

This output group relates to the provision of services that support legal processes and law reform. Services that support legal processes include legal aid, prosecution services, community mediation services, support for victims of crime and the delivery of independent, expert forensic medical services to the justice system. Other services in this output group include legal policy advice to government, law reform, implementation of new or amended legislation and the provision of legal advice to the government.

Objectives This output group contributes to the department’s objective of supporting the rule of law.

Personal identity and individual rights

Description of output

This output group delivers services that safeguard the Victorian community through the provision of services relating to rights and equal opportunity, life event registration, identity protection and advocacy and guardianship for Victorians with a disability or mental illness.

The outputs relating to privacy regulation and the Victorian electoral system were transferred to the Department of Premier and Cabinet on 1 January 2015 as a consequence of a machinery of government change.

Objectives This output group contributes to the department’s objective of protecting individual rights and personal

identity.

Enforcing and managing correctional orders

Description of output

This output group relates to the management of the State’s correctional system.

Objectives This output group contributes to the department’s objective of promoting community safety through

effective management of prisoners and offenders and provision of opportunities for rehabilitation and reparation.

Supporting the State’s fire and emergency services

Description of output

This output group supports the delivery of a coordinated, all hazards approach to emergency management, focusing on risk mitigation and active partnership with the Victorian community.

Objectives

This output group contributes to the department’s objective of minimising injury and property loss through a coordinated and integrated emergency response.

Industry regulation and support

Description of output

This output group delivers activities relating to regulating the gambling and liquor industries, harm minimisation, and support and development of the racing industry. This output group also promotes the empowerment of consumers and businesses to know their rights and responsibilities to promote a well-functioning market economy through regulation and support to consumers and businesses. There is a specific focus on the needs of vulnerable and disadvantaged consumers.

Objectives

This output group contributes to the department’s objective to promote responsible industry behaviour and an informed community through effective regulation, education, monitoring and enforcement.

Public sector integrityThis output group was transferred to the Department of Premier and Cabinet on 1 January 2015 as a consequence of a machinery of government change.

Other informationIn addition to, and incorporated in, the above output activities are a number of entities within the Justice Portfolio which report separately. The financial statements contain the appropriation revenue for these entities and the expenditure is represented in the receipt of regular grants expense and transfer payments. These are:

Policing Victoria Police

Supporting legal processes and law reform Office of Public Prosecutions Sentencing Advisory Council Victoria Legal Aid Victorian Institute of Forensic Medicine Victorian Law Reform Commission

Personal identity and individual rights Office of Victorian Privacy Commissioner (ceased operations on 16 September 2014) Office of Commissioner for Privacy and Data Protection (commenced operations on

17 September 2014 and transferred to Department of Premier and Cabinet on 1 January 2015) Victorian Electoral Commission (transferred to Department of Premier and Cabinet on

1 January 2015) Victorian Equal Opportunity and Human Rights Commission

Supporting the State’s fire and emergency services Country Fire Authority Emergency Services Telecommunications Authority Metropolitan Fire and Emergency Services Board Victoria State Emergency Service Authority

Industry regulation and support Residential Tenancies Bond Authority Victorian Commission for Gambling and Liquor Regulation Victorian Responsible Gambling Foundation

Public sector integrity Freedom of Information Commissioner (transferred to Department of Premier and Cabinet on 1 January

2015) Independent Broad-based Anti-corruption Commission (transferred to Department of Premier and

Cabinet on 1 January 2015) Victorian Inspectorate (transferred to Department of Premier and Cabinet on 1 January 2015)

The following organisations form part of the Justice Portfolio but are excluded from the above output activities as they are not funded out of the Budget Sector: Greyhound Racing Victoria Harness Racing Victoria Legal Practitioners Liability Committee Victorian Legal Services Board Victorian Legal Services Commissioner Professional Standards Council

Schedule A - Controlled income and expenses for the year ended 30 June 2016

Policing

Infringements and enhancing

community safety

Supporting legal processes and

law reform

Personal identity and individual

rights (i)

Enforcing and managing

correctional orders

Supporting the State’s fire and

emergency services

Industry regulation and

supportPublic sector

integrity (ii)Departmental

total2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Continuing operationsIncome from transactionsOutput appropriations 2,579,474 2,432,158 255,589 240,870 346,158 320,705 32,575 34,629 1,159,858 1,031,723 1,025,929 947,115 107,086 103,600 0 18,448 5,506,669 5,129,248Special appropriations 2,408 2,137 0 0 0 0 0 46,395 26 105 1,513 534 0 0 0 0 3,947 49,171Interest 0 0 0 0 0 0 0 0 142 160 0 0 35,166 39,419 0 0 35,308 39,579Grants 0 0 0 59 0 88 1,219 1,114 0 274 3,854 56 2,702 2,385 0 0 7,775 3,976Other income (iii) 0 0 155 1,638 624 229 264 129 930 346 14,201 12,478 47,383 46,484 0 0 63,557 61,304

Total income from transactions (iii) 2,581,882 2,434,295 255,744 242,567 346,782 321,022 34,058 82,267 1,160,956 1,032,608 1,045,497 960,183 192,337 191,888 0 18,448 5,617,256 5,283,278

Expenses from transactionsEmployee expenses 0 0 60,570 54,832 55,401 52,582 17,510 16,944 473,437 410,893 28,313 24,340 47,065 45,014 0 618 682,296 605,223Depreciation and amortisation (iii) 0 0 9,202 10,070 3,722 3,422 558 877 72,996 60,160 21,681 21,313 467 656 0 78 108,626 96,576Interest expense 0 0 65 123 (61) (36) 1 8 20,722 21,439 (42) (4) (7) 12 0 0 20,678 21,542Grants and other transfers 2,581,882 2,434,295 9,383 14,761 259,016 235,607 8,410 56,480 9,772 13,491 939,587 873,812 98,390 97,611 0 17,664 3,906,440 3,743,721Capital asset charge 0 0 2,708 3,189 1,014 1,114 80 256 125,683 95,794 3,562 1,809 374 51 0 0 133,421 102,213Supplies and services (iii) 0 0 163,470 152,416 39,896 40,572 8,003 8,764 457,065 437,625 48,615 31,005 38,997 38,064 0 88 756,046 708,534

Total expenses from transactions (iii) 2,581,882 2,434,295 245,398 235,391 358,988 333,261 34,562 83,329 1,159,675 1,039,402 1,041,716 952,275 185,286 181,408 0 18,448 5,607,507 5,277,809

Net result from transactions (net operating balance) (iii) 0 0 10,346 7,176 (12,206) (12,239) (504) (1,062) 1,281 (6,794) 3,781 7,908 7,051 10,480 0 0 9,749 5,469

Other economic flows included in net resultNet gain/(loss) on non-financial assets 0 0 (3,522) (12,954) 200 183 34 31 792 558 182 116 110 96 0 0 (2,204) (11,970)Net gain/(loss) on financial instruments 0 0 (10) (2) 0 (2) 0 0 (551) (52) 0 (1) 1,982 767 0 0 1,421 710Other gains/(losses) from other economic flows 0 0 (143) (290) (215) (439) (37) (75) (874) (1,340) (196) (274) (119) (227) 0 1 (1,584) (2,644)

Total other economic flows included in net result 0 0 (3,675) (13,246) (15) (258) (3) (44) (633) (834) (14) (159) 1,973 636 0 1 (2,367) (13,904)

Net result (iii) 0 0 6,671 (6,070) (12,221) (12,497) (507) (1,106) 648 (7,628) 3,767 7,749 9,024 11,116 0 1 7,382 (8,435)

Other economic flows - other comprehensive incomeItems that will not be reclassified to net resultChanges in physical asset revaluation surplus 0 0 (267) 0 29,325 0 (2) 0 53,673 (5,000) 40 0 15 0 0 0 82,784 (5,000)

Total other economic flows - other comprehensive income 0 0 (267) 0 29,325 0 (2) 0 53,673 (5,000) 40 0 15 0 0 0 82,784 (5,000)

Comprehensive result (iii) 0 0 6,404 (6,070) 17,104 (12,497) (509) (1,106) 54,321 (12,628) 3,807 7,749 9,039 11,116 0 1 90,166 (13,435)

Schedule B - Controlled assets and liabilities as at 30 June 2016Assets

Policing

Infringements and enhancing

community safety

Supporting legal processes and

law reform

Personal identity and individual

rights (i)

Enforcing and managing

correctional orders

Supporting the State’s fire and

emergency services

Industry regulation and

supportPublic sector

integrity (ii)Departmental

total2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Financial assets 387,352 389,111 58,466 68,405 59,640 76,725 9,041 9,756 169,040 200,112 78,444 108,329 509,624 510,545 0 0 1,271,607 1,362,983Non-financial assets (iii) 0 0 44,856 51,759 8,903 192,474 1,374 1,734 2,049,186 1,912,473 60,723 72,697 3,392 3,188 0 0 2,168,434 2,234,325

Total assets (iii) 387,352 389,111 103,322 120,164 68,543 269,199 10,415 11,490 2,218,226 2,112,585 139,167 181,026 513,016 513,733 0 0 3,440,041 3,597,308

LiabilitiesTotal liabilities 387,352 389,111 52,490 48,402 54,542 58,656 8,388 8,483 387,214 500,390 59,365 43,997 35,575 36,000 0 0 984,926 1,085,039

Net assets (iii) 0 0 50,832 71,762 14,001 210,543 2,027 3,007 1,831,012 1,612,195 79,802 137,029 477,441 477,733 0 0 2,455,115 2,512,269

(i) Outputs relating to privacy regulation and the victorian electoral system were transferred to the Department of Premier and Cabinet on 1 January 2015 as a consequence of a machinery of government change.(ii) Output group transferred to the Department of Premier and Cabinet on 1 January 2015 as a consequence of a machinery of government change.(iii) The 2014-15 comparative has been adjusted (refer to note 1V).

Note 3. Administered (non-controlled) itemsIn addition to the specific departmental operations which are included in the financial statements (comprehensive operating statement, balance sheet, statement of changes in equity and cash flow statement), the department administers or manages other activities and resources on behalf of the State. The transactions relating to these activities are reported as administered items (refer to Note 1(D) and 1(J)) in this note.

Policing

Infringements and enhancing

community safety

Supporting legal processes and

law reform (i)

Personal identity and individual

rights (i)(ii)

Enforcing and managing

correctional orders

Supporting the State’s fire and

emergency services

Industry regulation and

support (i)Public sector

integrity (i)(iii) Departmental total2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Administered income from transactionsAppropriations - payments made on behalf of the State 0 0 0 0 0 0 0 0 0 0 0 0 28,905 28,871 0 0 28,905 28,871Special appropriations applied 0 0 4,224 4,109 0 0 0 8,913 0 0 0 0 0 0 0 0 4,224 13,022Sale of goods and services 0 0 34,585 32,057 42,068 38,670 6,443 5,496 12,556 12,924 48,668 34,504 54 317 0 0 144,374 123,968Fines 0 0 702,566 648,263 0 0 0 0 344 192 0 0 0 0 0 0 702,910 648,455Fees 0 0 260,945 255,664 2 2 9,742 9,138 0 0 0 0 2,457 2,271 0 0 273,146 267,075Other income 0 0 35,098 22,094 356 613 60 108 1,492 2,429 323 387 572,705 365 0 0 610,034 25,996

Total administered income from transactions 0 0 1,037,418 962,187 42,426 39,285 16,245 23,655 14,392 15,545 48,991 34,891 604,121 31,824 0 0 1,763,593 1,107,387

Administered expenses from transactionsPayments made on behalf of the State 0 0 0 0 0 0 0 0 0 0 0 0 28,905 28,871 0 0 28,905 28,871Payments into the Consolidated Fund 0 0 561,060 566,803 42,068 38,670 6,443 5,496 24,577 24,268 48,668 34,504 567,154 317 0 0 1,249,970 670,058Other expenses 0 0 4,879 5,076 263 293 44 8,963 1,292 1,230 240 185 145 153 0 0 6,863 15,900

Total administered expenses from transactions 0 0 565,939 571,879 42,331 38,963 6,487 14,459 25,869 25,498 48,908 34,689 596,204 29,341 0 0 1,285,738 714,829

Total administered net result from transactions (net operating balance) 0 0 471,479 390,308 95 322 9,758 9,196 (11,477) (9,953) 83 202 7,917 2,483 0 0 477,855 392,558

Administered other economic flows included in administered net resultNet gain/(loss) on non-financial assets 0 0 0 (54) 0 (4) (11) (8) (11,962) (279) 694 (2) 0 (2) 0 0 (11,279) (349)Net gain/(loss) on financial instruments 0 0 (314,608) (284,302) 0 0 0 0 0 0 0 0 0 0 0 0 (314,608) (284,302)Other gains/(losses) from other economic flows 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Total administered other economic flows 0 0 (314,608) (284,356) 0 (4) (11) (8) (11,962) (279) 694 (2) 0 (2) 0 0 (325,887) (284,651)

Total administered comprehensive result 0 0 156,871 105,952 95 318 9,747 9,188 (23,439) (10,232) 777 200 7,917 2,481 0 0 151,968 107,907

Administered financial assetsCash and deposits 0 0 10,869 12,076 39,256 19,733 209 259 13,540 12,984 1,170 974 737 838 0 0 65,781 46,864Receivables (iv) 0 0 1,151,307 996,634 8,389 8,484 593 187 6 0 810 480 1 0 0 0 1,161,106 1,005,785Equity investments in other justice portfolio entities 0 0 0 0 42,224 42,224 0 0 0 0 556,585 530,958 11,098 11,098 0 0 609,907 584,280

Total administered financial assets 0 0 1,162,176 1,008,710 89,869 70,441 802 446 13,546 12,984 558,565 532,412 11,836 11,936 0 0 1,836,794 1,636,929

Administered liabilitiesCreditors and accruals 0 0 0 0 0 0 0 0 (97) 2 0 0 0 0 0 0 (97) 2

Policing

Infringements and enhancing

community safety

Supporting legal processes and

law reform (i)

Personal identity and individual

rights (i)(ii)

Enforcing and managing

correctional orders

Supporting the State’s fire and

emergency services

Industry regulation and

support (i)Public sector

integrity (i)(iii) Departmental total2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Deposits payable 0 0 10,140 12,117 39,019 19,465 179 222 10,232 9,595 967 820 587 675 0 0 61,124 42,894Provisions 0 0 0 0 0 0 0 0 41 40 0 0 0 0 0 0 41 40Unearned revenue 0 0 30 19 45 38 744 507 181 87 41 17 25 16 0 0 1,066 684Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Total administered liabilities 0 0 10,170 12,136 39,064 19,503 923 729 10,357 9,724 1,008 837 612 691 0 0 62,134 43,620

Total administered net assets 0 0 1,152,006 996,574 50,805 50,938 (121) (283) 3,189 3,260 557,557 531,575 11,224 11,245 0 0 1,774,660 1,593,309

(i) The 2014-15 comparatives have been adjusted to remove the administered balances of the statutory reporting entities in the Justice Portfolio.(ii) Outputs relating to privacy regulation and the victorian electoral system were transferred to the Department of Premier and Cabinet on 1 January 2015 as a consequence of a machinery of government change.(iii) Output group transferred to the Department of Premier and Cabinet on 1 January 2015 as a consequence of a machinery of government change.(iv) The 2014-15 comparatives have been adjusted to due to a change in the method of allocating the State Administration Unit (SAU) balance across the output groups.Fines revenue of $702.910 million (2015: $648.455 million) mainly comprises traffic camera fines of $363.150 million (2015: $311.031 million) and on the spot fines of $136.551 million (2015: $165.464 million) issued by Victoria Police. All fines collected during the year are paid into the Consolidated Fund.Other income includes a $567.100 million court ordered payment received from Tatts Group in settlement of gambling licence litigation, which was paid into the Consolidated Fund in 2015-16.Administered receivables comprises $1,883.558 million (2015: $1,744.143 million) debtors, less $722.452 million (2015: $738.359 million) provision for doubtful debts.

Note 4. Income from transactions2016 2015

$’000 $’000

(a) InterestInterest from financial assets at fair value through profit/loss: - Interest from investments 5,484 8,609 - Interest from real estate agent trust accounts 29,824 30,970

Total interest 35,308 39,579

(b) GrantsOther specific purpose from: - General government within portfolio 32 0 - General government outside portfolio 7,743 3,528 - Other states and local government 0 448

Total grants 7,775 3,976

(c) Other incomeFines and fees 14,044 13,223Sale of goods 1,496 145Dividends from investments 11,176 9,959Income from Residential Tenancies Bond Authority (RTBA) 10,000 10,000Other 26,592 16,805Fair value of assets received free of charge or for nominal consideration (i) 249 11,172

Total other income (i) 63,557 61,304

(i) The 2014-15 comparative has been adjusted (refer to note 1V).

Note 5. Expenses from transactions2016 2015

$’000 $’000

(a) Employee expensesSalary and wages 516,086 460,981Superannuation (note 17) 51,240 45,849Annual leave and long service leave expense 67,258 59,924Other on-costs (fringe benefits tax, payroll tax and workcover levy) 47,085 37,826Departure packages 627 643

Total employee expenses 682,296 605,223

(b) Depreciation and amortisationBuildings (i) 44,504 35,050Buildings leasehold 15,939 15,939Leasehold improvements 6,530 7,859Plant and equipment (i) 20,151 16,729Leased plant and equipment 4,750 4,508Software 16,752 16,491

Total depreciation and amortisation (i) 108,626 96,576

2016 2015$’000 $’000

(c) Interest expenseInterest on finance leases 20,678 21,542

Total interest expense 20,678 21,542

(i) The 2014-15 comparative has been adjusted (refer to note 1V).(d) Grants and other transfers

Payments for specific purpose to: - Victoria Police 2,581,882 2,434,295 - Country Fire Authority 477,623 451,214 - Metropolitan Fire and Emergency Services Board 340,625 325,705 - Victoria Legal Aid 146,025 130,127 - Office of Public Prosecution 60,521 59,902 - Victoria State Emergency Service 47,479 47,191 - Victorian Electoral Commission 0 46,395 - Court Services Victoria 20,802 35,040 - Victorian Commission for Gambling and Liquor Regulation 32,829 32,454 - Victorian Institute of Forensic Medicine 30,747 27,575 - Independent Broadbased Anti-corruption Commission 0 14,873 - Emergency Services Telecommunications Authority 47,932 24,376 - Victorian Equal Opportunity and Human Rights Commission 8,361 7,985 - Freedom of Information Commissioner 0 1,402 - Victorian Inspectorate 0 1,389 - Office of Victorian Privacy Commissioner 0 422 - Office of Commissioner for Privacy and Data Protection 0 1,014 - Sentencing Advisory Council 1,792 1,753 - Victorian Responsible Gambling Foundation 1,606 997 - Other parties 108,216 99,612

Total grants and other transfers 3,906,440 3,743,721

(e) Supplies and servicesOutsourced contracted costs 414,355 383,034Contractors, professional services, and consultants 109,349 105,993Prison operating expenses 31,164 32,757Accommodation and property services 54,662 55,619Printing, stationery and other office expenses 26,291 27,815Technology services costs 42,485 38,054Other (i) 77,740 65,262

Total supplies and services (i) 756,046 708,534

(i) The 2014-15 comparative has been adjusted (refer to note 1V).

Note 6. Other economic flows included in net result2016 2015

$’000 $’000

(a) Net gain/(loss) on non-financial assetsImpairment of intangible asset (3,655) (13,076)Net gain/(loss) on disposal of property, plant and equipment 1,451 1,106

Total net gain/(loss) on non-financial assets (2,204) (11,970)

(b) Net gain/(loss) on financial instrumentsImpairment of loans and receivables(i) (504) 1,103Bad debts written off by unilateral agreement (55) (1,158)Net gain/(loss) on disposal of financial instruments (820) 138Net gain/(loss) from revaluation of financial assets at fair value 2,800 627

Total net gain/(loss) on financial instruments 1,421 710

(c) Other gains/(losses) from other economic flowsNet gain/(loss) from revaluation of long service leave liability(ii) (1,013) (2,456)Net gain/(loss) from revaluation of other provisions(iii) (571) (188)

Total other gains/(losses) from other economic flows (1,584) (2,644)

(i) Includes (increase)/decrease in provision for doubtful debts.(ii) Revaluation gain/(loss) due to changes in bond rates.(iii) Revaluation gain/(loss) due to changes in bond rates and actuarial assumptions.

Note 7. Restructuring of administrative arrangementsTransfer of net assets to Courts Services VictoriaOn 1 July 2014, Court Services Victoria commenced operations as a statutory public sector body under the Court Services Victoria Act 2014. On commencement, the responsibility for the administrative services and facilities that support the Victorian courts, Victorian Civil and Administrative Tribunal, and Judicial College of Victoria, transferred from the department to Court Services Victoria.

As part of this restructure of administrative arrangements, the department transferred a number of employees and other net assets to Court Services Victoria on 1 July 2014. Additional land and buildings were transferred on 31 January 2016 once the land had been reserved for Courts purposes.

The net assets transferred out of the department as a result of the administrative restructure were recognised at the carrying amount of those assets in the balance sheet immediately prior to the transfer.

The net assets transfer was treated as a contribution of capital by the State in compliance with the accounting requirements of Financial Reporting Direction 119A Transfers Through Contributed Capital.

In respect of the activities relinquished, the following assets and liabilities were transferred at the date of transfer:

2016 2015$’000 $’000

ControlledAssets

Cash 0 1,933Receivables 0 41,183Prepayments 0 1,305Property, plant and equipment - carrying value 53,436 731,586

2016 2015$’000 $’000

Intangible assets - carrying value 0 35,489

LiabilitiesEmployee provisions 0 (65,106)Other liabilities 0 (119,899)

Controlled net assets transferred 53,436 626,491Net capital contribution (53,436) (626,491)

AdministeredAssets

Cash 0 6,801Receivables 0 1,878

LiabilitiesOther liabilities 0 (8,953)

Administered net assets transferred 0 (274)Net capital contribution 0 274

The revaluation surplus in relation to certain relinquished non-financial physical assets of $21.813 million in 2015-16 and $349.402 million in 2014-15 was also reclassified to accumulated surplus in accordance with FRD119A at the date of transfer.

Transfer of net assets to Department of Premier and CabinetOn 1 January 2015, the office of the Public Interest Monitor was transferred from the department to the Department of Premier and Cabinet as a result of a machinery of government change announced by the Victorian Government on 4 December 2014.

As part of this restructure of administrative arrangements, the department transferred a number of employees and other net assets to the Department of Premier and Cabinet.

The net assets transferred out of the department as a result of the administrative restructure were recognised at the carrying amount of those assets in the balance sheet immediately prior to the transfer.

The net assets transfer was treated as a contribution of capital by the State in compliance with the accounting requirements of Financial Reporting Direction 119A Transfers Through Contributed Capital.

In respect of the activities relinquished, the following assets and liabilities were transferred at the date of transfer:

2016 2015$’000 $’000

ControlledAssets

Cash 0 17Receivables 0 268Property, plant and equipment - carrying value 0 733

LiabilitiesEmployee provisions 0 (253)Other liabilities 0 (53)

Controlled net assets transferred 0 712

2016 2015$’000 $’000

Net capital contribution from the Crown 0 (712)

Note 8. Receivables2016 2015

$’000 $’000

Current receivablesContractualOther receivables (i) 20,558 21,220Provision for doubtful contractual receivables (i) (See note 8(a) below) (1,279) (775)

19,279 20,445StatutoryAmounts owing from Victorian Government (ii)* 542,787 651,484GST input tax credit recoverable 22,256 34,218

565,043 685,702

Total current receivables 584,322 706,147

* $250.716 million (2015: $266.668 million) relates to Victoria Police.

Non-current receivablesContractualAdvance to Metropolitan Fire and Emergency Services Board 1,427 1,665Other receivable 0 1,603

1,427 3,268StatutoryAmounts owing from Victorian Government (ii)* 159,207 139,448

159,207 139,448

Total non-current receivables 160,634 142,716

Total receivables 744,956 848,863

* $136.636 million (2015: $122.443 million) relates to Victoria Police.

(i) The department’s policy on the average credit period on sales of goods is 30 days. No interest is charged on other receivables. An allowance has been made for estimated irrecoverable amounts from the sale of goods when there is objective evidence that an individual receivable is impaired. The increase was recognised in the net result for the current financial year.(ii) The amounts recognised from the Victorian Government represent funding for all commitments incurred through the appropriations and are drawn from the Consolidated Fund as the commitments fall due.

(a) Movement in the provision for doubtful contractual receivables

Balance at beginning of the year 775 1,878Reversal of unused provision recognised in net result (3) (3)Increase in provision recognised in net result 507 0Reversal of provision for receivables written off during the year as uncollectible 0 (1,100)

Balance at end of the year 1,279 775

(b) Ageing analysis of contractual receivablesPlease refer to note 21(b) (table 21.4) for the ageing analysis of contractual receivables.

2016 2015$’000 $’000

(c) Nature and extent of risk arising from contractual receivablesPlease refer to note 21 for the nature and extent of credit risk arising from contractual receivables.

Note 9. Investments and other financial assets2016 2015

$’000 $’000

Current investments and other financial assets - Term deposits(i) > 3 months 0 7,500

Total current investments and other financial assets 0 7,500

Non-current investments and other financial assetsManaged investment schemes: - Equity trust - Australian dollar(ii) 89,806 88,372 - Equity trust - foreign currency(ii) 24,515 27,600 - Fixed interest trust(ii) 131,705 89,795 - Unlisted property trust(ii) 25,154 20,297

Total non-current investments and other financial assets 271,180 226,064

Total investments and other financial assets 271,180 233,564

(i) Term deposits under ‘investments and other financial assets’ class include only term deposits with maturity greater than 3 months.(ii) The department designated all its managed investment schemes at fair value through profit or loss.(a) Ageing analysis of investments and other financial assets

Please refer to note 21(b) (table 21.4) for the ageing analysis of investments and other financial assets.

(b) Nature and extent of risk arising from investments and other financial assetsPlease refer to note 21 for the nature and extent of risks arising from investments and other financial assets.

Note 10. Inventories2016 2015

$’000 $’000

Current inventoriesSupplies and consumables - at cost 4,104 3,378Raw materials - at cost 3,277 3,554Work in progress - at cost 16 0Total inventories 7,397 6,932

Note 11. Non-financial physical assets classified as held for sale

2016 2015$’000 $’000

Non-financial physical assets classified as held for sale:Land held for sale 644 1,514Finance lease vehicles held for sale 102 94Total non-financial physical assets classified as held for sale 746 1,608

Liabilities directly associated with assets classified as held for sale:Finance lease vehicles liabilities 89 82Total liabilities directly associated with assets classified as held for sale 89 82

(a) Fair value measurement of non-financial physical assets classified as held for saleThe following table provides the fair value measurement hierarchy of the department’s non-financial physical assets classified as held for sale, excluding the finance lease assets. The fair value measurement heirarchy does not apply to finance lease assets.

($’000)

2016Carrying amount as at

30 June 2016Fair value measurement at end of reporting

period using:Level 1 (i) Level 2 (i) Level 3 (i)

Land held for sale 644 0 0 644Total assets classified as held for sale 644 0 0 644(i) Classified in accordance with the fair value hierarchy, see note 1(B).

($’000)

2015Carrying amount as at

30 June 2015Fair value measurement at end of reporting

period using:Level 1 (i) Level 2 (i) Level 3 (i)

Land held for sale 1,514 0 0 1,514Total assets classified as held for sale 1,514 0 0 1,514(i) Classified in accordance with the fair value hierarchy, see note 1(B).

Note 12. Property, plant and equipmentClassification by ‘Public Safety and Environment’ purpose group - carrying amounts

Gross carrying amount

Accumulated depreciation

Net carrying amount

2016 2015 2016 2015 2016 2015$’000 $’000 $’000 $’000 $’000 $’000

Land at fair value (i) 148,195 216,533 0 0 148,195 216,533Buildings at fair value (i)(ii) 1,035,265 986,033 (15) (113,390) 1,035,250 872,643Buildings leasehold at fair value(i) 488,961 504,412 0 (63,754) 488,961 440,658Leasehold improvements at fair value(iii) 79,462 84,698 (50,785) (45,959) 28,677 38,739Plant and equipment at fair value (ii)(iv) 243,254 208,072 (103,807) (85,487) 139,447 122,585Plant and equipment under finance lease at fair value (iv) 20,229 19,504 (7,407) (8,122) 12,822 11,382

Assets under construction at cost 280,761 500,161 0 0 280,761 500,161Total property, plant and equipment 2,296,127 2,519,413 (162,014) (316,712) 2,134,113 2,202,701

(i) An independent valuation of the department’s land, buildings, leased buildings and artwork was performed by the Valuer General in 2015-16 (refer to note 1(L)). The effective date of the valuation is 30 June 2016. The fair value of land is determined by direct reference to recent market transactions on a arm’s length basis with land of comparable size and location to that held by the department, while the fair value of buildings is generally based on depreciated replacement cost.(ii) The 2014-15 comparative has been adjusted (refer to note 1V).(iii) Fair value of leasehold improvements is depreciated cost. Expenditure is depreciated over the life of the lease agreement, to reflect the consumption of economic resources over the period of the agreement.(iv) The fair value of plant and equipment is depreciated cost. This represents a reasonable approximation of fair value as there is no evidence of a reliable market-based fair value for this class of asset.

Classification by ‘Public Safety and Environment’ purpose group - movements in carrying amounts

Land at fair value (i)

Buildings at fair value (i)

Buildings leasehold at

fair value (i)

Leasehold improvements

at fair value

Plant & equipment at

fair value

Leased plant & equipment at

fair value

Assets under construction at

cost Total2016 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Opening written down balance 216,533 872,643 440,658 38,739 122,585 11,382 500,161 2,202,701Additions 21 4,947 0 1,742 12,266 8,947 136,925 164,848Disposals 0 0 0 0 (15) (2,658) 0 (2,673)Transfer out of assets under construction 0 335,058 0 92 21,175 0 (356,325) 0Revaluation of PPE 57,593 (39,053) 59,242 0 2 0 0 77,784Reversal of impairment of assets 0 0 5,000 0 0 0 0 5,000Reclassification between classes 0 680 0 (5,366) 4,686 0 0 0Machinery of government transfer in 0 0 0 0 0 0 0 0Machinery of government transfer out (49,120) (4,316) 0 0 0 0 0 (53,436)Fair value of assets received free of charge or for nominal consideration 0 0 0 0 246 3 0 249Fair value of assets provided free of charge or for nominal consideration 0 0 0 0 0 0 0 0Depreciation(ii) 0 (44,504) (15,939) (6,530) (20,151) (4,750) 0 (91,874)Transfer to disposal group held for sale 0 0 0 0 0 (102) 0 (102)Net transfers contributed capital (76,832) (90,205) 0 0 (1,347) 0 0 (168,384)Closing written down balance 148,195 1,035,250 488,961 28,677 139,447 12,822 280,761 2,134,113(i) An independent valuation of the department’s land, buildings, leased buildings and artwork was performed by the Valuer General in 2015-16 (refer to note 1(L)). The effective date of the valuation is 30 June 2016.(ii) Aggregate depreciation allocated during the year is recognised as an expense and disclosed in Note 5(b) to the financial statements.

Classification by ‘Public Safety and Environment’ purpose group - movements in carrying amounts

Land at fair value

Buildings at fair value

Buildings leasehold at

fair value

Leasehold improvements

at fair value

Plant & equipment at

fair value

Leased plant & equipment at

fair value

Assets under construction at

cost Total2015 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Land at fair value

Buildings at fair value

Buildings leasehold at

fair value

Leasehold improvements

at fair value

Plant & equipment at

fair value

Leased plant & equipment at

fair value

Assets under construction at

cost Total2015 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000Opening written down balance 377,278 915,123 675,142 57,341 100,483 18,416 674,741 2,818,524Additions (i) 0 3,857 0 2,062 6,694 7,782 173,723 194,118Disposals 0 0 0 0 (11) (2,164) 0 (2,175)Transfer out of assets under construction (i) 0 304,915 0 4,670 34,692 0 (344,277) 0Impairment of assets 0 0 (5,000) 0 0 0 0 (5,000)Reclassification between classes 0 14 0 96 (1,329) 0 1,219 0Machinery of government transfer out (161,965) (316,694) (213,545) (17,267) (9,549) (8,055) (5,245) (732,320)Fair value of assets received free of charge or for nominal consideration 0 0 0 0 8,623 4 0 8,627Fair value of assets provided free of charge or for nominal consideration 0 0 0 (135) (109) 0 0 (244)Depreciation(i) 0 (35,050) (15,939) (7,859) (16,729) (4,508) 0 (80,085)Transfer to disposal group held for sale 0 0 0 0 0 (94) 0 (94)Net transfers contributed capital 1,220 478 0 (169) (180) 1 0 1,350Closing written down balance (i) 216,533 872,643 440,658 38,739 122,585 11,382 500,161 2,202,701(i) The 2014-15 comparative has been adjusted (refer to note 1V).Aggregate depreciation allocated during the year is recognised as an expense and disclosed in Note 5(b) to the financial statements.

Fair value measurement hierarchy for assets as at 30 June 2016

($’000)

2016

Carrying amount as at 30 June 2016

Fair value measurement at end of reporting period using:

Level 1 (i) Level 2 (i) Level 3 (i)

Land at fair value Non-specialised land 6,300 0 0 6,300 Specialised land 141,895 0 0 141,895Total land at fair value 148,195 0 0 148,195

Buildings at fair value Heritage buildings 5,575 0 0 5,575 Specialised buildings 1,029,675 0 0 1,029,675Total buildings at fair value 1,035,250 0 0 1,035,250

Leasehold improvements at fair value Leasehold improvements 28,677 0 0 28,677Total leasehold improvements at fair value 28,677 0 0 28,677

Plant and equipment at fair value Artwork 27 0 27 0 Other plant and equipment 139,420 0 0 139,420Total plant and equipment at fair value 139,447 0 27 139,420

($’000)

2015

Carrying amount as at 30 June 2015

Fair value measurement at end of reporting period using:

Level 1 (i) Level 2 (i) Level 3 (i)

Land at fair value Specialised land 216,533 0 0 216,533Total land at fair value 216,533 0 0 216,533

($’000)

2016

Carrying amount as at 30 June 2016

Fair value measurement at end of reporting period using:

Level 1 (i) Level 2 (i) Level 3 (i)

Buildings at fair value Specialised buildings (ii) 872,643 0 0 872,643Total buildings at fair value (ii) 872,643 0 0 872,643

Leasehold improvements at fair value Leasehold improvements 38,739 0 0 38,739Total leasehold improvements at fair value 38,739 0 0 38,739

Plant and equipment at fair value Artwork 25 0 25 0 Other plant and equipment (ii) 122,560 0 0 122,560Total plant and equipment at fair value (ii) 122,585 0 25 122,560(i) Classified in accordance with the fair value hierarchy, see note 1(B).(ii) The 2014-15 comparative has been adjusted (refer to note 1V).There have been no transfers between levels during the period.

Independent valuations in 2015-16An independent valuation of the department’s land, buildings, leased buildings and artwork was performed by the Valuer General in 2015-16. The Valuer General used external independent valuers to perform the valuations of the department’s land which was performed by G. M. Brien & Associates Pty Ltd, buildings which was performed by Napier & Blakeley Pty Ltd, and artwork which was performed by the Dominion Group. The effective date of the valuation is 30 June 2016.

Heritage buildingsThe department holds heritage listed buildings which cannot be modified or disposed of without formal ministerial approval. Heritage buildings are valued using the depreciated replacement cost method. The replacement cost relates to the costs to replace the current service capacity of the asset. This cost generally represents the replacement cost of the building after applying depreciation rates on a useful life basis. However, for some heritage and iconic assets, the cost may be the reproduction cost rather than the replacement cost if those assets’ service potential could only be replaced by reproducing them with the same materials. Economic obsolescence has also been factored into the depreciated replacement cost calculation.

Non-specialised land, non-specialised buildings and artworksNon-specialised land, non-specialised buildings and artworks are valued using the market approach. Under this valuation method, the assets are compared to recent comparable sales or sales of comparable assets which are considered to have nominal or no added improvement value.

For non-specialised land and non-specialised buildings, independent valuations are performed to determine the fair value using the market approach. Valuation of the assets are determined by analysing comparable sales and allowing for share, size, topography, location and other relevant factors specific to the asset being valued. From the sales analysed, an appropriate rate per square metre is applied to the subject asset.

For artwork, valuation of the assets is determined by a comparison to similar examples of the artist’s work in existence throughout Australia and overseas, and research on prices paid for similar examples offered at auction or through art galleries in recent years.

To the extent that non-specialised land, non-specialised buildings and artworks do not contain significant, unobservable adjustments, these assets are classified as level 2 under the market approach.

Specialised land and specialised buildingsFor specialised land, the market approach is also used, adjusted for the community service obligation

(CSO) to reflect the specialised nature of the land being valued. The CSO adjustment is a reflection of the valuer’s assessment of the impact of restrictions associated with an asset to the extent that is also equally applicable to market participants. This approach is in light of the highest and best use consideration required for fair value measurement, and takes into account the use of the asset that is physically possible, legally permissible, and financially feasible. As adjustments of CSO are considered as significant unobservable inputs, specialised land would be classified as level 3 assets.

For specialised buildings, the depreciated replacement cost method is used, adjusting for the associated depreciations. As depreciation adjustments are considered as significant, unobservable inputs in nature, specialised buildings are classified as level 3 fair value measurements.

Plant and equipmentPlant and equipment is held at fair value. When plant and equipment is specialised in use, such that it is rarely sold other than as part of a going concern, fair value is determined using the depreciated replacement cost method.

There were no changes in valuation techniques throughout the period to 30 June 2016.

For all assets measured at fair value, the current use is considered the highest and best use.

Reconciliation of level 3 fair value

($’000)

2016Specialised

landSpecialised

buildingsHeritage

buildingsLeasehold

improvementsPlant and

equipment

Opening balance 216,533 872,643 0 38,739 122,560Purchases (sales) 21 328,725 0 (3,532) 38,291Transfers in (out) of level 3 (125,952) (82,561) 0 0 (1,280)Depreciation 0 (44,504) 0 (6,530) (20,151)Impairment loss 0 0 0 0 0Revaluation 51,293 (44,628) 5,575 0 0Closing balance 141,895 1,029,675 5,575 28,677 139,420

($’000)

2015Specialised

landSpecialised

buildingsHeritage

buildingsLeasehold

improvementsPlant and

equipment

Opening balance 376,278 887,839 27,284 57,341 99,643Purchases (sales) (i) 1,220 309,264 0 6,524 48,380Transfers in (out) of level 3 (160,965) (289,410) (27,284) (17,267) (8,734)Depreciation (i) 0 (35,050) 0 (7,859) (16,729)Impairment loss 0 0 0 0 0Closing balance (i) 216,533 872,643 0 38,739 122,560(i) The 2014-15 comparative has been adjusted (refer to note 1V).

Description of significant unobservable inputs to level 3 valuations:

Valuation technique Significant unobservable inputs

Specialised land Market approach Community service obligation (CSO) adjustment

Specialised buildings Depreciated replacement cost Useful life

Heritage buildings Depreciated replacement cost Useful life

Leasehold improvements Depreciated replacement cost Term of lease

Plant and equipment Depreciated replacement cost Useful life

The significant unobservable inputs have remained unchanged from 2015.

Note 13. Intangible assets2016 2015

$’000 $’000

Gross carrying amountOpening balance 67,687 138,174Additions 8,099 0Net additions to/(from) software works in progress 3,464 3,174Refund on termination of contract 0 (9,300)Disposals (1,624) 0Impairment (3,655) (13,076)Machinery of government transfer out 0 (51,285)Closing balance 73,971 67,687

Accumulated amortisationOpening balance 47,038 46,343Amortisation expense (i) 16,752 16,491Disposals (1,624) 0Machinery of government transfer out 0 (15,796)Closing balance 62,166 47,038

Net book value at end of financial year 11,805 20,649(i) The consumption of intangible produced assets is included in the ‘depreciation and amortisation’ expense line item in note 5(b) and the comprehensive operating statement.

Significant intangible assetsThe department has entered into a software licensing agreement valued at $8.099 million. This is a national system that broadcasts warning alerts in the event of bush fires, floods or other emergencies.

Note 14. Payables2016 2015

$’000 $’000

Current payablesContractualTrade creditors and other payables (i)(ii) 163,230 135,586Accrued capital works 17,538 151,998Salaries and wages 9,916 5,487

190,684 293,071StatutoryPay as you go (PAYG) tax withheld 761 6,101Payroll tax 4,947 4,224Fringe benefits tax 212 176Amounts payable to government agencies * 280,183 297,110

286,103 307,611Total current payables 476,787 600,682

* $250.716 million (2015: $266.668 million) relates to Victoria Police.

Non-current payablesContractual

2016 2015$’000 $’000

Amounts payable to government 1,427 1,665

StatutoryAmounts payable to government agencies * 139,981 122,443Total non-current payables 141,408 124,108

Total payables 618,195 724,790* $136.636 million (2015: $122.443 million) relates to Victoria Police.(i) The department’s policy on the average credit period is 30 days.(ii) This amount includes accrued expenses and other payables.

(a) Maturity analysis of contractual payablesPlease refer to note 21(c) (table 21.5) for the maturity analysis of contractual payables.

(b) Nature and extent of risk arising from contractual payablesPlease refer to note 21 for the nature and extent of risks arising from contractual payables.

Note 15. Borrowings2016 2015

$’000 $’000

Current borrowingsFinance lease liabilities (i) (note 18) - PPP related finance lease liabilities 12,686 13,326 - Non-PPP related finance lease liabilities 6,314 6,236Total current borrowings 19,000 19,562

Non-current borrowingsFinance lease liabilities (i) (note 18) - PPP related finance lease liabilities 163,208 175,894 - Non-PPP related finance lease liabilities 6,557 5,215Total non current borrowings 169,765 181,109Total borrowings 188,765 200,671(i) Secured by the assets leased. Finance leases are effectively secured as the rights to the leased assets revert to the lessor in the event of default.

(a) Maturity analysis of borrowingsPlease refer to note 21(c) (table 21.5) for the maturity analysis of borrowings.

(b) Nature and extent of risk arising from borrowingsPlease refer to note 21 for the nature and extent of risk arising from borrowings.

(c) Defaults and breachesDuring the current and prior years, there were no defaults and breaches of any of the loans.

Note 16. Provisions2016 2015

$’000 $’000

Current provisionsEmployee benefits (i) (note 16(a)) - annual leave: - Unconditional and expected to be settled within 12 months (ii) 41,316 36,268 - Unconditional and expected to be settled after 12 months (iii) 5,969 5,192Employee benefits (i) (note 16(a)) - long service leave: - Unconditional and expected to be settled within 12 months (ii) 42,629 38,848 - Unconditional and expected to be settled after 12 months (iii) 27,133 24,371

117,047 104,679

Provisions for on-costs (note 16(a) and (b)): - Unconditional and expected to be settled within 12 months (ii) 18,165 16,061 - Unconditional and expected to be settled after 12 months (iii) 6,550 5,693Other provisions (note 16(b)) 6,902 3,970

31,617 25,724

Total current provisions 148,664 130,403

Non-current provisionsEmployee benefits (i) (note 16(a)) 17,003 16,071Provisions for on-costs (note 16(a) and (b)) 2,936 2,648Other provisions (note 16(b)) 9,363 10,456

Total non-current provisions 29,302 29,175

Total provisions 177,966 159,578

(a) Employee benefits (i) and related on-costs

Current employee benefitsAnnual leave entitlements 47,285 41,460Long service leave entitlements 69,762 63,219

117,047 104,679

Non-current employee benefitsLong service leave entitlements 17,003 16,071

Total employee benefits 134,050 120,750

Current on-costs 24,715 21,754Non-current on-costs 2,936 2,648

Total on-costs 27,651 24,402

Total employee benefits and related on-costs 161,701 145,152(i) Provisions for employee benefits consist of amounts for annual leave and long service leave accrued by employees, not including on-costs.(ii) The amounts disclosed are nominal amounts.(iii) The amounts disclosed are discounted to present value.

(b) Movement in provisions (excluding employee benefits)

2016

Employee benefit

on-costsOther

provisions Total$’000 $’000 $’000

Opening balance 24,402 14,426 38,828Additional provisions recognised 16,652 5,260 21,912Reductions arising from payments/other sacrifices of future economic benefits (13,403) (3,972) (17,375)Unwind of discount and effect of changes in the discount rate 0 551 551Reduction due to transfer out 0 0 0Closing balance 27,651 16,265 43,916Current 24,715 6,902 31,617Non-current 2,936 9,363 12,299

2015

Employee benefit

on-costsOther

provisions Total$’000 $’000 $’000

Opening balance 29,903 11,459 41,362

Additional provisions recognised 12,946 5,740 18,686Reductions arising from payments/other sacrifices of future economic benefits (10,125) (2,892) (13,017)

Unwind of discount and effect of changes in the discount rate 0 119 119

Reduction due to transfer out (8,322) 0 (8,322)

Closing balance 24,402 14,426 38,828

Current 21,754 3,970 25,724Non-current 2,648 10,456 13,104

Note 17. SuperannuationEmployees of the department are entitled to receive superannuation benefits and the department contributes to both defined benefit and defined contribution plans. The defined benefit plans provides benefits based on years of service and final average salary.

The department does not recognise any defined benefit liability in respect of the plan(s) because the entity has no legal or constructive obligation to pay future benefits relating to its employees; its only obligation is to pay superannuation contributions as they fall due. The Department of Treasury and Finance recognises and discloses the State’s defined benefit liabilities in its disclosure for administered items.

However, superannuation contributions paid or payable for the reporting period are included as part of employee benefits in the comprehensive operating statement of the department.

The name, details and amounts expensed in relation to the major employee superannuation funds and contributions made by the department are as follows:

FundPaid contribution

for the yearContribution outstanding

at year end2016 2015 2016 2015

$’000 $’000 $’000 $’000

Defined benefit plans:Emergency Services and State Super- revised and new 4,764 4,917 52 40

Defined contribution plans:VicSuper 36,241 32,694 449 289Various other 9,602 7,837 132 72

Total 50,607 45,448 633 401The basis for contributions is determined by the various schemes.

Note 18. LeasesLeasing arrangementsAs part of the Corrections’ Long Term Management Strategy, the State entered into a 25 year public private partnership (PPP) arrangement for the design, construction and maintenance of two prisons, Marngoneet Correctional Centre and Metropolitan Remand Centre. The Marngoneet Correctional Centre is a medium security facility located at Lara, providing intensive treatment and offender management programs for males who are at moderate to high risk of re-offending. The Metropolitan Remand Centre is a maximum security facility located at Ravenhall for unsentenced male prisoners. The finance leases for the provision of these prison facilities end in 2031, and are disclosed in the table below. The commitments for facilities maintenance are disclosed in note 19.

The State also entered into a finance lease for the provision of prison facilities for 20 years at Fulham Correctional Centre. Fulham Correctional Centre accommodates predominantly mainstream sentenced prisoners. The finance lease for Fulham’s prison facilities ends in 2017, and is disclosed in the table below. The commitments for facilities maintenance and correctional services are disclosed in note 19.

Finance lease liabilities payableMinimum future lease

paymentsPresent value of minimum

future lease payments2016 2015 2016 2015$’000 $’000 $’000 $’000

PPP related finance lease liabilities payable Not longer than 1 year 32,617 33,918 12,686 13,326 Longer than 1 year and not longer than 5 years 108,330 113,054 29,712 34,085 Longer than 5 years 306,316 334,208 133,496 141,809

447,263 481,180 175,894 189,220Other finance lease liabilities payable Not longer than 1 year 6,693 6,620 6,314 6,236 Longer than 1 year and not longer than 5 years 6,853 5,416 6,557 5,215 Longer than 5 years 0 0 0 0

13,546 12,036 12,871 11,451Minimum future lease payments* 460,809 493,216 188,765 200,671Less future finance charges (272,044) (292,545) 0 0Present value of minimum lease payments 188,765 200,671 188,765 200,671

Included in the financial statements as:Current borrowings lease liabilities (note 15) 19,000 19,562Non-current borrowings lease liabilities (note 15) 169,765 181,109

188,765 200,671* Minimum future lease payments include the aggregate of all lease payments and any guaranteed residual.(a) Maturity analysis of finance lease liabilitiesPlease refer to note 21(c) (table 21.5) for the maturity analysis of finance lease liabilities.(b) Nature and extent of risk arising finance lease liabilitiesPlease refer to notes 21(c) and (d) for the nature and extent of risk arising from finance lease liabilities.

Note 19. Commitments for expenditure(a) Commitments other than public private partnerships (i)

($’000)

2016 2015Nominal value Nominal value

Capital expenditure commitmentsProperty, plant and equipment 46,295 113,452Total capital expenditure commitments 46,295 113,452

Intangible asset commitmentsSoftware 12,306 8,935Total intangible asset commitments 12,306 8,935

Operating lease commitmentsAccomodation leases 239,580 204,540Other 6 12Total operating lease commitments 239,586 204,552

Outsourcing and other commitmentsPrison operation and maintenance contracts (ii) (iii) 4,111,169 641,868Prisoner transportation contracts 83,687 99,854Other corrections contracts (iv) 119,109 52,216Infringement Management and Enforcement Services contracts 35,320 95,653Traffic camera services contracts 45,028 77,495Camera maintenance, testing and other contracts (iv) 15,534 13,258Health services contracts 170,935 140,567Working with children contracts 12,858 7,017Emergency management contracts 42,806 0Other (iv) 55,412 13,152Total outsourcing commitments 4,691,858 1,141,080Total commitments other than public private partnerships 4,990,045 1,468,019(i) The figures presented are inclusive of GST.(ii) The 2014-15 comparative figure has been adjusted to include Port Phillip Prison’s commitments.(iii) The year on year increase reflects the renewed contract for operating and maintaining Port Phillip Prison for a further 20 years.(iv) The 2014-15 comparative figures have been adjusted to provide more detailed line items.

(b) Public private partnershipsCommissioned public private partnerships (i)(ii)(iii)

($’000)

2016 2015

Other commitments Other commitmentsPresent

valueNominal

valuePresent

valueNominal

value

Private Prisons 1,466,566 1,818,840 1,368,228 1,886,532

Sub-total 1,466,566 1,818,840 1,368,228 1,886,532

Uncommissioned public private partnerships (iv)

($’000)

2016 2015Minimum lease

paymentsOther

commitmentsTotal

commitmentsMinimum lease

paymentsOther

commitmentsTotal

commitmentsDiscounted

valuePresent

valueNominal

valueDiscounted

valuePresent

valueNominal

valuePrivate Prison (v) 791,623 2,799,413 7,459,820 791,623 2,652,215 7,459,820Sub-total 791,623 2,799,413 7,459,820 791,623 2,652,215 7,459,820

Total commitments for public private partnerships 4,265,979 9,278,660 4,020,443 9,346,352(i) The present values of the minimum lease payments for commissioned public private partnerships (PPPs) are recognised on the balance sheet and are not disclosed as commitments.(ii) Refer to note 18 for further details on the commissioned public private partnership projects.(iii) The 2014-15 comparative figures for the commissioned public private partnerships have been adjusted to remove Port Phillip Prison’s commitments which are now disclosed under outsourcing commitments, and to include GST on the remaining commitments.(iv) The discounted values of the minimum lease payments for uncommissioned PPPs have been discounted to the projects’ expected dates of commissioning, and the present values of other commitments have been discounted to 30 June of the respective financial years.(v) In September 2014, the State entered into a contract with GEO Consortium to design, construct, operate and maintain a new medium security men’s prison for an operating period of 25 years.

(c) Commitments payable (i)

($’000)

2016 2015Nominal value Nominal value

Capital expenditure commitments payableLess than 1 year 37,404 103,356Longer than 1 year and not longer than 5 years 8,891 10,096Longer than 5 years 0 0Total capital expenditure commitments 46,295 113,452

Intangible assets commmitments payableLess than 1 year 7,116 2,298Longer than 1 year and not longer than 5 years 5,190 6,637Longer than 5 years 0 0Total intangible assets commitments 12,306 8,935

Operating lease commitments payableLess than 1 year 40,048 34,366Longer than 1 year and not longer than 5 years 141,993 116,771Longer than 5 years 57,545 53,415Total operating lease commitments 239,586 204,552

Outsourcing and other commitments payable (ii)

Less than 1 year 424,740 341,986Longer than 1 year and not longer than 5 years 857,393 420,980

($’000)

2016 2015Nominal value Nominal value

Longer than 5 years 3,409,725 378,114Total outsourcing commitments 4,691,858 1,141,080

Public private partnership commitments payable (ii)

Less than 1 year 73,031 67,692Longer than 1 year and not longer than 5 years 1,408,112 1,185,956Longer than 5 years 7,797,517 8,092,704Total public private partnership commitments 9,278,660 9,346,352Total commitments 14,268,705 10,814,371(i) For future finance lease payments refer to note 18.(ii)

The 2014-15 comparative figures for the commissioned public private partnerships have been adjusted to remove Port Phillip Prison’s commitments which are now disclosed under outsourcing commitments, and to include GST on the remaining commitments.

Note 20. Contingent assets and contingent liabilities2016 2015$’000 $’000

Contingent assetsNil contingent assets

Contingent liabilitiesMake good provisions 3,008 3,272Liabilities pending the outcome of legal action 5,211 4,625

8,219 7,897Unquantifiable contingent liabilityNative title

A number of claims have been filed with the Federal Court under the Commonwealth Native Title Act 1993 that affect Victoria. It is not feasible at this time to quantify any future liability.

Note 21. Financial instruments(a) Financial risk management objectives and policiesThe department’s principal financial instruments comprise of: cash assets term deposits receivables (excluding statutory receivables) managed investment schemes payables (excluding statutory payables) finance lease payables.

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement, and the basis on which income and expenses are recognised, with respect of each class of financial asset, financial liability and equity instrument are disclosed in note 1 to the financial statements.

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

The department’s main financial risks include credit risk, liquidity risk, interest rate risk, and equity price risk. The department manages these financial risks in accordance with its financial risk management policy.

The department uses different methods to measure and manage the different risks to which it is exposed. Primary responsibility for the identification and management of financial risks rests with the department’s Finance Committee.

The carrying amounts of the department’s contractual financial assets and financial liabilities by category are in Table 21.1.

Categorisation of financial instruments(i)

Table 21.1($’000)

2016

Contractual financial assets /

liabilities designated at fair

value through profit or loss

Contractual financial assets

loans and receivables

Contractual financial

liabilities at amortised cost Total

Contractual financial assetsCash and deposits 0 255,471 0 255,471Receivables 0 20,706 0 20,706Investments and other contractual financial assets: - Managed investment schemes 271,180 0 0 271,180 - Term deposits > 3 months 0 0 0 0Total contractual financial assets 271,180 276,177 0 547,357

Contractual financial liabilitiesPayables: - Trade creditors and other payables 0 0 163,230 163,230 - Accrued capital works 0 0 17,538 17,538 - Salary and wages 0 0 9,916 9,916 - Amounts payable to government 0 0 1,427 1,427Borrowings: - Finance lease liabilities 0 0 188,765 188,765Total contractual financial liabilities 0 0 380,876 380,876

($’000)

2015

Contractual financial assets /

liabilities designated at fair

value through profit or loss

Contractual financial assets

loans and receivables

Contractual financial

liabilities at amortised cost Total

Contractual financial assetsCash and deposits 0 280,556 0 280,556Receivables 0 23,713 0 23,713Investments and other contractual financial assets: - Managed investment schemes 226,064 0 0 226,064 - Term deposits > 3 months 0 7,500 0 7,500Total contractual financial assets 226,064 311,769 0 537,833

($’000)

2015

Contractual financial assets /

liabilities designated at fair

value through profit or loss

Contractual financial assets

loans and receivables

Contractual financial

liabilities at amortised cost Total

Contractual financial liabilitiesPayables: - Trade creditors and other payables 0 0 135,586 135,586 - Accrued capital works 0 0 151,998 151,998 - Salary and wages 0 0 5,487 5,487 - Amounts payable to government 0 0 1,665 1,665Borrowings: - Finance lease liabilities 0 0 200,671 200,671Total contractual financial liabilities 0 0 495,407 495,407(i) Amounts disclosed in this table exclude statutory amounts (e.g. amounts owing from Victorian Government and GST input tax credit recoverable and tax payable).

Net holding gain/(loss) on financial instruments by category (i)

Table 21.2($’000)

2016Net holding gain/(loss)

Total interest income /

(expense) TotalContractual financial assetsDesignated at fair value through profit or loss 2,800 0 2,800Loans and receivables (at amortised cost) (559) 5,484 4,925Total contractual financial assets 2,241 5,484 7,725

Contractual financial liabilitiesAt amortised cost 0 20,678 20,678Total contractual financial liabilities 0 20,678 20,678

($’000)

2015Net holding gain/(loss)

Total interest income /

(expense) TotalContractual financial assetsDesignated at fair value through profit or loss 627 0 627Loans and receivables (at amortised cost) (55) 8,609 8,554Total contractual financial assets 572 8,609 9,181

Contractual financial liabilitiesAt amortised cost 0 21,542 21,542Total contractual financial liabilities 0 21,542 21,542(i) Amounts disclosed in this table exclude holding gains and losses related to statutory financial assets and liabilities.The net holding gains or losses disclosed above are determined as follows:for cash and deposits, and loans or receivables, the net gain or loss is calculated by taking the movement in the fair value of the asset, the interest income, and minus any impairment recognised in the net resultfor financial liabilities measured at amortised cost, the net gain or loss is the interest expensefor financial assets designated at fair value through profit or loss, the net gain or loss is calculated by taking the

Table 21.2($’000)

2016Net holding gain/(loss)

Total interest income /

(expense) Totalmovement in the fair value of the financial asset.

(b) Credit riskCredit risks arise from the contractual financial assets of the department, which comprises of cash and deposits, non-statutory receivables and investments and other contractual financial assets. The department’s exposure to credit risk arises from the potential default of a counterparty on their contractual obligations resulting in financial loss to the department. Credit risk is measured at fair value and is monitored on a regular basis.

Credit risk associated with the department’s contractual financial assets is minimal because the main debtor is the Victorian Government. Credit risk in relation to receivables is also monitored by management by reviewing the ageing of receivables on a monthly basis.

In addition, the department does not engage in hedging for its contractual financial assets and mainly obtains contractual financial assets that are on fixed interest, except for cash assets, which are mainly cash at bank.

Credit risk in relation to the department’s investments and other contractual financial assets is managed by Treasury Corporation Victoria and the Victorian Funds Management Corporation.

Provision of impairment for contractual financial assets is recognised when there is objective evidence that the department will not be able to collect on a receivable. Objective evidence includes financial difficulties of the debtor, default payments, debts which are more than 60 days overdue, and changes in debtor credit ratings.

Except as otherwise detailed in the following table, the carrying amount of contractual financial assets recorded in the financial statements, net of any allowances for losses, represents the department’s maximum exposure to credit risk without taking account of the value of any collateral obtained.

Credit quality of contractual financial assets that are neither past due nor impaired(i)

Table 21.3 ($’000)

2016Financial

institutionsGovernment

Agencies Other TotalCash and deposits (1,113) 81,424 175,160 255,471Receivables 2,068 11,218 4,948 18,234Investments and other financial assets 0 0 271,180 271,180Total contractual financial assets 955 92,642 451,288 544,885

2015Cash and deposits (1,248) 61,471 220,333 280,556Receivables 2,265 13,917 4,881 21,063Investments and other financial assets 0 0 233,564 233,564Total contractual financial assets 1,017 75,388 458,778 535,183(i) The total amounts disclosed here exclude statutory amounts (e.g. amounts owing from Victorian Government and GST input tax credit recoverable).

Contractual financial assets that are either past due or impaired

There are no material financial assets which are individually determined to be impaired. Currently the department does not hold any collateral as security nor credit enhancements relating to any of its financial assets.

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

The ageing analysis table discloses the ageing only of contractual financial assets that are past due but not

impaired.

Ageing analysis of contractual financial assets(i)

Table 21.4($’000)

2016Carrying amount

Not past due and

not impaired

Past due but not impaired

Less than 1 month

1 to 3 months

3 months to 1 year

1 to 5 years

Receivables: - Accrued interest 3,788 3,788 0 0 0 0 - Other receivables 16,918 14,446 487 1,080 890 15Investments and other contractual financial assets - Managed investment schemes 271,180 271,180 0 0 0 0 - Term deposits 0 0 0 0 0 0

291,886 289,414 487 1,080 890 152015

Receivables: - Accrued interest 3,926 3,926 0 0 0 0 - Other receivables 19,787 17,137 1,053 672 912 13Investments and other contractual financial assets - Managed Investment Schemes 226,064 226,064 0 0 0 0 - Term Deposits 7,500 7,500 0 0 0 0

257,277 254,627 1,053 672 912 13(i) The carrying amounts disclosed here exclude statutory amounts (e.g. amounts owing from Victorian Government and GST input tax credit recoverable).

(c) Liquidity riskLiquidity risk arises when the department is unable to meet its financial obligations as they fall due. The department operates under the government’s fair payments policy of settling financial obligations within 30 days and in the event of a dispute, making payments within 30 days from the date of resolution.

The department’s maximum exposure to liquidity risk is the carrying amounts of financial liabilities as disclosed in the balance sheet. The exposure to liquidity risk is deemed insignificant based on prior periods’ data and current assessment of risk.

The carrying amount detailed in the following table of contractual financial liabilities recorded in the financial statements represents the department’s maximum exposure to liquidity risk.

Table 21.5 discloses the contractual maturity analysis for the department’s contractual financial liabilities.

Maturity analysis of contractual financial liabilities(i)(ii)

Table 21.5($’000)

2016

Carrying amount

Nominal amount

Maturity dates (i)

Less than 1 month

1 to 3 months

3 months to 1 year1 to 5 years

Greater than 5 years

Contractual payables: - Other payables 192,111 192,111 192,064 86 (15) (24) 0Borrowings: - Finance lease liabilities 188,765 460,809 4,519 6,224 28,567 115,183 306,316

380,876 652,920 196,583 6,310 28,552 115,159 306,3162015

Table 21.5($’000)

2016

Carrying amount

Nominal amount

Maturity dates (i)

Less than 1 month

1 to 3 months

3 months to 1 year1 to 5 years

Greater than 5 years

Contractual payables: - Other payables 294,736 294,736 294,775 (16) (5) (18) 0Borrowings: - Finance lease liabilities 200,671 493,216 4,594 6,499 29,445 118,470 334,208

495,407 787,952 299,369 6,483 29,440 118,452 334,208(i) Maturity analysis is presented using the contractual undiscounted cash flow.(ii) The carrying amounts disclosed exclude statutory amounts (e.g. GST payable).

(d) Market riskMarket risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The department’s exposures to market risk are insignificant and primarily through interest rate risk and equity price risk, with only minimal exposure to foreign currency risk.

Foreign currency risk

The department is not exposed to significant foreign currency risk through its payables relating to purchases of supplies from overseas. This is because of a limited amount of purchases denominated in foreign currencies and a short timeframe between commitment and settlement.

Interest rate risk

Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market interest rates. The department does not hold any interest bearing financial instruments that are measured at fair value, and therefore has no exposure to fair value interest rate risk.

Cash flow interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The department has minimal exposure to cash flow interest rate risks through its cash and deposits that are at floating rate. Management has concluded for cash at bank, it can be left at floating rate without necessarily exposing the department to significant risk. Management monitors movement in interest rates on a regular basis.

Interest rate exposures are insignificant and arise predominantly from assets bearing variable interest rates. The aim is to reduce risk by implementing a duration limits policy and restricting exposure to illiquid, long dated floats. Minimisation of risk on financial liabilities is achieved by undertaking fixed rate finance lease arrangements.

The carrying amounts of financial assets and financial liabilities that are exposed to interest rates are set out in Table 21.6.

Equity price risk

The department is exposed to equity price risk through its managed investment schemes. The department appointed the Victorian Funds Management Corporation to manage its investment portfolio in accordance with the Investment Risk Management Plan approved by the Treasurer. The fund manager on behalf of the department closely monitors performance and manages the equity price risk through diversification of its investment portfolio.

Interest rate exposure of financial instruments(i)

Table 21.6($’000)

2016

Weighted averageinterest

rate %Carryingamount

Interest rate exposureFixed

interest rate

Variable interest

rate

Non-interest bearing

Financial assetsCash and deposits: 2.37% 255,471 194,305 7,696 53,470Receivables: - Accrued interest 1.87% 3,788 3,788 0 0 - Other receivables 16,918 0 0 16,918Investment and other contractual financial assets 271,180 0 0 271,180Total financial assets 547,357 198,093 7,696 341,568

Financial liabilitiesPayables: - Amounts payable to government 9,171 0 0 9,171 - Other payables 182,940 0 0 182,940Borrowings: - Finance lease liabilities 8.18% 188,765 188,765 0 0Total financial liabilities 380,876 188,765 0 192,111

2015

Financial assetsCash and deposits: 2.46% 280,556 231,856 4,978 43,722Receivables: - Accrued interest 1.67% 3,926 3,926 0 0 - Other receivables 19,787 0 0 19,787Investment and other contractual financial assets 2.35% 233,564 7,500 0 226,064

Total financial assets 537,833 243,282 4,978 289,573

Financial liabilitiesPayables: - Amounts payable to government 9,660 0 0 9,660 - Other payables 285,076 0 0 285,076Borrowings: - Finance lease liabilities 8.41% 200,671 200,671 0 0

Total financial liabilities 495,407 200,671 0 294,736(i) The carrying amounts disclosed here exclude statutory amounts (e.g. amounts owing from Victorian Government, GST input tax credit recoverable, and GST payable).

Taking into account past performance, future expectations, economic forecasts and fund managers’ knowledge and experience of the financial markets, the department believes the following movements are ‘reasonably possible’ over the next 12 months:

Market risk sensitivity

Table 21.7($’000)

2016Carryingamount

Interest rate risk Other price riskNet

result EquityNet

result EquityNet

result EquityNet

result Equity(+)1.0% (+)1.0% (-)1.0% (-)1.0% (+)10% (+)10% (-)10% (-)10%

Contractual financial assets:Cash and deposits 7,696 77 77 (77) (77) 0 0 0 0Managed investment schemes - Equity trust - Australian dollar 89,806 0 0 0 0 8,981 8,981 (8,981) (8,981) - Equity trust - foreign currency 24,515 0 0 0 0 2,452 2,452 (2,452) (2,452) - Fixed interest trust 131,705 0 0 0 0 13,171 13,171 (13,171) (13,171) - Unlisted property trust 25,154 0 0 0 0 2,515 2,515 (2,515) (2,515)Total impact 278,876 77 77 (77) (77) 27,119 27,119 (27,119) (27,119)

($’000)

2015 Carryingamount

Interest rate risk Other price riskNet

result EquityNet

result EquityNet

result EquityNet

result Equity(+)1.0% (+)1.0% (-)1.0% (-)1.0% (+)10% (+)10% (-)10% (-)10%

Contractual financial assets:Cash and deposits 4,978 50 50 (50) (50) 0 0 0 0Managed investment schemes - Equity trust - Australian dollar 88,372 0 0 0 0 8,837 8,837 (8,837) (8,837) - Equity trust - foreign currency 27,600 0 0 0 0 2,760 2,760 (2,760) (2,760) - Fixed interest trust 89,795 0 0 0 0 8,980 8,980 (8,980) (8,980) - Unlisted property trust 20,297 0 0 0 0 2,030 2,030 (2,030) (2,030)Total impact 231,042 50 50 (50) (50) 22,607 22,607 (22,607) (22,607)

(e) Fair ValueThe fair values and net fair values of financial instrument assets and liabilities are determined as follows: Level 1 - the fair value of financial instrument with standard terms and conditions and traded in active

liquid markets are determined with reference to quoted market prices; Level 2 - the fair value is determined using inputs other than quoted prices that are observable for the

financial asset or liability, either directly or indirectly; and Level 3 - the fair value is determined in accordance with generally accepted pricing models based on

discounted cash flow analysis using unobservable market inputs.

The department’s managed investment schemes are within level 2 of the fair value hierarchy.

The department considers that the carrying amount of financial 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 following table shows that the fair values of the contractual financial assets and liabilities are the same as the carrying amounts.

Comparison between carrying amount and fair value(i)

Table 21.8($’000)

Carrying amount Fair value

Carrying amount Fair value

2016 2016 2015 2015

Contractual financial assetsCash and deposits 255,471 255,471 280,556 280,556Receivables: - Accrued interest 3,788 3,788 3,926 3,926 - Other receivables 16,918 16,918 19,787 19,787Investment and other contractual financial assets 271,180 271,180 233,564 233,564Total contractual financial assets 547,357 547,357 537,833 537,833

Contractual financial liabilitiesPayables: - Amounts payable to government 9,171 9,171 9,660 9,660 - Other payables 182,940 182,940 285,076 285,076Borrowings: - Finance lease liabilities 188,765 188,765 200,671 200,671Total contractual financial liabilities 380,876 380,876 495,407 495,407(i) The carrying amounts disclosed here exclude statutory amounts (e.g. amounts owing from Victorian Government, GST input tax credit recoverable, and GST payable).

Note 22. Cash flow information(a) Reconciliation of cash and cash equivalentsFor the purposes of the cash flow statement and balance sheet, cash includes cash on hand and in banks and investments in term deposits of less than three months, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the cash flow statement is reconciled to the related items in the balance sheet as follows:

2016 2015

$’000 $’000

Cash (i) (1,030) (1,159)Funds held in trust(ii) - cash 62,197 49,859 - term deposits 194,304 231,856

255,471 280,556

The above figures are reconciled to cash at the end of the financial year as shown in the cash flow statement as follows:

Balance as per cash flow statement 255,471 280,556

Term deposits comprise the following:

Victorian Consumer Law Fund 1,300 1,000Domestic Builders Fund 17,510 14,882National Gambling Research Trust 491 1,126Residential Tenancies Fund 12,928 14,807Victorian Property Fund 162,075 200,041

194,304 231,856(i) Due to the State of Victoria’s investment policy and government funding arrangements, government departments generally do not hold a large cash reserve in their bank accounts. Cash received by a department from the generation of revenue is generally paid into the State’s bank account, known as the Public Account. Similarly, any departmental expenditure, including those in the form of cheques drawn by the department for the payment of goods and services to its suppliers and creditors are made via the Public Account. The process is such that, the Public Account would remit to the department the cash required for the amount drawn on the cheques. This remittance by the Public Account occurs upon the presentation of the cheques by the department’s suppliers or creditors.The above funding arrangements often result in departments having a shortfall in the cash at bank required for payment of unpresented cheques at the reporting date.At 30 June 2016, cash at bank includes the amount of a shortfall for the payment of unpresented cheques of $1.074 million (2015: $0.929 million).(ii) Funds held in trust are quarantined for use specifically for the purposes under which each trust fund has been established and is not used for operating purposes.

(b) Reconciliation of net result for the period2016 2015

$’000 $’000

Net result for the period (i) 7,382 (8,435)

Non-cash movements:Net (gain)/loss on disposal of non-current assets (1,451) (1,106)Depreciation and amortisation of non-current assets (i) 108,626 96,576Impairment of non-current assets 3,655 13,076Resources (received)/provided free of charge or for nominal consideration (i) (249) (10,928)Net (gain)/loss from financial instruments (1,421) (710)Net gain/(loss) from revaluation of long service leave liability 1,013 2,456Net gain/(loss) from revaluation of other provisions 571 188

Movements in assets and liabilities:Decrease / (increase) in receivables (27,902) (55,075)Decrease / (increase) in inventories (465) 581Decrease / (increase) in prepayments (11,937) 1,613Increase / (decrease) in payables 15,495 30,498Increase / (decrease) in provisions 16,805 17,980Net cash flows from/(used in) operating activities (i) 110,122 86,714(i) The 2014–15 comparative has been adjusted (refer to note 1V)

Note 23. Physical asset revaluation surplus2016 2015

$’000 $’000

Physical asset revaluation surplus: (i)

Balance at beginning of financial year 603,231 957,633LandBalance at beginning of financial year 126,894 220,321Revaluation increment/(decrement) during the year 57,593 0Transfer to accumulated surplus (ii) (iii) (91,152) (93,427)Balance at end of financial year 93,335 126,894

BuildingsBalance at beginning of financial year 476,337 737,312Revaluation increment/(decrement) during the year 20,189 0Impairment losses 0 (5,000)Reversal of impairment losses 5,000 0Transfer to accumulated surplus (ii) (iii) 20,370 (255,975)Balance at end of financial year 521,896 476,337

ArtworkBalance at beginning of financial year 0 0Revaluation increment/(decrement) during the year 2 0Balance at end of financial year 2 0

Total physical asset revaluation surplus 615,233 603,231Net change in physical asset revaluation surplus (ii) 12,002 (354,402)(i) The physical asset revaluation surplus arises from the revaluation of land, buildings, and artwork.(ii) The physical asset revaluation surplus relating to assets transferred to Court Services Victoria under a restructure of administrative arrangements (refer to note 7) and the Victorian Institute of Forensic Medicine under another arrangement has been reclassified to accumulated surplus. The resulting net change in the physical asset revaluation surplus of $70.782 million in 2015-16 and $349.402 million in 2014-15 does not affect the Comprehensive Operating Statement, but is reflected in the Statement of Changes in Equity. The remaining net change in the physical asset revaluation surplus of $82.784 million in 2015-16 mainly relates to the revaluation of the department’s land and building assets, which does affect and is reflected in the Comprehensive Operating Statement.(iii) When land and buildings are transferred to another entity, any associated revaluation increment or decrement within the asset revaluation surplus is transferred to accumulated surplus in accordance with FRD119A.

Note 24. Summary of compliance with annual parliamentary appropriations and special appropriations(a) Summary of compliance with annual parliamentary appropriationsThe following table discloses the details of the various parliamentary appropriations received by the department for the year. In accordance with accrual output-based management procedures ‘provision of outputs’ and ‘additions to net assets’ are disclosed as ‘controlled’ activities of the department. Administered transactions are those that are undertaken on behalf of the State over which the department has no control or discretion.APPROPRIATION ACT FINANCIAL MANAGEMENT ACT 1994

Annual Appropriation

Advance from Treasurer Section 3(2) Section 29 Section 30 Section 32 MOG

Section 35 Advances

Total Parliamentary Authority

Appropriations Applied Variance

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’0002016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

ControlledProvision of outputs 5,156,798 5,008,233 147,234 14,652 0 0 230,577 199,472 62,729 28,015 99,468 129,861 0 (48,553) 0 0 5,696,806 5,331,680 5,506,669 5,129,248 190,137 202,432 (i)

Victorian Law Reform Commission 707 721 0 0 0 0 0 0 0 0 0 0 0 0 0 0 707 721 706 720 1 1

5,157,505 5,008,954 147,234 14,652 0 0 230,577 199,472 62,729 28,015 99,468 129,861 0 (48,553) 0 0 5,697,513 5,332,401 5,507,375 5,129,968 190,138 202,433

Additions to net assets 345,335 739,115 5,620 3,908 0 0 1,491 935 (62,729) (28,015) 119,607 105,649 0 (2,672) 0 0 409,324 818,920 128,597 554,612 280,727 264,308 (ii)

AdministeredPayments made on behalf of the State 54,461 54,461 0 0 0 0 0 0 0 0 0 0 0 0 0 0 54,461 54,461 28,905 28,871 25,556 25,590 (iii)

Total 5,557,301 5,802,530 152,854 18,560 0 0 232,068 200,407 0 0 219,075 235,510 0 (51,225) 0 0 6,161,298 6,205,782 5,664,877 5,713,451 496,421 492,331

(a) Summary of compliance with annual parliamentary appropriations (continued)(i) Provision of outputs (including Victorian Law Reform Commission)

The majority of the $190.138 million variance (2015: $202.433 million) relates to rephasing and carryover of output appropriations from 2015-16 to 2016-17.

The primary drivers of the rephasing and carryover are: Expanding Community Correctional Services to Meet Demand - Offending behaviour programs for

moderate and high risk offenders and Mental health liason pilot commenced later than anticipated. Marngoneet Correctional Centre precinct (Karreenga) - construction completion has been revised to

August 2016 with commissioning by late September 2016. Victorian Racing Industry Fund Grants - Owing to the size and scope of some of the VRIF’s capital

works programs, the timing of certain projects may extend beyond the financial year in which they are approved or initially anticipated to occur. While funds are committed, the precise timing of claims is dependant upon receipt of appropriate documentation indicating project stages have been completed in line with Ministerial approval, payment is then facilitated. Funding has been rephased into future years to align with the expected payment obligations.

Emergency Management - grant payment pending finalisation of contract extension for the emergency services pagers and equipment upgrade.

Infringement Management and Enforcement Services - rephase or carryover of funds for projects including the Mobile Camera Replacement program and National Heavy Vehicle Regulator.

IT Refresh - Funding was required to be recashflowed to future years for the implementation of the department’s IT Transformation/Refresh program.

Victoria Police - funding is required in 2016-17 for projects including Metropolitan Mobile Radio, Mobile Data Network, Protective Services Officeres - radio black spot funding, Conducted energy devices, Ice Action Plan - Cracking down on clandestine drug labs, and Registered sex offender management.

(ii) Additions to net asset base (ATNAB)

The majority of the $280.727 million variance (2015: $264.308 million) relates to rephasing and carryover of ATNAB appropriation into 2016-17.

The primary drivers of the rephasing and carryover are: Corrections Remand Infrastructure - Funding was redirected to this initiative from other projects during

the year. The project is currently on track for delivery in May 2018. Expanding Community Correctional Services to meet demand - The expansion of Community

Corrections Services to meet demand has been combined with Community Corrections - Contributing to a safer community (2016-17 Budget) to gain greater efficiency in delivery. The combined project is on schedule for delivery by June 2018, and cashflow has been aligned.

Infringement Management and Enforcement Services (IMES) Reform Project - Funding from IMES and Reforming the Collection and Enforcement of Legal Debt in Victoria have been redirected to procure an IT solution using a customisable off-the-shelf system. This will allow the department to gain efficiencies by combining the two projects. Tender process commenced in March 2016 and funds recashflowed to reflect the new timelines.

Critical Infrastructure and Services - Supporting Recent Prison Expansion - The project timelines for reception works and cellular accommodation have been revised to ensure that sufficient maximum security beds are available following the Metropolitan Remand Centre incident. The design and documentation phase for the medical and education centres has involved greater complexity than originally anticipated, resulting in rephasing of funding. Waste water treatment facilities are on track for completion in July with rephasing of funding into the first quarter of 2016.

Corrections System expansion and Women’s prison expansion strategy - The delivery of new infrastructure in the Dame Phyllis Frost Centre has been resequenced to minimise disruption to operations while additional beds and new units are constructed. The Specialist Mental Health facilities, expansion and upgrade of infrastructure, such as the medical centre and prison industries will follow. Funding from Corrections System expansion was redirected to Corrections Remand infrastructure, reducing the project scope. The cashflow has been aligned with the adjusted scope and timeframes.

Victoria Police - funding is required in 2016-17 for projects including Custody officers to free up 400 police, Mobile technology pilot, Echuca Police Station replacement, Wyndham Multi-Disciplinary Centre, and Mernda Police Station.

(iii) Administered - Payments on behalf of state

The variance of $25.556 million (2015: $25.590 million) is due to an over estimate of amounts paid/payable to other states and jurisdictions for their share of Tattersall’s taxation which is collected in Victoria.

(b) Summary of compliance with special appropriations

Authority Purpose Appropriations applied2016 2015

$’000 $’000

Controlled special appropriations applied

1 Corrections Act 1986 (No. 117/1986), s.104ZW

Compensation to CCS from the WorkCover Authority Fund under the Accident Compensation Act 1985

26 105

2 Volunteer Work Comp (Emergency Management Act 1986 (Act No. 30/1986), s.32)

Payments to volunteers for work related injuries under 1986 Act

123 183

3 VicSES Volunteer Work Comp (Victoria State Emergency Service Act 2005 (Act No. 51/2005), s.52)

Payments to SES volunteers for work related injuries under 2005 Act

476 351

4 Financial Management Act 1994 (No. 18/1994), s.10

Payments of Commonwealth grants under section 10 of the Financial Management Act 1994

3,322 2,137

5 Electoral Act 2002 (No. 23/2002), s.181 Cost incurred by the Victorian Electoral Commission

0 46,395

Total 3,947 49,171

Administered special appropriations applied

6 Melbourne City Link Act 1995 (No. 107/1995), s.14 (4)

Payments to City Link 2,387 2,609

7 EastLink Project Act 2004 (No 39/2004), s.26

Payments to East Link 1,837 1,500

8 Crown Proceedings Act 1958 (No. 6232/1958), s.26

Payments due for Crown Proceedings in the Supreme Court of Victoria

0 0

9 Electoral Act 2002 (No. 23/2002), s.215 Electoral entitlements 0 8,913

Total 4,224 13,022

Note 25. Ex-gratia expenses2016 2015

$’000 $’000Ex-gratia expensesCompensation for economic loss 29 1Total ex-gratia expenses (i) 29 1(i) Ex-gratia expenses are also presented under other supplies and services in note 5(e).

Note 26. Annotated income agreementsThe following is a listing of Annotated Revenue Retention Agreements approved by the Treasurer under Section 29 of the Financial Management Act 1994:

2016 2015$’000 $’000

User charges, or sales of goods and servicesConsumer Affairs Victoria Publications and Conferences (i) 41 89Corrections Victoria Prison Industries (ii) 12,242 11,456Crime Statistics Agency 169 0Emergency Alerting System (iii) 28,689 12,599Emergency Services Management (iv) 19,958 24,294Fees for Legal Services (v) 39,162 36,682Gaming and Liquor Regulation (vi) 845 743Infringement Court Fees 34,570 31,761Public Information, Education, Training and Mediation Services (vii) 701 727Registrar of Births, Deaths and Marriages (viii) 6,369 5,405Secretariat Legal Education and Board of Examiners 2,728 1,349Victorian Institute of Forensic Medicine Services 11,593 9,896Victoria Police Policing Services and Event Management (ix) 9,940 11,154

167,007 146,155Asset salesVictoria Police Asset Sales 1,491 935

1,491 935Commonwealth specific purpose paymentsNational Bushfire Mitigation Program 900 0National Coronial Information System 0 441National Disaster Resilience Program (x) 2,088 4,176Provision of Fire Services (x) 3,003 2,902Victoria Legal Aid 57,579 45,798

63,570 53,317

Total annotated income agreements 232,068 200,407(i) Previously known as Sale of Business Name Information.(ii) Previously known as Prison Industries(iii) Previously known as National Emergency Warning System.(iv) Previously known as Office of the Emergency Services Commissioner and State Control Centre Facility Charge.(v) Previously known as Solicitor Fees.(vi) Previously known as VCGLR Licence and Permit Application Investigations.(vii) Previously known as Dispute Settlement Services Victoria, OPA Public Information and Education Programs, and VEOHRC Community Education Programs.(viii) Previously known as Birth, Deaths and Marriages(ix) Previously known as Victoria Police Information, Security, Events and Training Services(x) Previously known as Emergency Management Council

Note 27. Trust account balances(a) Trust account balances relating to trust accounts controlled and/or administered by the department:

Cash and cash equivalents and investments (i)

2016 Opening balance as at

1 July 2015Total

receiptsTotal

payments

Closing balance as at 30 June 2016

$’000 $’000 $’000 $’000

Controlled Trusts

Victorian Consumer Law Fund- Australian Consumer Law and Fair Trading Act 2012 (No. 21/2012), s.134- Holds monies paid into and out of the fund under s.134 and Part 6.2 respectively of this Act.

1,134 256 0 1,390

Correctional Enterprises Working Account- Financial Management Act 1994 (No. 18/1994), Part 4- Working account for Correctional Enterprises.

7,494 12,956 11,464 8,986

Crime Prevention and Victims’ Aid Fund- Confiscation Act 1997 (No. 108/1997), s.134- Holds monies paid into and out of the fund under s.134 of this Act.

41 0 0 41

Domestic Builders Fund- Domestic Building Contracts Act 1995 (No 91/1995), s.124- Holds monies paid into and out of the fund under s.124 of this Act.

18,535 12,689 9,464 21,760

Motor Car Traders’ Guarantee Fund- Motor Car Traders Act 1986 (No. 104/1986), s.74- Holds monies paid into and out of the fund under s.74 of this Act.

1,800 3,700 2,559 2,941

National Gambling Research Trust- Memorandum of Understanding between the State and Federal Governments.- Funds a multi jurisdictional group devoted to national gambling research.

1,203 22 577 648

Residential Tenancies Fund- Residential Tenancies Act 1997 (No. 109/1997), s.491- Holds monies paid into and out of the fund under s.492 and s.493 respectively of this Act.

39,097 26,716 28,717 37,096

Sex Work Regulation Fund- Sex Work Act 1994 (No. 102/1994), s.66- Holds monies paid into and out of the fund under s.66 of this Act.

645 1,908 1,497 1,056

Treasury Trust Fund- Financial Management Act 1994 (No. 18/1994), Part 4- Working account for the department.

26,311 24,214 19,379 31,146

Vehicle Lease Trust Account- Financial Management Act 1994 (No. 18/1994), Part 4- Working account for the sale of VicFleet motor vehicles.

0 1,619 1,619 0

Victorian Property Fund- Estate Agents Act 1980 (No. 9428/1980), s.72- Holds monies paid into and out of the fund under s.73 and s.75 respectively of this Act.

419,017 52,114 48,514 422,617

Total Controlled Trusts 515,277 136,194 123,790 527,681

Administered Trusts

2016 Opening balance as at

1 July 2015Total

receiptsTotal

payments

Closing balance as at 30 June 2016

$’000 $’000 $’000 $’000

Asset Confiscation Office Retained Monies Trust Account- Financial Management Act 1994 (No. 18/1994), Part 4- Working account for the Asset Confiscation Office.

15,695 9,508 11,018 14,185

Departmental Suspense Account- Financial Management Act 1994 (No. 18/1994), Part 4- Working account for the department.

4,012 381 480 3,913

Public Service Commuter Club- Financial Management Act 1994 (No. 18/1994), Part 4- Working account for the Public Service Commuter Club.

(206) 1,775 1,809 (240)

Revenue Suspense- Financial Management Act 1994 (No. 18/1994), Part 4- Working account for the allocation of revenue.

16 0 5 11

Sundry Deposits- Financial Management Act 1994 (No. 18/1994), Part 4- Holds monies in term deposits for the Victorian Government Solicitors Office.

29 0 0 29

Treasury Trust Fund- Financial Management Act 1994 (No. 18/1994), Part 4- Working account for the department.

7,663 666 731 7,598

Victorian Government Solicitor’s Trust Account- Financial Management Act 1994 (No. 18/1994), Part 4- Working account for the Victorian Government Solicitors Office.

18,170 40,972 21,185 37,957

Total Administered Trusts 45,379 53,302 35,228 63,453(i) Refer to notes 9 and 22(a).

2015 Opening balance as at

1 July 2014Total

receiptsTotal

payments

Closing balance as at 30 June 2015

$’000 $’000 $’000 $’000

Controlled TrustsVictorian Consumer Law Fund, Act No. 21/2012, s.134 1,091 43 0 1,134Correctional Enterprises Working Account 7,145 11,858 11,509 7,494Crime Prevention and Victims’ Aid Fund, Act No. 108/1997, s.134

41 0 0 41

Domestic Builders Fund, Act No. 91/1995, s.124 13,245 12,940 7,650 18,535Motor Car Traders’ Guarantee Fund, Act No. 104/1986, s.74 991 4,314 3,505 1,800National Gambling Research Trust 2,184 36 1,017 1,203Residential Tenancies Fund, Act No. 109/1997, s.491 41,290 25,668 27,861 39,097Sex Work Regulation Fund, Act No. 102/1994, s.66 488 1,549 1,392 645Treasury Trust Fund 28,783 9,322 11,794 26,311Vehicle Lease Trust Account 0 1,205 1,205 0Victorian Property Fund, Act No. 9428/1980, s.72 406,568 55,180 42,731 419,017Total Controlled Trusts 501,826 122,115 108,664 515,277

Administered TrustsAsset Confiscation Office Retained Monies Trust Account 15,935 6,096 6,336 15,695Courtlink Trust Account 1,102 0 1,102 0Departmental Suspense Account 4,345 472 805 4,012Public Service Commuter Club (899) 2,381 1,688 (206)

2015 Opening balance as at

1 July 2014Total

receiptsTotal

payments

Closing balance as at 30 June 2015

$’000 $’000 $’000 $’000Revenue Suspense 16 0 0 16Sundry Deposits 28 1 0 29Treasury Trust Fund 8,383 1,092 1,812 7,663Security Account 22 0 22 0Victorian Government Solicitor’s Trust Account 15,041 75,018 71,889 18,170Total Administered Trusts 43,973 85,060 83,654 45,379

(b) Third party funds under managementThe third party funds under management are funds held in trust for certain clients. They are not used for government purposes and therefore are not included in the department’s financial statements.

Any earnings on the funds held pending distribution are also applied to the trust funds under management as appropriate.

2016 2015

$’000 $’000

Non-government transactions

Prisoner Private Monies Account (i)

Cash 5,812 5,117Amounts owing to prisoners (5,812) (5,117)

0 0

Prisoner Compensation Quarantine Account (i)

Cash 118 260Amounts owing to prisoners (118) (260)

0 0

Non-government fines (ii)

Receivables 274,371 250,730less provision for doubtful debts (251,247) (231,240)

23,124 19,490Amounts owing to non-government entities (23,124) (19,490)

0 0(i) Included under Enforcing and Managing Correctional Orders output group in note 3 Administered Items.(ii) Note disclosure only - not included in the balance sheet or note 3 Administered Items. As amounts are recovered, they are transferred to another entity.

Note 28. Responsible personsIn accordance with the Ministerial Directions issued by the Minister for Finance under the Financial Management Act 1994, the following disclosures are made regarding responsible persons for the reporting period.

NamesThe persons who held the positions of Ministers and Accountable Officers in the department are as follows:Attorney-General The Hon. Martin Pakula, MP 1 July 2015 to 30 June 2016Acting Attorney-General The Hon. Jill Hennessy, MP 23 September 2015 to 2 October 2015

The Hon. Jane Garrett, MP 24 December 2015 to 10 January 2016

Minister for Consumer Affairs, Gaming and Liquor Regulation

The Hon. Jane Garrett, MP 1 July 2015 to 9 June 2016The Hon. James Merlino, MP 10 June 2016 to 19 June 2016The Hon. Marlene Kairouz, MP 20 June 2016 to 30 June 2016

Acting Minister for Consumer Affairs, Gaming and Liquor Regulation

The Hon. Wade Noonan, MP 1 July 2015 to 12 July 2015The Hon. Lisa Neville, MP 21 September 2015 to 2 October 2015The Hon. Martin Pakula, MP 25 March 2016 to 10 April 2016

Minister for Corrections The Hon. Wade Noonan, MP 1 July 2015 to 22 May 2016The Hon. Steve Herbert, MP 23 May 2016 to 30 June 2016

Acting Minister for Corrections The Hon. Jane Garrett, MP 17 July 2015 to 24 July 2015The Hon. Martin Pakula, MP 19 September 2015 to 22 September 2015The Hon. Fiona Richardson, MP 23 September 2015 to 27 September 2015The Hon. Jane Garrett, MP 12 January 2016 to 29 January 2016The Hon. Robin Scott, MP 8 February 2016 to 22 May 2016

Minister for Emergency Services The Hon. Jane Garrett, MP 1 July 2015 to 9 June 2016The Hon. James Merlino, MP 10 June 2016 to 30 June 2016

Acting Minister for Emergency Services

The Hon. Wade Noonan, MP 1 July 2015 to 12 July 2015The Hon. Lisa Neville, MP 21 September 2015 to 2 October 2015The Hon. Martin Pakula, MP 25 March 2016 to 10 April 2016

Minister for Police The Hon. Wade Noonan, MP 1 July 2015 to 22 May 2016The Hon. Lisa Neville, MP 23 May 2016 to 30 June 2016

Acting Minister for Police The Hon. Jane Garrett, MP 17 July 2015 to 24 July 2015The Hon. Martin Pakula, MP 19 September 2015 to 22 September 2015The Hon. Fiona Richardson, MP 23 September 2015 to 27 September 2015The Hon. Jane Garrett, MP 12 January 2016 to 29 January 2016The Hon. Robin Scott, MP 8 February 2016 to 22 May 2016

Minister for Racing The Hon. Martin Pakula, MP 1 July 2015 to 30 June 2016Acting Minister for Racing The Hon. Jill Hennessy, MP 23 September 2015 to 2 October 2015

The Hon. Jane Garrett, MP 24 December 2015 to 10 January 2016

Secretary Greg Wilson 1 July 2015 to 30 June 2016Acting Secretary Julia Griffith 24 February 2016 to 17 March 2016

Donald Speagle 18 March 2016 to 28 March 2016

Remuneration

Remuneration received or receivable by the Accountable Officer (Secretary) in connection with the management of the department during the reporting period was in the range:

$480,000 - $489,999 ($480,000 - $489,999 in 2014-15)

The above 2014-15 comparative figures have been adjusted to include accrued amounts.

Amounts relating to Ministers are reported in the financial statements of the Department of Premier and Cabinet.

Note 29. Remuneration of executives and payments to other personnel(a) Remuneration of executivesThe number of executive officers from the department, other than Ministers and the Accountable Officer, whose total remuneration exceeded $100,000 during the reporting period, are shown in their relevant income bands in the first two columns of the table below. The total remuneration of executive officers includes base remuneration, which is shown in the third and fourth columns, plus bonus payments, long service leave payments, redundancy payments and retirement benefits. The total annualised employee equivalent provides a measure of full time equivalent executive officers over the reporting period.

The variation from last year’s base and total remuneration figures is due to a number of factors, including the outcome of the executive officer remuneration review, which was payable from 1 July 2015. Furthermore, a number of employment contracts were completed during the year and renegotiated, and a number of executives received bonus payments during the year. A number of executive officers retired, resigned or were retrenched in the past year. This has had a significant impact on total remuneration figures due to the inclusion of annual leave, long service leave and retrenchment payments. In addition, a number of executive roles which were vacant in the previous reporting period were filled during the course of the year with pro-rata remuneration accordingly included in the table below.

Income band Total remuneration (i) Base remuneration (i)

2016 2015 2016 2015

No. No. No. No.$100,000-109,999 0 0 0 2$110,000-119,999 0 1 1 0$120,000-129,999 0 2 1 2$130,000-139,999 2 1 2 2$140,000-149,999 0 1 0 3$150,000-159,999 2 3 3 2$160,000-169,999 1 4 1 2$170,000-179,999 3 3 4 6$180,000-189,999 6 4 6 2$190,000-199,999 6 3 10 5$200,000-209,999 8 3 3 2$210,000-219,999 1 5 2 9$220,000-229,999 7 8 10 7$230,000-239,999 5 3 1 1$240,000-249,999 2 2 3 3$250,000-259,999 3 3 1 2$260,000-269,999 1 3 3 3$270,000-279,999 3 2 2 0$280,000-289,999 2 1 1 0$290,000-299,999 0 0 2 3$300,000-309,999 2 1 2 0$310,000-319,999 3 1 0 0$320,000-329,999 0 2 0 1$330,000-339,999 1 0 1 0$340,000-349,999 1 0 0 0$380,000-389,999 0 1 0 0Total number of executives 59 57 59 57Total annualised employee equivalent (AEE)(ii) 53.8 53.2 53.8 53.2Total amount $13,310,666 $12,362,895 $12,597,580 $11,601,976(i) The 2014-15 comparative figures have been adjusted to include accrued amounts.(ii) Annualised employee equivalent is based on paid working hours of 38 ordinary hours per week over 52 weeks for a reporting period. It represents the full-time equivalent of all executive officers working 38 ordinary hours per week over

Income band Total remuneration (i) Base remuneration (i)

2016 2015 2016 2015

No. No. No. No.the full reporting period.

The above table includes 6 executives from the Victorian Government Solicitor’s Office.

The reconciliation between the above table and the actual number of executive officers employed at 30 June 2016 is included in the supplementary information to the annual report in Appendix 6 reconciliation of executive numbers.

In 2015-16 there were 8 executive officers (2015: 9) whose total remuneration paid by the department was less than $100,000 for the year, and 8 executive officers (2015: 9) whose base remuneration paid by the department was less than $100,000 for the year.

Related parties

Related transactions and loans requiring disclosure under the Directions of the Minister for Finance have been considered and there are no matters to report.

Note 30. Remuneration of auditors2016 2015

$’000 $’000

Victorian Auditor-General’s OfficeAudit of the financial statements 323 315

323 315

Note 31. Glossary of terms and style conventionsAdministered item

Administered item generally refers to a department lacking the capacity to benefit from that item in the pursuit of the entity’s objectives and to deny or regulate the access of others to that benefit.

Amortisation

Amortisation is the expense which results from the consumption, extraction or use over time of a non-produced physical or intangible asset. This expense is classified as an other economic flow.

Borrowings

Borrowings refers to interest-bearing liabilities mainly raised from public borrowings raised through the Treasury Corporation of Victoria, finance leases and other interest-bearing arrangements. Borrowings also include non-interest-bearing advances from government that are acquired for policy purposes.

Capital asset charge

A charge levied on the written-down value of controlled non-current physical assets in a department’s balance sheet which aims to: attribute to agency outputs the opportunity cost of capital used in service delivery; and provide incentives to departments to identify and dispose of underutilised or surplus assets in a timely manner.

Commitments

Commitments include those operating, capital and other outsourcing commitments arising from non-cancellable contractual or statutory sources.

Comprehensive result

The comprehensive result is the net result of all items of income and expense recognised for the period. It is the aggregate of operating result and other comprehensive income.

Controlled item

Controlled item generally refers to the capacity of a department to benefit from that item in the pursuit of the entity’s objectives and to deny or regulate the access of others to that benefit.

Current grants

Amounts payable or receivable for current purposes for which no economic benefits of equal value are receivable or payable in return.

Depreciation

Depreciation is an expense that arises from the consumption through wear or time of a produced physical or intangible asset. This expense is classified as a ‘transaction’ and so reduces the ‘net result from transactions’.

Effective interest method

The effective interest method is used to calculate the amortised cost of a financial asset or liability 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 instrument, or, where appropriate, a shorter period.

Employee benefits expenses

Employee benefits expenses include all costs related to employment including wages and salaries, fringe benefits tax, leave entitlements, redundancy payments and superannuation contributions.

Ex-gratia expenses

Ex-gratia expenses mean the voluntary payment of money or other non-monetary benefit (e.g. a write off) that is not made either to acquire goods, services or other benefits for the entity or to meet a legal liability, or to settle or resolve a possible legal liability or claim against the entity.

Financial asset

A financial asset is any asset that is: cash; an equity instrument of another entity; a contractual or statutory right:

to receive cash or another financial asset from another entity; or to exchange financial assets or financial liabilities with another entity under conditions that are

potentially favourable to the entity; or a contract that will or may be settled in the entity’s own equity instruments and is:

a non-derivative for which the entity is or may be obliged to receive a variable number of the entity’s own equity instruments; or

a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments.

Financial instrument

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets or liabilities that are not contractual (such as statutory receivables or payables that arise as a result of statutory requirements imposed by governments) are not financial instruments.

Financial liability

A financial liability is any liability that is: a contractual obligation:

to deliver cash or another financial asset to another entity; or to exchange financial assets or financial liabilities with another entity under conditions that are

potentially unfavourable to the entity; or a contract that will or may be settled in the entity’s own equity instruments and is:

a non-derivative for which the entity is or may be obliged to deliver a variable number of the entity’s own equity instruments; or

a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments. For this purpose, the entity’s own equity instruments do not include instruments that are themselves contracts for the future receipt or delivery of the entity’s own equity instruments.

Financial statements

A complete set of financial statements comprises: a comprehensive operating statement for the period; a balance sheet as at the end of the period; a statement of changes in equity for the period; a cash flow statement for the period; notes, comprising a summary of significant accounting policies and other explanatory information; comparative information in respect of the preceding period as specified in paragraph 38 of AASB 101

Presentation of Financial Statements; and a balance sheet as at the beginning of the preceding period when an entity applies an accounting policy

retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements in accordance with paragraph 41 of AASB 101.

Grants and other transfers

Transactions in which one unit provides goods, services, assets (or extinguishes a liability) or labour to another unit without receiving approximately equal value in return. Grants can be either operating or capital in nature.

While grants to governments may result in the provision of some goods or services to the transferor, they do not give the transferor a claim to receive directly benefits of approximately equal value. For this reason, grants are referred to by the AASB as involuntary transfers and are termed non-reciprocal transfers. Receipt and sacrifice of approximately equal value may occur, but only by coincidence. For example, governments are not obliged to provide commensurate benefits, in the form of goods or services, to particular taxpayers in return for their taxes.

Grants can be paid as general purpose grants which refer to grants that are not subject to conditions regarding their use. Alternatively, they may be paid as specific purpose grants which are paid for a particular purpose and/or have conditions attached regarding their use.

Intangible produced assets

Refer to produced assets in this glossary.

Intangible non-produced assets

Refer to non-produced assets in this glossary.

Interest expense

Costs incurred in connection with the borrowing of funds. Interest expense includes the interest component of finance lease repayments, and the increase in financial liabilities and non-employee provisions due to the unwinding of discounts to reflect the passage of time.

Interest income

Interest income includes interest received on bank term deposits, interest from investments, and other interest received.

Net result

Net result is a measure of financial performance of the operations for the period. It is the net result of items of income, gains and expenses (including losses) recognised for the period, excluding those that are classified as ‘other economic flows - other comprehensive income’.

Net result from transactions/net operating balance

Net result from transactions or net operating balance is a key fiscal aggregate and is 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.

Net worth

Net worth is assets less liabilities, which is an economic measure of wealth.

Non-financial assets

Non-financial assets are all assets that are not ‘financial assets’. It includes inventories, land, buildings, plant and equipment, cultural and heritage assets and intangible assets.

Non-produced assets

Non-produced assets are assets used for production that have not themselves been produced. They include land, subsoil assets, and certain intangible assets. Non-produced intangibles are intangible assets needed for production that have not themselves been produced. They include constructs of society such as patents.

Other economic flows included in net result

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. It includes: gains and losses from disposals, revaluations and impairments of non-financial physical and intangible

assets; and fair value changes of financial instruments.

Other economic flows - other comprehensive income

Other economic flows - other comprehensive income comprises items (including reclassification adjustments) that are not recognised in net result as required or permitted by other Australian Accounting Standards. The components of other economic flows - other comprehensive income include: changes in physical asset revaluation surplus; and gains and losses on remeasuring available-for-sale financial assets.

Payables

Payables includes short and long term trade debt and accounts payable, grants and interest payable.

Produced assets

Produced assets include buildings, plant and equipment, inventories, cultivated assets and certain intangible assets. Intangible produced assets may include computer software, and research and development costs (which does not include the start-up costs associated with capital projects).

Receivables

Receivables include amounts owing from government through appropriation receivable, short and long term trade credit and accounts receivable, accrued investment income, grants, taxes and interest receivable.

Sales of goods and services

Refers to income from the direct provision of goods and services and includes fees and charges for services rendered, sales of goods and services, fees from regulatory services, and work done as an agent for private enterprises. User charges includes sale of goods and services income.

Supplies and services

Supplies and services generally represent cost of goods sold and the day-to-day running costs, including maintenance costs, incurred in the normal operations of the department.

Taxation income

Taxation income represents income received from the State’s taxpayers and includes: gambling taxes levied mainly on private lotteries, electronic gaming machines, casino operations and

racing; and other taxes, including licence fees.

Transactions

Transactions are those economic flows that are considered to arise as a result of policy decisions, usually an interaction between two entities by mutual agreement. They 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 (e.g. assets provided/given free of charge or for nominal consideration) or where the final consideration is cash. In simple terms, transactions arise from the policy decisions of the government.

Style conventions

Figures in the tables and in the text have been rounded. Discrepancies in tables between totals and sums of components reflect rounding. Percentage variations in all tables are based on the underlying unrounded amounts.

The notation used in the tables is as follows:

(xxx.x) negative numbers201x year period201x-1x year period

The financial statements and notes are presented based on the illustration for a government department in the 2015-16 Model Report for Victorian Government Departments. The presentation of other disclosures is generally consistent with the other disclosures made in earlier publications of the department’s annual reports.