4 1998-99 estimated outcome

This chapter provides information on the projected financial outcome for 1998-99. Projected 1998-99 financial statements have been provided for each of the general government and public trading enterprises sectors, and for the whole of Territory. More detailed information and the audited result for 1998-99 will be available following the completion of the 1998-99 financial year.

General Government Sector

The general government sector is expected to achieve a consolidated operating loss for 1998-99 of $150m, which is $11m worse than the original Budget time estimate of $139m.

The worsening position includes $20m in abnormal expenses not originally budgeted for, which are offset by a $9m improvement in general operations. The abnormal expenses shown in the GGS statements relate mainly to the write down or write off of assets.

Table 4.1
1998-99 GGS Forecast Outcome

Expenses include net abnormal and extraordinary expenses

Totals may not add due to rounding.

Balances for total GGS assets are expected to be $6,415m at the end of 1998-99, an increase of $124m over the audited opening position for 1998-99. Total GGS liabilities are anticipated to be $2,052m, an increase of $185m over the audited opening position for 1998-99.

The impact on the net assets of the GGS is a forecast decrease of $41m (from the 1997-98 closing position), an improvement of $45m on the budgeted decrease of $86m.

The following graph compares the budget with the estimated outcome for major revenue and expense items.

Figure 4.1
Revenue and Expenses

Revenue

The projected estimate for revenue for 1998-99 has increased by $14m from the Budget estimate of $1,568m, due mainly to greater than expected taxation revenue, Commonwealth grants and interest revenue.

Taxation Revenues

Full year taxation revenues are projected to be $14.6m above 1998-99 Budget estimates. This increase is mainly due to the reclassification of the Emergency Services Levy ($10m) from user charges to taxes. Other items include increased collections in stamp duty ($4.9m) for the transfer of marketable securities, payroll tax ($2.4m), franchise fees ($4.7m), and gambling taxes ($3.0m). These increases are offset by decreases in conveyance revenue ($7.6) and other taxes ($2.8m).

The graph below illustrates the composition of taxation revenue, the highest revenue class for the General Government sector (40% of total revenue).

Figure 4.2
Taxation Revenue Composition

Note: Other taxes includes the General Insurance Levy, Ambulance Levy and Debits Tax.

User Charges

User charges (non-ACT Government) are projected to fall below budget estimates by $23.9m. This decrease is, in part, due to the reclassification of the Emergency Services Levy ($10m) to taxes. The remaining decrease results from lower than expected CanDeliver revenues ($12.4m), which is matched by a similar decrease in cost of goods sold.

Commonwealth Grants

Grants from the Commonwealth are projected to be $10.4m above the 1998-99 Budget estimate. This increase is mainly due to an increase to the Hospital Funding Grant for incentive payments relating to the ACT signing the Australian Health Care Agreement ($13.5m). The increase is offset by a small decrease in the General Revenue Grant ($2.4m).

Interest Revenue

Interest revenue is expected to be $21.4m above budget estimates. The increase is mainly due to the reclassification of the Superannuation Provision Unit’s return on investments from other revenue to interest revenue ($24.1m) offset by the external fund management expenses ($1.7m), originally included in the 1998-99 Budget as an administrative expense.

Other Revenue

Other revenue relates to items such as dividends, donations, gains on disposal of assets, lease sales and other miscellaneous revenue items individual to particular agencies. Other revenue is expected to be below budget estimates by $11.5m. The reduction relates to reclassification of the Superannuation Provision Unit’s return on investments from other revenue to interest ($24.1) and greater than anticipated lease sales revenue ($12.9m) as a result of increased activity with land development joint ventures.

Expenses

Total expenses for 1998-99, including net abnormal and extraordinary items, are projected to be $1,732m. This is $25m higher than the published 1998-99 Budget. The main reason for the increase is unbudgeted abnormal items of $20m, details of which are provided later in this chapter.

Specific expense variances from the original 1998-99 Budget include:

Employee Expenses

Employee expenses (including superannuation expenses) are projected to be higher than budget estimates by $9m. The increase results mainly from higher than budgeted expenses by Totalcare ($7.2m), related to increased activity. However Totalcare employee expenses are $1.7m lower than the 1997-98 audited outcome due to the impact of the current redundancy program.

Administrative Expenses

Administrative expenses are projected to be lower than the 1998-99 Budget estimate by $17.1m. The decrease is mainly due to the reclassification of administrative expenses ($14.0m) and a reduction in Canberra Theatre joint venture activity ($1.3m). Reclassified items include medical supplies, which are now included under cost of goods sold, superannuation external fund management expenses, which now offset interest revenue, and Territory insurance payments, which are included under other expenses.

Depreciation and Amortisation

Depreciation and amortisation expenses are projected to be lower than budget by $5.3m. The decrease relates to lower depreciation on IT equipment ($13.0m) with the modernisation program not proceeding as rapidly as expected. This is offset by increases for DUS ($5.0m) and DECS ($2.9m) as a result the revaluation of roads and stormwater assets and buildings respectively.

Cost of Goods Sold

Cost of goods sold is projected to be higher than budget by $15.1m, due to increased contractual work by Totalcare. Additional increases relating to the reclassification of administrative expenses to cost of goods sold and the increase in land sales are offset by the reduction in CanDeliver services.

Grants and Purchased Services

Grants and purchased services are projected to be higher than budget by $4m. The increase is largely due to expensing payments made to non-ACT Government health providers relating to increased monies received from the Australian Health Care Agreement ($3m) and the provision of a capital works grant to the ACT Hockey association ($1m) within existing resources.

Interest Expenses

Interest expenses are anticipated to be lower than budget estimates by $4.2m. The decrease results mainly from lower interest payments ($2.1) associated with lower IT modernisation related borrowings and a reduction in expected interest rates ($1.4m) on the Territory’s debt.

Other Expenses

Other expenses are projected to be higher than budget estimates by $2.9m, due to the correction of internal coding for concession transfer payments from DECS to ACTION ($2m). Projected increases relating to the reclassification of Territory insurance expenses are offset by a reduction to the home loan portfolio’s provision for doubtful debts.

Extraordinary and Abnormal Items

Net abnormal and extraordinary items are projected to total $20m by year end. They include:

• Department of Health and Community Services - $1.8m loss on transfer of the ACT Hospice;
• Department of Education and Community Services - $5.6m downward revaluation of land;
• Office of Asset Management - $9m including the write off of $7.8m of receivables relating to the Dunlop 3 ($3.5m) and Dunlop 4 ($4.3) joint ventures; and
• TotalCare Industries - $3.7m redundancy and year 2000 costs.

Statement of Financial Position

The general government sector net asset position projected for year end is $4,363m. This is a decrease on the audited opening net asset position, but an improvement on the budgeted closing position. The 1998-99 budgeted movement in net assets was originally estimated to be a decrease of $87.5m. It is now estimated that this movement will be a decrease of $40.9m based on the difference between the audited opening balance and the 1998-99 estimated outcome.

Total assets are expected to be less than anticipated in the original budget estimates. The main influence is a decrease in the estimated current and non-current receivables from budget. However the estimated total assets are still expected to be $124m greater than the audited outcome, the main influence being an increase in property, plant and equipment.

Total liabilities are expected to be lower than originally budgeted by $141m. This relates to a significant reduction in the borrowings required for IT modernisation. However liabilities will still be $165m greater than the audited outcome due to an increase in non-current employee entitlements.

Table 4.2
General Government Sector
1998-99 Forecast Operating Statement

Table 4.3
General Government Sector
1998-99 Forecast Statement of Financial Position

Table 4.4
General Government Sector
1998-99 Forecast Cashflow Statement

Note: Cash on the cashflow statement may not equal cash at bank on the balance sheet due to some agencies reporting cash as investments.

Public Trading Enterprise Sector

The consolidated public trading enterprise sector operating result after tax for 1998-99 is projected to be $13.9m, a decrease of $2.1m against the original budget of $16.0m. This comprises a reduction in revenue of $2.9m offset by a reduction in income tax equivalent of $0.7m.

Table 4.5
1998-99 PTE Forecast Outcome

Expenses include net abnormal and extraordinary expenses

Totals may not add due to rounding.

Balances for total PTE assets are expected to be $2,769m at the end of 1998-99, a decrease of $253m over the audited opening position for 1998-99. Total PTE liabilities are anticipated to be $413m, a decrease of $182m over the adjusted audited opening balance.

On this same basis, the net assets of the PTE sector are now forecast to decrease by $71m from the opening balance of $2,427m to $2,356m.

Table 4.6
Public Trading Enterprise Sector
1998-99 Forecast Operating Statement

Table 4.7
Public Trading Enterprise Sector
1998-99 Forecast Statement of Financial Position

Table 4.8
Public Trading Enterprise Sector
1998-99 Forecast Cashflow Statement

Note: Cash on the cashflow statement may not equal cash at bank on the balance sheet due to some agencies reporting cash as investments.

Total Territory

Operating Statement

As a result of the performance of the General Government and Public Trading Enterprise sectors during this financial year, the projected consolidated Total Territory operating result for 1998-99 is $12.8m worse than the original Budget time estimates. The projected 1998-99 operating loss is $162m.

Table 4.9
1998-99 Total Territory Forecast Outcome

Expenses include net abnormal and extraordinary expenses

Totals may not add due to rounding.

The increase in the estimated loss from the original budget estimate is due to net abnormal items of $22.7m, involving redundancy costs and the revaluation or write-off of assets. The operating result before abnormal and extraordinary items is an improvement of $8.9m on the original 1998-99 Budget estimate.

Statement of Financial Position

The ACT’s net asset position is projected to be $6,757m compared to the audited opening net asset position of $6,853m. The decrease is mainly due to an increase in non-current employee entitlements and short term borrowings, and is offset by a decrease in non-current borrowings.

Projected consolidated Financial Statements for the Territory for 1998-99 are as follow.

Table 4.10
Consolidated Total Territory
1998-99 Forecast Operating Statement

Table 4.11
Consolidated Total Territory
1998-99 Forecast Statement of Financial Position

Table 4.12
Consolidated Total Territory
1998-99 Forecast Cashflow Statement

Note: Cash on the cashflow statement may not equal cash at bank on the balance sheet due to some agencies reporting cash as investments.