Appendix E - Glossary and abbreviations

Abnormal Items

Items of revenue and expense included in the net result for the reporting period, which are considered abnormal by reason of their size and effect on the net result.

Accommodation

Expenditure on leased or owned premises, including rent, lighting, cleaning, security and removal expenses.

Accounting Policy

Specific accounting principles and practices applied in preparing and presenting financial statements.

Accrual Accounting

Involves the recognition of revenue, expenses, assets, liabilities and equity when the economic transaction giving rise to the movement of resources occurs, irrespective of the timing of any related movement in cash.

Accruals

Accruals adjust the cash position at year end to reflect the true financial position of the entity. Adjusting accounts at year end are reversed in the subsequent period to show the true financial position for that period.

Accrued Expenses

Expenses incurred during the accounting period but due for payment in the next accounting period.

Accrued Revenue

Revenue earned at the end of the reporting period for which the entity has not raised an invoice, or otherwise billed, by the close of the reporting period. A previous period accrual is reversed at the beginning of the new financial year, to show the true financial position in that new period.

Accumulated Amortisation

This is the total, at a given point in time, of the amortisation expense charged for a particular amortised asset or a class of assets.

Accumulated Depreciation

This is the total, at a given point in time, of the annual depreciation expense charged for a particular depreciable asset or a class of assets.

Accumulated Funds

Represents the capital the Government has injected into an entity, less any capital distributions to Government, plus the surpluses and deficits accumulated in an entity as a result of operations. For Departments, capital injections and distributions may occur as a result of a change in administrative arrangements.

Acquisition

Acquisition includes establishing control over an asset, and means undertaking the risks, and receiving the rights to future benefits, as would be conferred with ownership, usually in exchange for a cost of acquisition.

Administrative Expenses

This category of expenses is one of a number identified according to their nature or type for disclosure in the Operating Statement. This category includes such types of expenses as travel, office requisites, postage, computer services, consultants and telecommunications services.

Amortisation

The term "amortisation" is often used interchangeably with the term "depreciation". The terms have the same meaning, although , depreciation is generally used in relation to non-current assets that have physical substance (eg. property, plant and equipment) while amortisation is generally used in relation to intangible non-current assets (eg. intangible and leased assets).

Appropriation

The maximum amount of public moneys authorised by the Assembly under the authority of a law for transfer from the Territory Bank Account to a department bank account.

Assets

Future economic benefits or service potential controlled by an entity as a result of past transactions or other events.

Asset Classes

The means by which categories of assets may be disclosed in the notes to the financial statements.

Australian Accounting Standards

The accounting and reporting framework issued and maintained by the Australian Accounting Research Foundation with the approval of the Australian Accounting Standards Board and the Public Sector Accounting Standards Board. The standards provide a prescription of the acceptable methods of measuring and recording specific types of accounting transactions and of the required level of disclosure of those transactions in the financial statements.

Budget Papers

These accompany the Treasurer’s Budget Speech and contain detailed information on the Budget, as well as explanatory material on the broader context of the Budget.

Capital

The accumulated wealth that an entity possesses and relates to owner’s equity in the entity.

Capital Deficit

This is a GFS term. The sum of all capital outlays less revenues classified as capital in nature.

Capital Expenditure

The cost incurred in the course of adding to the future economic benefits provided by an asset as a result of physical addition, improvement or extension of the useful life of the asset. Capital expenditure also includes the purchase of any new assets above the asset recording threshold.

Capital Grants

Unrequited payments intended to contribute towards the cost of capital expenditure of the grant recipients.

Capital Injections

Capital injections are the means by which the Government injects equity funds into an entity, to increase the entity’s net asset position. The entity may require this additional funding for purposes such as the purchase or development of assets, the payment of debt, or to increase an entity’s working capital. On occasion capital injections may be repayable.

Capital Outlays

This is a GFS term. It comprises new fixed assets, second hand assets, land and intangibles, gross fixed capital expenditure, and other capital outlays.

Capital Revenue

Commonwealth payments and other receipts of a capital nature such as the sale of assets. Some income of a capital nature (for example sale of land assets) is treated as an offset to outlays in government finance statistics.

Capital Works

Capital works include:

• the creation of a new Territory asset, including new construction projects, the purchase of prefabricated or demountable buildings, and additions to an asset;
• alterations to, or refurbishment of buildings, and other assets;
• demolition work;
• furniture and fittings, equipment or plant which are provided as an integral component in the construction of buildings or works;
• work which significantly increases the capacity of an asset, for example, the major reconstruction of roads and bridges;
• design fees; and
• site testing and field investigations related to an approved capital works proposal or project.

Cash

Cash comprises cash on hand, cash in bank accounts and cash equivalents.

Cash Accounting (or Cash Basis of Accounting)

Involves recognising and recording transactions solely on the basis of the receipt and payment of cash, and does not recognise the timing of related resource movements or the stocks of resources (other than cash) at the end of a reporting period.

Cash Flows

Cash movements resulting from transactions with parties external to the entity.

Commitment

A firm intention (usually represented by a contractual obligation) at the end of the reporting period which will give rise to a future payment or sacrifice of service potential or benefits.

Commonwealth General Purpose Grants

General purpose recurrent grants and general purpose capital grants are paid by the Commonwealth to the Territory unconditionally, that is, they can be used according to the policies and priorities of the Territory Government without further Commonwealth influence.

Commonwealth Grants Commission (CGC)

Established by the Commonwealth Government in 1933, the Commission acts as an independent authority to make recommendations to the Commonwealth concerning the distribution of the combined pool of general purpose grants and hospital funding grants among the States and the Territories.

Commonwealth Payments - Other

Grant funding from the Commonwealth which the ACT can access as a service provider.

Commonwealth Specific Purpose Payments (SPPs)

Specific purpose payments are current and capital payments made by the Commonwealth on the basis that the Territory meets certain conditions. The conditions attaching to SPPs vary considerably. In general, the payments are made on the condition that the Territory ensures the funds allocated are used for a specified program and are applied in accordance with the objectives of the program. Conditions include general requirements (eg. the requirement, as a condition of the hospital funding grants, that the ACT provide free public hospital treatment) and broad Commonwealth-Territory agreements covering principles and program delivery mechanisms. They may also involve detailed conditions on the operation of joint expenditure programs including program or project approval, matching arrangements and information sharing.

Comparative Pricing

The "Comparative Pricing" framework empowers both Government and agencies to be price setters for outputs through a negotiation process guided by benchmarking. Under the framework, the Government is able to purchase outputs at what it regards as an "fair price" which will not include inefficiencies. The fair price, however, may include acceptable premiums related to quality and the inability to achieve comparable economies of scale because of the size of the ACT.

An important component of this framework is a requirement for agencies to recognise a capital charge and an allocation of centrally held expenditures, such as superannuation. This is necessary to identify a true cost for agency activities.

Agreed benchmarked prices will be funded through "Government Payments for Outputs" with any shortfalls caused by above average benchmarked expenses being partly financed through an "Injection for Operations" (see separate definition). Where the department is required to provide an above average level of services or is subject to diseconomies of scale due to the size and profile of the ACT, this additional revenue is funded through Government Payments for Outputs.

Current Assets

Cash or other assets of the department that would in the ordinary course of operations of the department be consumed or converted into cash within twelve months.

Current Deficit

This is a GFS term. The sum of all current outlays less revenues not classified as capital.

Current Liabilities

Liabilities of the department that would in the ordinary course of operations of the department be due and payable within twelve months.

Current Outlays

This is a GFS term. It comprises current expenditure, sales of goods and services, final consumption expenditure, interest payments and other transfer payments.

Debt

A legal obligation to make payments of principal and (in many cases) interest according to a predetermined schedule. Debt includes obligations arising from loans (often referred to as advances from the Commonwealth); bonds, notes and other securities on issue; the capitalised value of outstanding lease commitments under finance lease arrangements; supplier/buyer credits; bank overdrafts; and deferred contract payments.

Debt Servicing

Payments of interest and repayments of principal associated with advances from the Commonwealth and borrowings.

Departmental

Departmental items are those items over which the department has discretion, responsibility and authority. If the department has:

• the capacity to benefit from the use of the asset or funds in the pursuit of its objectives and to deny or regulate the access of others to those assets or funds;
• discretion and responsibility for how the funds are spent; or
• expended funds, incurred a liability, or received free services, related to the operations under its control;

it would be considered that the department controls the item.

Depreciation Expense

Periodic expense of operations associated with the consumption or loss of service potential of non-current assets caused by the use of an asset. The consumption may occur through use, wear and tear, or obsolescence. Depreciation is the term applied to physical assets such as property, plant and equipment. (Amortisation is the term used to apply to leases and intangibles.)

Employee

An employee is a natural person who receives benefits in exchange for services provided to an employer.

Employee Entitlements

Benefit entitlements that employees accumulate as a result of rendering their services to an employer up to the reporting date, and may include, but are not limited to, annual leave, long service leave, superannuation benefits and other post-employment benefits.

Expense

Expenses represent the consumption or loss of future economic benefits in the form of reductions in assets or increases in liabilities of the entity that result in a decrease in capital during the reporting period.

Expenses on Behalf of the Territory

Territorial (Administered) revenues, which the Government appropriates for payment of grants, subsidies and transfer payments. By excluding Territorial (Administered) revenues from an entity’s Operating Statement, the Operating Statement is able to reflect the revenues over which the entity’s management has control and should be held accountable.

Extraordinary Items

Items of revenue and expense which are attributable to transactions or other events of a type that are outside the ordinary operations of the entity and are not of a recurring nature.

Finance Lease

A finance lease is a lease which effectively transfers from the lessor to the lessee substantially all the risks and benefits incident to the ownership of the leased property.

Financing Transactions

This is a GFS term. The means by which governments finance deficits or invest surpluses. This comprises financing transactions, increase in provisions, advances received (net), borrowings (net) and other financing transactions.

Total financing transactions is equal to the total outlays minus total revenue

General Government Sector (GGS)

This is an ABS categorisation of certain public sector agencies. It covers those agencies which provide non-market goods and services (such as police or consumer protection) primarily for collective consumption of the community and/or are responsible for the transfer or redistribution of income for public policy purposes (such as pensions). The provision of such services or transfer of such benefits is funded for the most part from compulsory levies on the household and business sectors (such as taxation) or from general revenue such as Commonwealth grants, rather than from specific charges paid by users.

Government Finance Statistics (GFS)

The framework used by the ABS for presentation of data on government outlays, revenue and financing transactions through either the general government sector or the public component of the business sector (the public trading enterprise sector) in accordance with an internationally accepted set of concepts and definitions.

Government Payment for Outputs (GPO)

"Government Payment for Outputs" is the revenue that departments earn from producing outputs for Government. The Legislative Assembly approves the output prices as part of the total budget. The output prices are guided by best practice benchmarking under the Comparative Pricing Framework.

Grants (non-ACT Government)

These grants include payments to individuals or organisations for general assistance or for a particular purpose that, by virtue of their payment, contribute to the achievement of the program's objectives. Grants may be for capital, current or recurrent purposes, and the grant name or category reflects the use of the grant. Grants are usually made subject to terms and conditions contained in legislation or contracts or stipulated in correspondence. An individual or organisation may apply for a grant based on eligibility criteria being met. Grants do not reflect an investment by the Government and are not reflected in the Territory’s balance sheet.

Injection for Operations

Payments made by the Government to fund departmental shortfalls in "Government Payment for Outputs" revenues, when purchase decisions are based on benchmarked prices under the Comparative Pricing Framework. The separate disclosure of "Government Payment for Outputs" and "Injection for Operations" highlights the above average cost structure within departmental operations.

An injection for operations is funding provided after negotiation and agreement with the recipient department, to maintain the viability of operations whose cost is higher than the agreed price paid by the Government for the purchase of these services. The injection is reported after the operating result and after extraordinary items. The injection provides cash to maintain operations while action is taken over time to pursue greater efficiency and effectiveness.

Inventories

Include goods, other property and services (but does not include depreciable assets):

• held for sale or consumption in the ordinary course of service delivery;
• in the process of production for such sale or consumption; or
• to be used up in the production of goods, other property or services for sale or consumption including consumable stores and supplies.

Investments

These are assets held by an entity primarily for the accretion of wealth through receipt of distributions (such as interest, royalties, dividends and rentals) or for capital appreciation, and include items of property, plant and equipment which are held for sale other than in the ordinary course of the department's operations, and which do not satisfy the definition of "property, plant and equipment".

Liabilities

Future payments that an entity is obliged to make to other entities as a result of past transactions or other past events. Liabilities are a broader concept than debt. They also include obligations which do not have a predetermined repayment schedule, and those which do not require payments of interest - such as unfunded liabilities of superannuation funds, liabilities in respect of other employee entitlements (long service and annual leave), trade creditors, and provisions for deferred maintenance.

Loan Council

Established under the Financial Agreement Act of 1927, the Australian Loan Council has the objective of managing the call on national savings by the Australian public sector as a whole. The Loan Council consists of a Commonwealth representative (usually the Treasurer) as chairman and a representative of each of the six States and the Northern Territory and ACT (usually Treasurers).

Loan Council Allocation (LCA)

The LCA is a measure of the call on national savings by a jurisdiction. The Australian Loan Council allocates, by mutual agreement, an annual target for total net financing by each jurisdiction. The Loan Council Allocation is calculated as the net deficit or surplus of the non-financial public sector plus a number of memorandum items and an addendum item. The memorandum items include operating leases (where the net present value exceeds $5 million), recourse asset sales, deferred employer contributions to public sector superannuation funds, infrastructure projects with private sector involvement (assessed on a risk-weighted basis) and net borrowings by local government.

The addendum item is the total net borrowings by universities within each jurisdiction’s responsibility (with this amount being included in the public sector deficit/surplus). For 1999-2000 the Australian National University is treated as within Commonwealth jurisdiction.

Materiality

Materiality is the concept of establishing the importance of financial data in accordance with Australian Accounting Standard (AAS) 5. In general an item of information is material if its omission, non-disclosure or misstatement would cause the financial statements to mislead users when making evaluations or decisions.

Memorandum Items

The size of a jurisdiction’s Loan Council Allocation is determined by adding the general government deficit, the public trading enterprise’s net financing requirement and certain memorandum items.

These memorandum items are included because their nature is sufficiently similar to financing transactions in their economic impact to left inclusion. These include:

• the net movement of operating leases with a net present value of payments greater than $5m;
• private sector involvement in public sector infrastructure;
• sales of assets on a recourse basis; and
• an adjustment to exclude all superannuation payments to externally managed and controlled superannuation funds from outlays.

Net Financing Requirement (NFR)

This is a GFS term. It measures the extent to which the general government sector requires funds from outside the public sector in order to finance the deficit and repayments of debt to the Commonwealth. The ACT’s NFR exceeds the deficit because of repayments of debt to the Commonwealth which must be financed. Net financing requirement is equal to the total deficit less advances received (net).

Operating Leases

Leasing arrangements in which substantially all risks and benefits incidental to the ownership of the leased property effectively remain with the lessor (the owner of the property) rather than passing to the lessee (which would make it a finance lease).

Operating Result

Operating profit or loss for the period being reported.

Prepayments

Payments made in one reporting period, in respect of goods or services that the entity expects to receive or consume in future periods.

Property, Plant and Equipment

Property, Plant and Equipment are assets that:

• are held by the entity for use in the production or supply of goods and services, for rental to others, or for administrative purposes, and may include items held for the maintenance, construction or repair of such assets;
• have been acquired, obtained or constructed with the intention of being used on a continuing basis; and
• are not intended for sale in the ordinary course of business or service delivery.

Provision

Provision means:

• in relation to an Operating Statement, an amount charged as an expense to recognise:
  • a liability accrued; or
  • a reduction in the carrying amount of an asset by way of:
    • depreciation or amortisation of the asset; or
    • diminution in the value of the asset;
• in relation to a Statement of Financial Position, accrued liabilities that have accumulated from previous reporting periods and the current reporting period in relation to assets or liabilities included in that statement.

Public Financial Enterprises (PFEs)

The PFEs are government controlled enterprises which may have one or more of the following characteristics:

• they perform central bank functions;
• they accept demand, time or savings deposits; and
• they have the authority to incur liabilities and acquire financial assets in the market on their own account.

The ACT’s only PFE is the Home Loan Trust Account, the purpose of which is to account for home loans provided to low income earners through off-budget funding arrangements.

Public Trading Enterprises (PTEs)

Government-owned entities which provide goods and services for sale in the market with the aim of recovering all, or at least a significant proportion of, their operating costs.

Receipts

Cash inflows for a period, irrespective of when the moneys are earned.

Revenues

Inflows or other enhancements, or savings in outflows, of future economic benefits in the form of increases in assets or reductions in liabilities of the entity, that result in an increase in capital during the reporting period.

Reserves

Reserves are recognised for the incentives on revaluation of non-current assets or other intended uses of accumulated funds. Departmental and Territorial reserves are accounted for separately.

Retained Earnings (or Earnings)

Retained Earnings are the accumulated operating results since the 1996-97 audited Financial Statements not transferred to reserves or to Government.

Service Purchasing

Refers to contractual arrangements by which the Territory (as purchaser) contracts with a provider for delivery of specified services. These are identified as specific outputs which contribute toward the achievement of the Government's desired outcomes, with outputs often defined in terms of quantity, quality, timeliness, price and/or a contribution toward cost. Providers are required to report against agreed indicators in order to assist the Territory to meet its accountability obligations to the community.

Statements of Accounting Concepts

Statements of Accounting Concepts are statements released by the Australian Accounting Research Foundation, with the approval of The Institute of Chartered Accountants in Australia and the Australian Society of Certified Practicing Accountants. They provide the conceptual framework for general purpose financial reporting.

Statements of Accounting Practice

Statements of Accounting Practice are statements released by the Australian Accounting Research Foundation, with the approval of The Institute of Chartered Accountants in Australia and the Australian Society of Certified Practicing Accountants. These statements do not have the authority of Australian Accounting Standards but provide guidance on specific issues.

Territorial

Territorial (Administered) items are revenues, expenses, assets and liabilities that a department administers but does not control. These items relate to activities performed on behalf of the Territory. An item would generally be regarded as a Territorial (Administered) item if the department:

• has restricted or no discretion in relation to the item;
• has restricted or no discretion to increase or decrease the item;
• has responsibility for the item, but restricted or no authority over its use; or
• is responsible only for the collection and/or transfer of the item.

Items are Territorial (Administered) where decisions relating to their use are primarily made by Government.

Total Deficit

This is a GFS term. It measures the extent to which the ACT general government sector has increased or decreased its net financial position, that is the extent to which the Government is able, or unable, to match outlays against revenues.

Total deficit is equal to total outlays minus total revenue less increase in provisions

Treasurer's Advance

Funds available for expenditure in excess of specific appropriations or not specifically provided for by appropriations and for advances which will be recovered during the financial year.

Trust Money

Money that an agency is holding in trust, on behalf of third parties. The agency acts as administrator of these funds, and is not permitted to spend these funds on the agency’s controlled activities. These moneys are accounted for separately from either departmental or Territory moneys.

User Charges

Revenues resulting from the sale of goods and services to consumers. User charges include revenue that the reporting entity controls, and excludes Territory (administered) revenue. User charges exclude Government payment for outputs, by means of Output Appropriation.

ABBREVIATIONS