Comcare statement for the year ended 30 June 2017: Notes

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1. DEPARTMENTAL FINANCIAL PERFORMANCE

This section analyses the financial performance of Comcare for the year ended 30 June 2017

  

2017
$'000

2016
$'000

Note 1.1: EXPENSES

1.1A

Employee benefits

  
 

Wages and salaries

50,704

49,756

 

Superannuation

  
 

Defined contribution plans

6,027

5,833

 

Defined benefit plans

3,295

3,740

 

Leave and other entitlements

5,145

6,884

 

Separation and redundancies

755

406

 

Other

849

1,182

 

Total employee benefits

66,775

67,801

Accounting policy

Accounting policies for employee related expenses are contained in the People and Relationships section.

  

2017
$'000

2016
$'000

1.1B

Supplier expenses

  
 

Goods and services supplied or rendered

  
 

Consultants

1,800

2,602

 

Legal expenses

2,575

2,962

 

Contractors

5,734

7,595

 

Assurance services

1,204

1,199

 

Fees for Professional Services

906

-

 

External claims services

4,154

1,767

 

Education and conference delivery

554

337

 

Information communication technology

5,024

5,555

 

Property services

1,121

1,449

 

Travel

2,112

2,000

 

Other

4,409

2,117

 

Total goods and services supplied or rendered

29,593

27,583

    
 

Goods supplied

765

804

 

Services rendered

28,828

26,779

 

Total goods and services supplied or rendered

29,593

27,583

    
 

Other supplier expenses

  
 

Operating lease rentals in connection with

  
 

Minimum lease payments

5,883

6,048

 

Total other supplier expenses

5,883

6,048

 

Total supplier expenses

35,476

33,631

    
    
 

Leasing commitments

  
 

Comcare, in its capacity as lessee, currently has eight agreements. Seven lease agreements for office accommodation with lease payments subject to regular increases in accordance with rent reviews and pre-determined percentage increases. The final lease agreement relates to motor vehicles provided for investigations.

The remaining period of the lease agreements are between one to five years with an option to renew subject to negotiation of lease. All operating leases are effectively non-cancellable.

    
 

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:

  
 

Within 1 year

7,022

6,639

 

Between 1 to 5 years

24,835

24,374

 

More than 5 years

-

5,932

 

Total operating lease commitments

31,857

36,945

Accounting policy

An operating lease is a lease where the lessor retains substantially all risks and benefits in the underlying asset. Operating lease payments are expensed on a straight-line basis which is representative of the pattern of benefits derived from the leased assets.

  

2017
$'000

2016
$'000

1.1C

Finance costs

  
 

Unwinding of discount

39

101

 

Total finance costs

39

101

Accounting policy

All borrowing costs are expensed as incurred.

  

2017
$'000

2016
$'000

1.1D

Write-downs and impairment of assets

  
 

Revaluation of property, plant and equipment

-

(186)

 

Impairment on intangible assets

664

-

 

Total write-downs and impairment of assets

664

(186)

    

1.1E

Losses/(Gains) from asset sales

  
 

Property, plant and equipment

  
 

Proceeds from sale

(4)

(18)

 

Carrying value of assets disposed

30

6

 

Selling expense

-

-

 

Total losses/(gains) from asset sales

26

(12)

    

1.1F

Workers' compensation claims expense

  
 

Workers' compensation claims expenses paid and payable (net)

246,016

259,185

 

Total workers' compensation claims expense

246,016

259,185

    
 

Premium claims expense

  
 

Incapacity

131,390

140,935

 

Legal including common law

17,300

13,312

 

Medical, travel and other

69,268

79,992

  

217,958

234,239

 

(Less): Recoveries from third parties

(1,677)

(4,000)

 

Total premium claims expense

216,281

230,239

    
 

Pre-premium claims expense

  
 

Incapacity

12,150

14,579

 

Legal, including common law

1,110

631

 

Medical, travel and other

16,475

13,736

 

Total pre-premium claims expense

29,735

28,946

    

1.1G

Common law asbestos-related disease claims expense

  
 

Common law asbestos-related disease claim payments

18,708

22,594

 

Total common law asbestos-related disease claims expense

18,708

22,594

  

2017
$'000

2016
$'000

Note 1.2: OWN-SOURCE REVENUE AND GAINS  
    
Own-source revenue  
    

1.2A

Sale of goods and rendering of services

  
 

Sale of goods

-

1

 

Rendering of services

22,613

19,530

 

Total sale of goods and rendering of services

22,613

19,531

    

1.2B

Fees and fines

  
 

Licence fees

16,159

17,416

 

Total fees and fines

16,159

17,416

    

1.2C

Workers' compensation premiums

  
 

Related entities

303,043

316,332

 

External entities

79,459

98,334

 

Total workers' compensation premiums

382,502

414,666

    

1.2D

Interest

  
 

Interest

30,168

27,554

 

Total interest

30,168

27,554

Accounting policy

Interest revenue is recognised using the effective interest method as set out in AASB139 Financial Instruments: Recognition and Measurement.

  

2017
$'000

2016
$'000

1.2E

Gains from movement in workers' compensation claims provision

  
 

Gains from movement in workers' compensation claims provision

368,500

62,600

 

Total gains from movement in workers' compensation claims provision

368,500

62,600

    
 

Gains from movement in premium claims provision

  
 

Movements during reporting period:

  
 

Premium claims provision

338,400

66,900

 

Recoveries receivable

(1,200)

900

 

Total gains from movement in premium claims expense

337,200

67,800

    
 

Gains from movement in Commonwealth latent mental disease claims provision

  
 

Movements during reporting period:

  
 

Commonwealth latent mental disease claims provision

5,600

-

 

Total gains from movement in Commonwealth latent mental disease claims provision

5,600

-

    
 

Gains from movement in Pre-premium claims provision

  
 

Movements during reporting period:

  
 

Pre-premium claims provision

25,700

(5,200)

 

Total gains from movement in Pre-premium claims provision

25,700

(5,200)

    

1.2F

Gains from movement in common law asbestos-related disease claims provision

  
 

Movements during reporting period:

  
 

Asbestos claims provision

100,660

6,440

 

Recoveries receivable

(14,840)

6,300

 

Total gains from movement in common law asbestos-related disease claims provision

85,820

12,740

    

1.2G

Revenue from Government

  
 

Department of Employment

  
 

Corporate Commonwealth entity payment item

6,104

7,727

 

Grants from portfolio department

54,895

58,440

 

Total revenue from Government

60,999

66,167

    

1.2H

Available funding from movement in claims provision

  
 

Available funding from movement in claims provisions

(127,186)

20,372

 

Total available funding from movement in claims provision

(127,186)

20,372

Accounting policy

Revenue from Government
Amounts appropriated for departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as Revenue from Government when the entity gains control of the appropriation, except for certain amounts that relate to activities that are reciprocal in nature, in which case revenue is recognised only when it has been earned. Appropriations receivable are recognised at their nominal amounts.
Funding received or receivable from non-corporate Commonwealth entities (appropriated to the non-corporate Commonwealth entity as a corporate Commonwealth entity payment item for payment to this entity) is recognised as Revenue from Government by the corporate Commonwealth entity unless the funding is in the nature of an equity injection or a loan.

2. DEPARTMENTAL FINANCIAL POSITION

This section analyses Comcare's assets used to conduct its operations and the operating liabilities incurred as a result. Employee related information is disclosed in the People and Relationships section.
  

2017
$'000

2016
$'000

Note 2.1: FINANCIAL ASSETS
    

2.1A

Cash and cash equivalents

  
 

Cash at bank and on hand

8,279

2,339

 

Deposits at call

21,500

13,000

 

Term deposits

950,000

805,000

 

Total cash and cash equivalents

979,779

820,339

    

Accounting policy

Cash is recognised at its nominal amount. Cash and cash equivalents include cash on hand and demand deposits in bank accounts with an original maturity of 3 months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

  

2017
$'000

2016
$'000

2.1B

Trade and other receivables

  
 

Goods and services receivable

  
 

Goods and services

2,407

229

 

Total goods and services receivables

2,407

229

    
 

Appropriations receivable

  
 

For existing programs*

2,666,165

2,802,684

 

Total appropriations receivable

2,666,165

2,802,684

    
 

Other receivables

  
 

Third party claims recoveries receivable

8,400

9,600

 

Third party claims recoveries receivable - common law asbestos-related claims

126,840

141,680

 

Claims recoveries

7,713

6,187

 

GST receivable from the Australian Taxation Office

2,966

882

 

Other receivables

-

(34)

 

Total other receivables

145,919

158,315

    
 

Total trade and other receivables (gross)

2,814,491

2,961,228

    
 

Less impairment allowance account

  
 

Goods and services

(1)

(1)

 

Claims recoveries

(1,018)

(1,019)

 

Total impairment allowance account

(1,019)

(1,020)

    
 

Total trade and other receivables (net)

2,813,472

2,960,208

    

* The value disclosed is the combined value of the pre-premium special appropriation receivable, asbestos-related disease special appropriation receivable and net premiums held in the Commonwealth Consolidated Revenue Fund as identified in the Overview.

  

2017
$'000

2016
$'000

 

Trade and other receivables (net) expected to be recovered

  
 

No more than 12 months

55,199

69,027

 

More than 12 months

2,758,273

2,891,181

 

Total trade and other receivables (net)

2,813,472

2,960,208

    
 

Trade and other receivables (gross) aged as follows

  
 

Not overdue

2,810,334

2,955,790

 

Overdue by:

  
 

0 to 30 days

7

78

 

31 to 60 days

109

124

 

61 to 90 days

142

112

 

More than 90 days

3,899

5,124

 

Total trade and other receivables (gross)

2,814,491

2,961,228

  

2017
$'000

2016
$'000

    
 

Impairment allowance aged as follows

  
 

Not overdue

-

-

 

Overdue by:

  
 

0 to 30 days

-

-

 

31 to 60 days

-

-

 

61 to 90 days

-

-

 

More than 90 days

(1,019)

(1,020)

 

Total impairment allowance

(1,019)

(1,020)

    
 

Credit terms for goods and services were within 30 days (2016: 30 days)

  

Accounting policy

Revenue from the sale of goods is recognised when:

  • the risks and rewards of ownership have been transferred to the buyer
  • Comcare retains no managerial involvement nor effective control over the goods
  • the revenue and transaction costs incurred can be reliably measured
  • it is probable that the economic benefits associated with the transaction will flow to Comcare.

Revenue from the rendering of services is recognised by reference to the stage of completion of contracts at the reporting date. The revenue is recognised when:

  • the amount of revenue, stage of completion and transaction costs incurred can be reliably measured
  • the probable economic benefits associated with the transaction will flow to Comcare.

The stage of completion on contracts at the reporting date is determined by reference to the proportion that costs incurred to date bear to the estimated total costs of the transaction.

Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any impairment allowance. Collectability of debts is reviewed as at the end of the reporting period. Allowances are made when collectability of the debt is no longer probable.

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loan and receivables'. Receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate.

Reconciliation of impairment allowance

 

Movements in relation to 2017

 

Goods and services
$'000

Other receivables
$'000

Total
$'000

As at 1 July 2016

1

1,019

1,020

Amounts written off

-

(1,676)

(1,676)

Increase/(decrease) recognised in net surplus

-

1,675

1,675

Total as at 30 June 2017

1

1,018

1,019

    

Movements in relation to 2016

   
 

Goods and services
$'000

Other receivables
$'000

Total
$'000

As at 1 July 2015

98

959

1,057

Amounts written off

(97)

(2,692)

(2,789)

Increase/(decrease) recognised in net surplus

-

2,752

2,752

Total as at 30 June 2016

1

1,019

1,020

    

Accounting policy

Financial assets are assessed for impairment at the end of each reporting period.

Financial assets held at amortised cost: if there is objective evidence that an impairment loss has been incurred for receivables held at amortised cost, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. The carrying amount is reduced by way of an allowance account. The loss is recognised in the Statement of Comprehensive Income.

  

Other receivables
$'000

Total
$'000

2.1C

Other financial assets

  
 

Interest accrued

7,272

12,440

 

Other

1,145

2

 

Total other financial assets

8,417

12,442

    
 

Other financial assets expected to be recovered

  
 

No more than 12 months

8,417

12,442

 

More than 12 months

-

-

 

Total other financial assets

8,417

12,442

Note 2.2: NON-FINANCIAL ASSETS

2.2A

Reconciliation of the opening and closing balances of property, plant and equipment and intangibles (2017)

   
  

Other property, plant and
equipment
$'000

Computer software
purchased and internally
developed
$'000

Total
$'000

 

As at 1 July 2016

   
 

Gross book value

30,452

18,989

49,441

 

Accumulated depreciation/amortisation

(15,888)

(15,000)

(30,888)

 

Net book value 1 July 2016

14,564

3,989

18,553

     
 

Additions:

   
 

By purchase or internally developed

3,067

2,176

5,243

 

Depreciation/amortisation expense

(3,580)

(1,345)

(4,925)

     
 

Impairment recognised in net cost of services

-

(664)

(664)

     
 

Disposals:

   
 

Cost of assets disposed

(1,447)

(888)

(2,335)

 

Add write back of depreciation on disposals

1,422

883

2,305

 

Net asset disposals

(25)

(5)

(30)

     
 

Net book value 30 June 2017

14,026

4,151

18,177

     
 

Net book value 30 June 2017 represented by:

   
 

Gross book value

32,072

20,277

52,349

 

Accumulated depreciation/amortisation

(18,046)

(16,126)

(34,172)

 

Net book value 30 June 2017

14,026

4,151

18,177

     
Reconciliation of the opening and closing balances of property, plant and equipment and intangibles (2016)
 

Other property, plant and equipment
$'000

Computer software purchased and internally developed
$'000

Total
$'000

As at 1 July 2015

   

Gross book value

31,669

18,272

49,941

Accumulated depreciation/amortisation

(17,982)

(13,272)

(31,254)

Net book value 1 July 2015

13,687

5,000

18,687

    

Additions:

   

By purchase or internally developed

306

769

1,075

Depreciation/amortisation expense

(3,882)

(1,780)

(5,662)

    

Impairment recognised in net cost of services

-

-

-

    

Disposals:

   

Cost of assets disposed

(2,257)

(51)

(2,308)

Add write back of depreciation on disposals

2,252

51

2,303

Net asset disposals

(5)

-

(5)

    

Revaluations:

   

Revaluation of assets - net value cost adjustment

733

-

733

Add write back of depreciation on revaluation of assets

3,725

-

3,725

Net revaluation

4,458

-

4,458

    

Net book value 30 June 2016

14,564

3,989

18,553

    

Net book value 30 June 2016 represented by:

   

Gross book value

30,452

18,989

49,441

Accumulated depreciation/amortisation

(15,888)

(15,000)

(30,888)

Net book value 30 June 2016

14,564

3,989

18,553

Accounting policy

Acquisition of assets
Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value plus transaction costs where appropriate.

Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and income at their fair value at the date of acquisition, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amounts at which they are recognised in the transferor's accounts, immediately prior to the restructuring.

Asset recognition threshold
Purchases of property, plant and equipment are recognised initially at cost in the Statement of Financial Position, except for purchases costing less than $5,000, which are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).

The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant to 'make good' provisions in property leases taken up by Comcare where there exists an obligation to restore the property to its original condition. These costs are included in the value of Comcare's leasehold improvements with a corresponding provision for the 'make good' recognised.

Revaluations
Following initial recognition at cost, property, plant and equipment are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets did not differ materially from the assets' fair values as at the reporting date. The regularity of independent valuations depends upon the volatility of movements in market values for the relevant assets.

Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reverses a previous revaluation decrement of the same asset class that was previously recognised in the surplus/deficit. Revaluation decrements for a class of assets are recognised directly in the surplus/deficit except to the extent that they reverse a previous revaluation increment for that class.

Depreciation has been restated to reflect the change in the net carrying amount of the asset after revaluation.

Depreciation
Depreciable property, plant and equipment assets are written off to their estimated residual values over their estimated useful lives to Comcare using, in all cases, the straight-line method of depreciation.

Depreciation rates (useful lives), residual value and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate.

Depreciation rates applying to each class of depreciable asset are based on the following useful lives:

 

2017

2016

Office machines and equipment

2 to 10 years

2 to 10 years

Leasehold improvements

Lease terms

Lease terms

Motor vehicles

2 to 5 years

2 to 5 years

Impairment
All assets were assessed for impairment at 30 June 2017. Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount.

The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows, and the asset would be replaced if Comcare were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Intangibles
Comcare's intangibles comprise purchased software for internal use with an initial cost of $30,000 or more. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Software is amortised on a straight-line basis over its anticipated useful life. The useful lives of Comcare's software are 3 to 10 years (2016: 3 to 10 years).

All software assets were assessed for indications of impairment as at 30 June 2017.

Sale of assets
Gains from disposal of assets are recognised when control of the asset has passed to the buyer.

  

2017
$'000

2016
$'000

2.2B

Other non-financial assets

  
 

Prepayments

1,445

1,771

 

Total other non-financial assets

1,445

1,771

    
 

Other non-financial assets are expected to be recovered in:

  
 

No more than 12 months

1,405

1,571

 

More than 12 months

40

200

 

Total other non-financial assets

1,445

1,771

    
 

No indicators of impairment were found for other non-financial assets.

  
  

2017
$'000

2016
$'000

Note 2.3: PAYABLES
    

2.3A

Suppliers

  
 

Trade creditors and accruals

3,169

3,310

 

Total supplier payables

3,169

3,310

    
 

Suppliers expected to be settled in:

  
 

No more than 12 months

3,169

3,310

 

Total suppliers expected to be settled

3,169

3,310

    
 

Settlement is usually made within 30 days (2016: 30 days).

  
    

2.3B

Workers' compensation claims payable

3,041

2,540

    
 

Workers' compensation claims payable expected to be settled in:

  
 

No more than 12 months

3,041

2,540

 

Total workers' compensation claims payable

3,041

2,540

    

2.3C

Other payables

  
 

Income in advance

10,252

278

 

GST payable to ATO

833

32

 

Lease incentives

3,715

3,724

 

Salaries and wages

437

315

 

Superannuation

72

37

 

Other

1,966

1,857

 

Total other payables

17,275

6,243

    
 

Other payables expected to be settled in:

  
 

No more than 12 months

12,796

991

 

More than 12 months

4,479

5,252

 

Total other payables

17,275

6,243

   

2017
$'000

2016
$'000

     
Note 2.4: PROVISIONS
     

2.4A

Workers' compensation claims

   
 

Premium claims

2.4D

2,429,100

2,767,500

 

Commonwealth latent mental disease claims

2.4E

17,000

22,600

 

Pre-premium claims

2.4F

347,900

373,600

 

Total workers' compensation claims

 

2,794,000

3,163,700

     
 

Workers' compensation claims provisions expected to be settled in:

  
 

No more than 12 months

 

323,000

340,700

 

More than 12 months

 

2,471,000

2,823,000

 

Total workers' compensation claims

 

2,794,000

3,163,700

     

2.4B

Common law asbestos-related disease claims

2.4G

969,920

1,070,580

     
 

Common law asbestos-related disease claims provisions expected to be settled in:

   
 

No more than 12 months

 

42,560

48,300

 

More than 12 months

 

927,360

1,022,280

 

Total common law asbestos-related disease claims provisions

 

969,920

1,070,580

     

2.4C

Other provisions

   
 

Provision for restoration obligations

 

2,468

2,422

 

Total other provisions

 

2,468

2,422

     
 

Other provisions expected to be settled in:

   
 

No more than 12 months

 

105

236

 

More than 12 months

 

2,363

2,186

 

Total other provisions

 

2,468

2,422

     
 

Provision for restoration obligations reconciliation

   
 

Carrying amount 1 July

 

2,422

2,541

 

Additional provisions made

 

-

-

 

Amount used

 

-

(220)

 

Adjustment in provision as a result of revaluation

 

7

-

 

Unwinding of discount

 

39

101

 

Closing balance as at 30 June

 

2,468

2,422

Comcare currently has seven agreements for the leasing of premises which have contract clauses with a requirement to restore the premises to their original condition at the conclusion of the lease. Comcare has made a provision to recognise this obligation.
  2017
$'000
2016
$'000

2.4D

Provision for premium claims

  
 

Carrying amount at 1 July

2,767,500

2,834,400

 

Increase/(Decrease) in provisions made during the year

(133,819)

(85,461)

 

Claims payments made during the year

(216,281)

(230,239)

 

Unwinding of discount

42,000

51,800

 

Change in discount rate

(94,700)

259,700

 

Change in inflation rate

64,400

(62,700)

 

Closing balance at 30 June*

2,429,100

2,767,500

    

* Refer to Overview for disclosure of the funding available to Comcare to meet this liability.

The valuation of premium claims liabilities was undertaken as at 30 June 2017 by independent consulting actuaries, Taylor Fry Pty Ltd. Taylor Fry has stated that its valuation complies with actuarial Professional Standard PS300 Actuarial reports and advice on general insurance technical liabilities.

The provision for premium claims represents an actuarial assessment of the expected payments to be made in the future by Comcare in relation to workers' compensation claims incurred on or after 1 July 1989. The provision is recognised on a gross basis with an intended 75% probability of sufficiency. The estimate for third party recoveries is included in trade and other receivables. Refer to Note 2.1B.

The following assumptions have been made in determining the provision amount.

  

2017

2016

 

Economic assumptions

  
 

Medical payments inflation

4.30% to 4.80%

3.79% to 4.87%

 

Other payments inflation

2.82% to 4.00%

2.33% to 3.09%

 

Discount rate

1.63% to 6.00%

1.5% to 4.0%

    
 

Premium business liability assumptions

  
 

Claim frequency

0.90%

1.01%

 

Third party recoveries

0.7%

0.7%

 

Claims administration expenses

15.5%

14.7%

 

Average claim size

$108,030

$108,749

  

2017
$'000

2016
$'000

    

2.4E

Provision for Commonwealth latent mental disease claims

  
 

Carrying amount at 1 July

22,600

22,600

 

Increase/(Decrease) in provisions made during the year

(5,700)

(2,000)

 

Claims payments made during the year

-

-

 

Unwinding of discount

400

400

 

Change in discount rate

(800)

2,100

 

Change in inflation rate

500

(500)

 

Closing balance at 30 June*

17,000

22,600

* Refer to Overview for disclosure of the funding available to Comcare to meet this liability.

The valuation of Commonwealth latent mental disease claims liabilities was undertaken as at 30 June 2017 by independent consulting actuaries, Taylor Fry Pty Ltd. Taylor Fry has stated that its valuation complies with actuarial Professional Standard PS300 Actuarial reports and advice on general insurance technical liabilities.

The provision represents an actuarial assessment of the expected payments to be made in future by Comcare in relation to latent mental diseaseclaims for which the date of injury as defined in the SRC Act is after balance date.

The provision is recognised on a gross basis with an intended 75% probability of sufficiency.

  

2017
$'000

2016
$'000

2.4F

Provision for pre-premium claims

  
 

Carrying amount at 1 July

373,600

368,400

 

Increase/(Decrease) in provisions made during the year

7,535

1,746

 

Claims payments made during the year

(29,735)

(28,946)

 

Unwinding of discount

5,800

7,400

 

Change in discount rate

(18,200)

32,600

 

Change in inflation rate

8,900

(7,600)

 

Closing balance at 30 June*

347,900

373,600

    
* Refer to Overview for disclosure of the funding available to Comcare to meet this liability.

The valuation of pre-premium claims liabilities was undertaken as at 30 June 2017 by independent consulting actuaries, Taylor Fry Pty Ltd. Taylor Fry has stated that its valuation complies with actuarial Professional Standard PS300 Actuarial reports and advice on general insurance technical liabilities.

The provision from pre-premium claims represents an actuarial assessment of the expected payments to be made in the future by Comcare in relation to workers' compensation  claims  incurred prior to 1 July 1989. The provision is recognised on a gross basis with an intended 75% probability of sufficiency.

Economic assumptions used in determining the amount of the provision for pre-premium claims liability are the same as those applied for the premium business.

  

2017
$'000

2016
$'000

2.4G

Provision for common law asbestos-related disease claims

  
 

Carrying amount at 1 July

1,070,580

1,077,020

 

Increase/(Decrease) in provisions made during the year

(83,072)

(86,466)

 

Claims payments made during the year

(18,708)

(22,594)

 

Unwinding of discount

31,640

37,240

 

Change in discount and inflation rate

(30,520)

65,380

 

Closing balance at 30 June*

969,920

1,070,580

    
* Refer to Overview for disclosure of the funding available to Comcare to meet this liability.

The valuation of common law asbestos-related disease claims liabilities was undertaken as at 30 June 2017 by independent consulting actuaries, Finity Consulting Pty Ltd. Finity Consulting has stated that its valuation complies with actuarial Professional Standard PS300 Actuarial reports and advice on general insurance technical liabilities.

The provision for common law asbestos-related disease claims represents an actuarial assessment of the expected payments to be made in the future by Comcare in relation to common law claims against the Australian Government by individuals seeking compensation as a result of direct or indirect exposure to asbestos. The provision is recognised on a gross basis with an intended 75% probability of sufficiency. The estimate for third party recoveries is included in trade and other receivables. Refer to Note 2.1B.

The following assumptions have been made in determining the provision amount.

  

2017
$'000

2016
$'000

 

Economic assumptions

  
 

Wage inflation

3.50%

3.50%

 

Superimposed inflation

2.00%

2.00%

 

Discount rate

3.25%

3.00%

3. FUNDING

This section identifies Comcare's funding structure.

  

2017
$'000

2016
$'000

    

Note 3.1: CASH FLOW RECONCILIATION

  
    
 

Reconciliation of cash and cash equivalents as per statement of financial position to cash flow statement

  
    
 

Cash and cash equivalents as per:

  
 

Cash flow statement

979,779

820,339

 

Statement of financial position

979,779

820,339

 

Difference

-

-

    
 

Reconciliation of net cost of services to net cash from operating activities:

  
 

Net cost of services

533,541

166,488

 

Add revenue from Government

(66,187)

86,539

    
 

Adjustments for non-cash items

  
 

Depreciation and amortisation of property, plant and equipment

4,925

5,662

 

Write-down and impairment of assets

664

(186)

 

Loss on disposal of assets

26

5

 

Unwinding of discount

39

101

    
 

Movements in assets and liabilities:

  
 

Assets

  
 

(Increase)/Decrease in net receivables

148,789

(9,446)

 

(Increase)/Decrease in accrued revenues

4,025

367

 

(Increase)/Decrease in prepayments

326

236

 

Liabilities

  
 

Increase/(Decrease) in payables

9,340

(39,485)

 

Increase/(Decrease) in provisions

(470,763)

(66,383)

 

(Increase)/Decrease in assets payables

(446)

264

 

(Increase)/Decrease in make good provision

(46)

-

    
 

Net cash from/(used by) operating activities

164,233

144,162

4. PEOPLE AND RELATIONSHIPS

  

2017
$'000

2016
$'000

 
Note 4.1: EMPLOYEE PROVISIONS
 

Employee provisions

  
 

Leave

15,857

16,399

 

Separation and redundancy

302

209

 

Total employee provisions

16,159

16,608

    
 

Employee provisions are expected to be settled in:

  
 

No more than 12 months

6,660

6,713

 

More than 12 months

9,499

9,895

 

Total employee provisions

16,159

16,608

    

Accounting policy

Liabilities for short-term employee benefits and termination benefits expected within twelve months of the end of the reporting period are measured at their nominal amounts. The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.

Other long-term employee benefits are measured as net total of the present value of the defined benefit obligation at the end of the reporting period minus the fair value at the end of the reporting period of plan assets (if any) out of which the obligations are to be settled directly.

Leave

The liability for employee benefits includes provisions for annual leave and long service leave. The liability for long service leave has been determined by reference to the short hand method prescribed under section 24 of the Financial Reporting Rule.

The leave liabilities are calculated on the basis of employees’ remuneration at the estimated salary rates that will be applied at the time the leave is taken, including Comcare’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

The liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at 30 June 2017. In determining the present value of the liability, attrition rates and pay increases through promotion and inflation have been taken into account.

Separation and redundancy

Provision is made for separation and redundancy benefit payments. Comcare recognises a provision for termination when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.

Superannuation

Staff of Comcare are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS accumulation plan (PSSap) or other superannuation schemes.

The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap is a defined contribution scheme.

The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported in the Department of Finance's administered schedules and notes.

Comcare makes employer contributions to the employees' defined benefit superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the Government. Comcare accounts for the contributions as if they were contributions to defined contribution plans.

The liability for superannuation recognised as at 30 June represents outstanding contributions.

 

2017
$'000

  

Note 4.2: KEY MANAGEMENT PERSONNEL REMUNERATION

 
  

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. The entity has determined the key management personnel to be the Portfolio Minister (the Minister for the Department of Employment), Chief Executive Officer and General Managers. Key management personnel remuneration is reported in the table below.

  

Short-term employee benefits

1,670

Post-employment benefits

253

Other long-term benefits

170

Total key management personnel remuneration expenses1

2,093

  

The total number of key management personnel that is included in the above table is 8.

 
  

1. The above key management personnel remuneration excludes the remuneration and other benefits of the Portfolio Minister. The Portfolio Minister's remuneration
and other benefits are set by the Remuneration Tribunal and are not paid by Comcare.

 
  
  
 

Note 4.3: RELATED PARTY DISCLOSURES

Related party relationships

The entity is an Australian Government controlled entity. Related parties to this entity are Key Management Personnel including the Portfolio Minister and Executive, and other Australian Government entities.

Transactions with related parties

Given the breadth of Government activities, related parties may transact with the government sector in the same capacity as ordinary citizens. Such transactions include the payment or refund of taxes, receipt of a Medicare rebate or higher education loans. These transactions have not been separately disclosed in this note.

The following transactions with related parties occurred during the financial year:

  • The entity transacts with other Australian Government controlled entities consistent with normal day-to-day business operations provided under normal terms and conditions, including the payment of workers compensation and insurance premiums. These are not considered individually significant to warrant separate disclosure as related party transactions.
  • Refer to Note 4.1 Employee Provisions for details on superannuation arrangements with the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), and the PSS accumulation plan (PSSap).

5. MANAGING UNCERTAINTIES

Note 5.1: CONTINGENT ASSETS AND LIABILITIES

Quantifiable contingencies

As at 30 June 2017 Comcare has no quantifiable contingencies.

Unquantifiable contingencies

Comcare has a criminal prosecution before the South Australian Magistrates Court relating to alleged breaches of the Work Health and Safety Act 2011. It is not possible to estimate the potential pecuniary penalty payable to the Commonwealth by the Defendant if the matter is successful.

There may be matters of which Comcare has not been advised of, or is aware of, that might be classified as unquantifiable contingencies.

Accounting policy

Contingent liabilities and contingent assets are not recognised in the statement of financial position but are reported in the notes. They may arise from uncertainty as to the existence of a liability or asset or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain and contingent liabilities are disclosed when settlement is greater than remote.

  

2017
$

2016
$

Note 5.2: REMUNERATION OF AUDITORS
    
 

Financial statement audit services provided to Comcare by the Australian National Audit Office

215,000

215,000

    
 

Other services provided by KPMG

  
 

Continuous monitoring

65,000

49,500

 

Annual desk top reviews

-

16,500

 

Supply chain desk top review

-

5,500

 

Total other services provided by KPMG

65,000

71,500

    
Note 5.3: FINANCIAL INSTRUMENTS
    

5.3A

Categories of financial instruments

2017

2016

 

Financial assets

$'000

$'000

 

Loans and receivables

  
 

Cash and cash equivalents

979,779

820,339

 

Receivables for goods and services

2,407

229

 

Other receivables and claims recoveries

7,713

6,187

 

Total financial assets

989,899

826,755

    
 

Financial liabilities

  
 

At amortised cost

  
 

Trade creditors

3,169

3,310

 

Workers' compensation payables

3,041

2,540

 

Total financial liabilities

6,210

5,850

Accounting Policy

Financial assets
Comcare classifies its financial assets as loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Financial assets are recognised and derecognised upon 'trade date'.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest rate basis except for financial assets that are recognised ‘at fair value through profit or loss'.

Loan and receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loan and receivables’. Receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate.

Comcare does not have any loans.

Impairment of financial assets
Financial assets are assessed for impairment at the end of each reporting period.

Financial assets held at amortised cost - if there is objective evidence that an impairment loss has been incurred for receivables held at amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount is reduced by way of an allowance account. The loss is recognised in the Statement of Comprehensive Income.

Financial liabilities

Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities. Financial liabilities are recognised and derecognised upon ‘trade date’.

Financial liabilities at fair value through profit or loss

Financial liabilities at 'fair value through profit or loss' are initially measured at fair value.

Subsequent fair value adjustments are recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

Other financial liabilities

Supplier and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (irrespective of having been invoiced).

  

2017
$

2016
$

5.3B

Net gains or losses on financial assets

  
 

Loans and receivables

  
 

Interest revenue

30,168

27,554

 

Net gains on loans and receivables

30,168

27,554

 

Net gains on financial assets

30,168

27,554

    

5.3C

Net income and expense from financial liabilities

  
 

There was no income or expense from financial liabilities during the year (2016: Nil).

  
    

5.3D

Fair value of financial instruments

  
 

The fair value of each class of Comcare's financial assets and financial liabilities equal their carrying amounts in both the current and immediately preceding reporting periods and none of these financial assets or liabilities are readily traded on organised markets in a standardised form.

  

Carrying amount
2017
$'000

Fair value
2017
$'000

Carrying amount
2016
$'000

Fair value
2016
$'000

 

Financial assets

989,899

989,899

826,755

826,755

 

Total financial assets

989,899

989,899

826,755

826,755

 

Financial liabilities

6,210

6,210

5,850

5,850

 

Total financial liabilities

6,210

6,210

5,850

5,850

5.3E Credit risk

Comcare is exposed to minimal credit risk as the majority of its receivables are cash on deposit with banks. The major exposure to credit risk is the risk that arises from the potential default by a bank. This amount is equal to the total amount of cash at bank (2017: $979.8m and 2016: $820.3m). Comcare's current Investment Policy requires all investments to be placed with a financial institution with a Standard and Poor's rating of at least BBB/Baa. To mitigate credit risk, the Investment Policy restricts investment with any single financial institution to no more than 50 per cent of the total investment portfolio.

As at 30 June 2017

Credit rating

 

AAA
$'000

AA
$'000

A
$'000

A-1+
$'000

A-1
$'000

A-2
$'000

Not rated
$'000

Total
$'000

Cash and cash equivalents

-

-

-

639,779

290,000

50,000

-

979,779

Receivables

-

-

-

-

-

-

2,407

2,407

Other receivables

-

-

-

-

-

-

7,713

7,713

 

As at 30 June 2016

Credit rating

 

AAA
$'000

A
$'000

$'000

A-1+
$'000

A-1
$'000

A-2
$'000

Not rated
$'000

Total
$'000

Cash and cash equivalents

-

130,000

80,000

235,000

375,339

-

-

820,339

Receivables

-

-

-

-

-

-

229

229

Other receivables

-

-

-

-

-

-

6,187

6,187

Comcare holds no collateral to mitigate against credit risk.

Credit quality of financial instruments not past due nor individually determined as impaired

 

Not past due
nor impaired
2017
$'000

Not past due
nor impaired
2016
$'000

Past due or
impaired

2017
$'000

Past due or
impaired
2016
$'000

Cash and cash equivalents

979,779

820,339

-

-

Receivables

2,311

137

96

92

Other receivables

3,652

842

4,061

5,345

Total

985,742

821,318

4,157

5,437

Ageing of financial assets that were past due but not impaired for 2017

 

0 to 30
days
$'000

31 to 60
days
$'000

61 to 90
days
$'000

90+
days
$'000


Total

$'000

Receivables

-

95

-

1

96

Other receivables

7

15

142

2,879

3,043

Total

7

110

142

2,880

3,139

 

Ageing of financial assets that were past due but not impaired for 2016

 

0 to 30

days

$'000

31 to 60

days

$'000

61 to 90

days

$'000

90+

days

$'000

Total

$'000

Receivables

59

5

4

23

91

Other receivables

18

119

108

4,081

4,326

Total

77

124

112

4,104

4,417

5.3F Liquidity risk

Comcare's financial liabilities were trade creditors, workers' compensation payables and other payables. Comcare has negligible liquidity risk as it has substantial cash holdings to meet its short term financial obligations at 30 June. Under Comcare's Investment Policy, investments are managed in a manner which maximises investment return while minimising risk ensures that accessibility of funds is maintained and cash flow requirements are met.

Maturities for financial liabilities 2017

 

On

demand

$'000

Within 1

year

$'000

1 to 2

years

$'000

2 to 5

years

$'000

> 5

years

$'000

Total

$'000

Trade creditors

-

3,169

-

-

-

3,169

Workers' compensation claims payable

-

3,041

-

-

-

3,041

Total

-

6,210

-

-

-

6,210

 

Maturities for financial liabilities 2016

 

On

demand

$'000

Within 1

year

$'000

1 to 2

years

$'000

2 to 5

years

$'000

> 5

years

$'000

Total

$'000

Trade creditors

-

3,310

-

-

-

3,310

Workers' compensation claims payable

-

2,540

-

-

-

2,540

Total

-

5,850

-

-

-

5,850

Comcare has no derivative financial liabilities in either the current or prior years.

5.3G Market risk

Currency risk

Currency risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Comcare holds basic financial instruments that do not expose it to certain market risks. Comcare is not exposed to 'currency risk' or 'other price risk'.

Interest rate risk

Interest rate risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The only interest bearing item on the balance sheet is 'cash and cash equivalents'. 'Cash and cash equivalents' comprises investments in both term deposit accounts and standard banking transaction accounts. Those investments held in term deposit accounts bear interest at a fixed rate and will not fluctuate with changes in market interest rates. The daily cash balance in the standard banking transaction account is stated at a nominal amount and is not subject to interest rate risk.

Note 5.4: FAIR VALUE MEASUREMENT

The following tables provide an analysis of assets and liabilities that are measured at fair value.

The different levels of the fair value hierarchy are defined below.

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at measurement date.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability.

5.4A Fair value measurements, valuation techniques and inputs used

 

Fair value measurement
at the end of the reporting period

For Levels 2 and 3 fair value measurements

 

2017
$'000

2016
$'000

Category
(Level 1, 2 or 3)

Valuation technique(s)1

Non-financial assets2

      

Leasehold improvements

11,343

13,290

Level 3

Cost approach

Actual cost of replacement of similar assets. Price per square metre.

Computer and IT equipment

2,629

1,193

Level 2

Market comparable

Sale prices of comparable computer and IT equipment.

Office equipment

-

16

Level 2

Market comparable

Sale prices of comparable office equipment.

Artwork

54

60

Level 2

Market comparable

Private sales of similar artwork. Professional appraisals of similar artwork.

Motor vehicle

-

5

Level 2

Market comparable

Sale price of comparable motor vehicles.

Total non-financial assets

14,026

14,564

    

Total fair value measurements of assets in the statement of financial position

14,026

14,564

    

1. Comcare engaged a professional valuer to undertake a comprehensive valuation of non-financial assets as at 30 June 2016.

2. The highest and best use of all non-financial assets are the same as their current use.

5.4B Reconciliation for recurring Level 3 fair value measurements

 

Non-financial assets

 

Leasehold improvements

Total

 

2017
$'000

2016
$'000

2017
$'000

2016
$'000

As at 1 July

13,290

-

13,290

-

Total (losses) recognised in net cost of services1

(2,678)

-

(2,678)

-

Purchase

731

-

731

-

Transfer into Level 32

-

13,290

-

13,290

Total as at 30 June

11,343

13,290

11,343

13,290

Accounting policy

Any transfers between levels of the fair value hierarchy are deemed to have occurred at the end of the reporting period.

1. These losses are presented in the Statement of Comprehensive Income under note 2.2A.

2. Transfers into Level 3 relate to Leasehold Improvements amounts held at 30 June 2015 and reported as Level 2. Comcare deems transfers between levels of the fair value hierarchy to have occurred at the end of the 2015-16 reporting period.

6. OTHER INFORMATION

Note 6.1: ASSETS HELD IN TRUST

Comcare Beneficiaries Trust Account

The Beneficiaries Trust Account was established on 1 December 1988 to administer compensation benefits paid under both the Compensation (Commonwealth Government Employees) Act 1971 and the SRC Act to beneficiaries that are under a legal disability. The majority of these are children under the age of 18 who have been awarded compensation following the death of a parent under compensable circumstances.

These monies are not available for other purposes of Comcare and are not recognised in the financial statements.

   2017
$'000
2016
$'000

Cash at bank

   

Total amount held by Comcare at the beginning of the reporting period

 

1,285

1,176

    

Add:

Funds deposited

79

140

 

Interest earned

32

40

Available for payment

 

1,396

1,356

    

Less:

Final payouts

98

71

  

98

71

    

Total value held by Comcare at the end of the reporting period

 

1,298

1,285

    

Total cash at bank

 

1,298

1,285

The above values are estimated at fair value at the time when acquired.

Note 6.2: REPORTING OF OUTCOMES

Outcome 1 - Support participation and productivity through healthy and safe workplaces that minimise the impact of harm in workplaces covered by Comcare.

  Outcome 1 Total
  2017
$'000
2016
$'000
2017
$'000
2016
$'000

Expenses

    

Employee benefits

66,775

67,801

66,775

67,801

Supplier expenses

35,476

33,631

35,476

33,631

Depreciation and amortisation

4,925

5,662

4,925

5,662

Finance costs

39

101

39

101

Write-downs and impairment of assets

664

(186)

664

(186)

Losses/(Gains) from asset sales

26

(12)

26

(12)

Workers' compensation claims expense

246,016

259,185

246,016

259,185

Common law asbestos-related disease claims expense

18,708

22,594

18,708

22,594

Total expenses

372,629

388,776

372,629

388,776

     

Income

    

Sale of goods and rendering of services

22,613

19,531

22,613

19,531

Fees and fines

16,159

17,416

16,159

17,416

Workers' compensation premiums

382,502

414,666

382,502

414,666

Interest

30,168

27,554

30,168

27,554

Other revenue

408

757

408

757

Gains from movement in workers' compensation claims provision

368,500

62,600

368,500

62,600

Gains from movement in common law asbestos-related disease claims provision

85,820

12,740

85,820

12,740

Revenue from Government

60,999

66,167

  

Available funding from movement in claims provision

(127,186)

20,372

(127,186)

20,372

Total income

839,983

641,803

839,983

641,803

     

Assets

    

Cash and cash equivalents

979,779

820,339

979,779

820,339

Trade and other receivables

2,813,472

2,960,208

2,813,472

2,960,208

Other financial assets

8,417

12,442

8,417

12,442

Property, plant and equipment

14,026

14,564

14,026

14,564

Computer software

4,151

3,989

4,151

3,989

Other non-financial assets

1,445

1,771

1,445

1,771

Total assets

3,821,290

3,813,313

3,821,290

3,813,313

     

Liabilities

    

Suppliers

3,169

3,310

3,169

3,310

Workers' compensation claims payable

3,041

2,540

3,041

2,540

Other payables

17,275

6,243

17,275

6,243

Employee provisions

16,159

16,608

16,159

16,608

Workers' compensation claims

2,794,000

3,163,700

2,794,000

3,163,700

Common law asbestos-related disease claims

969,920

1,070,580

969,920

1,070,580

Other provisions

2,468

2,422

2,468

2,422

Total liabilities

3,806,032

4,265,403

3,806,032

4,265,403

Comcare's program components supporting the outcome are described in the Overview.