2022-23 Financial Report

Victorian Budget 2022/23

2022/23

Financial

Report

(incorporating Quarterly

Financial Report No. 4)

Presented by Tim Pallas MP

Treasurer of the State of Victoria

2022–23 FINANCIAL REPORT (incorporating Quarterly Financial Report No. 4)

Victorian Budget 2022/23

The Secretary

Department of Treasury and Finance

1 Treasury Place

Melbourne, Victoria, 3002

Australia

Tel: (03) 9651 5111

Website: dtf.vic.gov.au

Authorised by the Victorian Government

1 Treasury Place, Melbourne, 3002

Printed by Doculink, Port Melbourne

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ISSN 1443-1289 (print)

ISSN 2204-7166 (online)

Published October 2023

Financial Report

(Incorporating Quarterly Financial Report No. 4)

2022-23

Presented by

Tim Pallas MP

Treasurer of the State of Victoria

for the information of Honourable Members

_______________________

Ordered to be printed

_______________________

Published by order, or under the authority, of the Parliament of Victoria

October 2023

2022-23 Financial Report

TABLE OF CONTENTS

Chapter 1 – Foreword ............................................................................................................................. 1

Chapter 2 – General government sector outcome ................................................................................... 5

Chapter 3 – Broader public sector outcome .......................................................................................... 17

Chapter 4 – Annual Financial Report ..................................................................................................... 29

1. About this report .................................................................................................................................... 45

2. How funds are raised ............................................................................................................................. 48

3. How funds are spent .............................................................................................................................. 54

4. Major assets and investments ............................................................................................................... 63

5. Financing state operations ..................................................................................................................... 75

6. Other assets and liabilities ..................................................................................................................... 96

7. Risks, contingencies and valuation judgements .................................................................................. 109

8. Comparison against budget and the public account............................................................................ 140

9. Other disclosures ................................................................................................................................. 169

Chapter 5 – Supplementary uniform presentation framework tables ................................................... 191

Appendix A – General government sector quarterly financial report .................................................... 197

Appendix B – Financial Management Act 1994 – Compliance index ..................................................... 201

Style conventions ............................................................................................................................... 205

2022-23 Financial Report

2022-23 Financial Report Chapter 1 1

CHAPTER 1 – FOREWORD

PURPOSE

The 2022-23 Financial Report presents the

consolidated financial outcomes for the State of

Victoria, including the general government sector,

the public non-financial corporations sector and the

public financial corporations sector.

This chapter outlines the economic and fiscal

context for the State’s financial performance and

position, and summarises the 2022-23 results.

Chapter 2 analyses the results for the general

government sector, comparing them with actual

outcomes in 2021-22 and the revised estimates for

the year as presented in the 2023-24 Budget.

Chapter 3 presents the 2022-23 results for the State

of Victoria and the broader public sector.

Chapter 4 contains the audited financial statements

as required under the Financial Management Act 1994.

These are presented in line with applicable

Australian accounting standards and

pronouncements, in particular AASB 1049 Whole of

Government and General Government Sector Financial

Reporting.

Chapter 5 provides supplementary information

required under the Uniform Presentation

Framework. Appendix A includes the Quarterly

Financial Report for the general government sector

as required by Section 26 of the Financial Management

Act 1994. Appendix B presents a compliance index

providing a linkage between the relevant legislative

provisions relating to the preparation of this report

and the disclosure provided therein.

ECONOMIC CONTEXT

The Victorian economy performed well in 2022-23.

Growth in final demand, a key indicator of

economic activity, was solid. Employment growth

was strong and the unemployment rate was low

throughout the year. Alongside these positive

outcomes, high inflation and rising interest rates

presented rising cost-of-living pressures for some

households, as has been the case nationally and

globally.

In 2022-23, state final demand increased by

4.0 per cent, to be more than 11 per cent larger than

in 2018-19. This follows very strong economic

growth in 2021-22 as the economy recovered from

the impacts of the COVID-19 pandemic. State final

demand growth in 2022-23 was driven by consumer

spending, which rose by 6.9 per cent, supported by

strong employment outcomes and the high level of

savings that consumers accumulated during the

pandemic. However, growth in consumer spending

slowed over the year and declined in the June

quarter, as cost-of-living pressures weighed on some

households.

Business investment also contributed to growth in

state final demand in 2022-23, rising by a strong

8.0 per cent. Public demand increased by 0.7 per cent,

driven by public investment. Dwelling investment

detracted moderately from growth as labour and

material shortages delayed activity.

The increase in economic activity over recent years

has resulted in a very strong labour market. Since

September 2020, the Victorian labour market has

added more than 500 000 jobs, reaching the

Government’s Jobs Plan target of 400 000 jobs

more than two years early. In annual terms,

employment grew by 4.0 per cent in 2022-23.

This increase was mostly driven by full-time

employment, which rose by 5.7 per cent, while

part-time employment increased by 0.4 per cent.

The share of working-age Victorians in employment

was at record high levels in 2022-23 and the

unemployment rate remained historically low at

3.7 per cent.

2 Chapter 1 2022-23 Financial Report

High inflation remains a challenge to the Victorian

economy, as it does nationally and globally,

although inflation has started to ease. Initially, the

pick-up in inflation was driven by pandemic-related

supply chain disruptions and compounded by

Russia’s invasion of Ukraine, though high price

growth has since become evident across a broad

range of goods and services. In year-average terms,

headline Melbourne inflation averaged 6.9 per cent

in 2022-23. However, inflation appears to have

peaked, easing to 5.6 per cent over the year to

June 2023 from a high of 8.0 per cent over the year

to December 2022.

Wages increased by 3.4 per cent in 2022-23, driven

by ongoing strength in the labour market and a

larger than usual increase in minimum and award

wages. This was the fastest rate of wages growth in

over a decade.

The Victorian population rose by 2.4 per cent over

the year to March 2023 (reflecting the latest

available data). This is above pre-pandemic rates of

growth, and was driven by a strong recovery in net

overseas migration after national border restrictions

eased from late 2021.

FISCAL OUTCOMES

The Government recorded a general government

sector operating deficit of $8.8 billion for 2022-23.

The 2022-23 operating result was an improvement

of $1.5 billion compared with the revised estimate

in the 2023-24 Budget, mainly due to higher than

expected revenue. This includes higher than

expected taxation revenue as well as higher than

expected other revenue and income.

Total revenue from transactions for the year was

$84.7 billion, which was $1.8 billion higher than

the revised estimate. This was $1.7 billion, or

2 per cent, higher compared with the previous

year, reflecting an increase in taxation revenue,

interest, sales of goods and services and other

revenue and income.

State taxation revenue increased by $849 million

compared with the revised estimate. This was

primarily driven by higher than expected land

transfer duty and higher payroll tax due to a

stronger than expected labour market in the

June quarter 2022-23.

The increase of $1.8 billion in taxation revenue

compared with 2021-22 is largely attributable to an

increase in land tax reflecting strong post-pandemic

site value growth, higher payroll tax revenue

collected due to the stronger labour market, and the

introduction of the Mental Health and Wellbeing

Levy that came into effect on 1 January 2022.

The easing of public health restrictions on in-person

gambling venues also contributed to an increase in

gambling taxes from electronic gaming machines.

Revenue from the sale of goods and services was

$619 million higher compared with the previous

year, primarily due to the upfront recognition of

licence revenue from the VicRoads Modernisation

joint venture for its right to deliver specific

administrative and cash collection services. The

increase is also partly due to higher own-source

revenue for schools, such as from camps, sports

and excursions, which has increased since the easing

of public health measures.

Grants revenue of $40.1 billion was $1.7 billion

lower compared with 2021-22. The decrease

primarily reflects a reduction in grants from the

Commonwealth relating to support for COVID-19

impacted businesses and the COVID-19 health

response.

Other revenue and income for 2022-23 was

$256 million higher than the 2021-22 outcome.

The increase was primarily due to the recognition of

the grant of a right to the operator (GORTO)

liability revenue progressively being unwound over

the 40-year concession term following the VicRoads

Modernisation joint venture. There were also

increases in other revenue in the health sector

related to external-to-government contributions,

recoverable salaries and income from additional

activities.

2022-23 Financial Report Chapter 1 3

Total general government sector expenses reduced

to $93.6 billion in 2022-23, a decrease of $3.2 billion

(3.4 per cent) compared with the previous year. This

was primarily due to significant reductions in grant

payments mainly reflecting the unwinding of the

Government’s business support measures in

response to the COVID-19 pandemic.

Employee expenses of $33.6 billion for 2022-23

were $221 million (0.7 per cent) lower than the

revised budget and $1.4 billion (4.3 per cent) higher

than 2021-22. Compared with the previous year,

this increase includes additional resources in the

health sector for increased service delivery. The

increase in employee expenses also reflects increases

in remuneration levels in line with enterprise

bargaining agreements.

Interest expenses of $4 billion for 2022-23 were

$97 million lower than the revised budget.

Compared with the previous year, interest expenses

increased by $1.1 billion, reflecting additional

borrowings to finance the State’s capital program

and an increase in the interest rates on borrowings.

Other operating expenses in 2022-23 were

$455 million higher than the revised budget and

$114 million lower than in 2021-22. The increase

from the revised budget primarily reflects the timing

of expenditure programs across departments.

Grant expenses of $19.1 billion were consistent with

the revised budget and $6 billion lower than in

2021-22. The year-on-year decrease was primarily due

to significant reductions in grant payments mainly

reflecting the unwinding of the Government’s

business support measures in response to the

COVID-19 pandemic.

Government infrastructure investment (GII), which

includes general government net infrastructure

investment (net of asset sales) and estimated

construction related cash outflows for Partnerships

Victoria projects, was $21.8 billion for 2022-23.

This was lower than the revised budget of

$22.5 billion published in the 2023-24 Budget.

Compared with the previous year, GII increased by

$3 billion, largely due to extensive capital

infrastructure investment in the transport,

education, housing and health sectors.

Net debt for the general government sector was

$115 billion (20.3 per cent of estimated gross state

product) at 30 June 2023, $1.6 billion lower than the

revised budget estimate. This improved result

primarily reflects lower than expected borrowings

following the better than anticipated net cashflows

from operating activities.

The net cash flows from operating activities surplus

of $4.3 billion was an improvement of $1.4 billion

compared with the $2.9 billion surplus forecast in

the 2023-24 Budget. The improvement from the

revised budget was primarily driven by the better

than expected net result from transactions discussed

above and an increase in payables, partially offset by

a higher than expected increase in receivables.

4 Chapter 1 2022-23 Financial Report

2022-23 Financial Report Chapter 2 5

CHAPTER 2 – GENERAL GOVERNMENT SECTOR OUTCOME

• The Government recorded a general

government sector operating deficit of

$8.8 billion in 2022-23.

• The 2022-23 operating result was an

improvement of $1.5 billion compared with the

revised estimate in the 2023-24 Budget. This was

due to higher than expected revenue of

$1.8 billion, partially offset by higher than

expected expenses of $289 million.

• The level of government infrastructure

investment was $21.8 billion in 2022-23. This

was below the revised budget of $22.5 billion

published in the 2023-24 Budget.

• Net debt for the general government sector was

$115 billion (20.3 per cent of gross state

product (GSP)) at 30 June 2023 compared with

$116.7 billion (20.6 per cent of GSP) published

in the 2023-24 Budget. This improved result

reflects lower than expected borrowings

following the better than anticipated net

cashflows from operating activities.

• Victoria is rated AA by Standard & Poor’s

(S&P) with a stable outlook and Aa2 by

Moody’s Investors Service (Moody’s) also with

a stable outlook. Moody’s rating and its outlook

reflects the strong institutional framework and

the large and diverse economic base that

support the State’s ability to adjust state-based

revenues and expenditures as required. S&P in

its latest report notes that Victoria’s economy is

wealthy, well-diversified and has solid

fundamentals with low unemployment.

FISCAL OBJECTIVES

As part of the 2022-23 Budget, the Government

outlined its fiscal strategy and objectives for the

2022-23 financial year, including:

• general government net debt as a percentage of

GSP to stabilise in the medium term

• general government interest expense as a

percentage of revenue to stabilise in the

medium term

• fully funding the unfunded superannuation

liability by 2035

• a net operating cash surplus consistent with

maintaining general government net debt at a

sustainable level after the economy has

recovered from the COVID-19 pandemic.

The 2022-23 results compared with the

Government’s fiscal strategy and objectives were:

• net debt to GSP increasing from 19.4 per cent

at 30 June 2022 to 20.3 per cent at

30 June 2023, but lower than the revised

estimate of 20.6 per cent

• interest expense as a percentage of revenue of

4.7 per cent for the 2022-23 financial year, an

increase of 1.2 percentage points compared with

the previous year, but lower than the revised

estimate of 4.9 per cent

• a net operating cash surplus of $4.3 billion,

an improvement of $13.1 billion compared with

the previous year.

The Government remains on track to fully fund the

unfunded superannuation liability by 2035, with a

contribution of $607 million made to the State

Superannuation Fund, under section 90(2) of the

State Superannuation Act 1988, to fund this liability in

2022-23.

6 Chapter 2 2022-23 Financial Report

Fiscal aggregates are useful for assessing the impact

of the financial transactions of the Government and

its controlled entities on the economy. These

measures, derived from the audited financial

statements in Chapter 4, are shown in Table 2.1.

Table 2.1: Key fiscal aggregates for the general government sector ($ million)

2022

2023

actual

revised

Operating statement aggregates

Net result from transactions – Net operating balance

(13 791)

(8 847)

(10 326)

Net result

(13 501)

(9 847)

(10 541)

Net lending/(borrowing)

(24 539)

(20 132)

(21 682)

Comprehensive result – Total change in net worth

24 729

8 252

(10 829)

Balance sheet aggregates

Net worth

178 528

186 783

167 702

Net financial worth

(51 988)

(69 278)

(79 562)

Net financial liabilities

141 149

165 321

168 564

Net debt

99 978

115 044

116 693

Cash flow statement aggregates

Net cash flows from operating activities

(8 857)

4 250

2 892

Cash surplus/(deficit)

(23 749)

(11 698)

(13 259)

(per cent)

Net debt to GSP

(a)

19.4

20.3

20.6

Interest expense to revenue

3.5

4.7

4.9

Note:

(a) The ratios to GSP may vary from publications year to year due to revisions to the Australian Bureau of Statistics data.

The net result from transactions deficit of

$8.8 billion improved by $1.5 billion compared with

the $10.3 billion deficit forecast in the 2023-24 Budget.

The improved result was primarily due to higher than

expected revenue. This includes higher than expected

taxation revenue as well as higher than expected

other revenue and income received in 2022-23.

The $4.9 billion lower deficit compared with the

2021-22 result was primarily due to a decrease in

grant payments mainly reflecting the unwinding of

the Government’s business support measures in

response to COVID-19.

The decrease in expenditure was compounded by an

increase in revenue, mainly attributed to higher land

tax revenue reflecting strong post-pandemic site

value growth, an increase in payroll tax revenue due

to the stronger labour market, and the introduction

of the Mental Health and Wellbeing Levy, which

came into effect on 1 January 2022. This was

partially offset by a decline in land transfer duty,

primarily driven by the fall in settlement volumes

that coincided with rising borrowing costs.

The net result is a further measure of financial

performance for the period, including the impact of

market movements on the value of assets and

liabilities. The 2022-23 net result was an

improvement of $694 million compared with the

revised budget and an improvement of $3.7 billion

compared with the 2021-22 outcome. The

improvement compared with the prior year was due

to the same reasons as explained for the net result

from transactions, partially offset by higher losses

from other economic flows in 2022-23, mainly

related to the write-off of inventory in the health

sector.

The net lending/(borrowing) measure broadly

reflects the net impact of the general government

sector on the economy and financial markets,

including the impact of operating and capital

investing transactions. Net borrowing of

$20.1 billion for 2022-23 was $1.6 billion lower than

the revised estimate, mainly due to an improvement

in the net result from transactions compared with

expectations.

2022-23 Financial Report Chapter 2 7

The 2022-23 comprehensive result – total

change in net worth significantly improved

compared with the revised estimate. The increase of

$19.1 billion from the revised budget is attributable

to the revaluation of assets in the transport,

education and health sectors and a valuation gain in

the general government sector’s investment in other

sector entities. This increase is primarily due to a

revaluation gain on the Treasury Corporation of

Victoria’s (TCV) liabilities due to an increase in

interest rates and an increase in the Transport

Accident Commission’s (TAC) net asset position

due to unrealised gains on financial instruments.

There was also a remeasurement gain on the State’s

defined benefit superannuation liability. This was

primarily due to the investment returns on

superannuation assets exceeding the interest income

allowed for in the net superannuation interest

expense, partly offset by a liability related

remeasurement loss due to higher inflation. Also

driving the improvement was the change in the net

result from transactions as previously explained.

Net worth is a measure of economic wealth and is

equal to net assets outlined in Table 2.4. The

$19.1 billion increase compared with the revised

budget is due to the drivers as explained in the

comprehensive result – total change in net worth

above.

The year-on-year movement in net financial

worth, which is equal to total financial assets less

total liabilities, was mainly due to increased net debt,

as explained in the next column.

Net financial liabilities are total liabilities less

financial assets (excluding investments in other

sector entities). Net financial liabilities were

$165.3 billion at 30 June 2023, $3.2 billion lower

than the revised budget. This decrease was primarily

due to lower borrowings and a decrease in the

State’s defined benefit superannuation liability. The

decrease was partially offset by higher than expected

accrued expenses in the transport and health

sectors.

Net debt represents gross debt less liquid financial

assets. Net debt of $115 billion at 30 June 2023 was

$1.6 billion lower than the revised estimate in the

2023-24 Budget. This improved result primarily

reflects lower than expected borrowings following

the better than anticipated net cashflows from

operating activities. This improvement was partially

offset by lower than expected cash holdings.

The increase in net debt in 2022-23 reflects

additional borrowings required to finance the State’s

capital program, partially offset by the proceeds

from the VicRoads Modernisation joint venture

which were used to establish the Victorian Future

Fund.

The net cash flows from operating activities

surplus of $4.3 billion was an improvement of

$1.4 billion compared with the $2.9 billion surplus

forecast in the 2023-24 Budget. The improvement

from the revised budget was primarily driven by the

better than expected net result from transactions

discussed above and an increase in payables,

partially offset by a higher than expected increase in

receivables.

The cash deficit position in 2022-23 reflects the

sum of net cash flows from operating and investing

activities. The deficit position in 2022-23 was a

$1.6 billion improvement compared with the

$13.3 billion deficit forecast in the 2023-24 Budget,

primarily attributed to the improved net cash flows

from operating activities as discussed above.

8 Chapter 2 2022-23 Financial Report

FINANCIAL PERFORMANCE

Table 2.2 shows an operating deficit of $8.8 billion

in 2022-23 compared with the revised 2022-23

estimate of a deficit of $10.3 billion.

Table 2.2: Summary of operating statement ($ million)

2023

Revised

% revised

2022

actual

revised

variance

actual

Revenue and income from transactions

Taxation

32 350

31 501

849

30 546

Interest income

1 307

1 360

(53)

(4)

557

Dividends, income tax equivalent and rate equivalent income

820

756

885

Sales of goods and services

6 263

6 068

196

5 645

Grants

40 138

39 804

335

41 805

Other revenue and income

3 842

3 462

379

3 586

Total revenue and income from transactions

84 720

82 952

1 769

83 023

Expenses from transactions

Employee expenses

33 629

33 850

(221)

(1)

32 239

Net superannuation interest expense

719

481

Other superannuation

3 760

3 459

301

3 912

Depreciation

4 604

4 813

(209)

(4)

4 308

Interest expense

3 974

4 071

(97)

(2)

2 869

Grant expense

19 053

18 992

25 063

Other operating expenses

27 828

27 373

455

27 943

Total expenses from transactions

93 567

93 278

289

96 814

Net result from transactions – Net operating balance

(8 847)

(10 326)

1 479

(14)

(13 791)

Total other economic flows included in net result

(1 000)

(214)

(785)

367

290

Net result

(9 847)

(10 541)

694

(7)

(13 501)

Revenue

Total revenue from transactions for the year was

$84.7 billion, which was $1.8 billion higher than the

revised estimate. This was $1.7 billion, or 2 per cent,

higher compared with the previous year, reflecting

an increase in taxation revenue, interest, sales of

goods and services and other revenue and income.

Table 2.3 shows that state taxation revenue

increased by $849 million compared with the

revised estimate. This was primarily driven by

higher land transfer duty of $521 million due to a

smaller than expected fall in dwelling prices and

resilient non-residential collections in the last

quarter of 2022-23, and higher payroll tax of

$241 million due to a stronger than expected labour

market in the June quarter of 2022-23.

The increase of $1.8 billion in taxation revenue

compared with 2021-22 is attributable to an increase

in land tax reflecting strong post-pandemic site

value growth, higher payroll tax revenue collected

due to the stronger labour market and the

introduction of the Mental Health and Wellbeing

Levy which came into effect on 1 January 2022.

The easing of public health restrictions on in-person

gambling venues also contributed to an increase in

gambling taxes from electronic gaming machines.

The increase in taxation revenue, however, was

partially offset by a decline in land transfer duty,

primarily driven by the fall in settlement volumes

that coincided with increased borrowing costs as

interest rates increased.

2022-23 Financial Report Chapter 2 9

Table 2.3: Taxation ($ million)

2023

actual

2023

revised

Revised

variance

% revised

variance

2022

actual

TAXES ON EMPLOYERS’ PAYROLL AND LABOUR FORCE

Payroll tax

7 392

7 150

241

6 618

Mental Health and Wellbeing Levy

904

874

349

Total taxes on employers’ payroll and labour force

8 296

8 024

271

6 967

TAXES ON IMMOVABLE PROPERTY

Land tax

5 367

5 289

4 135

Fire Services Property Levy

792

800

(8)

(1)

759

Congestion levy

108

117

(9)

(8)

109

Metropolitan improvement levy

206

200

Total taxes on property

6 473

6 413

5 203

TAXES ON THE PROVISION OF GOODS AND SERVICES

Gambling taxes

(a)

Public lotteries

621

639

(18)

(3)

638

Electronic gaming machines

1 365

940

Casino

180

182

(2)

(1)

142

Racing and other sports betting

287

290

(3)

(1)

292

Other

(2)

Financial and capital transactions

Land transfer duty

8 737

8 217

521

10 361

Metropolitan planning levy

Financial accommodation levy

156

160

(4)

(3)

152

Growth areas infrastructure contribution

260

300

(40)

(13)

361

Levies on statutory corporations

173

Taxes on insurance

1 875

1 877

(1)

1 724

Total taxes on the provision of goods and services

13 694

13 241

452

14 816

TAXES ON THE USE OF GOODS AND PERFORMANCE OF ACTIVITIES

Motor vehicle taxes

Vehicle registration fees

1 946

1 965

(19)

(1)

1 870

Duty on vehicle registrations and transfers

1 256

1 193

1 097

Liquor licence fees

(6)

(22)

Other

665

637

566

Total taxes on the use of goods and performance of activities

3 888

3 823

3 559

Total taxation revenue

32 350

31 501

849

30 546

Note:

(a) The public lotteries, electronic gaming machines, casino, racing and other sports betting and other gambling taxes balances include gambling licence revenue to

30 June 2023 of $184 million (30 June 2022: $157 million) recognised under AASB 15 Revenue from Contracts with Customers. The balance of these items is

recognised under AASB 1058 Income of Not-for-Profit Entities.

Dividends, income tax and rate equivalent income

of $820 million was $64 million lower compared

with the previous year. This decline is primarily due

to no dividend being received from TCV in

2022-23.

Interest income was $53 million lower than the

revised budget and $750 million higher when

compared with the previous year. The significant

increase is due to higher interest income generated

from general government sectors holdings of

financial assets and increased interest rates. The

increase in the Centralised Banking System (CBS)

deposits mainly relating to proceeds received from

the VicRoads Modernisation joint venture, which

was used to establish the Victorian Future Fund,

also contributed to the improvement in interest

income.

10 Chapter 2 2022-23 Financial Report

Revenue from the sale of goods and services was

$196 million higher than the revised budget and

$619 million higher when compared with the

previous year, primarily due to the upfront

recognition of licence revenue from the VicRoads

Modernisation joint venture for its right to deliver

specific administrative and cash collection services.

The increase is also partly due to higher own-source

revenue for schools, such as from camps, sports

and excursions, which has increased since the easing

of public health measures.

Grants revenue of $40.1 billion was $1.7 billion

lower compared with 2021-22. The decrease

primarily reflects a reduction in Commonwealth

grants to support COVID-19 impacted businesses

and the COVID-19 health response. This was

partially offset by an increase in GST revenue as a

result of the increased GST pool and the

population share growth in Victoria.

Grants were $335 million higher than the revised

budget. The increase is due to the Commonwealth’s

decision to bring forward the payment of the

2023-24 local government grant to the end of

2022-23 as well as the receipt of Social Housing

Accelerator payment under the Affordable Housing,

Community Services and Other Federation Funding

Agreement. This was also partially offset by not

receiving a number of capital grants for transport

projects in 2022-23 due to the timing of project

milestones.

Other revenue and income for 2022-23 was

$256 million higher than the 2021-22 outcome.

The increase primarily reflects the recognition of the

grant of a right to the operator (GORTO) liability

revenue progressively being unwound over the

40 year concession term following the VicRoads

Modernisation joint venture. There were also

increases in other revenue in the health sector

related to external-to-government contributions,

recoverable salaries and income from additional

activities.

Other revenue and income was $379 million higher

than the revised budget, primarily reflecting

increases in recoverable salaries and income from

additional activities in the health sector, and the

recognition of assets received free of charge in the

government services, environment and transport

sectors.

Expenses

Total general government sector expenses reduced

to $93.6 billion in 2022-23, a decrease of $3.2 billion

(3.4 per cent) compared with the previous year.

Total expenses were $289 million higher than the

revised estimate in the 2023-24 Budget. The decrease

in total expenses compared with the previous year is

primarily due to significant reductions in grant

payments mainly reflecting the unwinding of the

Government’s business support measures in

response to the COVID-19 pandemic.

Employee expenses of $33.6 billion for 2022-23

were $221 million (0.7 per cent) lower than the

revised budget and $1.4 billion (4.3 per cent) higher

than 2021-22. Compared with the previous year,

this increase includes additional resources in the

health sector for increased service delivery. The

increase in employee expenses also reflects increases

in remuneration levels in line with enterprise

bargaining agreements.

The lower employee expenses for 2022-23

compared with the revised budget were primarily

due to the timing of recruitment in the health

sector. This was partially offset by an increase in

long service leave, oncosts and salary allowances in

the justice sector.

Other superannuation expenses of $3.8 billion for

2022-23 were $301 million higher than the revised

budget and $152 million lower than in 2021-22.

The decrease compared with the previous year is

primarily due to increases in the Commonwealth

Government bond yields that underlie the key

superannuation valuation assumptions between

30 June 2021 and 30 June 2022.

Depreciation expenses increased by $296 million

from the previous year to $4.6 billion. This increase

was primarily due to increased depreciation in the

justice and community safety sectors due to the

completion of capital projects, and in the education

sector due to the impact of prior year asset

revaluations on the depreciation expense.

Interest expenses of $4 billion for 2022-23 were

$97 million lower than the revised budget.

Compared with the previous year, interest expenses

increased by $1.1 billion, reflecting additional

borrowings to finance the State’s capital program

and an increase in the interest rates on borrowings.

Other operating expenses in 2022-23 were

$27.8 billion, $455 million higher than the revised

budget. The increase from the revised budget

primarily reflects the timing of expenditure

programs across departments.

2022-23 Financial Report Chapter 2 11

Compared with the previous year, other operating

expenses reduced by $114 million. This was

primarily driven by a year-on-year reduction in

expenditure across the health and education sector

relating to the unwinding of COVID-19 activities.

The reduced expenses related to the redress

schemes also contributed to the decrease in other

operating expenses.

Grant expenses of $19.1 billion were consistent

with the revised budget and $6 billion lower than in

2021-22. The decrease compared with the previous

year was primarily due to significant reductions in

grant payments mainly reflecting the unwinding of

the Government’s business support measures in

response to the COVID-19 pandemic.

Other economic flows included in the net

result

The net result differs from the net result from

transactions due to other economic flows, which

include revaluation gains and losses recognised for

the period.

The net result from transactions is the

Government’s net surplus measure for the purposes

of its fiscal strategy.

Other economic flows included in the net result for

2022-23 totalled a net revaluation loss of $1 billion.

This was $785 million higher than the revised

budget and $1.3 billion higher than 2021-22. The

increase was primarily related to the write-off of

inventory in the health sector.

12 Chapter 2 2022-23 Financial Report

FINANCIAL POSITION

Table 2.4 shows the general government sector net

assets increased by $8.3 billion to $186.8 billion in

2022-23. This was $19.1 billion (11.4 per cent)

higher than expected in the 2022-23 revised budget.

Table 2.4: Summary balance sheet ($ million)

2023

Revised

2023

Actual

2022

actual

variance

revised

movement

actual

Assets

Financial assets (excluding investment in other sector entities)

39 086

(97)

39 183

11 397

27 690

Investment in other sector entities:

Public non-financial corporations

80 880

1 354

79 526

3 156

77 724

Public financial corporations

15 162

5 687

9 476

3 725

11 438

Non-financial assets

256 062

8 798

247 264

25 546

230 516

Total assets

391 190

15 741

375 449

43 823

347 367

Liabilities

Superannuation

18 904

(2 873)

21 778

(852)

19 756

Borrowings

142 289

(2 545)

144 834

24 868

117 420

Other liabilities

43 214

2 079

41 135

11 551

31 663

Total liabilities

204 407

(3 340)

207 747

35 568

168 839

Net assets

186 783

19 081

167 702

8 256

178 528

Assets

Financial assets in Table 2.4 include cash,

investments, loans and placements. The value of

financial assets held by the general government

sector increased by $11.4 billion during the year.

The increase is mainly due to higher cash balances

in 2022-23 primarily relating to the proceeds from

the VicRoads Modernisation joint venture which

were used to establish the Victorian Future Fund.

The increase also reflects the State’s minority

shareholding interest in the VicRoads joint venture

corporate trustees.

General government investments in other sector

entities increased by $6.9 billion in the year. This

was mainly due to an increase in interest rates which

positively impacted the valuation of the liabilities

held by TCV and an increase in TAC’s net asset

position due to unrealised gains on financial

instruments resulting from favourable market

performance. The increase was also driven by

managerial asset revaluations by the water sector

entities, combined with additional capital

investment in Homes Victoria.

Non-financial assets increased by $25.5 billion

during 2022-23, mainly due to the Government’s

investment in infrastructure and the revaluation of

assets primarily in the transport, education and

health sectors. The recognition and valuation of

VicRoads’ registration and licensing database also

contributed to this increase.

Liabilities

Total liabilities as at 30 June 2023 were $204.4 billion,

$35.6 billion higher than the 2021-22 outcome but

$3.3 billion lower than the revised budget. The

decrease compared with the revised budget mainly

reflects lower borrowings as a result of the higher

than expected net cashflows from operating activities,

a decrease in the State’s defined benefit

superannuation liability due to an increase in the

bond yields that underlie the key superannuation

valuation assumptions, and higher than expected

investment returns on superannuation assets.

Total liabilities increased when compared with the

2021-22 outcome, partially due to additional

borrowings to finance the State’s capital program.

The increase in GORTO liabilities related to the

VicRoads Modernisation joint venture and the West

Gate Tunnel Project also contributed to the

increased total liabilities in 2022-23.

2022-23 Financial Report Chapter 2 13

CASH FLOWS

Table 2.5 outlines the use of cash resources.

It summarises cash generated through the

operations of government departments and other

general government sector agencies, and how the

cash has been invested in fixed assets.

The net cash flows from operating activities surplus

of $4.3 billion was an improvement of $1.4 billion

compared with the $2.9 billion surplus forecast in

the 2023-24 Budget. This improvement was primarily

driven by the better than expected net result from

transactions discussed above and an increase in

payables. This was partially offset by an increase in

receivables.

Compared with the previous year, the net cash

flows from operating activities improved by

$13.1 billion from a deficit of $8.9 billion to a

$4.3 billion surplus. This was primarily driven by the

upfront proceeds of $7.9 billion received from the

VicRoads Modernisation joint venture. Also driving

the improvement in net cash flows from operating

activities was the year-on-year improvement in net

result from transactions.

A detailed cash flow statement is provided in

Chapter 4.

Table 2.5: Application of cash resources ($ million)

2022

2023

actual

revised

Net result from transactions – Net operating balance

(13 791)

(8 847)

(10 326)

Add back: non-cash revenues and expenses (net)

(a)

4 934

13 097

13 219

Net cash flows from operating activities

(8 857)

4 250

2 892

Less:

Net investment in fixed assets

Purchases of non-financial assets

15 168

16 273

16 559

Net cash flows from investments in financial assets for policy purposes

(47)

1 625

1 778

Sales of non-financial assets

(275)

(325)

(408)

Net investment in fixed assets

14 845

17 573

17 929

Leases and service concession arrangements

2 447

2 083

2 388

Other movements

1 094

(330)

(700)

Decrease/(increase) in net debt

(b)

(27 244)

(15 077)

(16 725)

Notes:

(a) Includes depreciation, prepayments and movements in the unfunded superannuation liability and liability for employee benefits, as well as operating cash flows not

required to be recognised in the operating statement for the respective year.

(b) On 1 July 2022, the seven Waste and Resource Recovery Groups were abolished and transferred from the PNFC sector to be amalgamated into the former

Department of Environment, Land, Water and Planning (DELWP) to form a business unit within DELWP, Recycling Victoria. This has resulted in the increase in net

debt shown in the table above not equalling the movement on the balance sheet. DELWP has been renamed the Department of Energy, Environment and Climate

Action (DEECA) following the machinery of government changes announced by the Premier on 5 December 2022 with effect from 1 January 2023. Refer to Note 9.8 in

Chapter 4 for further details.

14 Chapter 2 2022-23 Financial Report

GOVERNMENT INFRASTRUCTURE INVESTMENT

Infrastructure supports delivery of high-quality

services to the community. It has a significant and

ongoing impact on state and national productivity

and generates significant direct and indirect

employment and wider economic benefits.

Government infrastructure investment (GII), which

includes general government net infrastructure

investment (net of asset sales) and estimated

construction related cash outflows for Partnerships

Victoria projects, was $21.8 billion in 2022-23. This

was lower than the revised budget of $22.5 billion

published in the 2023-24 Budget. Compared with the

previous year, GII increased by $3 billion, largely

due to extensive capital infrastructure investment in

the transport, education, housing and health sectors.

The Government’s infrastructure scorecard 2022-23

Major projects completed during the year include:

• Cranbourne line duplication

• Echuca-Moama Bridge

• Frankston line stabling

• Goulburn Valley Health redevelopment – planning and development

• Melbourne Park redevelopment – Stage 3

• Monash Freeway Upgrade – Stage 2

• New youth justice facility

• Northern Hospital inpatient expansion – Stage 2

• Royal Victorian Eye and Ear Hospital redevelopment

• Victorian Heart Hospital

• Western Plains Correctional Centre

• Women’s prison system capacity

Major projects under procurement or in progress include:

• 85 by 2025 (Level Crossing Removal)

• A Pathway to More Acute Mental Health Beds

• Additional Acute Mental Health Beds in Regional Victoria

• Additional VLocity trains

• Ballarat Health Services expansion and redevelopment

• Barwon Heads Road Upgrade Stage 2

• Barwon Women’s and Children’s Hospital

• Best Start, Best Life: Infrastructure

• Big Housing Build

• Building a world class Geelong Performing Arts Centre

• Casey Hospital Emergency Department Expansion Project

• City Loop fire and safety upgrade (Stage 2) and intruder alarm

• Courts case management system

• E-Class Tram Infrastructure Program

• Enrolment Growth and New Schools (Land acquisition for new schools, New schools construction,

Relocatable Buildings Program, School upgrades: established area growth)

• Forensic Mental Health Expansion Project (Thomas Embling Hospital)

• Frankston Hospital Redevelopment

• Geelong Convention and Exhibition Centre (part of Geelong City Deal)

• Geelong Fast Rail

• Gippsland Line Upgrade Stage 1

2022-23 Financial Report Chapter 2 15

The Government’s infrastructure scorecard 2022-23 (continued)

• High Capacity Metro Trains

• Homes Victoria Ground Lease Model Project 1

• Homes Victoria Ground Lease Model Project 2

• Hospital Infrastructure Delivery Fund

• Hurstbridge Line upgrade Stage 2

• Kananook Train Maintenance Facility Stage 2

• Kardinia Park Stadium Stage 5 Redevelopment

• M80 Ring Road upgrade

• Melbourne Arts Precinct Transformation Phase One

• Melton Line Upgrade

• Men’s prison system capacity

• Metro Tunnel

• Metropolitan Network Modernisation program

• More VLocity trains

• Murray Basin Rail Project

• New Footscray Hospital

• New Melton Hospital

• New metropolitan trains

• New trains for Sunbury

• New Wyndham Law Court

• Next generation computer aided dispatch system for Triple Zero

• Next Generation Trams

• North East Link – Primary Package (Tunnels)

• North East Link (State and Freeway Packages)

• Princes Highway East Duplication - Stage 3

• Public housing renewal program

• Public transport ticketing asset renewal

• Redevelopment of Royal Melbourne Hospital and Royal Women’s Hospital

• Shepparton Line Upgrade – Stage 3

• South Dynon Train Maintenance Facility Stage 1

• South Dynon Train Maintenance Facility Stage 2

• Suburban Rail Loop – Airport

• Suburban Rail Loop East

• Suburban Roads Upgrade

• Technology and resources to support Victoria’s fines system

• Ten new community hospitals to give patients the best care

• Tram infrastructure upgrades

• Twenty-five more level crossing removals by 2030

• Warrnambool Base Hospital Redevelopment

• Warrnambool Line Upgrade – Stage 2

• Waurn Ponds Track Duplication – Stage 2

• West Gate Tunnel

• Western Highway duplication – Ballarat to Stawell

• Western Rail Plan

16 Chapter 2 2022-23 Financial Report

2022-23 Financial Report Chapter 3 17

CHAPTER 3 – BROADER PUBLIC SECTOR OUTCOME

• The public non-financial corporation (PNFC)

sector reported a net surplus from transactions

of $97 million in 2022-23. Once losses reported

as other economic flows are included, the PNFC

sector’s net result declines to a deficit of

$3.2 billion in 2022-23.

• The net debt of the non-financial public sector

(NFPS), which includes both the general

government and the PNFC sectors, has

increased from $116.4 billion at 30 June 2022 to

$133.5 billion at 30 June 2023. This increase is

predominantly due to additional borrowings to

fund the Government’s infrastructure program.

• The public financial corporation (PFC) sector

reported a net deficit from transactions of

$3.2 billion in 2022-23. Once capital gains on the

investments held by the State’s insurance

agencies and revaluations reported as other

economic flows are included, the PFC sector’s

net result improves to a surplus of $3.3 billion in

2022-23.

• Combining the above, the State’s net result

declined from a surplus of $568 million in

2021-22 to a deficit of $7.6 billion in 2022-23.

This decrease is mainly due to lower financial

asset and liability revaluation gains in the PFC

sector.

This chapter sets out the financial results of the

broader public sector for 2022-23, comprising:

• the NFPS, which consolidates the general

government, discussed in Chapter 2, and the

PNFC sector. The PNFC sector comprises a

wide range of entities that provide services

primarily funded by user charges and fees. The

main services provided by PNFCs include water,

housing and transport

• the State of Victoria, which consolidates the

NFPS and the PFC sector. PFCs can be

categorised into two broad types: those that

provide services to the general public and

businesses (such as WorkSafe Victoria, the

Transport Accident Commission, Breakthrough

Victoria and State Trustees Limited) and those

that predominantly provide financial services to

other government entities (such as the Victorian

Funds Management Corporation, Treasury

Corporation of Victoria (TCV) and the Victorian

Managed Insurance Authority).

18 Chapter 3 2022-23 Financial Report

PUBLIC NON-FINANCIAL CORPORATIONS SECTOR

Operating statement

Tables 3.1 and 3.2 summarise the operating

statement and financial position for the PNFC

sector. These figures are derived from the audited

financial statements in Chapter 4.

Table 3.1: 2022-23 summary operating statement – PNFC sector

(a)

($ million)

2023

actual

2023

revised

Revised

variance

% revised

variance

2022

actual

Revenue and income from transactions

Interest income

112

(27)

(24)

Dividends

(12)

(37)

Sales of goods and services

7 171

7 245

(74)

(1)

6 823

Grants

2 742

2 458

284

3 009

Other revenue and income

815

743

810

Total revenue and income from transactions

10 832

10 589

243

10 703

Expenses from transactions

Employee expenses

1 768

1 736

1 593

Superannuation

(b)

175

163

156

Depreciation

1 975

1 934

1 938

Interest expense

865

868

(3)

804

Grant expense

5 066

5 181

(115)

(2)

4 739

Other operating expenses

654

657

(3)

(1)

527

Other property expenses

233

222

233

Total expenses from transactions

10 735

10 761

(26)

9 989

Net result from transactions – Net operating balance

(172)

269

(156)

714

Total other economic flows included in net result

(3 297)

(1 194)

(2 103)

176

(2 934)

Net result

(3 200)

(1 366)

(1 834)

134

(2 220)

Notes:

(a) Figures in this table are subject to rounding to the nearest million and may not add up to the totals.

(b) Comprises superannuation interest expense and other superannuation expenses.

Revenue

Total revenue from transactions for the PNFC

sector was $10.8 billion in 2022-23, which was

$243 million higher than the revised budget. The

main driver for this increase was grants received by

VicForests to fund transition support package

payments for industry participants to transition away

from native timber logging by 1 January 2024. Total

revenue from transactions for the PNFC sector was

also $130 million, or 1 per cent, higher compared

with the previous year.

Table 3.1 shows that total revenue for 2022-23 has

not changed significantly compared to 2021-22 or

the revised budget.

Expenses

Total expenses from transactions for the PNFC

sector was $10.7 billion in 2022-23, which was in line

with the revised estimates but was $747 million, or

7 per cent, higher compared with the previous year.

This increase in expenditure is largely due to an

11 per cent increase in employee expenses, other

operating expenses and an increase in grant expenses

incurred by the Director of Housing.

Net result from transactions

When combined, the higher increase in expenses

compared to revenue resulted in the PNFC sector’s

net result from transactions declining from a surplus

of $714 million in 2021-22 to a surplus of

$97 million in 2022-23.

2022-23 Financial Report Chapter 3 19

Net result and other economic flows

The net result from transactions does not include

some significant drivers of the PNFC sector’s

performance such as the revaluation of land,

buildings, infrastructure and service concession

assets. In accordance with Australian accounting

standards, these items are disclosed as other

economic flows and included in the net result.

The losses from total other economic flows included

in net result was $363 million higher than 2021-22

largely reflecting the derecognition of the rail assets

under AASB 16 Leases at nominal value. Refer to Note

5.2 in Chapter 4 of this report for further detail on

this arrangement.

The losses from total other economic flows included

in net result was $2.1 billion greater than the revised

estimates primarily due to larger rail asset

derecognition than the original forecast by VicTrack.

Overall, this resulted in the PNFC sector reporting a

net result deficit of $3.2 billion in 2022-23.

Financial position

Table 3.2: 2022-23 summary balance sheet – PNFC sector

(a)

($ billion)

2023

actual

Revised

variance

2023

revised

Actual

movement

2022

actual

Assets

Financial assets

(b)

4.9

1.2

3.7

4.9

Non-financial assets

(c)

121.9

2.1

119.8

8.1

113.9

Total assets

126.8

3.4

123.5

8.1

118.7

Liabilities

Borrowings

21.4

(0.8)

22.2

2.1

19.3

Other provisions

12.1

2.5

9.6

2.4

9.7

Other liabilities

(d)

12.5

0.3

12.1

0.5

12.0

Total liabilities

45.9

2.0

43.9

4.9

41.0

Net assets

80.9

1.4

79.5

3.2

77.7

Notes:

(a) Figures in this table are subject to rounding to the nearest billion and may not add up to the totals.

(b) Financial assets include cash and deposits, advances paid, investments, loans and placements, receivables and investments accounted for using the equity method.

(d) Other liabilities consist of payables, employee benefits, deposits held and advances received.

Table 3.2 shows that PNFC sector net assets

increased by $3.2 billion to $80.9 billion at

30 June 2023. This was $1.4 billion higher than

expected in the revised budget.

The increase in total assets of $8.1 billion compared

with 2021-22 is primarily driven by capital

expenditure by the water businesses during the year,

the addition of the North East Link service

concession assets and the Big Housing Build for the

Director of Housing. Liabilities increased by

$4.9 billion compared with 2021-22 primarily due to

an increase in borrowings incurred by the water

businesses of $802 million and by the State Tolling

Corporation of $932 million to fund the

construction of the North East Link project. Other

provisions increased by $2.4 billion primarily due to

movements in deferred tax liability balances

following asset revaluations.

20 Chapter 3 2022-23 Financial Report

FINANCIAL SUSTAINABILITY OF THE NON-FINANCIAL PUBLIC SECTOR

The sustainability of the NFPS is an important

consideration for credit rating agencies, in particular

the level of net debt, net financial liabilities and the

State’s capacity to service these liabilities.

Table 3.3 shows NFPS net debt of $133.5 billion at

30 June 2023. This compares with $116.4 billion the

previous year and a revised budget of $137.4 billion

in the 2023-24 Budget.

The ratio of NFPS net debt to gross state product

(GSP) was 23.5 per cent at 30 June 2023 compared

with 22.6 per cent at 30 June 2022. The increase in

NFPS net debt was predominantly due to additional

borrowings to fund the Government’s infrastructure

program.

Table 3.3: Non-financial public sector net debt and net financial liabilities as at 30 June

(a)

($ million)

2023

actual

Revised

variance

2023

revised

Actual

movement

2022

actual

Assets

Cash and deposits

21.9

1.0

21.0

9.1

12.8

Advances paid

0.9

(0.2)

1.1

0.3

0.6

Investments, loans and placements

4.7

(0.5)

5.2

0.5

4.2

Total

27.5

0.3

27.3

9.9

17.6

Liabilities

Deposits held and advances received

1.6

Borrowings

159.4

(3.6)

163.0

27.0

132.5

Total

161.0

(3.6)

164.6

27.0

134.1

Net debt

(b)

133.5

(3.8)

137.4

17.1

116.4

Superannuation

18.9

(2.9)

21.8

(0.9)

19.8

Net debt plus superannuation liabilities

152.4

(6.7)

159.1

16.2

136.2

Other liabilities (net)

(c)

41.3

1.7

39.6

10.6

30.7

Net financial liabilities

(d)

193.7

(5.0)

198.7

26.8

166.9

(per cent)

Net debt to GSP

(e)

23.5

24.2

22.6

Net debt plus superannuation liabilities to GSP

(e)

26.9

28.1

26.4

Net financial liabilities to GSP

(e)

34.2

35.1

32.4

Notes:

(a) Figures in this table are subject to rounding to the nearest million and may not add up to the totals.

(b) Net debt is the sum of borrowings, deposits held and advances received less the sum of cash and deposits, advances paid and investments, loans and placements.

(c) Other liabilities include other employee entitlements and provisions and other non-equity liabilities, less other non-equity financial assets.

(d) Net financial liabilities is total liabilities less financial assets (excluding investments in other sector entities).

(e) The ratios to GSP may vary from publications year to year due to revisions to the Australian Bureau of Statistics data.

2022-23 Financial Report Chapter 3 21

Indicators of financial condition

Table 3.4 shows the key indicators of financial

sustainability for the NFPS.

The operating cash flow surplus to revenue ratio is

an indication of the extent to which the cash

generated from operations can be used to fund

infrastructure. This ratio increased from negative

7.8 per cent in 2021-22 to positive 6.9 per cent in

2022-23. This was largely due to a $13.2 billion

increase in net cash flows from operating activities

which primarily related to the general government

sector and is discussed in the previous chapter.

The gross debt to revenue ratio, which indicates the

state’s overall debt burden, increased to

176.4 per cent as at 30 June 2023 due to an increase

in borrowings.

The NFPS interest expense to revenue ratio,

a measure of the State’s debt service burden, has

increased since 2021-22 due to increases in debt and

the higher interest rate environment.

Table 3.4: Indicators of financial condition for NFPS

(a)

(per cent)

2015

2016

2017

2018

2019

2020

2021

2022

2023

Operating cash flow surplus to revenue

9.1

11.7

24.4

8.7

12.4

(2.2)

(13.9)

(7.8)

6.9

Gross debt to revenue

(a)

81.0

76.8

64.7

69.8

75.5

110.1

144.1

150.6

176.4

Interest expense to revenue

4.9

4.4

3.9

3.7

3.9

4.0

3.7

4.7

Note:

(a) Gross debt comprises borrowings, deposits held and advances received.

Infrastructure investment

Net cash flows from investments in non-financial

assets included $15.9 billion invested by the general

government sector and $4 billion in the PNFC

sector, primarily in the water sector.

Infrastructure investment in the PNFC sector

included the following:

• the upgrade and renewal of water and sewer

assets by the Melbourne metropolitan water

corporations. This included the Melbourne

Water Corporation’s 5 West Nutrient Removal

Plant at the Western Treatment Plant to help

protect Port Phillip Bay’s biodiversity and

duplication of the Yarra River Crossing for the

Hobsons Bay Main Sewer, Yarra Valley Water’s

Kallista and Sassafras Olinda sewer projects,

Southeast Water’s Hanna Street sewer upgrade

and digital meter rollout, and Greater Western

Water’s Gisborne Recycled Water Plant Upgrade

and the Melton to Bacchus Marsh

Interconnector.

• the upgrade and renewal of water and sewer

assets in regional Victoria.

• the Director of Housing’s Big Housing Build

program is investing in social and affordable

housing, delivering 12,000 new dwellings.

• transport infrastructure primarily related to the

North East Link State Tolling Corporation’s

investment in the North East Link – Primary

Package (Tunnels).

22 Chapter 3 2022-23 Financial Report

PUBLIC FINANCIAL CORPORATIONS SECTOR

Operating statement

Tables 3.5 and 3.6 summarise the operating

statement and financial position for the PFC sector.

These figures are derived from the audited financial

statements in Chapter 4.

Table 3.5: 2022-23 summary operating statement – PFC sector

(a)

($ million)

2023

actual

2023

revised

Revised

variance

% revised

variance

2022

actual

Revenue and income from transactions

Interest income

3 583

3 695

(112)

(3)

2 473

Dividends

2 311

1 722

588

3 052

Sales of goods and services

6 164

6 120

5 675

Grants

377

516

Other revenue and income

Total revenue and income from transactions

12 460

11 936

524

11 737

Expenses from transactions

Employee expenses

509

529

(20)

(4)

451

Other superannuation

(1)

Depreciation

Interest expense

3 445

3 379

2 469

Other operating expenses

10 773

10 473

301

8 746

Grant expense

127

129

(2)

641

Other property expenses

672

314

358

114

780

Total expenses from transactions

15 663

14 957

705

13 217

Net result from transactions – Net operating balance

(3 203)

(3 022)

(181)

(1 480)

Total other economic flows included in net result

6 488

154

6 334

16 936

Net result

3 285

(2 868)

6 153

(215)

15 456

Note:

(a) Figures in this table are subject to rounding to the nearest million and may not add up to the totals.

Revenue

Total revenue from transactions for the PFC sector

was $12.5 billion in 2022-23. This is $524 million

higher than the revised budget and $723 million, or

6.2 per cent, higher than in 2021-22.

Table 3.5 shows that dividends increased by

$588 million compared with the revised budget. This

was primarily driven by dividend income and realised

capital gains for the State’s insurance agencies due to

stronger than expected investment market

performance. The impact this had on total revenue

was partly offset by TCV’s interest income falling

short of expectations by $112 million.

Compared with 2021-22, the increase in revenue

from transactions is primarily attributable to higher

premium revenue for the State’s insurance agencies

and higher interest income for TCV. This was partly

offset by lower dividend income and realised capital

gains for the State’s insurance agencies. While

investment market performance was favourable, this

performance was reflected in higher unrealised gains

which are reported as other economic flows included

in the net result.

2022-23 Financial Report Chapter 3 23

Expenses

Total expenses from transactions for the PFC sector

were $15.7 billion in 2022-23. This was higher than

the revised estimate due to a higher-than-expected

tax expense for the TAC, which forms part of other

property expenses, and higher-than-expected claims

expenses for the State’s insurance agencies.

Total expenses from transactions for the PFC sector

were $2.4 billion, or 18.5 per cent, higher in 2022-23

compared with the previous year. This increase was

largely due to increased claims expenses for the

State’s insurance agencies and a higher interest

expense for TCV, partly offset by a lower grant

expense primarily driven by the rephase of the

TAC’s $450 million grant to the State.

Net result from transactions

Overall, the increase in expenses exceeded the

increase in revenue such that the PFC sector’s net

result from transactions deteriorated from a deficit

of $1.5 billion in 2021-22 to a deficit of $3.2 billion

in 2022-23.

Net result and other economic flows

The net result from transactions does not include

some significant drivers of the PFC sector’s

performance, such as revaluations and capital gains

on the investments held by the State’s insurance

agencies. In accordance with Australian accounting

standards, these items are disclosed as other

economic flows. In 2022-23, other economic flows

for the PFC sector were positive $6.5 billion and

were primarily due to:

• an actuarial release for the TAC due to changes

in the claims assumptions that underlie the

valuation of its outstanding claims liabilities

• a net revaluation gain that arose due to the

combined impact of increases in the discount

rates (positive) and inflation rates (negative) that

are used to value the liabilities of the State’s

insurance agencies

• unrealised gains on the investments held by the

State’s insurance agencies due to favourable

investment market performance

• the release of risk margins and claims handling

expenses

• a mark-to-market revaluation gain on TCV’s

borrowings as a result of higher bond yields.

Overall, this resulted in the PFC sector reporting a

net surplus of $3.3 billion in 2022-23.

24 Chapter 3 2022-23 Financial Report

Financial position

Table 3.6: 2022-23 summary balance sheet – PFC sector

(a)

($ billion)

2023

actual

Revised

variance

2023

revised

Actual

movement

2022

actual

Assets

Financial assets

(b)

192.3

0.1

192.1

31.1

161.1

Non-financial assets

(c)

3.7

(0.4)

4.1

(0.1)

3.8

Total assets

195.9

(0.3)

196.2

31.1

164.9

Liabilities

Borrowings

132.3

(7.3)

139.7

25.0

107.3

Other provisions

47.0

0.7

46.3

2.4

44.6

Other liabilities

(d)

3.2

0.2

3.0

0.1

3.1

Total liabilities

182.5

(6.4)

188.9

27.6

155.0

Net assets

13.4

6.2

7.3

3.5

9.9

Notes:

(a) Figures in this table are subject to rounding to the nearest billion and may not add up to the totals.

(b) Financial assets include cash and deposits, advances paid, investments, loans and placements, receivables and investments accounted for using the equity method.

(d) Other liabilities consist of payables, employee benefits, deposits held and advances received.

Table 3.6 shows that PFC sector net assets increased

by $3.5 billion in 2022-23 to $13.4 billion at

30 June 2023. This is $6.2 billion higher than the

revised budget.

The increase in net assets since 30 June 2022 is

primarily due to an increase in TCV loans receivable

from the NFPS and an increase in the investments

held by the State’s insurance agencies and TCV.

However, this was partly offset by an increase in

TCV borrowings and increases in the outstanding

claims liabilities of the State’s insurance agencies.

Relative to the revised budget, the increase in net

assets is predominantly attributable to

higher-than-expected investments held by the State’s

insurance agencies and lower-than-expected TCV

borrowings, partly offset by lower-than-expected

loans receivable by TCV from the NFPS.

The reported net result and net asset position of the

PFC sector are impacted by the accounting

convention adopted for TCV, whereby its fixed

interest rate loans to government clients are

measured at book value while its borrowings are

reported at market value.

This approach enables TCV’s loans to be

consolidated with the borrowings of the general

government and PNFC sectors but, for the PFC

sector in isolation, creates a mismatch between the

value of TCV’s assets (which are at book value) and

its liabilities (which are at market value).

This difference, which is estimated to be around

$12.7 billion at 30 June 2023, is eliminated when

TCV’s loans to government clients are consolidated

in the whole of state accounts. Note that in TCV’s

own accounts both assets and liabilities are reported

at market value.

The PFC sector’s net asset position is also sensitive

to changes in Commonwealth Government bond

yields which, in accordance with Australian

accounting standards, underlie the discount rates

used to value the insurance agencies’ outstanding

claims liabilities. In isolation, an increase in bond

yields between 30 June 2022 and 30 June 2023

reduced the value of insurance agencies’ claims

liabilities. However, this impact was more than offset

by other experience, in particular the ongoing accrual

of claims and increases in inflation assumptions.

2022-23 Financial Report Chapter 3 25

STATE OF VICTORIA

Operating statement

Tables 3.7 and 3.8 summarise the operating

statement and financial position for the State of

Victoria. These figures are derived from the audited

financial statements in Chapter 4.

Table 3.7: 2022-23 summary operating statement – State of Victoria

(a)

($ million)

2023

actual

2023

revised

Revised

variance

% revised

variance

2022

actual

Revenue and income from transactions

Taxation

31 852

31 019

833

30 080

Interest income

1 502

1 507

(5)

610

Dividends

2 404

1 894

510

3 144

Sales of goods and services

17 943

17 773

170

16 462

Grants

40 063

39 676

387

41 224

Other revenue and income

4 681

4 171

510

4 417

Total revenue and income from transactions

98 445

96 040

2 404

95 936

Expenses from transactions

Employee expenses

35 168

35 486

(318)

(1)

33 638

Net superannuation interest expense

721

724

(3)

482

Other superannuation

3 982

3 667

314

4 107

Depreciation

7 652

7 749

(97)

(1)

7 203

Interest expense

4 778

4 681

3 712

Grant expense

16 468

16 607

(140)

(1)

21 952

Other operating expenses

42 415

41 667

748

40 097

Total expenses from transactions

111 184

110 582

601

111 192

Net result from transactions – Net operating balance

(12 739)

(14 542)

1 803

(12)

(15 255)

Total other economic flows included in net result

5 101

(491)

5 592

(1 138)

15 823

Net result

(7 638)

(15 033)

7 395

(49)

568

Note:

(a) Figures in this table are subject to rounding to the nearest million and may not add up to the totals.

Table 3.7 shows the State recorded a net deficit from

transactions of $12.7 billion in 2022-23 compared

with a deficit of $15.3 billion in 2021-22. This

improvement was largely driven by the general

government sector, partly offset by higher deficits in

the PNFC and PFC sectors, as discussed in the

earlier sections of this chapter.

Once other economic flows are included, the State’s

net result declined from a surplus of $568 million in

2021-22 to deficit of $7.6 billion in 2022-23. This is

primarily attributable to lower other economic flows

for the PFC sector due to lower revaluation gains on

TCV borrowings and the outstanding claims

liabilities of the State’s insurance agencies, partly

offset by higher unrealised gains on the investments

held by the State’s insurance agencies.

26 Chapter 3 2022-23 Financial Report

Chart 3.1: Revenue contributions by sector

(a)

Note:

(a) The State of Victoria will not equal the sum of the general government, PNFC and PFC sectors due to inter-sector eliminations.

Financial position

Table 3.8 shows that the State’s net assets have

increased from $219.8 billion in 2021-22 to

$234.2 billion in 2022-23. While total assets have

increased by $56.9 billion, this is partly offset by a

$42.5 billion increase in liabilities.

The State’s financial assets increased from

$84.5 billion in 2021-22 to $103.7 billion in 2022-23

and non-financial assets, including infrastructure,

increased from $380.5 billion in 2021-22 to

$418.1 billion in 2022-23.

The increase in financial assets is primarily due to the

establishment of the Victorian Future Fund with the

proceeds from the VicRoads Modernisation joint

venture and an increase in the investments held by

the State’s insurance agencies and TCV. The increase

in non-financial assets is mainly due to the

Government’s investment in infrastructure and the

revaluation of assets primarily in the transport,

education and health sectors.

The increase in the State’s liabilities is largely due to

borrowings increasing from $136.5 billion in 2021-22

to $165 billion in 2022-23. Other liabilities also

increased, from $88.9 billion in 2021-22 to

$103.8 billion by 2022-23.

The increase in borrowings is mainly due to

incremental borrowings by TCV to fund the

Government’s infrastructure investment program.

The increase in other liabilities is predominantly

driven by higher payables due to the recognition of

the grant of a right to the operator (GORTO)

liability as part of the VicRoads Modernisation joint

venture and increases in the outstanding claims

liabilities of the State’s insurance agencies.

100

120

General government

sector

Public non-financial

corporations

Public financial

corporations

State of Victoria

$ billion

2021-22 2022-23

2022-23 Financial Report Chapter 3 27

Table 3.8: 2022-23 summary balance sheet – State of Victoria

(a)

($ billion)

2023

actual

Revised

variance

2023

revised

Actual

movement

2022

actual

Assets

Financial assets

(b)

103.7

6.5

97.3

19.3

84.5

Non-financial assets

(c)

418.1

14.8

403.3

37.6

380.5

Total assets

521.8

21.3

500.6

56.9

464.9

Liabilities

Superannuation

18.9

(2.9)

21.8

(0.9)

19.8

Borrowings

165.0

(6.0)

171.0

28.5

136.5

Other liabilities

(d)

103.8

3.8

100.0

14.8

88.9

Total liabilities

287.6

(5.1)

292.8

42.5

245.2

Net assets

234.2

26.4

207.8

14.4

219.8

Notes:

(a) Figures in this table are subject to rounding to the nearest billion and may not add up to the totals.

(b) Financial assets include cash and deposits, advances paid, investments, loans and placements, receivables and investments accounted for using the equity method.

(d) Other liabilities consist of payables, employee benefits, deposits held and advances received, contract liabilities and other provisions.

Chart 3.2: Net assets by sector as at 30 June

(a)

Note:

(a) General government net assets exclude investments in other sector entities which means that the data for the State of Victoria will not equal the sum of the general

government, PNFC and PFC sectors.

100

150

200

250

General government sector Public non-financial

corporations

Public financial corporations State of Victoria

$ billion

2021-22 2022-23

28 Chapter 3 2022-23 Financial Report

2022-23 Financial Report Chapter 4 29

CHAPTER 4 – ANNUAL FINANCIAL REPORT

30 Chapter 4 2022-23 Financial Report

2022-23 Financial Report Chapter 4 31

REPORT STRUCTURE

The Treasurer of Victoria presents the Annual Financial Report of the State of Victoria (the State) for the

financial year ended 30 June 2023 as follows:

Report

Certifications

Report of the Auditor-General

Page 33

Certification by the Treasurer and the Secretary of the Department of Treasury and

Finance

Page 39

Financial

statements

Consolidated comprehensive operating statement

Page 40

Consolidated balance sheet

Page 41

Consolidated cash flow statement

Page 42

Consolidated statement of changes in equity

Page 44

Notes to the

financial

statements

1. About this report

Page 45

Basis of preparation

Compliance information

2. How funds are raised

Page 48

Revenue and income recognised from taxes, grants, sales of goods and services and

other sources

3. How funds are spent

Page 54

Operating expenses of the State and capital spending on infrastructure and other assets

4. Major assets and investments

Page 63

Land, buildings, infrastructure, plant and equipment, other non-financial assets,

and investments held in associates and joint arrangements

5. Financing state operations

Page 75

Borrowings and leases, service concession arrangements, cash flow information,

investments held and commitments at 30 June

6. Other assets and liabilities

Page 96

Other key asset and liability balances

7. Risks, contingencies and valuation judgements

Page 109

Financial instruments, contingent assets and liabilities, and fair value determination

disclosures

8. Comparison against budget and the public account

Page 140

Explanations of material variances between budget and actual outcomes, and

public account disclosures

9. Other disclosures

Page 169

Additional disclosures including disaggregated information, funds under management,

related party transactions, subsequent events and controlled entities.

32 Chapter 4 2022-23 Financial Report

PUBLIC SECTOR TERMS EXPLAINED

The State of Victoria reporting entity includes government departments, public non-financial corporations

(PNFCs), public financial corporations (PFCs) and other government-controlled entities. The State and most of

its subsidiary entities are not-for-profit entities.

The State controlled entities are classified into several sectors according to the System of National Accounts

(refer to Note 9.9), as follows:

Sector

Explanation

General government sector

(GGS)

The Victorian general government sector includes all government departments, offices and

other bodies engaged in providing services free of charge or at prices significantly below their

cost of production. The general government sector is not a separate entity but represents a

sector within the State of Victoria reporting entity, and is reported in accordance with

AASB 1049 Whole of Government and General Government Sector Financial Reporting.

The primary function of entities within the GGS is to provide general government services

that are mainly non-market in nature and are largely for collective consumption by the

community, or that involve the transfer or redistribution of income. These services are

financed mainly through taxes, other compulsory levies and user charges.

Public non-financial

corporations (PNFC) sector

The primary function of entities in the PNFC sector is to produce goods and services

(of a non-financial nature) for sale in the market place at economically significant prices.

Public financial

corporations (PFC) sector

The primary function of entities in the PFC sector is to provide financial intermediation

services or auxiliary financial services and have one or more of the following characteristics:

• they perform a central borrowing function or they provide insurance services

• they accept call, term or savings deposits

• they have the ability to incur liabilities and acquire financial assets in the market on their

own account.

Non-financial public sector

(NFPS)

The NFPS sector represents the consolidation of the general government and PNFC sectors.

Note 9.1 disaggregates information about these sectors. Disclosing this information assists users of the financial

statements to determine the effects of differing activities on the financial performance and position of the State.

It also assists users to identify the resources used in providing a range of goods and services, and the extent to

which the State has recovered the costs of those resources from revenues attributable to those activities.

Non-financial public sector

Public non-financial

corporations

Public financial

corporations

General government

Departments

Statutory authorities and other agencies controlled by government

State of Victoria

2022-23 Financial Report Chapter 4 33

REPORT OF THE AUDITOR-GENERAL

34 Chapter 4 2022-23 Financial Report

2022-23 Financial Report Chapter 4 35

36 Chapter 4 2022-23 Financial Report

2022-23 Financial Report Chapter 4 37

38 Chapter 4 2022-23 Financial Report

2022-23 Financial Report Chapter 4 39

CERTIFICATION BY THE TREASURER AND THE SECRETARY OF THE DEPARTMENT OF

TREASURY AND FINANCE

The Department of Treasury and Finance has prepared the Annual Financial Report through consolidating the

financial information provided by the Victorian public sector reporting entities listed in Note 9.8.

In our opinion, the Annual Financial Report, which comprises the consolidated comprehensive operating

statement, consolidated balance sheet, consolidated cash flow statement, consolidated statement of changes in

equity, and notes to the financial statements of the State and the Victorian general government sector as at

30 June 2023:

a) presents fairly the State’s and the Victorian general government sector’s financial positions as at 30 June 2023

and their financial performance and cash flows for the financial year ended on that date

b) has been prepared in accordance with Australian Accounting Standards and pronouncements, in particular

AASB 1049 Whole of Government and General Government Sector Financial Reporting and the financial reporting

requirements contained in Part 5 of the Financial Management Act 1994.

At the time of signing, we are not aware of any circumstances which would render any particulars included in the

Annual Financial Report to be misleading or inaccurate.

Authorised for issue on:

2 October 2023

PRIMARY FINANCIAL STATEMENTS

40 Chapter 4 2022-23 Financial Report

CONSOLIDATED COMPREHENSIVE OPERATING STATEMENT

For the financial year ended 30 June ($ million)

State of Victoria

General

government sector

Notes

2023

2022

2023

2022

Revenue and income from transactions

Taxation

2.1

31 852

30 080

32 350

30 546

Interest income

2.2

1 502

610

1 307

557

Dividends, income tax equivalent and rate equivalent income

2.3

2 404

3 144

820

885

Sales of goods and services

2.4

17 943

16 462

6 263

5 645

Grants

2.5

40 063

41 224

40 138

41 805

Other revenue and income

2.6

4 681

4 417

3 842

3 586

Total revenue and income from transactions

98 445

95 936

84 720

83 023

Expenses from transactions

Employee expenses

3.1

35 168

33 638

33 629

32 239

Net superannuation interest expense

3.2

721

482

719

481

Other superannuation

3.2

3 982

4 107

3 760

3 912

Depreciation

4.1.2

7 652

7 203

4 604

4 308

Interest expense

5.7

4 778

3 712

3 974

2 869

Grant expense

3.3

16 468

21 952

19 053

25 063

Other operating expenses

3.4

42 415

40 097

27 828

27 943

Total expenses from transactions

3.5, 3.6

111 184

111 192

93 567

96 814

Net result from transactions – Net operating balance

(12 739)

(15 255)

(8 847)

(13 791)

Other economic flows included in net result

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

Net gain/(loss) on financial assets or liabilities at fair value

3 469

10 492

(29)

155

Share of net profit/(loss) from associates/joint venture entities

(39)

Other gains/(losses) from other economic flows

9.3

1 583

5 323

(1 022)

115

Total other economic flows included in net result

5 101

15 823

(1 000)

290

Net result

(7 638)

568

(9 847)

(13 501)

Other economic flows – Other comprehensive income

Items that will not be reclassified to net result

Changes in non-financial assets revaluation surplus

21 214

23 335

13 710

18 702

Remeasurement of superannuation defined benefits plans

3.2

1 371

7 821

1 356

7 791

Other movements in equity

(644)

(84)

(536)

(53)

Items that may be reclassified subsequently to net result

Net gain/(loss) on financial assets at fair value

130

(5)

139

(45)

Net gain/(loss) on equity investments in other sector entities at

proportional share of the carrying amount of net assets

6.1

3 431

11 834

Total other economic flows – Other comprehensive income

22 070

31 067

18 099

38 230

Comprehensive result – Total change in net worth

14 432

31 634

8 252

24 729

KEY FISCAL AGGREGATES

Net operating balance

(12 739)

(15 255)

(8 847)

(13 791)

Less: Net acquisition of non-financial assets from transactions

9.1

16 075

15 149

11 285

10 748

Net lending/(borrowing)

(28 814)

(30 405)

(20 132)

(24 539)

The accompanying notes form part of these financial statements.

PRIMARY FINANCIAL STATEMENTS

2022-23 Financial Report Chapter 4 41

CONSOLIDATED BALANCE SHEET

As at 30 June ($ million)

State of Victoria

General

government sector

Notes

2023

2022

2023

2022

Assets

Financial assets

Cash and deposits

(a)

5.5

25 678

17 258

19 698

10 974

Advances paid

5.6

930

632

5 308

4 929

Receivables and contract assets

6.3

11 973

10 955

9 046

8 406

Investments, loans and placements

5.6

63 975

55 623

3 853

3 370

Investments accounted for using the equity method

4.3.1

1 193

1 180

Investments in other sector entities

6.1

96 042

89 162

Total financial assets

103 750

84 479

135 128

116 851

Non-financial assets

Inventories

6.2

1 851

2 452

574

1 262

Non-financial assets held for sale

139

212

110

171

Land, buildings, infrastructure, plant and equipment

4.1.1

408 948

372 959

249 480

225 770

Other non-financial assets

4.2

7 152

4 842

5 898

3 313

Total non-financial assets

418 090

380 466

256 062

230 516

Total assets

3.6

521 840

464 945

391 190

347 367

Liabilities

Deposits held and advances received

5.4

1 777

1 724

1 615

1 831

Payables

6.4

40 334

29 303

28 047

17 551

Contract liabilities

6.4

598

596

352

342

Borrowings

5.1

164 953

136 486

142 289

117 420

Employee benefits

3.1

10 948

10 519

10 250

9 857

Superannuation

6.5

18 904

19 756

18 904

19 756

Other provisions

6.6

50 129

46 795

2 950

2 082

Total liabilities

287 643

245 180

204 407

168 839

Net assets

234 197

219 765

186 783

178 528

Accumulated surplus/(deficit)

80 106

84 968

45 889

52 824

Reserves

154 090

134 797

140 894

125 704

Net worth

234 197

219 765

186 783

178 528

FISCAL AGGREGATES

Net financial worth

(183 893)

(160 702)

(69 278)

(51 988)

Net financial liabilities

183 893

160 702

165 321

141 149

Net debt

76 146

64 697

115 044

99 978

The accompanying notes form part of these financial statements.

Note:

(a) The increase in cash and deposits is primarily due to the $7.9 billion received from the VicRoads Modernisation joint venture, which has been used to establish the

Victorian Future Fund.

PRIMARY FINANCIAL STATEMENTS

42 Chapter 4 2022-23 Financial Report

CONSOLIDATED CASH FLOW STATEMENT

For the financial year ended 30 June ($ million)

State of Victoria

General

government sector

Notes

2023

2022

2023

2022

Cash flows from operating activities

Receipts

Taxes received

31 123

29 822

31 621

30 288

Grants

40 822

42 127

40 881

42 720

Sales of goods and services

(a)

20 018

18 383

6 873

6 281

Interest received

1 058

204

1 229

548

Dividends, income tax equivalent and rate equivalent receipts

2 292

3 130

693

549

Other receipts

(b)

10 569

2 488

10 207

1 906

Total receipts

105 882

96 153

91 503

82 293

Payments

Payments for employees

(34 760)

(32 711)

(33 260)

(31 334)

Superannuation

(4 192)

(4 258)

(3 975)

(4 062)

Interest paid

(4 281)

(3 360)

(3 559)

(2 591)

Grants and subsidies

(15 771)

(21 500)

(18 403)

(24 619)

Goods and services

(a)

(37 840)

(38 065)

(27 110)

(27 524)

Other payments

(961)

(1 025)

(945)

(1 019)

Total payments

(97 805)

(100 919)

(87 253)

(91 150)

Net cash flows from operating activities

5.5

8 077

(4 766)

4 250

(8 857)

Cash flows from investing activities

Cash flows from investments in non-financial assets

Purchases of non-financial assets

3.5, 3.6

(20 519)

(18 717)

(16 273)

(15 168)

Sales of non-financial assets

542

458

325

275

Net cash flows from investments in non-financial assets

(19 977)

(18 259)

(15 948)

(14 893)

Cash flows from investments in financial assets for policy purposes

Cash inflows

606

515

759

1 597

Cash outflows

(966)

(675)

(2 385)

(1 550)

Net cash flows from investments in financial assets for policy purposes

(359)

(160)

(1 625)

Cash flows from investments in financial assets for liquidity management

purposes

Cash inflows

6 407

6 482

824

657

Cash outflows

(13 560)

(18 502)

(1 316)

(985)

Net cash flows from investments in financial assets for liquidity management

purposes

(c)

(7 153)

(12 021)

(492)

(328)

Net cash flows from investing activities

(27 490)

(30 440)

(18 065)

(15 173)

Cash flows from financing activities

Advances received

Advances repaid

(26)

(185)

(274)

(958)

Advances received (net)

(c)

(126)

(242)

(930)

Borrowings received

33 500

33 979

28 040

24 642

Borrowings repaid

(5 719)

(3 389)

(5 291)

(3 287)

Net borrowings

(c)

27 780

30 590

22 749

21 355

Deposits received

3 135

5 446

2 830

5 250

Deposits repaid

(3 101)

(5 380)

(2 807)

(5 280)

Deposits received (net)

(c)

(30)

Net cash flows from financing activities

27 833

30 531

22 529

20 395

Net increase/(decrease) in cash and cash equivalents

8 420

(4 674)

8 713

(3 634)

Cash and cash equivalents at beginning of reporting period

(d)

17 258

21 933

10 985

14 609

Cash and cash equivalents at end of the reporting period

5.5

25 678

17 258

19 698

10 974

PRIMARY FINANCIAL STATEMENTS

2022-23 Financial Report Chapter 4 43

CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)

For the financial year ended 30 June ($ million)

State of Victoria

General

government sector

Notes

2023

2022

2023

2022

FISCAL AGGREGATES

Net cash flows from operating activities

8 077

(4 766)

4 250

(8 857)

Net cash flows from investments in non-financial assets

(19 977)

(18 259)

(15 948)

(14 893)

Cash surplus/(deficit)

(11 900)

(23 025)

(11 698)

(23 749)

The accompanying notes form part of these financial statements.

Notes:

(a) These items include goods and services tax.

(b) This increase in other receipts from the prior year primarily reflects the $7.9 billion proceeds from the VicRoads Modernisation joint venture. Notes 4.3.1 and 5.3.4

provides more information on the accounting treatment of this arrangement.

(c) In accordance with AASB 107 Statement of Cash Flows, TCV has reported its cash flow information for whole of government consolidation purposes on a net basis for

both financial years ended 30 June 2022 and 30 June 2023.

(d) On 1 July 2022, the seven Waste and Resource Recovery Groups were abolished and transferred from the PNFC sector to be amalgamated into the former

Department of Environment, Land, Water and Planning (DELWP) to form a business unit within DELWP, Recycling Victoria. This has resulted in the 1 July 2022

opening balance not equalling the 30 June closing balance. DELWP has been renamed the Department of Energy, Environment and Climate Action (DEECA) following

the machinery of government changes announced by the Premier on 5 December 2022 with effect from 1 January 2023. Refer to Note 9.8 for further details.

PRIMARY FINANCIAL STATEMENTS

44 Chapter 4 2022-23 Financial Report

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the financial year ended 30 June ($ million)

State of Victoria

Accumulated

surplus/(deficit)

Non-financial assets

revaluation surplus

Investment in other

sector entities

revaluation surplus

Other

reserves

Total

2023

Balance at 1 July 2022

84 968

132 911

1 886

219 765

Net result for the year

(7 638)

Other comprehensive income for the year

604

21 214

253

22 070

Transfer to/(from) accumulated surplus

2 174

(2 174)

Balance at 30 June 2023

80 106

151 951

2 139

234 197

2022

Balance at 1 July 2021

76 532

109 790

1 808

188 130

Net result for the year

568

Other comprehensive income for the year

7 654

23 335

31 067

Transfer to/(from) accumulated surplus

214

(214)

Balance at 30 June 2022

84 968

132 911

1 886

219 765

General government sector

2023

Balance at 1 July 2022

52 824

79 719

44 815

1 170

178 528

Opening balance adjustment

(a)

Restated balance at 1 July 2022

52 827

79 719

44 815

1 170

178 531

Net result for the year

(9 847)

Other comprehensive income for the year

749

13 710

3 431

210

18 099

Transfer to/(from) accumulated surplus

2 160

(2 160)

Balance at 30 June 2023

45 889

91 269

48 245

1 380

186 783

2022

Balance at 1 July 2021

58 642

61 017

32 981

1 159

153 799

Net result for the year

(13 501)

Other comprehensive income for the year

7 683

18 702

11 834

38 230

Transfer to/(from) accumulated surplus

Balance at 30 June 2022

52 824

79 719

44 815

1 170

178 528

The accompanying notes form part of these financial statements.

Note:

(a) On 1 July 2022, the seven Waste and Resource Recovery Groups were abolished and transferred from the PNFC sector to be amalgamated into the former

Department of Environment, Land, Water and Planning (DELWP) to form a business unit within DELWP, Recycling Victoria. This has resulted in the 1 July 2022

opening balance not equalling the 30 June closing balance. DELWP has been renamed the Department of Energy, Environment and Climate Action (DEECA) following

the machinery of government changes announced by the Premier on 5 December 2022 with effect from 1 January 2023. Refer to Note 9.8 for further details.

2022-23 Financial Report Chapter 4 45

1. ABOUT THIS REPORT

Basis of preparation

This Annual Financial Report presents the audited

general purpose consolidated financial statements of

the State and the Victorian general government

sector for the year ended 30 June 2023. This report

informs users about the Government’s stewardship

of the resources entrusted to it.

Accounting policies selected and applied ensure that

the resulting financial information satisfies the

concepts of relevance and reliability, thereby

ensuring that the substance of the underlying

transactions or other events is reported.

The accrual basis of accounting has been applied,

where assets, liabilities, equity, income and expenses

are recognised in the reporting period to which they

relate, regardless of when cash is received or paid.

These financial statements are in Australian dollars

and the historical cost convention is used except

for:

• the general government sector investments in

other sector entities which are measured at net

asset value

• non-financial physical assets including service

concession arrangement assets and right-of-use

assets which, subsequent to initial recognition,

are measured at a revalued amount being their

fair value at the reporting date less any

subsequent accumulated depreciation and

subsequent impairment losses. Revaluations are

made with sufficient regularity to ensure that

the carrying amounts do not materially differ

from their fair values

• certain liabilities, most notably unfunded

superannuation and insurance claim provisions,

which are subject to actuarial assessments

• financial assets classified at fair value through

other comprehensive income, which are

measured at fair value with movements

reflected in other economic flows – other

comprehensive income

• financial assets classified at fair value through

profit and loss, which are measured at fair value

with movements reflected in other economic

flows included in net result.

Judgements, estimates and assumptions are required

to be made about the carrying values of assets and

liabilities that are not readily apparent from other

sources. The estimates and associated assumptions

are based on professional judgements derived from

historical experience and various other factors that

are believed to be reasonable under the

circumstances. Actual results may differ from these

estimates. Revisions to accounting estimates are

recognised in the period in which the estimate is

revised and also in future periods that are affected

by the revision. Judgements and assumptions made

by management in applying Australian Accounting

Standards that have significant effects on the

financial statements and estimates relate to:

• revenue/income recognition – determination of

GST income based on the State’s entitlement

(Note 2.5)

• provision for employee benefits – use of

assumptions in the measurement of employee

benefit provisions (Note 3.1)

• superannuation expenses and liabilities – use of

actuarial assumptions in measuring liabilities

(Note 3.2 and Note 6.5)

• insurance claims – use of actuarial assumptions

in the measurement of liabilities for outstanding

insurance claims (Note 6.6.1)

• service concession arrangements – whether and

how AASB 1059 Service Concession

Arrangements: Grantor applies (Note 5.3)

• fair value measurement – Level 3 valuation

inputs used in measuring fair values of financial

and non-financial physical assets and liabilities

in accordance with AASB 13 Fair Value

Measurement (Note 7.4 and Note 7.5).

All amounts in the financial statements have been

rounded to the nearest $1 000 000 except in the

Public Account disclosure in Note 8.2 and the

Related party transactions disclosure in Note 9.5,

which are rounded to the nearest $1 000.

Figures in the 2022-23 Financial Report may not add

due to rounding.

1. ABOUT THIS REPORT

46 Chapter 4 2022-23 Financial Report

Basis for consolidation

The consolidated financial statements of the State

incorporate assets and liabilities of all reporting

entities it controlled as at 30 June 2023 and the

revenue and expenses of controlled entities for the

part of the reporting period in which control existed

(Note 9.8).

The consolidated financial statements of the

Victorian general government sector incorporate

the assets and liabilities, revenue and expenses of

entities classified as general government. Entities in

the public non-financial corporation (PNFC) and

public financial corporation (PFC) sectors are not

consolidated into the financial statements of the

general government sector, but are accounted for as

equity investments measured at the Government’s

proportional share of the carrying amount of the

net assets of the PNFC and PFC sector entities

before consolidation eliminations. Where the

carrying amount of the entity’s net assets is less than

zero (before consolidation), the amount is not

included in the general government sector, but the

net liabilities will be consolidated at the State level.

Any change in the carrying amount of the

investment from period to period is accounted for

as if the change in carrying amount is a change in

fair value and accounted for in a manner consistent

with AASB 9 Financial Instruments.

Entities which are not controlled by the State,

including local government authorities, universities

and denominated hospitals, are not consolidated

into the financial statements for the State.

Where entities adopt dissimilar accounting policies

and their effect is considered material, adjustments

are made to ensure consistent policies are adopted

in these financial statements.

In preparing the consolidated financial statements

for reporting the State and the Victorian general

government sector, all material transactions and

balances between consolidated government

controlled entities are eliminated.

Although certain entities prepare their audited

financial statements on a different financial year end

basis, their information on transactions and

balances supplied for consolidation purposes reflect

adjusted audited figures.

Consistent with the requirements of AASB 1004

Contributions, contributions by owners (that is,

contributed capital and its repayment) are treated as

equity transactions and, therefore, do not form part

of the revenues and expenses of the relevant sectors

of government.

Compliance

These general-purpose financial statements have

been prepared in the manner and form as

determined by the Treasurer, in accordance with the

Financial Management Act 1994 and applicable

Australian Accounting Standards (AASs), which

include Interpretations issued by the Australian

Accounting Standards Board (AASB). In particular,

they are presented consistent with the requirements

of AASB 1049 Whole of Government and General

Government Sector Financial Reporting.

Where appropriate, those AAS paragraphs

applicable to not-for-profit entities have been

applied.

The Government Finance Statistics (GFS)

information included in this report is based on the

GFS manual (the Australian Bureau of Statistics (ABS)

publication Australian System of Government Finance

Statistics: Concepts, Sources and Methods 2015 as updated

from time to time). Note 9.4 describes the significant

differences between Australian Accounting Standards

and the requirements contained in the GFS Manual.

Economic and fiscal impacts affecting

this report

The COVID-19 pandemic caused significant economic

and fiscal impacts from early 2020, which persisted

through 2022-23. The Commonwealth Government

enacted national border restrictions between

March 2020 and February 2022, which led to a smaller

population in Victoria than would have been the case

in the absence of the pandemic, affecting the State’s

share of national GST revenues. The pandemic also

affected global supply and demand, driving a pick-up

in global inflation which was exacerbated by Russia’s

invasion of Ukraine. High inflation in Victoria and

Australia, and a corresponding sharp rise in Australian

interest rates, also affected the State’s revenue and

expenses, including GST revenue, land transfer duty

revenue and interest expense.

The State’s comprehensive operating statement and

balance sheet in 2022-23 were also impacted by

financial market volatility and bond yield

movements which impacted the investment returns

of the superannuation funds and State’s insurance

agencies and the valuation of the related liabilities.

1. ABOUT THIS REPORT

2022-23 Financial Report Chapter 4 47

Further market related impacts have also been

considered and, where deemed appropriate,

specifically included in relevant disclosures

throughout the 2022-23 Financial Report to reflect the

material management judgements, estimates and

assumptions in the valuation of key balances within

the financial report:

• Note 6.5: Superannuation

• Note 6.6.1: Insurance claims

• Note 7.5: Fair value determination of

non-financial assets.

48 Chapter 4 2022-23 Financial Report

2. HOW FUNDS ARE RAISED

Introduction

This section presents the sources and amounts of

revenue and income raised by the State.

Revenue and income recognition are determined by

the State based on the substance of the relevant

arrangement in accordance with the requirements of

AASB 15 Revenue from Contracts with Customers and

AASB 1058 Income of Not-for-Profit Entities.

Structure

2.1 Taxation ..........................................................................48

2.2 Interest income..............................................................49

2.3 Dividends, income tax equivalent and

rate equivalent income .................................................49

2.4 Sales of goods and services .........................................50

2.5 Grants .............................................................................51

2.6 Other revenue and income..........................................53

2.1 Taxation

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

TAXES ON EMPLOYERS’ PAYROLL AND LABOUR FORCE

Payroll tax

7 286

6 526

7 392

6 618

Mental Health and Wellbeing Levy

900

349

904

349

Total taxes on employers’ payroll and labour force

8 186

6 875

8 296

6 967

TAXES ON IMMOVABLE PROPERTY

Land tax

5 310

4 088

5 367

4 135

Fire Services Property Levy

792

759

792

759

Congestion levy

108

109

108

109

Metropolitan improvement levy

206

200

206

200

Total taxes on property

6 416

5 156

6 473

5 203

TAXES ON THE PROVISION OF GOODS AND SERVICES

Gambling taxes

(a)

Public lotteries

621

638

621

638

Electronic gaming machines

1 365

940

1 365

940

Casino

180

142

180

142

Racing and other sports betting

287

292

287

292

Other

Financial and capital transactions

Land transfer duty

8 737

10 361

8 737

10 361

Metropolitan planning levy

Financial accommodation levy

156

152

Growth areas infrastructure contribution

260

361

260

361

Levies on statutory corporations

173

Taxes on insurance

1 875

1 724

1 875

1 724

Total taxes on the provision of goods and services

13 364

14 491

13 694

14 816

TAXES ON THE USE OF GOODS AND PERFORMANCE OF ACTIVITIES

Motor vehicle taxes

Vehicle registration fees

1 944

1 868

1 946

1 870

Duty on vehicle registrations and transfers

1 256

1 097

1 256

1 097

Liquor licence fees

Other

665

566

665

566

Total taxes on the use of goods and performance of activities

3 886

3 557

3 888

3 559

Total taxation

31 852

30 080

32 350

30 546

Note:

(a) The public lotteries, electronic gaming machines, casino, racing and other sports betting and other gambling taxes balances include gambling licence revenue to

30 June 2023 of $184 million (30 June 2022: $157 million) recognised under AASB 15 Revenue from Contracts with Customers. The balance of these items is

recognised under AASB 1058 Income of Not-for-Profit Entities.

2. HOW FUNDS ARE RAISED

2022-23 Financial Report Chapter 4 49

Taxation represents income earned from the State’s

taxpayers. For taxes (excluding gambling licence

revenue), income is recognised under AASB 1058

when the relevant taxable event has occurred.

Gambling licence revenue is accounted for under

AASB 15 using the principles noted in Note 2.4.

2.2 Interest income

Interest income includes interest earned on bank

term deposits and other investments, and the

unwinding over time of the discount on financial

assets. Interest income is recognised using the

effective interest method, which allocates the

interest over the relevant period.

Net realised and unrealised gains or losses on the

revaluation of investments do not form part of net

result from transactions, but are reported either as

part of other economic flows included in the net

result or as unrealised gains or losses taken directly

to equity, forming part of the total change in net

worth in the comprehensive result.

2.3 Dividends, income tax equivalent and rate equivalent income

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Dividends from PFC sector

139

Dividends from PNFC sector

102

107

Dividends from non-public sector

2 404

3 144

Dividends

2 404

3 144

183

288

Income tax equivalent income from PFC sector

411

343

Income tax equivalent income from PNFC sector

221

249

Income tax equivalent income

632

592

Local government rate equivalent income

Total dividends, income tax equivalent and rate equivalent income

2 404

3 144

820

885

General government sector dividends, income tax

equivalent and rate equivalent income represent

income earned from other sectors of government.

Such income for the general government sector is

recognised when the right to receive the payment is

established.

Dividends and income tax equivalent income are

mainly from the public non-financial corporation

(PNFC) and public financial corporation (PFC)

sectors. This income is based on established

dividend policies and the profitability of the PNFCs

and PFCs.

While most government departments and agencies

are exempt from federal income tax, certain larger

PNFC and PFC entities are subject to income tax

equivalents payable to the general government

sector in accordance with the National Tax

Equivalent Regime (NTER). The primary objective

of the NTER is to promote competitive neutrality

by uniformly applying income tax laws to NTER

entities and their privately held counterparts.

Dividends and income tax equivalents from the

PNFC and PFC sectors are eliminated on

consolidation into the financial statements of the

State.

Dividends earned from the non-public sector

primarily relate to distributions from investments

held in managed funds.

2. HOW FUNDS ARE RAISED

50 Chapter 4 2022-23 Financial Report

Dividends by entity

(a)

($ million)

General

government sector

2023

2022

Public financial corporations

Victorian Managed Insurance Authority

Transport Accident Commission

Treasury Corporation of Victoria

132

Victorian Funds Management Corporation

Dividends from PFC sector

139

Public non-financial corporations

Greater Western Water

Melbourne Water Corporation

South East Water Corporation

Yarra Valley Water Corporation

Development Victoria

Dividends from PNFC sector

102

107

Note:

(a) ‘Amounts equivalent to dividends’ paid by the Transport Accident Commission and the Victorian Managed Insurance Authority are received and reported as

contributions forming part of grant revenue, due to the requirements of AASB 1023 General Insurance Contracts. There were no amounts paid in 2022-23. The

amounts paid in 2021-22 were $400 million from the Transport Accident Commission and $50 million from the Victorian Managed Insurance Authority.

2.4 Sales of goods and services

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Amounts recognised as revenue from contracts with customers (AASB 15)

Sale of goods

651

577

Provision of services

(a)

15 562

14 351

5 091

4 511

Amounts recognised as income of not-for-profit entities (AASB 1058)

Motor vehicle regulatory fees

242

278

242

278

Other regulatory fees

771

699

749

679

Refunds and reimbursements

374

232

Amounts recognised as lease income (AASB 16)

Rental

342

325

Total sales of goods and services

17 943

16 462

6 263

5 645

Note:

(a) Further disclosure on provision of services is available on the Department of Treasury and Finance’s website (www.dtf.vic.gov.au). This further disclosure is not

subject to audit by the Victorian Auditor-General’s Office.

The sale of goods and services included in the table

above (excluding regulatory fees, refunds and

reimbursements, which are recognised under

AASB 1058, and rental income, which is recognised

under AASB 16 Leases), represent transactions that

the State has determined to be classified as revenue

from contracts with customers in accordance with

AASB 15. Revenue is measured based on the

consideration specified in the contract with the

customer. The State recognises revenue when it

transfers control of a good or service to the

customer, i.e. when, or as, the performance

obligations for the sale of goods and services to the

customer are satisfied:

• customers obtain control of the supplies and

consumables at a point in time when the goods

are delivered to and have been accepted at their

premises

• revenue from the rendering of services is

recognised at a point in time when the

performance obligations are satisfied when the

service is completed and over time when the

customer simultaneously receives and consumes

the services as it is provided.

Consideration received in advance of recognising

the associated revenue from the customer is

recorded as a contract liability (Note 6.4). Where the

performance obligations are satisfied but not yet

billed, a contract asset is recorded (Note 6.3).

Regulatory fees are accounted for under AASB 1058

as they represent income arising from statutory

requirements, which is recognised when the State

has the right to receive payment.

2. HOW FUNDS ARE RAISED

2022-23 Financial Report Chapter 4 51

2.5 Grants

(a)

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

General purpose grants

19 152

17 620

19 152

17 620

Specific purpose grants for on-passing

5 547

5 124

5 547

5 124

Specific purpose grants

15 341

18 394

15 310

18 361

Total

40 041

41 137

40 009

41 105

Other contributions and grants

129

700

Total grants

40 063

41 224

40 138

41 805

Note:

(a) Grants predominantly relate to grants from the Commonwealth Government, which are recognised under AASB 1058 Income of Not-for-Profit Entities.

Grants income mainly comprises contributions

from the Commonwealth to assist the State in

meeting its general or specific service delivery

obligations, primarily for the purpose of aiding in

the financing of the operations of the recipient,

capital purposes and/or for on-passing to other

recipients. Grants also include grants from other

jurisdictions.

On initial recognition of the assets granted, the

State recognises any related contributions by

owners, increases in liabilities, decreases in assets

and revenue (related amounts) in accordance with

other Australian Accounting Standards.

Related amounts may take the form of either:

(a) contributions by owners, in accordance with

AASB 1004

(b) revenue or a contract liability arising from a

contract with a customer, in accordance with

AASB 15

(d) a financial instrument, in accordance with

AASB 9

(e) a provision, in accordance with AASB 137

Provisions, Contingent Liabilities and Contingent

Assets.

2. HOW FUNDS ARE RAISED

52 Chapter 4 2022-23 Financial Report

Grants that are enforceable and contain sufficiently

specific performance obligations are recognised

under AASB 15. Revenue from grants under

AASB 15 is recognised when the State satisfies the

performance obligation as described in Note 2.4.

The State has not recognised any material grant

revenue under AASB 15 in the current or previous

year.

Income from grants without any sufficiently specific

performance obligations, or that are not

enforceable, is recognised using AASB 1058, when

the State has an unconditional right to receive cash

which usually coincides with receipt of cash.

Income from grants to construct capital assets that

are controlled by the State is recognised

progressively as the assets are constructed.

The progressive percentage costs incurred are used

to recognise income because this most closely

reflects the progress to completion.

In applying AASB 1058, a portion of the grant

income may need to be deferred. The portion is

recognised as unearned income in Note 6.4.

Total goods and services tax (GST)-related

payments include GST entitlements, and

no-worse-off payments under the Treasury Laws

Amendment (Making Sure Every State and Territory Gets

Their Fair Share of GST) Act 2018. The

Commonwealth Government makes GST-related

payments to states and territories in the form of

general-purpose grants. Funds are remitted

throughout the financial year based on the

Commonwealth’s estimates of each state’s relative

share of the GST pool for that financial year and of

no-worse-off payments.

The Commonwealth subsequently updates each

state’s share of the national GST pool and

no-worse-off payment when the final aggregate

GST pool and state populations are known, and

adjusts any over or under payment during the year

through the remittance of funds in the subsequent

year. The State has made the significant judgement

that the legislation, operation, and objectives of the

GST arrangements are such that its entitlement to

the annual GST pool and no-worse-off payment

forms the basis for GST income recognition, rather

than the funding progressively received from the

Commonwealth across the financial year. As a

result, the State monitors and tracks its share of the

GST pool and no-worse-off payment progressively

to determine if a receivable or payable needs to be

recognised at the end of each reporting period.

2. HOW FUNDS ARE RAISED

2022-23 Financial Report Chapter 4 53

2.6 Other revenue and income

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Amounts recognised as revenue from contracts with customers (AASB 15)

Royalties

140

151

129

140

Other revenue – Health

262

270

262

270

Other miscellaneous revenue

1 299

1 253

1 084

923

Amounts recognised as income of not-for-profit entities (AASB 1058)

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

(a)

978

829

515

482

Fines

737

896

733

893

Donations and gifts

(b)

324

284

225

195

Other income – Education

378

368

378

368

Amounts recognised as lease income (AASB 16)

Other non-property rental

Revenue items accounted for under AASB 1059

Revenue related to economic service concession arrangements

483

288

483

288

Total other revenue and income

4 681

4 417

3 842

3 586

Notes:

(a) The 2022-23 figure includes $402 million (2021-22: $434 million) relating to the progressive recognition of the contribution made by Cross Yarra Partnerships

consortium (assets free of charge) to the Metro Tunnel settlement.

(b) Primarily relates to donations to health services from non-government sources.

Other revenue and income comes from a variety of

miscellaneous sources, as the above table

summarises.

Resources received free of charge or for

nominal consideration are recognised at fair value

when the State obtains control over them,

irrespective of whether these contributions are

subject to restrictions or conditions over their use.

Volunteer contributions in the form of services are

only recognised when a fair value can be reliably

determined and the services would have been

purchased if not received as a donation.

Fines are collected from road safety cameras, toll

road evasions, police on-the-spot, court and other

(non-traffic) statutory infringements. Income is

recognised at the time the notice of the fine is

issued.

Revenue related to economic service

concession arrangements reflects the progressive

unwinding of the grant of a right to the operator

liability (Note 6.4) recognised applying AASB 1059

Service Concession Arrangements: Grantors. Refer to

Note 5.3 for details on service concession

arrangements.

Other income – Education mainly comprises

locally raised funds from school fetes, fundraising

events and voluntary contributions made by

parents.

Other revenue – Health mainly comprises

research funding from non-government

organisations and non-salary cost recovery from

external organisations in the health sector.

Other miscellaneous revenue includes all other

revenue from various sources that are not able to be

classified elsewhere.

54 Chapter 4 2022-23 Financial Report

3. HOW FUNDS ARE SPENT

Introduction

This section presents the major components of

expenditure incurred by the State towards the

delivery of services and on capital or infrastructure

projects during the year, as well as any related

obligations outstanding at 30 June 2023.

Structure

3.1 Employee expenses and provision for

outstanding employee benefits ...................................54

3.2 Superannuation interest expense and

other superannuation expenses ..................................56

3.3 Grant expense ...............................................................57

3.4 Other operating expenses ...........................................58

3.5 Total operating expenses and purchases of

non-financial assets by department ...........................60

3.6 Classification of the functions of government

disclosure........................................................................61

3.1 Employee expenses and provision for outstanding employee benefits

Employee expenses (operating statement)

Employee expenses in the operating statement are a

major component of operating costs and include all

costs related to employment, including wages and

salaries, fringe benefits tax, leave entitlements and

redundancy payments. Greater than 95 per cent of

employee expenses in the operating statement are

wages and salaries. Employee expenses are

recognised in the period in which the employee

provides the services.

Employee benefits (balance sheet)

As part of annual operations, the State provides for

benefits accruing to employees but payable in future

periods in respect of wages and salaries, annual

leave and long service leave, and related on-costs

for services rendered to the reporting date.

In measuring employee benefits, significant

judgement is applied in determining expected future

wage and salary levels, experience of employee

departures and periods of service. Future payments

expected to be made after 12 months are

discounted to reflect the estimated timing and

amount of benefit payment. The table below shows

the key components of this provision at 30 June.

Total provision for employee benefits and on-costs at 30 June ($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Current

Accrued salaries and wages

611

801

579

772

Other employee benefits

171

236

143

209

Annual leave

Unconditional and expected to settle within 12 months

2 153

1 998

1 994

1 845

Unconditional and expected to settle after 12 months

425

436

378

388

Long service leave

Unconditional and expected to settle within 12 months

839

876

777

795

Unconditional and expected to settle after 12 months

4 228

3 899

4 027

3 727

On-costs

Unconditional and expected to settle within 12 months

397

359

363

326

Unconditional and expected to settle after 12 months

869

765

817

722

Total current employee benefits and on-costs

9 694

9 372

9 079

8 783

Non-current

Long service leave

1 095

1 006

1 020

938

On-costs

159

142

151

135

Total non-current employee benefits and on-costs

1 254

1 148

1 171

1 074

Total employee benefits and on-costs

10 948

10 519

10 250

9 857

3. HOW FUNDS ARE SPENT

2022-23 Financial Report Chapter 4 55

Wages and salaries and annual leave

Liabilities for employee benefits are recognised in

the provision for employee benefits and classified as

current liabilities where the State does not have an

unconditional right to defer settlement of these

liabilities.

Long service leave

Consistent with the above policy, unconditional

long service leave (LSL) is disclosed as a current

liability even where the State does not expect to

settle the liability within 12 months, because it will

not have the unconditional right to defer the

settlement of the entitlement should an employee

take leave within 12 months.

The components of this current LSL liability are

measured at:

• undiscounted value – if the State expects to

wholly settle within 12 months

• present value – if the State does not expect to

wholly settle within 12 months.

Conditional LSL is disclosed as a non-current

liability as there is a right to defer the settlement of

the entitlement until the employee has completed

the requisite years of service. This non-current LSL

liability is measured at present value.

Any gain or loss following revaluation of the

present value of the non-current LSL liability is

recognised as a transaction, except to the extent that

a gain or loss arises due to changes in bond interest

rates for which it is then recognised as an other

economic flow in the net result.

On-costs

Employee benefits on-costs such as payroll tax and

the Mental Health and Wellbeing Levy, workers

compensation and superannuation are recognised

separately as a component of the provision for

employee benefits.

Movements in provisions of on-costs ($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Opening balance

1 265

1 182

1 183

1 104

Additional provisions recognised

432

422

402

388

Additions due to acquisitions

Reductions arising from payments/other sacrifices of future economic benefits

(270)

(256)

(250)

(240)

Reductions resulting from remeasurement or settlement without cost

(6)

(39)

(4)

(39)

Unwind of discount and effect of changes in the discount rate

(10)

(46)

(9)

(39)

Reduction due to held for sale/divestment

(8)

(4)

(8)

(4)

Closing balance

1 425

1 265

1 331

1 183

Represented by:

Current

1 266

1 124

1 180

1 047

Non-current

159

142

151

135

3. HOW FUNDS ARE SPENT

56 Chapter 4 2022-23 Financial Report

3.2 Superannuation interest expense and other superannuation expenses

Superannuation expense recognised in the

operating statement

The State recognises the net superannuation

expense from transactions on the following basis:

• in relation to defined contribution

(i.e. accumulation) superannuation plans, the

associated expense is simply the employer

contributions that are paid or payable in respect

of employees who are members of these plans

during the reporting period

• for defined benefit plans, the superannuation

expense reflects the employer financed

component of defined benefits that are

expected to accrue over the reporting period

(i.e. service cost), along with the net

superannuation interest expense.

Remeasurements of the net superannuation liability

are recognised under other economic flows – other

comprehensive income and consist of:

• actuarial gains and losses, which reflect the

change in the defined benefit obligation that

have arisen due to differences between actual

outcomes and the assumptions used to calculate

the superannuation expense from transactions

• the return on plan assets, excluding amounts

included in the net superannuation interest

expense

• the effect of any change in actuarial

assumptions during the period.

These remeasurements are fully recognised as other

comprehensive income in the period in which they

occur.

During 2022-23, the State changed the approach

used to determine the financial assumptions for

wages growth and the inflation rate, which underlie

the valuation of the State’s defined benefit

superannuation liability at 30 June 2023. This will

also impact the superannuation expense in future

years. Please refer to note 6.5 for further details on

these changes in assumptions and their financial

impact.

Superannuation expense recognised in the operating statement

(a)

($ million)

State of Victoria

2023

2022

Defined benefit plans

Net superannuation interest expense

721

482

Current service cost

993

1 352

Remeasurements:

Expected return on superannuation assets excluding interest income

(836)

(1 299)

Other actuarial (gain)/loss on superannuation assets

(941)

2 859

Actuarial and other adjustments to unfunded superannuation liability

406

(9 381)

Total expense recognised in respect of defined benefit plans

343

(5 987)

Defined contribution plans

Employer contributions to defined contribution plans

2 895

2 668

Other (including pensions)

Total expense recognised in respect of defined contribution plans

2 989

2 755

Total superannuation (gain)/expense recognised in operating statement

3 331

(3 232)

Represented by:

Net superannuation interest expense

721

482

Other superannuation

3 982

4 107

Superannuation expense from transactions

4 703

4 589

Remeasurement recognised in other comprehensive income

(1 371)

(7 821)

Total superannuation costs recognised in operating statement

3 331

(3 232)

Note:

(a) The disclosure in this note is for the consolidated State of Victoria only, as greater than 95 per cent of the total is in the general government sector.

3. HOW FUNDS ARE SPENT

2022-23 Financial Report Chapter 4 57

Net superannuation interest expense is the

change during the period in the net defined benefit

liability that arises from the passage of time. This is

effectively calculated by applying the discount rate

(a long-term government bond yield) to the net

superannuation liability without reference to the

expected rate of investment return on plan assets.

Other superannuation includes all superannuation

expenses from transactions except the net

superannuation interest expense. That is, it includes

current service cost, which is the increase in

entitlements associated with the employment

services provided in the current period, and

employer contributions to defined contribution

plans.

3.3 Grant expense

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Current grant expense

Commonwealth Government

3 046

3 106

3 044

3 105

Local government (including grants for on-passing)

2 110

1 526

2 107

1 525

Private sector and not-for-profit on-passing

4 703

4 314

4 703

4 314

Other private sector and not-for-profit

(a)

5 405

12 077

5 353

11 989

Grants within the Victorian Government

2 980

2 819

Grants to other state governments

124

197

124

196

Total current grant expense

15 387

21 220

18 310

23 948

Capital grant expense

Local government (including grants for on-passing)

111

104

111

104

Private sector and not-for-profit on-passing

721

551

337

285

Other private sector and not-for-profit

Grants within the Victorian Government

678

Other grants

211

171

Total capital grant expense

1 080

733

743

1 115

Total grant expense

16 468

21 952

19 053

25 063

Note:

(a) The decrease in other private sector and not-for-profit grants primarily reflects the payments to support businesses during COVID-19 in 2021-22.

Grants expenses to third parties are recognised as

an expense in the reporting period in which they are

paid or payable.

They include transactions such as grants, subsidies,

personal benefit payments made in cash to

individuals, and other transfer payments made to

local government, non-government schools and

community groups.

For the general government sector, these include

grants and transfer payments to public non-financial

corporations and public financial corporations.

3. HOW FUNDS ARE SPENT

58 Chapter 4 2022-23 Financial Report

3.4 Other operating expenses

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Purchase of supplies and consumables

(a)

6 497

5 967

5 316

5 011

Cost of goods sold

308

313

Finance expenses and fees

589

572

Purchase of services

(a)

21 970

21 680

19 445

19 292

Insurance claims expense

(b)

9 605

7 508

513

405

Maintenance

2 148

1 972

1 194

1 078

Short-term and low value lease expense

117

124

120

124

Other

1 181

1 961

1 160

1 951

Total other operating expenses

42 415

40 097

27 828

27 943

Notes:

(a) A breakdown of purchase of supplies and consumables and purchase of services is provided in the following two tables.

(b) The increase in the insurance claims expense is primarily due to higher claims incurred for WorkSafe, due to growth in claim numbers and rising treatment costs, and

for the Victorian Managed Insurance Authority primarily due to builder insolvencies and the October 2022 flood events.

Other operating expenses generally represent the

day-to-day running costs incurred in normal

operations and include supplies and services costs,

which are recognised as an expense in the reporting

period in which they are incurred. The carrying

amounts of any inventories held for distribution are

expensed when distributed.

Audit fees of $406 000 ($395 000 in 2022) were

paid or payable to the Victorian Auditor-General’s

Office for the audit of the Annual Financial Report

of the State of Victoria. The Victorian Auditor-

General’s Office provided no other services, other

than the review of the Estimated Financial

Statements and the financial audits of departments

and agencies.

The following lease payments are recognised on a

straight-line basis:

• Short-term leases – leases with a term less

than 12 months

• Low-value leases – leases where the

underlying asset’s fair value (when new,

regardless of the age of the asset being leased) is

no more than $10 000.

Variable lease payments are not included in the

measurement of the lease liability i.e. variable lease

payments that do not depend on an index or a rate,

initially measured using the index or rate as at the

commencement date. These payments are

recognised in the period in which the event or

condition that triggers those payments occur.

All leases, other than those within the above

categories, are recognised on the State’s balance

sheet (refer to Note 5.2 for further details).

Insurance claims expense includes claims

incurred during the financial year and any costs

associated with processing and resolving claims, net

of reinsurance recoveries.

3. HOW FUNDS ARE SPENT

2022-23 Financial Report Chapter 4 59

Purchase of supplies and consumables ($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Medicinal pharmacy and medical supplies

2 192

1 959

2 192

1 959

Office supplies and consumables

236

221

223

209

Specialised operational supplies and consumables

301

306

253

252

Other purchase of supplies and consumables

3 767

3 481

2 649

2 592

Total purchase of supplies and consumables

6 497

5 967

5 316

5 011

Purchase of services ($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Service contracts

11 414

11 151

10 802

10 493

Accommodation/occupancy

1 290

1 416

1 113

1 192

Medical and client care services

533

444

533

444

Staff related expenses (non-labour related)

414

332

377

299

Other purchase of services

8 319

8 337

6 620

6 863

Total purchase of services

21 970

21 680

19 445

19 292

3. HOW FUNDS ARE SPENT

60 Chapter 4 2022-23 Financial Report

3.5 Total operating expenses and purchases of non-financial assets by department

(a)

The following table discloses the funds spent by each portfolio department, including operating expenditure and

capital expenditure, as part of the department’s normal activities.

($ million)

Expenses from

transactions

Purchases of

non-financial assets

State of Victoria

2023

2022

2023

2022

Education

20 192

19 958

2 096

1 953

Energy, Environment and Climate Action

11 417

10 264

2 412

2 065

Families, Fairness and Housing

9 910

10 153

1 007

965

Government Services

1 486

Health

29 845

29 020

1 592

1 362

Jobs, Skills, Industry and Regions

5 763

13 082

721

236

Justice and Community Safety

14 343

17 235

742

1 267

Premier and Cabinet

893

926

Transport and Planning

13 450

14 150

11 281

10 013

Treasury and Finance

21 413

14 314

Parliament

346

322

Courts

851

867

234

478

Regulatory bodies and other part budget funded agencies

(b)

3 727

3 374

209

258

Total

133 636

133 664

20 443

18 694

(Less)/plus eliminations and adjustments

(c)

(22 452)

(22 472)

Grand total

111 184

111 192

20 519

18 717

General government sector

Education

20 192

19 958

2 096

1 953

Energy, Environment and Climate Action

4 700

3 817

277

300

Families, Fairness and Housing

7 876

8 214

Government Services

1 486

Health

29 670

28 856

1 552

1 347

Jobs, Skills, Industry and Regions

4 645

12 014

405

Justice and Community Safety

10 835

11 232

719

1 109

Premier and Cabinet

886

897

Transport and Planning

8 792

7 706

10 473

9 490

Treasury and Finance

10 779

11 220

Parliament

346

322

Courts

851

867

234

478

Regulatory bodies and other part budget funded agencies

(b)

3 727

3 374

209

258

Total

104 784

108 477

16 138

15 132

(Less)/plus eliminations and adjustments

(c)

(11 216)

(11 663)

135

Grand total

93 567

96 814

16 273

15 168

Notes:

(a) On 5 December 2022, the Premier announced a number of machinery of government changes to restructure the functions of government departments, including the

renaming of several departments and the creation of a new department with effect from 1 January 2023. Refer to Note 9.8 for further details.

(b) Other general government sector agencies not allocated to departmental portfolios.

3. HOW FUNDS ARE SPENT

2022-23 Financial Report Chapter 4 61

3.6 Classification of the functions of government disclosure

The classification of the functions of government

(COFOG) framework disclosures required under

AASB 1049 Whole of Government and General

Government Sector Financial Reporting classify expenses,

acquisition of non-financial assets and total assets in

terms of their purposes. This information is

presented to facilitate improved inter-jurisdictional

comparison of the financial operations of public

sector jurisdictions.

The major COFOG groups reflect the broad

objectives of government, and the groups and

subgroups detail the means by which these broad

objectives are achieved.

The major groups are:

• General public services: includes legislative

and executive organs, financial and fiscal affairs,

external affairs, foreign economic aid, general

services, basic research, research and

development – general public services, public

debt transactions.

• Public order and safety: includes police

services, civil and fire protection services, law

courts, prisons, research and development.

• Economic affairs: includes general economic,

commercial and labour affairs, agriculture,

forestry, fishing and hunting, fuel and energy,

mining, manufacturing, and construction,

communication, other industries, research and

development.

• Environmental protection: includes waste

management, wastewater management,

pollution abatement, protection of biodiversity

and landscape, research and development.

• Housing and community amenities: includes

housing and community development, water

supply, street lighting, research and

development.

• Health: includes medical products, appliances,

and equipment, outpatient services, hospital

services, mental health institutions, community

health services, public health services, research

and development.

• Recreation, culture and religion: includes

recreational and sporting services, cultural

services, broadcasting and publishing services,

religious and other community services,

research and development.

• Education: includes pre-primary and primary

education, secondary education, tertiary

education, education not defined by level,

subsidiary services to education, research and

development.

• Social protection: includes sickness and

disability, old age, survivors, family and

children, unemployment, housing, social

exclusion, research and development.

• Transport: includes road transport, bus

transport, water transport, railway transport, air

transport, multi-mode urban transport, pipeline

and other transport, research and development.

3. HOW FUNDS ARE SPENT

62 Chapter 4 2022-23 Financial Report

Total operating expenses, purchases of non-financial assets and total assets by classification of the

functions of government

The following table presents the operating and capital expenditure and total assets held by classification of the

functions of government.

($ million)

Expenses from

transactions

Purchases of

non-financial assets

Total assets

State of Victoria

2023

2022

(a)

2023

2022

2023

(b)

2022

General public services

18 947

16 126

149

242

7 016

8 312

Public order and safety

11 587

11 580

1 120

1 765

15 723

14 924

Economic affairs

4 021

10 442

422

122

1 601

1 485

Environmental protection

1 157

1 211

141

288

16 652

16 647

Housing and community amenities

6 587

6 695

2 262

1 841

62 694

56 298

Health

28 650

28 052

1 516

1 156

24 162

22 630

Recreation, culture and religion

2 641

2 422

456

274

16 517

16 313

Education

20 565

19 115

2 195

1 948

43 672

38 952

Social protection

9 018

8 601

1 044

1 162

37 820

37 066

Transport

9 984

9 821

11 154

9 897

198 072

172 751

Not allocated by purpose

(c)(d)

(1 973)

(2 875)

97 910

79 567

Total

111 184

111 192

20 519

18 717

521 840

464 945

General government sector

General public services

7 039

6 265

3 212

4 432

Public order and safety

12 018

12 204

1 120

1 765

15 723

14 924

Economic affairs

4 105

10 434

422

124

1 579

1 421

Environmental protection

1 226

1 203

141

287

16 652

16 647

Housing and community amenities

2 698

2 783

154

3 698

2 368

Health

28 981

28 125

1 516

1 156

24 162

22 630

Recreation, culture and religion

1 373

1 437

8 662

8 682

Education

20 644

19 197

2 195

1 948

43 672

38 952

Social protection

7 913

8 239

101

253

2 492

2 420

Transport

8 129

7 496

10 360

9 480

136 729

118 393

Not allocated by purpose

(c)(d)

(557)

(571)

121

134 609

116 499

Total

93 567

96 814

16 273

15 168

391 190

347 367

Notes:

(a) The June 2022 figures have been reclassified between various expenses by COFOG classifications to more correctly reflect the nature of the transactions.

(b) Certain balances have been reclassified between general public services and housing and community amenities classifications to more correctly reflect the nature of

the balances.

(d) Not allocated by purpose for total assets represents eliminations and adjustments, and financial assets that are not able to be allocated by purpose.

2022-23 Financial Report Chapter 4 63

4. MAJOR ASSETS AND INVESTMENTS

Introduction

This section outlines those assets that the State

controls, reflecting investing activities in the current

and prior years.

Structure

4.1 Land, buildings, infrastructure, plant

and equipment...............................................................63

4.2 Other non-financial assets ..........................................70

4.3 Investments in associates and joint arrangements ..72

4.1 Land, buildings, infrastructure, plant and equipment

4.1.1 Total land, buildings, infrastructure, plant and equipment

(a)(b)

($ million)

State of Victoria

General government sector

Gross

carrying

Accumulated

Carrying

Gross

carrying

Accumulated

Carrying

2023

amount

depreciation

amount

depreciation

amount

Buildings

90 192

(5 453)

84 739

61 904

(3 870)

58 034

Land and national parks

140 518

95 317

Infrastructure systems

108 930

(5 007)

103 922

26 251

(631)

25 620

Plant, equipment and vehicles

20 723

(7 658)

13 065

12 131

(5 835)

6 296

Roads and road infrastructure

47 689

(9)

47 680

45 294

Earthworks

12 170

Cultural assets

6 964

(110)

6 853

6 859

(110)

6 749

Total land, buildings, infrastructure,

plant and equipment

427 186

(18 238)

408 948

259 927

(10 447)

249 480

2022

Buildings

81 782

(5 134)

76 648

56 665

(4 197)

52 468

Land and national parks

137 377

93 099

Infrastructure systems

95 058

(4 063)

90 995

20 380

(554)

19 826

Plant, equipment and vehicles

19 106

(7 320)

11 786

11 073

(5 713)

5 360

Roads and road infrastructure

41 144

(2 088)

39 056

40 098

(2 080)

38 019

Earthworks

10 231

Cultural assets

7 052

(184)

6 867

6 952

(184)

6 768

Total land, buildings, infrastructure,

plant and equipment

391 749

(18 790)

372 959

238 499

(12 729)

225 770

Notes:

(a) The State of Victoria balances include work in progress of $4.9 billion (2022: $4.9 billion) for buildings, $27.8 billion (2022: $21.3 billion) for infrastructure systems,

$2.4 billion (2022: $1.7 billion) for plant, equipment and vehicles and $14.6 billion (2022: $11.3 billion) for roads and road infrastructure, as part of the State’s capital

program. Work in progress is not subject to depreciation.

(b) The general government sector balances include work in progress of $3.5 billion (2022: $3.6 billion) for buildings, $24.4 billion (2022: $18.6 billion) for infrastructure

systems, $2.3 billion (2022: $1.6 billion) for plant, equipment and vehicles and $12.4 billion (2022: $10.4 billion) for roads and road infrastructure, as part of the

State’s capital program. Work in progress is not subject to depreciation.

4. MAJOR ASSETS AND INVESTMENTS

64 Chapter 4 2022-23 Financial Report

The following tables are subsets of total land, buildings, infrastructure, plant and equipment by right-of-use

(leased) assets and service concession assets.

Total right-of-use (leased) assets: Buildings, infrastructure, plant and equipment ($ million)

State of Victoria

General government sector

2023

Gross

carrying

amount

Accumulated

depreciation

Carrying

amount

Gross carrying

amount

Accumulated

depreciation

Carrying

amount

Buildings

11 268

(2 106)

9 162

10 653

(1 846)

8 807

Infrastructure systems

(8)

(3)

Plant, equipment and vehicles

1 199

(661)

537

944

(564)

380

Total right-of-use assets:

Land, buildings, infrastructure, plant and equipment

12 487

(2 775)

9 712

11 600

(2 413)

9 187

2022

Buildings

10 939

(1 949)

8 990

10 312

(1 739)

8 573

Infrastructure systems

(5)

(1)

Plant, equipment and vehicles

1 166

(534)

632

953

(463)

489

Total right-of-use assets:

Land, buildings, infrastructure, plant and equipment

12 122

(2 487)

9 635

11 266

(2 204)

9 062

Total service concession assets: Land, buildings, infrastructure, plant and equipment

(a)(b)

($ million)

State of Victoria

General government sector

2023

Gross

carrying

amount

Accumulated

depreciation

Carrying

amount

Gross

carrying

amount

Accumulated

depreciation

Carrying

amount

Buildings

2 462

(96)

2 366

2 147

(96)

2 050

Land and national parks

3 353

Infrastructure systems

14 754

(55)

14 700

8 586

Plant, equipment and vehicles

1 592

(76)

1 516

1 592

(76)

1 516

Roads and road infrastructure

18 596

16 349

Earthworks

1 056

Total service concession land, buildings, infrastructure,

plant and equipment assets

41 813

(226)

41 587

33 083

(172)

32 911

2022

Buildings

2 244

(127)

2 117

2 092

(127)

1 965

Land and national parks

3 353

Infrastructure systems

11 956

(112)

11 844

6 929

Plant, equipment and vehicles

1 200

(49)

1 151

1 200

(49)

1 151

Roads and road infrastructure

14 432

(397)

14 035

13 526

(397)

13 129

Earthworks

916

Total service concession land, buildings, infrastructure,

plant and equipment assets

34 101

(685)

33 416

28 016

(573)

27 444

Notes:

(a) The State of Victoria balances include work in progress of $331 million (2022: $166 million) for buildings, $8.6 billion (2022: $6.9 billion) for infrastructure systems,

$1.2 billion (2022: $875 million) for plant, equipment and vehicles and $10.8 billion (2022: $7.1 billion) for roads and road infrastructure, as part of the State’s capital

program. Work in progress is not subject to depreciation.

(b) The general government sector balances include work in progress of $16 million (2022: $14 million) for buildings, $8.6 billion (2022: $6.9 billion) for infrastructure

systems, $1.2 billion (2022: $875 million) for plant, equipment and vehicles and $8.6 billion (2022: $6.2 billion) for roads and road infrastructure, as part of the

State’s capital program. Work in progress is not subject to depreciation.

4. MAJOR ASSETS AND INVESTMENTS

2022-23 Financial Report Chapter 4 65

Recognition and measurement

Initial recognition

All land, buildings, infrastructure, plant and

equipment (herein referred to as non-financial

physical assets) are measured initially at cost, except

for service concession assets (SCA) which are

initially measured at current replacement cost

(CRC). Where an asset is acquired for no or

nominal cost, the cost is its fair value at the date of

acquisition.

The cost of constructed non-financial physical

assets includes the cost of all materials used in

construction, direct labour on the project and an

appropriate proportion of variable and fixed

overheads. The cost of leasehold improvements is

capitalised when incurred.

Right-of-use assets are initially measured at cost,

which comprises the initial amount of the lease

liability adjusted for:

• any lease payments made at or before the

commencement date

• any initial direct costs incurred

• any estimate of costs to dismantle and remove

the underlying asset or to restore the underlying

asset or the site on which it is located, less any

lease incentive received.

SCAs are initially recognised at CRC, calculated in

accordance with the cost approach to fair value

measurement under AASB 13 Fair Value

Measurement. The CRC reflects the amount that

would be required to currently replace the asset’s

service capacity.

The CRC for the SCA includes the costs that are

directly attributable to the design and construction

of the SCA by the operator and includes:

• the purchase price (including costs that the

operator seeks to recover from the State)

• costs directly attributable to bringing the asset

to its location or condition.

The same principle applies to existing assets owned

by the State and transferred to an SCA under a new

or an existing service concession arrangement, with

any difference between the CRC and the carrying

value of the asset being accounted for as a

revaluation.

Subsequent measurement

All non-financial physical assets are subsequently

measured at fair value less accumulated depreciation

and impairment.

Right-of-use assets are adjusted for certain

remeasurements of the lease liabilities. Right-of-use

assets arising from below market leases are

recognised at cost instead of fair value (Note 5.2).

SCAs are measured at fair value with regard to the

asset’s CRC.

Non-financial physical assets are measured at fair

value with regard to the asset’s highest and best use

after due consideration is made for any legal or

physical restrictions imposed on the asset and

public announcements or commitments made in

relation to the intended use of the asset.

Theoretical opportunities that may be available in

relation to the asset are not taken into account until

it is virtually certain that the restrictions will no

longer apply. Therefore, unless otherwise disclosed,

the current use of these non-financial physical assets

will be their highest and best use.

Refer to Note 7.5 for a summary of revaluation

details.

Assets under construction

Assets under construction are measured at cost,

except for service concessions assets. For service

concession assets, the accumulation of costs

incurred during the construction of SCAs results in

a progressive build-up of the asset. A corresponding

liability (either financial liability or grant of a right to

the operator liability, refer to Note 5.3) is also

progressively recognised.

The State applies the fair value proxy approach for

the SCAs that are under construction. This

approach captures the financing cost incurred

during the construction of an SCA by the private

sector, with an aim of achieving faithful

representation of the CRC of SCA construction in

progress balances.

The financing cost to the State implied in the

service concession arrangement contract during the

construction of an SCA is used as a proxy of the

financing cost incurred by the private sector

constructing the asset. The cost is an indication of

an increase in the fair value of the SCA construction

in progress that is measured with the CRC method.

The increment in the CRC of the SCA construction

in progress is recorded as an increase in the asset

revaluation surplus.

4. MAJOR ASSETS AND INVESTMENTS

66 Chapter 4 2022-23 Financial Report

Impairment

Intangible assets with indefinite useful lives (and

intangible assets not yet available for use) are tested

annually for impairment and whenever there is an

indication that the asset may be impaired.

All other assets are assessed annually for indications

of impairment, except for:

• inventories (refer to Note 6.2)

• non-financial physical assets held for sale

• certain biological assets related to agricultural

activity (refer to Note 4.2)

• investment properties that are measured at fair

value (refer to Note 4.2)

• assets arising from construction contracts

(refer to Note 4.1).

If there is an indication of impairment, the assets

concerned are tested as to whether their carrying

value exceeds their recoverable amount. Where an

asset’s carrying value exceeds its recoverable

amount, the difference is written off as an other

economic flow, except to the extent that the write

down can be debited to an asset revaluation surplus

amount applicable to that class of asset.

If there is an indication that there has been a change

in the estimate of an asset’s recoverable amount

since the last impairment loss was recognised,

the carrying amount would be increased to its

recoverable amount. This reversal of the

impairment loss occurs only to the extent that the

asset’s carrying amount does not exceed the carrying

amount that would have been determined, net of

depreciation or amortisation, if no impairment loss

had been recognised in prior years.

It is deemed that, in the event of the loss or

destruction of an asset, the future economic

benefits arising from the use of the asset will be

replaced unless a specific decision to the contrary

has been made. The recoverable amount for most

assets is measured at the higher of current

replacement cost and fair value less costs to sell.

The recoverable amount for assets held primarily to

generate net cash inflows are measured at the higher

of the present value of future cash flows expected

to be obtained from the asset and fair value less

costs to sell.

The recoverable amount of primarily non-cash

generating assets of not-for-profit entities, which

are typically specialised in nature and held for

continuing use of their service capacity, is expected

to be materially the same as fair value determined

under AASB 13, with the consequence that

AASB 136 Impairment of Assets does not apply to

such assets that are regularly revalued.

4.1.2 Depreciation ($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Buildings

3 220

2 875

2 478

2 228

Infrastructure systems

1 735

1 660

Plant, equipment and vehicles

1 336

1 292

835

796

Roads and road infrastructure

1 004

956

998

954

Cultural assets

Intangible produced assets

343

399

230

261

Total depreciation

7 652

7 203

4 604

4 308

4. MAJOR ASSETS AND INVESTMENTS

2022-23 Financial Report Chapter 4 67

The following two tables are subsets of total depreciation expense.

Depreciation of right-of-use (leased) assets ($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Buildings

704

745

642

681

Infrastructure systems

Plant, equipment and vehicles

156

152

118

Total depreciation of right-of-use assets

863

899

760

800

Depreciation of service concession assets ($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Buildings

Infrastructure systems

Plant, equipment and vehicles

Roads and road infrastructure

202

204

202

204

Intangible produced assets

Total depreciation of service concession assets

385

376

300

291

All infrastructure assets, buildings, plant and

equipment and other non-financial physical assets

(excluding assets held for sale, land and investment

properties) that have finite useful lives are

depreciated. Depreciation begins when the asset is

available for use, that is, when it is in the location

and condition necessary for it to be capable of

operating in the manner intended by management.

It is generally calculated on a straight line basis, at

rates that allocate the asset’s value, less any estimated

residual value, over its estimated useful life.

The estimated useful lives, residual values and

depreciation method are reviewed at the end of each

annual reporting period, and adjustments are made

where appropriate.

Right-of-use assets are generally depreciated over the

shorter of the asset’s useful life and the lease term.

Where there is ownership of the underlying leased

asset, or if the cost of the right-of-use asset reflects

the exercise of a purchase option, the right-of-use

asset is depreciated over its useful life.

Leasehold improvements are depreciated over the

shorter of the lease term and useful lives.

Typical estimated useful lives for the different asset

classes for current and prior years are included in the

table below:

Asset

Useful life

Buildings

1 to 150 years

Leased assets

2 to 60 years

Infrastructure systems:

Water infrastructure – storage facilities

2 to 350 years

Water infrastructure – other

5 to 50 years

Rail infrastructure

15 to 100 years

Other infrastructure

7 to 70 years

Plant, equipment and vehicle

(including leased assets)

1 to 80 years

Road and road infrastructure

(including bridges)

60 to 90 years

Cultural assets (with finite useful lives)

84 to 100 years

Intangible produced assets

3 to 5 years

Service concession assets:

• roads and bridges

• other infrastructure

• buildings

• plant, equipment and vehicles

50 to 100 years

5 to 100 years

3 to 75 years

1 to 50 years

4. MAJOR ASSETS AND INVESTMENTS

68 Chapter 4 2022-23 Financial Report

Indefinite life assets

Land, earthworks, land under declared roads, public

records, Port of Melbourne channels and core

cultural assets, which are considered to have an

indefinite life, are not depreciated. Depreciation is

not recognised in respect of these assets because

their service potential has not, in any material sense,

been consumed during the reporting period.

Intangible assets

Intangible produced assets with finite useful lives

are depreciated as an expense from transactions on

a systematic (typically straight line) basis over the

asset’s useful life. Depreciation begins when the

asset is available for use, that is, when it is in the

location and condition necessary for it to be capable

of operating in the manner intended by

management.

All intangible assets are tested for impairment

whenever there is an indication that the asset may

be impaired.

If intangible assets, including those recognised

under SCAs, have been determined to have an

indefinite useful life, they are tested for impairment

on an annual basis.

The consumption of intangible non-produced assets

with finite useful lives is not classified as a

transaction, but as amortisation and included in the

net result as an other economic flow.

See Note 4.2 for further information on intangible

assets.

2022-23 Financial Report Chapter 4 69

4. MAJOR ASSETS AND INVESTMENTS

Reconciliation of movements in carrying values during the financial period

(a)

($ million)

Land and buildings

Plant, equipment vehicle and

infrastructure system

Roads, road infrastructure and

earthworks

Cultural assets

Total

State of Victoria

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

Opening balance

214 024

187 002

102 781

95 341

49 287

45 965

6 867

6 624

372 959

334 932

Acquisitions of self-owned assets

(b)

7 008

6 042

9 199

9 219

2 641

1 301

18 872

16 591

Additions of right-of-use assets

325

239

265

190

590

429

Additions of service concession arrangement assets

242

153

2 476

2 204

3 393

2 750

6 110

5 107

Reclassification

796

164

(570)

(182)

(109)

132

Revaluation

6 384

23 445

5 925

(562)

5 518

219

215

17 899

23 318

Disposals

(206)

(304)

(171)

(136)

(2)

(5)

(379)

(446)

Assets recognised for the first time

161

189

300

272

Impairment

(189)

(2)

(35)

(433)

(2)

(3)

(227)

(437)

Depreciation

(3 220)

(2 875)

(3 071)

(2 953)

(1 004)

(956)

(14)

(20)

(7 308)

(6 805)

Closing balance

225 258

214 024

116 987

102 781

59 850

49 287

6 853

6 867

408 948

372 959

General government sector

Opening balance

145 567

124 168

25 186

19 036

48 250

45 863

6 768

6 525

225 771

195 592

Acquisitions of self-owned assets

(b)

5 789

4 927

6 851

7 239

2 778

1 303

15 441

13 498

Additions of right-of-use assets

305

232

149

166

454

398

Additions of service concession arrangement assets

2 475

2 201

2 099

2 078

4 663

4 280

Reclassification

(32)

(22)

(112)

(47)

(36)

Revaluation

4 302

18 561

271

223

5 518

192

215

10 161

19 192

Disposals

(62)

(158)

(98)

(70)

(2)

(5)

(162)

(233)

Assets recognised for the first time

125

178

Assets transferred between government entities

(c)

(27)

(2 073)

(2 777)

(197)

(241)

(2 296)

(3 012)

Impairment

(186)

(35)

(5)

(1)

(2)

(3)

(194)

(39)

Depreciation

(2 478)

(2 229)

(885)

(844)

(998)

(954)

(14)

(20)

(4 374)

(4 047)

Closing balance

153 351

145 567

31 916

25 186

57 465

48 250

6 749

6 768

249 480

225 770

Notes:

(a) The reconciliation of movements comprises land and buildings, infrastructure systems, plant, equipment, vehicles, roads, roads infrastructure and cultural assets, right-of-use assets, service concession assets, and excludes intangible assets, investment

properties and other non-financial assets.

(b) Represents additions of assets recognised under AASB 116 Property, Plant and Equipment.

4. MAJOR ASSETS AND INVESTMENTS

70 Chapter 4 2022-23 Financial Report

The following two tables are subsets of the total reconciliation of movements in carrying value.

Reconciliation of movements in carrying values of right-of-use assets during the financial period ($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Opening balance

9 635

9 607

9 062

8 988

Additions of right-of-use assets

590

429

454

398

Revaluation

350

498

430

477

Depreciation

(863)

(899)

(760)

(800)

Closing balance

9 712

9 635

9 187

9 062

Reconciliation of movements in carrying values of service concession arrangement assets during

the financial period ($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Opening balance

33 416

27 461

27 444

22 935

Additions of service concession arrangement assets

6 110

5 107

4 663

4 280

Revaluation

2 445

1 224

1 666

974

Assets transferred between Government entities

(562)

(454)

Depreciation

(385)

(376)

(300)

(291)

Closing balance

41 587

33 416

32 911

27 444

4.2 Other non-financial assets

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Intangible produced assets

4 330

4 356

2 921

3 035

Accumulated depreciation

(2 614)

(2 372)

(1 628)

(1 634)

Service concession assets – Intangible produced

(a)

3 370

512

3 370

512

Accumulated depreciation

(4)

Intangible non-produced assets

994

968

Accumulated amortisation

(414)

(385)

(59)

(55)

Total intangibles

5 663

3 079

4 680

1 936

Investment properties

317

332

305

320

Biological assets

Other assets

1 153

1 376

909

1 052

Total other non-financial assets

7 152

4 842

5 898

3 313

Note:

(a) This includes the Registration and Licensing and the Land Titling and Registry databases.

4. MAJOR ASSETS AND INVESTMENTS

2022-23 Financial Report Chapter 4 71

Reconciliation of movement in intangibles, investment properties and biological assets

(a)

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Opening balance

3 466

3 402

2 261

2 268

Acquisitions of self-owned intangible produced assets

447

473

323

347

Reclassification

(188)

(44)

(2)

Revaluation

(b)

2 870

2 869

Disposals

(122)

(57)

(106)

(56)

Assets recognised for the first time

168

Impairment

(164)

(122)

(126)

(106)

Amortisation and depreciation

(c)

(382)

(438)

(234)

(266)

Closing balance

5 999

3 466

4 989

2 261

Notes:

(a) Reconciliation does not include movements in other assets.

(b) The 2023 amount includes the recognition and valuation of VicRoads’ registration and licensing database under AASB 1059, post the VicRoads Modernisation joint

venture.

Purchased intangible assets are initially

recognised at cost. When the recognition criteria in

AASB 138 Intangible Assets is met, internally

generated intangible assets are recognised at cost.

Subsequently, intangible assets (excluding SCA

intangibles) with finite useful lives are carried at cost

less accumulated amortisation or depreciation and

accumulated impairment losses. Service concession

intangible assets recognised by applying AASB 1059

are subsequently measured at fair value (current

replacement cost).

Certain intangible assets have indefinite useful lives

because the value does not diminish with use and

they can be used multiple times over an extended

period with no foreseeable limit. As a result, a finite

life cannot be determined. For these assets,

subsequent measurement is at fair value estimated

using such assets’ current replacement cost.

Investment properties represent properties held to

earn rentals or for capital appreciation, or both.

Investment properties exclude properties held to

meet service delivery objectives of the State.

Investment properties are initially recognised at

cost.

Costs incurred subsequent to initial acquisition are

capitalised when it is probable that future economic

benefits in excess of the originally assessed

performance of the asset will flow to the State.

Subsequent to initial recognition at cost, investment

properties are measured at fair value, with changes

in the fair value recognised as other economic flows

in the comprehensive operating statement in the

period that they arise.

Fair values are determined based on a market

comparable approach that reflects recent

transaction prices for similar properties.

Biological assets comprise productive trees in

commercial native forests and any living animal (or

breeding stock), plant or agricultural produce that is

the harvested product of biological assets. These

biological assets are measured at fair value less costs

to sell, and are revalued at 30 June each year.

An increase or decrease in the fair value of these

biological assets is recognised in the consolidated

comprehensive operating statement as an other

economic flow.

Other assets include prepayments, which represent

payments in advance of receipt of goods or services

or that part of expenditure made in one accounting

period covering a term extending beyond that

period.

4. MAJOR ASSETS AND INVESTMENTS

72 Chapter 4 2022-23 Financial Report

4.3 Investments in associates and joint arrangements

Investments in certain entities are classified as either

associates or joint arrangements (joint ventures

or joint operations).

The classification depends on the contractual rights

and obligations of each investor, rather than the

legal structure of the joint arrangement.

Joint arrangements are contractual arrangements

between the State (or a controlled entity) and one or

more other parties to undertake an economic

activity that is subject to joint control.

The investments accounted for using the equity

method (associates and joint ventures) and joint

operations are disclosed below.

4.3.1 Investments accounted for using the

equity method

Associates and joint ventures are accounted for

using the equity method, after initially being

recognised at cost in the consolidated balance sheet.

The equity method requires the State’s share of the

post-acquisition profits or losses of these

investments to be recognised in the net result as

other economic flows. The share of

post-acquisition movements in revaluation surpluses

and any other reserves is recognised in both the

comprehensive operating statement and the

statement of changes in equity. The cumulative

post-acquisition movements are adjusted against the

cost of the investment, as well as any dividends

received or receivable.

Associates

Associates are those entities over which the State

exercises significant influence, but no control or

joint control.

Joint ventures

Joint ventures are joint arrangements whereby the

State, a subsidiary entity and one or more other

external parties that have joint control of the

arrangements have rights to the net assets of the

arrangements. Joint control only exists when

decisions about the relevant activity require the

unanimous consent of the parties sharing control

(the venturers).

The State only has one material joint arrangement

(referred to as the VicRoads Modernisation joint

venture), over which the State exercises significant

influence, disclosed below.

VicRoads Modernisation Joint Venture

On 15 August 2022 the Government entered into a

joint venture partnership with a consortium of

Aware Super, Australian Retirement Trust and

Macquarie Asset Management to operate VicRoads’

registration, licensing and custom plates functions.

The VicRoads joint venture operates from various

locations across the State of Victoria and has been

structured as a 40-year concession. The State

received upfront proceeds of $7.9 billion whilst also

retaining a minority shareholding interest in the

VicRoads joint venture corporate trustees. This

minority interest has been accounted for as an

investment using the equity method consistent with

requirements of AASB 128 Investments in Associates

and Joint Ventures.

Refer to Note 5.3.4 for the accounting treatment

and disclosure on the upfront proceeds as a service

concession arrangement.

Movement in the State’s proportional share

of the net assets of the joint venture ($ million)

2023

Opening balance

Acquisition of minority interest in the joint venture

1 210

Share of profit/(loss) after income tax

(39)

Closing balance

1 170

Share of commitments in VicRoads Modernisation

joint venture

The State does not have any existing or any future

obligations to make financial contributions or

commitments to the joint venture in accordance

with the contractual arrangements.

4. MAJOR ASSETS AND INVESTMENTS

2022-23 Financial Report Chapter 4 73

Summarised financial information of

VicRoads Modernisation joint venture

accounted for using the equity method ($ million)

Summarised balance sheet as at 30 June

2023

Current assets

Cash and cash equivalents

105

Other current assets (excluding cash)

Total current assets

185

Total Non-current assets

9 161

Total assets

9 345

Current liabilities

Financial liabilities (excluding payables, provisions)

Other non-financial liabilities

(including payables, provisions)

151

Total current liabilities

178

Non-current liabilities

Financial liabilities (excluding payables, provisions)

2 950

Other non-financial liabilities

(including payables, provisions)

Total non-current liabilities

3 008

Total liabilities

3 186

Net assets

6 160

Summarised operating statement

for the financial year ended 30 June

2023

Revenue and income from transactions

Revenue

387

Interest income

Total revenue and income from transactions

391

Expenses from transactions

Depreciation

(214)

interest expense

(144)

Other expenses

(274)

Total expenses from transactions

(632)

Net result from transactions

(241)

Other economic flows – Included in net result

Net result from continuing operation

(209)

Net result before tax

(209)

Income tax credit

Net result

(203)

Other economic flows – Other comprehensive income

Total comprehensive income

(203)

4.3.2 Joint operations

The State has classified the following arrangements

as joint operations, based on the rights and

obligations of each investor to the arrangement.

For these arrangements, the State recognises in its

financial statements:

• its direct right to the assets, liabilities, revenues

and expenses

• its share of any jointly held or incurred assets,

liabilities, revenues and expenses.

Royal Melbourne Showgrounds

The State entered into a joint venture agreement

with the Royal Agricultural Society of Victoria

(RASV) in 2003 to redevelop the Royal Melbourne

Showgrounds. The State of Victoria’s interest in the

unincorporated joint venture at 30 June 2023 was

50 per cent (50 per cent in 2022), and is recognised

as a joint operation for accounting purposes.

Under the agreement, the State has agreed to

support certain obligations of RASV that may arise

out of the joint operation. In accordance with the

terms set out in the State’s commitment to RASV,

the State will pay (in the form of a loan), the

amount requested by RASV. If any outstanding loan

amount remains unpaid at the date 25 years after

the operation term has commenced, RASV will be

obliged to satisfy and discharge any outstanding

loan amount. This may take the form of a transfer

to the State of the whole of the RASV participating

interest in the joint operation.

In May 2020, RASV advised the State that it is

unable to meet its share of the quarterly service

payments (QSPs) under the Development and

Operations Agreement with PPP Solutions

(Showgrounds) Nominee Pty Ltd. Accordingly,

the State has recognised a financial guarantee

liability amounting to $61.1 million in relation to

this obligation. As at 30 June 2023, the balance of

this liability was $42.4 million.

Since June 2020, the State has provided RASV with

a loan to fulfill its obligation to pay RASV’s

proportion of QSPs to the concessionaire.

AgriBio Project

In April 2008, the State entered into a joint venture

agreement with La Trobe University to establish a

world-class research facility on the university’s

campus in Bundoora.

The State of Victoria’s interest in the

unincorporated joint venture at 30 June 2023 was

75 per cent (75 per cent in 2022).

4. MAJOR ASSETS AND INVESTMENTS

74 Chapter 4 2022-23 Financial Report

Murray-Darling Basin Authority

The Commonwealth and the basin states – New

South Wales, Victoria, Queensland, South Australia

and the Australian Capital Territory – entered into

the intergovernmental agreement for the

Murray-Darling Basin Reform. Under the Water Act

2007 (Cth), the Murray-Darling Basin Authority

(MDBA) was established by the Commonwealth on

3 July 2008, and the participants have a joint interest

in the infrastructure assets and water rights.

The MDBA undertakes activities that support the

sustainable and integrated management of the water

resources of the Murray-Darling Basin in a way that

best meets the social, economic and environmental

needs of the Basin and its communities.

The share in the individually controlled assets was

transferred at transition in the original proportions

of the share of the entity held by the individual

jurisdictions as follows:

• New South Wales: 26.7 per cent

• South Australia: 26.7 per cent

• Victoria: 26.7 per cent

• the Commonwealth Government: 20 per cent.

2022-23 Financial Report Chapter 4 75

5. FINANCING STATE OPERATIONS

Introduction

State operations are financed through a variety of

means, including surplus cash flows from operating

activities, asset sales, advances and borrowings.

This section presents the financing of the State and

general government sector’s operations, including

material commitments, leases and service

concession arrangements recorded by the State.

Structure

5.1 Borrowings ....................................................................75

5.2 Leases ..............................................................................76

5.3 Service concession arrangements (SCA) ..................79

5.4 Deposits held and advances received........................89

5.5 Cash flow information and balances .........................89

5.6 Advances paid and investments, loans and

placements .....................................................................92

5.7 Interest expense ............................................................93

5.8 Commitments for future expenditure .......................94

5.1 Borrowings

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Current borrowings

Domestic borrowings

22 867

15 684

18 473

13 822

Foreign currency borrowings

262

216

Lease liabilities

800

730

744

675

Service concession arrangement liabilities

2 627

1 339

2 413

1 129

Derivative financial instruments

652

833

Total current borrowings

27 208

18 803

21 630

15 669

Non-current borrowings

Domestic borrowings

123 221

102 465

109 117

88 752

Foreign currency borrowings

415

433

Lease liabilities

7 715

8 050

7 184

7 562

Service concession arrangement liabilities

5 595

5 577

4 144

5 149

Derivative financial instruments

799

1 158

214

288

Total non-current borrowings

137 745

117 683

120 659

101 752

Total borrowings

164 953

136 486

142 289

117 420

Borrowings refer to interest bearing liabilities

mainly raised from domestic borrowings through

TCV, lease liabilities, service concession

arrangement liabilities and other interest bearing

arrangements.

Borrowings exclude liabilities raised from other

government entities, which are classified as deposits

held and advances received.

All borrowings, except for lease liabilities, are

classified as financial instruments (Note 7.1). All

borrowings are initially recognised on the settlement

date at the fair value of the consideration received

less directly attributable transaction costs.

The measurement basis subsequent to initial

recognition depends on whether the State has

categorised its borrowings as either financial

liabilities measured at fair value through profit or

loss, or financial liabilities at amortised cost.

The classification depends on the nature and

purpose of the borrowings. The State determines

the classification of its borrowings at initial

recognition.

The State’s domestic borrowings are measured at

fair value through profit or loss on the basis that the

financial liabilities are managed on a fair value basis

in accordance with documented risk strategies.

Derivative financial instruments are recognised at

fair value. They are initially recognised at fair value

on the date on which a derivative contract is entered

into.

Any gains or losses arising from changes in the fair

value of derivatives after initial recognition are

recognised in the consolidated comprehensive

operating statement as an other economic flow

included in the net result.

5. FINANCING STATE OPERATIONS

76 Chapter 4 2022-23 Financial Report

5.2 Leases

Recognition and measurement of leases as a

lessee

For contracts entered into, the State considers

whether a contract is, or contains, a lease. A lease is

defined as a contract, or part of a contract, that

conveys the right to use an asset (the underlying

asset) for a period of time in exchange for

consideration.

To apply this definition, the State assesses whether

the contract meets three key criteria:

• whether the contract contains an identified asset,

which is either explicitly identified in the

contract or implicitly specified by being

identified at the time the asset is made available

to the State and for which the supplier does not

have substantive substitution rights

• whether the State has the right to obtain

substantially all of the economic benefits from

use of the identified asset throughout the period

of use and has the right to direct the use of the

identified asset throughout the period of use

• whether the State has the right to make

decisions in respect of how and for what

purpose the asset is used throughout the period

of use.

Separation of lease and non-lease components

At inception or on reassessment of a contract that

contains a lease component, the State separates out

and accounts separately for non-lease components

within a lease contract, and excludes these amounts

when determining the lease liability and right-of-use

asset amounts.

Lease liability – Initial measurement

The lease liability is initially measured at the present

value of the lease payments unpaid at the

commencement date, discounted using the interest

rate implicit in the lease if that rate is readily

determinable or the State’s incremental borrowing

rate.

Lease payments included in the measurement of the

lease liability comprise the following:

• fixed payments (including in-substance fixed

payments)

• variable payments based on an index or rate,

initially measured using the index or rate as at

the commencement date

• amounts expected to be payable under a residual

value guarantee

• payments arising from purchase and termination

options reasonably certain to be exercised.

Lease liability – subsequent measurement

Subsequent to initial measurement, the liability is

reduced for payments made and increased for

interest. It is remeasured to reflect any reassessment

or modification, or if there are changes in

in-substance fixed payments.

When the lease liability is remeasured, the

corresponding adjustment is reflected in the right of

use asset, or comprehensive operating statement if

the right of use asset is already reduced to zero.

Short-term leases and leases of low-value assets

The State has elected to account for short-term

leases and leases of low-value assets using the

practical expedients outlined in AASB 16. Instead of

recognising a right-of-use asset and lease liability, the

payments in relation to these are recognised as an

expense on a straight-line basis over the lease term.

Note 3.4 outlines the definition of a short term and

low value lease.

5. FINANCING STATE OPERATIONS

2022-23 Financial Report Chapter 4 77

State’s leasing activities

Information on the State’s leasing activities is

presented below.

Public Private Partnerships (PPPs) classified as leases

The State has a number of PPP arrangements which

are classified as leases under AASB 16. Under these

arrangements, the capital component of the payment

that relates to the State’s right to use assets are

accounted for as lease liabilities. In addition, over

the lease period, the State pays for ongoing

operation and maintenance costs which is

recognised as a commitment and disclosed as lease

commitments below.

Office accommodation leases

The State has a number of office accommodation

leases which are leased by entities throughout the

general government, PNFC and PFC sectors.

The majority of these leases, in magnitude and

number, are within the general government sector.

The Accommodation Carpool and Library services

group within the Department of Government

Services holds a number of office accommodation

leases, which are occupied by agencies in the general

government sector and managed through a service

arrangement. The lease contracts’ terms vary

depending on market availability and the

Government’s location and tenure requirements,

with a range of terms from five years to 30 years

with options to renew after that date in general.

Property leases for government office

accommodation are recognised as right of use assets

with a corresponding lease liability under AASB 16.

Health sector

Health services lease various land and buildings such

as consulting suites, warehouses, carer support units,

treatment areas such as dialysis suites, staff

accommodation (generally for medical staff on

rotation), offices, opportunity shops, ambulance

stations and related facilities. They also lease a range

of medical and non-medical equipment, IT

equipment, network infrastructure, motor vehicles

and aircraft for transport services. Most lease

contracts are for periods between one and 10 years

with options to renew for various lease terms,

although some health services have contracts of up

to 40 years. Health services also have in place short-

term rental agreements that can be terminated with

limited notice (often one month).

Emergency management

The State has entered into leases for airport hangars.

These assets are leased to assist the State in

delivering its fire and emergency management

outputs. The assets are leased for a period between

one and three years.

Community safety

The State has entered into leases for a combination

of rotary and winged aircrafts for its Victoria Police

operational needs. These aircraft are leased for a

period of up to 10 years.

Buses

The State has entered into leases relating to buses

with a lease term of the same duration as the

franchise term of seven years with an option to

extend for a further three years.

Leases at significantly below-market terms and

conditions

The State elected to measure right-of-use assets

arising from leases that are significantly below

market terms and conditions at cost as per the

temporary relief given to not-for-profit entities by

AASB 2018-8 Amendments to Australian Accounting

Standards – Right of Use Assets of Not-for-Profit Entities.

These right-of-use assets are depreciated on a

straight-line basis over the shorter of the lease term

and the estimated useful lives of the assets.

Transport Leases between the general government

sector (Department of Transport and Planning) and

the public non-financial corporations sector

(Victorian Rail Track)

Victorian Rail Track (VicTrack) is the custodial

owner of the State’s transport-related land,

infrastructure, rolling stock and associated assets,

which the State, through the Department of

Transport and Planning (DTP), is highly dependent

on to provide Victorians with a public transport

system. DTP leases metropolitan, regional and

interstate train and tram assets from VicTrack at

nominal cost in order to provide public transport

services in Victoria.

VicTrack provides access to its leased assets to assist

the State in furthering its objectives.

The general government sector has classified the

leases entered into with VicTrack as leases that are

significantly below market terms and conditions, and

principally enable the State to further its objectives

and the right-of-use asset value in the general

government sector is recorded at cost (a nominal

amount).

These underlying assets subject to the leases are

recognised at fair value, at a consolidated whole of

government level, after eliminating the inter-sector

leases.

5. FINANCING STATE OPERATIONS

78 Chapter 4 2022-23 Financial Report

Presentation of right-of-use assets and lease

liabilities

The State presents right-of-use assets as property,

plant and equipment unless they meet the definition

of investment property, in which case they are

disclosed as investment property on the balance

sheet. Lease liabilities are presented as borrowings

on the balance sheet.

Lease commitments

(a)(b)(c)

($ million)

State of Victoria

2023

2022

Present

value

Nominal

value

Present

value

Nominal

value

Commissioned leases

AgriBio Project

130

232

128

238

Bendigo Hospital

818

1 510

768

1 470

Casey Hospital

117

123

Melbourne Convention Centre

235

326

245

353

New Schools Public Private Partnership

204

338

217

377

Partnerships Victoria in Schools

144

237

142

241

Prisons

(d)

135

190

159

236

Royal Children’s Hospital

927

1 575

829

1 468

Royal Melbourne Showgrounds

Royal Women’s Hospital

239

345

231

349

Victorian Comprehensive Cancer Centre (VCCC)

461

947

442

948

Total commissioned leases

3 407

5 842

3 276

5 830

Notes:

(a) The figures in this table are for the consolidated State of Victoria only, as all commissioned leases are recorded in the general government sector.

(b) The liability associated with commissioned leases are recognised on the balance sheet and are not disclosed as a lease commitment.

(d) Prisons include the Metropolitan Remand Centre and Marngoneet Correctional Centre. The 2021-22 figures for these prisons have been separately disclosed as lease

commitments in accordance with AASB 16.

5. FINANCING STATE OPERATIONS

2022-23 Financial Report Chapter 4 79

5.3 Service concession arrangements (SCA)

AASB 1059 applies to arrangements where an

operator provides public services, using a service

concession asset, on behalf of the State and

importantly, the operator manages at least some of

the public service at its own discretion. The State

must also control the asset for AASB 1059 to apply.

This means that certain PPP arrangements are not

within the scope of AASB 1059 and are accounted

for as either leases (refer to Note 5.2) or assets

being constructed by the State (refer to Note 5.8)

and conversely, certain arrangements that are not

PPPs (such as certain external service arrangements)

could be captured within the scope of AASB 1059.

For arrangements within the scope of AASB 1059,

at initial recognition a public sector grantor records

the asset(s) used in the service concession

arrangement at current replacement cost with a

related liability, which could be a financial liability,

an accrued revenue liability (referred to as the grant

of a right to the operator liability) or a combination

of both.

The nature of the liability and subsequent

accounting depends on the consideration exchanged

in the arrangement between the State and the

operator.

A financial liability is recognised where the State

has a contractual obligation to pay the operator

under the service concession arrangement for the

provision of service concession assets and/or

services. It is recognised as a borrowing (Note 5.1).

The liability is increased by interest charges

(Note 5.7), based on the interest rate implicit in the

arrangement. The liability is reduced by any

payments made by the State to the operator as

required by the contract.

These payments take the form of state

contributions and other periodic payments (referred

to as service payments). The state contributions are

usually made during the construction phase of the

asset. Service payments include both capital and

service elements.

The capital elements are associated with the design,

construction, and financing of the service

concession asset. The service elements included

within the service payments compensate the

operator for delivery of services such as ongoing

operation, maintenance, replacement, and other

costs. The service payments may be impacted by

key performance indicators (KPIs) not being met

and are generally quarterly (QSP), monthly (MSP) or

other periodic intervals.

A grant of a right to the operator (GORTO)

liability is recognised where the State does not have

a contractual obligation to pay cash or another

financial asset under the SCA but instead grants the

right to the operator to earn revenue from the

public use of the asset (Note 6.4). It represents

unearned revenue and is progressively reduced over

the period of the concession (Note 2.6).

Financial liabilities and GORTO liabilities are

initially recognised at the same amount as the

service concession asset, adjusted by the amount of

any other consideration from the State to the

operator, or from the operator to the State.

An exception to this principle occurs when an

existing asset of the grantor is reclassified as a result

of becoming part of an SCA. When this occurs, the

asset is revalued to current replacement cost with a

corresponding adjustment to the asset revaluation

surplus. A liability is not recognised unless

additional consideration is provided by the operator.

If the assets included in an SCA are upgraded or

expanded, the State recognises a corresponding

liability (either financial or GORTO) for the

amounts the State is liable for on the

upgrade/expansion work.

After initial recognition, service concession assets

are measured by applying the revaluation model for

the State’s property, plant and equipment (Note 4.1)

and intangible assets (Note 4.2). For service

concession assets that are under construction the

State applies the fair value proxy approach

(Note 4.1.1) to achieve faithful representation of

construction in progress balances.

The following material SCAs existed at 30 June 2023.

Unless noted in the arrangement specific disclosures

below, no material changes have occurred during the

year.

80 Chapter 4 2022-23 Financial Report

5. FINANCING STATE OPERATIONS

Service concession arrangements ($ million)

SCA arrangement

(a)

Note

Classification of

arrangement

Operational/

construction in

progress (CIP)

Managed by

Periodic payments in

operations phase

Payments

impacted

by KPI

Carrying

amount of

liability as at

30 June 2023

Carrying amount

of asset as at 30

June 2023

Carrying amount

of liability as at 30

June 2022

Carrying amount

of asset as at 30

June 2022

CityLink

5.3.1

GORTO

Operational

DTP

None – User pays Operator

1 869

5 070

1 966

4 674

Eastlink

5.3.2

GORTO

Operational

DTP

None – User pays Operator

1 969

4 062

2 055

3 664

Land Use Victoria

5.3.3

GORTO

Operational

DTP

None – User pays Operator

2 518

509

2 589

512

VicRoads Modernisation

5.3.4

GORTO

Operational

DTP

None – User pays Operator

8 646

2 858

Peninsula Link

5.3.5

Financial Liability

Operational

DTP

QSPs

Yes

601

968

626

882

Fulham Correctional

Centre Contract

Extension

5.3.6

Financial Liability

Operational

DJCS

QSPs

Yes

174

179

Port Phillip Prison

Contract Extension

5.3.7

Financial Liability

Operational

DJCS

QSPs

Yes

218

224

Ravenhall Correction

Centre

5.3.8

Financial Liability

Operational

DJCS

QSPs

Yes

493

640

503

658

Metropolitan Bus

Contracts

(b)

5.3.9

Financial Liability

Operational

DTP

MSPs

Yes

136

278

128

241

Southern Cross Station

5.3.10

Financial Liability

Operational

DTP

QSPs

Yes

339

447

349

461

Western Roads Upgrade

5.3.11

Financial Liability

Operational

DTP

QSPs

Yes

462

1 544

732

1 425

Desalination Plant

5.3.12

Financial Liability

Operational

DEECA

Water Service Payments

(WSPs)

Yes

3 170

4 574

3 226

3 962

High Capacity Metro

Trains (HCMT) Project

5.3.13

Financial Liability

Construction in

Progress

DTP

QSPs

Yes

1 260

1 445

1 004

1 126

Metro Tunnel Project –

Tunnel and Stations

5.3.14

Financial Liability

Construction in

Progress

DTP

QSPs

Yes

3 263

8 586

2 931

6 929

North East Link – Primary

package (Tunnels)

5.3.15

Financial Liability

Construction in

Progress

State Tolling

Corporation

QSPs

Yes

1 363

2 246

431

906

West Gate Tunnel

5.3.16

Hybrid

(GORTO/Financial

Liability)

Construction in

Progress

DTP

None – User pays Operator

4 720

8 584

3 684

6 223

Homes Victoria Ground

Lease Model Project 1

5.3.17

Hybrid

(GORTO/Financial

Liability)

Construction in

Progress

Homes

Victoria

Quarterly Services Payment

(QSP) and rental charges by the

operator

Yes

277

315

146

152

Notes:

(a) This note presents consolidated State of Victoria service concession arrangements. All of these arrangements are held in the general government sector with the exception of the North East Link – Primary package (Tunnels) and the Homes Victoria

Ground Lease Model Project 1 which are recognised in the public non-financial corporations sector.

(b) Metropolitan Bus Contracts are now disclosed in this table for 2022-23 following the separate disclosure of service concession arrangement commitments that are also included in Note 5.3.

5. FINANCING STATE OPERATIONS

2022-23 Financial Report Chapter 4 81

Details relevant to all arrangements

Unless specified differently in the arrangement

specific details section below, all of the below

information is relevant to all arrangements.

The State has entered into an arrangement with the

operator which gives the operator the right to

provide public services to users for a specified

period (concession period).

The operator, based on the terms and conditions

specified in the agreement, is:

• responsible for the design, construction,

financing, operation and maintenance and

replacement of the relevant asset(s) during the

concession period

• subject to key performance indicators (KPIs)

and/or annual works programs that ensure a

level of public service delivery for users.

The operator has the opportunity to rectify any

performance issues where relevant.

The operator has access to the asset to perform the

required services and manages at least some of

those services under its own discretion.

The State has control over what services the

operator provides with the asset over the

concession period, whom to provide them to and at

what price. It is responsible for monitoring that

contractual obligations are met, and will intervene as

required to ensure safety for users of the asset as

appropriate and to protect public interest.

At the end of the concession period, the rights and

obligations provided to the operator during the

concession period cease, and the service concession

asset(s) will be returned to the State.

The agreements do not include options for renewal

and may be subject to termination.

Arrangement specific details

5.3.1 CityLink

Operator: CityLink Melbourne Limited (CML)

Transurban Infrastructure Management Limited

(TIML)

Concession period: 45 years

The State and CML entered into the Melbourne

City Link Concession Deed in October 1995.

The Concession Deed requires CML to pay to the

State specified concession fees at specified intervals

during the concession period.

In accordance with the Concession Deed, CML has

exercised an option to meet its obligations to pay

concession fees by way of issuing concession notes.

These notes are non-interest bearing promissory

notes payable by CML at the end of the concession

period, or earlier in the event of CML achieving

certain profitability levels and cash flows.

Between June 2005 and June 2010, the State entered

into arrangements with CML and TIML whereby

the State received upfront payments in exchange for

assigning the right to all existing and future

concession notes to TIML.

The value of concession notes due to be received by

the State in accordance with the Concession Deed

has been disclosed at the present value of

concession notes to be issued in future periods by

CML. The present value of the concession notes is

disclosed as part of the GORTO liability.

The concession period to operate the CityLink road

network was extended to January 2045 as a result of

the partial funding of the West Gate Tunnel Project.

The Concession Deed provides for CML to lease

certain land and road infrastructure from the State

during the concession period.

Under the terms of the Concession Deed, there are

certain provisions under which the State could be

entitled to share in the financial success of the

CityLink project:

• additional concession fees where the CML

revenue and equity return exceed the

benchmarks set out in the original Base Case

Financial Model

• variable lease rental expected to commence in

2035

• early end to concession period if specified

equity return threshold is reached

• share of revenue based on compensable

enhancements events which result in additional

revenue for CityLink.

To date, none of the above events have occurred.

5. FINANCING STATE OPERATIONS

82 Chapter 4 2022-23 Financial Report

5.3.2 EastLink

Operator: Connect East Pty Ltd (ConnectEast)

Concession period: 35 years

The State and the operator entered into the

EastLink Concession Deed in October 2004.

EastLink opened to traffic in June 2008.

ConnectEast has a right to operate the EastLink

road network for the duration of the concession

period which is due to expire on

30 November 2043.

The Concession Deed provides for ConnectEast to

lease certain land and road infrastructure from the

State during the concession period. These assets will

be returned to the State at the end of the concession

period.

The EastLink Concession Deed contains

compensable enhancement provisions that enable

the State to claim 50 per cent of any additional

revenue derived by ConnectEast Pty Ltd as a result

of certain events that particularly benefit EastLink,

including changes to the adjoining road network.

On 2 January 2014, the State lodged a compensable

enhancement claim arising as a result of opening the

Peninsula Link road network. This claim remains

outstanding. Refer to Note 7.2 for further details on

this claim.

5.3.3 Land Use Victoria

Operator: Secure Electronic Registries Victoria

(SERV)

Concession period: 40 years

The Victorian Land Registry Services (VLRS), now

known as Secure Electronic Registries Victoria

(SERV), commenced in September 2018 (Stage 1)

and is responsible for part of Registration, Landata

and Systems Branches of Land Use Victoria for a

term of 40 years. The services, such as processing

title searches, registrations, inquiries and

modifications/changes to land registry titles have

continued to be delivered to the public and

stakeholders, customers and clients in a seamless

manner ensuring service delivery requirements are

maintained and key performance indicators are met.

The second stage of the transition of services to

SERV was in November 2019. The Registrar of

Titles has remained with the State and has retained

all statutory obligations and powers. The Registrar

of Titles is responsible for preserving the integrity

and security of the land register and enforcing

service standards. The State will continue to own

the land registry data and provide the State

Guarantee of title.

The arrangement provides SERV with access to the

State Material Licence, which includes all State

Data, Operating Manual, State Software, and the

rights to provide operator and non-statutory

services (e.g. certain Title and LANDATA© Search

Products and Property Certificates).

The Operating Concession Deed (OCD) required

SERV to pay a concession licence fee to the State of

$2.8 billion in September 2018. The upfront

consideration received from the SERV is recognised

as a grant of a right to the operator (GORTO)

liability and recognised as revenue proportionally

over the service period of 40 years.

The State initially recognised intangible assets for

the Land Registry Services (LRS) software (the

Victorian Online Titles System) ($38 million) and

the Titling and Registry database (database)

($474 million). Refer to Note 4.2 for details of the

fair value measurement of the service concession

intangible assets. Subsequent to the initial

recognition, both intangible assets are carried under

the revaluation model in line with AASB 138.

5. FINANCING STATE OPERATIONS

2022-23 Financial Report Chapter 4 83

5.3.4 VicRoads Modernisation

Operator: Aware Super, Australian Retirement

Trust and Macquarie Asset Management (the

‘Consortium’).

Concession period: 40 years

On 15 August 2022, the State and the Consortium

entered into a joint venture to operate the

Registration and Licensing (R&L) and Custom

Plates functions of VicRoads. The joint venture will

modernise a number of VicRoads services through

increased investment to make them more

user-friendly for motorists.

The State will continue to maintain responsibility

for key regulatory and policy functions, retaining

ownership and regulation of data, and continuing to

fully control motorists pricing, privacy, road access

and safety.

The consideration provided by the Consortium to

the State in return for granting the concession

comprises upfront proceeds of $7.9 billion in cash

and a minority shareholding interest in the joint

venture. $275 million of the consideration was

recognised upfront as licence revenue for the joint

venture’s right to deliver specific administrative and

cash collection services. The remainder of the

consideration was recognised as a grant of a right to

the operator liability and will be recognised as

revenue proportionally over the 40-year concession

period.

The State initially recognised intangible assets for

the VicRoads R&L database of $3.2 billion.

Subsequent to the initial recognition, intangible

assets are carried under the revaluation model in

line with AASB 138.

5.3.5 Peninsula Link

Operator: Southern Way Pty Ltd (Southern Way)

Concession period: 25 years

The State entered into a Peninsula Link Project

Deed with Southern Way on 20 January 2010.

The concession period will end in January 2038.

The State compensates Southern Way for delivery

of ongoing maintenance services through QSP

payments, which are subject to KPI linked

abatement.

5.3.6 Fulham Correctional Centre

Operator: Australasian Correctional Investment

Limited (ACI)

Concession period: 38 years

In October 1995, the State entered into a public

private partnership arrangement with the operator.

The construction of the prison was completed in

1997 and the operational phase under the original

contract was due to end in 2017. However,

a contract extension was entered into in April 2015,

with the terms of the contract extension coming

into effect in July 2016. The contract extension has

an initial term of 11 years and subject to ACI’s

performance, a further term of 8.3 years that would

end in October 2035.

5.3.7 Port Philip Prison

Operator: G4S Correctional Services (Australia) Pty

Ltd (G4S)

Concession period: 40 years

In July 1996, the State entered into a public private

partnership arrangement with the operator.

The construction of the prison was completed in

1997 and the operational phase under the original

contract was due to end in 2017.

However, a contract extension was entered in

December 2015, with the terms of the contract

extension coming into effect in September 2017.

The contract extension was also novated in

September 2017. The contract extension has an

initial term of 10 years and subject to G4S’

performance, a further term of 10 years that would

end in September 2037.

5.3.8 Ravenhall Correction Centre

Operator: GEO Consortium

Concession period: 25 years

In September 2014, the State entered into a public

private partnership with the operator.

The construction of the prison was completed in

November 2017 and the operational phase is due to

expire in 2042.

5. FINANCING STATE OPERATIONS

84 Chapter 4 2022-23 Financial Report

5.3.9 Metropolitan Bus Contracts

Operator: Cranbourne Transit, Donric Group,

Kinetic (Melbourne) Pty Ltd, Transit Systems and

Ventura Bus Lines.

Concession period:

• Kinetic bus contract – Seven years with

29-month extension subject to satisfying flexible

performance measures; and

• Other contracts – Eight years with two-year

extensions subject to satisfying flexible

performance measures.

In June and July 2018, new Metropolitan Bus

Service Contracts were signed with the operators of

the metropolitan buses.

Contracts with Cranbourne Transit, Donric Group,

Transit Systems and Ventura Bus Lines will expire

in 2026. In addition to the current bus fleet

managed by the Operators, new buses introduced

from 2025 under these Metropolitan contracts will

be electric buses under the Zero Emission Bus

initiative.

Kinetic Pty Ltd, which operates SkyBus and runs

local bus routes across Australia and New Zealand,

has been awarded the contract for the Metropolitan

Bus Franchise from 31 January 2022. In addition to

the current bus fleet operated by Transdev

(previous operator), Kinetic will introduce 36 fully

electric buses to the network by mid-2025.

The State’s control over the asset lies in its

unconditional right to acquire the assets at market

value at the end of the concession period.

5.3.10 Southern Cross Station

Operator: Civic Nexus Pty Ltd (CNPL)

Concession period: 30 years

In July 2002, the State entered into a Service and

Development Agreement (SDA) with the operator

for the redevelopment of Southern Cross Station.

The agreement ends in June 2036.

Construction commenced in September 2002 and

completed in August 2006.

The State’s QSP payments to the operator for the

delivery of operating and maintenance services are

subject to abatement in accordance with the terms

and conditions of the SDA.

5.3.11 Western Roads Upgrade

Operator: Netflow OSARS (Western) Partnership

(Netflow)

Concession period: 20 years

In December 2017, the State signed the Western

Roads Upgrade contract with Netflow.

The agreement includes eight road projects and

37 road rehabilitation projects. The project achieved

commercial acceptance in September 2021. Under

the agreement, the State made a capital contribution

(Option Amount) to Netflow in March 2023.

5.3.12 Desalination Plant

Operator: AquaSure Pty Ltd (AquaSure)

Concession period: 30 years

The State and AquaSure entered into the public

private partnership on 30 July 2009.

The Victorian Desalination Project (VDP) was

initiated to design, build, finance and operate a

desalination plant, transfer pipeline and 220 kilovolt

underground power cable capable of supplying

150 gigalitres of water per annum into the

Melbourne network.

Under the arrangement, the State has an obligation

to make water security payments provided the plant

is maintained to the appropriate standard.

The State will also make water usage payments for

any water that is ordered and delivered to the

required standard. Water can be ordered annually

for flexible amounts from 0 to 150 gigalitres (in set

increments).

A Statement of Obligations (SoO) was issued to the

Melbourne Water Corporation under section 4I of

the Water Industry Act 1994 that required Melbourne

Water Corporation to pay all monies as required by

the State under the project deed with Aquasure.

The arrangement was codified through the Water

Interface Agreement (WIA) between the State

(DEECA) and the Melbourne Water Corporation.

DEECA does not control any receipt arising from

this arrangement and is required to pay the amounts

from the Melbourne Water Corporation into the

Consolidated Fund.

The State has assessed the agreements between

AquaSure, DEECA (on behalf of the State) and

Melbourne Water Corporation and concluded that

the agreements are connected and should form one

single commercial arrangement. Under the

combined agreement, Melbourne Water

Corporation is considered the ultimate grantor.

5. FINANCING STATE OPERATIONS

2022-23 Financial Report Chapter 4 85

DEECA, on behalf of the State, administers the

arrangement and recognises contractual liability on

the capital portion of WSPs to AquaSure and

contractual receivable from Melbourne Water

Corporation determined in the WIA as financial

instruments under AASB 9 (Refer to Note 7.1).

As at 30 June 2023, AquaSure had produced

4.1 gigalitres of the 15 gigalitres ordered for 2022-23

with the remaining 10.9 gigalitres of the water order

cancelled.

On 1 April 2023, the Minister for Water announced

the 2023-24 Supply Notice ordering 0 gigalitres for

the Required Annual Water Volume in 2023-24 and

with non-binding forecasts of 50 gigalitres for

2024-25 and 75 gigalitres in 2025-26.

5.3.13 High Capacity Metro Trains

Operator: Evolution Rail Consortium

(Evolution Rail)

Concession period: 30 years

In November 2016, the State entered into a project

agreement with Evolution Rail.

Under the contract, the operator will design, build,

commission and finance a fleet of 65 high capacity

trains, a depot at Pakenham East (including a train

maintenance facility (TMF) and a stabling yard),

a light service facility (LSF) at Calder Park and two

simulators.

The stabling yard was returned to the State in

July 2020 for ongoing maintenance, while Evolution

Rail will be responsible for the maintenance of

other constructed assets for a period of 30 years,

until 2053.

The State is contracted to make PSP payments

(representing pro-rata payments to Project Co

during the phased delivery of the HCMTs)

commencing on 28 Feb 2021, which is the date the

5th HCMT entered service, until commencement of

the QSP at provisional acceptance of all 65 HCMT

sets.

In October 2021, a settlement agreement was

executed by the State and Evolution Rail to amend

the original project agreement. The variation

amended the contractual terms of the original

Project Deed and released the State from claims

made by Evolution Rail.

As part of the agreement, the State has also

committed to purchase an additional five train set in

preparation for the proposed Melbourne Airport

Rail Link project.

5.3.14 Metro Tunnel Project –

Tunnel and Stations

Operator: Cross Yarra Partnership (CYP)

Concession period: 25 years

In December 2017, the State entered into an

agreement with CYP to deliver the Metro Tunnel –

Tunnel and Stations.

Assets to be constructed includes twin

nine-kilometre tunnels under the Central Business

District, five underground stations, station fit-out,

mechanical and electrical systems and certain

commercial opportunities at the new stations.

CYP will be responsible for providing maintenance

and other services until 2048.

CYP will be provided with a lease to operate some

commercial tenancies within the constructed asset

through the concession period.

On 24 December 2020, the State entered into

settlement and amending deeds with CYP to

address a range of commercial issues arising during

project delivery. The parties agreed to share the

increased costs of the project on a 50:50 basis, with

each party agreeing to pay $1.37 billion. The project

is on track for completion in 2025.

5. FINANCING STATE OPERATIONS

86 Chapter 4 2022-23 Financial Report

5.3.15 North East Link –

Primary Package (Tunnels)

Operator: Spark

Concession period: 25 years

In October 2021, the State and the North East Link

State Tolling Corporation contracted with the Spark

consortium to deliver the Primary Package

(Tunnels) of the North East Link.

The $11.1 billion Primary Package (Tunnels) is

being delivered as an availability PPP with an

Incentivised Target Cost regime that applies in

respect of costs incurred during the design and

construction phase of the project.

The project is expected to reach commercial

acceptance in December 2028.

The Primary Package (Tunnels) scope includes:

• twin, three-lane tunnels

• split interchange at Lower Plenty Road and

Manningham Road

• an upgrade on the existing interchange south of

Bulleen Road to accommodate the tunnel on

ramp, a new interchange west of Thompsons

Road to service the new Bulleen Park & Ride

and accommodate the tunnel off- and on-ramps

• new and upgraded green land bridges,

development of extensive shared user paths and

walking and cycling infrastructure to form a

new North East Trail network

• high-quality outcomes in open space, noise

walls design and maximising tree canopy

replacement.

The other remaining project elements of the North

East Link will be delivered under separate packages.

The new link will be tolled, with the State retaining

toll revenues, while the Eastern Freeway and the

M80 Ring Road will remain toll free. A state owned

corporation, the State Tolling Corporation, has been

established to collect tolls for the North East Link

with toll revenue going towards the cost of building

and maintaining the project.

5.3.16 West Gate Tunnel

Operator: Transurban Limited (Transurban)

Concession period: 28 years

In December 2017, the State entered into a PPP

contract with Transurban to deliver the West Gate

Tunnel Project.

The project will be funded through a combination

of state contribution, tolls imposed on users of the

West Gate Tunnel (until 2045), adjustments to

various CityLink tolls during the remaining term of

Transurban’s existing CityLink Concession

(to 2035), and a 10-year extension of the CityLink

Concession (from 2035 to 2045).

In March 2022, the State and Transurban Group

entered into amending and settlement deeds to

formally document the resolution of various

commercial issues related to the project. As part of

the settlement, the State will contribute $1.9 billion,

Transurban Group will contribute $2.2 billion and

the Design and Construct Subcontractors will

forego revenue and profit margins on the project.

5. FINANCING STATE OPERATIONS

2022-23 Financial Report Chapter 4 87

5.3.17 Homes Victoria Ground Lease Model

Project 1

Operator: Building Communities (Vic) Ltd

Concession period: 40 years

In June 2021, Homes Victoria achieved financial

close on a housing arrangement whereby it

appointed the Building Communities consortium to

finance, design, construct, maintain and operate

619 brand new social housing dwellings,

126 affordable homes and 365 market rental homes,

including Specialist Disability Accommodation

dwellings, at existing housing sites at Brighton,

Flemington and Prahran.

The three sites are being delivered under a Ground

Lease Model on a fully financed, build-to-rent basis.

The ground lease will be delivered as a PPP

arrangement under the Partnerships Victoria

framework. Construction of the assets commenced

in 2021 and commercial acceptance is expected by

January 2024.

A ground-lease model is being used for this package

whereby title to public land and dwellings (which

will have a residual design life) will revert to Homes

Victoria at the end of the lease period.

Homes Victoria is contracted to make quarterly

service payments for the 40-year operating term,

which will include both a capital and a life cycle

component. While operating the dwellings, Building

Communities will perform the following functions:

asset management, community engagement,

maintenance and lifecycle replacement, tenancy

management and residential lease management.

SCA Commitments

The SCA commitments table below comprises of

the following:

• commissioned SCAs, only the operating and

maintenance commitments of the SCA

arrangement are included in the commitments

amounts, as the capital component (i.e. the

construction of the underlying asset) is recorded

as a liability on the State’s balance sheet

• uncommissioned SCAs, the commitments

include the capital component not yet

recognised on the balance sheet (i.e. the amount

relating to the asset which hasn’t been

constructed as yet), the State’s future capital

contributions as well as the operating and

maintenance commitments for the SCA

contract.

88 Chapter 4 2022-23 Financial Report

5. FINANCING STATE OPERATIONS

Service Concession Arrangements – Commitments

(a)(b)(c)(d)

($ million)

2023

2022

Liability

Capital

contribution

(f)

Other

commitments

Total

commitments

Liability

Capital

contribution

(f)

Other

commitments

Total

commitments

Discounted

value

(e)

Present

value

Nominal

value

Discounted

value

(e)

Present

value

Nominal

value

Financial liability model – Commissioned

Metropolitan Bus Contracts

(g)

2 985

3 417

3 477

4 080

Peninsula Link

195

268

240

353

Prisons

(h)

5 292

8 318

5 341

8 614

Southern Cross Station

391

508

370

499

Victorian Desalination Plant

1 654

3 643

1 631

3 749

Water Infrastructure

(i)

135

187

Western Roads Upgrade

514

741

507

754

Financial liability model - Uncommissioned

(j)

High Capacity Metro Trains

1 322

1 440

5 982

1 322

1 459

6 102

Metro Tunnel Project – Tunnel and Stations

2 226

2 536

838

7 770

2 241

3 068

838

8 282

North East Link – Primary Package (Tunnels)

(k)

4 080

7 145

1 030

18 439

4 476

8 031

980

20 132

Hybrid model (GORTO and financial liability models) –

Uncommissioned

(j)

Homes Victoria Ground Lease Model Project 1

702

117

739

West Gate Tunnel Project

634

1 684

Total commitments for service concession arrangements

(g)(h)

7 661

10 369

14 414

50 479

8 156

12 861

15 016

55 175

Notes:

(a) This note presents consolidated State of Victoria service concession arrangements. All of these arrangements are held in the general government sector with the exception of Water Infrastructure, North East Link – Primary package (Tunnels) and the

Homes Victoria Ground Lease Model Project 1 which are recognised in the public non-financial corporations sector.

(b) The liability associated with commissioned service concession arrangements are recognised on the balance sheet and are not disclosed as a commitment.

(d) The liability value has been discounted to the expected date of commissioning.

(e) The liability payments include the committed future liabilities yet to be recognised on the balance sheet.

(f) The capital contribution is measured at nominal value and represents the State’s total unpaid capital contribution for the uncommissioned service concession arrangement.

(g) Metropolitan Bus Contracts are now disclosed following the separate disclosure of Service Concession Arrangements commitments. Please refer to Note 5.3.9 for further information.

(h) Prisons includes Fulham Correctional Centre, Port Phillip Prison and Ravenhall Correctional Centre. The 2021-22 figures have been restated to remove the Metropolitan Remand Centre, Marngoneet Correctional Centre and Hopkins Correctional Centre as

these are now separately disclosed as leases or Property, Plant and Equipment commitments under AASB 16 or AASB 116 respectively. Please refer to Note 5.2 and Note 5.8 for further information.

(i) Water Infrastructure includes Barwon Region Water Corporation, Central Highlands Region Water Corporation and Coliban Region Water Corporation.

(j) For uncommissioned SCAs, the commitments include the capital component not yet recognised on the balance sheet (i.e. the amount relating to the asset which hasn’t been constructed as yet), the State’s future capital contributions as well as the

operating and maintenance commitments.

(k) In October 2021, the State entered into an arrangement with Spark consortium to deliver the North East Link - Primary Package (Tunnels) project between an upgraded Eastern Freeway and the M80 Ring Road. The nominal value represents the value of

commitments over the construction and full 25-year concession period. Refer to Note 5.3.15 for further details.

5. FINANCING STATE OPERATIONS

2022-23 Financial Report Chapter 4 89

5.4 Deposits held and advances received

Deposits held include deposits, security deposits,

and trust fund balances held on behalf of public or

private sector bodies. Advances received include

loans and other repayable funds from public sector

bodies for policy purposes.

Deposits held and advances received are categorised

as financial liabilities at amortised cost.

5.5 Cash flow information and balances

Cash and deposits, including cash equivalents,

comprise cash on hand and cash at bank, deposits at

call and those highly liquid investments with an

original maturity of three months or less, which are

held for the purpose of meeting short-term cash

commitments rather than for investment purposes,

that are readily convertible to known amounts of

cash and are subject to an insignificant risk of

changes in value.

For cash flow statement presentation purposes,

cash and cash equivalents include bank overdrafts,

which are included as current borrowings on the

balance sheet.

Reconciliation of cash and cash equivalents ($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Cash

2 792

3 522

2 721

3 079

Deposits at call

(a)

22 886

13 736

16 977

7 896

Cash and cash equivalents

25 678

17 258

19 698

10 974

Bank overdraft

Cash and cash equivalents as per cash flow statement

25 678

17 258

19 698

10 974

Note:

(a) The increase in deposits at call is primarily due to the $7.9 billion received from the VicRoads Modernisation joint venture, which has been used to establish the

Victorian Future Fund.

5. FINANCING STATE OPERATIONS

90 Chapter 4 2022-23 Financial Report

Reconciliation of net result to net cash flows from operating activities ($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Net result

(7 638)

568

(9 847)

(13 501)

Non-cash movements

Revenue related to economic service concession arrangements

(483)

(288)

(483)

(288)

Depreciation and amortisation

7 691

7 242

4 609

4 313

Revaluation of investments

(1 690)

4 475

(150)

(63)

Assets (received)/provided free of charge

(722)

(762)

(300)

(445)

Assets not previously/no longer recognised

161

(109)

161

(109)

Revaluation of assets

489

1 422

315

362

Discount/premium on other financial assets/borrowings

(291)

(393)

Foreign currency dealings

Unrealised (gains)/losses on borrowings

(1 230)

(14 091)

177

(97)

Discounting of assets and liabilities

(1)

Movements included in investing and financing activities

Net gain/loss from sale of investments

131

(603)

(48)

Net gain/loss from sale of non-financial assets

(88)

(5)

(91)

(17)

Realised gains/losses on borrowings

(613)

(329)

(1)

Movements in assets and liabilities

Increase/(decrease) in allowance for impairment losses

(166)

(162)

(183)

(195)

Increase/(decrease) in payables and contract liabilities

8 830

8 536

344

Increase/(decrease) in employee benefits

428

483

391

473

Increase/(decrease) in superannuation

511

331

504

330

Increase/(decrease) in other provisions

2 739

(2 597)

533

465

(Increase)/decrease in receivables and contract assets

(848)

372

(768)

(39)

(Increase)/decrease in other non-financial assets

867

(413)

816

(346)

Net cash flows from operating activities

8 077

(4 766)

4 250

(8 857)

5. FINANCING STATE OPERATIONS

2022-23 Financial Report Chapter 4 91

Changes in liabilities arising from financing activities ($ million)

State of Victoria

Non-cash changes

2023

Opening

balance

Cash

flows

Liabilities resulting from the

acquisition of new assets

(a)

Fair value

changes

Closing

balance

Borrowings and derivative instruments

120 789

29 357

539

(2 471)

148 216

Lease liabilities

8 781

(541)

275

8 515

Service concession arrangements liabilities

6 916

(1 036)

2 343

8 222

Advances and deposits received

1 724

1 777

2022

Borrowings and derivative instruments

101 107

32 802

1 129

(14 249)

120 789

Lease liabilities

8 672

(776)

885

8 781

Service concession arrangements liabilities

6 519

(1 436)

1 833

6 916

Advances and deposits received

1 784

(60)

1 724

General government sector

Non-cash changes

2023

Opening

balance

Cash

flows

Liabilities resulting from the

acquisition of new assets

(a)

Fair value

changes

Closing

balance

Borrowings and derivative instruments

102 906

24 323

539

127 804

Lease liabilities

8 237

(573)

264

7 927

Service concession arrangements liabilities

6 277

(1 001)

1 281

6 557

Advances and deposits received

(b)

1 835

(220)

1 615

2022

Borrowings and derivative instruments

78 509

23 455

1 129

(186)

102 906

Lease liabilities

8 067

(673)

843

8 237

Service concession arrangements liabilities

6 409

(1 427)

1 294

6 277

Advances and deposits received

2 791

(960)

1 831

Notes:

(a) Mainly comprising liabilities resulting from the recognition of new right of use assets under lease arrangements, and service concession arrangements, including

from public private partnerships.

(b) On 1 July 2022, the seven Waste and Resource Recovery Groups were abolished and transferred from the PNFC sector to be amalgamated into the former

Department of Environment, Land, Water and Planning (DELWP) to form a business unit within DELWP, Recycling Victoria. This has resulted in the 1 July 2022

opening balance not equalling the 30 June closing balance. DELWP has been renamed the Department of Energy, Environment and Climate Action (DEECA) following

the machinery of government changes announced by the Premier on 5 December 2022 with effect from 1 January 2023. Refer to Note 9.8 for further details.

5. FINANCING STATE OPERATIONS

92 Chapter 4 2022-23 Financial Report

5.6 Advances paid and investments, loans and placements

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Current advances paid and investments, loans and placements

Loans and advances paid

693

347

946

832

Equities and managed investment schemes

3 641

3 831

641

718

Australian dollar term deposits

1 830

4 342

198

104

Debt securities

9 945

6 995

Derivative financial instruments

227

1 109

128

430

Total current advances paid and investments, loans and placements

16 336

16 624

1 915

2 088

Non-current advances paid and investments, loans and placements

Loans and advances paid

237

285

4 362

4 097

Equities and managed investment schemes

42 253

36 595

2 853

2 054

Australian dollar term deposits

Debt securities

5 840

2 475

Derivative financial instruments

237

239

Total non-current advances paid and investments, loans and placements

48 569

39 631

7 246

6 211

Total advances paid and investments, loans and placements

64 905

56 255

9 161

8 299

Represented by:

Advances paid

930

632

5 308

4 929

Investments, loans and placements

63 975

55 623

3 853

3 370

The items in the table above are financial

instruments (Note 7.1) that have been classified into

financial instrument categories, depending on the

purpose for which the investments were acquired.

The State determines the classification of its

investments at initial recognition.

Any dividend or interest earned on these financial

assets is recognised in the consolidated

comprehensive operating statement as a revenue or

income transaction.

Advances paid include long and short-term loans,

non-marketable debentures and long and short-term

promissory agreements (bonds and bills) mainly

issued to the PNFC and PFC sectors for policy

rather than liquidity management purposes.

Advances are initially measured at fair value and

subsequently measured at amortised cost. They

exclude equity contributions and are eliminated on

consolidation of the State’s position.

5. FINANCING STATE OPERATIONS

2022-23 Financial Report Chapter 4 93

5.7 Interest expense

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Interest on interest bearing liabilities

3 926

2 879

3 116

2 053

Interest on lease liabilities

404

396

387

379

Interest on service concessions

422

416

414

407

Discount interest on payables

Total interest expense

4 778

3 712

3 974

2 869

Interest expense represents costs incurred in

relation to borrowings. It includes interest on

advances, loans, overdrafts, bonds and bills,

deposits, interest components of lease repayments,

service concession financial liabilities and the

amortisation of discounts or premiums in relation

to borrowings.

The State recognises borrowing costs immediately

as an expense, even where they are directly

attributable to the acquisition, construction or

production of a qualifying asset.

5. FINANCING STATE OPERATIONS

94 Chapter 4 2022-23 Financial Report

5.8 Commitments for future expenditure

Commitments for future expenditure include

operating and capital commitments arising from

contracts. Commitments recognised under SCA

arrangements are not included in this section. Please

refer to Note 5.3 for further detail on these.

These commitments are disclosed at their nominal

value and are inclusive of the GST payable.

These future expenditures cease to be disclosed as

commitments once the related liabilities are

recognised in the consolidated balance sheet.

Commitments for future expenditure

(a)

($ million)

State of Victoria

General

government sector

Nominal values

2023

2022

2023

2022

Capital expenditure commitments

Land and buildings

(b)(c)

8 077

9 531

7 604

8 829

Plant, equipment and vehicles

(c)

377

396

363

385

Infrastructure systems

(c)

10 301

10 360

8 832

8 901

Road networks and earthworks

1 152

2 333

1 145

2 332

Other

512

220

140

193

Total capital expenditure commitments

20 420

22 840

18 083

20 639

Service and lease commitments not included in the lease liability

Rail services

4 945

4 961

6 725

7 318

Bus services

4 977

5 840

4 440

5 248

Other

689

428

681

423

Total service and new short-term lease commitments

10 611

11 229

11 845

12 989

Other commitments

Capital investment commitments

471

296

Cladding Safety Victoria

119

131

119

131

COVID-19 Quarantine Victoria

Commercial contracts

(c)

3 292

1 853

2 993

1 642

Emergency Alert System

173

Emergency Telecommunication Networks

245

273

245

273

Grant program commitments

(c)

2 344

2 533

2 337

2 768

Information technology

619

277

603

193

Public transport ticketing system

(d)

1 948

148

1 948

148

Outsourcing of services

463

556

214

Policing services

Provision for Health Services

1 900

1 982

1 918

1 982

Social Housing

681

618

Traffic camera services (Traffic camera office)

238

388

238

388

Transport Accident Commission funded medical research

Other

(b)(c)

8 196

8 368

7 494

7 925

Total other commitments

20 761

17 560

18 214

15 795

Total commitments

51 792

51 629

48 143

49 424

Notes:

(a) The figures presented are inclusive of GST.

(b) PPP commitments recognised under AASB 116 are now included in this line item. These were previously under Public Private Partnerships (PPPs) recognised under

AASB 116 in Note 5.4 Public Private Partnerships note which no longer exists. A breakdown of these PPP commitments under AASB 116 is provided in the following

table.

(d) In May 2023, the State entered into a contract with Conduent Victoria Ticketing System Pty Ltd to provide a new public transport ticketing system for a period of up

to 15 years commencing on 1 December 2023.

5. FINANCING STATE OPERATIONS

2022-23 Financial Report Chapter 4 95

PPE commitments ($ million)

State of Victoria

(a)

2023

2022

Liability

(b)

Other

commitments

Liability

(b)

Other

commitments

Discounted

value

(c)

Present

value

Nominal

value

Discounted

value

(c)

Present

value

Nominal

value

Commissioned PPE commitments

Hopkins Correctional Centre

226

393

218

392

Uncommissioned PPE commitments

Frankston Hospital Redevelopment

917

996

2 518

1 125

937

2 518

New Footscray Hospital

(d)

1 020

1 055

3 381

1 343

1 056

3 381

Total PPE commitments

1 937

2 277

6 292

2 468

2 211

6 291

Notes:

(a) The figures in this table are for the consolidated State of Victoria only, as all the uncommissioned PPE commitments is recorded in the general government sector.

(b) The liability payments include the committed future liabilities yet to be recognised on the balance sheet.

(c) The liability value has been discounted to the expected date of commissioning and the present value of other commitments has been discounted to 30 June of the

respective financial years.

(d) The other commitments present value and nominal value columns includes State’s total unpaid capital contributions for this project. The capital contribution for this

project is $573 million ($573 million in 2021-22).

Ageing analysis of commitments

(a)

($ million)

State of Victoria

General

government sector

Nominal values

2023

2022

2023

2022

Capital expenditure commitments payable

Less than 1 year

11 027

11 544

9 492

10 187

1 year but less than 5 years

(b)

6 209

7 075

5 420

6 235

5 years or more

(b)

3 184

4 221

3 171

4 217

Total capital expenditure commitments

(b)

20 420

22 840

18 083

20 639

Service and lease commitments not included in the lease liability

Less than 1 year

2 943

2 924

3 766

3 672

1 year but less than 5 years

5 613

5 793

6 283

7 116

5 years or more

2 055

2 511

1 797

2 202

Total service and new short-term lease commitments

10 611

11 229

11 845

12 989

Other commitments payable

Less than 1 year

(b)

7 161

6 800

5 405

5 824

1 year but less than 5 years

(b)

5 948

4 321

5 220

3 660

5 years or more

(b)

7 652

6 440

7 590

6 312

Total other commitments

(b)

20 761

17 560

18 214

15 796

Total commitments

(b)

51 792

51 629

48 143

49 424

Notes:

(a) The figures presented are inclusive of GST.

(b) PPE commitments are now included in this line item. These were previously under PPPs recognised under AASB 116 in Note 5.4 Public Private Partnerships note which

no longer exists. The 2021-22 comparative figures have been restated to reflect this addition.

96 Chapter 4 2022-23 Financial Report

6. OTHER ASSETS AND LIABILITIES

Introduction

This section sets out other assets and liabilities that

arise from the State’s operations.

Structure

Assets

6.1 Investments in other sector entities ..........................96

6.2 Inventories .....................................................................97

6.3 Receivables and contract assets ..................................98

Liabilities

6.4 Payables and contract liabilities ..................................99

6.5 Superannuation .......................................................... 100

6.6 Other provisions ........................................................ 106

6.1 Investments in other sector entities

The general government sector investments in other

sector entities are measured at net asset value.

Where the carrying amount is less than zero (before

consolidation), the amount is not included in the

general government sector, but the net liabilities will

be consolidated at the state level.

The net gain/(loss) on equity investments in other

sector entities is measured at the proportional share

of the carrying amount of net assets and represents

the net gain or loss relating to the equity held by the

general government sector in other sector entities.

It arises from a change in the carrying amount of

net assets of the subsidiaries. The net gains are

measured based on the proportional share of the

subsidiary’s carrying amount of net assets before

elimination of inter-sector balances.

Investments in other sector entities ($ million)

2023

2022

Balance of investment in PNFC and PFC

sectors at beginning of period

89 162

73 125

Net contributions/(returns) to other

sectors by owner

3 450

4 203

Revaluation gain/(loss) for period

(a)

3 431

11 834

Total investments in other sector entities

96 042

89 162

Note:

(a) Year-on-year change mainly relates to a revaluation gain in 2022 on the

Treasury Corporation of Victoria’s external loan liabilities due to an

increase in interest rates.

6. OTHER ASSETS AND LIABILITIES

2022-23 Financial Report Chapter 4 97

6.2 Inventories

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

At cost

Raw materials

Work in progress

204

134

Finished goods

Consumable stores

644

1 294

549

1 220

Land and other assets held as inventory

923

939

At net realisable value

Finished goods

Consumable stores

Total inventories

1 851

2 452

574

1 262

Inventories include goods and other property held

either for sale, or for distribution at zero or nominal

cost, or for consumption in the ordinary course of

business operations.

Inventories held for distribution are measured at

cost, adjusted for any loss of service potential. All

other inventories, including land held as inventory,

are measured at the lower of cost and net realisable

value.

Where inventories are acquired for no cost or

nominal consideration, they are measured at current

replacement cost at the date of acquisition.

Cost includes an appropriate portion of fixed and

variable overhead expenses. Cost is assigned to land

held as inventory (undeveloped, under development

and developed) and to other high-value,

low-volume inventory items on a specific

identification of cost basis. Cost for all other

inventory is measured on the basis of weighted

average cost.

Bases used in assessing loss of service potential for

inventories held for distribution include current

replacement cost and technical or functional

obsolescence. Technical obsolescence occurs when

an item still functions for some or all of the tasks it

was originally acquired to do, but no longer matches

existing technologies. Functional obsolescence

occurs when an item no longer functions the way it

did when it was first acquired.

Other inventories include raw materials, work in

progress, finished goods and consumable stores.

They are measured at weighted average cost.

6. OTHER ASSETS AND LIABILITIES

98 Chapter 4 2022-23 Financial Report

6.3 Receivables and contract assets

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Contractual

Sales of goods and services

1 396

1 426

734

733

Accrued investment income

209

130

Other receivables

2 433

2 529

1 653

1 725

Allowance for impairment losses of contractual receivables

(332)

(308)

(202)

Statutory

Sales of goods and services

Taxes receivable

5 447

4 715

5 840

5 156

Fines and regulatory fees

2 594

2 729

2 593

2 728

GST input tax credits recoverable

1 435

1 446

600

604

Other receivables

Allowance for impairment losses of statutory receivables

(2 303)

(2 368)

(2 303)

(2 368)

Other

Actuarially determined

970

599

Contract assets

112

105

Total receivables and contract assets

11 973

10 955

9 046

8 406

Represented by:

Current receivables and contract assets

10 121

9 318

8 517

7 892

Non-current receivables and contract assets

1 852

1 637

530

514

Receivables consist of:

• contractual receivables, classified as financial

instruments

• statutory receivables that do not arise from

contracts

• other actuarially determined receivables

• contract assets.

Contractual receivables are initially recognised at

fair value plus any directly attributable transaction

costs. Subsequent to initial measurement, loans and

receivables are measured at amortised cost using the

effective interest method, less any impairment.

Contractual receivables are classified as financial

instruments (Note 7.1).

Contract assets relate to the State’s right to

consideration in exchange for goods transferred to

customers for works completed, but not yet billed at

the reporting date. The contract assets are

transferred to receivables when the State issues an

invoice to the customer.

Statutory receivables are recognised and measured

similarly to contractual receivables but are not

classified as financial instruments because they do

not arise from contracts.

Allowance for impairment losses: the State

applies the simplified approach under AASB 9 for

all contractual receivables and statutory receivables

to measure expected credit losses using a lifetime

expected loss allowance based on the assumptions

about risk default and expected loss rates.

The expected loss rate is based on past history,

existing market conditions as well as forward-

looking estimates at the end of the financial year.

6. OTHER ASSETS AND LIABILITIES

2022-23 Financial Report Chapter 4 99

6.4 Payables and contract liabilities

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Contractual

Accounts payable

2 411

2 261

865

828

Accrued expenses

6 182

5 828

5 356

5 148

Grant of a right to the operator liability

(a)

19 799

10 344

19 725

10 305

Unearned income

11 755

10 769

1 960

1 203

Statutory

Accrued taxes payable

124

102

Unearned income

Other

Contract liabilities

598

596

352

342

Total payables and contract liabilities

40 932

29 899

28 398

17 893

Represented by:

Current payables and contract liabilities

12 615

10 898

8 544

7 244

Non-current payables and contract liabilities

28 318

19 001

19 855

10 649

Note:

(a) The increase in the grant of a right to the operator liability is primarily due to the VicRoads Modernisation joint venture.

Payables consist of:

• contractual payables, such as accounts payable

and accrued expenses

• grant of right to the operator liability

• statutory payables (accrued taxes payable), such

as GST and fringe benefits tax payables

• unearned income

• contract liabilities.

Contractual payables are classified as financial

instruments (Note 7.1) and measured at amortised

cost. Accounts payable represent liabilities for

goods and services provided to the State prior to

the end of the financial year that are unpaid, and

arise when the State becomes obliged to make

future payments in respect of the purchase of those

goods and services.

Contract liabilities relate to consideration received

in advance from customers in which set

performance obligations have not yet been satisfied

at the end of the reporting period. The revenue is

expected to be recognised in future periods as the

performance obligations are satisfied.

At 30 June 2023, the liabilities primarily relate to

consideration received in advance for membership

subscriptions to Ambulance Victoria and from

international students in the education sector, and

developer and customer contributions towards

infrastructure works in the water sector.

Statutory payables are recognised and measured

similarly to contractual payables but are not

classified as financial instruments and not included

in the category of financial liabilities at amortised

cost, because they do not arise from contracts.

Unearned income comprises upfront fees received

for the medium term lease over the Port of

Melbourne, unearned insurance premiums received

and upfront licence revenue. This unearned income

is recognised progressively as revenue over the term

of the relevant arrangements.

Grant of a right to the operator liabilities relate

to economic service concession arrangements and

are recognised applying AASB 1059 (Note 5.3).

It represents unearned revenue and is progressively

reduced over the period of the arrangement in

accordance with its substance (Note 2.6).

6. OTHER ASSETS AND LIABILITIES

100 Chapter 4 2022-23 Financial Report

6.5 Superannuation

The disclosure in this note is for the consolidated

State of Victoria only, as the full value of the

$18.9 billion superannuation liability is in the

general government sector.

Net superannuation liability

The State’s public sector defined benefit

superannuation plans are responsible for the liability

for employee superannuation entitlements. These

plans are not consolidated in the Annual Financial

Report as they are not controlled by the State.

However, the majority of the superannuation

liability is the responsibility of the State and is

recognised accordingly.

At each reporting date, a net liability or asset is

recognised in respect of defined benefit

superannuation obligations. This is measured as the

difference between the present value of the defined

benefit obligations at the reporting date and the net

market value of the defined benefit superannuation

plans’ assets.

AASB 119 Employee Benefits requires the defined

benefit obligation to include an assumed value of

contributions tax relating to service before the

reporting date or on benefits resulting from that

service. The contributions tax component is

calculated as the present value of the tax that is

estimated to be paid on contributions that are

expected to be made to fund the past service

liability. These tax payments have been determined

based on the deficit (if any) valued using the

funding valuation assumptions, which is smaller

than the deficit shown in these statements valued

using the AASB 119 assumptions. The expected

payments are then discounted to the reporting date

using the AASB 119 discount rate.

The superannuation liabilities of agencies for which

the State is not responsible, such as universities, are

not reflected in the balance sheet.

Defined benefit plans: these provide benefits

based on years of service and final average salary.

At each reporting date, a liability or asset is

recognised in respect of defined benefit

superannuation obligations.

The present value of defined benefit obligations is

based upon future payments, which are expected to

arise due to membership of the superannuation plan

to date, taking into account the taxes payable by the

plan.

Consideration is given to expected future salary

levels and employee departures. Expected future

payments are discounted to present values using

yields applying to long-term Commonwealth

Government bonds.

Salary and pension inflation rates are actuarial

assumptions based on fund experience along with

long term economic and market indicators. (Refer

to change in financial assumptions disclosures

below)

Defined contribution plans: the State has no

obligation to fund any shortfall in these funds and is

only responsible for meeting agreed and/or

legislated contribution requirements.

6. OTHER ASSETS AND LIABILITIES

2022-23 Financial Report Chapter 4 101

Net superannuation liability ($ million)

State of Victoria

2023

2022

Emergency Services and State Super

Defined benefit obligation

40 541

40 138

Tax liability

(a)

2 122

1 943

Plan assets

(24 757)

(23 487)

Net liability/(asset)

17 907

18 594

Other funds

(b)

Defined benefit obligation

2 542

2 718

Tax liability

(a)

Plan assets

(1 545)

(1 556)

Net liability/(asset)

997

1 161

Total superannuation

Defined benefit obligation

43 083

42 856

Tax liability

(a)

2 122

1 943

Plan assets

(26 301)

(25 043)

Superannuation liability

18 904

19 756

Represented by:

Current liability

(c)

279

992

Non-current liability

(c)

18 625

18 764

Total superannuation liability

18 904

19 756

Notes:

(a) Tax liability represents the present value of tax payments on contributions that are expected to be required to fund accrued benefits.

(b) Other funds include constitutionally protected schemes and the State’s share of liabilities of the defined benefit scheme of the Health Super Fund (which is now part

of Aware Super).

(c) The 2022 superannuation liability balances have been reclassified from current to non-current to more correctly reflect the nature of the transactions.

Reconciliation of the defined benefit obligation ($ million)

State of Victoria

2023

2022

Opening balance of defined benefit obligation

44 799

54 079

Current service cost

993

1 352

Interest cost

1 630

928

Contributions by plan participants

241

215

Remeasurements:

Actuarial (gain)/loss arising from change in financial assumptions

(983)

(8 884)

Actuarial (gain)/loss arising from change in demographic assumptions

Actuarial (gain)/loss due to other experience

1 388

(497)

Benefits paid

(2 863)

(2 395)

Closing balance of defined benefit obligation

45 205

44 799

Reconciliation of the fair value of plan assets ($ million)

State of Victoria

2023

2022

Opening balance of plan assets

25 043

26 834

Interest income

910

447

Remeasurements:

Expected return on plan assets excluding interest income

836

1 299

Actuarial gain/(loss) relative to expected return

941

(2 859)

Employer contributions

1 193

1 502

Contributions by plan participants

241

215

Benefits paid (including tax paid)

(2 863)

(2 395)

Closing balance of plan assets

26 301

25 043

6. OTHER ASSETS AND LIABILITIES

102 Chapter 4 2022-23 Financial Report

The State’s defined benefit superannuation plans

provide benefits based on years of service and final

average salary. These are:

• State Super Funds (SSF), a collection of defined

benefit schemes providing both lump sum and

pension benefits (Revised Scheme, New

Scheme, State Employees Retirement Benefits

Scheme, Transport Scheme, Melbourne Water

Corporation Employees Superannuation

Scheme, Port of Melbourne Authority

Superannuation Scheme and Parliamentary

Contributory Superannuation Fund). All

schemes are now closed to new members.

• Emergency Services Superannuation Scheme

Defined Benefit (ESSS DB), a defined benefit

lump sum scheme, which remains open to new

members. It also has a number of pensioners

remaining from prior schemes.

• Constitutionally Protected Pension Schemes,

defined benefit pensions that continue to be

provided to new office holders.

• Health Super Division of Aware Super (Health

Super), a defined benefit scheme that provides

both lump sum and pension benefits. This

scheme is closed to new members.

The SSF, ESSS DB and Constitutionally Protected

Pension Schemes are exempt public sector

superannuation schemes. These schemes comply

with national superannuation standards under a

Heads of Government Agreement, and are treated

as complying for concessional tax and

superannuation guarantee purposes.

The Emergency Services Superannuation Board

(ESSB) is responsible for the governance of the SSF

and ESSS DB and acts as paying agent for

constitutionally protected pensions. The ESSB has

the following roles:

• Administration of the schemes, including

payment of benefits to beneficiaries in

accordance with the governing rules of the

schemes. The administration service has been

outsourced to Iress (previously Financial

Synergy Holdings Pty Ltd).

• Management and investment of the assets of

the schemes, the responsibility for which is

primarily outsourced to the Victorian Funds

Management Corporation (VFMC).

• Compliance with superannuation law and other

applicable regulations in accordance with the

Heads of Government Agreement.

Constitutionally protected pensions are governed by

Victorian acts for which the Attorney-General is

responsible.

Aware Super is a regulated public offer

superannuation fund. Aware Super Pty Ltd (ASPL)

is responsible for the governance of Aware Super

and therefore Health Super. As trustee, ASPL has

the following roles:

• Administration of Health Super, including

payment of benefits to beneficiaries in

accordance with the governing rules.

• Management and investment of the assets of

Health Super.

• Compliance with superannuation law and other

applicable regulations.

6. OTHER ASSETS AND LIABILITIES

2022-23 Financial Report Chapter 4 103

Superannuation assumptions

The significant actuarial assumptions used for

superannuation reporting purposes are the discount

rate, future rates of wages growth and the inflation

rate that is used to index pensions, (while the

expected return on assets is included for

completeness), as detailed below.

Victorian statutory

Financial

Per cent per annum

superannuation funds

Actuary

assumptions

2023

2022

Emergency Services and State Super

PwC Securities Ltd.

Expected return on assets

(a)

7.0

7.6

Discount rate

(b)

4.2

3.8

Wages growth

(c)

3.3

3.7

Inflation rate

(c)

2.5

2.2

Constitutionally Protected Pensions

PwC Securities Ltd.

Discount rate

(b)

4.2

3.8

Wages growth

(c)

3.3

3.7

Inflation rate

(c)

n.a.

Health Super Fund

Mercer (Australia) Pty. Ltd.

Expected return on assets

(a)

5.0

3.8

Discount rate

(b)

4.2

3.8

Wages growth

(c)

3.3

3.7

Inflation rate

(c)

2.5

2.2

Notes:

(a) The expected return on assets stated is gross of tax. This rate is adjusted in the calculation process to reflect the assumed rate of tax payable by each scheme.

(b) In accordance with accounting standards, the discount rate is based on a long-term Commonwealth bond rate. The rate stated above is an annual effective rate,

gross of tax.

(c) The wages growth and inflation rates in this table are actuarial assumptions based on fund experiences along with long term economic and market indicators and do

not reflect the Government’s wages policy. The wages growth assumption at 30 June 2023 is the weighted average of the scheme specific wage growth rates.

The inflation rate shown above is the long-term assumption applied in determining the defined benefit obligation.

Change in financial assumptions for wages growth

For previous financial reports, the inflation

assumptions adopted for superannuation valuation

purposes, under AASB 119, were based on the

relationship between the yields on nominal and index

linked Commonwealth Government bonds. In

particular, the rate at which pensions were assumed

to increase, which is linked to price inflation, was

determined based on the relationship between the

yields on nominal and inflation linked

Commonwealth Government bonds with terms

similar to that of the liability and included an

allowance for an inflation risk premium. Based on

the historical relationship between price and wage

inflation, salaries were assumed to increase by

1.5 per cent per annum more than price inflation.

This approach has been changed effective from

30 June 2023, such that the wage growth and

inflation assumptions are now determined based on

fund experience along with long-term economic and

market indicators. This simplifies the assumption

setting process and better aligns it with the approach

adopted for most other government and corporate

schemes.

Both the prior and current approaches to setting

wage growth and inflation assumptions are

acceptable under AASB 119 and are consistent with

actuarial guidance.

6. OTHER ASSETS AND LIABILITIES

104 Chapter 4 2022-23 Financial Report

Impact of the change in inflation assumptions

The change in the approach to setting inflation assumptions as at 30 June 2023 had the following impact on the

assumptions adopted as outlined below.

(per cent)

Prior basis

New basis

Difference

Discount rate per annum (p.a.)

4.2

0.0

Salary increase rate p.a (excluding promotional)

3.9

3.3

(0.6)

Future pension increase rate p.a (2024-25 and onwards)

2.4

2.5

0.1

The change in approach to setting the wage growth

and inflation assumptions is estimated to have

increased the defined benefit obligation at

30 June 2023 by approximately $20 million. This is

recognised as a remeasurement in other

comprehensive income.

This change in approach to setting inflation

assumptions does not impact the superannuation

expense from transactions for 2022-23, and its

impact in future years will depend on the relative

change in the inflation assumptions that are adopted

over time.

Market volatility and bond yield movements

High inflation and rising interest rates, along with

concerns regarding geopolitical tensions,

contributed to a fall in global markets over the later

stages of 2021-22 resulting in negative overall

portfolio returns.

This negative market sentiment continued in the

early part of 2022-23. However, the second half of

2022-23 was positively impacted by signs of easing

inflation pressures and resilient company earnings,

especially within the large cap technology stocks

exposed to Artificial Intelligence.

This resulted in the investment returns on the

State’s defined benefit superannuation assets

exceeding expectations in 2022-23.

The favourable impact this had on the State’s

superannuation liability was partially offset by an

increase in the defined benefit superannuation

obligation (DBO). This increase was primarily

attributable to increases in actual and expected

inflation partly offset by the impact of an increase in

the Commonwealth Government bond yield that

underlies the superannuation valuation assumptions

and relative reduction in the rate of wage growth in

2022-23.

Overall, the State’s superannuation liability

decreased by $852 million in the year to

30 June 2023.

It is important to note that changes in the reported

superannuation liability that arise solely due to

changes in the bond yields that underlie its valuation

do not affect the amount of cash required to fund

this liability over time. However, superannuation

funding requirements will vary over time based on

any differences between the actual and expected

returns on superannuation assets.

6. OTHER ASSETS AND LIABILITIES

2022-23 Financial Report Chapter 4 105

Sensitivity analysis

The key risks associated with the State’s defined

benefit superannuation plans are:

• investment risk – the risk that investment

returns will be lower than assumed and that

State contributions will need to increase to

offset the shortfall

• wages growth risk – the risk that wages or

salaries (on which future benefits are based) will

rise more rapidly than assumed, thereby

increasing defined benefits and requiring

additional employer contributions

• pension growth risk – the risk that CPI and

therefore pension increases will be higher than

assumed, thereby increasing defined benefit

pension payments and requiring additional

employer contributions

• longevity risk – the risk that pensioners will live

longer than expected, thereby increasing defined

benefit pension payments and requiring

additional employer contributions.

To illustrate the impact that movements in these

assumptions can have on the State’s superannuation

liability, the defined benefit obligation has been

remeasured under the scenarios below.

The assumptions below have been adjusted while

maintaining all other assumptions. There have been

no changes to the methods and assumptions used to

prepare this sensitivity analysis since the prior

period.

These scenarios are expected to have the following impact on the State’s defined benefit obligation.

Discount rate

Wage growth

Inflation rate

Base case

plus 0.25 per cent

Discount rate

(per cent a year)

4.2

4.5

4.2

Salary growth

(per cent a year)

3.3

3.5

3.3

Inflation rate

(per cent a year)

2.5

2.8

Estimated increase / (decrease)

(per cent)

n.a

(2.7)

0.4

2.0

Estimated increase / (decrease) in

defined benefit obligation

($ million)

n.a

(1 203)

178

891

Target asset allocation (per cent)

Asset class

2023

2022

Domestic equity

20.9

19.2

International equity

28.8

28.9

Domestic debt assets

16.4

17.3

International debt assets

3.8

4.3

Property

7.8

7.4

Cash

7.2

7.7

Other (including private equity, hedge funds and infrastructure)

15.1

15.2

Total

100

The assets are invested in the asset classes shown

above. The chosen assets are not designed to match

the liabilities exactly. However, the nature of the

liabilities is considered in setting the investment

strategy.

6. OTHER ASSETS AND LIABILITIES

106 Chapter 4 2022-23 Financial Report

Funding arrangements

The funding arrangements for each defined benefit

plan are as follows:

• SSF – the scheme is partially funded, with

participating employers generally contributing

the cost of service as it accrues while the State

meets the cost of past service

• ESSS DB – a funded scheme, with a funding

target of 110 per cent to 120 per cent of vested

benefits. The board’s shortfall limit is

95 per cent of vested benefits

• Constitutionally Protected Pension Schemes –

unfunded schemes (i.e. there are no assets) and

benefits are paid from the Consolidated Fund as

they fall due

• Health Super – a funded scheme where

employers contribute in accordance with the

actuary’s recommendations, which are designed

to maintain scheme assets in excess of

100 per cent of the scheme’s vested benefits.

In the 2023-24 financial year, employer

contributions of $881 million, in total, are expected

to be paid to the defined benefit plans. Of this,

$279 million relates to the funding of the SSF’s past

service liability.

The weighted average duration of the defined

benefit obligation is approximately 11.0 years.

6.6 Other provisions

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Provision for insurance claims

WorkSafe Victoria

3 805

3 499

Transport Accident Commission

1 602

1 609

Victorian Managed Insurance Authority

920

650

Other agencies

102

100

Current provision for insurance claims

6 428

5 821

100

Other provisions

2 285

1 400

1 963

1 109

Total current other provisions

8 713

7 222

2 063

1 169

Non-current provision for insurance claims

WorkSafe Victoria

22 841

20 813

Transport Accident Commission

15 114

15 630

Victorian Managed Insurance Authority

2 540

2 201

Other agencies

123

122

Non-current provision for insurance claims

40 618

38 741

122

Other provisions

798

833

765

815

Total non-current other provisions

41 417

39 574

887

912

Total other provisions

50 129

46 795

2 950

2 082

Other provisions are recognised when the State has

a present obligation, the future sacrifice of

economic benefits is probable, and the amount of

the provision can be measured reliably.

The amount recognised as a provision is the best

estimate of the consideration required to settle the

present obligation at reporting date, taking into

account the risks and uncertainties surrounding the

obligation.

Where a provision is measured using the cash flows

estimated to settle the present obligation, its

carrying amount is the present value of those cash

flows.

When some or all of the economic benefits required

to settle a provision are expected to be received

from a third party, the receivable is recognised as an

asset when recovery is virtually certain and the

amount of the receivable can be measured reliably.

6. OTHER ASSETS AND LIABILITIES

2022-23 Financial Report Chapter 4 107

6.6.1 Insurance claims

Assumptions used in measurement of liability for

outstanding insurance claims

The liability for outstanding insurance claims is

independently assessed by actuaries. It covers claims

reported but not yet paid, claims incurred but not

yet reported, and the anticipated costs of settling

those claims. Due to the inherent uncertainty in the

estimate of the outstanding insurance claims, a risk

margin is included. The risk margin is set to increase

the probability that the liability estimate will be

sufficient to 75 per cent.

The actuaries take into account projected inflation

and other factors to arrive at expected future

payments. These are then discounted to the

reporting date using a market determined, risk-free

discount rate to determine the liability for

outstanding insurance claims.

Market volatility and bond yield movements

The State’s insurance agencies hold significant

assets that are invested to support their claims

liabilities. The return on these investments impact

on an insurer’s net asset position. Despite strong

financial market performance in the first half of

2021-22, high inflation and rising interest rates

which, along with concerns regarding geopolitical

tensions, contributed to a fall in global markets over

the later stages of 2021-22 resulting in negative

overall portfolio returns. This negative market

sentiment continued in the early part of 2022-23.

However, the second half of 2022-23 was positively

impacted by signs of easing inflation pressures and

resilient company earnings, especially within the

large cap technology stocks exposed to Artificial

Intelligence. As a result, the investment returns on

the portfolios invested by the State’s insurance

agencies were positive in 2022-23.

The Insurer’s net asset position is also sensitive to

Commonwealth Government bond yields which, in

accordance with Australian Accounting Standards,

underlie the discount rates used to value the State

insurance agencies’ outstanding claims liabilities.

Commonwealth Government bond yields increased

in 2022-23, which reduced the value of the State

insurance agencies’ outstanding claims liabilities.

Reconciliation of movements in insurance claims

(a)

($ million)

State of Victoria

2023

2022

Opening balance

44 562

47 432

Effect of changes in assumptions and claims experience

(1 704)

(5 973)

Cost of prior year claims (unwinding of discount)

1 312

920

Increase in claims incurred

(b)

9 104

7 443

Claim payments during the year

(b)

(5 243)

(4 685)

Other

(986)

(575)

Closing balance

47 046

44 562

Notes:

(a) Reconciliation of movements in insurance claims is only disclosed for the whole of state as they are only material for the State’s insurance agencies in the public

financial corporations sector.

(b) Claim payments and claims incurred during the year are net of recoveries.

108 Chapter 4 2022-23 Financial Report

6. OTHER ASSETS AND LIABILITIES

Insurance claims assumptions

Weighted average

Financial assumptions used (%)

(a)(b)(c)

expected term to

settlement (years)

Weighted average

inflation rate (%)

(d)

Weighted average

discount rate (%)

Prudential margin

used (%)

(e)

Entity

Actuary

2023

2022

2023

2022

2023

2022

2023

2022

Victorian WorkCover

Authority (WorkSafe

Victoria)

PwC Actuarial Ltd.

7.50

7.40

AWE inflation

0 to 20 years = 3.58

21+ years = 3.55

CPI inflation

0 to 20 years = 2.71

21+ years = 2.55

AWE inflation

0 to 20 years = 3.20

21+ years = 3.37

CPI inflation

0 to 20 years = 2.72

21+ years = 2.37

0 to 20 years = 4.21

21+ years = 4.61

0 to 20 years = 3.69

21+ years = 4.24

10.00

Transport Accident

Commission

Finity Consulting Pty. Ltd.

13.60

15.80

AWE inflation

0 to 20 years = 3.41

21+ years = 3.42

CPI inflation

0 to 20 years = 3.80

21+ years = 2.83

AWE inflation

0 to 20 years = 3.26

21+ years = 3.40

CPI inflation

0 to 20 years = 2.59

21+ years = 2.40

0 to 20 years = 4.21

21+ years = 4.49

0 to 20 years = 3.82

21+ years = 4.30

11.00

Victorian Managed

Insurance Authority

Finity Consulting Pty. Ltd.

(Medical Indemnity)

4.00

3.90

6.90

6.60

4.10

3.40

Risk margin = 7.50

CHE = 2.00

Risk margin = 13.50

CHE = 2.00

Victorian Managed

Insurance Authority

Finity Consulting Pty Ltd.

(Liability)

2.30

3.40

3.00

4.10

3.00

Risk margin = 31.70

CHE = 3.00

Risk margin = 25.80

CHE = 4.00

Victorian Managed

Insurance Authority

Finity Consulting Pty. Ltd.

(Property)

1.50

1.40

3.40

3.00

4.10

3.00

Risk margin = 14.30

CHE = 1.40

Risk margin = 14.00

CHE = 4.00

Victorian Managed

Insurance Authority

Finity Consulting Pty. Ltd.

(Other)

2.10

1.90

3.40

3.00

4.10

3.00

Risk margin = 17.50

CHE = 3.00

Risk margin = 17.50

CHE = 4.00

Victorian Managed

Insurance Authority

Finity Consulting Pty. Ltd.

(Dust Diseases and

Workers’ Compensation)

8.80

9.50

5.40

5.25

4.30

3.80

Risk margin = 28.50

CHE = 4.00

Risk margin = 28.50

CHE = 3.30

Victorian Managed

Insurance Authority

Finity Consulting Pty. Ltd.

(Domestic Building

Insurance)

2.40

2.70

3.40

3.00

4.10

3.20

Risk margin = 23.50

CHE = 3.50

Risk margin = 23.50

CHE = 4.50

Victorian Managed

Insurance Authority

Finity Consulting Pty. Ltd.

(Construction)

2.80

3.40

3.00

4.10

3.00

Risk margin = 31.70

CHE = 3.00

Risk margin = 31.70

CHE = 4.00

Notes:

(a) The inflation rate assumptions are based on the anticipated rise in costs relevant to a particular entity.

(b) Financial assumptions used for provisions not later than 1 year and later than 1 year are the same unless otherwise specified.

(d) AWE = Victorian Average Weekly Earnings.

(e) CHE refers to claims handling expenses. These are the direct expenses that are expected to be incurred when settling claims.

2022-23 Financial Report Chapter 4 109

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

Introduction

The State is exposed to risks from both its activities

and outside factors. In addition, it is often necessary

to make judgements and estimates associated with

recognition and measurement of items in the

financial statements.

This section presents information on financial

instruments, contingent assets and liabilities, and

fair value determinations on the State’s assets and

liabilities.

Structure

7.1 Financial instruments ................................................ 109

7.2 Contingent assets and contingent liabilities

(State of Victoria) ...................................................... 124

7.3 Fair value determination ........................................... 128

7.4 Fair value determination of financial assets

and liabilities ............................................................... 130

7.5 Fair value determination of non-financial assets . 133

7.1 Financial instruments

Introduction

Financial instruments arise out of contractual

agreements that give rise to a financial asset of one

entity and a financial liability or equity instrument of

another entity. Due to the nature of the State’s

activities, certain assets and liabilities arise under

statute rather than a contract (for example, taxes,

fines and penalties). Such assets and liabilities

(statutory receivables and payables) are initially

recognised and measured in the same manner as

financial instruments, even though they are not

financial instruments. The disclosure requirements

associated with financial instruments therefore do

not apply.

The main purposes for the State to hold financial

instruments are:

• for liquidity management purposes

• to manage financial risk

• to fund the State’s capital expenditure program

• to meet long-term insurance and

superannuation liabilities.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

110 Chapter 4 2022-23 Financial Report

Categories of financial instruments ($ million)

2023

State of

Victoria

General

government

sector

Financial assets

Cash and deposits

25 678

19 698

Financial assets designated at fair value through profit or loss

62 426

2 602

Financial assets mandatorily measured at fair value through profit or loss

381

133

Financial assets at amortised cost

5 024

7 963

Financial assets measured at fair value through other comprehensive income

Investment in equity instrument designated at fair value through other comprehensive income

762

761

Total financial assets

(a)

94 289

31 174

Financial liabilities

Financial liabilities designated at fair value through profit and loss

131 633

Financial liabilities mandatorily measured at fair value through profit or loss

724

212

Financial liabilities at amortised cost

42 912

149 912

Total financial liabilities

(b)

175 269

150 125

2022

Financial assets

Cash and deposits

17 258

10 974

Financial assets designated at fair value through profit or loss

(c)

54 250

2 294

Financial asset mandatorily measured at fair value through profit or loss

707

431

Financial assets at amortised cost

4 517

7 349

Financial assets measured at fair value through other comprehensive income

Investment in equity instrument designated at fair value through other comprehensive income

(c)

483

482

Total financial assets

(a)

77 233

21 548

Financial liabilities

Financial liabilities designated at fair value through profit and loss

106 487

Financial liabilities mandatorily measured at fair value through profit or loss

851

327

Financial liabilities at amortised cost

38 902

124 899

Total financial liabilities

(b)

146 240

125 227

Notes:

(a) The State’s total financial assets exclude statutory receivables, contract assets and other receivables of $8 268 million ($7 236 million in 2022) while the general

government sector’s total financial assets exclude statutory receivables and contract assets of $6 731 million ($6 132 million in 2022).

(b) The State’s total financial liabilities exclude statutory taxes payable, unearned income, contract liabilities, grant of right to the operator liability and advance

premiums of $32 393 million ($21 870 million in 2022) while the general government sector’s total financial liabilities exclude statutory taxes payable, contract

liabilities, grant of right to the operator liability, and unearned income of $22 177 million ($11 917 million in 2022).

Categories of financial instruments

Financial assets at amortised cost are classified

within this category if both of the following criteria

are met and the assets are not designated as fair

value through profit or loss:

• the assets are held within a business model

whose objective is to hold financial assets in

order to collect the contractual cash flows

• the contractual terms of the financial asset give

rise on specified dates to cash flows that are

solely payments of principal and interest on the

principal amount outstanding.

These assets are initially recognised on the date they

originated and initially measured at fair value plus

any directly attributable transaction costs.

Subsequent to initial recognition, these assets are

measured at amortised cost using the effective

interest method (less any impairment).

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

2022-23 Financial Report Chapter 4 111

Financial assets measured at fair value through

other comprehensive income

Debt instruments are measured at fair value through

other comprehensive income as an irrevocable

designation choice if both of the following criteria

are met and the assets are not designated as fair

value through profit or loss:

• the assets are held within a business model

whose objective is achieved by both collecting

contractual cash flows and selling the financial

assets

• the contractual terms of the financial asset give

rise on specified dates to cash flows that are

solely payments of principal and interest on the

principal amount outstanding.

Equity investments are measured at fair value

through other comprehensive income if the assets

are not held for trading and the State has

irrevocably elected at initial recognition to recognise

these equity investments in this category.

Such assets are initially recognised at fair value.

Subsequent to initial recognition, they are measured

at fair value with gains and losses arising from

changes in fair value, recognised in other economic

flows – other comprehensive income.

Upon disposal of these equity instruments, any

related balance in fair value reserve is reclassified to

accumulated surplus.

Financial assets at fair value through profit or

loss

At initial recognition, an irrevocable designation at

fair value through profit or loss is allowed subject to

certain criteria. Financial instruments may be

designated at fair value through profit or loss,

if doing so eliminates or significantly reduces a

measurement or recognition inconsistency that

would otherwise arise from measuring assets or

recognising the gains and losses on them on

different bases.

Financial instruments at fair value through the

profit or loss are initially measured at fair value and

attributable transaction costs are expensed as

incurred. Subsequently, any changes in fair value are

recognised in the net result as other economic flows

unless the changes in fair value relate to changes in

the State’s own credit risk. In this case, the portion

of the change attributable to changes in the State’s

own credit risk is recognised in other

comprehensive income, with no subsequent

recycling to net result when the financial liability is

derecognised. The State recognises some debt

securities that are held for trading in this category

and designated certain debt securities as fair value

through net result in this category.

Financial assets and liabilities at fair value through

net result are categorised as such at trade date, or if

they are classified as held for trading or designated

as such upon initial recognition. Financial

instrument assets are designated at fair value

through the net result on the basis that the financial

assets form part of a group of financial assets that

are managed based on their fair values and have

their performance evaluated in accordance with

documented risk management and investment

strategies.

Financial liabilities at amortised cost are initially

recognised on the date they are originated. They are

initially measured at fair value plus any directly

attributable transaction costs. Subsequent to initial

recognition, these financial instruments are

measured at amortised cost with any difference

between the initial recognised amount and the

redemption value being recognised in profit or loss

over the period of the interest bearing liability, using

the effective interest rate method (refer to

Note 5.1).

Financial instrument liabilities measured at

amortised cost include all of the State’s payables,

deposits held and advances received, and interest

bearing arrangements other than those designated at

fair value through profit or loss.

Derivative financial instruments are initially

recognised at fair value on the date on which a

derivative contract is entered into. Derivatives are

carried as assets when their fair value is positive and

as liabilities when their fair value is negative. Any

gains or losses arising from changes in the fair value

of derivatives after initial recognition are recognised

in the consolidated comprehensive operating

statement as a other economic flows included in the

net result.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

112 Chapter 4 2022-23 Financial Report

Derecognition of financial assets and liabilities

A financial asset (or, where applicable, a part of a

financial asset or part of a group of similar financial

assets) is derecognised in any of the following

instances:

• the rights to receive cash flows from the asset

have expired

• the State retains the right to receive cash flows

from the asset, but has assumed an obligation to

pay them in full without material delay to a third

party under a pass through arrangement

• the State has transferred its rights to receive

cash flows from the asset and either:

– has transferred substantially all the risks and

rewards of the asset

– has neither transferred nor retained

substantially all the risks and rewards of the

asset but has transferred control of the

asset.

Where the State has retained substantially all the

risks and rewards and not transferred control, the

asset is recognised to the extent of the State’s

continuing involvement in the asset.

Upon disposal of debt instruments measured at fair

value to other comprehensive income, any related

balance in the fair value reserve is reclassified to

profit or loss.

A financial liability is derecognised when the

obligation under the liability is discharged, cancelled

or expires.

When an existing financial liability is replaced by

another from the same lender on substantially

different terms, or the terms of an existing liability

are substantially modified, such an exchange or

modification is treated as a derecognition of the

original liability and the recognition of a new

liability. The difference in the respective carrying

amounts is recognised as an other economic flow in

the consolidated comprehensive operating

statement.

Reclassification of financial instruments

Subsequent to initial recognition, reclassification of

financial liabilities is not permitted. Financial assets

are required to be reclassified between fair value

through the net result, fair value through other

comprehensive income and amortised cost when

and only when the State’s business model for

managing its financial assets has changed such that

its previous classification would no longer apply.

If under rare circumstances an asset is reclassified,

the reclassification is applied prospectively from the

reclassification date and previously recognised gains,

losses or interest should not be restated. If the asset

is reclassified to fair value, the fair value should be

determined at the reclassification date and any gain

or loss arising from a difference between the

previous carrying amount and fair value is

recognised in the net result.

Impairment of financial assets

The State records the allowance for impairment for

the relevant financial instruments consistent with

the expected credit loss approach required by

AASB 9. Subject to AASB 9, impairment

assessments include the State’s contractual

receivables, statutory receivables and its investment

in debt instruments.

All financial instrument assets, except those

measured at fair value through profit or loss, are

subject to review at each reporting date.

Recognition of a loss allowance for expected credit

losses on a financial asset is required. Under the

general approach, if the credit risk for a financial

asset has increased significantly, then the loss

allowance is measured at an amount equal to the

lifetime expected credit losses. If the credit risk has

not increased significantly, then the loss allowance is

measured at an amount equal to 12 months’

expected credit losses. Under the simplified

approach that has been applied to trade receivables,

and statutory receivables the measurement of their

loss allowance is at an amount equal to lifetime

expected credit losses.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

2022-23 Financial Report Chapter 4 113

Financial risk management

The State is exposed to a number of financial risks,

including:

As a whole, the State’s financial risk management

program seeks to manage these risks and the

associated volatility on its financial performance.

Responsible and prudent financial risk management

is carried out individually by the State’s entities,

in accordance with the State’s risk management

framework, developed by the Department of

Treasury and Finance (DTF) and established by the

Treasurer. The State’s risk management framework

comprises the following key components:

• The Treasurer is responsible for approving and

establishing the prudential framework

containing policies and guidelines on financial

risk management

• The Senior Executive Group of DTF is

responsible for advising the Government on the

management of the State’s financial risks

• DTF’s Financial Assets and Liabilities Group

provides oversight of the State’s key financial

balance sheet and financial market risks. These

risks relate to the State’s investments,

borrowings, superannuation and insurance

claims liabilities, as well as exposures to interest

rate, foreign exchange and commodity price

volatility and liquidity position

• DTF administers the State’s Central Banking

System (CBS). The CBS is a DTF cash

management initiative that allows the State to

reduce its external borrowings, resulting in

interest savings. Savings are achieved through a

bank account pooling arrangement of

department and agency accounts, utilising

surplus funds to reduce the State’s funding

requirements.

• TCV is the State’s central borrowing authority

and financing advisor. An independent

prudential supervisor is appointed by the

Treasurer to monitor TCV’s compliance with its

prudential framework

• VFMC acts as the State’s central investment

fund manager providing expertise in developing

investment strategy and providing funds

management services in accordance with each

entity’s investment objectives. An independent

prudential supervisor is appointed by the

Treasurer to monitor VFMC’s compliance with

its prudential framework

• The State’s entities are responsible for setting

their own financial risk policy and objectives in

accordance with the Standing Directions 2018

(Standing Directions) under the Financial

Management Act 1994. All entities are responsible

for the day-to-day operational management of

their financial instruments and associated risks

in accordance with the Standing Directions.

The Standing Directions cover areas such as

financial management objectives, responsibility

structure and delegation, and policies and guidance

on interest rate risk, foreign exchange risk,

counterparty risk, commodity price risk, investment

risk, credit risk, liquidity risk and operational risk.

The Accountable Officer of each of the State’s

entities is responsible for advising its board, the

responsible Minister, DTF and, for Portfolio

Agencies, the Accountable Officer of their Portfolio

Department of any material compliance deficiency,

and of planned and completed remedial actions,

as soon as practicable.

A number of the State’s entities enter into derivative

financial instruments in accordance with the

Treasurer’s prudential and financial management

framework, in order to manage their exposure to

movements in interest rates, foreign currency

exchange rates and commodity-related exposures.

These derivative financial instruments, which

include interest rate swaps, futures and forward

foreign exchange contracts, are used to manage the

risks inherent in either borrowings, financial asset

investments or cash flow denominated in foreign

currency. Derivative financial instruments are not

used to add leverage to the State’s financial position.

Financial risks

Market risk

Interest rate risk

Foreign currency risk

Equity price risk

Credit risk

Liquidity risk

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

114 Chapter 4 2022-23 Financial Report

7.1.1 Interest rate risk

The State is exposed to interest rate risk through

borrowings and investments in interest bearing

financial assets, such as deposits and debt securities.

Interest rate risk could be in the form of fair value

risk or cash flow risk.

Fair value interest rate risk is the risk that the value

of a financial instrument will fluctuate because of

changes in market interest rates. It relates to

financial instruments with fixed interest rates

measured at fair value and represents the most

significant interest rate risk for the State.

Cash flow interest rate risk is the risk that the future

cash flows of a financial instrument will fluctuate

because of changes in market interest rates. Only a

small portion of the State’s financial instruments are

exposed to cash flow interest rate risk and these

arise from financial assets and financial liabilities

with floating interest rates, which are measured at

amortised cost.

The interest rate exposure table provides details of

the carrying amounts of financial assets and

liabilities that expose the State to either interest rate

fair value risk or interest rate cash flow risk.

2022-23 Financial Report Chapter 4 115

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

Interest rate exposure as at 30 June ($ million)

State of Victoria

General government sector

2023

Floating rate

Fixed rate

Non-interest

bearing

Total

Floating rate

Fixed rate

Non-interest

bearing

Total

Financial assets

Cash and deposits

25 207

175

297

25 678

19 291

160

247

19 698

Receivables

128

3 573

3 705

2 236

2 315

Advances paid

901

930

228

4 051

1 029

5 308

Term deposits

1 789

1 832

193

202

Derivative financial instruments

213

246

464

127

133

Equities and managed investment schemes

802

45 091

45 894

411

3 082

3 493

Debt securities

1 399

14 378

15 785

Total financial assets

27 585

16 588

50 115

94 289

19 991

4 454

6 729

31 174

Financial liabilities

Payables, deposits held and advances received

370

9 923

10 317

526

7 288

7 836

Derivative financial instruments

504

947

1 451

211

215

Interest-bearing liabilities

13 173

133 591

146 765

12 146

115 444

127 589

Lease liabilities

614

7 309

592

8 515

600

7 031

296

7 927

Service concession arrangement liabilities

8 222

6 557

Total financial liabilities

14 158

149 650

11 462

175 269

13 276

129 055

7 795

150 125

2022

Financial assets

Cash and deposits

16 422

137

699

17 258

10 346

121

508

10 974

Receivables

126

3 585

3 719

2 234

2 274

Advances paid

150

436

632

617

3 588

724

4 929

Term deposits

4 341

4 380

134

142

Derivative financial instruments

210

1 139

1 348

431

Equities and managed investment schemes

1 205

39 195

40 426

1 152

1 594

2 773

Debt securities

665

8 797

9 470

Total financial assets

18 606

13 565

45 062

77 233

12 174

3 875

5 499

21 548

Financial liabilities

Payables, deposits held and advances received

834

8 895

9 754

1 141

6 641

7 807

Derivative financial instruments

581

1 411

1 991

251

331

Interest-bearing liabilities

13 110

105 689

118 798

8 633

93 942

102 575

Lease liabilities

490

7 871

420

8 781

516

7 484

237

8 237

Service concession arrangement liabilities

6 916

6 277

Total financial liabilities

14 434

121 081

10 725

146 240

10 370

107 728

7 129

125 227

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

116 Chapter 4 2022-23 Financial Report

Interest rate risk management

The State’s policy for managing interest rate risk on

borrowings is to achieve relative certainty of the

cash interest cost impact on the net result from

transactions on the operating statement, while

seeking to minimise the net borrowing cost within

portfolio risk management guidelines. Generally,

this is achieved by undertaking fixed rate

borrowings across a range of maturity profiles.

Derivative instruments, such as interest rate swaps

and futures contracts, are used to either change the

interest rate between fixed and floating rates of

interest or between different floating rates of

interest.

At 30 June 2023, approximately 88 per cent

(90 per cent in 2022) of the State’s domestic

borrowings are at fixed rates of interest. There has

been no material change in the State’s exposure to

interest rate risk or the manner in which it manages

and measures the risk from the previous reporting

period.

Interest rate sensitivity analysis on total borrowings

The State has analysed the possible effects of

changes in interest rates on the total reported value

of borrowings and the operating statement using

the following assumptions:

• The impact of a movement in interest rates on

the market value of total State borrowings for

both derivative and non-derivative instruments

at the reporting date, and the stipulated change

occurs at the beginning of the financial year and

is held constant throughout the reporting

period.

• An increase or decrease of 50 basis points

(50 basis points in 2022). Based on historic

movements, and in particular, management’s

knowledge and experience of the recent

volatility in global financial markets, the State

has assessed that a movement of this magnitude

is reasonably possible.

• No change in interest risk management as a

result of changes in interest rates.

With all other variables held constant, the impact of

a 50 basis point increase or decrease on market

value of total net borrowings of the State is a

$3.3 billion increase/$3.4 billion decrease (30 June

2022 $2.7 billion increase/$2.8 billion decrease of a

50 basis point impact). This revaluation impact on

total net borrowings is unrealised, and is recognised

in the operating statement as other economic flows

and impacts the net result.

The sensitivity to interest rates is mainly attributable

to the revaluation of fixed interest rate borrowings

at fair value, but this does not impact on the net

result from transactions.

7.1.2 Foreign currency risk

All foreign currency transactions during the

financial year are brought to account using the

exchange rate in effect at the date of the transaction.

Foreign monetary items existing at the end of the

reporting period are translated at the closing rate at

the end of the reporting period. Non-monetary

assets carried at fair value that are denominated in

foreign currencies are translated to the functional

currency at the rates prevailing at the date the fair

value was determined.

Foreign currency translation differences are

recognised in other economic flows in the

consolidated comprehensive operating statement,

and accumulated in a separate component of equity

in the period in which they arise.

The State is also exposed to foreign currency risk

through investments in foreign currency

denominated financial assets, primarily international

equities. This exposure is mainly via the major

currencies such as the United States dollar,

Canadian dollar, Japanese yen, Swiss franc, the euro,

Pound sterling and the New Zealand dollar.

The carrying amount of the State’s foreign currency

denominated monetary assets and monetary

liabilities at the reporting date is $5.4 billion

($5.4 billion in 2022) of equities and managed

investment schemes and $677 million ($649 million

in 2022) of foreign currency borrowings.

When managing foreign currency, VFMC, the

State’s fund manager, determines an optimal foreign

currency exposure range at the total portfolio level

in accordance with the investment risk management

plan approved by the Treasurer. In the

implementation of this approach, international

equities, and a portion of international debt

investments, are unhedged, while other investments

denominated in foreign currency, such as

infrastructure and hedge funds, are hedged back to

Australian dollars. In certain circumstances,

in accordance with VFMC’s governance

frameworks, VFMC may deviate from this approach

with the aim of improving expected risk-adjusted

portfolio outcomes.

TCV is the State’s central borrowing authority and

part of its funding program consists of foreign

currency borrowings. The State’s policy is to hedge

any material foreign currency exposures arising

from borrowings. TCV uses foreign exchange

options, and spot and forward foreign exchange rate

contracts, to manage offshore borrowings.

There has been no material change in the State’s

exposure to foreign currency risk, or the manner in

which it manages and measures this risk, since the

previous reporting period.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

2022-23 Financial Report Chapter 4 117

Foreign currency sensitivity analysis

The State has analysed the possible effects that

changes in exchange rates against the Australian

dollar may have on its financial position and result

based on:

• exposures to the pool of foreign currencies for

both derivative and non-derivative instruments

at the reporting date

• historic movements, future expectations and

management’s knowledge and experience of the

foreign currency markets

• the stipulated change taking place at the

beginning of the financial year and then held

constant throughout the reporting period

• no change in foreign exchange risk management

and associated hedging as a result of changes in

foreign exchange rates.

On this basis, the State has assessed that it may be

exposed to a 15 per cent increase or decrease in

exchange rates against the Australian dollar

(15 per cent in 2022).

With all other variables held constant, the impact of

a 15 per cent increase or decrease in exchange rates

at 30 June 2023 is a $1.9 billion increase/

$2.2 billion decrease ($455 million increase/

$511 million decrease in 2022) on economic flows

and net assets. There is no direct impact on the net

result from transactions.

7.1.3 Equity price risk

The State is exposed to equity price risk from

Australian and international investments in equities

directly and indirectly via managed investment

schemes or funds. These investments are selected as

part of a diversified portfolio to match investment

objectives appropriate to the State’s liabilities.

The State limits its equity price risk by diversifying

its investment portfolio. This is determined by

VFMC, as reflected in the investment risk

management plans approved by the Treasurer, and

in accordance with the Borrowing and Investments

Powers Act 1987 and the prudential supervisory

policies and framework of the State.

There has been no material change in the State’s

exposure to equity price risk or the manner in which

it manages and measures the risk since the previous

reporting period.

Equity price sensitivity analysis

The State has analysed the possible effects that

changes in equity prices may have on its financial

position and result based on:

• exposures to equity securities for both

derivative and non-derivative instruments at the

reporting date

• historic movements, future expectations and

management’s knowledge and experience of the

volatility of the equity markets

• the stipulated change taking place at the

beginning of the financial year and then held

constant throughout the reporting period

• no change in investment strategy / risk

management as a result of the changes in equity

prices.

On this basis, the State has assessed that it may be

exposed to a 15 per cent increase or decrease in

equity prices (increase or decrease of 15 per cent in

2022).

With all other variables held constant, a 15 per cent

increase or decrease in listed equities prices at

30 June 2023 is expected to result in a $2.5 million

increase/$2.5 million decrease ($2.3 million

increase/$2.3 million decrease in 2022) in other

economic flows and net assets. On the same basis,

a 15 per cent increase or decrease in unlisted equity

prices is expected to result in a $4.3 billion

increase/$4.3 billion decrease ($3.7 billion

increase/$3.7 billion decrease in 2022) in other

economic flows and net assets. There is no direct

impact on the net result from transactions.

7.1.4 Credit risk

Credit risk refers to the possibility that a borrower

will default on its financial obligations as and when

they fall due. The State’s exposure to credit risk

mainly arises through its investments in fixed

interest instruments and contractual loans and

receivables. Most of the State’s investments and

derivatives are centrally managed by TCV and

VFMC. In accordance with the Borrowings and

Investment Powers Act 1987 and the prudential

supervisory policies and framework of the State,

limits are set both in terms of the quality and

amount of credit exposure.

The State has a material credit risk exposure

resulting from the level of investments and

derivative transactions with the four major

Australian banks, which is managed with reference

to established credit quality and exposure policies.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

118 Chapter 4 2022-23 Financial Report

In relation to each class of recognised financial

asset, the State’s maximum exposure to credit risk,

without taking account of the value of any collateral

obtained at the reporting date, is the carrying

amount of those assets as recognised in the balance

sheet.

There has been no material change to the State’s

credit risk profile in 2022-23.

The following tables provide information on the credit quality of the State’s financial assets.

Credit quality of financial assets ($ million)

State of Victoria

Other

2023

(Aa2/ AA

credit rating)

(min triple-B

credit rating)

(not rated)

Total

Financial assets

Financial assets with loss allowance measured at 12 month expected credit

loss

Cash and deposits

13 307

3 018

1 879

18 204

Advances paid

563

101

673

Term deposits

Debt securities

Financial assets with loss allowance measured at lifetime credit loss (not

credit impaired)

Cash and deposits

6 494

864

116

7 475

Receivables applying the simplified approach for impairment

889

265

2 803

3 956

Advances paid

Term deposits

154

Financial assets with loss allowance measured at lifetime credit loss (credit

impaired)

Term deposits

Total financial assets

20 835

4 799

4 917

30 551

Other

2022

(Aa1/ AA

credit rating)

(min triple-B

credit rating)

(not rated)

Total

Financial assets

Financial assets with loss allowance measured at 12 month expected

credit loss

Cash and deposits

2 801

5 516

343

8 660

Advances paid

209

111

329

Term deposits

Debt securities

Financial assets with loss allowance measured at lifetime credit loss

(not credit impaired)

Cash and deposits

7 488

1 089

8 598

Receivables applying the simplified approach for impairment

781

337

2 898

4 016

Advances paid

Term deposits

Financial assets with loss allowance measured at lifetime credit loss

(credit impaired)

Term deposits

Total financial assets

11 107

7 286

3 392

21 784

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

2022-23 Financial Report Chapter 4 119

Credit quality of financial assets (continued) ($ million)

General government sector

Government agencies

Other

2023

(Aa2/ AA

credit rating)

(Aa2/ AA

credit rating)

(min triple-B

credit rating)

(not rated)

Total

Financial assets

Financial assets with loss allowance measured at 12 month

expected credit loss

Cash and deposits

499

11 223

2 484

213

14 419

Advances paid

4 260

563

101

4 924

Term deposits

Debt securities

Financial assets with loss allowance measured at lifetime

credit loss (not credit impaired)

Cash and deposits

1 974

3 064

151

5 279

Receivables applying the simplified approach for impairment

238

391

1 812

2 530

Advances paid

163

Term deposits

154

Financial assets with loss allowance measured at lifetime

credit loss (credit impaired)

Term deposits

Total financial assets

7 137

14 814

3 375

2 218

27 543

Government agencies

Other

2022

(Aa1/ AA

credit rating)

(Aa1/ AA

credit rating)

(min triple-B

credit rating)

(not rated)

Total

Financial assets

Financial assets with loss allowance measured at 12 month

expected credit loss

Cash and deposits

410

1 034

3 559

208

5 210

Advances paid

4 178

209

111

4 498

Term deposits

Debt securities

Financial assets with loss allowance measured at lifetime

credit loss (not credit impaired)

Cash and deposits

173

4 986

586

5 764

Receivables applying the simplified approach for impairment

162

281

199

1 895

2 537

Advances paid

163

Term deposits

Financial assets with loss allowance measured at lifetime

credit loss (credit impaired)

Term deposits

Total financial assets

5 088

6 326

4 684

2 242

18 339

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

120 Chapter 4 2022-23 Financial Report

7.1.5 Other matters

Offsetting financial instruments

A master netting arrangement or similar

arrangement can be set up with counterparties

where required by general market practice. To the

extent that these arrangements meet the criteria for

offsetting in the consolidated balance sheet, they are

reported on a net basis.

Financial instrument assets and liabilities are offset,

with the net amount reported in the consolidated

balance sheet only where there is a currently legally

enforceable right to offset the recognised amounts

and there is an intention to settle on a net basis or

to realise the asset and settle the liability

simultaneously.

Some master netting arrangements do not result in

an offset of balance sheet assets and liabilities.

Where the State does not have a legally enforceable

right to offset recognised amounts, because the

right to offset is enforceable only on the occurrence

of future events such as default, insolvency or

bankruptcy, they are reported on a gross basis.

The following tables provide information on the

impact of offsetting on the balance sheet, as well as

the financial impact of netting for instruments

subject to an enforceable master netting

arrangement, as well as available cash and financial

instrument collateral.

The State has entered into arrangements that do not

meet the criteria for offsetting in a normal course of

business but allow for the relevant amounts to be

set off in certain circumstances, such as bankruptcy,

default or insolvency.

The effect of these arrangements is reflected in the

column related amounts not offset.

The net amount column shows the impact on the

State balance sheet if all existing rights of offset

were exercised.

Master netting or similar arrangements

(a)

($ million)

State of Victoria

Effects of offsetting on the balance sheet

2023

Gross

amounts

Gross amounts

set off in the

consolidated

balance sheet

Net amounts

presented in the

consolidated

balance sheet

amounts not

offset

Net

amount

Financial assets

Derivative financial instruments

530

(65)

464

(304)

160

Financial liabilities

Derivative financial instruments

1 526

(75)

1 451

(260)

1 191

2022

Financial assets

Derivative financial instruments

1 431

(82)

1 348

(602)

746

Financial liabilities

Derivative financial instruments

2 130

(139)

1 991

(532)

1 459

Note:

(a) Master netting or similar arrangements is only disclosed for the whole of State as they are only material for the State’s insurance agencies in the public financial

corporations sector.

Net gain or loss by category of financial instruments

The net gains or losses on financial assets and

liabilities held at 30 June 2023 are determined as

follows:

• For financial assets at amortised cost the net

gain or loss is calculated by taking the interest

revenue, plus or minus foreign exchange gains

or losses arising from revaluation of the

financial assets, and minus any impairment

recognised in the net result.

• For financial liabilities measured at amortised

cost, the net gain or loss is calculated by taking

the interest expense, plus or minus foreign

exchange gains or losses arising from the

revaluation of financial liabilities measured at

amortised cost.

• For financial assets and liabilities that are

designated at fair value through profit or loss,

the net gain or loss is calculated by taking the

movement in the fair value of the financial asset

or liability.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

2022-23 Financial Report Chapter 4 121

Net gain or loss by category of financial instruments ($ million)

2023

State of

Victoria

General

government

sector

Financial assets

Cash and deposits

(18)

(7)

Financial assets designated at fair value through profit or loss

713

Financial assets mandatorily measured at fair value through profit or loss

657

(55)

Financial assets at amortised cost

(39)

(31)

Financial assets measured at fair value through other comprehensive income

Investment in equity instrument designated at fair value through other comprehensive income

Total financial assets

1 313

(74)

Financial liabilities

Financial liabilities designated at fair value through profit and loss

1 964

(2)

Financial liabilities mandatorily measured at fair value through profit or loss

Financial liabilities at amortised cost

(3)

Total financial liabilities

2 031

(5)

2022

Financial assets

Cash and deposits

(12)

(5)

Financial assets designated at fair value through profit or loss

(a)

(2 128)

(136)

Financial assets mandatorily measured at fair value through profit or loss

(1 678)

248

Financial assets at amortised cost

(17)

(9)

Financial assets measured at fair value through other comprehensive income

(a)

Investment in equity instrument designated at fair value through other comprehensive income

Total financial assets

(3 835)

Financial liabilities

Financial liabilities designated at fair value through profit and loss

14 594

Financial liabilities mandatorily measured at fair value through profit or loss

(41)

Financial liabilities at amortised cost

Total financial liabilities

14 552

Notes:

(a) The 2022 figures have been reclassified to reflect more current information.

Breakdown of interest income

(a)

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Interest income from financial assets not at fair value through profit or loss

902

153

1 305

556

Interest income from financial assets at fair value through profit or loss

502

560

Total

1 403

712

1 307

557

Note:

(a) These items include amounts that relate to discount interest on financial assets. Therefore, figures in this table cannot be reconciled to the primary financial

statements.

Breakdown of interest and fee expense items

(a)

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Interest expense from financial liabilities not at fair value through profit or loss

1 319

1 222

3 917

2 839

Interest expense from financial liabilities at fair value through profit or loss

3 667

2 560

Fee expenses from financial liabilities not at fair value through profit or loss

Fee expenses from financial liabilities at fair value through profit or loss

546

536

Total

5 575

4 353

3 966

2 882

Note:

(a) These items do not include amounts that relate to discount interest on financial liabilities. Therefore, figures in this table cannot be reconciled to the primary

financial statements.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

122 Chapter 4 2022-23 Financial Report

7.1.6 Liquidity risk

Liquidity risk arises from being unable to meet

financial obligations as they fall due. The State is

exposed to liquidity risk mainly through the

maturity of its external borrowings raised by TCV

and the requirement to fund cash deficits.

The State’s central treasury, TCV, is responsible for

ensuring that the State’s liquidity requirements can

be met at all times. DTF and TCV have a liquidity

policy to assist the Government to manage the

whole of Victorian government liquidity risk.

The liquidity management policy has three main

components as follows.

Short-term liquidity management and control

The policy requires daily measurement of the whole

of Victorian government liquidity ratio, which

measures TCV’s liquid assets (after discounting to

reflect potential loss of value in the event of a quick

sale), versus 12 months of debt refinancing and

interest obligations as well as six months of new

borrowing requirements.

The policy also measures the daily going concern

net and cumulative cash flow limits to manage

short-term liquidity exposures during normal

operating liquidity conditions and the monitoring of

going concern and liquidity stress scenario cash

flows out to 12 months.

As at 30 June 2023, the whole of Victorian

government liquidity ratio was 116 per cent against

a minimum target liquidity ratio of 100 per cent.

The high level of liquidity at 30 June 2023 was due

to TCV accessing financial markets to pre-position

itself ahead of the forecast increase in borrowing

requirements, as well as temporarily holding the

Victorian Future Fund balance in cash, pending its

investment in a diversified range of assets under the

management of VFMC. The investment of these

additional funds in liquid assets in advance of the

timing of expenditure has resulted in a relatively

high liquidity ratio.

To manage the liquidity risk more prudently, in

December 2022 the whole of Victorian government

liquidity ratio calculation methodology was

amended to also include 100 per cent of new debt

requirement for the next six months in addition to

the 80 per cent of the debt service obligations for

the next 12 months. The liquidity ratio of

116 per cent at 30 June 2023 was calculated based

on the amended liquidity calculation methodology.

The liquidity ratio at 30 June 2022 was 178 per cent

against a limit of 80 per cent. It should be noted

that the liquidity ratio at 30 June 2022 was

calculated based on the previous liquidity ratio

calculation methodology which did not include the

additional liquidity requirement of 100 per cent of

new debt requirement for the next six months.

Long-term liquidity management monitoring

The State’s policy on long-term management of

liquidity primarily focuses on the diversification of

funding sources and debt maturities.

Managing a liquidity crisis

In the event of a liquidity crisis, the State has

liquidity crisis management plans in place to manage

liquidity conditions. The liquidity crisis management

plans are a set of protocols established to respond

to specific conditions during a crisis.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

2022-23 Financial Report Chapter 4 123

Maturity analysis of financial liabilities

Disclosed are details of the State’s maturity analysis

for its domestic borrowings, lease liabilities and

service concession arrangement liabilities.

The maturity analysis for the remainder of the

State’s financial liabilities are immaterial to the

financial report.

Domestic borrowings ($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Carrying amount

146 088

118 149

127 589

102 575

Nominal amount

(a)

194 675

153 766

132 001

107 313

Contractual maturity

0 to 3 months

2 355

3 823

2 524

3 324

3 months to 1 year

24 375

14 935

20 283

8 866

1 to 2 years

13 071

11 947

6 306

5 997

2 to 5 years

45 768

33 463

24 588

20 048

5 years or more

109 105

89 597

78 300

69 078

Note:

(a) Represents undiscounted nominal amount.

Lease liabilities payable ($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Less than 1 year

1 047

1 041

981

964

1 year but less than 5 years

6 156

5 934

5 852

5 706

5 years or more

3 791

4 606

3 563

4 357

Minimum lease payments

10 994

11 580

10 395

11 027

Future finance charges

2 479

2 799

2 469

2 789

Total lease liabilities

8 515

8 781

7 927

8 237

Service concession arrangement liabilities payable

(a)

($ million)

State of Victoria

General

government sector

2023

2022

2023

2022

Less than 1 year

2 582

1 411

2 573

1 406

1 year but less than 5 years

3 353

4 194

3 286

4 129

5 years or more

7 572

7 786

5 965

7 103

Minimum liability payments

13 507

13 392

11 823

12 639

Future finance charges

5 285

6 476

5 266

6 361

Total service concession arrangement liabilities

8 222

6 916

6 557

6 277

Note:

(a) The 2021-22 figures have been restated following the reclassification of minimum liability payments and future finance charges to better reflect the Metro Tunnel

service concession arrangement.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

124 Chapter 4 2022-23 Financial Report

7.2 Contingent assets and contingent liabilities

(State of Victoria)

Contingent assets and contingent liabilities are not

recognised in the balance sheet but are disclosed

and, if quantifiable, are measured at nominal value.

Contingent assets and liabilities are presented

inclusive of GST receivable or payable respectively.

Contingent assets

Contingent assets are possible assets that arise from

past events, whose existence will be confirmed only

by the occurrence or non-occurrence of one or

more uncertain future events not wholly within the

control of the entity.

These are classified as either quantifiable, where the

potential economic benefit is known,

or non-quantifiable.

The table below contains quantifiable contingent

assets as at 30 June 2023.

Quantifiable contingent assets

(a)

($ million)

State of Victoria

2023

2022

General government

157

124

Public non-financial corporations

659

532

Public financial corporations

Eliminations

(23)

(86)

Total contingent assets – State of Victoria

(b)

794

569

Guarantees, indemnities and warranties

202

156

Legal proceedings and disputes

Other

592

413

Total contingent assets – State of Victoria

(b)

794

569

Notes:

(a) Figures reflect contingent assets that arise from outside of government.

(b) As at 30 June 2023, the majority of contingent assets held by the State

relate to developer contributions of water and sewerage infrastructure

whereby control is transferred to the State’s water entities upon

completion of various development projects.

Non-quantifiable contingent assets

Peninsula Link compensable enhancement claim

The EastLink Concession Deed contains

compensable enhancement provisions that enable

the State to claim 50 per cent of any additional

revenue derived by ConnectEast Pty Ltd

(ConnectEast) as a result of certain events that

particularly benefit EastLink, including changes to

the adjoining road network.

On 2 January 2014, the State lodged a compensable

enhancement claim as a result of opening Peninsula

Link. The claim remains outstanding.

Contingent liabilities

Contingent liabilities are either:

• possible obligations that arise from past events,

whose existence will be confirmed only by the

occurrence or non-occurrence of one or more

uncertain future events not wholly within the

control of the entity

• present obligations that arise from past events

but are not recognised because of either of the

following:

– it is not probable that an outflow of

resources embodying economic benefits will

be required to settle the obligations

– the amount of the obligations cannot be

measured with sufficient reliability.

Contingent liabilities are also classified as either

quantifiable or non-quantifiable.

The table below contains quantifiable contingent

liabilities as at 30 June 2023.

Quantifiable contingent liabilities ($ million)

State of Victoria

2023

2022

General government

17 104

16 578

Public non-financial corporations

239

158

Public financial corporations

Eliminations

(a)

(14 907)

(14 523)

Total contingent liabilities – State of Victoria

2 436

2 269

Guarantees, indemnities and warranties

(b)

1 598

1 309

Legal proceedings and disputes

367

391

Other

471

569

Total contingent liabilities – State of Victoria

2 436

2 269

Notes:

(a) Mainly represents the guarantee of borrowings provided by the Treasurer

for the public sector borrowings portfolio.

(b) Inclusive of loans provided by TCV to entities other than the State of

Victoria and participating authorities, subject to the provision of a

guarantee by the Treasurer.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

2022-23 Financial Report Chapter 4 125

Non-quantifiable contingent liabilities

A number of potential obligations are

non-quantifiable at this time arising from:

• indemnities relating to transactions, including

financial arrangements and consultancy services,

as well as for directors and administrators

• performance guarantees, warranties, letters of

comfort and the like

• deeds in respect of certain obligations

• unclaimed monies, which may be subject to

future claims by the general public against the

State.

An overview of the more significant

non-quantifiable liabilities follows.

Biosciences Research Centre (known as AgriBio)

The quarterly service fee payment obligations of

Biosciences Research Centre Pty Ltd (BRC Co) on

behalf of the joint venture participants (Department

of Energy, Environment and Climate Action and La

Trobe University) are backed by the State of

Victoria under a State Support Deed.

Under this Deed, the State ensures that the joint

venture participants have the financial capacity to

meet their payment obligations to BRC Co, thereby

enabling BRC Co to meet its obligations to pay the

quarterly service fee to the concessionaire under the

Project Agreement. The State underwrites the risk

of any default by BRC Co.

Compulsory property acquisitions

The State has compulsorily acquired a number of

properties (residential and commercial) through the

Land Acquisition and Compensation Act 1986 to

facilitate delivery of various projects. Possible future

claims for compensation arising from the

compulsory acquisition of these properties cannot

be quantified at this stage.

COVID-19 class action – Victorian businesses

A class action has been filed in the Supreme Court

of Victoria against the State of Victoria, the

Ministers for Health and Jobs, and the Secretaries of

the Department of Health and Human Services and

the Department of Jobs, Precincts and Regions

relating to economic losses suffered by Victorian

businesses under Stage 3 and 4 public health

restrictions. The VMIA has been notified of this

proceeding and it is intended that VMIA’s

Combined Liability Policy will respond.

At this stage it is impractical to quantify the

financial effects of this contingent liability.

COVID-19 related claim notifications

The Department of Transport and Planning has

received and may receive notifications under the

contractual agreements by the contractors in

relation to the possible impact of COVID-19 on a

number of projects. Current and possible future

claims cannot be reliably estimated at this stage, as

quantifiable claims are still under review and/or

have not yet been provided for under the contract.

It is not possible to estimate the financial effect of

these claims at the date of this report.

Department of Education

The Department of Education has a number of

non-quantifiable contingent liabilities, arising from

indemnities provided by it, as follows:

• Volunteer school workers and volunteer student

workers: the Education and Training Reform Act

2006 provides indemnity for personal injuries or

death (and at the discretion of the Minister, for

property damage) suffered by volunteer school

workers and volunteer student workers arising

out of or in the course of engaging in school

work or community work respectively.

• Teaching service and public service employees:

if a Department employee is named as a

defendant in a civil proceeding (for example,

personal injury, discrimination or employment

claim), any costs and damages will generally be

paid by the Department provided the employee

was not under the influence of illicit drugs or

alcohol or engaging in a criminal offence and

the behaviour was not outrageous and was

related to their employment.

• Board members: the Education and Training

Reform Act 2006 requires the State to indemnify

a member of a Merit Protection Board or a

Disciplinary Appeals Board for anything done

or omitted to be done in good faith in the

exercise of a power or the discharge of their

statutory duties.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

126 Chapter 4 2022-23 Financial Report

• School councils: the Education and Training

Reform Act 2006 requires the Department to

indemnify individual members of school

councils for any legal liability, whether in

contract, negligence or defamation, if they acted

in good faith and in the exercise of their powers

or functions. The Department may decide to

indemnify school councils (which are separate

entities to the Department) in claims of

common law negligence, employment disputes

and other civil claims, for the cost of settlement

and/or legal representation. The Department

will take into account the impact of payment

upon the school’s educational program and any

insurance cover for the school council, and will

likely indemnify if the Department is satisfied

that:

– the school council acted in good faith and

according to issued guidelines and

directions

– the school council has insufficient funds to

pay the claim.

Firefighters’ Presumptive Rights Compensation and

Fire Services Legislation Amendment (Reform) Act

2019

The Firefighters’ Presumptive Rights Compensation and

Fire Services Legislation Amendment (Reform) Act 2019

(the Act) was assented on 2 July 2019.

Part 2 of the Act, which came into operation on

3 July 2019, provides for the establishment and

operation of the Firefighters’ Presumptive Rights

Compensation scheme for both career and

volunteer firefighters. At the time of the preparation

of this report, it is impractical to quantify any

possible contingent liabilities for the State arising

from the scheme.

Fiskville independent investigation and closure of

training college

On 26 March 2015, the Government announced the

permanent closure of Fiskville Training College

(Fiskville). Fiskville and Victorian Emergency

Management Training Centre training grounds

owned by the CFA at Penshurst, Bangholme, West

Sale, Wangaratta, Huntly, and Longerenong have

been the subject of notices issued by the

Environment Protection Authority Victoria (EPA).

The CFA has a number of contingent liabilities

arising from the closure of Fiskville and the notices

issued by the EPA. These relate to any further

notices that may be issued by the EPA, any

regulatory infringements that may be imposed by

the EPA, compensation that may be sought and,

any legal claims that may be made.

At this stage it is impractical to quantify the

financial effects of these contingent liabilities.

Land remediation – environmental concerns

In addition to properties for which remediation

costs have been provided in the State’s financial

statements, certain other properties have been

identified as potentially contaminated sites.

The State does not admit any liability in respect of

these sites. However, remedial expenditure may be

incurred to restore the sites to an acceptable

environmental standard in the event contamination

is identified.

Native Title

A number of claims have been filed in the Federal

Court under the Commonwealth Native Title Act

1993 that affect Victoria. It is not feasible at this

time to quantify any future liability.

October 2022 flood event

In October 2022, Victoria experienced significant

rainfall which caused a major widespread flood

event, resulting in loss and damage to many homes,

farms, properties, community assets, roads, local

government infrastructure and other infrastructure.

These impacts have been, and continue to be felt, in

many local government areas across regional

Victoria and metropolitan Melbourne. The

Victorian and Commonwealth governments are

working cooperatively together on implementing

relief and recovery initiatives to be cost shared

under the Disaster Recovery Funding Arrangements

(DRFA). The Victorian Government has also

initiated a number of separate programs not eligible

under the DRFA to support communities impacted

by the flood event.

The State is insured by policies with the VMIA and

may be able to recover certain costs that relate to

flood repairs and recovery required to State owned

assets and infrastructure through these policies.

At this stage it is not possible to accurately quantify

the full financial effects of these events.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

2022-23 Financial Report Chapter 4 127

Per-fluoroalkyl and poly-fluoroalkyl substances

(known as PFAS)

Fire Rescue Victoria and the Country Fire Authority

(State Fire Services) has determined that there are

per-fluoroalkyl and poly-fluoroalkyl substances

contamination at specific State Fire Service

properties and adjoining surroundings. The State

Fire Services continue to test for exposure across all

sites and locations. Due to the ongoing complexities

of each site and adjoining surroundings together

with the multiple stages of testing required to

establish the degree of penetration, the State Fire

Services are unable to estimate an underlying value

for this liability. This is likely to include any

remediation works which may be required to meet

environmental and people health and safety

obligations across all of the sites while this testing

continues and a complete program of works to

remediate related risks.

Planning scheme compensation

Under section 98 of the Planning and Environment Act

1987, the owner or occupier of any land may claim

compensation from the planning authority for

financial loss suffered as the natural, direct and

reasonable consequence of the land being reserved,

or declared as reserved for a public purpose under a

planning scheme.

The future liability depends on a number of factors

and cannot be reliably quantified.

Public acquisition overlays for the future

development of rail and road infrastructure

Public acquisition overlays are in place to reserve

certain areas of land for future development of rail

and road infrastructure. Under section 98 of the

Planning and Environment Act 1987, the State has a

legislative responsibility to compensate eligible land

and property owners who face either:

• loss on sale – an eligible landowner is entitled to

compensation for the incremental loss on sale

when a property affected by a public acquisition

overlay is sold for less than its market value

• financial loss – the entitlement to financial loss

compensation is triggered when a development

permit is refused because the property is

required for a public purpose.

Compensation and purchase claims occur as a result

of claims by land owners. The future liability

depends on factors, including the number of claims

received and the prevailing value of land at the time

the claim is made. As a result, the liability cannot be

reliably quantified.

Public transport rail partnership agreements

The Department of Transport and Planning (DTP)

is party to contractual arrangements from

30 November 2017, with franchisees to operate

across the state:

• metropolitan tram services until 1 December

2024

• metropolitan train services until 7 June 2026.

The major contingent liabilities arising in the event

of early termination or expiry of the contracts are:

• partnership assets – to maintain continuity of

services, at early termination or expiry of the

franchise contract, assets will revert to DTP or a

successor. In the case of some assets,

a reversion back to DTP would entail those

assets being purchased

• unfunded superannuation – at the early

termination or expiry of the contract, DTP will

assume any unfunded superannuation amounts

(apart from contributions the operator is

required to pay over the contract term) to the

extent that the State becomes the successor

operator.

Royal Commission into the Management of Police

Informants

Since the conclusion of the Royal Commission into

the Management of Police Informants (RCMPI),

the State of Victoria (Victoria Police) has been

served with a number of civil claims. These civil

claims and a number of Court of Appeal criminal

matters as well as ongoing disclosure work by

Victoria Police will likely dictate whether further

claims are received.

Given those circumstances it is not possible to

reliably quantify any contingent liabilities relating to

potential matters arising from the conduct explored

by the RCMPI.

Royal Melbourne Showgrounds redevelopment

The State has entered into an agreement with the

Royal Agricultural Society of Victoria (RASV)

pursuant to which the State agrees to support

certain payment obligations of RASV that may arise

under the Non-Core Development Agreement

subject to the RASV complying with certain

obligations as set out in that Deed.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

128 Chapter 4 2022-23 Financial Report

Southern Cross Station target capacity threshold

The State has a possible liability relating to a claim

from a contractor responsible for operating and

maintaining Southern Cross Station. The claim

relates to patronage levels at the station and the

contract provides a process to assess whether

modifications to the station, compensation to the

contractor or changes to the service standards are

required. The claim is being considered and the

financial effect is yet to be determined.

Victorian Managed Insurance Authority –

insurance cover

The VMIA was established in 1996 as an insurer for

state government departments, participating bodies

as defined under the Victorian Managed Insurance

Authority Act 1996 and other entities as declared by

the Minister. The VMIA insures its clients for

property, public and products liability, professional

indemnity, medical indemnity, contract works and a

range of other insurances. The VMIA also provides

domestic building insurance to Victorian residential

builders.

The VMIA reinsures in the private market based on

the likelihood and impact of events as well as the

cost and availability of such cover. The risk of

losses above what the VMIA reinsures in the private

market is borne by the State.

The State, under separate deeds of indemnity, has

agreed to reimburse the VMIA:

• if the costs of public sector medical indemnity

claims for a policy year exceed the initial

estimate, on which the risk premium was based

by more than 20 per cent

• for losses above a certain limit that the VMIA

may incur due to changes in the availability of

reinsurance.

Yallourn Power Station safety net

The Government has reached an agreement with

EnergyAustralia (EA) to ensure an orderly transition

as EA implements the closure of the Yallourn

Power Station in June 2028.

The agreement includes, should it be needed,

a safety net to avoid an unplanned exit of Yallourn.

As part of this safety net, under certain scenarios,

the State agrees to provide partial support to EA in

the event of exceptional costs incurred in the

operation of the Yallourn Power Station.

This support will help to ensure Yallourn’s workers

and Victoria’s energy system have sufficient time to

plan for the plant’s closure. The possible liability

depends on a number of future events and cannot

be reliably and readily quantified.

7.3 Fair value determination

This section sets out information on how the State

determines fair value for financial reporting

purposes. Fair value is the price that would be

received to sell an asset or paid to transfer a liability

in an orderly transaction between market

participants at the measurement date.

Fair values are determined for the following assets

and liabilities:

• financial assets and liabilities at fair value

• land, buildings, infrastructure, plant and

equipment (including service concession and

right-of-use assets)

• investment properties

• biological assets

In addition, the fair values of other assets and

liabilities are determined for disclosure purposes

(financial assets and liabilities carried at amortised

cost).

The State determines the policies and procedures

for determining fair values for both financial and

non-financial assets and liabilities as required.

For the purpose of fair value disclosures, the State

has determined classes of assets and liabilities on the

basis of the nature, characteristics and risks of the

asset or liability.

Fair value hierarchy

A number of inputs are used in determining fair

value. To increase consistency and comparability in

the financial statements, these inputs are categorised

into three levels, also known as the fair value

hierarchy. The levels are as follows:

• Level 1 – quoted (unadjusted) market prices in

active markets for identical assets or liabilities

• Level 2 – valuation techniques for which the

lowest level input that is significant to the fair

value measurement is directly or indirectly

observable

• Level 3 – valuation techniques for which the

lowest level input that is significant to the fair

value measurement is unobservable.

The State determines whether transfers have

occurred between levels in the hierarchy by

reassessing categorisation (based on the lowest level

input that is significant to the fair value

measurement as a whole) at the end of each

reporting period.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

2022-23 Financial Report Chapter 4 129

Fair value disclosure

For those assets and liabilities for which fair value

determination is applied, the following disclosures

are provided:

• carrying amount and the fair value (which

would be the same for those assets measured at

fair value)

• which level of the fair value hierarchy was used

to determine the fair value

• in respect of those assets and liabilities subject

to fair value determination using Level 3 inputs:

– a reconciliation of the movements in fair

values from the beginning of the year to the

end

– details of significant unobservable inputs

used in the fair value determination.

This section is divided between financial

instruments and non-financial physical assets.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

130 Chapter 4 2022-23 Financial Report

7.4 Fair value determination of financial assets and liabilities

How fair values are determined

The fair values of the State’s financial assets and

liabilities are determined as follows:

• Level 1 – the fair value of financial instruments

with standard terms and conditions traded in an

active liquid market are determined with

reference to quoted market prices

• Level 2 – the fair value of other financial assets

and financial liabilities (excluding derivative

instruments) are determined in accordance with

generally accepted pricing models based on

discounted cash flow analysis, using prices from

observable current market transactions

• Level 3 – the fair value of derivative

instruments, such as interest rate futures

contracts for difference, are calculated using

quoted prices. Where such prices are not

available, use is made of discounted cash flow

analysis using the applicable yield curve for the

duration of the instrument for non-optional

derivatives, and option pricing models for

optional derivatives.

Fair value of financial instruments measured at amortised cost

(a)

($ million)

2023

2022

State of Victoria

Carrying

amount

Fair

value

Carrying

amount

Fair

value

Financial assets

Term deposits

218

215

156

Advances paid

923

626

624

Equities and managed investment schemes

169

Debt securities

Non-current receivables

397

391

Total financial assets

(b)

1 716

1 713

1 189

1 187

Financial liabilities

Payables, deposits held and advances received

10 263

10 276

9 709

Domestic borrowings

15 963

17 424

13 551

12 832

Service concession arrangement liabilities

8 222

6 916

Total financial liabilities

(c)

34 448

35 923

30 176

29 457

General government sector

Financial assets

Term deposits

202

199

142

Advances paid

5 302

6 225

4 924

5 412

Equities and managed investment schemes

135

Debt securities

Non-current receivables

373

366

Total financial assets

(b)

6 021

6 941

5 441

5 928

Financial liabilities

Payables, deposits held and advances received

7 819

7 826

7 805

Domestic borrowings

117 789

107 969

102 210

85 077

Service concession arrangement liabilities

6 557

6 277

Total financial liabilities

(c)

132 165

122 352

116 293

99 159

Notes:

(a) Additional information on the State’s fair value of financial assets and liabilities measured at amortised cost for both the 2023 and 2022 financial years has been

provided to align with the State’s financial instruments measured at fair value tables on the next page.

(b) Total financial assets excludes current receivables held at amortised cost, consistent with the requirements of AASB 7 Financial Instruments: Disclosure.

(c) Total financial liabilities excludes lease liabilities held at amortised cost, consistent with the requirements of AASB 7 Financial Instruments: Disclosure.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

2022-23 Financial Report Chapter 4 131

Financial assets and liabilities measured at fair value ($ million)

State of Victoria

Carrying

amount as at

Fair value measurement at

end of reporting period using

2023

30 June

Level 1

Level 2

Level 3

Financial assets

Cash

25 678

Derivative financial instruments

464

307

127

Term deposits

1 614

Advances paid

Equities and managed investment schemes

45 725

5 856

25 192

14 677

Debt securities at fair value

15 777

4 417

11 320

Total financial assets

89 265

35 988

38 434

14 843

Financial liabilities

Domestic borrowings

130 125

110 512

19 613

Foreign currency borrowings

677

Derivative financial instruments

1 448

1 233

209

Total financial liabilities

132 249

110 517

21 523

209

2022

Financial assets

Cash

17 258

Derivative financial instruments

1 348

873

430

Term deposits

4 223

4 192

Advances paid

Equities and managed investment schemes

40 418

5 226

22 128

13 064

Debt securities at fair value

9 462

1 400

8 062

Total financial assets

72 716

23 967

35 254

13 494

Financial liabilities

Domestic borrowings

104 597

85 072

19 526

Foreign currency borrowings

649

Derivative financial instruments

1 991

1 730

247

Total financial liabilities

107 238

85 085

21 906

247

General government sector

(a)

Carrying

amount as at

Fair value measurement at

end of reporting period using

2023

30 June

Level 1

Level 2

Level 3

Financial assets

Cash

19 698

Derivative financial instruments

133

127

Term deposits

Advances paid

Equities and managed investment schemes

3 358

2 886

473

Debt securities at fair value

Total financial assets

23 211

22 612

473

127

2022

Financial assets

Cash

10 974

Derivative financial instruments

431

430

Term deposits

Advances paid

Equities and managed investment schemes

2 773

2 145

627

Debt securities at fair value

Total financial assets

14 200

13 142

627

430

Note:

(a) The general government sector’s financial liabilities are measured at amortised cost and therefore not required to be disclosed in the above table for financial assets

and liabilities measured at fair value, in accordance with Australian Accounting Standards.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

132 Chapter 4 2022-23 Financial Report

Reconciliation of Level 3 fair value movements

(a)

($ million)

Derivative financial

instrument assets

Equities and managed

investment schemes

Debt Securities at

fair value

State of Victoria

2023

2022

2023

2022

2023

2022

Opening balance

430

13 064

9 828

Total gains and losses recognised in:

Net result

(186)

382

(38)

520

Other comprehensive income

878

(16)

Purchases

1 004

3 332

Sales

(72)

(8)

(267)

(838)

Settlements

(57)

(78)

Transfers from other levels

224

Transfers out of Level 3

(1)

Closing balance

127

430

14 677

13 064

Note:

(a) Reconciliation of Level 3 fair value movements is only disclosed for the whole of state as they are only material for the State’s insurance agencies in the public

financial corporations sector.

Description of Level 3 valuation techniques used

and key inputs to valuation

The majority of the State’s Level 3 financial assets

relate to either investment funds/trusts managed by

VFMC on behalf of the State’s insurance agencies

or derivative financial instruments in the general

government sector. Approximately one third of the

funds under management by VFMC are directly

managed internally while two-thirds are managed

externally by fund managers selected by VFMC.

The disclosure below provides details of the inputs

and assumptions used in the valuation models for

various asset classes. The State is not privy to the

detailed inputs and assumptions used by external

fund managers to value the underlying investment

assets and is not in a position to provide a

sensitivity analysis.

The unlisted investment fund/trust assets include

the following asset classes: infrastructure,

non-traditional strategies, property and private

equities.

Infrastructure

Infrastructure investments comprise both domestic

and international exposures to transport, social,

energy and other infrastructure assets through

unlisted funds and trusts. The valuations of unlisted

on infrastructure investments are primarily based on

the discounted cash flow methodology. Key inputs

and assumptions, which are subject to estimation

uncertainty, include the risk-free discount rate, risk

premium, asset utilisation rates, capital expenditure

and operating cost forecasts and other estimated

future cash flows dependent on the longer-term

general economic forecasts and the forecast

performance of applicable underlying assets.

Non-traditional strategies

Non-traditional strategies comprise investments in

hedge funds and other non-traditional investments

such as insurance investments. These are assets that

do not fit within the definition of other asset

classes, but which provide diversification benefits to

the total portfolio. Investments are made through

externally managed unlisted pooled vehicles.

The valuation of hedge fund investments is based

primarily on the underlying assets, which may be

quoted on an exchange or traded in a dealer market.

For less liquid securities, valuation methodologies

are set out by each fund manager. Depending on

the investment, the methodologies applied include

discounted cash flow, amortised cost, direct

comparison and other market accepted

methodologies. The fund manager may choose to

appoint independent valuation agents to seek

independent price verification. Key inputs and

assumptions, which are subject to estimation

uncertainty, include the appropriate credit spread

and other risk premium, the risk-free discount rate,

future cash flows, and future economic and

regulatory conditions.

The insurance investments include an unlisted trust

with exposure to a portfolio of United States life

insurance policies. The valuation of insurance

investments is based on the discounted cash flow

methodology, with key assumptions of insureds’

mortality and premium payments on the valuation

date. Other assumptions and interdependencies

include the weighted average discount rate, life

expectancy estimates obtained from qualified

providers, and expected premium payments based

on the back-solving premiums optimisation

method.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

2022-23 Financial Report Chapter 4 133

Property investments

Property investments comprise externally managed

unlisted property trusts with exposure to the

domestic and international commercial, industrial,

retail and development property market.

The valuations of unlisted property investments are

primarily based on discounted cash flow,

capitalisation and direct comparison methodologies.

The assumptions, which may be subject to

estimation uncertainty, include the estimated future

profits and cash flows, risk-free rate, risk premium,

and future economic and regulatory conditions.

Private equities

VFMC’s holdings of private equity investments are

small and being phased out. Private equity

investments are valued primarily on multiples of

earnings, discounted cash flow, market equivalents

and other accepted methodologies. Key inputs and

assumptions, which are subject to estimation

uncertainty, include the estimated future profits and

cash flows, the risk-free discount rate, the risk

premium, and future economic and regulatory

conditions.

Derivative financial instruments

The fair value of derivative instruments resulting

from the forward sale of large-scale generation

certificates (LGCs) are determined by the State with

reference to observable market prices of LGCs

currently trading in the market as at reporting date.

These instruments are categorised as Level 1 for fair

value purposes.

In the absence of an active market, the fair value of

derivative contracts for difference and the LGCs

receivable are valued using unobservable inputs

such as future wholesale electricity price forecasts

provided by external advisors, comparable risk-free

rates of zero coupon government bonds and LGC

price forecasts. In addition, assumptions are applied

to forecast the renewable energy generation

volumes over the life of the instrument.

Adjustments are made to the valuations when

necessary to recognise differences in the

instrument’s terms. To the extent that the

significant inputs are unobservable, the State

categorises these investments as Level 3.

The fair value of derivative financial instruments is

based on the discounted cash flow technique.

The selection of variables requires significant

judgement. As such, there is a range of reasonably

possible assumptions in estimating the fair value of

derivatives. Significant inputs in applying this

technique include wholesale electricity price

forecasts, LGC price forecasts, credit value

adjustments, growth rates applied for cash flows

and discount rates used.

7.5 Fair value determination of

non-financial assets

Revaluations of non-financial physical assets

Non-financial physical assets are revalued on a

cyclical basis in accordance with the Financial

Reporting Directions (FRDs) issued by the Assistant

Treasurer. A full revaluation undertaken by the

Valuer-General normally occurs every five years,

based upon the asset’s classification of the functions

of government framework. This led to assets within

the education purpose group being formally

revalued in 2022-23. However, a revaluation may

occur more frequently if fair value assessments

indicate material changes in values. Independent

valuers are generally used to conduct these

scheduled revaluations.

Certain infrastructure assets are revalued using

specialised advisors. Any interim revaluations are

determined in accordance with the requirements of

the FRDs.

Under FRD 103 Non-financial physical assets, where

the cumulative impact of relevant indicators is less

than 40 per cent but greater than 10 per cent of the

carrying value of an asset class, managerial

revaluations are performed. During the period,

managerial revaluations lead to revaluations being

recorded across the State, with the majority

recorded in the Transport, Health and Housing and

community amenities purpose groups. These

revaluations were undertaken using land and

building indices as determined by the

Valuer-General Victoria (VGV) and consider facts

and circumstances as at the point of calculation,

in addition to internal expertise and judgements.

Specialised asset revaluations also take into

consideration the assets’ highest and best use

(HBU), which must consider the use of the assets

that is physically possible, legally permissible and

financially feasible.

Due to the high level of valuation uncertainty

inherent within any Level 3 revaluation, which has

been heightened since the beginning of the

COVID-19 pandemic and more recent market

volatilities, current values may change over a

relatively short period of time.

Revaluation increases or decreases arise from

differences between an asset’s carrying value and

fair value.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

134 Chapter 4 2022-23 Financial Report

Net revaluation increases (where the carrying

amount of a class of assets is increased) are

recognised in other economic flows – other

comprehensive income and accumulated in equity

under the asset revaluation surplus. However, the

net revaluation increase is recognised in the net

result to the extent that it reverses a net revaluation

decrease in respect of the same class of

non-financial asset previously recognised as an

expense (other economic flows) in the net result.

Net revaluation decreases are recognised in other

economic flows – other comprehensive income to

the extent that a credit balance exists in the asset

revaluation surplus in respect of the same class of

non-financial asset. Otherwise, the net revaluation

decreases are recognised immediately as other

economic flows in the net result. The net

revaluation decrease recognised in other economic

flows – other comprehensive income reduces the

amount accumulated in equity under the asset

revaluation surplus.

Revaluation increases and decreases relating to

individual assets within a class of non-financial asset

are offset against one another within that class but

are not offset in respect of assets in different

classes.

The fair value of cultural assets and collections,

heritage assets and other non-financial physical

assets (including Crown land and infrastructure

assets) that the State intends to preserve because of

their unique historical, cultural or environmental

attributes, is measured at the replacement cost of

the asset less, where applicable, accumulated

depreciation (calculated on the basis of such cost to

reflect the already consumed or expired future

economic benefits of the asset) and any

accumulated impairment. These policies and any

legislative limitations and restrictions imposed on

their use and/or disposal may impact their fair

value.

Road network assets (including earthworks of the

declared road networks) are measured at fair value,

determined by reference to the asset’s current

replacement cost.

Land under declared roads acquired prior to

1 July 2008 is measured at fair value. Land under

declared roads acquired on or after 1 July 2008 is

measured initially at the cost of acquisition and

subsequently at fair value. The fair value

methodology applied by the Valuer-General

Victoria is based on discounted site values for

relevant municipal areas applied to the land area

under the arterial road network, including related

reservations.

Infrastructure assets of water, rail and port

authorities within the public non-financial

corporation sector are measured at fair value.

The fair value of infrastructure systems and plant,

equipment and vehicles, is normally determined by

reference to the asset’s current replacement cost,

or where the infrastructure is held by a for-profit

entity, the fair value may be derived from estimates

of the present value of future cash flows.

Note 4.1.1 describes the recognition and

measurement of land, buildings, infrastructure, plant

and equipment.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

2022-23 Financial Report Chapter 4 135

7.5.1 Land, buildings, infrastructure, plant and equipment

Carrying amounts, fair values and fair value hierarchy ($ million)

Carrying

amount

Fair value measurement at the end of

the 2023 reporting period using:

Carrying

amount

Fair value measurement at the end of

the 2022 reporting period using:

State of Victoria

2023

Level 1

Level 2

Level 3

2022

Level 1

Level 2

Level 3

Buildings

77 783

14 284

63 499

69 939

13 917

56 022

Non-specialised buildings

15 411

11 706

3 706

14 501

11 545

2 956

Specialised buildings

61 584

2 573

59 011

54 741

2 355

52 385

Heritage buildings

787

782

697

680

Land and national parks

139 947

27 745

112 202

137 377

27 616

109 761

Non-specialised land

28 001

27 221

780

26 139

25 412

727

Specialised land

67 250

525

66 725

66 542

2 204

64 338

Land under roads

42 687

National parks and other land

only holdings

2 010

Plant, equipment, vehicles and

infrastructure systems

(a)

96 366

302

96 064

88 109

253

87 856

Infrastructure systems

82 168

82 157

75 950

Rolling stock

(a)

6 413

5 343

Plant, equipment and vehicles

7 785

291

7 494

6 816

253

6 563

Roads, road infrastructure and

earthworks

56 010

45 084

Cultural assets

(b)

6 867

2 500

4 367

6 867

2 480

4 387

Total land, buildings,

infrastructure, plant and

equipment

(a)(b)(c)

376 974

44 832

332 141

347 375

44 266

303 109

Notes:

(a) The 2022 comparative figures have been restated to correctly reflect the disclosure of the High Capacity Metro Trains at fair value.

(b) The 2022 comparative figures have been reclassified from level 3 to level 2 for certain cultural assets within the National Gallery of Victoria to more accurately reflect

the nature of their fair value measurement.

(c) The State’s total land, building, infrastructure, plant and equipment in this table excludes most construction in progress assets, which are valued at cost. Construction

in progress assets arising from service concession arrangements are measured at fair value and included in this disclosure. The total of excluded assets is $33.2 billion

(2022: $26.3 billion).

Carrying

amount

Fair value measurement at the end of

the 2023 reporting period using:

Carrying

amount

Fair value measurement at the end of

the 2022 reporting period using:

General government sector

2023

Level 1

Level 2

Level 3

2022

Level 1

Level 2

Level 3

Buildings

52 166

2 876

49 290

46 960

3 078

43 882

Non-specialised buildings

3 652

616

3 036

3 141

878

2 262

Specialised buildings

47 726

2 254

45 472

43 139

2 200

40 939

Heritage buildings

787

782

681

680

Land and national parks

94 748

3 953

90 795

93 099

3 898

89 201

Non-specialised land

4 142

3 530

611

2 435

1 813

622

Specialised land

45 910

423

45 487

45 968

2 085

43 883

Land under roads

42 687

National parks and other land

only holdings

2 010

Plant, equipment, vehicles and

infrastructure systems

14 855

165

14 690

12 591

156

12 434

Infrastructure systems

9 847

9 846

8 183

Plant, equipment and vehicles

5 008

164

4 844

4 408

156

4 251

Roads, road infrastructure and

earthworks

53 671

44 046

Cultural assets

(a)

6 763

2 420

4 343

6 768

2 400

4 368

Total land, buildings,

infrastructure, plant and

equipment

(a)(b)

222 202

9 414

212 788

203 464

9 533

193 931

Notes:

(a) The 2022 comparative figures have been reclassified from level 3 to level 2 for certain cultural assets within the National Gallery of Victoria to more accurately reflect

the nature of their fair value measurement.

(b) The general government’s sector’s total land, building, infrastructure, plant and equipment in this table excludes most construction in progress assets, which are

valued at cost. Construction in progress assets arising from service concession arrangements are measured at fair value and included in this disclosure. The total of

excluded assets is $27.3 billion (2022: $22.3 billion).

136 Chapter 4 2022-23 Financial Report

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

Reconciliation of Level 3 fair value movements ($ million)

State of Victoria

2023

Opening

balance

Depreciation

Impairment

Assets recognised

for the first time

Revaluation

Acquisitions/

(disposals)

Capitalisation of

work-in-progress

Transfers in/out of

Level 3

Reclassification

Closing

balance

Buildings

56 023

(2 359)

(16)

202

4 097

2 061

3 406

(2)

63 499

Non-specialised buildings

2 957

(200)

(13)

190

658

(2)

3 706

Specialised buildings

52 385

(2 124)

(2)

179

3 904

1 970

2 747

(50)

59 011

Heritage buildings

680

(36)

(4)

138

782

Land and national parks

109 762

(194)

2 325

383

(24)

(214)

112 202

Non-specialised land

727

(9)

(8)

780

Specialised land

64 338

(194)

2 325

391

(16)

(283)

66 725

Land under roads

42 687

National parks and other land only holdings

2 010

Plant, equipment, vehicles and infrastructure systems

87 856

(3 131)

(32)

383

5 170

3 163

2 540

(1)

116

96 064

Infrastructure systems

75 950

(1 802)

(22)

328

4 842

2 025

812

82 157

Rolling stock

5 343

(262)

(6)

1 337

6 413

Plant, equipment and vehicles

6 563

(1 067)

(10)

328

1 144

390

(1)

7 494

Roads, road infrastructure and earthworks

45 084

(1 001)

(3)

5 518

3 409

2 987

56 010

Cultural assets

4 387

(11)

(123)

4 367

Total

303 110

(6 502)

(245)

683

17 188

9 036

9 018

(27)

(117)

332 141

2022

Buildings

50 166

(2 196)

(15)

154

3 240

2 223

2 462

(1)

(11)

56 023

Non-specialised buildings

4 104

(246)

(1 055)

2 957

Specialised buildings

44 926

(1 905)

(15)

132

3 413

2 190

2 427

173

1 044

52 385

Heritage buildings

1 136

(44)

(222)

(195)

680

Land and national parks

93 221

(17)

100

15 815

347

242

109 762

Non-specialised land

1 355

(28)

(706)

727

Specialised land

56 079

(17)

6 860

286

270

726

64 338

Land under roads

34 120

8 567

42 687

National parks and other land only holdings

1 667

342

2 010

Plant, equipment, vehicles and infrastructure systems

(a)

83 563

(2 935)

(11)

268

(566)

2 906

4 459

171

87 856

Infrastructure systems

73 563

(1 660)

(10)

171

(638)

1 931

2 538

75 950

Rolling stock

(a)

4 031

(373)

(29)

1 714

5 343

Plant, equipment and vehicles

5 969

(903)

(1)

1 004

207

116

6 563

Roads, road infrastructure and earthworks

41 843

(958)

(2)

220

3 008

973

45 084

Cultural assets

(b)

4 137

(20)

218

4 387

Total

(a)(b)

272 928

(6 109)

(45)

542

18 925

8 508

7 928

249

183

303 110

Notes:

(a) The 2022 comparative figures have been restated to correctly reflect the disclosure of the High Capacity Metro Trains at fair value.

(b) The 2022 comparative figures have been reclassified from level 3 to level 2 for certain cultural assets within the National Gallery of Victoria to more accurately reflect the nature of their fair value measurement.

2022-23 Financial Report Chapter 4 137

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

Reconciliation of Level 3 fair value movements (continued) ($ million)

General government sector

Opening

balance

Depreciation

Impairment

Assets

recognised for

the first time

Revaluation

Acquisitions/

(disposals)

Capitalisation of

work-in-progress

Assets

transferred

between

government

entities

Transfers in/out

of Level 3

Reclassification

Closing

balance

2023

Buildings

43 882

(1 961)

(14)

141

2 650

1 892

2 613

(4)

(2)

49 290

Non-specialised buildings

2 262

(151)

(13)

183

658

(2)

(1)

3 036

Specialised buildings

40 939

(1 774)

134

2 463

1 799

1 954

(3)

(43)

45 472

Heritage buildings

680

(36)

(4)

138

782

Land and national parks

89 201

(7)

(194)

1 783

174

(16)

(212)

90 795

Non-specialised land

622

(9)

(3)

611

Specialised land

43 883

(7)

(194)

1 782

182

(16)

(210)

45 487

Land under roads

42 687

National parks and other land only holdings

2 010

Plant, equipment, vehicles and infrastructure

systems

12 434

(880)

(9)

274

2 595

112

(1)

107

14 690

Infrastructure systems

8 183

(41)

164

1 538

9 846

Plant, equipment and vehicles

4 251

(839)

(9)

110

1 056

112

(1)

107

4 844

Roads, road infrastructure and earthworks

44 046

(998)

5 518

2 109

2 979

53 671

Cultural assets

4 368

(11)

(126)

4 343

Total

193 931

(3 857)

(217)

265

10 300

6 789

5 715

(19)

(123)

212 788

2022

Buildings

38 548

(1 813)

(14)

127

3 221

2 164

1 669

(33)

43 882

Non-specialised buildings

3 302

(191)

(954)

2 262

Specialised buildings

34 110

(1 579)

(14)

116

3 394

2 162

1 643

186

921

40 939

Heritage buildings

1 136

(44)

(222)

(195)

680

Land and national parks

74 301

(13)

14 237

356

230

(36)

89 201

Non-specialised land

1 262

(741)

622

Specialised land

37 252

(13)

5 288

295

230

705

43 883

Land under roads

34 120

8 567

42 687

National parks and other land only holdings

1 667

342

2 010

Plant, equipment, vehicles and infrastructure

systems

10 239

(816)

(3)

227

2 564

160

(9)

12 434

Infrastructure systems

6 492

(43)

(3)

159

1 580

(2)

8 183

Plant, equipment and vehicles

3 747

(773)

984

159

(7)

4 251

Roads, road infrastructure and earthworks

41 740

(954)

(2)

192

2 336

972

(237)

44 046

Cultural assets

(a)

4 118

(20)

218

4 368

Total

(a)

168 946

(3 604)

(32)

279

18 095

7 445

2 820

(240)

250

(28)

193 931

Note:

(a) The 2022 comparative figures have been reclassified from level 3 to level 2 for certain cultural assets within the National Gallery of Victoria to more accurately reflect the nature of their fair value measurement.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

138 Chapter 4 2022-23 Financial Report

Description of valuation techniques and significant

unobservable inputs to Level 3 fair value measurements

The State measures all non-financial physical assets

initially at cost and subsequently revalues the assets

at fair value less accumulated depreciation and

impairment. The disclosure below provides

additional information about the Level 3

measurements (fair value measurements using

significant unobservable inputs).

The Victorian not-for-profit public sector entities

hold their recurring non-financial assets measured at

Level 3 primarily for service potential rather than

their ability to generate net cash inflows, which is

the case with the Victorian for-profit public sector

entities.

Government entities designated as for profit in

accordance with FRD 108 Classification of entities as for

profit are considered to be primarily held to generate

future net cash flows.

The table below provides the respective fair value

disclosures for not-for-profit and for-profit public

sector entities. The disclosures reflect the significant

asset balances within each of the different Level 3

asset classes. These assets are measured at the end

of the reporting period using inputs not based on

observable market data. The sensitivity of the

unobservable input to fair value has been assessed

and a significant increase or decrease in the

significant unobservable input will result in

significantly higher or lower valuation of the

underlying asset.

Fair value disclosure for assets held primarily for service potential

Asset class

Valuation technique

Significant unobservable input

Buildings

Non-specialised buildings

Current replacement cost

Direct cost per square metre

Useful life

Specialised buildings

Current replacement cost

Direct cost per square metre

Useful life

Heritage buildings

Current replacement cost

Direct cost per square metre

Useful life

Land and national parks

Non-specialised land

Market approach

CSO adjustment

(a)

Specialised land

Market approach

CSO adjustment

(a)

Land under roads

Market approach

CSO adjustment

(a)

National parks

Market approach

CSO adjustment

(a)

Plant, equipment, vehicles and infrastructure systems

Infrastructure systems and rolling stock

Current replacement cost

Cost:

per square metre

per unit

Useful life

Plant, equipment and vehicles

Current replacement cost

Cost per unit

Useful life

Roads and roads infrastructure

Current replacement cost

Cost per kilometre lane

Earthworks

Current replacement cost

Cost per kilometre

Cultural assets

Current replacement cost

Unit of value by comparative basis

Statistically verified random samples

Note:

(a) The CSO adjustment reflects the specialised nature of the asset being valued through a market approach. The CSO adjustment is a reflection of the valuer’s

assessment of the impact of restrictions associated with an asset to the extent that is also equally applicable to market participants. This approach takes into

account the highest and best use consideration for fair value measurement and considers the use of the asset that is physically possible, legally permissible, and

financially feasible.

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

2022-23 Financial Report Chapter 4 139

Fair value disclosure for assets held primarily for generating net cash inflows

Asset class

Valuation technique

Significant unobservable input

Range

Buildings

Metropolitan water corporations

Current replacement cost

Direct cost per unit

Direct cost per square metre

Useful life

$3 025–$49 385 325

$12–$10 000

1–150 years

Land

Metropolitan water corporations

Market approach

CSO adjustment

(a)

1–92 per cent

Channels

Ports

Discounted cash flow method

(income approach)

Discount rates

(b)

8.6 per cent

Infrastructure

Ports

Current replacement cost

Useful life

1–25 years

Metropolitan water corporations

Discounted cash flow method

(income approach)

Discount rates

(b)

5.0–6.0 per cent

Regulatory Asset Base (RAB)

exit multiple

1.05–1.25

Useful life

1–245 years

Plant, equipment and vehicles

Metropolitan water corporations

Current replacement cost

Useful life

Cost per unit

1–50 years

$1–$5 266 894

Notes:

(a) The CSO adjustment reflects the specialised nature of the asset being valued through a market approach. The CSO adjustment is a reflection of the valuer’s

assessment of the impact of restrictions associated with an asset to the extent that is also equally applicable to market participants. This approach takes into

account the highest and best use consideration for fair value measurement and considers the use of the asset that is physically possible, legally permissible, and

financially feasible.

(b) Applicable to the valuation using the income approach.

140 Chapter 4 2022-23 Financial Report

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

Introduction

This section presents a summary of the original

published budget estimates for the Victorian general

government sector and explains the material

variances between the estimates and actual

outcomes as presented in these financial statements.

It also provides disclosure of information in respect

of the Public Account, in accordance with the

requirement of the Financial Management Act 1994

(FMA).

Structure

8.1 Explanations of material variances

between budget and actual outcomes .................... 140

8.2 Public Account disclosures ...................................... 149

8.1 Explanations of material variances

between budget and actual outcomes

The tables and notes that follow explain material

variances between the general government sector

original budget as published in Chapter 1 of

2022-23 Budget Paper No. 5 Statement of Finances and

actual outcomes.

The tables also include the revised budget estimates

as published in Appendix B of 2023-24 Budget

Paper No. 5 Statement of Finances.

The original budget data is sourced from the

estimated financial statements, which were reviewed

by the Auditor-General, but were not subject to an

audit.

For the general government sector comprehensive

operating statement, variances are considered to be

material where the variance exceeds the greater of

10 per cent of the original budget estimates or

$100 million. In regard to the other statements, high

level explanations of variances in the key aggregates,

where material, have been provided.

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

2022-23 Financial Report Chapter 4 141

Consolidated comprehensive operating statement for the financial year ending 30 June ($ million)

General government sector

Notes

Published

budget

Revised

budget

2023

actual

Budget

variance

Revised

budget

variance

Revenue and income from transactions

Taxation

(a)

30 488

31 501

32 350

1 862

849

Interest income

(b)

715

1 360

1 307

592

(53)

(4)

Dividends, income tax equivalent and rate

equivalent income

(c)

602

756

820

218

Sales of goods and services

(d)

6 366

6 068

6 263

(103)

(2)

196

Grants

(e)

40 351

39 804

40 138

(213)

(1)

335

Other revenue and income

(f)

3 459

3 462

3 842

383

379

Total revenue and income from transactions

81 980

82 952

84 720

2 740

1 769

Expenses from transactions

Employee expenses

(g)

33 087

33 850

33 629

541

(221)

(1)

Net superannuation interest expense

682

719

Other superannuation

3 768

3 459

3 760

(8)

301

Depreciation

4 650

4 813

4 604

(46)

(1)

(209)

(4)

Interest expense

3 899

4 071

3 974

(97)

(2)

Grant expense

(h)

17 391

18 992

19 053

1 663

Other operating expenses

(i)

26 367

27 373

27 828

1 461

455

Total expenses from transactions

89 844

93 278

93 567

3 723

289

Net result from transactions – net operating

balance

(7 864)

(10 326)

(8 847)

(983)

1 479

(14)

Other economic flows included in net result

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

165

Net gain/(loss) on financial assets or liabilities at

fair value

(29)

(104)

(138)

(100)

(140)

Share of net profit/(loss) from associates/joint

venture entities, excluding dividends

(39)

(43)

n.a

(65)

(248)

Other gains/(losses) from other economic flows

(479)

(345)

(1 022)

(543)

113

(677)

196

Total other economic flows included in net result

(j)

(347)

(214)

(1 000)

(652)

188

(785)

367

Net result

(8 212)

(10 541)

(9 847)

(1 635)

694

(7)

Other economic flows – other comprehensive

income

Items that will not be reclassified to net result

Changes in non-financial assets revaluation surplus

5 940

4 611

13 710

7 769

131

9 098

197

Remeasurement of superannuation defined

benefits plans

984

(1 529)

1 356

371

2 885

(189)

Other movements in equity

(536)

(582)

n.a

(546)

n.a

Items that may be reclassified subsequently to net

result

Net gain/(loss) on financial assets at fair value

139

136

n.a

136

n.a

Net gain/(loss) on equity investments in other

sector entities at proportional share of the

carrying amount of net assets

(3 869)

(3 383)

3 431

7 299

(189)

6 813

(201)

Total other economic flows – other

comprehensive income

3 105

(288)

18 099

14 994

483

18 387

n.a

Comprehensive result – total change in net worth

(5 107)

(10 829)

8 252

13 359

(262)

19 081

(176)

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

142 Chapter 4 2022-23 Financial Report

Revenue and income from transactions

Revenue from transactions was $84.7 billion for the

year 30 June 2023. This is $2.7 billion (3 per cent)

higher than the published budget. Movements in

revenue items from the published budget are

discussed below.

a) Taxation revenue was $1.9 billion higher than

the published budget. This was driven by higher

than budgeted land tax of $531 million caused

by higher than expected revaluation rates on

land in Victoria, and higher than budgeted land

transfer duty collections of $512 million due to

a milder than forecast correction in Victoria’s

property market. Payroll tax and Mental Health

and Wellbeing Levy collections were also

$662 million higher than the published budget,

driven by a stronger than expected recovery in

the Victorian economy and labour market. Duty

on vehicles registrations and transfers was also

$178 million higher than the published budget,

driven by increases in the prices of motor

vehicles.

b) Interest income was $592 million higher than

the published budget. This was largely driven by

increases in interest rates over the twelve

months to June 2023, along with a higher than

expected cash and deposits balance due to the

proceeds received from the VicRoads

Modernisation joint venture which were used to

establish the Victorian Future Fund and were

invested in the central banking system during

2022-23.

c) Dividends, income tax equivalent and rate

equivalent income was $218 million higher than

the published budget. This was largely driven by

income tax equivalent income from the

Transport Accident Commission (TAC), due to

higher than forecast profits largely resulting

from higher bond yields.

d) Revenue from the sales of goods and services

was lower than the published budget by

$103 million. This was primarily driven by lower

than expected metropolitan public transport

fare revenue.

e) Grant revenue was $213 million lower than the

published budget. This was largely driven by the

timing of expected receipt of capital grants from

the Commonwealth of over $680 million for the

North East Link and Melbourne Airport Rail

projects and a grant of $450 million from the

TAC which has been rephased to future years.

This decrease was partially offset by an increase

in financial assistance grants to local

government with the Commonwealth bringing

forward the 2023-24 payments to 2022-23, and

an increase in GST grants due to an increase in

the national GST pool due to stronger than

anticipated recovery in consumption. The State

also received $496 million from the

Commonwealth for the Social Housing

Accelerator program as part of a national

partnership agreement.

f) Other revenue and income was $383 million

higher than the published budget. This was

driven by the health sector due to increases in

other revenue related to external to government

contributions, recoverable salaries and income

from additional activities. In addition, there was

also an increase in unclaimed monies collected

by the State Revenue Office and assets received

free of charge.

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

2022-23 Financial Report Chapter 4 143

Expenses from transactions

Expenses from transactions was $93.6 billion for

the year ended 30 June 2023. This is $3.7 billion

(4 per cent) higher than the published budget.

Movements in expense items from the published

budget are discussed below.

g) Employee expenses was $541 million higher

than the published budget. This was largely

driven by new initiatives funded in 2022-23 in

the health sector and higher than expected costs

within the regulatory bodies in the justice and

community safety, and environment sectors.

h) Grant expenses were $1.7 billion higher than

the published budget. This was largely driven by

the recognition of grants to local government

for the October 2022 floods and on-passing of

grants to local government in which the grants

for on-passing were brought forward from

2023-24 to 2022-23 by the Commonwealth. The

increase is also driven by grants associated with

the Power Saving Bonus initiative.

i) Other operating expenses were $1.5 billion

higher than the published budget. This was

driven by the Government’s continuing

response to COVID-19 in the transport sector

and flood recovery works along with operating

expenditure related to the Department of

Transport and Planning’s capital program. The

increase also reflects the new service fee

arrangements with the VicRoads Modernisation

joint venture for the delivery of registration and

licensing, and custom plates functions.

Other economic flows included in net result

j) Total other economic flows included in the net

result have decreased by $652 million since the

published budget. This decrease primarily

related to the write-off of inventory in the

health sector.

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

144 Chapter 4 2022-23 Financial Report

Consolidated balance sheet as at 30 June ($ million)

Published

budget

Revised

budget

2023

actual

Budget

variance

Revised

budget

variance

Assets

Financial assets

Cash and deposits

14 527

19 735

19 698

5 171

(37)

Advances paid

5 231

5 670

5 308

(361)

(6)

Receivables and contract assets

7 177

8 109

9 046

1 869

938

Investments, loans and placements

10 056

4 451

3 853

(6 203)

(62)

(598)

(13)

Investments accounted for using the equity method

1 219

1 180

1 170

n.a

(38)

(3)

Investments in other sector entities

79 552

89 002

96 042

16 490

7 040

Total financial assets

116 553

128 185

135 128

18 575

6 944

Non-financial assets

Inventories

197

781

574

378

192

(207)

(26)

Non-financial assets held-for-sale

182

169

110

(72)

(40)

(59)

(35)

Land, buildings, infrastructure, plant and equipment

217 590

238 943

249 480

31 890

10 537

Other non-financial assets

7 157

7 372

5 898

(1 259)

(18)

(1 474)

(20)

Total non-financial assets

225 125

247 264

256 062

30 937

8 798

Total assets

341 678

375 449

391 190

49 512

15 741

Liabilities

Deposits held and advances received

1 468

1 714

1 615

147

(99)

(6)

Payables

21 683

26 914

28 047

6 363

1 133

Contract liabilities

235

338

352

117

Borrowings

146 853

144 834

142 289

(4 564)

(3)

(2 545)

(2)

Employee benefits

10 033

10 099

10 250

217

151

Superannuation

23 555

21 778

18 904

(4 651)

(20)

(2 873)

(13)

Other provisions

2 282

2 071

2 950

668

880

Total liabilities

206 110

207 747

204 407

(1 703)

(1)

(3 340)

(2)

Net assets

135 569

167 702

186 783

51 214

19 081

Accumulated surplus/(deficit)

36 989

41 661

45 889

8 900

4 228

Reserves

98 580

126 041

140 894

42 314

14 854

Net worth

135 569

167 702

186 783

51 214

19 081

FISCAL AGGREGATES

Net financial worth

(89 556)

(79 562)

(69 278)

20 278

(23)

10 284

(13)

Net financial liabilities

169 108

168 564

165 321

(3 788)

(2)

(3 243)

(2)

Net debt

118 507

116 693

115 044

(3 463)

(3)

(1 648)

(1)

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

2022-23 Financial Report Chapter 4 145

Net financial worth

Net financial worth is total financial assets minus

total liabilities. Net financial worth was $20.3 billion

higher than the published budget. This was due to an

increase in financial assets of $18.6 billion and a

$1.7 billion decrease in liabilities.

The higher than forecast increase in financial assets

was primarily driven by an increase in investments in

other sectors, predominantly due to the mark-to-

market revaluation gain on TCV’s borrowings as a

result of higher bond yields. Also driving the

increase was higher than forecast proceeds received

from the VicRoads Modernisation joint venture

which were used to establish the Victorian Future

Fund.

The lower than expected liabilities included

$4.6 billion lower borrowings and a $4.7 billion

lower superannuation liability, partially offset by a

$6.4 billion higher payables balance as described

under net financial liabilities below.

Net financial liabilities

Net financial liabilities are total liabilities less all

financial assets (excluding investments in other

sectors). Net financial liabilities were $3.8 billion

lower than the published budget.

The decrease is primarily driven by lower borrowings

of $4.6 billion mainly as a result of higher than

forecast cash flows from operating activities, and a

decrease in the superannuation liability of $4.7 billion

reflecting an increase in the bond yields that underlie

the key superannuation valuation assumptions,

partially offset by the impact of lower than expected

investment returns on superannuation assets in the

June quarter of 2022-23. These decreases were

partially offset by higher than forecast payables of

$6.4 billion resulting from transactions including the

grant of a right to the operator liability recognised as

part of the VicRoads Modernisation joint venture,

and an increase in unearned income mainly relating

to reconciliation of grants received from the

Commonwealth under the National Health Reform

Agreement.

The lower than expected net financial liabilities were

also driven by an increase in receivables and contract

assets of $1.9 billion primarily due to an increase in

land tax receivables and accrued income tax

equivalent income from TAC.

Net debt

Net debt equals the sum of deposits held, advances

received, government securities, loans and other

borrowings less the sum of cash and deposits,

advances paid and investments, loans and

placements. Net debt was $3.5 billion lower

compared with the published budget. This was

primarily due to lower borrowings as explained

under the net financial liabilities above, and higher

than forecast proceeds received from the VicRoads

Modernisation joint venture which were used to

establish the Victorian Future Fund.

Non-financial assets

Non-financial assets were $30.9 billion higher than

the published budget. This was primarily due to the

revaluation of non-financial assets in the transport,

education and health sectors. The timing of asset

transfers from the general government sector to

other sectors of government was lower than forecast,

which also contributed to this increase.

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

146 Chapter 4 2022-23 Financial Report

Consolidated cash flow statement for the year ended 30 June ($ million)

General government sector

Published

budget

Revised

budget

2023

actual

Budget

variance

Revised

budget

variance

Cash flows from operating activities

Receipts

Taxes received

30 770

32 179

31 621

851

(559)

(2)

Grants

40 319

39 822

40 881

563

1 059

Sales of goods and services

(a)(b)

6 920

6 667

6 873

(47)

(1)

206

Interest received

682

1 309

1 229

546

(81)

(6)

Dividends, income tax equivalent and rate

equivalent receipts

596

804

693

(111)

(14)

Other receipts

(b)

6 873

10 217

10 207

3 334

(11)

Total receipts

86 160

90 999

91 503

5 343

504

Payments

Payments for employees

(32 772)

(33 616)

(33 260)

(489)

355

(1)

Superannuation

(3 977)

(3 686)

(3 975)

(289)

Interest paid

(3 588)

(3 769)

(3 559)

(1)

210

(6)

Grants and subsidies

(17 391)

(18 977)

(18 403)

(1 012)

573

(3)

Goods and services

(a)

(25 845)

(26 635)

(27 110)

(1 265)

(476)

Other payments

(1 305)

(1 424)

(945)

360

(28)

479

(34)

Total payments

(84 879)

(88 107)

(87 253)

(2 374)

853

(1)

Net cash flows from operating activities

1 281

2 892

4 250

2 969

232

1 357

Cash flows from investing activities

Cash flows from investments in

non-financial assets

Purchases of non-financial assets

(15 138)

(16 559)

(16 273)

(1 135)

285

(2)

Sales of non-financial assets

693

408

325

(367)

(53)

(83)

(20)

Net cash flows from investments in

non-financial assets

(14 445)

(16 151)

(15 948)

(1 503)

203

(1)

Net cash flows from investments in financial

assets for policy purposes

(1 429)

(1 778)

(1 625)

(196)

153

(9)

Subtotal

(15 874)

(17 929)

(17 573)

(1 699)

356

(2)

Net cash flows from investments in financial

assets for liquidity management purposes

(6 254)

(1 062)

(492)

5 762

(92)

570

(54)

Net cash flows from investing activities

(22 129)

(18 991)

(18 065)

4 063

(18)

926

(5)

Cash flows from financing activities

Advances received (net)

(448)

(120)

(242)

206

(46)

(122)

101

Net borrowings

21 253

24 969

22 749

1 496

(2 220)

(9)

Deposits received (net)

n.a

Net cash flows from financing activities

20 805

24 849

22 529

1 724

(2 320)

(9)

Net increase/(decrease) in cash and cash

equivalents

(43)

8 750

8 713

8 756

n.a

(37)

Cash and cash equivalents at beginning of

reporting period

14 570

10 985

(3 585)

(25)

Cash and cash equivalents at end of the

reporting period

14 527

19 735

19 698

5 171

(37)

Notes:

(a) These items include goods and services tax.

(a) Sales of goods and services and other receipts were previously aggregated in the 2022-23 Budget.

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

2022-23 Financial Report Chapter 4 147

Net cash flows from operating activities

Net cash flows from operating activities were

$3 billion higher than the published budget. This

was largely due to higher than forecast proceeds

received from the VicRoads Modernisation joint

venture.

A reconciliation of the net result to net cash flows

from operating activities is provided at Note 5.5.

Net cash flows from investing activities

Net cash flows from investing activities were

$4.1 billion lower than the published budget. This

decrease was driven by lower cash outflows in

financial assets for liquidity management purposes

due to the timing of investments made from the

Victorian Future Fund with VFMC. This decrease

was partially offset by higher than forecast

expenditure on the State’s capital program.

Net cash flows from financing activities

Net cash inflows from financing activities were

$1.7 billion higher than the published budget. This

was primarily due to higher borrowings than

expected in the published budget primarily as a

result of higher than forecast expenditure on the

State's capital program.

Consolidated statement of changes in equity

The major variations between actual outcomes and

the published budget for the statement of changes

in equity are largely addressed in the explanations

provided previously.

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

148 Chapter 4 2022-23 Financial Report

Consolidated statement of changes in equity ($ million)

Accumulated

surplus/(deficit)

Non-financial

assets

revaluation

surplus

Investment in

other sector

entities

revaluation

surplus

Other

reserves

Total

2022-23 original budget

Balance at 1 July 2022

44 170

61 604

33 740

1 162

140 676

Net result for the year

(8 212)

Other comprehensive income for the year

1 030

5 940

(3 869)

3 105

Transfer to/(from) accumulated surplus

Balance at 30 June 2023

36 989

67 545

29 871

1 165

135 569

2022-23 revised budget

Balance at 1 July 2022

52 827

79 719

44 815

1 170

178 531

Net result for the year

(10 541)

Other comprehensive income for the year

(1 520)

4 611

(3 383)

(288)

Transfer to/(from) accumulated surplus

895

(895)

Balance at 30 June 2023

41 661

83 436

41 432

1 173

167 702

2022-23 actual

Balance at 1 July 2022

52 824

79 719

44 815

1 170

178 528

Opening balance adjustment

(a)

Restated balance at 1 July 2022

52 827

79 719

44 815

1 170

178 531

Net result for the year

(9 847)

Other comprehensive income for the year

749

13 710

3 431

210

18 099

Transfer to/(from) accumulated surplus

2 160

(2 160)

Balance at 30 June 2023

45 889

91 269

48 245

1 380

186 783

Variance to original budget

Balance at 1 July 2022

8 657

18 115

11 075

37 855

Net result for the year

(1 635)

Other comprehensive income for the year

(281)

7 769

7 299

207

14 994

Transfer to/(from) accumulated surplus

2 160

(2 160)

Balance at 30 June 2023

8 900

23 725

18 375

215

51 214

Variance to revised budget

Balance at 1 July 2022

Net result for the year

694

Other comprehensive income for the year

2 269

9 098

6 813

207

18 387

Transfer to/(from) accumulated surplus

1 265

(1 265)

Balance at 30 June 2023

4 228

7 834

6 813

207

19 081

Note:

(a) On 1 July 2022, the seven Waste and Resource Recovery Groups were abolished and transferred from the PNFC sector to be amalgamated into the former

Department of Environment, Land, Water and Planning (DELWP) to form a business unit within DELWP, Recycling Victoria. This has resulted in the 1 July 2022

opening balance not equalling the 30 June closing balance. DELWP has been renamed the Department of Energy, Environment and Climate Action (DEECA) following

the machinery of government changes announced by the Premier on 5 December 2022 with effect from 1 January 2023. Refer to Note 9.8 for further details.

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

2022-23 Financial Report Chapter 4 149

8.2 Public Account disclosures

The Financial Management Act 1994 (FMA) requires

the following disclosures of information in respect

of the transactions and balances of the Public

Account.

The Public Account is the Government’s official

bank account. The Public Account holds the cash

balances of the Consolidated Fund and the Trust

Fund.

The FMA, among other things, also provides for:

• temporary advances from the Public Account

for a number of purposes related to the needs

of the Government

• investment of the Public Account in trustee

securities

• temporary borrowings should the balance in the

Consolidated Fund be insufficient to meet

commitments during a financial year.

Consolidated Fund

The Consolidated Fund, established by the FMA,

is the Government’s primary financial account and

receives all consolidated revenue under the

Constitution Act 1975 from which payments,

appropriated by Parliament, are made.

Trust Fund

Within the Public Account, the Trust Fund includes

a range of specific purpose accounts established for

funds that are not subject to parliamentary

appropriation. Examples include accounts to record

specific purpose payments from the

Commonwealth for on-passing by the State to third

parties, suspense account balances for accounting

purposes, working accounts for commercial and

departmental service units, and accounts facilitating

the receipt and disbursement of other funds held by

the State in trust. Additional accounts may also be

established within the Trust Fund by legislation to

receive State revenues hypothecated to particular

purposes (e.g. lotteries revenue for hospitals and

charities).

Structure of Public Account disclosure

8.2.1 Summarised consolidated fund receipts

and payments for the financial year

ended 30 June ....................................................... 150

8.2.2 Consolidated fund receipts for the

financial year ended 30 June ............................... 152

8.2.3 Trust fund cash flow statement for the

financial year ended 30 June ............................... 154

8.2.4 Trust fund summary for the financial year

ended 30 June ....................................................... 155

8.2.5 Reconciliation of cash flows to balances held . 155

8.2.6 Details of securities held and included in the

balances at 30 June ............................................... 156

8.2.7 Consolidated Fund payments:

Special appropriations ......................................... 156

8.2.8 Consolidated Fund payments:

Annual appropriations ......................................... 157

8.2.9 Amounts paid into working accounts pursuant

to Section 23 of the Financial Management

Act 1994 for the year ended 30 June ................. 157

8.2.10 Transfers pursuant to Sections 30 and 31 of

the Financial Management Act 1994 for the

financial year ended 30 June 2023 ..................... 158

8.2.11 Appropriation of revenue and asset sale

proceeds pursuant to Section 29 of the

Financial Management Act 1994 for the financial

year ended 30 June 2023 ..................................... 159

8.2.12 Section 32 carryovers – Financial Management

Act 1994 for the financial year ended 30 June. 160

8.2.13 Payments from advance to the Treasurer for

the financial year ended 30 June ........................ 161

8.2.14 Payments from advances and unused

advances carried forward to 2022-23

pursuant to Section 35 and 35(4) of the

Financial Management Act 1994 ............................ 167

8.2.15 Government guarantees ...................................... 168

8.2.16 Allocations pursuant to Section 28 of the

Financial Management Act 1994 for the

financial year ended 30 June ............................... 168

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

150 Chapter 4 2022-23 Financial Report

8.2.1 Summarised consolidated fund receipts and payments for the financial year

ended 30 June ($ thousand)

Notes

2023

2022

Receipts

Taxation

32 039 338

30 739 360

Fines and regulatory fees

1 147 402

904 279

Grants received

26 155 023

27 742 773

Sales of goods and services

1 372 878

1 140 076

Interest received

1 110 353

455 272

Dividends, income tax equivalent and rate equivalent receipts

745 108

511 232

Other receipts

8 745 403

945 883

Total cash inflows from operating activities

71 315 505

62 438 876

Total cash inflows from investing and financing activities

23 759 655

27 330 194

Total consolidated fund receipts

8.2.2

95 075 159

89 769 070

Payments

Special appropriations

Special appropriations (excluding Section 33, Financial Management Act, No. 18 of 1994

appropriation to meet certain obligations)

5 289 199

6 649 340

Section 28 Financial Management Act, No. 18 of 1994

(appropriation for borrowing against future appropriations)

8.2.16

348 000

Section 33 Financial Management Act, No. 18 of 1994

(appropriation to meet certain obligations)

111 461

523 994

Total special appropriations

8.2.7

5 400 660

7 521 334

Annual appropriations

Provision of outputs

Provision of outputs – Net application

8.2.8

50 456 619

50 014 454

Section 29 Financial Management Act, No. 18 of 1994

(appropriation of annotated receipts)

8.2.11

2 477 051

5 474 313

Section 32 Financial Management Act, No. 18 of 1994

(prior year unspent appropriations brought forward)

8.2.12

368 441

489 955

Section 35 Financial Management Act, No. 18 of 1994 (temporary advances)

8.2.14

399 253

Advance to Treasurer to be sanctioned

8.2.13

9 075 575

13 370 599

Total provision of outputs

62 776 939

69 349 321

Additions to net asset base

Additions to net asset base – Net application

8.2.8

10 336 196

8 929 804

Section 29 Financial Management Act, No. 18 of 1994

(appropriation of annotated receipts)

8.2.11

1 253 258

1 063 346

Section 32 Financial Management Act, No. 18 of 1994

(prior year unspent appropriations brought forward)

8.2.12

591 851

351 499

Advance to Treasurer to be sanctioned

8.2.13

3 139 385

1 777 259

Total additions to net asset base

15 320 690

12 121 909

Payments made on behalf of the State

8.2.8

7 094 937

4 870 653

Section 32 Financial Management Act, No. 18 of 1994

(prior year unspent appropriations brought forward)

(a)

8.2.12

1 356

Total payments made on behalf of State

7 094 937

4 872 009

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

2022-23 Financial Report Chapter 4 151

8.2.1 Summarised consolidated fund receipts and payments for the financial year

ended 30 June (continued) ($ thousand)

Notes

2023

2022

Other

Contribution by the State under agreements pursuant to Section 25 of the

Murray-Darling Basin Act 1993

8.2.8

31 429

29 926

Victorian Law Reform Commission –

Pursuant to Section 17 (b) of the Victorian Law Reform Commission Act 2000

8.2.8

779

1 226

Total other

32 208

31 152

Total annual appropriations

85 224 774

86 374 391

Applied appropriations remaining unspent relating to the 2022-23 appropriations

(1 267 914)

(1 878 951)

Total payments

89 357 520

92 016 774

Consolidated fund balance 1 July

2 247 704

Add total receipts for year

95 075 159

89 769 070

Less total payments for year

(89 357 520)

(92 016 774)

Consolidated fund balance 30 June

5 717 639

Reconciliation of unspent appropriations:

Applied appropriations unspent at end of year

14 978 458

13 822 004

add payments made during the year under the Financial Management Act, No. 18 of

1994, Section 33

111 461

523 994

Subtotal

15 089 919

14 345 998

less applied appropriations unspent at beginning of year

(13 822 004)

(12 467 047)

Current year appropriations remaining unspent as at 30 June

1 267 914

1 878 951

Note:

(a) The 2022 figure has been restated to reflect more current information.

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

152 Chapter 4 2022-23 Financial Report

8.2.2 Consolidated fund receipts for the financial year ended 30 June

($ thousand)

Published

budget

Actual

2023

2022

Operating activities

Taxation

Payroll tax

8 240 586

8 357 407

7 938 313

Mental Health and Wellbeing Levy

983 034

1 104 983

397 491

Land tax

4 749 233

4 742 892

3 845 986

Fire Services Property Levy

800 240

791 858

758 758

Congestion levy

108 369

120 605

103 942

Financial and capital transactions

Land transfer duty

8 234 381

8 710 095

10 375 272

Other property duties

Metropolitan Planning Levy

19 998

21 913

22 185

Financial accommodation levy

183 513

155 462

150 963

Growth areas infrastructure contribution

165 000

153 698

194 946

Gambling

Public lotteries

734 550

670 409

677 966

Electronic gaming machines

1 041 137

1 313 231

819 263

Casino

222 656

177 533

218 771

Racing and other sports betting

270 000

253 213

257 748

Other

100 205

107 248

73 047

Levies on statutory corporations

173 480

Taxes on insurance

1 829 009

1 875 467

1 727 756

Motor vehicle

Registration fees pursuant to the Road Safety Act, No. 127 of 1986

2 006 598

1 954 137

1 878 406

Stamp duty on vehicle transfers

1 077 248

1 255 327

1 097 436

Franchise fees

Liquor

26 039

20 905

25 842

Other

76 319

79 430

1 719

Total taxation

31 041 605

32 039 338

30 739 360

Fines and regulatory fees

Fines

424 665

596 388

365 154

Regulatory fees

675 310

551 014

539 125

Total fines and regulatory fees

1 099 975

1 147 402

904 279

Grants received

(a)

Department of Education

3 233

25 914

Department of Energy, Environment and Climate Action

211

1 093

1 215

Department of Families, Fairness and Housing

586

21 189

9 534

Department of Health

72 541

259 849

81 189

Department of Jobs, Skills, Industry and Regions

1 564

1 524

27 898

Department of Justice and Community Safety

582

625

Department of Transport and Planning

14 364

2 136

6 419

Department of Treasury and Finance

26 641 250

25 865 417

27 589 979

Total grants received

26 731 098

26 155 023

27 742 773

Sales of goods and services

Other sales of goods and services

1 465 605

1 372 878

1 140 076

Total sales of goods and services

1 465 605

1 372 878

1 140 076

Interest received

478 271

1 110 353

455 272

Dividends, income tax equivalent and rate equivalent revenue

Dividends

134 419

60 477

246 989

Income tax equivalent revenue

223 910

679 850

259 619

Local government tax equivalent revenue

5 090

4 781

4 624

Total dividends, income tax equivalent and rate equivalent revenue

363 418

745 108

511 232

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

2022-23 Financial Report Chapter 4 153

8.2.2 Consolidated fund receipts for the financial year ended 30 June (continued) ($ thousand)

Other receipts

Land rent received

18 821

18 400

17 882

Royalties received

139 132

128 665

139 940

Other

3 949 898

8 598 339

788 061

Total other receipts

4 107 851

8 745 403

945 883

Total cash inflows from operating activities

65 287 823

71 315 505

62 438 876

Cash inflows from investing activities

Proceeds from investments

(5 100 813)

360

(441)

Proceeds from sale of property, plant and equipment

202 327

170 993

Other loans

642

Return of capital – Government entities

250 700

209 835

Total cash inflows from investing activities

(4 849 471)

202 687

380 387

Cash inflows from financing activities

Loans to government agencies

23 831

22 313

19 170

Borrowings

25 119 509

23 534 655

26 930 637

Total cash inflows from financing activities

25 143 340

23 556 968

26 949 807

Total cash inflows from investing and financing activities

20 293 869

23 759 655

27 330 194

Total consolidated fund receipts

85 581 693

95 075 159

89 769 070

Note:

(a) On 5 December 2022, the Premier announced various machinery of government changes effective 1 January 2023. See Note 9.8 for further details.

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

154 Chapter 4 2022-23 Financial Report

8.2.3 Trust fund cash flow statement for the financial year ended 30 June ($ thousand)

2023

2022

Cash flows from operating activities

Receipts

Taxation

617 442

416 620

Regulatory fees and fines

234 787

243 502

Grants received

(a)

23 008 725

24 940 231

Sale of goods and services

1 568 676

1 453 891

Interest received

152 187

32 853

Dividend received

37 238

17 610

Net transfers from the consolidated fund

9 389 063

9 513 193

Other receipts

338 587

172 577

Payments

Payments for employees

(504 897)

(670 495)

Superannuation

(40 393)

(50 407)

Interest paid

(116 619)

(126 255)

Grants and subsidies

(a)

(24 536 841)

(26 484 488)

Goods and services

(4 057 093)

(5 034 123)

Net cash flows from operating activities

6 090 861

4 424 709

Cash flows from investing activities

Purchase of non-financial assets

(65 969)

(172 654)

Sales of non-financial assets

98 263

88 215

Net proceeds from customer loans

705 415

236 882

Other investing activities

(a)

(3 797 331)

(3 885 955)

Net cash flows from investing activities

(a)

(3 059 622)

(3 733 512)

Cash flows from financing activities

Net borrowings

(417 296)

(83 273)

Net cash flows from financing activities

(417 296)

(83 273)

Net increase/(decrease) in trust fund cash and deposits

(a)

2 613 943

607 924

Note:

(a) The 2021-22 comparative figures have been restated to reflect more correct information.

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

2022-23 Financial Report Chapter 4 155

8.2.4 Trust fund summary for the financial year ended 30 June ($ thousand)

Balances

held 2023

Balances

held 2022

State Government funds

Accounts established to receive levies imposed by Parliament and record the expenditure thereof

421 911

288 785

Accounts established to receive monies provided in the annual budget and record the expenditure thereof

1 167 055

765 804

Specific purpose operating accounts established for various authorities

3 891 059

3 033 273

Suspense and clearing accounts to facilitate accounting procedures

346 555

28 798

Treasury Trust Fund

349 974

299 027

Agency and deposit accounts

890 245

772 295

Total State Government funds

7 066 799

5 187 981

Joint Commonwealth and State funds

855 886

173 777

Commonwealth Government funds

Commonwealth Grants passed on to individuals and organisations

441 848

56 015

Total Commonwealth Government funds

441 848

56 015

Prizes, scholarships, research and private donations

464 935

443 318

Total Trust Fund

8 829 467

5 861 091

8.2.5 Reconciliation of cash flows to balances held ($ thousand)

Balances

held at

30 June 2022

Net

movement

for year

Balances

held at

30 June 2023

Cash and deposits

Cash balances outside the Public Account

(1 334)

1 302

(32)

Deposits held with the Public Account – Specific trusts

1 024 485

423 886

1 448 371

Deposits held with the Public Account – General trusts

Other balances held in the Public Account

3 352 767

8 096 780

11 449 547

Total cash and deposits

4 375 933

8 521 969

12 897 902

Investments

Investments held with the Public Account – Specific trusts

1 485 158

164 040

1 649 199

Total investments

1 485 158

164 040

1 649 199

Total fund balances

5 861 091

8 686 009

14 547 101

Less funds held outside the Public Account

Cash

(1 334)

1 302

(32)

Total fund balances held outside the Public Account

(1 334)

1 302

(32)

Total funds held in the Public Account

(a)

5 862 425

8 684 708

14 547 133

Note:

(a) See Note 8.2.6 for details of securities and investments including amounts held in the Public Account on behalf of trust accounts.

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

156 Chapter 4 2022-23 Financial Report

8.2.6 Details of securities held and included in the balances at 30 June ($ thousand)

2023

2022

Funds held at 30 June

Trust accounts

Amounts invested on behalf of specific trusts

3 097 570

2 509 644

Amounts invested on behalf of general trusts

General account balances

5 731 908

3 352 767

Total trust accounts

8 829 493

5 862 425

Consolidated fund account balance

5 717 639

Total funds held in the public account

14 547 133

5 862 425

Represented by:

Stocks and securities held with/in –

Managed investments

1 649 214

1 485 174

Treasury Corporation of Victoria

8 320

7 060

1 657 534

1 492 234

Cash and investments held with/in –

Treasury Corporation of Victoria

Cash at bank balances held in Australia

(a)

11 695 222

3 510 776

11 695 222

3 510 776

Total stock, securities, cash and investments

13 352 756

5 003 010

Add cash advanced pursuant to Sections 36 and 37 of the Financial Management Act, No. 18 of 1994

1 194 377

859 415

Total funds held in the public account

14 547 133

5 862 425

Note:

(a) The increase in cash at bank balances held in Australia is primarily due to the $7.9 billion received from the VicRoads Modernisation joint venture, which has been

used to establish the Victorian Future Fund.

8.2.7 Consolidated Fund payments: Special appropriations

(a)

($ thousand)

2023

2022

Education

4 821

6 173

Energy, Environment and Climate Action

79 160

202 054

Families, Fairness and Housing

82 868

65 299

Government Services

Health

3 028 091

2 306 388

Jobs, Skills, Industry and Regions

11 571

1 812

Justice and Community Safety

113 843

334 230

Premier and Cabinet

164 199

69 504

Transport and Planning

541 509

1 535 940

Treasury and Finance

1 055 212

2 687 708

Parliament

53 031

50 732

Courts

266 356

261 493

Total special appropriations

5 400 660

7 521 334

Note:

(a) On 5 December 2022, the Premier announced various machinery of government changes effective 1 January 2023. See Note 9.8 for further details.

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

2022-23 Financial Report Chapter 4 157

8.2.8 Consolidated Fund payments: Annual appropriations

(a)

($ thousand)

2023

Provision

of outputs

Additions to

net asset base

Payments made on

behalf of the State

Total

Education

14 215 268

1 382 273

15 597 540

Energy, Environment and Climate Action

2 006 331

165 856

620 485

2 792 672

Families, Fairness and Housing

4 290 153

563 846

2 686 724

7 540 723

Government Services

178 684

Health

11 908 083

Jobs, Skills, Industry and Regions

2 865 959

54 592

94 329

3 014 881

Justice and Community Safety

8 819 054

273 908

69 710

9 162 672

Premier and Cabinet

326 364

919

327 283

Transport and Planning

4 769 590

7 804 103

1 926

12 575 619

Treasury and Finance

350 318

4 420

3 653 192

4 007 929

Parliament

251 061

8 894

259 955

Courts

476 533

77 386

553 919

Total annual appropriations

50 457 398

10 336 196

7 126 366

67 919 960

2022

Education

14 204 687

1 000 501

15 205 188

Energy, Environment and Climate Action

1 816 366

195 992

678 100

2 690 457

Families, Fairness and Housing

5 903 801

205 618

69 107

6 178 526

Government Services

Health

11 491 080

Jobs, Skills, Industry and Regions

2 188 919

121 771

80 773

2 391 463

Justice and Community Safety

8 508 661

689 837

52 956

9 251 455

Premier and Cabinet

459 502

Transport and Planning

4 264 746

6 557 532

10 822 278

Treasury and Finance

470 349

9 137

4 019 643

4 499 129

Parliament

240 979

8 032

249 011

Courts

466 591

141 384

607 975

Total annual appropriations

50 015 681

8 929 804

4 900 579

63 846 064

Note:

(a) On 5 December 2022, the Premier announced various machinery of government changes effective 1 January 2023. See Note 9.8 for further details.

8.2.9 Amounts paid into working accounts pursuant to Section 23 of the

Financial Management Act 1994 for the year ended 30 June ($ thousand)

2023

2022

Appropriation transfer equivalent to consolidated fund receipts

35 491

38 700

Interest received on credit balances

283

Total amounts paid into working accounts

35 774

38 715

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

158 Chapter 4 2022-23 Financial Report

8.2.10 Transfers pursuant to Sections 30 and 31 of the Financial Management Act 1994

for the financial year ended 30 June 2023

(a)

($ thousand)

Decrease

Increase

Section 30 and 31 transfers

(Transfers between items of departmental appropriations)

Education

Provision of outputs

4 237

Additions to the net asset base

4 237

Energy, Environment and Climate Action

Provision of outputs

26 756

Additions to the net asset base

26 756

Families, Fairness and Housing

Provision of outputs

110 170

Additions to the net asset base

110 170

Government Services

Provision of outputs

7 717

Additions to the net asset base

7 717

Health

Provision of outputs

83 282

Additions to the net asset base

83 282

Jobs, Skills, Industry and Regions

Provision of outputs

2 886

Additions to the net asset base

2 886

Justice and Community Safety

Provision of outputs

344 219

Additions to the net asset base

360 929

Payments made on behalf of the State

16 710

Premier and Cabinet

Provision of outputs

919

Additions to the net asset base

919

Transport and Planning

Provision of outputs

211 485

Additions to the net asset base

211 485

Parliament

Provision of outputs

1 211

Additions to the net asset base

1 211

Total Section 30 and 31 transfers

809 592

Note:

(a) On 5 December 2022, the Premier announced various machinery of government changes effective 1 January 2023. See Note 9.8 for further details.

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

2022-23 Financial Report Chapter 4 159

8.2.11 Appropriation of revenue and asset sale proceeds pursuant to Section 29 of the

Financial Management Act 1994 for the financial year ended 30 June 2023

(a)

($ thousand)

Source

Department

Outputs

Commonwealth

Other

Total

Education

60 924

382 295

3 172

446 390

Energy, Environment and Climate Action

110 120

161 583

271 703

Families, Fairness and Housing

35 349

419 243

14 456

469 047

Government Services

3 084

Health

276 343

149 292

1 550

427 185

Jobs, Skills, Industry and Regions

28 067

215 022

243 089

Justice and Community Safety

233 832

102 479

2 115

338 426

Premier and Cabinet

423

Transport and Planning

198 231

1 216 290

1 414 521

Treasury and Finance

6 407

Parliament

33 724

Courts

76 311

Total appropriation

1 056 406

2 646 204

27 700

3 730 309

Note:

(a) On 5 December 2022, the Premier announced various machinery of government changes effective 1 January 2023. See Note 9.8 for further details.

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

160 Chapter 4 2022-23 Financial Report

8.2.12 Section 32 carryovers – Financial Management Act 1994 for the financial year ended 30 June

Amounts approved for carryover to 2022-23 pursuant to Section 32 of the

Financial Management Act 1994

(a)

($ thousand)

Department

Provision of

outputs

Additions to

net assets

Payments made on

behalf of State

Total

carryover

Education

106 854

325 524

432 378

Energy, Environment and Climate Action

81 958

15 280

97 238

Families, Fairness and Housing

22 317

14 462

36 779

Government Services

Health

43 704

Jobs, Skills, Industry and Regions

44 721

Justice and Community Safety

7 936

50 442

58 379

Premier and Cabinet

9 404

Transport and Planning

59 960

166 097

226 056

Treasury and Finance

25 486

Parliament

5 506

1 516

7 022

Courts

15 658

Total carryovers by department

407 846

588 980

996 825

Note:

(a) On 5 December 2022, the Premier announced various machinery of government changes effective 1 January 2023. See Note 9.8 for further details.

Amounts applied against carryover of appropriations in 2022-23 pursuant to Section 32 of the

Financial Management Act 1994 ($ thousand)

Department

Provision

of outputs

Additions to

net assets

Payments made on

behalf of State

Total

carryover

Education

106 854

325 524

432 378

Energy, Environment and Climate Action

72 548

12 280

84 828

Families, Fairness and Housing

21 304

8 641

29 945

Government Services

Health

(a)

43 718

Jobs, Skills, Industry and Regions

31 606

Justice and Community Safety

7 936

50 442

58 378

Premier and Cabinet

9 404

Transport and Planning

(a)

60 585

178 010

238 595

Treasury and Finance

8 980

Parliament

5 506

1 296

6 802

Courts

15 658

Total carryovers by department

368 441

591 851

960 292

Note:

(a) The 2022-23 applied amounts are higher than the 2022-23 approved amounts in the previous table as a result of the transfer of certain section 32 carryover

amounts between the departments during 2022-23 as result of the machinery of government changes.

Amounts approved for carryover to 2023-24 pursuant to Section 32 of the

Financial Management Act 1994 ($ thousand)

Department

Provision

of outputs

Additions to

net assets

Payments made on

behalf of State

Total

carryover

Education

91 380

278 703

370 083

Energy, Environment and Climate Action

80 763

6 256

87 019

Families, Fairness and Housing

16 620

18 463

54 242

89 325

Government Services

Health

26 529

Jobs, Skills, Industry and Regions

163 380

2 222

165 602

Justice and Community Safety

31 134

28 807

59 941

Premier and Cabinet

13 998

Transport and Planning

165 779

381 452

547 232

Treasury and Finance

16 292

504

16 796

Parliament

1 216

Courts

26 200

Total carryovers by department

605 876

743 823

54 242

1 403 941

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

2022-23 Financial Report Chapter 4 161

8.2.13 Payments from advance to the Treasurer for the financial year ended 30 June

(a)

($ thousand)

Department

Purpose

2022-23

Education

Free Kinder

106 700

Best Start, Best Life

47 794

School enrolment-based funding

44 955

Victoria’s Flood Response

29 221

228 670

Energy, Environment and

$250 Power Saving Bonus

642 400

Climate Action

Forestry Transition Program

147 509

Emergency Works Flood and Storm Events

84 224

Three New Parks link to Suburban Parks

27 550

Portfolio Agencies

25 340

Emergency response services (fires and floods)

23 883

Emergency Animal Disease preparedness

19 890

Energy Efficiency Upgrades For Homes

17 018

Aviation Firefighting Resources

15 959

Offshore Wind

13 176

Hydrogen Park Murray Valley

12 315

State Electricity Commission of Victoria (SEC)

11 108

Renewable Energy Zones

9 925

Solar Homes – Virtual Power Plant program

7 513

Cladding Rectification Program

6 900

Energy support payment

4 320

Waste Levy waiver for flood waste

4 300

Victorian Energy Storage Target

3 876

Camping on Crown Water Frontages

2 700

Biosecurity Responses

2 634

Fast Tracking Waste and Recycling Infrastructure

2 060

Community Energy and Microgrid Program

1 700

Minor works on Crown Land reserves and land management projects

1 305

Protecting The Future Of Hanging Rock

1 300

Mineral Licensing operations

967

Horticulture Netting Trial Scheme

828

Electricity network development

624

Retreat and Resettlement program

500

Royal Melbourne Showgrounds Joint Venture

464

Future Drought Fund – Regional Drought Resilience Planning

389

Kids Go Free to the Royal Melbourne Show

229

Victorian Rural Women’s Network

140

1 093 047

Families, Fairness

Big Housing Build

72 380

and Housing

Civil claims costs for historical institutional child abuse

38 933

October 2022 flood relief

28 323

From Homelessness to a Home (H2H)

22 480

Family violence and sexual assault programs

15 615

COVID-19 support for vulnerable communities

10 064

Public housing operations

6 600

Financial assistance to community service organisations

6 156

Organisational transition

6 039

Construction of Foodbank hubs

5 115

Emergency food relief for Victorians impacted by the flood crisis

4 500

Homes for Families (H4F)

4 280

Journey to Social Inclusion

3 693

’Jobs that Matter’ workforce recruitment campaign

2 146

Vietnamese Cultural Museum

2 120

Supporting victims of sexual harm and violence

2 000

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

162 Chapter 4 2022-23 Financial Report

8.2.13 Payments from advance to the Treasurer for the financial year ended 30 June

(continued) ($ thousand)

Department

Purpose

2022-23

Families, Fairness

Integrated Client and Case Management System

1 650

and Housing (continued)

Victorian Volunteer Strategy

1 275

Whole of Government Family Violence Information Sharing and Multi-Agency Risk

Assessment and Management (MARAM) reforms

1 221

Victorian Historical Care Leavers Redress Scheme

1 047

Investing in Victoria’s Gender Equality Strategy

1 000

Construction of food relief hub for Shepparton Foodshare

1 000

VITS LanguageLoop

880

Tackling racism in Victoria head on

866

COMPASS Partnership Addressing Disadvantage

717

Recovery support program following the June 2021 flood and storm event

512

Building a Sense of Belonging in Victoria

330

240 941

Government Services

Service Victoria Operational Funding

19 898

Common corporate platform Whole of Government Initiative

14 551

Strengthening the Centre

11 788

Melbourne CBD Economic Revitalisation Package

11 606

Digital Victoria Operational Funding

6 836

Mobile Black Spot Program

4 408

2022-23 Council Flood Support Fund

3 500

Digital Literacy for Seniors Program

2 000

COVID-19 Administration

1 336

Operational funding

1 200

Service Victoria Digital Driver Licensing

786

Service Victoria Business Licensing

546

Development of the Digital Victoria Marketplace

324

Supporting Community Sector Jobs

276

79 055

Health

Additional resources provided to health services

964 381

Workforce attraction and retention strategy

370 548

Emergency response services

159 183

COVID-19 Testing and vaccination services and engagement

73 631

Enabling care and meeting demand for hospital services

71 839

Elective Surgery Catch Up Plan

64 175

Better at home: Hospital care in the home

57 857

Support for primary care to protect our hospitals

32 540

Providing additional bed capacity through modular facilities

21 805

Delivering the Australian Institute for Infectious Disease

19 055

Service delivery fund for Aboriginal Community Controlled Organisations and Aboriginal

Community Controlled Health Organisations

16 800

Free flu vaccinations for all Victorians

15 069

COVID-19 health response

14 970

Funding for community service organisations

14 833

Victoria’s Flood Recovery

14 178

Securing our nursing and midwifery workforce supply

11 050

Strengthening community-based services

10 000

Medical Research: Generation Victoria and Living Evidence

8 500

Reformed area services to better support the mental health and wellbeing of adults and

older adults

8 413

More support for our nurses and midwives

6 787

Equitable cancer care and prevention

6 316

Information sharing and family violence risk assessment and management reform

6 237

Supporting decriminalisation of public intoxication

6 211

Rapid Antigen Tests

6 100

Cumming Global Centre for Pandemic Therapeutics

6 000

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

2022-23 Financial Report Chapter 4 163

8.2.13 Payments from advance to the Treasurer for the financial year ended 30 June

(continued) ($ thousand)

Department

Purpose

2022-23

Health (continued)

New legal foundations and supporting mental health consumers to exercise their rights

4 512

Enabling a high-quality, efficient public pathology system

4 402

Brain Cancer Centre Investment

4 100

Modernising Victoria’s health system

3 023

Additional funding for Ambulance services

2 574

M-pox vaccination program

2 272

Alcohol and other drug treatment, support and harm reduction services

2 192

Additional resources in Public Sector Residential Aged Care Facilities

1 396

Promoting good mental health and wellbeing in all communities

1 236

Supporting the mental health and wellbeing of people in contact with the criminal and youth

justice systems

771

Centre for Victorian Data Linkage

585

Maternal and child health workforce support package

500

Supporting the mental health and wellbeing of rural and regional Victorians

260

Rural and regional Public Sector Residential Aged Care Services project

2 014 335

Jobs, Skills, Industry

CSL Parkville North site

162 175

and Regions

2026 Victorian Commonwealth Games

135 040

Jobs for Victoria

88 000

Flood Recovery and Support

81 830

Melbourne Arts Precinct transformation

70 255

Geelong City Deal

52 429

Reimbursement to the Commonwealth Government for Pandemic Leave Disaster Payment

and High Risk Settings Pandemic Payment programs

49 339

Creative Industries Recovery

37 396

TAFE

36 700

COVID-19 pandemic industry and economic support

30 839

Victorian Sick Pay Guarantee

24 374

Securing and Scaling mRNA vaccine manufacturing capability in Victoria

22 900

Visitor Economy – recovery and reform package

15 048

Living Local – supporting our suburbs to recover and thrive

13 000

Melbourne CBD economic revitalisation package

11 071

Melbourne and Olympic Parks Trust

10 150

Live Music Restart Program

9 992

Supporting industries: COVID-19 coordination and recovery

9 479

NBC Universal Partnership

8 419

Connecting Victoria Mobile Program

7 145

Victorian tourism package

6 800

Workforce transition

6 385

Experience Economy Package

6 000

Small Business Ventilation Support

5 727

Backing TAFE for the Skills Victoria Needs

5 379

Pre-Prep VET subsidised training

4 940

Kennedy Community Centre

4 500

Brain Cancer Centre Investment

4 100

Regional car parks in Ballarat and the Latrobe Valley

3 096

State Sport Centres Trust

2 995

Kids Go Free

2 878

Melbourne Exhibition and Convention Centre

2 855

Industry Support and Investment

2 570

Biosecurity responses

2 476

Delivering the Australian Institute for Infectious Disease

2 364

Kardinia Park Stadium Trust

2 267

Emergency animal disease preparedness and response

2 017

Victorian Skills Authority

1 516

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

164 Chapter 4 2022-23 Financial Report

8.2.13 Payments from advance to the Treasurer for the financial year ended 30 June

(continued) ($ thousand)

Department

Purpose

2022-23

Jobs, Skills, Industry

Medical Research – Living Evidence

1 500

and Regions (continued)

Geelong Convention and Exhibition Centre

1 424

Cultural Agencies

1 091

Venture Growth Fund

1 078

Cultural Agencies State Collections Management

1 019

Community sports infrastructure loans scheme

922

Investor Migration and Global Talent

831

Melbourne City Revitalisation

800

Social Services Workforce Reform Project Office

723

Timber Industry and Worker Support

700

Victorian Timber Innovation Fund

652

Victoria’s Home of Motorsport design and planning

617

Click for Vic

500

Restoring our local ports and boating infrastructure

386

Building Better TAFEs Fund – South West TAFE

370

Swinburne University of Technology – Prahran Campus

314

Victorian Government Trade and Investment Network

300

Latrobe Valley Transition and Transformation

298

Better Boating Fund supplement

266

Major Events Fund

250

Earth Resources Regulation Licensing

233

Future Drought Fund – Regional Drought Resilience Planning

181

Royal Melbourne Showgrounds redevelopment project

157

Rural Women’s Network

Strengthening the Victorian Forestry Plan

959 186

Justice and Community

Natural disaster relief and grant assistance

706 336

Safety

Victorian flood recovery initiatives

250 959

Primary producer flood recovery grants

223 500

Supporting Victoria Police operations and resources

185 889

Increasing policing capacity

39 192

COVID-19 Quarantine Victoria

38 742

Technology and resources to support Victoria’s fines system

37 076

Responding to COVID-19 in corrections and youth justice

34 419

Support for emergency service organisations

25 406

Gambling and Liquor regulatory reform

20 780

Primary producers relief

19 500

Initiatives to support Victoria’s recovery from the 2019-20 bushfires

11 357

Victoria Police service delivery response to the Victorian October 2022 floods

10 011

Victoria Police system enhancements and resources

8 724

Business and not-for-profit concessional loan program

6 380

Support for Harness Racing Victoria

6 000

Women’s custodial health services

5 800

Flood and storm council support fund

4 759

Traditional Owner Settlement Act

4 070

Service delivery transformation program

3 470

Public intoxication reforms

2 946

Industry engagement and enforcement operation (COVID-19)

2 533

Interim custody management services at Bendigo Law Court

2 531

Community based diversionary services and opening Cherry Creek

1 667

Supporting Community Sector Jobs

1 098

Flood awareness campaign

1 000

Information sharing and family violence risk assessment and management reform

516

Ex-gratia relief

433

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

2022-23 Financial Report Chapter 4 165

8.2.13 Payments from advance to the Treasurer for the financial year ended 30 June

(continued) ($ thousand)

Department

Purpose

2022-23

Justice and Community

Supporting mental health and wellbeing for the criminal and youth justice system

428

Safety (continued)

Victorian Emergency Relief and Recovery Foundation

315

Countering Violent Extremism

263

Support relating to the Singleton bus crash

216

Delivering new police station infrastructure

1 656 334

Premier and Cabinet

Breakthrough Victoria

300 000

Delivering First Peoples’ ownership of Victoria’s treaty process

35 000

Service Victoria operational funding

24 798

Strengthening the Centre

19 948

Digital Victoria: Driving modern and sustainable management of digital

14 720

Common corporate platform Whole of Government Initiative

13 718

Social Services Jobs Guarantee

10 557

Costs associated with administration changes

7 570

Munarra Centre for Regional Excellence project

4 407

Digital Victoria operational funding

3 164

Better Supports for on-demand workers in Victoria

2 775

Workforce Transition

2 745

Support implementation of integrity reforms

1 359

Donation for Syria & Turkey earthquake

1 000

Donation for Good Friday Appeal 2023

1 000

Parliament security

973

State Funerals & Memorial Services

935

Service Victoria Digital Driver licences initiative

786

Increasing policing capacity

765

Strengthening the Independence of Aboriginal Trust

720

Women in construction

621

Service Victoria Business Licensing initiative

546

Central agencies Commonwealth Games resourcing

544

Feasibility study for Progressing Traditional Owner Settlements

500

Donation for Danihers Drive charitable fundraising event

500

Donation towards Ukraine Crisis Appeal

500

Self-determination and delivering on Victoria Commitment Closing the Gap Initiative

472

Traditional Owner Settlement Act 2010 – Taungurung Agreements

330

Development of the Digital Victoria Marketplace

324

Establishment of the Electoral Review

323

Donation for Pakistan Humanitarian Support

200

451 798

Transport and Planning

Level Crossing Removal Program

1 167 345

COVID‑19 Impacts on the Transport Network

553 720

North East Link (State and Freeway Packages)

289 388

Suburban Rail Loop East – Main Works

283 829

Regulatory Programs and Services

263 901

Metro Tunnel

200 801

Victoria’s Flood Recovery Program

165 000

North East Link – Primary Package (Tunnels) and State Toll Co

157 195

More VLocity Trains

115 023

Better Roads Victoria

80 000

Car Parks for Commuters

58 301

South Dynon Train Maintenance Facility – Stage 1

48 332

Warrnambool Line Upgrade – Stage 2

38 163

Outer Metropolitan Ring Road Planning

34 046

St Kilda Pier Revitalisation

32 725

Great Ocean Road Infrastructure and Resilience

31 023

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

166 Chapter 4 2022-23 Financial Report

8.2.13 Payments from advance to the Treasurer for the financial year ended 30 June

(continued) ($ thousand)

Department

Purpose

2022-23

Transport and Planning

Metro Tunnel Readiness

30 460

(continued)

Shepparton Corridor Upgrade – Stage 3

26 355

Tram Infrastructure Upgrades

24 755

Geelong Fast Rail

23 962

Next Generation Trams

20 891

Caulfield Rationalisation Works

20 806

Suburban Rail Loop – Airport

15 000

Train Radio System Upgrade

14 620

Kananook Train Maintenance Facility Stage 2

14 175

Suburban Rail Loop East – Development, Initial and Early Works

12 900

Arden Precinct Redevelopment

11 400

Cheaper Public Transport Fares for the Regions

9 544

Multi-Purpose Taxi Program

9 519

Victorian Renewable Energy Terminal Development

8 000

Keeping Ballarat Moving

7 961

Greening Victoria’s Bus Fleet

7 691

Regional Rail

7 624

Maintaining Victoria’s Road Network

5 650

Ison Road – Rail Overpass

4 808

Ticketing System Services Agreement

4 500

Motorists Benefits

4 085

Unlocking Capacity on the Metro Rail Network

3 305

Albion Station Upgrade

3 000

Capacity Improvements to Wyndham Vale and Melton

2 865

Ballarat Line Upgrade – Stage 1

2 570

Regional Road Upgrades

2 487

Caulfield to Dandenong Signalling Upgrade Works

2 223

City Loop Fire and Safety Upgrade (Stage 2) and Intruder Alarm

1 955

Flood Reclamation Roadmap

1 475

Energy Brix Site Rehabilitation

1 000

West Gate Tunnel

1 000

Workforce Transition

1 000

Delivering Victoria’s Bus Plan

934

Additional Train Services

737

Metropolitan Road Upgrades

735

Transport and Amenity Program

468

Windfall Gains Tax Implementation

176

Personal Safety on the Transport Network

Mernda Rail Extension

Traffic Infringement Camera Trials

3 829 595

Treasury and Finance

Victorian Homebuyer Fund

855 536

Social Housing Growth Fund

649 980

Central Banking System

48 500

VicRoads Modernisation

37 135

State Revenue Office compliance activity

14 298

State Revenue Office ex-gratia payments

8 104

Windfall Gains Tax administration

1 130

Central agencies Commonwealth Games resourcing

1 021

High Value High Risk projects gateway reviews

700

Administration of the Local Council Lending Scheme

593

State Revenue Office Compliance Program

500

Energy Brix site rehabilitation

488

Better Regulation Victoria

250

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

2022-23 Financial Report Chapter 4 167

8.2.13 Payments from advance to the Treasurer for the financial year ended 30 June

(continued) ($ thousand)

Department

Purpose

2022-23

Treasury and Finance

State Revenue Office – Fire Services Property Levy council funding

243

(continued)

Commercial reform and advisory services

187

Consumer awareness – insurance

1 618 674

Parliament

Funding supplementation for IBAC

4 446

2022 State Election Costs

3 062

Additional depreciation equivalent funding following an asset revaluation

2 079

Victorian Ombudsman Parliamentary Referral Investigation

1 429

Development of critical information technology systems and witness welfare programs for

IBAC

1 391

Implementation of integrity reforms

1 025

Budget supplementation for the Victorian Ombudsman

812

Parliamentary Advisers

540

Electorate Office equipment

251

Electorate office operations

140

Performance audit of Victorian Inspectorate by Integrity and Oversight Committee

Additional funding for Parliamentary Budget Office

15 292

Courts

Wyndham Law Courts

16 370

Magistrates Court maintenance

3 000

Specialist Family Violence integrated court response

2 581

Victorian Civil and Administrative Tribunal chambers audio upgrades

2 300

Supreme Court probate online initiative

1 650

St Basils Home for the Aged Coronial Inquest

1 591

Supreme Court of Victoria accommodation

355

Judicial Commission of Victoria Investigating panels

184

28 032

Total Payments from Advance to the Treasurer

12 214 960

Note:

(a) On 5 December 2022, the Premier announced various machinery of government changes effective 1 January 2023. See Note 9.8 for further details.

8.2.14 Payments from advances and unused advances carried forward to 2022-23

pursuant to Section 35 and 35(4) of the Financial Management Act 1994 ($ thousand)

Department

Purpose

2022-23

Health

Elective Surgery Catch Up Plan

107 560

Additional resources provided to health services

100 913

Supporting the community health system through the COVID-19 pandemic

95 912

More support for our nurses and midwives

71 633

Securing and maintaining a PPE stockpile

23 235

Total payments from advances pursuant to Section 35 and 35(4) of the Financial Management Act 1994

399 253

8. COMPARISON AGAINST BUDGET AND THE PUBLIC ACCOUNT

168 Chapter 4 2022-23 Financial Report

8.2.15 Government guarantees

Money received or recovered in respect of any guarantee payments

There has been no money received or recovered during 2022-23 in respect of any guarantee payments.

8.2.16 Allocations pursuant to Section 28 of the Financial Management Act 1994

for the financial year ended 30 June ($ thousand)

2023

2022

Section 28 allocations

(Appropriation for borrowing against future appropriation)

Department of Transport and Planning

Addition to net asset base

348 000

Total Section 28 allocations

348 000

2022-23 Financial Report Chapter 4 169

9. OTHER DISCLOSURES

Introduction to this section

This section includes several additional disclosures

that assist the understanding of this financial report.

Structure

9.1 Disaggregated information ...................................... 170

9.2 Funds under management ....................................... 178

9.3 Other gains/(losses) from other economic flows 178

9.4 Reconciliation between Government

Finance Statistics and Australian Accounting

Standards ..................................................................... 179

9.5 Related party transactions ........................................ 182

9.6 Subsequent events ..................................................... 183

9.7 Other accounting policies ........................................ 183

9.8 Controlled entities ..................................................... 185

9.9 Glossary of technical terms ..................................... 188

9. OTHER DISCLOSURES

170 Chapter 4 2022-23 Financial Report

9.1 Disaggregated information

Disaggregated operating statement for the financial year ended 30 June ($ million)

General government

sector

Public non-financial

corporations

2023

2022

2023

2022

Revenue and income from transactions

Taxation

32 350

30 546

Interest income

1 307

557

Dividends, income tax equivalent and rate equivalent income

820

885

Sales of goods and services

6 263

5 645

7 171

6 823

Grants

40 138

41 805

2 742

3 009

Other revenue and income

3 842

3 586

815

810

Total revenue and income from transactions

84 720

83 023

10 832

10 703

Expenses from transactions

Employee expenses

33 629

32 239

1 768

1 593

Net superannuation interest expense

719

481

Other superannuation

3 760

3 912

173

155

Depreciation

4 604

4 308

1 975

1 938

Interest expense

3 974

2 869

865

804

Grant expense

19 053

25 063

654

527

Other operating expenses

27 828

27 943

5 066

4 739

Other property expenses

233

Total expenses from transactions

93 567

96 814

10 735

9 989

Net result from transactions – net operating balance

(8 847)

(13 791)

714

Other economic flows included in net result

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

(1)

(12)

Net gain/(loss) on financial assets or liabilities at fair value

(29)

155

(72)

Share of net profit/(loss) from associates/joint venture entities

(39)

Other gains/(losses) from other economic flows

(1 022)

115

(3 343)

(2 849)

Total other economic flows included in net result

(1 000)

290

(3 297)

(2 934)

Net result

(9 847)

(13 501)

(3 200)

(2 220)

Other economic flows – other comprehensive income

Items that will not be reclassified to net result

Changes in non-financial assets revaluation surplus

13 710

18 702

3 282

3 612

Remeasurement of superannuation defined benefits plans

1 356

7 791

Other movements in equity

(536)

(53)

(108)

(20)

Items that may be reclassified subsequently to net result

Net gain/(loss) on financial assets at fair value

139

(45)

(10)

Net gain/(loss) on equity investments in other sector entities at proportional share of

the carrying amount of net assets

3 431

11 834

Total other economic flows – other comprehensive income

18 099

38 230

3 180

3 662

Comprehensive result – total change in net worth

8 252

24 729

(20)

1 442

FISCAL AGGREGRATES

Net operating balance

(8 847)

(13 791)

714

Purchases of non-financial assets (including change in inventories)

16 125

15 550

4 282

3 389

Less: Sales of non-financial assets

(325)

(275)

(215)

(182)

Less: Depreciation and amortisation

(4 604)

(4 308)

(1 975)

(1 938)

Plus: Other movements in non-financial assets

(218)

3 790

3 920

Less: Net acquisition of non-financial assets from transactions

11 285

10 748

5 882

5 189

Net lending/(borrowing)

(20 132)

(24 539)

(5 785)

(4 475)

9. OTHER DISCLOSURES

2022-23 Financial Report Chapter 4 171

Public financial

corporations

Inter-sector

eliminations

State of Victoria

2023

2022

2023

2022

2023

2022

(497)

(466)

31 852

30 080

3 583

2 473

(3 474)

(2 430)

1 502

610

2 311

3 052

(747)

(844)

2 404

3 144

6 164

5 675

(1 655)

(1 680)

17 943

16 462

377

516

(3 194)

(4 106)

40 063

41 224

4 681

4 417

12 460

11 737

(9 568)

(9 526)

98 445

95 936

509

451

(738)

(645)

35 168

33 638

721

482

3 982

4 107

985

869

7 652

7 203

3 445

2 469

(3 505)

(2 431)

4 778

3 712

127

641

(3 366)

(4 279)

16 468

21 952

10 773

8 746

(1 252)

(1 330)

42 415

40 097

672

780

(905)

(1 013)

15 663

13 217

(8 782)

(8 829)

111 184

111 192

(3 203)

(1 480)

(786)

(697)

(12 739)

(15 255)

(2)

3 450

10 409

3 469

10 492

(39)

3 040

6 527

2 909

1 531

1 583

5 323

6 488

16 936

2 909

1 531

5 101

15 823

3 285

15 456

2 123

833

(7 638)

568

4 222

1 018

21 214

23 335

1 371

7 821

(11)

(644)

(84)

130

(5)

(3 431)

(11 834)

(9)

791

(10 816)

22 070

31 067

3 285

15 447

2 915

(9 983)

14 432

31 634

(3 203)

(1 480)

(786)

(697)

(12 739)

(15 255)

187

(56)

(17)

20 390

19 108

(1)

(542)

(458)

(88)

(985)

(869)

(7 652)

(7 203)

(1)

3 879

3 702

(51)

(1 041)

(886)

16 075

15 149

(3 152)

(1 579)

255

189

(28 814)

(30 405)

9. OTHER DISCLOSURES

172 Chapter 4 2022-23 Financial Report

Disaggregated balance sheet as at 30 June ($ million)

General government

sector

Public non-financial

corporations

2023

2022

2023

2022

Assets

Financial assets

Cash and deposits

19 698

10 974

2 232

1 843

Advances paid

5 308

4 929

273

522

Receivables and contract assets

9 046

8 406

1 541

1 679

Investments, loans and placements

3 853

3 370

818

812

Loans receivable from non-financial public sector

(a)

Investments accounted for using equity method

1 180

Investments in other sector entities

96 042

89 162

Total financial assets

135 128

116 851

4 864

4 856

Non-financial assets

Inventories

574

1 262

1 277

1 191

Non-financial assets held for sale

110

171

Land, buildings, infrastructure, plant and equipment

249 480

225 770

117 535

110 087

Other non-financial assets

5 898

3 313

3 105

2 567

Total non-financial assets

256 062

230 516

121 946

113 887

Total assets

391 190

347 367

126 811

118 742

Liabilities

Deposits held and advances received

1 615

1 831

1 161

1 188

Payables

28 047

17 551

10 475

9 984

Contract liabilities

352

342

260

259

Borrowings

142 289

117 420

21 375

19 312

Employee benefits

10 250

9 857

573

545

Superannuation

18 904

19 756

Other provisions

2 950

2 082

12 087

9 730

Total liabilities

204 407

168 839

45 931

41 019

Net assets

186 783

178 528

80 880

77 724

Accumulated surplus/(deficit)

45 889

52 824

(29 846)

(26 419)

Reserves

140 894

125 704

110 725

104 143

Net worth

186 783

178 528

80 880

77 724

FISCAL AGGREGATES

Net financial worth

(69 278)

(51 988)

(41 066)

(36 163)

Net financial liabilities

165 321

141 149

41 066

36 163

Net debt

115 044

99 978

19 213

17 324

Note:

(a) Loans receivable from the non-financial public sector are reported at amortised cost.

9. OTHER DISCLOSURES

2022-23 Financial Report Chapter 4 173

Public

financial corporations

Inter-sector

eliminations

State of Victoria

2023

2022

2023

2022

2023

2022

4 100

4 919

(352)

(478)

25 678

17 258

(4 708)

(4 864)

930

632

2 367

1 886

(982)

(1 016)

11 973

10 955

59 364

51 551

(60)

(110)

63 975

55 623

126 353

102 724

(126 353)

(102 724)

1 193

(96 042)

(89 162)

192 254

161 125

(228 497)

(198 353)

103 750

84 479

1 851

2 452

139

212

332

354

41 601

36 749

408 948

372 959

3 343

3 397

(5 193)

(4 436)

7 152

4 842

3 675

3 751

36 407

32 313

418 090

380 466

195 929

164 876

(192 090)

(166 040)

521 840

464 945

212

233

(1 212)

(1 528)

1 777

1 724

2 864

2 724

(1 052)

(956)

40 334

29 303

(14)

(5)

598

596

132 326

107 309

(131 036)

(107 555)

164 953

136 486

125

118

10 948

10 519

18 904

19 756

46 980

44 573

(11 888)

(9 590)

50 129

46 795

182 507

154 956

(145 202)

(119 634)

287 643

245 180

13 421

9 919

(46 888)

(46 406)

234 197

219 765

13 065

9 796

50 998

48 767

80 106

84 968

356

123

(97 886)

(95 174)

154 090

134 797

13 421

9 919

(46 888)

(46 406)

234 197

219 765

9 747

6 168

(83 295)

(78 719)

(183 893)

(160 702)

(9 747)

(6 168)

(12 747)

(10 442)

183 893

160 702

(57 335)

(51 697)

(775)

(908)

76 146

64 697

9. OTHER DISCLOSURES

174 Chapter 4 2022-23 Financial Report

Disaggregated cash flow statement for the financial year ended 30 June ($ million)

General government

sector

Public non-financial

corporations

2023

2022

2023

2022

Cash flows from operating activities

Receipts

Taxes received

31 621

30 288

Grants

40 881

42 720

2 746

2 990

Sales of goods and services

(a)

6 873

6 281

8 104

7 378

Interest received

1 229

548

Dividends, income tax equivalent and rate equivalent receipts

693

549

Other receipts

(b)

10 207

1 906

472

304

Total receipts

91 503

82 293

11 423

10 732

Payments

Payments for employees

(33 260)

(31 334)

(1 736)

(1 572)

Superannuation

(3 975)

(4 062)

(168)

(154)

Interest paid

(3 559)

(2 591)

(849)

(809)

Grants and subsidies

(18 403)

(24 619)

(441)

(324)

Goods and services

(a)

(27 110)

(27 524)

(5 380)

(5 335)

Other payments

(945)

(1 019)

(578)

(475)

Total payments

(87 253)

(91 150)

(9 151)

(8 670)

Net cash flows from operating activities

4 250

(8 857)

2 272

2 061

Cash flows from investing activities

Cash flows from investments in non-financial assets

Purchases of non-financial assets

(16 273)

(15 168)

(4 263)

(3 379)

Sales of non-financial assets

325

275

215

182

Net cash flows from investments in non-financial assets

(15 948)

(14 893)

(4 047)

(3 197)

Cash flows from investments in financial assets for policy purposes

Cash inflows

759

1 597

537

787

Cash outflows

(2 385)

(1 550)

(293)

(33)

Net cash flows from investments in financial assets for policy purposes

(1 625)

243

754

Sub-total

(17 573)

(14 845)

(3 804)

(2 443)

Cash flows from investments in financial assets for liquidity management purposes

(c)

Cash inflows

824

657

143

Cash outflows

(1 316)

(985)

(85)

(201)

Net cash flows from investments in financial assets for liquidity management purposes

(492)

(328)

(4)

(58)

Net cash flows from investing activities

(18 065)

(15 173)

(3 808)

(2 501)

Cash flows from financing activities

Advances received

365

164

Advances repaid

(274)

(958)

(394)

(780)

Advances received (net)

(c)

(242)

(930)

(30)

(616)

Borrowings received

28 040

24 642

3 181

2 592

Borrowings repaid

(5 291)

(3 287)

(2 159)

(1 930)

Net borrowings

(c)

22 749

21 355

1 022

662

Deposits received

2 830

5 250

300

177

Deposits repaid

(2 807)

(5 280)

(294)

(104)

Deposits received (net)

(c)

(30)

Other financing inflows

1 040

616

Other financing outflows

(105)

(310)

Other financing (net)

(c)

936

306

Net cash flows from financing activities

22 529

20 395

1 934

425

Net increase/(decrease) in cash and cash equivalents

8 713

(3 634)

399

(14)

Cash and cash equivalents at beginning of reporting period

(d)

10 985

14 609

1 833

1 857

Cash and cash equivalents at end of the reporting period

19 698

10 974

2 232

1 843

FISCAL AGGREGATES

Net cash flows from operating activities

4 250

(8 857)

2 272

2 061

Dividends paid

(102)

(107)

Net cash flows from investments in non-financial assets

(15 948)

(14 893)

(4 047)

(3 197)

Cash surplus/(deficit)

(11 698)

(23 749)

(1 877)

(1 243)

Notes:

(a) These items include goods and services tax.

(b) This increase in other receipts from the prior year primarily reflects the $7.9 billion proceeds from the VicRoads Modernisation joint venture. Notes 4.3.1 and 5.3.4

provides more information on the accounting treatment of this arrangement.

(c) In accordance with AASB 107 Statement of Cash Flows, TCV has reported its cash flow information for whole of government consolidation purposes on a net basis for

both financial years ended 30 June 2022 and 30 June 2023.

(d) On 1 July 2022, the seven Waste and Resource Recovery Groups were abolished and transferred from the PNFC sector to be amalgamated into the former

Department of Environment, Land, Water and Planning (DELWP) to form a business unit within DELWP, Recycling Victoria. This has resulted in the 1 July 2022

opening balance not equalling the 30 June closing balance. DELWP has been renamed the Department of Energy, Environment and Climate Action (DEECA) following

the machinery of government changes announced by the Premier on 5 December 2022 with effect from 1 January 2023.

9. OTHER DISCLOSURES

2022-23 Financial Report Chapter 4 175

Public financial

corporations

Inter-sector

eliminations

State of Victoria

2023

2022

2023

2022

2023

2022

(497)

(466)

31 123

29 822

396

517

(3 202)

(4 100)

40 822

42 127

6 745

6 497

(1 704)

(1 773)

20 018

18 383

3 122

2 042

(3 361)

(2 408)

1 058

204

2 311

3 052

(745)

(508)

2 292

3 130

192

(132)

10 569

2 488

12 597

12 300

(9 641)

(9 171)

105 882

96 153

(501)

(450)

738

645

(34 760)

(32 711)

(49)

(41)

(4 192)

(4 258)

(3 243)

(2 369)

3 369

2 409

(4 281)

(3 360)

(129)

(656)

3 202

4 100

(15 771)

(21 500)

(6 551)

(6 480)

1 201

1 274

(37 840)

(38 065)

(353)

(13)

915

483

(961)

(1 025)

(10 825)

(10 011)

9 425

8 912

(97 805)

(100 919)

1 772

2 289

(216)

(259)

8 077

(4 766)

(39)

(187)

(20 519)

(18 717)

542

458

(38)

(186)

(19 977)

(18 259)

(691)

(1 870)

606

515

(28)

(42)

1 740

951

(966)

(675)

(27)

(42)

1 050

(920)

(359)

(160)

(65)

(228)

1 105

(903)

(20 337)

(18 419)

5 593

5 681

(91)

6 407

6 482

(35 853)

(40 558)

23 694

23 241

(13 560)

(18 502)

(30 260)

(34 876)

23 603

23 241

(7 153)

(12 021)

(30 325)

(35 104)

24 708

22 338

(27 490)

(30 440)

118

(437)

(251)

(60)

(56)

703

1 610

(26)

(185)

266

1 359

(126)

27 616

30 469

(25 337)

(23 725)

33 500

33 979

(77)

(448)

1 808

2 276

(5 719)

(3 389)

27 539

30 021

(23 530)

(21 448)

27 780

30 590

(12)

3 135

5 446

(50)

(165)

169

(3 101)

(5 380)

(45)

(134)

157

229

(1 269)

(668)

(12)

(142)

116

452

217

(89)

(1 152)

(217)

27 735

29 859

(24 366)

(20 149)

27 833

30 531

(819)

(2 956)

126

1 930

8 420

(4 674)

4 919

7 875

(478)

(2 409)

17 258

21 933

4 100

4 919

(352)

(478)

25 678

17 258

1 772

2 289

(216)

(259)

8 077

(4 766)

(8)

(139)

110

247

(38)

(186)

(19 977)

(18 259)

1 726

1 963

(50)

(11 900)

(23 025)

9. OTHER DISCLOSURES

176 Chapter 4 2022-23 Financial Report

Disaggregated statement of changes in equity for the financial year ended 30 June ($ million)

Accumulated

surplus/(deficit)

Contributions

by owners

Non-financial

assets

revaluation

surplus

Investment in other

sector entities

revaluation surplus

Other

reserves

Total

General government sector

Balance at 1 July 2022

52 824

79 719

44 815

1 170

178 528

Opening balance adjustment

(a)

Restated balance at 1 July 2022

52 827

79 719

44 815

1 170

178 531

Net result for the year

(9 847)

Other comprehensive income for the year

749

13 710

3 431

210

18 099

Transfer to/(from) accumulated surplus

2 160

(2 160)

Dividends paid

Transactions with owners in their capacity as

owners

Balance at 30 June 2023

45 889

91 269

48 245

1 380

186 783

PNFC sector

Balance at 1 July 2022

(26 419)

75 138

28 337

667

77 724

Opening balance adjustment

(a)

(1)

(2)

(3)

Restated balance at 1 July 2022

(26 420)

75 136

28 337

667

77 721

Net result for the year

(3 200)

Other comprehensive income for the year

(137)

3 282

3 180

Transfer to/(from) accumulated surplus

(14)

Dividends paid

(102)

Transactions with owners in their capacity as

owners

3 281

Balance at 30 June 2023

(29 846)

78 417

31 605

702

80 880

PFC sector

Balance at 1 July 2022

9 796

9 919

Net result for the year

3 285

Other comprehensive income for the year

(8)

Transfer to/(from) accumulated surplus

Dividends paid

(8)

Transactions with owners in their capacity as

owners

225

Balance at 30 June 2023

13 065

290

13 421

Eliminations

50 998

(78 707)

29 067

(48 245)

(46 888)

Total State of Victoria

80 106

151 951

2 139

234 197

Note:

(a) On 1 July 2022, the seven Waste and Resource Recovery Groups were abolished and transferred from the PNFC sector to be amalgamated into the former

Department of Environment, Land, Water and Planning (DELWP) to form a business unit within DELWP, Recycling Victoria. This has resulted in the 1 July 2022

opening balance not equalling the 30 June closing balance. DELWP has been renamed the Department of Energy, Environment and Climate Action (DEECA) following

the machinery of government changes announced by the Premier on 5 December 2022 with effect from 1 January 2023. Refer to Note 9.8 for further details.

9. OTHER DISCLOSURES

2022-23 Financial Report Chapter 4 177

Disaggregated statement of changes in equity for the financial year ended 30 June (continued) ($ million)

Accumulated

surplus/(deficit)

Contributions

by owners

Non-financial

assets

revaluation

surplus

Investment in other

sector entities

revaluation surplus

Other

reserves

Total

General government sector

Balance at 1 July 2021

58 642

61 017

32 981

1 159

153 799

Net result for the year

(13 501)

Other comprehensive income for the year

7 683

18 702

11 834

38 230

Transfer to/(from) accumulated surplus

Dividends paid

Transactions with owners in their capacity as

owners

Total equity as at 30 June 2022

52 824

79 719

44 815

1 170

178 528

PNFC sector

Balance at 1 July 2021

(24 192)

71 602

24 939

604

72 953

Net result for the year

(2 220)

Other comprehensive income for the year

(14)

3 612

3 662

Transfer to/(from) accumulated surplus

114

(213)

Dividends paid

(107)

Transactions with owners in their capacity as

owners

3 437

Total equity as at 30 June 2022

(26 419)

75 138

28 337

667

77 724

PFC sector

Balance at 1 July 2021

(5 505)

(5 438)

Net result for the year

15 456

Other comprehensive income for the year

(15)

(9)

Transfer to/(from) accumulated surplus

Dividends paid

(139)

Transactions with owners in their capacity as

owners

Total equity as at 30 June 2022

9 796

9 919

Eliminations

48 767

(75 203)

24 845

(44 815)

(46 406)

Total State of Victoria

84 968

132 911

1 886

219 765

9. OTHER DISCLOSURES

178 Chapter 4 2022-23 Financial Report

9.2 Funds under management

The State has responsibility for transactions and

balances relating to trust funds held on behalf of

third parties external to the State. The funds

managed on behalf of third parties are not

recognised in these financial statements as they are

managed on a fiduciary and custodial basis, and

therefore are not controlled by the State. Funds

under management are reported in the table below.

($ million)

State of Victoria

General Government

Sector

2023

2022

2023

2022

Cash and investments in common and premium funds

1 431

1 280

161

Funds under management by Legal Services Board

3 165

3 860

3 165

3 860

Funds under management by the Senior Master of the Supreme Court

2 133

2 079

2 133

2 079

Investments, real estate, personal and other assets

1 936

5 201

Other funds held

Residential tenancies bonds money

1 384

1 268

1 384

1 268

Total funds under management

10 077

13 711

6 876

7 396

9.3 Other gains/(losses) from other

economic flows

Other economic flows are changes in the volume or

value of an asset or liability that do not result from

transactions. This includes remeasurements of

certain liabilities for variables such as movements in

discount rates used to value these liabilities.

Total other gains/(losses) from other economic flows ($ million)

State of Victoria

General government

sector

2023

2022

2023

2022

Net (increase)/decrease in allowances for credit losses

142

162

144

170

Amortisation of intangible non-produced assets

(39)

(5)

Net swap interest revenue/(expense)

(39)

Bad debts written off

(418)

(497)

(410)

(487)

Other gains/(losses)

1 937

5 694

(752)

436

Total other gains/(losses) from other economic flows

1 583

5 323

(1 022)

115

9. OTHER DISCLOSURES

2022-23 Financial Report Chapter 4 179

9.4 Reconciliation between

Government Finance Statistics and

Australian Accounting Standards

This note identifies the convergence differences

between the Australian Accounting Standards

reporting (upon which this report is based) and the

Government Finance Statistics (GFS) reporting.

GFS information enables policymakers and analysts

to study developments in the financial operations,

financial position and liquidity situation of the

Government based on consistent economic

reporting rules and definitions.

In December 2019, AASB 2019-7 Amendments to

Australian Accounting Standards – Disclosure of GFS

Measures of Key Fiscal Aggregates and GAAP/GFS

Reconciliations was issued to modify AASB 1049

Whole of Government and General Government Sector

Financial Reporting requirements by providing

optional relief from the disclosure of key fiscal

aggregates measured in accordance with the GFS

where they differ from the key fiscal aggregates

provided pursuant this Accounting Standard.

If the optional relief is adopted, AASB 2019-7

requires an explanation of how each of the key

fiscal aggregates required under AASB 1049 are

calculated and how they differ from the

corresponding key fiscal aggregate measured in

accordance with the ABS GFS. The State has

elected to apply this optional relief.

The key fiscal aggregates below, as defined by

AASB 1049, have convergence differences with the

GFS:

• Cash surplus/deficit represents the net cash

flows from operating activities plus net cash

flows from investments in non-financial assets

(less dividends paid for the public non-financial

corporation (PNFC) and public financial

corporation (PFC) sectors).

• Comprehensive result – total change in net

worth is the amount included in the operating

statement representing total change in net

worth other than transactions with owners as

owners.

• Net lending/borrowing is the financing

requirement of government, calculated as the

net operating balance less the net acquisition of

non-financial assets. It also equals transactions

in financial assets less transactions in liabilities.

A positive result reflects a net lending position

and a negative result reflects a net borrowing

position.

• Net result from transactions – net operating

balance is revenue from transactions minus

expenses from transactions. It is a summary

measure of the ongoing sustainability of

operations. It excludes gains and losses

resulting from changes in price levels and other

changes in the volume of assets. It is the

component of the change in net worth that is

due to transactions and can be attributed

directly to government policies.

• Net worth is calculated as assets less liabilities,

which is an economic measure of wealth.

The convergence differences between AASB 1049

and the GFS and their expected impacts applying

GFS methodology are outlined in the following

table.

9. OTHER DISCLOSURES

180 Chapter 4 2022-23 Financial Report

Convergence

difference

AASB 1049 Treatment

ABS GFS Treatment

Fiscal aggregate impact

AASB 16 Leases

Operating leases are

recognised on the balance

sheet under AASB 16 Leases

unless the lease is shorter

than 12 months or where

the underlying assets are

worth less than $10 000.

Operating leases are not

recognised on the balance

sheet.

• Cash surplus/ deficit

• Comprehensive result

– total change in net worth

• Net lending/ borrowing

• Net result from transactions

– net operating balance

• Net worth

AASB 1059 Service concession arrangements

Economic service

concession arrangements,

such as toll roads, are

recognised on the State’s

balance sheet under

AASB 1059 Service

Concession Arrangements:

Grantors.

Economic service concession

arrangements, such as toll

roads, are not recognised on

the balance sheet as well as

the associated operating

statement impacts.

• Cash surplus/ deficit

• Comprehensive result

– total change in net worth

• Net lending/ borrowing

• Net result from transactions

– net operating balance

• Net worth

AASB 15 Revenue from Contracts with Customers and AASB 1058 Income of Not-for-Profit Entities

Deferral of revenue

recognition, such as where

performance obligations

have not been satisfied, or

for capital grants from the

Commonwealth

Government, is a

requirement under AASB 15

Revenue from Contracts

with Customers and

AASB 1058 Income of

Not-for-Profit Entities.

Deferral of revenue

recognition, such

as where performance

obligations have not been

satisfied, or for capital grants

from the Commonwealth

Government, is not

recognised. This timing

difference is expected to

impact all the key fiscal

aggregates. While it is

expected that there will not

be a net change to the fiscal

aggregates over time, there

will be convergence

differences in any given year.

• Cash surplus/ deficit

• Comprehensive result

– total change in net worth

• Net lending/ borrowing

• Net result from transactions

– net operating balance

• Net worth

Port of Melbourne lease transaction

Port Licence Fee

The 15-year prepaid Port

Licence Fee from the

medium-term lease of the

Port of Melbourne is

recognised upfront upon

receipt.

The 15-year prepaid Port

Licence Fee from the

medium-term lease of the

Port of Melbourne is

recognised as revenue over

the 15-year period.

• Comprehensive result

– total change in net worth

• Net lending/ borrowing

• Net result from transactions

– net operating balance

• Net worth

Port of Melbourne

lease transaction

The Port of Melbourne

lease transaction is treated

as an operating lease with

the leased assets remaining

with the PNFC sector.

The Port of Melbourne lease

transaction is recognised as a

sale of equity from the

general government sector.

• Cash surplus/ deficit

• Comprehensive result

– total change in net worth

• Net lending/ borrowing

• Net result from transactions

– net operating balance

• Net worth

9. OTHER DISCLOSURES

2022-23 Financial Report Chapter 4 181

Convergence

difference

AASB 1049 Treatment

ABS GFS Treatment

Fiscal aggregate impact

PNFC/PFC dividends

Dividends are classified as

after-profit distributions to

owners.

Under GFS, dividends

paid/payable are recognised

as an expense from

transactions on the operating

statement.

• Comprehensive result

– total change in net worth

• Net lending/ borrowing

• Net result from transactions

– net operating balance

• Net worth

Doubtful receivables

Provisions for expected

credit loss are included on

the balance sheet as a

reduction to assets.

The act of creating provisions

is not considered an

economic event and is

therefore not included on

the balance sheet.

• Comprehensive result

– total change in net worth

• Net worth

Provisions

Provisions recognised under

AASB 137 are recorded

when there is a present

obligation, the future

sacrifice of economic

benefits is probable, and

the amount of the provision

can be measured reliably.

The act of creating provisions

is not considered an

economic event and is

therefore not included on

the balance sheet. The

associated expense is not

recognised on the operating

statement.

• Comprehensive result

– total change in net worth

• Net lending/ borrowing

• Net result from transactions

– net operating balance

• Net worth

Future tax benefits / deferred tax liabilities

Tax effect accounting is

adopted, whereby

differences between tax

and accounting bases are

deferred as either future

income tax benefit assets or

provisions for deferred

liabilities.

Under GFS, deferred tax is

not recognised.

• Comprehensive result

– total change in net worth

• Net worth

Investment in other sector entities

The net worth of

investments in other sector

entities for the general

government sector includes

doubtful receivables, future

tax benefits and deferred

tax liabilities of the PNFC

and PFC sectors.

The determination of net

worth is exclusive of this.

• Comprehensive result

– total change in net worth

• Net worth

PNFC/PFC net worth

The PNFC/PFC sectors

report net worth as assets

less liabilities.

Under GFS, the PNFC/PFC

sectors report zero net

worth, as the ownership

interest is recognised as a

liability.

• Comprehensive result

– total change in net worth

• Net worth

9. OTHER DISCLOSURES

182 Chapter 4 2022-23 Financial Report

9.5 Related party transactions

The State of Victoria reporting entity includes

government departments, PNFC, PFC and other

government-controlled entities.

Key management personnel

All cabinet ministers are considered members of the

key management personnel of the State of Victoria

reporting entity for 2022-23. They are listed below.

Position title

Key management personnel

Premier

Hon Daniel Andrews

Deputy Premier

Hon Jacinta Allan

Ministers of the Crown

Hon Lizzie Blandthorn

Hon Colin Brooks

Hon Anthony Carbines

Hon Ben Carroll

Hon Lily D’Ambrosio

Mr Steve Dimopoulos

Hon Enver Erdogan

(c)

Hon Melissa Horne

Hon Natalie Hutchins

Hon Sonya Kilkenny

(a)

Hon Shaun Leane

(b)

Mr Tim Pallas

Mr Danny Pearson

Hon Jaala Pulford

(b)

Hon Harriet Shing

Hon Ros Spence

Ms Ingrid Stitt

Hon Natalie Suleyman

(c)

Hon Jaclyn Symes

Hon Mary-Anne Thomas

Hon Gayle Tierney

Hon Gabrielle Williams

Notes:

(a) Appointed to Ministry on 4 July 2022.

(b) Held Ministry until 5 December 2022.

Related parties of the State of Victoria reporting

entity include:

• all cabinet ministers and their close family

members

• other arrangements or entities jointly controlled

by the ministers or their close family members,

or entities that they have significant influence

over.

Transactions and balances with key

management personnel and other related

parties

Given the breadth and depth of State Government

activities, related parties transact with the Victorian

public sector as normal citizens in a manner

consistent with other members of the public,

involving the receipt of services and benefits, and

payment of taxes and other government fees and

charges. No transactions have occurred with related

parties on terms and conditions more or less

favourable than those conducted under standard

government policies, procedures and practices.

Outside of normal citizen type transactions,

transactions are disclosed only when they are

considered necessary to draw attention to the

possibility that the State’s financial position and

profit or loss may have been affected by the

existence of related parties, and by transactions and

outstanding balances, including commitments, with

such parties.

There were no material related party transactions

that involved key management personnel, their

close family members and their personal business

interests. No provision has been required, nor any

expense recognised, for impairment of receivables

from related parties.

Remuneration of key management personnel

The remuneration and allowances of ministers are

set by the Parliamentary Salaries and Superannuation Act

1968 and the aggregated remuneration for ministers

is $11.2 million in 2023 ($10.6 million in 2022).

($ thousand)

State of Victoria

2023

2022

Salaries and short-term employee benefits

10 055

9 782

Post-employment benefits

(a)

1 074

846

Termination benefits

(b)

Total

11 225

10 628

Notes:

(a) Benefit relates to superannuation expense paid to ministers who were

members of an accumulated superannuation fund. Increase from

previous year was due to the 0.5 per cent increase in the super guarantee

rate and a higher number of accumulated fund members in comparison

to the prior financial year.

(b) Separation benefit paid in compliance with s.7E of the Parliamentary

Salaries and Superannuation Act 1968.

9. OTHER DISCLOSURES

2022-23 Financial Report Chapter 4 183

9.6 Subsequent events

Assets, liabilities, revenues or expenses arise from

past transactions or other past events. Adjustments

are made to amounts recognised in the financial

statements for events that occur after the reporting

period and before the date the statements are

authorised for issue, where those events provide

information about conditions that existed at the

reporting date. If required, note disclosure is made

about events that occur between the end of the

reporting period and the date the statements are

authorised for issue where the events relate to

conditions that arose after the reporting period that

are considered to be of material interest.

Commonwealth Games 2026

On 18 July 2023, the Victorian Government

announced its decision not to proceed with hosting

the 2026 Commonwealth Games.

On 19 August 2023, the Commonwealth Games

Federation, Commonwealth Games Federation

Partnerships and Commonwealth Games Australia

and the State of Victoria announced they had settled

all their disputes regarding the cancellation of the

multi-hub regional Victoria 2026 Commonwealth

Games. The State of Victoria has agreed to pay the

Commonwealth Games parties (the Commonwealth

Games Federation, Commonwealth Games

Federation Partnerships and Commonwealth

Games Australia) AUD $380 million. This will be

reflected in the 2023-24 Annual Financial Report. The

settlement finalises all matters between the parties.

On 18 July 2023, the Victorian Government also

announced its decision to deliver a comprehensive

$2 billion package of investment to ensure regional

Victoria receives the benefits that would have been

facilitated by the Commonwealth Games.

There are no other events that have arisen since

30 June that have significantly affected or may

significantly affect the operations, or results, or state

of affairs of the State.

9.7 Other accounting policies

9.7.1 Accounting for the goods and services

tax

Revenues, expenses and assets are recognised net of

the amount of associated GST, except where the

GST incurred is not recoverable from the taxation

authority. In this case, the GST payable is

recognised as part of the cost of acquisition of an

asset or part of an item of expense.

Receivables and payables are stated inclusive of

GST receivable or payable. Cash flows are

presented on a gross basis. The GST components

of cash flows from investing or financing activities

are presented as an operating cash flow.

Commitments and contingent assets and liabilities

are also stated inclusive of GST.

9.7.2 Prospective accounting and reporting

changes

New and revised accounting standards have been

issued that are not effective for the 2022-23

reporting period. These accounting standards have

not been applied to the Annual Financial Report. The

State is reviewing its existing policies and assessing

the potential implications of:

• AASB 2022-10 Amendments to Australian

Accounting Standards – Fair Value Measurement of

Non-Financial Assets of Not-for-Profit Public Sector

Entities:

– AASB 2022-10 amends AASB 13 Fair Value

Measurement by adding authoritative

implementation guidance and illustrative

examples for fair value measurement of

non-financial assets of not-for-profit public

sector entities not held primarily for their

ability to generate net cash inflows.

– Among other things, this Standard:

• specifies that an entity needs to consider

whether an asset’s highest and best use

differs from its current use only when it

is held for sale or held for distributions

to owners under AASB 5 Non-current

Assets Held for Sale and Discontinued

Operations or if it is highly probable that

it will be used for an alternative purpose

• clarifies that an asset’s use is ‘financially

feasible’ if market participants would be

willing to invest in the asset’s service

capacity, considering both the capacity

to provide needed goods or services and

the resulting costs of those goods and

services

9. OTHER DISCLOSURES

184 Chapter 4 2022-23 Financial Report

• specifies that if both market selling

price and some market participant data

required to fair value the asset are not

observable, an entity needs to start with

its own assumptions and adjust them to

the extent that reasonably available

information indicates that other market

participants would use different data

• provides guidance on the application of

the cost approach to fair value,

including the nature of costs to be

included in a reference asset and

identification of economic

obsolescence.

– This Standard applies prospectively to

annual periods beginning on or after

1 January 2024, with earlier application

permitted

• AASB 17 Insurance Contracts, AASB 2022-8

Amendments to Australian Accounting Standards -

Insurance Contracts: Consequential Amendments and

AASB 2022-9 Amendments to Australian

Accounting Standards – Insurance Contracts in the

Public Sector

– AASB 17 replaces AASB 4 Insurance

Contracts, AASB 1023 General Insurance

Contracts and AASB 1038 Life Insurance

Contracts for not-for-profit public sector

entities for annual reporting periods

beginning on or after 1 July 2026.

– AASB 2022-9 amends AASB 17 to make

public sector-related modifications (for

example, it specifies the pre-requisites,

indicators, and other considerations in

identifying arrangements that fall within the

scope of AASB 17 in a public sector

context). This Standard applies for annual

reporting periods beginning on or after

1 July 2026.

– AASB 2022-8 makes consequential

amendments to other Australian

Accounting Standards so that public sector

entities are permitted to continue to apply

AASB 4 and AASB 1023 to annual periods

before 1 July 2026.

• AASB 2020-1 Amendments to Australian

Accounting Standards – Classification of Liabilities as

Current or Non-Current and AASB 2022-6

Amendments to Australian Accounting Standards –

Non-current Liabilities with Covenants

– AASB 2020-1 amended AASB 101

Presentation of Financial Statements to clarify

requirements for the presentation of

liabilities in the statement of financial

position as current or non-current and was

applicable to annual reporting periods

beginning on or after 1 January 2022.

– AASB 2022-6 Amendments to Australian

Accounting Standards – Non-current Liabilities

with Covenants. AASB 2020-6 subsequently

amended AASB 2020-1, deferring the

mandatory effective date of AASB 2020-1

from 1 January 2022 to 1 January 2023.

AASB 2022-6 was applicable for annual

reporting periods beginning on or after

1 January 2022.

– AASB 2022-6 amends and clarifies the

requirements contained in AASB 2020-1.

Among other things, it:

• clarifies that only those covenants that

an entity must comply with at or before

the reporting date affect a liability’s

classification as current or non-current

and

• requires additional disclosures for non-

current liabilities that are subject to an

entity complying with covenants within

twelve months after the reporting date

– AASB 2022-6 applies to annual reporting

periods beginning on or after 1 January

2023.

A number of other standards and amendments have

also been issued that apply to future reporting

periods, however they are not expected to have any

significant impact on the financial statements in the

period of initial application.

9. OTHER DISCLOSURES

2022-23 Financial Report Chapter 4 185

9.8 Controlled entities

The table below contains a list of the significant

controlled entities which have been consolidated for

the purposes of the financial report. Unless

otherwise noted below, all such entities are wholly

owned. The entities below may include additional

consolidated entities, for which only the parent

entity has been listed.

The principal activities of the controlled entities

reflect the three sectors of government they are

within as set out in the reporting structure under

public sector terms explained earlier in this chapter.

Further, Note 3.6 reflects the broad objectives of

these controlled entities.

General government

(a)

Department of Education

Victorian Academy of Teaching and

Leadership

Victorian Curriculum and Assessment

Authority

Victorian Institute of Teaching

Victorian Registration and Qualifications

Authority

Department of Energy, Environment,

and Climate Action

(b)

Catchment Management Authorities

including:

• Corangamite Catchment Management

Authority

• East Gippsland Catchment Management

Authority

• Glenelg Hopkins Catchment

Management Authority

• Goulburn Broken Catchment

Management Authority

• Mallee Catchment Management

Authority

• North Central Catchment Management

Authority

• North East Catchment Management

Authority

• West Gippsland Catchment

Management Authority

• Wimmera Catchment Management

Authority

Caulfield Racecourse Reserve Trust

Dhelkunya Dja Land Management Board

Environment Protection Authority

Gunaikurnai Traditional Owner Land

Management Board

Mine Land Rehabilitation Authority

Office of the Commissioner for

Environmental Sustainability

Parks Victoria

Royal Botanic Gardens Board

Rural Assistance Commissioner

Sustainability Victoria

Trust for Nature (Victoria)

Veterinary Practitioners Registration Board

of Victoria

Victorian Energy Safety Commission

Victorian Environmental Water Holder

Yorta Yorta Traditional Owner Land

Management Board

Department of Families, Fairness and

Housing

Commission for Children and Young People

Family Violence Prevention Agency

Shrine of Remembrance Trustees

Victorian Disability Workers Commission

Victorian Multicultural Commission

Victorian Veterans Council

Department of Government Services

(c)

Cenitex

Residential Tenancies Bond Authority

Department of Health

Health Purchasing Victoria

Hospitals, Health and Ambulance Services

including:

• Albury Wodonga Health

• Alexandra District Health

• Alfred Health

• Alpine Health

• Ambulance Victoria

• Austin Health

• Bairnsdale Regional Health Service

• Barwon Health

• Bass Coast Health

• Beaufort and Skipton Health Service

• Beechworth Health Service

• Benalla Health

• Bendigo Health

• Boort District Health

• Casterton Memorial Hospital

• Central Gippsland Health Service

• Central Highlands Rural Health

• Cohuna District Hospital

• Colac Area Health

• Corryong Health

• Dental Health Services Victoria

• Dhelkaya Health

• East Grampians Health Service

• East Wimmera Health Service

• Eastern Health

• Echuca Regional Health

• Great Ocean Road Health

• Gippsland Southern Health Service

• Goulburn Valley Health

• Grampians Health

• Heathcote Health

• Hesse Rural Health Service

• Heywood Rural Health

• Inglewood and Districts Health Service

• Kerang District Health

• The Kilmore and District Hospital

• Kooweerup Regional Health Service

• Kyabram District Health Service

• Latrobe Regional Hospital

• Mallee Track Health and Community

Service

• Mansfield District Hospital

• Maryborough District Health Service

• Melbourne Health

• Mildura Base Public Hospital

• Monash Health

• Moyne Health Services

• NCN Health

• Northeast Health Wangaratta

• Northern Health

• Omeo District Health

• Orbost Regional Health

• Peninsula Health

• Peter MacCallum Cancer Institute

• Portland District Health

• Robinvale District Health Services

• Rochester and Elmore District Health

Service

• The Royal Children’s Hospital

• The Royal Victorian Eye and Ear Hospital

• The Royal Women’s Hospital

• Rural Northwest Health

• Seymour Health

• South Gippsland Hospital

• South West Healthcare

• Swan Hill District Health

• Tallangatta Health Service

• Terang and Mortlake Health Service

• Timboon and District Healthcare Service

• Victorian Assisted Reproductive

Treatment Authority

• Victorian Institute of Forensic Mental

Health

• West Gippsland Healthcare Group

• West Wimmera Health Service

• Western District Health Service

• Western Health

• Yarram and District Health Service

• Yarrawonga Health

• Yea and District Memorial Hospital

9. OTHER DISCLOSURES

186 Chapter 4 2022-23 Financial Report

General government (continued)

Department of Health (continued)

The Queen Elizabeth Centre

Tweddle Child and Family Health Service

Victorian Health Promotion Foundation

Victorian Pharmacy Authority

Department of Jobs, Skills, Industry and

Regions

Adult Community and Further Education

Board

Adult Multicultural Education Services

Australian Centre for the Moving Image

Dockland Studios Melbourne Pty Ltd

Film Victoria

Game Management Authority

Library Board of Victoria

Melbourne Cricket Ground Trust

Melbourne Recital Centre Limited

Museums Board of Victoria

National Gallery of Victoria, Council of

Trustees

Secretary, Project Development

TAFEs including:

• Bendigo Kangan Institute

• Box Hill Institute

• Chisholm Institute

• Federation Training

• Gordon Institute of TAFE

• Goulburn Ovens Institute of TAFE

• Holmesglen Institute

• Melbourne Polytechnic

• South West Institute of TAFE

• Sunraysia Institute of TAFE

• William Angliss Institute of TAFE

• Wodonga Institute of TAFE

Victoria 2026 Pty Ltd

(d)

Victorian Fisheries Authority

Victorian Institute of Sport Limited

Victorian Institute of Sport Trust

Visit Victoria

Department of Justice and

Community Safety

Country Fire Authority

Emergency Services Telecommunications

Authority

Fire Rescue Victoria

Office of Public Prosecutions

Office of the Special Investigator

Professional Standards Council of Victoria

Sentencing Advisory Council

Victoria Legal Aid

Victoria Police (Office of the Chief

Commissioner of Police)

Victoria State Emergency Service

Authority

Victorian Equal Opportunity and

Human Rights Commission

Victorian Gambling and Casino Control

Commission

Victorian Information Commissioner

Victorian Institute of Forensic Medicine

Victorian Law Reform Commission

Victorian Legal Services Board and

Commissioner

Victorian Racing Commissioner

Victorian Racing Integrity Board

Victorian Racing Tribunal

Victorian Responsible Gambling

Foundation

Department of Premier and Cabinet

Labour Hire Licensing Authority

Portable Long Service Authority

Victorian Aboriginal Heritage Council

Victorian Electoral Commission

Victorian Public Sector Commission

Victorian Independent Remuneration

Tribunal

Wage Inspectorate Victoria

Department of Transport and Planning

(e)

Architects Registration Board of Victoria

Cladding Safety Victoria

Head, Transport for Victoria

Heritage Council of Victoria

Safe Transport Victoria

(f)

Suburban Rail Loop Authority

Surveyors Registration Board of Victoria

VicRoads Modernisation including:

(g)

• CP Services Victoria Pty Ltd

• R&L Services Victoria Pty Ltd

• Victorian R&L Services Trust

• Victoria CP Services Trust

Victorian Building Authority

Victorian Planning Authority

Department of Treasury and Finance

Essential Services Commission

Infrastructure Victoria

Courts

Judicial College of Victoria

Judicial Commission of Victoria

Parliament of Victoria

Independent Broad-based Anti-corruption

Commission (IBAC)

Ombudsman Victoria

Parliamentary Budget Office (PBO)

Victorian Inspectorate

Victorian Auditor-General’s Office

Public non-financial corporation

(a)

Department of Energy, Environment, and

Climate Action

Agriculture Victoria Services Pty Ltd

Alpine Resorts Victoria

(h)

Dairy Food Safety Victoria

Great Ocean Road Coast and Parks Authority

Melbourne Market Authority

Murray Valley Wine Grape Industry

Development Committee

Phillip Island Nature Parks

PrimeSafe

State Electricity Commission of Victoria

VicForests

Victorian Strawberry Industry Development

Committee

Water authorities including:

• Barwon Region Water Corporation

• Central Gippsland Region Water

Corporation

• Central Highlands Region Water

Corporation

• Coliban Region Water Corporation

• East Gippsland Region Water

Corporation

• Gippsland and Southern Rural Water

Corporation

• Goulburn Murray Rural Water

Corporation

• Goulburn Valley Region Water

Corporation

• Grampians Wimmera Mallee Water

Corporation

• Greater Western Water

• Lower Murray Urban and Rural Water

Corporation

• Melbourne Water Corporation

• North East Region Water Corporation

• South East Water Corporation

• South Gippsland Region Water

Corporation

• Wannon Region Water Corporation

• Westernport Region Water Corporation

• Yarra Valley Water Corporation

Zoological Parks and Gardens Board

Department of Families, Fairness and

Housing

Director of Housing

Queen Victoria Women’s Centre Trust

VITS Language Loop

9. OTHER DISCLOSURES

2022-23 Financial Report Chapter 4 187

Public non-financial corporation (continued)

Department of Health

Cemeteries including:

• Ballarat General Cemeteries Trust

• Geelong Cemeteries Trust

• The Greater Metropolitan Cemeteries

Trust

• Southern Metropolitan Cemeteries Trust

• The Mildura Cemetery Trust

• Remembrance Parks Central Victoria

Department of Jobs, Skills, Industry

and Regions

Australian Grand Prix Corporation

Emerald Tourist Railway Board

Geelong Performing Arts Centre Trust

Kardinia Park Stadium Trust

Launch Victoria Ltd

Melbourne and Olympic Parks Trust

Melbourne Arts Precinct Corporation

Melbourne Convention and

Exhibition Trust

State Sport Centres Trust

Victorian Arts Centre Trust

Department of Justice and

Community Safety

Greyhound Racing Victoria

Harness Racing Victoria

Department of Transport and Planning

Development Victoria

North East Link State Tolling Corporation

Melbourne Port Lessor Pty Ltd

Port of Hastings Development Authority

Ports Victoria

V/Line Corporation

Victorian Rail Track

Department of Treasury and Finance

Victorian Plantations Corporation (shell)

Workplace Injury Commission

(i)

Public financial corporation

(a)

Department of Jobs, Skills, Industry and

Regions

Breakthrough Victoria Pty Ltd

Department of Treasury and Finance

State Trustees Limited

Transport Accident Commission

Treasury Corporation of Victoria

Victorian Funds Management Corporation

Victorian Managed Insurance Authority

Victorian WorkCover Authority

Notes:

(a) On 5 December 2022, the Premier announced machinery of government (MoG) changes effective 1 January 2023. This resulted in the creation of a new department,

the Department of Government Services, with several other departments renamed. The MoG changes also resulted in the transfer of various functions between

departments, including the land and property function transferring from the Department of Treasury and Finance to the Department of Transport and Planning

(DTP), higher education transferring from the Department of Education to the Department of Jobs, Skills, Industry and Regions (DJSIR), Land Use Victoria and the

planning and building functions transferring from the Department of Energy, Environment and Climate Action (DEECA) to DTP, and the agriculture, forestry,

resources and climate change functions transferring from DJSIR to DEECA.

There was also the transfer of portfolio responsibility for a number of stand-alone entities between departments.

(b) On 1 July 2022, the seven Waste and Resource Recovery Groups were abolished and amalgamated into the Department of Energy, Environment, and Climate Action

(DEECA) to form a business unit within DEECA, Recycling Victoria.

(d) On 7 September 2022, the Victorian Commonwealth Games Organising Committee was established as Victoria 2026 Pty Ltd. On 18 July 2023, the Premier announced

that Victoria will no longer host the 2026 Commonwealth Games and the entity is expected to decommission its activities in the coming months.

(e) Effective from August 2022, VicHoldCo was dissolved.

(f) On 1 July 2022, Commercial Passenger Vehicles Victoria and Transport Safety Victoria came together as a new entity, Safe Transport Victoria (STV), to create a new

regulator to manage safety, compliance, accreditation and registration for commercial passenger vehicles, buses and the marine sector.

(g) On 15 August 2022, the majority interest in the corporate trustees was transferred to the joint venture partner as part of the financial close of the VicRoads

Modernisation process, with the State retaining an interest in the joint venture.

(h) The Alpine Resorts Legislation Amendment Act 2022 commenced on 1 October 2022. It abolished Victoria’s four existing Alpine Resort Management Boards

(ARMBs), and the Alpine Resorts Coordinating Council (ARCC) and established a single entity, Alpine Resorts Victoria, to manage the Falls Creek, Mt Hotham,

Mt Buller, Mt Stirling, Lake Mountain and Mt Baw Baw alpine resorts.

(i) On 1 September 2022, the Accident Compensation Conciliation Service (ACCS) changed its name to the Workplace Injury Commission.

9. OTHER DISCLOSURES

188 Chapter 4 2022-23 Financial Report

9.9 Glossary of technical terms

The following is a summary of the major technical

terms used in this report as sourced from the

Uniform Presentation Framework (2019). Technical

terms that have been discussed elsewhere in this

chapter are excluded from the list.

ABS GFS manual represents the ABS publication

Australian System of Government Finance Statistics:

Concepts, Sources and Methods 2015 as updated from

time to time.

Capital grants are transactions in which the

ownership of an asset (other than cash and

inventories) is transferred from one institutional

unit to another to enable the recipient to acquire

another asset, or in which the funds realised by the

disposal of another asset are transferred, for which

no economic benefits of equal value are receivable

or payable in return.

Cash surplus/deficit represents the net cash flows

from operating activities plus net cash flows from

investments in non-financial assets (less dividends

paid for the PNFC and PFC sectors).

Cash surplus/deficit – ABS GFS version is equal

to the cash surplus deficit (above) less the value of

assets acquired under agreements meeting the

definition of material finance leases prior to the

application of AASB 16 Leases and similar

arrangements.

Change in net worth (comprehensive result) is

revenue from transactions less expenses from

transactions plus other economic flows and

measures the variation in a government’s

accumulated assets and liabilities.

Comprehensive result is the amount included in

the operating statement representing total change in

net worth other than transactions with owners as

owners.

Current grants are amounts payable or paid for

current purposes for which no economic benefits of

equal value are receivable or payable in return.

Effective interest method is the method used to

calculate 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.

Fiscal aggregates are analytical balances that are

useful for macroeconomic analysis purposes,

including assessing the impact of a government and

its sectors on the economy.

Key fiscal aggregates defined under ABS GFS

manual are required to be disclosed under

AASB 1049. They are: opening net worth, net

operating balance, net lending/(borrowing), change

in net worth due to revaluations, change in net

worth due to other changes in the volume of assets,

total change in net worth, closing net worth, and

cash surplus/(deficit). AASB 1049 also allows

additional fiscal aggregates to be included such as

net financial worth, net financial liabilities and net

debt.

Government Finance Statistics (GFS) enables

policymakers and analysts to study developments in

the financial operations, financial position and

liquidity situation of the Government. More details

about the GFS can be found in the Australian

Bureau of Statistics GFS manual Australian System of

Government Finance Statistics: Concepts, Sources and

Methods 2015.

Infrastructure systems provide essential services

used in delivering final services or products. They

are generally a complex interconnected network of

individual assets and mainly include sewerage

systems, water storage and supply systems, and

public transport assets owned by the State.

Interest expense represents costs incurred in

connection with borrowings. It includes interest on

advances, loans, overdrafts, bonds and bills,

deposits, interest components of lease repayments,

service concession financial liabilities and

amortisation of discounts or premiums in relation

to borrowings.

Leases are rights conveyed in a contract, or part of

a contract, to use an asset (the underlying asset) for

a period of time in exchange for consideration.

Net acquisition of non-financial assets (from

transactions) are purchases (and other

acquisitions) of non-financial assets less sales (or

disposals) of non-financial assets less depreciation

plus changes in inventories and other movements in

non-financial assets. Includes only those increases

or decreases in non-financial assets resulting from

transactions and therefore excludes write offs,

impairment write downs and revaluations.

9. OTHER DISCLOSURES

2022-23 Financial Report Chapter 4 189

Net cash flows from investments in financial

assets (liquidity management purposes) are cash

receipts from liquidation or repayment of

investments in financial assets for liquidity

management purposes less cash payments for such

investments. Investment for liquidity management

purposes means making funds available to others

with no policy intent and with the aim of earning a

commercial rate of return.

Net cash flows from investments in financial

assets (policy purposes) represents cash payments

made for acquiring financial assets for policy

purposes, less cash receipts from the repayment and

liquidation of such investments in financial assets.

Acquisition of financial assets for policy purposes is

distinguished from investments in financial assets

(liquidity management purposes) by the underlying

government motivation for acquiring the assets.

Acquisition of financial assets for policy purposes

includes loans made by the Government that are

motivated by government policies, such as

encouraging the development of certain industries

or assisting people affected by natural disaster.

For the general government sector, this item also

includes cash flows arising from the acquisition and

disposal by the Government of its investments

(contributed capital) in entities in the PNFC and

PFC sectors.

Net debt equals sum of deposits held, advances

received, government securities, loans and other

borrowing less the sum of cash and deposits,

advances paid and investments, loans and

placements. For the PFC sector, this also includes

loans receivable from other sector entities.

Net financial liabilities is calculated as liabilities

less financial assets, other than equity in PNFCs and

PFCs. This measure is broader than net debt as it

includes significant liabilities, other than borrowings

(e.g. accrued employee liabilities such as

superannuation and long service leave entitlements).

For the PNFC and PFC sectors, it is equal to

negative net financial worth.

Net financial worth is equal to financial assets

minus liabilities. It is a broader measure than net

debt as it incorporates provisions made (such as

superannuation, but excluding depreciation and bad

debts) as well as holdings of equity. Net financial

worth includes all classes of financial assets and

liabilities, only some of which are included in net

debt.

Net lending/borrowing is the financing

requirement of the Government, calculated as the

net operating balance less the net acquisition of

non-financial assets. It also equals transactions in

financial assets less transactions in liabilities.

A positive result reflects a net lending position and

a negative result reflects a net borrowing position.

Net operating balance or net result from

transactions is a key fiscal aggregate and is revenue

from transactions minus expenses from

transactions. It is a summary measure of the

ongoing sustainability of operations. It excludes

gains and losses resulting from changes in price

levels and other changes in the volume of assets.

It is the component of the change in net worth that

is due to transactions and can be attributed directly

to government policies.

Net result is a measure of financial performance of

the operations for the period. It is the net result of

items of revenue, gains and expenses (including

losses) recognised for the period, excluding those

that are classified as other non-owner movements in

equity.

Net worth is calculated as assets less liabilities,

which is an economic measure of wealth.

Non-financial assets are all assets that are not

financial assets. It includes inventories, land,

buildings, infrastructure, road networks, land under

roads, plant and equipment, cultural and heritage

assets, intangibles and biological assets such as

commercial forests.

Non-financial public sector represents the

consolidated transactions and assets and liabilities of

the general government and PNFC sectors.

In compiling statistics for the non-financial public

sector, transactions and debtor creditor

relationships between sub sectors are eliminated to

avoid double counting.

Non-produced assets are assets needed for

production that have not themselves been

produced. They include land, subsoil assets, and

certain intangible assets. Non-produced intangibles

are intangible assets needed for production that

have not themselves been produced. They include

constructs of society such as patents.

Operating result is a measure of financial

performance of the operations for the period.

It is the net result of items of revenue, gains and

expenses (including losses) recognised for the

period, excluding those that are classified as other

non-owner movements in equity. Refer also to net

result.

9. OTHER DISCLOSURES

190 Chapter 4 2022-23 Financial Report

Other economic flows are changes in the volume

or value of an asset or liability that do not result

from transactions. In simple terms, other economic

flows are changes arising from market

remeasurements. They include gains and losses

from disposals, revaluations and impairments of

non-current physical and intangible assets; actuarial

gains and losses arising from defined benefit

superannuation plans; fair value changes of financial

instruments and agricultural assets; and depletion of

natural assets (non-produced) from their use or

removal.

Produced assets include buildings, plant and

equipment, inventories, cultivated assets and certain

intangible assets. Intangible produced assets may

include computer software, motion picture films

and development costs (which does not include the

start-up costs associated with capital projects).

Public Private Partnership (PPP) is where the

State from time to time enters certain arrangements

with private sector participants to design and

construct or upgrade assets used to provide public

services. These arrangements usually include the

provision of operational and maintenance services

for a specified period of time.

Roads include road pavement and road works in

progress. All land under roads is included under the

category of ‘land’.

Road infrastructure mainly includes sound

barriers, bridges and traffic signal control systems.

Service concession arrangement is a contract

effective during the reporting period between a

grantor and an operator in which:

a) the operator has the right of access to the

service concession asset (or assets) to provide

public services on behalf of the grantor for a

specified period of time

b) the operator is responsible for at least some of

the management of the public services provided

through the asset and does not act merely as an

agent on behalf of the grantor

c) the operator is compensated for its services

over the period of the service concession

arrangement.

System of National Accounts explain how the

Australian economy operates and how it evolves

over time by measuring, classifying, and aggregating

these transactions. It includes a full set of flow

accounts for each sector of the economy (income,

capital and financial), input-output tables, supply

and use tables, satellite accounts, state-based

estimates, balance sheets and reconciliation

accounts, and productivity estimates.

Taxation revenue represents revenue received from

the State’s taxpayers and includes: payroll tax, land

tax, duties levied principally on conveyances and

land transfers, gambling taxes levied mainly on

private lotteries, electronic gaming machines, casino

operations and racing, insurance duty relating to

compulsory third party, life and non-life policies,

insurance company contributions to fire brigades,

Fire Services Property Levy, motor vehicle taxes,

including registration fees and duty on registrations

and transfers, levies (including the environmental

levy) on statutory corporations in other sectors of

government, and other taxes, including landfill

levies, licence and concession fees.

Transactions are those economic flows that are

considered to arise as a result of policy decisions,

usually interactions between two entities by mutual

agreement, and also flows within an entity, such as

depreciation where the owner is simultaneously

acting as the owner of the depreciating asset and as

the consumer of the service provided by the asset.

Taxation is regarded as mutually agreed interactions

between the Government and taxpayers.

Transactions can be cash or in kind (e.g. assets

provided/given free of charge or for nominal

consideration). In simple terms, transactions arise

from the policy decisions of the Government.

2022-23 Financial Report Chapter 5 191

CHAPTER 5 – SUPPLEMENTARY UNIFORM PRESENTATION

FRAMEWORK TABLES

THE ACCRUAL GOVERNMENT FINANCE

STATISTICS PRESENTATION

The Government Finance Statistics (GFS) system

employed by the Australian Bureau of Statistics is

designed to provide statistics relating to the finances

of the Australian public sector. The statistics show

the consolidated transactions and balances of the

various institutional sectors of government from an

economic viewpoint, providing details of the

revenue, expenses, payments, receipts, assets and

liabilities. It includes only those transactions and

balances over which a government exercises control

under its legislative or policy framework and

excludes from the calculation of net operating

balance both revaluations (realised and unrealised

gains or losses) arising from a change in market

prices, and other changes in the volume of assets

that result from discoveries, depletion and

destruction of assets. These gains and losses are

classified as other economic flows.

GENERALLY ACCEPTED ACCOUNTING

PRINCIPLES/GOVERNMENT FINANCE

STATISTICS HARMONISATION

In October 2007, the Australian Accounting

Standards Board issued AASB 1049 Whole of

Government and General Government Sector Financial

Reporting, applicable from 1 July 2008. The objective

as set out by the Financial Reporting Council in

December 2002 was ‘to achieve an Australian

accounting standard for a single set of government

reports which are auditable, are comparable

between jurisdictions, and in which the outcome

statements are directly comparable with the relevant

budget statements’. This standard incorporates the

major elements of the GFS framework, including

the presentation formats and key fiscal aggregates,

into a standard based on generally accepted

accounting principles.

The current Uniform Presentation Framework

(UPF) was agreed by the Council of Federal

Financial Relations in February 2019, based on the

2015 update to the Australian System of

Government Finance Statistics (GFS) Framework,

AASB 1049, and is applicable from the reporting

period commencing 1 July 2018. In addition to the

audited Annual Financial Report presented in

Chapter 4, the following statements are also

required to be presented under the UPF.

192 Chapter 5 2022-23 Financial Report

FINANCIAL STATEMENTS FOR THE NON-FINANCIAL PUBLIC SECTOR

Table 5.1: Non-financial public sector operating statement for the financial year ended 30 June ($ million)

2023

2022

Revenue from transactions

Taxation

31 876

30 099

Interest income

902

153

Dividends and income tax equivalent and rate equivalent income

513

575

Sales of goods and services

13 148

11 976

Grants

40 182

41 818

Other revenue and income

4 657

4 396

Total revenue and income from transactions

91 278

89 018

Expenses from transactions

Employee expenses

35 310

33 759

Net superannuation interest expense

721

482

Other superannuation

3 933

4 066

Depreciation

7 564

7 116

Interest expense

4 318

3 259

Grant expense

16 837

22 421

Other operating expenses

32 384

31 987

Total expenses from transactions

101 067

103 091

Net result from transactions – Net operating balance

(9 789)

(14 073)

Other economic flows included in net result

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

Net gain/(loss) on financial assets or liabilities at fair value

Share of net profit/(loss) from associates/joint venture entities

(39)

Other gains/(losses) from other economic flows

(1 224)

(993)

Total other economic flows included in net result

(1 154)

(903)

Net result

(10 943)

(14 976)

Other economic flows – Other comprehensive income

Items that will not be reclassified to net result

Changes in non-financial assets revaluation surplus

21 214

23 332

Remeasurement of superannuation defined benefits plans

1 371

7 821

Other movements in equity

(644)

(73)

Items that may be reclassified subsequently to net result

Net gain/(loss) on financial assets at fair value

130

(5)

Net gain/(loss) on equity investments in other sector entities at proportional share of the carrying amount of

net assets

3 500

11 216

Total other economic flows – Other comprehensive income

25 570

42 291

Comprehensive result – Total change in net worth

14 627

27 316

FISCAL AGGREGRATES

Net operating balance

(9 789)

(14 073)

Net acquisition of non-financial assets from transactions

Purchases of non-financial assets (including change in inventories)

19 831

18 923

Less: Sales of non-financial assets

(540)

(457)

Less: Depreciation and amortisation

(7 564)

(7 116)

Plus/(less): Other movements in non-financial assets

3 879

3 702

Less: Net acquisition of non-financial assets from transactions

15 605

15 052

Net lending/(borrowing)

(25 394)

(29 125)

2022-23 Financial Report Chapter 5 193

Table 5.2: Non-financial public sector balance sheet for the financial year ended 30 June ($ million)

2023

2022

Assets

Financial assets

Cash and deposits

(a)

21 930

12 817

Advances paid

930

632

Receivables and contract assets

10 368

9 676

Investments, loans and placements

4 672

4 182

Investments accounted for using the equity method

1 180

Investments in other sector entities

15 166

11 441

Total financial assets

54 246

38 758

Non-financial assets

Inventories

1 851

2 452

Non-financial assets held for sale

139

212

Land, buildings, infrastructure, plant and equipment

408 618

372 608

Other non-financial assets

6 927

4 573

Total non-financial assets

417 534

379 846

Total assets

471 780

418 604

Liabilities

Deposits held and advances received

1 638

1 602

Payables

38 241

27 187

Contract liabilities

598

596

Borrowings

159 411

132 459

Employee benefits

10 823

10 402

Superannuation

18 904

19 756

Other provisions

3 157

2 221

Total liabilities

232 772

194 223

Net assets

239 008

224 381

Accumulated surplus/(deficit)

69 742

77 899

Reserves

169 267

146 482

Net worth

239 008

224 381

FISCAL AGGREGATES

Net financial worth

(178 526)

(155 464)

Net financial liabilities

193 692

166 906

Net debt

133 518

116 430

Note:

(a) The increase in cash and deposits is primarily due to the $7.9 billion received from the VicRoads Modernisation joint venture, which has been used to establish the

Victorian Future Fund.

194 Chapter 5 2022-23 Financial Report

Table 5.3: Non-financial public sector cash flow statement for the financial year ended 30 June ($ million)

2023

2022

Cash flows from operating activities

Receipts

Taxes received

31 147

29 842

Grants

40 924

42 735

Sales of goods and services

(a)

14 676

13 092

Interest received

832

158

Dividends, income tax equivalent and rate equivalent receipts

342

231

Other receipts

(b)

10 523

2 268

Total receipts

98 444

88 325

Payments

Payments for employees

(34 910)

(32 833)

Superannuation

(4 143)

(4 217)

Interest paid

(3 934)

(2 987)

Grants and subsidies

(16 141)

(21 968)

Goods and services

(a)

(32 042)

(32 209)

Other payments

(961)

(1 025)

Total payments

(92 131)

(95 240)

Net cash flows from operating activities

6 314

(6 915)

Cash flows from investing activities

Cash flows from investments in non-financial assets

Purchases of non-financial assets

(20 480)

(18 532)

Sales of non-financial assets

540

457

Net cash flows from investments in non-financial assets

(19 940)

(18 074)

Net cash flows from investments in financial assets for policy purposes

(569)

(199)

Sub-total

(20 509)

(18 274)

Net cash flows from investments in financial assets for liquidity management purposes

(495)

(386)

Net cash flows from investing activities

(21 005)

(18 659)

Cash flows from financing activities

Advances received (net)

(157)

Net borrowings

23 768

22 035

Deposits received (net)

Net cash flows from financing activities

23 803

21 926

Net increase/(decrease) in cash and cash equivalents

9 112

(3 649)

Cash and cash equivalents at beginning of the reporting period

12 817

16 466

Cash and cash equivalents at end of the reporting period

21 930

12 817

FISCAL AGGREGATES

Net cash flows from operating activities

6 314

(6 915)

Net cash flows from investments in non-financial assets

(19 940)

(18 074)

Cash surplus/(deficit)

(13 626)

(24 989)

Notes:

(a) These items include goods and services tax.

(b) The increase in other receipts from the prior year primarily reflects the $7.9 billion proceeds from the Vicroads Modernisation joint venture. Chapter 4, Notes 4.3.1

and 5.3.4 provides more information on the accounting treatment of this arrangement.

2022-23 Financial Report Chapter 5 195

Table 5.4: Non-financial public sector statement of changes in equity ($ million)

Accumulated

surplus/(deficit)

Non-financial

assets revaluation

surplus

Investment in other

sector entities

revaluation surplus

Other

reserves

Total

2023

Balance at 1 July 2022

77 899

132 901

11 744

1 837

224 381

Net result for the year

(10 943)

Other comprehensive income for the year

612

21 214

3 500

245

25 570

Transfer to/(from) accumulated surplus

2 174

(2 174)

Total equity as at 30 June 2023

69 742

151 941

15 243

2 082

239 008

2022

Balance at 1 July 2021

84 992

109 782

528

1 763

197 065

Net result for the year

(14 976)

Other comprehensive income for the year

7 669

23 332

11 216

42 291

Transfer to/(from) accumulated surplus

214

(214)

Total equity as at 30 June 2022

77 899

132 901

11 744

1 837

224 381

196 Chapter 5 2022-23 Financial Report

Table 5.5: General government sector detailed expenses by function

(a)

($ million)

2023

2022

(b)

General public services

7 039

6 265

Executive and legislative organs, financial and fiscal affairs, external affairs

2 878

3 057

General services

757

785

Public debt transactions

2 932

2 029

General public services NEC

(c)

472

393

Public order and safety

12 018

12 204

Police services

4 013

3 985

Civil and fire protection services

3 658

3 331

Law courts

1 367

1 339

Prisons

1 911

1 950

Public order and safety NEC

(c)

1 068

1 599

Economic affairs

4 105

10 434

General economic, commercial and labour affairs

1 386

8 596

Agriculture, forestry, fishing and hunting

631

563

Fuel and energy

1 382

589

Other industries

499

436

Economic affairs NEC

(c)

208

249

Environmental protection

1 226

1 203

Protection of biodiversity and landscape

620

659

Environmental protection NEC

(c)

606

544

Housing and community amenities

2 698

2 783

Community development

2 573

2 671

Water supply

125

112

Health

28 981

28 125

Outpatient services

2 185

1 996

Hospital services

23 001

21 028

Community health services

3 000

2 790

Public health services

670

2 203

Health NEC

(c)

126

108

Recreation, culture and religion

1 373

1 437

Recreational and sporting services

821

837

Cultural services

552

600

Education

20 644

19 197

Pre-primary and primary education

9 366

8 701

Secondary education

7 527

6 930

Tertiary education

2 069

2 165

Education not definable by level

114

Subsidiary services to education

128

125

Education NEC

(c)

1 440

1 205

Social protection

7 913

8 239

Sickness and disability

3 147

3 009

Old age

469

288

Family and children

2 666

2 419

Housing

903

1 837

Social protection NEC

(c)

727

687

Transport

8 129

7 496

Road transport

3 101

2 675

Bus transport

1 423

1 267

Water transport

Railway transport

3 056

2 809

Multi-mode urban transport

489

691

Not allocated by purpose

(d)

(557)

(571)

Total expenses

93 567

96 814

Notes:

(a) Chapter 4, Note 3.6 provides definitions and descriptions of the classification of the functions of government.

(b) The June 2022 figures have been reclassified between various expenses by COFOG classifications to more correctly reflect the nature of the transactions.

(d) Not allocated by purpose represents eliminations and adjustments.

2022-23 Financial Report Appendix A 197

APPENDIX A – GENERAL GOVERNMENT SECTOR QUARTERLY

FINANCIAL REPORT

Table A.1: Operating statement for the past five quarters ($ million)

2021-22

2022-23

Jun

Sep

Dec

Mar

Jun

Revenue and income from transactions

Taxation

7 599

7 842

6 539

10 716

7 254

Interest income

162

259

331

371

345

Dividends, income tax equivalent and rate equivalent income

430

146

528

Sales of goods and services

1 694

1 696

1 503

1 411

1 654

Grants

10 279

9 265

10 494

10 712

9 668

Other revenue and income

1 053

751

1 007

723

1 361

Total revenue and income from transactions

21 216

19 900

20 019

23 990

20 811

Expenses from transactions

Employee expenses

8 391

8 361

8 383

7 916

8 968

Net superannuation interest expense

120

172

191

177

179

Other superannuation

1 068

1 039

835

913

972

Depreciation

1 118

1 085

1 093

1 160

1 266

Interest expense

826

822

991

995

1 166

Grant expense

5 481

4 021

4 287

5 081

5 665

Other operating expenses

8 612

5 814

7 024

6 471

8 519

Total expenses from transactions

25 615

21 315

22 804

22 714

26 734

Net result from transactions – Net operating balance

(4 399)

(1 415)

(2 785)

1 276

(5 924)

Other economic flows included in net result

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

(31)

(35)

Net gain/(loss) on financial assets or liabilities at fair value

121

(7)

(98)

Share of net profit/(loss) from associates/joint venture entities

(43)

Other gains/(losses) from other economic flows

105

(5)

101

(107)

(1 012)

Total other economic flows included in net result

200

137

(1 187)

Net result

(4 200)

(1 392)

(2 648)

1 304

(7 111)

Other economic flows – Other comprehensive income

Items that will not be reclassified to net result

Changes in non-financial assets revaluation surplus

(a)

18 240

3 504

148

258

9 800

Remeasurement of superannuation defined benefits plans

4 723

1 284

138

(3 160)

3 094

Other movements in equity

(33)

(437)

(224)

Items that may be reclassified subsequently to net result

Net gain/(loss) on financial assets at fair value

Net gain/(loss) on equity investments in other sector entities at

proportional share of the carrying amount of net assets

12 980

3 507

(76)

Total other economic flows – Other comprehensive income

(a)

35 943

4 439

3 923

(2 861)

12 598

Comprehensive result – Total change in net worth

(a)

31 743

3 047

1 275

(1 557)

5 487

KEY FISCAL AGGREGATES

Net operating balance

(4 399)

(1 415)

(2 785)

1 276

(5 924)

Less: Net acquisition of non-financial assets from transactions

1 582

2 692

4 224

1 624

2 746

Net lending/(borrowing)

(5 982)

(4 107)

(7 009)

(347)

(8 670)

Note:

(a) Changes in non-financial assets revaluation surplus, including associated totals, have been restated from September 2022 and the following quarters resulting from

an update to the initial valuation of the registration and licensing database following the VicRoads Modernisation joint venture, consistent with the requirements of

AASB 1059 Service Concession Arrangements: Grantors.

198 Appendix A 2022-23 Financial Report

Table A.2: Balance sheet as at the end of the past five quarters ($ million)

2021-22

2022-23

Jun

Sep

Dec

Mar

Jun

Assets

Financial assets

Cash and deposits

10 974

22 544

21 468

20 941

19 698

Advances paid

4 929

5 025

5 227

5 332

5 308

Receivables and contract assets

8 406

8 041

7 717

10 809

9 046

Investments, loans and placements

3 370

3 472

3 619

3 874

3 853

Investments accounted for using the equity method

1 221

1 223

1 180

Investments in other sector entities

89 162

89 414

93 525

94 739

96 042

Total financial assets

116 851

129 716

132 779

136 918

135 128

Non-financial assets

Inventories

1 262

1 130

1 118

1 121

574

Non-financial assets held for sale

171

154

110

Land, buildings, infrastructure, plant and equipment

225 770

229 316

233 161

236 254

249 480

Other non-financial assets

(a)

3 313

6 970

6 778

6 250

5 898

Total non-financial assets

(a)

230 516

237 569

241 140

243 709

256 062

Total assets

(a)

347 367

367 285

373 919

380 627

391 190

Liabilities

Deposits held and advances received

1 831

1 762

1 727

1 695

1 615

Payables

17 551

27 048

26 006

26 654

28 047

Contract liabilities

342

358

407

361

352

Borrowings

117 420

125 758

132 754

136 828

142 289

Employee benefits

9 857

9 911

9 582

9 827

10 250

Superannuation

19 756

18 845

18 629

21 804

18 904

Other provisions

2 082

2 026

1 962

2 161

2 950

Total liabilities

168 839

185 707

191 066

199 331

204 407

Net assets

(a)

178 528

181 578

182 853

181 296

186 783

Accumulated surplus/(deficit)

52 824

52 290

49 863

50 255

45 889

Reserves

(a)

125 704

129 289

132 990

131 042

140 894

Net worth

(a)

178 528

181 578

182 853

181 296

186 783

FISCAL AGGREGATES

Net financial worth

(51 988)

(55 991)

(58 287)

(62 413)

(69 278)

Net financial liabilities

141 149

145 405

151 812

157 152

165 321

Net debt

99 978

96 479

104 167

108 376

115 044

Note:

(a) Other non-financial assets and reserves, including associated totals, have been restated from September 2022 and the following quarters resulting from an update to

the initial valuation of the registration and licensing database following the VicRoads Modernisation joint venture, consistent with the requirements of AASB 1059

Service Concession Arrangements: Grantors.

2022-23 Financial Report Appendix A 199

Table A.3: Statement of cash flows for the past five quarters ($ million)

2021-22

2022-23

Jun

Sep

Dec

Mar

Jun

Cash flows from operating activities

Receipts

Taxes received

8 970

7 962

7 213

6 965

9 481

Grants

10 373

9 307

10 417

10 731

10 426

Sales of goods and services

(a)

1 930

2 097

1 235

1 768

1 774

Interest received

157

235

319

365

309

Dividends, income tax equivalent and rate equivalent receipts

140

399

Other receipts

393

8 171

1 163

239

634

Total receipts

21 919

27 859

20 487

20 468

22 689

Payments

Payments for employees

(8 133)

(8 282)

(8 662)

(7 758)

(8 558)

Superannuation

(1 275)

(838)

(1 104)

(1 075)

(958)

Interest paid

(728)

(724)

(880)

(915)

(1 040)

Grants and subsidies

(4 729)

(4 190)

(4 445)

(5 077)

(4 691)

Goods and services

(a)

(7 110)

(6 033)

(7 243)

(5 793)

(8 041)

Other payments

(320)

(240)

(200)

(241)

(265)

Total payments

(22 294)

(20 307)

(22 534)

(20 859)

(23 554)

Net cash flows from operating activities

(376)

7 552

(2 047)

(391)

(865)

Cash flows from investing activities

Cash flows from investments in non-financial assets

Purchases of non-financial assets

(5 095)

(3 500)

(4 781)

(3 155)

(4 837)

Sales of non-financial assets

128

Net cash flows from investments in non-financial assets

(4 967)

(3 426)

(4 653)

(3 115)

(4 753)

Net cash flows from investments in financial assets for policy purposes

(391)

(682)

(387)

(165)

Sub-total

(4 939)

(3 818)

(5 335)

(3 502)

(4 919)

Net cash flows from investments in financial assets for

liquidity management purposes

(33)

(71)

(100)

(207)

(113)

Net cash flows from investing activities

(4 972)

(3 889)

(5 435)

(3 709)

(5 032)

Cash flows from financing activities

Advances received (net)

232

(111)

(5)

(39)

(88)

Net borrowings

2 834

7 968

6 441

3 605

4 734

Deposits received (net)

(317)

(29)

Net cash flows from financing activities

2 750

7 896

6 407

3 573

4 654

Net increase/(decrease) in cash and cash equivalents

(2 598)

11 559

(1 076)

(527)

(1 243)

Cash and cash equivalents at beginning of the reporting period

(b)

13 573

10 985

22 544

21 468

20 941

Cash and cash equivalents at end of the reporting period

10 974

22 544

21 468

20 941

19 698

FISCAL AGGREGATES

Net cash flows from operating activities

(376)

7 552

(2 047)

(391)

(865)

Net cash flows from investments in non-financial assets

(4 967)

(3 426)

(4 653)

(3 115)

(4 753)

Cash surplus/(deficit)

(5 343)

4 126

(6 700)

(3 506)

(5 618)

Notes:

(a) These items are inclusive of goods and services tax.

(b) On 1 July 2022, the seven Waste and Resource Recovery Groups were abolished and transferred from the PNFC sector to be amalgamated into the former

Department of Environment, Land, Water and Planning (DELWP) to form a business unit within DELWP, Recycling Victoria. This has resulted in the 1 July 2022

opening balance not equalling the 30 June closing balance. DELWP has been renamed the Department of Energy, Environment and Climate Action (DEECA) following

the machinery of government changes announced by the Premier on 5 December 2022 with effect from 1 January 2023. Refer to Note 9.8 in Chapter 4 for further

details.

200 Appendix A 2022-23 Financial Report

2022-23 Financial Report Appendix B 201

APPENDIX B – FINANCIAL MANAGEMENT ACT 1994 –

COMPLIANCE INDEX

The Financial Management Act 1994 (the Act) requires the Minister to prepare an audited annual financial report

for tabling in Parliament. This report has been prepared in accordance with applicable Australian Accounting

Standards and the Act.

The Act also requires the annual financial report to meet certain requirements. The following compliance index

explains how these requirements are met, together with appropriate references in this document.

Financial Management

Act 1994 reference

Requirement

Comments/reference

Section 24(1)

The Minister must prepare an annual financial

report for each financial year.

Refer Chapter 4

Section 24(2)

The annual financial report:

(a) must be prepared in the manner and form

determined by the Minister, having regard to

appropriate financial reporting frameworks

Manner is in accordance with

Australian Accounting Standards and

Ministerial Directions.

Form is consolidated comprehensive

operating statement, consolidated

balance sheet, consolidated cash flow

statement, consolidated statement of

changes in equity and accompanying

notes. Refer Chapter 4.

(b) must present fairly the financial position of

the State and the Victorian general

government sector at the end of the financial

year as well as:

Refer Chapter 4, consolidated balance

sheet

(i) the transactions on the Public Account

Refer Chapter, 4 Note 8.2 Public

Account disclosures

(ii) the transactions of the Victorian general

government sector

Refer Chapter 4, consolidated

comprehensive operating statement,

consolidated cash flow statement and

selected notes

(iii) other financial transactions of the State.

Refer Chapter 4, consolidated

comprehensive operating statement,

consolidated cash flow statement and

selected notes

202 Appendix B 2022-23 Financial Report

Financial Management

Act 1994 reference

Requirement

Comments/reference

In respect of the financial year:

working accounts under section 23

Refer Chapter 4, Note 8.2.9 Amounts

paid into working accounts pursuant

to Section 23 of the Financial

Management Act 1994 for the year

ended 30 June

(d) must include details of amounts allocated to

departments during the financial year under

section 28

Refer Chapter 4, Note 8.2.16

Allocations pursuant to Section 28 of

the Financial Management Act 1994

for the financial year ended 30 June

(e) must include details of money credited under

section 29 to an item in a schedule to an

appropriation Act for that financial year

Refer Chapter 4, Note 8.2.11

Appropriation of revenue and asset

sale proceeds pursuant to Section 29

of the Financial Management Act

1994 for the financial year ended

30 June 2023

(f) must include particulars of amounts

transferred in accordance with

determinations under section 30 or 31

Refer Chapter 4, Note 8.2.10 Transfers

pursuant to Sections 30 and 31 of the

Financial Management Act 1994 for

the financial year ended 30 June 2023

(g) must include details of:

(i) amounts appropriated in respect of the

financial year as a result of a

determination under section 32 in

respect of unused appropriation for the

preceding financial year

Refer Chapter 4, Note 8.2.12 Section

32 carryovers – Financial

Management Act 1994 for the

financial year ended 30 June

(ii) the application during the financial year

of amounts referred to in subparagraph

(i)

Refer Chapter 4, Note 8.2.12 Section

32 carryovers – Financial

Management Act 1994 for the

financial year ended 30 June

(iii) amounts appropriated in respect of the

next financial year as a result of a

determination under section 32 in

respect of unused appropriation for the

financial year.

Refer Chapter 4, Note 8.2.12 Section

32 carryovers – Financial

Management Act 1994 for the

financial year ended 30 June

(h) must include:

(i) details of expenses and obligations met

from money advanced to the Minister

under section 35(1) during the financial

year

Refer Chapter 4, Note 8.2.14

Payments from advances and unused

advances carried forward to 2022-23

pursuant to Section 35 and 35(4) of

the Financial Management Act 1994

(ii) a statement of the reasons for carrying

forward any part of an unused advance

to the next financial year under

section 35(4).

Refer Chapter 4, Note 8.2.14

Payments from advances and unused

advances carried forward to 2022-23

pursuant to Section 35 and 35(4) of

the Financial Management Act 1994

2022-23 Financial Report Appendix B 203

Financial Management

Act 1994 reference

Requirement

Comments/reference

(i) must include details of payments made

during the financial year out of money

advanced to the Treasurer in an annual

appropriation Act for that year to meet

urgent claims

Refer Chapter 4, Note 8.2.13

Payments from advance to the

Treasurer for the financial year ended

30 June

(j) must include details of:

(i) payments made during the financial year

in fulfilment of any guarantee by the

Government under any Act

Refer Chapter 4, Note 8.2.15

Government guarantees

(ii) money received or recovered by the

Minister or Treasurer during the financial

year in respect of any guarantee

payments.

Refer Chapter 4, Note 8.2.15

Government guarantees

(k) must include details, as at the end of the

financial year, of:

(i) the liabilities (including contingent

liabilities under guarantees and

indemnities or in respect of

superannuation payments and all other

contingent liabilities) and assets of the

State

Refer Chapter 4, consolidated balance

sheet

Refer Chapter 4, Note 7.2 Contingent

assets and contingent liabilities (State

of Victoria)

Refer Chapter 4, Note 3.2

Superannuation interest expense and

other superannuation expenses and

Note 6.5 Superannuation

(ii) prescribed assets and prescribed

liabilities of prescribed bodies.

Refer Chapter 4, Note 9.1

Disaggregated information, and

Chapter 5, Table 5.2 Non-financial

public sector balance sheet for the

financial year ended 30 June

(l) must be audited by the Auditor-General.

Refer Chapter 4, Report of the

Auditor-General

Section 26(1)

The Minister must prepare a quarterly financial

report for each quarter of each financial year.

Refer Appendix A

Section 26(2)

A quarterly financial report comprises:

(a) a statement of financial performance of the

Victorian general government sector for the

quarter

Refer Appendix A, Table A.1 Operating

statement for the past five quarters

(b) a statement of financial position of the

Victorian general government sector at the

end of the quarter

Refer Appendix A, Table A.2 Balance

sheet as at the end of the past five

quarters

general government sector for the quarter

Refer Appendix A, Table A.3

Statement of cash flows for the past

five quarters

(d) a statement of the accounting policies on

which the statements required by paragraphs

(a), (b) and (c) are based.

Refer Chapter 4

204 Appendix B 2022-23 Financial Report

Financial Management

Act 1994 reference

Requirement

Comments/reference

Section 26(2A)

A quarterly financial report must be prepared in

the manner and form determined by the Minister,

having regard to appropriate financial reporting

frameworks.

Refer to Appendix A for agreed form

Section 26(3A)

The quarterly financial report for the quarter

ending on 30 June in a financial year must include,

in addition to the statements referred to in

sub-section (2)(a) to (d) for that quarter, those

statements for the period of 12 months ending on

that 30 June.

Refer to Chapter 4, consolidated

comprehensive operating statement,

consolidated balance sheet,

consolidated cash flow statement and

selected notes

2022-23 Financial Report Style conventions 205

STYLE CONVENTIONS

Figures in the tables and in the text have been rounded. Discrepancies in tables between totals and sums of

components reflect rounding. Percentage variations in all tables are based on the underlying unrounded amounts.

The notation used in the tables is as follows:

n.a. not available or not applicable

1 billion 1 000 million

1 basis point 0.01 per cent

.. zero, or rounded to zero

(x xxx.x) negative amount

x xxx.0 rounded amount

202x financial year

Please refer to the Treasury and Finance glossary for budget and financial reports at dtf.vic.gov.au for

additional terms and references.

The Annual Financial Report is based on the style set in the example of a general purpose financial report for a

government in illustrative example A of AASB 1049 Whole of Government and General Government Sector Financial

Reporting. The styles used in other chapters of this document are generally consistent with those used in other

publications relating to the annual budget papers.

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