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Overview

Basis of Preparation of the Financial Statements

The financial statements are general purpose financial statements and are required by section 42 of the Public Governance, Performance and Accountability Act 2013.

The financial statements have been prepared in accordance with:

  1. Public Governance, Performance and Accountability (Financial Reporting Rule) (FRR) 2015 for reporting periods ending on or after 1 July 2015; and
  2. Australian Accounting Standards and Interpretations—Reduced Disclosure Requirements issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The financial statements have been prepared on an accrual basis and are in accordance with the historical cost convention, except for certain assets and liabilities at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position.

The financial statements are presented in Australian dollars and values are rounded to the nearest thousand dollars for departmental accounts and the nearest million dollars for administered accounts, unless otherwise specified.

The financial statements of Defence Service Homes Insurance Scheme (DSHIS) are consolidated into DVA's financial statements. In this process, all intra-entity transactions and balances are eliminated. For further details refer to Note 1.1C.

New Accounting Standards

Adoption of New Australian Accounting Standard Requirements

All new accounting standards, revised standards, amending standards and/or interpretations that were issued prior to the signing of the statements by the Secretary and the Chief Finance Officer, and are applicable to the current reporting period did not have a material effect on DVA's financial statements.

The following change in accounting standards and interpretations has an impact on DVA's financial statements in the current financial year:

  • AASB 2015-6 Amendments to Australian Accounting Standards AASB 124 Related Party Disclosures—Extending Related Party Disclosures to Not-for-Profit Public Sector Entities

Future Australian Accounting Standard requirements

The following new standards will have a disclosure impact only in future reporting periods:

  • AASB 2015-7 Amendments to Australian Accounting Standards AASB 116 Property, Plant and Equipment—Fair Value Disclosures of Not-for-Profit Public Sector Entities
  • AASB 16 Leases (preceded by AASB 117 Leases)
  • AASB 9 Financial Instruments
  • AASB 15 Revenue from Contracts with Customers

Taxation

DVA is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).

Competitive Neutrality

DVA provides administrative services for the Defence Home Ownership Assistance Scheme and the Defence Home Owner Scheme. The Defence Home Ownership Assistance Scheme is subject to the Australian Government's Competitive Neutrality Policy. The fees charged cover DVA's anticipated costs in providing the service to the Department of Defence and were subject to Competitive Neutrality charges. Under Competitive Neutrality arrangements, DVA is required to make Australian Income Tax Equivalent payments to the Government, in addition to payments for FBT and GST. The amount paid during 2016–17 is disclosed in the Statement of Comprehensive Income.

The amounts have been calculated as being payable to the Australian Government in the form of company income tax under the Income Tax Assessment Act if it had applied. These amounts have been paid or are payable by DVA to the Official Public Account.

Foreign Currency

Transactions denominated in a foreign currency are converted to Australian dollars at the exchange rate at the date of the transaction. Foreign currency receivables and payables are converted to Australian dollars at the exchange rates current as at balance date. Associated currency gains and losses are not material.

Events after the Reporting Period

Departmental

There were no subsequent events between balance date and signing of the financial statements that had the potential to significantly affect the ongoing structure and financial activities of DVA.

Comparative Figures and Prior Period Adjustments

The changes in the reporting requirements of special accounts have resulted in an adjustment of $9 million between "Cash and cash equivalents" and "Receivables" in the administered financial statements for the prior period. The following notes are affected accordingly:

  • 4.1A Cash and cash equivalents: from $38 million to $47 million;
  • 4.1B Receivables: from $120 million to $111 million;
  • Administered Cash Flow Statement: Special Accounts (Cash from OPA) from $23 million to $32 million.

Breaches of Section 83 of the Constitution

Section 83 of the Constitution provides that no amount may be paid out of the Consolidated Revenue Fund except under an appropriation made by law.

For 2016–17, DVA conducted a section 83 compliance review to identify any new special accounts, changes to legislation, system changes or business activity changes which may impact on the previously identified section 83 control framework. None were detected.

A financial quantification of potential breaches of section 83 was performed by DVA. This review identified that potential breaches were $19.75 million for 2016–17 financial year, comprising:

  • $1.1 million in residential aged care payments from the reconciliation of data received from the Department of Human Services (DHS);
  • $17 million identified through the DVA debt register;
  • $0.2 million identified through DVA's internal testing of transactions; and
  • $1.45 million identified through other review processes.

Further details of the 2016–17 section 83 review are provided in Table A.

DVA's Audit and Risk Committee and Financial Statements Sub-Committee formed a view that DVA had reviewed its section 83 risk in a manner consistent with the published policy statements from the Department of Finance.

DVA will continue to monitor its level of compliance with section 83 of the Constitution across all legislation for which it is administratively responsible. Where possible, future changes to procedures and amendments to legislation will continue to be progressed to reduce the risk of non-compliance to an acceptably low level across all programs.

Table A—2016–17 Summary
Appropriations identified
as subject to conditions
Expenditure in 2016–17 Review complete?
(Yes/No)
Breaches identified
to 30 June 2017
Potential breaches to date yet to be resolved Remedial action taken or proposed1
  $'000   Were any breaches identified? Total
$'000
Yes/No Indicative extent
$'000
 
SPECIAL APPROPRIATIONS
Veterans' Entitlements Act 1986 9,912,957 Yes No N/A Yes 19,574 D,S
Safety, Rehabilitation and Compensation Act 1988 181,823 Yes No N/A Yes 66 D
Military Rehabilitation and Compensation Act 2004 449,694 Yes No N/A Yes 112 D

1 L= legislative change; S=systems change; P=planned; M=made (e.g. SM, or LP); D=debt recovery

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