Report 7: 2020-21

Audit Results Report – Annual 2019-20 Financial Audits of State Government Entities

Key financial ratios of public sector entities

In this section we present selected key financial ratios and information commonly used for assessing financial performance or analysing the financial health of entities:

Liquidity (current) ratio for all entities – 4 year trend

The liquidity or current ratio is a traditional method of assessing an entity’s ability to meet its debts as and when they fall due. It is calculated by dividing current assets by current liabilities. A ratio of more than 1 is generally accepted to show a low risk.

Eighty-one percent of entities at 30 June 2020 had a current ratio above 1.0, similar to previous years.

Liquidity ratio Percentage of entities

30/6/17

Percentage of entities

30/6/18

Percentage of entities

30/6/19

Percentage of entities

30/6/20

Greater than or equal to 1 (low risk) 81 82 83 81
Less than 1 19 18 17 19

Source: OAG based on audited financial statements in tabled annual reports

Table 12: Liquidity ratios of entities – 4 year trend 

Financial result for all entities – 4 year trend

A number of factors can determine whether an entity achieves a surplus financial result. However, a surplus is generally an indicator that an entity is adequately funded and/or has sound financial management including good budgeting.

Sixty-eight entities (54%) reported a surplus for 2019-20, lower than the previous 3 years. The following table is a summary of the financial results of entities over the past 4 years.

Financial result Percentage of entities

2016-17

Percentage of entities

2017-18

Percentage of entities

2018-19

Percentage of entities

2019-20

Surplus 72 70 59 54
Deficit 28 30 41 46

Source: OAG based on audited financial statements in tabled annual reports

Table 13: Financial results of entities – 4 year trend

Borrowings to assets ratio

While a relatively small number of entities have a borrowings liability, their borrowings are significant in value. The borrowings to assets ratio is an indicator of the extent to which an entity’s borrowings are covered by assets.

However, caution is needed when interpreting the results as the indicator does not differentiate between current and non-current assets and borrowings. It is a high level indicator of the extent that an entity has debt obligations.

Source: OAG based on audited financial statements in tabled annual reports

# The Departments of the Attorney General and Corrective Services amalgamated from 1 July 2017 to become the Department of Justice.

Note: Entities with a low percentage borrowing (ratio below 5%) have been omitted.

Figure 13: Borrowings to assets ratio of entities – 4 year trend

Dividends paid by public corporations to general government

Dividends paid by public corporations contributed $392 million to the general government sector financial results in 2019-20, compared with $1,350 million in 2018-19.

Each corporation operates under their own enabling legislation with differing requirements and processes for the payment of dividends to Government. Treasury has advised that, in general terms, the dividend payout ratios are determined each year through a combination of SCIs and the annual budget process. The dividends are generally calculated as a percentage of net profit after tax[1].

The timing of dividend payments and the required approval processes are also prescribed in each corporations’ legislation. Broadly, however, the board makes a recommendation to the Minister, who consults with the Treasurer before determining the amount of the dividend. The process of seeking the Treasurer’s concurrence includes Treasury review of the actual and budget financial statements of the corporation. Once the dividend amount has been agreed, the corporation pays the dividend to the Treasurer (the Consolidated Account), in accordance with their legislation. If the Minister directs a different dividend amount, then this direction is required to be tabled in Parliament.

Dividends paid during a financial year generally include an interim dividend for that year and the final dividend from the preceding financial year. Therefore, dividends paid during a financial year do not wholly relate to the trading surplus of that year.

Source: OAG based on audited annual financial statements of entities

* Owner of Gold Corporation surpluses – excludes surplus attributable to non-controlling interests

# financial reports present whole numbers only

Table 14: Dividends paid by public corporations to general government

 

[1] Public Corporation Dividend Payout Ratios – refer to page 240, 2020-21 Economic and Fiscal Outlook paper of the State Budget.

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