Report 7: 2020-21

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

Selected significant financial transactions and financial ratios

Introduction

This section of the report provides information on selected significant financial transactions made in 2019-20 that we noted during our audits. It also includes selected key financial ratios and information commonly used for assessing financial performance or analysing the financial health of entities. We report this information to provide insight to important issues considered during the audits. Other notable transactions relating to the COVID-19 pandemic are reported on page 31.

Some of the information below may also be reported in each entity’s tabled annual report but we have summarised it here for the convenience of Parliament. By including these items in this report, we are not implying that we have a residual audit-related concern with these transactions.

Selected significant financial transactions

Assets

  • Commissioner of Main Roads spent $1.25 billion on developing infrastructure, mainly on construction of the Karratha-Tom Price road, Bunbury outer ring road, Smart Kwinana Freeways, Murdoch Drive extension and the Armadale Road bridge over the Kwinana Freeway. Additional funding of $116 million was also received for local government roadworks including the Broome to Cape Leveque Road, the Outback Way and Stephenson Avenue.
  • There was an 11%, $491.3 million, increase in the Keystart Housing Scheme Trust loan portfolio. This was mainly due to the continued demand for the Keystart low deposit product from credit worthy borrowers who are unable to meet the lending criteria of mainstream lenders in Western Australia. It also includes additional lending resulting from increased income limits.
  • The Department of Planning, Lands and Heritage’s property, plant and equipment value increased by $197.5 million, to $333.6 million, mainly due to an increase in the value of pastoral leased land held. This resulted from the rent review of pastoral leases, required by the Land Administration Act 1997, undertaken by the Valuer General.
  • Department of Local Government, Sport and Cultural Industries spent $93 million on the new Museum project which consisted of $52 million of building cost and $41 million of exhibit cost. The project is scheduled for completion in November 2020.
  • From 1 February 2020 the Child and Adolescent Health Service took over responsibility for neonatal services transferred from the North Metropolitan Health Service. Assets totalling $18.8 million were transferred. Neonatal staff expenses and related contracts for services were also transferred.
  • A $251.4 m loss on revaluation of land, mostly for State forest lands, was reported by the Department of Biodiversity, Conservation and Attractions. The Department’s significant land parcels across the State were valued by the Valuer General, and the lower value was mainly attributed to a 10-15% general reduction in values across the State.

Liabilities

  • The Annual Report on State Finances reported $198 million for entities’ total combined provision for doubtful debts. This increase of $182 million on the previous year was mainly due to the impact of COVID-19 on the economic and social circumstances of individuals and businesses. In addition, Keystart reported $30 million additional doubtful debts provision related to loans to homebuyers.
  • Western Australian Treasury Corporation’s borrowings increased by $2.8 billion, or 5%, mainly to meet routine client lending requirements. Decreases in interest rates were reflected in the reduced interest received from authorities and interest paid on borrowings.
  • Bunbury Water Corporation (Aqwest) obtained a $7.5 million loan advance from the Western Australian Treasury Corporation in November 2019 for construction of the Ngoora Moolinap Water Treatment Plant project. Aqwest invested a further $2.32 million of its own funds into the $15 million project during the 2019-20 financial year.

Expenditure

  • WA Country Health Service‘s employee benefits expense increased by $69 million to $1,126 million due to FTE growth of 316 for new programs such as palliative care and Country Health Initiative programs, as well as additional FTE for COVID clinics, preparedness and containment.
  • Taxi plate owners received $118.2 million during 2019-20 under the Voluntary taxi plate buy back scheme from the Department of Transport. The Department also paid $35 million under a settlement of a litigation on behalf of State Government in respect to a dispute under the Marine and Harbours Act (1981) relating to an agreement to build and operate a port in Western Australia.
  • Health Support Services’ expenses on computer services (supplies and services category) were $18.1 million higher in 2019-20 than the previous year. This was largely due to additional government investment on the HealthNext project which included the establishment of new cloud services and state-side digital communications network, as well as additional ICT investments for the WA health system in response to the COVID‑19 pandemic.
  • Grants made by the Department of the Premier and Cabinet included $3.5 million to Telethon, $2.4 million to the Kalamunda Community Centre, and payments from the Land and Equity Fund totalling $2.7 million.
  • Following the 2018-19 Independent Review of the Public Sector Commission, and development of its new remit and strategic plan, the Commission filled staff vacancies in 2019-20. This contributed to the Commission’s $3.5 million (25%) increase in employee benefits expenses between 2018-19 and 2019-20.
  • The Parliamentary Commissioner for Administrative Investigations (Ombudsman) employee benefits expense increased by $893,000, 11.5%, for an expanded Child Death Review function that commenced in 2019-20, to plan and develop a new Reportable Conduct Scheme in 2019-20 and to meet the workload associated with the role of the Energy and Water Ombudsman.

Revenue

  • Gold Corporation’s revenue of $23.87 billion in 2020 was 32% higher than 2019, due primarily to increased precious metal prices during the year. Cost of Goods Sold also increased by 32%. There was a relatively small resulting increase in net profit.
  • The Landgate Partial Commercialisation of the Western Australian Land Information Authority (Landgate) on 22 October 2019 raised $1.41 billion. This amount was transferred to the State Government.
  • Synergy’s sales of energy to retail customers increased by $94 million (4%) due to a 1.75% increase in tariffs and increased consumption, attributed to a warmer than usual summer and people working from home during the COVID-19 shutdown. For similar reasons, Horizon Power’s 1.75% tariff increase and 7.8% volume consumption increase for residential customers resulted in a $7.9 million increase in revenue.
  • Australian Government grants and contributions to the Department of Education increased by $91.5 million, mainly due to the additional $90.0 million Quality Schools funding under the National School Reform Agreement.
  • Water Corporation’s annual service charge revenue increased by 3.9% overall or $51 million to $1,361 million due to the impact of price increases and the growth in number of connections. Developer contributions declined by 7%, or $16 million, mainly due to the decline in development activity around the State for part of the year.
  • Annual land sales under Western Australian Land Authority’s programs were $74.9 million industrial, $55.6 million metropolitan and $10.9 million regional. The Authority’s regional program was the only 1 to report an increase on the previous year.
  • Pilbara Ports Authority’s revenue increased by 8% ($32.9 million) due to increases in tonnage fees, pilotage charges and security fees from 1 July 2019. Increased tonnage volumes at Port Hedland and increased shipping volumes at Port Hedland and Ashburton also contributed to the improved revenue result.
  • Dividends received from entities into the State’s Consolidated Account decreased from $1.35 billion in 2018-19 to $392 million for the financial year 2019-20. This was reported in the Annual Report on State Finances.
  • The Building and Construction Industry Training Board’s levy revenue increased from $27.2 to $38.8 million, largely due to the removal of the exemption for the resources sector. This was partially offset by the slowdown in residential housing construction during the COVID-19 pandemic.
  • Construction Industry Long Service Leave Payments Board’s contribution income from employers decreased from $37.7 to $32.7 million, 13%, due to an average 9% reduction in contribution levy rates agreed by the Board after consulting their actuary. The levy rate reduction provides financial relief to the construction industry due to the uncertainty of the COVID-19 pandemic.
  • The Department of Training and Workforce Development secured $44 million for 2019-20 through the Royalties for Regions program to support regional TAFEs. Funding was used to support resourcing of smaller regional TAFEs and lecturer housing.
  • Mental Health Commission received $12.2 million in Royalties for Regions funding in 2019‑20 for the North West Drug and Alcohol Support Program which included $5.9 million relating to 2018-19 funding received in early 2019-20.
  • During 2019-20, Police Service received $16 million for the Police Redress Scheme set up by the Western Australian Government for former police officers who were medically retired for a work-related illness or injury. All funds received were paid out during the year.
  • Public Trustee’s fees and charges income increased by 16%, or $2.9 million, to $21.2 million. This resulted from a combination of growth in client activity and the annual CPI increase.
  • The Art Gallery of Western Australia received a number of significant donations of artworks totalling $704,000, up from $246,000 last year.

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