The reduced disclosure requirements prescribed by AASB 1053 Application of Tiers of Australian Accounting Standards, is included in Treasurer’s Instruction 1107 Application of Tiered Reporting – Reduced Disclosure Requirements for Tier 2 entities. This applied to TAFEs for their 2018 financial reports for the first time. The same recognition and measurement requirements apply to all entities, but Tier 2 entities, such as TAFEs, have fewer disclosure requirements than Tier 1 entities.
General purpose financial statements continue to be prepared by Tier 2 entities but the required level of detail is reduced so that the reports are shorter but still provide relevant information to users. A number of disclosure notes were reduced in detail without impacting the usefulness and understandability of the financial statements for users. Examples are the notes on financial instruments and the annual leave and long service leave provisions. Entities may include additional disclosures based on their judgement of user needs.
New Tier 2 entity model financial statements prepared by the Department of Training and Workforce Development were a guide for the TAFEs’ 2018 financial reporting.
These reduced disclosure requirements will apply to future financial reporting by the TAFEs. This will make preparation of annual financial statements less onerous and reduce the annual reporting cost burden to the TAFEs.
Listed below are significant 2018 financial transactions we noted during our TAFE audits. Most of this information can be found in each TAFE’s annual report. By reporting these items, we are not implying that we have any residual concern with these transactions.
- South Metropolitan TAFE’s property, plant and equipment reduced by $12 million due to the eTech land and buildings on its Fremantle campus being transferred to the Department of Planning, Land and Heritage.
- Staff from South Metropolitan TAFE’s Balga and Midland campuses transferred to North Metropolitan TAFE, with leave liabilities of $2.7 million also transferred. The South Metropolitan TAFE reported this liability at 31 December 2017 and paid the amount to North Metropolitan TAFE in 2018.
- South Metropolitan TAFE’s fee for service revenue was down 11% ($3.1 million) from the previous year due mainly to a $2.4 million decrease in international student revenue.
- North Metropolitan TAFE reported a $5.1 million reduction in fee for service revenue, mainly due to a significant decrease in the number of international students studying in 2018.
- Central Regional TAFE’s student fees and fee for service revenue was lower by $1.7 million this year, mainly due to lower enrolments in the Gascoyne and Kalgoorlie regions.
- North Regional TAFE’s 2018 employment costs were $2.1 million higher than the prior year due to an increase in staff numbers, primarily required for the SMS system implementation.
- In 2018, the 5 TAFEs reported deficits for the third successive year since amalgamation of the previous 11 state training providers. It should be noted that the 2017 deficits are higher than 2016 and 2018 because of significant revaluation decrements for land and buildings that were required to be brought to account as expenses in 2017 following amalgamation.
Although all TAFEs recorded deficits for the period, they nevertheless had a favourable liquidity ratio at 31 December 2018.
The liquidity or current ratio is a traditional way of assessing an entity’s ability to meet its debts as and when they fall due. A ratio of more than 1 is generally accepted as low risk. Table 14 shows that on this basis, all 5 TAFEs were low risk. However, care should be taken in concluding on the broader financial position of an entity solely on this indicator which compares current assets to current liabilities.
Student curriculum hours (SCH) is the measure used to report the quantum of training delivered by the TAFEs. In 2018, a total of 21.5 million SCH of training was delivered by the 5 TAFEs through their Delivery and Performance Agreements (DPA) with DTWD. Overall this was a slight increase on the 2017 delivery, but still down from 2016.
Table 15 shows the delivery for each TAFE.
The cost per SCH is a key financial performance measure. It is calculated by dividing the total cost of services by the total number of SCH of training delivered, including both DPA and other training delivered.
Many factors influence this measure, so this data alone should not be used to compare TAFEs. However, it provides a high level indication of efficiency. Factors can include regional location and economic conditions, the relative cost of different courses offered and student demographics.