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Finance

Chief Finance Officer - Overview

Adam Black (Assistant Director-General)

This overview summarises the key changes in financial results over the 2008-09 period.

Economic and fiscal environment

2008-09 has seen a major financial and economic crisis that has driven a number of countries into recession and severely impacted on the national and Queensland economies.

The Australian Government has introduced a number of stimulus packages, while the Reserve Bank has lowered official interest rates in a bid to minimise the economic slow down and encourage spending.

A significant amount of the stimulus funding has been directed at infrastructure projects, including schools and early childhood facilities. In the context of an economic situation where jobs are squeezed and unemployment is on the rise, training and skills development are emphasised.

New funding arrangements, relating to early childhood education and care and education and training, have been agreed between the Commonwealth and the states through COAG. The agreements, covering general funding and a number of National Partnership Agreements, focus on achieving improved educational and training outcomes.

The general economic environment and government's reduced relative share of goods and services tax (GST) revenue has put pressure on recurrent expenditures, as whole-of-government efficiency dividends must now be realised while ensuring front-line services are not affected.

During 2008-09, the department was affected by a number of machinery-of-government (MOG) changes. From 1 January 2009, the Office for Early Childhood Education and Care was established within the department, with funding transferred from the Department of Communities. On 26 March 2009, Arts Queensland and related statutory authorities were transferred to the Department of the Premier and Cabinet. Along with the first full financial year of operations of the two statutory TAFEs, these MOG changes provided a number of financial management and resource transfer challenges.

In my first year as Chief Finance Officer of the Department of Education and Training, I would like to acknowledge the contribution of my predecessor, Alan Abrahams, for his leadership of the financial governance processes of the department during 2008-09.

Explanation of terms

The Department of Education and Training financial report contains financial data labelled 'Economic Entity' and 'Parent Entity':

  • Parent Entity refers to funds within the controlled department.
  • Economic Entity refers to the combined operations of the Parent Entity and Corporate and Professional Services (CAPS).

Unless otherwise indicated, information in the overview refers to the Economic Entity.

Summary of financial performance

Surplus = Total income - Total expenses
$0.722 million   $6.589 billion   $6.588 billion

For detailed financial information see:

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Our income - where the funds come from

In 2008-09, the department underwent MOG changes which will need to be taken into account when comparing previous year's results with that of 2008-09. We received $6.589 billion for our operations, an increase of $468 million from the previous year.

State Government output revenue increased by $589 million, largely due to a change in funding arrangements with the Australian Government. Grants previously received directly from the Australian Government are now received as output revenue. Other increases included funding for enterprise bargaining outcomes, enhanced literacy support for students, and additional investment in the pre-Prep early learning program in Indigenous communities.

Fees and charges decreased by $10 million, predominantly reflecting the separation of Southbank Institute of Technology and Gold Coast Institute of TAFE from the department, as statutory training authorities.

The department also received $3.668 billion in administered funding, an increase of $413 million from 2007-08. Administered funding is distributed as grants to statutory authorities, peak bodies for non-state schools and other entities, enabling them to deliver agreed services to Queenslanders.

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Figure 51: Income

  • Income
 

Source: Department of Education and Training

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Our expenses - how the funds are spent

The department's total expenses of $6.588 billion this year is an increase of $468 million from last year. Salaries and wages are still the agency's major expense component at 72 per cent of total expenses. This is in line with the agency's use of funds to retain service delivery staff, including teachers and trainers supporting the learning needs of students and clients.

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Figure 52: Expenses

  • Expenses
 

Source: Department of Education and Training

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Employee expenses

Enterprise bargaining agreements saw salary rates increase by around 4 per cent, resulting in employee expenses rising by $289 million, to a total of $4.719 billion.

The increased employee expenses are also due increased teacher numbers resulting from enrolment growth and additional teachers engaged in the delivery of continuing and new teaching and learning initiatives.

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Supplies and services

Higher expenditure in supplies and services during 2008-09 is due mainly to an expanded capital program with related non-capitalised expenditure.

This is in line with the increased Commonwealth investment in various programs, including the Building the Education Revolution initiative.

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Figure 53: Average cost per student in state schools

  • Average cost per student in state schools
 

Source: Department of Education and Training

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Depreciation and amortisation

Depreciation expense totals $335 million, with an increase of $11 million from last year. This is mainly due to revaluation of existing assets, which include assets transferred from Department of Communities as part of the MOG transfer, adding to the depreciation expense for the year.

There are also major capital projects that are capitalised to final assets during the year and commenced depreciation.

(Refer to note 2 (new window) 544K Adobe PDF document in the financial statements for more details)

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Capital investment

The Capital Acquisitions Program is a significant area of investment for the department and ensures delivery of high priority programs in the enhancement of our $17.471 billion asset base, which includes over 20 000 buildings in 1245 state schools and 11 TAFE institutes across Queensland. The program includes:

  • construction of new physical facilities
  • refurbishment of existing facilities
  • significant information and communications technologies (ICT) investments.

Property, plant and equipment and intangible assets increased by $655 million to $16.808 billion from the previous financial year, mainly due to the combined effects of the capital works program and revaluation of the existing asset base (which includes the MOG transfer from Department of Communities).

In 2008-09, capital outlays were approximately $680 million. Some projects that the department invested in included:

  • new schools
  • enhancement of learning facilities in schools
  • continued investment in the Tomorrow's Schools program.

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Our Assets - what we own

The department held assets totalling $17.471 billion at 30 June 2009, an increase of $600 million on 2007-08. This is mainly due to revaluation of the asset base (including MOG transfer from the Department of Communities) and the delivery of a significant capital program in 2008-09.

The majority of assets held by the department are teaching sites for schools and TAFE institutes, consisting of land and buildings, which are capitalised as part of the capital program.

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Figure 54: Value of intangible assets, property, plant and equipment

  • Value of intangible assets, property, plant and equipment
 

Source: Department of Education and Training

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Our liabilities - what we owe

The department held liabilities totalling $958 million at 30 June 2009, an increase of $20 million on 2007-08.

The lease asset and corresponding finance lease liability for the Southbank Education and Training Precinct is held by the department and forms the majority of our financial liabilities.

Capital creditors from the delivery of the capital program also make up a large portion of the creditors at 30 June 2009, and the introduction of the Annual Leave Central Scheme resulted in the provision for annual leave now being reflected under Accrued Employee Benefits.

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Equity - our net worth

Equity = What the department owns - What the department owes
$16.513 billion   $17.471 billion   $0.958 billion

In 2008-09, the department continued to maintain a strong financial position, with liabilities representing less than 6 per cent of total assets.

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Future directions

In 2009-10, the department's total revenue is expected to be significantly affected by the Commonwealth Building the Education Revolution initiative, which will inject considerable additional funding to the department during the term of the initiative.

A whole-of-government efficiency dividend imposed on corporate overheads will see savings to be made in a number of areas, including travel, publications and advertising, and procurement practices, and a reduction in the use of contractors and agency staff.

During May 2009, the department restructured its delivery of corporate services. As a result, Corporate and Professional Services (CAPS) no longer exists as a separate financial entity, and all functions have been amalgamated into the Department of Education and Training. From 2009-10, the department will no longer prepare separate financial statements for CAPS.

There are a number of challenges ahead which will continue to test our ability to be innovative and to deliver balanced budgets. Our challenges include the creation of further statutory TAFEs, commitment to savings in corporate overheads and the delivery of large Commonwealth-funded programs.

There will be opportunities to be flexible in the way we operate while putting in place better governance practices through the implementation of the Financial Accountability Act 2009.

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