AR 2013-14 Financial Report

Summary of Financial Results

 
2014
2013
2012
 
$'000
$'000
$'000
Services provided to other Government Entities
150,516
146,217
157,357
Total income from transactions
150,969
146,602
157,679
Total expenses from transactions
(151,242)
(153,103)
(194,830)
Net result from transactions before depreciation and amortisation
22,023
17,350
(16,254)
Net result from transactions
(273)
(6,501)
(37,151)
Net result for the period
(5)
(6,995)
(37,497)
Net cash flow from operating and investing activities
10,075
(6,480)
(51,308)
Total assets
98,188
98,347
114,157
Total liabilities
40,071
39,891
48,706
  • CenITex met its budget for the financial year with a turnaround of about $7m on the previous year.
Provision of services to customers
$150.52 million
Less expenses to deliver the service
$144.44 million
Net result from service delivery
$6.073 million
Less expenses to implement change
($6.078) million
Net result from transactions
($0.005) million
  • CenITex improved its EBITDA by 26.9 per cent against the previous year by recovering all revenue while maintaining tight cost controls, negotiating better procurement outcomes and benefiting from cost saving achieved as a result of the past year’s program of works.
  • CenITex increased revenue despite a reduction in its customer base of more than 2700 desktops (due to past year’s Sustainable Government Initiative) through tighter billing processes and passing on Consumer Price Index (CPI) related costs.
  • CenITex proactively managed its labour costs, realising the benefits of the prior year’s labour rationalisation program, only replacing essential workforce positions when they became vacant and encouraging staff to take annual leave.
  • CenITex continued to consolidate and rationalise vendor contracts thus driving more efficient pricing. These procurement measures are deliverable as a result of critical mass afforded through consolidation of departments and agencies under the Efficient Technology Services (ETS) program. In particular:
    • increasing strategic capability uplift by refreshing category savings plans for data centre/telecom and software categories has translated to cost savings.
    • during the year two key Whole of Victorian Government software contracts were successfully renegotiated by CenITex in conjunction with the Department of State Development and Business Innovation resulting in better outcomes for government. The previous year’s implementation of a software licencing compliance tool to enable effective management of licence usage was largely responsible for this successful outcome.
  • The benefits of the ETS program and asset refresh initiatives have delivered financial gains with cost savings achieved in hardware maintenance and electricity costs through continued server virtualisation and retirement of old equipment.
  • Departments and agencies which migrated to the ETS Windows 7 solution assisted government in avoiding additional costs associated with extended Windows XP support. It is anticipated that the remaining departments and agencies will migrate over the coming year to avoid further cost increases in 2015.
  • CenITex continues to maintain liquidity through tight cash management control and stronger collaboration in finance and client engagement functions.
  • CenITex invested $6.07m for operational change in relation to Program Evolve. Program Evolve, established to enable CenITex to outsource its current range of services, successfully completed the Expression of Interest and Collaborative Dialogue phases of the procurement process, prepared the Request for Proposal (RFP) and draft contract for review, and developed a draft Target State Operating Model.
  • CenITex invested $13.5m in asset refresh, funding projects which delivered:
    • consolidation, refresh and virtualisation of the Oracle Solaris Environment to mitigate risk of service availability and performance
    • a network switch refresh to reduce service risk
    • a multiple server refresh for departments
    • continued storage backup consolidation for departments
    • replacement of data centre core switches to uplift capacity and rationalise underlying architecture
    • commencement of domain controller uplifts to reduce service risks
    • replacement of remote site infrastructure to mitigate service risk
    • server virtualisation and decommissioning of the Veritas cluster and migration to CenITex target state infrastructure to reduce business and operational costs to affected customers
    • a secondary data centre core switch capacity uplift to improve service performance
    • migration of customers to the Bluecoat standard for web content filtering
    • completion of identity management infrastructure, simplifying directory architecture and significantly reducing costs through removal of 82 servers, whilst uplifting capabilities to the government identity provisioning service (GIPS) and web access.

Financial Report

for the financial year ended 30 June 2014

Contents

This financial report covers CenITex as an individual entity and is presented in Australian currency.

Its principal address is:
CenITex
Level 32, 80 Collins Street
Melbourne VIC 3000


Comprehensive Operating Statement

for the financial year ended 30 June 2014

 
Note
2014
2013
   
$’000
$’000
Income from transactions      
Services provided to other government entities
2(a)
150,516
146,217
Interest
2(b)
453
385
Total income from transactions  
150,969
146,602
Expenses from transactions      
Employee benefits
3(a)
62,728
64,631
ICT expenditure
3(b)
47,347
50,760
Depreciation
3(c)
22,296
23,851
Other operating expenses
3(d)
18,871
13,861
Total expenses from transactions  
151,242
153,103
Net result from transactions (net operating balance)  
(273)
(6,501)
Other economic flows included in net result      
Net gain/(loss) on disposal of PPE assets  
299
(594)
Net gain/(loss) from revaluation of long service leave liability  
(31)
100
Total other economic flows included in net result  
268
(494)
Net Result  
(5)
(6,995)
Comprehensive result  
(5)
(6,995)

The above Comprehensive Operating Statement should be read in conjunction with the accompanying notes.

Balance Sheet

as at 30 June 2014

 
Note
2014
2013
   
$’000
$’000
Assets      
Financial Assets      
Cash and deposits  
13,383
3,362
Receivables
8,408
9,144
Total financial assets  
21,791
12,506
Non-Financial Assets      
Prepayments
14,058
12,397
Property, plant and equipment
37,030
56,940
Intangible assets
25,309
16,504
Total non-financial assets  
76,397
85,841
Total assets  
98,188
98,347
Liabilities      
Payables
12,354
13,220
Provisions
11,529
10,558
Borrowings
16,188
16,113
Total liabilities  
40,071
39,891
Net assets  
58,117
58,456
Equity      
Accumulated surplus/(loss)  
(64,803)
(64,798)
Contribution by Owners  
122,920
123,254
Total equity  
58,117
58,456
Commitments for expenditure    
Contingent assets and contingent liabilities    

The above Balance Sheet should be read in conjunction with the accompanying notes.

Statement of Changes in Equity

for the financial year ended 30 June 2014

 
Accumulated Loss
Contributions by Owners
Total
 
$'000
$'000
$'000
Balance at 1 July 2012
(57,803)
123,254
65,451
Net result for the year
(6,995)
-
(6,995)
Administrative restructure - net assets transferred
-
-
-
Balance at 30 June 2013
(64,798)
123,254
58,456
Net result for the year
(5)
-
(5)
Administrative restructure - net assets transferred
-
(334)
(334)
Balance at 30 June 2014
(64,803)
122,920
58,117

Cash Flow Statement

for the financial year ended 30 June 2014

 
Note
2014
2013
   
$'000
$'000
Cash flows from operating activities      
Receipts      
Receipts from other government entities  
164,264
170,382
Interest received  
453
385
GST  
448
-
Total Receipts  
165,165
170,767
Payments      
Payments to suppliers  
(84,014)
(96,999)
Payments to employees  
(59,496)
(58,161)
GST  
-
(6,706)
Interest and other costs of finance paid  
(11)
(6)
Total Payments  
(143,521)
(161,872)
Net cash flows from/(used in) operating activities
21,644
8,895
Cash flows from investing activities      
Payments for non-financial assets  
(11,582)
(15,423)
Proceeds from sale of non-financial assets  
13
48
Net cash flows from/(used in) investing activities  
(11,569)
(15,375)
Cash flows from financing activities      
Loan from Government  
-
6,500
Repayment of finance leases  
(54)
(36)
Net cash flows from/(used in) financing activities  
(54)
6,464
Net increase/(decrease) in cash and cash equivalents  
10,021
(16)
Cash and cash equivalents at the beginning of the financial year  
3,362
3,378
Cash and cash equivalents at the end of the financial year  
13,383
3,362

The above Cash Flow Statement should be read in conjunction with the accompanying notes.
Non-cash transactions are disclosed in Note 16.

Notes to the Financial Statements

Contents

Note 1. Summary of accounting policies

These annual financial statements represent the audited general purpose financial statements for CenITex for the period ended 30 June 2014. The purpose of the report is to provide users with information about CenITex’s stewardship of resources entrusted to it.

(a) Statement of compliance

The financial report is a general purpose financial report that has been prepared on an accrual basis in accordance with the Financial Management Act 1994 and applicable Australian Accounting Standards (AAS), which includes the Australian accounting standards issued by the Australian Accounting Standards Board (AASB), interpretations and other mandatory professional requirements.
The financial report also complies with relevant Financial Reporting Directions (FRDs) issued by the Minister for Finance, and relevant Standing Direction (SD) authorised by the Minister for Finance.

(b) Basis of preparation

Judgements, estimates and assumptions are required to be made about the carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on professional judgements derived from historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

Accounting policies are selected and applied in a manner that ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events are reported.

The accounting policies applied in preparing the financial statements for the year ended 30 June 2014 and the comparative information presented for the year ended 30 June 2013 are set out below.
The financial report has been prepared on a historical cost convention except for plant and equipment where fair value is applied. Cost is based on the fair value of the consideration given in exchange for assets.

Consistent with AASB 13 Fair Value Measurement, where it is applicable, assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

  • Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;
  • Level 2 – The lowest level input that is significant to the fair value measurement is directly or indirectly observable;
  • Level 3 – The lowest level input that is significant to the fair value measurement is unobservable.

(c) Scope and presentation of financial statements

As a result of the statewide policy to improve consistency in public sector reporting, CenITex has prepared its complete set of financial statements to align with the Accounting Standard AASB 1049 Whole of Government and General Government Sector Financial Reporting presentation format used in the Financial Report for the State and the general government sector.

Comprehensive Operating Statement

CenITex’s comprehensive operating statement comprises two components, being ‘net result from transactions’ and ‘other economic flows included in net result’. The sum of the two components represents the net result. This classification is consistent with the whole of government reporting format and is allowed under Accounting Standard AASB 101 Presentation of Financial Statements.

Income and expenses in the Comprehensive Operating Statement are classified according to whether they arise from ‘transactions’ or ‘other economic flows’.

‘Transactions’ are those economic flows that are considered to arise as a result of policy decisions, usually interactions between two entities by mutual agreement. Transactions also include flows within an entity, such as depreciation where the owner is simultaneously acting as the owner of the depreciating asset and as the consumer of the service provided by the asset. Transactions can be in kind (e.g. assets provided/given free of charge or for nominal consideration) or where the final consideration is cash.

‘Other economic flows included in net result’ are changes in the volume or value of an asset or liability that do not result from transactions. It includes:

  • gains and losses from disposals; and
  • gains and losses from revaluation of long service leave liability

The net result is equivalent to profit or loss derived in accordance with AAS.

Balance sheet

Assets and liabilities are presented in liquidity order, with assets aggregated into financial assets and non-financial assets. Current and non-current assets and liabilities (non-current being those assets or liabilities expected to be recovered or settled more than 12 months after the reporting period) are disclosed in the notes, where relevant.

Statement of Changes in Equity

The Statement of Changes in Equity presents reconciliations of each non-owner and owner equity opening balance at the beginning of the reporting period to the closing balance at the end of the reporting period. It also shows separately changes due to amounts recognised in the ‘comprehensive result’ and amounts recognised ‘in other comprehensive income – other movements in equity’ related to transactions with the owner in its capacity as owner.

Cash Flow Statement

Cash flows are classified according to whether they arise from operating activities, investing activities, or financing activities. This classification is consistent with requirements under AASB 107 Statement of Cash Flows.

For the purposes of the cash flow statement, cash comprises cash on hand, cash at bank and deposits at call, and highly liquid investments with short periods to maturity that are readily convertible to cash on hand and are subject to an insignificant risk of changes in value.

Rounding of amounts

Amounts in the financial statements (including the notes) have been rounded to the nearest thousand dollars, unless otherwise stated.

(d) Changes in accounting policies

Subsequent to the 2012-13 reporting period, the following new and revised Standards have been adopted in the current period with their financial impact detailed as below.

AASB 13 Fair value measurement

AASB 13 establishes a single source of guidance for all fair value measurements. AASB 13 does not change when CenITex is required to use fair value, but rather provides guidance on how to measure fair value under Australian Accounting Standards when fair value is required or permitted. CenITex has considered the specific requirements relating to highest and best use, valuation premise, and principal (or most advantageous) markets. The methods, assumptions, processes and procedures for determining fair value were revisited and adjusted where applicable. CenITex has reviewed the fair value principles as well as its current valuation methodologies in assessing the fair value, and the assessment has not materially changed the fair values recognised.

AASB 13 requires specific disclosures about fair value measurements and disclosures of fair values, CenITex has considered and applied these requirements where they are applicable.

The disclosure requirements of AASB 13 apply prospectively and need not be applied in comparative information before first application. Consequently, the 2012-13 comparatives of these disclosures have not been provided.

AASB 119 Employee benefits

In 2013-14, CenITex has applied AASB 119 Employee benefits (September 2011, as amended) and the related consequential amendments for the first time.

The revised AASB 119 changes the accounting for defined benefit plans, termination benefits and definition of short-term employee benefits.

As the current accounting policy is for the Department of Treasury and Finance to recognise and disclose the State’s defined benefit liabilities in its financial statements, changes in defined benefit obligation and plan assets will have limited impact on CenITex.

The short-term employee benefits were previously expected to be settled within twelve months after the end of the reporting period in which the employees render the related service, however, short-term employee benefits are now defined as benefits expected to be settled wholly within twelve months after the end of the reporting period in which the employees render the related service.

CenITex has reassessed the changes in classification as determined in accordance with AASB 119 and has determined that the changes have not materially altered its measurement of the annual leave provision.

(e) Reporting entity

The financial statements cover CenITex as an individual reporting entity. CenITex is a State Body established on 16 July 2008 by Order in Council under section 14 of the State Owned Enterprise Act 1992 (the Act) and declared a re-organising body on 24 April 2012 by Order in Council under section 7(1) of the Act.

Objectives and funding

CenITex’s mission is to provide information and communication technology (ICT) workplace and hosting services for the whole of Victorian Government in an industry competitive, integrated and reliable manner, delivering efficient and excellent customer service and value. CenITex is predominantly funded by customer departments and agencies for the provision of services. The fees charged for these services are based on a cost recovery model.

Services

Information about CenITex’s income and expenses is set out in Note 2 and Note 3.

(f) Income from transactions

Income is recognised to the extent that it is probable that the economic benefits will flow to the entity and the income can be reliably measured.

Services provided to other government entities

CenITex provides services to government departments and agencies. Revenue is brought to account when services have been provided or when a usage or service charge has been made. Customer payments of accounts which at reporting date were billed and paid in advance are classified as unearned revenue under current liabilities.

Interest

Interest includes interest received on deposits. Interest income is recognised as revenue when earned.

Services provided to other government entities

CenITex provides services to government departments and agencies. Revenue is brought to account when services have been provided or when a usage or service charge has been made. Customer payments of accounts which at reporting date were billed and paid in advance are classified as unearned revenue under current liabilities.

Interest

Interest includes interest received on deposits. Interest income is recognised as revenue when earned.

Fair value of assets and services received free of charge or for nominal consideration

Contributions of resources received free of charge or for nominal consideration are recognised at their fair value when control is obtained over them, irrespective of whether these contributions are subject to restrictions or conditions over their use. Contributions in the form of services are recognised only when a fair value can be reliably determined and the services would have been purchased if not received as a donation.

(g) Expenses from transactions

Expenses from transactions are recognised as they are incurred, and reported in the financial year to which they relate.

Employee benefits

See Note 1(i) regarding employee benefit provisions
Employee benefits expenses include all costs related to employment, including wages and salaries, leave entitlements, redundancy payments and superannuation contributions. They are recognised when incurred, except for contributions in respect of defined benefit plans. These expenses also include payments to contractors.

Superannuation

Defined benefit plans
The amount charged to the Comprehensive Operating Statement in respect of defined benefit superannuation plans represents the contributions made by CenITex to the superannuation plan with regard to the current services of current CenITex staff. Superannuation contributions are made to the plans based on the relevant rules of each plan.

The Department of Treasury and Finance (DTF) in their Annual Financial Statements disclose on behalf of the State as the sponsoring employer, the net defined benefit cost related to the members of these plans as an administered liability. See DTF’s Annual Financial Statements for more detailed disclosures in relation to these plans.

ICT expenditure
ICT expenditure includes software licences and maintenance, hardware maintenance, telecommunication expenses and outsourced ICT expenses. They are recognised in the period in which they are incurred.

Depreciation
Where assets have separate identifiable components that have distinct useful lives, a separate depreciation rate is determined for each component.

Depreciation is calculated using the straight-line method to allocate their cost (net of their residual values) over their estimated useful lives, starting from the time at which the asset is held ready for use. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each Balance Sheet date.

Unless otherwise stated, the depreciation periods used for current and prior year are listed below:

Building lease hold improvements 5 to 10 years
Computer equipment 3 to 4 years
Plant and equipment - Facilities 5 to 10 years
Plant and equipment - Network 5 years
Plant and equipment - Servers 5 years
Plant and equipment - Storage 5 years
Plant and equipment - Office machines & equipment 5 years
Motor vehicles under finance lease 3 years
Intangible Assets 5 years

Interest expense

Interest expense is recognised in the period in which it is incurred.

Impairment of assets

Except for financial assets (refer Note 1(h), intangible assets with indefinite useful lives (and intangible assets not yet available for use) and all other assets are tested annually for indications of impairment.

If there is an indication of impairment, the assets concerned are tested as to whether their carrying value exceeds their possible recoverable amount. Where an asset’s carrying value exceeds its recoverable amount, the difference is written-off by a charge to the Comprehensive Operating Statement, except to the extent that the write-down can be debited to an asset revaluation surplus amount applicable to that class of asset.

It is deemed that, in the event of the loss of an asset, the future economic benefits arising from the use of the asset will be replaced unless a specific decision to the contrary has been made. The recoverable amount for most assets is measured at the higher of depreciated replacement cost and fair value less costs to sell. The recoverable amount for assets held primarily to generate net cash inflows is measured at the higher of the present value of future cash flows expected to be obtained from the asset and fair value less costs to sell.

Other operating expenses

Other operating expenses generally represent the day-to-day running costs incurred by CenITex in its normal operations. These items are recognised as an expense in the reporting period in which they are incurred or payable.

(h) Assets

Cash and deposits

Cash and deposits comprise cash on hand and cash at bank, deposits at call and highly liquid investments with an original maturity of three months or less that are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value.

Receivables

Receivables consist predominantly of debtors in relation to goods and services, accrued revenue and GST input tax credits recoverable.
Receivables are recognised initially at fair value and subsequently measured using the effective interest rate method, at amortised cost less any accumulated impairment.
A provision for doubtful receivables is made when there is objective evidence that the debts will not be collected. Bad debts are written-off when identified.

Prepayments

Prepayments include software licences and maintenance, other ICT expenditure and accommodation expenses that are paid in advance. They are recognised in the period in which they are incurred.

Property, plant and equipment

All non-current physical assets are initially measured at cost less accumulated depreciation and impairment.

A fair value assessment of non-current assets was undertaken during the year and it is deemed that depreciated cost generally represents a reasonable approximation of fair value.

Intangible assets

Intangible assets represent identifiable non-monetary assets without physical substance.

Purchased intangible assets are initially recognised at cost. Intangible assets with finite useful lives are carried at cost less accumulated depreciation and accumulated impairment losses. Costs incurred subsequent to initial acquisition are capitalised when it is expected that additional future economic benefits will flow to CenITex.

When the recognition criteria in Accounting Standard AASB 138 Intangible Assets are met, internally generated intangible assets are recognised and measured at cost less accumulated depreciation and impairment losses.

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development (or from the development phase of an intangible project) is recognised only if all of the following are demonstrated:

  1. the technical feasibility of completing the intangible asset so that it will be available for use or sale;
  2. an intention to complete the intangible asset and use or sell it;
  3. the ability to use or sell the intangible asset;
  4. the intangible asset will generate probable future economic benefits;
  5. the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
  6. the ability to measure reliably the expenditure attributable to the intangible asset during its development.

(i) Liabilities

Payables

Payables consist of:

  • contractual payables, such as accounts payable and unearned income. Accounts payable represent liabilities for goods and services provided to CenITex before the end of the financial year that are unpaid, and arise when CenITex becomes obliged to make future payments in respect of purchase of those goods and services;
  • statutory payables, such as GST and fringe benefits tax payables.

Contractual payables are classified as financial instruments and categorised as financial liabilities at amortised cost (see Note 15). Statutory payables are recognised and measured similarly to contractual payables, but are not classified as financial instruments and not included in the category of financial liabilities at amortised cost, because they do not arise from a contract.

Borrowings

Interest bearing liabilities are recorded initially at fair value, less directly attributable transaction costs.

Subsequent to initial recognition, interest bearing liabilities are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised using the effective interest rate method in the comprehensive result over the period of the interest bearing liability.

Provisions

Provisions are recognised when CenITex has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recognised from a third party, the receivable is recognised as an asset if recovery is virtually certain and the amount of the receivable can be measured reliably.

Employee benefits

(i) Wages and salaries and annual leave
Liabilities for wages and salaries and annual leave are recognised in the provision for employee benefits as ‘current liabilities’.

Depending on the expectation of the timing of settlement, liabilities for wages and salaries and annual leave are measured at:

  • undiscounted value – component that CenITex expects to wholly settle within 12 months; or
  • present value – component that CenITex does not expect to wholly settle within 12 months.

(ii) Long service leave
Liability for long service leave (LSL) is recognised in the provision for employee benefits.

Unconditional LSL is disclosed as a current liability even when CenITex does not expect to settle the liability within 12 months because it does not have the unconditional right to defer the settlement of the entitlement should an employee take leave within 12 months.

The components of this current LSL liability are measured at:

  • undiscounted value – component that CenITex expects to wholly settle within 12 months
  • present value – component that CenITex does not expect to wholly settle within 12 months

Conditional LSL is disclosed as a non-current liability. There is an unconditional right to defer the settlement of the entitlement until the employee has completed the requisite years of service. This non-current LSL liability is measured at present value.

Any gain or loss following revaluation of the present value of non-current LSL liability is recognised as a transaction, except to the extent that a gain or loss arises due to changes in bond interest rates for which it is then recognised as an other economic flow.

(iii) Employee benefits on-costs
Employee benefits on-costs (payroll tax, workers compensation, superannuation, annual leave and LSL accrued while on leave taken in service) are recognised and included with annual leave and LSL employee benefits.

(iv) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts a voluntary redundancy in exchange for these benefits. CenITex recognises termination benefits when it is demonstrably committed either to terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or to providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after Balance Sheet date are discounted to present value.

Leases
A lease is a right to use an asset for an agreed period of time in exchange for payment. Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and rewards incidental to ownership. Leases of property, plant and equipment are classified as finance infrastructure leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership from the lessor to the lessee. All other leases are classified as operating leases.

CenITex as lessee
Finance leases are recognised as assets and liabilities at amounts equal to either the fair value of the leased plant and equipment or, if lower, the present value of the minimum lease payment, each determined at the inception of the lease. The leased asset is depreciated over the shorter of the estimated useful life of the asset or the term of the lease. Minimum lease payments are allocated between the principal component of the lease liability and the interest expenses calculated using the interest rate implicit in the lease, and are charged directly to the Comprehensive Operating Statement. Contingent rentals associated with finance leases are recognised as an expense in the period in which they are incurred.

Operating lease payments, including any contingent rentals, are recognised as an expense in the Comprehensive Operating Statement on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern of the benefits derived from the use of the leased asset. The leased asset is not recognised in the balance sheet.

All incentives for the agreement of a new or renewed operating lease are recognised as an integral part of the net consideration agreed for the use of the leased asset, irrespective of the incentive’s nature or form or the timing of payments. In the event that lease incentives are received to enter into operating leases, the aggregate cost of incentives is recognised as a reduction of rental expense over the lease term on a straight-line basis, unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

(j) Equity

Contributions by owners

Additions to net assets that have been designated as contributions by owners are recognised as contributed capital. Other transfers that are in the nature of contributions or distributions have also been designated as contributions by owners.

Transfers of net assets arising from administrative restructurings are treated as distributions to or contributions by owners.

(k) Events after reporting date

Assets, liabilities, income or expenses arise from past transactions or other past events. Where the transactions result from an agreement between CenITex and other parties, the transactions are recognised only when the agreement is irrevocable at or before balance date. Adjustments are made to amounts recognised in the financial statements for events that occur after the reporting date and before the date on which the statements are authorised for issue where those events provide information about conditions that existed at the reporting date. Note disclosure is made about events between the balance date and the date on which the statements are authorised for issue where the events relate to conditions that arose after the reporting date and which may have a material impact on the results of subsequent years.

(l) Commitments

Commitments include those operating, capital and other outsourcing commitments arising from non-cancellable contractual or statutory sources and are disclosed at their nominal value and inclusive of the GST.

(m) Contingent assets and contingent liabilities

Contingent assets and contingent liabilities are not recognised in the Balance Sheet, but are disclosed by way of a note and, if quantifiable, are measured at nominal value and presented inclusive of the GST.

(n) Functional and presentation currency

The functional currency of CenITex is the Australian dollar, which has also been identified as the presentation currency of CenITex.

(o) Goods and Services Tax (GST)

Income, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In the latter case, GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the Balance Sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities that were recovered from, or paid to, the taxation authority, are presented as an operating cash flow.

(p) Australian Accounting Standards (AASs) issued that are not yet effective

Certain new AASs have been published that are not mandatory for the 30 June 2014 reporting period. CenITex is assessing the impact of AASs that are issued but not yet effective, hence it has not adopted these standards early.

(q) Financial instruments

Financial instruments arise out of contractual agreements that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Due to the nature of CenITex’s activities, certain financial assets and financial liabilities arise under statutory obligation rather than a contract. Such financial assets and financial liabilities do not met the definition of financial instruments in an AASB 132 Financial Instruments: Presentation. For example, statutory receivables arising from taxes do not meet the definition of financial instruments as they do not arise under contract.

Where relevant, for note disclosure purposes, a distinction is made between those financial assets and financial liabilities that meet the definition of financial instruments in accordance with AASB 132 and those that do not.

The following refers to financial instruments unless otherwise stated.

Categories of non-derivative financial instruments
Loans and receivables

Loans and receivables are financial instrument assets with fixed and determinable payments that are not quoted on an active market. These assets are initially recognised at fair value plus and directly attributable transaction costs. Subsequent to initial measurement, receivables are measured at amortised cost using the effective interest method, less any impairment.

Loans and receivables category includes, trade receivables and other receivables, but not statutory receivables.

Financial liabilities at amortised cost

Financial instrument liabilities are initially recognised on the date they are originated. They are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial instruments are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in profit and loss over the period of the interest-bearing liability, using the effective interest rate method (refer to Note 15).

Financial instruments liabilities measured at amortised cost include all of CenITex’s contractual payables, loan from Government and interest-bearing arrangements other than those designated at fair value through profit or loss.

Note 2. Income from transactions

 
2014
2013
 
$'000
$'000
(a) Services provided to other Government Entities:    
Work place support (1)
112,774
109,631
Hosting (1)
24,798
24,542
Projects
12,656
11,896
Victorian Government Electronic Messaging System (VGEMS)
288
148
Total Revenue from services provided to other Government Entities
150,516
146,217
(b) Interest    
Interest from financial assets not at fair value through P&L:    
- Interest on bank deposits
453
385
Total interest revenue from financial assets not at fair value through P&L
453
385
Total interest revenue
453
385

Note 3. Expenses from transactions

   
2014
2013
   
$'000
$'000
(a) Employee benefits      
Post employment benefits      
- Defined contribution superannuation plans
4,526
4,273
- Defined benefit superannuation expense
260
275
Termination benefits  
1,349
962
Salaries, wages, leave entitlements, contractor payments  
56,593
59,121
Total employee benefits  
62,728
64,631
(b) ICT Expenditure      
Software licences and maintenance  
22,704
21,323
Hardware maintenance  
7,127
7,916
Telecommunications  
15,341
16,930
Outsourced ICT  
2,175
4,591
Total ICT Expenditure  
47,347
50,760
(c) Depreciation      
Depreciation of non-current assets
14,713
17,899
Depreciation of non-current intangible assets
7,583
5,952
Total depreciation and amortisation  
22,296
23,851
(d) Other operating expenses      
Occupancy  
12,959
11,427
Professional services, travel, stationery  
5,901
2,428
Interest expense - finance lease costs  
11
6
Total other operating expenses  
18,871
13,861

Note 4. Receivables

 
2014
2013
 
$'000
$'000
Current receivables    
Contractual    
Trade receivables
6,637
4,165
Provision for doubtful contractual receivables (See also Note 4(a))
(355)
(268)
Other receivables
1,398
4,102
Statutory    
GST input tax credit recoverable
728
1,145
Total current receivables
8,408
9,144
Total receivables
8,408
9,144

(a) Movement in the provision for doubtful contractual receivables(a) Movement in the provision for doubtful contractual receivables

 
2014
2013
 
$'000
$'000
Balance at beginning of the year
268
271
Increase of the provision in the year
87
(3)
Balance at end of the year
355
268

(b) Ageing analysis of contractual receivables

See Note 15(d) for the ageing of contractual receivables.

(c) Nature and extent of risk arising from contractual receivables

See Note 15(d) for the nature and extent of credit risk arising from contractual receivables.

Note 5. Prepayments

 
2014
2013
 
$'000
$'000
Current other assets    
Prepayments - Software licences and maintenance, and other ICT expenditure paid in advance
13,704
12,057
Accommodation expenditure paid in advance
354
340
Total other assets
14,058
12,397

Note 6. Property, plant and equipment

Non-Current assets
2014
2013
 
$'000
$'000
Buildings - leasehold improvements:    
At fair value
2,601
2,601
Less accumulated depreciation
(2,207)
(1,793)
Written down value
394
808
Plant and equipment - Computer equipment    
At fair value
1,536
6,637
Less accumulated depreciation
(1,447)
(5,692)
Written down value
89
945
Plant and equipment - Facilities    
At fair value
6,978
4,997
Less accumulated depreciation
(5,566)
(3,321)
Written down value
1,412
1,676
Plant and equipment - Network    
At fair value
60,370
58,950
Less accumulated depreciation
(49,718)
(44,118)
Written down value
10,652
14,832
Plant and equipment - Servers    
At fair value
56,942
50,710
Less accumulated depreciation
(49,544)
(40,790)
Written down value
7,398
9,920
Plant and equipment - Storage    
At fair value
46,217
40,959
Less accumulated depreciation
(38,743)
(30,666)
Written down value
7,474
10,293
Plant and equipment - Office Machines and Equipment    
At fair value
46
48
Less accumulated depreciation
(35)
(29)
Written down value
11
19
Motor vehicles under finance lease    
At fair value
287
177
Less accumulated depreciation
(98)
(63)
Written down value
189
114
Work in progress    
At cost
9,411
18,333
Written down value
9,411
18,333
Net carrying amount of property, plant and equipment
37,030
56,940

Movements in carrying amounts

 
Buildings leasehold improvements
(2), (3a)
Work in progress
     
Plant and equipment
(2), (3b)
   
Motor vehicles under finance lease
Total
 
Level 3
 
Level 3
   
     
Computer equipment
Facilities
Network
Servers
Storage
Office machines & equipment
   
 
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
2014                    
Opening balance
808
18,333
945
1,676
14,832
9,920
10,293
19
114
56,940
Administrative restructure - net assets transferred
-
-
(334)
-
-
-
-
-
-
(334)
Additions
-
7,724
28
198
2,525
2,007
1,102
-
148
13,732
Disposals/Adjustments
-
-
(9)
-
(46)
(77)
(71)
-
(18)
(221)
Transfers
-
(16,646)
17
5
(1,042)
(220)
(486)
(1)
(1)
(18,374)
Depreciation expense
(414)
-
(558)
(467)
(5,617)
(4,232)
(3,364)
(7)
(54)
(14,713)
Closing balance
394
9,411
89
1,412
10,652
7,398
7,474
11
189
37,030 (1)
 
Buildings leasehold improvements
(2), (3a)
Work in progress
     
Plant and equipment
(2), (3a)
   
Motor vehicles under finance lease
Total
 
Level 3
Level 3
 
     
Computer equipment
Facilities
Network
Servers
Storage
Office machines & equipment
   
 
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
2013                    
Opening balance
1,919
17,439
1,961
1,756
19,955
12,352
10,229
11
151
65,773
Administrative restructure - net assets transferred
-
-
-
-
-
-
-
-
-
-
Additions
91
9,362
123
435
2,954
2,995
4,092
16
77
20,145
Disposals/Adjustments
-
-
(2)
-
(40)
(4)
-
-
(75)
(121)
Transfers
(160)
(8,468)
(172)
(3)
(1,138)
(925)
(92)
-
-
(10,958)
Depreciation expense
(1,042)
-
(965)
(512)
(6,899)
(4,498)
(3,936)
(8)
(39)
(17,899)
Closing balance
808
18,333
945
1,676
14,832
9,920
10,293
19
114
56,940 (1)
  1. During the year asset adjustments were re-classified.
  2. Classified in accordance with the fair value measurement hierarchy as at reporting date. See note 1(b).
  3. Description of unobservable assets to level 3 valuation.
    1. Building leasehold improvements are valued at depreciated replacement cost where the weighted average cost per square metre is $343. The useful life of building leasehold improvements is disclosed in note 1(g).
    2. Plant and equipment is valued at depreciated replacement cost where the weighted average cost per asset is $16,103 and the cost per unit is between $0 to $1,082,767. The useful life of plant and equipment is disclosed in note 1(g).
 
2014
2013
 
$'000
$'000
Aggregate depreciation recognised as an expense during the year;    
Buildings leasehold improvements
414
1,042
Plant and equipment - Computer equipment
558
965
Plant and equipment - Facilities
467
512
Plant and equipment - Network
5,617
6,899
Plant and equipment - Servers
4,232
4,498
Plant and equipment - Storage
3,364
3,936
Plant and equipment - Office machines and equipment
7
8
Motor vehicles
54
39
Total depreciation expense
14,713
17,899

Note 7. Intangible assets

Non-Current assets
Capitalised development
 
2014
2013
 
$'000
$'000
Gross carrying amount    
Opening balance
27,357
20,846
Additions - from work in progress
16,388
7,396
Retirements
-
(885)
Closing balance
43,745
27,357
Accumulated amortisation and impairment    
Opening balance
(10,853)
(5,255)
Depreciation expense
(7,583)
(5,952)
Retirement of intangibles
-
354
Closing balance
(18,436)
(10,853)
Net book value at the end of the financial year
25,309
16,504

Note 8. Payables

 
2014
2013
 
$'000
$'000
Current payables    
Contractual    
Supplies and services
9,008
12,506
Other Current Payables    
Unearned revenue
2,807
324
Other payables
525
376
Statutory    
GST and FBT payable
14
14
Total payables
12,354
13,220

(a) Maturity analysis of contractual payables

See Note 15(e) for the maturity analysis of contractual payables.

(b) Nature and extent of risk arising from contractual payables

See Note 15(f) for the nature and extent of risks arising from contractual payables.

Note 9. Borrowings

 
2014
2013
 
$'000
$'000
Current borrowings    
Finance lease liabilities (1)
71
42
Total current borrowings
71
42
Non-current borrowings    
Finance lease liabilities (1)
117
71
Loan from Government (2)
16,000
16,000
Total non-current borrowings
16,117
16,071
Total borrowings
16,188
16,113

(1)Secured by the assets leased. Finance leases are effectively secured as the rights to the leased assets revert to the lessor in the event of default.
(2)It is an unsecured loan which bears no interest. The term of a loan is agreed with the Treasurer.

(a) Maturity analysis of interest bearing liabilities

Refer to Note 15(e) for the maturity analysis of interest bearing liabilities.

(b) Nature and extent of risk arising from interest bearing liabilities

Refer to Note 15(f) for the nature and extent of risks arising from interest bearing liabilities.

Note 10. Provisions

 
2014
2013
 
$'000
$'000
Current    
Employee benefits (1)    
- Unconditional and expected to be settled within 12 months
3,574
3,384
- Unconditional and expected to be settled after 12 months
3,964
3,785
 
7,538
7,169
Provisions related to employee benefit on-costs:    
- Unconditional and expected to be settled within 12 months
543
542
- Unconditional and expected to be settled after 12 months
603
606
 
1,146
1,148
Provision for other employee entitlements
-
54
Total current provisions
8,684
8,371
Non-current    
Employee benefits
2,470
1,886
Provisions related to employee benefit on-costs
375
301
Total non-current provisions
2,845
2,187
Total provisions
11,529
10,558

(1)The prior year annual leave provision was restated to reflect the timing of leave settlement.

Note 11. Superannuation

CenITex employees are entitled to receive superannuation benefits and CenITex contributes to defined benefit as well as contribution plans. The defined benefit plan provides benefits based on years of service and final average salary.

CenITex does not recognise any defined benefit liability in respect of the plans because the entity has no legal or constructive obligation to pay future benefits relating to its employees; its only obligation is to pay superannuation contributions as they fall due. The Department of Treasury and Finance recognises and discloses the State’s defined benefit liabilities in its financial statements.

However, superannuation contributions for the reporting period are included as part of employee benefits in CenITex’s Comprehensive Operating Statement.

Details of the major employee superannuation funds and contributions made by CenITex are as follows.

The basis for contributions is determined by the various schemes.

Employees of CenITex employed under the Victorian Public Sector Award are entitled to benefits from the Government Employees Superannuation Fund in the event of retirement, disability or death. This fund provides defined lump-sum benefits based on years of service and final average salary.

Fund Contribution
for the year
Contribution outstanding at year end
 
2014
2014
 
$'000
$'000
Defined benefit plans:    
State Employees Retirement Benefits Scheme (SERBS)
260
-
Defined contribution plans:    
Victorian Superannuation Fund – VicSuper scheme
2,751
-
Other
1,775
-
Total defined contributions
4,526
-
Total
4,786
-

The above amounts were measured as at 30 June, or in the case of employer contributions they relate to the year ended 30 June.

Note 12. Leases

Finance leases - CenITex as lessee

Finance leases relate to motor vehicles with lease terms of three years. CenITex has options to purchase the motor vehicles for a nominal amount at the conclusion of the lease agreements.

  Minimum future lease payments
Present value of minimum future lease payments
2014
$'000
$'000
Finance lease liabilities payable    
- Not longer than one year
80
71
- Longer than one year and not longer than five years
123
117
Minimum future lease payments (1)
203
188
Less future finance charges
15
-
Present value of minimum lease payments
188
188
Included in the financial statements as:    
Current interest bearing liabilities (refer to Note 9)
-
71
Non-current interest bearing liabilities (refer to Note 9)
-
117
   
188
  Minimum future lease payments
Present value of minimum future lease payments
2013
$'000
$'000
Finance lease liabilities payable    
- Not longer than one year
47
42
- Longer than one year and not longer than five years
76
71
Minimum future lease payments (1)
123
113
Less future finance charges
10
-
Present value of minimum lease payments
113
113
Included in the financial statements as:    
Current interest bearing liabilities (refer to Note 9)
-
42
Non-current interest bearing liabilities (refer to Note 9)
-
71
   
113

(1) Minimum finance lease payments include the aggregate of all lease payments and any guaranteed residual.

Operating leases - CenITex as lessee

Leasing arrangements

Operating leases relate to buildings with lease terms of three to five years, with an option to extend for a further three years. All operating lease contracts contain market review clauses in the event that CenITex exercises its option to renew. CenITex does not have an option to purchase the leased asset at the expiry of the lease period.

 
2014
2013
 
$'000
$'000
Operating leases payable    
Not longer than one year
10,503
10,128
Longer than one year and not longer than five years
33,884
39,407
Longer than five years
6,962
11,941
 
51,349
61,476

Note 13. Commitments for expenditure

 
2014
2013
 
$'000
$'000
The following commitments have not been recognised as liabilities in the financial statements:    
(a) Capital expenditure commitments    
Plant and equipment    
Payable:    
Not longer than one year
138
1,080
Total capital expenditure commitments
138
1,080

(b) Lease commitments

Finance lease liabilities and non-cancellable operating lease commitments are disclosed in Note 12.

Note 14. Contingent assets and contingent liabilities

CenITex had no contingent assets or liabilities at 30 June 2014. (2013: NIL)

Note 15. Financial instruments

(a) Financial risk management objectives and policies

CenITex’s principal financial instruments comprise:

  • cash assets
  • receivables (excluding statutory receivables)
  • payables (excluding statutory payables)
  • interest bearing liabilities
  • finance lease payables.

Details of significant accounting policies and methods adopted in respect of each class of financial asset, financial liability and equity instrument including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised are disclosed throughout Note 1 to these financial statements.

The main purpose in holding financial instruments is to manage CenITex’s financial risks prudently within the government’s policy parameters.

CenITex’s main financial risks include credit risk, liquidity risk and interest rate risk. CenITex manages these financial risks in accordance with its Financial Risk Management Policy.

CenITex uses different methods to measure and manage the different risks to which it is exposed. Primary responsibility for the identification and oversight of financial risks rests with CenITex’s Risk and Audit Committee.

(b) Categorisation of financial instruments

 
Contractual Financial Assets Loans and Receivables
Contractual Financial Liabilities at amortised cost
Total
2014      
Contractual Financial Assets      
Cash and deposits
13,383
-
13,383
Receivables
8,035
-
8,035
Total financial assets
21,418
-
21,418
Contractual Financial Liabilities      
Payables
-
12,340
12,340
Interest bearing liabilities
-
188
188
Total financial liabilities
-
12,528
12,528
 
Contractual Financial Assets Loans and Receivables
Contractual Financial Liabilities at amortised cost
Total
2013      
Contractual Financial Assets      
Cash and deposits
3,362
-
3,362
Receivables
8,267
-
8,267
Total financial assets
11,629
 
11,629
Contractual Financial Liabilities      
Payables
-
13,206
13,206
Interest bearing liabilities
-
113
113
Total financial liabilities
-
13,319
13,319

The amount of financial assets disclosed here excludes statutory receivables (i.e.GST input tax credit recoverable), and the provision for doubtful debts.

The amount of financial liabilities disclosed here excludes statutory payables (i.e. taxes payable).

(c) Net holding gain /(loss) on financial instruments by category

 
2014
2013
 
$'000
$'000
Contractual financial assets    
Cash and deposits
453
385
 
453
385
Contractual financial liabilities    
At amortised cost
(11)
(6)
Net holding gain/(loss)
442
379

The net holding gains and losses disclosed above are determined as follows:

  • For cash and deposits, the net gain or loss is calculated by taking the interest revenue and adding or subtracting foreign exchange gains or losses arising from revaluation of the financial assets minus any impairment recognised in the net result.
  • For financial liabilities measured at amortised cost, the net gain or loss is calculated by taking the interest expense and adding or subtracting foreign exchange gains or losses arising from the revaluation of financial liabilities at amortised cost.

(d) Credit risk exposures

Credit risk arises from the financial assets of CenITex, which comprise cash and deposits, and trade and other receivables. CenITex's exposure to credit risk arises from the potential default of counter parties on their contractual obligations resulting in financial loss to CenITex. Credit risk is measured at fair value and is monitored on a regular basis.

Credit risk associated with CenITex financial assets is minimal because the debtors are government departments.

Provision for impairment of contractual financial assets is recognised when there is objective evidence that CenITex will not be able to collect a receivable. Objective evidence includes financial difficulties of the debtor, default payments, and changes in credit ratings.

The carrying amount of financial assets recorded in the financial report, net of any allowances for losses, represents CenITex’s maximum exposure to credit risk without taking account of the value of any collateral obtained.

Table 15.1: Credit risk exposure and ageing analysis of financial assets

  Weighted
average effective
interest rate
Credit risk exposure
Not past due and not impaired
Past due but not impaired
Impaired financial assets
 
Carrying amount
Fixed interest rate
Variable
interest rate
Non-interest
bearing
Less than
1 Month
1–3 months
3 months –
1 year
1–5 years
2014  
($'000)
($'000)
($'000)
($'000)
($'000)
($'000)
($'000)
($'000)
($'000)
($'000)
Cash
2.5%
13,383
-
13,383
-
13,383
-
-
-
-
-
Receivables(i)  
6,637
-
-
6,637
4,982
427
367
861
-
-
Other  
1,398
-
-
1,398
1,398
-
-
-
-
-
   
21,418
-
13,383
8,035
19,763
427
367
861
-
-
2013  
($'000)
($'000)
($'000)
($'000)
($'000)
($'000)
($'000)
($'000)
($'000)
($'000)
Cash
2.8%
3,362
-
3,362
-
3,362
-
-
-
-
-
Receivables(i)  
4,165
-
-
4,165
1,992
400
1,148
620
5
-
Other  
4,102
-
-
4,102
4,102
-
-
-
-
-
   
11,629
-
3,362
8,267
9,456
400
1,148
620
5
-

(i) Ageing analysis of receivables excludes doubtful debts and statutory receivables for GST input tax credits recoverable. These amounts are no contractual, and are therefore outside the scope of this disclosure.

(e) Liquidity risk

Liquidity risk arises when CenITex is unable to meet its financial obligations as they fall due. CenITex operates under the Victorian Government’s Fair Payments policy of settling financial obligations within 30 days and, in the event of a dispute, making payments within 30 days of the date of resolution.

Maximum exposure to liquidity risk is the carrying amounts of financial liabilities.

a id="t152" name="t152">

  Weighted
average effective
interest rate
Nominal amount(i)
Liquidity risk exposure
Maturity dates
 
Fixed interest rate
Variable
interest rate
Non-interest
bearing
Less than
1 Month
1–3 months
3 months –
1 year
1–5 years
>5 years
2014  
($'000)
($'000)
($'000)
($'000)
($'000)
($'000)
($'000)
($'000)
($'000)
Payables:                    
Payable to Government agencies  
2,807
-
-
2,807
2,807
-
-
-
-
Other payables (1)  
9,533
-
-
9,533
9,533
-
-
-
-
Interest bearing liabilities:                    
Finance lease liabilities
6.6%
203
203
-
-
38
8
34
123
 
Loan from Government  
16,000
-
-
16,000
-
-
-
16,000
-
   
28,543
203
-
28,340
12,378
8
34
16,123
-
2013                    
Payables:                    
Payable to Government agencies  
324
-
-
324
324
-
-
-
-
Other payables (1)  
12,882
-
-
12,882
12,882
-
-
-
-
Interest bearing liabilities:                    
Finance lease liabilities
6.8%
123
123
-
-
21
5
21
76
 
Loan from Government  
16,000
-
-
16,000
-
-
-
16,000
-
   
29,329
123
-
29,206
13,227
5
21
16,076
-

(1) The amounts disclosed are the contractual undiscounted cash flows of each class of financial liabilities.

(f) Market risk

CenITex exposure to market risk is primarily through interest rate risk with only insignificant exposure to foreign currency risk and other price risks. Objectives, policies and processes used to manage each of these risks are disclosed in the paragraphs below.

Foreign currency risk
CenITex is exposed to insignificant foreign currency risk through its payables relating to purchases from overseas for which the counterparty invoices are in foreign currency.

Based on past and current assessment of economic outlook, it is deemed unnecessary for CenITex to enter into any hedging arrangements to manage the risk.

Interest rate risk
Exposure to interest rate risk relates solely to cash balances held in deposits at variable interest rates. For financial liabilities, CenITex’s exposure to interest rate risk relates solely to motor vehicle leases. CenITex’s interest bearing liabilities are managed by VicFleet at interest rates fixed at the inception of the lease.

CenITex’s exposure to interest rate risk is set out in tables 15.1 and 15.2.

Sensitivity disclosure analysis
Taking into account future expectations, economic forecasts, and management’s knowledge and experience of the financial markets, CenITex believes the following movements are possible over the next 12 months:

A parallel shift of +1.00% and -1.00% in market interest rates (AUD) from year-end rates of 2.5% (2013:2.8%)

Table 15.3 discloses the impact on net operating result and equity for each category of financial instrument held by CenITex at year-end, as presented to key management personnel, if the above movements were to occur.

Table 15.3: Market risk exposure

   
2014
   
Interest rate risk
   
–1.00%
1.00%
   
(100 basis points)
(100 basis points)
 
Carrying amount ($‘000)
Profit
Equity
Profit
Equity
 
($‘000)
($‘000)
($‘000)
($‘000)
Financial assets:          
Cash and deposits
13,383
(134)
(134)
134
134
Receivables (1)
7,680
-
-
-
-
Financial liabilities:          
Payables (1)
9,533
-
-
-
-
Interest bearing liabilities (2)
188
-
-
-
-
Loan from Government (3)
16,000
-
-
-
-
Total increase/ (decrease)  
(134)
(134)
134
134
   
2013
   
Interest rate risk
   
–1.00%
1.00%
   
(100 basis points)
(100 basis points)
 
Carrying amount ($‘000)
Profit
Equity
Profit
Equity
 
($‘000)
($‘000)
($‘000)
($‘000)
Financial assets:          
Cash and deposits
3,362
(34)
(34)
34
34
Receivables (1)
7,999
-
-
-
-
Financial liabilities:          
Payables (1)
12,882
-
-
-
-
Interest bearing liabilities (2)
113
-
-
-
-
Loan from Government (3)
16,000
-
-
-
-
Total increase/ (decrease)  
(34)
(34)
34
34

(1) The carrying amount is denominated in Australian Dollars and is non-interest bearing. This item is not subject to the identified risk sensitivities.

(2) Interest bearing liabilities relate solely to finance lease liabilities associated with motor vehicles. Each contract has interest fixed at the inception of the lease. This item is not subject to identified risk sensitivities.

(3) Loan from Government bears no interest. This item is not subject to the identified risk sensitivities.

(g) Fair value

CenITex considers the carrying amount of financial assets and financial liabilities recorded in the financial report to be a good approximation of their fair values and the expectation that they will be paid in full.

Note 16. Cash flow information

 
2014
2013
 
$'000
$'000
Reconciliation of net result for the period to net cash flows from operating activities    
Net result for the period
(5)
(6,995)
Non-cash movements    
Net (gain)/loss on sale or disposal of non-current assets
186
594
Depreciation and amortisation of non-current assets
22,296
23,851
Increase/(decrease) in doubtful debts
87
(3)
Movements in assets and liabilities    
(Increase)/decrease in current receivables
3,791
7,706
(Increase)/decrease in other current assets
822
173
Increase/(decrease) in current payables
(6,558)
(16,776)
Increase/(decrease) in provisions
1,025
345
Net cash flows from/(used in) operating activities
21,644
8,895

Note 17. Ex gratia payments

No ex-gratia payments were made during the year. (2013: NIL)

Note 18. Related party transactions

Grant Hehir was the chairman of the CenITex Board up to 8 October 2013 and secretary of the Department of Treasury and Finance (DTF) and was a director of the Treasury Corporation Victoria (TCV) Board. CenITex provides services to DTF on normal commercial terms and uses TCV term deposit facilities.

Grantly Mailes was appointed as Chairman of CenITex on 9 October 2013 with a further three month appointment that commenced on 9 January 2014 and concluded on 8 April 2014. He is also Deputy Secretary, Innovation and Technology, Department of State Development, Business and Innovation (DSDBI). CenITex provides services to DSDBI on normal commercial terms.

Randall Shaw was appointed as a Director of CenITex Board on 17 December 2013 and subsequently appointed as Chairman effective 9 April 2014. He is also a Director of the Victorian Government Purchasing Board, managed by Department of Treasury and Finance (DTF). CenITex provides services to DTF. Randall Straw is also engaged on contract work with DSDBI, CenITex provides services to DSDBI on normal commercial terms.

There were no other transactions between CenITex and responsible persons and their related parties during the financial year.

Note 19. Responsible persons

In accordance with the Ministerial Directions issued by the Minister for Finance under the Financial Management Act 1994, the following disclosures are made regarding responsible persons for the reporting period.

Persons who held positions of ministers and accountable officers responsible for CenITex during the financial year from 1 July 2013 to 30 June 2014 were:

  • The Assistant Treasurer, Minister for Technology and the Minister Responsible for the Aviation Industry, the Hon. Gordon Rich-Phillips MLC, from 1 July 2013 to 30 June 2014
  • Chairman, Mr Grant Hehir, from 1 July 2013 to 8 October 2013
  • Chairman, Mr Grantly Mailes, from 9 October 2013 to 8 April 2014
  • Chairman, Mr Randall Straw, from 9 April 2014 to 30 June 2014
  • Chief Executive, Mr Michael Vanderheide, from 1 July 2013 to 30 June 2014
Position Name Period
Board member Randall Straw 17 December 2013 to 30 June 2014
Board member Johanna Barker 8 April 2014 to 30 June 2014
Board member Richard Tait 17 December 2013 to 30 June 2014
Board member Conrad Harvey 17 December 2013 to 30 June 2014
Income band
Total Remuneration 2014
Total Remuneration 2013
$0–10,000
3
1
$10,001–20,000
3
-
$20,001–30,000
-
-
$30,001–40,000
-
-
$40,001–50,000
-
-
Total as at 30 June
6
1
Total amount
$49,425
$0

The former Chairmen of CenITex, Mr Grantly Mailes and Mr Grant Hehir, did not receive any remuneration in their position as Chairman.

Remuneration

Remuneration received or receivable by accountable officers in connection with the management of CenITex during the reporting period was:

  • Accountable officer: 1 July 2013 to 30 June 2014, $330,000 to $339,999. (2013: $310,000 to $319,000)

Amounts relating to Ministers are reported in the financial statements of the Department of Premier and Cabinet.

Other transactions

Other related transactions and loans requiring disclosure under the Directions of the Minister for Finance have been considered and there are no matters to report.

Note 20. Remuneration of executives and payments to other personnel with significant management responsibilities

(a) Remuneration of executives

The numbers of executive officers, other than ministers and the accountable officers, and their total remuneration during the reporting period are shown in the table below in their relevant income bands. Base remuneration is exclusive of bonus payments, long service leave payments, redundancy payments and retirement benefits. The total annualised employee equivalent provides a measure of full time equivalent executive officers over the reporting period.

Income Band
Base Remuneration
2014
No.
Total Remuneration
2014
No.
Base Remuneration
2013
No.
Total Remuneration
2013
No.
$10,000 – 19,999
-
-
1
-
$20,000 – 29,999
-
-
1
2
$40,000 – 49,999
-
-
1
1
$80,000 – 89,999
-
-
1
1
$150,000 – 159,999
1
-
-
-
$160,000 – 169,999
-
-
2
2
$180,000 – 189,999
-
1
-
-
$210,000 – 219,999
1
1
-
-
$250,000 – 259,999
1
1
1
1
$260,000 – 269,999
1
-
-
-
$270,000 – 279,999
-
1
-
-
Total number of executives
4.0
4.0
7.0
7.0
Total annualised employee equivalents (AEE) (1)
3.8
3.8
3.6
3.6
Total amount
$888,065
$930,285
$759,455
$775,524

(1) Annualised employee equivalent is based on paid working hours of 38 ordinary hours per week over the 52 weeks for a reporting period.

(b) Payments to other personnel with significant management responsibilities

There were no payments made to contractors of CenITex charged with significant management responsibilities. (2013: NIL).

Note 21. Remuneration of auditors

 
2014
2013
 
$'000
$'000
Victorian Auditor General’s Office    
Audit of the financial report
79
77
 
79
77

Note 22. Events occurring after the balance date

During the year CenITex commenced program Evolve to test the market to potentially outsource ICT services that are presently in-sourced. Primarily this was in response to opportunities to access new services in potentially more cost effective ways.

Responsibility for the next stage of this program has been transferred to DSDBI effective 1 July 2014 at the direction of the Minister for Technology.

It is expected that over financial year 2014 -2015, DSDBI will continue with the testing of the market for CenITex services with expectation that the majority of its services will be transitioned to the private sector with any remaining functions transferred to DSDBI via machinery of government (MoG) change.

CenITex’s business plan has been developed under the expectation that once contracts are in place, a new operating model established and all transfer and transition activities completed, then CenITex as an entity will be closed. The exact timing of this is uncertain and would depend on responses to the Request for Proposal (RFP) process. It is however anticipated over the next 18 to 24 months.

The organisation’s goal in the medium term is to successfully transition CenITex services to the private sector on behalf of customers while maintaining the stability of services, ensuring financial solvency and supporting its people through the transition process.

The Directors have taken steps to ensure the solvency of the organisation by significantly reducing labour costs and incurring capital expenditure only on a needs basis to maintain service levels. Over the last 3 years, CenITex has progressively improved its financial position. It has met its budget and exceeded cash forecasts at 30 June 2014 through prudent cost and cash management control. CenITex’s customers have also committed their expenditure to the equivalent of CenITex’s budget revenue for financial year 2014 -2015 thus further strengthening its financial position.

Considering the uncertainties described above with reference to timing, and the fact that CenITex has a reasonable expectation that it has adequate resources to continue to operate for the foreseeable future, it continues to adopt the going concern basis in preparing this financial report.

Statutory Certification

We certify that the Financial Statements for CenITex for the year ended 30 June 2014 have been prepared in accordance with Standing Direction 4.2 of the Financial Management Act 1994, applicable Financial Reporting Directions, Australian Accounting Standards and other mandatory professional reporting requirements.

We further state that, in our opinion, the information set out in the Comprehensive Operating Statement, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and notes to and forming part of the financial statements, present fairly the financial transactions for the year ended 30 June 2014 and the financial position of CenITex as at that date.

We are not aware of any circumstance which would render any particulars included in the financial statements to be misleading or inaccurate.

We authorise the attached financial statements for issue on 5 September 2014.

image of signature of Randall Straw

Randall Straw
Chairman
CenITex

image of signature of Michael Vanderheide

Michael Vanderheide
Chief Executive
CenITex

image of signature of Catherine Ho

Catherine Ho
Chief Financial Officer
CenITex

Melbourne
September 2014


Auditor-General’s report

VAGO - Victorian Auditor-General's Office
To the Board Member, CenITex

The Financial Report
The accompanying financial report for the year ended 30 June 2013 of CenITex which comprises the comprehensive operating statement, balance sheet, statement of changes in equity, cash flow statement, notes comprising a summary of significant accounting policies and other explanatory information, and the statutory certification has been audited.

The Board Members' Responsibility for the Financial Report
The Board Member of CenITex are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards, and the financial reporting requirements of the Financial Management Act 1994, and for such internal control as the Board Member determine is necessary to enable the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error.

Auditor's Responsibility
As required by the Audit Act 1994, my responsibility is to express an opinion on the financial report based on the audit, which has been conducted in accordance with Australian Auditing Standards. Those Standards require compliance with relevant ethical requirements relating to audit engagements and that the audit be planned and performed to obtain reasonable assurance about whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The audit procedures selected depend on judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, consideration is given to the internal control relevant to the entity's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the Board Members, as well as evaluating the overall presentation of the financial report.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Independence
The Auditor-General's independence is established by the Constitution Act 1975. The Auditor-General is not subject to direction by any person about the way in which his powers and responsibilities are to be exercised. In conducting the audit, the Auditor-General, his staff and delegates complied with all applicable independence requirements of the Australian accounting profession.

Opinion
In my opinion, the financial report presents fairly, in all material respects, the financial position of CenITex as at 30 June 2014 and its financial performance and its cash flows for the year then ended in accordance with applicable Australian Accounting Standards, and the financial reporting requirements of the Financial Management Act 1994.

Matters Relating to the Electronic Publication of the Audited Financial Report
This auditor's report relates to the financial report of CenITex for the year ended 30 June 2014 included both in CenITex's annual report and on the website. The Board Members of CenITex is responsible for the integrity of the CenITex's website. I have not been engaged to report on the integrity of the CenITex's website. The auditor's report refers only to the subject matter described above. It does not provide an opinion on any other information which may have been hyperlinked to/from these statements. If users of the financial report are concerned with the inherent risks arising from publication on a website, they are advised to refer to the hard copy of the audited financial report to confirm the information contained in the website version of the financial report.

Melbourne
8 September 2014

John Doyle
Auditor-General