Online version of the 2012-13 Department of Health and Ageing Annual Report

Notes to and Forming Part of the Financial Statements

Page last updated: 29 October 2013

Note 1: Summary of Significant Accounting Policies

Note 2: Events After the Reporting Period

Note 3: Expenses

Note 4: Income

Note 5: Financial Assets

Note 6: Non-Financial Assets

Note 7: Payables

Note 8: Provisions

Note 9: Cash Flow Reconciliation

Note 10: Contingent Assets and Liabilities

Note 11: Senior Executive Remuneration

Note 12: Remuneration of Auditors

Note 13: Financial Instruments

Note 14: Financial Assets Reconciliation

Note 15: Special Account

Note 16: Compliance with Statutory Conditions for Payments from the Consolidated Revenue Fund

Note 17: Compensation and Debt Relief

Note 18: Reporting of Outcomes

Note 19: Cost Recovery

Note 1: Summary of Significant Accounting Policies

1.1 Objective of the Therapeutic Goods Administration

The Therapeutic Goods Administration (TGA) is a division of the Department of Health and Ageing which is an Australian Government controlled entity. The TGA contributes to Outcome 1 of the Department of Health and Ageing – a reduction in the incidence of preventable mortality and morbidity in Australia, including through regulation and national initiatives that support healthy lifestyles and disease prevention.

Therapeutic goods are regulated to ensure that medicinal products and medical devices in Australia meet standards of safety, quality and efficacy at least equal to that of comparable countries. These products and devices should be made available in a timely manner and the regulatory impact on business kept to a minimum.

This is achieved through a risk management approach to pre-market evaluation and approval of therapeutic products intended for supply in Australia, licensing of manufacturers and post market surveillance.

The continued existence of the TGA in its present form and with its present programs is dependent on Government policy. TGA is reflected as a special account in the Department of Health and Ageing’s statements.

On 20 June 2011, the Australian and New Zealand Prime Ministers signed a statement of intent on a plan to progressively implement a joint agency over a period of up to five years that will combine the Australian TGA and the New Zealand Medicines and Medical Devices Safety Authority (Medsafe).

The Australian Government continues to have regard to developments in case law, including the High Court’s most recent decision on Commonwealth expenditure in Williams v Commonwealth (2012) 288 ALR 410, as they contribute to the larger body of law relevant to the development of Commonwealth programs. In accordance with its general practice, the Government will continue to monitor and assess risk and decide on any appropriate actions to respond to risks of expenditure not being consistent with constitutional or other legal requirements.

1.2 Basis of Preparation of the Financial Statements

A determination was made under the Financial Management and Accountability Act 1997 for the TGA special account to be treated as a business operation. The financial statements and notes are therefore required by section 49 of the Financial Management and Accountability Act 1997 and are general purpose financial statements.

The financial statements and notes have been prepared in accordance with:

  1. Finance Minister’s Orders (or FMOs) for reporting periods ending on or after 1 July 2011; and
  2. Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The financial statements have been prepared on an accrual basis and are in accordance with the historical cost convention, except for certain assets and liabilities at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position.

The financial statements are presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.

Unless an alternative treatment is specifically required by an accounting standard or the FMOs, assets and liabilities are recognised in the Balance Sheet when and only when it is probable that future economic benefits will flow to the entity or a future sacrifice of economic benefits will be required and the amounts of the assets or liabilities can be reliably measured. However, assets and liabilities arising under executory contracts are not recognised unless required by an accounting standard. Liabilities and assets that are unrealised are reported in the Schedule of Commitments or the schedule of contingencies.

Unless alternative treatment is specifically required by an accounting standard, income and expenses are recognised in the Statement of Comprehensive Income when, and only when, the flow, consumption or loss of economic benefits has occurred and can be reliably measured.

1.3 Significant Accounting Judgements and Estimates

No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to carrying amounts of assets and liabilities within the next reporting period.

1.4 New Australian Accounting Standards

Adoption of New Australian Accounting Standard Requirements

No accounting standard has been adopted earlier than the application date as stated in the standard.

New and revised standards that were issued prior to the sign-off date and are applicable to the current reporting period did not have a financial impact, and are not expected to have a future financial impact on the TGA.

Future Australian Accounting Standard Requirements

New standards, revised standards, interpretations or amending standards that were issued by the Australian Accounting Standards Board prior to the sign-off date, are not expected to have a future financial impact on the TGA.

1.5 Revenue

Revenue from the sale of goods is recognised when:

  1. the risks and rewards of ownership have been transferred to the buyer;
  2. the TGA retains no managerial involvement or effective control over the goods;
  3. the revenue and transaction costs incurred can be reliably measured; and
  4. it is probable that the economic benefits associated with the transaction will flow to the TGA.

Revenue from rendering of services is recognised by reference to the stage of completion of contracts at the reporting date. The revenue is recognised when:

  1. the amount of revenue, stage of completion and transaction costs incurred can be reliably measured; and
  2. the probable economic benefits associated with the transaction will flow to the entity.

The stage of completion of contracts at the reporting date is determined by reference to the proportion that costs incurred to date bear to the estimated total costs of the transaction.

Receivables for goods and services are recognised at the nominal amounts due less any impairment allowance. Collectability of debts is reviewed at the end of the reporting period. Allowances are made when collectability of the debt is no longer probable.

The TGA recovers the cost of all activities undertaken within the scope of the Therapeutic Goods Act 1989 from industry through fees and charges and recognises revenue only when it has been earned.

Annual charges for entries on the Australian Register of Therapeutic Goods and manufacturing licence charges are recognised as revenue in the financial year to which the charges relate and are non-refundable, except where exemption is given on the basis of low value turnover.

Minor application fees, evaluation fees and conformity assessment fees (less than $10,000) are recognised as revenue on receipt.

Major application fees, evaluation fees and conformity assessment fees are recognised progressively as services are performed.

Revenue from Government

Revenue was provided to the TGA (through the Department of Health and Ageing) to provide interest supplementation for surplus amounts standing to the credit of the Official Public Account and for funding activity associated with progressive implementation of the joint agency.

1.6 Gains

Resources Received Free of Charge

Resources received free of charge are recognised as gains when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense.

Resources received free of charge are recorded as either revenue or gains depending on their nature.

Contributions of assets at no cost of acquisition or for nominal consideration are recognised as gains at their fair value when the asset qualifies for recognition, unless received from another Government entity as a consequence of a restructuring of administrative arrangements.

Sale of Assets

Gains from disposal of assets are recognised when control of the asset has passed to the buyer.

1.7 Employee Benefits

Liabilities for ‘short-term employee benefits’ (as defined in AASB 119 Employee Benefits ) and termination benefits due within twelve months of the end of the reporting period are measured at their nominal amounts.

The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.

Other long-term employee benefits are measured as the net total of the present value of the defined benefit obligation at the end of the reporting period minus the fair value at the end of the reporting period of plan assets (if any) out of which the obligations are to be settled directly.

Leave

The liability for employee benefits includes provisions for annual leave and long service leave. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken in future years by employees of the TGA is estimated to be less than the annual entitlement for sick leave.

The leave liabilities are calculated on the basis of employees’ remuneration at the estimated salary rates that will apply at the time the leave is taken, including the TGA’s employee superannuation contribution rates to the extent that leave is likely to be taken during service rather than paid out on termination.

The liability for long service leave is determined with reference to an actuarial assessment last conducted on 26 May 2011. An actuary is engaged every 3 years to reassess the leave liability. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Separation and Redundancy

Provision is made for separation and redundancy benefit payments. The TGA recognises a provision for termination when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.

Superannuation

Under the Superannuation Legislation Amendment (Choice of Funds) Act 2004, staff of the TGA are able to become members of any complying superannuation fund. A complying superannuation fund is one that meets the requirements under the Income Tax Assessment Act 1997 and the Superannuation Industry (Supervision) Act 1993.

The majority of staff of the TGA are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), or the PSS accumulation plan (PSSap).

The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap and other compliant superannuation funds are defined contribution schemes.

The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported in the Department of Finance and Deregulation’s administered schedules and notes.

The TGA makes employer contributions to the employees’ superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the Government. The TGA accounts for the contributions as if they were contributions to defined contribution plans.

The liability for superannuation recognised at 30 June 2013 represents outstanding contributions for the final fortnight of the year.

1.8 Leases

A distinction is made between finance leases and operating leases. Finance leases effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of leased assets. An operating lease is a lease that is not a finance lease. In operating leases, the lessor effectively retains substantially all such risks and benefits.

The TGA has no finance leases.

Operating lease payments are expensed on a straight line basis which is representative of the pattern of benefits derived from the leased assets.

1.9 Cash

Cash is recognised at its nominal amount. Cash and cash equivalents includes:

  1. cash in TGA’s special account;
  2. the balance held in the Official Public Account; and
  3. cash held by outsiders.

1.10 Financial Assets

The TGA classifies its financial assets as loans and receivables.

The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Financial assets are recognised and derecognised upon trade date.

Effective Interest Method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest rate basis except for financial assets that are recognised ‘at fair value through profit or loss’.

Loans and Receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate.

Impairment of Financial Assets

Financial assets are assessed for impairment at the end of each reporting period.

Financial assets carried at amortised cost - if there is objective evidence that an impairment loss has been incurred for loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount is reduced by way of an allowance account. The loss is recognised in the Statement of Comprehensive Income.

Financial assets carried at cost - if there is objective evidence that an impairment loss has been incurred, the amount of the impairment loss is the difference between the carrying amount of the asset and the present value of the estimated future cash flows discounted at the current market rate for similar assets.

1.11 Financial Liabilities

Financial liabilities are classified as other financial liabilities. Financial liabilities are recognised and derecognised upon ‘trade date’.

Other Financial Liabilities

Other financial liabilities including borrowings are initially measured at fair value, net of transaction costs.

These financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Supplier and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

1.12 Contingent Liabilities and Contingent Assets

Contingent liabilities and contingent assets are not recognised in the Balance Sheet but are disclosed in the relevant schedules and notes. They may arise from uncertainty as to the existence of a liability or asset, or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain and contingent liabilities are disclosed when settlement is greater than remote.

1.13 Acquisition of Assets

Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value plus transaction costs where appropriate.

Assets acquired at no cost, or for nominal consideration are initially recognised as assets and revenues at their fair value at the date of acquisition, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amounts at which they were recognised in the transferor’s accounts immediately prior to the restructuring.

1.14 Property, Plant and Equipment

Asset Recognition Threshold

Purchases of property, plant and equipment including land, buildings and infrastructure are recognised initially at cost in the Balance Sheet, except for purchases costing less than $2,000. Leasehold improvements to properties with values of $10,000 or greater are capitalised. Any purchases under the thresholds are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).

The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant to ‘make good’ provisions in property leases taken up by the TGA where there exists an obligation to restore the property to its original condition. These costs are included in the value of the TGA’s leasehold improvements with a corresponding provision for the ‘make good’ recognised

Revaluations

Fair values for each class of asset are determined as shown below:

Asset Class Fair value measured at
Leasehold improvements Depreciated replacement cost
Property, plant and equipment Market selling price

Following initial recognition at cost, property, plant and equipment assets were carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets did not materially differ from the assets’ fair values at the reporting date. Independent valuations are conducted every three years, with desktop reviews carried out in the other years.

An independent asset revaluation was conducted in 2011-12 by the Australian Valuation Office.

Revaluation adjustments were made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reversed a previous revaluation decrement of the same asset class that was previously recognised in the surplus/deficit. Revaluation decrements for a class of assets are recognised directly in the surplus/deficit except to the extent that they reversed a previous revaluation increment for that class.

Any accumulated depreciation at the revaluation date was eliminated against the gross carrying amount of the asset and the asset was restated to the revalued amount.

Depreciation

Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the TGA using in all cases, the straight line method of depreciation.

Depreciation rates (useful lives) and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate. Residual values are re-estimated only when assets are revalued.

Depreciation rates applying to each class of depreciable asset are based on the following useful lives:

2012-13 2011-12
Leasehold improvements Lease term Lease term
Property, plant and equipment 3 to 20 years 3 to 20 years

Impairment

All assets were assessed for impairment at 30 June 2013. Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount was less than its carrying amount.

The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows, and the asset would be replaced if the TGA were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Derecognition

An asset is recommended for disposal if the item no longer complies with occupational health and safety standards; the item is reaching the optimum selling time to maximise returns or has reached end of life; the item contains hazardous material and the item is beyond repair. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal.

1.15 Intangibles

The TGA’s intangible assets comprise internally developed and purchased software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Internally developed software and purchased software with values of $100,000 or greater are capitalised.

Software is amortised on a straight-line basis over its anticipated useful life. The useful lives of the TGA’s software assets are 3 to 10 years (2011-12: 3 to 10 years).

All software assets were assessed for indications of impairment at 30 June 2013.

1.16 Taxation

The TGA is exempt from all forms of taxation except Fringe Benefits Tax (FBT), the Goods and Services Tax (GST) and certain excise and customs duties.

Revenues, expenses, assets and liabilities are recognised net of GST, except:

  1. where the amount of GST incurred is not recoverable from the Australian Taxation Office; and
  2. for receivables and payables which are recognised inclusive of GST.

1.17 Comparative Figures

Comparative figures have been adjusted to conform to changes in presentation in these financial statements, where required.

Note 2: Events After the Reporting Period

No reportable events occured after the balance date

Note 3: Expenses

2013
$'000
2012
$'000
Note 3A: Employee Benefits
Wages and salaries 58,193 53,560
Superannuation:
    Defined contribution plans
3,738 3,130
    Defined benefit plans
7,536 6,906
Leave and other entitlements 10,656 13,190
Other employee benefits 272 333
Total employee benefits 80,395 77,119
Note 3B: Suppliers
Goods and services
Consultants 6,038 6,098
Contractors 3,073 3,318
Property 4,982 3,983
Travel 2,127 2,537
Information technology 4,380 4,662
Advertising and media 449 448
Committee expenses 906 929
Legal 1,222 1,637
Library and laboratory 1,183 1,220
Office records and general expenses 1,024 1,090
Staff related expenses 939 877
Other 1,317 1,180
Total goods and services 27,640 27,979
Goods and services are made up of:
Provision of goods - related entities 132 7
Provision of goods - external parties 2,535 2,623
Provision of services - related entities 3,044 2,927
Provision of services - external parties 21,929 22,422
Total goods and services 27,640 27,979
Other supplier expenses
Operating lease rentals-external parties:
    Minimum lease payments
6,341 6,105
    Contingent rentals
2,687 2,509
Workers compensation expenses 940 842
Total other supplier expenses 9,968 9,456
Total supplier expenses 37,608 37,435
Note 3C: Depreciation and Amortisation
Depreciation:
    Property, plant and equipment
1,655 1,258
    Buildings - leasehold improvements
1,079 821
Total depreciation 2,734 2,079
Amortisation:
    Computer software - internally developed
1,428 1,033
    Computer software - purchased
222 115
Total amortisation 1,650 1,148
Total depreciation and amortisation 4,384 3,227
Note 3D: Write-Down and Impairment of Assets
Asset write-downs and impairments from:
    Impairment on financial instruments
592 562
    Write-down of property, plant and equipment
75 5
    Write-down of leasehold improvements
- 14
Total write-down and impairment of assets 667 581

Note 4: Income

2013
$'000
2012
$'000
REVENUE
Note 4A: Sale of Goods and Rendering of Services
Rendering of services - related entities 1,377 47
Rendering of services - external parties
Total sale of goods and rendering of services 118,660 115,436
Note 4B: Other Revenue
Other revenue 42 993
Total other revenue 42 993
GAINS
Note 4C: Other Gains
Resources received free of charge 145 110
Total other gains 145 110
REVENUE FROM GOVERNMENT
Note 4D: Revenue from Government
Revenue from Government 3,634 6,274
Total revenue from Government 3,634 6,274

Note 5: Financial Assets

2013
$'000
2012
$'000
Note 5A: Cash and Cash Equivalents
Special account 1,644 1,318
Total cash and cash equivalents 1,644 1,318
Note 5B: Trade and Other Receivables
Goods and services:
Goods and services - related entities 1,454 258
Goods and services - external parties 6,572 5,236
Total receivables for goods and services 8,026 5,494
Other receivables:
Receivable from the Official Public Account 56,698 55,192
GST receivable from the Australian Taxation Office 316 423
Total other receivables 57,014 55,615
Total trade and other receivables (gross) 65,040 61,109
Less impairment allowance account:
Goods and services (1,105) (972)
Total impairment allowance account (1,105) (972)
Total trade and other receivables (net) 63,935 60,137
Receivables are expected to be recovered in:
No more than 12 months 63,935 60,137
Total trade and other receivables (net) 63,935 60,137
Receivables are aged as follows:
Not overdue 62,760 59,188
Overdue by:
0 to 30 days 533 574
31 to 60 days 332 125
61 to 90 days 127 250
More than 90 days 1,288 972
Total receivables (gross) 65,040 61,109
The impairment allowance account is aged as follows:
Not overdue - -
Overdue by:
0 to 31 days - -
31 to 60 days - -
61 to 90 days (127) -
More than 90 days (978) (972)
Total impairment allowance account (1,105) (972)
Reconciliation of the Impairment Allowance Account:
Movements in relation to 2013
Goods and services
$'000
Total
$'000
Opening balance 972 972
Amounts written off (95) (95)
Amounts recovered and reversed (270) (270)
Increase recognised in net deficit 498 498
Closing balance 1,105 1,105
Movements in relation to 2012
Goods and services
$'000
Total
$'000
Opening balance 614 614
Amounts written off (86) (86)
Amounts recovered and reversed (137) (137)
Increase recognised in net surplus 581 581
Closing balance 972 972
2013
$'000
2012
$'000
Note 5C: Other Financial Assets
Accrued revenue 373 2,355
Total other financial assets 373 2,355
Total other financial assets are expected to be recovered in:
No more than 12 months 373 2,355
Total other financial assets 373 2,355

Note 6: Non-Financial Assets

2013
$'000
2012
$'000
Note 6A: Land and Buildings
Leasehold improvements:
Fair value 4,865 4,513
Accumulated depreciation (1,232) (152)
Total leasehold improvements 3,633 4,361
Total land and buildings 3,633 4,361

All revaluations are conducted in accordance with the revaluation policy stated at Note 1.  In 2011-12 the Australian Valuation Office conducted a revaluation of all assets and in 2012-13 conducted a desktop review of fair value with nil adjustments required.

No indicators of impairment were found for land and building assets.

No land and building assets are expected to be sold or disposed of within the next 12 months.

2013
$'000
2012
$'000
Note 6B: Property, Plant and Equipment
Other property, plant and equipment
Fair value 7,179 6,383
Accumulated depreciation (1,627) (20)
Total other property, plant and equipment 5,552 6,363

All revaluations are conducted in accordance with the revaluation policy stated at Note 1.  In 2011-12 the Australian Valuation Office conducted a revaluation of all assets and in 2012-13 conducted a desktop review of fair value with nil adjustments required.

No indicators of impairment were found for property, plant and equipment.

No property, plant or equipment was held for sale or disposal at 30 June 2013.

Note 6C: Reconciliation of the Opening and Closing Balances of Property, Plant and Equipment 2013
Leasehold improvements
$'000
Other property, plant and equipment
$'000
Total
$'000
As at 1 July 2012
Gross book value 4,513 6,383 10,896
Accumulated depreciation and impairment (152) (20) (172)
Net book value 1 July 2012 4,361 6,363 10,724
Additions:
By purchase 351 919 1,270
Depreciation expense (1,079) (1,655) (2,734)
Disposals:
Other - (75) (75)
Net book value 30 June 2013 3,633 5,552 9,185
Net book value as at 30 June 2013:
Gross book value 4,865 7,179 12,044
Accumulated depreciation and impairment (1,232) (1,627) (2,859)
Net book value as at 30 June 2013 3,633 5,552 9,185
Note 6C: Reconciliation of the Opening and Closing Balances of Property, Plant and Equipment 2012
Leasehold improvements
$'000
Other property, plant and equipment
$'000
Total
$'000
As at 1 July 2011
Gross book value 6,634 8,060 14,694
Accumulated depreciation and impairment (2,228) (2,808) (5,036)
Net book value 1 July 2011 4,406 5,252 9,658
Additions:
By purchase 241 2,249 2,490
Revaluations recognised in other comprehensive income 549 65 614
Reclassification - 60 60
Depreciation expense (821) (1,258) (2,079)
Disposals:
Other disposals (14) (5) (19)
Net book value 30 June 2012 4,361 6,363 10,724
Net book value as at 30 June 2012 represented by:
Gross book value 4,513 6,383 10,896
Accumulated depreciation and impairment (152) (20) (172)
Net book value as at 30 June 2012 4,361 6,363 10,724
2013
$'000
2012
$'000
Note 6D: Intangibles
Computer software:
    Internally developed - in progress
1,053 1,387
    Internally developed - in use
17,389 15,345
    Purchased
2,707 1,879
    Accumulated amortisation
(16,679) (15,033)
Total intangibles 4,470 3,578

No indicators of impairment were found for intangible assets.

No intangible assets are expected to be sold or disposed of within the next 12 months.

Note 6E: Reconciliation of the Opening and Closing Balances of Intangibles 2013
Computer software - internally developed
$'000
Computer software - purchased
$'000
Total
$'000
As at 1 July 2012
Gross book value 16,732 1,879 18,611
Accumulated amortisation and impairment (13,248) (1,785) (15,033)
Net book value 1 July 2012 3,484 94 3,578
Additions:
By purchase or internally developed 1,710 832 2,542
Amortisation (1,428) (222) (1,650)
Disposals:
Other - - -
Net book value 30 June 2013 3,766 704 4,470
Net book value as at 30 June 2013 represented by:
Gross book value 18,442 2,707 21,149
Accumulated amortisation and impairment (14,676) (2,003) (16,679)
Net book value as at 30 June 2013 3,766 704 4,470
Note 6E: Reconciliation of the Opening and Closing Balances of Intangibles 2012
Computer software - internally developed
$'000
Computer software - purchased
$'000
Total
$'000
As at 1 July 2011
Gross book value 19,303 2,265 21,568
Accumulated amortisation and impairment (15,850) (1,996) (17,846)
Net book value 1 July 2011 3,453 269 3,722
Additions:
By purchase or internally developed 1,064 - 1,064
Reclassification - (60) (60)
Amortisation (1,033) (115) (1,148)
Net book value 30 June 2012 3,484 94 3,578
Net book value as at 30 June 2012 represented by:
Gross book value 16,732 1,879 18,611
Accumulated amortisation and impairment (13,248) (1,785) (15,033)
Net book value as at 30 June 2012 3,484 94 3,578
2013
$'000
2012
$'000
Note 6F: Other Non-Financial Assets
Prepayments 873 762
Total other non-financial assets 873 762
Total other non-financial assets are expected to be recovered in:
No more than 12 months 731 587
More than 12 months 142 175
Total other non-financial assets 873 762

No indicators of impairment were found for other non-financial assets.

Note 7: Payables

2013
$'000
2012
$'000
Note 7A: Suppliers
Trade creditors 4,664 4,325
Total supplier payables 4,664 4,325
Supplier payables expected to be settled within 12 months:
Related entities 616 909
External parties 4,048 3,416
Total supplier payables 4,664 4,325
Settlement was usually made within 30 days.
Note 7B: Employee Payables
Salaries and wages 2,904 2,857
Superannuation 317 284
Total employee payables 3,221 3,141
All employee payables are expected to be settled in the next 12 months.
Note 7C: Other Payables
Unearned income 14,554 13,322
Total other payables 14,554 13,322

All other payables are expected to be settled in the next 12 months.

Note 8: Provisions

2013
$'000
2012
$'000
Note 8A: Employee Provisions
Leave 24,042 23,201
Other - 135
Total employee provisions 24,042 23,336
Employee provisions are expected to be settled in:
No more than 12 months 9,018 9,403
More than 12 months 15,024 13,933
Total employee provisions 24,042 23,336
Note 8B: Other Provisions
Provision for low value turnover 697 1,048
Restoration obligations 202 172
Provision for lease increases 147 130
Other provisions 126 -
Total other provisions 1,172 1,350
Other provisions are expected to be settled in:
No more than 12 months 823 1,048
More than 12 months 349 302
Total other provisions 1,172 1,350
Reconciliation of other provisions:
Provision for low value turnover 1
$'000
Restoration obligations 2
$'000
Provision for lease increases
$'000
Other provisions 3
$'000
Total
Carrying amount 1 July 2012 1,048 172 130 - 1,350
    Additional provisions made
697 36 (73) 126 786
    Amounts used
- (6) - - (6)
    Amounts reversed
(1,048) - 90 - (958)
Closing balance 30 June 2013 697 202 147 126 1,172
  1. The TGA has a provision for exemptions that are expected to be granted under the low value turnover (LVT) scheme. A sponsor can seek exemption from the liability to pay an annual charge for an entry on the Australian Register of Therapeutic Goods if the therapeutic good qualifies as LVT.
  2. The TGA has agreements for the leasing of premises which have provisions requiring the entity to restore the premises to their original condition at the conclusion of the lease. The TGA has made a provision to reflect the present value of this obligation.
  3. The other provision relates to the 25% refund that the TGA is required to make for conformity assessments of device design examinations that are not completed within the legislated time frame.

Note 9: Cash Flow Reconciliation

2013
$'000
2012
$'000
Reconciliation of cash and cash equivalents as per Balance Sheet to Cash Flow Statement
Cash and cash equivalents as per:
    Cash flow statement
1,644 1,318
    Balance sheet
1,644 1,318
Difference - -
Reconciliation of net cost of services to net cash from operating activities:
Net cost of services (4,207) (1,823)
Add revenue from Government 3,634 6,274
Adjustment for non-cash items
Depreciation / amortisation 4,384 3,227
Net write-down of non-financial assets 75 19
Changes in assets / liabilities
(Increase) in net receivables and other financial assets (1,816) (9,913)
(Increase) / decrease in prepayments (111) 20
Increase in employee provisions 706 4,782
Increase / (decrease) in supplier payables 338 (557)
Increase in employee and other payables 1,312 268
Increase / (decrease) in other provisions (178) 547
Net cash from operating activities 4,137 2,844

Note 10: Contingent Assets and Liabilities

Contingent Assets

Quantifiable Contingencies

At 30 June 2013 the TGA did not have any quantifiable contingent assets (2011-12: Nil).

Unquantifiable Contingencies

At 30 June 2013 the TGA did not have any unquantifiable contingent assets (2011-12: Nil).

Contingent Liabilities

Quantifiable Contingencies

At 30 June 2013 the TGA did not have any quantifiable contingent liabilities (2011-12: $0.1 million).

Unquantifiable Contingencies

At 30 June 2013

The TGA has provided an indemnity to its transactional banker in relation to any claims made against the bank resulting from errors in the TGA’s payment files.

At 30 June 2012

The TGA has provided an indemnity to its transactional banker in relation to any claims made against the bank resulting from errors in the TGA’s payment files.

Significant Remote Contingencies

At 30 June 2013 the TGA did not have any significant remote contingencies (2011-12: Nil).

Note 11: Senior Executive Remuneration

Note 11A: Senior Executive Remuneration Expense for the Reporting Period
2013
$'000
2012
$'000
Short-term employee benefits:
    Salary (including annual leave taken)
4,483 4,359
    Annual leave accrued
368 351
    Performance bonuses
249 405
    Other
724 627
Total short-term employee benefits 5,824 5,742
Post-employment benefits:
    Superannuation
761 765
Total post-employment benefits 761 765
Other long-term benefits:
    Long service leave
161 154
Total other long-term benefits 161 154
Total 6,746 6,661

Notes:

  1. Note 11A is prepared on an accrual basis (therefore the performance bonus expenses disclosed above may differ from the cash bonus disclosed in Note 11B).
  2. Note 11A excludes acting arrangements and part-year service where total remuneration expensed for a senior executive was less than $180,000.
Note 11B: Average Annual Reportable Remuneration Paid to Substantive Senior Executives During the Reporting Period
2012-13
Average annual reportable remuneration 1 Staff No. Reportable Salary 2 Contributed superannuation 3 Reportable allowances 4 Bonus Paid 5 Total
No. $ $ $ $ $
Total remuneration (including part-time arrangements):
less than $180,000 6 64,207 9,406 - 4,523 78,136
$180,000 to $209,999 6 166,755 24,839 38 5,482 197,114
$210,000 to $239,999 9 191,298 25,783 - 6,710 223,791
$240,000 to $269,999 9 210,322 30,164 - 13,769 254,255
$270,000 to $299,999 1 235,467 36,857 - 24,600 296,924
$450,000 to $479,999 1 406,900 58,132 931 - 465,963
Total 32
2011-12
Average annual reportable remuneration 1 Staff No. Reportable Salary 2 Contributed superannuation 3 Reportable allowances 4 Bonus Paid 5 Total
No. $ $ $ $ $
Total remuneration (including part-time arrangements):
less than $180,000 8 80,774 14,675 - 3,451 98,900
$180,000 to $209,999 5 163,160 21,191 - 3,496 187,847
$210,000 to $239,999 9 189,618 29,018 - 6,889 225,525
$240,000 to $269,999 9 203,319 34,024 - 12,383 249,726
$270,000 to $299,999 1 228,936 43,337 - 19,879 292,152
$330,000 to $359,999 1 289,402 33,707 - 33,131 356,240
Total 33

Notes:

  1. This table reports substantive senior executives who received remuneration during the reporting period.  Each row is an averaged figure based on headcount for individuals in the band.
  2. 'Reportable salary' includes the following:
    1. gross payments (less any bonuses paid, which are disclosed in the 'bonus paid' column); 
    2. reportable fringe benefits (at the net amount prior to 'grossing up' to account for tax benefits); and
    3. salary sacrificed superannuation.
  3. The 'contributed superannuation' amount is the average actual superannuation contributions paid to senior executives in that reportable remuneration band during the reporting period.
  4. 'Reportable allowances' are the average actual allowances paid as per the 'total allowances' line on individuals' payment summaries.
  5. 'Bonus paid' represents average actual bonuses paid during the reporting period in that reportable remuneration band.  The 'bonus paid' within a particular band may vary between financial years due to various factors such as individuals commencing with or leaving the TGA during the financial year.
Note 11C: Other Highly Paid Staff
2012-13
Average annual reportable remuneration 1 Staff No. Reportable Salary 2 Contributed superannuation 3 Reportable allowances 4 Bonus Paid 5 Total
No. $ $ $ $ $
Total remuneration (including part-time arrangements):
$180,000 to $209,999 9 149,298 34,152 - 3,862 187,312
$210,000 to $239,999 2 188,629 28,935 358 5,197 223,119
Total 11
2011-12
Average annual reportable remuneration 1 Staff No. Reportable Salary 2 Contributed superannuation3 Reportable allowances 4 Bonus Paid 5 Total
No. $ $ $ $ $
Total remuneration (including part-time arrangements):
$180,000 to $209,999 9 151,493 27,161 44 4,618 183,316
$210,000 to $239,999 1 193,029 19,299 - 8,570 220,898
Total 10

Notes:

  1. This table reports staff:
    1. who were employed by the TGA during the reporting period;
    2. whose reportable remuneration was $180,000 or more for the financial period; and
    3. were not required to be disclosed in Tables A or B.
    Each row is an averaged figure based on headcount for individuals in the band.
    TGA staff include medical officers, legal officers and scientists. Details of salary and entitlements are included in the Department of Health and Ageing Enterprise Agreement 2011-2014.
  2. 'Reportable salary' includes the following:
    1. gross payments (less any bonuses paid, which are disclosed in the 'bonus paid' column); 
    2. reportable fringe benefits (at the net amount prior to 'grossing up' to account for tax benefits); and
    3. salary sacrificed superannuation.
  3. The 'contributed superannuation' amount is the average actual superannuation contributions paid to staff in that reportable remuneration band during the reporting period.
  4. 'Reportable allowances' are the average actual allowances paid as per the 'total allowances' line on individuals' payment summaries.
  5. 'Bonus paid' represents average actual bonuses paid during the reporting period in that reportable remuneration band.  The 'bonus paid' within a particular band may vary between financial years due to various factors such as individuals commencing with or leaving the TGA during the financial year.

Note 12: Remuneration of Auditors

2013
$'000
2012
$'000
Financial statement audit services were provided free of charge to the TGA by the Australian National Audit Office (ANAO).
Fair value of services provided
Financial statement audit services 145 110
Total 145 110

No other services were provided by the ANAO.

Note 13: Financial Instruments

2013
$'000
2012
$'000
Note 13A Categories of Financial Instruments
Financial assets
Loans and receivables
Cash and cash equivalents 1,644 1,318
Goods and services receivable 6,921 4,522
Total 8,565 5,840
Carrying amount of financial assets 8,565 5,840
Financial liabilities
At amortised cost:
    Trade creditors
4,664 4,325
Total 4,664 4,325
Carrying amount of financial liabilities 4,664 4,325
Note 13B Net Income and Expense from Financial Assets
Loans and receivables
    Impairment
592 562
Net loss loans and receivables 592 562
Net loss from financial assets 592 562

The movement in the impairment account reflects an increase in the impairment provision and the write-down of receivables.

Note 13C Credit risk 

TGA's maximum credit risk in each class of financial assets is the carrying amount of the assets. The total amount of trade receivables is $8.026 million (2012: $5.494 million). The TGA has assessed the risk of default on payment and allowed impairment of $1.105 million in 2013 (2012: $0.972 million).

The following table illustrates the TGA's gross exposure to credit risk, excluding any collateral or credit enhancements.

2013
$'000
2012
$'000
Financial assets
    Goods and services receivable (gross)
8,026 5,494
Total 8,026 5,494

The TGA holds no collateral to mitigate against risk.

Credit quality of financial instruments not past due or individually determined as impaired
Not past due nor impaired Not past due nor impaired Past due or impaired Past due or impaired
2013
$'000
2012
$'000
2013
$'000
2012
$'000
Loans and receivables
    Goods and services receivable
5,746 3,573 2,280 1,921
Total 5,746 3,573 2,280 1,921
Ageing of financial assets that were past due but not impaired for 2013
0 to 30 days
$'000
31 to 60 days
$'000
61 to 90 days
$'000
90+ days
$'000
Total
$'000
Loans and receivables
    Goods and services receivable
533 332 - 310 1,175
Total 533 332 - 310 1,175
Ageing of financial assets that were past due but not impaired for 2012
0 to 30 days
$'000
31 to 60 days
$'000
61 to 90 days
$'000
90+ days
$'000
Total
$'000
Loans and receivables
    Goods and services receivable
574 125 250 - 949
Total 574 125 250 - 949

Note 13D Liquidity Risk 

The TGA's financial liabilities are payables.  The exposure to liquidity risk is based on the notion that the TGA will encounter difficulty in meeting its obligations associated with financial liabilities. This is highly unlikely as cost recovery policies ensure there are appropriate resources to meet its financial obligations.

Maturities for non-derivative financial liabilities 2013
within 1 year
$'000
Total
$'000
Other liabilities
Trade creditors 4,664 4,664
Total 4,664 4,664
Maturities for non-derivative financial liabilities 2012
within 1 year
$'000
Total
$'000
Other liabilities
Trade creditors 4,325 4,325
Total 4,325 4,325

The TGA has no derivative financial liabilities in either 2013 or 2012.

Note 13E Market Risk 

The TGA has no material exposure to currency risk, interest rate risk or other price risk.

Note 14: Financial Assets Reconciliation

2013
$'000
2012
$'000
Financial Assets
Total financial assets as per Balance Sheet 65,952 63,810
Less: non-financial instrument components
    Receivable from the Official Public Account
56,698 55,192
    GST receivable from the Australian Taxation Office
316 423
    Accrued revenue
373 2,355
Total non-financial instrument components 57,387 57,970
Total financial assets as per financial instruments note 8,565 5,840

Note 15: Special Account

Therapeutic Goods Administration
2013
$'000
2012
$'000
Balance brought forward from previous period 56,509 46,154
Increases:
    Appropriation credited to special account
3,634 7,303
    Costs recovered
117,714 111,393
    Other receipts
27 765
Total increases 121,375 119,461
Available for payments 177,884 165,615
Decreases:
Departmental
    Payments made
119,543 109,106
Total decreases 119,543 109,106
Balance carried to the next period 58,341 56,509

The TGA operates one special account established under section 21 of the Financial Management and Accountability Act 1997. The purposes of the account are set out in section 45 of the Therapeutic Goods Act 1989 (the Act) and are; to make payments to further the objects of the Act; and to enable the Commonwealth to participate in the international harmonisation of regulatory controls on therapeutic goods and other related activities.

Note 16: Compliance with Statutory Conditions for Payments from the Consolidated Revenue Fund

Section 83 of the constitution provides that no amount may be paid out of the Consolidated Revenue Fund except under an appropriation made by law. The Department of Finance and Deregulation provided information to all agencies in 2011 regarding the need for risk assessments in relation to compliance with statutory conditions on payments from special appropriations, including special accounts.

The TGA operates one special account established under section 21 of the Financial Management and Accountability Act 1997. The purposes of the account are set out in section 45 of the Therapeutic Goods Act 1989 (the Act) and are; to make payments to further the objects of the Act; and to enable the Commonwealth to participate in the international harmonisation of regulatory controls on therapeutic goods and other related activities.

The broad nature of the purpose of the account has provided the TGA with confidence that the risk of non-compliance of special account payments is at an acceptably low level. The TGA will continue to ensure its compliance with statutory conditions for payment.

During 2012-13 additional legal advice was received by the Department of Finance and Deregulation that indicated there could be breaches of section 83 under certain circumstances with payments for long service leave, goods and services tax and payments under determinations of the Remuneration Tribunal. TGA will review its processes and controls over payments for these items to minimise the possibility of breaches as a result of these payments.

Note 17: Compensation and Debt Relief

2013 2012
$ $
Departmental
No 'Act of Grace' expenses were made during the reporting period (2012: Nil). - -
No waivers of amounts owing to the Commonwealth were made pursuant to section 34(1) of the Financial Management and Accountability Act 1997 (2012: No waivers). - -
No payments were provided under the Compensation for Detriment caused by Defective Administration (CDDA) scheme during the reporting period (2012: Nil). - -
No ex-gratia payments were provided for during the reporting period (2012: Nil). - -
No payments were provided in special circumstances relating to APS employment pursuant to section 73 of the Public Service Act 1999 during the reporting period (2012: No payments made). - -

Note 18: Reporting of Outcomes

The TGA is a division of the Department of Health and Ageing.  The TGA contributes to Outcome 1 of the Department of Health and Ageing - a reduction in the incidence of preventable mortality and morbidity in Australia, including through regulation and national initiatives that support healthy lifestyles and disease prevention.  All costs are attributable to the outcome.

Note 19: Cost Recovery

2013
$'000
2012
$'000
Receipts subject to cost recovery policy:
Prescription medicines 60,780 56,650
Non-prescription medicines 6,220 6,517
Complementary medicines 14,276 9,579
Blood tissues, human cell and tissue therapies 3,187 3,427
Good manufacturing practice 10,985 12,294
Medical devices 22,363 26,857
Total receipts subject to cost recovery policy 117,811 115,324