Notes to and forming part of
the Financial Statements
For the year ended 30 June 2001

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Note 1: Summary of Significant Accounting Policies

1.1 Objectives of the Dairy Adjustment Authority

The principal activity of the Authority is to administer applications and make determinations for the purposes of making Dairy Structural Adjustment Program (DSAP) payments to eligible dairy producers. The term ‘Authority’ means the Dairy Adjustment Authority. Note 3 explains the costs of administration.

Under clause 74 of Schedule 2 to the Dairy Produce Act 1986, the financial year to 30 June 2001 is the first reporting period for the Authority. Accordingly there are no comparatives to present in these financial statements.

1.2 Basis of Accounting

The financial statements are required by section 49 of the Financial Management and
Accountability Act 1997 and are a general purpose financial report.

The financial statements have been prepared in accordance with:

• Schedule 2 to the Dairy Produce Act 1986;
• Schedule 1 to Orders issued by the Finance Minister for preparation of Financial Statements in relation to financial statements ending on or after 30 June 2001; and
• Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Boards (Accounting Guidance Releases) and the Consensus Views of the Urgent Issues Group.

The financial statements have been prepared having regard to Statements of Accounting Concepts, which establish authoritative guidance on the nature, subject, purpose and broad content of general purpose financial reports.

The financial statements have been prepared on an accrual basis and on the basis of historical costs and do not take into account changing money values.

The accounting policies have been consistently applied by the Authority.

1.3 Dairy Structural Adjustment Fund

The Authority’s operations are funded through the Dairy Structural Adjustment Fund (DSAF) that is in turn funded through a consumer levy on the sales of drinking milk. This levy, at 11 cents per litre of milk, is in part to provide for the operational expenses of the Authority, and the payments to eligible dairy producers.

The DSAF is vested and administered by the Australian Dairy Corporation (ADC). Under clause 80 of Schedule 2 to the Dairy Produce Act 1986, the ADC and the Minister must take all reasonable steps to maintain the solvency of the DSAF in meeting DSAP and other obligations relative to the deregulation of the Australian dairy industry.

The ADC is required under clause 79 to meet the DSAP obligations to eligible dairy producers as determined by the Authority and meet the administration costs of the Authority incurred under clauses 65, 70 and 71.

Whereas the ADC’s administered financial statements report the financial performance and position of the DSAF, these financial statements of the Authority report the operating expenses incurred in fulfilling the Authority’s responsibilities. The ADC is responsible for settling the financial obligations associated with these operating expenses by allocating sufficient DSAF financial resources.

1.4 Employee Entitlements

Salaries and Wages, Annual Leave and Long Service Leave

Provision is made for the Authority’s liability for employee entitlements arising from services rendered by employees to balance date. Employee entitlements arising from wages and salaries, annual leave and long service leave, have been measured at their nominal amounts. Long service leave payable later than one year has not been measured at the present value of estimated future cash outflows as it is not materially different to the nominal amount.

No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken by employees is less than the annual entitlement for sick leave.

Superannuation

Superannuation is compulsory for all employees. However, under prescribed requirements determined by the Minister for the Department of Finance and Administration, the Authority is able to contribute to a number of schemes, membership of which is determined in part by the nature of the employment contract. At 30 June 2001 membership of the schemes were:

Contributions to the schemes are at the legislated level (8 percent during 2000-01). The current contribution rate to PSS is 13 percent. An additional 3 percent (2 percent at certain levels of salary) is contributed for employer productivity benefits.

1.5 Taxation

The Authority is exempt from all forms of taxation except fringe benefits tax and the goods and services tax.

1.6 Rounding of Amounts

Amounts are rounded to the nearest $1,000 except in relation to:

• executive remuneration;
• remuneration of Members; and
• remuneration of auditors.

1.7 Cash

The Authority was established on the basis that funding is the responsibility of the ADC through the DSAF. Therefore, the Authority has no cash, and there is no requirement to represent the use of the funding provided by the ADC in a statement of cash flows. Refer note 1.3.

1.8 Licences

Obligations arising under a licence entitling the Authority to occupy premises and utilise certain assets within the premises are expensed on a basis which is representative of the pattern of benefits derived from the licensed assets.

1.9 Insurance

Officers engaged in the delivery of Commonwealth programs are indemnified by the Commonwealth provided they act lawfully and in good faith in carrying out their duties. The Authority’s premises are insured through the building, furniture and equipment agreement. Workers compensation is insured through Comcare Australia.

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