Notes to and forming part of
the Financial Statements
For the year ended 30 June 2002

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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) and Supplementary Dairy Assistance Scheme (SDA) payments to eligible dairy producers. The term ‘Authority’ means the Dairy Adjustment Authority. Note 3 explains the costs of administration.

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 of Orders issued by the Finance Minister, being the Financial Management and Accountability (Financial Statements 2001-2002) Orders,
• 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.

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

1.3 Dairy Structural Adjustment Fund

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

The DSAF is vested in and administered by the Australian Dairy Corporation. Under clause 80 of Schedule 2 to the Dairy Produce Act 1986, the Australian Dairy Corporation 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 Australian Dairy Corporation is required under clause 79 to meet the DSAP and SDA 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 Australian Dairy Corporation’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 Australian Dairy Corporation 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 2002 membership of the schemes were:

Contributions to the schemes are at the legislated level (8% during 2001- 02). The current contribution rate to PSS is 13%. An additional 3% (2% 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 Australian Dairy Corporation through the DSAF. Therefore, the Authority has no cash, and there is no requirement to represent the use of the funding provided by the Australian Dairy Corporation 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.

Note 2: Events Occurring after Balance Date

The Authority’s activities will wind down to a minimal level over the next financial year, as all claims for payments are assessed and initial payments made. An aspect of the wind down will involve office relocation and associated costs. Employment contracts contain termination provisions that may be exercised in the next financial year. Costs related to relocation and termination provisions are yet to be determined.

Note 3: Operating Expenses

3.1 Remuneration of Members and Employee
	2002 $'000	2001 $'000
Renumeration for services provided by:
Members	315	435
employees	999	1007
casual and agency staff	1,343	2,221
other employee expenses	269	321
Total	2,926	3,984

3.2 Supplier expenses
	2002 $'000	2001 $'000
Supply of goods and services related to:
legal services	598	1,263
internal audit services	243	835
other contracted services	819	3.988
operating lease rentals	837	1,237
other supplies	1,605	1,415
Total	4,102	8,739

Note 4: Receivables

	2001 $'000	2001 $'000
Dairy Structural Adjustment Fund (DSAF)	570	901

The Australian Dairy Corporation must, under clause 79 of Schedule 2 to the Dairy Produce Act 1986, meet the administration costs of the Authority. The Australian Dairy Corporation ensures the obligations arising under the Act are met through the DSAF. The amounts receivable by the Authority are not overdue. Refer note 1.3.

Note 5: Payables

	2001 $'000	2001 $'000
Trade Creditors and Accruals	477	851

The Authority has trade creditors and accrued expenditure for administrative costs incurred in carrying out its objective. All such creditors and accruals as at 30 June 2002 are less than one year to maturity.

Note 6: Provisions

	2002 $'000	2001 $'000
Employee leave entitlements	93	50

Note 7: Remuneration of Officers

The number of officers who received or were due to receive total remuneration of $100,000 or more in respect of their taking part in the management of the Authority is:

Bands	2002 NUMBER	2001 NUMBER
110,000-119,000	1	-
130,000-139,999	-	1
150,000 –159,999	1	-
Aggregate	$268,513	$134,173

Remuneration includes salaries, accrued leave, performance pay and employer contributions to superannuation.

Note 8: Remuneration and Allowances of Members

The Members during the year, and up to the date of this report were:

• Patrick Musgrave - Chair
• John Drinan
• Jim Forsyth
• Merrilyn McPherson
• Terry O’Callaghan

The number of Members of the Authority whose remuneration and allowances fall within the following bands is:

Member’s remuneration and allowances Bands	2002 NUMBER	2001 NUMBER
20,000 – 29,999	1	1
30,000 – 39,999	2	-
50,000 – 59,000	1	-
60,000 – 69,999	-	1
70,000 – 79,999	-	1
110,000 – 119,999	-	1
150,000 – 159,999	-	1
160,000 – 169,999	1	-
Aggregate amount of remuneration and allowances received or due and receivable by Members of the Authority	$314,871	$434,810
Members met formally 38 times during the year to 30 June 2002. In addition to formal Members’ meetings, there were workshops and meetings involving executive management and Members during the course of the year. The above remuneration includes remuneration paid in accordance with Remuneration Tribunal determinations. The above remuneration also includes a management charge from the Department of Agriculture, Fisheries and Forestry – Australia (AFFA) in relation to the government Member.

Members' Interests

Other than the provision of services as Members for which the remuneration disclosed above was received, there were no transactions with Members or Member-related entities during the year.

Note 9: Remuneration of Auditors

	2002 $	2001 $
Remuneration to the Auditor-General for auditing the financial statements for the reporting period	28,000	34,400

No other services were provided by the Auditor-General during the reporting period.

Note 10: Staffing Levels

At the peak of administrative activity, during the processing of applications and making
determinations, the Authority’s staffing numbers reached a maximum of 47. By 30 June 2002, staffing numbers had reduced to 18.6 (equivalent full-time positions).

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