OTWAY HEALTH - Parliament of Victoria · The Strategic Plan was released at a community meeting in...

OTWAY HEALTH

ANNUAL REPORT 2016 – 2017

OTWAY HEALTHPO Box 84 75 McLachlan Street Apollo Bay, Victoria 3233

This year’s Annual Report cover image and inner contents images featuring flora, celebrate Otway Health’s award for Service Industry Garden of the Year 2016 - Apollo Bay.

Phone: (03) 8237 8500Email: [email protected]: www.otwayhealth.org.au

OTWAY HEALTH Annual Report 2016-2017 | 1

OTWAY HEALTH

CONTENTS

ANNUAL REPORT 2016-2017

OTWAY HEALTH

Report of Operations 2

Responsible Bodies Declaration 2

Strategic Direction 6

Values and Behaviours 6

Organisational Structure 8

Our Services 10

Board Report 11

CEO Report 13

Compliance Requirements 17

Disclosure Index 24

Key Financial and Service Reporting 26


OTWAY HEALTH

YEAR ENDING 30 JUNE 2017

REPORT OF OPERATIONS

Responsible Bodies DeclarationIn accordance with the Financial Management Act 1994, I am pleased to present the report of operations for Otway Health for the year ending 30 June 2017.

Denise McLachlan Otway Health Board Chair Apollo Bay, 29 August 2017

AboutOtway Health is located in Apollo Bay, southwest Victoria. We are block funded as a Multi-purpose Service (MPS) providing a wide range of clinical and community services to our catchment area from Lavers Hill to Wye River. We offer health and community services to the 3,500 residents in the area, which increases to over 20,000 during the summer months.

Through our Board, Otway Health is accountable to the Commonwealth Government and the Victorian Government for the efficiency and integrity of operations and the quality of the services provided. Funding arrangements for an MPS consist of Commonwealth and State Aged Care as well as Victorian Department of Health and Human Services funding.

At a local level these funding arrangements facilitate a greater degree of flexibility to an MPS, allowing a range of services that respond to needs of our community. Otway Health has a joint agreement with both the Commonwealth and Victorian Governments for the efficiency and integrity of our operations and the quality of the services we provide.

Responsible State Ministers

The Hon Jill Hennessy MPMinster for Health Minister for Ambulance Services

The Hon Jenny Mikakos MPMinister for Families and Children Minister for Youth Affairs

The Hon Martin Foley MPMinister for Housing, Disability and Ageing Minister for Mental Health

The Hon Fiona Richardson MPMinister for Women


Responsible Commonwealth Ministers

The Hon Greg Hunt MPMinister for Health

The Hon Fiona NashMinister for Regional Development Minister for Regional Communications Minister for Local Government and Territories

The Hon Christian Porter MPMinister for Social Service

Board CommitteesBoard Executive Committee

Denise McLachlanPresident

Lorraine Harris1st Vice President

Nina Brooks 2nd Vice President

Kate GillanInterim CEO

Board of Governance


Commencement July 2012

Lorraine HarrisVice President


Lindsay GraysonBoard Director


Rob Knowles Board Director


Nina Brooks Board Director


Simon Barty Board Director


Joy HumphreysBoard Director


Jan Byers Board Director


Nicholas SalkeldBoard Director


Simon BartyChairperson


Lorraine Harris1st Vice President

Nina Brooks2nd Vice President

Lindsay GraysonBoard Director

Jo HumphreysBoard Director

Rob KnowlesBoard Director

Jan ByersBoard Director

Nick SalkeldBoard Director

Bryan JamesCommunity Member


Finance Audit and Risk Committee


Board Selection Panel

Denise McLachlanChairperson

Nina BrooksBoard Director


Denise McLachlanChairperson

Pam CharnockDirector Clinical and Nursing Services (Executive Sponsor)

Capital Works

Lorraine HarrisChairperson


Jo HumphreysBoard Director

Rob Knowles

Board Director


Clinical Quality Risk and Compliance Committee

CEO Management Committee

Nina BrooksChairperson




Otway Health Auxiliary

Chris MarrinerTreasurer

Lynne HallSecretary

People and Culture Committee

Joy HumphreysChairperson

Nina BrooksBoard Director

Rob KnowlesBoard Director

Jan ByersBoard Director


Community Advisory Committee

Joy HumphreysChairperson


Anne RoutSupport Services Manager (Executive Sponsor)


Otway Health Grounds - Awarded Service Industry Garden of the Year 2016 - Apollo Bay.

Executive StaffKate GillanInterim CEO

Pam CharnockDirector Clinical and Nursing Services

Carissa BrockActing Chief Operations Officer

Anne RoutSupport Services Manager

Helen HealyBusiness Services Manager


OTWAY HEALTH

STRATEGIC PLAN 2017–2021

STRATEGIC DIRECTION

Otway Health is a flexible and adaptable Multi-Purpose Service. Otway Health is an organisation that recognises we are in a state of continual change. To accommodate this change we are flexible and adaptable; being a Multi-Purpose Service gives us that.

Our Purpose

Otway Health works with the community and all levels of Government to provide a range of health, community, information and well-being services that enable individuals, families and the wider community to achieve their optimum health and well-being goals

Our Vision

Otway Health will be an innovative, responsive and highly professional organisation that adapts to the diverse and changing health needs of the community.

Values and Behaviours

Professional

We deliver excellent, confidential, reliable and safe services with integrity to the community.

Compassionate

We deliver person centred care and are welcoming and equitable to all people engaging with the service.

Responsive

We are dynamic, innovative and adaptable in responding to changing health and social environments.

Accountable

Our actions are trustworthy, principled and transparent.

Respectful

We are consultative; providing a non-judgmental, accepting environment where needs are acknowledged and considered.


Otway Health Grounds - Awarded Service Industry Garden of the Year 2016 - Apollo Bay.

Strategic Pillars

A more detailed Strategic Plan 2017 -2021 is available on our website www.otwayhealth.org.au

Strategic Pillar 1 - Healthy Community

We will actively connect with all sectors of the community to enable people to make the best decisions about their health and well-being needs.

Strategic Pillar 2 - Service Excellence

Person centred services that are constantly reviewed and subject to continuous improvement and evidence based practice and quality improvement processes.

Strategic Pillar 3 - Sustainability

The development of the necessary resources to enable the continuous delivery of high quality services to the community.

Strategic Pillar 4 - Good Governance

The provision of strong, transparent and accountable governance and leadership.

Strategic Pillar 5 - Collaborative Partnerships

Provide a rich service mix to the community through strong service networks.

OTWAY HEALTH Annual Report 2016-2017 | 9OTWAY HEALTH Annual Report 2016-2017 | 8

OTWAY HEALTH

Board of Directors

Acting Chief Executive Officer Executive AssistantBoard Secretariat

Support Services Manager

Business Services Manager

Acting Chief Operations Officer

Director Clinical & Nursing Services

GP Clinic Clinical Nurse Manager Manager Primary Care

Communications Business Units Development

Human Resources & OHS

Primary Care Team

Facilities & Infrastructure

In-Home Support

Quality Payroll

FundraisingCatering Projects

ITDocument Control

Neighbourhood House

Admin/ReceptionSecond Sails

Sea Mist

Project Officer

Health Information & Central Records

Finance Ops

Finance Projects

VMO’s Urgent Care

Acute CareMedical

Residential Aged Care

Otway Health is committed to the principles of merit and equity in the workplace with respect to employment, promotion and opportunity. Selection processes reflect equal opportunity and diversity principles. The organisation recognizes the Public Sector Code of Conduct and actively promotes a positive working environment and values based culture, which includes a code of conduct for staff and volunteers.

Our dedicated staff.

FUNCTIONAL

ORGANISATIONAL STRUCTURE


OTWAY HEALTH

Marrar Woorn Neighbourhood House.

Home and Community Care activities.

Exercise Therapy.

CLINICAL | SUPPORT | BUSINESS

Clinical ServicesAcute CareAids and Equipment HireAged CareCommunity NursingCommunity WelfareChronic Disease ManagementDay Respite CareDelivered MealsEmergency ReliefExercise ClassesExercise TherapyFalls Prevention ProgramFood ServicesHome and Community CareImmunisationInfant WelfareIntegrated Services for Young ChildrenNeedle Exchange ProgramNurse ClinicOccupational TherapyPalliative CarePlanned Activities GroupPhysiotherapyResidential Aged CareResidential Respite CareSenior Independent Living ClassesSocial SupportUrgent Care 24/7Volunteer SupportVisiting Services

OUR SERVICES

Support Services Apollo Bay Children’s CentreCommunications and FundraisingCustomer Service and ReceptionExecutive Assistance to the CEOOtway Health’s Central Records, incorporating medical records and FOIQuality ImprovementRisk ManagementAudits Board Secretariat

Business ServicesAdministrationAsset ManagementBuildings and GroundsCleaningFinancial ManagementGovernance SupportGrants and SubmissionsHuman Resources ManagementInformation TechnologyInformation ManagementInfrastructure MaintenanceOccupational Health and SafetyMarrar Woorn Neighbourhood HouseManagement of Second Sails Opportunity Shop


BOARD REPORT

I am happy to report to the financial year 2016/17 on behalf of the Otway Health Board. It was another successful year as Otway Health continues to deliver a sustainable health service that meets the needs of our community.

This year has seen Otway Health engage in broad community consultation as it developed the Strategic Plan for 2017-2021. To create a Strategic Plan that is robust and a true reflection of the community’s health care needs, the Otway Health Board canvassed input from local key stakeholders. We were thrilled at the number of people who provided feedback in this intricate process to ensure that we identify the best possible health outcomes for the community. The Strategic Plan was released at a community meeting in April 2017 and places Otway Health firmly on track to continue to develop as an ongoing viable health service.

In the 2017-2021 Strategic Plan there is a high importance placed upon the core health services of aged care and allied health. Otway Health continues to develop strong alliances with other health agencies to ensure non-core services continue to be available. Our Strategic Plan identifies the strategic alliances to be developed in order to meet these priorities.

As is the cycle of Board membership, in 2016/17 we saw the resignation of Board Directors and we also welcomed new Directors. We thanked Russell Dawe, Sisca Verwoert, Denise Hooke, Cathy Donovan, Richard Tantau and Pamela McKimm for their service to Otway Health and welcomed Rob Knowles, Joy Humphreys, Jan Byers and Nicholas Salkeld to the Board. Rob Knowles is a former Victorian Minister of Health, Housing and Aged Care and brings to the Otway Health Board his substantial experience in Multi-purpose Healthcare Services such as ours. Joy Humphreys, Jan Byers and Nicholas Salkeld all have extensive experience in their fields as well as strong local community ties.

Otway Health is committed to working with the community to provide a range of services that enable individuals, families and the wider community to achieve their optimum health and well being goals. Otway Health recognises that a positive workplace culture is critical to achieving this vision. In 2016, an independent Organisational Culture Review identified recommendations to strengthen organisational culture. The Board and Executive of Otway Health acknowledge their responsibility in providing leadership for a positive workplace culture by setting clear expectations of behaviour, ensuring those expectations are met through appropriate training and consultation and having fair and transparent systems and processes in place to address issues when they occur. To address these expectations, the Otway Health Board has established the People and Culture Committee (PCC), a formal committee of Board of Directors of Otway Health which aims to work with staff to strengthen their experience at work.

The Otway Health Board ensures that their actions are consistent with Otway Health values through feedback from the Community Advisory Committee (CAC). The CAC is a formal committee of the Board of Directors of Otway Health, whose purpose is to provide advice to the Board. With this advice, Otway Health can improve

OTWAY HEALTH BOARD CHAIR

DENISE MCLACHLAN


Mad Hatters Tea Party - celebrating National Volunteer Week.

engagement within the community promoting its health and wellbeing services. The CAC was established in 2015 to provide direction into all levels of health service operations, planning and policy development. In May 2017 a dedicated email address for the CAC was made public so that the community has direct access to the committee representing them.

In March 2017, Otway Health joined forces with the Apollo Bay and District Health Foundation to commission an external consultant to undertake an Integrated Primary Care Review. The aim of this review is to develop a long term, sustainable model of healthcare delivery that best meets the community’s needs. Our task is to develop and implement the best model to attract and retain both Doctors and specialists and to build and strengthen health services in Apollo Bay, both now and as the region grows.

Denise McLachlan Otway Health Board Chair


CEO REPORT

Otway Health continues to build regional relationships with health organisations including; Barwon Health, Lorne Community Hospital and Timboon and District Healthcare Service (TDHS).

Throughout 2016/17 we have shared resources with neighbouring health services, for mutual benefit. Such an arrangement has seen Otway Health’s Occupational Therapist swap one day per month with the Dietitian from TDHS so that both organisations can benefit from specialist skills otherwise unavailable.

In 2016/17, Otway Health and Lorne Community Hospital both greatly benefited from the shared role of Grants Officer that successfully generated funds for extra programs and infrastructure works across both organisations. This role brought together the two health services, along with Windana Inc., to deliver a new model of care to the region for those needing drug and alcohol support. The project will deliver remote access telehealth recovery services to the Southern Otway region. It’s an innovative ‘no wrong door’ referral pathway. Staff who come in contact with a resident requiring recovery services will be able to refer without needing to engage in multi-level referral processes.

ClinicalThis year, Otway Health has benefited from upgraded equipment and redesigned space within its Urgent Care Unit. This space houses telehealth facilities that let us engage with health specialists remotely. The new equipment provides easier access to tools that aid in diagnosis and treatment so that in the event a patient does require a transfer, we can now to do so more efficiently.

In April 2016 Otway Health was successful in applying for extra funding from the Department of Health and Human Services (Victoria) from the Regional Health Infrastructure Fund. This extra funding provides for capital improvement works, including upgrades to heating, storage and security for Otway Health’s Urgent Care Unit.

Throughout the year, Otway Health has been actively recruiting staff for the Clinical Division. We have successfully recruited staff with experience in both smaller and larger health services; staff that bring skills to complement our current team. The skill range of staff joining us now include; Registered Nurses, Enrolled Nurses and Personal Care Attendants, who will all join our Clinical Division. As part of a successful recruitment strategy, Otway Health offers three months accommodation to new clinical staff moving to Apollo Bay. This has greatly broadened our ability to attract experienced staff. Fluctuations in recruitment are common occurrences in any organisation. The Department of Health and Human Services (DHHS) continue to monitor staff retention and at Otway Health it remains consistent from year to year.

In April 2017, Otway Health began trialling the use of Nurse Practitioners alongside our locum on-call Doctors. A Nurse Practitioner is a registered nurse with the expertise to diagnose and treat people of all ages with a variety of acute or chronic health conditions.

OTWAY HEALTH INTERIM CEO

KATE GILLAN


Our dedicated staff.

Over the months of this trial feedback has indicated that Nurse Practitioners have been well received by our staff and community; providing afterhours care, clinics and advanced training to our nursing staff. Due to this success, we will be commencing the process to recruit our own Nurse Practitioners as new Otway Health employees.

Workplace CultureIn 2016/17 Otway Health took part in an independent review into workplace culture, under the guidance of the DHHS. Consultant Chris Hicks produced an ‘Organisational Culture Review’ in late 2016. In conducting this review, all staff and recent ex-staff had the opportunity to provide feedback about their experience working at Otway Health. Once the review was completed a summary of the findings was shared publically. The Otway Health Board and Executive Team welcome this workplace culture review as a tool to guide staffing support and education well into the future. Senior management developed a framework to provide structure for Otway Health to meet the objectives of the report’s recommendations. This framework focuses on improving workplace environment by supporting the Workforce and Workplace Culture Improvement Project (WWCIP), which is a commitment from the Board and Executive team to focus on improving the workplace environment at Otway Health.

One of the recommendations in the Hicks report was to develop a Staff Consultative Committee (SCC) and the Board established the People and Culture Committee to support this new initiate. Otway Health staff self-nominated to join the SCC, which aims to be the positive driver of the changes required to meet the recommendations in the 2016 Organisational Cultural Review.

As a response to Hick’s recommendations, independent wellbeing counsellor, Shane Storer began delivering 12 months of support available monthly to employees. This support compliments Otway Health’s existing and comprehensive Employee Assistance Program. Shane offers individual counselling sessions as well as delivering group wellness training.

QualityIn 2017, Otway Health implemented recommendation 11 from Hick’s report and employed a temporary Project Officer to assist in clinical and operational matters. This role assists the Executive with identifying, prioritising and ameliorating the numerous clinical and operational issues that have emerged. The Project Officer has helped to enhance clinical performance by; engaging with Otway Health’s Nursing Team to strengthen care delivery by reviewing clinical quality and safety, identifying training opportunities, enhancing the provision of nursing services and nursing workforce, and reviewing and establishing upskilling of triage, assessment and scope of practice of nurses to consolidate the nursing team.

In 2016/17 Otway Health was working towards successful accreditation in the tri-annual National Safety and Quality Health Service (NSQHS) Standards.


These standards aim to improve the quality of health service provision in Australia by providing a nationally consistent statement of the level of care consumers can expect from health service organisations.

In 2016, the Australian Commission on Safety and Quality in Healthcare called for feedback as they developed version 2 of the NSQHS Standards. Otway Health’s Quality Officer offered feedback which resulted in an invitation to attend the Australian Commission on Safety and Quality in Healthcare forum for Multi-Purpose Services from around Australia. This forum was a great opportunity for Otway Health to discuss version 2 of the NSQHS Standards and give broad feedback of how it applies to an MPS.

Community ProgramsIn 2016/17 the Federal Government introduced the Commonwealth Home Support Programme (CHSP) as an entry level home help program for older people who need some help with daily tasks to live independently at home. CHSP has now replaced services previously delivered by Otway Health under Home and Community Care. CHSP aims to deliver timely, high quality entry-level support services, taking into account individual goals, preferences and choices, to help frail older people stay in their homes as long as they can and wish to do so.

Otway Health is a provider for NDIS services across Allied Health and In-home and Social Support programs and continues to be a key source of funding which enables us to provide these services. As part of the changes in funding and new frameworks, Otway Health was allocated funding for the Regional Assessment Service (RAS) which introduced a new way to assess clients at home. These new processes required staff throughout Otway Health to undergo significant training to learn and apply new processes.

Last financial year, Otway Health received funding from the Foundation for Rural and Regional Renewal for the pilot program ‘Osteo-fit’, which took preventative measures against osteoporosis. This 12 week program was very popular and had successful results, so in 2016/17 Otway Health sought a new model of funding to deliver Osteo-fit for a second year. This model was developed in conjunction with the ‘Life!’ program, which is a Victorian lifestyle modification program that helps reduce risk of type 2 diabetes and cardiovascular disease.

VolunteersOtway Health is very fortunate to have over 100 volunteers who contribute to the organisation across a series of programs: Second Sails Opportunity Shop, gardening, aged care activities, meals-on-wheels and transport. Second Sails is by far the largest contributor to volunteer hours with the shop opening for 324 days in the reporting period with volunteers donating collectively over 5,000 hours of their time.

In 2016, Otway Health entered the Colac Otway Shire’s annual Garden Awards and won in the section of Industry Garden of the Year. Otway Health’s gardens are maintained by the Volunteer Gardening Team, tending to the grounds on


Free health checks by Otway Health - 2017 Great Ocean Road Running Festival Market.

Auxiliary Second Sails.

Volunteer Gardening Group.

a weekly basis. This award is a testament to their dedication as well as their green thumbs that keep the gardens looking beautiful all year round.

In 2017, Otway Health nominated long standing volunteer, Frances Simms, for the Colac Otway Shire’s Australia Day Awards. In receiving the award for Community Service, Frances was acknowledged for 52 years of voluntary service with Otway Health. With a volunteering career spanning half a century, Frances proves herself to be a role model for both her generation and younger generations as well.

Grants and DonationsDonations have always played a significant role in Otway Health’s ability to deliver a broad range of services. Donations are received from individuals, families and organisations that often have strong community ties to Otway Health.

The Second Sails Auxiliary and the Apollo Bay and District Health Foundation both continue to support Otway Health annually. Their regular contributions enable Otway Health to enhance its service delivery capabilities.

Otway Health Donations 2016/17

• Auxiliary Second Sails• Apollo Bay and District Health Foundation• In memory of Beverly Muntz• Hans Fankhanel• Bell Charitable Trust• Salle Bufe

Fundraising Events 2016/17

• Great Ocean Road Running Festival Market

Grants Received 2016/17

• Give Where You Live Foundation• Regional Health Infrastructure Fund• Better Care Victoria• Department of Health and Human Services• Foundation for Rural and Regional Renewal• Colac Otway Shire• South West Alliance of Rural Health

Kate GillanOtway Health Interim CEO


OTWAY HEALTH

YEAR ENDING 30 JUNE 2017

Safety and Quality Performance

Key Performance Indicator Target Actual

Health Service Accreditation Full compliance Achieved

Overall compliance with cleaning standards Full co mpliance Achieved

Very high risk (Category A) 90 points N/A

High risk (Category B) 85 points Achieved

Moderate risk (Category C) 85 points Achieved

VICNISS data compliance* Full compliance Achieved

Compliance with the Hand Hygiene Australia Program 80% 83%

Percentage of healthcare workers immunised for influenza 75% 77%

*Victorian Healthcare Associated Infection Surveillance.

VHES Positive Patient Experience and Discharge Care Results

Key Performance Indicator Quarter 1 Quarter 2 Quarter 3

Positive Patient Experience < 42 responses < 42 responses < 42 responses

Discharge Care < 42 responses < 42 responses < 42 responses

Funded Flexible Aged Care Places

Campus Number

Flexible High Care 9

Flexible Low Care 21

Flexible Home Care 3

COMPLIANCE REQUIREMENTS


Utilisation of Flexible Aged Care Places

Campus Number Occupancy level %

Flexible High Care 994 34.04%

Flexible Low Care 3061 64.51%

Respite 749 *

Flexible Home Care N/A N/A

Other community services N/A N/A

Total 4804 62.6%

*Respite beds used are flexible and not connected to occupancy.

Acute Care

Service Campus Type of activity Actual Activity 2016-17

Medical inpatients Clinical Bed days 246 days 43 episodes

Urgent care Clinical Presentations 1160

Non-admitted patients Nurse Clinic Occasions of service 141

Radiology Clinical Number of clients 62

Palliative care Clinical Number of clients 5

District nursing Community Occasions of service 1027

Maternity Community Number of clients N/A

Renal dialysis N/A Number of clients N/A


Primary Health Care

Service Actual Activity 2016-17 (ocassions of service)

Speech Pathology* N/A

Community Health Nurse 189

Occupational Therapy 222

District nursing N/A

Dietetics* 11

Podiatry* 68

Physiotherapy 728

Community Nursing 1027

Allied Health Assistant 820

Community Welfare Worker 117

*Services which are not funded or only part funded through the MPS Tripartite Agreement.

Employment Conduct Principles Public Sector Values and Employment Principles have been incorporated in Otway Health’s intensive employee orientation program. Otway Health is an Equal Opportunity Employer and our employment decisions are founded on merit and equity.

Workforce Information

Hospitals

Labour Category

JUNE

Current Month FTE

JUNE

YTD FTE

2016 2017 2016 2017

Nursing 18.74 16.54 17.09 17.67

Administration and Clerical 15.99 14.91 14.07 15.76

Medical Support 5.88 10.91 5.56 6.47

Hotel and Allied Services 13.03 11.14 13.10 12.02

Medical Officers N/A N/A N/A N/A

Hospital Medical Officers N/A N/A N/A N/A

Sessional Clinicians N/A N/A N/A N/A

Ancillary Staff (Allied Health) 3.74 1.82 3.58 2.91


Statement of Occupational Health and SafetyOtway Health is committed to ensuring a safe and healthy work environment and improving the health, safety and welfare of all employees, volunteers, contractors and visitors. Otway Health’s Occupational Health and Safety (OH&S) Policy outlines this commitment which is supported by our OH&S Management Framework. Otway Health demonstrates this commitment to constantly improving OH&S by:

• Developing, implementing and monitoring work systems to ensure safe practices

• Developing and maintaining an OH&S policy framework

• Providing written procedures and guidelines to ensure safe work systems

• Monitoring, measuring and comparing OH&S performance

• Training and educating of all staff, OH&S representatives and volunteers

Key Areas of focus during 2016/17 included:

• Review of practices and processes influential to workplace culture

• Review of a workplace cultural consultative framework supported by the development of a People and Culture Committee and a Staff Consultative Committee

• Evaluation and review of OH&S policies to reflect legislative requirements and Otway Health’s objectives

• Improvement of the organisational orientation process to increase effectiveness

• Continued commitment to improving workplace culture through SCC and PCC

• Development of organisational goals for OH&S improvements

• Development of mental health and work related stress prevention programs and initiates

• Development of Occupational Violence awareness campaign for health care workers

Governance, Leadership and Culture Performance

Key performance indicator Target Actual

People Matter Survey patient safety culture 80% 88%

Building Act 1993 In accordance with “Good Building Principles and Practices”, Agencies are required to regularly carry out assessments and reports on the condition of built assets. Otway Health has complied with all government requirements to ensure that all built assets are maintained and protected.

Freedom of Information Act 1982 The Freedom of Information Act 1982 provides the right for members of the public to obtain information held by Otway Health. These requests under the Act are made in writing to the Principal Officer who is the Director Clinical and Nursing Services. The Support Services Manager is the Authorised Officer. Twelve requests were processed under the Act during 2016/17 and all of these were granted in full.

Protected Disclosure Act 2012The Protected Disclosure Act ensures transparency and accountability and provides an environment that guarantees disclosures can be made safely without the fear of reprisal. Throughout the year no disclosures have been made under the Act.


Safe Patient Care Act 2015In accordance with Safe Patient Care Act 2015, Otway Health has complied with all government requirements in the 2016/17 reporting period. This ensures that Otway Health provides the correct staffing levels in caring for its patients.

Otway Health has no matters to report in relation to its obligations under section 40 of the Safe Patient Care Act 2015.

Carers Recognition Act 2012The Carers Recognition Act formally recognises and values the role of carers and the importance of care relationships in the Victorian community. It includes a set of principles about the significance of care relationships, and specifies obligations for state government agencies, local councils, and other organisations that interact with people in care relationships. Throughout the reporting period no disclosures have been made under the Act.

Victorian Industry Participation Policy Act 2003In accordance with the Victorian Industry Participation Policy Act 2003, Otway Health is required to report on the implementation of the Victorian Industry Participation Policy (VIPP). During 2016/17 there have been no tenders let or completed with a value greater than $1 million.

Attestation on Compliance with Health Purchasing Victoria (HPV) Health Purchasing Policies I, Carissa Brock certify that Otway health has put in place appropriate internal controls and processes to ensure that it has complied with all requirements set out in the HPV Health Purchasing Policies including mandatory HPV collective agreements as required by the Health Services Act 1988 (Vic) and has critically reviewed these controls and processes during the year.

Carissa BrockOtway Health Acting Chief Operations OfficerApollo Bay, 29 August 2017

Attestation for compliance with the Ministerial Standing Direction 3.7.1 – Risk Management Framework and ProcessesI, Kate Gillan certify that Otway Health has complied with Ministerial Direction 3.7.1 – Risk Management Framework and Processes. Otway Health’s Audit Committee has verified this.

Kate GillanOtway Health Interim CEOApollo Bay, 29 August 2017


Summary of Environmental Performance Otway Health has been active in the subject of environmental sustainability for five years now with the implementation of the Environmental Sustainability Action Plan back in 2012. This plan set out a range of goals, objectives and evaluation measures that would assist our organisation in becoming a more sustainable health service. With an effective and efficient use of resources, the intention was to see a reduction in our environmental impact to promote a healthier and more sustainable present and future.

By actively thinking about the environmental impact we make, our aim was to develop a culture of caring for the environment that is supported by the actions and initiatives of both the organisation and people. In order to achieve this vision, the Sustainability Action Plan was created to set the following objectives:

• Reducing Organisational energy consumption by 10% and increasing clean energy sources by 5% by 2017

• Reducing Organisational water consumption by 10% and increasing capture and reuse of water by 5% by 2017

• To reduce the amount of waste going to landfill by 20% and increase recycling practices by 10%

• To embed environmental specifications and social responsibility into procurement and purchasing practice policies at Otway Health by 2015

• Develop more sustainable transport systems and solution at Otway Health by 2017

Otway Health will continue to uphold our environmental performance responsibilities as we carry on providing an outstanding health care service for our rural community. We aim to continue to work towards strengthening our focus and response to minimising our environmental impact in the future, working together to meet our vision to achieve a healthy, safe and secure community.

Consultancies over $10,000In 2016/17, there was 1 consultancy costing in excess of $10,000 (exclusive of GST) which was undertaken by CWH Mediation & Workplace Relations Pty Ltd, for the Organisational Culture Review to the value of $15,018 (exclusive of GST).

Consultancies under $10,000In 2016/17 there were 5 consultancies costing less than $10,000 (exclusive of GST) per consultancy, with a total cost of $26,499 (exclusive of GST).

Expenditure on Government AdvertisingIn the 2016/17 reporting period Otway Health had no expenditure on government advertising.

National Competition PolicyDuring 2016/17 Otway Health complied with the degree applicable with the National Competition Policy including the Competitive Neutrality Policy Victoria and subsequent reforms. Payroll, accountancy, and cleaning services have been externally contracted. These contracts have continued in the 2016/17 financial year.


Information and Communications Technology (ICT) ExpenditureDetails of Otway Health’s Information and Communication Technology (ICT) expenditure for 2016/17. The total ICT expenditure incurred during 2016/17 is $357,453 (excluding GST) with the details shown below.

Business As Usual (BAU) ICT expenditure Total (excluding GST)

Non Business As Usual (Non BAU) ICT expenditure Total = Operational Expenditure + Capital Expenditure (excluding GST)

Operational Expenditure (excluding GST)

Capital Expenditure (excluding GST)

$333,856 $23,597 $19,915 $3,682

Occupational ViolenceOtway Health is committed to addressing occupational violence incidences. During the 2016/17 reporting period, there were 0 incidents registered.

Occupational Violence Statistics 2016-17

1. Workcover accepted claims with an occupational violence cause per 100 FTE 0

2. Number of accepted Workcover claims with lost time injury with an occupational violence cause per 1,000,000 hours worked.

0

3. Number of occupational violence incidents reported 2

4. Number of occupational violence incidents reported per 100 FTE 3.61

5. Percentage of occupational violence incidents resulting in a staff injury, illness or condition

0

Additional Information Available on RequestConsistent with FRD 22H (Section 6.19) the Report of Operations should confirm that details in respect of the items listed below have been retained by Otway Health and are available to the relevant Ministers, Members of Parliament and the public on request (subject to the freedom of information requirements, if applicable):

(a) Declarations of pecuniary interests have been duly completed by all relevant officers

(b) Details of shares held by senior officers as nominee or held beneficially

(c) Details of publications produced by the entity about itself, and how these can be obtained

(d) Details of changes in prices, fees, charges, rates and levies charged by the Health Service

(e) Details of any major external reviews carried out on the Health Service

(f) Details of major research and development activities undertaken by the Health Service that are not otherwise covered either in the report of operations or in a document that contains the financial statements and report of operations

(g) Details of overseas visits undertaken including a summary of the objectives and outcomes of each visit;

(h) Details of major promotional, public relations and marketing activities undertaken by the Health Service to develop community awareness of the Health Service and its services


(i) Details of assessments and measures undertaken to improve the occupational health and safety of employees

(j) General statement on industrial relations within the Health Service and details of time lost through industrial accidents and disputes, which is not otherwise detailed in the report of operations

(k) A list of major committees sponsored by the Health Service, the purposes of each committee and the extent to which those purposes have been achieved

(l) Details of all consultancies and contractors including consultants/contractors engaged, services provided, and expenditure committed for each engagement

Disclosure IndexThe annual report of the Otway Health is prepared in accordance with all relevant Victorian legislation. This index has been prepared to facilitate identification of the Department’s compliance with statutory disclosure requirements.

Legislation Requirement Page Reference

Ministerial Directions

Report of Operations

Charter and purpose

FRD 22H Manner of establishment and the relevant Ministers 2, 3

FRD 22H Purpose, functions, powers and duties 6, 7

FRD 22H Initiatives and key achievements 13, 14, 15, 16

FRD 22H Nature and range of services provided 10

Management and structure

FRD 22H Organisational structure 8, 9

Financial and other information

FRD 10A Disclosure index 24, 25

FRD 11A Disclosure of exgratia expenses N/A

FRD 21C Responsible person and executive officer disclosures 2

FRD 22H Application and operation of Protected Disclosure 2012 20

FRD 22H Application and operation of Carers Recognition Act 2012 21

FRD 22H Application and operation of Freedom of Information Act 1982 20

FRD 22H Compliance with building and maintenance provisions of Building Act 1993 20

FRD 22H Details of consultancies over $10,000 22

FRD 22H Details of consultancies under $10,000 22

FRD 22H Employment and conduct principles 9

FRD 22H Information and communication technology expenditure 23


Legislation Requirement Page Reference

FRD 22H Major changes or factors affecting performance N/A

FRD 22H Occupational violence 23

FRD 22H Operational and budgetary objectives and performance against objectives

N/A

FRD 24C Reporting of office-based environmental impacts 22

FRD 22H Significant changes in financial position during the year N/A

FRD 22H Statement on national competition policy 22

FRD 22H Subsequent events 56

FRD 22H Summary of the financial results for the year 26, 27

FRD 22H Additional information available on request 23, 24

FRD 22H Workforce data disclosures including a statement on the application of employment and conduct principles

9, 19, 23

FRD 25C Victorian industry participation policy disclosures 21

FRD 29B Workforce data disclosures 19

FRD 103F Non-financial physical assets 46

FRD 110A Cash flow statements 54, 55

FRD 112D Defined benefit superannuation obligations 42

SD 5.2.3 Declaration in report of operations 28, 29

SD 3.7.1 Risk management framework and processes 21

Other requirements under Standing Directions 5.2

SD 5.2.2 Declaration in financial statements 30

SD 5.2.1(a) Compliance with Australian accounting standards and other authoritative pronouncements

28

SD 5.2.1(a) Compliance with ministerial directions 21

Legislation

Freedom of Information Act 1982 20

Protected Disclosure Act 2012 20

Carers Recognition Act 2012 21

Victorian Industry Participation Policy Act 2003 21

Building Act 1993 20

Financial Management Act 1994 2

Safe Patient Care Act 2015 21


OTWAY HEALTH

REPORTING

KEY FINANCIAL AND SERVICE

Key Financial and Service ReportingThe financial year of 2016/17 saw the implementation of a financial management improvement plan to create financial sustainability for Otway Health.

Otway Health is a multiple-purpose health service, a model implemented in Apollo Bay more than 20 years ago. Being funded by both Commonwealth and State Government involves complex and comprehensive policy and funding guidelines for reporting. Changes in modelling and funding including Primary Health Care continue to herald significate challenges for Otway Health. Management continue to undertake reviews of how to do business and highlight opportunities.

With Otway Health successful in many grant applications in 2016/17, an increase to the operating profit was experienced with the implementation of these projects falling over the end of this financial year. They will now be budgeted for expenditure in the next financial year.

The end of year current asset ratio was 1.44. Management of creditors and debtors continue to be fully compliant in all forms of financial management.

Financial Summary

Financial Review 2017 2016 2015 2014 2013

Total Revenue 8,283,004 7,198,834 7,039,930 6,342,934 6,927,434

Total Expenses 7,909,677 7,704,905 7,346,987 6,898,840 6,665,209

Net Result for the year (inc. capital and specific items)

373,327 (506,071) (307,057) (555,906) 262,225

Retained Surplus/ (Accumulate Deficit)

3,585,157 3,211,828 3,717,901 4,024,958 4,580,864

Total Assets 16,376,148 16,038,018 15,872,280 16,118,646 15,107,759

Total Liabilities 3,800,095 3,835,293 3,163,482 3,102,791 3,430,194

Net Assets 12,576,053 12,202,726 12,708,798 13,015,855 11,677,565

Total Equity 12,576,053 12,202,726 12,708,798 13,015,855 11,677,565


Financial Sustainability Performance

Operating Result

2016/17 Target Actual

Annual Operating Result ($m) - 0.10 0.37

Cash Management


Creditors < 60 days 51 days

Debtors < 60 days 38 days

Adjusted Current Asset Ratio 0.70 1.44

Days of Available Cash 14 days 245 days

Asset Management


Asset Management Plan Full compliance Achieved


Independent Auditor’s Report To the Board of Otway Health

Opinion I have audited the financial report of Otway Health (the health service) which comprises the:

balance sheet as at 30 June 2017 comprehensive operating statement for the year then ended statement of changes in equity for the year then ended cashflow statement for the year then ended notes to the financial statements, including a summary of significant accounting

policies board member's, accountable officer's and chief finance & accounting officer's

declaration.

In my opinion the financial report presents fairly, in all material respects, the financial position of the health service as at 30 June 2017 and their financial performance and cash flows for the year then ended in accordance with the financial reporting requirements of Part 7 of the Financial Management Act 1994 and applicable Australian Accounting Standards.

Basis for Opinion

I have conducted my audit in accordance with the Audit Act 1994 which incorporates the Australian Auditing Standards. My responsibilities under the Act are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of my report.

My independence is established by the Constitution Act 1975. My staff and I are independent of the health service in accordance with the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to my audit of the financial report in Australia. My staff and I have also fulfilled our other ethical responsibilities in accordance with the Code.

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

Board’s responsibilities for the financial report

The Board of the health service is responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards and the Financial Management Act 1994, and for such internal control as the Board determines is necessary to enable the preparation and fair presentation of a financial report that is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the Board is responsible for assessing the health service’s ability to continue as a going concern, and using the going concern basis of accounting unless it is inappropriate to do so.


2

Auditor’s responsibilities for the audit of the financial report

As required by the Audit Act 1994, my responsibility is to express an opinion on the financial report based on the audit. My objectives for the audit are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

As part of an audit in accordance with the Australian Auditing Standards, I exercise professional judgement and maintain professional scepticism throughout the audit. I also:

identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

obtain an understanding of internal control relevant to the audit 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 health service’s internal control

evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board

conclude on the appropriateness of the Board’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the health service’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor’s report. However, future events or conditions may cause the health service to cease to continue as a going concern.

evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.

I communicate with the Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

MELBOURNE 29 August 2017

Ron Mak as delegate for the Auditor-General of Victoria


OTWAY HEALTH

Board Member's, accountable officer's and chief finance & accounting officer's declaration

The attached financial statements for Otway Health have been prepared in accordance with Standing Direction 5.2 of the Financial Management Act 1994, applicable Financial Reporting Directions, Australian Accounting Standards, including interpretations 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 accompanying notes, presents fairly the financial transactions during the year ended 30 June 2017 and the financial position of Otway Health at 30 June 2017.

At the time of signing, we are not aware of any circumstances which would render any particulars included in the financial statements to be misleading or inaccurate.

We authorise the attached financial statements for issue on this day.

NICHOLAS SALKELD Board Chair

KATHERINE GILLAN Accountable Officer

HELEN HEALY Chief Finance and Accounting Officer

Dated the 24th day of August, 2017.


OTWAY HEALTH

COMPREHENSIVE OPERATING STATEMENT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

Note 2017 2016 $ $

Revenue from Operating Activities 2.1 7,377,369 6,629,540 Revenue from Non-operating Activities 2.1 248,897 237,513 Employee Expenses 3.1 (4,973,590) (5,099,888) Non Salary Labour Costs 3.1 (399,931) (173,795) Supplies & Consumables 3.1 (132,544) (157,886) Other Expenses 3.1 (1,744,353) (1,546,885) Net result before capital and specific Items 375,848 (111,401)

Capital Purpose Income 2.1 656,738 267,292 Impairment of Non-Financial Assets 3.1 (2,127) - Depreciation and Amortisation 4.5 (671,524) (651,884) Finance Costs 3.2 (11,350) (13,182) Net result after capital and specific items 347,585 (509,174)

Other economic flows included in net result

Net gain/(loss) on non-financial assets 7.2 - 10,832 Revaluation of long service leave 25,742 (7,729) Total other economic flows included in net result 25,742 3,103 NET RESULT FOR THE YEAR 373,327 (506,071) Comprehensive Result

373,327 (506,071)

This statement should be read in conjunction with the accompanying notes Page 2


OTWAY HEALTH

BALANCE SHEET AS AT 30 JUNE 2017

Note 2017 2016 $ $

ASSETS Current Assets Cash and Cash Equivalents 6.2 925,256 849,726 Receivables 5.1 918,910 806,536 Investments and other Financial Assets 4.1 3,502,913 2,933,099 Prepayments 5.3 62,614 11,178 Total Current Assets 5,409,693 4,600,539 Non-Current Assets

Investments Accounted for using the Equity Method 4.2 (616) (616) Property, Plant & Equipment 4.4 10,967,071 11,438,095 Total Non-Current Assets 10,966,455 11,437,479 TOTAL ASSETS

16,376,148

16,038,018

LIABILITIES

Current Liabilities Payables 5.4 984,111 602,754 Borrowings 6.1 83,855 95,185 Provisions 3.3 737,998 800,069 Other Current Liabilities 5.2 1,790,894 1,955,447 Total Current Liabilities 3,596,858 3,453,455 Non-Current Liabilities

Borrowings 6.1 101,710 129,573 Provisions 3.3 101,527 252,264 Total Non-Current Liabilities 203,237 381,837 TOTAL LIABILITIES

3,800,095

3,835,292

NET ASSETS

12,576,053

12,202,726

EQUITY

Property, Plant & Equipment Asset Revaluation Reserve 8.1 4,513,024 4,513,024 Asset Replacement Reserve 8.1 185,902 185,902 Restricted Specific Purpose Reserve 8.1 504,427 504,427 Contributed Capital 8.1 3,787,544 3,787,544 Accumulated Surpluses 8.1 3,585,156 3,211,829

TOTAL EQUITY 12,576,053 12,202,726 Contingent Liabilities and Contingent Assets

7.3

Commitments for Expenditure 6.3

This statement should be read in conjuction with the accompanying notes Page 3

OTWAY HEALTH

BALANCE SHEET AS AT 30 JUNE 2017

Note 2017 2016 $ $

ASSETS Current Assets Cash and Cash Equivalents 6.2 925,256 849,726 Receivables 5.1 918,910 806,536 Investments and other Financial Assets 4.1 3,502,913 2,933,099 Prepayments 5.3 62,614 11,178 Total Current Assets 5,409,693 4,600,539 Non-Current Assets

Investments Accounted for using the Equity Method 4.2 (616) (616) Property, Plant & Equipment 4.4 10,967,071 11,438,095 Total Non-Current Assets 10,966,455 11,437,479 TOTAL ASSETS

16,376,148

16,038,018

LIABILITIES

Current Liabilities Payables 5.4 984,111 602,754 Borrowings 6.1 83,855 95,185 Provisions 3.3 737,998 800,069 Other Current Liabilities 5.2 1,790,894 1,955,447 Total Current Liabilities 3,596,858 3,453,455 Non-Current Liabilities

Borrowings 6.1 101,710 129,573 Provisions 3.3 101,527 252,264 Total Non-Current Liabilities 203,237 381,837 TOTAL LIABILITIES

3,800,095

3,835,292

NET ASSETS

12,576,053

12,202,726

EQUITY

Property, Plant & Equipment Asset Revaluation Reserve 8.1 4,513,024 4,513,024 Asset Replacement Reserve 8.1 185,902 185,902 Restricted Specific Purpose Reserve 8.1 504,427 504,427 Contributed Capital 8.1 3,787,544 3,787,544 Accumulated Surpluses 8.1 3,585,156 3,211,829

TOTAL EQUITY 12,576,053 12,202,726 Contingent Liabilities and Contingent Assets

7.3

Commitments for Expenditure 6.3

This statement should be read in conjuction with the accompanying notes Page 3


OTWAY HEALTH

STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

Property, Plant & Equipment Revaluation

Surplus

Restricted Purpose Reserves

Asset Replacement

Reserves

Contribution by Owners

Accumulated Surplus / (Deficits) Total

Note $ $ $ $ $ $

Balance at 1 July 2015 4,513,024 504,427 185,902 3,787,544 3,717,900 12,708,797

Net Result for the year

- - - - (506,071) (506,071)

Balance at 30 June 2016 8.1 4,513,024 504,427 185,902 3,787,544 3,211,829 12,202,726 Net Result for the year

-

-

-

-

373,327

373,327

Balance at 30 June 2017 8.1 4,513,024 504,427 185,902 3,787,544 3,585,156 12,576,053

This statements shuld be read in conjunction with the accompanying notes Page 4

OTWAY HEALTH

STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

Property, Plant & Equipment Revaluation

Surplus

Restricted Purpose Reserves

Asset Replacement

Reserves

Contribution by Owners

Accumulated Surplus / (Deficits) Total

Note $ $ $ $ $ $

Balance at 1 July 2015 4,513,024 504,427 185,902 3,787,544 3,717,900 12,708,797

Net Result for the year

- - - - (506,071) (506,071)

Balance at 30 June 2016 8.1 4,513,024 504,427 185,902 3,787,544 3,211,829 12,202,726 Net Result for the year

-

-

-

-

373,327

373,327

Balance at 30 June 2017 8.1 4,513,024 504,427 185,902 3,787,544 3,585,156 12,576,053

This statements shuld be read in conjunction with the accompanying notes Page 4


OTWAY HEALTH

CASHFLOW STATEMENT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

Note 2017 2016

$ $

CASH FLOWS FROM OPERATING ACTIVITIES

Operating grants from government 6,579,777 5,148,582 Capital Grants from Government 640,991 260,649

Patient and resident fees received 323,325 403,819

Donations & bequests received 259,228 204,541

Interest received 82,552 97,140

Capital Donations and Bequests Received 28,561 30,154

Other receipts 1,412,814 1,138,521

GST received from/(paid to) ATO 84,838 112,896 Total receipts 9,412,086 7,396,302

Employee expenses paid (5,160,656) (5,206,688)

Non salary labour costs (399,931) (173,795) Payments for supplies & consumables (132,544) (157,885) Finance costs (11,350) (13,182) Other payments (2,655,888) (1,778,498) Total payments (8,360,369) (7,330,048)

NET CASH FLOW FROM/(USED IN) OPERATING ACTIVITIES 8.2 1,051,717 66,254

CASH FLOWS FROM INVESTING ACTIVITIES

Payments for Non-Financial Assets (202,627) (337,528) Proceeds from Sale of Non-Financial Assets - 64,489 Purchase of Investments (734,367) - Proceeds from Sale of Investments - 548,516

NET CASH FLOW FROM/(USED IN) INVESTING ACTIVITIES (936,994) 275,477

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of Borrowings (39,193) -

NET CASH INFLOW FROM FINANCING ACTIVITIES (39,193) -

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS HELD 75,530 341,731

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 849,726 507,995

CASH AND CASH EQUIVALENTS AT END OF YEAR 6.2 925,256 849,726

This Statement should be read in conjunction with the accompanying notes Page 5

OTWAY HEALTH

CASHFLOW STATEMENT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

Note 2017 2016

$ $

CASH FLOWS FROM OPERATING ACTIVITIES

Operating grants from government 6,579,777 5,148,582 Capital Grants from Government 640,991 260,649

Patient and resident fees received 323,325 403,819

Donations & bequests received 259,228 204,541

Interest received 82,552 97,140

Capital Donations and Bequests Received 28,561 30,154

Other receipts 1,412,814 1,138,521

GST received from/(paid to) ATO 84,838 112,896 Total receipts 9,412,086 7,396,302

Employee expenses paid (5,160,656) (5,206,688)

Non salary labour costs (399,931) (173,795) Payments for supplies & consumables (132,544) (157,885) Finance costs (11,350) (13,182) Other payments (2,655,888) (1,778,498) Total payments (8,360,369) (7,330,048)

NET CASH FLOW FROM/(USED IN) OPERATING ACTIVITIES 8.2 1,051,717 66,254

CASH FLOWS FROM INVESTING ACTIVITIES

Payments for Non-Financial Assets (202,627) (337,528) Proceeds from Sale of Non-Financial Assets - 64,489 Purchase of Investments (734,367) - Proceeds from Sale of Investments - 548,516

NET CASH FLOW FROM/(USED IN) INVESTING ACTIVITIES (936,994) 275,477

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of Borrowings (39,193) -

NET CASH INFLOW FROM FINANCING ACTIVITIES (39,193) -

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS HELD 75,530 341,731

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 849,726 507,995

CASH AND CASH EQUIVALENTS AT END OF YEAR 6.2 925,256 849,726

This Statement should be read in conjunction with the accompanying notes Page 5


OTWAY HEALTH NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2017

Page 6

Contents

Note 1

Summary of significant accounting policies Page

7

2 Funding delivery of our services 9 2.1 Analysis of revenue by source 9

3 The cost of delivery of our services 10 3.1 Analysis of expenses by source 10 3.2 Finance costs 11 3.3 Employee benefits in the balance sheet 12 3.4 Superannuation 13

4 Key assets to support service delivery 14 4.1 Investments and other financial assets 14 4.2 Investments accounted for using the equity method 15 4.3 Jointly Controlled Operations and Assets 16 4.4 Property, plant & equipment 17 4.5 Depreciation 22

5 Other assets and liabilities 23 5.1 Receivables 23 5.2 Other liabilities 23 5.3 Prepayments and other non-financial assets 23 5.4 Payables 24

6 How we finance our operations 25 6.1 Borrowings 25 6.2 Cash and cash equivalents 26 6.3 Commitments for expenditure 26

7 Risks, contingents & valuation uncertainties 27 7.1 Financial Instruments 27 7.2 Net gain / (loss) on disposal of non-financial assets 32 7.3 Contingent assets and contingent liabilities 32 7.4 Fair value determinations 33

8 Other disclosures 34 8.1 Equity 34 8.2 Reconciliation of net result for the year to net cash inflow from operating activities 35 8.3 Responsible persons disclosures 35 8.4 Executive officer disclosures 36 8.5 Related parties 37 8.6 Remuneration of auditors 37 8.7 AASBs issued that are not yet effective 38 8.8 Events occuring after the balance date 39 8.9 Alternative presentation of comprehensive operating statement 39



Page 6

Contents

Note 1

Summary of significant accounting policies Page

7

2 Funding delivery of our services 9 2.1 Analysis of revenue by source 9

3 The cost of delivery of our services 10 3.1 Analysis of expenses by source 10 3.2 Finance costs 11 3.3 Employee benefits in the balance sheet 12 3.4 Superannuation 13

4 Key assets to support service delivery 14 4.1 Investments and other financial assets 14 4.2 Investments accounted for using the equity method 15 4.3 Jointly Controlled Operations and Assets 16 4.4 Property, plant & equipment 17 4.5 Depreciation 22

5 Other assets and liabilities 23 5.1 Receivables 23 5.2 Other liabilities 23 5.3 Prepayments and other non-financial assets 23 5.4 Payables 24

6 How we finance our operations 25 6.1 Borrowings 25 6.2 Cash and cash equivalents 26 6.3 Commitments for expenditure 26

7 Risks, contingents & valuation uncertainties 27 7.1 Financial Instruments 27 7.2 Net gain / (loss) on disposal of non-financial assets 32 7.3 Contingent assets and contingent liabilities 32 7.4 Fair value determinations 33

8 Other disclosures 34 8.1 Equity 34 8.2 Reconciliation of net result for the year to net cash inflow from operating activities 35 8.3 Responsible persons disclosures 35 8.4 Executive officer disclosures 36 8.5 Related parties 37 8.6 Remuneration of auditors 37 8.7 AASBs issued that are not yet effective 38 8.8 Events occuring after the balance date 39 8.9 Alternative presentation of comprehensive operating statement 39




Page 7

Basis of presentation

These financial statements are presented in Australian dollars and the historical cost convention is used unless a different measurement basis is specifically disclosed in the note associated with the item measured on a different basis.

The accrual basis of accounting has been applied in the preparation of these financial statements whereby assets, liabilities, equity, income and expenses are recognised in the reporting period to which they relate, regardless of when cash is received or paid.

Consistent with the requirements of AASB 1004 Contributions (that is contributed capital and its repayment) are treated as equity transactions and, therefore, do not form part of the income and expenses of the hospital.

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

Transfers of net assets arising from administrative restructurings are treated as distributions to or contribution by owners. Transfer of net liabilities arising from administrative restructurings are treated as distribution to owners.

Judgements, estimates and assumptions are required to be made about financial information being presented. The significant judgements made in the preparation of these financial statements are disclosed in the notes where amounts affected by those judgements are disclosed. 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.

Revisions to accounting estimates are recognised in the period in which the estimate is revised and also future periods that are affected by the revision. Judgements and assumptions made by management in applying the application of AASB that have significant effect on the financial statements and estimates are disclosed in the notes under the heading: 'Significant judgement or estimates'.



Page 7

Basis of presentation

These financial statements are presented in Australian dollars and the historical cost convention is used unless a different measurement basis is specifically disclosed in the note associated with the item measured on a different basis.

The accrual basis of accounting has been applied in the preparation of these financial statements whereby assets, liabilities, equity, income and expenses are recognised in the reporting period to which they relate, regardless of when cash is received or paid.

Consistent with the requirements of AASB 1004 Contributions (that is contributed capital and its repayment) are treated as equity transactions and, therefore, do not form part of the income and expenses of the hospital.

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

Transfers of net assets arising from administrative restructurings are treated as distributions to or contribution by owners. Transfer of net liabilities arising from administrative restructurings are treated as distribution to owners.

Judgements, estimates and assumptions are required to be made about financial information being presented. The significant judgements made in the preparation of these financial statements are disclosed in the notes where amounts affected by those judgements are disclosed. 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.

Revisions to accounting estimates are recognised in the period in which the estimate is revised and also future periods that are affected by the revision. Judgements and assumptions made by management in applying the application of AASB that have significant effect on the financial statements and estimates are disclosed in the notes under the heading: 'Significant judgement or estimates'.




Page 8

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These annual financial statements represent the audited general purpose financial statements for Otway Health for the period ending 30 June 2017. The purpose of the report is to provide users with information about the Health Services' stewardship of resources entrusted to it.

(a) Statement of Compliance

These financial statements are general purpose financial statements which have been prepared on in accordance with the Financial Management Act 1994 and applicable AASBs, which include interpretations issued by the Australian Accounting Standards Board (AASB). They are presented in a manner consistent with the requirements of AASB 101 Presentation of Financial Statements.

The financial statements also comply with relevant Financial Reporting Directions (FRDs) issued by the Department of Treasury and Finance, and relevant Standing Directions (SDs) authorised by the Minister for Finance.

The Health Service is a not-for profit entity and therefore applies the additional Aus paragraphs applicable to “not-for-profit” Health Services under the AASB's.

The annual financial statements were authorised for issue by the Board of the Health Service on August 24, 2017

(b) Reporting Entity The financial statements include all the controlled activities of Otway Health.

Its principle address is: 75 McLachlan Street Apollo Bay VIC 3233

A description of the nature of Otway Health's operations and its principal activities is included in the report of operations, which does not form part of these financial statements.

Objectives and funding Otway Health's overall objective is to provide a multi-purpose service to the community within the health service catchment area.

Otway Health is predominantly funded by way of Multi-Purpose grant for the provision of services.

(c) Basis of accounting preparation and measurement Accounting policies are selected and applied in a manner which 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 is reported.

The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2017, and the comparative information presented in these financial statements for the year ended 30 June 2016.

The going concern basis was used to prepare the financial statements.

These financial statements are presented in Australian dollars, the functional and presentation currency of the Health Service.

The financial statements, except for cash flow information, have been prepared using the accrual basis of accounting. Under the accrual basis, items are recognised as assets, liabilities, equity, income or expenses when they satisfy the definitions and recognition criteria for those items, that is they are recognised in the reporting period to which they relate, regardless of when cash is received or paid.

The financial statements are prepared in accordance with the historical cost convention, except for:

• non-current physical assets, which subsequent to acquisition, are measured at a revalued amount being their fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent impairment losses. Revaluations are made and are re-assessed when new indices are published by the Valuer General to ensure that the carrying amounts do not materially differ from their fair values;

• The fair value of assets other than land is generally based on their depreciated replacement value.

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.



Page 8

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These annual financial statements represent the audited general purpose financial statements for Otway Health for the period ending 30 June 2017. The purpose of the report is to provide users with information about the Health Services' stewardship of resources entrusted to it.

(a) Statement of Compliance

These financial statements are general purpose financial statements which have been prepared on in accordance with the Financial Management Act 1994 and applicable AASBs, which include interpretations issued by the Australian Accounting Standards Board (AASB). They are presented in a manner consistent with the requirements of AASB 101 Presentation of Financial Statements.

The financial statements also comply with relevant Financial Reporting Directions (FRDs) issued by the Department of Treasury and Finance, and relevant Standing Directions (SDs) authorised by the Minister for Finance.

The Health Service is a not-for profit entity and therefore applies the additional Aus paragraphs applicable to “not-for-profit” Health Services under the AASB's.

The annual financial statements were authorised for issue by the Board of the Health Service on August 24, 2017

(b) Reporting Entity The financial statements include all the controlled activities of Otway Health.

Its principle address is: 75 McLachlan Street Apollo Bay VIC 3233

A description of the nature of Otway Health's operations and its principal activities is included in the report of operations, which does not form part of these financial statements.

Objectives and funding Otway Health's overall objective is to provide a multi-purpose service to the community within the health service catchment area.

Otway Health is predominantly funded by way of Multi-Purpose grant for the provision of services.

(c) Basis of accounting preparation and measurement Accounting policies are selected and applied in a manner which 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 is reported.

The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2017, and the comparative information presented in these financial statements for the year ended 30 June 2016.

The going concern basis was used to prepare the financial statements.

These financial statements are presented in Australian dollars, the functional and presentation currency of the Health Service.

The financial statements, except for cash flow information, have been prepared using the accrual basis of accounting. Under the accrual basis, items are recognised as assets, liabilities, equity, income or expenses when they satisfy the definitions and recognition criteria for those items, that is they are recognised in the reporting period to which they relate, regardless of when cash is received or paid.

The financial statements are prepared in accordance with the historical cost convention, except for:

• non-current physical assets, which subsequent to acquisition, are measured at a revalued amount being their fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent impairment losses. Revaluations are made and are re-assessed when new indices are published by the Valuer General to ensure that the carrying amounts do not materially differ from their fair values;

• The fair value of assets other than land is generally based on their depreciated replacement value.

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.


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FOR THE YEAR ENDING 30 JUNE 2017

Note 2: Funding delivery of our services

Note 2.1: Analysis of Revenue by Source Other MPS 2017

Other MPS 2016

Total 2017

Total 2016

$ $ $ $

Government Grants 5,445,811 4,632,788 5,445,811 4,632,788 Indirect Contributions by Department of Health and Human Services 10,108 8,816 10,108 8,816 Patient and Resident Fees 309,428 430,877 309,428 430,877 Donations & Bequests (non capital) 259,228 204,541 259,228 204,541 Childcare fees 240,796 219,447 240,796 219,447 SWARH joint venture revenue 715,648 711,614 715,648 711,614 Other Revenue from Operating Activities 396,350 421,458 396,350 421,458 Total revenue from Operating Activities 7,377,369 6,629,540 7,377,369 6,629,540

Interest 82,552 88,242 82,552 88,242 Other Revenue from Non-Operating Actitivies 166,345 149,271 166,345 149,271 Total revenue from Non-Operating Activies 248,897 237,513 248,897 237,513

Capital Purpose Income (excluding interest) 656,738 267,292 656,738 267,292 Total Capital Purpose Income 656,738 267,292 656,738 267,292 Net gain/(loss) non financial assets (note 7.2) - 10,832 - 10,832

Total Revenue 8,283,004 7,145,178 8,283,004 7,145,178

The Department of Health and Human Services makes certain payments on behalf of the health service. These amounts have been brought to account in determining the operating result for the year by recording them as revenue and expenses.

Income is recognised in accordance with AASB 118 Revenue and is recognised as to the extent that it is probable that the economic benefits will flow to Otway Health and the income can be reliably measured at fair value. Unearned income at reporting date is reported as income received in advance.

Amounts disclosed as revenue are where applicable, net of returns, allowances and duties and taxes.

Government Grants and other transfers of income (other than contributions by owners) In accordance with AASB 1004 Contributions, government grants and other transfers of income (other than contributions by owners) are recognised as income when the Health Service gains control of the underlying assets irrespective of whether conditions are imposed on the Health Service’s use of the contributions.

Contributions are deferred as income in advance when the Health Service has a present obligation to repay them and the present obligation can be reliably measured.

Indirect Contributions from the Department of Health and Human Services • Insurance is recognised as revenue following advice from the Department of Health and Human Services. • Long Service Leave (LSL) – Revenue is recognised upon finalisation of movements in LSL liability in line with the arrangements set out in the Metropolitan Health and Aged Care Services Division Hospital Circular 04/2017 (update for 2016-17).

Patient and Resident Fees Patient fees are recognised as revenue at the time invoices are raised.

Donations and Other Bequests Donations and bequests are recognised as revenue when received. If donations are for a special purpose, they may be appropriated to a surplus, such as the specific restricted purpose surplus.

Interest Revenue Interest revenue is recognised on a time proportionate basis that takes in account the effective yield of the financial asset, which allocates interest over the relevant period.

Otway Health's overall objective is to deliver programs and services that support and enhance the wellbeing of all Victorians. To enable the health service to fulfill its objective it receives income based on parliamentary appropriations. The health service also receives income from the supply of services. Structure 2.1 Analysis of revenue by source

Page 9



Note 2: Funding delivery of our services

Note 2.1: Analysis of Revenue by Source Other MPS 2017

Other MPS 2016

Total 2017

Total 2016

$ $ $ $

Government Grants 5,445,811 4,632,788 5,445,811 4,632,788 Indirect Contributions by Department of Health and Human Services 10,108 8,816 10,108 8,816 Patient and Resident Fees 309,428 430,877 309,428 430,877 Donations & Bequests (non capital) 259,228 204,541 259,228 204,541 Childcare fees 240,796 219,447 240,796 219,447 SWARH joint venture revenue 715,648 711,614 715,648 711,614 Other Revenue from Operating Activities 396,350 421,458 396,350 421,458 Total revenue from Operating Activities 7,377,369 6,629,540 7,377,369 6,629,540

Interest 82,552 88,242 82,552 88,242 Other Revenue from Non-Operating Actitivies 166,345 149,271 166,345 149,271 Total revenue from Non-Operating Activies 248,897 237,513 248,897 237,513

Capital Purpose Income (excluding interest) 656,738 267,292 656,738 267,292 Total Capital Purpose Income 656,738 267,292 656,738 267,292 Net gain/(loss) non financial assets (note 7.2) - 10,832 - 10,832

Total Revenue 8,283,004 7,145,178 8,283,004 7,145,178

The Department of Health and Human Services makes certain payments on behalf of the health service. These amounts have been brought to account in determining the operating result for the year by recording them as revenue and expenses.

Income is recognised in accordance with AASB 118 Revenue and is recognised as to the extent that it is probable that the economic benefits will flow to Otway Health and the income can be reliably measured at fair value. Unearned income at reporting date is reported as income received in advance.

Amounts disclosed as revenue are where applicable, net of returns, allowances and duties and taxes.

Government Grants and other transfers of income (other than contributions by owners) In accordance with AASB 1004 Contributions, government grants and other transfers of income (other than contributions by owners) are recognised as income when the Health Service gains control of the underlying assets irrespective of whether conditions are imposed on the Health Service’s use of the contributions.

Contributions are deferred as income in advance when the Health Service has a present obligation to repay them and the present obligation can be reliably measured.

Indirect Contributions from the Department of Health and Human Services • Insurance is recognised as revenue following advice from the Department of Health and Human Services. • Long Service Leave (LSL) – Revenue is recognised upon finalisation of movements in LSL liability in line with the arrangements set out in the Metropolitan Health and Aged Care Services Division Hospital Circular 04/2017 (update for 2016-17).

Patient and Resident Fees Patient fees are recognised as revenue at the time invoices are raised.

Donations and Other Bequests Donations and bequests are recognised as revenue when received. If donations are for a special purpose, they may be appropriated to a surplus, such as the specific restricted purpose surplus.

Interest Revenue Interest revenue is recognised on a time proportionate basis that takes in account the effective yield of the financial asset, which allocates interest over the relevant period.

Otway Health's overall objective is to deliver programs and services that support and enhance the wellbeing of all Victorians. To enable the health service to fulfill its objective it receives income based on parliamentary appropriations. The health service also receives income from the supply of services. Structure 2.1 Analysis of revenue by source




Note 2.1: Analysis of Revenue by Source (Cont.)

Page 10

Sale of investments The gain/loss on the sale of investments is recognised when the investment is realised.

Other income Other income includes non-property rental, dividends, forgiveness of liabilities, and bad debt reversals.

Category groups Otway Health provides services supported by a Multi Purpose Service (MPS) agreement. Accordingly it is not possible to analyse revenue by source as it is at the discretion of the Board of Management as to how to allocate grant income received. As a MPS Otway Health is not required to provide segment information in relation to its Residential Aged Care Service (RACS).

Note 3: The Cost of delivering services

Note 3.1: Analysis of Expenses by Source Other

MPS 2017

Other MPS 2016

Total 2017

Total 2016

$ $ $ $ Employee Expenses 4,973,590 5,099,888 4,973,590 5,099,888 Other Operating Expenses

Non Salary Labour Costs 399,931 173,795 399,931 173,795 Supplies & Consumables 132,544 157,886 132,544 157,886 Other Expenses

SWARH IT expenses 665,247 626,812 665,247 626,812 Domestic Services & Supplies 122,733 128,041 122,733 128,041 Fuel, Light, Power & Water 67,345 64,335 67,345 64,335 Insurance costs funded by DHS 10,108 8,816 10,108 8,816 Motor Vehicle Expenses 35,749 27,639 35,749 27,639 Repairs & Maintenance 130,653 93,930 130,653 93,930 Maintenance Contracts 46,256 38,887 46,256 38,887 Other Expenses from Continuing Operations 666,262 558,424 666,262 558,424

Total other expenses 1,744,353 1,546,885 1,744,353 1,546,885 Total Expenditure from Operating Activities 7,250,418 6,978,454 7,250,418 6,978,454

Depreciation & Amortisation (refer note 4.5) 671,524 651,884 671,524 651,884 Impairment of Non-Financial Assets 2,127 - 2,127 - Finance costs (refer note 3.2) 11,350 13,182 11,350 13,182 Total other expenses 685,001 665,066 685,001 665,066

Total Expenses 7,935,419 7,643,520 7,935,419 7,643,520

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

Employee expenses Employee expenses include: • wages and salaries; • fringe benefits tax; • leave entitlements; • termination payments; • workcover premiums; and • superannuation expenses which are reported differently depending upon whether employees are members of defined contribution plans.

This section provides an account of the expenses incurred by the Otway Health in delivering services and outputs. In Section 2, the funds that enable the provision of services were disclosed and in this note the costs associated with provision of services are recorded. Structure 3.1 Analysis of expenses by source 3.2 Finance costs 3.3 Employee benefits in the balance sheet 3.4 Superannuation



Note 2.1: Analysis of Revenue by Source (Cont.)

Page 10

Sale of investments The gain/loss on the sale of investments is recognised when the investment is realised.

Other income Other income includes non-property rental, dividends, forgiveness of liabilities, and bad debt reversals.

Category groups Otway Health provides services supported by a Multi Purpose Service (MPS) agreement. Accordingly it is not possible to analyse revenue by source as it is at the discretion of the Board of Management as to how to allocate grant income received. As a MPS Otway Health is not required to provide segment information in relation to its Residential Aged Care Service (RACS).

Note 3: The Cost of delivering services

Note 3.1: Analysis of Expenses by Source Other

MPS 2017

Other MPS 2016

Total 2017

Total 2016

$ $ $ $ Employee Expenses 4,973,590 5,099,888 4,973,590 5,099,888 Other Operating Expenses

Non Salary Labour Costs 399,931 173,795 399,931 173,795 Supplies & Consumables 132,544 157,886 132,544 157,886 Other Expenses

SWARH IT expenses 665,247 626,812 665,247 626,812 Domestic Services & Supplies 122,733 128,041 122,733 128,041 Fuel, Light, Power & Water 67,345 64,335 67,345 64,335 Insurance costs funded by DHS 10,108 8,816 10,108 8,816 Motor Vehicle Expenses 35,749 27,639 35,749 27,639 Repairs & Maintenance 130,653 93,930 130,653 93,930 Maintenance Contracts 46,256 38,887 46,256 38,887 Other Expenses from Continuing Operations 666,262 558,424 666,262 558,424

Total other expenses 1,744,353 1,546,885 1,744,353 1,546,885 Total Expenditure from Operating Activities 7,250,418 6,978,454 7,250,418 6,978,454

Depreciation & Amortisation (refer note 4.5) 671,524 651,884 671,524 651,884 Impairment of Non-Financial Assets 2,127 - 2,127 - Finance costs (refer note 3.2) 11,350 13,182 11,350 13,182 Total other expenses 685,001 665,066 685,001 665,066

Total Expenses 7,935,419 7,643,520 7,935,419 7,643,520

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

Employee expenses Employee expenses include: • wages and salaries; • fringe benefits tax; • leave entitlements; • termination payments; • workcover premiums; and • superannuation expenses which are reported differently depending upon whether employees are members of defined contribution plans.

This section provides an account of the expenses incurred by the Otway Health in delivering services and outputs. In Section 2, the funds that enable the provision of services were disclosed and in this note the costs associated with provision of services are recorded. Structure 3.1 Analysis of expenses by source 3.2 Finance costs 3.3 Employee benefits in the balance sheet 3.4 Superannuation


Page 11



Note 3.1: Analysis of Expenses by Source (Cont.)

Other operating expenses Other operating expenses generally represent the day-to-day running costs incurred in normal operations and include:

Supplies and consumables Supplies and services costs which are recognised as an expense in the reporting period in which they are incurred. The carrying amounts of any inventories held for distribution are expensed when distributed.

Bad and doubtful debts Refer to Note 4.1 Investments and other financial assets.

Fair value of assets, services and resources provided free of charge or for nominal consideration

Contributions of resources provided free of charge or for nominal consideration are recognised at their fair value when the transferee obtains control over them, irrespective of whether restrictions or conditions are imposed over the use of the contributions, unless received from another agency as a consequence of a restructuring of administrative arrangements. In the latter case, such a transfer will be recognised at its carrying value. Contributions in the form of services are only recognised when a fair value can be reliably determined and the services would have been purchased if not donated.

Share of net profits/ (losses) of associates and jointly controlled entities, excluding dividends. Refer to Note 4.2 Investments Accounted for Using the Equity Method

Other gains/ (losses) from other economic flows Other gains/ (losses) include: a. the revaluation of the present value of the long service leave liability due to changes in the bond rate movements, inflation rate movements and the impact of changes in probability factors; and b. transfer of amounts from the reserves to accumulated surplus or net result due to disposal or derecognition or reclassification.

Note 3.2: Finance Costs

2017 2016 $ $

Finance charges on SWARH finance leases 11,350 13,182 Total Finance Costs 11,350 13,182 Finance costs are recognised as expenses in the period in which they are incurred.

Finance costs include: – finance charges in respect of finance leases recognised in accordance with AASB 117 Leases.

Page 11



Note 3.1: Analysis of Expenses by Source (Cont.)

Other operating expenses Other operating expenses generally represent the day-to-day running costs incurred in normal operations and include:

Supplies and consumables Supplies and services costs which are recognised as an expense in the reporting period in which they are incurred. The carrying amounts of any inventories held for distribution are expensed when distributed.

Bad and doubtful debts Refer to Note 4.1 Investments and other financial assets.

Fair value of assets, services and resources provided free of charge or for nominal consideration

Contributions of resources provided free of charge or for nominal consideration are recognised at their fair value when the transferee obtains control over them, irrespective of whether restrictions or conditions are imposed over the use of the contributions, unless received from another agency as a consequence of a restructuring of administrative arrangements. In the latter case, such a transfer will be recognised at its carrying value. Contributions in the form of services are only recognised when a fair value can be reliably determined and the services would have been purchased if not donated.

Share of net profits/ (losses) of associates and jointly controlled entities, excluding dividends. Refer to Note 4.2 Investments Accounted for Using the Equity Method

Other gains/ (losses) from other economic flows Other gains/ (losses) include: a. the revaluation of the present value of the long service leave liability due to changes in the bond rate movements, inflation rate movements and the impact of changes in probability factors; and b. transfer of amounts from the reserves to accumulated surplus or net result due to disposal or derecognition or reclassification.

Note 3.2: Finance Costs

2017 2016 $ $

Finance charges on SWARH finance leases 11,350 13,182 Total Finance Costs 11,350 13,182 Finance costs are recognised as expenses in the period in which they are incurred.

Finance costs include: – finance charges in respect of finance leases recognised in accordance with AASB 117 Leases.


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Note 3.3: Employee benefits in the balance sheet Current Provisions

2017 $

2016 $

Annual Leave - Unconditional and expected to be utilised within 12 months

237,763

275,786

- Unconditional and expected to be utilised after 12 months 29,971 37,615 Long Service Leave

- Unconditional and expected to be utilised within 12 months 62,919 84,456 - Unconditional and expected to be utilised after 12 months 177,888 125,135

Accrued Days Off - Unconditional and expected to be utilised within 12 months 8,354 12,769

Accrued Wages and Salaries - Unconditional and expected to be utilised within 12 months 133,827 158,230

Provisions related to Employee Benefit On-costs - Unconditional and expected to be utilised within 12 months 59,167 83,220 - Unconditional and expected to be utilised after 12 months 28,109 22,858

Total Current Provisions 737,998 800,069 Non-Current Provisions

Conditional Long Service Leave Entitlements 92,403 228,130 Provisions related to Employee Benefit On-costs 9,124 24,134 Total Non-Current Provisions 101,527 252,264 Total Provisions 839,525 1,052,333 (a) Employee Benefits and Related On-Costs

Current Employee Benefits and related on-costs

Current

Unconditional Long Service Leave Entitlements 267,295 232,879 Accrued Wages and Salaries 133,827 158,230 Annual Leave 328,522 396,191 Accrued Days Off 8,354 12,769

737,998 800,069 Non-Current

Conditional Long Service Leave Entitlements 101,527 252,264 Total Employee Benefits and Related On-Costs 839,525 1,052,333 (b) Movements in Provisions:

Movement in Long Service Leave:

Balance July 1 461,009 596,926 Provision made during the year (14,955) 65,021 Settlement made during the year (102,974) (193,208) Revaluation of long service leave 25,742 (7,729) Balance June 30 368,822 461,009

Provisions Provisions are recognised when the Health Service 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 liability 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, using a discount rate that reflects the time value of money and risks specific to the provision.

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

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Note 3.3: Employee benefits in the balance sheet Current Provisions

2017 $

2016 $

Annual Leave - Unconditional and expected to be utilised within 12 months

237,763

275,786

- Unconditional and expected to be utilised after 12 months 29,971 37,615 Long Service Leave

- Unconditional and expected to be utilised within 12 months 62,919 84,456 - Unconditional and expected to be utilised after 12 months 177,888 125,135

Accrued Days Off - Unconditional and expected to be utilised within 12 months 8,354 12,769

Accrued Wages and Salaries - Unconditional and expected to be utilised within 12 months 133,827 158,230

Provisions related to Employee Benefit On-costs - Unconditional and expected to be utilised within 12 months 59,167 83,220 - Unconditional and expected to be utilised after 12 months 28,109 22,858

Total Current Provisions 737,998 800,069 Non-Current Provisions

Conditional Long Service Leave Entitlements 92,403 228,130 Provisions related to Employee Benefit On-costs 9,124 24,134 Total Non-Current Provisions 101,527 252,264 Total Provisions 839,525 1,052,333 (a) Employee Benefits and Related On-Costs

Current Employee Benefits and related on-costs

Current

Unconditional Long Service Leave Entitlements 267,295 232,879 Accrued Wages and Salaries 133,827 158,230 Annual Leave 328,522 396,191 Accrued Days Off 8,354 12,769

737,998 800,069 Non-Current

Conditional Long Service Leave Entitlements 101,527 252,264 Total Employee Benefits and Related On-Costs 839,525 1,052,333 (b) Movements in Provisions:

Movement in Long Service Leave:

Balance July 1 461,009 596,926 Provision made during the year (14,955) 65,021 Settlement made during the year (102,974) (193,208) Revaluation of long service leave 25,742 (7,729) Balance June 30 368,822 461,009

Provisions Provisions are recognised when the Health Service 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 liability 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, using a discount rate that reflects the time value of money and risks specific to the provision.

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

OTWAY HEALTH Annual Report 2016-2017 | 42Page 13



Employee benefits This provision arises for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave for services rendered to the reporting date.

Wages and salaries, annual leave, sick leave and accrued days off

Liabilities for wages and salaries, including non-monetary benefits, annual leave, and accumulating sick leave are all recognised in the provision for employee benefits as ‘current liabilities’, because the health service does not have an unconditional right to defer settlements of these liabilities.

Depending on the expectation of the timing of settlement, liabilities for wages and salaries, annual leave and sick leave are measured at: • Undiscounted value – if the health service expects to wholly settle within 12 months; or • Present value – if the health service does not expect to wholly settle within 12 months.

Long service leave (LSL) Liability for LSL is recognised in the provision for employee benefits. Unconditional LSL is disclosed in the notes to the financial statements as a current liability, even where the health service does not expect to settle the liability within 12 months because it will not have the unconditional right to defer the settlement of the entitlement should an employee take leave within 12 months. An unconditional right arises after a qualifying period.

The components of this current LSL liability are measured at: • Undiscounted value – if the health service expects to wholly settle within 12 months; and • Present value – where the entity does not expect to settle a component of this current liability 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 followed 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 estimations e.g. bond rate movements, inflation rate movements and changes in probability factors which are then recognised as other economic flow.

Termination benefits Termination benefits are payable when employment is terminated before the normal retirement date or when an employee decides to accept an offer of benefits in exchange for the termination of employment.

The health service recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy.

On-costs related to employee expense Provision for on-costs, such as payroll tax, workers compensation and superannuation are recognised together with provisions for employee benefits.

Note 3.4: Superannuation Defined contribution plans:

Paid Contributions 2017 2016

$ $

Contributions Outstanding 2017 2016

$ $ First State Super 229,758 249,908 - - Hesta 141,170 150,495 - - Self Managed Funds 15,749 14,841 - - Total 386,677 415,244 - -

Employees of the Health Service are entitled to receive superannuation benefits and Otway Health contributes to defined contribution plans.

Superannuation contributions paid or payable for the reporting period are included as part of employee benefits in the comprehensive operating statement of the Health Service.

Defined contribution superannuation plans In relation to defined contribution (i.e. accumulation) superannuation plans, the associated expense is simply the employer contributions that are paid or payable in respect of employees who are members of these plans during the reporting period. Contributions to defined contribution superannuation plans are expensed when incurred.

The name and details of the major employee superannuation funds and contributions made by Otway Health are disclosed above.

Page 13



Employee benefits This provision arises for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave for services rendered to the reporting date.

Wages and salaries, annual leave, sick leave and accrued days off

Liabilities for wages and salaries, including non-monetary benefits, annual leave, and accumulating sick leave are all recognised in the provision for employee benefits as ‘current liabilities’, because the health service does not have an unconditional right to defer settlements of these liabilities.

Depending on the expectation of the timing of settlement, liabilities for wages and salaries, annual leave and sick leave are measured at: • Undiscounted value – if the health service expects to wholly settle within 12 months; or • Present value – if the health service does not expect to wholly settle within 12 months.

Long service leave (LSL) Liability for LSL is recognised in the provision for employee benefits. Unconditional LSL is disclosed in the notes to the financial statements as a current liability, even where the health service does not expect to settle the liability within 12 months because it will not have the unconditional right to defer the settlement of the entitlement should an employee take leave within 12 months. An unconditional right arises after a qualifying period.

The components of this current LSL liability are measured at: • Undiscounted value – if the health service expects to wholly settle within 12 months; and • Present value – where the entity does not expect to settle a component of this current liability 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 followed 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 estimations e.g. bond rate movements, inflation rate movements and changes in probability factors which are then recognised as other economic flow.

Termination benefits Termination benefits are payable when employment is terminated before the normal retirement date or when an employee decides to accept an offer of benefits in exchange for the termination of employment.

The health service recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy.

On-costs related to employee expense Provision for on-costs, such as payroll tax, workers compensation and superannuation are recognised together with provisions for employee benefits.

Note 3.4: Superannuation Defined contribution plans:

Paid Contributions 2017 2016

$ $

Contributions Outstanding 2017 2016

$ $ First State Super 229,758 249,908 - - Hesta 141,170 150,495 - - Self Managed Funds 15,749 14,841 - - Total 386,677 415,244 - -

Employees of the Health Service are entitled to receive superannuation benefits and Otway Health contributes to defined contribution plans.

Superannuation contributions paid or payable for the reporting period are included as part of employee benefits in the comprehensive operating statement of the Health Service.

Defined contribution superannuation plans In relation to defined contribution (i.e. accumulation) superannuation plans, the associated expense is simply the employer contributions that are paid or payable in respect of employees who are members of these plans during the reporting period. Contributions to defined contribution superannuation plans are expensed when incurred.

The name and details of the major employee superannuation funds and contributions made by Otway Health are disclosed above.


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Note 4: Key Assets to support service delivery

Note 4.1: Investments and other Financial Assets 2017 2016 $ $

Current Loans and receivables Aust. Dollar Term Deposits > 3 months 3,502,913 2,933,099 TOTAL INVESTMENTS AND OTHER FINANCIAL ASSETS 3,502,913 2,933,099 Represented by:

Multi-Purpose Service Investments 1,712,019 977,652 Accommodation Bonds (Refundable Entrance Fees) 1,790,894 1,955,447

3,502,913 2,933,099 (a) Ageing of Other Financial Assets Please refer to Note 7.1 for the ageing analysis of investments and other financial assets

(b) Nature and extent of risk arising from other financial assets Please refer to Note 7.1 for the nature and extent of credit risk arising from investments and other financial assets

Investments and other financial assets Hospital investments must be in accordance in Standing Direction 3.7.2 – Treasury and Investment Risk Management. Investments are recognised and derecognised on trade date where purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs.

Investments are classified in the following categories: - financial assets at fair value through profit or loss; - held-to-maturity; - loans and receivables; and - available-for-sale financial assets.

Otway Health classifies its other financial assets between current and non-current assets based on the purpose for which the assets were acquired. Management determines the classification of its other financial assets at initial recognition.

Otway Health assesses at each balance sheet date whether a financial asset or group of financial assets is impaired. All financial assets, except those measured at fair value through profit or loss are subject to annual review for impairment.

Derecognition of financial assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

• the rights to receive cash flows from the asset have expired; or • the Health Service retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass through’ arrangement; or • the Health Service has transferred its rights to receive cash flows from the asset and either:

(a) has transferred substantially all the risks and rewards of the asset; or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Health Service has neither transferred nor retained substantially all the risks and rewards or transferred control, the asset is recognised to the extent of the Health Service’s continuing involvement in the asset.

Impairment of financial assets

At the end of each reporting period Otway Health assesses whether there is objective evidence that a financial asset or group of financial asset is impaired. All financial instrument assets, except those measured at fair value through profit or loss, are subject to annual review for impairment.

The allowance is the difference between the financial asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. In assessing impairment of statutory (non-contractual) financial assets, which are not financial instruments, professional judgement is applied in assessing materiality using estimates, averages and other computational methods in accordance with AASB 136 Impairment of Assets.

Doubtful debts Receivables are assessed for bad and doubtful debts on a regular basis. Those bad debts considered as written off by mutual consent are classified as a transaction expense. Bad debts not written off by mutual consent and the allowance for doubtful debts are classified as other economic flows in the net result.

The health service controls infrastructure and other investments that are utilised in fulfilling its objectives and conducting its activities. They represent the key resources that have been entrusted to the health service to be utilised for delivery of those outputs.

Structure 4.1 Investments and other financial assets 4.2 Investments accounted for using the equity method 4.3 Jointly Controlled Operations and Assets 4.4 Property, plant & equipment 4.5 Depreciation and amortisation

Page 14



Note 4: Key Assets to support service delivery

Note 4.1: Investments and other Financial Assets 2017 2016 $ $

Current Loans and receivables Aust. Dollar Term Deposits > 3 months 3,502,913 2,933,099 TOTAL INVESTMENTS AND OTHER FINANCIAL ASSETS 3,502,913 2,933,099 Represented by:

Multi-Purpose Service Investments 1,712,019 977,652 Accommodation Bonds (Refundable Entrance Fees) 1,790,894 1,955,447

3,502,913 2,933,099 (a) Ageing of Other Financial Assets Please refer to Note 7.1 for the ageing analysis of investments and other financial assets

(b) Nature and extent of risk arising from other financial assets Please refer to Note 7.1 for the nature and extent of credit risk arising from investments and other financial assets

Investments and other financial assets Hospital investments must be in accordance in Standing Direction 3.7.2 – Treasury and Investment Risk Management. Investments are recognised and derecognised on trade date where purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs.

Investments are classified in the following categories: - financial assets at fair value through profit or loss; - held-to-maturity; - loans and receivables; and - available-for-sale financial assets.

Otway Health classifies its other financial assets between current and non-current assets based on the purpose for which the assets were acquired. Management determines the classification of its other financial assets at initial recognition.

Otway Health assesses at each balance sheet date whether a financial asset or group of financial assets is impaired. All financial assets, except those measured at fair value through profit or loss are subject to annual review for impairment.

Derecognition of financial assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

• the rights to receive cash flows from the asset have expired; or • the Health Service retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass through’ arrangement; or • the Health Service has transferred its rights to receive cash flows from the asset and either:

(a) has transferred substantially all the risks and rewards of the asset; or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Health Service has neither transferred nor retained substantially all the risks and rewards or transferred control, the asset is recognised to the extent of the Health Service’s continuing involvement in the asset.

Impairment of financial assets

At the end of each reporting period Otway Health assesses whether there is objective evidence that a financial asset or group of financial asset is impaired. All financial instrument assets, except those measured at fair value through profit or loss, are subject to annual review for impairment.

The allowance is the difference between the financial asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. In assessing impairment of statutory (non-contractual) financial assets, which are not financial instruments, professional judgement is applied in assessing materiality using estimates, averages and other computational methods in accordance with AASB 136 Impairment of Assets.

Doubtful debts Receivables are assessed for bad and doubtful debts on a regular basis. Those bad debts considered as written off by mutual consent are classified as a transaction expense. Bad debts not written off by mutual consent and the allowance for doubtful debts are classified as other economic flows in the net result.

The health service controls infrastructure and other investments that are utilised in fulfilling its objectives and conducting its activities. They represent the key resources that have been entrusted to the health service to be utilised for delivery of those outputs.

Structure 4.1 Investments and other financial assets 4.2 Investments accounted for using the equity method 4.3 Jointly Controlled Operations and Assets 4.4 Property, plant & equipment 4.5 Depreciation and amortisation


Page 15



Note 4.2: Investments Accounted for Using the Equity Method 2016 2016 $ $

Investments in Associates (616) (616) Total (616) (616)

Name of Entity Principal Activity

Associates Apollo Bay Medical Clinic Pty Ltd

Country of Incorporation

Australia

Ownership Interest Value 2017 2016 2017 2016

% % $ $

50.00% 50.00% (616) (616)

Summarised Financial Information of Associates 2017 2016 $ $

Current Assets 89,300 109,193 Non-Current Assets - - Total Assets 89,300 109,193

Current Liabilities 57,366 110,425 Non-Current Liabilities - - Total Liabilities 57,366 110,425 Net Assets 31,934 (1,231)

Share of Associates Net Assets 15,967 (616)

The ownership agreement states that Otway Health & Community Services will be entitled to 100 percent of the assets on wind-up.

Total Income 798,792 902,292 Net Result - - Share of Associates' Result after Income Tax - - Management fee received 22,657 23,965

Movements in carrying amounts of interests in the associate 2017 2016

$ $ Carrying amount at the beginning of the year (616) (616) Share of associate's net result after tax - - Carrying amount at the end of the year (616) (616)

Management fees received from Associates

During the 2017 financial year, Otway Health received a management fee of $22,657 from the Apollo Bay Medical Clinic ($2016, $23,965).

Associates and joint ventures Associates and joint ventures are accounted for in accordance with the policy outlined in Section 4.

Jointly controlled assets or operations Interests in jointly controlled assets or operations are not consolidated by Otway Health, but are accounted for in accordance with the policy outlined in Section 4.

Investments accounted for using the equity method An associate is an entity over which Otway Health exercises significant influence, but not control.

The investment in the associate is accounted for using the equity method of accounting. Under the equity method for accounting, the investment in the associate is recognised at cost on initial recognition, and the carrying amount is increased or decreased in subsequent years to recognise Otway Health's share of the profits or losses of the associates after the date of acquisition. Otway Health’s share of the associate’s profit or loss is recognised in Otway Health’s net result as ‘other economic flows’. The share of post-acquisition changes in revaluation surpluses and any other reserves, are recognised in both the comprehensive operating statement and the statement of changes in equity. The cumulative post acquisition movements are adjusted against the carrying amount of the investment, including dividends received or receivable from the associate.

Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Joint ventures are joint arrangements whereby Otway Health, via its joint control of the arrangement, has rights to the net assets of the arrangements.

Interests in joint ventures are accounted for in the financial statements using the equity method, as applied to investments in associates and are disclosed as required by AASB 12.

Page 15



Note 4.2: Investments Accounted for Using the Equity Method 2016 2016 $ $

Investments in Associates (616) (616) Total (616) (616)

Name of Entity Principal Activity

Associates Apollo Bay Medical Clinic Pty Ltd

Country of Incorporation

Australia

Ownership Interest Value 2017 2016 2017 2016

% % $ $

50.00% 50.00% (616) (616)

Summarised Financial Information of Associates 2017 2016 $ $

Current Assets 89,300 109,193 Non-Current Assets - - Total Assets 89,300 109,193

Current Liabilities 57,366 110,425 Non-Current Liabilities - - Total Liabilities 57,366 110,425 Net Assets 31,934 (1,231)

Share of Associates Net Assets 15,967 (616)

The ownership agreement states that Otway Health & Community Services will be entitled to 100 percent of the assets on wind-up.

Total Income 798,792 902,292 Net Result - - Share of Associates' Result after Income Tax - - Management fee received 22,657 23,965

Movements in carrying amounts of interests in the associate 2017 2016

$ $ Carrying amount at the beginning of the year (616) (616) Share of associate's net result after tax - - Carrying amount at the end of the year (616) (616)

Management fees received from Associates

During the 2017 financial year, Otway Health received a management fee of $22,657 from the Apollo Bay Medical Clinic ($2016, $23,965).

Associates and joint ventures Associates and joint ventures are accounted for in accordance with the policy outlined in Section 4.

Jointly controlled assets or operations Interests in jointly controlled assets or operations are not consolidated by Otway Health, but are accounted for in accordance with the policy outlined in Section 4.

Investments accounted for using the equity method An associate is an entity over which Otway Health exercises significant influence, but not control.

The investment in the associate is accounted for using the equity method of accounting. Under the equity method for accounting, the investment in the associate is recognised at cost on initial recognition, and the carrying amount is increased or decreased in subsequent years to recognise Otway Health's share of the profits or losses of the associates after the date of acquisition. Otway Health’s share of the associate’s profit or loss is recognised in Otway Health’s net result as ‘other economic flows’. The share of post-acquisition changes in revaluation surpluses and any other reserves, are recognised in both the comprehensive operating statement and the statement of changes in equity. The cumulative post acquisition movements are adjusted against the carrying amount of the investment, including dividends received or receivable from the associate.

Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Joint ventures are joint arrangements whereby Otway Health, via its joint control of the arrangement, has rights to the net assets of the arrangements.

Interests in joint ventures are accounted for in the financial statements using the equity method, as applied to investments in associates and are disclosed as required by AASB 12.


Page 16



Note 4.3: Jointly Controlled Operations and Assets

Ownership Interest Interest in Jointly Controlled Entities Principal Activity 2017 2016

% % South West Alliance of Rural Health (SWARH) Information Technology 3.17% 3.11%

The Health Service interest in assets employed in the above jointly controlled operations and assets is detailed below, based on SWARH unaudited financial statements. The amounts are included in the financial statements under their respective asset categories:

Current Assets

2017 2016 $ $

Cash and Cash Equivalents 166,392 64,884 Receivables 585,257 464,373 Other Assets 591 11,178 Total Current Assets 752,240 540,435 Non-Current Assets Property, Plant & Equipment

190,429 231,702

Total Assets 942,669 772,137 Current Liabilities Payables

670,057 463,909 Finance Lease Liability 83,855 95,185 Employee Benefits 54,444 55,937 Total Current Liabilities 808,356 615,031 Non-Current Liabilities Finance Lease Liability

101,710 129,573

Employee Benefits 9,459 10,927 Total Non-Current Liabilities 111,169 140,500 Total Liabilities 919,525 755,531 Net Assets 23,144 16,606

The Health Service interest in revenues and expenses resulting from jointly controlled operations and assets is detailed below: Revenues Revenue from Operating Activities 715,648 711,614 Capital Purpose Income 15,747 - Total Revenue 731,395 711,614 Expenses

Employee Benefits 206,282 193,916 Maintenance Contract and IT Support 346,170 374,296 Finance costs 11,350 13,182 Other Expenses from Ordinary Activities 28,716 21,095 Impairment of Non-Financial Assets 2,127 - Depreciation 116,476 108,745 Revaluation of Long Service Leave (1,210) - Total Expenses 709,911 711,234 Net Result 21,484 380

Investments in joint operations In respect of any interest in joint operations, Otway Health recognises in the financial statements: • its assets, including its share of any assets held jointly; • any liabilities including its share of liabilities that it had incurred; • its revenue from the sale of its share of the output from the joint operation; • its share of the revenue from the sale of the output by the operation; and • its expenses, including its share of any expenses incurred jointly.

Page 16



Note 4.3: Jointly Controlled Operations and Assets

Ownership Interest Interest in Jointly Controlled Entities Principal Activity 2017 2016

% % South West Alliance of Rural Health (SWARH) Information Technology 3.17% 3.11%

The Health Service interest in assets employed in the above jointly controlled operations and assets is detailed below, based on SWARH unaudited financial statements. The amounts are included in the financial statements under their respective asset categories:

Current Assets

2017 2016 $ $

Cash and Cash Equivalents 166,392 64,884 Receivables 585,257 464,373 Other Assets 591 11,178 Total Current Assets 752,240 540,435 Non-Current Assets Property, Plant & Equipment

190,429 231,702

Total Assets 942,669 772,137 Current Liabilities Payables

670,057 463,909 Finance Lease Liability 83,855 95,185 Employee Benefits 54,444 55,937 Total Current Liabilities 808,356 615,031 Non-Current Liabilities Finance Lease Liability

101,710 129,573

Employee Benefits 9,459 10,927 Total Non-Current Liabilities 111,169 140,500 Total Liabilities 919,525 755,531 Net Assets 23,144 16,606

The Health Service interest in revenues and expenses resulting from jointly controlled operations and assets is detailed below: Revenues Revenue from Operating Activities 715,648 711,614 Capital Purpose Income 15,747 - Total Revenue 731,395 711,614 Expenses

Employee Benefits 206,282 193,916 Maintenance Contract and IT Support 346,170 374,296 Finance costs 11,350 13,182 Other Expenses from Ordinary Activities 28,716 21,095 Impairment of Non-Financial Assets 2,127 - Depreciation 116,476 108,745 Revaluation of Long Service Leave (1,210) - Total Expenses 709,911 711,234 Net Result 21,484 380

Investments in joint operations In respect of any interest in joint operations, Otway Health recognises in the financial statements: • its assets, including its share of any assets held jointly; • any liabilities including its share of liabilities that it had incurred; • its revenue from the sale of its share of the output from the joint operation; • its share of the revenue from the sale of the output by the operation; and • its expenses, including its share of any expenses incurred jointly.


Page 17



Note 4.4: Property, plant & equipment 2017 2016 $ $

(a) Gross carrying amount and accumulated depreciation Land

Land at Fair Value 3,545,000 3,545,000 Total Land 3,545,000 3,545,000

Buildings

Buildings at Fair Value 7,592,004 7,569,991 Less Accumulated Depreciation 1,091,169 726,065

Total Buildings 6,500,835 6,843,926

Plant & Equipment Plant and Equipment at Fair Value 1,989,369 1,916,965

Less Accumulated Depreciation 1,330,586 1,169,447 Total Plant & Equipment 658,783 747,517

Medical Equipment

Medical Equipment at Fair Value 477,032 431,642 Less Accumulated Depreciation 387,509 358,704

Total Medical Equipment 89,523 72,938

Leased Equipment SWARH Leased Equipment at Fair Value 289,406 337,459

Less Accumulated Amortisation 116,476 108,745 Total Leased Equipment 172,930 228,714

Total Property, Plant & Equipment 10,967,071 11,438,095

(b) Reconciliations of the carrying amounts of each asset class

Plant & Medical Leased Total Land Buildings Equipment Equipment Equipment

$ $ $ $ $

Balance at 1 July 2015 3,545,000 7,192,541 768,967 82,572 215,866 11,804,946 Additions - 16,465 180,645 19,617 121,593 338,320 Disposals - (53,287) - - (53,287) Depreciation expense (note 4.5) - (365,080) (148,808) (29,251) (108,745) (651,884) Balance at 1 July 2016 3,545,000 6,843,926 747,517 72,938 228,714 11,438,095

Additions - 22,013 74,532 45,390 60,692 202,627 Impairment Losses recognised in Net Result - - (2,127) - - (2,127) Depreciation expense (note 4.5) - (365,104) (161,139) (28,805) (116,476) (671,524) Balance at 30 June 2017 3,545,000 6,500,835 658,783 89,523 172,930 10,967,071

Land and buildings carried at valuation An Independent valuation of the Health Service's land and buildings was performed by the Valuer-General Victoria to determine the fair value of the land and buildings. The valuation, which conforms to Australian Valuation Standards, was determined by reference to the amounts for which assets could be exchanged between knowledgeable willing parties in an arm's length transaction. The valuation was based on independent assessments. The effective date of the valuation is 30 June 2014.

Page 17



Note 4.4: Property, plant & equipment 2017 2016 $ $

(a) Gross carrying amount and accumulated depreciation Land

Land at Fair Value 3,545,000 3,545,000 Total Land 3,545,000 3,545,000

Buildings

Buildings at Fair Value 7,592,004 7,569,991 Less Accumulated Depreciation 1,091,169 726,065

Total Buildings 6,500,835 6,843,926

Plant & Equipment Plant and Equipment at Fair Value 1,989,369 1,916,965

Less Accumulated Depreciation 1,330,586 1,169,447 Total Plant & Equipment 658,783 747,517

Medical Equipment

Medical Equipment at Fair Value 477,032 431,642 Less Accumulated Depreciation 387,509 358,704

Total Medical Equipment 89,523 72,938

Leased Equipment SWARH Leased Equipment at Fair Value 289,406 337,459

Less Accumulated Amortisation 116,476 108,745 Total Leased Equipment 172,930 228,714

Total Property, Plant & Equipment 10,967,071 11,438,095

(b) Reconciliations of the carrying amounts of each asset class

Plant & Medical Leased Total Land Buildings Equipment Equipment Equipment

$ $ $ $ $

Balance at 1 July 2015 3,545,000 7,192,541 768,967 82,572 215,866 11,804,946 Additions - 16,465 180,645 19,617 121,593 338,320 Disposals - (53,287) - - (53,287) Depreciation expense (note 4.5) - (365,080) (148,808) (29,251) (108,745) (651,884) Balance at 1 July 2016 3,545,000 6,843,926 747,517 72,938 228,714 11,438,095

Additions - 22,013 74,532 45,390 60,692 202,627 Impairment Losses recognised in Net Result - - (2,127) - - (2,127) Depreciation expense (note 4.5) - (365,104) (161,139) (28,805) (116,476) (671,524) Balance at 30 June 2017 3,545,000 6,500,835 658,783 89,523 172,930 10,967,071

Land and buildings carried at valuation An Independent valuation of the Health Service's land and buildings was performed by the Valuer-General Victoria to determine the fair value of the land and buildings. The valuation, which conforms to Australian Valuation Standards, was determined by reference to the amounts for which assets could be exchanged between knowledgeable willing parties in an arm's length transaction. The valuation was based on independent assessments. The effective date of the valuation is 30 June 2014.




( c) Fair value measurement hierarchy for assets

Land at fair value

Carrying amount as at 30 June

2017

Fair value measurement at end of reporting period using:

Level 1 (i) Level 2 (i) Level 3 (i)

Non-specialised land 2,130,000 - 2,130,000 - Specialised land 1,415,000 - - 1,415,000 Total of land at fair value 3,545,000 - 2,130,000 1,415,000

Buildings at fair value Non-specialised buildings

1,896,343 - 1,896,343 - Specialised buildings

- Hospital and Laura Pengilly Wing

3,440,340 - - 3,440,340 - Day Centre and Library 853,921 - - 853,921 - Community Gym 237,939 - - 237,939 - Consulting Rooms 72,292 - - 72,292

Total of buildings at fair value 6,500,835 - 1,896,343 4,604,492

Plant and equipment at fair value Plant equipment and vehicles at fair value - Vehicles

125,791 125,791 - - Plant and equipment 532,992 - 532,992 Total of plant, equipment and vehicles at fair value 658,783 - 125,791 532,992

Medical equipment at fair value - - Medical equipment 89,523 - 89,523 Total medical equipment at fair value 89,523 - - 89,523

Leased equipment at fair value - - SWARH leased equipment 172,930 - - 172,930 Total leased equipment at fair value 172,930 - - 172,930

10,967,071 - 4,152,134 6,814,937

Land at fair value


2016




Buildings at fair value

Non-specialised buildings 1,972,080 - 1,972,080 - Specialised buildings

- Hospital and Laura Pengilly Wing 3,745,183 - - 3,745,183 - Day Centre and Library 898,620 - - 898,620 - Community Gym 147,283 - - 147,283 - Consulting Rooms 80,760 - - 80,760


Plant and equipment at fair value

Plant equipment and vehicles at fair value

- Vehicles 174,993 174,993 - - Plant and equipment 572,524 - 572,524 Total of plant, equipment and vehicles at fair value 747,517 - 174,993 572,524



11,438,095 - 4,277,073 7,161,022 Note

(i) Classified in accordance with the fair value hierarchy, There have been no transfers between levels during the period.

Page 18



( c) Fair value measurement hierarchy for assets

Land at fair value


2017




Buildings at fair value Non-specialised buildings

1,896,343 - 1,896,343 - Specialised buildings

- Hospital and Laura Pengilly Wing

3,440,340 - - 3,440,340 - Day Centre and Library 853,921 - - 853,921 - Community Gym 237,939 - - 237,939 - Consulting Rooms 72,292 - - 72,292


Plant and equipment at fair value Plant equipment and vehicles at fair value - Vehicles

125,791 125,791 - - Plant and equipment 532,992 - 532,992 Total of plant, equipment and vehicles at fair value 658,783 - 125,791 532,992



10,967,071 - 4,152,134 6,814,937

Land at fair value


2016




Buildings at fair value

Non-specialised buildings 1,972,080 - 1,972,080 - Specialised buildings

- Hospital and Laura Pengilly Wing 3,745,183 - - 3,745,183 - Day Centre and Library 898,620 - - 898,620 - Community Gym 147,283 - - 147,283 - Consulting Rooms 80,760 - - 80,760


Plant and equipment at fair value

Plant equipment and vehicles at fair value

- Vehicles 174,993 174,993 - - Plant and equipment 572,524 - 572,524 Total of plant, equipment and vehicles at fair value 747,517 - 174,993 572,524



11,438,095 - 4,277,073 7,161,022 Note

(i) Classified in accordance with the fair value hierarchy, There have been no transfers between levels during the period.




Revisions to accounting estimates are recognised in the period in which the estimate is revised and also in future periods that are affected by the revision. Judgements and assumptions made by management in the application of AASBs that have significant effects on the financial statements and estimates relate to:

• the fair value of land, buildings, infrastructure, plant and equipment, (refer to Note 7.1); • superannuation expense (refer to Note 3.4); and • actuarial assumptions for employee benefit provisions based on likely tenure of existing staff, patterns of leave claims, future salary movements and future discount rates (refer to Note 3.3).

Consistent with AASB 13 Fair Value Measurement, Otway Health determines the policies and procedures for both recurring fair value measurements such as property, plant and equipment, investment properties and financial instruments, and for non-recurring fair value measurements such as non- financial physical assets held for sale, in accordance with the requirements of AASB 13 and the relevant FRDs.

All 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 (unadjusted) market prices in active markets for identical assets or liabilities · Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

· Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For the purpose of fair value disclosures, Otway Health has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above

In addition, Otway Health determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The Valuer-General Victoria (VGV) is Otway Health’s independent valuation agency.

Otway Health, in conjunction with VGV [and other external valuers, if applicable] monitors the changes in the fair value of each asset and liability through relevant data sources to determine whether revaluation is required.

Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the following assumptions:

• that the transaction to sell the asset or transfer the liability takes place either in the principal market (or the most advantageous market, in the absence of the principal market), either of which must be accessible to the Health Service at the measurement date; • that the Health Service uses the same valuation assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

The fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

Consideration of highest and best use (HBU) for non-financial physical assets Judgements about highest and best use must take into account the characteristics of the assets concerned, including restrictions on the use and disposal of assets arising from the asset’s physical nature and any applicable legislative/contractual arrangements. In considering the HBU for non-financial physical assets, valuers are probably best placed to determine highest and best use (HBU) in consultation with Health Services. Health Services and their valuers therefore need to have a shared understanding of the circumstances of the assets. A Health Service has to form its own view about a valuer’s determination, as it is ultimately responsible for what is presented in its audited financial statements. In accordance with paragraph AASB 13.29, Health Services can assume the current use of a non-financial physical asset is its HBU unless market or other factors suggest that a different use by market participants would maximise the value of the asset. Therefore, an assessment of the HBU will be required when the indicators are triggered within a reporting period, which suggest the market participants would have perceived an alternative use of an asset that can generate maximum value. Once identified, Health Services are required to engage with VGV or other independent valuers for formal HBU assessment.

These indicators, as a minimum, include: External factors: • Changed acts, regulations, local law or such instrument which affects or may affect the use or development of the asset; • Changes in planning scheme, including zones, reservations, overlays that would affect or remove the restrictions imposed on the asset’s use from its past use; • Evidence that suggest the current use of an asset is no longer core to requirements to deliver a Health Service’s service obligation; • Evidence that suggests that the asset might be sold or demolished at reaching the late stage of an asset’s life cycle. In addition, Health Services need to assess the HBU as part of the 5-year review of fair value of non-financial physical assets. This is consistent with the current requirements on FRD 103F Non-financial physical assets and FRD 107B Investment properties.

Page 19



Revisions to accounting estimates are recognised in the period in which the estimate is revised and also in future periods that are affected by the revision. Judgements and assumptions made by management in the application of AASBs that have significant effects on the financial statements and estimates relate to:

• the fair value of land, buildings, infrastructure, plant and equipment, (refer to Note 7.1); • superannuation expense (refer to Note 3.4); and • actuarial assumptions for employee benefit provisions based on likely tenure of existing staff, patterns of leave claims, future salary movements and future discount rates (refer to Note 3.3).

Consistent with AASB 13 Fair Value Measurement, Otway Health determines the policies and procedures for both recurring fair value measurements such as property, plant and equipment, investment properties and financial instruments, and for non-recurring fair value measurements such as non- financial physical assets held for sale, in accordance with the requirements of AASB 13 and the relevant FRDs.

All 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 (unadjusted) market prices in active markets for identical assets or liabilities · Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

· Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For the purpose of fair value disclosures, Otway Health has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above

In addition, Otway Health determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The Valuer-General Victoria (VGV) is Otway Health’s independent valuation agency.

Otway Health, in conjunction with VGV [and other external valuers, if applicable] monitors the changes in the fair value of each asset and liability through relevant data sources to determine whether revaluation is required.

Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the following assumptions:

• that the transaction to sell the asset or transfer the liability takes place either in the principal market (or the most advantageous market, in the absence of the principal market), either of which must be accessible to the Health Service at the measurement date; • that the Health Service uses the same valuation assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

The fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

Consideration of highest and best use (HBU) for non-financial physical assets Judgements about highest and best use must take into account the characteristics of the assets concerned, including restrictions on the use and disposal of assets arising from the asset’s physical nature and any applicable legislative/contractual arrangements. In considering the HBU for non-financial physical assets, valuers are probably best placed to determine highest and best use (HBU) in consultation with Health Services. Health Services and their valuers therefore need to have a shared understanding of the circumstances of the assets. A Health Service has to form its own view about a valuer’s determination, as it is ultimately responsible for what is presented in its audited financial statements. In accordance with paragraph AASB 13.29, Health Services can assume the current use of a non-financial physical asset is its HBU unless market or other factors suggest that a different use by market participants would maximise the value of the asset. Therefore, an assessment of the HBU will be required when the indicators are triggered within a reporting period, which suggest the market participants would have perceived an alternative use of an asset that can generate maximum value. Once identified, Health Services are required to engage with VGV or other independent valuers for formal HBU assessment.

These indicators, as a minimum, include: External factors: • Changed acts, regulations, local law or such instrument which affects or may affect the use or development of the asset; • Changes in planning scheme, including zones, reservations, overlays that would affect or remove the restrictions imposed on the asset’s use from its past use; • Evidence that suggest the current use of an asset is no longer core to requirements to deliver a Health Service’s service obligation; • Evidence that suggests that the asset might be sold or demolished at reaching the late stage of an asset’s life cycle. In addition, Health Services need to assess the HBU as part of the 5-year review of fair value of non-financial physical assets. This is consistent with the current requirements on FRD 103F Non-financial physical assets and FRD 107B Investment properties.




Page 20

(d) Reconciliation of Level 3 fair value

2017

Plant and Medical

Land Buildings equipment equipment Leased assets Opening Balance 1,415,000 4,871,846 572,524 72,938 228,714 Purchases (sales) - 22,013 74,532 45,390 60,692 Gains or losses recognised in net result

- Depreciation - (289,367) (111,937) (28,805) (116,476) - Impairment loss - - (2,127) - -

1,415,000 4,604,492 532,992 89,523 172,930

2016

Land

Buildings Plant and

equipment Medical

equipment

Leased assets Opening Balance 1,415,000 5,220,461 551,329 72,938 228,714 Purchases (sales) - 365,080 93,002 29,251 108,745 Gains or losses recognised in net result

- Depreciation - (713,695) (71,807) (29,251) (108,745)

1,415,000 4,871,846 572,524 72,938 228,714

Identifying unobservable inputs (level 3) fair value measurements

Level 3 fair value inputs are unobservable valuation inputs for an asset or liability. These inputs require significant judgement and assumptions in deriving fair value for both financial and non-financial assets. Unobservable inputs shall be used to measure fair value to the extent that relevant observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. However, the fair value measurement objective remains the same, i.e., an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability. Therefore, unobservable inputs shall reflect the assumptions that market participants would use when pricing the asset or liability, including assumptions about risk. Assumptions about risk include the inherent risk in a particular valuation technique used to measure fair value (such as a pricing risk model) and the risk inherent in the inputs to the valuation technique. A measurement that does not include an adjustment for risk would not represent a fair value measurement if market participants would include one when pricing the asset or liability i.e., it might be necessary to include a risk adjustment when there is significant measurement uncertainty. For example, when there has been a significant decrease in the volume or level of activity when compared with normal market activity for the asset or liability or similar assets or liabilities, and the Health Service has determined that the transaction price or quoted price does not represent fair value. A Health Service shall develop unobservable inputs using the best information available in the circumstances, which might include the Health Service’s own data. In developing unobservable inputs, a Health Service may begin with its own data, but it shall adjust this data if reasonably available information indicates that other market participants would use different data or there is something particular to the Health Service that is not available to other market participants. A Health Service need not undertake exhaustive efforts to obtain information about other market participant assumptions. However, a Health Service shall take into account all information about market participant assumptions that is reasonably available. Unobservable inputs developed in the manner described above are considered market participant assumptions and meet the object of a fair value measurement.

Specialised land and specialised buildings

The market approach is also used for specialised land and specialised buildings although is adjusted for the community service obligation (CSO) to reflect the specialised nature of the asset being valued. Specialised assets contain significant, unobservable adjustments; therefore these assets are classified as Level 3 under the market based direct comparison approach. The CSO adjustment is a reflection of the valuer's assessment of the impact of restrictions associated with an asset to the extent that is also equally applicable to market participants. This approach is in light of the highest and best use consideration required for fair value measurement, and takes into account the use of the asset that is physically possible, legally permissable and financially feasible. As adjustments of CSO are considered as significant unobservable inputs, specialised land would be classified as Level 3 assets. For the Health Services, the depreciated replacement cost method is used for the majority of specialised buildings, adjusting for the associated depreciation. As depreciation adjustments are considered as significant and unobservable inputs in nature, specialised buildings are classified as Level 3 for fair value measurements.

An independent valuation of Otway Health Services' specialised land and specialised buildings was performed by the Valuer-General Victoria. The valuation was performed using the market approach adjusted for CSO. The effective date of the valuation is 30 June 2014.

Vehicles Otway Health Service acquires new vehicles and at times disposes of them before completion of their economic life. The process of acquisition, use and disposal in the market is managed by Otway Health Service who set relevant depreciation rates during use to reflect the consumption of the vehicles. As a result, the fair value of vehicles does not differ materially from the carrying value (depreciated cost).

Plant and equipment Plant and equipment is held at carrying value (depreciated cost). When plant and equipment is specialised in use, such that it is rarely sold other than as part of a going concern, the depreciated replacement cost is used to estimate the fair value. Unless there is market evidence that current replacement costs are significantly different from the original acquisition cost, it is considered unlikely that depreciated replacement cost will be materially different from the existing carrying value.

There were no changes in valuation techniques throughout the period to 30 June 2017.

For all assets measured at fair value, the current use is considered to be the highest and best use.



Page 20

(d) Reconciliation of Level 3 fair value

2017

Plant and Medical

Land Buildings equipment equipment Leased assets Opening Balance 1,415,000 4,871,846 572,524 72,938 228,714 Purchases (sales) - 22,013 74,532 45,390 60,692 Gains or losses recognised in net result

- Depreciation - (289,367) (111,937) (28,805) (116,476) - Impairment loss - - (2,127) - -

1,415,000 4,604,492 532,992 89,523 172,930

2016

Land

Buildings Plant and

equipment Medical

equipment

Leased assets Opening Balance 1,415,000 5,220,461 551,329 72,938 228,714 Purchases (sales) - 365,080 93,002 29,251 108,745 Gains or losses recognised in net result

- Depreciation - (713,695) (71,807) (29,251) (108,745)

1,415,000 4,871,846 572,524 72,938 228,714

Identifying unobservable inputs (level 3) fair value measurements

Level 3 fair value inputs are unobservable valuation inputs for an asset or liability. These inputs require significant judgement and assumptions in deriving fair value for both financial and non-financial assets. Unobservable inputs shall be used to measure fair value to the extent that relevant observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. However, the fair value measurement objective remains the same, i.e., an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability. Therefore, unobservable inputs shall reflect the assumptions that market participants would use when pricing the asset or liability, including assumptions about risk. Assumptions about risk include the inherent risk in a particular valuation technique used to measure fair value (such as a pricing risk model) and the risk inherent in the inputs to the valuation technique. A measurement that does not include an adjustment for risk would not represent a fair value measurement if market participants would include one when pricing the asset or liability i.e., it might be necessary to include a risk adjustment when there is significant measurement uncertainty. For example, when there has been a significant decrease in the volume or level of activity when compared with normal market activity for the asset or liability or similar assets or liabilities, and the Health Service has determined that the transaction price or quoted price does not represent fair value. A Health Service shall develop unobservable inputs using the best information available in the circumstances, which might include the Health Service’s own data. In developing unobservable inputs, a Health Service may begin with its own data, but it shall adjust this data if reasonably available information indicates that other market participants would use different data or there is something particular to the Health Service that is not available to other market participants. A Health Service need not undertake exhaustive efforts to obtain information about other market participant assumptions. However, a Health Service shall take into account all information about market participant assumptions that is reasonably available. Unobservable inputs developed in the manner described above are considered market participant assumptions and meet the object of a fair value measurement.

Specialised land and specialised buildings

The market approach is also used for specialised land and specialised buildings although is adjusted for the community service obligation (CSO) to reflect the specialised nature of the asset being valued. Specialised assets contain significant, unobservable adjustments; therefore these assets are classified as Level 3 under the market based direct comparison approach. The CSO adjustment is a reflection of the valuer's assessment of the impact of restrictions associated with an asset to the extent that is also equally applicable to market participants. This approach is in light of the highest and best use consideration required for fair value measurement, and takes into account the use of the asset that is physically possible, legally permissable and financially feasible. As adjustments of CSO are considered as significant unobservable inputs, specialised land would be classified as Level 3 assets. For the Health Services, the depreciated replacement cost method is used for the majority of specialised buildings, adjusting for the associated depreciation. As depreciation adjustments are considered as significant and unobservable inputs in nature, specialised buildings are classified as Level 3 for fair value measurements.

An independent valuation of Otway Health Services' specialised land and specialised buildings was performed by the Valuer-General Victoria. The valuation was performed using the market approach adjusted for CSO. The effective date of the valuation is 30 June 2014.

Vehicles Otway Health Service acquires new vehicles and at times disposes of them before completion of their economic life. The process of acquisition, use and disposal in the market is managed by Otway Health Service who set relevant depreciation rates during use to reflect the consumption of the vehicles. As a result, the fair value of vehicles does not differ materially from the carrying value (depreciated cost).

Plant and equipment Plant and equipment is held at carrying value (depreciated cost). When plant and equipment is specialised in use, such that it is rarely sold other than as part of a going concern, the depreciated replacement cost is used to estimate the fair value. Unless there is market evidence that current replacement costs are significantly different from the original acquisition cost, it is considered unlikely that depreciated replacement cost will be materially different from the existing carrying value.

There were no changes in valuation techniques throughout the period to 30 June 2017.

For all assets measured at fair value, the current use is considered to be the highest and best use.

OTWAY HEALTH Annual Report 2016-2017 | 50 Page 21



(e) Description of significant unobservable inputs to Level 3 valuations:

Valuation technique (i)

Significant unobservable inputs (i)

Specialised land

Market approach

Community Service Obligation (CSO) adjustment

Specialised buildings Depreciated replacement cost Direct cost per square metre

Useful life of specialised buildings

Plant and equipment at fair value Depreciated replacement cost Cost per unit

Useful life of PPE

Vehicles Depreciated replacement cost Cost per unit

Useful life of vehicles

Medical equipment at fair value Depreciated replacement cost Cost per unit

Useful life of medical equipment

Refer to Note 7.4 for guidance on fair value measurement indicative expectations.

Property, Plant and Equipment Where an asset is acquired for no or nominal cost, the cost is its fair value at the date of acquisition. Assets transferred as part of a merger/machinery of government are transferred at their carrying amount. More details about the valuation techniques and inputs used in determining the fair value of non-financial physical assets are discussed in Note 4.4 Property, plant and equipment.

Land and Buildings are recognised initially at cost and subsequently measured at fair value less accumulated depreciation and impairment.

Plant, Equipment and Vehicles are recognised initially at cost and subsequently measured at fair value less accumulated depreciation and impairment. Depreciated historical cost is generally a reasonable proxy for fair value because of the short lives of the assets concerned.

Revaluations of Non-Current Physical Assets Non-current physical assets are measured at fair value and are revalued in accordance with FRD103F Non-current physical assets . This revaluation process normally occurs at least every five years, based upon the asset's Government Purpose Classification, but may occur more frequently if fair value assessments indicate material changes in values. Independent valuers are used to conduct these scheduled revaluations and any interim revaluations are determined in accordance with the requirements of the FRDs. Revaluation increments or decrements arise from differences between an asset's carrying value and fair value.

Revaluation increments are recognised in ‘other comprehensive income’ and are credited directly in equity to the asset revaluation surplus, except that, to the extent that an increment reverses a revaluation decrement in respect of that same class of asset previously recognised as an expense in net result, the increment is recognised as income in the net result.

Revaluation decrements are recognised in ‘other comprehensive income’ to the extent that a credit balance exists in the asset revaluation surplus in respect of the same class of property, plant and equipment.

Revaluation increases and revaluation decreases relating to individual assets within an asset class are offset against one another within that class but are not offset in respect of assets in different classes.

Revaluation surplus is not normally not transferred to accumulated funds on derecognition of the relevant asset.

In accordance with FRD 103F Otway Health's non-current physical assets were assessed to determine whether revaluation of the non-current physical assets was required.

Page 21



(e) Description of significant unobservable inputs to Level 3 valuations:

Valuation technique (i)

Significant unobservable inputs (i)

Specialised land

Market approach

Community Service Obligation (CSO) adjustment

Specialised buildings Depreciated replacement cost Direct cost per square metre

Useful life of specialised buildings

Plant and equipment at fair value Depreciated replacement cost Cost per unit

Useful life of PPE

Vehicles Depreciated replacement cost Cost per unit

Useful life of vehicles

Medical equipment at fair value Depreciated replacement cost Cost per unit

Useful life of medical equipment

Refer to Note 7.4 for guidance on fair value measurement indicative expectations.

Property, Plant and Equipment Where an asset is acquired for no or nominal cost, the cost is its fair value at the date of acquisition. Assets transferred as part of a merger/machinery of government are transferred at their carrying amount. More details about the valuation techniques and inputs used in determining the fair value of non-financial physical assets are discussed in Note 4.4 Property, plant and equipment.

Land and Buildings are recognised initially at cost and subsequently measured at fair value less accumulated depreciation and impairment.

Plant, Equipment and Vehicles are recognised initially at cost and subsequently measured at fair value less accumulated depreciation and impairment. Depreciated historical cost is generally a reasonable proxy for fair value because of the short lives of the assets concerned.

Revaluations of Non-Current Physical Assets Non-current physical assets are measured at fair value and are revalued in accordance with FRD103F Non-current physical assets . This revaluation process normally occurs at least every five years, based upon the asset's Government Purpose Classification, but may occur more frequently if fair value assessments indicate material changes in values. Independent valuers are used to conduct these scheduled revaluations and any interim revaluations are determined in accordance with the requirements of the FRDs. Revaluation increments or decrements arise from differences between an asset's carrying value and fair value.

Revaluation increments are recognised in ‘other comprehensive income’ and are credited directly in equity to the asset revaluation surplus, except that, to the extent that an increment reverses a revaluation decrement in respect of that same class of asset previously recognised as an expense in net result, the increment is recognised as income in the net result.

Revaluation decrements are recognised in ‘other comprehensive income’ to the extent that a credit balance exists in the asset revaluation surplus in respect of the same class of property, plant and equipment.

Revaluation increases and revaluation decreases relating to individual assets within an asset class are offset against one another within that class but are not offset in respect of assets in different classes.

Revaluation surplus is not normally not transferred to accumulated funds on derecognition of the relevant asset.

In accordance with FRD 103F Otway Health's non-current physical assets were assessed to determine whether revaluation of the non-current physical assets was required.




Note 4.5: Depreciation and Amortisation 2017 2016 $ $

Buildings 365,104 365,080 Plant & Equipment 161,139 148,808 Medical Equipment 28,805 29,251 Leased Equipment 116,476 108,745 Total Depreciation 671,524 651,884

Depreciation All infrastructure assets, buildings, plant and equipment and other non-financial physical assets that have finite useful lives are depreciated (i.e. excludes land assets held for sale, and investment properties). Depreciation begins when the asset is available for use, which is when it is in the location and condition necessary for it to be capable of operating in a manner intended by management.

Depreciation is generally calculated on a straight line basis, at a rate that allocates the asset value, less any estimated residual value over its estimated useful life. Estimates of the remaining useful lives, residual value and depreciation method for all assets are reviewed at least annually, and adjustments made where appropriate. This depreciation charge is not funded by the Department of Health & Human Services.

Assets with a cost in excess of $1,000 are capitalised and depreciation has been provided on depreciable assets so as to allocate their cost or valuation over their estimated useful lives.

The following table indicates the expected useful lives of non current assets on which the depreciation charges are based.

2017 2016 Buildings - Structure Shell Building Fabric Up to 55 years Up to 55 years - Site Engineering Services and Central Plant Up to 40 years Up to 40 years

Central Plant - Fit Out Up to 25 years Up to 25 years - Trunk Reticulated Building Systems Up to 40 years Up to 40 years

Plant & Equipment Up to 15 years Up to 15 years Medical Equipment Up to 15 years Up to 15 years Computers & Communications Up to 15 years Up to 15 years Furniture & Fittings Up to 15 years Up to 15 years - Motor Vehicles Up to 7 years Up to 7 years Leasehold Improvements Up to 10 years Up to 10 years

As part of the Buildings valuation, building values were separated into components and each component assessed for its useful life which is represented above.

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Note 4.5: Depreciation and Amortisation 2017 2016 $ $

Buildings 365,104 365,080 Plant & Equipment 161,139 148,808 Medical Equipment 28,805 29,251 Leased Equipment 116,476 108,745 Total Depreciation 671,524 651,884

Depreciation All infrastructure assets, buildings, plant and equipment and other non-financial physical assets that have finite useful lives are depreciated (i.e. excludes land assets held for sale, and investment properties). Depreciation begins when the asset is available for use, which is when it is in the location and condition necessary for it to be capable of operating in a manner intended by management.

Depreciation is generally calculated on a straight line basis, at a rate that allocates the asset value, less any estimated residual value over its estimated useful life. Estimates of the remaining useful lives, residual value and depreciation method for all assets are reviewed at least annually, and adjustments made where appropriate. This depreciation charge is not funded by the Department of Health & Human Services.

Assets with a cost in excess of $1,000 are capitalised and depreciation has been provided on depreciable assets so as to allocate their cost or valuation over their estimated useful lives.

The following table indicates the expected useful lives of non current assets on which the depreciation charges are based.

2017 2016 Buildings - Structure Shell Building Fabric Up to 55 years Up to 55 years - Site Engineering Services and Central Plant Up to 40 years Up to 40 years

Central Plant - Fit Out Up to 25 years Up to 25 years - Trunk Reticulated Building Systems Up to 40 years Up to 40 years

Plant & Equipment Up to 15 years Up to 15 years Medical Equipment Up to 15 years Up to 15 years Computers & Communications Up to 15 years Up to 15 years Furniture & Fittings Up to 15 years Up to 15 years - Motor Vehicles Up to 7 years Up to 7 years Leasehold Improvements Up to 10 years Up to 10 years

As part of the Buildings valuation, building values were separated into components and each component assessed for its useful life which is represented above.


Page 23



Note 5: Other Assets and liabilities

Note 5.1: Receivables 2017 $

2016 $

Current

Contractual

Trade Debtors 600,401 470,018 Patient Fees 146,077 159,974 Accrued Investment Income 25,495 25,495 Accrued Revenue 113,096 141,657 Statutory

885,069 797,144

GST Receivable 33,841 9,392 33,841 9,392

TOTAL CURRENT RECEIVABLES 918,910 806,536

TOTAL RECEIVABLES 918,910 806,536

(b) Ageing of Receivables Please refer to Note 7.1 for the ageing analysis of contractual receivables

(c) Nature and extent of risk arising from Receivables Please refer to Note 7.1 for the nature and extent of credit risk arising from contractual receivables

Receivables Receivables consist of: - Statutory receivables, which includes predominantly amounts owing from the Victorian Government and Goods and Services Tax (GST) input tax - Contractual receivables, which includes mainly debtors in relation to goods and services, loans to third parties, accrued

investment income, and finance lease receivables.

Receivables that are contractual are classified as financial instruments and categorised as loans and receivables. Statutory receivables are recognised and measured similarly to contractual receivables (except for impairment), but are not classified as financial instruments because they do not arise from a contract.

Receivables are recognised initially at fair value and subsequently measured at amortised cost, using the effective interest rate method, less any accumulated impairment.

Trade debtors are carried at nominal amounts due and are due for settlement within 30 days from the date of recognition. Collectability of debts is reviewed on an ongoing basis, and debts which are known to be uncollectible are written off. A provision for doubtful debts is recognised when there is objective evidence that the debts may not be collected and bad debts are written off when identified.

Note 5.2: Other Liabilities CURRENT

2017 $

2016 $

Monies Held in Trust

Accommodation Bonds (Refundable Entrance Fees) 1,790,894 1,955,447 Total Other Liabilities 1,790,894 1,955,447 Represented by the following assets: Investments and Other Financial Assets (refer to Note 4.1)

1,790,894

1,955,447 Note 5.3: Prepayments and other non-financial assets

2017 2016 CURRENT $ $ Prepayments 62,614 11,178 Total Other Assets 62,614 11,178

Other non-financial assets include prepayments which represent payments in advance of receipt of goods or services or that part of expenditure made in one accounting period covering a term extending beyond that period.

This section sets out those assets and liabilities that arose from the health service's operations. Structure 5.1 Receivables 5.2 Other liabilities 5.3 Prepayments and other assets 5.4 Payables

Page 23



Note 5: Other Assets and liabilities

Note 5.1: Receivables 2017 $

2016 $

Current

Contractual

Trade Debtors 600,401 470,018 Patient Fees 146,077 159,974 Accrued Investment Income 25,495 25,495 Accrued Revenue 113,096 141,657 Statutory

885,069 797,144

GST Receivable 33,841 9,392 33,841 9,392

TOTAL CURRENT RECEIVABLES 918,910 806,536

TOTAL RECEIVABLES 918,910 806,536

(b) Ageing of Receivables Please refer to Note 7.1 for the ageing analysis of contractual receivables

(c) Nature and extent of risk arising from Receivables Please refer to Note 7.1 for the nature and extent of credit risk arising from contractual receivables

Receivables Receivables consist of: - Statutory receivables, which includes predominantly amounts owing from the Victorian Government and Goods and Services Tax (GST) input tax - Contractual receivables, which includes mainly debtors in relation to goods and services, loans to third parties, accrued

investment income, and finance lease receivables.

Receivables that are contractual are classified as financial instruments and categorised as loans and receivables. Statutory receivables are recognised and measured similarly to contractual receivables (except for impairment), but are not classified as financial instruments because they do not arise from a contract.

Receivables are recognised initially at fair value and subsequently measured at amortised cost, using the effective interest rate method, less any accumulated impairment.

Trade debtors are carried at nominal amounts due and are due for settlement within 30 days from the date of recognition. Collectability of debts is reviewed on an ongoing basis, and debts which are known to be uncollectible are written off. A provision for doubtful debts is recognised when there is objective evidence that the debts may not be collected and bad debts are written off when identified.

Note 5.2: Other Liabilities CURRENT

2017 $

2016 $

Monies Held in Trust

Accommodation Bonds (Refundable Entrance Fees) 1,790,894 1,955,447 Total Other Liabilities 1,790,894 1,955,447 Represented by the following assets: Investments and Other Financial Assets (refer to Note 4.1)

1,790,894

1,955,447 Note 5.3: Prepayments and other non-financial assets

2017 2016 CURRENT $ $ Prepayments 62,614 11,178 Total Other Assets 62,614 11,178

Other non-financial assets include prepayments which represent payments in advance of receipt of goods or services or that part of expenditure made in one accounting period covering a term extending beyond that period.

This section sets out those assets and liabilities that arose from the health service's operations. Structure 5.1 Receivables 5.2 Other liabilities 5.3 Prepayments and other assets 5.4 Payables




Note 5.4: Payables 2017 $

2016 $

Current

Contractual

Trade Creditors 260,423 111,825 Accrued Expenses 53,631 23,520 Income in Advance - 3,500 SWARH Payables 670,057 463,909 TOTAL PAYABLES 984,111 602,754 (a) Maturity analysis of payables

Please refer to Note 7.1 for the ageing analysis of contractual payables

(b) Nature and extent of risk arising from payables

Please refer to Note 7.1 for the nature and extent of risks arising from contractual payables

Payables Payables consist of:

• contractual payables which consist predominantly of accounts payable representing liabilities for goods and services provided to the Health Service prior to the end of the financial year that are unpaid, and arise when the health service becomes obliged to make future payments in respect of the purchase of those goods and services. The normal credit terms are usually Nett 30 days. • statutory payables, such as goods and services tax and fringe benefits tax payables.

Contractual payables are classified as financial instruments and are initially recognised at fair value, and then subsequently carried at amortised cost. 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.

Page 24



Note 5.4: Payables 2017 $

2016 $

Current

Contractual

Trade Creditors 260,423 111,825 Accrued Expenses 53,631 23,520 Income in Advance - 3,500 SWARH Payables 670,057 463,909 TOTAL PAYABLES 984,111 602,754 (a) Maturity analysis of payables

Please refer to Note 7.1 for the ageing analysis of contractual payables

(b) Nature and extent of risk arising from payables

Please refer to Note 7.1 for the nature and extent of risks arising from contractual payables

Payables Payables consist of:

• contractual payables which consist predominantly of accounts payable representing liabilities for goods and services provided to the Health Service prior to the end of the financial year that are unpaid, and arise when the health service becomes obliged to make future payments in respect of the purchase of those goods and services. The normal credit terms are usually Nett 30 days. • statutory payables, such as goods and services tax and fringe benefits tax payables.

Contractual payables are classified as financial instruments and are initially recognised at fair value, and then subsequently carried at amortised cost. 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.




Note 6: How we finance our operations

Note 6.1: Borrowings Current - Finance Lease Liability (i)

2016 2016 $ $

83,855 95,185 Total Current 83,855 95,185 Non-Current - Finance Lease Liability (i)

101,710 129,573

Total Non-Current 101,710 129,573 TOTAL BORROWINGS

185,565

224,758

(i) Otway Health's share of finance lease liabilities undertaken by the SWARH joint arrangement.

(a) Maturity analysis of borrowings Please refer to Note 7.1 for the ageing analysis of borrowings.

(b) Nature and extent of risk arising from borrowings Please refer to Note 7.1 for the nature and extent of risks arising from borrowings.

(c ) Defaults and breaches During the current and prior year, SWARH have not reported any defaults and breaches of any of the borrowings.

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 leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Finance Leases Entity as lessee

Finance leases are recognised as assets and liabilities at amounts equal to the fair value of the lease property or, if lower, the present value of the minimum lease payment, each determined at the inception of the lease. The lease asset is depreciated over the shorter of the estimated useful life of the asset or the term of the lease. Minimum lease payments are apportioned between reduction of the outstanding lease liability, and the periodic finance expense which is calculated using the interest rate implicit in the lease, and 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.

Entity as lessor The health service deos not hold any finance lease arrangements with other parties.

Operating Leases Entity as lessee 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.


This section provides information on the sources of finance utilised by the hospital during its operations, along with interest expenses (the cost of borrowings) and other information related to financing activities of the hospital. This section includes disclosures of balances that are financial instruments (such as borrowings and cash balances). Note: 7.1 provides additional, specific financial instrument disclosures. Structure 6.1 Borrowings 6.2 Cash and cash equivalents 6.3 Commitments for expenditure

Page 25



Note 6: How we finance our operations

Note 6.1: Borrowings Current - Finance Lease Liability (i)

2016 2016 $ $

83,855 95,185 Total Current 83,855 95,185 Non-Current - Finance Lease Liability (i)

101,710 129,573

Total Non-Current 101,710 129,573 TOTAL BORROWINGS

185,565

224,758

(i) Otway Health's share of finance lease liabilities undertaken by the SWARH joint arrangement.

(a) Maturity analysis of borrowings Please refer to Note 7.1 for the ageing analysis of borrowings.

(b) Nature and extent of risk arising from borrowings Please refer to Note 7.1 for the nature and extent of risks arising from borrowings.

(c ) Defaults and breaches During the current and prior year, SWARH have not reported any defaults and breaches of any of the borrowings.

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 leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Finance Leases Entity as lessee

Finance leases are recognised as assets and liabilities at amounts equal to the fair value of the lease property or, if lower, the present value of the minimum lease payment, each determined at the inception of the lease. The lease asset is depreciated over the shorter of the estimated useful life of the asset or the term of the lease. Minimum lease payments are apportioned between reduction of the outstanding lease liability, and the periodic finance expense which is calculated using the interest rate implicit in the lease, and 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 Leases Entity as lessee 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.


This section provides information on the sources of finance utilised by the hospital during its operations, along with interest expenses (the cost of borrowings) and other information related to financing activities of the hospital. This section includes disclosures of balances that are financial instruments (such as borrowings and cash balances). Note: 7.1 provides additional, specific financial instrument disclosures. Structure 6.1 Borrowings 6.2 Cash and cash equivalents 6.3 Commitments for expenditure


Page 26



Note 6.2: Cash and cash equivalents

For the purposes of the Cash Flow Statement, cash includes cash on hand and in banks, and short-term deposits which are readily convertible to cash on hand, and are subject to insignificant risk of change in value, net of outstanding overdrafts.

2017 2016 $ $ Cash on Hand 1,068 968 Cash at Bank 608,336 421,369 Short Term Money market 315,852 427,389 Total Cash and Cash Equivalents 925,256 849,726

Represented by:

Cash for Health Service Operations (as per Cash Flow Statement) 925,256 849,726

Cash and cash equivalents recognised on the balance sheet comprise cash on hand and cash at bank, deposits at call and highly liquid investments (with an original maturity of three months or less), which are held for the purpose of meeting short term cash commitments rather than for investment purposes, which are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value.

For the cash flow statement presentation purposes, cash and cash equivalents includes bank overdrafts, which are included as current borrowings in the balance sheet.

Note 6.3: Commitments for Expenditure

(a ) Commitments other than public private partnerships 2017 2016 $ $

Capital expenditure Commitments Land and Buildings Not Later than 1 year - 37,360

- 37,360

Operating Lease commitments Operating lease commitments in respect of computers, photocopiers and property payable as follows: Non-cancellable 23,652 38,620 Total Operating Lease commitments 23,652 38,620

Total Commitments (inclusive of GST) other than public private partnerships 23,652 75,980

(b ) Commitments payable

Capital Expenditure Commitments

2016 $

Less than 1 year - 37,360

Total capital expenditure commitments - 37,360

Lease commitments payable Less than 1 year Longer than 1 year but not longer than 5 years Total lease commitments Total Commitments (inclusive of GST)

22,536 16,084

23,652 75,980

Commitments for future expenditure include operating and capital commitments arising from contracts. These commitments are disclosed by way of a note at their nominal value and are inclusive of the GST payable. In addition, where it is considered appropriate and provides additional relevant information to users, the net present values of significant individual projects are sated. These future expenditures cease to be disclosed as commitments once the related liabilities are recognised on the balance sheet.

23,652 38,620

2017

$

15,263 8,389

Page 26



Note 6.2: Cash and cash equivalents

For the purposes of the Cash Flow Statement, cash includes cash on hand and in banks, and short-term deposits which are readily convertible to cash on hand, and are subject to insignificant risk of change in value, net of outstanding overdrafts.

2017 2016 $ $ Cash on Hand 1,068 968 Cash at Bank 608,336 421,369 Short Term Money market 315,852 427,389 Total Cash and Cash Equivalents 925,256 849,726

Represented by:

Cash for Health Service Operations (as per Cash Flow Statement) 925,256 849,726

Cash and cash equivalents recognised on the balance sheet comprise cash on hand and cash at bank, deposits at call and highly liquid investments (with an original maturity of three months or less), which are held for the purpose of meeting short term cash commitments rather than for investment purposes, which are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value.

For the cash flow statement presentation purposes, cash and cash equivalents includes bank overdrafts, which are included as current borrowings in the balance sheet.

Note 6.3: Commitments for Expenditure

(a ) Commitments other than public private partnerships 2017 2016 $ $

Capital expenditure Commitments Land and Buildings Not Later than 1 year - 37,360

- 37,360

Operating Lease commitments Operating lease commitments in respect of computers, photocopiers and property payable as follows: Non-cancellable 23,652 38,620 Total Operating Lease commitments 23,652 38,620

Total Commitments (inclusive of GST) other than public private partnerships 23,652 75,980

(b ) Commitments payable

Capital Expenditure Commitments

2016 $

Less than 1 year - 37,360

Total capital expenditure commitments - 37,360

Lease commitments payable Less than 1 year Longer than 1 year but not longer than 5 years Total lease commitments Total Commitments (inclusive of GST)

22,536 16,084

23,652 75,980

Commitments for future expenditure include operating and capital commitments arising from contracts. These commitments are disclosed by way of a note at their nominal value and are inclusive of the GST payable. In addition, where it is considered appropriate and provides additional relevant information to users, the net present values of significant individual projects are sated. These future expenditures cease to be disclosed as commitments once the related liabilities are recognised on the balance sheet.

23,652 38,620

2017

$

15,263 8,389

OTWAY HEALTH Annual Report 2016-2017 | 56 Page 27



Note 7: Risks, contingencies & valuation uncertainties

Note 7.1: Financial Instruments

Financial Risk Manangement Objectives and Policies The Health Service's principal financial instruments comprise of:

- Cash Assets - Term Deposits - Receivables (excluding statutory receivables) - Payables (excluding statutory payables) - Accommodation Bonds

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

The Health Service's main financial risks include credit risk, liquidity risk and interest rate risk. The Health Service manages these financial risks in accordance with its financial risk management policy.

The Health Service uses different methods to measure and manage the different risks to which it is exposed. Primary responsibility for the identification and management of financial risks rests with the finance committee of the Health Service.

The main purpose in holding financial instruments is to prudentially manage the Health Service's financial risks within the government policy parameters.

(a) Categorisation of financial instruments

Consolidated Carrying Amount

2017 2016 $ $

Financial Assets Cash and cash equivalents

Loans and receivables 925,256

849,726

Receivables - Trade Debtors 746,478 629,992 - Other Receivables

Other Financial Assets - Term Deposit

201,205

3,502,913

178,330

2,933,099 Total Financial Assets (i) 5,375,852 4,591,147 Financial Liabilities At Amortised Cost

Payables 984,111 602,754 Borrowings Other Financial Liabilities - Accomodation bonds

185,565

1,790,894

224,758

1,955,447 Total Financial Liabilities (ii) 2,960,570 2,782,959

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

No net holding gain or loss was made in respect of any of the above categories of financial instruments with the exception of interest revenue which is disclosed in Note 2.1, and finance expense which is disclosed in Note 3.2.

Introduction The hospital is exposed to risk from its activities and outside factors. In addition, it is often necessary to make judgements and estimates associated with recognition and measurement of items in the financial statements. This section sets out financial instrument specific information, (including exposures to financial risks) as well as those items that are contingent in nature or require a higher level of judgement to be applied, which for the hospital is related mainly to fair value determination. Structure 7.1 Financial instruments 7.2 Net gain / (loss) on disposal of non-financial assets 7.3 Contingent assets and contingent liabilities 7.4 Fair value determination

Page 27



Note 7: Risks, contingencies & valuation uncertainties

Note 7.1: Financial Instruments

Financial Risk Manangement Objectives and Policies The Health Service's principal financial instruments comprise of:

- Cash Assets - Term Deposits - Receivables (excluding statutory receivables) - Payables (excluding statutory payables) - Accommodation Bonds

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

The Health Service's main financial risks include credit risk, liquidity risk and interest rate risk. The Health Service manages these financial risks in accordance with its financial risk management policy.

The Health Service uses different methods to measure and manage the different risks to which it is exposed. Primary responsibility for the identification and management of financial risks rests with the finance committee of the Health Service.

The main purpose in holding financial instruments is to prudentially manage the Health Service's financial risks within the government policy parameters.

(a) Categorisation of financial instruments

Consolidated Carrying Amount

2017 2016 $ $

Financial Assets Cash and cash equivalents

Loans and receivables 925,256

849,726

Receivables - Trade Debtors 746,478 629,992 - Other Receivables


201,205

3,502,913

178,330

2,933,099 Total Financial Assets (i) 5,375,852 4,591,147 Financial Liabilities At Amortised Cost

Payables 984,111 602,754 Borrowings Other Financial Liabilities - Accomodation bonds

185,565

1,790,894

224,758

1,955,447 Total Financial Liabilities (ii) 2,960,570 2,782,959

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

No net holding gain or loss was made in respect of any of the above categories of financial instruments with the exception of interest revenue which is disclosed in Note 2.1, and finance expense which is disclosed in Note 3.2.

Introduction The hospital is exposed to risk from its activities and outside factors. In addition, it is often necessary to make judgements and estimates associated with recognition and measurement of items in the financial statements. This section sets out financial instrument specific information, (including exposures to financial risks) as well as those items that are contingent in nature or require a higher level of judgement to be applied, which for the hospital is related mainly to fair value determination. Structure 7.1 Financial instruments 7.2 Net gain / (loss) on disposal of non-financial assets 7.3 Contingent assets and contingent liabilities 7.4 Fair value determination


Page 28



(c) Credit Risk Credit risk arises from the contractual financial assets of the Health Service, which comprise cash and deposits, non-statutory receivables and available for sale contractual financial assets as listed in the table below. The Health Service’s exposure to credit risk arises from the potential default of a counter party on their contractual obligations resulting in financial loss to the Health Service. Credit risk is measured at fair value and is monitored on a regular basis.

Credit risk associated with the Health Service’s contractual financial assets is minimal because the main debtor is the Victorian Government. For debtors other than the Government, it is the Health Service’s policy to deal where possible with entities with high credit ratings. Trade and Other receivables that are not either past due nor impaired are considered to be of high credit quality.

In addition, the Health Service does not engage in hedging for its contractual financial assets and mainly obtains contractual financial assets that are on fixed interest, except for cash assets, which are mainly cash at bank. As with the policy for debtors, the Health Service’s policy is to only deal with banks with high credit ratings.

Provision of impairment for contractual financial assets is recognised when there is objective evidence that the Health Service will not be able to collect a receivable. Objective evidence includes financial difficulties of the debtor, default payments, debts which are more than 60 days overdue, and changes in debtor credit ratings.

Except as otherwise detailed in the following table, the carrying amount of contractual financial assets as recorded in the financial staements, net of any allowance for losses, represents Otway Health's maximum exposure to credit risk without taking into account of the value of any collateral obtained.

Credit quality of contractual financial assets that are neither past due nor impaired

Cash and Cash Equivalents 925,256 - - 925,256

2016 Financial Assets Cash and Cash Equivalents 849,726 - - 849,726 Loans and Receivables

- Trade Debtors - - 629,992 629,992 - Other receivables - - 178,330 178,330

Other Financial Assets

- Term deposits 2,933,099 - - 2,933,099 Total Financial Assets 3,782,825 - 808,322 4,591,147

Ageing analysis of financial assets as at 30 June

Not Not

Past Due But Not Impaired

2017 Financial Assets

Past Due Less than 1-3 3 Months - 1-5 Impaired Carrying And Not 1 Month Months 1 Year Years Financial Amount Impaired Assets

$ $ $ $ $ $ $

Cash and Cash Equivalents 925,256 925,256 - - Receivables - Trade Debtors 600,401 594,023 398 1,043

-

4,937

- -

- - - Other Receivables 284,668 268,451 3,216 6,664

Other Financial Assets - Term Deposit 3,502,913 3,502,913 - -

6,337

-

- -

- - Total Financial Assets 5,313,238 5,290,643 3,614 7,707 11,274 - - 2016 $ $

$

$

$

$ $

Financial Assets

Cash and Cash Equivalents Receivables - Trade Debtors

422,337

470,018

422,337

450,496

-

12,079

-

7,443

- - -

- - - Other Receivables


327,127

3,360,488

322,409

3,360,488

2,287

-

2,431

-

- -

- - - Total Financial Assets 4,579,969 4,555,729 14,366 9,874 - - -

Financial institutions (AA- credit

rating)

Government Agencies (AA credit

rating)

Other (min BBB

credit rating)

Total

2017 $ $ $ $ Financial Assets

Loans and Receivables - Trade Debtors

- - 746,478 746,478 - Other receivables

Other Financial Assets - Term deposits

- - 201,205 201,205

3,502,913 - - 3,502,913 Total Financial Assets 4,428,169 - 947,683 5,375,852

Page 28



(c) Credit Risk Credit risk arises from the contractual financial assets of the Health Service, which comprise cash and deposits, non-statutory receivables and available for sale contractual financial assets as listed in the table below. The Health Service’s exposure to credit risk arises from the potential default of a counter party on their contractual obligations resulting in financial loss to the Health Service. Credit risk is measured at fair value and is monitored on a regular basis.

Credit risk associated with the Health Service’s contractual financial assets is minimal because the main debtor is the Victorian Government. For debtors other than the Government, it is the Health Service’s policy to deal where possible with entities with high credit ratings. Trade and Other receivables that are not either past due nor impaired are considered to be of high credit quality.

In addition, the Health Service does not engage in hedging for its contractual financial assets and mainly obtains contractual financial assets that are on fixed interest, except for cash assets, which are mainly cash at bank. As with the policy for debtors, the Health Service’s policy is to only deal with banks with high credit ratings.

Provision of impairment for contractual financial assets is recognised when there is objective evidence that the Health Service will not be able to collect a receivable. Objective evidence includes financial difficulties of the debtor, default payments, debts which are more than 60 days overdue, and changes in debtor credit ratings.

Except as otherwise detailed in the following table, the carrying amount of contractual financial assets as recorded in the financial staements, net of any allowance for losses, represents Otway Health's maximum exposure to credit risk without taking into account of the value of any collateral obtained.

Credit quality of contractual financial assets that are neither past due nor impaired

Cash and Cash Equivalents 925,256 - - 925,256

2016 Financial Assets Cash and Cash Equivalents 849,726 - - 849,726 Loans and Receivables

- Trade Debtors - - 629,992 629,992 - Other receivables - - 178,330 178,330

Other Financial Assets

- Term deposits 2,933,099 - - 2,933,099 Total Financial Assets 3,782,825 - 808,322 4,591,147

Ageing analysis of financial assets as at 30 June

Not Not

Past Due But Not Impaired

2017 Financial Assets

Past Due Less than 1-3 3 Months - 1-5 Impaired Carrying And Not 1 Month Months 1 Year Years Financial Amount Impaired Assets

$ $ $ $ $ $ $

Cash and Cash Equivalents 925,256 925,256 - - Receivables - Trade Debtors 600,401 594,023 398 1,043

-

4,937

- -

- - - Other Receivables 284,668 268,451 3,216 6,664

Other Financial Assets - Term Deposit 3,502,913 3,502,913 - -

6,337

-

- -

- - Total Financial Assets 5,313,238 5,290,643 3,614 7,707 11,274 - - 2016 $ $

$

$

$

$ $

Financial Assets


422,337

470,018

422,337

450,496

-

12,079

-

7,443

- - -

- - - Other Receivables


327,127

3,360,488

322,409

3,360,488

2,287

-

2,431

-

- -

- - - Total Financial Assets 4,579,969 4,555,729 14,366 9,874 - - -

Financial institutions (AA- credit

rating)

Government Agencies (AA credit

rating)

Other (min BBB

credit rating)

Total

2017 $ $ $ $ Financial Assets

Loans and Receivables - Trade Debtors

- - 746,478 746,478 - Other receivables

Other Financial Assets - Term deposits

- - 201,205 201,205

3,502,913 - - 3,502,913 Total Financial Assets 4,428,169 - 947,683 5,375,852


Page 29



Contractual financial assets that are either past due or impaired

There are no material financial assets which are individually determined to be impaired. The Health Service does not hold any collateral as security nor credit enhancements relating to any of its financial assets.

There are no financial assets that have had their terms renegotiated so as to prevent them from being past due or impaired, and they are stated at the carrying amounts as indicated. The ageing analysis table above discloses the ageing only of contractual financial assets that are past due but not impaired.

(d) Liquidity Risk Liquidity risk is the risk that the Health Service would be unable to meet its financial obligations as and when they fall due.

The Health Service’s maximum exposure to liquidity risk is the carrying amounts of financial liabilities as disclosed in the face of the balance sheet. The Health Service manages its liquidity risk by monitoring forecast cash flows and ensuring that liquid assets are available.

The following table discloses the contractual maturity analysis for the Health Service's financial liabilities. For interest rates applicable to each class of liability refer to individual notes to the financial statements.

Maturity Analysis of financial liabilities as at 30 June

Maturity Dates

Carrying Amount

Contractual Cash Flows

Less than 1 Month

1-3 Months

3 Months - 1 Year

1-5 Years

Over 5 Years

2017 $ $ $ $ $ $ $ Payables 984,111 984,111 984,111 - - - - Borrowings 185,565 185,565 - 20,964 62,891 101,710

Accommodation Bonds 1,790,894 1,790,894 - - - 1,790,894 - Total Financial Liabilities 2,960,570 2,960,570 984,111 20,964 62,891 1,892,604 -


Accommodation Bonds 1,955,447 1,955,447 - - - 1,955,447 - Total Financial Liabilities 2,558,201 2,558,201 602,755 - - 1,955,447 -

(e) Market Risk The Health Service's exposures to market risk are primarily through interest rate risk with only insignificant exposure to foreign currency and other price risks. Objectives, policies and processes used to manage each of these risks are disclosed below.

Currency Risk The Health Service has no exposure to foreign currency risk.

Interest Rate Risk Exposure to interest rate risk might arise primarily through the Health Service's interest bearing assets and liabilities. The Health Service currently has no interest bearing liabilities and is unlikely to have any into the future as interest bearing liabilities can only be entered into with the approval of the Department of Treasury and Finance.

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Health Service has minimal exposure to cash flow interest rate risks through its cash and term deposits that are at a floating rate.

The Health Service manages this risk by mainly undertaking fixed rate or non-interest bearing financial instruments with relatively even maturity profiles, with only insignificant amounts of financial instruments at floating rate. Management has concluded for cash at bank and bank overdraft, as financial assets that can be left at floating rate without necessarily exposing the Health Service to significant bad risk, management monitors movement in interest rates on a daily basis.

Page 29



Contractual financial assets that are either past due or impaired

There are no material financial assets which are individually determined to be impaired. The Health Service does not hold any collateral as security nor credit enhancements relating to any of its financial assets.

There are no financial assets that have had their terms renegotiated so as to prevent them from being past due or impaired, and they are stated at the carrying amounts as indicated. The ageing analysis table above discloses the ageing only of contractual financial assets that are past due but not impaired.

(d) Liquidity Risk Liquidity risk is the risk that the Health Service would be unable to meet its financial obligations as and when they fall due.

The Health Service’s maximum exposure to liquidity risk is the carrying amounts of financial liabilities as disclosed in the face of the balance sheet. The Health Service manages its liquidity risk by monitoring forecast cash flows and ensuring that liquid assets are available.

The following table discloses the contractual maturity analysis for the Health Service's financial liabilities. For interest rates applicable to each class of liability refer to individual notes to the financial statements.

Maturity Analysis of financial liabilities as at 30 June

Maturity Dates

Carrying Amount

Contractual Cash Flows

Less than 1 Month

1-3 Months

3 Months - 1 Year

1-5 Years

Over 5 Years


Accommodation Bonds 1,790,894 1,790,894 - - - 1,790,894 - Total Financial Liabilities 2,960,570 2,960,570 984,111 20,964 62,891 1,892,604 -


Accommodation Bonds 1,955,447 1,955,447 - - - 1,955,447 - Total Financial Liabilities 2,558,201 2,558,201 602,755 - - 1,955,447 -

(e) Market Risk The Health Service's exposures to market risk are primarily through interest rate risk with only insignificant exposure to foreign currency and other price risks. Objectives, policies and processes used to manage each of these risks are disclosed below.

Currency Risk The Health Service has no exposure to foreign currency risk.

Interest Rate Risk Exposure to interest rate risk might arise primarily through the Health Service's interest bearing assets and liabilities. The Health Service currently has no interest bearing liabilities and is unlikely to have any into the future as interest bearing liabilities can only be entered into with the approval of the Department of Treasury and Finance.

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Health Service has minimal exposure to cash flow interest rate risks through its cash and term deposits that are at a floating rate.

The Health Service manages this risk by mainly undertaking fixed rate or non-interest bearing financial instruments with relatively even maturity profiles, with only insignificant amounts of financial instruments at floating rate. Management has concluded for cash at bank and bank overdraft, as financial assets that can be left at floating rate without necessarily exposing the Health Service to significant bad risk, management monitors movement in interest rates on a daily basis.




Page 30

Interest Rate Exposure of Financial Assets and Liabilities as at 30 June Weighted

Average Interest Rates

Carrying Amount

Interest Rate Exposure Fixed Variable

Interest Interest Rate Rate

Non

Interest Bearing

2017 % $ $ $ $ Financial Assets


0.35 925,256

600,401

- 608,336

- -

1,068

600,401 - Other Receivables 284,668 - - 284,668

Other Financial Assets - Term Deposit 2.40 3,502,913 3,502,913 - - Total Financial Assets 5,313,238 3,502,913 608,336 886,137 Financial Liabilities

Payables 984,111 - - 984,111 Borrowings 9.40 185,565 185,565 - Accommodation Bonds 1,790,894 - - 1,790,894 Total Financial Liabilities 2,960,570 - 185,565 2,775,005 2016

Financial Assets


0.35 422,337

470,018

- 421,369

- -

968



Payables 602,755 - - 602,755 Borrowings 9.40 224,758 224,758 - Accommodation Bonds 1,955,447 - - 1,955,447 Total Financial Liabilities 2,782,959 - 224,758 2,558,201 Other Price Risk

The Health Service is exposed to insignificant other price risk

Sensitivity Disclosure Analysis Taking into account past performance, future expectations, economic forecasts, and management's knowledge and experience of the financial markets, the Health Service believes the following movements are 'reasonably possible' over the next 12 months (Base rates are sourced from the Reserve Bank of Australia)

- A parallel shift of +1% and -1% in market interest rates (AUD) from year-end rates of 4%; - A parallel shift of +1% and -1% in inflation rate from year-end rates of 2% (the impact of this has not been modelled).



Page 30

Interest Rate Exposure of Financial Assets and Liabilities as at 30 June Weighted

Average Interest Rates

Carrying Amount

Interest Rate Exposure Fixed Variable

Interest Interest Rate Rate

Non

Interest Bearing

2017 % $ $ $ $ Financial Assets


0.35 925,256

600,401

- 608,336

- -

1,068



Payables 984,111 - - 984,111 Borrowings 9.40 185,565 185,565 - Accommodation Bonds 1,790,894 - - 1,790,894 Total Financial Liabilities 2,960,570 - 185,565 2,775,005 2016

Financial Assets


0.35 422,337

470,018

- 421,369

- -

968



Payables 602,755 - - 602,755 Borrowings 9.40 224,758 224,758 - Accommodation Bonds 1,955,447 - - 1,955,447 Total Financial Liabilities 2,782,959 - 224,758 2,558,201 Other Price Risk

The Health Service is exposed to insignificant other price risk

Sensitivity Disclosure Analysis Taking into account past performance, future expectations, economic forecasts, and management's knowledge and experience of the financial markets, the Health Service believes the following movements are 'reasonably possible' over the next 12 months (Base rates are sourced from the Reserve Bank of Australia)

- A parallel shift of +1% and -1% in market interest rates (AUD) from year-end rates of 4%; - A parallel shift of +1% and -1% in inflation rate from year-end rates of 2% (the impact of this has not been modelled).




Page 31

The following table discloses the impact on net operating result and equity for each category of variable rate financial instruments held by the Health Service at year end as presented to key management personnel, if changes in the relevant interest rate risk occur

Carrying

Interest Rate Risk

-1% +1% Amount Profit Equity Profit Equity

2017 $ $ $ $ $

Financial Assets Cash and Cash Equivalents 608,336 (6,083) (6,083) 6,083 6,083 Receivables - Trade Debtors 600,401 - - - - - Other Receivables 284,668 - - - - Other Financial Assets - Term Deposit 3,502,913 (35,029) (35,029) 35,029 35,029

Total Financial Assets 4,996,318 (41,112) (41,112) 41,112 41,112

Financial Liabilities Payables 984,111 - - - - Borrowings 185,565 1,856 1,856 (1,856) (1,856) Other Financial Liabilities - Accommodation Bonds 1,790,894 - - - -

Total Financial Liabilities 2,960,570 1,856 1,856 (1,856) (1,856)

2016 Financial Assets Cash and Cash Equivalents 401,932 (4,019) (4,019) 4,019 4,019 Receivables - Trade Debtors 78,378 - - - - - Other Receivables 339,120 - - - - Other Financial Assets - Term Deposit 3,161,416 (31,614) (31,614) 31,614 31,614




(f) Fair Value The fair values and net fair values of financial instrument assets and liabilities are determined as follows:

• Level 1 - the fair value of financial instrument with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market prices;

• Level 2 - the fair value is determined using inputs other than quoted prices that are observable for the financial asset or liability, either directly or indirectly; and

• Level 3 - the fair value is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using unobservable market inputs.

The Health service considers that the carrying amount of financial assets and liabilities recorded in the financial statements to be a fair approximation of their fair values, because of the short-term nature of the financial instruments and the expectation that they will be paid in full.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

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 any directly attributable transaction costs. Subsequent to initial measurement, loans and receivables are measured at amortised cost using the effective interest method, less any impairment.

Loans and receivables category includes cash and deposits, term deposits with maturity greater than three months, trade receivables, loans 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.

Financial instrument liabilities measured at amortised cost include all of the Health Service’s contractual payables, deposits held and advances received, and interest-bearing arrangements.

Net Gain/(Loss) on financial instruments Net gain/(loss) on financial instruments includes: - realised and unrealised gains and losses from revaluations of financial instruments that are designated at fair value through profit or loss or held-for- trading; - impairment and reversal of impairment for financial instruments at amortised cost; and - disposals of financial assets.

Revaluations of financial instruments at fair value



Page 31

The following table discloses the impact on net operating result and equity for each category of variable rate financial instruments held by the Health Service at year end as presented to key management personnel, if changes in the relevant interest rate risk occur

Carrying

Interest Rate Risk

-1% +1% Amount Profit Equity Profit Equity

2017 $ $ $ $ $

Financial Assets Cash and Cash Equivalents 608,336 (6,083) (6,083) 6,083 6,083 Receivables - Trade Debtors 600,401 - - - - - Other Receivables 284,668 - - - - Other Financial Assets - Term Deposit 3,502,913 (35,029) (35,029) 35,029 35,029




2016 Financial Assets Cash and Cash Equivalents 401,932 (4,019) (4,019) 4,019 4,019 Receivables - Trade Debtors 78,378 - - - - - Other Receivables 339,120 - - - - Other Financial Assets - Term Deposit 3,161,416 (31,614) (31,614) 31,614 31,614




(f) Fair Value The fair values and net fair values of financial instrument assets and liabilities are determined as follows:

• Level 1 - the fair value of financial instrument with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market prices;

• Level 2 - the fair value is determined using inputs other than quoted prices that are observable for the financial asset or liability, either directly or indirectly; and

• Level 3 - the fair value is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using unobservable market inputs.

The Health service considers that the carrying amount of financial assets and liabilities recorded in the financial statements to be a fair approximation of their fair values, because of the short-term nature of the financial instruments and the expectation that they will be paid in full.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

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 any directly attributable transaction costs. Subsequent to initial measurement, loans and receivables are measured at amortised cost using the effective interest method, less any impairment.

Loans and receivables category includes cash and deposits, term deposits with maturity greater than three months, trade receivables, loans 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.

Financial instrument liabilities measured at amortised cost include all of the Health Service’s contractual payables, deposits held and advances received, and interest-bearing arrangements.

Net Gain/(Loss) on financial instruments Net gain/(loss) on financial instruments includes: - realised and unrealised gains and losses from revaluations of financial instruments that are designated at fair value through profit or loss or held-for- trading; - impairment and reversal of impairment for financial instruments at amortised cost; and - disposals of financial assets.

Revaluations of financial instruments at fair value




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The revaluation gain/(loss) on financial instruments at fair value excludes dividends or interest earned on financial assets.



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The revaluation gain/(loss) on financial instruments at fair value excludes dividends or interest earned on financial assets.




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Note 7.2: Net gain / (loss) on disposal of non-financial assets 2017 2016 $ $ Proceeds from Disposals of Non-Current Assets

Equipment

- 4,944 Motor Vehicles - 59,545

Total Proceeds from Disposals of Assets - 64,489

Less: Written-Down Value of Non-Current Assets Sold Equipment

- 370 Motor Vehicles - 53,287

Total Written-Down Value of Assets Sold - 53,657 Net gain / (loss) on disposal of non-financial assets - 10,832

Disposal of non-financial Assets Any gain or loss on the sale of non-financial assets is recognised in the comprehensive operating statement. Refer to Note 8.1 – ‘comprehensive income’.

Impairment of non-financial Assets All other non-finanical assets are tested annually for indications of impairment except for:

• financial assets; • investment property that is measured at fair value; and • non-current physical assets held for sale.

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 as an expense except to the extent that the write-down can be debited to an asset revaluation surplus amount applicable to that same class of asset.

If there is an indication that there has been a reversal in the estimate of an asset’s recoverable amount since the last impairment loss was recognised, the carrying amount shall be increased to its recoverable amount. This reversal of the impairment loss occurs only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised in prior years.

It is deemed that, in the event of the loss or destruction 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. 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.

Note 7.3: Contingent Assets and Contingent Liabilities

The service has received funding in relation to a social housing innovation project. Under the agreement entered into with the Department of Health and Human Services the service is required to continue to manage the project for a period of 40 years expiring in 2043. Should the project cease within this time the service is required to repay monies to the Department of Health and Human Services under an agreed formula specified in the agreement. It is the intention of Otway Health & Community Services to comply with the conditions of the agreement and no amount is considered to be refundable, contingent or otherwise.



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Note 7.2: Net gain / (loss) on disposal of non-financial assets 2017 2016 $ $ Proceeds from Disposals of Non-Current Assets

Equipment

- 4,944 Motor Vehicles - 59,545

Total Proceeds from Disposals of Assets - 64,489

Less: Written-Down Value of Non-Current Assets Sold Equipment

- 370 Motor Vehicles - 53,287

Total Written-Down Value of Assets Sold - 53,657 Net gain / (loss) on disposal of non-financial assets - 10,832

Disposal of non-financial Assets Any gain or loss on the sale of non-financial assets is recognised in the comprehensive operating statement. Refer to Note 8.1 – ‘comprehensive income’.

Impairment of non-financial Assets All other non-finanical assets are tested annually for indications of impairment except for:

• financial assets; • investment property that is measured at fair value; and • non-current physical assets held for sale.

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 as an expense except to the extent that the write-down can be debited to an asset revaluation surplus amount applicable to that same class of asset.

If there is an indication that there has been a reversal in the estimate of an asset’s recoverable amount since the last impairment loss was recognised, the carrying amount shall be increased to its recoverable amount. This reversal of the impairment loss occurs only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised in prior years.

It is deemed that, in the event of the loss or destruction 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. 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.

Note 7.3: Contingent Assets and Contingent Liabilities

The service has received funding in relation to a social housing innovation project. Under the agreement entered into with the Department of Health and Human Services the service is required to continue to manage the project for a period of 40 years expiring in 2043. Should the project cease within this time the service is required to repay monies to the Department of Health and Human Services under an agreed formula specified in the agreement. It is the intention of Otway Health & Community Services to comply with the conditions of the agreement and no amount is considered to be refundable, contingent or otherwise.




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Note 7.4: Fair value determination

Asset class Examples of types of assets Expected fair value level Likely valuation approach Significant inputs (level 3 only)

Non-specialised land

Vacant land, land not subject to restrictions, in areas where there is an active market

Level 2 Market approach N/A

Specialised land

Land subject to restrictions, in areas where there is not an active market

Level 3 Market approach Community Service Obligation

(CSO) adjustment

Non-specialised buildings

For general commercial buildings Level 2 Market approach that are just built

Specialised buildings with limited

N/A

Specialised buildings alternative uses and/or substantial customisation e.g. hospitals

Level 3 Depreciated replacement cost

Cost per square metre / useful life

Plant and equipment

Specialised items with limited alternative uses and/or substantial customisation

Level 3

Depreciated replacement

cost Cost per unit / useful life

Vehicles If there is an active resale market Level 2 Market approach N/A available

Vehicles If there is not an active resale market available Level 3 Depreciated replacement

cost

Cost per unit / useful life



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Note 7.4: Fair value determination

Asset class Examples of types of assets Expected fair value level Likely valuation approach Significant inputs (level 3 only)

Non-specialised land

Vacant land, land not subject to restrictions, in areas where there is an active market

Level 2 Market approach N/A

Specialised land

Land subject to restrictions, in areas where there is not an active market

Level 3 Market approach Community Service Obligation

(CSO) adjustment

Non-specialised buildings

For general commercial buildings Level 2 Market approach that are just built

Specialised buildings with limited

N/A

Specialised buildings alternative uses and/or substantial customisation e.g. hospitals

Level 3 Depreciated replacement cost

Cost per square metre / useful life

Plant and equipment

Specialised items with limited alternative uses and/or substantial customisation

Level 3

Depreciated replacement

cost Cost per unit / useful life

Vehicles If there is an active resale market Level 2 Market approach N/A available

Vehicles If there is not an active resale market available Level 3 Depreciated replacement

cost

Cost per unit / useful life




Note 8: Other Disclosures

Note 8.1: Equity 2017 2016

$ $ (a) Surpluses Property, Plant & Equipment Revaluation Surplus Balance at the beginning of the reporting period 4,513,024 4,513,024 Revaluation Increments/(Decrements)

- Land - - - Buildings

Balance at the end of the reporting period - -

4,513,024 4,513,024 Represented by:

- Land

1,688,337 1,688,337 - Buildings 2,824,687 2,824,687

4,513,024 4,513,024 Asset Replacement Surplus

Balance at the beginning of the reporting period 185,902 185,902 Balance at the end of the reporting period 185,902 185,902 Restricted Specific Purpose Surplus

Balance at Beginning of Reporting Period 504,427 504,427 Balance at the end of the reporting period 504,427 504,427 (b) Contributed Capital

Balance at Beginning of Reporting Period 3,787,544 3,787,544 Balance at the end of the reporting period 3,787,544 3,787,544 (c) Accumulated Surplus / (Deficit)

Balance at Beginning of Reporting Period 3,211,829 3,717,900 Net Surplus/(Deficit) for the year 373,327 (506,071) Balance at the end of the reporting period 3,585,156 3,211,829

(d) Total Equity at end of financial year 12,576,053 12,202,726

Contributed Capital Consistent with Australian Accounting Interpretation 1038 Contributions by Owners Made to Wholly-Owned Public Sector Entities and FRD 119A Contributions by Owners, appropriations for additions to the net asset base have been designated as contributed capital. Other transfers that are in the nature of contributions to or distributions by owners that have been designated as contributed capital are also treated as contributed capital.

Property, Plant & Equipment Revaluation Surplus The asset revaluation reserve is used to record increments and decrements on the revaluation of non-current physical assets.

This section includes additional material disclosures required by accounting standards or otherwise, for the understanding of this Structure 8.1 Equity 8.2 Reconciliation of net result for the year to net cash inflow / (outflow) from operating activities 8.3 Responsible persons disclosures 8.4 Executive officer disclosures 8.5 Related parties 8.6 Remuneration of auditors 8.7 AASBs issued that are not yet effective 8.8 Events occurring after the balance sheet date 8.9 Alternative presentation of comprehensive operating statement

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Note 8: Other Disclosures

Note 8.1: Equity 2017 2016

$ $ (a) Surpluses Property, Plant & Equipment Revaluation Surplus Balance at the beginning of the reporting period 4,513,024 4,513,024 Revaluation Increments/(Decrements)

- Land - - - Buildings

Balance at the end of the reporting period - -

4,513,024 4,513,024 Represented by:

- Land

1,688,337 1,688,337 - Buildings 2,824,687 2,824,687

4,513,024 4,513,024 Asset Replacement Surplus

Balance at the beginning of the reporting period 185,902 185,902 Balance at the end of the reporting period 185,902 185,902 Restricted Specific Purpose Surplus

Balance at Beginning of Reporting Period 504,427 504,427 Balance at the end of the reporting period 504,427 504,427 (b) Contributed Capital

Balance at Beginning of Reporting Period 3,787,544 3,787,544 Balance at the end of the reporting period 3,787,544 3,787,544 (c) Accumulated Surplus / (Deficit)

Balance at Beginning of Reporting Period 3,211,829 3,717,900 Net Surplus/(Deficit) for the year 373,327 (506,071) Balance at the end of the reporting period 3,585,156 3,211,829

(d) Total Equity at end of financial year 12,576,053 12,202,726

Contributed Capital Consistent with Australian Accounting Interpretation 1038 Contributions by Owners Made to Wholly-Owned Public Sector Entities and FRD 119A Contributions by Owners, appropriations for additions to the net asset base have been designated as contributed capital. Other transfers that are in the nature of contributions to or distributions by owners that have been designated as contributed capital are also treated as contributed capital.

Property, Plant & Equipment Revaluation Surplus The asset revaluation reserve is used to record increments and decrements on the revaluation of non-current physical assets.

This section includes additional material disclosures required by accounting standards or otherwise, for the understanding of this Structure 8.1 Equity 8.2 Reconciliation of net result for the year to net cash inflow / (outflow) from operating activities 8.3 Responsible persons disclosures 8.4 Executive officer disclosures 8.5 Related parties 8.6 Remuneration of auditors 8.7 AASBs issued that are not yet effective 8.8 Events occurring after the balance sheet date 8.9 Alternative presentation of comprehensive operating statement


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Note 8.2: Reconciliation of Net Result for the Year to Net Cash Inflow / (Outflow) from Operating Activities

2017 $

2016 $

Net Result for the Year 373,327 (506,071)

Non-Cash Movements

Depreciation 671,524 651,884 Revaluation of Long Service Leave (25,742) 7,729 Impairment of Non-Financial Assets 2,127 -

Movements included in Investing and Financing Activities Net (Gain)/Loss from Sale of Plant and Equipment - (10,832)

Movements in Assets & Liabilities

Increase/(Decrease) in Employee Entitlements (187,066) (106,799) Increase/(Decrease) in Payables 381,357 423,694 Increase/(Decrease) in Other Liabilities - (6,644) Decrease/(Increase) in Prepayments (51,436) (10,069) Decrease/(Increase) in Receivables (112,374) (376,638)

Net Cash Inflow From Operating Activities 1,051,717 66,254 Note 8.3: Responsible Persons Disclosures

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.

Period Responsible Minister From To The Honourable Jill Hennessy, Minister for Health, Minister for Ambulance Services 1/07/2016 30/06/2017

Governing Board

D. McLachlan 1/07/2016 30/06/2017 N. Brooks 1/07/2016 30/06/2017 L. Harris 1/07/2016 30/06/2017 L. Grayson 1/07/2016 30/06/2017 S. Barty 1/07/2016 30/06/2017 J. Humphreys 1/07/2016 30/06/2017 R. Knowles 1/07/2016 30/06/2017 J. Byers 1/07/2016 30/06/2017 N.Salkeld 1/07/2016 30/06/2017

Accountable Officers

D. Cerasa 1/07/2016 14/05/2017 K. Gillan 15/05/2017 30/06/2017

Remuneration of Responsible Persons

Remuneration received or receivable by responsible persons was in the range: $300,000 - $309,999 ($360,000 - $369,999 in 2015-16).

The Acting Chief Executive Officer is employed by Lorne Community Hospital and information relating to her remuneration is disclosed in the financial statements of Lorne Community Hospital. During the year Otway Health paid $21,000 (2016 :$nil) to Lorne Community Hospital in relation to the service provided by the CEO and other Administration staff.

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Note 8.2: Reconciliation of Net Result for the Year to Net Cash Inflow / (Outflow) from Operating Activities

2017 $

2016 $

Net Result for the Year 373,327 (506,071)

Non-Cash Movements

Depreciation 671,524 651,884 Revaluation of Long Service Leave (25,742) 7,729 Impairment of Non-Financial Assets 2,127 -

Movements included in Investing and Financing Activities Net (Gain)/Loss from Sale of Plant and Equipment - (10,832)

Movements in Assets & Liabilities

Increase/(Decrease) in Employee Entitlements (187,066) (106,799) Increase/(Decrease) in Payables 381,357 423,694 Increase/(Decrease) in Other Liabilities - (6,644) Decrease/(Increase) in Prepayments (51,436) (10,069) Decrease/(Increase) in Receivables (112,374) (376,638)

Net Cash Inflow From Operating Activities 1,051,717 66,254 Note 8.3: Responsible Persons Disclosures

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.

Period Responsible Minister From To The Honourable Jill Hennessy, Minister for Health, Minister for Ambulance Services 1/07/2016 30/06/2017

Governing Board

D. McLachlan 1/07/2016 30/06/2017 N. Brooks 1/07/2016 30/06/2017 L. Harris 1/07/2016 30/06/2017 L. Grayson 1/07/2016 30/06/2017 S. Barty 1/07/2016 30/06/2017 J. Humphreys 1/07/2016 30/06/2017 R. Knowles 1/07/2016 30/06/2017 J. Byers 1/07/2016 30/06/2017 N.Salkeld 1/07/2016 30/06/2017

Accountable Officers

D. Cerasa 1/07/2016 14/05/2017 K. Gillan 15/05/2017 30/06/2017

Remuneration of Responsible Persons

Remuneration received or receivable by responsible persons was in the range: $300,000 - $309,999 ($360,000 - $369,999 in 2015-16).

The Acting Chief Executive Officer is employed by Lorne Community Hospital and information relating to her remuneration is disclosed in the financial statements of Lorne Community Hospital. During the year Otway Health paid $21,000 (2016 :$nil) to Lorne Community Hospital in relation to the service provided by the CEO and other Administration staff.


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Note 8.4: Executive Officer Disclosures

Remuneration of Executives The number of executive officers, other than Ministers and Accountable Officers, and their total remuneration during the reporting period are shown in the table below. Total annualised employee equivalent provides a measure of full time equivalent executive officers over the reporting period.

Remuneration comprises employee benefits in all forms of consideration paid, payable or provided in exchange for services rendered, and is disclosed in the following categories.

Short-term employee benefits include amounts such as wages, salaries, annual leave or sick leave that are usually paid or payable on a regular basis, as well as non-monetary benefits such as allowances and free or subsidised goods or services.

Post-employment benefits include pensions and other retirement benefits paid or payable on a discrete basis when employment has ceased.

Other long-term benefits include long service leave, other long-service benefit or deferred compensation.

Termination benefits include termination of employment payments, such as severance packages.

Remuneration of executive officers Total Remuneration (including Key management personnel disclosed in Note 8.5) 2017 2016

$ $

Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits

Total Remuneration (i) (ii)

Total number of executives 6.00 5.00

Total annualised employee equivalent (AEE) (iii) 4.00 4.00

Notes (i) No comparatives have been reported because remuneration in the prior year was determined in line with the basis and definition under FRD 21B. Remuneration previously excluded non-monetary benefits and comprised any money, consideration or benefit received or receivable, excluding reimbursement of out-of-pocket expenses, including any amount received or receivable from a related party transaction. Refer to the prior year's financial statements for executive remuneration for the 2015-16 reporting period.

(ii) The total number of executive officers includes persons who meet the definition of Key Management Personnel (KMP) of the entity under AASB 124 Related Party Disclosures and are also reported within the related parties note disclosure (Note 8.5).

(iii) Annualised employee equivalent is based on the time fraction worked over the reporting period.

436,957 40,561 14,454

4,665

496,637

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Note 8.4: Executive Officer Disclosures

Remuneration of Executives The number of executive officers, other than Ministers and Accountable Officers, and their total remuneration during the reporting period are shown in the table below. Total annualised employee equivalent provides a measure of full time equivalent executive officers over the reporting period.

Remuneration comprises employee benefits in all forms of consideration paid, payable or provided in exchange for services rendered, and is disclosed in the following categories.

Short-term employee benefits include amounts such as wages, salaries, annual leave or sick leave that are usually paid or payable on a regular basis, as well as non-monetary benefits such as allowances and free or subsidised goods or services.

Post-employment benefits include pensions and other retirement benefits paid or payable on a discrete basis when employment has ceased.

Other long-term benefits include long service leave, other long-service benefit or deferred compensation.

Termination benefits include termination of employment payments, such as severance packages.

Remuneration of executive officers Total Remuneration (including Key management personnel disclosed in Note 8.5) 2017 2016

$ $

Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits

Total Remuneration (i) (ii)

Total number of executives 6.00 5.00

Total annualised employee equivalent (AEE) (iii) 4.00 4.00

Notes (i) No comparatives have been reported because remuneration in the prior year was determined in line with the basis and definition under FRD 21B. Remuneration previously excluded non-monetary benefits and comprised any money, consideration or benefit received or receivable, excluding reimbursement of out-of-pocket expenses, including any amount received or receivable from a related party transaction. Refer to the prior year's financial statements for executive remuneration for the 2015-16 reporting period.

(ii) The total number of executive officers includes persons who meet the definition of Key Management Personnel (KMP) of the entity under AASB 124 Related Party Disclosures and are also reported within the related parties note disclosure (Note 8.5).

(iii) Annualised employee equivalent is based on the time fraction worked over the reporting period.

436,957 40,561 14,454

4,665

496,637


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Note 8.5: Related parties

The health service is a wholly owned and controlled entity of the State of Victoria. Related parties of the health service include: · all key management personnel and their close family members; · all cabinet ministers and their close family members; and · all hospitals and public sector entities that are controlled and consolidated into the whole of state consolidated financial statements.

All related party transactions have been entered into on an arm’s length basis.

Key management personnel (KMP) of the hospital include the Portfolio Ministers and Cabinet Ministers and KMP as determined by the hospital and are disclosed at Note 8.3. The compensation detailed below excludes the salaries and benefits the Portfolio Ministers receive. The Minister’s remuneration and allowances is set by the Parliamentary Salaries and Superannuation Act 1968, and is reported within the Department of Parliamentary Services’ Financial Report.

Compensation

2017 ($'000)

Short term employee benefits 678 Post-employment benefits 56 Other long-term benefits 20 Termination benefits 97 Total 851 Transactions with key management personnel and other related parties

Given the breadth and depth of State government activities, related parties transact with the Victorian public sector in a manner consistent with other members of the public e.g. stamp duty and other government fees and charges. Further employment of processes within the Victorian public sector occur on terms and conditions consistent with the Public Administration Act 2004 and Codes of Conduct and Standards issued by the Victorian Public Sector Commission. Procurement processes occur on terms and conditions consistent with the Victorian Government Procurement Board requirements. Outside of normal citizen type transactions with the department, there were no related party transactions that involved key management personnel and their close family members. No provision has been required, nor any expense recognised, for impairment of receivables from related parties.

All transactions that have occurred with KMP and their related parties have been trivial or domestic in nature. In this context, transactions are only disclosed when they are considered of interest to users of the financial report in making and evaluation of decisions about the allocation of scarce resources.

Significant transactions with government-related entities

Otway Health received funding from the Department of Health and Human Services of $4.424 million (2016: $3.759 million).

Note 8.6: Remuneration of Auditors 2017 2016 $ $

Victorian Auditor-General's Office Audit or review of financial statement 9,900 9,700

9,900 9,700

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Note 8.5: Related parties

The health service is a wholly owned and controlled entity of the State of Victoria. Related parties of the health service include: · all key management personnel and their close family members; · all cabinet ministers and their close family members; and · all hospitals and public sector entities that are controlled and consolidated into the whole of state consolidated financial statements.

All related party transactions have been entered into on an arm’s length basis.

Key management personnel (KMP) of the hospital include the Portfolio Ministers and Cabinet Ministers and KMP as determined by the hospital and are disclosed at Note 8.3. The compensation detailed below excludes the salaries and benefits the Portfolio Ministers receive. The Minister’s remuneration and allowances is set by the Parliamentary Salaries and Superannuation Act 1968, and is reported within the Department of Parliamentary Services’ Financial Report.

Compensation

2017 ($'000)

Short term employee benefits 678 Post-employment benefits 56 Other long-term benefits 20 Termination benefits 97 Total 851 Transactions with key management personnel and other related parties

Given the breadth and depth of State government activities, related parties transact with the Victorian public sector in a manner consistent with other members of the public e.g. stamp duty and other government fees and charges. Further employment of processes within the Victorian public sector occur on terms and conditions consistent with the Public Administration Act 2004 and Codes of Conduct and Standards issued by the Victorian Public Sector Commission. Procurement processes occur on terms and conditions consistent with the Victorian Government Procurement Board requirements. Outside of normal citizen type transactions with the department, there were no related party transactions that involved key management personnel and their close family members. No provision has been required, nor any expense recognised, for impairment of receivables from related parties.

All transactions that have occurred with KMP and their related parties have been trivial or domestic in nature. In this context, transactions are only disclosed when they are considered of interest to users of the financial report in making and evaluation of decisions about the allocation of scarce resources.

Significant transactions with government-related entities

Otway Health received funding from the Department of Health and Human Services of $4.424 million (2016: $3.759 million).

Note 8.6: Remuneration of Auditors 2017 2016 $ $

Victorian Auditor-General's Office Audit or review of financial statement 9,900 9,700

9,900 9,700


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Note 8.7: AASBs issues that are not yet effective

Certain new accounting standards have been published that are not mandatory for 30 June 2017 reporting period. DTF assesses the impact of all these new standards and advises the Health Service of their applicability and early adoption where applicable.

As at 30 June 2017, the following standards and interpretations had been issued by AASB but were not yet effective. They become effective for the first financial statements for reporting periods commencing after the stated operative dates as detailed in the table below. Otway Health has not and does not intend to adopt these standards early.

Standard / Interpretation STATEMENT Applicable for

annual reporting periods

beginning on

Impact on public sector entity financial statements

AASB 9 Financial Instruments

The key changes include the simplified requirements for the classification and measurement of financial assets, a new hedging accounting model and a revised impairment loss model to recognise impairment losses earlier, as opposed to the current approach that recognises impairment only when incurred.

1-Jan-18 The assessment has identified that the amendments are likely to result in earlier recognition of impairment losses and at more regular intervals. While there will be no significant impact arising from AASB 9, there will be a change to the way financial instruments are disclosed.

AASB 15 Revenue from Contracts with Customers

The core principle of AASB 15 requires an entity to recognise revenue when the entity satisfies a performance obligation by transferring a promised good or service to a customer.

1-Jan-18 The changes in revenue recognition requirements in AASB 15 may result in changes to the timing and amount of revenue recorded in the financial statements. The Standard will also require additional disclosures on service revenue and contract modifications.

AASB 2014-5 Amendments to Australian Accounting Standards arising from AASB 15

Amends the measurement of trade receivables and the recognition of dividends. Trade receivables, that do not have a significant financing component, are to be measured at their transaction price, at initial recognition. Dividends are recognised in the profit and loss only when: • the entity’s right to receive payment of the dividend is established; • it is probable that the economic benefits associated with the dividend will flow to the entity; and • the amount can be measured reliably.

1 Jan 2017, except amendments to AASB 9 (Dec 2009) and AASB 9 (Dec 2010) apply from 1 Jan 2018

The assessment has indicated that there will be no significant impact for the public sector.

AASB 16 Leases The key changes introduced by AASB 16 include the recognition of most operating leases (which are current not recognised) on balance sheet.

1-Jan-19 The assessment has indicated that as most operating leases will come on balance sheet, recognition of the right-of-use assets and lease liabilities will cause net debt to increase. Rather than expensing the lease payments, depreciation of right-of-use assets and interest on lease liabilities will be recognised in the income statement with marginal impact on the operating surplus.

AASB 2016-4 Amendments to Australian Accounting Standards – Recoverable Amount of Non-Cash- Generating Specialised Assets of Not-for-Profit Entities

The standard amends AASB 136 Impairment of Assets to remove references to using depreciated replacement cost (DRC) as a measure of value in use for not-for-profit entities.

1 Jan 2017 The assessment has indicated that there is minimal impact. Given the specialised nature and restrictions of public sector assets, the existing use is presumed to be the highest and best use (HBU), hence current replacement cost under AASB 13 Fair Value Measurement is the same as the depreciated replacement cost concept under AASB 136.

AASB 1058 Income of Not-for-Profit Entities

This standard replaces AASB 1004 Contributions and establishes revenue recognition principles for transactions where the consideration to acquire an asset is significantly less than fair value to enable to not-for-profit entity to further its objectives.

1-Jan-19 The assessment has indicated that revenue from capital grants that are provided under an enforceable agreement that have sufficiently specific obligations, will now be deferred and recognised as performance obligations are satisfied. As a result, the timing recognition of revenue will change.

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Note 8.7: AASBs issues that are not yet effective

Certain new accounting standards have been published that are not mandatory for 30 June 2017 reporting period. DTF assesses the impact of all these new standards and advises the Health Service of their applicability and early adoption where applicable.

As at 30 June 2017, the following standards and interpretations had been issued by AASB but were not yet effective. They become effective for the first financial statements for reporting periods commencing after the stated operative dates as detailed in the table below. Otway Health has not and does not intend to adopt these standards early.

Standard / Interpretation STATEMENT Applicable for

annual reporting periods

beginning on

Impact on public sector entity financial statements

AASB 9 Financial Instruments

The key changes include the simplified requirements for the classification and measurement of financial assets, a new hedging accounting model and a revised impairment loss model to recognise impairment losses earlier, as opposed to the current approach that recognises impairment only when incurred.

1-Jan-18 The assessment has identified that the amendments are likely to result in earlier recognition of impairment losses and at more regular intervals. While there will be no significant impact arising from AASB 9, there will be a change to the way financial instruments are disclosed.

AASB 15 Revenue from Contracts with Customers

The core principle of AASB 15 requires an entity to recognise revenue when the entity satisfies a performance obligation by transferring a promised good or service to a customer.

1-Jan-18 The changes in revenue recognition requirements in AASB 15 may result in changes to the timing and amount of revenue recorded in the financial statements. The Standard will also require additional disclosures on service revenue and contract modifications.

AASB 2014-5 Amendments to Australian Accounting Standards arising from AASB 15

Amends the measurement of trade receivables and the recognition of dividends. Trade receivables, that do not have a significant financing component, are to be measured at their transaction price, at initial recognition. Dividends are recognised in the profit and loss only when: • the entity’s right to receive payment of the dividend is established; • it is probable that the economic benefits associated with the dividend will flow to the entity; and • the amount can be measured reliably.

1 Jan 2017, except amendments to AASB 9 (Dec 2009) and AASB 9 (Dec 2010) apply from 1 Jan 2018

The assessment has indicated that there will be no significant impact for the public sector.

AASB 16 Leases The key changes introduced by AASB 16 include the recognition of most operating leases (which are current not recognised) on balance sheet.

1-Jan-19 The assessment has indicated that as most operating leases will come on balance sheet, recognition of the right-of-use assets and lease liabilities will cause net debt to increase. Rather than expensing the lease payments, depreciation of right-of-use assets and interest on lease liabilities will be recognised in the income statement with marginal impact on the operating surplus.

AASB 2016-4 Amendments to Australian Accounting Standards – Recoverable Amount of Non-Cash- Generating Specialised Assets of Not-for-Profit Entities

The standard amends AASB 136 Impairment of Assets to remove references to using depreciated replacement cost (DRC) as a measure of value in use for not-for-profit entities.

1 Jan 2017 The assessment has indicated that there is minimal impact. Given the specialised nature and restrictions of public sector assets, the existing use is presumed to be the highest and best use (HBU), hence current replacement cost under AASB 13 Fair Value Measurement is the same as the depreciated replacement cost concept under AASB 136.

AASB 1058 Income of Not-for-Profit Entities

This standard replaces AASB 1004 Contributions and establishes revenue recognition principles for transactions where the consideration to acquire an asset is significantly less than fair value to enable to not-for-profit entity to further its objectives.

1-Jan-19 The assessment has indicated that revenue from capital grants that are provided under an enforceable agreement that have sufficiently specific obligations, will now be deferred and recognised as performance obligations are satisfied. As a result, the timing recognition of revenue will change.




Note 8.8: Events Occurring after the Balance Date

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Assets, liabilities, income or expenses arise from past transactions or other past events. Where the transactions result from an agreement between the Health Service and other parties, the transactions are only recognised when the agreement is irrevocable at or before the end of the reporting period.

Adjustments are made to amounts recognised in the financial statements for events which occur between the end of the reporting period and the date when the financial statements are authorised for issue, where those events provide information about conditions which existed at the reporting date. Note disclosure is made about events between the end of the reporting period and the date the financial statements are authorised for issue where the events relate to conditions which arose after the end of the reporting period that are considered to be of material interest.

There are no events occurring since the balance date to the date of this report that would have a material effect on the operations of the health service.

Note 8.9: Alternative presentation of comprehensive operating statement

Note

2017 2016

$ $ Grants

Operating 2.1 5,455,919 4,641,603 Capital 2.1 640,991 260,649

Interest 2.1 82,552 88,242 Sales of Goods and Services 550,224 650,324 Other Income 2.1 1,537,571 1,486,883 Other capital income 2.1 15,747 6,644 Revenue from transactions 8,283,004 7,134,346 Employee Expenses

3.1

4,973,590 5,099,888

Operating Expenses

Supplies and consumables 3.1 132,544 157,886 Non salary labour costs 3.1 399,931 173,795 Other 3.1 1,744,353 1,546,885

Non-Operating Expenses

Finance Lease Charges 3.2 11,350 13,182 Impairment of Non-Financial Assets 3.1 2,127 - Depreciation and amortisation 4.5 671,524 651,884 Expenses from transactions 7,935,419 7,643,520 Net Result from transactions 347,585 (509,174) Other economic flows included in net result Net gain/(loss) on non-financial assets 7.2 - 10,832 Revaluation of Long Service Leave 25,742 (7,729) Total other 25,742 3,103 continuing 373,327 (506,071) Comprehensive result

373,327 (506,071)



Note 8.8: Events Occurring after the Balance Date

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Assets, liabilities, income or expenses arise from past transactions or other past events. Where the transactions result from an agreement between the Health Service and other parties, the transactions are only recognised when the agreement is irrevocable at or before the end of the reporting period.

Adjustments are made to amounts recognised in the financial statements for events which occur between the end of the reporting period and the date when the financial statements are authorised for issue, where those events provide information about conditions which existed at the reporting date. Note disclosure is made about events between the end of the reporting period and the date the financial statements are authorised for issue where the events relate to conditions which arose after the end of the reporting period that are considered to be of material interest.

There are no events occurring since the balance date to the date of this report that would have a material effect on the operations of the health service.

Note 8.9: Alternative presentation of comprehensive operating statement

Note

2017 2016

$ $ Grants

Operating 2.1 5,455,919 4,641,603 Capital 2.1 640,991 260,649

Interest 2.1 82,552 88,242 Sales of Goods and Services 550,224 650,324 Other Income 2.1 1,537,571 1,486,883 Other capital income 2.1 15,747 6,644 Revenue from transactions 8,283,004 7,134,346 Employee Expenses

3.1

4,973,590 5,099,888

Operating Expenses

Supplies and consumables 3.1 132,544 157,886 Non salary labour costs 3.1 399,931 173,795 Other 3.1 1,744,353 1,546,885

Non-Operating Expenses

Finance Lease Charges 3.2 11,350 13,182 Impairment of Non-Financial Assets 3.1 2,127 - Depreciation and amortisation 4.5 671,524 651,884 Expenses from transactions 7,935,419 7,643,520 Net Result from transactions 347,585 (509,174) Other economic flows included in net result Net gain/(loss) on non-financial assets 7.2 - 10,832 Revaluation of Long Service Leave 25,742 (7,729) Total other 25,742 3,103 continuing 373,327 (506,071) Comprehensive result

373,327 (506,071)

Otway Health is a Multi-Purpose Service, jointly funded by the Commonwealth Government and the Victorian Government.

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