The most significant changes to service agreements for the 2009-2012 three year service agreement cycle are:

• standard terms and conditions written in plain English;
• service agreements will be delivered online via the Funded Agency Channel; and
• organisations with an existing funding relationship with the department will not be required to sign paper copies of the service agreement or variations.

The department will work with sector representatives through the Human Services Partnership Implementation Committee (HSPIC) to review and continue to refine a range of service agreement business processes.

Signing service agreements

Effective 1 July 2009, organisations with an existing funding and service delivery relationship with DHS and/or DH and/or DEECD will not be required to physically sign their new 2009-12 service agreement or any subsequent variations to the service agreement. They are still, however, required to agree to the service agreement and any variations to the service agreement.

Where an organisation does not have an existing funding and service delivery relationship with DHS and/or DH and/or DEECD, or there has been a break in service delivery (service agreement periods), a new service agreement must be established and signed by all parties. Organisations are required to sign the service agreement or variation prior to the department signing the service agreement or variation.

Where an organisation requests the provision of a paper copy of their service agreement or variation to sign, this will be provided. Organisations are to contact the department’s regional Program and Service Adviser (PASA) who will forward copies of the service agreement or variation for signature, as requested.

The Department of Human Services (DHS) and Department of Education and Early Childhood Development (DEECD) operate on a standard three year service agreement business cycle.

The current three year cycle is from 1 July 2009 to 30 June 2012.

Organisations will be offered three year service agreements except where:

• the funding in the agreement is time limited, and will cease before 30 June 2012;
• the agreement starts after 1 July 2009;
• other circumstances exist that warrant a shorter agreement period. The organisation will be advised the reason for a shorter agreement period.

The Budget Build reports, available via secure logon on the Funded Agency Channel, provide organisations with a three year outlook of proposed funding, regardless of the end date of the service agreement.

Schedule 3 of the service agreement provides details of the services to be delivered by the organisation. More information about the activities shown in schedule 3 and associated service standards, guidelines and policies is provided in:

• policy and funding plans
• service standards and guidelines
• applicable departmental policies provided to the organisation
• this kit which contains some of the departmental policies 

The Funded Agency Channel (https://fac.dhs.vic.gov.au/home.aspx) and DHS internet (http://www.dhs.vic.gov.au/home) also provide links to this information.

Clause 4 of the standard terms and conditions sets out how services are to be delivered. The organisation is required to:

• use due care, skill and judgment
• act in accordance with applicable professional ethics, principles and standards
• perform its obligations on time
• comply with service standards, guidelines and performance targets
• comply with all applicable departmental policies
• comply with all applicable laws including laws relating to fire protection, health, and general safety
• tell the department of any matter that may give rise to a conflict of interest and quickly deal with the matter to resolve the conflict of interest
• tell the department in writing when the organisation stops delivering the services being funded.

An organisation must maintain a register of all assets purchased with funding provided in the service agreement, where the asset is valued at $3,000 or more at the time of purchase. 

The organisation must provide the departmnet with an up to date copy of the asset register when requested.

Where an organisation ceases to provide funded services for whatever reason, the department may request for transfer of department funded assets to another service provider, to the department or for reimbursement for the current value of the assets. Where the asset was not entirely purchased from department funding, this will be taken into account. Department staff will discuss any transfer or reimbursement arrangements with the organisation.

Non-current physical assets (department funded)

Non-current physical assets are items that are valuable or useful and have a life expectancy of more than one year. For recording purposes, they can be defined as operating assets and are normally used to produce and deliver goods or services to the community. Such assets display one or more of the following characteristics:

• The cost of the asset can be recovered through use or disposal.
• The asset's useful life can be estimated with reasonable accuracy.
• The asset is used in the day-to-day operations of the organisation.
• The current cost of the asset can be determined with reasonable accuracy.
• The asset is readily consumed and replenished.
• The types of non-current physical assets that need to be recorded include:
  • office equipment
  • motor vehicles
  • furniture
  • computers
  • communications systems
  • equipment.

Asset registers - what to record

The minimum information required about each asset is detailed in Attachment 1 Organisations assets register - data requirements. An example of an assets register is shown in Attachment 2 Sample of an asset register. The format of the register is at the funded organisation's discretion provided all required information is included.

Organisations must label all the department funded non-current physical assets valued at $3,000 or more with a unique identification (ID) number to allow identification and periodic stock audits.

Organisations are encouraged to record all non-current physical assets on an assets register, regardless of the funding source, as an appropriate control procedure for the custodianship of assets under their control.

Recording similar assets as groups

Recording of assets should generally be on an asset-by-asset basis, although grouping of similar or related assets may be more practical in some situations. An organisation needs to weigh the relative costs and benefits of grouping assets in relation to the overall purposes of recording and reporting, including control over custody, disposal and replacement.

Multiple assets that combine to perform one function, for example a personal computer comprising monitor, keyboard and central processing unit, are normally recorded as one asset rather than as individual assets. The components can be replaced or interchanged without the need to adjust the assets register.

The cost of replacing an asset is treated as a maintenance cost and should be recorded in the financial records accordingly.

Where an asset comprises a large number of individual components that have complementary functions, the asset may be recorded as an aggregate item. For example, a set of books, periodicals and indexes that together make up a library could be viewed as a single asset for recording purposes. This approach would be applied in situations where the value of the individual components is less than $3,000, but the total value of the asset is more than $3,000.

Maintaining a register of existing assets

Organisations must maintain an asset register that includes all assets purchased with department funds.

Where an asset can be identified as being purchased with department funds, and is more than five years old and/or the purchase cost is not known, it should be recorded at the cost of a comparable item at current prices.

Where an asset is less than five years old and the purchase cost is known, it should be recorded at the net written down value (purchase cost less accumulated depreciation). Refer to Attachment 3 Sample depreciation of non-current physical assets and Attachment 4 Recommended annual depreciation rates for information on depreciation and depreciation rates.

Recording asset purchases and their costs

The purchase of non-current physical assets should be recorded in the assets register in the month in which they are purchased.

Asset purchases should be recorded at the purchase cost including installation costs, computer cabling, transportation and other associated costs incurred to bring the asset into service. Purchase orders, invoices and delivery dockets should provide sufficient details for this purpose.

Leased assets

There are two types of leasing arrangements: operating lease and finance lease. A finance lease is an arrangement undertaken to finance the cost of acquiring a leased asset. Finance leases must be recorded in the assets register.

An operating lease is when the leased item is 'given back' at the end of the lease period.

Depreciation in accordance with Australian Accounting Standard

All non-current physical assets with a direct unit cost value of $3,000 or more must be depreciated in accordance with the Australian Accounting Standard (AASB116), Property Plant and Equipment. Annual depreciation charges must be calculated using methods consistent with AASB116, for example, straight-line or reducing balance, based on the purchase cost or the deemed value. The straight-line method is preferred (see Attachment 3).

Depreciation should commence in the month following the acquisition and installation of the asset (disregarding fractions of a month). The disposal of an asset should cause depreciation to cease at the end of the month in which the asset was disposed (disregarding fractions of a month).

When an asset is transferred from one organisation to another, it must only be depreciated to the end of the month of the transfer and reported in the organisation's statement of financial position at the end of the financial year. The organisation that receives the asset should record the asset at the written down value, as supplied by the transferring organisation, commence depreciation from the first full month following acquisition and include the asset in the statement of financial position at the end of the financial year.

A list of the standard depreciation rates that are applicable to the various types of non-current physical assets are detailed in Attachment 4.

If an organisation decides not to use the standard depreciation rates in Attachment 4, it should engage a suitably qualified person to determine a rate consistent with industry standards, based on the asset's estimated useful life at the time of acquisition. This approach may be necessary when dealing with any specialist equipment.

Disposal of assets

When an asset is sold, transferred, scrapped or otherwise disposed of by an organisation, the assets register should be updated to include the date of disposal, the disposal amount and the method of disposal. The asset should only be deleted from the register at the end of the financial year after the statement of financial position is finalised and the information incorporated into the organisation's annual report.

If an asset is traded in, it should be treated as a disposal. When an asset is sold outright, the sale proceeds must be recorded as a receipt in the organisation's financial records and recorded on the assets register.

The organisation can only sell department funded assets listed in the assets register with the written approval of the department.

If the service agreement is terminated, or if the organisation ceases to be funded by the department, the organisation must dispose of the asset in a manner directed by the department. The proceeds from the sale of such an asset should be paid back to the department, or used in a manner directed by the department. The amount will equal the proportion of the department's contribution to the purchase price.

Stock audit

A stock audit should be completed annually and adjustments made to the asset register where necessary. A record of the stock audit conducted, its results and write offs should be retained.

Further information

Your accountant will be able to help set up and maintain an asset register. For any further information, contact your Program and Service Adviser in the first instance.

Contents

This section provides information on reporting and accountability, including financial reporting to the department.

• 4.5.1 Reporting and accountability
• 4.5.2 Financial accountability requirements
• 4.5.3 FARs forms
• 4.5.4 Timelines for financial accountability reporting
• 4.5.5 Glossary of Financial Accountability Terms

Organisations with a service agreement are accountable for the appropriate use of funding provided, and for the delivery of the services specified in the service agreement.

To ensure accountability, organisations are required to regularly report on their service outputs through data collections and other reporting. This allows the organisation and department to periodically review progress and to adjust the service agreement if necessary.

Details of data collection requirements are located on the Funded Agency Channel and in the Policy and Funding Plans.

To ensure funded organisations remain in a sound financial position, the department collects information about the organisation's finances. This information is reviewed and analysed by the department. To minimise administrative burden, financial information collected is linked to the organisation's legal reporting obligations.

Funded organisations are required to report their financial position to the department. Reporting requirements are aligned with the organisation's legal reporting requirements and operating year. Financial reporting to the department is commonly called the Financial Accountability Requirements (FAR).

Standard financial reporting forms have been developed for use by organisations, and templates are provided in this section. Organisations may also provide the department with a copy of their annual report, instead of using some report templates, where the annual report contains required financial information.

The department will write to funded organisations each year to request completion of the FAR.

FAR completion dates

Annual FAR reports must be submitted to the department within three months of end the organisation's financial operating period. For example, an organisation operating on a financial year (1 July to 30 June) must submit the FAR by 1 October. An organisation operating on a calendar year (1 January to 31 December) must submit the FAR by 1 April.

Where circumstances warrant, the due dates for the FAR can be extended. Contact the department if your organisation cannot submit the FAR by the requested due date.

Where the department has reasonable concerns about an organisation's financial position, the department can require more frequent FAR reporting. The department will discuss any concerns it has with the organisation.

Financial reporting standards

Organisations are required to comply with the Australian Equivalents to International Financial Reporting standards (AIFRS) which came into effect from the commencement of 2005.

Information about the AIFRS can be found on the Australian Accounting Standards Board's website at www.aasb.com.au/index.html (external link).

FAR requirements for organisation type

The FAR requirements for a particular organisation will depend on the:

• organisation legal status
• service agreement type, and
• whether the organisation is required by legislation to produce audited annual financial statements.

The following is a summary of legislative financial reporting requirements, along with the departmental FAR requirements for each situation.

Incorporated Associations (non-prescribed):

Organisations established under the Associations Incorporation Act 1981 (as amended) having gross receipts of less than $200,000 and gross assets of less than $500,000 are defined as non-prescribed Incorporated Associations. They are required to produce an annual financial statement that does not need to be audited. FAR requirements are:

• certification 
• Cash Indicators Statement (CIS), and
• an Annual Report that contains the association's financial statement can be provided instead of the CIS.

Incorporated Associations (prescribed):

Organisations established under the Associations Incorporation Act 1981 (as amended) having gross receipts of more than $200,000 or gross assets of more than $500,000 are defined as prescribed Incorporated Associations. They are required to produce an annual financial statement that must be audited. FAR requirements are:

• certification
• Financial Indicators Statement (FIS)
• Audit Report, and
• an Annual Report that contains the association's audited financial statement can be provided instead of the FIS and Audit Report.

Companies limited by guarantee:

Organisations established as a company limited by guarantee under the Corporations Act 2001 (as amended) are required to produce an annual financial statement that must be audited. FAR requirements are:

• certification
• Financial Indicators Statement (FIS)
• Audit Report, and
• an Annual Report that contains the company audited financial statement can be provided instead of the FIS and Audit Report.

Companies limited by shares:

Organisations established as a company limited by shares under the Corporations Act 2001 (as amended) are required to produce an annual financial statement. In large proprietary companies, these must be audited. In small proprietary companies an audit is not required by legislation. FAR requirements are:

• certification
• Financial Indicators Statement (FIS)
• Audit Report (large proprietary companies only), and
• an Annual Report that contains the company audited financial statement can be provided instead of the FIS and Audit Report.

Cooperatives:

Organisations established under the Cooperatives Act 1996 (as amended) are required to produce an annual financial statement that must be audited. FAR requirements are:

• certification
• Financial Indicators Statement (FIS)
• Audit Report, and 
• an Annual Report that contains the cooperative's audited financial statement can be provided instead of the FIS and Audit Report.

Government entities:

The legislative financial reporting requirements of government entities, including local government, public hospitals, government schools and educational bodies including universities and TAFE, is determined by the legislation under which they are established and governed.

Entities established under other legislation:

Some charitable and denominational non-government organisations are established or operate under specific Acts of Parliament. These Acts specify financial reporting requirements. FAR requirements are:

• certification
• Financial Indicators Statement (FIS)
• Audit Report, and 
• an Annual Report that contains the entity's audited financial statement can be provided instead of the FIS and Audit Report.

Trusts:

Organisations established under the Trustees Act 1958, Trustee Companies Act 1984 or other relevant Acts governing incorporation of trusts have financial reporting governed by these Acts. Many are required to produce an annual financial statement that must be audited. FAR requirements are:

• Certification
• Financial Indicators Statement (FIS)
• Audit Report, and
• an Annual Report that contains the trust's audited financial statement can be provided instead of the FIS and Audit Report.

Unincorporated consortia:

An unincorporated consortium is a group of independent legal entities, working together but with each member having its own financial reporting requirements. FAR requirements are for the consortium:

• Certification.

Other:

Where the organisation holding a service agreement is not covered by the above, the department will discuss and determine the most appropriate financial reporting requirements. The organisation will be advised of this.

Where the department has concerns about the financial position of an organisation, the organisation may be required to produce more frequent (interim) FAR reports. The department will discuss any concerns about the organisation's financial position with the organisation.

Copies of the relevant legislation can be obtained online at:

• http://www.dms.dpc.vic.gov.au (external link)
• http://www.lawsearch.gov.au (external link)
• http://www.lawlex.com.au (external link)
• For information about associations, cooperatives and limited partnerships registered in Victoria, search the Victorian Names Register on Consumer Affairs Victoria's website at http://www.consumer.vic.gov.au (external link)
• For information about Incorporated Aboriginal Associations, cooperatives or groups, search the Office of the Registrar of Aboriginal Corporations website at http://www.orac.gov.au (external link)
• For information about companies registered in Australia, search the National Names Index on the Australian Securities and Investment Commission website at http://www.asic.gov.au/easylodge (external link)
• For information about friendly societies registered in Australia, search the Australian Prudential Regulation Authority website at http://www.apra.gov.au/friendly/FriendlyList.cfm (external link).
• For information about the incorporation status of bodies corporate formed by individual Acts of Parliament, refer to the applicable Acts on the Victorian Legislation and Parliamentary Documents website at http://www.dms.dpc.vic.gov.au or the Australasian Legal Information Institute website under Victorian Consolidated Acts at http://www.austlii.edu.au. (external link). Alternatively, use an internet search engine, such as Google (external link).

Standard FAR templates.

Following are links to the standard FAR templates for DHS and DEECD financial reporting. Where your organisation's Annual Report contains the required financial data, this can be submitted instead of the FIS, Audit and CIS. A certification will be required in all cases:

• Certification
• Financial Indicators Statement (FIS)
• Audit Report
• Cash Indicators Statement (CIS)

Organisation certification

Organisation certification is mandatory for all organisations. Organisations must have their certification signed by one of the following:

• treasurer or equivalent
• chief executive officer
• president
• chairperson
• director
• principal

Independent Auditor's Statement (IAS)

The IAS is mandatory for all organisations that are required to produce audited annual financial statements. The Auditor's Statement covers the annual Financial Indicators Statement (FIS). Where the organisations annual report contains an audited annual financial statement, this may be provided in lieu if the IAS and FIS.

Public bodies (as defined under the Audit Act) that are required to report to either the State or Commonwealth are not required to obtain an auditor's opinion on the annual Financial Indicators Statement. This exclusion applies principally to local government authorities and government owned tertiary institutions. If the department has assessed that the organisation should provide audited statements, it will provide the organisation with the department's Approved Auditor's Statement.

The Approved Auditor's Statement must be completed and returned to the department, along with the relevant financial statements and organisation certification.

Auditor accreditation

Organisations that are incorporated under the Cooperatives Act or Corporations Law must be audited by a registered company auditor. Organisations that are incorporated under specific State or Commonwealth legislation must be audited in accordance with any specified audit requirements within that legislation.

A qualified member of the Australian Society of Certified Practising Accountants, the Institute of Chartered Accountants or the National Institute of Accountants must audit organisations that are registered under the Associations Incorporation Act or any State or Commonwealth legislation that does not specify auditing requirements. Annual Financial and Cash Indicators Statements (FIS and CIS).

Annual financial or cash indicators statement (FIS or CIS)

The annual Financial Indicators Statement (FIS) is mandatory for all organisations that are required to produce audited annual financial statements. The FIS provides information on an organisation's total financial position for the reporting year and is completed on an accrual basis in accordance with relevant Australian Accounting Standards. Where the organisations annual report contains an audited annual financial statement, this may be provided in lieu if the independent auditor's statement and FIS.

The Cash Indicators Statenment (CIS) is mandatory for all organisations that have no requirement to produce audited annual financial statements. The CIS is completed on a cash basis. Where the organisations annual report contains an annual financial statement, this may be provided in lieu if the CIS.

Recording provisions for long service leave and sick leave

Provisions for long service leave and sick leave represent the current level of unpaid employee entitlements. It is anticipated that these amounts will be paid to employees at some future date, when the entitlements are due.

It is strongly recommended that smaller organisations maintain separate bank accounts for long service leave and sick leave provisions. This allows organisations to meet the costs of these employee entitlements as they fall due.

Declaration of relevant employee entitlements are required for both CIS and FIS.

The department will advise organisations of the FAR reporting requirements prior to the due date. FAR reporting will be based on the organisation's operating period.

Dates for the return of FAR are based on the organisation's standard operating period. Annual FARs are due three months after the end date of the period being reported on. Examples of FAR due dates are:

• Financial year (1 Jul to 30 Jun) - Due by 1 Oct
• Calendar year (1 Jan to 31 Dec) - Due by 1 Apr
• Other (1 Oct to 30 Sep) - Due by 1 Jan
• Other (1 Nov to 31 Oct) - Due by 1 Feb
• Other (1 Apr to 31 Mar) - Due 1 Jul

If the organisation cannot complete the FAR by the due date, the department must be notified prior to the due date and provided with a reason and expected date for submission.

Accrual accounting

A system that records expenses in the period in which they were incurred regardless of when the cash is actually paid out (for example, depreciation or long service leave). In the case of revenue, this is recorded in the period in which it was earned regardless of when cash is actually received (for example, unpaid fees).

Activity

The specific health or community services operation carried out under the department output. For example, occasional care is a service activity under children's services.

Assets

Service potential or future economic benefit controlled by the organisation as a result of past transactions or other past events.

Cash accounting

A system that records cash payments made and funds received.

Current assets

Cash or assets that are intended to be converted to cash within a 12 month period (for example, petty cash advance and debtors).

Current liabilities

Amounts owed by the organisation to outside parties that are intended to be paid within a 12 month period (for example, creditors and bank overdraft).

Liability

An obligation to pay in the future for a past transaction or event.

Non-current assets

Assets that are not intended to be converted to cash within a twelve month period. These are not purchased with the intention of resale (for example, vehicles, furniture and fittings, land and buildings).

Non-current liabilities

Amounts owed by the organisation to outside parties that are not required to be repaid in full within a 12 month period (for example, mortgage and loans).

The service agreement includes provisions allowing organisations to subcontract direct services, in whole or in part, to a third party. This can only happen with the prior written consent of the department.

There are no provisions for the subcontracting of direct services by hospitals.

An organisation, except for hospitals, may subcontract if it:

• provides written notification to the department of its intention to subcontract
• provides the subcontractor's name, address, legal status, relevant qualifications and details of the service to be subcontracted
• satisfies the department that the third party can satisfactorily provide the service(s) proposed to be subcontracted
• acknowledges that it remains responsible and accountable to the department for the provision of any subcontracted services
• obtains the written consent of the department.

Before subcontracting services, organisations are strongly advised to seek their own legal advice, to ensure that their obligations under the service agreement are not compromised. The subcontracting arrangement must ensure that the subcontractor has at least the same obligations as those that apply to the organisation under the service agreement, including any provision relating to confidentiality, permitted disclosure, insurance requirements and privacy of information. For example, an organisation may ask the subcontractor to sign a deed of confidentiality to reflect its own requirements, as outlined in its service agreement.

The subcontractor must meet an organisation's service delivery obligations and the organisation must ensure that the subcontractor meets these obligations (as the department does not have a direct legal relationship with the subcontractor).

The organisation holding the service agreement will be responsible for any subcontracted services.

When printing this page, it is recommended that you use the Landscape Orientation to ensure the diagram is fully displayed.

If during the term of the service agreement either the organisation or the department considers that the other is not meeting its obligations, or one of the parties admits to an inability to satisfactorily meet its obligations, there are processes in place to deal with the situation. Figure 1 shows the steps involved to resolve a breach of the service agreement, resolve disputes and terminate a service agreement.

All parties will act reasonably and in good faith to resolve a dispute. Should the issue not be resolved by the procedures outlined below, the dispute may be referred to the responsible Regional Director or Executive Director for final determination.

The Regional Director/Executive Director will use the following principles when reaching a final decision:

• The determination will be based on relevant information, facts and evidence.
• Parties will have the opportunity to present their case to the Regional Director/Executive Director.
• The process of determination will be fair and undertaken in a spirit of goodwill.
• Advice of the determination and the reasons for it will be provided to the organisation within 14 days.

Note: The dispute resolution process for hospitals is different from the process used for other types of service agreements.
 

Termination process

A service agreement may be terminated by the department if:

• an organisation undergoes a change of ownership
• an organisation undergoes a change of effective control, affecting its suitability to provide the service
• an organisation does not pay its debts
• an organisation comes under any form of an administrator's official management, receivership or liquidation
• where the service agreement is with a 'natural person', the 'natural person' becomes mentally incapacitated, falls ill for more than 14 days, dies or is convicted of a crime punishable by imprisonment
• statements provided are materially misleading or deceptive, or contain material omissions
• an organisation does not comply with or meet its obligations under the service agreement.

A service agreement can also be terminated by the organisation under the 'breach of the agreement' clause, if the department fails to comply with or meet its obligations under the service agreement.

Step 1: The deparetment/organisation provides notification to the other in writing. The notification must contain:

• reason for termination;
• the date on which services will cease;
• details of any outstanding requirements (e.g. data reporting);
• expected dates for completion of the termination;
• request for a non-audited financial statement (within 14 days);
• request for up-to-date asset register (for any assets purchased using departmerntal funds); and
• any other relevant information.

Step 2: The department and the organisation negotiate:

• any costs incurred by the organisation where the service agreement is being terminated prior to the end date in schedule 1 of the service agreement;
• return of surplus funds to the department; and
• transfer or disposal of department funded assets.

Step 3: The department provides the organisation with written confirmation of decisions reached in negotiations, detailing procedures and agreed time lines.

In normal circumstances, all outstanding requirements should be completed within 30 days of the cessation date.

The Intellectual Property (IP) clause in the standard service agreement has changed over the years following negotiations between DHS, funded organisations and peak bodies. Prior to 2006-07, any IP developed under the service agreement vested in the State of Victoria.

By default, ownership of IP now vests in the funded organisation, which in turn grants licence to the department to use the IP.

The IP clause requires that the funded organisation properly manage the Project Intellectual Property as specified in this kit.

Properly manage means to:

• register, maintain the registration of, protect, manage, exploit and (as appropriate) commercialise it for the benefit of the Victorian public
• to maintain, improve, enhance and develop it to the fullest extent reasonably necessary to maintain its usefulness and appropriateness to the organisation and the department for the provision of the services
• use, reproduce, publish, adapt, disseminate, communicate to the public, broadcast, and perform it for the benefit of the Victorian public
• comply with all applicable departmental or other Victorian government policies in respect of it.

In exceptional circumstances, DHS may negotiate that certain IP remains the property of the State of Victoria. Any exceptions will be discussed and confirmed with the organisastion in writing.

Privacy

New technology is providing opportunities to improve the accessibility and quality of human services, for example, through electronic linking of client records to the different services involved in client case management.

The department and organisations it funds are subject to a legislative privacy regime that governs the handling of personal and health information. The Information Privacy Act 2000 (IPA) and the Health Records Act 2001(HRA) protect personal and health information by setting standards on how such information should be handled, from collection to disposal.

The IPA covers personal information, other than health related information, held by Victorian public sector organisations. The HRA covers health information handled by both public and private sector organisations.

The Office of the Victorian Privacy Commissioner (OVPC) and the Office of the Victorian Health Services Commissioner administer the IPA and HRA respectively. Both have powers to investigate complaints, impose compliance notices and impose penalties if a privacy breach is found to have occurred.

It is expected that organisations have a privacy policy and that procedures incorporate the principles in the Victorian privacy legislation as minimum standards for handling personal and health information. Broadly, this means organisations should:

• Collect only information which is needed for a specified primary purpose;
• Ensure clients know why information is collected and how it will be handled;
• Use and disclose the information only for the primary or a directly related purpose, or for another purpose with the person's consent (unless otherwise authorised by law);
• Store the information securely and protects it from unauthorised access;
• Retain the information for the period authorised by the Public Records Act 1973; and 
• Provide the person with access to their own information and the right to seek its correction.

Funded organisations are required by the standard clause in their service agreement to comply with both Acts. Funded organisations are also subject to the HRA in their own right, if handling health information.

For further details on privacy, including the department's privacy policy and a summary of the privacy principles, go to http://www.dhs.vic.gov.au/pdpd/ciiru/privacy.

The Corporate Integrity Information and Resolutions Unit of DHS (CIIRU) is developing guidelines intended to assist the department and its funded service partners in meeting their legislative requirements. These guidelines will be available on this website by the end of July 2009.

The full set of principles in the respective privacy laws can be found in the Information Privacy Act 2000 and in the Health Records Act 2001. Copies can be purchased from Information Victoria telephone 1300 366 356.

For more information, on the Health Records Act, contact:

Health Services Commissioner, 30th Floor, 570 Bourke Street Melbourne Victoria 3000.

Telephone: 1800 136 066.

Website: http://www.health.vic.gov.au/hsc (external link)

For more information on the Information Privacy Act contact:

Victorian Privacy Commissioner,Level 11, 10-16 Queen Street Melbourne Victoria 3000.

Telephone: 1300 666 444

Website: http://www.privacy.vic.gov.au (external link)

If further advice is required about specific issues surrounding health privacy and information privacy, funded organisations should seek independent legal advice.

Whistleblower Protection Act

The Whistleblower Protection Act 2001 facilitates the making of disclosures about improper conduct by public bodies and public officials and provides a number of protections for those who come forward with a disclosure ('whistleblowers'). It also provides for the investigation of disclosures that meet the definition, as detailed in the Act, of a 'public interest disclosure'.

The main objectives of the Act are to:

• promote a culture in which whistleblowers feel safe to make a disclosure
• protect people who disclose information about serious wrongdoing within the public sector from recrimination or other adverse consequences
• provide a framework for investigating disclosed matters, and
• ensure that investigated matters are dealt with properly.

The Act recognises that improper or corrupt conduct by employees, officers or other staff within the public service should not be tolerated, neither should actions that involve reprisals against those who come forward to disclose such conduct.

The Act makes it clear that public interest disclosures are about serious wrongdoing. 'Improper conduct' is defined as:

• corrupt conduct
• substantial mismanagement of public resources
• conduct involving substantial risk to public health or safety, or
• conduct involving substantial risk to the environment.

To further narrow the scope of the behaviour falling within the definition, the Act requires that the above conduct would, if proved, constitute:

• a criminal offence, or
• reasonable grounds for terminating the services of the relevant public officer.

Every public body, including departments and their associated statutory authorities, must establish a set of written procedures for handling disclosures made under the Act. If you meet the definition of a 'public body' outlined below, your organisation is required to comply with the Act. Public bodies included in the Act are:

• all government departments and administrative offices
• statutory authorities
• municipal councils
• government appointed boards and committees
• government owned companies
• universities
• TAFE colleges
• public hospitals
• state funded residential care services
• health services contractors, and
• correctional services contractors.

The Act requires that by 1 January 2002, or as soon as practicable thereafter, public bodies as defined in the Act must establish procedures to:

• facilitate the making of disclosures under the Act
• investigate the disclosed matters, and
• protect the whistleblower from reprisals because of disclosures.

A complete copy of the Whistleblower Protection Act 2001 can be found at http://www.legislation.vic.gov.au/ (external link) under the 'Victorian Law Today' section.

You may also view the Ombudsman's guidelines in relation to the Act, which are available at http://www.ombudsman.vic.gov.au (external link).

The Department of Human Services has created its own whistleblower website that may provide valuable information. See http://www.dhs.vic.gov.au/pdpd/ciiru/whistleblowers (external link).

As a result of the Government's mandate to restore openness, fairness and transparency to the Government of Victoria, a package of measures was introduced to entrench the principles of open government and probity in Victorian public administration.

One adopted measure was the requirement that all Victorian Government contracts and agreements include a provision for disclosure of contract/agreement information. In view of this mandate, a permitted disclosure clause (Confidential information) is included in all service agreements. The clause is consistent with the department's standard tender documents and allows for exemptions to disclose confidential information as it pertains to trade secrets, and or when it is likely to cause an unreasonable disadvantage, as defined in the Freedom of Information Act 1982.

Note: Confidential information means information exempt within section 34(1) of the Freedom of Information Act, as it relates to trade secrets and or unreasonable disadvantage.

Trade secrets

In deciding whether specific information should be categorised as a 'trade secret', consider the:

• extent to which it is known outside of your business
• extent to which it is known by the persons engaged in your business
• measures taken to guard its secrecy
• value to your business and to any competitors
• amount of money and effort invested in developing the information
• ease or difficulty with which others may acquire or develop this information.

Unreasonable disadvantage

In determining whether disclosure of specific information will expose the business to an unreasonable disadvantage, consider section 34(2) of the Freedom of Information Act, that is, whether:

• the information is generally available to competitors
• it could be disclosed without causing substantial harm to the competitive position of the business.

Freedom of information

The release of information by the department under a Freedom of Information request is subject to clarification and the knowledge of all affected parties. For example, the release of information about an organisation's employees or volunteers, within the context of them being a third party to the contract/agreement, is not disclosed without their written consent.

The following is an indicative list of contract details that the department generally makes available under Freedom of Information.

Service agreements are considered to fall under this category and, therefore, the following details will be published on the Victorian Government Purchasing Board website at www.vgpb.vic.gov.au (external link)

Department details

• name of department
• organisation (division or region)
• reference (any unique reference number)
• related tender (tender number)
• title (contract purpose)
• description (description of goods and services)
• contract type (categories of purchase of goods/services; operating and financial leases; revenue lease; construction)
• contract amount (value of contract: while $100,000 is the nominal threshold, contracts less than that may be disclosed)
• expires (expiry date)
• organisation contact (departmental contact person)
• phone no (departmental contact person's telephone number)
• email address (departmental contact person's email address)
• full agreement details (if total value greater than $10,000,000).

Supplier details

• Data Universal Numbering System (DUNS) number
• name
• address
• state
• post code
• email address

In accordance with the standard service agreement terms and conditions, all organisations are required to indemnify the department against a claim by any person for loss of or damage to property, death or personal injury or other financial loss, caused by the negligence of or breach of statutory duty by the organisation.

A significant majority of organisations that enter into a departmental service agreement are covered under either of two insurance programs arranged and funded by the department:

• Public Healthcare Insurance Program
• Community Service Organisations Insurance Program.

The insurer for both of the programs is the Victorian Managed Insurance Authority (VMIA) and details of the insurance cover provided, including the respective insurance manuals that it sends to the organisations, can be viewed on its website www.vmia.vic.gov.au (external link)

Public health care insurance program

The types of public healthcare services covered include:

• health service networks
• public hospitals
• community health centres
• ambulance
• alcohol and drug treatment
• hospice care
• palliative care
• sexual assault centres
• bush nursing centres.

The insurance program does not cover private for profit medical services, such as private hospitals, day centres, medical clinics and the like.

Community service organisations insurance program

The types of community service organisations (CSO) covered for service provision in Victoria and agreed border locations include:

• kindergartens
• youth accommodation
• family support
• residential care
• child protection
• Indigenous organisations
• disability accommodation support
• neighbourhood/community houses
• financial counselling
• community housing.

Under machinery of government changes, organisations such as neighbourhood houses and financial counselling services fall under the responsibility of other departments. However, the VMIA has maintained the cover for these programs. Such organisations may also still receive other funding streams from the department under a departmental service agreement and are therefore covered anyway.

The insurance program does not cover private for profit organisations (unless otherwise agreed by the Department of Human Services), organisations which have an interstate based head office, or other organisations which can access the economic benefits of state based or national group insurance programs, which include:

• educational institutions
• local government organisations
• religious denominational bodies
• Salvation Army
• YMCA
• YWCA.

Organisations not covered by departmental insurance programs

It is prudent for organisations that are not eligible for cover under departmental insurance programs to arrange appropriate insurance to:

• protect physical assets such as buildings and contents against loss and/or damage
• indemnify the organisation against legal liability for personal injury and/or property damage or other financial loss claims under such policies as:
  • public/products liability
  • professional indemnity
  • directors' and officers' liability.

Law requires WorkCover insurance if the organisation has any employees.

Consortia arrangements

Departmental insurance programs can be extended to cover all organisations that form part of a consortia funded by the department. The cover is strictly limited to consortia related activities only.

If at least one consortia member is an organisation covered under the public healthcare insurance program, then all other members will receive the benefit of the cover under this program. However, if the consortium does not contain an organisation covered under the healthcare insurance program, but contains at least one member covered under the CSO insurance program, then all other members will be covered under the CSO program.

Insurance enquiries

Organisations that are unsure of their eligibility for cover under departmental insurance arrangements should contact their Program and Service Advisor (PASA) for advice. If the PASA is uncertain of insurance eligibility, then the matter should be referred by the PASA to the department's insurance manager Lloyd Stuart, Finance and Business Services Branch, Financial and Corporate Services Division (telephone 03 9096 8319).

Specific enquiries made by organisations on insurance matters should be referred to the VMIA. The VMIA website (external link) lists names and contact numbers specific to each departmental insurance program.

The service agreement sets out details of services to be provided by the organisation in return for funding provided by the department. The payment schedule sets out how much and when funds will be paid, and schedule 3 sets out the services.

There may be times when an organisation does not spend all the funding provided by the department. Where services have been deliverd according to specification, and the organisation has some funding left over, this can be retained by the organisation and utilised for ongoing service provision.

Where service delivery targets have not been met, the department will meet with the organisation to determine the most approporiate action.

There are some activities that are funded on an estimate of the volume of service. When the actual volume of service is known, funding will be adjusted up or down to reflect the actual service delivery volume. For these activities, unspent funds can not be retained.

There may be other funding amounts tied to specific purposes. Where these exist, they must be used for those specific purposes. Organisations will be advised in writing of these requirements.

With the introduction of three year agreements and consistent with the principles of the partnership agreement, a distinction is made between funding that is negotiated and changes to funding to reflect price and or service changes, movements or adjustments.

Variations

A service agreement variation refers to the process through which organisations agree to change funding for one of the following:

• growth or reduction in services
• new services
• minor capital
• one-off items.

Changes due to service and funding model redevelopment are implemented through this process during the term of the agreement.

Variations are negotiated with an organisation and processed at set times throughout the year. There are three standard variation processing periods per year, in August/September, November/December and March/April. Processes have been developed for any variation that needs to occur outside of the designated variation processing periods.

The variation process involves:

• negotiating the substance of the variation (as required),
• reissuing, via the Funded Agency Channel, any service agreement schedules that are affected by the variation, and
• completing the variation.

Organisations will receive a copy of the revised service agreement (principally schedules 2 and 3) via the Funded Agency Channel. These are to reflect conversations and negotiations with departmental staff.

The variation becomes an addendum to the original service agreement and forms the revised basis on which the service agreement will be conducted.

Adjustments

Adjustments are changes to funding levels that occur automatically.

The main type of funding adjustment is a price adjustment. Price adjustments are made to provide increased funding for wages and non-wage cost increases. They reflect increased funding for the same service delivery outputs.

The other type of adjustment is a service adjustment. Service adjustments will only be made where the number of services actually delivered is used to adjust funding and the adjustment is not negotiated.

Organisations holding a service agreement must be legal entities, established under a range of legislative frameworks. Most funded organisations are:

• Incorporated Associations
• Companies
• Cooperatives
• Partnerships
• Entities established under specific Acts of Parliament.

Organisations must:

• meets all laws under which they are incorporated or required
• have an active Australian Business Number (ABN) (if the Organisation is required by law to have an ABN)
• be registered for Goods and Services Tax (GST) if applicable
• take all action necessary to authorise the performance of the organisation's obligations under the service agreement.

The organisation must provide the department with evidence of their status upon request.

The organisation must notify the department within five working days of any change to their status.

Goods and Services Tax (GST) must be paid on funding to GST registered private and community organisations, where there is an undertaking to supply specified services for that funding.

GST is not paid in the following circumstances:

• where the service agreement is with a government entity (for example, local government, government schools, public hospitals)
• where the organisation is not registered for GST
• where the services being supplied are not taxable supply (applies to Disability individual support funding managed through a financial intermediary arrangement).

From 2009-10, all funding in the service agreement schedules will be shown exclusive of GST. Where GST is payable, it will be added to scheduled payments at the time payment is actually made.

'Gifts' made to the organisation by the department are not subject to GST. A gift is defined as a transfer of funds where there is no contractual obligation attached to those funds.

The process for GST payment is as follows:

• the department will pay the organisation the agreed funding, plus the 10 per cent GST for each funded activity
• the organisation will remit the GST to the ATO
• the department will claim GST from the ATO.

Figure 3 GST payment flow

Summary of GST criteria

If the funded organisation does not have an Australian Business Number (ABN), a withholding tax of 46.5 per cent will be applied on the funding, subject to exceptions listed on the statement by a supplier (see ATO internet site for further information). The department's preference is to enter into service agreements with organisations that have an ABN.

If the funded organisation has an ABN, but is not registered for GST, the department will not add GST when making any payments. See http://www.abr.business.gov.au (external link) for further information about registration.

If the funded organisation has an ABN and is registered for GST, GST is added when there is a taxable supply.

Australian Business Number (ABN)

ABN registration online

An ABN is a key part of the new tax system. The ABN uniquely identifies every Australian trading entity that has a relationship with the ATO, whether business, government or not for profit. All organisations should register with the ATO for an ABN because:

• it is the precursor to registering for GST
• payment made to organisations that do not have an ABN will be subject to a 46.5 per cent tax withholding, in accordance with Pay As You Go (PAYG) legislation.

The department will retain records relating to the ABN for each organisation. If the ABN is not recorded, the department will be required to withhold 46.5 per cent from every service payment and forward this amount to the ATO. It is in the interests of all service providers, no matter how small, to register for and maintain an active ABN.

Where an organisation has more than one ABN, the department requires the ABN that relates to the business entity with which the department has the service agreement.

If the organisation is also the lead organisation for a consortium, the organisation will need to return the ABN and GST registration details for that consortium, in addition to its own GST and ABN details. The ATO provides a separate GST registration form for organisation groups (consortia).

GST registration

The ATO requires that all entities carrying out an enterprise must register for GST if their annual turnover is at or above the ATO threshold of $75,000 (for commercial organisations) or $150,000 (for non-profit organisations). This includes income from all sources, not just funding from the department.

Not for profit organisations with an annual turnover of below $150,000 have an option to register for GST. Organisations deciding not to register will be unable to charge GST on services delivered and the department will not enter into a Recipient Created Tax Invoice (RCTI) arrangement with them. Organisations will need to inform the department of the option chosen and if their GST status changes.

Although an organisation may decide not to register for GST, it will still need to obtain an ABN to avoid the withholding tax of 46.5 per cent from each service payment.

Recipient Created Tax Invoices

GST legislation requires that where a taxable 'supply' is provided, and there is a need for documentation to accompany this supply, the documentation should be in the form of a tax invoice. The ATO has provided guidelines regarding the content of the tax invoice.

Where payments to an organisation are grossed up by 10 per cent for GST, the department will issue a RCTI.

The benefits of using RCTI include:

• retaining current cash flow of payments to organisations. Payments by the department to organisations will continue to be made in advance (payment after the event would severely disrupt the cash flow to organisations).
• providing advice on service payments by activity with separate identification of the GST payment to be remitted to the ATO by the organisation
• avoiding confusion between service payments and the GST calculation
• no requirement for organisations to invoice the department for services provided.

A key requirement is that there must be a written agreement to the provision of the RCTI by the department. The agreement for the RCTI must be in place between the organisation and the department prior to the first payment.

If the organisation has an annual turnover of below $150,000 and has chosen not to register for GST, the RCTI will not apply and a normal remittance advice will be provided.

Funding information provided at service plan and activity levels is exclusive of GST. The GST is then added where appropriate at the applicable rate (10 per cent). The intention of the department is to make transparent to organisations the funding related to service delivery and the separate GST component. This will enable organisations to immediately identify the GST component of the department's funding, which must be remitted to the ATO.

As part of its response to Work Choices, the Victorian Government established the Ethical Purchasing Policy - Mandatory Safety Net for Nominated Sectors (MSN Policy). The aim of the policy is to establish and maintain a safety net of fair minimum employment standards for employees of funded organisations. The policy was implemented on 7 August 2006.

Under the MSN policy, Victorian Government Departments must ensure that organisations they fund provide their employees engaged in supplying the funded services with "terms and conditions of employment that are not less favourable overall than those provided by the relevant award(s) which applied prior to Work Choices, and comply with the provisions of nominated legislation".

Funded organisations are not required to provide terms and conditions of employment that are identical to those contained in the relevant award or awards.

This is a mandatory requirement and forms part of the standard service agreement used by Department of Human Services and will operate as an on going contractual obligation for the life of the service agreement.

Subcontractors engaged for the delivery of funded services must also comply with identical requirements. A subcontractor, for the purpose of the MSN policy, is an entity who is not engaged by DHS but who has contracted (formally or implicitly) with the funded organisation to perform some or all of the organisation's obligations in respect of the delivery of the services specified in the funding agreement. The policy requirements apply only to employees of the subcontractors who are directly engaged in the provision of goods or services to the funded organisation.

Relevant Federal Awards

Information regarding relevant awards, employee classification scales and pay rates is available online at http://www.airc.gov.au (external link), or http://www.wagenet.gov.au (external link).

Care should be taken to ensure that the awards, classification scale and pay rates that are used for determining the no less favourable test are current and accurate.

Legislation

The MSN policy includes a requirement that the minimum terms and conditions proposed or provided by funded organisations and their subcontractors fully comply with standards and obligations established by nominated legislation. Entitlements established by the nominated legislation must be maintained. The nominated legislation as at May 2008 comprises:

• the Long Service Leave Act 1992 (Vic)
• the Juries Act 2000 (Vic), and
• the Outworkers (Improved Protection) Act 2003 (Vic).

Information regarding Nominated Legislation is accessible from IRV and online at the IRV website available through Business Victoria at http://www.business.vic.gov.au (external link).

Australian Fair Pay Commission

For the purpose of comparison, the employee's wages must be not less than the relevant award plus all relevant wage adjustments made by the Australian Fair Pay Commission (AFPC).

The AFPC can be contacted on 1300 139 699 or (03) 8621 8212. Updated pay rates are available online at http://www.workplaceauthority.gov.au (external link). Again, care should be taken to ensure that the award based wage rates utilised for determining the no less favourable test are accurate and reflect current AFPC wage decisions.

Australian Industrial Relations Commission (AIRC)

Allowances contained in awards (including transitional awards) are reviewed by the AIRC following the publication of an AFPC determination. Under the MSN policy, as part of the requirement to provide employment standards no less favourable, the relevant award or awards must also reflect all adjustments to allowances made by the AIRC. AIRC changes to award allowances are published and available online at http://www.airc.gov.au (external link).

For more information:

Industrial Relations section of the Business Victoria website (external link), see PDF file: 2007 Guidelines for Victorian Government Departments, Ethical Purchasing Policy Mandatory Safety Net - Community Funded Sector.

For information relating to this page contact:

Alex McGillivray, Manager Funding and Monitoring Unit Ph: (03) 9096 1371
Authorised by: David Ali, Acting Director Business Development Branch

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