Agencies must assess the likely accounting treatment to be adopted for privately financed projects. A statement of accounting treatment is to be prepared, showing:
(a) balance sheet:
• Valuation, treatment and timing of assets to be passed to the agency at the end of any contract period
• Treatment and timing of any assets passed over to the private sector
• Valuation and treatment of any liabilities assumed
• Valuation and treatment of any contingent liabilities.
(b) operating statement:
• Treatment of any expenses to be incurred over the duration of the contract
• Treatment of any likely revenues to be received from the private sector.
(c) statement of cash flows:
• Treatment of any payments likely to be made to the private sector over the duration of the contract
• Treatment of any likely payments from the private sector
Agencies should refer to the relevant accounting standards proposed and, where reliance is placed on professional accounting opinions, copies of these should be attached to the statement.
The achievement of ‘off balance sheet’ transactions is not a motivation for the Government to deliver PFPs. The Government’s key drivers are improved value for money in service delivery and appropriately balanced risk allocation.
NSW Treasury is responsible for accounting policy guidelines and should be consulted by agencies when the most appropriate accounting treatment is being considered for a particular PFP transaction.
An updated statement of accounting treatment must be submitted to NSW Treasury after negotiations have been finalised. Before the contract is executed, the agency should obtain a NSW Treasury determination on the accounting treatment and should advise the Auditor-General of the proposed accounting treatment.
NSW Treasury is required to report the State’s exposure to infrastructure projects with private sector participation when putting forward the annual Loan Council allocation and when making periodic reports to the Loan Council.
Exposure is to be estimated as the full contingent exposure measured by the Government’s termination liability, in the case of private party default. If the termination liability does not include all forms of Government underwriting, the sum of the individual liabilities incurred under each clause of the project delivery contract may have to be estimated.
NSW Treasury will work closely with agencies in preparing an assessment of likely Loan Council impacts from private sector financing. The Treasury will normally use material contained in the statement of fiscal impacts, the economic appraisal and other supporting documentation.