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WorkSafe Victoria Annual Report2012

Letter to Minister

11 September 2012

The Hon. Gordon Rich-Phillips MLC Assistant Treasurer, Minister for Technology and Minister Responsible for the Aviation Industry.

Level 5, 1 Macarthur StreetEast Melbourne Vic 3000

Dear Minister

I am pleased to submit the 2011/12 Annual Report of WorkSafe Victoria for presentation to the Parliament, as required by section 46 of the Financial Management Act 1994.

Yours sincerely

David Krasnostein Chairperson

Contents

01 About WorkSafe 01 Vision and Mission 02 Strategy 2012 – Our Performance04 Chairperson’s Report05 Chief Executive’s Report06 Board 07 Senior Management08 Safety14 Service22 Sustainability22 / Our Organisation26 / Our OHS28 / Financial Management30 Financial Report74 Appendices74 / Appendix 1

Prosecutions78 / Appendix 2

Agent performance82 / Appendix 3

Self-insurance report87 / Appendix 4

Governance and compliance94 / Appendix 5

Disclosure index

WorkSafe Annual Report 2012 / 1

WorkSafe Victoria:

/ strives to prevent workplace injuries and illness

/ enforces Victoria’s occupational health and safety laws (including relevant Commonwealth laws)

/ provides reasonably priced workplace injury insurance for employers

/ helps injured workers return to work / manages the WorkSafe injury insurance

scheme by ensuring the prompt delivery of appropriate services and adopting prudent financial practices

/ provides an emergency response service that operates 24 hours a day, every day, across Victoria.

Our statutory obligations are covered in the following Acts of Parliament:

/ health, safety and welfare in the workplace under the Occupational Health and Safety Act 2004

/ workers compensation and the rehabilitation of injured workers under the Accident Compensation Act 1985

/ WorkSafe injury insurance premiums under the Accident Compensation (WorkCover Insurance) Act 1993

/ explosives and other dangerous goods under the Dangerous Goods Act 1985

/ high-risk equipment used in non-work related situations under the Equipment (Public Safety) Act 1994

/ mines and quarries under the Mines Act 1958.

WorkSafe provides a range of benefits to injured workers, including:

/ weekly payments / medical and allied health treatment/ ambulance transport/ hospital treatment/ personal and household help/ impairment lump sums / common law damages (where certain

criteria are met).

Funding

The organisation is primarily funded by insurance premiums paid by Victorian employers who are covered by the WorkSafe injury insurance scheme. In 2011/12 this totalled $1.878 billion.

About WorkSafe

Our Mission Working with the community to deliver outstanding workplace safety, together with quality care and insurance protection to workers and employers.

Our Vision Victorian workers returning home safe every day.


Safety

Sustainability Lowest average premium rate in Australia

Eleventh successive full-year actuarial release

Strong Performance From Insurance Operations

Employee Opinion Survey result above Australian National Norm

Service Employer and worker representative satisfaction with the WorkSafe Inspectorate above 96 per cent

Increased community engagement through our Advisory Service and website

Over 75,000 employers used our Online Employer Services portal to certify their payroll

Lowest injury claims rate on record

Lowest injury rate of any Australian jurisdiction

Reduction in injury rate of almost 10 per cent throughout Strategy 2012

Our Performance

Highlights


Our Five Year Aspirational Goals

2006/07 Baseline

2010/11 Result

2011/12 Result

2011/12 Target

8.35 claims per 1000 workers 11.29 10.34 10.17 8.35

30% improvement in return to work 75.8% 77.2% 73.8% 83%

Client satisfaction up to 90% 82.6% 85.8% 84.0% 90%

Improved employee satisfaction 64% 63% 67% 73%

Actuarial release of $1.7 billion1 $394M $136M $182M $150M

Premium break even rate of 1.2% 2 1.38% 1.316% 1.282% 1.271%

1 Cumulative ‘back to base’ target2 Target set pre-Hanks reforms

Strategy 2012

In 2011/12 Victoria enhanced its status as the safest state in which to work and the lowest priced provider of quality workplace injury insurance.


Chairperson’s Report

In 2007 we agreed our Strategy 2012, setting ambitious and aspirational goals. This has delivered outstanding results. Victoria now has the lowest injury rate on record, as well as the safest workplaces and the lowest premiums in the country. While we can be proud of these outcomes, we know there is much more to be done. We have more mountains to climb, and new challenges to meet and overcome.

A great strength of our scheme is its stability. This has enabled us to deliver results in partnership with the Victorian community and also to innovate. At a time when there is volatility and change in workers compensation around the country, the Victorian scheme remains a national leader. We will continue to build on this stability and aim to get the fundamentals right: strong occupational health and safety (OHS), fair compensation and competitive premiums.

WorkSafe 2017

We have now agreed our next five-year strategy – WorkSafe 2017. While Strategy 2012 served us well, our new strategy builds on our successes and addresses future challenges. These include shifts in the mix of Victorian industries and workforce demographics, economic volatility, and increasing community awareness of mental wellbeing issues. The new strategy is flexible and will enable us to be agile in the face of emerging issues or significant changes in our operating environment. WorkSafe 2017 will retain our three core pillars: safety, service and sustainability, and elevate return to work as a fourth pillar.

Major projects

Significant work occurred during the year to implement our Enhanced Agency Model. It aims to achieve the next step-change in the way our agents provide services to injured workers and employers. It will also embed a much greater return to work capability in our agents.

In line with Victorian Government policy we also have a number of projects aimed at reducing red tape to make it easier for companies to do business in this state. This year we reformed the system for licensing high risk work to simplify the renewal process for licence holders, we launched an online tool to help employers assess their obligations regarding the use of contractors, and we continue to enhance online services for employers. Our online portal is proving very popular, with over 75,000 employers using the system to certify their payroll for the last financial year.

During the year, the Victorian Government commissioned a Supplementary Impact Assessment to review the national OHS harmonisation package from a Victorian perspective. It found that Victorian businesses would face additional costs of more than $3.4 billion over the next five years under the proposed ‘model’ laws. In light of this, the Government announced that Victoria’s existing OHS framework would be maintained. WorkSafe will build on the work done to date and continue to work towards best practice legislation and regulation.

Dividend

During the year the Victorian Government introduced a dividend payment from WorkSafe. This measure brought WorkSafe in line with other Victorian government business enterprises, such as the TAC. The dividend will ensure the broader community benefits from the scheme’s strong performance. The dividend is 50 per cent of WorkSafe’s Performance from Insurance Operations (PFIO). In 2011/12 we paid $147 million to the Government from our 2010/11 PFIO. The Treasurer will consult with the Board prior to determining future dividend amounts.

Thank you

In 2012 Elana Rubin retired as Chair of the Board and Greg Tweedly retired as our Chief Executive. Both Elana and Greg made an enormous contribution to WorkSafe. Their legacy is an organisation that has matured and improved its efficiency and effectiveness, and the outcomes it delivers for the community.

I would like to thank my Board, the senior management team, our employees, stakeholders, agents and service providers for their hard work during the year. In partnership with the community we have achieved some fantastic results. Thanks also go to the Assistant Treasurer, the Hon. Gordon Rich-Phillips MLC and his staff for their support and guidance during the year.

David KrasnosteinChairperson

David Krasnostein


ChiefExecutive’s Report(Acting)

At the end of Strategy 2012, we have delivered strong performance in safety outcomes and financial management. Victoria has the lowest injury claims rate in its history, it is the safest State in which to work, and it has the lowest injury insurance premiums in Australia. These results are a testament to the commitment of WorkSafe employees, employers, workers and the Victorian community in making workplace safety a priority.

Safety

During the period of Strategy 2012 thousands of people who in the past would have been injured at work, returned home safe. Victoria’s injury claims rate dropped by almost 10 per cent throughout Strategy 2012, concluding the period at a new record low rate of 10.17 claims per thousand workers in 2011/12. Although we did not reach our aspirational target, Safe Work Australia’s Comparative Performance Monitor confirmed that Victoria continues to be the safest state to work in.

While number of work-related deaths did not reflect this positive trend in 2011/12, over the five years of Strategy 2012 fatalities declined by 17 per cent compared to the preceding five year period. In partnership with employers and workers, we must do more to stop this tragic loss of life.

Service

Once again the WorkSafe Inspectorate delivered outstanding service results and is to be commended for its consistency in this area over many years.

From 1 July 2011 our new agent panel commenced. While comprehensive mitigation strategies were put in place the transition meant disruption for our clients and this impacted on our agents’ service results.

Improving satisfaction with the services of our agents remains a challenge and it is something that all workers compensation schemes grapple with. Our Enhanced Agency Model will provide a stronger base to build on to deliver enhanced service to injured workers and employers.

Sustainability

Our performance from insurance operations (PFIO) remained strong at $385 million. This result was significantly higher than budget and highlights the benefits of improved workplace safety and claims management. We achieved our 11th successive full-year actuarial release – or write-down in projected liabilities – of $182 million.

Our net result was adversely impacted by investment returns, which were $318 million below target. Changes to economic assumptions, including discount rates resulted in a negative impact of $1.07 billion.

The strong negative impact of external factors were partially offset by the continued improvements in claims management, resulting in an after tax net result of negative $676 million.

Thank you

There are many people who have contributed to our success during Strategy 2012. I would like to thank our employees, senior management, the Board, agents, providers and stakeholders for their hard work and dedication, and I am sure together we will continue to deliver great results for workers and employers across Victoria.

Ian ForsythActing Chief Executive

Ian Forsyth

Financial Results 2011/12($M)

2010/11($M)

2009/10($M)

2008/09($M)

2007/08($M)

Impact on result from internal factors

Performance from insurance operations 385.0 293.9 654.1 277.4 957.6

WorkHealth and Research Institute initiatives 24.0 23.6 23.1 42.9 –

Result from internal factors 409.0 317.5 677.2 320.3 957.6

Impact on result from external factors

Difference between actual returns and long-term expected returns1 (318.3) 410.1 369.9 (2,061.1) (1,776.7)

Change in inflation assumptions and discount rates2 (1,070.2) 8.5 (531.3) (68.1) (57.6)

Impact from legislative changes – (9.4) (270.3) – –

Tax 303.9 (205.9) (69.9) 554.4 289.6

Net result (675.6) 520.8 175.6 (1,254.5) (587.1)1 Unfavourable conditions experienced in share markets in 2011/12 resulted in the actual investment return being below the expected long-term rate of return.2 There was an unfavourable impact from changes in economic assumptions (i.e. reductions in assumed discount rates and higher than expected actual inflation)

used to determine claims liability in 2011/12.


Board

David KrasnosteinBJuris (Hons), LLB, LLM Appointed 2011

ChairpersonAppointed 15 July 2012

Dr Geoff BrookeMBBS, MBA Appointed 2009

Paul BarkerBBus, FCA, ACIS Appointed 2001

Deputy ChairpersonAppointed 2006

Geoff HiltonBSc(Hons), MSc, FCA, MAPS Appointed 2007

Ian ForsythBEc Appointed 6 July 2012

Acting Chief Executive

Jane Bell LLB, BEc, LLM(London), FAICD Appointed 2009

Greg Tweedly BComm, CPA Appointed 2003

Chief Executive Retired 6 July 2012


Ian ForsythChief Executive (acting)

Anne Warner Director, Internal Review Unit

Pam AndersDirector, WorkHealth

Anthony Ventura Chief Risk Officer

Phillip Volkofsky Executive Director, Human Resources & Change Management

Ian SargentChief Financial Officer

Glenn Ockerby Executive Director Corporate Strategy & Business Performance Management

*Joint TAC/WorkSafe Collaboration

Clare Amies Head Health Services Group*

Doug Kearsley Capital Management*

Andrew Saunders Chief Executive IT Shared Solutions*

Len Boehm Executive Director Injury Support & Service

Vacant Deputy Chief Executive

Organisational Structure

Marlo Baragwanath General Counsel Legal, Legislative and Employer Services

Bernie Dean General Manager Prevention Strategy

Lisa Sturzenegger General Manager Health & Safety Operations

Ian ForsythExecutive Director Health & Safety

VacantExecutive Director Marketing & Communications


Victoria has the safest workplaces in Australia.

Safety

In 2011/12 Victoria achieved a record safety outcome in terms of injury claims rates and confirmed its position as the national OHS leader.

This is a strong result for our community, reflecting the combined efforts of WorkSafe, and employers and workers across Victoria. During the five years of Strategy 2012, thousands of people who in the pastwould have been injured at work, returned home safe.

As a modern and innovative regulator we use constructive compliance and a mix of incentives, assistance, persuasion and enforcement. We tailor our approach to the needs of industries and workplaces based on their hazards, industry structure, employer size, and employee demographics. During the year we continued to focus on three strategic areas: reducing the biggest causes of harm to Victorian workers, protecting the most vulnerable, and preparing for the future.

Our results

We measure our safety performance on the number of injury claims per thousand workers. In 2011/12 we achieved Victoria’s lowest injury rate on record. Claims per thousand workers dropped from 10.34 in 2010/11 to 10.17 in 2011/12. Safe Work Australia’s Comparative Performance Monitor also confirmed that Victoria is the safest state to work in Australia.

However, the number of work-related deaths increased to 24 in 2011/12 compared with 19 the previous year. Seven of these occurred over a terrible 12-day period in late 2011. While no fatality is acceptable, in the second half of 2011/12, workplace fatalities tracked at or near record low levels. In almost all workplace situations the risks are known and so are the solutions.

SafetyStrategy 2012 performance measures

2010/11Result

2011/12Result

2011/12Target

Claims per 1,000 workers 10.34 10.17 8.35

Four-week claims per 1,000 workers 4.19 4.15 3.28

Fatalities 19 24 <16

Hospital admissions of two or more days per 10,000 workers

3.51 3.64 3.31

WorkSafe 2017

We begin our new five year strategy, WorkSafe 2017, with confidence. Based on our results, the approaches in Strategy 2012 will remain relevant and significant work has been done to plan for the future. This includes reviewing our performance and developing a new regionally based strategic operating framework for our field force of inspectors. It will ensure continued focus and greater agility in improving OHS across Victoria. We will support improved capability in Victorian workplaces through grants and training. We will also explore ways to influence the safety culture and management of real-time risks in Victorian workplaces.

In 2012/13 we will change the way we report safety outcomes, moving to the measure of claims per million hours worked. This measure will provide us with a more accurate way to measure safety in Victoria as it aligns more closely with workers’ exposure to risk by taking into account the amount of time spent at work.

In partnership with employers and workers, we must do more to end this tragic loss of life, which has a devastating effect on families, friends, colleagues, employers and entire communities.

The Victorian community has worked effectively to strive for the 10-year aspirational goals set out in the National Occupational Health and Safety Strategy in 2002 – a 20 per cent reduction in work-related fatalities and a 40 per cent reduction in work-related injuries.

These goals were reflected in Strategy 2012 and have driven outstanding performance in OHS. Over the course of Strategy 2012, claims per thousand workers reduced by 10 per cent. Since the start of the National Occupational Health and Safety Strategy in 2002, claims per thousand workers reduced by 27 per cent. While we did not reach the aspirational target of 8.35 claims per thousand workers, this result is a significant achievement for our community and confirms Victoria’s position as the safest state in which to work. The National target for reducing work-related fatalities by 20 per cent was achieved. However, any workplace death is unacceptable and we will continue to work with the community to reduce workplace injuries and fatalities.


4.15 3.64 24

Claims per 1,000 workers

Four-week claims per 1,000 workers

Hospital admissions of two or morenights per 10,000 workers Fatalities

10.17


Safety

Our approach

Changing behaviours to prevent injuries

We aim to change behaviours and attitudes to improve OHS. This also helps to create a strong community expectation that our Inspectorate will work to keep duty holders on the right side of the law, but also enforce OHS laws when they are breached. We regularly gauge public perceptions about our approach and these remained very positive in 2011/12.

Football great Ron Barassi was recognised with the 2011 WorkSafe Award for Outstanding Support for Health and Safety in the Community, for the significant contribution he has made in raising safety awareness as WorkSafe’s VCFL Ambassador since 2001.

WorkSafe week enables us to raise awareness about OHS through a week of community sessions and activities. This year over 5,561 people participated with 72 per cent reporting that they made OHS changes at their workplace as a result of attending.

Practical and innovative support

The Prevention Fund supports projects that create workplace change, provide information and education to improve OHS, or reduce knowledge gaps. During the year a range of projects focussed on reducing manual handling risks across the construction and agricultural industries were undertaken.

The small business program provides practical services and tools, such as a free three-hour consultancy, information and advice. Over 1500 small employers utilised the consultancy services during the year.

A number of public awarenesscampaigns ran during the year:

/ ‘Get on to it before we do’ reminded employers of the importance of maintaining safe workplaces and the presence of WorkSafe Inspectors in the community.

/ ‘Would you do what you ask your workers to do?’ had the clear message that supervisors should not ask their employees to do something unsafe.

/ The iconic ‘Homecomings’ campaign was relaunched during the busy Christmas period to highlight that the most important reason for making a workplace safe is not at work at all.

/ ‘The Pain Game’ was designed to raise awareness about, and tackle, musculoskeletal injuries.

Our sponsorships of the Victorian Country Football League (VCFL), the Victorian Country Netball League and the Western Bulldogs Football Club continued during the year. These sponsorships enable us to engage at a grass roots level with communities across the state.

1011

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%11

Employer SatisfactionOver Time – Scheme

Injured Worker SatisfactionOver Time – Scheme*

Average PremiumRates 2012/13

Number of Injuries(Claims)

Percentage of Injured Workers SatisfiedWith Service Over Time – Self-insurers*

60.5 68

.7

68.6

68.3

69.8

68.9

72.8

1011

78.8

75.3

1.45

0

QLD

2.75

0

SA

2.28

0

TAS

1.69

1

WA

Workplace Injury Insurance Scheme

0.5%

1.0%

1.5%

2.5%

0.0%

3.5%

3.0%

2.0%

25

20

15

10

5

00506

0607

0708

0809

0910

Year

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%

74.7 83

.5

82.3

84.4

84.4

81.4

75.5

100%

75%

50%

25%

0%

Year

63.3

1011

61.7

0607

61.3

0708

66.7

0809

67.8

0910

Number of Injuryand Illness Claims

34,000

32,000

28,000

26,000

22,000

20,000

30,000

24,000

Year

0809

0910

0708

0607

28,8

56

29,1

07

28,6

89

28,8

54

1011

29,6

28

29,2

61

At Work 14-19 MonthsAfter Injury Reported

100%

40%

60%

20%

0

80%

Year

78.3

%

76.1

%

74.1

%

77.2

%

73.8

%

Employer Satisfactionby Agent

Allianz

Agent

Xchanging CGU QBE GBS Scheme

1112

1011

100%

80%

60%

40%

20%

0%

75.3

71.5

83.0

83.0

78.3

73.2

80.2

73.3

Victoria's Average Premium Rate

1.50%

2.00%

1.00%

Year

1112

1213

0506

0607

0708

0809

1011

0910

ComCareNSW

1.68

0

1033

216

18

1077

186

22

1011

613

1112

0708

0809

0910

1011

1112

* Break in series commencing 2010/11. We have undertaken to improve this measure to allow injured workers of self-insurers to give a more comprehensive response on the service they experienced.

VIC

1.29

8

11

1112

66.7

1112

Injured WorkerSatisfaction by Agent

Allianz

Agent

Xchanging CGU

1112

1011

100%

80

60%

40%

20%

0%QBE GBS Scheme

1.80

0

80.1

77.9 78

.875

.5

71.8

65.6 72

.572

.0 74.9

71.5

70.3

68.0 73

.263

.4

72.8

68.3

100%

80

60

%

%

40%

20%

0%

Employee opinion survey index score

6664

6863

6865 6366 67 66

WorkSafe Australian National Norm

Year

1011

1112

0809

0910

0708

1.29

8

1.33

8

1.80

1.62

1.46

1.33

8

1.38

7

1.38

7

time loss standard

Victorian employers are paying almost $1 billion a year to treat injuries such as broken bones, bad backs, sprains and torn ligaments.


Medium-sized businesses are supported through the owner visit program, which enables WorkSafe to engage directly with business owners on OHS and return to work. During the year the program enabled over 100 poorly performing employers utilise a free, six-hour consultancy to address key OHS issues.

WorkSafe worked with 24 high-risk large employers in the Integrated Approach program to help them achieve sustainable improvement to safety and injury management practices. Government employers were also engaged through high level performance meetings with agency heads at the Senior Public Sector OHS Roundtable.

WorkSafe’s annual information roadshow ran in 19 metropolitan and country locations in May and June 2012. Aimed at business operators, return to work coordinators and workplace Health and Safety Representatives, the free session provided information about OHS, return to work, premiums and online employer services.

/ More than 4,000 people were advised to see their GP within 24 hours of their check, mostly for having very high blood pressure or blood glucose levels.

/ Men are twice as likely as women to be at high risk of type 2 diabetes and the risks were greater in rural than metropolitan areas.

Through health promotion grants, WorkHealth has helped around 450 employers to invest in health and wellbeing programs for their workers.

The WorkHealth initiative is funded for five years through to December 2013, and a full review of the delivery, impacts and results of the program will be conductedin the latter part of 2012/13.

Our advisory service provides advice to the Victorian community through a dedicated telephone information line and website. In 2011/12 there were:

/ 1,127,324 visits to the website

/ 10,101,764 visits to specific pages of the website

/ 28,030 emails answered

/ 212,746 telephone calls for assistance about OHS, rehabilitation and compensation.

WorkHealth – our program of free, voluntary and confidential health checks – reached an important milestone during the year with over 500,000 workers completing a WorkHealth check. The program addresses some of the major health issues facing business by helping workers and their employers take steps to support better health at work, and in the long-term reduce levels of workplace injury and assist return to work.

It has provided one of the world’s largest snapshots of worker health:

/ 66 per cent of workers who have had a WorkHealth check have a medium to high risk for type 2 diabetes and/or heart disease.


Safety

Recognising excellence

The WorkSafe Awards celebrate and reward excellence in OHS and return to work. This year the awards were restructured and new categories, including a return to work stream, were introduced, attracting a record 176 submissions. WorkSafe congratulates the winners:

Health and Safety Representative of the Year – Marg Howard, Nestle Uncle Tobys.

OHS Management System of the Year – Grocon Constructors (Vic) Pty Ltd.

Best Solution to a Workplace Health and Safety Issue – CJM Attachments Pty Ltd with Swan Hill Rural City Council for its K-9 KUBE.

Best Health and Safety Initiative in a Small Business – Independent Ezy Access for its SCAFSAFE fall protection system.

Health and Safety Committee of the Year – Meritor Heavy Vehicle Systems Australia Ltd.

Commitment to Workplace Health and Wellbeing – KPMG for its A Healthy YOU workplace wellness program.

The analysis identified the 20 highest cost changes between the current Victorian laws and the proposed ‘model’ laws. It found that Victorian businesses would face additional costs of more than $3.4 billion over the next five years under the Commonwealth’s proposed ‘model’ Work Health and Safety laws.

Special Commendation – Commitment to Workplace Health and Wellbeing – Gippsland Water for its Annual Health & Wellbeing Program.

Outstanding Support for Health and Safety in the Community – Ron Barassi.

Employer excellence – PMP Print.

Occupational Rehabilitation Provider Achievement – The Recovre Group.

Treating Health Practitioner Award – Anjelo Ratnachandra - Beyond Pain.

Return to Work Coordinator Excellence – Joe O’Meara - Youth Justice Custodial Services.

Worker Return to Work Achievement Award – David Smooker - Orbost Civiland Civic.

National OHS harmonisation

During the year the Victorian Government commissioned a Supplementary Impact Assessment to review the impacts of Safe Work Australia’s national OHS harmonisation package on Victorian employers. The assessment was undertaken by PricewaterhouseCoopers and published on 12 April 2012.

The WorkSafe Awards recognise excellence in workplace health and safety, injury rehabilitation and return to work.

Profile: Sharing expertise in return to work

The winner of the 2011 WorkSafe Return to Work Coordinator Excellence award, Joe O’Meara, presented at a free workshop in Preston in March 2012. The presentation was part of an ongoing effort to help get injured workers back to work.

Joe O’Meara is the return to work coordinator at the Malmsbury Youth Justice Custodial Centre. He discussed his secrets to success and provided tips and hints for employers and injured workers to achieve better outcomes.

“It’s important for the workplace to have a culture that says we are going to look after an injured worker and get them back into the workplace,” Mr O’Meara said.

He also talked to attendees about suitable duties in challenging environments, working with mature aged workers, and the key to successful communication in workplaces.


It is widely acknowledged that Victoria has the best workplace laws in the country and much of the ‘model’ laws are based on the Victorian legislation. In light of the Supplementary Impact Assessment’s findings the Government announced that Victoria’s existing OHS framework would be maintained.

WorkSafe will build on the significant work completed to date and continue to work towards best practice OHS legislation and regulation.

Compliance and enforcement

In 2011/12 we continued to improve the agility, responsiveness and alignment of our inspection, investigation and prosecution activities. This enabled us to significantly increase the number of prosecutions commenced and send a powerful preventative message to duty holders. This improved performance follows significant reform to the strategy, structure and personnel of our Enforcement Group in 2010/11.

During the year WorkSafe undertook a range of compliance and enforcement activities:

/ A statewide blitz was launched targeting the eight most dangerous industries which accounted for a quarter of all workplace claims in 2010. The campaign focused on enforcement to send a clear message that unsafe work practices will not be tolerated.

/ A company, that pleaded guilty to two workplace safety charges over the collapse of a scaffold in 2009, was convicted and fined $170,000. The court found that part of the structure was overloaded with bricks and that the design was changed without reference to the designers or a qualified engineer.

/ A dairy products manufacturer was convicted and fined $300,000 after a forklift driver died at its cheese factory in September 2009 when a one-tonne bag of salt fell on him.

/ The Court of Appeal doubled a fine imposed on a large equipment hire company for failing to enforce its own safety procedures for loading heavy equipment. On appeal, it was convicted and fined $500,000.

/ Two Melbourne men lost their jobs and each received a fine of $1,500 for planking. One man was photographed four metres off the ground on top of a spray booth. The other was planking across the tynes of a forklift about four metres above the ground.

/ The Safe Towns program continued. It aims to make Victorian small businesses safer places to work and gives them time to carry out safety checks before an Inspector’s visit.

/ 41,781 workplace visits were undertaken compared with 44,012 in 2010/11. WorkSafe will continue to enhance its focus on the quality of workplace visits, and more time intensive programs such as the Owner Visit and Integrated Approach programs, rather than simply concentrating on delivering more workplace visits.

/ The number of prosecutions commenced increased by 36 per cent on the previous year, and an 86 per cent success rate was achieved.

The results of significant prosecutions during the year are set out below:

/ One of Australia’s biggest food manufacturers was convicted and fined $50,000 after a woman suffered crush injuries and burns to her hand when it was trapped between a hot plate and the top of a machine. This occurred when guarding was insufficient. In sentencing, the company’s guilty plea, co-operation with the investigation and subsequent remedial measures were considered.

Compliance measures 2009/10 2010/11 2011/12

Annual workplace visits* 46,211 44,012 41,781

Prosecution success rate 89.9% 74% 86%

Investigations proceeding to prosecution charges within 12 months

53.8% 29% 40%

Completed investigations proceeding to legal review

87.3% 77% 75%

Prosecutions commenced 96 75 102

* Includes Health & Safety, Enforcement Group, and Return to Work visits.


Striving to improve the service we provide has been a priority of Strategy 2012 and will continue in our new five-year strategy.

Service

WorkSafe Inspectorate service results

Outstanding service results were maintained by the WorkSafe OHS Inspectorate during the year, with employer and worker representative satisfaction both above 96 per cent. Over the course of Strategy 2012, our inspectorate has delivered impressive consistency in this area, making a major contribution to improved OHS in Victoria.

Agent service results

Our injured workers and employer service results for 2011/12 were disappointing. We implemented a new agent panel from 1 July 2011 that comprised five agents (down from six under the previous contract). In addition, the transition to the new Enhanced Agency Model (EAM) caused structural and personnel change within our agents, disrupting the services delivered to injured workers and employers. While causing short term disruption, these changes provide a strong base on which to strive for the necessary improvements in service outcomes.

The Enhanced Agency Model

The aim of the new model is to ensure that the cost of managing claims remains competitive, place a greater emphasis on sustainable return to work, and encourage professional development of claims management roles to improve service delivery to our clients.

As part of these reforms we have worked with our agents and stakeholders to create greater specialisation of claims management roles, particularly around

ServiceStrategy 2012 performance measures

2010/11Result

2011/12Result

2011/12Target

Client service index 85.8% 84.0% 90%

Employer satisfaction with advice and guidance 94.7% 95.2% 95%

Worker representative satisfaction with OHS Inspectorate

96.6% 96.9% 95%

Employer satisfaction with OHS Inspectorate 96.8% 97.6% 95%

Employer satisfaction with agents 78.8% 75.5% 88%

Injured worker satisfaction with agents 72.8% 68.3% 83%

At work 14-19 months after injury reported (sustained RTW)

77.2% 73.8% 83%

Agent employee turnover (claims related) 29.7% 30.3% 20.8%

Enrolments in tertiary and vocational personal injury management courses

124 123 140

/ We enabled access to entry level qualifications, including Certificate III – Diploma of Personal Injury which attracted 115 enrolments in 2011/12.

/ The provision of an ongoing suite of professional development training developed in conjunction with our agents.

/ We enabled access to post graduate qualifications via the Personal Injury Education Foundation. In the last five years, through Strategy 2012, 36 agent and WorkSafe employees have completed further post graduate studies in personal injury.

/ The Injury Support & Service Awards were held in November 2011 to recognise agent employees who demonstrate a high level of achievement and excellence across nine different categories.

more complex areas such as return to work and eligibility assessment. These new roles have also been supported by customised training and by refreshing the whole mix of industry specific vocational education.

The scale of change has led to short term disruption for some of our clients, for which we apologise. However, as our agents adapt to the new approach we are confident that we will have a better platform on which to build and innovate, to improve support and service to our clients.

People and capability

Attracting and retaining capable people and investing in professionalising the claims management industry remain key aims.

During the year our approach included the following programs:


97.6

%

96.9 %

95.2 % 68.3 %

75.5 %

Injured worker satisfaction with Agents

Employer satisfaction with Agents

Employer satisfactionwith adviceand guidance

Employer satisfaction with OHS Inspectorate

Worker representative satisfaction with OHS Inspectorate


Service

Return to work

Return to work remains a clear focus for the organisation. This is an area that requires continued effort and innovation to realise the improvements we strive to make. Our results in return to work are also sensitive to changes in economic conditions. We will increase our efforts to improve return to work outcomes during the implementation of WorkSafe 2017. There is a growing recognition of the health benefits of work, particularly when it comes to supporting injured workers to safely return to work.

International studies show that the longer someone is off work, the greater the health risks they face. New research also supports clinical evidence that work is generally good for health and wellbeing, and is an essential part of recovery. In addition, return to work that is safe and sustainable benefits employers in terms of premiums and business productivity.

During the year, WorkSafe commissioned Newspoll research, which found 93 per cent of Victorians believe doctors and physiotherapists had an important role to play in getting injured workers back on the job. Over 70 per cent of Victorians thought injured workers would benefit from returning to different work duties before they were fully recovered , while 78 per cent believed returning to work would help speed up the recovery process. These attitudes create a strong platform for WorkSafe to drive further improvement in return to work.

In 2011/12 the percentage of workers that had at least 10 days off work and returned to work within 14 to 19 months post-injury decreased to 73.8 per cent from 77.2 per cent the previous year. This survey based result was significantly impacted by difficult economic conditions. We also measure the percentage of workers off work for six months through the Heads of Workers’ Compensation Authorities Return to Work Monitor survey. On the durable return to work measure we

remained steady at 76 per cent. Victoria’s results are virtually identical to those achieved by other large states such as New South Wales and Queensland.

In 2011/12 our return to work activities included:

/ The continuation of targeted initiatives to support return to work results, such as our Worksite Assessment program (for

large employers) and Workplace Support Services (for claims where interpersonal issues in the workplace are the main barrier to return to work).

/ The provision of occupational physicians to help facilitate safe, timely and sustained return to work by identifying duties that match each worker’s capacity for work.

1011

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%11






60.5 68

.7

68.6

68.3

69.8

68.9

72.8

1011

78.8

75.3

1.45

0

QLD

2.75

0

SA

2.28

0

TAS

1.69

1

WA


0.5%

1.0%

1.5%

2.5%

0.0%

3.5%

3.0%

2.0%

25

20

15

10

5

00506

0607

0708

0809

0910

Year

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%

74.7 83

.5

82.3

84.4

84.4

81.4

75.5

100%

75%

50%

25%

0%

Year

63.3

1011

61.7

0607

61.3

0708

66.7

0809

67.8

0910


34,000

32,000

28,000

26,000

22,000

20,000

30,000

24,000

Year

0809

0910

0708

0607

28,8

56

29,1

07

28,6

89

28,8

54

1011

29,6

28

29,2

61


100%

40%

60%

20%

0

80%

Year

78.3

%

76.1

%

74.1

%

77.2

%

73.8

%


Allianz

Agent


1112

1011

100%

80%

60%

40%

20%

0%

75.3

71.5

83.0

83.0

78.3

73.2

80.2

73.3


1.50%

2.00%

1.00%

Year

1112

1213

0506

0607

0708

0809

1011

0910

ComCareNSW

1.68

0

1033

216

18

1077

186

22

1011

613

1112

0708

0809

0910

1011

1112


VIC

1.29

8

11

1112

66.7

1112


Allianz

Agent

Xchanging CGU

1112

1011

100%

80

60%

40%

20%

0%QBE GBS Scheme

1.80

0

80.1

77.9 78

.875

.5

71.8

65.6 72

.572

.0 74.9

71.5

70.3

68.0 73

.263

.4

72.8

68.3

100%

80

60

%

%

40%

20%

0%


6664

6863

6865 6366 67 66


Year

1011

1112

0809

0910

0708

1.29

8

1.33

8

1.80

1.62

1.46

1.33

8

1.38

7

1.38

7

time loss standard

1011

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%11






60.5 68

.7

68.6

68.3

69.8

68.9

72.8

1011

78.8

75.3

1.45

0

QLD

2.75

0

SA

2.28

0

TAS

1.69

1

WA


0.5%

1.0%

1.5%

2.5%

0.0%

3.5%

3.0%

2.0%

25

20

15

10

5

00506

0607

0708

0809

0910

Year

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%

74.7 83

.5

82.3

84.4

84.4

81.4

75.5

100%

75%

50%

25%

0%

Year

63.3

1011

61.7

0607

61.3

0708

66.7

0809

67.8

0910


34,000

32,000

28,000

26,000

22,000

20,000

30,000

24,000

Year

0809

0910

0708

0607

28,8

56

29,1

07

28,6

89

28,8

54

1011

29,6

28

29,2

61


100%

40%

60%

20%

0

80%

Year

78.3

%

76.1

%

74.1

%

77.2

%

73.8

%


Allianz

Agent


1112

1011

100%

80%

60%

40%

20%

0%

75.3

71.5

83.0

83.0

78.3

73.2

80.2

73.3


1.50%

2.00%

1.00%

Year

1112

1213

0506

0607

0708

0809

1011

0910

ComCareNSW

1.68

0

1033

216

18

1077

186

22

1011

613

1112

0708

0809

0910

1011

1112


VIC

1.29

8

11

1112

66.7

1112


Allianz

Agent

Xchanging CGU

1112

1011

100%

80

60%

40%

20%

0%QBE GBS Scheme

1.80

0

80.1

77.9 78

.875

.5

71.8

65.6 72

.572

.0 74.9

71.5

70.3

68.0 73

.263

.4

72.8

68.3

100%

80

60

%

%

40%

20%

0%


6664

6863

6865 6366 67 66


Year

1011

1112

0809

0910

0708

1.29

8

1.33

8

1.80

1.62

1.46

1.33

8

1.38

7

1.38

7

time loss standard

1011

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%11






60.5 68

.7

68.6

68.3

69.8

68.9

72.8

1011

78.8

75.3

1.45

0

QLD

2.75

0

SA

2.28

0

TAS

1.69

1

WA


0.5%

1.0%

1.5%

2.5%

0.0%

3.5%

3.0%

2.0%

25

20

15

10

5

00506

0607

0708

0809

0910

Year

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%

74.7 83

.5

82.3

84.4

84.4

81.4

75.5

100%

75%

50%

25%

0%

Year

63.3

1011

61.7

0607

61.3

0708

66.7

0809

67.8

0910


34,000

32,000

28,000

26,000

22,000

20,000

30,000

24,000

Year

0809

0910

0708

0607

28,8

56

29,1

07

28,6

89

28,8

54

1011

29,6

28

29,2

61


100%

40%

60%

20%

0

80%

Year

78.3

%

76.1

%

74.1

%

77.2

%

73.8

%


Allianz

Agent


1112

1011

100%

80%

60%

40%

20%

0%

75.3

71.5

83.0

83.0

78.3

73.2

80.2

73.3


1.50%

2.00%

1.00%

Year

1112

1213

0506

0607

0708

0809

1011

0910

ComCareNSW

1.68

0

1033

216

18

1077

186

22

1011

613

1112

0708

0809

0910

1011

1112


VIC

1.29

8

11

1112

66.7

1112


Allianz

Agent

Xchanging CGU

1112

1011

100%

80

60%

40%

20%

0%QBE GBS Scheme

1.80

0

80.1

77.9 78

.875

.5

71.8

65.6 72

.572

.0 74.9

71.5

70.3

68.0 73

.263

.4

72.8

68.3

100%

80

60

%

%

40%

20%

0%


6664

6863

6865 6366 67 66


Year

1011

1112

0809

0910

0708

1.29

8

1.33

8

1.80

1.62

1.46

1.33

8

1.38

7

1.38

7

time loss standard

1011

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%11






60.5 68

.7

68.6

68.3

69.8

68.9

72.8

1011

78.8

75.3

1.45

0

QLD

2.75

0

SA

2.28

0

TAS

1.69

1

WA


0.5%

1.0%

1.5%

2.5%

0.0%

3.5%

3.0%

2.0%

25

20

15

10

5

00506

0607

0708

0809

0910

Year

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%

74.7 83

.5

82.3

84.4

84.4

81.4

75.5

100%

75%

50%

25%

0%

Year

63.3

1011

61.7

0607

61.3

0708

66.7

0809

67.8

0910


34,000

32,000

28,000

26,000

22,000

20,000

30,000

24,000

Year

0809

0910

0708

0607

28,8

56

29,1

07

28,6

89

28,8

54

1011

29,6

28

29,2

61


100%

40%

60%

20%

0

80%

Year

78.3

%

76.1

%

74.1

%

77.2

%

73.8

%


Allianz

Agent


1112

1011

100%

80%

60%

40%

20%

0%

75.3

71.5

83.0

83.0

78.3

73.2

80.2

73.3


1.50%

2.00%

1.00%

Year

1112

1213

0506

0607

0708

0809

1011

0910

ComCareNSW

1.68

0

1033

216

18

1077

186

22

1011

613

1112

0708

0809

0910

1011

1112


VIC

1.29

8

11

1112

66.7

1112


Allianz

Agent

Xchanging CGU

1112

1011

100%

80

60%

40%

20%

0%QBE GBS Scheme

1.80

0

80.1

77.9 78

.875

.5

71.8

65.6 72

.572

.0 74.9

71.5

70.3

68.0 73

.263

.4

72.8

68.3

100%

80

60

%

%

40%

20%

0%


6664

6863

6865 6366 67 66


Year

1011

1112

0809

0910

0708

1.29

8

1.33

8

1.80

1.62

1.46

1.33

8

1.38

7

1.38

7

time loss standard

* A break in series occurred from 2009/10


/ Aligning the Return to Work Inspectorate program with key projects.

/ The introduction of incentives for agents to support return to work, including through contact with the treating health practitioner and timely use of occupational rehabilitation.

/ Supporting injured workers to return to work with their pre-injury employer through timely, outcome-based occupational rehabilitation services.

/ Supporting workers who are unable to return to their pre-injury employer to return to work with a new employer. Incentives for new employers continued to be provided through the WISE program.

Over the next five years we intend to substantially lift the capability and capacity of our agents to support return to work. We will do this through industry-wide training and the creation of agent return to work specialists. We will integrate the use of triage and occupational rehabilitation services in the Enhanced Agency Model to build on changes implemented in recent years. These include reform of the occupational rehabilitation industry and the return to work Inspectorate. We will also lead the development of a transparent and accurate national return to work measure.

Profile: Return to work return to life

WorkSafe launched a new toolkit for employers to help get injured workers back to safe work earlier. The toolkit was released as part of the ‘Return to work, return to life’ campaign and includes templates, checklists and forms that can be customised to suit employers’ needs.

Former Australian Olympic swimmer, Michael Klim, helped launch the campaign with City of Casey school crossing supervisor Judy Grant and Assistant Treasurer, the Hon. Gordon Rich-Phillips MLC. They encouraged Victorians to help more injured people make a comeback to the workplace.

Judy Grant was struck by a car while working in November 2010. Despite suffering serious injuries, Judy worked hard and was supported by the council to return to work on modified duties.

Judy said it was reassuring to know she didn’t need to be 100 per cent to return to work.

“The City of Casey has been very supportive of my return to work by encouraging me to resume my duties progressively, and at my own pace,” she said. “Returning to work has improved both my mental and physical health and it has allowed me to take back control of my life.”

Comeback hero Michael Klim, City of Casey school crossing supervisor Judy Grant, and Assistant Treasurer, the Hon. Gordon Rich-Phillips MLC launch WorkSafe’s ‘Return to work, return to life’ campaign.

1011

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%11






60.5 68

.7

68.6

68.3

69.8

68.9

72.8

1011

78.8

75.3

1.45

0

QLD

2.75

0

SA

2.28

0

TAS

1.69

1

WA


0.5%

1.0%

1.5%

2.5%

0.0%

3.5%

3.0%

2.0%

25

20

15

10

5

00506

0607

0708

0809

0910

Year

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%

74.7 83

.5

82.3

84.4

84.4

81.4

75.5

100%

75%

50%

25%

0%

Year

63.3

1011

61.7

0607

61.3

0708

66.7

0809

67.8

0910


34,000

32,000

28,000

26,000

22,000

20,000

30,000

24,000

Year

0809

0910

0708

0607

28,8

56

29,1

07

28,6

89

28,8

54

1011

29,6

28

29,2

61


100%

40%

60%

20%

0

80%

Year

78.3

%

76.1

%

74.1

%

77.2

%

73.8

%


Allianz

Agent


1112

1011

100%

80%

60%

40%

20%

0%

75.3

71.5

83.0

83.0

78.3

73.2

80.2

73.3


1.50%

2.00%

1.00%

Year

1112

1213

0506

0607

0708

0809

1011

0910

ComCareNSW

1.68

0

1033

216

18

1077

186

22

1011

613

1112

0708

0809

0910

1011

1112


VIC

1.29

8

11

1112

66.7

1112


Allianz

Agent

Xchanging CGU

1112

1011

100%

80

60%

40%

20%

0%QBE GBS Scheme

1.80

0

80.1

77.9 78

.875

.5

71.8

65.6 72

.572

.0 74.9

71.5

70.3

68.0 73

.263

.4

72.8

68.3

100%

80

60

%

%

40%

20%

0%


6664

6863

6865 6366 67 66


Year

1011

1112

0809

0910

0708

1.29

8

1.33

8

1.80

1.62

1.46

1.33

8

1.38

7

1.38

7

time loss standard


Service

Throughout Strategy 2012, WorkSafeand the Transport Accident Commissionhave collaborated in areas such as health services, technology infrastructure and capital management to capture synergies and benefit the clients of both schemes.

The Health Services Group (HSG) works with healthcare providers to achieve better rehabilitation and return to work outcomes for the Victorian community.

The following are some of HSG’s highlights in 2011/12:

/ Growth in the number and capability of physiotherapists specialising in the treatment of injured workers through the network provider program.

/ Working with General Practice Victoria to help ensure return to work is considered as an integral part of rehabilitation.

/ Implementing a new funding model for in-patient rehabilitation services provided by private hospitals. The new model utilises the Australian National Sub-acute and Non-acute Patient classification system and will allow us to better monitor client outcomes. The TAC and WorkSafe are the first Victorian health funding organisations to implement such a remuneration system.

/ HSG revised the clinical framework used by its Clinical Panel to assist healthcare professionals achieve the best possible health and return to work outcomes. As part of the revision, HSG consulted with and sought the endorsement of inter-jurisdictional clinical, academic and compensation scheme representatives. The outcome is a nationally endorsed clinical framework.

/ HSG has continued to work with health providers on improved outcomes for injured workers, in order to balance the increasing costs associated with the provision of health care with scheme viability.

Information Technology Shared Solutions (ITSS) works to benefit the clients of WorkSafe and the TAC through improved technology systems and operates under a Joint Venture Agreement which commenced on 1 July 2007 for a five year period. This year the Agreement was extended for a further five year period. ITSS enables a single approach to common projects and initiatives, also achieving economies of scale. In the coming years it will deliver an Integrated Claims Platform (aligned with the TAC), health and safety, premium, and finance related systems. It will also deliver enabling technologies to support client relationship management and improve client experience.

During the year ITSS:

/ delivered systems to support the Enhanced Agency Model

/ continued the electronic claims file project to facilitate and enhance claims management

/ continued to replace the legacy systems supporting premium rules and improve premium transparency

/ improved the accuracy of employer-related information and the capacity to develop employer profiles to support programs

/ continued to refresh core technology and infrastructure to maintain key systems availability.

Capital Management

The Capital Management Group (CMG) is a joint WorkSafe-TAC collaboration established in October 2007. The CMG provides a central point for interaction with our investment manager (the Victorian Funds Management Corporation), and the Department of Treasury and Finance on a wide range of investment, balance sheet and financial risk matters. It also manages compliance with the Prudential Standards issued by the Victorian Government.

During 2011/12, the CMG arranged a new structure for investment fees, developed policies on re-insurance and managed an actuarial peer review of the December 2011 claims liability valuation.

Victorian Ombudsman

This year we continued to implement the recommendations of the 2011 Victorian Ombudsman’s report on record keeping and the administrative practices of our agents. Our aim is to ensure that our systems enable our agents to provide timely and effective support to injured workers.


Internal review outcomes 2010/11 2011/12

Health & Safety

Inspector’s decision affirmed (no change) 129 108

Inspector’s decision set aside 114 143

Inspector’s decision varied 20 26

Compliance date only changed 1,668 1,454

Extension refused 51 43

Application refused 5 17

Application withdrawn 88 53

Application ineligible/not reviewable 35 19

Licensing

Licensing decision affirmed 13 8

Licensing decision set aside 1 2

Licensing decision application withdrawn 1 1

Licensing application ineligible/not reviewable

2 2

Return to work

Inspector’s decision affirmed 4 5


Compliance date only changed 4 0


Total 2,138 1,884

In response to the Ombudsman’s report, in 2011/12 WorkSafe:

/ developed record keeping standards (policy and procedures) for our agents

/ enhanced an audit and compliance program, including controls, health checks, audits, and performance measures

/ developed and implemented a training program for agent employees.

In addition, we completed planning and development of the business case phase for the introduction of an electronic claim file for injured workers.

Transparent regulation

Anyone directly affected by certain decisions made by WorkSafe Inspectors can request a review. This process has been in place for seven years for OHS matters, four years for licensing and two years for return to work. It reflects our commitment to transparent and consistent regulatory decision making. Strict statutory time frames ensure decisions are reviewed in a timely and effective way. The review process continues to have strong uptake by the Victorian community with a total of 1,868 requests for review received and 1,884 concluded during the year.


Service

The aim is to develop a clearer Act that will enable employers, workers and agents to more easily understand their obligations, and the benefits available to injured workers.

Compliance and enforcement under the Accident Compensation Act

Regulation and enforcement is a powerful way to promote compliance with legal obligations. During the year we refined our proactive programs aimed at detecting and dealing with non-compliance. Our programs focus on the appropriateness of payments made to healthcare providers, employers’ compliance with return to work obligations, and worker fraud. We also continued to refer healthcare practitioner behaviour to the relevant regulatory body where appropriate. During the financial year there were 19 prosecutions under the Accident Compensation Act. The following are the outcomes of some of the most significant prosecutions during the year:

Improving the Accident Compensation Act

The Victorian Government committed to a rewrite of Victoria’s accident compensation legislation in a simplified, logical and plain language format. A steering committee, chaired by the Department of Treasury and Finance and including representatives from WorkSafe, has been overseeing the delivery of this initiative. The aim is to develop a restructured, clearer Act that will enable employers, workers and agents to more easily understand their obligations, and the benefits available to injured workers. This will also help to reduce compliance costs for employers, however there will be no change to policy or injured worker benefits as a result of the new legislation.

/ A truck driver who continued to receive compensation benefits for a workplace injury while working for a new employer was ordered to repay almost $27,000 and perform 100 hours of unpaid community work.

/ An employer fraudulently obtained payments under the Work Incentive Scheme for Employers (WISE) by falsely claiming to have employed his sister, who had suffered a workplace injury at her previous employment. He was ordered to repay $9,205 and was placed on an adjourned undertaking of good behaviour for one year.

/ A man who worked as a truck driver for two years while fraudulently receiving $40,000 in workers compensation benefits received a nine-month prison sentence.

/ A man who defrauded WorkSafe and the Transport Accident Commission by using fake university certificates from Serbia to register as a psychologist was sentenced to five years and two months jail, with a non-parole period of two and a half years. He was also ordered to repay just over $35,000.


Self-insurance

A self-insurer is an employer approved by WorkSafe to manage its own workers compensation claims and accordingly has full responsibility for meeting its claims liabilities. Currently there are 38 self-insurers in Victoria who collectively represent about eight per cent of the Victorian scheme, based on remuneration.

WorkSafe’s self-insurance performance system supports constructive, accountable, transparent and effective regulation of self-insurers. It enables WorkSafe to continue its active regulation these employers. We target areas of underperformance in OHS, return to work and injury management, and support self-insurers to develop and implement strategies designed to promote sustained improvement in these areas.

Our focus in 2011/12 included improving OHS performance through direct engagement with self-insurers’ senior and front-line management. This culminated in the delivery of several targeted inspectorate campaigns and the production of detailed performance reports.

It aims to promote economic growth and competitiveness, make it easier to do business and invest in both states, and put downward pressure on the cost of living and running a business. Victoria and NSW are the two most populous states, and account for 54 per cent of Australia’s GDP. As part of this agreement, the Victorian Government will be looking for opportunities to increase collaboration between the two states. This includes sharing information, ideas and best practice between WorkSafe and WorkCover NSW in order to benefit both schemes, employers and workers in each state.

National Disability Insurance Scheme

During the year the Australian, state and territory governments agreed to establish the National Disability Insurance Scheme. The scheme will provide people with a permanent disability with care and support over their lifetime, regardless of how they acquired their disability.

The scheme will commence in stages from the middle of 2013. A National Disability Transition Agency is being established. WorkSafe is continuing to contribute to the implementation of this fundamental reform of disability care and support in Australia.

In 2011/12, 66.7 per cent of injured workers were satisfied with the service they experienced from their self-insured employer, compared to 63.3 per cent the previous year; a 3.4 percentage point improvement. In 2011/12 self-insurers achieved a sustained return to work rate of 77.0 per cent which was down from the previous year’s result of 81.1 per cent. These results are broadly consistent with WorkSafe agent performance and reflect the volatile economic environment. We continue to work with self-insurers to improve their performance in these areas.

During 2011/12 we implemented the following initiatives in relation to self-insurance:

/ Major work was carried out on information management systems to meet the requirements of new legislative provisions for the assumption of scheme work injury claim liabilities by self-insurers and to improve the regulation of self-insurers

/ New regulations were made on the methodology and formula for calculating contributions by self-insurers to the WorkCover Authority Fund.

Bilateral harmonisation

In December 2011 Victorian Premier, the Hon. Ted Baillieu, and New South Wales Premier, the Hon. Barry O’Farrell, announced a reform partnership.


Over the course of Strategy 2012, WorkSafe injury insurance premiums reduced by 17.4 per cent to a record low. Victorian businesses benefit from the lowest average premiums in Australia.

Sustainability

Throughout Strategy 2012 we have delivered a strong and stable scheme. It has provided additional benefits to injured workers and record low premiums to employers, while enabling us to innovate and reduce red tape. We have also invested in the future through capability programs for agent employees and in health and safety initiatives at workplaces.

We aim to attract, develop and retain the best people and collaborate effectively with our stakeholders. We continually strive to improve our productivity so that we can provide the highest value service to the people of Victoria. We do this by working in a cost effective manner, and behaving ethically, fairly and respectfully of the environment.

While there is much to be proud of, there is more to be done and sustainability of our people and our finances will remain at the forefront in our next five-year strategy, WorkSafe 2017.

WorkSafe injury insurance

Over the course of Strategy 2012, WorkSafe injury insurance premiums have reduced by 17.4 per cent, and benefits to injured workers were enhanced.

In May 2012, the Victorian Government announced that injury insurance premiums would be cut by a further three per cent, taking the average premium rate

SustainabilityStrategy 2012 performance measures

2010/11Result

2011/12Result

2011/12Target

Performance from Insurance Operations (PFIO) $294M $385M $253M

Actuarial Release $136M $182M $150M

Break even premium 1.316% 1.282% 1.271%

Operating expenses (safety and insurance operations)

$243M $245M $246M

Premium revenue $1.802B $1.878B $1.816B

Employee Opinion Survey Index 63% 67% 73%

Through WorkSafe 2017 we will continue to expand our online employer services to reduce red tape. We will also develop and implement new premium incentives for good OHS and return to work performance.

Our organisation

Our employees help to protect and improve people’s lives and we are proud to deliver on our mission to work with the community to deliver outstanding workplace safety, together with quality care and insurance protection to workers and employers.

to 1.298 per cent for the 2012/13 financial year. This represents a saving to Victorian businesses of $57 million per annum. Victoria now has the lowest premium rates in its history, the lowest premiums of any Australian state, and a quality benefit scheme for injured workers.

Jurisdictions across Australia are experiencing significant financial pressure on scheme viability and in response have typically increased premiums or reduced benefits to injured workers in recent years. Over the same period, Victoria has been able to reduce its premium while increasing benefits.


385M

67%

$ Performance from Insurance operations (PFIO)

Employee Opinion Survey Index 182M

1.338 %

$ Actuarial release

Average premium rate for 2011/12 1.298 %

Average premium rate for 2012/13


Sustainability

A stable and well-managed scheme, talented people, and a genuine partnership with our stakeholders enable us to provide low-cost, quality insurance and services that make a difference.

Our work is guided by our values of being:/ constructive;/ accountable;/ transparent;/ effective; and/ caring.

Listening to our employees

We conduct an Employee Opinion Survey (EOS) annually to enable our employees to provide feedback on how they find WorkSafe as a place to work. This process is an important part of enhancing our culture and in 2011/12 we achieved a response rate to the survey of 85 per cent.

Our EOS result this year reflected statistically significant improvements in five survey categories. We also achieved better or stable results in all 13 other categories compared to our results last year.

Pleasingly, four of the statistically improved categories (leadership and direction, organisational change, values and communication) were targeted areas of focus following the decline in our overall results in 2011/12. While we compare favourably with the Australian National Norm we are determined to make WorkSafe the best workplace it can possibly be. This is a key deliverable to which all of our people can directly contribute.

Social responsibility

We have a strong culture of social responsibility and it underpins our work. Our principles of social responsibility are set out below:

/ We exist to serve and strengthen the Victorian community by driving better safety and return to work, and providing quality care and insurance protection.

/ We work with many suppliers, and partners to deliver services. We aim to deal with others who are socially and ethically responsible, and use our influence to encourage others to join us in having a positive impact on our community.

/ We uphold responsible governance as a cornerstone of our operations and our accountability to the public. We have transparent processes, checks and balances and hold ourselves up to public scrutiny.

/ We ensure our business is respectful of the environment and continually look for ways to minimise the impact of our operations. We are committed to meeting all government environmental standards.

Building our capability

Developing our employees and leaders remains a strong focus for the organisation. During the year we continued programs to build the capability of our employees to ensure we fully utilise their talents and are well-placed to deliver our goals:

/ Performance and talent management – we support employee career development through encouraging real-time performance feedback and a formal program of twice-yearly employee performance reviews and development planning, talent and succession reviews.

/ Leadership development program – we provide assessment and feedback for individual leaders on leadership competencies, style and the climate created for direct reports.

/ People leaders’ program – we build the capability of all people leaders to lead and manage their teams and resources.

/ Diploma of Management – we develop frontline managers and project team leaders to effectively lead their teams and manage resources.

/ Graduate program – we help to build our future capability and diversify our age demographic by bringing in recent graduates.


Green office program

We aim to minimise our footprint on the environment and have developed an environmental policy to guide us. The policy underpins our ‘being green’ strategy and is supported by the fantastic work that employee volunteers have accomplished through the Green Office Program and the Green Business Champions.

Results in this area over the course of Strategy 2012 include:

/ 37 per cent reduction in paper use/ 25 per cent green power used/ 6 per cent reduction in water use/ Waste Wise Accreditation maintained.

Partnering with stakeholders

We continued to engage and collaborate with our stakeholders during the year on issues impacting our operations, services and future direction. Ensuring employer and worker representatives, lawyers, and medical and allied health practitioners are involved in our organisation makes us more effective. We would like to thank the members of the following forums and committees for their contribution during the year.

The WorkHealth Advisory Group facilitates discussion about the health and wellbeing of the Victorian workforce and the WorkHealth program.

The Senior Occupational Health and Safety Roundtable is a forum for senior management from across the Victorian public sector and unions.

Institute for Safety Compensation and Recovery Research

The Institute for Safety, Compensation and Recovery Research was established in 2009 as a joint venture between WorkSafe, the TAC and Monash University. It conducts and commissions research in workplace injury and illness prevention, compensation practice, health and vocational rehabilitation to support the aims of WorkSafe and the TAC.

The Institute has undertaken over 30 research projects on topics including prevention of work-related musculoskeletal disorders, psychosocial interventions for chronic pain, and return to work interventions. The performance of ISCRR and its contribution to WorkSafe and TAC objectives will be reviewed in 2012/13.

The Occupational Health and Safety Advisory Committee provides feedback to the Board on the most effective means of promoting healthy and safe working environments in our administration of the Occupational Health and Safety Act and its Regulations.

The WorkCover Advisory Committee provides the Board with feedback on the best ways to compensate injured workers and assist them to return to work.

The Rehabilitation and Compensation Working Group is a sub-group of the WorkCover Advisory Committee. It provides feedback on the application of the Accident Compensation Act and related policy on the rehabilitation and compensation of injured workers.

The Major Hazard Advisory Committee enables WorkSafe to consult with industry experts on the implementation of the Major Hazard Facilities Regulations.

The Legal Liaison Group facilitates discussion about WorkSafe’s policies in relation to common law and its panel firms. The group also provides input into legislative change proposals, Ministerial Directions and protocols.

1011

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%11






60.5 68

.7

68.6

68.3

69.8

68.9

72.8

1011

78.8

75.3

1.45

0

QLD

2.75

0

SA

2.28

0

TAS

1.69

1

WA


0.5%

1.0%

1.5%

2.5%

0.0%

3.5%

3.0%

2.0%

25

20

15

10

5

00506

0607

0708

0809

0910

Year

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%

74.7 83

.5

82.3

84.4

84.4

81.4

75.5

100%

75%

50%

25%

0%

Year

63.3

1011

61.7

0607

61.3

0708

66.7

0809

67.8

0910


34,000

32,000

28,000

26,000

22,000

20,000

30,000

24,000

Year

0809

0910

0708

0607

28,8

56

29,1

07

28,6

89

28,8

54

1011

29,6

28

29,2

61


100%

40%

60%

20%

0

80%

Year

78.3

%

76.1

%

74.1

%

77.2

%

73.8

%


Allianz

Agent


1112

1011

100%

80%

60%

40%

20%

0%

75.3

71.5

83.0

83.0

78.3

73.2

80.2

73.3


1.50%

2.00%

1.00%

Year

1112

1213

0506

0607

0708

0809

1011

0910

ComCareNSW

1.68

0

1033

216

18

1077

186

22

1011

613

1112

0708

0809

0910

1011

1112


VIC

1.29

8

11

1112

66.7

1112


Allianz

Agent

Xchanging CGU

1112

1011

100%

80

60%

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1.80

0

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77.9 78

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71.8

65.6 72

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71.5

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68.0 73

.263

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72.8

68.3

100%

80

60

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%

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0%


6664

6863

6865 6366 67 66


Year

1011

1112

0809

0910

0708

1.29

8

1.33

8

1.80

1.62

1.46

1.33

8

1.38

7

1.38

7

time loss standard

1011

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%11






60.5 68

.7

68.6

68.3

69.8

68.9

72.8

1011

78.8

75.3

1.45

0

QLD

2.75

0

SA

2.28

0

TAS

1.69

1

WA


0.5%

1.0%

1.5%

2.5%

0.0%

3.5%

3.0%

2.0%

25

20

15

10

5

00506

0607

0708

0809

0910

Year

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%

74.7 83

.5

82.3

84.4

84.4

81.4

75.5

100%

75%

50%

25%

0%

Year

63.3

1011

61.7

0607

61.3

0708

66.7

0809

67.8

0910


34,000

32,000

28,000

26,000

22,000

20,000

30,000

24,000

Year

0809

0910

0708

0607

28,8

56

29,1

07

28,6

89

28,8

54

1011

29,6

28

29,2

61


100%

40%

60%

20%

0

80%

Year

78.3

%

76.1

%

74.1

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77.2

%

73.8

%


Allianz

Agent


1112

1011

100%

80%

60%

40%

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75.3

71.5

83.0

83.0

78.3

73.2

80.2

73.3


1.50%

2.00%

1.00%

Year

1112

1213

0506

0607

0708

0809

1011

0910

ComCareNSW

1.68

0

1033

216

18

1077

186

22

1011

613

1112

0708

0809

0910

1011

1112


VIC

1.29

8

11

1112

66.7

1112


Allianz

Agent

Xchanging CGU

1112

1011

100%

80

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80

60

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6664

6863

6865 6366 67 66


Year

1011

1112

0809

0910

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1.29

8

1.33

8

1.80

1.62

1.46

1.33

8

1.38

7

1.38

7

time loss standard

1011

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%11






60.5 68

.7

68.6

68.3

69.8

68.9

72.8

1011

78.8

75.3

1.45

0

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2.75

0

SA

2.28

0

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1.69

1

WA


0.5%

1.0%

1.5%

2.5%

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3.5%

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25

20

15

10

5

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0607

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0809

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Year

0809

0910

0708

0405

0506

0607

Year

100%

80%

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74.7 83

.5

82.3

84.4

84.4

81.4

75.5

100%

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Year

63.3

1011

61.7

0607

61.3

0708

66.7

0809

67.8

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34,000

32,000

28,000

26,000

22,000

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Year

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0910

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28,8

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29,1

07

28,6

89

28,8

54

1011

29,6

28

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61


100%

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Year

78.3

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76.1

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74.1

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77.2

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73.8

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Allianz

Agent


1112

1011

100%

80%

60%

40%

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75.3

71.5

83.0

83.0

78.3

73.2

80.2

73.3


1.50%

2.00%

1.00%

Year

1112

1213

0506

0607

0708

0809

1011

0910

ComCareNSW

1.68

0

1033

216

18

1077

186

22

1011

613

1112

0708

0809

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1112


VIC

1.29

8

11

1112

66.7

1112


Allianz

Agent

Xchanging CGU

1112

1011

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80

60

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6664

6863

6865 6366 67 66


Year

1011

1112

0809

0910

0708

1.29

8

1.33

8

1.80

1.62

1.46

1.33

8

1.38

7

1.38

7

time loss standard


Sustainability

We aim to set a very high standard in improving the health and wellbeing of our employees, preventing workplace injury, and supporting those who are injured return to work.

Our OHS performance

The main features of our best practice OHS approach are set out below:

/ We consult and actively engage with employees on OHS and in the development of OHS policies and procedures. We also ensure employees have access to our OHS policies and procedures. In 2011/12 we reviewed our internal complaints policies and procedures to reduce complexity, remove ambiguity and improve awareness.

/ Our OHS is led by our Board and Chief Executive. WorkSafe’s OHS Committee meets bi-monthly. It comprises senior management and Health and Safety Representatives and is chaired by the Chief Executive.

/ We seek to maintain an environment where employees feel safe to report all hazards and incidents, managers know how to investigate hazards and incidents and eliminate or control risk. Our systems encourage Health and Safety Representatives to be actively involved in the management of reported hazards and incidents.

/ Our research ensures our approach to OHS is underpinned by a strong evidence base. WorkSafe employees continue to participate in research projects with health and educational institutions.

Outlined on the following page is a comprehensive report on progress against our key OHS performance indicators.

/ We keep all our employees, including managers, up to date on OHS requirements by ensuring they receive refresher training at least once every three years. Our Health and Safety Representatives are also offered initial training and refresher courses.

/ We maintain accreditation under the SafetyMap certification system. This is audited annually to ensure we meet the standards required for ongoing accreditation. These audits provide valuable information that enables us to continue to improve our OHS. This year the Mulgrave, Essendon Fields and Exhibition Street sites were audited with no non-conformances identified.

/ We aim to build a resilient, productive and engaged workforce. We identify opportunities to increase employee engagement levels and reduce stress risk.

/ We proactively manage the wellbeing of employees through our comprehensive health and wellbeing program cover-ing physical, emotional, financial, and community wellbeing which is part of the broader feelingood@work program.

1011

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%11






60.5 68

.7

68.6

68.3

69.8

68.9

72.8

1011

78.8

75.3

1.45

0

QLD

2.75

0

SA

2.28

0

TAS

1.69

1

WA


0.5%

1.0%

1.5%

2.5%

0.0%

3.5%

3.0%

2.0%

25

20

15

10

5

00506

0607

0708

0809

0910

Year

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%

74.7 83

.5

82.3

84.4

84.4

81.4

75.5

100%

75%

50%

25%

0%

Year

63.3

1011

61.7

0607

61.3

0708

66.7

0809

67.8

0910


34,000

32,000

28,000

26,000

22,000

20,000

30,000

24,000

Year

0809

0910

0708

0607

28,8

56

29,1

07

28,6

89

28,8

54

1011

29,6

28

29,2

61


100%

40%

60%

20%

0

80%

Year

78.3

%

76.1

%

74.1

%

77.2

%

73.8

%


Allianz

Agent


1112

1011

100%

80%

60%

40%

20%

0%

75.3

71.5

83.0

83.0

78.3

73.2

80.2

73.3


1.50%

2.00%

1.00%

Year

1112

1213

0506

0607

0708

0809

1011

0910

ComCareNSW

1.68

0

1033

216

18

1077

186

22

1011

613

1112

0708

0809

0910

1011

1112


VIC

1.29

8

11

1112

66.7

1112


Allianz

Agent

Xchanging CGU

1112

1011

100%

80

60%

40%

20%

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1.80

0

80.1

77.9 78

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.5

71.8

65.6 72

.572

.0 74.9

71.5

70.3

68.0 73

.263

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72.8

68.3

100%

80

60

%

%

40%

20%

0%


6664

6863

6865 6366 67 66


Year

1011

1112

0809

0910

0708

1.29

8

1.33

8

1.80

1.62

1.46

1.33

8

1.38

7

1.38

7

time loss standard


Claims and return to work 2009/10 2010/11 2011/12

Number of claims (standardised)

10 10 13

Claims-rate per 100 FTEs 0.80 0.89 1.13

Number of time-loss claims 5 3 6

Time-loss claims - rate per 100 FTEs

0.40 0.27 0.52

Number of 13-week claims 4 4 2

13-week claims - rate per 100 FTEs

0.319 0.354 0.17

Number of fatality claims 0 0 0

Average cost per claim 35,472 195,597 34,826

Number of claims with RTW plans initiated

7 4 6

Percentage of 13-week claims with RTW plans initiated

100% 100% 100%

Employee OHS Appraisal(% positive response) 2009/10 2010/11 2011/12

My work area is a safe place to work

93 94 95

Is adequate OHS training provided?

84 82 80

Is WorkSafe proactive on OHS matters?

77 77 79

Is reporting of incidents and injuries encouraged?

91 91 92

Is corrective action taken by management?

80 80 81

Is there meaningful consultation on OHS relevant matters?

73 73 76

Do work instructions, procedures etc address OHS issues?

81 85 87

My manager is committed to OHS improvements

83 83 85

Senior management cares about OHS and employee wellbeing

73 70 76

Incidents/Hazards 2009/10 2010/11 2011/12

Number of hazards reported 189 148 140

Hazard-rate per 100 full-time employees

15.81 13.12 12.19

Number of incidents 183 175 162

Incident-rate per 100 FTEs 14.62 15.51 14.11

Injury-non compensable 70 51 52

Inspections 2009/10 2010/11 2011/12

Percentage of scheduled work-place inspections conducted

80% 80% 83%

Resolution of OHS issues arising from inspections/audits

100% 100% 100%

Number of Provisional Improvement Notices

0 0 0

Number of improvement and prohibition notices

0 0 0

OHS committee recommendations implemented

100% 100% 100%


outstanding claims liabilities. However, the common law threshold is becoming diluted as increasingly less serious injuries are litigated. Further management strategies will be required to mitigate the risk of upward pressure on common law liabilities and ensure the sustainability of this benefit.

We will continue to manage the scheme and our internal administrative costs responsibly. Although these costs, as a proportion of scheme costs, are also at an historic low, we will strive to further improve our operating efficiency and effectiveness.

WorkSafe sets its average premium rate on the basis that a four per cent real investment return can be achieved over five years – the average duration of our claims liabilities. Our investments are managed by the Victorian Funds Management Corporation (VFMC). The VFMC’s investment strategy aims to achieve this return within established risk parameters. The VFMC continues to maintain an allocation of 70 per cent to growth assets.

Our assets and liabilities are valued using Australian Accounting Standards. The valuation can be affected by a range of factors, such as inflation and bond yields, with small market and economic shifts significantly affecting our annual results. The organisation has no control over these external factors. However, we do control internal factors, such as our operational and claims management performance.

Our reporting framework therefore identifies the internal and external factors that impact on our financial results. This provides a clear and transparent picture of our operations, as well as the overall health of the scheme. This measure is our performance from insurance operations, or PFIO. This calculation does not include external factors such as inflation, investment returns and legislative change.

An actuarial release – or write down in liabilities – is achieved when projected claims costs are reduced due to improvements in actual claims experience.

Financial results

We achieved a PFIO of $385 million in 2011/12. This result was well above budget and assisted by an actuarial release of $182 million.

Our after-tax operating result was ($676)million, compared with $521 million in 2010/11. Our net result was adversely impacted by the following external factors, which totalled $1,388.5 million:

/ Investment returns of 4.10 per cent had a negative impact of $318 million compared to long-term expected returns. This compared with a return of 11.79 per cent in the previous year.

/ Changes to economic assumptions, including discount rates and inflation, resulted in a negative impact of $1,070 million.

Sustainability

Financial management

A financially sustainable scheme enables us to provide insurance and safety services to the community, now and into the future. Prudent scheme management has delivered a series of actuarial releases, seven premium rate reductions for employers since 2003/04, and enhanced benefits for injured workers.

Ensuring ongoing financial sustainability requires constant vigilance and sound management. Small changes in claim trends can significantly impact our actuarial valuations because of the long-term nature of our liabilities.

Workers compensation schemes in Australia and around the world continue to face challenges in terms of volatility in global investment markets and the impact that has on local economic conditions. Our strategic and policy settings, and the underlying strength of our scheme has allowed us to continue to adapt to changes in our environment and deliver results for the community.

During the year, our processes enabled us to identify and manage a number of cost pressures in common law, impairment benefit claims and medical and like services.

The right to common law for seriously injured workers is a key component of the scheme. This benefit represents around 30 per cent of the scheme’s total

In 2011/12 the average premium rate was a record low 1.338 per cent of payroll. This rate will reduce by a further three per cent in 2012/13.


WorkSafe Scorecard 2001–2012

Year Average

premium rate Funding

ratio Net

result PFIO* Actuarial release

2000/01 2.22% 88% ($260M) ($262M) ($366M)

2001/02 2.22% 87% ($98M) $465M $121M

2002/03 2.22% 83% ($315M) $505M $157M

2003/04 2.22% 101% $1.222B $718M $316M

2004/05 1.998% 113% $775M $747M $439M

2005/06 1.8% 119% $1.003B $476M $260M

2006/07 1.62% 134% $1.17B $729M $394M

2007/08 1.46% 120% ($587M) $958M $511M

2008/09 1.387% 97% ($1.254B) $277M $78M

2009/10 1.387% 100% $176M $654M $189M

2010/11 1.338% 108% $521M $294M $136M

2011/12 1.338% 96% ($676M) $385M $182M

*Performance from insurance operations.

Financial Results 2011/12($M)

2010/11($M)

2009/10($M)

2008/09($M)

2007/08($M)

Impact on result from internal factors

Performance from insurance operations 385.0 293.9 654.1 277.4 957.6

WorkHealth and Research Institute initiatives 24.0 23.6 23.1 42.9 –

Result from internal factors 409.0 317.5 677.2 320.3 957.6

Impact on result from external factors

Difference between actual returns and long-term expected returns1 (318.3) 410.1 369.9 (2,061.1) (1,776.7)

Change in inflation assumptions and discount rates2 (1,070.2) 8.5 (531.3) (68.1) (57.6)

Impact from legislative changes – (9.4) (270.3) – –

Tax 303.9 (205.9) (69.9) 554.4 289.6

Net result (675.6) 520.8 175.6 (1,254.5) (587.1)

1 Unfavourable conditions experienced in share markets in 2011/12 resulted in the actual investment return being below the expected long-term rate of return.

2 There was an unfavourable impact from changes in economic assumptions (i.e. reductions in assumed discount rates and higher than expected actual inflation) used to determine claims liability in 2011/12.

WorkSafe Injury Insurance premium

In 2011/12 the average premium rate charged to employers was 1.338 per cent of payroll. This rate will reduce by three per cent in 2012/13 to a new record low of 1.298 per cent , the lowest rate in Australia.

Assets and liabilities

At 30 June 2012 WorkSafe’s total assets were $11.4 billion, compared with $10.9 billion at 30 June 2011. Our total liabilities were $10.7 billion, compared with $9.4 billion at 30 June 2011. The valuation

determined that our funding ratio was 96 per cent (compared with 108 per cent at 30 June 2011). This funding ratio is within the preferred target range of 85-115 per cent.


Financial Report

Contents

31 Financial Statements 35 Notes to the Financial Statements70 Statement by the Chair, Acting Chief Executive

and Chief Financial Officer71 Auditor-General’s report


Comprehensive Operating Statement For the year ended 30 June 2012

2012 2011

Note $000s $000s

Revenue and income

Premium revenue 8 1,878,387 1,801,506

Investment income 9 451,732 1,075,528

Recoveries revenue 11 (a) 134,478 151,726

Other income 10 23,095 25,131

Total revenue and income 2,487,692 3,053,891

Expenses

Claims expense 11 (b) (2,955,184) (1,824,421)

Authorised agent fees 12 (206,932) (205,522)

Investment expenses 9 (29,746) (31,532)

Other operating costs 13 (275,274) (265,716)

Total expenses (3,467,136) (2,327,191)

Result before income tax (979,444) 726,700

Tax income (expense) 16 (a) 303,882 (205,858)

Net result for the year (675,562) 520,842

Other comprehensive income – –

Other comprehensive income, net of income tax – –

Total comprehensive income for the year (675,562) 520,842

The comprehensive operating statement should be read in conjunction with the accompanying notes to the financial statements.


Balance Sheet As at 30 June 2012

2012 2011

Note $000s $000s

Current assets

Cash and cash equivalents 27 (a) 43,998 26,354

Receivables 17 76,058 68,196

Investments 18 1,831,982 1,730,933

Recoveries receivable 19 42,956 40,938

Tax recoveries 16 (b) 139 139

Other assets 20 8,836 10,981

Total current assets 2,003,969 1,877,541

Non-current assets

Investments 18 8,001,080 7,961,304

Recoveries receivable 19 211,416 196,701

Plant and equipment 21 22,134 26,251

Intangibles 22 68,760 63,764

Deferred tax assets 16 (c) 1,079,795 775,913

Total non-current assets 9,383,185 9,023,933

Total assets 11,387,154 10,901,474

Current liabilities

Payables 23 117,084 127,829

Outstanding claims 24 (a) 1,841,526 1,752,886

Provisions 25 29,370 27,688

Total current liabilities 1,987,980 1,908,403

Non-current liabilities

Outstanding claims 24 (a) 8,702,362 7,476,052

Provisions 25 8,731 6,376

Total non-current liabilities 8,711,093 7,482,428

Total liabilities 10,699,073 9,390,831

Net assets 688,081 1,510,643

Equity

Reserves 26 702,029 704,322

Accumulated (deficit) surplus 26 (13,948) 806,321

Total equity 688,081 1,510,643

The balance sheet should be read in conjunction with the accompanying notes to the financial statements.


Statement of Changes in Equity For the year ended 30 June 2012

WorkHealthReserve

ResearchReserve

Accumulated(Deficit) Surplus

TotalEquity

Note $000s $000s $000s $000s

Balance at 1 July 2010 556,499 95,071 338,231 989,801

Total comprehensive income for the year

Net result for the year – – 520,842 520,842

Other comprehensive income – – – –

Total comprehensive income for the year – – 520,842 520,842

Transactions with owners, recorded directly in equity

Transfer of initiatives' net results for the year 26 44,204 8,548 (52,752) –

Dividend paid – – – –

Total transactions with owners 44,204 8,548 (52,752) –

Balance at 30 June 2011 600,703 103,619 806,321 1,510,643

Total comprehensive income for the year

Net result for the year – – (675,562) (675,562)

Other comprehensive income – – – – Total comprehensive income for the year – – (675,562) (675,562)

Transactions with owners, recorded directly in equity

Transfer of initiatives' net results for the year 26 (2,967) 674 2,293 –Dividend paid – – (147,000) (147,000)

Total transactions with owners (2,967) 674 (144,707) (147,000)

Balance at 30 June 2012 597,736 104,293 (13,948) 688,081

The statement of changes in equity should be read in conjunction with the accompanying notes to the financial statements.


Cash Flow Statement For the year ended 30 June 2012

2012 2011

Note $000s $000s

Cash flows from operating activities

Premium received 2,057,575 1,922,571

Claims paid (1,562,396) (1,561,360)

Self-insurers (exit) re-entry settlements (67,641) 2,315

Claim recoveries received 114,572 117,270

Authorised and management agent fees (264,659) (267,771)

Dividends received 272,580 227,393

Interest received 222,993 287,945

Health and Safety licence registration fees received 5,590 5,516

Contribution (to) from DTF Consolidated Fund (14,629) 925

Distributions from prior insurers under liquidation 1,956 364

Sundry receipts 17,282 24,292

Goods and services tax paid to the ATO (129,243) (115,307)

Payments to suppliers and employees (284,245) (314,747)

Net cash flows from operating activities 27 (b) 369,735 329,406

Cash flows from investing activities

Sale of investments 5,435,836 6,235,401

Purchase of investments (5,553,043) (6,218,492)

Purchase of plant and equipment (2,137) (5,538)

Proceeds from disposal of plant and equipment – 5

Payments for intangibles (19,376) (24,447)

Net cash flows used in investing activities (138,720) (13,071)

Cash flows from financing activities

Dividend paid (147,000) –

Net cash flows used in financing activities (147,000) –

Net increase in cash and cash equivalents 84,015 316,335

Cash and cash equivalents at beginning of the year 1,428,493 1,126,577

Effects of exchange rate changes on cash held in foreign currencies 2,872 (14,419)

Cash and cash equivalents at end of the year 27 (a) 1,515,380 1,428,493

The cash flow statement should be read in conjunction with the accompanying notes to the financial statements.


Notes to and forming part of the Financial Statements For the year ended 30 June 2012

1. Workcover Authority Fund

The WorkCover Authority Fund was established on 1 December 1992 under Section 32 of the Accident Compensation Act 1985 subsequent to the proclamation of the Accident Compensation (WorkCover) Act 1992. The financial affairs of the Victorian WorkCover Authority are reflected in the WorkCover Authority Fund, which is maintained pursuant to Section 32 of the Accident Compensation Act 1985. The Victorian WorkCover Authority uses the trading name of WorkSafe Victoria (‘WorkSafe’).

2. Accident Compensation (Amendment) Act 1998

The Accident Compensation (Amendment) Act 1998 was assented to on 17 November 1998. Resulting from Part 2 of this Act all Authorised Insurer licences issued under the Accident Compensation (WorkCover Insurance) Act 1993 were cancelled and re-insurance arrangements in force were terminated on 30 June 1999. The liabilities for outstanding claims as at 1 July 1999 for injuries on and from 1 September 1985 were assigned to the WorkCover Authority Fund as principal insurer of the scheme. Under the Act, Authorised Agents appointed under an instrument of appointment act on behalf of WorkSafe in the issuing of Workplace Injury Insurance policies, collection of premiums and the administration of claims.

3. Summary of Significant Accounting Policies

Statement of compliance

These general purpose financial statements have been prepared in accordance with the Financial Management Act 1994 and applicable Australian Accounting Standards (AAS) which include Interpretations, issued by the Australian Accounting Standards Board (AASB). For the purposes of A-IFRS, the Victorian State Government has determined that WorkSafe is a not-for-profit entity.

The annual financial statements were authorised for issue in accordance with a resolution of the Board on 31 August 2012.

Basis of preparation

The financial statements cover WorkSafe as an individual reporting entity. WorkSafe is a statutory authority established by statute enacted by the Victorian State Parliament and domiciled in Australia. The financial statements have been prepared on an accruals basis, and are based on historical costs and do not take into account changing money values, except for outstanding claims liabilities, recoveries receivable, employee leave liabilities and leasehold restoration provisions which are included at present value, and investments and plant and equipment which are included at fair value. Historical cost is based on the fair value of the consideration given in exchange for assets.

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 2012 and the comparative information for the year ended 30 June 2011.

The preparation of financial statements in conformity with AAS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying WorkSafe’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements have been disclosed in Notes 3(c), 3(f), 3(g), 4 and 33(e). Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revisions affect only that period, or in the period of the revision and future periods if the revisions affect both current and future periods.

Australian Accounting Standards issued but not yet effective

The AASB has issued the following new or revised Australian Accounting Standards, which are applicable to WorkSafe with effect from 1 January 2013:

AASB Title

9 Financial Instruments

13 Fair Value Measurement

119 Employee Benefits

2009-11 Amendments to Australian Accounting Standards arising from AASB 9





These standards are not effective for the annual reporting period ended 30 June 2012 and have not been applied in preparing WorkSafe’s financial statements. Details of the impact of adopting AASB 9, AASB 2009-11 and AASB 2010-7 have not yet been assessed. The application of AASB 13 and AASB 11-8 is expected to impact on the disclosure of fair value measurement using unobservable inputs. The other new or revised standards are not expected to have a significant impact on WorkSafe’s financial statements. WorkSafe will apply these standards for the annual reporting periods beginning on or after the operative date set out above.

The following significant accounting policies have been adopted in the preparation and presentation of the financial statements:

(a) Insurance premium

Premium revenue comprises policy amounts charged to employers by WorkSafe under Workplace Injury Insurance policies. The earned portion of premiums received and receivable is recognised as revenue. Premium is treated as earned from the policy effective date and is recognised as revenue over the policy period.

At year end, a provision is made for confirmed premium based on certification of employer remuneration and is assessed by an independent actuary. The actuary uses historical data at points in time and the most recent certified remuneration for the current year in assessing the final remuneration estimate. The premium increase or decrease that may result from the reassessment of prior year’s premium estimate (i.e. the difference between the actuarial estimation and actual certification) is taken up as a part of current year’s premium.

(b) Unexpired risk liability

All Workplace Injury Insurance policies expire on 30 June and hence no unearned premium exists at the reporting date.

Given no unearned premium exists at the reporting date a liability adequacy test is not undertaken at 30 June. A liability adequacy test assesses whether the unearned premium liability is sufficient to cover all expected future cash flows relating to future claims against current insurance contracts.

(c) Assets backing general insurance liabilities

With the exception of plant and equipment, and intangibles, WorkSafe has determined that all assets are held to back Workplace Injury Insurance liabilities and their accounting treatment is described below.

Investments

WorkSafe’s investment portfolio is managed by the Victorian Funds Management Corporation (VFMC) through internal management, fund managers and a Master Custodian. The Master Custodian holds the investments and conducts settlements pursuant to instructions from the VFMC’s internal management and the fund managers.

Investments are designated at fair value through the comprehensive operating statement. Initial recognition is at cost in the balance sheet, with attributable transaction costs expensed as incurred. Subsequent measurement is at fair value with any resultant realised and unrealised gains or losses recognised in the comprehensive operating statement.

The following methods and assumptions are used to determine the fair value of investments:

• financial instruments traded in an organised financial market (traded securities) – current quoted market price for the instrument. Quoted market prices are used to value listed shares, options, debentures and other equity and debt securities

• financial instruments not readily traded in an organised financial market – the present value of contractual future cash flows. Cash flows are discounted using standard valuation techniques at the applicable market yield having regard to the timing of the cash flows.

Details of fair value for the different types of investment assets are listed below:

• cash assets and deposits held at call with banks are carried at face value, which approximates to their fair value

• investments in discounted money market instruments are valued at their quoted mid price at the reporting date, as with fine trading spreads in this market, there is an ability to transact at mid price

• shares, fixed interest securities, options and units in trusts listed on stock exchanges are stated at their quoted bid price at the reporting date

• futures contracts listed on recognised exchanges are valued using the quoted settlement price

• units in unlisted trusts are recorded at fair value as determined by the fund manager or valuations by other skilled independent third parties. In determining fair value observable market transactions of the units and the underlying assets are used where available and applicable; some of the underlying assets of the trusts are valued using valuation models that include inputs which are not based on observable market data.

All purchases and sales of investments that require delivery of the asset within the time frame established by regulation or market convention (‘regular way’ transactions) are recognised at trade date, being the date on which the commitment is made to buy or sell the asset. In cases where the period between trade and settlement exceeds this time frame, the transaction is recognised at settlement date.

Investments are derecognised when the rights to receive future cash flows from the assets have expired, or have been transferred, and WorkSafe has transferred substantially all the risks and rewards of ownership.

Investments that are due to mature, expire or be realised within twelve months of reporting date are classified as current investments for the purposes of classification in the balance sheet. While this classification policy may result in a reported working capital deficit, included in non-current investments is a large proportion of listed securities which the VFMC also uses to ensure sufficient liquidity is available at all times to meet WorkSafe’s operating requirements.

Dividend income is recognised when WorkSafe’s right to receive payment has been established, whilst interest revenue is recognised on an accrual basis. Trust distribution income is recognised when the market prices are quoted ex-distribution for listed trusts. Unlisted trust distribution income is recognised when the trustee declares distributions.

Changes in fair value of investments at reporting date, as compared with their fair value at the previous reporting date, or fair value at acquisition if acquired during the financial year, are recognised as investment income or loss. Realised gains or losses on the termination of derivative positions and unrealised gains or losses on changes in fair value are included in investment income or loss.


Receivables

Premium receivable amounts due from employers (being the amounts due excluding the provision for confirmed premium) are initially recognised at fair value. They are subsequently measured at fair value which is approximated to by taking the initially recognised amount and reducing it for impairment as appropriate.

A provision for impairment of receivables is established when there is objective evidence that WorkSafe will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows. The impairment charge is recognised in the comprehensive operating statement.

Amounts owing to employers as a result of policies being in credit at reporting date are shown as premium creditors (Note 23).

(d) Foreign currency transactions and balances

Foreign currency transactions are converted to Australian currency at the rates of exchange applicable at the dates of the transactions. Investments held at reporting date in foreign currencies are converted to Australian currency using the rates of exchange ruling at that date. Gains or losses arising on foreign currency transactions are included in investment income in the period in which they arise.

(e) Derivative financial instruments

The VFMC and its managers use derivative financial instruments such as foreign exchange contracts, futures, swaps and options to more effectively manage the risks associated with investing large institutional portfolios. Derivatives are originally recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date with gain or loss recognised in the comprehensive operating statement.

The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.

(f) Claims

Claims expense which includes the movement in the liability for outstanding claims, is recognised in respect of insurance business and uninsured employers.

The liability for outstanding claims is measured as the central estimate of the present value of expected future payments against claims incurred at the reporting date under Workplace Injury Insurance contracts issued by WorkSafe, with an additional risk margin to allow for the inherent uncertainty in the central estimate.

The ultimate liability arising from claims made under insurance contracts

Provision is made for the estimated cost of claims incurred but not settled at the reporting date, including the cost of claims incurred but not yet reported to WorkSafe.

The estimated cost of claims includes direct expenses to be incurred in settling claims gross of the expected value of recoveries. WorkSafe takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established.

The estimation of claims incurred but not reported (IBNR) is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified to WorkSafe, where more information about the claim event is generally available. IBNR claims may often not be apparent to the insured until many years after the event giving rise to the claims has happened. In calculating the estimated cost of unpaid claims WorkSafe’s valuation actuary uses a variety of estimation techniques, generally based upon statistical analyses of historical experience, which assume that the development pattern of the current claims will be consistent with past experience. Allowance is made, however, for changes or uncertainties which may create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims including:

• changes in WorkSafe processes which might accelerate or slow down the development and/or recording of paid or incurred claims, compared with the statistics from previous periods

• changes in the legal environment

• the effects of inflation

• medical and technological developments.

Where possible, WorkSafe’s valuation actuary adopts multiple techniques to estimate the required level of provisions. This assists in giving greater understanding of the trends inherent in the data being projected. The projections given by the various methodologies also assist in setting the range of possible outcomes. The most appropriate estimation technique is selected taking into account the characteristics of the benefit type and the extent of the development of each accident year.

Details of specific assumptions used in deriving the outstanding claims liability are detailed in Note 4.

(g) Recoveries receivable

Recoveries from the Transport Accident Commission, prior insurers and other third parties are recognised as revenue. Recoveries receivable are reported as assets and measured as the present value of the expected future receipts. The actuarial assessment of the recoveries receivable is in a manner similar to the assessment of outstanding claims (see Note 3 (f)). A provision for impairment is established when there is objective evidence that WorkSafe will not be able to collect all the recovery amounts.


(h) Dispute resolution expenses

Claims expense also includes the cost associated with resolving disputes with claimants. Dispute resolution expenses comprise payments made to the Department of Treasury and Finance for courts management functions, the Accident Compensation Conciliation Service for conciliation matters arising out of Workplace Injury Insurance claims, and the cost relating to Medical Panels, Union Assist and WorkCover Assist.

(i) Operating leases

WorkSafe has continuing obligations under operating lease agreements for certain buildings, motor vehicles and office equipment. Operating lease payments are charged 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 in which economic benefits from the leased asset are consumed.

(j) Income tax

In accordance with Section 88 (3D) of the State Owned Enterprises Act 1992, WorkSafe is required to pay income tax equivalent under the National Tax Equivalent Regime.

The tax expense or income represents the tax payable or recoverable on the current year’s taxable income or tax loss based on the prevailing income tax rate adjusted for changes in deferred tax assets and liabilities.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates that are expected to apply when the assets and liabilities are realised or settled, based on tax rates that have been enacted or substantially enacted by the reporting date.

Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax off-sets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities which affect neither taxable income nor accounting result.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are off-set as WorkSafe settles its current tax assets and liabilities on a net basis.

(k) Dividends

The Accident Compensation Amendment (Repayments and Dividends) Act 2012 was ascented to on 24 April 2012. This Act amended the Accident Compensation Act 1985 to enable WorkSafe to repay capital and pay dividends to the Victorian State Government.

Pursuant to Section 33B of the amended Accident Compensation Act 1985, WorkSafe is required to pay to the Victorian State Government a dividend determined by the Treasurer. In determining the dividend policy applicable to WorkSafe, the Treasurer must have regard to the solvency margin determined to maintain the long-term financial viability of the scheme.

An obligation to pay a dividend only arises after a formal determination is made by the Treasurer following consultation between WorkSafe, the Assistant Treasurer and the Treasurer.

(l) Other income

Fines and penalties income is recognised upon receipt of the payment.

(m) Sundry receivables

Sundry receivables are stated at amounts due less any provision for impairment.

(n) Plant and equipment

Plant and equipment assets are measured initially at cost and subsequently at fair value. Fair value is determined by reference to the asset’s depreciated cost, less impairment.

The cost of leasehold improvements is capitalised as an asset and depreciated over the remaining term of the lease. This includes the fair value of any dismantling, removal or restoration costs, where an obligation existed at the time of entering the contract for the premises to be returned to their original state upon vacation of the premises.

(o) Depreciation

Depreciation is provided on a straight-line basis on plant and equipment to write off those assets over their estimated useful lives to WorkSafe to estimated residual value. The depreciation rates applied to each of the asset classes are as follows:

2012 2011

Computer equipment 331/3% 331/3%

Furniture and equipment 20% 20%

Leasehold improvements to buildings are written-off over their estimated useful lives to WorkSafe or the lease term, whichever is the lesser, using the straight-line method. The lease terms range from 3 to 10 years (2011: 3 to 10 years).

The estimated useful lives, residual values and depreciation methods are reviewed at the end of each annual reporting period.


(p) Impairment of assets

Assets are assessed annually for indications of impairment except for:

• financial instrument assets • deferred tax assets.

If there is an indication of impairment, the assets concerned are tested as to whether their carrying value exceeds their recoverable amount. Where an asset’s carrying value exceeds its recoverable amount, the difference is written-off by a charge to the comprehensive operating statement.

The recoverable amount is measured at the higher of depreciated replacement cost and fair value less costs to sell. It is deemed that, in the event of the loss 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.

(q) Intangible assets

Intangible assets represent identifiable non-monetary assets without physical substance.

Intangible assets are recognised at cost. Costs incurred subsequent to initial recognition are capitalised when it is expected that additional future economic benefits will flow to WorkSafe.

Amortisation is allocated to intangible assets with finite useful lives on a systematic basis over the assets’ useful lives. The amortisation period and the amortisation method for intangible assets with a finite useful life are reviewed at least at each year end. In addition an assessment is made at each reporting date to determine whether there are indicators that the intangible assets concerned are impaired. If so, the assets concerned are tested as to whether their carrying value exceeds their recoverable amount.

All intangible assets of WorkSafe have definite useful lives. The useful lives range from 2 to 10 years (2011: 3 to 10 years).

Internally-generated intangible assets representing internally developed software are recognised only from the point that it is probable that the expected future economic benefits attributable to the asset will flow to WorkSafe and that the cost of the item can be measured reliably.

Where no internally-generated intangible asset can be recognised, development expenditure is expensed in the period as incurred.

Internally-generated intangible assets are stated at cost less accumulated amortisation and impairment, and are amortised on a straight-line basis over their useful lives from the date the assets are available for use. Impairment losses are included in the comprehensive operating statement.

(r) Employee benefits

Provision is made for benefits accruing to employees in relation to salaries, annual leave and long service leave for services rendered to the reporting date.

In determining the provision, allowance is made for on-costs including superannuation, payroll tax and Workplace Injury Insurance premium, and consideration is given to future increases in salary rates and experience of employee departures. Expected future payments are discounted using interest rates on selected Commonwealth Government securities with terms to maturity, which closely match the estimated future cash outflows.

Wages and salaries, annual leave and sick leave

Liabilities for wages, salaries and annual leave are recognised in the provision for employee benefits, classified as current liabilities. No provision is made for non-vesting sick leave as the anticipated pattern of future sick leave taken indicates that accumulated non-vesting leave will never be paid. Those liabilities which are expected to be settled within 12 months of the reporting period, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Those liabilities that are not expected to be settled within twelve months are also recognised in the provision for employee benefits as current liabilities, where WorkSafe does not have the unconditional right to defer settlement. These liabilities are measured at the present value of the amounts expected to be paid when the liabilities are settled using the remuneration rate expected to apply at the time of settlement.

Long service leave

Liability for long service leave (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 WorkSafe does not expect to settle the liability within 12 months, because it will not have the unconditional right to defer settlement of the entitlement should an employee take leave within 12 months.

The components of this current LSL liability are measured at:

• nominal value – component that WorkSafe expects to settle within 12 months

• present value – component that WorkSafe does not expect to settle 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.

Defined contribution superannuation plans

Contributions to defined contribution superannuation plans are expensed when incurred.

Defined benefit superannuation plans

The amount charged to the comprehensive operating statement in respect of defined benefit superannuation plans represents the contributions made by WorkSafe to the superannuation plans in respect of the current services of current WorkSafe employees. Superannuation contributions are made to the plans based on the relevant rules of each plan.

WorkSafe does not recognise any defined benefit liability in respect of the superannuation schemes because it has no legal or constructive obligation to pay future benefits relating to its employees; its only obligation is to pay superannuation contributions as they fall due. The Department of Treasury and Finance administers and discloses the State’s defined benefit liabilities in its annual financial statements.


(s) Goods and services tax

Income, expenses and assets are recognised net of the amount of associated goods and services tax (GST), unless the GST incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included as part of the receivables or payables in the balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the ATO are classified as operating cash flows.

(t) Commitments

Commitments include those operating and capital commitments arising from non-cancellable contractual sources and are disclosed at their nominal value, inclusive of GST.

(u) Contingent assets and contingent liabilities

Contingent assets and contingent liabilities are not recognised in the balance sheet, but are disclosed by way of a note and, if quantifiable, are measured at nominal value, inclusive of GST.

(v) Events after reporting date

Assets, liabilities, income or expenses arise from past transactions or other past events. Where the transactions result from an agreement between WorkSafe and other parties, the transactions are only recognised when the agreement is irrevocable at or before the reporting date. Adjustments are made to amounts recognised in the financial statements for events which occur after the reporting date and before the date the 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 reporting date and the date the statements are authorised for issue where the events relate to conditions which arose after the reporting date and which may have a material impact on the results of subsequent years.

(w) Rounding of amounts

Amounts have been rounded to the nearest thousand dollars, unless otherwise stated.

(x) Presentation and functional currencies

The presentation currency of WorkSafe is the Australian dollar, which is also the functional currency of WorkSafe.

4. Actuarial Assumptions and Methods

WorkSafe writes Workplace Injury Insurance business, which is long-tail in nature, meaning that claims are typically settled more than one year after being reported.

Significant estimates and judgements are made by WorkSafe’s valuation actuary in respect of certain key asset and liability amounts disclosed in the financial statements. These estimates and judgements are continually being evaluated and are based on historical experience, as well as enhancements to actuarial modelling techniques.

The key areas of significant estimates and judgements and the methodologies used to determine key assumptions are set out below.

Provision is made for the estimated cost of claims incurred but not settled at the reporting date, including the cost of claims incurred but not reported to WorkSafe.

The estimation of outstanding claims liabilities is based largely on the assumption that past developments are an appropriate predictor of the future and involves a variety of actuarial techniques that analyse experience, trends and other relevant factors. The process commences with the actuarial projection of the future claims payments and claims handling costs incurred to the reporting date. The various payment codes of WorkSafe are grouped into a number of benefit categories and analysed separately.

The modeling approaches that are used to analyse and project the various benefit types fall into three broad categories including:

• payments per claim incurred (PPCI) • payments per active claim (PPAC) • payments per claim resolved (PPCR).

Projected future claims payments and associated claims handling costs are obtained by examining the results from the above methods. This projection is made without bias toward over or under estimation. As such, the resulting estimate is considered to be a net central estimate of outstanding claims liabilities that has an approximately equal chance of proving adequate as not. Where possible and appropriate, multiple actuarial methods will be applied to project future claims payments. This assists in providing a greater understanding of the trends inherent in the past data. The projections obtained from various methods also assist in setting the range of possible outcomes. The most appropriate method, or even a combination of methods, is selected taking into account the characteristics of each benefit type and the extent of the development of each past accident period.

The estimated liability is converted to inflated values, taking into account assumptions about future inflation. The present value of this liability is then calculated, by discounting the inflated cashflows to allow for future returns on the underlying assets using appropriate risk-free discount rates. A projection of future claims payments is undertaken separately for both gross claims payments and recoveries.


(a) Actuarial assumptions

The following assumptions have been made in determining the outstanding claims liabilities:

2012 2011

Average weighted term to settlement from injury date 5.8 years 5.4 years

Average claim frequency (claims per worker) 1.12% 1.17%

Average claim size $52,522 $48,603

Expense rate 11.8% 11.5%

Short-term discount rate (first 5 years) (2011: first 5 years) 2.1% – 3.0% 4.8% – 5.2%

Short-term inflation (AWE) (first 5 years) (2011: first 5 years) 3.8% 3.8% – 4.0%

Medium-term discount rate (6 – 15 years) (2011: 6 – 12 years) 3.3% – 4.4% 5.5% – 5.7%

Medium-term inflation (AWE) (6 – 15 years) (2011: 6 – 12 years) 3.8% 3.8%

Long-term gap (Discount – AWE) 1.8% 2.0%

Risk Margin 8.5% 8.5%

(b) Process used to determine assumptions

A description of the processes used to determine these assumptions is provided below:

Average weighted term to settlement

The average weighted term to settlement is calculated separately by benefit type based on historic settlement patterns. For most benefit types, it is an outworking of the models rather than an explicit assumption.

Average claim frequency

Claim frequency for the current underwriting year is estimated by projecting the number of claims incurred and dividing this by the number of workers for the year. The average claim frequency is not used directly in the valuation models.

Average claim size

Average claims size is in respect of the current underwriting year and takes into account the expected payments for each payment type (e.g. weekly, medical, impairment benefits, common law, other), as well as the proportion of total claims which receive each benefit.

Expense rate

At 30 June 2012, claims handling expenses are calculated by reference to forecast claims handling costs as a percentage of projected claim payments. The assumptions are:

2012 2011

Impairment and maims benefits (including associated medical reports) 25% 22%

Common law and common law legal 4% 3%

Weekly, medical reports, statutory legal and other 11% 12%

Medical and rehabilitation 19% 18%

Discount rate

Discount rates adopted are ‘risk-free’ rates, set by reference to traded Commonwealth Government securities.

Inflation

Short-term economic inflation assumptions are set by reference to current bank and other economic forecasters. Long-term (beyond 15 years) (2011: 12 years) economic inflation assumptions are set by assuming a fixed real return.

Risk margin

The overall risk margin was determined allowing for the relative uncertainty of the outstanding claims estimate. Uncertainty was analysed for each benefit type taking into account potential uncertainties relating to the actuarial models and assumptions, the quality of the underlying data used in the models, the general insurance environment, and the impact of legislative reform.

The estimate of uncertainty is greater for long-tail business when compared to short-tail business due to the longer time until settlement of outstanding claims.

The assumptions regarding uncertainty were applied to the net central estimates in order to arrive at an overall provision which is intended to have a 75% probability of adequacy. The risk margin applied at 30 June 2012 is 8.5% (2011: 8.5%).

(c) Sensitivity analysis – insurance contracts

Summary

WorkSafe valuation actuary conducts sensitivity analyses to quantify the exposure to risk of changes in the key underlying variables. The valuations included in the reported results are calculated using certain assumptions about these variables as disclosed above. The movement in any key variable will impact the financial performance and equity of WorkSafe.


The table below describes how a change in each assumption will affect the insurance liabilities and shows an analysis of the sensitivity of the net result and equity to changes in these assumptions.

Impact of changes in key variables

Expense rate – An estimate for the internal costs of handling claims is included in the outstanding claims liability. An increase or decrease in the expense rate assumption would have a corresponding impact on claims expense.

Discount rate – The outstanding claims liability is calculated by reference to expected future payments. These payments are discounted to adjust for the time value of money. An increase or decrease in the assumed discount rate will have an opposing impact on claims expense.

Long-term gap – Expected future payments are inflated to take account of inflationary increases. An increase or decrease in the long-term gap between the assumed rates of discount and inflation would have an opposing impact on claims expense, particularly given the long-tail nature of Workplace Injury Insurance business.

The impact of net result and equity, had changes in the key variable occurred at the end of the reporting period, is summarised in the table below.

2012 Net result

2012 Equity

2011 Net result

2011 Equity

$000s $000s $000s $000s

Recognised amounts per the financial statements (675,562) 688,081 520,842 1,510,643

Variable Movement

Expense rate +1% (741,826) 621,817 462,938 1,452,739

–1% (609,298) 754,345 578,746 1,568,547

Short-term discount rate +0.5% (565,721) 797,922 611,160 1,600,961

–0.5% (791,165) 572,478 426,119 1,415,920

Long-term gap +0.5% (589,850) 773,793 587,558 1,577,358

–0.5% (767,036) 596,607 449,721 1,439,522

5. Insurance Contracts – Risk Management Policies and Procedures

The financial condition and operation of WorkSafe is affected by a number of key risks including insurance, interest rate, credit, market, liquidity, financial and operational risks. WorkSafe’s policies and procedures in respect of managing these risks are set out below.

(a) Objectives in managing risks arising from insurance contracts and policies mitigating those risks

WorkSafe has an objective to manage insurance risk thus reducing the volatility of insurance premiums and performance from insurance operations. In addition to the inherent uncertainty of insurance risk, which can lead to significant variability in the loss experience, performance from insurance operations are significantly affected by market factors external to WorkSafe as explained in Note 7.

WorkSafe has developed, implemented and maintained a sound and prudent risk management strategy that encompasses all aspects of WorkSafe’s operations.

The strategy sets out WorkSafe’s policies and procedures, processes and controls in relation to the management of likely financial and non-financial risks.

Key aspects of the processes in place to mitigate risks include:

• the use of sophisticated management information systems, which provide reliable and up-to-date data on the risks to which the business is exposed at any point in time

• the use of detailed internal monitoring tools which link actuarial valuation projections with the management information systems to monitor claims patterns

• adherence to reliable procedures for pricing risk• an investment allocation strategy, established by the VFMC, derived from the matching of assets to the underlying claims liabilities to

optimise the returns within the risk management parameters.

(b) Terms and conditions of insurance business

The terms and conditions of the Workplace Injury Insurance scheme administered by WorkSafe are established under the Accident Compensation Act 1985. Cover is for annual periods ending 30 June each year. The terms and conditions of the scheme are the same for all insured employers.

(c) Concentration of insurance risk

WorkSafe underwrites Workplace Injury Insurance for Victorian employers. WorkSafe’s underwriting strategy requires risk premiums to be differentiated by industry in order to reflect the higher loss frequency in particular industries. In addition, where an individual employer is deemed large enough to be rated on their own claims history, this history is used to differentiate their risk premiums from others in the same industry.


(d) Interest rate risk

Financial assets and liabilities arising from insurance contracts entered into are directly exposed to interest rate risk. Changes in interest rates affect the valuation of WorkSafe’s assets and liabilities.

(e) Credit risk

Financial assets and liabilities arising from insurance contracts are stated in the balance sheet at the amounts that best represent the maximum credit risk exposure at the reporting date. There are no significant concentrations of credit risk.

6. Underwriting Result 2012 2011

Note $000s $000s

The underwriting result is extracted from the comprehensive operating statement and is as follows:

Premium revenue 8 1,878,387 1,801,506

Underwriting expenses

Net claims incurred 11(a) (2,794,082) (1,647,976)

Dispute resolution expenses 11(b) (26,624) (24,719)

Authorised agent fees 12 (206,932) (205,522)

Total underwriting expenses (3,027,638) (1,878,217)

Underwriting result (1,149,251) (76,711)

7. Explanation of Volatility of Financial Results

This note provides additional analysis of the result before income tax of $(979.44) million (2011: $726.70 million).

Given the long-term nature of the WorkSafe scheme both from investment and outstanding claims perspectives, the net result for WorkSafe is significantly affected by short-term market and economic factors external to the organisation. External factors contribute to the difference between actual returns and the long-term estimated returns established by management, and also include major changes in economic assumptions and legislative changes. External factors can cause significant variations in reported results from year to year as illustrated below.

Accordingly for internal management reporting purposes, WorkSafe monitors and measures its financial performance based on performance from insurance operations and the WorkHealth and Research Institute initiatives without the impact of external factors. This approach is considered a more appropriate indicator for measuring financial performance and is adopted for reporting to the Victorian State Government.

The impact of external factors on the financial result is explained below.

2012 2011

$000s $000s

Impact on result from internal factors:

– Performance from insurance operations 385,036 293,872

– WorkHealth and Research Institute initiatives 23,952 23,654

Impact on result from external factors:

– Difference between actual investment returns and long-term expected returns (i) (318,266) 410,060

– Changes in inflation assumptions and discount rates (ii) (1,070,166) 8,497

– Impact from legislative changes – (9,383)


Notes:

(i) Unfavourable conditions experienced in the share markets in 2011/12 resulted in the actual investment return being below the expected long-term rate of return. The net return on the investment portfolio for the year was 4.10% (2011: 11.79%) compared to the long-term estimated return established by management of 7.75% (2011: 7.25%) per annum based on its investment strategy.

(ii) There was an increase of $1,011.55 million in the outstanding claims liability as at 30 June 2012 due to reductions in assumed discount rates across all projection years. In addition, the claims liability at 30 June 2012 increased by $58.62 million due to actual inflation in the 12 months to 30 June 2012 being higher than expected. At 30 June 2011 there was a reduction of $28.43 million in the outstanding claims liability due to increases in short-term discount rates. This reduction was partially off-set by an increase in claims liability of $19.94 million due to actual inflation in the 12 months to 30 June 2011 being higher than expected.


8. Premium Revenue 2012 2011

$000s $000s

Gross premium (i) 1,908,475 1,828,098

Reassessment of prior year's premium 1,266 1,006

Premium discount allowed (26,452) (25,506)

Premium fines and penalties 11,042 8,658

Increase in provision for impairment of premium debts (5,649) (1,943)

Premium bad debts written-off (ii) (10,295) (8,807)

1,878,387 1,801,506

Notes:

(i) Gross premium revenue includes an estimated increase of $24.9 million (2011: $13.1 million) in relation to confirmed premium. Confirmed premium estimate makes allowance for employers who have not yet certified their remuneration (see Notes 3 (a) and 17). The rateable remuneration estimate on which the confirmed premium estimate is based, is obtained through an independent actuary PricewaterhouseCoopers Actuarial Limited.

(ii) Bad debts written-off during the period include unpaid premium for prior periods.

9. Investment Income 2012 2011

$000s $000s

Gross investment income

Changes in fair values of investments at fair value through the comprehensive operating statement:

– Realised gain 1,268 457,879

– Unrealised (loss) gain (29,631) 81,127

Total change in fair value of investments (i) (28,363) 539,006

Dividends 259,434 243,548

Interest (ii) 220,661 292,974

Gross investment income 451,732 1,075,528

Investment expenses (iii) (29,746) (31,532)

Net investment income (iv) 421,986 1,043,996

Notes:

(i) This is the difference between the fair value of the investments as at 30 June 2011 or the cost of acquisition (for investments purchased during the period), and sales proceeds (realised) or their fair value as at 30 June 2012 (unrealised).

(ii) Interest represents coupon interest earned and net settlements on swap contracts.

(iii) Fees paid to the VFMC under the Client Funds Management Service Agreement and other sundry professional fees incurred by WorkSafe in relation to management of the investment portfolio.

(iv) The net return on the investment portfolio for the year was 4.10% (2011: 11.79%).

10. Other Income 2012 2011

$000s $000s

Self-insurer receipts 11,347 14,055

Contribution from DTF Consolidated Fund – 925

Occupational Health & Safety licensing income 5,590 5,481

Fines and penalties 2,533 3,003

Distributions from prior insurers under liquidation 1,956 364

Asset rental income – ACCS (i) 1,084 432

Bad and doubtful debts written-back (off) 3 (3)

Sundry receipts 582 874

23,095 25,131

Note:

(i) WorkSafe received rental income from Accident Compensation Conciliation Service (ACCS) for the use of its plant and equipment.


11. Claims Costs 2012 2011

Current Year

Prior Year

Total

Current Year

Prior Year

Total

$000s $000s $000s $000s $000s $000s

(a) Net claims incurred

Gross claims incurred

Gross claims paid 164,665 1,448,945 1,613,610 152,787 1,392,961 1,545,748

Movement in outstanding claims 2,368,194 (2,058,800) 309,394 2,281,739 (1,849,908) 431,831

Gross claims incurred – undiscounted 2,532,859 (609,855) 1,923,004 2,434,526 (456,947) 1,977,579

Discount and discount movement (421,481) 1,427,037 1,005,556 (580,836) 402,959 (177,877)

Gross claims incurred (Note 11 (b)) 2,111,378 817,182 2,928,560 1,853,690 (53,988) 1,799,702

Recoveries revenue

Recoveries received (68,987) (48,758) (117,745) (55,923) (65,313) (121,236)

Movement in recoveries receivable (51,059) 52,995 1,936 (49,428) 13,709 (35,719)

Recoveries revenue – undiscounted (120,046) 4,237 (115,809) (105,351) (51,604) (156,955)

Discount and discount movement 6,922 (25,591) (18,669) 11,533 (6,304) 5,229

Recoveries revenue (113,124) (21,354) (134,478) (93,818) (57,908) (151,726)

Net claims incurred 1,998,254 795,828 2,794,082 1,759,872 (111,896) 1,647,976

Current year claims relate to risks borne in the current financial year. Prior year claims relate to a reassessment of the expense for risks borne in all previous financial years.

The net claims incurred of $2,794.08 million (2011: $1,647.98 million) is impacted by both internal and external factors as noted below:

2012 2011

$000s $000s

Claims incurred – internal (i) 1,723,916 1,647,090

Claims incurred – external (ii) 1,070,166 886

Net claims incurred 2,794,082 1,647,976

Notes:

(i) The 30 June 2012 ‘claims incurred – internal’ is $76.83 million (2011: $470.63 million) higher than the prior year due to the increase in the cost of claims in the 12 months to 30 June 2012, partially off-set by a larger reduction in the cost of previously reported claims.

(ii) The ‘claims incurred – external’ reflects the combined impact of changes in assumed rates of inflation and discount on the claims liability. For the year ended 30 June 2012, the claims incurred – external was $1,069.28 million higher (2011: $800.68 million lower) than the prior year as a result of:

• An increase in liability of $1,011.55 million (2011: decrease of $28.43 million) due to reductions in assumed discount rates across all projection years

• Actual inflation in the 12 months to 30 June 2012 being higher than expected, resulting in an increase in the liability of $58.62 million (2011: $19.94 million); and

• The second round of legislative changes increasing the incurred cost by $9.38 million in the prior year. There was no impact resulting from legislative changes during the year ended 30 June 2012.


The claims payments and movement in outstanding claims liability during the year by payment type are as follows (with the claims liability (liability movement) from the prior year by payment type in Note 24 (b)):

2012 2011

Claims Paid

Liability Movement

Total

Claims Paid

Liability Movement

Total

$000s $000s $000s $000s $000s $000s

Weekly compensation 587,208 309,262 896,470 562,979 25,743 588,722

Medical including medico-legal 364,147 283,171 647,318 343,557 83,850 427,407

Maims and impairment benefits 85,615 25,035 110,650 89,688 (13,275) 76,413

Common law 412,263 391,683 803,946 462,826 80,699 543,525

Other payment types 96,736 49,651 146,387 89,303 24,686 113,989

Claims handling expenses (i) – 150,528 150,528 – 36,447 36,447

Risk margin (ii) – 105,620 105,620 – 15,804 15,804

Self-insurer (re-entry) exit settlements 67,641 – 67,641 (2,605) – (2,605)

Gross claims incurred 1,613,610 1,314,950 2,928,560 1,545,748 253,954 1,799,702

Notes:

(i) Claims handling expenses is an allowance made for the direct expenses to be incurred in settling claims.

(ii) The prudential risk margin provides for the inherent uncertainty in the central estimate of the outstanding claims.

2012 2011

$000s $000s

b) Claims expense

Gross claims incurred (Note 11 (a)) 2,928,560 1,799,702

Certified payments to ACCS 13,028 12,189

Contribution to DTF Consolidated Fund for use of Courts 7,590 7,422

Medical Panels costs 3,471 2,893

WorkCover Assist costs 1,608 1,310

Union Assist costs 927 905

Dispute resolution expenses 26,624 24,719

Total claims expense 2,955,184 1,824,421

12. Authorised Agent Fees 2012 2011

$000s $000s

Authorised agent fees (i) 205,425 204,266

Management agent fees (ii) 1,507 1,256

206,932 205,522

Notes:

(i) Authorised agents operating under an instrument of appointment with WorkSafe issued pursuant to the Accident Compensation Act 1985 are paid fees for acting on behalf of WorkSafe in the issuing of policies, collection of premiums and the administration of claims. The agent remuneration includes performance based components.

(ii) Under Sections 20A & 20B of the Accident Compensation Act 1985 WorkSafe is empowered to administer the Workers Compensation Act 1958. Management agent fees represent amounts paid for managing liabilities under the 1958 Act, and the payments made to the TAC for the management of WorkSafe claims of injured workers with catastrophic injuries.


13. Other Operating Costs 2012 2011

$000s $000s

Employee and related 132,016 135,593

Information technology 22,276 23,958

Professional services 17,850 16,402

Marketing and communication 20,817 22,338

Occupancy and utilities 18,818 18,687

Research and external funding 25,321 19,328

Discount and discount movement in provisions 2,294 (94)

Depreciation 6,082 6,324

Amortisation 12,293 6,446

Loss on disposal of plant and equipment – 80

Write-down of intangibles 1,174 369

Other expenses 16,333 16,285

275,274 265,716

14. Total Expenses 2012 2011

$000s $000s

Total expenses include:

Depreciation on plant and equipment 6,082 6,324

Amortisation on intangibles 12,293 6,446

18,375 12,770

Operating lease rentals

– Premises 9,405 9,067

– Motor vehicles 4,355 4,203

– Office equipment 293 265

14,053 13,535

Employee benefit expense

– Post employment benefits:

– Defined contribution plans 12,486 12,783

– Defined benefit expense 2,098 2,192

14,584 14,975

– Termination benefits 1,016 2,002

– Other employee benefits 114,244 117,296

129,844 134,273

15. Remuneration of Auditors 2012 2011

$000s $000s

Auditor of the entity:

Audit of the financial statements – Victorian Auditor-General’s Office 369 356

369 356


16. Income Tax 2012 2011

$000s $000s

(a) Tax (income) expense

Major components of tax (income) expense for the financial years ended 30 June 2012 and 2011 are:

Current income tax

– Current tax (income) expense (251,975) 56,238

– Adjustments in respect of current income tax of prior years (2,812) 10,069

Deferred income tax

– Relating to origination and reversal of temporary differences (49,095) 139,551

Tax (income) expense reported in the comprehensive operating statement (303,882) 205,858 A reconciliation of tax (income) expense applicable to accounting result before income tax at the statutory income tax rate, to tax (income) expense calculated at WorkSafe’s effective income tax rate for the financial periods ended 30 June 2012 and 2011 is as follows:

2012 2011

$000s $000s


At the statutory income tax rate of 30% (2011: 30%) (293,833) 218,011

– Adjustments in respect of current income tax of prior years (2,812) 10,069

– Franking credits and withholding tax on dividends received (12,204) (13,689)

– Imputation gross-up on dividends received 4,180 4,267

– Other 787 (12,800)

At effective income tax rate of 31% (2011: 28%) (303,882) 205,858

Tax (income) expense reported in the comprehensive operating statement (303,882) 205,858

2012 2011

$000s $000s

(b) Tax recoveries

Balance at beginning of the year (139) (139)

Movements during the year:

– Income tax paid – –

– Income tax of prior years – –

Balance at end of the year (139) (139)

2012 2011

$000s $000s

(c) Deferred tax

Deferred tax at 30 June 2012 and 30 June 2011 relate to the following:

Deferred tax assets

– Claims handling expense included in outstanding claims 332,438 283,435

– Unrealised loss on investments 91,877 59,188

– Provisions not currently deductible 26,914 23,997

– Accruals not currently deductible 3,870 4,000

– Unutilised tax losses 633,379 411,960

1,088,478 775,913

Deferred tax liabilities

– Difference in depreciation of plant and equipment and amortisation of intangibles (8,683) (6,667)

Net deferred tax assets 1,079,795 775,913


17. Receivables 2012 2011

$000s $000s

Premium receivable 102,725 101,014

Provision for impairment (51,567) (45,918)

51,158 55,096

Confirmed premium estimate 24,900 13,100

Total receivables 76,058 68,196

Of the total receivables balance, premium receivable of $51.16 million (2011: $55.10 million) have known counterparties, while the confirmed premium estimate of $24.9 million is actuarially assessed (2011: $13.1 million). The average credit period for premium receivable is 30 days.

Included within premium receivable at the reporting date are $63.15 million (2011: $58.32 million) of past due receivables. WorkSafe has provided for $51.57 million (2011: $45.92 million) of these debts. WorkSafe does not hold any collateral over these balances. The average age of those receivables that are past due but not impaired is 73 days (2011: 72 days).

Ageing of past due premium receivable 2012 2011

$000s $000s

30 days past due 4,407 4,559

31 – 60 days past due 1,691 2,256

61 – 90 days past due 561 (159)

91 – 180 days past due 4,612 7,971

More than 180 days past due 51,883 43,688

Total 63,154 58,315

WorkSafe provides fully for uncollected debts of the employers who are in administration, receivership, liquidation or bankruptcy, and those debts where events have occurred and/or historical experience exists, which indicates that recovery of the debt is considered unlikely. A provison is also made for other past due debts based on historical loss experience.

Movement in provision for impairment 2012 2011

$000s $000s

Balance at beginning of the year 45,918 43,975

Amounts written-off during the year (632) (279)

Increase in allowance recognised in comprehensive operating statement 6,281 2,222

Balance at end of the year 51,567 45,918

18. Investments

Summary of investments integral to general insurance activities carried at fair value through the comprehensive operating statement

WorkSafe’s investment activity is undertaken pursuant to the Accident Compensation Act 1985, the Borrowing and Investment Powers Act 1987 and the Treasurer’s Prudential Statement. It is the Victorian Government’s policy that all the investment assets of WorkSafe be managed by the VFMC.

Under this arrangement, WorkSafe’s responsibility is to set investment objectives for the VFMC after considering such matters as WorkSafe’s capital needs, pricing and the Government’s risk preferences. The WorkSafe Board is not responsible for the management or prudential supervision of the investments – the management responsibility rests with the VFMC and the prudential supervision responsibility rests with the Department of Treasury and Finance (DTF).

The investment approach that is determined by the VFMC for WorkSafe is documented in a detailed Investment Risk Management Plan (IRMP) which is approved by the Treasurer. The IRMP is prepared by the VFMC and addresses issues concerning strategy, portfolio construction, benchmarks and risk management.

Investment performance, including comparisons to market benchmarks, is reported to the WorkSafe Board monthly. The Board’s standing Financial and Investment Strategies Committee also convenes periodically to review the VFMC’s investment performance against WorkSafe’s investment objectives as well as discusses with the VFMC, on an on-going basis, the strategic asset allocation and the implications for achieving the objectives.

The VFMC Board is required to certify to the DTF on a quarterly basis and on an annual basis to WorkSafe, that WorkSafe’s investment portfolio has been managed in accordance with the accepted IRMP and with WorkSafe’s investment objectives.

The investment portfolio consists of a range of assets that broadly resemble: cash and nominal bonds to cover short-term risk and liquidity needs; inflation linked assets that more closely match WorkSafe’s liability characteristics; and equities to provide for long-term growth.

As a part of the VFMC’s investment strategy, contracts are entered into which require WorkSafe to contribute additional future capital (partly paid shares and units). While these future obligations amounted to $242.52 million as at 30 June 2012 (2011: $230.67 million), no calls to subscribe were outstanding at the reporting date (2011: $nil).


2012 2011

$000s $000s

Cash and deposits at call (i) 1,454,279 1,391,400

Debt securities (i) 2,776,984 2,795,120

Australian listed equities 426,083 506,528

International listed equities 1,154,707 1,118,401

Unlisted equities 348,971 299,866

Listed trusts 65,409 71,273

Unlisted trusts 3,458,967 3,382,908

Financial derivatives – receivables (ii) 70,158 67,470

Investment settlements outstanding 77,504 59,271

Total investments (iii) 9,833,062 9,692,237

Current 1,831,982 1,730,933

Non-current 8,001,080 7,961,304

9,833,062 9,692,237

Notes:

(i) Where fund managers use futures contracts for efficient portfolio management, such positions are backed by holdings in cash and discount securities. Also included in cash and discount securities is the fund managers’ aggregate liquid position.

(ii) Derivatives allow investors to change their exposure to the risk of adverse movements in interest rates, exchange rates and share prices without altering the underlying physical security. They enable WorkSafe to protect the value of its assets against the risk of market fluctuations.

(iii) The investments, both current and non-current, except those in the unlisted equities and unlisted trusts, are readily convertible to cash assets.

19. Recoveries Receivable 2012 2011

$000s $000s

The recoveries receivable contained in the financial statements is obtained through independent actuarial valuation by PricewaterhouseCoopers Actuarial Limited.

Expected future recoveries (undiscounted) 280,591 282,527

Discount to present value (26,219) (44,888)

Recoveries receivable on incurred claims 254,372 237,639

Current 42,956 40,938

Non-current 211,416 196,701

254,372 237,639

20. Other Assets 2012 2011

$000s $000s

Sundry receivables (i) 5,401 6,846

Provision for impairment (ii) – (3)

5,401 6,843

Prepayments 3,435 4,138

8,836 10,981


Notes:

(i) The average credit period for sundry receivables is 28 days. Included within sundry receivables as at 30 June 2012 are $0.37 million (2011: $0.06 million) of past due receivables. WorkSafe provides fully for all receivables over 360 days because historical experience indicates that sundry receivables that are past due beyond 360 days are generally not recoverable. WorkSafe does not charge interest on overdue receivables nor hold collateral over these balances. The average age of those receivables that are past due but not impaired is 69 days (30 June 2011: 123 days).

(ii) Movement in provision for impairment 2012 2011

$000s $000s

Balance at beginning of the year 3 –

(Decrease) increase in allowance recognised in operating statement (3) 3

Balance at end of the year – 3

21. Plant and Equipment 2012 2011

$000s $000s

Leasehold improvements 37,237 36,943

Accumulated depreciation (21,092) (17,661)

16,145 19,282

Computer equipment 10,553 9,395


1,939 1,817

Furniture and equipment 11,292 10,779


4,050 5,152

Total plant and equipment 59,082 57,117


Balance at end of the year, at fair value 22,134 26,251

Movements in carrying amounts

Leasehold Improvements

Computer Equipment

Furniture & Equipment

Total

30 June 2012 $000s $000s $000s $000s

Carrying amount at beginning of the year 19,282 1,817 5,152 26,251

Additions 294 1,159 512 1,965

Disposals – – – –

Depreciation expense (3,431) (1,037) (1,614) (6,082)

Carrying amount at end of the year 16,145 1,939 4,050 22,134

Leasehold Improvements

Computer Equipment

Furniture & Equipment

Total

30 June 2011 $000s $000s $000s $000s

Carrying amount at beginning of the year 19,407 1,858 5,845 27,110

Additions 3,570 1,112 868 5,550

Disposals (77) – (8) (85)

Depreciation expense (3,618) (1,153) (1,553) (6,324)

Carrying amount at end of the year 19,282 1,817 5,152 26,251


22. Intangibles 2012 2011

$000s $000s

Computer software

– At cost 101,013 83,764

– Accumulated amortisation (32,253) (20,000)


Movements in carrying amounts

Computer Software

30 June 2012 $000s

Carrying amount at beginning of the year 63,764

Additions 18,463

Write-down of intangibles (1,174)

Amortisation expense (12,293)

Carrying amount at end of the year 68,760

30 June 2011 $000s

Carrying amount at beginning of the year 47,559

Additions 23,020

Write-down of intangibles (369)

Amortisation expense (6,446)

Carrying amount at end of the year 63,764

23. Payables 2012 2011

$000s $000s

Premium creditors 32,172 31,566

Other creditors and accruals 84,912 96,263

117,084 127,829

Other creditors and accruals represent liabilities for goods and services provided to WorkSafe, prior to the end of the financial year, which are unpaid. Amounts are normally settled within 30 days and are carried at nominal value, which approximates to fair value.


24. Outstanding Claims 2012 2011

$000s $000s

(a) Summary of valuation

The outstanding claims liability contained in the financial statements is obtained through independent actuarial valuation by PricewaterhouseCoopers Actuarial Limited.

Expected future claims payments (undiscounted) 11,108,111 10,886,506

Discount to present value (2,420,092) (3,257,289)

8,688,019 7,629,217

Claims handling expenses 1,021,794 871,266

9,709,813 8,500,483

Risk margin 834,075 728,455

Liability for outstanding claims 10,543,888 9,228,938

Current 1,841,526 1,752,886

Non-current 8,702,362 7,476,052

10,543,888 9,228,938

Liability 2012

Movement 2012

Liability 2011

Movement 2011

Liability 2010

$000s $000s $000s $000s $000s

(b) Movement in outstanding claims liability

Weekly compensation 2,914,468 309,262 2,605,206 25,743 2,579,463

Medical including medico-legal 2,131,302 283,171 1,848,131 83,850 1,764,281

Maims and impairment benefits 518,477 25,035 493,442 (13,275) 506,717

Common law 2,626,251 391,683 2,234,568 80,699 2,153,869

Other payment types 497,521 49,651 447,870 24,686 423,184

Claims handling expenses (i) 1,021,794 150,528 871,266 36,447 834,819

Risk margin (ii) 834,075 105,620 728,455 15,804 712,651

10,543,888 1,314,950 9,228,938 253,954 8,974,984

Notes:

(i) Claims handling expenses are an allowance made for the direct expenses to be incurred in settling claims.

(ii) The prudential risk margin provides for the inherent uncertainty in the central estimate of the outstanding claims.


(c) Reconciliation of movement in discounted net outstanding claims liability

30 June 2012 30 June 2011

GroGross ReRecoveries NeNett GroGross ReRecoveries NeNett

$000s $000s $000s $000s $000s $000s

Brought forward at beginning of the year 9,228,938 (237,639) 8,991,299 8,974,984 (207,150) 8,767,834

Effect of change in economic assumptions 1,029,326 (17,777) 1,011,549 (29,192) 761 (28,431)

Effect of past inflation rate different to assumptions 60,826 (2,209) 58,617 22,362 (2,428) 19,934

Effect of changes in other assumptions (226,437) 12,792 (213,645) (118,567) (35,174) (153,741)

Increase in claims incurred in current accident year 2,105,344 (113,125) 1,992,219 1,853,989 (93,818) 1,760,171

Release of risk handling margin and claims handling expenses (405,902) – (405,902) (385,883) – (385,883)

Cost of prior year claims moving closer to payment 365,403 (14,159) 351,244 448,610 (21,066) 427,544

Impact of Further Amendment Act – – – 8,383 – 8,383

Incurred claims recognised in the comprehensive operating statement 2,928,560 (134,478) 2,794,082 1,799,702 (151,725) 1,647,977

Claims (payments) recoveries during the year (1,613,610) 117,745 (1,495,865) (1,545,748) 121,236 (1,424,512)

Carried forward at end of the year 10,543,888 (254,372) 10,289,516 9,228,938 (237,639) 8,991,299 (d) Claims development table

The following tables show the development of gross and net undiscounted outstanding claims relative to the ultimate expected claims for the ten most recent accident years.

(i) Gross

Accident year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total

$000s $000s $000s $000s $000s $000s $000s $000s $000s $000s $000s

Estimate of ultimate claims cost:

– At end of accident year 1,607,636 1,696,339 1,594,546 1,667,314 1,657,693 1,662,551 1,664,184 1,820,572 2,023,875 2,106,262

– One year later 1,574,148 1,507,833 1,582,401 1,592,120 1,594,356 1,624,733 1,720,922 1,882,276 2,007,352 –

– Two years later 1,405,520 1,502,669 1,502,140 1,511,933 1,555,131 1,631,119 1,707,164 1,836,844 – –

– Three years later 1,394,100 1,361,029 1,370,703 1,428,761 1,579,787 1,605,039 1,671,093 – – –

– Four years later 1,338,779 1,298,061 1,325,047 1,417,887 1,555,099 1,597,988 – – – –

– Five years later 1,279,885 1,263,462 1,311,445 1,390,176 1,568,361 – – – – –

– Six years later 1,259,307 1,276,412 1,283,733 1,361,560 – – – – – –

– Seven years later 1,271,121 1,251,169 1,256,524 – – – – – – –

– Eight years later 1,262,459 1,234,549 – – – – – – – –

– Nine years later 1,252,831 – – – – – – – – –

Current estimate of cumulative claims cost 1,252,831 1,234,549 1,256,524 1,361,560 1,568,361 1,597,988 1,671,093 1,836,844 2,007,352 2,106,262 15,893,364

Cumulative payments (981,717) (958,337) (924,718) (923,916) (907,368) (839,968) (700,980) (580,890) (424,683) (164,569) (7,407,146)

Outstanding claims – undiscounted 271,114 276,212 331,806 437,644 660,993 758,020 970,113 1,255,954 1,582,669 1,941,693 8,486,218

2002 and prior years 2,621,893

Total outstanding claims – undiscounted 11,108,111

Discount (2,420,092)

Claims handling expenses 1,021,794

Risk margin 834,075

Total outstanding claims net of recoveries per balance sheet (Note 24 (c)) 10,543,888


(ii) Net

Accident year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total

$000s $000s $000s $000s $000s $000s $000s $000s $000s $000s $000s

Estimate of ultimate claims cost:

– At end of accident year 1,551,444 1,602,327 1,506,709 1,587,194 1,566,845 1,589,516 1,586,157 1,732,804 1,918,524 1,986,223

– One year later 1,484,285 1,422,485 1,504,988 1,503,543 1,518,226 1,550,542 1,635,318 1,782,741 1,902,261 –

– Two years later 1,323,384 1,422,647 1,422,906 1,438,408 1,478,738 1,548,512 1,616,939 1,737,719 – –

– Three years later 1,317,098 1,290,834 1,301,283 1,357,408 1,493,532 1,517,241 1,579,024 – – –

– Four years later 1,260,397 1,235,420 1,258,418 1,340,717 1,464,500 1,508,310 – – – –

– Five years later 1,209,302 1,199,516 1,240,655 1,305,352 1,476,952 – – – – –

– Six years later 1,188,176 1,208,649 1,212,894 1,279,945 – – – – – –

– Seven years later 1,197,209 1,182,063 1,189,769 – – – – – – –

– Eight years later 1,188,339 1,169,786 – – – – – – – –

– Nine years later 1,180,191 – – – – – – – – –

Current estimate of cumulative claims cost 1,180,191 1,169,786 1,189,769 1,279,945 1,476,952 1,508,310 1,579,024 1,737,719 1,902,261 1,986,223 15,010,180

Cumulative payments (912,733) (899,617) (867,156) (855,750) (836,130) (779,126) (644,172) (524,764) (367,678) (95,589) (6,782,715)

Outstanding claims – undiscounted 267,458 270,169 322,613 424,195 640,822 729,184 934,852 1,212,955 1,534,583 1,890,634 8,227,465

2002 and prior years 2,600,055

Total outstanding claims – undiscounted 10,827,520

Discount (2,393,873)

Claims handling expenses 1,021,794

Risk margin 834,075

Total outstanding claims net of recoveries per balance sheet (Note 24 (c)) 10,289,516

25. Provisions 2012 2011

$000s $000s

Employee benefits (Note 25(a)) 29,215 26,854

Leasehold restoration 155 834

Total current provisions 29,370 27,688

Employee benefits (Note 25(a)) 4,664 3,565

Leasehold restoration 4,067 2,811

Total non-current provisions 8,731 6,376

Total provisions 38,101 34,064


2012 2011

$000s $000s

(a) Employee benefits

Current

Annual leave entitlements 10,175 9,732

Unconditional long service leave entitlements 19,040 17,122

Total current employee benefits 29,215 26,854

Current employee benefits that:

Are expected to be utilised within 12 months after the end of the financial year 14,722 14,345

Are expected to be utilised more than 12 months after the end of the financial year 14,493 12,509

29,215 26,854

Non-current

Conditional long service leave entitlements 4,664 3,565

Total non-current employee benefits 4,664 3,565

Total employee benefits 33,879 30,419

(b) Movements in provisions Employee Benefits (i)

Leasehold Restoration (ii)

Total

30 June 2012 $000s $000s $000s

Balance at beginning of the year 30,419 3,645 34,064

Additional provisions recognised 14,044 73 14,117

Reductions arising from payments (12,374) – (12,374)

Unwinding of discount and effect of changes in the discount rate 1,790 504 2,294

Balance at end of the year 33,879 4,222 38,101

Notes:

(i) The provisions for employee benefits consist of annual leave and long service leave entitlements, including oncosts.

(ii) The provision for leasehold restoration represents the fair value of the dismantling, removal or restoration costs estimated to be required to be paid upon vacating the leased premises, where the obligation under these lease contracts for the premises to be returned to its original state existed at the time of entering into the leases.


26. Reserves and accumulated (deficit) surplus Reserves

WorkHealth Initiative (i)

Research Initiative (ii)

Total

Accumulated (Deficit) Surplus

Total Equity

$000s $000s $000s $000s $000s

Equity at 1 July 2010 556,499 95,071 651,570 338,231 989,801

Net result for the year – – – 520,842 520,842

Transfer to reserves of net result for the year of initiatives 44,204 8,548 52,752 (52,752) –

Dividend paid – – – – –

Equity at 30 June 2011 600,703 103,619 704,322 806,321 1,510,643

Net result for the year – – – (675,562) (675,562)

Transfer to reserves of net result for the year of initiatives (2,967) 674 (2,293) 2,293 –

Dividend paid – – – (147,000) (147,000)

Equity at 30 June 2012 597,736 104,293 702,029 (13,948) 688,081

Notes:

(i) WorkHealth is an initiative to support Victorian workplaces by offering voluntary programs to promote the health and wellbeing of workers to reduce workplace injury and improve return to work.

(ii) The Institute for Safety, Compensation, and Recovery Research is a collaborative initiative with the Transport Accident Commission and the Monash University to facilitate research and best practice in injury prevention, rehabilitation and compensation practice and to improve outcomes in those areas.

27. Notes to the Cash Flow Statement

(a) Reconciliation of cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents include cash on hand and highly liquid investments that have short periods to maturity and are readily convertible to cash at the option of WorkSafe. Cash and cash equivalents at the end of the financial year as shown in the cash flow statement are reconciled to the related items in the balance sheet as follows:

2012 2011

$000s $000s

Cash and cash equivalents 43,998 26,354

Investments – cash and deposits at call 1,471,382 1,402,139

1,515,380 1,428,493


2012 2011

$000s $000s

(b) Reconciliation of net result to net cash flows from operating activities

Net result for the year (675,562) 520,842

Changes in fair values of investments at fair value through the comprehensive operating statement 28,363 (539,006)

Depreciation on plant and equipment 6,082 6,324

Amortisation on intangibles 12,293 6,446

Gain on disposal of plant and equipment – 80

Write-down of intangibles 1,174 369

Discount and discount movement in provisions 2,294 (1,323)

Changes in assets and liabilities:

(Increase) in premiums receivable (7,862) (27,399)

Decrease (increase) in investment income receivable 15,476 (21,182)

(Increase) in recoveries receivable (16,733) (30,489)

Decrease (increase) in sundry receivable 1,442 (2,116)

Decrease (increase) in prepayments 702 (259)

(Increase) decrease in net deferred tax assets (303,882) 205,857

Increase (decrease) in premium creditors 606 (25,637)

(Decrease) in other creditors and accruals (11,351) (19,706)

Increase in outstanding claims 1,314,950 253,954

Increase in provisions 1,743 2,651

Total adjustments 1,045,297 (191,436)

Net cash flows from operating activities 369,735 329,406

28. Commitments 2012 2011

$000s $000s

(a) Operating leases (i)

Future minimum lease payments under non-cancellable operating lease arrangements:

Due within one year 22,972 21,330

Due later than one year and less than five years 82,654 63,810

Due later than five years 29,749 35,592

135,375 120,732

(b) Other operating commitments

Amounts payable under non-cancellable other operational contractual arrangements:

Due within one year 9,357 8,732

Due later than one year and less than five years 1,788 7,400

11,145 16,132

Note:

(i) Operating leases relate to leasehold premises, vehicles and office equipment with lease terms between 1 and 10 years. Some operating lease contracts contain market review clauses in the event that WorkSafe exercises its option to renew. WorkSafe does not have an option to purchase the leased assets at the expiry of the lease periods.


29. Responsible Person-Related Disclosures

(a) Responsible persons

In accordance with the Ministerial Directions issued by the Minister for Finance under the Financial Management Act 1994, the responsible persons who held office during the financial year were the Hon. Gordon Rich-Phillips MLC, Assistant Treasurer, and the following responsible persons:

Mr Paul Barker’s term as Chairperson ceased on 14 July 2012. Mr David Krasnostein was appointed as Chairperson effective 15 July 2012.Mr Greg Tweedly’s term as Chief Executive and director of WorkSafe ceased on 6 July 2012. Mr Ian Forsyth was appointed as the Acting Chief Executive and director effective 7 July 2012.

(b) Transactions with responsible person-related entities

Mr Greg Tweedly was a director of the Personal Injury Education Foundation (PIEF). WorkSafe is a founding member of PIEF and is committed to contributing towards its operating costs. The aggregate amounts in respect of the above transactions with responsible person-related entities were:

2012 2011

$000s $000s

Contributions – (22)

Membership and training (52) (70)

Mr Greg Tweedly was a Board member of the Institute for Safety, Compensation, and Recovery Research (ISCRR). WorkSafe is committed to contributing towards funding the research activities of ISCRR. The aggregate amounts in respect of the above transactions with responsible person-related entities were:

2012 2011

$000s $000s

Fundings (3,359) (1,667)

Project evaluation services (681) (511)

Seminars (3) –

Mr Paul Barker and Mr Geoff Hilton are, and Ms Elana Rubin was, directors of the TAC. Under the Accident Compensation Act 1985, WorkSafe is entitled to recover from the TAC, all compensation payable under the WorkSafe scheme for injury in a transaport accident during the course of work. WorkSafe also receives annual Workplace Injury Insurance premium from the TAC.

WorkSafe and the TAC reimbursed each other for the cost of external services acquired jointly, and internal services provided to each other, in relation to collaborative initiatives between WorkSafe and the TAC. In addition, WorkSafe made payments to the TAC for the management of WorkSafe claims of injured workers with catastrophic injuries.

The aggregate amounts in respect of the above transactions with responsible person-related entities were:

2012 2011

$000s $000s

Recovery of compensation paid 68,600 61,530

Workplace Injury Insurance premium 447 425

Cost reimbursement received and receivable 10,345 11,987

Cost reimbursement paid and payable (5,768) (5,756)

Management of catastrophic claims (1,154) (1,106)

Transactions with responsible person-related entities are made on normal commerical terms and conditions. Conflicts of interest are overcome where warranted, by directors declaring their interests and abstaining from voting at WorkSafe’s Board meetings.

30. Remuneration of Responsible Persons 2012 2011

$000s $000s

Total remuneration of all responsible persons received or receivable in connection with their employment (i) 766 846

– Mr Paul Barker (Chairperson, appointed effective 14 February 2012)– Ms Elana Rubin (Chairperson, term expired on 14 February 2012)– Mr Greg Tweedly (Chief Executive)– Ms Jane Bell

– Dr Geoff Brooke – Mr Geoff Hilton– Mr David Krasnostein (appointed effective 6 December 2011)


The number of responsible persons of WorkSafe whose remuneration falls within the following bands was:

$ $ 2012 2011

20,001 – 30,000 1 –

40,001 – 50,000 2 4

50,001 – 60,000 1 1

60,001 – 70,000 – 1

70,001 – 80,000 2 –

110,001 – 120,000 – 1

430,001 – 440,000 – 1

450,001 – 460,000 1 –

Note:

(i) Amounts relating to ministers are reported in the financial statements of the Department of Premier and Cabinet.

31. Remuneration of Executive Officers

The number of executive officers of WorkSafe, excluding the Chief Executive, whose total remuneration exceeded $100,000 is shown in the table below. Base remuneration is exclusive of bonus, long-service leave and redundancy payments. The number of executives varies from year to year due to the timing of appointments, resignations, and the composition of the executives. The total annualised employee equivalent provides a measure of full-time equivalent executive officers over the reporting period.

Income Band Base Remuneration Total Remuneration

$ $ 2012 2011 2012 2011

20,001 – 30,000 – 1 – –

50,001 – 60,000 1 – – –

100,001 – 110,000 1 – 1 1

140,001 – 150,000 1 – – –

150,001 – 160,000 – – 1 –

160,001 – 170,000 – 1 – –

170,001 – 180,000 1 1 – 2

190,001 – 200,000 1 – 1 –

210,001 – 220,000 – 1 1 –

220,001 – 230,000 1 1 – –

230,001 – 240,000 – 2 – –

240,001 – 250,000 3 1 2 2

260,001 – 270,000 1 1 1 –

270,001 – 280,000 1 1 2 2

280,001 – 290,000 – – – 1

290,001 – 300,000 – – 1 –

300,001 – 310,000 – – 1 –

310,001 – 320,000 – – – 1

320,001 – 330,000 – – – 1

350,001 – 360,000 – 1 – –

360,001 – 370,000 1 – – –

400,001 – 410,000 – – 1 –

420,001 – 430,000 – – – 1

Total number of executives 12 11 12 11

Total annualised employee equivalent (i) 11 10 11 10

Total amount $2,590,444 $2,458,231 $3,036,992 $2,871,436 Note:

(i) Annualised employee equivalent is based on working 38 ordinary hours per week over the reporting period.


32. Employee Superannuation 2012 2011

$000s $000s

Superannuation is provided for employees via the following schemes:

Defined contribution schemes

VicSuper Pty Ltd – VicSuper Scheme 8,623 9,056

Other 3,863 3,727

12,486 12,783

Defined benefit schemes

Emergency Services Superannuation Scheme

– Revised Scheme 714 749

– New Scheme 1,357 1,415

– State Employees Retirement Benefit Scheme 17 16

– Transport Scheme 10 12

2,098 2,192

14,584 14,975

WorkSafe does not recognise any defined benefit liability under the Emergency Services Superannuation Scheme, as WorkSafe has no legal or constructive obligation to pay future benefits relating to its employees. WorkSafe’s only obligation is to pay superannuation contributions as they fall due. The Department of Treasury and Finance administers and discloses the State’s defined benefit liabilities in its financial report.

The basis of superannuation contributions is based on the relevant rules of each plan. At 30 June 2012, contributions outstanding were $nil (2011: $nil).

Employees have the option of contributing exclusively to private sector complying funds or contributing to a state fund or both.

Employee superannuation includes contributions paid under salary sacrifice arrangements.

33. Financial Instruments WorkSafe’s financial assets and liabilities are exposed to a variety of financial risks: credit risk, liquidity risk and market risk. The VFMC uses different methods to measure different types of risk to which WorkSafe’s investment portfolio is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, and credit ratings for credit risk.

(a) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to WorkSafe.The VFMC manages credit risk by conducting due diligence on counterparties and will only deal with counterparties of high quality with substantial balance sheets. Agreements also contain provisions for the agreement to be reviewed or rescinded upon the occurrence of specified events relating to counterparty credit and liquidity.

Assessment processes also ensure that well-defined documentation underpins each transaction; that clear rules exist for completing single transactions with a particular counterparty; and that appropriate credit limits exist to accommodate the transaction. Exposure is measured according to the individual transaction, counterparty total, credit rating total and other bases, and is monitored by personnel separated from the dealing function. When conducting over-the-counter derivative transactions, bilateral legal contracts must be signed with the counterparty prior to execution of the transaction.

The establishment of appropriate policies and multi-tiered limits ensures that WorkSafe maintains a diversified portfolio without any significant concentration of credit risk on an industry, regional or country basis.

(i) WorkSafe’s maximum exposure to credit risk at reporting date in relation to each class of financial asset is the carrying amount of those assets as indicated in the balance sheet.

(ii) Concentrations of credit risk

The VFMC manages credit risk by diversifying the exposure among counterparties and operating in liquid markets. WorkSafe does not have any significant concentration of credit risk on an industry, regional or country basis. The investment strategy for WorkSafe is to ensure a diversified portfolio.


The table below provides information regarding the credit risk exposure of WorkSafe by classifying assets according to the credit ratings of counterparties.

30 June 2012Investment

grade (i)Non–investment

grade (ii)Past due or

impaired

Total

$000s $000s $000s $000s

Financial assets at fair value through the comprehensive operating statement

Cash and cash equivalents 43,998 – – 43,998

Cash and deposits at call 1,454,279 – – 1,454,279

Receivables – 40,621 11,956 52,577

Debt securities 2,662,936 114,048 – 2,776,984

Financial derivatives – receivables – 70,158 – 70,158

4,161,213 224,827 11,956 4,397,996

30 June 2011

$000s $000s $000s $000s

Financial assets at fair value through the comprehensive operating statement


Cash and deposits at call 1,391,400 – – 1,391,400

Receivables – 44,361 12,457 56,818

Debt securities 2,713,660 81,460 – 2,795,120

Financial derivatives – receivables – 67,470 – 67,470

4,131,414 193,291 12,457 4,337,162

Notes:

(i) Assets classified with Standard and Poors credit ratings of AAA to BBB– are classified as investment grade.

(ii) The non-investment grade assets include assets that fall outside the range of AAA to BBB– Standard and Poors credit ratings as well as non-rated assets that are within the risk parameters outlined in the Investment Risk Management Plan.

(b) Liquidity risk Liquidity risk arises from WorkSafe being unable to meet financial obligations as they fall due.

The VFMC uses a combination of cash and futures portfolios plus a large proportion of listed securities to ensure sufficient liquidity is available at all times to meet WorkSafe’s operating requirements.

The following tables summarise the maturity profile of WorkSafe’s financial liabilities. The tables include the liquidity analysis in relation to contractual (as opposed to statutory) financial liabilities. While the liability for outstanding claims is the most significant liability for which payments will need to be made in the future, they are excluded from the definition of a financial liability under AASB 4 ‘Insurance Contracts’.

Details on the average term to settlement for the claims liabilities portfolio are included in Note 4.


30 June 2012

Less than 3 months

4–12 months

1–5 years

5+ years Total

$000s $000s $000s $000s $000s

Financial liabilities

Other creditors and accruals 61,535 55,504 45 – 117,084

Derivative financial instruments – – – – –

61,535 55,504 45 – 117,084

30 June 2011


Other creditors and accruals 87,365 40,457 7 – 127,829

Derivative financial instruments – – – – –

87,365 40,457 7 – 127,829

(c) Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: market interest rates (interest rate risk), foreign exchange (currency risk) and market prices (equity price risk). When establishing the investment asset allocation, the VFMC considers input from actuaries to ensure that the investment mix is appropriate to service future WorkSafe liabilities and that projected outcomes are in line with the overall investment objectives and remain within the risk parameters approved by the Treasurer.

For the sensitivity analysis of each type of market risk, the percentage change used for each of the variables has been determined by WorkSafe as at 30 June 2012 and 2011, in consultation with the VFMC.

(i) Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The significant accounting policies (Note 3) describe the policies used to measure and report the assets and liabilities of WorkSafe. Where the applicable fair value is determined by discounting future cash flows, movements in interest rates will result in a reported unrealised gain or loss in the comprehensive operating statement.

The VFMC seeks to manage the interest rate risk through an asset allocation strategy for the investment portfolio, which acts as an economic hedge against the insurance liabilities of WorkSafe. To the extent that these assets and liabilities can be matched, unrealised gains and losses on the remeasurement of liabilities resulting from interest rate movements will be offset by unrealised losses or gains on the remeasurement of investment assets.

The VFMC uses derivatives to manage the interest rate risk on the interest rate sensitive assets. Interest rate swap contracts and forward rate agreements are used to either change the interest rate risk between fixed and floating rates of interest or between different floating rates of interest.

(a) Interest rate swaps

Interest rate swaps allow the VFMC to swap floating rate investments into fixed rates and vice versa. The settlement dates coincide with the dates on which interest is payable on the underlying debt.

Contracts normally involve quarterly payment or receipt of the net amount of interest. The unrealised gain on the swaps in the portfolio as at 30 June 2012 was $11.40 million (2011: $29.14 million).

(b) Interest rate options

The VFMC may enter into interest rate options to hedge interest rate exposures. The option contracts have repricing terms up to 3 months. As at 30 June 2012, the outstanding option contracts were $nil (2011: $nil).

(c) Forward rate agreements

The VFMC may enter into forward interest rate agreements with expiration terms ranging out to 12 months to maximise anticipated investment returns. As at 30 June 2012, outstanding agreements were $nil (2011: $nil).


(d) A summary of WorkSafe’s exposure to interest rate risk on financial instruments is as follows:

VariableInterest

Rate

Fixed Interest Rate Period to maturity or re–pricingNon

Interest Bearing

Total Carrying

Value30 June 2012Less than3 months

4–12 months

1–5 years

Over 5years

$000s $000s $000s $000s $000s $000s $000s

Financial assets

Cash and cash equivalents 43,998 – – – – – 43,998

Premium receivables – – – – – 51,158 51,158

Investments

– Interest rate swaps 11,401 – – – – – 11,401

– Other investments 1,878,139 1,253,516 32,894 520,582 545,459 5,591,071 9,821,661

Other assets – – – – – 5,401 5,401

1,933,538 1,253,516 32,894 520,582 545,459 5,647,630 9,933,619


Payables – – – – – 117,084 117,084

Net financial assets 1,933,538 1,253,516 32,894 520,582 545,459 5,530,546 9,816,535

VariableInterest

Rate

Fixed Interest Rate Period to maturity or re–pricingNon

Interest Bearing

Total Carrying

Value30 June 2011Less than3 months

4–12 months

1–5 years

Over 5years

$000s $000s $000s $000s $000s $000s $000s

Financial assets

Cash and cash equivalents 26,342 – – – – 12 26,354

Premium receivables – – – – – 55,096 55,096

Investments

– Interest rate swaps 29,141 – – – – – 29,141

– Other investments 2,258,175 1,011,190 23,634 506,126 387,630 5,476,341 9,663,096

Other assets – – – – – 6,843 6,843

2,313,658 1,011,190 23,634 506,126 387,630 5,538,292 9,780,530


Payables – – – – – 127,829 127,829

Net financial assets 2,313,658 1,011,190 23,634 506,126 387,630 5,410,463 9,652,701


2012 2011

$000s $000s

Reconciliation of net financial assets to net assets:

Net financial assets as above 9,816,535 9,652,701

Non-financial assets and liabilities:

– Recoveries receivable 254,372 237,639

– Prepayments 3,435 4,138

– Confirmed premium estimate 24,900 13,100

– Plant and equipment 22,134 26,251

– Intangibles 68,760 63,764

– Net deferred tax assets 1,079,795 775,913

– Tax recoveries 139 139

– Outstanding claims (10,543,888) (9,228,938)

– Provisions (38,101) (34,064)

Net assets per balance sheet 688,081 1,510,643

Interest rate sensitivity

A sensitivity analysis has been determined based on the exposure to interest rates at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. A 0.5% increase or decrease in interest rates (or discount rates) is used by actuaries to present the sensitivities of the actuarial clams liabilities (Note 4). This percentage has been used to present the impact on interest bearing investments. These movements are attributable to WorkSafe’s exposure to interest rates on its variable rate investments and its fair value movement on its fixed rate investments.

At reporting date, if interest rates had moved 0.5% up or down and all other variables were held constant, WorkSafe’s net result and equity would change as follows:

2012 2011

$000s $000s

Impact on net result and equity of a 0.5% increase in interest rates:

– before impact of interest rate derivatives (48,016) (51,080)

– impact of interest rate derivatives (4,724) 2,993

– after impact of interest rate derivatives (52,740) (48,087)

Impact on net result and equity of a 0.5% decrease in interest rates:

– before impact of interest rate derivatives 48,044 51,111

– impact of interest rate derivatives 4,725 (2,993)

– after impact of interest rate derivatives 52,769 48,118

(ii) Foreign currency risk

Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. WorkSafe is exposed to foreign exchange risk through its investments which are denominated in foreign currency, and anticipated future transactions.

Forward foreign exchange contracts

The VFMC limits foreign exchange risk through the use of forward contracts where it agrees to sell specified amounts of foreign currencies in the future at a predetermined exchange rate. The proportion of foreign exchange risk which is hedged is reviewed regularly to ensure that the net exposure is maintained at a level which is consistent with the overall investment objectives.

The table below summarises WorkSafe’s exposure to foreign currency risk and the management of that exposure using forward exchange contracts outstanding at balance date in Australian dollar equivalents.


Investment in Foreign Currency Forward Contract Cover Net exposure

2012 2011 2012 2011 2012 2011

$000s $000s $000s $000s $000s $000s

Australian Dollar 7,509,676 7,542,218 1,915,340 1,669,746 9,425,016 9,211,964

British Pound 116,045 107,287 (367,552) (352,908) (251,507) (245,621)

Euro Dollar 250,076 235,685 (280,550) (278,843) (30,474) (43,158)

Japanese Yen 68,818 76,754 (158,748) (151,375) (89,930) (74,621)

United States Dollar 1,673,162 1,504,920 (819,953) (719,469) 853,209 785,451

Other 163,466 200,544 (236,718) (142,322) (73,252) 58,222

Total investments (Note 18) 9,781,243 9,667,408 51,819 24,829 9,833,062 9,692,237

Foreign currency sensitivity

The sensitivity analysis below has been determined based on the exposure to foreign exchange rates at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the financial year.

The following table details WorkSafe’s sensitivity to a 10% increase and decrease in the Australian Dollar against the relevant foreign currencies.

The sensitivity analysis includes foreign currency denominated investment items and adjusts their translation at the year end for a 10% change in foreign currency rates. A positive number indicates an increase in the net result where the Australian Dollar strengthens against the respective currency.

2012 2011

$000s $000s

Impact on net result and equity of a 10% increase in foreign exchange rates:

– before impact of foreign exchange derivatives (144,554) (135,240)

– impact of foreign exchange derivatives 118,588 104,676

– after impact of foreign exchange derivatives (25,966) (30,564)

Impact on net result and equity of a 10% decrease in foreign exchange rates:

– before impact of foreign exchange derivatives 176,677 165,293

– impact of foreign exchange derivatives (144,941) (127,938)

– after impact of foreign exchange derivatives 31,736 37,355

(iii) Other price risk

WorkSafe is exposed to equity price risk arising from investments in Australia and overseas (Note 18). The equity investments are held to back general insurance activities and the portfolio is actively managed. The VFMC limits price risk through diversification of the equity investment portfolio.

Equity price sensitivity

The sensitivity analysis below has been determined based on the exposure to equity prices both within Australia and overseas markets at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the financial year.

The following table details WorkSafe’s sensitivity to a 10% increase and decrease in the Australian equities market and a 10% increase and decrease in overseas equities markets.

If Australian and overseas equity prices had been 10% higher or lower and all other variables held constant at the year end, WorkSafe’s net result and equity would change as follows:


2012 2011

$000s $000s

Impact on net result and equity of a 10% increase in:

– listed equity prices 135,063 150,539

– unlisted Australian equity prices 210,680 217,069

– unlisted Overseas equity prices 55,876 40,725

401,619 408,333

Impact on net result and equity of a 10% decrease in:

– listed equity prices (135,063) (150,539)

– unlisted Australian equity prices (210,680) (217,069)

– unlisted Overseas equity prices (55,876) (40,725)

(401,619) (408,333)

(d) Fair value WorkSafe’s financial instruments are classified into a three-level fair value hierarchy based on the degree to which the fair value is observable:

(i) Level 1 – Fair value is calculated based on quoted prices in active markets for identical assets or liabilities. These inputs are readily available in the market and are normally obtainable from multiple sources.

(ii) Level 2 – Fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or the liability, either directly (as prices) or indirectly (derived from prices).

(iii) Level 3 – Fair value is estimated using inputs for the asset or liability that are not based on observable market data.

The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table below:

30 June 2012 Level 1 Level 2 Level 3 Total

$000s $000s $000s $000s

Financial assets


Premium receivables – 51,158 – 51,158

Investments 3,189,437 6,495,497 148,128 9,833,062

Other assets – 5,401 – 5,401

3,233,435 6,552,056 148,128 9,933,619


Payables – 117,084 – 117,084

Net financial assets 3,233,435 6,434,972 148,128 9,816,535

30 June 2011 Level 1 Level 2 Level 3 Total

$000s $000s $000s $000s

Financial assets


Premium receivables – 55,096 – 55,096

Investments 3,162,891 6,308,703 220,643 9,692,237

Other assets – 6,843 – 6,843

3,189,245 6,370,642 220,643 9,780,530


Payables – 127,829 – 127,829

Net financial assets 3,189,245 6,242,813 220,643 9,652,701


Transfer between categories

An amount of $0.02 million was transferred from Level 1 to Level 2 during the year ended 30 June 2012 (2011: $36.64 million).

No amounts were transferred from Level 2 to Level 1 during the year ended 30 June 2012 (2011: $2.39 million).

Reconciliation of Level 3 fair value movements

The following table presents the changes in Level 3 instruments (financial assets) for the year ended 30 June 2012:

Investments 30 June 2012 30 June 2011

$000s $000s

Balance at beginning of the year 220,643 9,061

Transfers from Level 2 to Level 3 – 454,083

Losses recognised in the comprehensive operating statement (45,411) (110,673)

Purchases 241,549 232,710

Sales (213,579) (364,538)

Transfers from level 3 to Level 2 (55,074) –


e) Estimation uncertainty The investments managed by the VFMC on behalf of WorkSafe include unlisted investments. These unlisted investments are not traded in an active market, and hence their fair value at reporting date is based on the price advised by external fund managers or valuations determined by appropriately skilled independent third parties.

Where valuation techniques including discounted cash flows, multiples based analysis, comparison with similar transactions and other techniques considered appropriate in the circumstances have been employed in pricing or valuing investments, the valuations are inherently subject to estimation uncertainty. Given this inherent subjectivity, the underlying inputs and assumptions are reviewed on an on-going basis to ensure the valuations reflect the best estimates of the economic conditions at reporting date. The value of such investments at 30 June 2012 was $1.788 billion (2011: $1.756 billion), comprising Level 3 and some Level 2 investments.

It is reasonably possible that outcomes within the next financial year would be different from the assumptions used in the current valuation models and a material adjustment to the carrying amounts of the related investments could be required.

The disclosures below provide details of the inputs and assumptions used in the current valuation models. Except for the investment trusts managed by the VFMC disclosed below (VFMC Trusts), the remainder of the unlisted investments are held via third party pooled investment vehicles, where the actual assumptions used and sensitivity of the carrying value to these assumptions, and the reasonably possible range of outcomes have not been disclosed to the VFMC.

(i) Infrastructure investments Infrastructure investments comprise both domestic and international exposure to transport, social, energy and other infrastructure assets through unlisted pooled vehicles and unlisted trusts.

The valuations of unlisted infrastructure investments are primarily based on a discounted cash flow methodology. Key inputs which may be subject to estimation uncertainty include the risk-free rate, risk premium, and estimated future cash flows.

The carrying value of WorkSafe’s infrastructure investments with estimation uncertainty at 30 June 2012 was $446.287 million (2011: $444.153 million). Included in this asset class are unit holdings in the following VFMC Trusts:

VFMC Investment Trust 1A

The Trust has an investment in an unlisted pooled vehicle and holds equity in an unlisted airport in the United Kingdoms (UK), which has been valued by an independent valuer based on the discounted cash flow methodology using an estimated cost of equity. Forecast cash flows have been derived from a model provided by the airport’s management in line with the approved business plan.

The key input for the valuation of the airport is the discount rate applied to discount forecast cash flows. The discount rate applied at 30 June 2012 was 10.25% (2011: 10.35%). Key dependencies in forecasting future cash flows include passenger volumes and mix of passengers, operating costs, capital expenditure, gearing level and UK tax rate.

The carrying value of WorkSafe’s investment in the Trust with estimation uncertainty at 30 June 2012 was $124.341 million (2011: $113.236 million).


VFMC UK Investment Trust

The Trust holds equity in an unlisted UK-based Public Private Partnership (PPP), which has been valued by an independent valuer based on the discounted cash flow methodology using an estimated cost of equity. Forecast cash flows have been derived from a whole-of-life model provided by the PPP management, reflecting the consolidation of the underlying project models.

The key input for the valuation of the PPP is the discount rate applied to discount forecast cash flows. The discount rate applied at 30 June 2012 was 9.0% (2011: 9.0%). Key dependencies in the valuation model include long-term performance of the underlying projects, operating costs, long-term Retail Price Index, management of specific project events, counter party risks and group tax relief.

The carrying value of WorkSafe’s investment in the Trust with estimation uncertainty at 30 June 2012 was $85.235 million (2011: $79.679 million).

VFMC Finance Trust and VFMC Investments Pty Ltd

The unit and equity holdings provide an exposure to an Australian gas pipeline, which has been valued by an independent valuer based on the discounted cash flow methodology using an estimated cost of equity. Forecast cash flows have been derived from a model reflecting the latest economic and operating assumptions, including updated capital expenditure and operating budgets.

The key input for the valuation of the pipeline is the discount rate applied to discount forecast cash flows. The discount rate applied at 30 June 2012 was 9.2% (2011: 9.6%). Key dependencies in the valuation model include renewal of existing contracts upon expiry at the forecast level of volume and pricing, operating costs, capital expenditure and maintenance of the current capital structure.

The carrying value of WorkSafe’s investments with estimation uncertainty at 30 June 2012 was $70.117 million (2011: $69.129 million).

(ii) Private equity investments

Private equity investments comprise both domestic and international exposure to venture capital, buyout, special situations and expansion capital sectors. These investments include externally managed unlisted pooled vehicles and trusts.

The valuation of unlisted private equity investments are primarily based on multiples of earnings, discounted cash flow, market equivalents and other market accepted methodologies. Key inputs which may be subject to estimation uncertainty include the identification of appropriate comparables, estimated future profits, risk-free rate, risk premium, estimated future cash flows and future economic and regulatory conditions.

The carrying value of WorkSafe’s private equity investments with estimation uncertainty at 30 June 2012 was $263.504 million (2011: $283.266 million).

(iii) Property investments

Property investments include externally managed unlisted property trusts with exposure to domestic and international commercial, industrial, retail and development property market.

The valuations of unlisted property investments are primarily based on discounted cash flow, capitalisation and direct comparison methodologies. Key inputs which may be subject to estimation uncertainty include the identification of appropriate comparables, estimated future profits, risk-free rate, risk premium, estimated future cash flows and future economic and regulatory conditions.

The carrying value of WorkSafe’s property investments with estimation uncertainty at 30 June 2012 was $760.884 million (2011: $739.951 million).

(iv) Insurance investments

WorkSafe has unit holdings in the VFMC Insurance Strategies Trust, which holds a portfolio of life insurance policies in the United States. The portfolio of insurance policies is valued using the actuarial asset share method. Key inputs which are subject to estimation uncertainty include investment specific discount rate, estimates on life expectancy, expected future premiums to be paid or received, forecast cash flows and future economic conditions.

The weighted average discount rate applied to the portfolio at 30 June 2012 was 18.9% (2011: N/A). Estimates on life expectancy are obtained from qualified providers. Expected premium payments are optimised by using the ‘back solving’ method where the valuer determines the minimum amount that needs to be paid on each premium due date to prevent each individual policy from lapsing.

The carrying value of WorkSafe’s investment in the Trust with estimation uncertainty at 30 June 2012 was $112.856 million (2011: $nil). In prior year WorkSafe’s insurance investment of $151.359 million was held in a non-VFMC trust.

(v) Fixed interest investments

Fixed interest investments comprise investments in government, government-related, corporate and securitised bonds, loans and other debt instruments, primarily from Australian issuers but with some limited exposure to international issuers, and fixed interest and currency instruments through externally managed unlisted pooled vehicles and segregated portfolios.

The valuations of fixed interest investments are primarily based on third party pricing services, brokers, market makers and valuation methodologies determined to be appropriate by the managers or their independent valuation agent. Such methodologies applied may include discounted cash flow, amortised cost, direct comparison and others. Key inputs which may be subject to estimation uncertainty include appropriate credit spread and other risk premium, risk-free rate, estimated future cash flows, identification of appropriate comparables, future economic and regulatory conditions.

The carrying value of WorkSafe’s diversified fixed income investment with estimation uncertainty at 30 June 2012 was $27.359 million (2011: $13.015 million).


(vi) Non-traditional strategies investments

Non-traditional strategies investments comprise investments in hedge funds and other non-traditional investments that do not fit within the definition of other asset classes but which provide diversification benefits to the total portfolio. These investments are made through externally managed unlisted pooled vehicles.

The valuations of non-traditional strategies investments are primarily based on prices quoted on an exchange or traded in a dealer market. For less liquid securities, valuation methodologies such as discounted cash flow, amortised cost, direct comparison and other market accepted methodologies may be used. Key inputs which may be subject to estimation uncertainty include appropriate credit spread and other risk premium, risk-free rate, estimated future cash flows, identification of appropriate comparables, future economic and regulatory conditions.

The carrying value of WorkSafe’s non-traditional strategies investment with estimation uncertainty at 30 June 2012 was $177.559 million (2011: $124.128 million).

Statement by Chairperson, Acting Chief Executive and Chief Financial Officer

The attached financial statements of WorkSafe Victoria have been prepared in accordance with Standing Direction 4.2 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 2012 and the financial position of WorkSafe Victoria as at 30 June 2012.

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.

David Krasnostein Ian Forsyth Ian Sargent

Chairperson Acting Chief Executive Chief Financial Officer

Dated at Melbourne this 31st day of August 2012.


INDEPENDENT AUDITOR’S REPORT

To the Board Members, Victorian WorkCover Authority

The Financial Report

The accompanying financial report for the year ended 30 June 2012 of the Victorian WorkCover Authority which comprises the comprehensive operating statement, balance sheet, statement of changes in equity, cash flow statement, notes comprising a summary of significant accounting policies and other explanatory information, and the statement by chairperson, acting chief executive and chief financial officer has been audited.

The Board Members’ Responsibility for the Financial Report

The Board Members of the Victorian WorkCover Authority are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards, and the financial reporting requirements of the Financial Management Act 1994, and for such internal control as the Board Members determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

As required by the Audit Act 1994, my responsibility is to express an opinion on the financial report based on the audit, which has been conducted in accordance with Australian Auditing Standards. Those standards require compliance with relevant ethical requirements relating to audit engagements and that the audit be planned and performed to obtain reasonable assurance about whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The audit procedures selected depend on judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, consideration is given to the internal control relevant to the entity’s preparation and fair presentation of the financial report 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 entity’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the Board Members, as well as evaluating the overall presentation of the financial report.

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

Independence

The Auditor-General’s independence is established by the Constitution Act 1975. The Auditor-General is not subject to direction by any person about the way in which his powers and responsibilities are to be exercised. In conducting the audit, the Auditor-General, his staff and delegates complied with all applicable independence requirements of the Australian accounting profession.

Opinion

In my opinion, the financial report presents fairly, in all material respects, the financial position of the Victorian WorkCover Authority as at 30 June 2012 and of its financial performance and its cash flows for the year then ended in accordance with applicable Australian Accounting Standards, and the financial reporting requirements of the Financial Management Act 1994.

Matters Relating to the Electronic Publication of the Audited Financial Report

This auditor’s report relates to the financial report of the Victorian WorkCover Authority for the year ended 30 June 2012 included both in the Victorian WorkCover Authority’s annual report and on the website. The Board Members of the Victorian WorkCover Authority are responsible for the integrity of the Victorian WorkCover Authority’s website. I have not been engaged to report on the integrity of the Victorian WorkCover Authority’s website. The auditor’s report refers only to the subject matter described above. It does not provide an opinion on any other information which may have been hyperlinked to/from these statements. If users of the financial report are concerned with the inherent risks arising from publication on a website, they are advised to refer to the hard copy of the audited financial report to confirm the information contained in the website version of the financial report.

MELBOURNE D D R Pearson3 September 2012 Auditor-General


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Occupational Health and Safety Act 2004

A & A Di Medio & Son (Aust) Pty Ltd Without conviction, sentenced to be released on an adjourned undertaking for a period of 12 months, with a special condition to pay $4,000 to the Australian Quadraplegic Foundation.

A M & P Zanghi Pty Ltd Convicted and fined. $100,000.00

Age Print Company Pty Ltd Without conviction, fined. $20,000.00

Agricat Australia Pty Ltd Without conviction, fined. $3,500.00

Alpine MDF Industries Pty Ltd Convicted and fined. $40,000.00

Asian Pacific Building Corporation Pty Ltd Convicted and fined. $170,000.00

Associated Kiln Driers Convicted and fined. $70,000.00

Associated Kiln Driers Convicted and fined.

Australand Industrial Constructions Pty Ltd Convicted and fined. $350,000.00

Australian Aluminium Shopfitters Pty Ltd Convicted and fined. $250,000.00

Australian Pressings Pty Ltd Convicted and fined. $32,000.00

Bannockburn Excavations Pty Ltd Convicted and fined. $135,000.00

Bostik Australia Pty Ltd Convicted and fined. $90,000.00

Briteash Pty LtdWithout conviction, sentenced to be released on an adjourned undertaking with a special condition to pay $12,000 to the Collingwood Children's Farm.

Cameron Denbesten Without conviction, fined. $1,500.00

Carter Holt Harvey Wood Products Pty Ltd Convicted and fined. $230,000.00

Chalker Nominees Pty Ltd Convicted and fined. $3,000.00

Challenge Recruitment Pty Ltd Without conviction, fined. $30,000.00

Coates Hire Operations Pty Ltd Convicted and fined. $500,000.00

Coca-Cola (Amatil) Pty Ltd Convicted and fined. $75,000.00

Cressco Pty Ltd Without conviction, fined. $1,500.00

Crowley Excavation Pty Ltd Without conviction, fined. $22,500.00

CRP Industries Pty Ltd Convicted and fined. $200,000.00

DC Roof Tiling Pty Ltd Without conviction, fined. $7,500.00

Diamond Valley Pork Pty Ltd Convicted and fined. $100,000.00

EGI Bricklaying Pty Ltd Convicted and fined. $100,000.00

Federal Express (Australia) Pty Ltd Without conviction, fined. $15,000.00

Fogale Developments Pty Ltd Without conviction, fined. $500.00

Fonterra Australia Pty Ltd Convicted and fined. $300,000.00

Forrest Timber Pty Ltd Convicted and fined. $30,000.00

Fuji Fuels Pty Ltd Convicted and fined. $100,000.00

Future Universal Waste Services Pty Ltd (formerly SKM Recycling Pty Ltd) Convicted and fined. $75,000.00

Geelong Leather Pty Ltd Without conviction, fined. $10,000.00

George Weston Foods Ltd Convicted and fined. $50,000.00

Golden Plains Shire Council Without conviction released on an adjourned undertaking for a period of 2 years with special conditions.

Graham Campbell Ferrum International Pty Ltd Convicted and fined. $80,000.00

Grove (Aust) Pty LtdWithout conviction, sentenced to be released on an adjourned undertaking for a period of 12 months with a special condition to pay $80,000 into a court fund for special community projects.

GT 10 Geelong Pty Ltd Without conviction, fined. $6,000.00

Hamlan Homes Pty Ltd Without conviction, fined. $10,000.00

Healthy Snacks Australia Pty Ltd Without conviction, fined. $60,000.00

J & K Zausa Investments Pty Ltd Convicted and fined. $80,000.00

Jaydee Steel Construction Co. Pty Ltd Without conviction, fined. $10,000.00

Appendix 1 Prosecutions

Prosecutions

Defendant Result Fine


Josdale Investments Without conviction, fined. $27,000.00

Josdale Investments Without conviction, fined. $27,000.00

Joshua Bamford Convicted and fined.

Kanga Coolers Pty Ltd Convicted and fined. $45,000.00

LA HQ Pty Ltd Convicted and fined. $6,000.00

Laharum Bulk Handling Co. Pty Ltd Without conviction, fined. $50,000.00

Leslie Charles Grinter Without conviction, fined. $5,000.00

Limnos Poultry Pty Ltd Without conviction, fined. $15,000.00

Manumatic Industries Pty Ltd Convicted and fined. $48,000.00

Manumatic Industries Pty Ltd Convicted and fined. $26,000.00

Matthew James Bracchi Fine only. $5,000.00

Maurice Barton Sentenced to a period of imprisonment for 20 months, wholly suspended for a period of 3 years.

Mayneline Convicted and fined. $60,000.00

Melbourne Clipfit Glazing Systems Pty Ltd Convicted and fined. $55,000.00

MG Mining Services Pty Ltd Convicted and fined. $130,000.00

MJB Plumbing Pty Ltd Conviction and fine. $50,000.00

MJDJ Holdings Pty Ltd Without conviction, fined. $37,500.00

Nikolic Pty Ltd Convicted and fined. $100,000.00

O. & P. Gregory Pty Ltd Convicted and fined. $11,000.00

Orbit Drilling Pty Ltd Convicted and fined. $750,000.00

Paul Anthony Field trading as Latrobe Roofing and Spouting Services

With conviction, fined. $18,321.00

Perica Simic Convicted and fined. $15,000.00

Polycell Australia Pty Ltd Convicted and fined. $100,000.00

Powelltown Sawmills Pty LtdWithout conviction, sentenced to be released on an adjourned undertaking for a period of 12 months with special conditions to pay $45,000 to the SES and $15,000 to the CFA.

Roan Services Pty Ltd Convicted and fined. $35,000.00

Rodney James Coe Convicted and fined. $4,000.00

Schneider Electrics (Australia) Pty Ltd Convicted and fined. $50,000.00

Skilled Group Limited Convicted and fined. $50,000.00

John Martin Smith Convicted and fined. $120,000.00

SMS Scaffolding Pty Ltd Convicted and fined. $140,000.00

Southern USI Pty Ltd Convicted and fined. $50,000.00

Stanley Guthrie Convicted and fined. $50,000.00

Stewart John Kift Without conviction, fined. $1,500.00

Tait Timber and Hardware Pty Ltd Convicted and fined. $80,000.00

Timbertruss Geelong Pty Ltd Convicted and fined. $50,000.00



Toyota Motor Corporation Pty Ltd Convicted and fined. $20,000.00

Trevor Domaille Convicted and fined. $3,000.00

Turi Foods Farming Division Pty Ltd Convicted and fined. $40,000.00

Universal Concrete Contractors Pty Ltd Without conviction, fined. $2,000.00

Vollebregt House Restumping Convicted and fined. $40,000.00

Willow Ware Australia Pty Ltd Without conviction, fined. $50,000.00

Wood Street Investments Pty Ltd Without conviction, fined. $5,000.00

WPC Group Without conviction, fined. $5,000.00

Yarra Complete Car Care Pty Ltd Convicted and fined. $15,000.00

Prosecutions (Continued)



OH&S Regulations & Sentencing Act 1991

Joshua Luke Marshall Convicted and fined $13,250.00

Accident Compensation Act 1985

David JohnsConvicted and sentenced to 2 months imprisonment, suspended for a period of 2 years and ordered to pay restitution in the amount of $37,102.

Phillip Rowan Convicted and fined. $2,000.00

William Montalvo Without conviction, sentenced to be released on an adjourned undertaking for a period of 12 months and ordered to pay $9,205.20 compensation.

Robert Hocking Convicted and sentenced to 9 months imprisonment.

Department of Education and Early Childhood Without conviction, fined. $1,000.00

Debra Bourke Without conviction, sentenced to be released on an adjourned undertaking for a period of 12 months and ordered to pay $500.00 contribution to the court fund.

Karen Cantone Without conviction, sentenced to be released on an adjourned undertaking for a period of 12 months and ordered to pay $500.00 contribution to the court fund.

Vilma Montalvo Without conviction, sentenced to be released on an adjourned undertaking for a period of 12 months and ordered to pay $9,205.20 compensation.

Jayson Killick Convicted and fined and ordered to pay restitution in the amount of $13,800.00. $2,500.00

SJC Industrial Design Pty Ltd Without conviction, sentenced to be released on an adjourned undertaking for a period of 12 months.

Susan Dixon Convicted, fined and ordered to pay $13,597.00 in restitution. $1,500.00

Nathan Higgins Convicted and placed on a Community Corrections Order for a period of 12 months and ordered to pay restitution in the amount of $26,909.00.

Kerrie Anne Searle Sentenced to be released on an adjourned undertaking for a period of 12 months with the special condition to donate $300.00 to the Royal Children's Hospital.

Barrie Reiffiel With conviction, fined and ordered to pay $51,256.20 in compensation. $7,500.00

Bee & Gee Pty Ltd Without conviction, fined. $500.00

Crimes Act 1958

Dusan Milosevic With conviction, sentenced to a term of imprisonment for a period of 4 years 14 days and ordered to pay compensation in the sum of $34,690.61.

Antonio Lobello Sentenced to a term of imprisonment for a period of 4 months, wholly suspended for 12 months and ordered to pay $35,178.40 in compensation.

Michaelle Defrenza Without conviction, placed on a Community Based Order and ordered to pay restitution in the amount of $12,000.00.

Daniella Alleaume Without conviction, placed on a Community Based Order for 12 months and ordered to pay $27,000.00 in restitution.

Enforceable undertakings:The Occupational Health and Safety Act 2004 provides for enforceable undertakings as an enforcement option. This is a legal agreement in which a person or organisation undertakes to carry out specific activities to improve health and safety for workers and deliver benefits to industry and the broader community. In 2011/12 the following enforceable undertakings were entered into:

John Holland Pty Ltd & Thiess Pty Ltd John Holland Pty Ltd and Thiess Pty Ltd entered in to a $225,000 enforceable undertaking after two concrete panels, each weighting 11.3 tonnes, fell from a contractor’s truck in October 2006. No one was hurt in the incident near the Eastlink tollway project at Ringwood.In lieu of prosecution by WorkSafe, John Holland Pty Ltd and Thiess Pty Ltd will spend up to $225,000 to research best-practice for contractor engagement and management. If the research project costs less than $225,000, the difference will be donated to Monash University’s Institute for Safety, Compensation and Recovery Research.

AMCOR Packaging Australia Pty Ltd On 12 April 2011, a machine operator was injured when his fingers were caught by an extrusion lamination machine, causing serious lacerations. AMCOR failed to notify WorkSafe immediately after becoming aware that an incident had occurred at their workplace under their management and control. On 11 April 2012, WorkSafe accepted an enforceable undertaking, pursuant to Section 16 of the OHS Act.

Murray Human Services Inc On 4 June 2010 a supported employee of Murray Human Services Inc (MHS) had three fingers severed whilst operating a cross cut-off saw. The undertaking required MHS to provide assistance to other disability support providers in relation to occupational health and safety policies and procedures as relevant to supported workplaces, host a number of workshops for other disability service providers and produce a number of publications about the incident and the enhancements MHS has made to its safety systems.

Prosecutions (Continued)



Requests to WorkSafe for a prosecution to be brought, pursuant to section 131 of the Occupational Health and Safety Act 2004 (OHS Act).

Where WorkSafe has not brought prosecution proceedings within six months of an alleged offence, a person may request that WorkSafe bring a prosecution pursuant to section 131(1) of the OHS Act.

• In 2011/12, WorkSafe received 10 requests for a prosecution to be brought for an alleged offence.

Pursuant to section 131(2), within three months of the request being made, WorkSafe must advise the person in writing whether prosecution proceedings will be brought.

• For each of the 10 matters, WorkSafe determined not to prosecute (all matters had previous dealings with WorkSafe prior to the request).

Pursuant to section 131(3) where WorkSafe advises a person that prosecution will not be brought, the person may request that WorkSafe refer the matter to the Director of Public Prosecutions (DPP) for advice on whether a prosecution should be brought (section 131(4)):

• Eight matters were referred to the Director of Public Prosecutions• Of the eight referrals, the DPP recommended not to prosecute for three matters• For one matter, the request to prosecute was withdrawn by the applicant• Advice is pending on the remaining four matters.

Requests to WorkSafe for a prosecution to be brought, pursuant to sections 242AC and 252AA of the Accident Compensation Act 1985 (AC Act).

Where WorkSafe has not brought prosecution proceedings within six months of an alleged offence, a person may request that WorkSafe bring a prosecution pursuant to sections 242AC or 252AA of the AC Act.

• In 2011/12, WorkSafe received one request for a prosecution to be brought for an alleged offence under section 242AC, and one request for a prosecution to be brought for an alleged offence under section 252AA.

Pursuant to sections 242AC(2) and 252AA(2), within three months of the request being made, WorkSafe must advise the person in writing whether prosecution proceedings will be brought.

• In both matters, WorkSafe determined not to prosecute.

Pursuant to sections 242AC(3) and 252AA(3), where WorkSafe advises a person that prosecution will not be brought, the person may request that WorkSafe refer the matter to the Director of Public Prosecutions (DPP) for advice on whether a prosecution should be brought (sections 242AC(4) and 252AA(4)):

• Two matters were referred to the Director of Public Prosecutions• Of the two referrals, the DPP recommended not to prosecute for one matter• Advice is pending on the remaining matter.


Appendix 2 Agent Performance

This appendix includes data on agent performance which WorkSafe Victoria uses to assess the performance of its Authorised Agents for remuneration purposes and for general performance management. The information is provided to inform employers and the public on aspects of the performance of the WorkSafe Authorised Agents.

The information does not purport to be all-inclusive or contain all information which employers may require to make an informed assessment as to the selection of an agent. Employers should make their own independent assessment of the capabilities of each agent and, where appropriate, seek professional advice.

It should be noted when reviewing trend performance that there was a change in the Agent Panel for 2011/12. The Agent Panel for 2010/11 included GIO Workers’ Compensation (Victoria) Limited (GIO). As at 4pm 30 June 2011 the GIO portfolio was transferred to GBS and approximately 2.5% market share was transferred from CGU to Xchanging. This means that the market share allocation across agents in 2011/12 is different from the market share allocation that was in place for 2010/11. In addition two large Scheme employers, Toyota and Wesfarmers, moved to self insurance in 2011/12 and all performance data for these employers has been removed from the Scheme. Therefore the trend performance in this Appendix has been modified to reflect the market share allocation as at 30 June 2012.

Information on agent performance is also contained within the WorkSafe website: Home > Forms and Publications > Agent Performance Results.

Claims Management and Return to Work

AgentTimeliness of Employer Notification to Agent Return to Work Index1

% received within 12 days

% RTW within 6 months

Trend

Allianz 91.7% 79.7% Steady

CGU 88.7% 78.4% Steady

GBS 86.3% 79.5% Steady

QBE 91.5% 76.7% Steady

Xchanging 92.5% 79.0% Steady

Scheme 89.9% 78.6% Steady 1 Agent performance for RTW Index for 2011/12 is based on a new series commencing 1 July 2011 and differs from the series used in prior years.

Return to Work Index

Trend Information

Improved Performance in current year has improved by more than 2% of that in the previous year

Steady Current year performance within +/- 2% of the previous year

Deteriorated Performance in current year has deteriorated by more than 2% of that in the previous year

Note that Long Term Treatment Costs reported in prior years, is not being reported for 2011/12 due to a change in the calculation methodology. The agent performance overview on the WorkSafe website will be updated to include agent performance on long-term treatment costs later in the year.

Agent Duration - proportion of workers on weekly payments at

13 weeks 26 weeks 52 weeks 134 weeks

% Trend % Trend % Trend % Trend

Allianz 46.1% Steady 27.7% Steady 18.1% Steady 4.0% Deteriorated

CGU 48.0% Steady 28.9% Steady 18.8% Steady 2.9% Improved

GBS 44.3% Steady 25.0% Improved 16.4% Deteriorated 2.2% Steady

QBE 48.8% Deteriorated 29.0% Deteriorated 19.3% Deteriorated 2.9% Improved

Xchanging 47.0% Steady 29.2% Deteriorated 18.0% Steady 2.8% Improved

Scheme 46.9% Steady 28.0% Steady 18.2% Deteriorated 2.9% Steady

Note: a lower percentage represents higher performance


Duration

Trend Information




Service and Processing

AgentWorker Levels

of ServiceEmployer Levels

of ServiceValid Conciliation

Non Compliance Complaints

Combined satisfaction and

service score Trend

% of employers

satisfied Trend

Number of valid

complaints

Number of valid complaints per $10m

billed premium

Allianz 65.6% Deteriorated 71.5% Deteriorated 16 0.4

CGU 71.5% Deteriorated 77.9% Steady 10 0.2

GBS 63.4% Deteriorated 73.3% Deteriorated 30 0.8

QBE 68.0% Steady 73.2% Deteriorated 13 0.3

Xchanging 72.0% Steady 83.0% Steady 8 0.3

Scheme 68.3% Deteriorated 75.5% Deteriorated 78 0.4

Worker and Employer Service

Trend Information




Service and Processing (continued)

Agent Timeliness % of payments direct to injured workersTimeliness of

employer reimbursements

Weekly payments

% paid within 7 days Trend

Medical reimbursements

% paid within 10 days Trend

Calendar days to pay 75% of employer

reimbursements Trend

Allianz 99.6% Steady 93.1% Steady 17 Steady

CGU 98.5% Steady 92.6% Steady 15 Improved

GBS 97.9% Steady 89.2% Deteriorated 14 Deteriorated

QBE 99.0% Steady 93.4% Deteriorated 15 Improved

Xchanging 99.4% Steady 93.5% Steady 15 Improved

Scheme 98.9% Steady 92.3% Steady 15 Improved

Agent Timeliness of Processing Provider Accounts

% paid within 30 days of receipt of invoice Trend

% paid within 70 days of service Trend

Allianz 97.9% Steady 83.2% Steady

CGU 98.3% Steady 85.8% Improved

GBS2 95.7% Deteriorated 78.9% Steady

QBE 97.5% Steady 83.7% Steady

Xchanging 98.2% Steady 85.9% Steady

Scheme 97.5% Steady 83.7% Steady

2 Note: For the purposes of calculating GBS’ performance for 2011/12, transferred accounts received from the prior agent prior to 4pm 30 June 2011 but processed by GBS in 2011/12, are excluded from the Timeliness of Medical Reimbursements within 10 days direct to Injured Workers and the Timeliness of Processing Provider Accounts. These accounts are included in the overall Scheme performance.


Timeliness of Processing (excluding Employer Reimbursements)

Trend Information




Timeliness of Employer Reimbursement

Trend Information

Improved Performance in current year has improved by more than 2 calendar days of that in the previous year

Steady Current year performance within +/- 2 calendar days of the previous year

Deteriorated Performance in current year has deteriorated by more than 2 calendar days of that in the previous year

Authorised Agents operating under an instrument of appointment issued by WorkSafe pursuant to the Accident Compensation Act 1985 are paid fees for acting on behalf of WorkSafe in the issuing of policies, collection of premiums and the administration of claims. Agent remuneration includes performance based components. It also allows for the reduction of an agent’s fees upon the occurrence of an event such as a failure to meet performance criteria.

Reductions applicable to 2011/12:

There were no financial penalties imposed on agents under the Agency Agreement in 2011/2012.

Definitions

Measure Definition

Timeliness of employer notification to agent

The proportion of claims, with 20 days lost time duration or more, received by the agent from the employer with remuneration greater than $1 million and within 12 days of the employer receiving the claim from an injured worker. Measure includes claims received between 1 July 2011 and 30 April 2012.

Return to work index The proportion of injured workers recorded as working on the date six months after lodgement of their claim (Insurer Received date). Measure only includes claims received between 1 December 2010 and 30 November 2011, with greater than 10 days of weekly compensation paid. Measure reflects the new series commencing 1 July 2011.

Duration on weekly payments at 13, 26 and 52 weeks

Duration is measured as the number of workers receiving 13/ 26/ 52 weeks of compensation expressed as a proportion of workers who have received at least 20 days of compensation. See note (1).

Duration on weekly payments at 134 weeks

Duration is measured as the number of workers receiving 134 weeks of compensation for claims received on or after 1 September 2006 expressed as a proportion of workers who have received at least 20 days of compensation for claims reported between 1 September 2007 and 31 August 2009 inclusive. See note (1).

Injured worker levels of service from the agent

The Injured Worker Survey is an aggregate of two measures; overall satisfaction and performance against service attributes (average performance across nine service dimensions). These figures are based on an independent survey of 4879 workers who received weekly benefits within the ten month period spanning 1 May 2011 to February 2012, inclusive. See note (2).

Employer levels of service from the agent

The percentage of employers who said they were satisfied with the service and its quality from their agent. These figures are based on an independent survey of 1517 employers who had at least one claim that received any type of payment or that was entitled to weekly compensation in the three months prior to the survey (which is conducted on a monthly basis throughout the year). See note (3).

Valid conciliation non compliance complaints

This measure shows the number of valid complaints which were made against the agent and have been registered on the WorkSafe Conciliation Compliance Database between 1 July 2011 and 30 June 2012.The measure is also expressed as the number of complaints per $10 million of billed premium to allow for agent market share.The total number of disputes referred for conciliation between 1 July 2011 and 30 June 2012 as recorded on the WorkSafe computer system is 13,290.

Timeliness of weekly payments direct to injured workers

The timeliness of payment of weekly payments direct to injured workers is assessed as the percentage of payments made within 7 calendar days from a notification of payment requirement being received by the agent. See note (4).


Timeliness of medical reimbursements direct to injured workers

The timeliness of payment of medical reimbursements direct to injured workers is assessed as the percentage of payments made within 10 calendar days of a request for payment being received by the agent from the injured worker. See note (4).

Timeliness of employer reimbursements

The timeliness of reimbursements of weekly payments to employers is assessed as the number of days it takes to make 75% of payments. See note (4).

Timeliness of processing provider accounts - % paid within 30 days of invoice

The timeliness of payment to providers for treatment provided to injured workers is assessed as the percentage of accounts paid within 30 days of receipt by the agent. See note (4)

Timeliness of processing provider accounts - % paid within 70 days of service

The timeliness of payment to providers for treatment provided to injured workers is assessed as the percentage of accounts paid within 70 calendar days of service provided to the injured worker. See note (4)

Notes

(1) This assessment takes into account the differing mix of claims that agents manage.

(2) The survey is accurate to within +/-2.97% at 95% confidence level for each agent.

(3) The survey is accurate to within +/-4.92% at 95% confidence level for each agent.

(4) There may be instances where the agent is reliant on further information from third parties to make a payment.

Other than the injured worker and employer surveys, audits and timeliness of employer notification to agent, all assessments were made at 30 June 2012.

Market Share as at 30 June 2012

Agent % of Policies % of Remuneration % of Premium

Allianz 27% 23% 20%

CGU 27% 29% 28%

GBS 14% 15% 18%

QBE 18% 19% 20%

Xchanging 14% 14% 14%

Scheme 100% 100% 100% Notes

Number of policies refers to the employers with policies managed by each agent.

Remuneration refers to the wages (including superannuation) paid by employers managed by each agent.

Premium refers to the premium payable for the 2011/12 year for employers managed by the agent.

Due to rounding, market share may not equate to 100%.

Agent name Full description

Allianz Allianz Australia Workers' Compensation (Victoria) Limited

CGU CGU Workers Compensation (Vic) Limited

GBS Gallagher Bassett Services Workers Compensation Vic Pty Ltd

QBE QBE Workers Compensation (VIC) Limited

Xchanging Xchanging Integrated Services Vic Pty Ltd trading as Xchanging


Appendix 3 Self-Insurance Report

Overview

Self-insurers are part of the WorkSafe scheme. Their status is derived from the Accident Compensation Act 1985.

Employers are eligible to apply for self-insurance in Victoria if they satisfy prescribed minimum requirements of financial strength and viability. The applicant must be a body corporate and not a subsidiary of another body corporate, other than a foreign company.

As at 30 June 2012, there were 38 self-insurers operating in Victoria, representing approximately eight per cent of total scheme remuneration.

Applications and Approvals during 2011/12

Applications for self-insurance are made to WorkSafe. WorkSafe has the power to approve or refuse any application.

In determining whether an applicant is suitable, WorkSafe must be satisfied that the applicant is ‘fit and proper’ to be a self-insurer. In this regard, WorkSafe examines the applicant’s:

• financial viability• capacity to administer claims for

compensation• incidence of injuries to workers and the

cost of claims in respect of such injuries• safety of working conditions• compliance with the Act and Regulations• compliance with any terms and conditions

(where application is for re-approval) • any other matters that WorkSafe deems

applicable.

Approval as a self-insurer is subject to certain prescribed terms and conditions specified in Ministerial Orders, as well as any terms and conditions determined by WorkSafe.

Initial approval has effect for a period of three years. Renewal of approval is for a period of four years, unless WorkSafe, in its discretion, determines that approval has effect for six years. This longer period of approval is intended to reward good performance in the area of safety, injury management and return to work.

The following corporations commenced as self-insurers during 2011/12:

(i) Toyota Motor Corporation commenced as a self-insurer effective from 30 September 2011 for a period of three years.

(ii) Wesfarmers Limited commenced as a self-insurer effective from 31 January 2012.

(iii) Paper Australia Pty Ltd commenced as a self-insurer effective from 31 May 2012 for a period of three years.

The following corporation withdrew its application for self-insurance approval during 2011/12:

Nestlé Australia Ltd applied for approval to self-insure in Victoria in September 2011. Following WorkSafe’s assessment of Nestlé’s OHS management systems, it decided to withdraw its application, effective from 1 May 2012. The following corporations were successful in their application for renewal of approval to self-insure in Victoria during 2011/12:

(i) Ford Motor Company of Australia Ltd effective from 7 July 2011 for a period of four years.

(ii) Primary Health Care Ltd effective from 31 August 2011 for a period of four years.

(iii) ExxonMobil Australia Pty Ltd effective from 31 August 2011 for a period of four years.

(iv) Robert Bosch (Australia) Pty Ltd effective from 30 September 2011 for a period of four years.

(v) Arrium Ltd (formally Onesteel) effective from 1 November 2011 for a period of six years.

(vi) Hanson Australia (Holdings) Pty Ltd effective from 1 December 2011 for a period of four years.

(vii) Inghams Enterprises Pty Ltd effective from 12 January 2012 for a period of four years.

(viii) Unilever Australia (Holdings) Pty Ltd effective from 31 March 2012 for a period of four years.

Return to Work Rate

In 2011/12, self-insurers achieved a sustained return to work rate of 77.0 percent, which was down from the previous year’s result of 81.1 percent.

Service

WorkSafe’s Injured Worker Survey includes injured workers covered by self-insurers. In 2012, the average prompted satisfaction and service score was 66.7 per cent for all self-insurers (which was an improvement on the prior year’s result of 63.3 per cent) compared to 68.3 per cent for WorkSafe agents.

The service attribute result for all self-insurers was an improvement on the results in all nine attributes, compared to the prior year. However, in comparison to the results achieved by WorkSafe’s agents, self-insurers, as a whole, were below the result in five of the nine service attributes.

1011

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%11






60.5 68

.7

68.6

68.3

69.8

68.9

72.8

1011

78.8

75.3

1.45

0

QLD

2.75

0

SA

2.28

0

TAS

1.69

1

WA


0.5%

1.0%

1.5%

2.5%

0.0%

3.5%

3.0%

2.0%

25

20

15

10

5

00506

0607

0708

0809

0910

Year

0809

0910

0708

0405

0506

0607

Year

100%

80%

60%

40%

20%

0%

74.7 83

.5

82.3

84.4

84.4

81.4

75.5

100%

75%

50%

25%

0%

Year

63.3

1011

61.7

0607

61.3

0708

66.7

0809

67.8

0910


34,000

32,000

28,000

26,000

22,000

20,000

30,000

24,000

Year

0809

0910

0708

0607

28,8

56

29,1

07

28,6

89

28,8

54

1011

29,6

28

29,2

61


100%

40%

60%

20%

0

80%

Year

78.3

%

76.1

%

74.1

%

77.2

%

73.8

%


Allianz

Agent


1112

1011

100%

80%

60%

40%

20%

0%

75.3

71.5

83.0

83.0

78.3

73.2

80.2

73.3


1.50%

2.00%

1.00%

Year

1112

1213

0506

0607

0708

0809

1011

0910

ComCareNSW

1.68

0

1033

216

18

1077

186

22

1011

613

1112

0708

0809

0910

1011

1112


VIC

1.29

8

11

1112

66.7

1112


Allianz

Agent

Xchanging CGU

1112

1011

100%

80

60%

40%

20%

0%QBE GBS Scheme

1.80

0

80.1

77.9 78

.875

.5

71.8

65.6 72

.572

.0 74.9

71.5

70.3

68.0 73

.263

.4

72.8

68.3

100%

80

60

%

%

40%

20%

0%


6664

6863

6865 6366 67 66


Year

1011

1112

0809

0910

0708

1.29

8

1.33

8

1.80

1.62

1.46

1.33

8

1.38

7

1.38

7

time loss standard


List Of Self-Insurers as at 30 June 2012

1. Alcoa Australian Holdings Pty Ltd Alcoa Australia Rolled Products Pty Ltd

2. Alcoa of Australia Ltd Alcoa Of Australia Ltd

3. Amcor Ltd Amcor Closure Systems Pty LtdAmcor LtdAmcor Packaging (Australia) Pty LtdAperio Group (Australia) Pty LtdRota Die International Pty LtdSpecialty Packaging Group Pty LtdTechni-Chem Australia Pty Ltd

4. Australia and New Zealand Banking Group Ltd

Australia And New Zealand Banking Group LimitedFSP Group Pty LimitedMillennium 3 Financial Services Pty LtdSuper Concepts Pty Ltd

5. BHP Billiton Ltd BHP Billiton Ltd

6. BlueScope Steel Ltd Bluescope Distribution Pty LtdBluescope Steel (Ais) Pty LtdBluescope Steel LtdBluescope Water Pty Ltd

7. BP Australia Group Pty Ltd B P Australia Pty LtdCentrel Pty LtdElite Customer Solutions Pty LtdNo. 1 Riverside Quay Proprietary Ltd

8. Brambles Industries Ltd Brambles Industries LtdCHEP Australia LtdJMI Aerospace Australia Pty LtdRecall Information Management Pty Ltd

9. Brickworks Ltd Austral Precast (Vic) Pty LtdAuswest Timbers Pty LtdBrickworks LtdBristile Roofing (East Coast) Pty LtdNubrik Concrete Masonry Pty LtdNubrik Pty Ltd

10. Building Supplies Group Holdings Pty Ltd

Carter Holt Harvey Australia Pty LtdCarter Holt Harvey Corrugated Packaging Pty LtdCarter Holt Harvey Foodservice Packaging Pty LtdCarter Holt Harvey Woodproducts (Distribution) Pty LtdCarter Holt Harvey Woodproducts Australia Pty Ltd

11. Crown Ltd Crown LtdCrown Melbourne Ltd

12. CSR Ltd CSR Limited

13. ExxonMobil Australia Pty Ltd Esso Australia Resources Pty LtdMobil Exploration & Producing Australia Pty LtdMobil Oil Australia Pty LtdMobil Refining Australia Pty Ltd

14. Ford Motor Company of Australia Ltd

Ford Motor Company Of Australia Ltd

15. Goodman Fielder Ltd Goodman Fielder Consumer Foods Pty LtdQuality Bakers Australia Pty Ltd

16. Hanson Australia (Holdings) Proprietary Ltd

Galli Quarries Pty LtdHanson Construction Materials Pty LtdHanson Landfill Services Pty LtdHymix Australia Pty Ltd

17. Inghams Enterprises Pty Ltd Inghams Enterprises Pty Ltd

18. Kraft Australia Kraft Foods Australia Pty LtdKraft Foods Ltd


19. Mars Australia Pty Ltd Mars Australia Pty Ltd

20. Melbourne Water Corporation Melbourne Water Corporation

21. Myer Holdings Ltd Myer Pty LtdWarehouse Solutions Pty Ltd

22. OneSteel Ltd Fagersta Steels Pty LtdLitesteel Technologies Pty LtdOnesteel Australian Tube Mills Pty LtdOnesteel Coil Coaters Pty LtdOnesteel Recycling Pty LtdOnesteel Reinforcing Pty LtdOnesteel Trading Pty LtdOnesteel Wire Pty LtdP & T Tube Mills Pty LtdSSX Services Pty LtdThe Australian Steel Company (Operations) Pty Ltd

23. Paper Australia Pty Ltd Paper Australia Pty Ltd

24. PaperlinX Ltd Paperlinx Australia Pty LtdPaperlinx Services Pty Ltd

25. Philip Morris (Australia) Ltd Philip Morris Ltd

26. Primary Health Care Austrials Pty LtdDigital Diagnostic Imaging Pty LtdFormer Sds Pty LtdHealth Communication Network LtdHealthcare Imaging Services (Victoria) Pty LtdIdameneo (No 123) Pty LtdIdameneo (No.789) LtdSymbion Medical Centre Operations Pty LtdSymbion Pathology Pty Ltd

27. Qantas Airways Ltd Eastern Australia Airlines Pty LtdExpress Freighters Australia Pty LtdExpress Ground Handling Pty LtdJetstar Airways Pty LtdJetstar Group Pty LtdQ Catering LtdQantas Airways LtdQantas Cabin Crew Australia LtdQantas Courier LtdQantas Domestic Pty LtdQantas Ground Services Pty LtdQantas Information Technology LtdQantas Road Express Pty LtdSouthern Australia Airlines Pty LtdSunstate Pty LtdWishlist Holdings Ltd

28. Robert Bosch (Australia) Pty Ltd Robert Bosch (Australia) Pty Ltd

29. Royal Automobile Club of Victoria (RACV) Limited Epac Salary Solutions Pty LtdIntelematics Australia Pty LtdR.A.C.V Finance LimitedRACV Group Services Pty LtdRACV Insurance Services Pty LtdRACV Road Service Pty LtdRACV Sales And Marketing Pty LtdRACV Services Pty LtdRoyal Automobile Club Of Victoria (RACV) Ltd

30. Shell Australia Ltd Shell Refining (Australia) Pty LtdThe Shell Company Of Australia LtdTrident Shipping Services Pty LtdZip Airport Services Pty Ltd


31. The University Of Melbourne Australian International Health Institute (The University Of Melbourne) LtdAustralian Music Examinations Board (Vic) LtdMelbourne University Publishing LtdMU Student Union LtdThe University Of MelbourneUmee Ltd

32. Toll Holdings Ltd Toll Air Services Pty LtdToll Holdings LtdToll Ipec Pty LtdToll North Pty LtdToll Transport Pty Ltd

33. Toyota Motor Corporation Australia Ltd Toyota Motor Corporation Australia Ltd

34. Transfield Services Ltd App Corporation Pty LtdICD (Asia Pacific) Pty LtdO.g.c. Services Pty LtdTransfield Services Ltd

35. Unilever Australia (Holdings) Pty Ltd Unilever Australia (Holdings) Pty LtdUnilever Australia LtdUnilever Australia Supply Services LtdUnilever Australia Trading Ltd

36. Wesfarmers Ltd Australian Vinyls Corporation Pty LtdBullivants Pty LtdBunnings Group LtdColes Group LtdColes Group Supply Chain Pty LtdColes Supermarkets Australia Pty LtdCoregas Pty LtdCSBP LtdEureka Operations Pty LtdHarris Technology Pty LtdJ Blackwood & Son Pty LtdK Mart Australia LtdLawvale Pty LtdLiquorland (Australia) Pty LtdModwood Technologies Pty LtdOAMPS Insurance Brokers LtdOfficeworks Superstores Pty LtdProtector Alsafe Pty LtdTarget Australia Pty LtdViking Office Products Pty LtdWesfarmers Chemicals Energy & Fertilisers LtdWesfarmers General Insurance LtdWesfarmers Kleenheat Gas Pty LtdWesfarmers LtdWI Premium Funding Ltd

37. Westpac Banking Corporation Asgard Wealth Solutions LtdBT Financial Group Pty LtdHastings Funds Management LtdRAMS Financial Group Pty LtdSt George Bank LtdWestpac Banking CorporationWestpac Financial Consultants Ltd

38. Woolworths Ltd Dick Smith Electronics Pty LtdLangton’s Pty LtdPhillip Leong Stores Pty LtdQueensland Property Investments Pty LtdWoolstar Pty LtdWoolworths Ltd


Financial Statement of Self-Insurers 2011/12

Net assets (1) Outstanding

Claims Liabilities (2)

$M $M

Alcoa Australian Holdings Pty Ltd – –

Alcoa of Australia $2,813.00 $31.08

Amcor Ltd $3,748.60 $14.45

Australia and New Zealand Banking Group Ltd $37,954.00 $4.02

BHP Billiton Ltd $57,755.00(3) $1.10

BlueScope Steel Ltd – –

BP Australia Group Pty Ltd $9,102.00 $1.40

Brambles Ltd – –

Brickworks Ltd $1,675.75 $2.08

Building Supplies Group Holdings Pty Ltd (parent company of Carter Holt Harvey Australia Pty Ltd)

$95.16 $12.43

Burns, Philp & Company Pty Ltd* – $1.10

Crown Ltd $3,260.36 $14.44

CSR Ltd $1,278.70 $9.51

ExxonMobil Australia Pty Ltd $1,705.00 $3.16

Ford Motor Company of Australia Ltd $46.09 $20.92

Goodman Fielder Ltd $1,300.30 $3.19

Hanson Australia (Holdings) Pty Ltd – –

Inghams Enterprises Pty Ltd – –

Kraft Australia Holdings Pty Ltd (formerly Cadbury Australia Ltd) $1,212.99 $6.60

Mars Australia Pty Ltd (formerly Effem Foods Pty Ltd) – –

Melbourne Water Corporation $4,484.40 $5.93

Myer Holdings Ltd $861.33 $6.60

National Australia Bank Ltd* – $1.09

OneSteel Ltd $4,505.70 $4.65

Paper Australia Ltd – –

PaperlinX Ltd $736.40 $2.78

Philip Morris (Australia) Ltd $261.49 $1.40

Primary Health Care $2,504.38 $5.93

Qantas Airways Ltd $6,151.00 $29.11

Robert Bosch (Australia) Pty Ltd $167.46 $17.88

Royal Automobile Club of Victoria (RACV) Ltd – –

Shell Australia Ltd – –

The University Of Melbourne $3,661.97 $6.20

Toll Holdings Ltd – –

Toyota Motor Corporation Australia Ltd $1,025.06 $52.17

Transfield Services Ltd $1,124.80 $3.68

Unilever Australia (Holdings) Pty Ltd $427.14 $2.86

Wesfarmers Ltd $25,629.00 $78.83

Westpac Banking Corporation $43,808.00 $9.37

Woolworths Ltd $7,845.80 $131.37

Notes

1. Based on latest available information from self-insurers. In some instances only 2010/11 figures were available.

2. Based on latest information available as assessed by actuaries approved by WorkSafe.

Self-insurers are required to certify they have adequately provided for outstanding claims liabilities in their annual accounts. In some instances only 2010/11 figures were available.

3. Net assets are in $US.

* Ceased as a Victorian self-insurer.


Appendix 4 Governance and Compliance

Corporate Governance

WorkSafe Victoria (WorkSafe) is the trading name of the Victorian WorkCover Authority.

The primary corporate governance practices employed by WorkSafe ensure it is managed so that it:

• achieves its objectives

• meets its commitments to stakeholders

• operates effectively, efficiently and economically.

Board of Management

WorkSafe’s Board of Management is established under section 24 of the Accident Compensation Act 1985. The Board presently consists of six Directors, each of whom is appointed by the Governor in Council. One of the Directors is also the Chief Executive.

The Board sets the framework for the achievement of WorkSafe’s objectives and the execution of its functions. The Board does this by overseeing strategic planning, policy development, auditing exercises, and reviewing management performance.

Management of the operations and administration of WorkSafe is delegated by the Board to the Chief Executive who manages and controls the affairs of WorkSafe in accordance with the policies set by the Board.

Directors

The Directors currently serving on the Board are:

Mr David Krasnostein (Chairperson)BJuris (Hons), LLB, LLM

Ms Jane Bell LLB, BEc, LLM(London), FAICD

Mr Geoff Hilton BSc (Hons), MSc, FCA, MAPS

Mr Paul Barker (Deputy Chairperson) BBus, FCA, ACIS

Dr Geoff Brooke MBBS, MBA

Mr Ian Forsyth (Acting Chief Executive)BEc

Director whose terms expired during 2011/12:

Ms Elana Rubin (Chairperson) BA (Hons), MA, FFin, FAICD

Directors’ access to Independent Legal Advice

WorkSafe provides a budget for Directors to obtain independent legal advice in respect of their individual obligations as Directors.

Conflict of Interest

The Directors are required by section 31 of the Accident Compensation Act 1985 to declare any pecuniary interest in any matter being considered by the Board or in any other matter in which WorkSafe is concerned.

Directors are required to complete a declaration of private interests upon appointment and in July of each year that they are a director.

Conflicts of interest are overcome, where warranted, by Directors declaring their interests and abstaining from voting at WorkSafe Board meetings.

Board Committees

The Board is supported by five committees chaired by non-executive Directors.

Audit and Risk Management Committee (ARMCO) (Members as at 31 August 2012: David Krasnostein, Paul Barker, Jane Bell, Geoff Hilton)

The ARMCO oversees WorkSafe Victoria’s compliance with its statutory, financial and other responsibilities, assesses and reviews risk management, accounting, financial and operating controls, and assesses and reviews internal and external audits.

The primary objectives of the ARMCO include assisting WorkSafe Victoria’s Board to fulfil its obligations in regard to:

• the integrity and quality of interim and annual financial reporting and disclosures• identification and management of key business, financial and regulatory risks• compliance with laws, regulations, standards and codes• the adequacy of WorkSafe Victoria’s internal control framework.

Financial and Investment Strategies Committee (FISCO)

(Members as at 31 August 2012: David Krasnostein, Ian Forsyth)

The FISCO:

• makes recommendations to the Board on investment policy, objectives and strategy, asset allocation, and performance benchmarks• oversees the implementation of WorkSafe Victoria’s investment strategy• monitors investment management compliance, including compliance with applicable laws, rules and regulations, and the prudential statement


• monitors and assesses the performance of the funds under WorkSafe Victoria’s control, including the performance of the Victorian Funds Management Corporation (VFMC)

• provides the Board with information in relation to prospective investment returns and financial forecasts and any other investment and financial strategy information required.

Health Issues Committee (HISCO)

(Members as at 31 August 2012: Geoff Hilton)

HISCO is a joint WorkSafe/TAC Committee chaired by Ms Julie Caldecott (TAC Board Member). The HISCO:• assists WorkSafe Victoria achieve its health care objectives• maintains a clear and integrated health care strategy, in the best interests of the agencies’ clients and stakeholders; • ensures that health service contracts/agreements and relationships are managed and operated in an efficient,

economic and effective manner.

Remuneration and People Committee (REPCO)

(Members as at 31 August 2012: David Krasnostein, Ian Forsyth)

The REPCO:• establishes, maintains and reviews remuneration policy and ensures that such policies comply with law and government policy• oversees the application of remuneration policy to senior executives and ensures that the policy is consistent with the Government Senior

Executive Remuneration Panel guidelines and policies• is responsible for ensuring disclosure of Director and executive remuneration is made in accordance with regulatory requirements and good

governance practices.

Business Information Systems Committee (BISCO)

(Members as at 31 August 2012: Geoff Hilton, Ian Forsyth)BISCO is a joint WorkSafe/TAC Committee and is chaired by Mr Andrew Dyer (TAC Board Member).The Business Information Systems (BIS) Committee provides stewardship and governance of the combined business systems applications and information technology infrastructure portfolios for TAC and WorkSafe.

Risk Management

Compliance with the Victorian Government Risk Management Framework

Standing Direction 4.5.5 of the Financial Management Act 1994 requires public sector agencies to provide an annual attestation of compliance with the risk management process requirements set out in the Victorian Government Risk Management Framework.The Audit and Risk Management Committee of WorkSafe has considered the Statement by the Chief Executive on compliance with the Victorian Government Risk Management Framework and the Executive Team internal attestation.On this basis, I certify on behalf of the Board of WorkSafe that WorkSafe:• has risk management processes in place consistent with the Australia/New Zealand Risk Management Standard: AS/NZ 31000:2009• has an internal control system in place that enables the executive to understand, manage and satisfactorily control risk exposure• the Audit and Risk Management Committee and the Executive Team have critically reviewed the risk profile of WorkSafe during the period

1 July 2011 to 30 June 2012.

David KrasnosteinChairWorkSafe Victoria Date signed: 31 Aug 2012

Compliance

This section includes disclosures required by the Financial Management Act 1994, the Accident Compensation Act 1985, the Whistleblowers Protection Act 2001, and the Freedom of Information Act 1982. It also includes voluntary disclosure of additional regulatory compliance information.

Manner of Establishment and Relevant Minister

WorkSafe is established by section 18 of the Accident Compensation Act 1985 as a body corporate with perpetual succession.

The Hon. Gordon Rich-Phillips MLC was appointed the Assistant Treasurer in December 2010, with responsibility to manage Victoria’s workplace health and safety laws, and the accident compensation scheme.


Accountability of WorkSafe

Pursuant to section 20C of the Accident Compensation Act 1985, WorkSafe is required to exercise its powers and perform its functions under the Accident Compensation Act 1985, the Accident Compensation (WorkCover Insurance) Act 1993, the Occupational Health and Safety Act 2004, the Equipment (Public Safety) Act 1994, the Dangerous Goods Act 1985 and the Mines Act 1958 subject to the general direction and control of the Minister and any specific written directions given by the Minister. The Minister cannot give a direction in relation to a specific person.

Ministerial Directions

No Ministerial Directions were given under section 20C during the financial year 2011/12.

WorkSafe’s Objectives, Functions and Powers

WorkSafe’s primary objectives, functions and powers are found in sections 19, 20, 20A and 20B of the Accident Compensation Act 1985 and sections 7 and 8 the Occupational Health and Safety Act 2004.

These Acts are available from WorkSafe’s website located at worksafe.vic.gov.au.

WorkSafe’s Role in the Community

WorkSafe is the regulator of occupational health and safety and the accident compensation scheme in Victoria and its objectives and functions include:providing insurance to employers• paying compensation to injured workers• conducting and defending legal proceedings before courts and tribunals• assisting employers and workers in achieving healthy and safe working environments• promoting the effective occupational rehabilitation of injured workers and their return to work• developing and implementing programs to provide incentives for employers to implement measures to eliminate or reduce risks

to health and safety and to otherwise improve occupational health, safety and welfare• promoting public awareness and discussion of occupational health and safety and providing information services to workers,

employers and the Victorian community.

Access to Information

The Freedom of Information Act 1982 (FOI Act) gives members of the public the right to apply for access to information held by WorkSafe.The FOI Act applies to documents created by WorkSafe as well as those created by other organisations that are in the possession of WorkSafe and its authorised Agents.

In 2011/12 WorkSafe received 2,316 requests. During this period it received 33 applications for internal review under section 51 of the FOI Act and there were 15 appeals made to the Victorian Civil and Administrative Tribunal (VCAT).

The majority of requests were received from or on behalf of injured workers and persons and employers affected by health and safety incidents at the workplace.

As an alternative to the process under the FOI Act, injured workers may access information in relation to their injury claim held about them by WorkSafe and/or its authorised Agents under the Accident Compensation Act 1985. In 2011/12, 16,888 requests for information in relation to workers’ injury claims were received under that Act.

Categories of Documents

WorkSafe is the regulator of the workplace occupational health and safety system and the rehabilitation and compensation system in Victoria.

WorkSafe publishes information, guidance material and documents about its operations, legislative framework, including statutory functions and powers, online at www.worksafe.vic.gov.au.

Health and SafetyWorkSafe is responsible for improving health, safety and welfare in the workplace under the Occupational Health & Safety Act 2004 and associated legislation.

Information held by WorkSafe is separated into the categories of personal or case files, operational and policy files (on legislation or particular aspects of legislation) and correspondence files. Current files are stored at WorkSafe’s office in Exhibition Street or at one of its regional offices.

Categories of documents include:

• annual reports• computer records (databases, documents, spreadsheets)• correspondence• financial records• general information files• relevant journals, magazines and newsletters• inspections and investigations files

• legal advice and litigation files• policies, guidelines and submissions• licensing application forms• statistics and reports• complaint files• programs and events (e.g. WorkHealth, Work Safe Week), and• other documentary information.


Injury Support and ServiceWorkSafe is responsible for the compensation and rehabilitation of injured workers under the Accident Compensation Act 1985 as well as managing employer workplace injury insurance and premiums under the Accident Compensation (WorkCover Insurance) Act 1993.

The rehabilitation and compensation scheme is administered by a number of authorised Agents on behalf of WorkSafe. These Agents are currently responsible for a range of functions including premium collection, claim lodgement and the delivery of benefits to, and rehabilitation of, workers. Therefore, personal or case files of workers are held by the Agents who manage their claims. Other operational and policy files are stored at WorkSafe’s offices in Exhibition Street, Melbourne.

Examples of the types of documents to which members of the public usually apply for access are:

• documents relating to their personal information, for example a particular worker’s injury claim, or a workplace complaint made against an individual or company

• documents of a non-personal nature, for example details on WorkSafe’s processes or decisions, or information on an incident at a workplace.

Not all documents are automatically made available in response to a request. You may check our website or contact the Advisory Service to enquire as to whether the information you require is available for inspection or whether you should apply for it under the provisions of the FOI Act.

Making a Request

Workers’ injury claim filesIf you are a worker who has claimed compensation and wish to access documents in relation to your injury claim file you can contact the Agent managing your claim to apply for documents under section 107A of the Accident Compensation Act 1985.

Workplace Injury Insurance Premium InformationDocuments relating to employer premiums are held by the Agents. Certain documents can be released by the Agents without the need to use the FOI Act process. Employers should contact the Agent managing their claims to request access to particular documents.

Other InformationFor information not related to a worker’s injury claim file or an employer’s premium, requests must be made in writing and should be addressed to:

Freedom of InformationWorkSafe VictoriaGPO Box 4306Melbourne VIC 3001

Requests under the FOI Act must be made in writing. A statutory fee (of $25.10 from 1 July 2012) is payable for each FOI request and must be enclosed with the letter of request (cheques should be made payable to the WorkSafe Victoria). The fee may be waived if the applicant requests and provides evidence as to why payment of the fee would cause them financial hardship. Additional costs for access to documents may be also incurred, such as for photocopying and search time.

Decisions are made under the FOI Act by the Principal Officer or authorised FOI Officers in accordance with the requirements of sections 26 and 51 of the FOI Act. If you have a general query, you may contact the FOI team on (03) 9641 1555.

Further InformationFurther information and forms to help you make a request are available online at worksafe.vic.gov.au.

LibraryWorkSafe’s library has an extensive collection of publications. Members of the public are welcome to use the collection, but must first make an appointment by telephone.

The library operates from:Ground Floor222 Exhibition StreetMelbourneTelephone: (03) 9641 1548 or 1800 671 004

Whistleblowers Protection

WorkSafe has established procedures under Part 6 of the Whistleblowers Protection Act 2001. These procedures provide for disclosures to be made to the Protected Disclosure Co-ordinator or to one of a number of protected disclosure officers within WorkSafe. The Protected Disclosure Co-ordinator will determine whether it is a public interest disclosure and will be responsible for appointing an investigator and coordinating and overseeing the investigation. The Co-ordinator is also responsible for maintaining a confidential filing system and collating and publishing statistics on disclosures made. The procedures are available on WorkSafe Victoria’s website at www.worksafe.vic.gov.au.


Pursuant to section 104 of the Whistleblowers Protection Act 2001, WorkSafe reports for the period 2011/12 as follows:

Number and type of disclosures made to WorkSafe during the year One protected disclosure

Number of disclosures referred during the year by WorkSafe to the Ombudsman for determination as to whether they are public interest disclosures

One

Number and types of disclosed matters referred to the public body during the year by the Ombudsman None

Number and types of disclosed matters referred during the year by the public body to the Ombudsman to investigate One

Number and types of investigations of disclosed matters taken over by the Ombudsman from the public body during the year

None

Number of requests made under section 74 during the year to the Ombudsman to investigate disclosed matters None

Number and types of disclosed matters that the public body has declined to investigate during the year None

Number and types of disclosed matters that were substantiated on investigation and the action taken on completion of the investigation

None

Any recommendations of the Ombudsman under the Act that relate to WorkSafe None

Application for Internal Review

During 2011/12, there were 1,868 applications received for internal review of decisions, a decrease of 12% from the previous year. There were 1,884 decisions issued, including a small number of licensing and return to work reviews. All decisions were completed within the statutory time frames. Just over 77% of applications involved requests for additional time to comply with Improvement Notices. Outcomes were as follows:

Internal Review Outcomes 2011/12 2010/11

Health & Safety

Inspector’s decision affirmed (no change) 108 129


Inspector’s decision varied 26 20

Compliance date only changed 1,454 1,668

Extension refused 43 51

Application refused 17 5

Application withdrawn 53 88


Licensing

Licensing decision affirmed 8 13

Licensing decision set aside 2 1

Licensing decision application withdrawn 1 1

Licensing application ineligible/not reviewable 2 2

Return to work

Inspector’s decision affirmed 5 4


Compliance date only changed 0 4


TOTAL 1,884 2,138

In the year to 30 June 2012, there were 18 decisions lodged for review at VCAT. During the year, 1 decision was affirmed, 16 were struck out or dismissed, 9 were withdrawn and 5 were set aside. At the time of printing 4 matters are under negotiation and 1 is listed for hearing.


Environmental Performance WorkSafe has a Green Office policy focussed on protecting the environment and supporting sustainable outcomes.

During 2011/12, WorkSafe continued a number of environmentally sustainable initiatives, supported by an environmental committee, to reduce waste and improve resource efficiency. Initiatives include:

• Confirmed 4.5 star NABERS and 5 star GreenStar star energy efficiency rating for WorkSafe head office at 222 Exhibition Street, Melbourne

• Operating an environmental sustainability reporting system consistent with the Department of Sustainability and Environment and government policy through Resource Smart

• Using carbon neutral paper for all on-site copying and printing and recycled paper for off-site printing

• Reduced number of printed brochures and guidance material

• Procurement of 25% green electricity

• Actively managed office supplies to increase the recycled and sustainable content

• Inclusion of environmental considerations in procurement activities.

Victorian Industry Participation Policy

Details of contracts commenced to which the Victorian Industry Participation Policy Act 2003 (VIPP) applied are as follows:

• during 2011/12, WorkSafe commenced one contract in metropolitan Victoria totalling $6.6 million (gst inclusive) in value.

The commitments of the contractor under VIPP include:

• an overall level of local content of 100% of the total value of the contract

• 20 full time equivalent jobs retained.

The benefits to the Victorian economy in terms of skills and technology transfer include:

• training and transfer of technical skills to WorkSafe employees.

Details of contracts completed to which the VIPP applied are as follows:

• during 2011/12, no contracts were completed by WorkSafe to which the VIPP applied.

National Competition Policy

Review of Legislative Restrictions

In accordance with its National Competition Policy commitments, the Victorian Government commissioned a review of Victoria’s accident compensation legislation in 1998. The review identified three main restrictions on competition; the mandatory nature of the insurance, monopoly provision and centralised premium setting.

In December 2009 a new provision was introduced into the Accident Compensation Act 1985, to commence on 1 July 2010, which provides that the Minister must, once every 5 years, cause a review on any matter relating to the setting of premiums. The review is to be undertaken by an independent expert body. The Minister may also cause a review on any matter relating to self-insurer contributions to be undertaken by an independent expert body.

Competitive Neutrality

Under the Victorian Government’s Competitive Neutrality Policy, WorkSafe is listed as a Public Financial Enterprise. Therefore, in accordance with the obligations set out in the Competition Principles Agreement, WorkSafe pays the full suite of Commonwealth and State taxes or tax equivalents where applicable. WorkSafe is not a borrower in its own right and therefore is not subject to the Financial Accommodation Levy.

Building Act

WorkSafe’s policy with respect to new building works, and alterations to existing buildings, is to comply with the Building Act 1993 as if WorkSafe is not exempt from compliance as a public authority (as provided in section 217(3) of the Building Act 1993).

Some buildings occupied by WorkSafe may have been constructed or altered under exemptions for public bodies which applied at the time. WorkSafe is unaware of any material non-compliance with the current building standards for buildings of their nature and age.

Additional Information Available on Request

To the extent applicable, the information listed in Financial Reporting Direction 22, issued by the Minister for Finance, is available on request (subject to the provisions of the FOI Act).

Merit and equity, and employment and conduct principles

WorkSafe is committed to the application of principles of merit and equity in the employment process. These principles ensure applicants are assessed and evaluated fairly and equitably on the basis of key selection criteria and required competencies. All decision making recognises WorkSafe’s Code of Conduct, Organisation Values and relevant policies and processes.

All WorkSafe employees have access and support available to them via the Equal Employment Opportunity (EEO) Contact Officers.

In 2011/12, the focus for the EEO refresher training was predominantly in the Business Services areas. The training sessions were conducted divisionally and in mixed division sessions. All employees identified as required to attend participated in the training.


WorkSafe Workforce Data 30 June 2012 30 June 2011

Total number of employees 1,131 1,135

Full time equivalent 1,086 1,097

Males 550 558

Females 581 577

Full time 1,003 1,018

Part time 128 117

Average age 44 43

Workforce by WorkSafe classification band

Band 1 Band 2 Band 3 Band 4 Band 5 Band 6 Other

30 June 2012 8 66 134 344 381 88 110

30 June 2011 7 75 130 359 371 88 105

Consultants

The following table lists the consultants engaged in 2011/12 where the cost of each individual engagement was in excess of $10,000.

Consultancy Description of Work Total Approved

Project Fee

2011/12 Expenditure

Future Expenditure

$000s $000s $000s

Amerin Pty Ltd Human Resources organisational review 55 51 4

Eureka Economics Pty Ltd Reducing Regulatory Burden Analysis 90 56 –

Kokkin & Brown Pty Ltd Health & Safety Strategic Operating Framework Development

109 103 –

KPMG Information Technology Expenditure Review 91 91 –

KPMG Information Technology 2017 Strategy Options 207 207 –

KPMG IT Shared Solutions Governance Model Review 93 93 –

Noetic Solutions Pty Ltd Emergency Response Program Review 113 113 –

PricewaterhouseCoopers Impact Assessment on the proposed Model Work Health & Safety Act and Model Work Health & Safety Regulations

480 476 –

PricewaterhouseCoopers Regulatory Impact Statement for Dangerous Goods Storage and Handling Regulations

145 92 53

Regulatory Impact Solutions Pty Ltd

Economic Analysis for Regulatory Impact Statement on the Proposed Accident Compensation Regulations

67 61 –

The Boston Consulting Group 2017 Strategy Development 1,815 1,815 –

During 2011/12, there were no consultants engaged where the cost of each individual engagement was below $10,000.

The total approved project fees and expenditure for 2011/12 excludes GST.


Appendix 5 Compliance Index To Disclosure Requirements 2011/12

DISCLOSURE INDEX

The Annual Report of WorkSafe is prepared in accordance with all relevant Victorian legislations and pronouncements. This index has been prepared to facilitate identification of WorkSafe’s compliance with statutory disclosure requirements.

Ministerial Directions/Legislation Requirement Page reference Report of Operations Charter and purposeFRD 22C Manner of establishment and the relevant Minister 88FRD 22C Objectives, functions, powers and duties 89FRD 22C Nature and range of services provided 89Management and structureFRD 22C Organisational structure 7Financial and other informationFRD 22C Statement of workforce data and merit and equity 92FRD 22C Summary of the financial results for the year 5FRD 22C Significant changes in financial position during the year 32FRD 22C Operational and budgetary objectives and performance against objectives ThroughoutFRD 22C Major changes or factors affecting performance ThroughoutFRD 22C Subsequent events N/AFRD 22C Details of consultancy expenditure 93FRD 22C Application and operation of Freedom of Information Act 1982 89FRD 22C Compliance with building and maintenance provisions of Building Act 1993 92FRD 22C Application and operation of the Whistleblowers Protection Act 2001 90FRD 22C Statement on National Competition Policy 92FRD 22C Statement of availability of other information 92FRD 22C Occupational health and safety policy 26-27FRD 22C Employment and conduct principles 92FRD 10 Disclosure index 94FRD 25 Victorian Industry Participation Policy disclosures 92SD 4.5.5 Risk management compliance attestation 88SD 4.2(g) General information requirements ThroughoutSD 4.2(j) Sign-off requirements Inside coverFinancial StatementsFinancial statements required under Part 7 of the FMASD 4.2(a) Statement of changes in equity 33SD 4.2(b) Operating statement 31SD 4.2(b) Balance sheet 32SD 4.2(b) Cash flow statement 34Other requirements under Standing Directions 4.2SD 4.2(c) Compliance with Australian Accounting Standards

and other authoritative pronouncements35

SD 4.2(c) Compliance with Ministerial Directions 35SD 4.2(c) Accountable officer’s declaration 70SD 4.2(d) Rounding of amounts 40Other disclosures as required by FRDs in notes to the financial statementsFRD 3A Accounting for Dividends 38FRD 11 Disclosure of ex-gratia payments N/AFRD 17A Long service leave wage inflation and discount rates 39FRD 21B Responsible person and executive officer disclosures 59FRD 103D Non-current physical assets 38FRD 104 Foreign currency 37FRD 106 Impairment of assets 39FRD 109 Intangible assets 39FRD 110 Cash flow statement 34FRD 112C Defined benefit superannuation obligations 39FRD 116 Financial instruments – Public Finance Corporations 61-70FRD 120F Accounting and reporting pronouncements applicable to the 2011-12 reporting period 35LegislationFreedom of Information Act 1982 89Building Act 1983 92Whistleblowers Protection Act 2001 90Victorian Industry Participation Policy Act 2003 92Financial Management Act 1994 35

LOCAL OFFICES

NorthEssendon Fields 03 9223 6888Shepparton 03 5831 8260Wangaratta 03 5721 8588

WestBallarat 03 5338 4444Bendigo 03 5443 8866Geelong 03 5226 1200Mildura 03 5021 4001Warrnambool 03 5564 3200

EastDandenong 03 8792 9000Mulgrave 03 9565 9444Traralgon 03 5174 8900

ADVISORY SERVICE

222 Exhibition StreetMelbourne VIC 3000

Phone 03 9641 1444Toll-free 1800 136 089Email [email protected]

HEAD OFFICE

222 Exhibition StreetMelbourne VIC 3000

Phone 03 9641 1555Toll-free 1800 136 089Website worksafe.vic.gov.auTwitter @WorkSafe_VicFacebook facebook.com/worksafevictoria

www.worksafe.vic.gov.au

www.facebook.com/worksafevictoria