Funding of Capital Items - Disability Services Commission

Disability Services Commission 

Policy Information Sheet 

Policy No: 

August 2005 

FUNDING OF CAPITAL ITEMS 

The purpose of this policy statement is to outline the Commission’s policy 

position on the funding of capital items and its ongoing management of 

equity interests arising from previous capital funding arrangements. 

Policy Statement 

The Commission does not fund capital items except for some motor vehicle 

and minor equipment items where no other funding source is available and is 

essential to the running of the program. 

This policy covers both external service providers (government and nongovernment 

organisations, profit and not-for-profit organisations) and internal 

service providers (Accommodation Services, Metropolitan Services 

Coordination and Country Services Coordination Directorates). 

Definition of Asset Items 

For the purpose of this policy, capital items refer to the assets used for the 

provision of services to people with disabilities. 

“Assets” are defined as future economic benefits controlled by the entity as a 

result of past transactions or other past events (Statement of Accounting 

Concept (SAC) 4 – Definition and Recognition of the Elements of Financial 

Statements). 

• Future economic benefits (service potential) can be described as the 

scarce capacity to provide benefits to the entities that use them, and is 

common to all assets irrespective of their physical or other form. 

Entities use assets to provide goods and services that their customers 

or beneficiaries desire or need. Thus, assets provide a means for 

entities to achieve their objectives. 

• Control of an asset means the capacity of the entity to benefit from the 

asset in the pursuit of the entity’s objectives and to deny or regulate 

the access of others to that benefit.

• The transaction or other event giving the entity control over the future 

economic benefits must have occurred, i.e. ‘past’. Some of the assets 

held by non-government organisations were obtained from 

governments as grants or capital funding. 

An asset should be recognised in the statement of financial position when and 

only when: 

(a) 

(b) 

it is probable that the future economic benefits embodied in the asset 

will eventuate; and 

the asset possesses a cost or other value that can be measured 

reliably. 

Assets that are not recognised in the statement of financial position because 

they do not meet the above criteria may warrant disclosure in the notes of 

the financial report. Land and buildings, plant and equipment are examples 

of assets being used by service providers to provide goods and services. 

Capitalisation vs. Expensing of Expenditures 

The criteria for recognition as (capitalisation of expenditure on) an asset will 

depend on the conditions determined by individual entities. Most entities 

apply the criteria for recognition of asset specified in SAC 4, others may add 

on the materiality test of the transaction. 

Large organisations like to have a higher monetary limit before capitalising 

the expenditure. Small organisations prefer a lower monetary limit for 

capitalisation. As a guide, expenditure on an asset is to be capitalised and 

recognised in the statement of financial position when it is greater than 

$1,000 in value and more than two years useful life. 

Principles 

The capital policy funding framework is based on the following high order 

principles: 

1. Individuals should not be advantaged nor disadvantaged as a 

consequence of being in receipt of a service from a government or non 

government provider. 

2. Flexibility in service delivery and maximisation of the benefit to people 

with disabilities. 

3. Consistency and coherency between past and future arrangements. 

These are supported by the following principles at the operational level. 

1. In general, the Commission does not fund capital asset acquisitions.

2. Where capital funding is provided, the Commission will have an equity 

interest in the asset unless otherwise stated in an Agreement [for 

example, Community Aids and Equipment Program funding]. The extent 

of the equity interest will be based on the percentage that the funding 

amount represents the acquisition/construction cost of the asset [in line 

with generally accepted accounting principles]. 

3. The Commission will not enforce the sale of a capital asset in which the 

Commission holds an equity interest, unless the asset is used in a manner 

inconsistent with the Agreement. 

4. Service providers must advise the Commission of any intention to sell an 

asset in which it holds an equity interest and negotiate with the 

Commission on the application of the Commission’s portion of the sale 

proceeds. 

5. The Commission may approve exceptions to the above principles where a 

sound business case can demonstrate achievement of a better service and 

value for money outcome. 

Existing capital funding practices have been documented in one consolidated 

policy and detailed in Attachment A - Policy Framework for Funding of 

Capital Items. 

Attachment B outlines the Commission’s policy position relating to its equity 

interest in the CSDA properties. 

Attachment C outlines the Commission’s policy position relating to its equity 

interest arising from the use of program support funding. 

Attachments A, B and C form part of this policy. 

CONSULTATION PROCESS 

Both internal and external stakeholders have been consulted in the 

preparation of this policy. External consultation included representation from 

three Council of DSC Funded Agencies [COFA] members on the Commission’s 

working party. Consultation was also undertaken with staff from Lotterywest 

who confirmed the general intent of this policy is in line with their policies 

and practices. 

The Commission is committed to the continuous improvement of its services. 

It will therefore, review its policy on Funding of Capital Items on a regular 

basis.

In addition, formal complaints can be lodged through the Commission’s 

existing formal complaint mechanism by contacting - Consumer Liaison 

Officer, telephone (08) 9426 9244; toll free 1 800 998 214; TTY (08) 9426 

9315; E-mail: clo@dsc.wa.gov.au 

Date: August 2005 

For enquiries contact: 

Manager: Service Development & Monitoring 

Telephone (08)_9426 9382 

Toll Free 1 800 998 214 

TTY (08) 9426 9315 

Other relevant Policies: 

• Funding Non-Recurrent Accommodation Set up Costs through 

Accommodation Support Funding Information Sheet 

• Funding for Modified Motor Vehicles Information Sheet 

• Accommodation Support Funding Policy Information Sheet 

• Community Aids and Equipment Program Manual 

Policy Information Sheet replaced by this Information Sheet: 

Nil 

W:\Service Purchasing Development\SPD Shared Files\Policy\Information_Sheets\Policy on Funding of Capital Items 

August 2005.doc

ATTACHMENT A – POLICY FRAMEWORK FOR FUNDING OF CAPITAL ITEMS 

Does SPD Fund External 

Service Providers? 

Alternative Funding 

Sources for External 

Service Providers 

Does SPD Fund 

Internal Service 

Providers? 


Sources for Internal 


Government 

Policy 

Office / 

Administration 

Building 

Build 

/ Buy 

Lease 

No 

• Depreciation is not 

included in program 

support funding. 1 

fundraising, 

Lotterywest (Govt), 

sponsorship, bequests 

• Organisational 

Reserves (Dependent 

on the financial 

• Donations, 

• SPD does not restrict the 

use of program support 

funding for loan 

repayments. 2 

No 

• Lease payments are not 


support funding. 

• However, SPD does not 

restrict the use of program 

support funding for lease 

payments. 

position of individual 

organisations and 

level of funding 

provided by the 

Commission.) 


Reserves 

• Alternative income eg 

fees and charges 

• Within program 

support funding 

No • Government policy 

requires leasing 

arrangement 

No 

• As per the 

external service 

providers 

• May apply to 

Corporate Executive 

for additional funding 

– where funding is 

not approved the 

Directorate is required 

to absorb cost. 

Supports lease 

rather than build 

/ buy. 

1 - Program Support includes the combined costs defined as Program Management, Care Facility, and Corporate Office 

2 - Issue of property equity arising from Commission funding is detailed in Attachment C






Does SPD Fund 


Providers? 




Government 

Policy 

Community 

Access Client 

Facilities [Not 

Accommodation 

or Respite 

facilities] 

(eg ATE, DPS) 

Build 

/ Buy 

Lease 

No 





restrict the use of program 

support funding for loan 

repayments. 

Yes 

• Program support funding 

includes lease payments 

for operational / program 

requirements. 


fundraising, 




Reserves 


Reserves 

No 

• As per the external 

service providers 

Yes 



providers 

• Government policy 


arrangement 

• Included as part of 

program support 

funding. 


rather than build 

/ buy. 

Page 6 of






Does SPD Fund 


Providers? 




Government 

Policy 

Accommodation 

Special Care 

Facilities 

Build 

/ Buy 

Lease 

No 

• Housing is the 

responsibility of DHW. 




• SPD does not allow the use 

of program support funding 

for loan repayments. 


fundraising (including 

P&F support), 




Reserves 


No 

lodging / rent payments. 3 

• SPD does not allow the use Reserves 


for lease payments. These 

should be paid for by 

clients by way of board and 

• Client’s Board and 

Lodging / Rent 

payments 

No 



No 



providers 

• Can apply to Corpex 

for Capital funding 

under CWP. 


Reserves 

• Fundraising 

opportunities via 

Parent & Friends 

groups. 








Mainly leasing. 

In special 

circumstances, 

purchasing 

strategy may be 

permitted 

(subject to 

business case) 

Accommodation 

Group Homes 

Build 

/ Buy 

No 

• Housing is the 

responsibility of DHW. 




• SPD does not allow the use 


for loan repayments. 


fundraising, 




Reserves 

No 



• Can apply to Corpex 

for Capital funding 

under CWP to fund 

the fit out shortfall 

outside DHW purpose 

building guidelines. 


opportunities via 

Parent & Friends 

groups. 

DHW provides 

purpose built 

accommodation 

housing via the 

Community 

Housing 

Arrangement. 

3 - Private rental subsidy is available from SPD where there is a delay in DHW delivery of subsidised rental accommodation. 







Does SPD Fund 


Providers? 




Government 

Policy 

Lease 

No 

• SPD does not allow the 


funding for lease 

payments. These should 

be paid for by clients by 

way of board and 

lodging/rent payments. 


Reserves 

• Client’s Board and 

Lodging / Rent 

payments 

No 



providers 














Does SPD Fund 


Providers? 




Government 

Policy 

Upgrades 

/Refurbishments 

/ Renovations to 

Existing Facilities 

Land 

(either vacant or 

part of capital 

development) 

Standard Motor 

Vehicles 

Buy / 

Build 

Buy 

Buy 

No 

• DHW undertakes some 

upgrades (eg additional 

rooms), other upgrades 

are funded internally. 


fundraising, 




Reserves 

No • Donations, 

fundraising, 



Reserves 

Yes 

• Funds initial purchase of 

program / service vehicles 

only. 

• Does not fund replacement 

vehicles. 


fundraising, 



Reserves 

No 



• Capital Works 

Program 









opportunities 

No • May use existing 

surplus land or CWP 

for special 

developments not 

provided for under 

the DHW 

arrangement 



arrangement 

Supports build / 

buy and not 

leasing 

Mixed – subject 

to business case 


rather than 

purchase 







Does SPD Fund 


Providers? 




Government 

Policy 

Lease 

No 


restrict the use of 

program support funding 

to lease program / service 

vehicles (provided they 

operate within 

benchmarks). 


Reserves 

No • For vehicle requests 

may apply to 







• SPD does not permit the 


funding solely for 

administration vehicles. 







Does SPD Fund 


Providers? 




Government 

Policy 

Modified Motor 

Vehicles 

Buy 

Lease 

Yes 

• SPD will fund 100% of 

initial purchase and 90% 

of change over cost of 

replacement of modified 

vehicles. 

• SPD does not fund 

modifications. 

No 


prevent service providers 

from using program 

support funding for 

leasing program / service 

vehicles (provided they 

operate within 

benchmarks). 

• Lotterywest funding 

of modifications 

limited to 50% to a 

maximum of $7,500. 

• For change over costs 

(20%) and 

modification funding 

shortfall - Donations, 

fundraising, 



Reserves 


Reserves 



arrangement 

No • For new vehicle 

requests may apply to 







• modifications costs 

are amortised and 

included in vehicle 

leasing costs. 

Lease 







Does SPD Fund 


Providers? 




Government 

Policy 

Buy 

Yes (partially) 



• No separate funding 


fundraising, 




Reserves 

Yes 



• CWP for computer 

acquisitions and 

recurrent funding for 

other office 

equipment. 

Mixed 

Operating Assets 

(eg Computers, 

Photocopiers, 

etc.) 

Lease 

Yes (partially) 



• No separate funding 


Reserves 

Yes 



providers 

• Mixed arrangements 

for other office 

equipment funded 

from recurrent 

budgets. Where is 

not available may 

apply to Corporate 

Executive for 

additional funding – 

where funding is not 

approved the 



• However, internal 

policy does not allow 

lease of computers. 


Grant Purpose 

Purchase / Construction of 

Land and/or Building 

ATTACHMENT B - TREATMENT OF CSTDA EQUITY ARRANGEMENTS 

Commission’s Policy Position 

The Commission will not force sale upon a service provider in which it holds an equity interest. 

The Commission may consider placing caveats on properties in which it holds an equity interest. The service provider shall not 

mortgage or encumber in any other way the asset without the prior approval of the Commission. 

The Commission’s equity interest is determined by the formula prescribed in the capital agreement. In some cases this interest is 

the “equivalent value of the grant in today’s dollars” and in others it is based on the “original grant amount”. 

Where a property no longer meets an agency’s requirements, the Commission may consider the transfer of the equity for another 

purpose. The process for equity transfer will include: 

− 

− 

− 

− 

preparation of a supporting business case by the organisation; 

proceeds from sale to be reinvested in similar disability services; 

the Commission’s equity interest transfers to the new asset; and 

Ministerial approval to be obtained to transfer equity. 

The service provider should advise the Commission where they intend to undertake significant capital improvements which may 

alter the equity arrangements. The equity arrangements will be adjusted through consultation between parties. 

Whoever is deemed to control the asset should report the asset on their financial statements. The service provider reporting the 

asset shall be responsible for the insurance, maintenance and other operational costs associated with the asset. 

Not Specified 

Other Capital Items (e.g. 

plant and machinery) 

Maintenance / Minor Works 

The equity interest should be treated as above (by agreement between parties). 

The Commission relinquishes equity rights to these items. 

The Commission relinquishes equity rights to these items. 


ATTACHMENT C – EQUITY INTEREST ARISING FROM THE USE OF PROGRAM SUPPORT FUNDING 

Grant Purpose 

Purchase / Construction of 

Land and/or Building 

Commission’s Policy Position 

The Commission does not restrict the use of program support funding for loan / mortgage repayments for office / administration 

buildings or direct care facilities. 

When this occurs, service providers will not be permitted to include depreciation or interest / loan repayments for output 

reporting of the Agreements. 

The service provider shall advise the Commission of their intention to use program support funding for these purposes and the 

Commission may place a caveat on the relevant property. 

Where a property no longer meets a service provider’s requirements, the Commission may consider the transfer of the equity for 

another purpose. The process for equity transfer is similar to that of CSTDA equity arrangements and will include: 

− 

− 

− 

− 

preparation of a supporting business case by the service provider; 

proceeds from sale to be reinvested in similar disability services; 

the Commission’s equity interest transfers to the new asset; and 

Ministerial approval to be obtained to transfer equity. 

The service provider should advise the Commission where they intend to undertake significant capital improvements which may 

alter the equity arrangements. The equity arrangements will be adjusted through consultation between parties. 

From an accounting perspective, the service provider will be deemed to have “control” of the asset and as such will be 

responsible for disclosure in their financial statements and also responsible for insurance, maintenance and other operational 

costs associated with the asset.

Funding of Capital Items - Disability Services Commission

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