Section 5: Budgeted financial statements
5.1 Analysis of budgeted financial statements
The budgeted departmental Income Statement (refer Table 5.1) shows a net decrease in appropriations from $99.1 million forecast for 2006-07 to $93.8 million in 2007-08. The decline is due in part to the end of the 2006-07 Budget measure to support the disqualification of persons from the insurance industry. The balance is due to the additional levies collected in 2007-08 offset by the 2007-08 Budget measure — see Table 2.2.
Income from rents is a result of sub-letting an area of surplus leased space in the Canberra office. Subletting arrangements will cease in June 2007.
Revenue from sale of goods and services includes the various cost recovery activities as described in Section 4.2.
Following APRA’s transition to an FMA Act agency from 1 July 2007, the direct earning of interest on cash holdings will cease. A new appropriation, recognising interest on APRA reserves, has been approved in lieu — refer Table 2.2.
Employee expenses will increase from $60.5 million forecast in 2006-07 to $69.2 million in 2007-08. The increase has two key components: the 2007-08 Budget measure ($5.4 million of the total $6.8 million) combined with a 2006-07 underspend ($3 million) mainly due to higher than anticipated staff turnover. As a result of the latter, APRA has been unable to maintain its target headcount of 580 full time equivalent staffing. The 2007-08 Budget measure is partially aimed at assisting APRA to maintain its staffing capacity and quality.
Supplier costs will decrease from $25.8 million forecast in 2006-07 to $25.2 million in 2007-08. The net decrease has three main components: underspent enforcement activity ($1.2 million) in 2006-07; the cessation of the 2006-07 Budget measure enabling the disqualification of persons from the insurance industry ($3.7 million); offset by the 2007-08 Budget measure ($1.4 million of the total $6.8 million).
APRA is budgeting for an operating surplus of $0.2 million in 2007-08.
The budgeted departmental Balance Sheet (refer Table 5.2) shows an increase in total financial assets from the prior period consisting mainly of Basel II accreditation receivables.
No material change in non-financial assets is expected in 2007-08, however planned reinvestment in APRA’s core infrastructure will see non-financial asset balances grow beyond 2007-08. Acquisitions will be funded from APRA’s internal reserves.
Provisions for employee entitlements cover accumulated annual and long service leave which, following a one-off increase in 2007‑08 reflecting the impacts of the 2007-08 Budget measure, are expected to level off. The other provisions consist of making-good leased premises and equalising lease incentives.
APRA will maintain its sound financial position and continue to have sufficient resources available to cover all its known financial obligations.
Contributed equity will be maintained at the 2006-07 level. Retained surpluses are planned to maintain reserves at a level sufficient to accommodate unforseen business needs which may arise from supervision of at-risk institutions and enforcement actions. The determination of levies for 2007-08 is subject to the outcomes of industry consultation, including the extent to which retained surpluses can be returned to industry through the levies process.
The budgeted departmental Statement of Cash Flows (refer Table 5.3) reflects the decrease in appropriations as detailed in Table 5.1.
Table 5.4 shows the expected changes in equity from one financial year to the next. The only change expected reflects the small operating surplus of $0.2 million budgeted for 2007-08.
The departmental Capital Budget Statement (Table 5.5) indicates APRA’s capital requirements will be met from internally generated resources. The expected movements in non-financial asset values between 2006-07 and 2007-08 are shown in Table 5.6, the main activity being in infrastructure, plant and equipment to replace retired assets.
The Schedule of Budgeted Income and Expenses Administered on behalf of Government (refer Table 5.7) shows the amounts APRA collects in supervisory levies from the finance industry on behalf of the Government under the Financial Institutions Supervisory Levies Collection Act 1998. In addition to the amount required to fund APRA, the levies also include amounts to fund the activities of the Australian Taxation Office for unclaimed moneys and lost member functions and the Australian Securities and Investments Commission for consumer protection and market integrity functions. The expenses shown are an estimate of the amount of levies and penalties that will be waived or written off in the year.
Table 5.8 refers to minor amounts of the administered income (refer Table 7) that may not be collected at the year end.
As indicated in the Schedule of Budgeted Administered Cash Flows (refer Table 5.9), the cash collected is swept daily from the APRA account to the Official Public Account, from which APRA, in turn, draws down the amounts appropriated to it by the Parliament, as shown in Table 5.3.
APRA does not administer any non-financial assets on behalf of the Government.
5.2 Budgeted financial statements tables
Table 5.1: Budgeted departmental income statement
(for the period ended 30 June)
Table 5.2: Budgeted departmental balance sheet (as at 30 June)
Table 5.3: Budgeted departmental statement of cash flows
(for the period ended 30 June)
Table 5.4: Departmental statement of changes in equity — summary of
movement
(Budget year 2007-08)
Table 5.5: Departmental capital budget statement
Table 5.6: Departmental property, plant, equipment and intangibles — summary of movement (Budget year 2007-08)
Table 5.7: Schedule of budgeted income and expenses administered on behalf
of government (for the period ended 30 June)
Table 5.8: Schedule of budgeted assets and liabilities administered on behalf
of government (as at 30 June)
Table 5.9: Schedule of budgeted administered cash flows
(for the period ended 30 June)
Table 5.10: Schedule of administered capital budget
APRA does not have any administered capital items.
Table 5.11: Schedule of administered property, plant, equipment and intangibles — summary of movement
(Budget year 2007-08)
APRA does not have any administered property, plant, equipment or intangibles.
5.3 Notes to the financial statements
Basis of accounting
The financial statements have been prepared on an accrual basis in accordance with historical cost convention.
Budgeted departmental statement of financial performance
Revenues from government
APRA is funded by a special appropriation for levies and late payment penalties collected under the Financial Institutions Supervisory Levies Collection Act 1998. The revenue reported by APRA is net of the levies retained in the Official Public Account to fund the Australian Securities and Investments Commission (ASIC) for consumer protection and market integrity functions, and the Australian Taxation Office (ATO), for unclaimed monies and lost member functions.
Other revenue
Revenue from rendering of specific services is recognised by reference to the stage of completion of contracts or other agreements. Revenue from licence fees is recognised on receipt of the application and licence fee. Revenue from sub-lease rentals is recognised upon issue of invoice. Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.
Depreciation and amortisation
APRA’s depreciation expense remains in balance with the capital programme aimed at maintaining APRA’s processes and infrastructure to an appropriate standard.
Budgeted departmental statement of financial position
Financial assets
These include within receivables, levies invoiced but still outstanding at the financial year end and accrued revenues being interest and fees prorated over the periods to which they relate.
All accounts receivable are recorded at their estimated recoverable amount.
Non-financial assets
Non-financial assets include leasehold improvements, furniture and fittings, computer hardware and office equipment. All of the foregoing assets are shown at fair value. Intangible assets comprise capitalised software, including work in progress and are shown at cost. APRA does not own any land or buildings.
Other non-financial assets include prepayments.
Provisions and payables
Provisions and payables represent liabilities for miscellaneous accruals and employee benefits, including accrued salary and leave entitlements, provisions for making good leased premises and payments to trade creditors.
Equity
The opening balance of contributed equity represents the net value of assets and liabilities transferred from the Reserve Bank of Australia and the Insurance and Superannuation Commission on the formation of APRA on 1 July 1998, less an amount of $2.1 million returned to the Consolidated Revenue Fund as a return of unused appropriation in 2004-05.
Budgeted departmental statement of cash flows
Cash received from operating activities includes the appropriation for levies collected from industry less amounts collected on behalf of the ATO and ASIC, cash from fees and charges, and interest earned on cash balances and investments held as government backed securities.
Schedule of budgeted revenues and expenses administered on behalf of Government
Revenues
The other non-taxation revenues are the levies and late payment penalties collected under the Financial Institutions Supervisory Levies Collection Act 1998. The revenue reported in this statement is higher than that reported by APRA in the budgeted agency statement of financial position by the amount retained in the Official Public Account to fund ASIC and ATO activities described above.
Write down and impairment of assets
Write down and impairment of assets represents waivers and write-offs of levies.
Schedule of budgeted assets and liabilities administered on behalf of Government
Financial assets
The financial assets include levy debt invoiced and still outstanding at year end.
Schedule of budgeted administered cash flows
All cash collected by APRA for levies, late lodgement and late payment penalties under the Financial Institutions Supervisory Levies Collection Act 1998 is transferred to the Official Public Account at the close of business each day.