Skip to content

Part 4: Financial statements (continued)

Notes to and forming part of the financial statements
for the period ended 30 June 2012

Note 16: Administered expenses
  2012
$’000
2011
$’000
Note 16A: Grants    
Public sector:    
State and Territory Governments 83,612,420 85,548,292
Payment of COAG receipts from    
Government agencies 3,230,916 1,332,351
Other grants 2,450 54,994
Total grants 86,845,786 86,935,637
     
Note 16B: Interest    
IMF charges 11,289 18,734
Total interest 11,289 18,734
     
Note 16C: Other expenses    
Suppliers expenses 11,388 6,765
Total other expenses 11,388 6,765
Note 17: Administered income
  2012
$’000
2011
$’000
Note 17A: Interest    
Gross IMF remuneration 3,129 3,734
Less: Burden sharing (63) (21)
Net IMF remuneration 3,066 3,713
Interest on loan to IMF under    
New Arrangements to Borrow 722 127
Interest on loans to States and Territories 251
Total interest 4,039 3,840
Note 17B: Dividends    
Reserve Bank of Australia 500,000
Australian Reinsurance Pool Corporation 400,000
Total dividends 900,000
Note 17C: Sale of goods and rendering of services    
GST administration fees — external entities 677,367 673,347
Guarantee Scheme for Large Deposits and    
Wholesale Funding Fee 847,780 1,106,067
Guarantee of State and Territory Borrowing 63,373 100,129
Total sale of goods and rendering of services 1,588,520 1,879,543
Note 17D: COAG revenue from Government    
Building Australia Fund revenue 2,236,700 826,100
Health and Hospital Fund revenue 885,575 408,179
Education and Innovation Fund revenue 24,877 21,698
Interstate road transport revenue 83,764 87,380
Non-government schools revenue 7,700
Total COAG receipts from government agencies 3,230,916 1,351,057
Note 17E: Other revenue    
Write back of HCS Scheme 5,434
HIH Group liquidation proceeds 23,479 62,244
Other revenue 5,288 4,591
Total other revenue 28,767 72,269
Note 17F: Foreign exchange gains    
IMF SDR allocation 14,954 869,147
IMF maintenance of value 6,309 342,113
IMF quota revaluation (15,697) (788,040)
IFIs revaluation 2,552 (95,035)
Other (2,224) 10,034
Total foreign exchange gains 5,894 338,219
Note 18: Administered financial assets
  2012
$’000
2011
$’000
Note 18A: Cash and cash equivalents    
Cash on hand or on deposit 1,735 4,763
Total cash and cash equivalents 1,735 4,763
     
Note 18B: Receivables & loans    
Guarantee Scheme for Large Deposits and
Wholesale Funding contractual fee receivable
1,064,144 1,825,935
Guarantee Scheme for Large Deposits and
Wholesale Funding fee receivable
60,882 78,824
Guarantee of State and Territory
Borrowing contractual fee receivable
265,960 301,920
Guarantee of State and Territory
Borrowing fee receivable
4,738 5,998
Net GST receivable from the ATO 52 17
HLIC premiums receivable 40
Loans to States and Territories 15,101
IMF related moneys owing 277 950
IMF maintenance of value 342,113
IMF new arrangements to borrow loan 661,133 224,547
Dividends receivable 900,000
NDRRA receivables 128,643
Other receivables 17,577 13,860
Total receivables (gross) 2,989,864 2,922,847
     
Receivables are expected to be recovered in:    
No more than 12 months 1,452,023 570,445
More than 12 months 1,537,841 2,352,402
Total receivables (gross) 2,989,864 2,922,847
     
Receivables are aged as follows:    
Not overdue 2,989,864 2,922,847
Total receivables (gross) 2,989,864 2,922,847
Note 18: Administered financial assets (continued)
  2012
$’000
2011
$’000
Note 18C: Investments    
International financial institutions    
Asian Development Bank 338,793 261,954
European Bank for Reconstruction and Development 77,360 84,537
International Bank for Reconstruction and Development 180,902 169,244
International Finance Corporation 46,442 44,072
Multilateral Investment Guarantee Agency 6,084 5,774
Total international financial institutions 649,581 565,581
     
Australian Government entities    
Reserve Bank of Australia 6,369,000 5,339,000
Australian Reinsurance Pool Corporation 349,394 665,846
Total Australian Government entities 6,718,394 6,004,846
Total Investments 7,367,975 6,570,427
     
Investments are expected to be recovered in:    
No more than 12 months
More than 12 months 7,367,975 6,570,427
Total Investments 7,367,975 6,570,427
     
Note 18D: Other investments    
IMF quota 4,797,510 4,813,206
Total other investments 4,797,510 4,813,206
     
Other Investments are expected to be recovered in:    
No more than 12 months
More than 12 months 4,797,510 4,813,206
Total other investments 4,797,510 4,813,206
Note 19: Administered non-financial assets
  2012
$’000
2011
$’000
Note 19A: Other non-financial assets    
Prepayments — Infrastructure 1,788 14,526
Prepayments — FaHCSIA 26,900
Prepayments — Health 59,572
Prepayments — NSPP/GST payments to States and Territories 265
Total other non-financial assets 88,260 14,791
     
Other non-financial assets are expected to be recovered in:    
No more than 12 months 88,260 14,791
More than 12 months
Total other non-financial assets 88,260 14,791
Note 20: Administered payables
  2012
$’000
2011
$’000
Note 20A: Grants    
COAG grants payable 473,356 884,081
Total grants 473,356 884,081
     
Total grants are expected to be settled in:    
No more than 12 months 473,356 884,081
More than 12 months
Total grants, subsidies and personal benefits 473,356 884,081
     
Note 20B: Other payables    
GST appropriation payable 51 38
IMF SDR allocation 4,570,369 4,585,323
IMF related monies owing 973 3,982
Other 1 5
Total other payables 4,571,394 4,589,348
     
Total other payables are expected to be settled in:    
No more than 12 months 1,025 4,025
More than 12 months 4,570,369 4,585,323
Total other payables 4,571,394 4,589,348
     
Note 20C: Unearned income    
Guarantee Scheme for Large Deposits and
Wholesale Funding Contractual guarantee service obligation
1,064,144 1,825,935
Guarantee of State and Territory Borrowing
contractual guarantee service obligation
265,960 301,920
Total Unearned income 1,330,104 2,127,855
     
Total unearned income are expected to be settled in:    
No more than 12 months 693,497 902,380
More than 12 months 636,607 1,225,475
Total unearned income 1,330,104 2,127,855
Note 21: Administered interest bearing liabilities
  2012
$’000
2011
$’000
Note 21A: Loans    
IMF promissory notes1 3,141,726 3,781,655
Other promissory notes1 118,181 69,381
Total loans 3,259,907 3,851,036
     
Payable:    
Within one year
In one to five years 50,247 28,030
In more than five years 3,209,660 3,823,006
Total loans 3,259,907 3,851,036

1 Promissory notes held by the Treasury are at face value and have no interest rate associated.

Note 22: Administered provisions
Note 22A: Other provisions      
Provision for HCS Scheme   18,162 21,773
NDRRA provision   3,936,904 4,575,087
Total other provisions   3,955,066 4,596,860
       
Other provisions are expected to be settled in:      
No more than 12 months   420,943 563,981
More than 12 months   3,534,123 4,032,879
Total other provisions   3,955,066 4,596,860
 
Reconciliation of movements in other provisions      
  Provision
for HCS
Scheme
$’000
NDRRA
provision
$’000
Total
$’000
Carrying amount 1 July 2011 21,773 4,575,087 4,596,860
Additional provisions made 1,148,730 1,148,730
Amounts used (3,611) (2,960,564) (2,964,175)
Amounts revalued 836,062 836,062
Unwinding of discount or change in discount rate 337,589 337,589
Closing balance 2012 18,162 3,936,904 3,955,066
Note 23: Administered cash flow reconciliation
  2012
$’000
2011
$’000
Reconciliation of cash and cash equivalents as per Schedule of Administered Assets and Liabilities to Cash Flow Statement    
     
Cash and cash equivalents as per:    
Schedule of Administered Cash Flows 1,735 4,763
Schedule of Administered Assets and Liabilities 1,735 4,763
Difference
     
Reconciliation of net cost of services to net cash from operating activities:    
Net cost of services 81,110,327 83,316,208
     
Adjustments for non-cash items    
Foreign exchange loss/(gain) (5,894) (338,219)
     
Changes in assets / liabilities    
(Increase) / decrease in net receivables 42,424 1,835,833
(Increase) / decrease in other non-financial assets (73,469) 530,555
Increase / (decrease) in grants payable (410,725) 476,628
Increase / (decrease) in unearned income (797,751) (1,195,053)
Increase / (decrease) in loans
Increase / (decrease) in other payables (2,974) (14,122)
Increase / (decrease) in other provisions (641,794) 3,476,963
Net cash from (used by) operating activities (83,000,510) (78,543,623)

Note 24: Administered contingent assets and liabilities

Quantifiable administered contingencies

Quantifiable administered contingencies that are not remote are disclosed in the schedule of administered items as quantifiable administered contingencies.

Commitments under expanded IMF New Arrangements to Borrow (NAB)

Australia has made a line of credit available to the IMF under its NAB since 1998. In line with G20 Leaders’ commitments, Australia has joined with other countries to increase its credit line under an expanded NAB. The NAB is a contingent loan to help ensure that the IMF has the resources available to maintain stability and support recovery in the global economy. The funds are drawn upon by the IMF as needed to supplement the IMF’s usual quota resources and will be repaid in full with interest.

When the expanded NAB came into effect on 11 March 2011, Australia’s NAB credit arrangement increased from SDR801.3 million (A$1,187.8 million as at 30 June 2012) to SDR 4,370.4 million (A$6,478.5 million as at 30 June 2012).

Unquantifiable administered contingencies

Contingent Liabilities
Housing Loans Insurance Corporation — guarantee

The Australian Government sold HLIC on 12 December 1997 and has assumed all residual contingencies. The contingent liability relates to the HLIC’s contracts of mortgage insurance and any borrowings approved by the Treasurer up to the time of sale. The principal amount covered by the guarantee and the balances outstanding cannot be determined accurately.

Terrorism insurance — Australian Reinsurance Pool Corporation

The Terrorism Insurance Act 2003 established a scheme for replacement terrorism insurance covering damage to commercial property including associated business interruption and public liability. The Australian Reinsurance Pool Corporation (ARPC) uses reinsurance premiums paid by insurers to meet its administrative expenses and to build a reserve for claims and purchase retrocession to help meet future claims. The Act provides for an Australian Government guarantee of the liabilities of the ARPC, but the Treasurer must declare a reduced payout rate to insured parties if the Australian Government’s overall liability would otherwise exceed $10 billion.

Commitments under expanded IMF New Arrangements to Borrow (NAB)

Australia has made a line of credit available to the IMF under its NAB since 1998. During 2011-2012 Australia met four calls under the NAB totalling A$444.6 million (SDR 295.1 million). In 2010-11 Australia provided A$225.1 million (SDR150.9 million) under the NAB. These calls have been recognised as loans to the IMF in Note 18.

Under the IMF’s current ‘Resource Mobilization Plan’, a maximum of SDR 177.7 million (A$263.4 million as at 30 June 2012) could be called by the IMF between the period 1 July 2011 to 30 September 2012. As at the completion of these statements, the IMF has not called on the NAB.

Grants to States and Territories

As the Treasury has responsibility for all payments to the States and Territories under the Federal Financial Relations Framework, there may exist contingent liabilities which are remote and unquantifiable in relation to some agreements between the relevant agency with policy responsibility and the States and Territories. Whilst the Treasury does not bear the risk of the contingent event, the resultant payment would be made and reported by the Treasury under the Federal Financial Relations Framework.

Loan to New South Wales for James Hardie Asbestos Injuries Compensation Fund

The Australian Government has agreed to lend up to $160 million to the State Government of New South Wales (NSW) to support the loan facility to top up the James Hardie Asbestos Injuries Compensation Fund. Drawing on the loan is subject to the James Hardie Asbestos Injuries Compensation Fund requiring funds to meet its liabilities and is contingent on NSW meeting a number of conditions under the loan agreement with the Australian Government. The timing and amounts that may be drawn down by NSW cannot be determined accurately. On 16 February 2012 a loan of $14.9 million was provided to the State Government of NSW in respect of the loan facility. (2011: Nil).

Contingent Assets
HIH Claims Support Scheme

As the beneficiary of the HIH Claims Support Trust, the Australian Government is entitled to the residual balance of the Trust, after the collection of recoveries. Due to the inherent uncertainty of future recoveries, it is not possible to quantify these amounts accurately. During 2011-12 the Treasury received distributions from the Trust, however the amount and timing of future recoveries and subsequent distributions is unknown.

Burden sharing in the International Monetary Fund remuneration

Since 1986, the IMF has used its burden sharing mechanism to make up for the loss of income from unpaid interest charges on the loans of debtor members and to accumulate precautionary balances in a Special Contingent Account to protect the IMF against losses arising from the failure of a member to repay its overdue principal obligations. The mechanism works by providing for additions to the rate of charge on IMF loans and deductions to the rate of remuneration for creditor members such as Australia. Resources collected from individual members under the burden sharing mechanism are refundable to them as arrears cases are resolved, or as may be decided by the IMF.

Thus, resources collected for unpaid charges are refunded when these charges are eventually settled.

Likewise, precautionary balances held in the Special Contingent Account would be distributed back to members in proportion to their cumulative contributions when there are no overdue charges or principal balances. The IMF could also decide to make an early distribution.

As there is considerable and inherent uncertainty around the timing and amounts of burden sharing to be refunded to Australia this contingent asset cannot be reliably measured and as such is recorded as an unquantifiable contingent asset.

Note 24: Administered contingent assets and liabilities (continued)

Significant Remote administered contingencies

Guarantees

The following borrowings have been guaranteed by the Australian Government and are the Treasury’s responsibility:

Borrower Legislation authorising
guarantee
Principal
covered by
guarantee
Balance outstanding Balance outstanding
    2012
$’000
2012
$’000
2011
$’000
Papua New Guinea Papua New Guinea 1949
Papua New Guinea 1975
Papua New Guinea Loans Guarantee Act 1975
1,800 1,800 4,895
Commonwealth Bank of Australia1 Commonwealth Bank of Australia Act 1959 s117 780,811 780,811 750,252
Commonwealth Bank of Australia — Officers Superannuation Corporation1 Commonwealth Bank of Australia Act 1959 s117 3,721,200 3,721,200 3,709,000
Guarantee Scheme for Large Deposits and Wholesale Funding Guarantee Scheme for Large Deposits and Wholesale Funding Appropriation Act 2008 91,000,000 91,000,000 118,004,000
Guarantee of State and Territory Borrowing Guarantee of State and Territory Borrowing Appropriation Act 2009 32,000,000 32,000,000 39,500,000
Reserve Bank of Australia2 Reserve Bank of Australia Act 1959 s77 58,349,000 58,349,000 55,727,000
Total   185,852,811 185,852,811 217,695,147

1 Under the terms of the Commonwealth Bank Sale Act 1995, the Australian Government has guaranteed various liabilities of the Commonwealth Bank of Australia (CBA), and the Commonwealth Bank Officers’ Superannuation Corporation (CBOSC). The guarantee for the CBA relates to both on and off balance sheet liabilities. The guarantee of the CBOSC covers the due payments of any amount that is payable to or from Officers’ of the Superannuation Fund (the Fund), by CBOSC or by CBA, in respect of a person who was a member, retired member or beneficiary of the Fund immediately before 19 July 1996. The guarantee of the CBA and CBOSC reflected in the above table is the value at 30 June 2012.
2 The contingent liability for the RBA, relates to the Australian Government’s guarantee of the liabilities of the RBA. It is measured as the Bank’s total liabilities excluding the Bank’s distribution to the Commonwealth and Australian Government deposits. The major component of the Bank’s liabilities are notes (that is, currency) on issue.

Note 24: Administered contingent assets and liabilities (continued)

Guarantee Scheme for Large Deposits and Wholesale Funding

The Australian Government announced the guarantee of eligible deposits and wholesale funding for authorised deposit taking institutions from 12 October 2008 under the Guarantee Scheme for Large Deposits and Wholesale Funding.

The Scheme closed to new deposits from 31 March 2010. Since then, Australian authorised deposit-taking institutions have been prohibited from issuing any new guaranteed wholesale funding or accepting new guaranteed deposits above $1 million. Existing guaranteed wholesale funding is guaranteed to maturity. Depositors who covered their balances above $1 million under the Guarantee Scheme can have those funds covered to maturity for term deposits up to five years, or until October 2015 for at call deposits.

The expected liability for the Government under the Guarantee Scheme is remote and unquantifiable. Australia’s financial system is considered among the strongest and best regulated in the world. Authorised deposit-taking institutions are subject to prudential regulation by APRA in accordance with international standards, which are designed to ensure that financial institutions have the capacity to meet their financial obligations. This framework requires institutions to be adequately capitalised and have appropriate risk management systems in place.

Government expenditure would arise under the guarantee only in the unlikely event that an institution failed to meet its obligations with respect to a commitment that was subject to the guarantee and the guarantee was called upon. The impact on the Government’s budget would depend on the extent of the institution’s default.

As at 30 June 2012, total liabilities covered by the Guarantee Scheme were estimated at $91.0 billion, including $2.9 billion of large deposits and $88.1 billion of wholesale funding.

Guarantee of State and Territory Borrowing

The Guarantee of State and Territory Borrowing commenced on 24 July 2009 and closed to new issuances of guaranteed liabilities on 31 December 2010. Securities covered by the guarantee will continue to be guaranteed until these securities either mature or are bought back and extinguished by the issuer.

The expected liability under the guarantee is remote and unquantifiable. Government expenditure would arise under the guarantee only in the unlikely event that a State or Territory failed to meet its obligations with respect to a commitment that was subject to the guarantee and the guarantee was called upon. In such a case, the Government would likely be able to recover any such expenditure through a claim on the relevant State or Territory at a future date. The impact on the Government’s budget would depend upon the extent of the default and the State or Territory’s ability to meet the Government’s claim.

As at 30 June 2012, the face value of state and territory borrowings covered by the guarantee was $32.0 billion.

Note 25: Administered investments

The principal activities of each of the Treasury’s administered investments are as follows:

Development Banks

The European Bank for Reconstruction and Development (EBRD) was established in 1991 to assist former communist eastern European countries committed to the principles of multi-party democracy, pluralism and market economies, to develop their private sector and capital markets. The EBRD currently operates in 29 countries from Central Europe to Central Asia. It provides project financing for banks, industries and businesses, both new ventures and investments in existing companies. It also works with publicly owned companies, to support privatisation, restructuring state-owned firms and improvement of municipal services. The EBRD uses its close relationship with governments in the region to promote policies that will bolster the business environment.

The Asian Development Bank (ADB) was established in 1966 and has a mandate to reduce poverty and promote economic development in its developing member countries. The ADB does this by financing (through a mix of loans, grants, guarantees and co-financing activities with both other donors and the private sector) public sector and private sector activities. It also provides technical assistance to developing member countries so they can improve their policy and business investment environments. A significant portion of the ADB’s activities are focused in the infrastructure and energy sectors.

The World Bank was established in 1944 and comprises the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA). The IBRD provides financing and technical assistance to middle income countries and lends on harder terms than the IDA. The IDA provides concessional finance and technical assistance to low income countries. The IFC supports the development of the private sector by providing direct finance to private sector operations. MIGA provides guarantee services for projects, which reduce the risks for other co-financing partners including the private sector.

International Monetary Fund

The IMF is an organisation of 188 countries, working to foster global monetary cooperation and exchange rate stability, facilitate the balanced growth of international trade, and provide resources to help members in balance of payments difficulties or to assist with poverty reduction. The IMF undertakes surveillance and annual economic assessments, and provides technical assistance to member countries.

Australian Government entities

The Australian Government’s investment in controlled entities and companies in the Treasury portfolio are measured at their fair value. Fair value has been taken to be the net assets of the entities as at balance date.

Reserve Bank of Australia

The Reserve Bank of Australia is Australia’s central bank. Its duty is to contribute to the maintenance of price stability, full employment, and the economic prosperity and welfare of the Australian people. It does this by setting the cash rate to meet a medium-term inflation target, working to maintain a strong financial system and efficient payments system, and issuing the nation’s banknotes. The Bank provides selected banking services to the Australian Government and its agencies, and to a number of overseas central banks and official institutions. Additionally, it manages Australia’s gold and foreign exchange reserves.

Australian Reinsurance Pool Corporation

ARPC is a statutory authority established by the Terrorism Insurance Act 2003 to administer the terrorism reinsurance scheme, providing primary insurers with reinsurance for commercial property and associated business interruption losses arising from a declared terrorist incident.