Skip to content

Part 4: Financial statements (continued)

Notes to and forming part of the financial statements

Note 16: Administered Expenses
  2013
$’000
2012
$’000
Note 16A: Grants    
Public sector:    
State and Territory Governments 79,876,326 83,612,420
Payment of COAG receipts from Government agencies 1,521,247 3,230,916
Grants to international financial institutions1 13,928
Grants to private sector 21,413 2,450
Total grants 81,432,914 86,845,786
     
Note 16B: Interest    
IMF charges 3,489 11,289
Total interest 3,489 11,289
     
Note 16C: Other expenses    
Suppliers expenses 152 11,388
Total other expenses 152 11,388

1. Grant made to the IMF, Poverty Reduction and Growth Trust as agreed with the IMF upon Australia’s receipt of funds from the IMF Gold Sale. See note 17E.

Note 17: Administered Income
  2013
$’000
2012
$’000
Note 17A: Interest    
Gross IMF remuneration 1,069 3,129
Less: Burden sharing (35) (63)
Net IMF remuneration 1,034 3,066
Interest on loan to IMF under New Arrangements to Borrow 613 722
Interest on loans to States and Territories 694 251
Total interest 2,341 4,039
     
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 708,095 677,367
Guarantee Scheme for Large Deposits and Wholesale Funding Fee 528,740 847,780
Guarantee of State and Territory Borrowing 52,172 63,373
Total sale of goods and rendering of services 1,289,007 1,588,520
     
Note 17D: COAG receipts from Government    
Building Australia Fund revenue 981,610 2,236,700
Health and Hospital Fund revenue 460,037 885,575
Education and Innovation Fund revenue 3,769 24,877
Interstate road transport revenue 75,831 83,764
Total COAG receipts from government agencies 1,521,247 3,230,916
     
Note 17E: Other revenue    
HIH Group liquidation proceeds 4,045 23,479
IMF receipt of gold sales distribution1 13,928
Recovery of building education revolution funds 12,651
Other revenue 7,335 5,288
Total other revenue 37,959 28,767
     
Note 17F: Foreign exchange gains    
IMF SDR allocation (428,287) 14,954
IMF maintenance of value 59,607 6,309
IMF quota revaluation 449,572 (15,697)
IFIs revaluation 82,741 10,459
IMF new arrangement to borrow loans revaluation 79,340 (7,907)
Other (4,303) (2,224)
Total foreign exchange gains 238,670 5,894

1. Funds received from the IMF Gold Sale were committed by Australia to being returned to the IMF, Poverty Reduction and Growth Trust as a grant. See note 16A.

Note 18: Administered Financial Assets
  2013
$’000
2012
$’000
Note 18A: Cash and cash equivalents    
Cash on hand or on deposit 3,719 1,735
Total cash and cash equivalents 3,719 1,735
     
Note 18B: Receivables & loans    
Advances and loans:    
Loans to States and Territories 15,794 15,101
IMF new arrangements to borrow loan 895,785 661,133
Total advances and loans 911,579 676,234
     
Other receivables:    
Guarantee Scheme for Large Deposits and    
Wholesale Funding contractual fee receivable1 337,070 1,064,144
Guarantee Scheme for Large Deposits and Wholesale Funding fee receivable 30,833 60,882
Guarantee of State and Territory    
Borrowing contractual fee receivable1 198,864 265,960
Guarantee of State and Territory    
Borrowing fee receivable 3,840 4,738
Net GST receivable from the ATO 2 52
IMF related moneys owing 166 277
Dividends receivable 225,000 900,000
Other receivables 22,813 17,577
Total other receivables 818,588 2,313,630
Total trade and other receivables (gross) 1,730,167 2,989,864
     
Receivables are expected to be recovered in:    
No more than 12 months 460,696 1,452,023
More than 12 months 1,269,471 1,537,841
Total receivables (gross) 1,730,167 2,989,864
     
Receivables are aged as follows:    
Not overdue 1,730,167 2,989,864
Total receivables (gross) 1,730,167 2,989,864
     
Note 18C: Investments    
International financial institutions    
Asian Development Bank 391,780 338,793
European Bank for Reconstruction  and Development 88,231 77,360
International Bank for Reconstruction and Development 220,460 180,902
International Finance Corporation 51,029 46,442
Multilateral Investment Guarantee Agency 6,684 6,084
Total international financial institutions 758,184 649,581
     
Australian Government entities    
Reserve Bank of Australia 10,012,000 6,369,000
Australian Reinsurance Pool Corporation 432,685 349,394
Clean Energy Finance Corporation 6,495
Total Australian Government entities 10,451,180 6,718,394
     
Other Investments    
IMF quota 5,247,082 4,797,510
Total other investments 5,247,082 4,797,510
Total Investments 16,456,446 12,165,485
     
Investments are expected to be recovered in:    
More than 12 months 16,456,446 12,165,485
Total Investments 16,456,446 12,165,485

1. Refer Note 1.31 for details on accounting treatment and Note 20C for corresponding liability.

Note 19: Administered Non-financial Assets
  2013
$’000
2012
$’000
Note 19A: Other non-financial assets    
Prepayments – Infrastructure 773 1,788
Prepayments – FaHCSIA 19,841 26,900
Prepayments – Health 128,891 59,572
Total other
non-financial assets
149,505 88,260
     
Other non-financial assets are expected to be recovered in:    
No more than 12 months 149,505 88,260
More than 12 months  –  –
Total other non-financial assets 149,505 88,260
Note 20. Administered Payables
  2013
$’000
2012
$’000
Note 20A: Grants    
COAG grants payable1 768,276 459,116
Other grants payable 115 2,095
Total grants 768,391 461,211
     
Total grants are expected to be settled in:    
No more than 12 months 768,391 461,211
More than 12 months  –  –
Total grants, subsidies and personal benefits 768,391 461,211
     
Note 20B: Other payables    
GST appropriation payable 2 51
IMF SDR allocation 4,998,656 4,570,369
IMF related monies owing 544 973
Other 10 1
Total other payables 4,999,212 4,571,394
     
Total other payables are expected to be settled in:    
No more than 12 months 556 1,025
More than 12 months 4,998,656 4,570,369
Total other payables 4,999,212 4,571,394
     
Note 20C: Unearned income    
Guarantee Scheme for Large Deposits and Wholesale Funding Contractual guarantee service obligation2 337,070 1,064,144
Guarantee of State and Territory Borrowing contractual guarantee service obligation2 198,864 265,960
Total Unearned income 535,934 1,330,104
     
Total unearned income are expected to be settled in:    
No more than 12 months 328,042 693,497
More than 12 months 207,892 636,607
Total unearned income 535,934 1,330,104

1. 2012 comparative adjustment due to a minor correction of the first time application of the Natural Disaster Relief and Recovery Arrangements (NDRRA) accounting treatment in 2011.
2. Refer Note 1.31 for details on accounting treatment and Note 18B for corresponding receivable.

Note 21. Administered Interest Bearing Liabilities
  2013
$’000
2012
$’000
Note 21A: Loans    
IMF promissory notes1 3,044,851 3,141,726
Other promissory notes1 122,484 118,181
Total loans 3,167,335 3,259,907
     
Payable:    
Within one year  –  –
In one to five years 74,606 50,247
In more than five years 3,092,729 3,209,660
Total loans 3,167,335 3,259,907

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

Note 22. Administered Provisions
    2013
$’000
2012
$’000
Note 22A: Other provisions      
Provision for HCS Scheme   6,415 18,162
NDRRA provision   5,747,202 3,936,904
Total other provisions   5,753,617 3,955,066
       
Other provisions are expected to be settled in:      
No more than 12 months   2,269,439 420,943
More than 12 months &nbsp
;
3,484,178 3,534,123
Total other provisions   5,753,617 3,955,066
       
Reconciliation of movements in other provisions
  Provision for HCS Scheme
$’000
NDRRA provision
$’000
Total
$’000
Carrying amount 1 July 2012 18,162 3,936,904 3,955,066
Additional provisions made  – 1,812,439 1,812,439
Amounts used (11,747) (77,061) (88,808)
Amounts reversed  – (5,071) (5,071)
Unwinding of discount or change in discount rate  – 79,991 79,991
Closing balance 30 June 2013 6,415 5,747,202 5,753,617
Note 23. Administered Cash Flow Reconciliation
  2013
$’000
2012
$’000
Reconciliation of cash and cash equivalents as per Administered Schedule of Assets and Liabilities to Administered Cash Flow Statement    
     
Cash and cash equivalents as per:    
Schedule of administered cash flows 3,719 1,735
Schedule of administered assets and liabilities 3,719 1,735
Difference
     
Reconciliation of net cost of services to net cash from operating activities:    
Net cost of services 78,347,331 81,110,327
     
Adjustments for non-cash items    
Foreign exchange loss/(gain) (238,670) (5,894)
     
Changes in assets / liabilities    
(Increase) / decrease in net receivables 1,494,349 42,424
(Increase) / decrease in other non-financial assets (61,245) (73,469)
Increase / (decrease) in grants payable 307,180 (410,725)
Increase / (decrease) in unearned income (794,170) (797,751)
Increase / (decrease) in loans  –
Increase / (decrease) in other payables (469) (2,974)
Increase / (decrease) in other provisions 1,798,551 (641,794)
Net cash from (used by) operating activities (75,841,805) (83,000,510)

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$1,299.1 million as at 30 June 2013) to SDR 4,370.4 million (A$7,085.6 million as at 30 June 2013).

Unquantifiable administered contingencies

1.25 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 2012-13 Australia met four calls under the NAB totalling A$185.4 million (SDR 126.0 million). In 2011-12 Australia provided A$444.6 million (SDR 295.1 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 679.7 million (A$1,102.0 million as at 30 June 2013) could be called by the IMF between the period 1 July 2013 to 30 September 2013, although this is subject to change. The precise amount that will be called by the IMF cannot be determined accurately. 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 wi
th 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. Draw down 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. No further funding was provided to the State Government of NSW in respect of the loan facility in 2012-13. (2011-12: $14.9 million).

Contingent Assets

HIH Claims Support Scheme

As an insured creditor in the liquidation of the HIH Group, the Australian Government is entitled to payments arising from the HCSS’s position in the Proof of Debt of respective HIH companies. Treasury has received payments from the HIH Estate during 2012-13, however the timing and amount of future payments are unknown and will depend on the outcome of the estimation process and the completion of the liquidation of the HIH Group.

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 policy responsibility:

Borrower Legislation authorising
guarantee
Principal
covered by
guarantee
Balance outstanding Balance outstanding
    2013
$’000
2013
$’000
2012
$’000
Papua New Guinea Papua New Guinea 1949
Papua New Guinea 1975
Papua New Guinea Loans Guarantee Act 1975
1,300 1,300 1,800
Commonwealth Bank of Australia1 Commonwealth Bank of Australia Act 1959 s117 750,616 750,616 780,811
Commonwealth Bank of Australia – Officers Superannuation Corporation1 Commonwealth Bank of Australia Act 1959 s117 4,180,500 4,180,500 3,721,200
Guarantee Scheme for Large Deposits and Wholesale Funding Guarantee Scheme for Large Deposits and Wholesale Funding Appropriation Act 2008 48,300,000 48,300,000 91,000,000
Guarantee of State and Territory Borrowing Guarantee of State and Territory Borrowing Appropriation Act 2009 25,400,000 25,400,000 32,000,000
Reserve Bank of Australia2 Reserve Bank of Australia Act 1959 s77 56,943,000 56,943,000 58,349,000
Total   135,575,416 135,575,416 185,852,811

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 2013.
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 internat
ional 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 2013, total liabilities covered by the Guarantee Scheme were estimated at $48.3 billion, including $2.3 billion of large deposits and $46.0 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 2013, the face value of state and territory borrowings covered by the guarantee was $25.4 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 multiparty 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 investments 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.

Clean Energy Finance Corporation

The Clean Energy Finance Corporation (CEFC) is a legislated fund dedicated to investing in the clean energy sector in Australia.  The CEFC’s purpose is to catalyse and leverage an increased flow of finance for the commercialisation and deployment of renewable energy, low emissions and energy efficiency technologies, thus preparing and positioning the Australian economy and industry for a carbon constrained world.  The CEFC’s mission is to accelerate Australia’s transformation towards a more competitive economy in a carbon constrained world, by acting as a catalyst to increase investment in the clean energy sector.