APRA’s total operating expenditure for the 12 months to 30 June 2020 was $196.2 million against an original budget of $184.2 million. The expenditure in excess of the original budget were partly covered by $6.5 million budget increase approved during the 2019 Mid-Year Economic and Fiscal Outlook (MYEFO) update, and additional costs primarily related to: the fall in the Government 10-year bond yield impacting the valuation of staff leave provisions; higher property costs due to the adoption of a new accounting standard (AASB-16 – Leases); and a provision for a likely legal settlement.
APRA’s total income in 2019/20 was $192.4 million, against a budget of $192.5 million.
Income was fractionally lower than budget even though there was an over-collection of Financial Institutions Supervisory Levies due to higher than expected June 2019 quarter assets growth in the superannuation industry. This over-collection was offset, however, by lower cost recovery activities.
Industry levies are raised according to the Financial Institutions Supervisory Levies Collection Act 1998, the Supervisory Levy Imposition Acts 1998 relevant to each of APRA’s regulated industries, and the Private Health Insurance Supervisory Levy Imposition Act 2016. Following consultation with industry, the relevant Minister determines the levy rates for each regulated industry prior to the beginning of each financial year. Industry levies are based on the costs incurred by APRA in discharging its duties with respect to each sector. For industries APRA regulates, other than private health insurance, the levy rate is applied on the relevant institution’s total assets, subject to a minimum and maximum amount per institution. Exceptions to this are non-operating holding companies and small APRA-regulated superannuation funds, which are levied at a flat rate. For private health insurers, the levies are based on the number of policies held by each insurer at 30 June.
Levies are also collected to cover the costs of the National Claims and Policies Database (NCPD) for which a rate is applied to the gross earned premiums of general insurers that contribute to this database. The amount raised for NCPD purposes in 2019/20 was $1.0 million. The total levies collected by APRA also cover certain costs attributable to ASIC, the ATO, the ACCC, the Gateway Network Governance Body Ltd and The Treasury. Total levies collected by APRA in 2019/20, including on behalf of these agencies, were $238.0 million.
On an annual basis, APRA releases a Cost Recovery Implementation Statement to provide further information on the APRA component of the levies collected from industry.
APRA also administers the Risk Equalisation Special Account whereby revenue collected by APRA for the purposes of risk equalisation across the private health insurance industry is treated by the Government as revenue and expenses. Total Risk Equalisation collections and payments in 2019/20 were $472.7 million.
The components of APRA’s reserves were subject to the following changes during the year:
APRA’s retained surpluses increased by $16.0 million to $25.5 million, attributable to an operating deficit from ordinary activities of $3.9 million, a transfer of $4.0 million to the Contingency Enforcement Fund and an adjustment to the opening balance of $23.9 million due to accounting standard changes1; and
The Contingency Enforcement Fund was increased by $4.0 million from retained surpluses to $12.0 million, attributable to a planned growth in the size of the fund arising from the BEAR and the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
With these items, total reserves increased to $61.8 million. This included an asset revaluation reserve of $7.6 million and contributed equity of $16.7 million, which were materially unchanged over the year.
Reflecting the introduction of AASB-16 – Leases and AASB-15 – Income.↩