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Australian Prudential Regulation Authority Annual Report 2019-20

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6.1 Calculation of APRA Special Appropriation

The APRA Special Appropriation is calculated in accordance with the provisions of section 50 of the Australian Prudential Regulation Authority Act 1998.

Calculation of APRA special appropriation
	2020	2019
	$'000	$’000
Table 1: Summary of APRA levy funding
Current year levies and penalties (see Note 7.2, Table 1)	237,986	215,364
Risk equalisation receipts	472,666	463,146
Net current year levies and penalties (see Table 2 below)	710,652	678,510
Less: Amount retained in the Consolidated Revenue Fund (see Table 3 below)	(49,900)	(71,800)
Less: Risk equalisation payments to private health insurers	(472,666)	(463,146)
Total APRA levy funding (see Table 4 below)	188,086	143,564

Table 2: Net current year levies and penalties by levy type
Superannuation funds	91,120	83,066
Authorised deposit‑taking institutions	88,954	83,551
General insurers	31,583	27,306
Life insurers and friendly societies	20,239	16,908
Private health insurers	6,090	4,533
Risk equalisation receipts from private health insurers	472,666	463,146
Total	710,652	678,510

Table 3: Amounts retained in the Consolidated Revenue Fund by levy type¹
Superannuation funds	(45,600)	(49,600)
Authorised deposit‑taking institutions	(4,100)	(13,800)
General insurers	(100)	(4,800)
Life insurers and friendly societies	(100)	(3,600)
Total	(49,900)	(71,800)

Table 4: Amounts of levy payable to APRA under the APRA Special Appropriation by levy type²
Superannuation funds	45,520	33,466
Authorised deposit‑taking institutions	84,854	69,751
General insurers	31,483	22,506
Life insurers and friendly societies	20,139	13,308
Private health insurers	6,090	4,533
Total	188,086	143,564

This is represented by:
Special Appropriation	188,086	143,564
Total	188,086	143,564

¹ Including amounts as determined by the Minister in accordance with subsection 50(1) of the Australian Prudential Regulation Authority Act 1998.
² Table 4 above represents the total amount of levies payable to APRA for its operations.

Accounting Policy APRA is funded primarily through levies imposed on the industries it supervises. These levies, known as the Financial Institutions Supervisory Levies, are administered transactions collected on behalf of the Government and paid into the Consolidated Revenue Fund (CRF). An amount equal to the net levy revenue, less an amount specified by the Minister in an annual determination made under subsection 50(1) of the Australian Prudential Regulation Authority Act 1998 (APRA Act), is credited to the APRA Special Account as a Special Appropriation, in accordance with subsections 50(2), (3) and (5) of the APRA Act. The amounts specified in the Minister’s Determinations are retained in the CRF to cover: the costs of activities of the Australian Taxation Office (ATO) for unclaimed monies, lost member functions and for the administration of claims for early release of superannuation benefits on compassionate grounds; the Australian Securities and Investments Commission (ASIC) for consumer protection and market integrity functions; the Australian Competition and Consumer Commission (ACCC) to investigate foreign exchange and specific competition issues in Australia's financial system and the Gateway Network Governance Body to facilitate transmission of SuperStream data. APRA administers the collection of Financial Institutions Supervisory Levies and Financial Assistance Levies on behalf of the Government. While the revenues from Financial Institutions Supervisory Levies are in part used to fund the operations of APRA, they are not directly available to APRA for its own purposes upon receipt. The revenues from the Financial Assistance Levy are also not available to APRA for its own purposes. All administered collections are remitted to the Official Public Account with APRA's portion being transferred to its special account in accordance with annual determinations made by the Minister. Transactions and balances relating to levies are reported in Note 7.2: Administered income. 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. The transactions to and from this account are recorded within the Official Public Account (OPA) by way of notional receipts and payments.

6.2 Budgetary reports and explanations of major variances

The following tables provide a comparison of the original budget as presented in the 2019/20 Portfolio Budget Statements (PBS) to the 2019/20 final outcome as presented in accordance with Australian Accounting Standards. The budget is not audited.

6.2 Departmental budgetary reports

Summary of key variances to budget

Expenses

Employee benefits are higher than budget due to a fall in the Government 10 year bond yield (used to value leave provisions) adversely impacting employee year-end leave balances. In addition less staff have taken leave recently as a result of the pandemic. This impact is slightly offset by a lower average staffing level;
Supplier expenses are higher than budget due to a provision for likely legal settlement costs being raised, offset by deferral of some projects and some Business-As-Usual (BAU) activities as a result of the pandemic; and
Depreciation and amortisation expenses are higher than budget due to accounting changes following the introduction of AASB 16 - Leases.

Own-source revenue

Rendering of services is lower than budget due to lower cost recovery activities undertaken in the year; and;
Other revenue is higher than budget due to higher licensing and other fees received.

Revenue from Government is higher than budget due to a small over-collection of Financial Institutions Supervisory Levies. This is due to slightly higher than projected June quarter assets growth within the superannuation industry. This resulted in a minor over-estimate in the required levy rate for 2019-20.

Statement of comprehensive income
for the year ended 30 June 2020

Statement of comprehensive income
	Actual	Budget estimate	Variance
		Original
	2020	2020	2020
	$'000	$'000	$'000
Expenses
Employee benefits	132,774	132,027	(747)
Suppliers	45,494	41,872	(3,622)
Depreciation and amortisation	17,961	10,324	(7,637)
Total expenses	196,229	184,223	(12,006)

Less:
Own-source revenue
Other revenue	1,339	1,056	283
Rendering of services	2,904	4,417	(1,513)
Rental income	38	-	38
Total own-source revenue	4,281	5,473	(1,192)

Net cost of services	191,948	178,750	(13,198)

Revenue from Government	188,086	187,044	1,042
Operating surplus / (deficit)	(3,862)	8,294	(12,156)

Other comprehensive income
Items not subject to subsequent reclassification to net cost of services
Changes in asset revaluation reserve	42	-	42
Total other comprehensive income	42	-	42

Total comprehensive income / (loss)	(3,820)	8,294	(12,114)

Summary of key variances to budget

Assets

Financial assets are higher than budget due to lower expenditure on projects and BAU activities largely due to the pandemic impacting activity at the end of the year;
Non-financial assets are substantially higher than budget due to the creation of AASB-16 Right-of-Use (RoU) lease assets slightly offset by project deferrals.

Liabilities

Total payables are lower than budget due to the impact of AASB 16, writing off minimum lease and lease incentive liabilities against retained earnings;
Interest bearing liabilities are higher than budget due to the impact of AASB 16; and
Provisions are higher than budget due to a provision for legal settlement costs based on an initial claim received by APRA, as well as less leave taken by staff as a result of the pandemic and the impact of a fall in the Government 10 year bond yield.

Equity

The variance in retained surpluses is due the impact of new accounting standards (AASB 16 and AASB 15) adopted for the first time this year.

Statement of financial position
as at 30 June 2020

Statement of financial position
	Actual	Budget estimate	Variance
		Original
	2020	2020	2020
	$'000	$'000	$'000
Assets
Financial assets
Cash and cash equivalents	72,828	59,246	13,582
Trade and other receivables	2,071	2,975	(904)
Total financial assets	74,899	62,221	12,678

Non-financial assets
Property, plant and equipment	69,685	18,391	51,294
Intangibles	37,604	48,477	(10,873)
Prepayments	3,756	2,830	926
Total non-financial assets	111,045	69,698	41,347
Total assets	185,944	131,919	54,025

Liabilities
Payables
Suppliers	6,555	17,104	10,549
Other payables	2,937	12,411	9,474
Total payables	9,492	29,515	20,023

Interest bearing liabilities
Leases	52,232	-	(52,232)
Total interest bearing liabilities	52,232	-	(52,232)

Provisions
Employee provisions	49,697	47,541	(2,156)
Other provisions	12,752	3,183	(9,569)
Total provisions	62,449	50,724	(11,725)
Total liabilities	124,173	80,239	(43,934)
Net assets	61,771	51,680	10,091

Equity
Contributed equity	16,657	16,657	-
Contingency Enforcement Fund	12,000	12,000	-
Reserves	7,591	7,216	375
Retained surpluses	25,523	15,807	9,716
Total equity	61,771	51,680	10,091

Summary of key variances to budget

Equity and reserves variance to budget is due the impact of new accounting standards (AASB 16 and AASB 15) adopted for the first time this year, slightly offset by a smaller surplus made in the year.

Statement of changes in equity
for the year ended 30 June 2020

Statement of changes in equity
	Actual	Budget estimate	Variance
		Original
	2020	2020	2020
	$'000	$'000	$'000
Contributed equity
Opening balance	16,657	16,657	-
Closing balance as at 30 June	16,657	16,657	-

Retained surpluses
Opening balance
Balance carried forward from previous period	9,477	11,513	(2,036)
Opening balance adjustment due to AASB 15 & AASB 16	23,908	-	23,908
Revised opening balance	33,385	11,513	21,872
Transfer to Contingency Enforcement Fund	(4,000)	(4,000)	-
(Deficit) / surplus for the period	(3,862)	8,294	(12,156)
Closing balance as at 30 June	25,523	15,807	9,716

Asset revaluation reserve
Opening balance	7,549	7,216	333
Increase in revaluation reserve	42	-	42
Closing balance as at 30 June	7,591	7,216	375

Contingency Enforcement Fund
Opening balance	8,000	8,000	-
Transfer from retained surpluses	4,000	4,000	-
Closing balance as at 30 June	12,000	12,000	-

Total equity
Opening balance
Balance carried forward from previous period	41,683	43,386	(1,703)
Opening balance adjustment due to AASB 15 & AASB 16	23,908	-	23,908
Opening balance	65,591	43,386	22,205
Comprehensive income / (loss)
Increase in revaluation reserve	42	-	42
(Deficit) / surplus for the period	(3,862)	8,294	(12,156)
Closing balance as at 30 June	61,771	51,680	10,091

Summary of key variances to budget

Operating cash received

Higher than budget due to a small over-recovery of levies in 2019/20 (see comprehensive income statement commentary) plus increased GST received (and then re-recovered through appropriation post Section 74 remittance to the OPA) from higher suppliers expenditure and lease principal payments made during the year.

Operating cash used

Lower than budget largely due to AASB-16 re-categorisation of lease payments from operating activities to financing activities.

Investing cash used

Lower than budget projects capital expenditure due to deferral as a result of the pandemic.

Financing cash used

Higher than budget due to impact of AASB 16 lease payments.

Cash flow statement
for the year ended 30 June 2020

Cash flow statement
	Actual	Budget estimate	Variance
		Original
	2020	2020	2020
	$'000	$'000	$'000
Operating Activities
Cash received
Appropriations	200,767	196,512	4,255
Rendering of services	4,380	4,417	(37)
Net GST received	6,099	4,191	1,908
Other	447	860	(413)
Total cash received	211,693	205,980	5,713

Cash used
Employees	(126,077)	(130,374)	4,297
Suppliers	(39,545)	(46,098)	6,553
Lease liability - Interest payments	(981)	-	(981)
Net GST paid	(271)	-	(271)
Section 74 receipts transferred to Official Public Account (OPA)	(11,410)	(9,468)	(1,942)
Total cash used	(178,284)	(185,940)	7,656
Net cash from operating activities	33,409	20,040	13,369

Investing activities
Cash used
Purchase of property, plant and equipment and intangibles	(25,028)	(32,491)	7,463
Net cash used by investing activities	(25,028)	(32,491)	7,463

Financing activities
Cash used
Principal payments of lease liabilities	(7,231)	-	(7,231)
Total cash used	(7,231)	-	(7,231)
Net cash used by financing activities	(7,231)	-	(7,231)

Net increase / (decrease) in cash held	1,150	(12,451)	13,601
Cash and cash equivalents at the beginning of the reporting period	71,678	71,697	(19)
Cash and cash equivalents at the end of the reporting period	72,828	59,246	13,582

6.3 Aggregate assets and liabilities

Aggregate assets and liabilities
	2020	2019
	$'000	$’000
Assets expected to be recovered in:
More than 12 months	106,456	42,423
No more than 12 months	79,488	80,010
Total assets	185,944	122,433

Liabilities expected to be settled in:
More than 12 months	94,226	53,156
No more than 12 months	29,947	27,594
Total liabilities	124,173	80,750

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Australian Prudential Regulation Authority Annual Report 2019-20

Other information

6.1 Calculation of APRA Special Appropriation

6.2 Budgetary reports and explanations of major variances

6.3 Aggregate assets and liabilities

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