7. Administered notes to the financial statements
Income and expenses administered on behalf of Government
This section analyses the activities that the Australian Prudential Regulation Authority does not control but administers on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.
7.1 Administered expenses
2020 | 2019 | |||
Notes | $'000 | $’000 | ||
Expenses | ||||
7.1B: Other expenses | ||||
Risk equalisation levy payments | 6.1 | 472,666 | 463,146 | |
Lloyds security deposit interest expense | 7.4 | 55 | 55 | |
Total other expenses | 472,721 | 463,201 | ||
Total administered expenses | 472,721 | 463,201 | ||
Accounting policy | ||||
Expenses | ||||
Private health insurance risk equalisation expenses reflecting amounts returned to relevant industry participants are recognised at the time of payment as administered expenses. | ||||
7.2 Administered income
2020 | 2019 | |||
Income | $'000 | $’000 | ||
7.2A: Levy revenue | ||||
Risk equalisation levy receipts | 472,666 | 463,146 | ||
Financial Institutions Supervisory Levies and penalties (see Table 1) 1 | 237,986 | 215,364 | ||
Total levy revenue | 710,652 | 678,510 | ||
Accounting policy | ||||
Revenue | ||||
All administered revenues relate to the ordinary activities performed by APRA on behalf of the Government. These revenues are not directly available to be used by APRA for its own purposes and are remitted to the OPA, or in the case of the private health insurance risk equalisation levies, returned to the relevant industry participants in accordance with the Private Health Insurance (Risk Equalisation Policy) Rules 2015 (the Rules). APRA undertakes the collection of certain levies on behalf of the Government. These comprise Financial Institutions Supervisory Levies, Financial Assistance Levies and late payment penalties collected under the Financial Institutions Supervisory Levies Collection Act 1998. Administered revenue arising from levies (including Financial Assistance Levies) is recognised on an accrual basis, in line with the Minister's regulations and determinations. The collectability of debts is reviewed at balance date. Provisions are made when collection of the debt is judged to be less, rather than more likely. | ||||
Table 1: Financial Institutions Supervisory Levies revenue by type | ||||
Levy: | ||||
Superannuation funds | 91,011 | 83,022 | ||
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 | ||
Total Financial Industry Supervisory Levies | 237,877 | 215,320 | ||
Late payment penalties: | ||||
Superannuation funds | 109 | 44 | ||
Total late payment penalties | 109 | 44 | ||
Total current year financial industry levies and penalties | 237,986 | 215,364 | ||
1 Financial Institutions Supervisory Levies are detailed in the annual consultation paper released by the Department of The Treasury. In addition, APRA publishes a Cost Recovery Implementation Statement in relation to its component of the Financial Institutions Supervisory Levies. | ||||
The Financial Institutions Supervisory Levies are set to recover the operational costs of APRA, and other specific costs incurred by certain Commonwealth agencies and departments. The proportion of total current year levies and penalties attributable to APRA is set out in Note 6.1. | ||||
The risk equalisation levy receipts are set to equalise risk across the private health insurance industry, and are returned to relevant industry participants in accordance with the Rules shortly after they are collected. Waivers of levy debts are recognised as an offset to invoiced revenue at the time of approval by delegated APRA officials. Waivers generally occur due to a change of status of a supervised entity during the year, resulting in the annual levy being wholly or partly waived. | ||||
7.2B: Other revenue | ||||
Enforcement recoveries | 1,502 | - | ||
Lloyds security deposit interest income | 55 | 55 | ||
Total other revenue | 1,557 | 55 | ||
Total revenue | 712,209 | 678,565 | ||
Assets and liabilities administered on behalf of Government
This section analyses assets used to conduct operations and the operating liabilities incurred as a result of activities that the Australian Prudential Regulation Authority does not control but administers on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.
7.3 Administered financial assets
2020 | 2019 | ||
$'000 | $’000 | ||
7.3A: Cash and cash equivalents | |||
Financial Claims Scheme | 835 | 835 | |
Total cash and cash equivalents | 835 | 835 | |
The closing balance of Cash in special accounts does not include amounts held in trust: $2,000,000 (2019: $2,000,000). See Note 7.4 assets held in trust for more information. | |||
7.3B: Receivables | |||
Lloyds security held in trust | 2,000 | 2,000 | |
Financial Assistance Levy | 197 | 197 | |
Financial Institutions Supervisory Levies | - | 3 | |
Total receivables | 2,197 | 2,200 | |
Receivables were aged as follows: | |||
Not overdue | 2,000 | 2,003 | |
Overdue by: | |||
more than 90 days | 197 | 197 | |
Total receivables | 2,197 | 2,200 | |
There is no impairment allowance in 2020 (2019: Nil). The receivables greater than 90 days relate to the previous Financial Assistance Levy (FAL) that were charged to superannuation funds that were no longer APRA-regulated institutions at the levy date. This outstanding amount will be added to the next FAL and collected at that point. | |||
7.4 Administered assets held in trust
Monetary assets | |||
The Lloyds Security Deposit is held by APRA in trust. Responsibility for the administration of the Lloyds Security Deposit Trust was transferred from the Department of The Treasury to APRA on 26 May 2008. The purpose is to disburse amounts in accordance with section 92Q of the Insurance Act 1973. | |||
2020 | 2019 | ||
$'000 | $’000 | ||
Lloyds Deposit Trust Security | |||
Total amount held at the beginning of the reporting period | 2,000 | 2,000 | |
Receipts | (55) | (55) | |
Payments | 55 | 55 | |
Total amount held at the end of the reporting period | 2,000 | 2,000 | |
Total | 2,000 | 2,000 | |
The market valuation as at 30 June 2020 for the Lloyd's Security Deposit Trust was $2,016,142 (2019: $2,021,043). | |||
Non-monetary assets | |||
APRA has no non-monetary assets held in trust. | |||
7.5 Administered liabilities
2020 | 2019 | ||
$'000 | $’000 | ||
Other payables | |||
Lloyds Security Trust Deposit | 2,000 | 2,000 | |
Total other payables | 2,000 | 2,000 |
7.6 Administered contingent assets and liabilities
Unquantifiable administered contingencies |
APRA is responsible for the administration of the Financial Claims Scheme (FCS). The FCS provides depositors of authorised deposit-taking institutions (ADIs) and claimants of general insurers (GIs) with timely access to their funds in the event of a financial institution failure. |
Under the Banking Act 1959 the Scheme provides a mechanism for making payments to depositors under the Government's guarantee of deposits in ADIs. Payments are capped at $250,000 per account holder per ADI. As at 31 December 2019, deposits eligible for coverage under the Scheme were estimated to be $950 billion, compared to $920 billion as at 31 December 2018, reflecting overall deposit growth in the financial system. |
Under the Insurance Act 1973 the Scheme provides a mechanism for making payments to eligible beneficiaries with a valid claim against a failed GI. It is not possible to estimate these claims. |
In the very unlikely event of an ADI or GI failure, any payments made under the FCS would be recovered through the liquidation of the failed institution. If there was a shortfall in the amount recovered through the liquidation of the failed institution, a levy could be applied to the relevant industry to recover the difference between the amount expended and the amount recovered in the liquidation. |
Under the FCS, any payments to account-holders with protected accounts or eligible claimants would be made from APRA's FCS Special Account. Under the legislation, initial amounts available to meet payments, in the event of activation, are up to $20 billion per institution and up to $100 million for administration. |
It is not possible to estimate the amounts of any eventual payments that may be required in relation to either the ADI FCS or GI FCS and as such no amount is included in this note. |
7.7 Administered financial instruments
2020 | 2019 | |||||||
$'000 | $’000 | |||||||
7.7A: Categories of financial instruments | ||||||||
Financial assets at amortised cost | ||||||||
Other receivables | 2,000 | 2,000 | ||||||
Total financial assets at amortised cost | 2,000 | 2,000 | ||||||
Total financial assets | 2,000 | 2,000 | ||||||
Financial liabilities | ||||||||
Financial liabilities measured at amortised cost | ||||||||
Trade creditors and accruals | 2,000 | 2,000 | ||||||
Total financial liabilities measured at amortised cost | 2,000 | 2,000 | ||||||
Total financial liabilities | 2,000 | 2,000 | ||||||
7.7B: Net gains or losses on financial assets | ||||||||
There were no net gains or losses on financial assets. | ||||||||
7.7C: Net gains or losses on financial liabilities | ||||||||
There were no net gains or losses on financial liabilities. | ||||||||
7.7D: Fair value of financial instruments | ||||||||
Carrying amount | Fair value | Carrying amount | Fair value | |||||
2020 | 2020 | 2019 | 2019 | |||||
$'000 | $'000 | $'000 | $'000 | |||||
Financial assets | ||||||||
Other receivables | 2,000 | 2,016 | 2,000 | 2,021 | ||||
Total financial assets | 2,000 | 2,016 | 2,000 | 2,021 | ||||
Financial Liabilities | ||||||||
Trade creditors and accruals | 2,000 | 2,016 | 2,000 | 2,021 | ||||
Total financial liabilities | 2,000 | 2,016 | 2,000 | 2,021 | ||||
7.8 Administered budgetary reports and explanations of major variances
Administered budgetary reports | |||
Summary of key variances to budget The budgeted private health insurance industry risk equalisation levy is a broad estimate based on a historic growth profile. 2020 results, which are dependent on the spread of risk across the industry, came in higher than budget. The difference drives the overall magnitude of the risk equalisation levy collections and payments across the industry. The Financial Institutions Supervisory Levies over-collection against budget is due to a higher than expected June quarter assets growth in the superannuation industry. This caused a small under-estimation in the size of the industry at the superannuation levy date and therefore a small over-estimation in the required levy rate. Enforcement recoveries received during 2020 were not known at the time of setting the budget. | |||
Administered schedule of comprehensive income | |||
for the year ended 30 June 2020 | |||
Actual | Budget estimate | Variance | |
Original | |||
2020 | 2020 | 2020 | |
$'000 | $'000 | $'000 | |
Expenses | |||
Risk equalisation levy payments | 472,666 | 450,000 | (22,666) |
Lloyd's security interest expense | 55 | 55 | - |
Total expenses administered on behalf of Government | 472,721 | 450,055 | (22,666) |
Less: | |||
Income | |||
Risk equalisation levy collections | 472,666 | 450,000 | 22,666 |
Financial Institutions Supervisory Levies | 237,986 | 236,861 | 1,125 |
Enforcement recoveries | 1,502 | - | 1,502 |
Lloyd's security interest income | 55 | 55 | - |
Total income | 712,209 | 686,916 | 25,293 |
Surplus | 239,488 | 236,861 | 2,627 |
Summary of key variances to budget Administered receivables are lower than the original budget following a collection during the year of 2018/19 Financial Institutions Supervisory Levies in 2019/20. | |||
Administered schedule of assets and liabilities | |||
as at 30 June 2020 | |||
Actual | Budget estimate | Variance | |
Original | |||
2020 | 2020 | 2020 | |
$'000 | $'000 | $'000 | |
Assets | |||
Financial assets | |||
Receivables | 2,197 | 2,203 | (6) |
Cash and cash equivalents | 835 | 835 | - |
Total assets administered on behalf of Government | 3,032 | 3,038 | (6) |
Liabilities | |||
Liabilities administered on behalf of Government | 2,000 | 2,000 | - |
Total liabilities administered on behalf of Government | 2,000 | 2,000 | - |
Net assets administered on behalf of Government | 1,032 | 1,038 | (6) |
7.9 Administered aggregate assets and liabilities
2020 | 2019 | ||
$'000 | $’000 | ||
Assets expected to be recovered in: | |||
More than 12 months | 3,032 | 3,032 | |
Not more than 12 months | - | 3 | |
Total assets | 3,032 | 3,035 | |
Liabilities expected to be recovered in: | |||
More than 12 months | 2,000 | 2,000 | |
Total liabilities | 2,000 | 2,000 |
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https://www.transparency.gov.au/annual-reports/australian-prudential-regulation-authority/reporting-year/2019-20-41