Independent Auditor's report

Statement by the Secretary and Chief Finance Officer

Basis of preparation of the financial statements

The financial statements are general purpose financial statements and are required by clause 1(b) of section 43 of the Natural Heritage Trust of Australia Act 1997.

The financial statements have been prepared in accordance with:

• Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR); and
• Australian Accounting Standards and Interpretations – Reduced Disclosure Requirements issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention, except for certain assets and liabilities at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position. The financial statements are presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.

New Accounting Standards

All new, revised or amended standards and interpretations that were issued prior to the sign-off date and are applicable to the current reporting period did not have a material effect on the Trust’s financial statements.

AASB 15 Revenue from Contracts with Customers and AASB 16 Leases are not applicable to the Trust’s financial statements.

Taxation

The Trust is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).

Major events impacting the Australian Government in 2019–20

In 2019-20, Australia has faced significant events that have led to unpredicted impacts on the financial statements of Australian Government entities. The events being, the summer bushfires throughout Australia and the world wide Coronavirus (COVID-19) pandemic, which began to transpire around quarter three of this financial year.

Due to the severity of these events, the Australian Government announced several stimulus packages as well as financial assistance to businesses and families of those affected. The material financial package announced by the government that involved the Trust was in response to the summer bushfires and amounted to $7 million over 2019-20 and 2020-21. There were no elements of the COVID 19 packages that involved the Trust. Payments for measures commencing in 2019-20 were made from quarter three under Bushfire Response Package – Bushfire Wildlife Recovery Program and amounted to $2.060 million. Payments will continue in the new financial year.

Events after the reporting period

There are no events occurring after the reporting period that would materially affect the financial statements.

Notes to and forming part of the financial statements

Overview
Natural Heritage Trust financial statements
Note 1: Expenses
Note 2: Own-source Revenue and Gains
Note 3: Financial Assets
Note 4: Payables
Note 5: Aggregate Assets and Liabilities
Note 6: Contingent Assets and Liabilities
Note 7: Financial Instruments
Note 8: Special Accounts
Note 9: Budgetary Reports and Explanations of Major Variances

Statement of Comprehensive Income for the period ended 30 June 2020

Accounting Policy

Interest Revenue

Under subsection 6(2) of the Natural Heritage Trust of Australia Act 1997, the Trust is entitled to receive interest income equal to the fixed-income percentage of the uninvested amount standing to the credit of the Trust’s Special Account as at the end of the financial year. The fixed-income percentage is the percentage equal to the rate of interest earned by the Commonwealth as at the end of the financial year on deposits held with the Reserve Bank of Australia.

The funds held in the Official Public Account constitute ‘uninvested funds’ and as such are subject to the interest income provision. The interest is also applicable to all funds held in the Trust’s bank account excluding unpresented cheques, together with cash on hand and unbanked money.

Interest revenue is recognised using the effective interest method as set out in AASB139 Financial Instruments: Recognition and Measurement.

Revenue from Government

Under subsection 23 of the Natural Heritage Trust of Australia Act 1997, if another Act appropriates an amount from the Consolidated Revenue Fund for credit to the Trust’s Special Account, the amount is to be credited to the Special Account. Amounts appropriated for credit to the Trust’s Special Account for the year (adjusted for any formal additions and reductions) are recognised as Revenue from Government when the Trust gains control of the appropriation. Appropriations receivable are recognised at their nominal amounts.

Statement of Financial Position for the period ended 30 June 2020

Statement of Changes in Equity for the period ended 30 June 2020

Cash Flow Statement for the period ended 30 June 2020

Note 1: Expenses

Accounting Policy

Regional Land payments

Regional Land payments are made under National Landcare Program to protect, conserve and provide for the productive use of Australia’s water, soil, plants and animals and the ecosystems in which they live and interact, in partnership with governments, industry and communities.

Implementation costs

The Implementation costs represent funding provided to the Department of Agriculture, Water and the Environment, Department of Industry, Science, Energy and Resources, Great Barrier Reef Marine Park Authority, Department of Environment and Science (Queensland) and Torres Strait Regional Authority to cover costs associated with implementation of the Trust’s activities.

Accounting Policy

Grants

The Australian Government National Landcare Program funds a range of activities to help drive sustainable agriculture as well as supporting the protection, conservation and rehabilitation of Australia’s natural environment. The majority of these funds are provided through the Trust.

Note 2: Own-source Revenue and Gains

Accounting Policy

Resources Received Free of Charge

Resources received free of charge are recognised as revenue when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense. Resources received free of charge are recorded as either revenue or gains depending on their nature.

Note 3: Financial Assets

Credit terms for other receivables were within 30 days (2019: 30 days).

Accounting Policy

Financial assets

Other receivables that are held for the purpose of collecting the contractual cash flows where the cash flows are solely payments of principal and interest, that are not provided at below-market interest rates, are subsequently measured at amortised cost using the effective interest method adjusted for any loss allowance.

Note 4: Payables

All suppliers are expected to be settled in no more than 12 months. Settlement was usually made within 20 days (2019: 30 days). The balance primarily relates to the end of financial year accruals for the Regional Landcare Partnerships projects.

All grants are expected to be settled in no more than 12 months. Settlement was made according to the terms and conditions of each grant. This was usually within 20 days (2019: 30 days) of grant recipients meeting their performance or eligibility criteria.

Note 5: Aggregate Assets and Liabilities

Note 6: Contingent Assets and Liabilities

The Trust was not aware of any contingent assets or liabilities as at the signing date that would require disclosure in the financial statements (2019: Nil).

Note 7: Financial Instruments

The fair values of the financial assets and liabilities approximate their carrying amounts.

Accounting policy

Financial assets

With the implementation of AASB 9 Financial Instruments for the first time in 2019, the Trust now classifies its financial assets in the following categories:

a) financial assets at fair value through profit or loss;
b) financial assets at fair value through other comprehensive income; and
c) financial assets measured at amortised cost.

The classification depends on both the Trust’s business model for managing the financial assets and contractual cash flow characteristics of the item on initial recognition. Financial assets are recognised when the Trust becomes a party to the contract and, as a consequence, has legal right to receive or a legal obligation to pay cash and derecognised when the contractual rights to the cash flows from the financial asset expire or are transferred upon a trade date.

Financial Assets at Amortised Cost

Financial assets included in this category need to meet two criteria:

1. the financial asset is held in order to collect the contractual cash flows; and
2. the cash flows are solely payments of principal and interest (SPPI) on the principal outstanding amount.

Amortised cost is determined using the effective interest method.

Effective Interest Method

Income is recognised on an effective interest rate basis for financial assets that are recognised at amortised cost.

Financial Assets at Fair Value Through Other Comprehensive Income (FVOCI)

Financial assets measured at fair value through other comprehensive income are held with the objective of both collecting contractual cash flows and selling the financial assets and the cash flows meet the SPPI test.

Any gains or losses as a result of fair value measurement or the recognition of an impairment loss allowance is recognised in other comprehensive income.

Financial Assets at Fair Value Through Profit or Loss (FVTPL)

Financial assets are classified as financial assets at fair value through profit or loss where the financial assets either doesn’t meet the criteria of financial assets held at amortised cost or at FVOCI (i.e. mandatorily held at FVTPL) or may be designated.

Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest earned on the financial asset.

Impairment of Financial Assets

Financial assets are assessed for impairment at the end of each reporting period based on Expected Credit Losses, using the simplified approach which measures the loss allowance based on an amount equal to lifetime expected credit losses where risk has significantly increased, or an amount equal to 12-month expected credit losses if the risk has not increased.

The Trust has used the simplified approach for trade, contract and lease receivables. This approach always measures the loss allowance as the amount equal to the lifetime expected credit losses.

A write-off constitutes a derecognition event where the write-off directly reduces the gross carrying amount of the financial asset.

Financial liabilities

Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or ‘other financial liabilities’. Financial liabilities are recognised and derecognised upon ‘trade date’. All of the Trust’s financial liabilities are categorised as other financial liabilities.

Financial Liabilities at Amortised Cost

Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. These liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective interest basis.

Supplier and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

All payables are expected to be settled within 12 months except where indicated.

Fair Value Measurement

The Trust’s financial assets and liabilities are measured at nominal amounts or amortised cost. Hence, no fair value measurement disclosures are required.

Note 8: Special Accounts

1. Appropriation: Public Governance, Performance and Accountability Act 2013 section 80.

Establishing Instrument: Natural Heritage Trust of Australia Act 1997(NHT Act) section 4.

Purpose: Section 8 of the NHT Act sets out the purposes of the account as follows:

1. the National Vegetation initiative;
2. the Murray-Darling 2001 Project;
3. the National Land and Water Resources Audit;
4. the National Reserve System;
5. the Coasts and Clean Seas Initiative;
6. environmental protection (as defined by section 15 of the Act);
7. supporting sustainable agriculture (as defined by section 16 of the Act);
8. natural resources management (as defined by section 17 of the Act);
9. a purpose incidental or ancillary to any of the above purposes;
10. the making of grants of financial assistance for any of the above purposes; and
11. an accounting transfer purpose (as defined by section 18 of the Act).

In accordance with section 42 of the NHT Act, the Trust has ensured that the balance of the account has not fallen below the base amount of $300 million.

Note 9: Budgetary Reports and Explanations of Major Variances

The requirements of AASB 1055 Budgetary Reporting do not apply to the Trust as the Trust does not present budgeted financial statements to Parliament.