
03 Financial Statements NOTE 20: BUDGETARY REPORTS AND EXPLANATION OF MAJOR VARIANCES
Note 20: Budgetary Reports and Explanation of Major Variances
The following tables provide a comparison of the original budget as presented in the 2014-15 Treasury Portfolio Budget Statements (PBS) to the 2014-15 final outcome as presented in accordance with AAS for the Corporation. The Budget is not audited.
Note 20A: Departmental Budgetary Reports
The budgeted financial statements for 2014/15 were prepared on the basis of the Australian Government’s intention to abolish the CEFC. Legislation to abolish the CEFC and transfer the CEFC’s existing assets and liabilities to the Commonwealth was before Parliament at that time. Given the uncertainty regarding the timing of the passage of legislation, the budgeted financial statements assumed the CEFC was to be abolished from 1 July 2014. Accordingly, the 2014/15 budget assumed:
-
no new investments would be entered into by the CEFC post 30 June 2014;
-
revenue from those contracts planned to be executed prior to 30 June 2014 was forecast to continue through the life of the investments (including revenue associated with the unwind of previously recorded concessionality charges);
-
no additional concessionality charges were forecast to be incurred (consistent with the assumption of no new investments being entered into by the CEFC post 30 June 2014);
-
all operational expenses (employee benefits and supplier costs) were anticipated to cease effective 30 June 2014;
-
an allowance for possible loan impairment was provided in each period of the forward estimates in relation to the existing investment portfolio; and
-
all outstanding liabilities to suppliers and employees were assumed to be settled at 30 June 2014.
The Corporation was not abolished at 1 July 2014, and therefore has continued to fulfil its obligation to invest in accordance with the CEFC Act. There has been no material change in the direction of the Corporation or the operations of the Corporation during the 2014/15 financial year, and as a consequence there are a large number of material variances to a budget that was based on assumption of abolition on the first day of the financial period. In explaining variances to the budget, the Corporation has therefore focussed on those items which are considered of most significance to the operations of the CEFC.
Statement of Comprehensive Income
for the period ended 30 June 2015
Actual $’000 |
Budget[1] $'000 |
Variance[2] $’000 |
|
NET COST OF SERVICES |
|||
---|---|---|---|
EXPENSES |
|||
Employee benefits |
14,544 |
- |
(14,544) |
Suppliers |
4,688 |
- |
(4,688) |
Depreciation and amortisation |
455 |
313 |
(142) |
Finance costs |
6 |
- |
(6) |
Concessional loan charges |
1,392 |
- |
(1,392) |
Write-down and impairment of assets |
2,271 |
3,396 |
1,125 |
Provision for irrevocable loan commitments |
266 |
- |
(266) |
Total expenses |
23,622 |
3,709 |
(19,913) |
Own-Source Income |
|||
Own-source revenue |
|||
Interest and loan fee revenue |
54,619 |
37,125 |
17,494 |
Other revenue |
19 |
- |
19 |
Total own-source revenue |
54,638 |
37,125 |
17,513 |
Gains |
|||
Other gains |
139 |
- |
139 |
Total gains |
139 |
- |
139 |
Total own-source income |
54,777 |
37,125 |
17,652 |
Net contribution by / (cost of) services |
31,155 |
33,416 |
(2,261) |
Revenue from Australian Government |
- |
- |
- |
Surplus before income tax on continuing operations |
31,155 |
33,416 |
(2,261) |
Income tax expense |
- |
- |
- |
Surplus after income tax on continuing operations |
31,155 |
33,416 |
(2,261) |
Surplus after income tax |
31,155 |
33,416 |
(2,261) |
OTHER COMPREHENSIVE INCOME |
|||
Items not subject to subsequent classification to net cost of services |
|||
Changes in asset revaluation surplus |
1,138 |
- |
1,138 |
Total other comprehensive income before income tax |
1,138 |
- |
1,138 |
Income tax expense – other comprehensive income |
- |
- |
- |
Total other comprehensive income after income tax |
1,138 |
- |
1,138 |
Total comprehensive income |
32,293 |
33,416 |
(1,123) |
-
The Corporation’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Corporation’s 2014-15 PBS).
-
Difference between the actual and original budgeted amounts for 2014–15. Explanations of major variances are provided further below.
Statement of Financial Position
as at 30 June 2015
Actual $’000 |
Budget[1] $'000 |
Variance[2] $’000 |
|
ASSETS |
|||
---|---|---|---|
Financial assets |
|||
Cash and cash equivalents |
149,577 |
- |
149,577 |
Short-term investments |
100,000 |
- |
100,000 |
Trade and other receivables |
6,451 |
3,924 |
2,527 |
Loans and receivables at amortised cost |
322,871 |
408,311 |
(85,440) |
Available for sale financial assets |
77,057 |
565 |
76,492 |
Other financial assets |
597,875 |
413,574 |
184,301 |
Total financial assets |
1,253,831 |
826,374 |
427,457 |
Non-financial Assets |
|||
Property, plant and equipment |
314 |
134 |
180 |
Intangibles |
338 |
- |
338 |
Prepayments and other assets |
515 |
- |
515 |
Total non-financial assets |
1,167 |
134 |
1,033 |
Total assets |
1,254,998 |
826,508 |
428,490 |
LIABILITIES |
|||
Payables and unearned income |
|||
Suppliers |
1,617 |
- |
(1,617) |
Unearned income |
6,530 |
7,140 |
610 |
Other payables |
3,004 |
- |
(3,004) |
Total payables and unearned income |
11,151 |
7,140 |
(4,011) |
Provisions |
|||
Employee provisions |
878 |
- |
(878) |
Other provisions |
10,860 |
21,508 |
10,648 |
Total provisions |
11,738 |
21,508 |
9,770 |
Total liabilities |
22,889 |
28,648 |
5,759 |
Net assets |
1,232,109 |
797,860 |
434,249 |
EQUITY |
|||
Contributed equity |
1,168,363 |
742,307 |
426,056 |
Reserves |
1,138 |
- |
1,138 |
Retained surplus |
62,608 |
55,553 |
7,055 |
Total equity |
1,232,109 |
797,860 |
434,249 |
-
The Corporation’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Corporation’s 2014-15 PBS).
-
Difference between the actual and original budgeted amounts for 2014/15. Explanations of major variances are provided further below.
Statement of Changes in Equity
for the period ended 30 June 2015
Retained Surplus | Reserves | Contributed Equity | Total Equity | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Actual $'000 |
Budget1 $'000 |
Variance2 $'000 |
Actual $'000 |
Budget1 $'000 |
Variance2 $'000 |
Actual $'000 |
Budget1 $'000 |
Variance2 $'000 |
Actual $'000 |
Budget1 $'000 |
Variance2 $'000 |
|
Opening balance | ||||||||||||
Balance carried forward from previous period | 31,453 | 22,137 | 9,316 | - | - | - | 1,200,565 | 1,217,439 | (16,874) | 1,232,018 | 1,239,576 | (7,558) |
Comprehensive income | ||||||||||||
Surplus for the period | 31,155 | 33,416 | (2,261) | - | - | - | - | - | - | 31,155 | 33,416 | (2,261) |
Other comprehensive income | - | - | - | 1,138 | - | 1,138 | - | - | - | 1,138 | - | 1,138 |
Total comprehensive income | 31,155 | 33,416 | (2,261) | 1,138 | - | 1,138 | - | - | - | 32,293 | 33,416 | (1,123) |
Transactions with owners | ||||||||||||
Distributions to owners | ||||||||||||
Return of equity to Special Account | - | - | - | - | - | - | (50,600) | (475,132) | 424,532 | (50,600) | (475,132) | 424,532 |
Contributions by owners | ||||||||||||
Equity injection from Low Carbon Australia Limited |
- | - | - | - | - | - | 18,398 | - | 18,398 | 18,398 | - | 18,398 |
Total transactions with owners | - | - | - | - | - | - | (32,202) | (475,132) | 442,930 | (32,202) | (475,132) | 442,930 |
Closing balance as at 30 June | 62,608 | 55,553 | 7,055 | 1,138 | - | 1,138 | 1,168,363 | 742,307 | 426,056 | 1,232,109 | 797,860 | 434,249 |
Cash Flow Statement
for the period ended 30 June 2015
Actual $’000 |
Budget[1] $’000 |
Variance[2] $’000 |
|
OPERATING ACTIVITIES |
|||
---|---|---|---|
Cash received |
|||
Interest and fees |
51,620 |
38,166 |
13,454 |
Distributions from equity investments |
6 |
- |
6 |
Total cash received |
51,626 |
38,166 |
13,460 |
Cash used |
|||
Employees |
14,576 |
3,883 |
10,693 |
Suppliers |
4,805 |
960 |
3,845 |
Total cash used |
19,381 |
4,843 |
14,538 |
Net cash from operating activities |
32,245 |
33,323 |
(1,078) |
INVESTING ACTIVITIES |
|||
Cash received |
|||
Principal loan repayments received |
18,605 |
16,411 |
2,194 |
Redemption of short-term investments |
375,000 |
160,000 |
215,000 |
Redemption of other financial assets |
201,333 |
26,241 |
175,092 |
Total cash received |
594,938 |
202,652 |
392,286 |
Cash used |
|||
Purchase of property, plant and equipment |
254 |
- |
254 |
Purchase of intangibles |
388 |
- |
388 |
Loans made to other parties |
108,650 |
162,972 |
(54,322) |
Purchase of AFS financial assets |
74,514 |
- |
74,514 |
Purchase of short-term investments |
205,000 |
- |
205,000 |
Acquisition of other financial assets |
179,700 |
- |
179,700 |
Total cash used |
568,506 |
162,972 |
405,534 |
Net cash from (used by) investing activities |
26,432 |
39,680 |
(13,248) |
FINANCING ACTIVITIES |
|||
Cash received |
|||
Contributed equity |
18,398 |
- |
18,398 |
Total cash received |
18,398 |
- |
18,398 |
Actual $’000 |
Budget[1] $’000 |
Variance[2] $’000 |
|
---|---|---|---|
Cash used |
|||
Return of equity |
50,600 |
474,710 |
(424,110) |
Total cash used |
50,600 |
474,710 |
(424,110) |
Net cash from / (used by) financing activities |
(32,202) |
(474,710) |
442,508 |
Net increase in cash held |
26,475 |
(401,707) |
428,182 |
Cash and cash equivalents at the beginning of the reporting period |
123,102 |
401,707 |
(278,605) |
Cash and cash equivalents at the end of the reporting period |
149,577 |
- |
149,577 |
-
The Corporation’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Corporation’s 2014-15 PBS).
-
Difference between the actual and original budgeted amounts for 2014/15. Explanations of major variances are provided further below.
Note 20B: Departmental Major Budget Variance for 2014–15
Explanations of Major Variances |
Affected Line Items |
Statement of Comprehensive Income |
|
---|---|
Employee Benefits |
Since the Corporation was not abolished effective 30 June 2014 (as anticipated in the budget) employee benefit costs were incurred for the full 2014–15 financial year. In order to meet the obligations of the CEFC Act, it was necessary for the Corporation to continue to employ executives and staff across all key functions including investment, legal, risk management, finance, corporate affairs, human resources, etc. |
Suppliers |
Since the Corporation was not abolished effective 30 June 2014 (as anticipated in the budget) supplier costs were incurred in the normal course operations of the Corporation for the full 2014–15 financial year. |
Concessional loan charges |
Since the Corporation was not abolished effective 30 June 2014 (as anticipated in the budget) additional concessional loan charges were incurred on a number of new investments made during the 2014–15 financial year. The budget had assumed that no new investments would be made after 1 July 2014. |
Interest and loan fee revenue |
Since the Corporation was not abolished effective 30 June 2014 (as anticipated in the budget), funds held for new investments were not returned to The Department of the Treasury but instead were invested to generate income for the Corporation throughout the financial year. |
Statement of Financial Position |
|
Cash and Cash Equivalents; and Short Term investments |
Since the Corporation was not abolished effective 30 June 2014 (as anticipated in the budget), funds held for new investments were not returned to the CEFC Special Account held by Treasury but instead were held to fund new investments by the Corporation. |
Explanations of Major Variances |
Affected Line Items |
Loans and receivables at amortised cost |
A number of investments made by the Corporation in the 2013–14 financial year were expected to draw-down and become new receivables during the 2014–15 financial year. However, due to market uncertainty surrounding energy prices, including as a result of the proposed changes to the RET, a number of major projects did not proceed to construction and investment. Another significant investment by the Corporation was subsequently able to be funded by third party commercial banks, so the Corporation stepped aside and relinquished this investment to commercial banks. |
Available for sale financial assets |
Since the Corporation was not abolished effective 30 June 2014 (as anticipated in the budget), the Corporation continued to make new investments in 2014–15. The largest component of the variance to budget in available for sale financial assets was an investment made during 2014–15 in a Climate Bond issuance by National Australia Bank. |
Other financial assets |
Since the Corporation was not abolished effective 30 June 2014 (as anticipated in the budget), the Corporation continued to make new investments in 2014–15 and this is reflected in the other financial assets category. |
Other provisions |
The positive variance to budget in other provisions is due to (a) the fact that less concessionality was granted in 2013–14 than was anticipated at the time of preparing the 2014–15 budget and (b) the status of various investments in the Corporation’s portfolio at 30 June 2015. Once an investment draws-down, the provision for concessionality is classified as an offset to the loan and receivable. In preparing a budget it is not possible to anticipate exactly at what stage each investment will be at any given point in time. |
Contributed equity |
Since the Corporation was not abolished effective 30 June 2014 (as anticipated in the budget), funds held for new investments were not returned to the CEFC Special Account held by Treasury but instead were held to fund new investments by the Corporation. This meant that returns of equity to the CEFC Special Account held by Treasury were lower than budgeted. |
Retained Surplus |
Since the Corporation was not abolished effective 30 June 2014 (as anticipated in the budget), it continued operations and generated a larger retained surplus than would have been the case had it been abolished. |
Statement of Changes in Equity |
|
---|---|
Retained Surplus |
Since the Corporation was not abolished effective 30 June 2014 (as anticipated in the budget), it continued operations and retained earnings are larger than would have been the case had it been abolished. |
Contributed Equity |
Since the Corporation was not abolished effective 30 June 2014 (as anticipated in the budget), funds held for new investments were not returned to the CEFC Special Account held by Treasury but instead were held to fund new investments by the Corporation. This meant that returns of equity to the CEFC Special Account held by Treasury were lower than budgeted. The only return of equity in 2014/15 was an amount of $50.6 million from investments that had been realised during the normal course of operations. |
Explanations of Major Variances |
Affected Line Items |
Cash Flow Statement |
|
---|---|
Interest and fees |
Since the Corporation was not abolished effective 30 June 2014 (as anticipated in the budget), funds held for new investments were not returned to The Department of the Treasury but instead were invested and generated income for the Corporation. |
Employees |
Since the Corporation was not abolished effective 30 June 2014 (as anticipated in the budget) employees were retained in the Corporation and employment related payments were made throughout the 2014–15 financial year in the normal course of the Corporation fulfilling its investment obligations under the CEFC Act. |
Suppliers |
Since the Corporation was not abolished effective 30 June 2014 (as anticipated in the budget) supplier costs were paid throughout the 2014–15 financial year for costs associated with operating the Corporation in the normal course. |
Redemption of other financial assets; and Acquisition of other financial assets |
Since the Corporation was not abolished effective 30 June 2014 (as anticipated in the budget), the Corporation continued to make new investments in 2014–15 and this is reflected in the redemption and acquisition of other financial assets in the Cash Flow Statement. |
Loans made to other parties |
A number of investments made by the Corporation in the 2013–14 financial year were expected to draw-down and become new receivables during the 2014–15 financial year. However, due to market uncertainty surrounding energy prices, including as a result of the proposed changes to the RET, a number of major projects did not proceed to construction and investment. Another significant investment by the Corporation was subsequently able to be funded by third party commercial banks, so the Corporation stepped aside and relinquished this investment to commercial banks. |
Purchase of AFS financial assets |
Since the Corporation was not abolished effective 30 June 2014 (as anticipated in the budget), the Corporation continued to make new investments in 2014–15 including the purchase of AFS financial assets. The main component of AFS financial assets acquired was a climate bond issued by a major Australian Bank. |
Redemption of short-term investments; and Purchase of short-term investments |
Since the Corporation was not abolished effective 30 June 2014 (as anticipated in the budget), funds held for new investments were not returned to the CEFC Special Account held by Treasury but instead were used to fund short-term investments and then subsequently redeemed by the Corporation to funds loans made to other parties, purchases of AFS financial assets and acquisitions of other financial assets. |
Contributed equity |
The Corporation received a final distribution of cash from LCAL upon the formal dissolution of that Company during the 2014–15 financial year. The 2014–15 budget had assumed that this would be received prior to 30 June 2014. |
Return of equity; and Cash and cash equivalents at the beginning of the reporting period |
Since the Corporation was not abolished effective 30 June 2014 (as anticipated in the budget), funds held for new investments were not returned to the CEFC Special Account held by Treasury but instead were held to fund new investments by the Corporation. |