Annual Report 2011
Our Members are spreading the word.
The key to our success is that we share
Qantas Staff Credit Union Limited
Administration
A.B.N. 53 087 650 557
Incorporated In Australia
Chief Executive Officer
S. R. King, BEc, ACA, ACIM, AICD
Chairman
Chief Financial Officer
M. Anastasi, BComm (Accg), CA
M.P Boesen, BBus, CPA, FAMI, MAICD
Deputy-Chairman
D.L Hailes, MBA, FAMI
Directors
C. Adams, MAMI, MAICD
B. Bourke, BSc(Qld), BEng Aero(Syd), MEngSc(Syd), AFAMI
S. Collins, BEc, LLB, MAMI
H. Goodman, FCPA, AFAMI
G. Halliday, FINA, FAMI, JP
C. Harvey, BEc, FCPA, FCIS, FCIM, AFAMI
M. Haworth, FCPA, FCIS, FCIM, FAMI, JP
B. Phair, FCPA, AFAMI, MAICD
J. Etherington, BBus, MApplFin, CFTP (Snr), GAICD,
MAMI, AICD
Auditors
KPMG
Bankers
Westpac Banking Corporation
Solicitors
Hartmann & Associates
MacGillivrays
Registered Office
420 Forest Road, Hurstville, NSW
Telephone: 1300 747 747
Facsimile: (02) 9582 3400
Postal address:
Locked Bag 6747, Hurstville BC, NSW 1481
Internet
www.qantascu.com.au
Affiliations
National Credit Union Association Inc.
Indue Limited
Abacus Australian Mutuals Pty Ltd
2
it with our members.
Scott King, CEO
Contents
Chairman’s Report to Members
2
Chief Executive Officer’s Report to Members
4
Directors’ Report
6
Lead Auditor’s Independence Declaration 11
Corporate Governance Statement
12
Independent Auditor’s Report
15
Directors’ Declaration
16
Statement of Comprehensive Income 17
Statement of Changes in Equity
18
Statement of Financial Position
19
Statement of Cash Flows
20
Notes to the Financial Statements
21
Annual Report 2011
3
Chairman’s Report
Some QSCU Members may have been worried about how the
slowing global economy might affect their savings, but we have
always assured Members that their money is safe. QSCU has
no exposure to the United States or global markets and has no
international funding.
As a financial institution we are regulated in the same way as
the Banks, and as such have strict policies around regulations,
as directed by the Australian Prudential Regulatory Authority
(APRA). I’m pleased to report that our capital adequacy as
at June 2011 was 16.4% up from 15.8% and is significantly
above the minimum requirements.
The introduction of a National credit regime this year has
also meant a major overhaul of the financial services industry
Mark Boesen
Chairman
across Australia.
One of the key changes included a revision of the National
Consumer Protection Act, which now assists consumers
Our strength in the current market
switch home loan providers by eliminating exit fees imposed
I am delighted to report another strong year for Qantas Staff
Credit Union Ltd (QSCU), which reinforces our prudent financial
management and our agility in times of change. In what has
again been a challenging year it’s pleasing to note that your Credit
Union continues to be very secure. While our financial results
communicate our strength, it’s vital that we continue to implement
strategies to ensure our future sustainability and growth.
by some lenders. We believe this welcomed change provides
QSCU Members a fresh opportunity to take a look at the QSCU
offering and see how much they could save by switching their
home loan to us.
The Federal Government has also introduced a fairer, simpler
banking program which will require key information to be
provided to consumers on credit cards and home loans in
an easy to understand format. Other requirements include
Government regulation
restrictions on the practices of some credit card lenders in
As one of Australia’s largest Credit Unions, QSCU operates as
a robust, secure and stable business. Indeed, Australia’s Credit
Unions are some of the most secure and prudently run financial
institutions in the world.
imposing certain fees, such as over limit fees, and in making
Loans to Members
Member Deposits
unsolicited offers of credit card limit increases.
2
$750
$2,084.0m
$1,824.9m
$1,656m
$1,297.8m
$1,219.9m
$ million
$1765.3m
$1,587.4m
$1,392.1m
$1,263.1m
$1,077.7m
2005200620072008200920102011
$1,225
$1,108.1m
$750
$1,027.6m
$1,007.8m
$ million
$1,000
$1,406.6m
$2,100
$1,800
2005200620072008200920102011
At QSCU we’ve always believed in the philosophy of a ‘no
smoke and mirrors’ approach to banking, and have always
been upfront with our Members on information regarding our
products and services. We’re also proud to say that many of
the practices that the reforms are designed to address have
not been engaged in by your Credit Union.
Acknowledgements
I would like to take this opportunity to thank you, our Members.
We are grateful for your continued support and loyalty, and on
behalf of your Board, we look forward to ensuring the best in
service, competitive rates, and products for the year ahead.
I would also like to thank each of our Directors for their
Director’s roles and requirements
valuable contributions during the year. On behalf of the Board,
Our Directors are governed by the same set of requirements
handed down by APRA for all Authorised Deposit-taking
Institutions (ADIs) under the Banking Act 1959.
I recognise the outstanding achievements of Mr Scott King,
At QSCU, the importance and seriousness of these fit and
proper obligations are paramount. I’m very proud of our strong
and experienced Board, who represent a diverse and skilled
range of expertise and backgrounds. The Board works hard
to maintain their training and development requirements and
knowledge of the financial services industry. This ensures that
Directors are well informed to guide the strategic direction of
the business and to represent the needs of our Members.
In particular I would also like to thank our Credit Union staff.
his Management team and all QSCU staff in what has been
another great year.
I’ve had the opportunity to visit all our offices and have met
a large number of our staff, both interstate and in Sydney. What
I found was a fantastic team of enthusiastic and highly motivated
professional people working hard - not just for the Credit Union
but for their Members. It’s an honour to have them all on the team.
Corporate Social Responsibility
At QSCU we continue to place an important focus on giving
back, and one of those ways is by supporting those charities
that are close to the hearts of our Members. These charities
include Assistance Dogs Australia, the Humpty Dumpty
Foundation, and the Qantas Foundation.
Mark Boesen
Chairman
27th September 2011
We have also continued our commitment and support of local
events and issues that affect our Members through donations,
fundraising and volunteering.
Members Equity
Total Assets
$2,200
2005200620072008200920102011
$1,000
$1,992.9m
$1,800.2m
$1,531.6m
$1,415.1m
$1,200
$1,327.3m
$1,400
$1,205.4m
$50
$ million
$161.7m
$145.4m
$129.9m
$119.4m
$107.9m
$75
$99.0m
$100
$89.3m
$ million
$1,800
$2,262.0m
$160
2005200620072008200920102011
Annual Report 2011
3
Chief Executive Officer’s Report to Members
Scott King
Chief Executive Officer
It is a pleasure to report on our performance over the past year
and share with you our key areas of focus that will take Qantas
Staff Credit Union (QSCU) towards an even stronger future.
We’ve continued to invest in strategies to maintain our future
growth and sustainability, and our focus has stayed firmly on
ensuring our Members and their family receive a better deal for
their banking. Our pricing and service strategy has maintained
our competitive advantage and achieved strong results, in
what has again been a challenging year for financial institutions
These great results can be directly attributed to the loyalty of
our Members. We’ve seen a big move away from the banks,
and it’s clear that our Members are voting with their feet. This
has been shown by the success of our ‘home loan challenge’
campaign, which encouraged Members to use the Money
Smart calculator on our website to see how much they could
save by switching their loan to QSCU. Our Members continue
to move all their banking to QSCU, which means that we’re
able to return that support back in the form of more competitive
rates, and an overall better deal for your banking.
across Australia - and indeed globally.
While the global economic environment can be expected to
remain somewhat turbulent and the banking sector highly
competitive, it’s pleasing to note that QSCU has never been in
a stronger position.
Financial results
I am delighted to report another strong year in 2011 with a pre
tax profit of $23.2 million to grow our capital base, and a 13.5%
increase in total assets to $2.26 billion. This result has placed
QSCU as one of the largest Credit Unions in Australia.
Our growth in earnings was achieved by strong demand in our key
areas of home loans and deposits. Even though we continue to
experience intense competition for deposits, QSCU has worked
hard to ensure that our deposit rates have been competitive and in
most cases better than the banks, while still maintaining attractive
lending rates. Pleasingly, this has resulted in sustainable growth
in our deposits by 14.2% to $2.08 billion, providing us funding to
increase our loan book by 11.2% to $1.77 billion.
4
“A great deal more for your banking”
Earlier this year we embarked on a project to better understand
what it is our Members love about QSCU, and what you need
from us to be financially successful. It’s all part of our brand
refresh project to better shape the way we communicate with
our Members, meet your financial needs and ensure future
growth for our Credit Union.
From this research we found that what our Members want is
a “great deal” and a one-stop-shop for “all your banking”. So
we’ve implemented “A great deal more for your banking” as a
central focus for all our business decisions, competitive pricing
strategy, and products and service offering. This focus will also
mean that we continue to provide exceptional personalised
service, no matter how you do your banking with us.
Maintaining the competitiveness of our products is key and I’m
pleased to advise that one of our signature loan products is ranked
in the top 3 personal loans in the country, according to mozo.com.
au – one of Australia’s leading banking comparison sites.
Qantas Staff Credit Union Management Team
Back (L to R): Scott King, Anthony Moir, Kelly Davenport, Stephen Swannell,
Antar Chahine, Alex Lowy, Cindy Hansen, Joff Stevens, Michael Anastasi.
Front (L to R): David Bridges, Luke Tsafis, Wendy Tomlins, Jason Barker, Stephen Cook.
We’re also launching a new Visa Platinum credit card with
Qantas Frequent Flyer Points, which is due to launch in
November this year. It’s a product that our Members have
asked for, and I’m pleased to say that it’s just another way that
we’re providing a great deal more for your banking.
A big year for Credit Unions
New branch opening – Miranda
I’m pleased to announce to all of our Members based in the
Sutherland Shire that we’ve just opened a new branch in
Miranda. With over 18,000 Members living in this region of
metropolitan Sydney, this is a key part of our ongoing strategy to
provide our Members with a variety of channels to bank with us.
It’s been a big year for Credit Unions as a whole this year, with
increased recognition from Parliament, Abacus (the industry body
for Mutuals), and the general public on the important role Credit
Unions play in providing competitive banking for all Australians.
Thank you
You may have seen the Mutual Building Societies and Credit
Unions advert on television this year explaining how it “all
comes back to you”. This message supports and provides
recognition of the 4.5 million Australians who bank with Mutuals
like QSCU every day. My role on the Abacus Board will be to
continually strive for Mutuals to be recognised as the 5th pillar
of banking, ensuring our Members and the general public have
a choice for better banking.
would also like to extend a well earned thank you to our Staff,
Keeping you mobile
As a part of our focus on continually improving the service
channels we offer to Members, this year we launched ‘mobile
banking’ and released our new iPhone Application. This has
provided Members with a simpler and more convenient way to
access and manage your money using the latest technology,
and is just the first phase of online improvements, with further
enhancements due to roll out over the next 12 months.
Finally, I would like to thank you, our Members, for your
confidence and loyalty throughout what has been a
challenging year throughout the local and global economy. I
Management team, and Directors for their commitment to
each other and our Members, to ensure you receive a great
deal more for your banking.
Scott King
Chief Executive Officer
27th September 2011
Annual Report 2011
5
Directors’ Report
The Directors present their report together with the financial statements of the Qantas Staff Credit Union Limited (“the Credit Union”)
for the year ended 30 June 2011 and the Auditor’s report thereon.
The Credit Union is a company registered under the Corporations Act 2001.
Information on Directors
The names of the Directors in office at any time, during or since the end of the year, are:
Name
Position
Qualifications
Age
Experience & Responsibilities
Mark Boesen Chairman
BBus, CPA
56
-Director since 1992
FAMI, MAICD
-Chairman, Board
-Chairman, Executive & Remuneration Committee
-Chairman, Corporate Governance Committee
-Member, Australian Institute of Company Directors
-Formerly, Qantas General Manager Retirement Programs and Qantas Superannuation
-Formerly, Director of Qantas Superannuation Limited, Constellation Capital Management Limited and SeQant Asset Management Pty. Limited David Hailes
Deputy Chairman
MBA, FAMI
68
-Director since 1993
-Deputy Chairman, Board
-Chairman, Audit & Compliance Committee
-Member, Executive & Remuneration Committee
-Formerly, Qantas Manager Flight Operations Support
Colin Adams
Non-Executive Director
MAMI, MAICD
62
-Director since 2008
-Member, Risk Committee
-Director of
Interrelate Family Centres Ltd,
Columbia Securities Pty Ltd, Columbia Superannuation (NSW) Pty Ltd
Bill Bourke Non-Executive Director
BSc (Qld) 70
-Director since 1992
BEng Aero (Syd)
-Member, Audit and Compliance Committee
MEngSc (Syd)
-Director, Sydney Maritime Museum Custodian Ltd
AFAMI
-Formerly, Qantas Manager Environment –
Aircraft Operations
Sarah Collins Non-Executive Director
6
BEc, LLB
45
MAMI
-Director since 2001
-Member, Corporate Governance Committee
-Currently, Special Counsel – DLA Phillips Fox
-Formerly, Qantas General Manager Legal
Name
Position
Qualifications
Age
41
Experience & Responsibilities
Jeffrey
Non-Executive
BBus, MApp lFin
Etherington
Director
CFTP (Snr), GAICD
-Member, Risk Committee
MAMI, AICD, Fin
-Head of Investor Relations and Treasury Risk -
and Treasury Assoc. Qantas Airways
Henry Goodman Non-Executive Director
FCPA, AFAMI
73
-Director since 2008
-Director since 1989
-Former Deputy Chairman
-Member, Corporate Governance Committee
-Director, Accountman Services Pty Ltd
-Formerly, Director of Qantas Superannuation Limited
-Formerly, Finance Director, Qantek
Gary Halliday Non-Executive Director
FINA, FAMI, JP
63
-Director since 2004
-Member, Audit & Compliance Committee
-Fellow, Institute of National Accountants
-Formerly, General Manager Qantas Staff Credit Union Limited
Charles Harvey Non-Executive Director
BEc, FCPA, FCIS
67
FCIM, AFAMI
-Director since 1991
-Member, Audit & Compliance Committee
-Currently, Consultant
-Formerly, Qantas General Manager Financial Performance
-Director of:
Air Pacific Limited,
Richmond Limited,
-Alternate Director of Fiji Resorts Ltd
Max Haworth
-Director since 1974
Non-Executive Director
FCPA, FCIS, FCIM
79
FAMI, JP
-Former Chairman
-Member, Audit and Compliance Committee
-Formerly, Director of International Marketing Institute of Australia Ltd and the IMIA Centre for Strategic Business Studies Pty Ltd
- Formerly, Qantas Director of Treasury and
Associated Companies and General Manager
Qantas Superannuation Limited
- Director, M&B Haworth Pty Ltd ATF Haworth
Superannuation Fund
Annual Report 2011
7
Directors’ Report (continued)
Name
Position
Barry Phair Non-Executive Director
Qualifications
Age
FCPA, FAMI
66
MAICD
Experience & Responsibilities
-Director since 1990
-Former Deputy Chairman
-Chairman, Risk Committee
-Member, Executive & Remuneration Committee
-Formerly, Qantas General Manager Fleet & Long term Network Planning
-Formerly, Qantas Strategic Planning Director
-Formerly, Qantas Deputy Treasurer
The names of the Company Secretaries in office at the end of the year are:
Name
Qualifications
Age
Experience
Cindy Hansen
LLB (Hons)
44
F Fin
MAMI
Company Secretary 24 April 2007
Currently, General Counsel and Company Secretary,
Qantas Staff Credit Union Limited
Michael Anastasi CA, B Comm
40
- Company Secretary since 25 September 2007
MAMI
- Currently, Chief Financial Officer, Qantas Staff
Credit Union Limited
8
Qantas Staff Credit Union Board of Directors and Executive Management
Back (L to R): Jeffrey Etherington, Gary Halliday, Michael Anastasi (CFO),
Bill Bourke, Scott King (CEO), Charles Harvey
Front (L to R): Max Haworth, Colin Adams, David Hailes, Mark Boesen,
Sarah Collins, Barry Phair, Henry Goodman
Directors’ Meetings
Directors’ Benefits
The number of Directors meetings (including meetings of
Committees of Directors) and the number of meetings attended
by each of the Directors of the Credit Union during the financial
year are:
No Director has received or become entitled to receive during,
or since the financial year, a benefit because of a contract
made by the Credit Union, a controlled entity, or a related
body corporate with a Director, a firm of which a Director is
a member or an entity in which a Director has a substantial
financial interest, other than that disclosed in note 23 of the
financial statements.
Director
Board Meetings
Committee Meetings
Held
Attended
Held
Attended
C. Adams
11
11
6
6
M. P. Boesen
11
11
5
5
W. L. Bourke
11
9
2
2
S. C. Collins 11
11
2
1
J. Etherington 11
8
9
8
H. Goodman
11
9
2
1
D. L. Hailes
11
11
7
7
G. Halliday
11
10
6
4
C. F. Harvey
11
10
3
2
M. J. Haworth
11
11
2
2
Operating Results
B. G. Phair
11
11
13
13
Profit before income tax for the 2011 financial year was $23.20
million (2010: $21.80 million), reducing to $16.37 million (2010:
$15.42 million) after providing $6.83 million (2010: $6.38
million) for taxation.
All Directors requested, and were granted, leave for meetings
they were unable to attend.
Financial Performance Disclosures
Principal Activities
The principal activities of the Credit Union during the financial
year related to the provision of retail financial and associated
services to Members in accordance with our Constitution.
No significant changes to these activities occurred during the year.
Dividends
No dividends have been paid or declared since the end of the
financial year and no dividends have been recommended or
provided for by the Directors of the Credit Union.
Annual Report 2011
9
Directors’ Report (continued)
Review Of Operations
Total assets at year end were $2,262.02 million, representing
an increase of $269.14 million, or 13.51% over the previous
year. Included in total assets are Member loans and advances
of $1,765.32 million, having risen by $177.89 million or 11.21%
reflecting strong demand for mortgage secured loans. Deposits
increased by $259.10 million, or 14.20% to $2,084.00 million at
year end. Total Member’s equity at year end was $161.72 million,
an increase of $16.37 million, or 11.26%. Continued Member
support together with increased lending levels and competitive
interest rates offered to depositors and borrowers, coupled with
prudent expenditure controls, enabled the Credit Union to further
strengthen its financial position during the year.
Directors or officers. The insurance policy does not cover
payments made arising out of claims made against any
Directors or officers by reason of any wrongful act in their
capacity as Directors or officers.
No insurance cover has been provided for the benefit of the
auditors of the Credit Union.
Likely Developments
No other matter, circumstance or likely development in the
operations has arisen since the end of the financial year that
has significantly affected or may significantly affect: (i)
The operations of the Credit Union;
Significant Changes In State Of Affairs
(ii)
The results of those operations; or
No significant changes occurred in the state of affairs of the
Credit Union during the year that has not otherwise been
disclosed in this Report or the financial statements.
(iii)
The state of affairs of the Credit Union
Events Occurring After Balance Date
Lead Auditor’s Independence Declaration
The MEAA Funding No. 1 Trust (Trust) was established on the
11th July 2011 to provide the Credit Union access to emergency
liquidity support in the event of a systemic liquidity crisis.
The lead auditor’s independence declaration is set out on page
12 and forms part of the Directors’ report for financial year
ended 30 June 2011.
Two classes of notes were issued by the Trust. Both are fully
owned by the Credit Union and accordingly there was neither
impact on the balance sheet nor material impact on the profit
and loss. The Class A Notes ($110.2 million) are AAA rated by
Moody’s and are eligible securities for repurchase agreements
with the Reserve Bank of Australia (RBA). The Class B Notes
($12.3 million) are not rated and are not eligible securities for
repurchase agreements with the RBA. Principal losses should
they arise are allocated to the Class B Notes prior to the Class
A Notes and as such the Class B Notes are necessary to
ensure a AAA rating on the Class A notes.
Rounding
in the financial years subsequent to this financial year.
The amounts contained in the financial statements have been
rounded to the nearest one thousand dollars in accordance
with ASIC Class Order 98/100 (as amended). The Credit
Union is permitted to round to the nearest one thousand
($’000) for all amounts except prescribed disclosures that
are shown in whole dollars.
This report is made in accordance with a resolution of the
Board of Directors and is signed for and on behalf of the
Directors by:
Indemnification Of Directors And Officers
Since the end of the previous financial year, the Credit
Union has not indemnified or made a relevant agreement for
indemnifying against a liability for any person who is or has
been an officer, Director or auditor of the Credit Union.
Mark Boesen, Chairman
Insurance Of Directors And Officers
During the financial year, the Credit Union paid an insurance
premium of $80,850 (2010: $80,850) in respect of Directors’
and Officers’ Liability and Company Reimbursement insurance
policies for any past, present or future, Director, secretary
or executive officer of the Credit Union. The policy does not
contain details of the premiums paid in respect of individual
10
David Hailes, Deputy Chairman
Sydney
27th September 2011
Lead Auditor’s independence declaration under
Section 307C of the Corporations Act 2001
To: the Directors of Qantas Staff Credit Union Limited
I declare that, to the best of my knowledge and belief, in
relation to the audit for the financial year ended 30 June 2011
there have been:
(i)
no contraventions of the auditor independence
requirements as set out in the Corporations Act 2001 in
relation to the audit, and
(ii)
no contraventions of any applicable code of professional
conduct in relation to the audit.
KPMG
Martin McGrath
Partner
Sydney
27th September 2011.
Annual Report 2011
11
Corporate Governance Statement
Corporate governance is the system by which companies are
directed and managed. It influences how the objectives of the
company are set and achieved, how risk is monitored and
assessed, and how performance is optimised.
The Australian Prudential Regulation Authority (APRA) has issued
Prudential Standard APS 510 Governance, which sets out
minimum foundations for good governance of regulated financial
institutions, such as QSCU. This standard “aims to ensure that
regulated institutions are managed in a sound and prudent
manner by a competent Board of Directors, which is capable
of making reasonable and impartial business judgements in the
best interests of the regulated institution and which gives due
consideration to the impact of its decisions on depositors”.
Framework
Directors and management are committed to high standards
of corporate governance and with this in mind, have articulated
and formalised the corporate governance framework within
which QSCU operates in a Board Charter.
The Board Charter is a written policy document that defines the
respective roles, responsibilities and authorities of the Board,
both individually and collectively, and of Management in setting
the direction, management and control of the organisation. As
such, it establishes the guidelines within which the Directors and
Officers are to operate as they carry out their respective roles.
QSCU has also adopted the 8 Corporate Governance
Principles and Recommendations published in 2007 by the
Australian Stock Exchange Corporate Governance Council,
as appropriate to QSCU’s particular circumstances, as a
non-listed, mutual, financial institution.
Statement Of Principles
Principle 1
Lay solid foundations for management
and oversight
To establish and publish the respective roles and
responsibilities of board and management.
The Board Charter outlines the role of the Board and senior
management. In governing QSCU, the Directors must act in
the best interests of QSCU as a whole. It is the role of senior
management to manage QSCU in accordance with the
direction and delegations of the Board and the responsibility of
the Board to oversee the activities of management in carrying
out these delegated duties. Senior management is responsible
for the day-to-day management of QSCU.
12
The details of some Board functions are handled through Board
Committees. However, the Board as a whole is responsible for
determining the extent of powers residing in each Committee
and is ultimately responsible for accepting, modifying or rejecting
Committee recommendations. Each Committee has its own
Charter, which includes its structure, authority and responsibilities.
The Board currently has the following Committees:
•
Executive & Remuneration Committee;
•
Audit & Compliance Committee;
•
Risk Committee;
•
Corporate Governance Committee.
QSCU’s policies and procedures, including the Board and
Committee Charters and the Delegations Manual, ensure a
balance of authority so that no single individual has
unfettered powers.
Principle 2
Structure the board to add value
Have a board of effective composition, size and commitment
to adequately discharge its responsibilities and duties.
QSCU currently has 11 Directors, elected by Members by
democratic ballot for a three (3) year term. Under QSCU’s
Constitution the number of Directors must be at least 5 and
no more than 11. The eligibility requirements to nominate as a
Director and the process for election of Directors are governed
by the Constitution.
The overriding principle to which the Board has regard in
relation to the structure of the Board is that all Directors must
be fit and proper persons as defined in APRA Prudential
Standard APS 520 Fit and Proper Requirements. The Board
Charter and QSCU’s Fit and Proper Policy set out how QSCU
assesses whether or not a person is fit and proper. All current
Directors have been assessed as being fit and proper, in
accordance with QSCU’s policy.
In its Prudential Standard APS 510 Governance, APRA
requires the Board to have a majority of independent and nonexecutive Directors at all times. In addition, certain positions,
such as Chairman of the Board and Chairman of the Audit
& Compliance Committee, must be held by an independent,
non-executive Director.
The Board Charter sets out how QSCU assesses whether or
not a person is independent. The Board has resolved that all
Directors, except Gary Halliday (a former General Manager
of QSCU), are independent, in accordance with the Board
Charter. All Directors, whether assessed as independent or not,
bring an independent judgement to bear on Board decisions.
All Directors are currently non-executive.
Collectively, the Board must have the necessary skills,
knowledge and experience to understand the risks of QSCU,
including its legal and prudential obligations, and to ensure that
QSCU is managed in an appropriate way taking into account
these risks.
In addition, Directors should bring certain personal attributes to
the Board table to allow them to make an effective contribution
to Board deliberations and processes. This includes having
sufficient time available to fulfil the role.
To achieve this skills mix, QSCU regularly reviews the need
for various skills and experience against the current skills and
experience represented on the Board.
Principle 3
Promote ethical and responsible decision making
Actively promote ethical and responsible decision-making.
In making its decisions, QSCU not only complies with its legal
obligations, but also considers the reasonable expectations of
its stakeholders, including Members and employees. QSCU’s
policies and procedures promote responsibility, accountability
and integrity.
The Board has adopted a Corporate Social Responsibility
Policy and has implemented and enforced a strict Directors’
and Officers’ Code of Conduct. Under this Code, all Directors,
Officers and employees must comply at all times, with all laws
governing QSCU’s operations and in keeping with the highest
legal, moral and ethical standards.
Principle 4
Safeguard integrity in financial reporting
Have a structure to independently verify and safeguard the
integrity of the company’s financial reporting.
The Board has in place a structure of review and authorisation
designed to ensure the truthful and factual presentation of
QSCU’s financial position. The structure includes the following:
•
review and consideration of the accounts by the Audit and
Compliance Committee;
•
a process to ensure the independence and competence
of QSCU’s internal and external auditors.
The principal responsibilities of the Audit and Compliance
Committee are set out in its Charter. The Audit and
Compliance Committee is structured to comply with
APRA prudential standards.
Principle 5
Make timely and balanced disclosure
Promote timely and balanced disclosure of all material
matters concerning the company.
QSCU is not a listed company and therefore is not required to
comply with the ASX Listing Rules for disclosure. However, the
Board still has in place mechanisms designed to ensure that:
•
all Members have equal and timely access to material
information concerning QSCU – including its financial
situation, performance and governance;
•
QSCU’s announcements are factual and presented in
a clear and balanced way.
In addition, QSCU has policies and procedures in relation to
disclosing and managing actual or potential conflicts of interest
that may or might reasonably be thought to exist, and to
minimise the risk of related party transactions.
Annual Report 2011
13
Statement of Principles (continued)
Principle 6
Principle 8
Respect the rights of Members
Remunerate fairly and responsibly
Respect the rights of Members and facilitate the effective
exercise of those rights.
Ensure the level and composition of remuneration is
The Board and Management of QSCU respect the rights of
Members, and facilitate the effective exercise of those rights by:
sufficient and reasonable and that its relationship to
corporate and individual performance is clear.
QSCU has adopted remuneration policies that attract and
maintain appropriately experienced Directors and employees
•
communicating effectively with Members;
•
giving Members ready access to balanced and
understandable information about QSCU and its
corporate objectives;
offering of the highest level of service to Members. There is a
making it easy for Members to participate in general
meetings.
The Executive & Remuneration Committee assists the Board
•
so as to encourage enhanced performance by QSCU and the
clear relationship between performance and remuneration of
executive employees.
by recommending compensation of the CEO and Directors’
fees to the Board for approval and reviewing remuneration
Principle 7
Recognise and manage risk
Establish a sound system of risk oversight and management
and internal control.
The Board has in place a system of risk oversight and
management and internal control to:
•
identify, and where possible, quantify the major risks
confronting QSCU;
•
develop and review policies to monitor, control and
where possible, minimise risks within the broader
objectives of QSCU.
The Board has established a Risk Committee to assist the
Board to manage and monitor material business risks. The
principal responsibilities of the Risk Committee are set out in
its Charter.
QSCU also has an internal udit function, independent of the
external Auditor and Management, reporting directly to the
Audit & Compliance Committee.
14
proposals made by the CEO for senior management. The
principal responsibilities of the Executive & Remuneration
Committee are set out in its Charter.
Advice to Directors
Directors may obtain independent professional advice, at the
expense of QSCU, on matters arising in the course of their
Board duties, in accordance with the Board Charter and
Delegations Manual.
Independent auditor’s report to the Members
of Qantas Staff Credit Union Limited
Report on the financial report
We have audited the accompanying financial statements
of Qantas Staff Credit Union Limited (the Company), which
comprises the Statement of Financial Position as at 30 June
2011, the Statement of Comprehensive Income, Statement of
Changes in Equity and cash flow statement for the year ended
on that date, a summary of significant accounting policies and
other explanatory notes 1 to 28 and the Directors’ declaration
set out on page 16.
Directors’ responsibility for the
financial report
The Directors of the Company are responsible for the preparation
and fair presentation of the financial report in accordance with
Australian Accounting Standards (including the Australian
Accounting Interpretations) and the Corporations Act 2001.
This responsibility includes establishing and maintaining internal
control relevant to the preparation and fair presentation of the
financial report that is free from material misstatement, whether
due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are
reasonable in the circumstances. In note 1, the Directors also
state, in accordance with Australian Accounting Standard AASB
101 Presentation of Financial Statements, that the financial
report, comprising the financial statements and notes, complies
with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial
statements based on our audit. We conducted our audit
in accordance with Australian Auditing Standards. These
Auditing Standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and
perform the audit to obtain reasonable assurance whether
the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material
misstatement of the financial statements, whether due to
fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation
and fair presentation of the financial report in order to design
audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the Directors, as
well as evaluating the overall presentation of the financial report.
We performed the procedures to assess whether in all material
respects the financial report presents fairly, in accordance
with the Corporations Act 2001 and Australian Accounting
Standards (including the Australian Accounting Interpretations),
a view which is consistent with our understanding of the
Company’s financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the
independence requirements of the Corporations Act 2001.
Auditor’s opinion
In our opinion:
1 the financial report of Qantas Staff Credit Union Limited is in
accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company’s financial
position as at 30 June 2011 and of its performance for
the year ended on that date; and
(ii) complying with Australian Accounting Standards
(including the Australian Accounting Interpretations) and
the Corporations Regulations 2001.
2 the financial report also complies with International Financial
Reporting Standards as disclosed in note 1.
KPMG
Martin McGrath
Partner
Sydney
27th September 2011
Annual Report 2011
15
Directors’ Declaration
1 In the opinion of the Directors of Qantas Staff Credit Union
Limited (the Company):
(a) the financial statements and notes that are contained
on pages 17 to 57 are in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the Company’s
financial position as at 30 June 2011 and of its
performance for the financial year ended on that
date; and
(ii) complying with Australian Accounting Standards
(including the Australian Accounting Interpretations)
and the Corporations Regulations 2001;
(b) the financial report also complies with International
Financial Reporting Standards as disclosed in Note 1;
and
(c) there are reasonable grounds to believe that the
Company will be able to pay its debts as and when they
become due and payable.
2 The Directors have been given the declarations required by
Section 295A of the Corporations Act 2001 from the Chief
Executive Officer and Chief Financial Officer for the financial
year ended 30 June 2011.
Signed in accordance with a resolution of the Directors:
Mark Boesen, Chairman
Director
David Hailes, Deputy Chairman
Director
Sydney
27th September 2011
16
Statement of Comprehensive Income
For the year ended 30 June 2011
Note
Interest revenue
2a
Interest expense
2c
2011
$000
2010
$000
146,934
(99,645)
109,946
(63,267)
47,289
46,679
9,076
8,715
56,365
55,394
Non interest expenses
Impairment losses on loans and advances
2d
(823)
Other expenses
2e
(32,341)
(1,503)
(32,092)
Net interest income
Other income
2b
Total operating income
Profit before income tax
23,201
21,799
Income tax expense
(6,831)
(6,384)
Profit after income tax
16,370
15,415
Total comprehensive income
16,370
15,415
3
The above Statement of Comprehensive Income should be read in conjunction with the Notes to the Financial Statements set out
on pages 21 to 57.
Annual Report 2011
17
Statement of Changes In Equity
For the year ended 30 June 2011
Note
Capital
Reserve
General Reserve for
Credit Losses
Retained Profits
Total
$000
$000
$000
$000
Total as at 1 July 2009
211
4,200
125,524
129,935
Profit for the year
18
-
-
15,415
15,415
Transfers to / (from) Reserves 17
22
300
(322)
-
Total as at 30 June 2010
233
4,500
140,617
145,350
Profit for the year
18
-
-
16,370
16,370
Transfers to / (from) Reserves 17
13
300
(313)
-
Total as at 30 June 2011
246
4,800
156,674
161,720
The above Statement of Changes in Equity should be read in conjunction with the Notes to the Financial Statements set out on
pages 21 to 57.
18
Statement of Financial Position
As at 30 June 2011
Note
ASSETS
Cash
4
Receivables
5
Held to maturity financial instruments
6
Loans and advances to Members
7
Available for sale assets
9
Plant and equipment
10a
Intangibles
10b
Prepayments & debtors
11
Deferred tax assets
12
2011 $000
2010
$000
56,440
4,016
428,437
1,765,323
3,258
2,064
357
827
1,293
48,643
3,212
346,333
1,587,425
3,258
1,723
375
568
1,342
TOTAL ASSETS
2,262,015
1,992,879
LIABILITIES
Deposits Creditor accruals and settlement accounts
Current tax liability
Provisions 2,084,005
12,370
1,712
2,208
1,824,902
16,354
3,973
2,300
TOTAL LIABILITIES
2,100,295
1,847,529
NET ASSETS
161,720
145,350
MEMBERS’ EQUITY
Reserves
Retained earnings
13
14
15
16
17
18
TOTAL MEMBERS’ EQUITY
5,046
156,674
4,733
140,617
161,720
145,350
The above Statement of Financial Position should be read in conjunction with the Notes to the Financial Statements set out on
pages 21 to 57.
Annual Report 2011
19
Statement Of Cash Flows
For the year ended 30 June 2011
Note
2011
$000
2010
$000
OPERATING ACTIVITIES
Interest received
Fees and commissions received
Dividends received
Interest paid
Cash paid to Suppliers and employees
Income taxes paid
Net (increase) in member loans Net increase in deposits and shares Net (increase) / decrease in receivables from other financial institutions Net cash from operating activities
26b
146,097
8,599
484
(98,594)
(30,712)
(9,043)
(178,728)
253,391
(82,103)
109,403
8,427
387
(59,712)
(30,426)
(5,021)
(196,871)
174,540
4,257
9,391
4,984
INVESTING ACTIVITIES
Proceeds on sale of property, plant and equipment
Purchase of property plant and equipment
Purchase of intangibles
65
(1,372)
(287)
23
(673)
(185)
Net cash used in investing activities
(1,594)
(835)
Total net cash increase 7,797
4,149
Cash at beginning of year
48,643
44,494
Cash at end of year
56,440
48,643
26a
The above Statement of Cash Flows should be read in conjunction with the Notes to the Financial Statements set out on pages 21 to 57.
20
Notes to the Financial Statements
For the year ended 30 June 2011
1. Statement of Accounting Polices
b. Significant Accounting Policies
Qantas Staff Credit Union Limited is a company domiciled in
Australia. The address of the Company’s registered office is
420 Forest Road, Hurstville, NSW. The Credit Union is primarily
involved in the provision of financial products, services and
associated activities to Members.
a. Basis of Preparation
(i) Statement of compliance
The financial report is a general purpose financial
report which has been prepared in accordance with
Australian Accounting Standards (AASBs) (including
Australian Accounting Interpretations) adopted by the
Australian Accounting Standards Board (AASB) and the
Corporations Act 2001. The financial report of the Credit
Union complies with the International Financial Reporting
Standards (IFRSs) and interpretations adopted by the
International Accounting Standards Board.
The accounting policies set out below have been applied
consistently to all periods presented in these financial
statements.
c. Loans to Members
(i) Basis of inclusion
All loans are initially recognised at fair value, net
of transaction costs incurred and inclusive of loan
origination fees. Loans are subsequently measured
at amortised cost using the effective interest method
less any impairment losses. Any difference between
the proceeds (net of transaction costs) and the
redemption amount is recognised in the Statement of
Comprehensive Income over the period of the loans
using the effective interest method.
Loans to Members are reported at their recoverable
amount representing the aggregate amount of principal
and unpaid interest owing to the Credit Union at balance
date, less any allowance or provision for impairment.
The financial statements were approved by the Board
of Directors on 27th September 2011.
(ii) Basis of Measurement
(ii) Interest earned
Term Loans - The loan interest is calculated on the basis
of daily balance outstanding and is charged in arrears to
a Member’s account on the last day of each month.
Credit Cards – For interest free credit cards, interest
will be charged only where the relevant transactions do
not qualify for interest free status in accordance with the
terms and conditions of the facility.
The financial statements have been prepared on the
historical cost basis except where otherwise stated.
(iii)Functional and presentation currency
These financial statements are presented in Australian
dollars, which is the Credit Union’s functional currency.
The Credit Union is of a kind referred to in ASIC Class
Order 98/100 dated 10 July 1998 (as amended) and in
accordance with that Class Order, all financial information
presented in Australian dollars has been rounded to the
nearest thousand unless otherwise stated.
(iii) Loan origination fees and transaction costs
(iv)Use of estimates and judgements
The preparation of financial statements requires
management to make judgements, estimates and
assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from
these estimates.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is
revised and in any future periods affected.
Loan establishment fees and associated transaction
costs are initially deferred as part of the loan balance,
and are brought to account as either a net expense
or net income over the expected life of the loan. The
amounts brought to account are included as part of
interest revenue or expense as appropriate.
d. Loan Impairment
(i) Specific Provision
Losses for impaired loans are recognised when there
is objective evidence that the impairment of a loan
has occurred. Impairment losses are calculated on
individual loans. The amount provided for impairment is
determined by management and the Board to recognise
Annual Report 2011
21
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
the probability of loan amounts not being collected in
accordance with terms of the loan agreement. g. Advances to Other Financial Institutions
Receivables from other financial institutions include loans,
bank accepted bills of exchange, certificates of deposit and
settlement account balances due from other banks. They
are brought to account at the gross value of the outstanding
balance. Interest on receivables due from other financial
institutions is recognised on an effective yield basis.
ii) Collective Provision
A collective provision is made for groups of loans
with similar credit risk characteristics. Loans that are
individually assessed for impairment and for which an
impairment loss is or continues to be recognised are
not included in a collective assessment of impairment.
The amount of impairment loss is based upon
estimated losses incurred within the portfolio, based
upon objective evidence of impairment, the estimated
probability of default and the expected loss given
default having regard to the historical experience of
the Credit Union. The provision increase or decrease is
recognised in the Statement of Comprehensive Income.
iii) General Reserve for Credit Losses
In addition to the above provisions, the Credit Union will
maintain a general reserve for credit losses of at least
0.5%, but no more than 1.25% of total risk weighted
assets (as defined in APS 112 Capital Adequacy:
Credit Risk)
h. Financial Instruments
The Credit Union utilises a range of financial instruments.
Financial instruments are classified and measured as follows:
Loans and advances: This category includes non-derivative
financial assets with fixed or determinable payments that
are not quoted in an active market. They are measured
at amortised cost; refer Note 1(c) Loans to Members for
further details.
Held to maturity investments: This category includes
non-derivative financial assets with fixed or determinable
payments and a fixed maturity that the Credit Union has a
positive intention and ability to hold to maturity. They are
measured at amortised cost.
Available for sale assets: This category includes
investments in equity instruments. Available-for-sale
financial assets are recognised on acquisition at cost on a
trade date basis and thereafter at fair value unless fair value
is unable to be determined reliably, in which case they are
carried at cost. Changes in the fair value of available-forsale assets are reported in the “available-for-sale securities
revaluation reserve” net of applicable income taxes until
the investments are sold, collected or otherwise disposed
of, or until such investments are impaired. On disposal
the accumulated change in fair value is transferred to the
Statement of Comprehensive Income.
Investments in shares which do not have a quoted market
price in an active market and are not capable of being
reliably valued are measured at cost less any provision
for impairment.
Other Financial Liabilities: These liabilities are measured at
amortised cost.
e. Bad Debts Written Off
Bad debts are written off from time to time as determined
by management and the Board of Directors when it is
reasonable to expect that the recovery of the debt is
unlikely. Bad debts are written off as expenses in the
Statement of Comprehensive Income or against the
provision for impairment.
f. Plant and Equipment
Plant and equipment with the exception of freehold land,
are depreciated on a straight- line basis, so as to write off
the net cost of each asset over its expected useful life to
the Credit Union. The useful lives are adjusted if appropriate
at each reporting date. Estimated useful lives at the balance
date are as follows:
- Leasehold Improvements – 3 to 10 years.
- Plant and Equipment – 2.5 to 7 years.
22
Items of plant and equipment are measured at cost less
accumulated depreciation and accumulated impairment
losses. Cost includes expenditure that is directly attributable
to the acquisition of the asset.
Assets less than $300 are not capitalised.
i.Deposits
(i) Basis for Determination
l. Leasehold on Premises
Leases where the lessor retains substantially all the risks
and rewards of ownership of the net asset are classified as
operating leases. Payments made under operating leases
(net of incentives received from the lessor) are charged to
the Statement of Comprehensive Income on a straight-line
basis over the period of the lease.
A provision is recognised for the lease incentive benefits on the
operating leases, where applicable, based on the Net Present
Value of the future payments during the life of the lease,
discounted at the relevant rate of increase, as specified in the
lease agreement. Increases in the provision in future years shall
be recognised as part of the interest expense.
Savings, term investments and retirement savings
accounts are quoted at the aggregate amount of
money owing to depositors.
(ii) Interest on deposits
At Call
Interest on deposit balances is calculated and accrued
on a daily basis at current rates and credited to
accounts on a monthly basis.
Term Deposits
Interest on term deposits is calculated and accrued on
a daily basis at agreed rates and is paid or credited to
accounts in accordance with the terms of the deposit.
m. Income Tax
The income tax expense shown in the Statement of
Comprehensive Income is based on the operating profit
Retirement Savings Account (RSA)
Interest on Retirement Savings Accounts are calculated
and accrued on a daily basis at current rates and credited
to Retirement Savings Accounts on a monthly basis.
before income tax adjusted for any non-tax deductible or
non-assessable items between accounting profit and taxable
income. Deferred tax assets and liabilities are recognised
using the Statement of Financial Position liability method in
respect of temporary differences arising between the tax
j.Borrowings
All loans and borrowings are initially recognised at fair
value, net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost using the
effective interest method. Any difference between the
proceeds (net of transaction costs) and the redemption
amount is recognised in the Statement of Comprehensive
Income over the period of the loans and borrowings using
the effective interest method.
bases of assets or liabilities and their carrying amounts in
the financial statements. Current and deferred tax balances
relating to amounts recognised directly in equity are also
recognised directly in equity.
temporary differences between carrying amounts of assets
and liabilities for financial reporting purposes and their
respective tax bases at the rate of income tax applicable
to the period in which the benefit will be received or the
k. Provision for Employee Benefits
The provision for long service leave is based on the present
value of the estimated future cash outflows to be made
resulting from employees’ service up to reporting date, and
having regard to the probability that employees as a group
will remain employed for the period of time necessary to
qualify for long service leave.
Provisions for annual leave represent present obligations
resulting from employees’ services calculated on
undiscounted amounts based on remuneration, wage and
salary rates that the Credit Union expects to pay as at
reporting date.
Contributions are made by the Credit Union to an
employee’s superannuation fund and are charged to the
Statement of Comprehensive Income as incurred.
Deferred tax assets and liabilities are recognised for all
liability will become payable. These differences are presently
assessed at 30%.
Deferred tax assets are only brought to account if it is probable
that future taxable amounts will be available to utilise those
temporary differences. The recognition of these benefits is
based on the assumption that no adverse change will occur
in income tax legislation; and the anticipation that the Credit
Union will derive sufficient future assessable income and
comply with the conditions of deductibility imposed by the law
to permit a future income tax benefit to be obtained.
n. Goods and Services Tax (GST)
As a financial institution, the Credit Union is input taxed on all
income except other income from commissions and some
fees. An input taxed supply is not subject to GST collection,
Annual Report 2011
23
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
and similarly the GST paid on purchases cannot be
recovered. In addition certain prescribed purchases are
subject to reduced input tax credits (RITC), of which
75% of the GST paid is recoverable. In addition, general
apportionment may be recoverable in some cases.
Revenue, expenses and assets are recognised net of the
amount of goods and services tax (GST), except where the
amount of the GST incurred is not recoverable from the
Australian Tax Office (ATO). In these circumstances, the
GST is recognised as part of the cost of acquisition of the
asset or as part of an item of expense.
Receivables and payables are stated with the amount
of GST included where applicable GST is collected. The
net amount of GST recoverable from, or payable to, the
ATO is included as a current asset or current liability in the
Statement of Financial Position. Cash flows are included
in the Statement of Cash Flows on a gross basis. The
GST components of cash flows arising from investing and
financing activities, which are recoverable from, or payable
to, the Australian Taxation Office, are classified as operating
cash flows.
basis of making the judgements about carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised
if the revision affects only that period or in the period of
the revision and future periods if the revision affects both
current and future periods.
Management have made judgements when applying the
Credit Union’s accounting policies with respect to the
classification of assets as available for sale and in assessing
the impairment provision for loans.
q. Redeemable Preference Shares
o. Impairment of Assets
At each reporting date the Credit Union assesses whether
there is any indication that individual assets are impaired.
Where impairment indicators exist, recoverable amount
is determined and impairment losses are recognised
in the Statement of Comprehensive Income where the
asset’s carrying value exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value
less costs to sell and value in use. For the purpose of
assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time
value of money and the risks specific to the asset. Where
it is not possible to estimate recoverable amount for an
individual asset, recoverable amount is determined for the
cash-generating unit to which the asset belongs.
r. Recoverable Amount of Non-Current Assets
Valued on Cost Basis
24
The preparation of a financial report in conformity with
Australian Accounting Standards requires management to
make judgements, estimates and assumptions that affect
the application of policies and reported amounts of assets
and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience
and various other factors that are believed to be reasonable
under the circumstances, the results of which form the
The carrying amounts of non-current assets valued on the
cost basis are reviewed to determine whether they are in
excess of their recoverable amount at reporting date. If
the carrying amount of a non-current asset exceeds its
recoverable amount, the asset is written down to the lower
amount. The write-down is recognised as an expense in
the Statement of Comprehensive Income in the reporting
period in which it occurs. In assessing the recoverable
amounts of non-current assets relevant cash flows have
been discounted to their present value.
s. Other Trade and Other Receivables
Trade and other receivables are stated at their amortised
cost less impairment losses (see accounting policy (o)).
p. Accounting Estimates and Judgements
The Credit Union issues redeemable preference shares
to each Member upon joining. Up until 1st April 2010, all
Members were required to hold five fully paid preference
shares of $2 each in accordance with the constitution of
the Credit Union. These shares are redeemed for their face
value of $2 each on leaving the Credit Union. Subsequent
to 1 April 2010, this share capital remains uncalled.
t. Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances,
short term bills and call deposits. Bank overdrafts that
are repayable on demand and form an integral part of
the Credit Union’s cash management are included as a
component of cash and cash equivalents for the purpose
of the statement of cash flows.
u. Expenses – Operating Lease Payments
Payments made under operating leases are recognised in
the Statement of Comprehensive Income on a straight-line
basis over the term of the lease. Lease incentives received
are recognised in the Statement of Comprehensive Income
as an integral part of the total lease expense and spread
over the lease term.
v. Intangibles – Computer Software Costs
The Credit Union capitalises computer software costs
and recognises them as an intangible asset where they
are clearly identifiable, can be reliably measured and will
lead to future economic benefits that the Credit Union
controls. Capitalised software assets are carried at cost
less amortisation and any impairment losses. The Credit
Union amortises these assets on a straight-line basis at
a rate applicable to the expected useful life of the asset,
but usually not exceeding 5 years. Any impairment loss is
recognised under operating expenditure in the Statement
of Comprehensive Income when incurred.
w. Trade and Other Payables
Trade and other payables are stated at their amortised cost.
Trade payables are non-interest bearing and are normally
settled on 60-day terms.
x. Presentation of Financial Statements
Some comparatives reported in previous financial year
have been reclassified to conform with current years presentation.
y. New Standards and Interpretations
Not Yet Adopted
A number of new standards, amendments to standards
and interpretations are effective for annual periods
beginning after 1 July 2010, and have not been applied
in preparing these financial statements. None of these
are expected to have a significant effect on the financial
statements of the Group, except for AASB 9 Financial
Instruments, which becomes mandatory for the 2014
financial statements and could change the classification
and measurement of financial assets. The Credit Union
does not plan to adopt this standard early and the extent
of the impact has not yet been determined.
Annual Report 2011
25
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
2. Statement of Comprehensive Income
a. Analysis of interest revenue
2011
Interest
Average
Average
Revenue
Balance
Interest Rate
$000
$000
%
121,704
1,654,753
7.35
21,474
402,446
5.34
2,858
63,372
4.51
898
18,407
4.88
146,934
2,138,978
6.87
Category of interest bearing assets
Loans and advances to Members
Investment securities
Deposits at call with other financial institutions
Regulatory deposits
TOTAL INTEREST REVENUE
Interest
Average Average
Revenue
Balance
Interest Rate
$000
$000
%
Loans and advances to Members
95,551
1,486,867
6.43
Investment securities
11,863
287,740
4.12
1,646
53,107
3.10
886
18,407
4.81
109,946
1,846,121
5.96
2011
2010
Category of interest bearing assets
Deposits at call with other financial institutions
Regulatory deposits
TOTAL INTEREST REVENUE
26
2010
b. Other Income:
$000
$000
Fees and commissions
8,373
8,089
Dividends received 484
387
Bad debts recovered
219
230
Gain on disposal of property, plant and equipment
-
9
TOTAL OTHER INCOME
9,076
8,715
c. Interest expense
Analysis of interest expense
2011
Interest
Average
Average
Expense
Balance
Interest Rate
$000
$000
%
99,634
1,996,900
4.99
11
81
13.58
-
-
-
99,645
1,996,981
4.99
Category of interest bearing liabilities
Deposits
Bank overdraft Other
TOTAL INTEREST EXPENSE
2010
Interest
Average
Average
Expense
Balance
Interest Rate
$000
$000
%
63,258
1,693,518
3.74
Bank overdraft 9
63
14.29
Other
-
-
-
63,267
1,693,581
3.74
2011
2010
d. Impairment losses on loans and advances
$000
$000
Bad debts written off directly against profit
823
1,303
Addition to provision for doubtful debts
-
200
TOTAL IMPAIRMENT LOSSES ON LOANS & ADVANCES
823
1,503
Category of interest bearing liabilities
Deposits
TOTAL INTEREST EXPENSE
e. Other expenses
Salaries and on costs
10,934
9,934
Superannuation costs
923
845
Transaction costs
9,391
9,591
Information technology
2,831
2,661
Insurance and legal
348
365
Directors remuneration
484
454
Depreciation of plant and equipment
972
1,231
Amortisation of intangibles
305
696
Employee entitlements
330
571
Other provisions
-
300
Rental – operating leases
1,604
1,494
Supervision levies
87
84
General administrative costs
4,132
3,866
32,341
32,092
Amounts set aside to provisions:
Annual Report 2011
27
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
f. Auditor’s Remuneration
2011
2010
$
$
119,570
113,660
41,648
39,590
161,218
153,250
30,487
-
191,705
153,250
3. Income Tax Expense
2011
2010
$000
$000
6,770
6,673
12
(44)
Statutory audit
Regulatory audits
Subtotal
Non audit services
TOTAL
a. Current Tax Expense
Current year Prior year under/(over) provision for current tax
Deferred tax expense
Prior year under provision for deferred tax
-
-
Increase / (decrease) in deferred tax liability
(2)
41
(Increase) / decrease in deferred tax asset
51
(286)
6,831
6,384
TOTAL INCOME TAX EXPENSE IN INCOME STATEMENT
b. Reconciliation between tax expense and pre tax net profit:
Profit before tax
Income tax using the Company tax rate of 30%
23,201
21,799
6,961
6,540
Tax effect of expenses/ income
- Other non-deductible expenses
- Prior year under/(over) provision for current tax
- Rebateable dividend imputation credits
INCOME TAX EXPENSE ATTRIBUTABLE TO PROFIT
28
7
4
12
(44)
(149)
(116)
6,831
6,384
2011
2010
$000
$000
2,603
2,455
4. Cash
Cash on hand
Deposits at call
Cash at bank 12,883
9,308
Other financial institutions
30,000
27,000
Other Authorised Deposit-taking Institutions
10,954
9,880
56,440
48,643
TOTAL CASH
5.Receivables
Interest receivable 2,948
2,111
Sundry debtors and settlement accounts 1,068
1,101
TOTAL RECEIVABLES 4,016
3,212
Maturity analysis
Not longer than 3 months
3 to 12 months
6. Held to Maturity Financial Instruments
3,949
2,993
67
219
4,016
3,212
Other public securities:
Bank accepted bills of exchange
Bank issued certificates of deposit
Deposits with other authorised deposit-taking institutions
TOTAL HELD TO MATURITY FINANCIAL INSTRUMENTS
24,712
129,120
385,318
198,806
410,030
327,926
18,407
18,407
428,437
346,333
Maturity analysis
Not longer than 3 months
3 to 12 months
413,012
330,603
15,425
15,730
428,437346,333
Fair value
Bank accepted bills of exchange
24,714
129,180
Bank issued certificates of deposit
Deposits with other authorised deposit-taking institutions
385,381
199,545
18,407
18,407
428,502
347,132
Annual Report 2011
29
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
2011
2010
$000
$000
7. Loans and Advances
Amount due comprises:
Overdrafts and revolving credit
38,730
35,950
Term loans
1,728,117
1,553,180
Subtotal
1,766,847
1,589,130
Less:
Provision for impaired loans (Note 8)
TOTAL LOANS AND ADVANCES (1,524)
(1,705)
1,765,323
1,587,425
Maturity analysis - gross loans and advances
Not longer than 3 months
77,280
70,564
Longer than 3 and not longer than 12 months
124,063
110,097
Longer than 1 and not longer than 5 years
574,976
512,214
Longer than 5 years
990,528
896,255
1,766,847
1,589,130
8. Provison on Impaired Loans
a. Total provision comprises
Specific provisions
-
188
Collective provisions
1,524
1,517
TOTAL PROVISION
1,524
1,705
b. Movement in the specific provision
Balance at the beginning of year
Amounts written off against the specific provision
Increase / (decrease) in provision
Specific provision balance at end of year
c. Movement in the collective provision
Balance at the beginning of year
Increase / (decrease) in provision
Collective provision balance at end of year
30
188
(181)
-
(7)
188
-
188
1,517
1,505
7
12
1,524
1,517
2011
2010
$000
$000
8. Provison on Impaired Loans (continued)
d. Impaired loans written off Amounts written off against the specific provision
-
Amounts written off directly to expense 823
1,303
Total bad debts
823
1,303
Bad debts recovered in the period 219
230
9. Available For Sale Financial Instruments
Shares in unlisted corporations Indue Limited
1,934
1,934
Subordinated deferred deposit – unlisted corporations
Indue Limited
447
447
Perpetual subordinated debt Indue Limited
TOTAL AVAILABLE FOR SALE FINANCIAL INSTRUMENTS
877
877
3,258
3,258
Indue Limited
The shareholding in Indue Limited is measured at cost as its fair value could not be
measured reliably. This company was created to supply services to member credit
unions and the shares are held to enable the Credit Union to receive essential banking
services. The shares are not able to be publicly traded and are not redeemable.
The Perpetual subordinated debt with Indue Limited is a debt instrument upon which
the Credit Union earns a return of the 90 day bank bill rate plus 175 basis points. It is
perpetual in nature and not able to be traded and is not redeemable.
Based on the net assets of Indue Limited, any fair value determination on these shares
is likely to be greater than their cost value, but due to the nature of services supplied
a market value is not able to be determined readily.
While classified as available for sale financial instruments under the Accounting
Standards, the Credit Union is not intending, nor able, to dispose of these instruments.
The available for sale financial instruments relating to Indue Limited would be classified
within level 3 of the fair value hierarchy under AASB 7 Financial Instruments: Disclosures
as the assets are not valued based on observable market data.
There has been no movement in the Indue Limited available for sale balance during the year.
Annual Report 2011
31
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
2011
2010
$000
$000
5,335
4,651
(4,441)
(3,962)
894
689
10 a. Plant and Equipment
Leasehold property improvements - at cost
Less: provision for depreciation
1,257
1,144
(1,031)
(958)
226
186
Computer equipment - at cost
2,847
2,420
Less: provision for depreciation
(2,190)
(1,890)
657
530
Motor vehicles - at cost
530
497
(243)
(179)
287
318
2,064
1,723
Office furniture and equipment - at cost
Less: provision for depreciation
Less: provision for depreciation
TOTAL PLANT AND EQUIPMENT – NET BOOK VALUE
Movement in the assets balances during the year were:
Plant & Equipment
2011
2010
Leasehold
Other plant Leasehold
Other plant
improvements
& equipment
improvements
& equipment
$000
$000
$000
$000
Opening balance
689
1,034
1,362
933
Purchases 684
685
90
583
-
(56)
-
(14)
(479)
(493)
(763)
(468)
894
1,170
689
1,034
Less:
Assets disposed
Depreciation charge
Balance at the end of the year
32
2011
2010
$000
$000
5,117
4,830
(4,760)
(4,455)
357
375
10 b. Intangibles
Computer software - at cost
Less: provision for amortisation
TOTAL INTANGIBLES
Movement in the Intangibles balances during the year were:
Computer software
Opening balance
375
886
Purchases 287
185
Less:
Assets disposed
-
-
(305)
(696)
357
375
Prepayments
548
515
Debtors
279
53
TOTAL PREPAYMENTS & DEBTORS 827
568
Net deferred tax asset / (Liability) 1,293
Net deferred tax assets represents the estimated future tax benefit / liability
at the applicable rate of 30% on the following items:
1,342
Amortisation charge
Balance at the end of the year
11.
12.
Prepayments & Debtors
Deferred Tax
Deferred tax assets
- Provisions for impairment on loans 457
512
- Provisions for employee benefits not currently deductible
599
600
45
78
- Other accruals
158
98
- Fixed assets
316
311
63
90
1,638
1,689
(32)
(26)
- Deferred income (313)
(321)
(345)
(347)
1,293
1,342
- Lease liability
- Other provisions
Deferred tax liabilities
- Prepayments NET DEFERRED TAX ASSETS / (LIABILITIES)
Annual Report 2011
33
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
2011
2010
$000
$000
1,276,030
1,109,255
171,438
179,258
13.Deposits
Deposits
- Call deposits
- Retirement Savings Accounts
- Term deposits
Total deposits
Member withdrawable shares
TOTAL DEPOSITS & SHARES
635,715
535,554
2,083,183
1,824,067
822
835
2,084,005
1,824,902
Maturity analysis At call
1,538,686
1,353,851
Not longer than 3 months
202,232
163,992
Longer than 3 and not longer than 6 months
269,325
244,718
Longer than 6 and not longer than 12 months
71,170
57,026
2,592
5,315
2,084,005
1,824,902
Longer than 12 months and not longer than 5 years
Customer or Industry Groups
The majority of deposits are from employees and former employees of
companies within the Qantas Group, associated companies, Commonwealth
Government departments and authorities and from related or nominated
persons or entities in accordance with the Constitution of the Credit Union.
Deposits are also accepted from non members and wholesale depositors.
Charge on Members’ accounts
The Credit Union may charge the deposit accounts of a Member in relation
to any debt owed by the member to the Credit Union.
14.
Creditor Accruals and Settlement Accounts
Creditors and accruals
PAYG Tax Retirement Savings Account
Interest payable on deposits
Sundry creditors
TOTAL CREDITOR ACCRUALS AND SETTLEMENT ACCOUNTS
34
2,161
1,455
7
15
9,686
8,635
516
6,249
12,370
16,354
15.
2011
2010
$000
$000
Current income tax liability 1,712
3,973
TOTAL TAXATION LIABILITIES
1,712
3,973
3,973
2,286
(10,121)
(5,980)
RSA tax liability
1,078
961
Liability for income tax in current year
6,770
6,673
-
77
12
(44)
1,712
3,973
1,996
2,000
Taxation Liabilities
Current income tax liability comprises: Balance – previous year
Income tax paid Adjustment re: general interest charge provision
Under/ (over) statement in prior year
16.Provisions
Employee entitlements
Other TOTAL PROVISIONS
212
300
2,208
2,300
Provisions movements Employee entitlements
Balance – previous year
2,000
1,642
Less amounts paid Increases in provision
Closing balance
Total number of full time equivalent employees at year end
(334)
(213)
330
571
1,996
2,000
145
130
Other Balance – previous year
300
Less amounts paid (88)
-
Increases in provision
300
Closing balance
300
212
Annual Report 2011
35
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
2011
2010
$000
$000
246
233
17.Reserves
a.
Capital reserve account
b.
General reserve for credit losses
4,800
4,500
TOTAL RESERVES 5,046
4,733
Capital reserve account
Balance at the beginning of the year
233
211
Transfer from retained earnings on share redemptions
Balance at the end of year
13
22
246
233
This account represents the amount of redeemable preference shares
redeemed by the Credit Union since 1 July 1999. The Law requires that the
redemption of the shares be made out of profits. Since the value of the shares
has been paid to Members in accordance with the terms and conditions of
the share issue, the account represents the amount of profits appropriated
to the account.
General reserve for credit losses
This reserve records amounts previously set aside as a general provision for
doubtful debts and is maintained to comply with the Prudential Standards set
down by APRA.
Balance at the beginning of the year
Add: increase / (decrease) transferred from retained earnings
Balance at end of year
18.
4,200
300
300
4,800
4,500
140,617
125,524
16,370
15,415
(300)
(300)
(13)
(22)
156,674
140,617
Retained Earnings
Retained profits at the beginning of the financial year
Add: operating profit for the year
Less transfer to reserve for credit losses in year Less transfer to capital account on redemption of shares
Retained profits at the end of the financial year
36
4,500
19.
Interest Rate Change Profile of Financial Assets and Liabilities
Financial assets and liabilities have conditions that allow interest rates to be amended either on maturity (term deposits
and term investments) or after adequate notice is given (loans and savings). The table below shows the respective value of
funds where interest rates are capable of being altered within the prescribed time bands, being the earlier of the contractual
repricing date, or maturity date.
Average
Floating
Up to 12
1-5
Non
Total
2011
interest
interest
months
years
interest
rate
bearing
ASSETS
%
$000
$000
$000
$000
$000
Cash
4.75
53,837
-
-
2,603
56,440
Receivables
3,949
67
-
-
4,016
Investment securities:
Bills of exchange
5.34
24,712
-
-
-
24,712
Certificates of deposit
5.34
369,893
15,425
-
-
385,318
Authorised deposit taking institutions
4.88
18,407
-
-
-
18,407
Loans & advances 7.35 1,725,134
21,816
18,373
- 1,765,323
Available for sale assets
1,324
-
-
1,934
3,258
Deferred tax assets
-
-
-
1,293
1,293
Other assets
-
-
-
3,248
3,248
Total Assets
2,197,256
9,078
2,262,015
LIABILITIES
Payables to other Financial Institutions
-
-
-
-
Deposits 4.99 1,537,864
542,727
2,592
-
Redeemable preference shares
-
-
-
822
Provisions -
-
-
2,208
Payables -
-
-
12,370
Current tax liability
-
-
-
1,712
2,083,183
822
2,208
12,370
1,712
Total Liabilities
17,112
2,100,295
Average
Floating
Up to 12
1-5
Non
2010
interest
interest
months
years interest
rate
bearing
ASSETS
%
$000
$000
$000
$000
Cash
4.50
46,188
-
-
2,455
Receivables
2,993
219
-
-
Investment securities:
Bills of exchange
4.12
129,120
-
-
-
Certificates of deposit
4.12
183,076
15,730
-
-
Authorised deposit taking institutions
4.81
18,407
-
-
-
Loans & advances 6.43 1,534,109
34,736
18,580
-
Available for sale assets
1,324
-
-
1,934
Deferred tax assets
-
-
-
1,342
Other assets
-
-
-
2,666
Total
129,120
198,806
18,407
1,587,425
3,258
1,342
2,666
Total Assets
8,397
1,992,879
LIABILITIES
Payables to other Financial Institutions
-
-
-
-
Deposits 3.74 1,353,016
465,736
5,315
-
Redeemable preference shares
-
-
-
835
Provisions
-
-
-
2,300
Payables -
-
-
16,354
Current tax liability
-
-
-
3,973
1,824,067
835
2,300
16,354
3,973
Total Liabilities
1,847,529
1,537,864
1,915,217
1,353,016
37,308
542,727
50,685
465,736
18,373
2,592
18,580
5,315
23,462
$000
48,643
3,212
Annual Report 2011
37
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
20. Fair Value of Financial Assets and Liabilities
Fair value has been determined on the basis of the present value of expected future cash flows under the terms and
conditions of each financial asset and financial liability. Significant assumptions used in determining the cash flows are
that the cash flows will be consistent with the contracted cash flows under the respective contracts. The information is
only relevant to circumstances at balance date and will vary depending on the contractual rates applied to each asset and
liability, relative to market rates and conditions at the time. No assets held are regularly traded by the Credit Union, and there
is no active market to assess the value of the financial assets and liabilities.
Fair
Value
2011
Book
Value
Variance
$000
$000
$000
$000
$000
ASSETS
Cash
56,440
56,440
-
48,643
48,643
Receivables
4,016
4,016
-
3,212
3,212
Investment securities:
Bills of exchange
24,714
24,712
2
129,180
129,120
Certificates of deposit
385,381
385,318
63
199,545
198,806
Authorised Deposit taking Institutions
18,407
18,407
-
18,407
18,407
Loans & advances 1,765,271 1,765,323
(52)
1,587,446 1,587,425
Available for sale assets
3,258
3,258
-
3,258
3,258
Taxation assets
1,293
1,293
-
1,342
1,342
Other assets
3,248
3,248
2,666
2,666
$000
Total Assets
2,262,028
Book Variance
Value
2,262,015
13
Fair Value
2010
1,993,699
1,992,879
60
739
21
820
LIABILITIES
Deposits
2,083,494 2,083,183
311
1,824,002 1,824,067
(65)
Redeemable preference shares
822
822
-
835
835
Provisions
2,208
2,208
-
2,300
2,300
Payables 12,370
12,370
-
16,354
16,354
Taxations liabilities
1,712
1,712
-
3,973
3,973
Total Liabilities
2,100,606
2,100,295
311
1,847,464
1,847,529
(65)
The following methods and assumptions are used to determine the net fair values of financial assets and liabilities:
Cash Assets
The carrying amounts approximate fair value because of their short term to maturity or are receivable on demand.
Receivables
The carrying amount approximates fair value because of their short term to maturity.
Investment Securities
For financial instruments traded in organised financial markets, fair value is the current quoted market bid price for an asset
or offer price for a liability, adjusted for transaction costs necessary to realise the asset or settle the liability. For investments
where there is no quoted market price, a reasonable estimate of the fair value is determined by reference to the current
market value of another instrument which is substantially the same or is calculated based on the expected cash flows or the
underlying net asset base of the investment / security.
38
Loans and Advances
For variable rate loans, (excluding impaired loans) the amount shown in the Statement of Financial Position is considered to
be a reasonable estimate of fair value. The fair value for fixed rate loans is calculated by utilising discounted cash flow models
(i.e. the net present value of the portfolio’s future principal and interest cash flows), based on the maturity of the loans.
The discount rates applied are based on the current applicable rate offered for the average remaining term of the portfolio.
The fair value of impaired loans is calculated by discounting expected cash flows using a rate which includes a premium
for the uncertainty of the flows.
Other Investments
The carrying amount approximates fair value as they are short term in nature.
Deposits
The fair value of non interest bearing, call and variable rate deposits, and fixed rate deposits repricing within six months,
is the amount shown in the Statement of Financial Position as at 30 June 2011. Discounted cash flows (based upon the
deposit type and its related maturity) were used to calculate the fair value of other term deposits.
Payables
The carrying value of payables approximates their fair value as they are short term in nature and reprice frequently.
21.
2011
2010
$000
$000
Financial Commitments
a.
Outstanding loan commitments
Loans approved but not funded
35,35239,849
The loans will be made available at the discretion of Management and
the Board subject to the availability of funds, anticipated to be drawn
down within 12 months.
b.
Outstanding overdraft commitments
Member overdraft facilities approved but not funded There are no restrictions as to the utilisation of such overdraft facilities.
c.
Outstanding line of credit commitments
Member line of credit facilities approved but not funded 40,133
40,016
25,52325,329
These facilities are subject to the availability of funds
d.
Outstanding credit card commitments
Member credit card facilities approved but not funded 33,933
31,276
There are no restrictions as to the utilisation of such credit card facilities.
Annual Report 2011
39
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
21.
2011
2010
$000
$000
Financial Commitments (continued)
e.
Future lease rental commitments
Operating lease payments under existing lease arrangements for building
accommodation, are payable over the following periods:
Within 1 year
1,397
1,382
Later than 1 year but not later than 5 years
4,857
4,661
101
551
Over 5 years
6,3556,594
The Credit Union leases various properties under operating leases expiring
from one to eight years, such leases generally provide the Credit Union
with a right of renewal at which time all terms are renegotiated. Lease
payments comprise a base amount plus an incremental contingent rental subject to movements in the Consumer Price Index. f.
Material Contracts
The Credit Union signed an addendum to a contract with
Data Action Pty. Ltd. who provide computer facilities, management
services and associated support services on 10 May 2010. The
contract addendum extended the original term for a period of 3 years
(from 10 May 2010) with an option to extend for an additional 4 years.
The fees payable over the next 3 years are as follows:
g.
Within 1 year
1,896
1,869
Later than 1 year but not 5 years
4,290
4,227
6,186
6,096
Charge over Assets
The Credit Union has executed an equitable mortgage over its assets in
favour of Indue Limited. The equitable charge is to meet any settlement
obligations arising from member chequing and debit card facilities.
h.
Contingent Liabilities and Contingent Assets
The Directors of the Credit Union are of the opinion that there are no
matters that require a provision other than those that are adequately
provided for. 40
22. Standby Borrowing Facilities
Unrestricted access to the following credit facilities with a bank and an Authorised Deposit-taking Institution are held:
Gross
$000
2011
Current
Borrowing
$000
Net
Available
$000
Unsecured overdraft 1,100
-
1,100
TOTAL STANDBY BORROWING FACILITIES
1,100
-
1,100
Gross
$000
2010
Current
Borrowing
$000
Net
Available
$000
Unsecured overdraft
1,100
-
1,100
TOTAL STANDBY BORROWING FACILITIES
1,100
-
1,100
23. Key Management Personnel
a. Remuneration of key management personnel (KMP)
Key management personnel are those persons having authority and responsibility for planning, directing and
controlling the activities of the Credit Union, directly or indirectly, including any Director (whether executive or
otherwise) of that entity.
Key management personnel (KMP) have been taken to comprise the Directors and the 3 Members (2010: 3 Members)
of the executive management responsible for the day-to-day financial and operational management of the Credit Union.
The aggregate compensation of KMP during the year comprising amounts paid or payable or provided for was as follows:
(a) Short-term employee benefits
(b) Post-employment benefits - superannuation contributions
(c) Other long-term benefits – net increases in long service leave provision
(d) Termination benefits
Total 2011
2010
$
$
1,532,306
1,425,447
110,517
110,587
20,969
55,413
-
-
1,663,792
1,591,447
In the above table, remuneration shown as short term benefits means (where applicable) wages, salaries and social
security contributions, paid annual leave and paid sick leave, profit-sharing and bonuses, value of fringe benefits
received, but excludes out of pocket expense reimbursements.
All remuneration to Directors was approved by the Members at the 2010 Annual General Meeting of the Credit Union.
Annual Report 2011
41
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
b.
2011
2010
$
$
Loans to Key Management Personnel
(i) The aggregate value of loans to key management personnel
as at balance date amounted to
6,748,850
(ii) The total value of revolving credit facilities to key management
personnel, as at balance date amounted to
42,000
Less amounts drawn down and included in (i)
6,941,751
42,000
(5,770)
(4,648)
Net balance available
36,230
(iii) During the year the aggregate value of loans disbursed
to key management personnel amounted to:
37,352
Revolving credit facilities 406,467
234,154
1,809,382
1,948,500
2,215,849
2,182,654
(iv) During the year the aggregate value of repayments received amounted to:
2,899,521
1,457,725
490,771
382,945
Term Loans
(v) Interest and other revenue earned on Loans and revolving credit facilities to KMP
The Credit Union’s policy for lending to Directors and Management is that all loans are approved and deposits
accepted on the same terms and conditions that applied to Members for each class of loan or deposit.
There are no loans that are impaired in relation to the loan balances with Directors or other KMP.
There are no benefits or concessional terms and conditions applicable to the close family members of the key
management persons (KMP). There are no loans which are impaired in relation to the loan balances with close family
relatives of Directors and other KMP.
c.
Other transactions between related parties including deposits from key Management personnel are:
Total value term and savings deposits from KMP Total Interest paid on deposits to KMP
2011
$
2010
$
2,878,297
2,891,950
138,611
208,376
The Credit Union’s policy for receiving deposits from KMP is that all transactions are approved and deposits
accepted on the same terms and conditions that applied to Members for each type of deposit.
d.
Transactions with Other Related Parties
Other transactions between related parties include deposits from Director related entities or close family members
of Directors, and other KMP.
The Credit Union’s policy for receiving deposits from related parties is that all transactions are approved and deposits
accepted on the same terms and conditions that applied to Members for each type of deposit.
There are no benefits paid or payable to the close family members of the key management personnel.
42
24.Membership
a.Eligibility
Membership is available to employees and former employees of companies within the Qantas Group, associated
companies and industries, Commonwealth Government departments and authorities and nominated or related
persons or entities in accordance with the Constitution of the Credit Union.
ll Members are required to hold five redeemable preference shares of $2 each in accordance with member
A
eligibility. From 1 April 2010, the Credit Union ceased calling up the share capital and for all new Members who
joined the Credit Union since this date, the share capital remains uncalled. 2011
Number
2010
Number
b.
Total Membership
87,86284,528
of which fully paid
82,170
of which uncalled 5,692
83,498
1,030
25. Superannuation Liabilities
The Credit Union contributes to the Qantas Superannuation Plan (“the Plan”) with other entities in the Qantas Group. For
all employees the Credit Union contributes the minimum required under the Superannuation Guarantee Act (1992) plus, for
permanent employees other employer contributions to the Plan. Employees also contribute between 4% and 10% of their
salary to the Plan, depending on their age or by election. All employees are entitled to benefits on resignation, retirement,
disability or death. The Credit Union has no interest in the Plan (other than as a contributor) and is not liable for the
performance of the Plan, or the obligations of the Plan. The Credit Union contributed $957,201 to the Plan during the
2011 financial year, ($878,644 in 2010). No contributions were outstanding as at 30 June 2011.
Annual Report 2011
43
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
2011
2010
$000
$000
26. Notes To Statement Of Cash Flows
a.
Reconciliation of Cash
For the purpose of the Statement of Cash Flow, cash includes:
b.
Cash on hand
2,603
2,455
Deposits at call
42,883
36,308
Other authorised deposit taking Institutions
10,954
9,880
Total Cash
56,440
48,643
Reconciliation of cash from operations to accounting profit
The net cash increase/(decrease) from operating activities is reconciled to the profit after tax
Profit after income tax
16,370
15,415
Add / (Deduct):
Bad debts written off
823
1,303
1,276
1,927
(Gain) / loss on sale of assets
-
(9)
Increase / (decrease) in provision for impairment
7
200
(3)
358
(88)
300
Increase / (decrease) in provision for income tax
(2,261)
1,687
(Increase) / decrease in net deferred tax assets
48
(324)
1,051
3,555
698
(855)
(259)
(64)
7
108
(838)
(543)
(178,728)
(196,871)
Increase in deposits and shares 253,391
174,540
(Increase) / decrease in receivables from other financial institutions (82,103)
4,257
9,391
4,984
Depreciation & amortisation expense Increase / (decrease) in provisions for employee entitlements
Increase / (decrease) in other provisions
Increase / (decrease) in interest payable
Increase / (decrease) in creditors and other liabilities
(Increase) / decrease in prepayments
(Increase) / decrease in sundry debtors
(Increase) / decrease in interest receivable
(Increase) in Member loans Net Cash From Operating Activities
44
27. Financial Risk Management
(a)
Introduction and overview
The Credit Union has exposure to the following risks from its use of financial instruments:
•
credit risk
•
liquidity risk
•
market risk
•
operational risk
This Note presents information about the Credit Union’s exposure to each of the above risks, the objectives, policies
and processes for measuring and managing those risks, and the Credit Union’s management of capital.
Risk management framework
The Board of Directors has overall responsibility for the establishment and oversight of the Credit Union’s risk
management framework. The Board has established both a Risk Committee and Audit & Compliance Committee
to oversee the financial reporting, audit and risk management processes.
The Risk Committee is comprised of not less than three non executive Directors.
The Risk Committee’s major activities are to:
• Assist the Board to update and regularly review QSCU’s risk profile, including QSCU’s risk appetite;
• Assist the Board to review QSCU’s policy on risk and review QSCU’s system of risk management and internal
control, having regard to QSCU’s material business risks. These risks may include but are not limited to:
-
Credit risk;
-
Liquidity risk;
-
Market risk (funding risk and interest rate risk);
-
Financial reporting risk (the risk of material error in the financial statements);
-
Operational risk (risks attributable to the daily operations of QSCU, such as data, legal, fraud, property and asset)
-
Other risks which if not properly managed will affect QSCU (such as environmental, sustainability,
compliance, strategic, external, ethical conduct, reputation or brand, technological, product or service quality
and human capital).
• Oversee, monitor and review QSCU’s system of risk management, policies and procedures;
• Report to the Board on all material matters arising from its review and monitoring functions by the provision
to the Board of the Committee’s minutes of meetings or by special report, as appropriate;
• Review and make recommendations on any changes to risk limit structures; and
• Oversee and monitor Management’s annual risk assessment.
The Audit & Compliance Committee is comprised of not less than three non executive Directors, the majority of who
must be independent. The Chairman of the Board cannot be Chairman of the Audit & Compliance Committee.
The Audit & Compliance Committee’s major activities are to:
• recommend to the Board the appointment of both the internal and external auditor
• monitor reports received from internal audit, external audit and the compliance department, and management’s
responses thereto;
• liaise with the auditors (internal and external) on the scope of their work, and experience in conducting an
effective audit;
• ensure that external auditors remain independent in the areas of work conducted;
Annual Report 2011
45
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
27. Financial Risk Management (continued)
• oversight compliance with statutory responsibilities relating to financial disclosure and management information
reporting to the Board;
• review and approve the compliance approach, ensuring that it covers all material risks and financial reporting
requirements of QSCU;
• assist the Board in the engagement, performance assessment and remuneration of the auditors;
• evaluate the adequacy and effectiveness of QSCU’s administrative, operating and accounting policies;
• monitor and review the propriety of any related party transactions;
• overseeing APRA statutory reporting requirements, as well as other financial reporting requirements; and
• establish and maintain policies and procedures for whistleblowing
(b)
Credit risk
Credit risk is the risk of financial loss to the Credit Union if a Member or counterparty to a financial instrument fails
to meet its contractual obligations, and arises principally from the Credit Union’s loans and advances to Members,
liquid investments and investment securities.
Management of credit risk – loans and advances
The Board of Directors has delegated responsibility for the management of credit risk to the Lending & Credit Control
departments in respect of loans and advances. The Credit Union has established functional areas responsible for the
oversight of the Credit Union’s credit risk, including:
• Formulating credit policies covering credit assessment, collateral requirements, reporting, documentary and legal
procedures, and compliance with regulatory and statutory requirements;
• Establishing the authorization structure for the approval and renewal of credit facilities. Authorisation limits are
delegated by the Board of Directors and are detailed within policy;
• The CEO, or in his absence the CFO, must approve all loans outside of approved policy;
• Total loan facilities to any one member or family group must not exceed $1,000,000 without the prior approval
of the Board lending panel. Loans approved by the Board lending panel must be confirmed at the next
Board meeting;
• Limit concentrations of exposure to counterparties. Total borrowings for any Member must not exceed 5% of
QSCU’s consolidated capital base;
• Reviewing and assessing credit risk. The Credit Control department assesses all credit exposures where they are
in breach of contractual obligations;
• Establishing appropriate provisions to recognise the impairment of loans and facilities;
• Debt recovery procedures; and
• Review of compliance with the above policies.
Management of credit risk – liquid investments
The risk of losses from liquid investments is reduced by the nature and quality of the independent rating of the
counterparty, and the limits of concentration of investments to any individual counterparty. The Credit Union will only
hold investments with Authorised Deposit-taking Institutions (ADIs) trading in Australia and Australian Federal and
State Governments. Any exposures to any individual ADI (or group) will not exceed 50% of the Credit Union’s capital
base. There is no set limit for government counterparties.
46
In addition to limiting counterparty exposures, the Credit Union will only hold High Quality Liquid Investments (HQLA)
within the range detailed below:
Short Term Credit Rating
Standard & Poors A1 or Equivalent*
Min HQLA %
Max HQLA %
50
100
Standard & Poors A2 or Equivalent*
0 Unrated (Indue Limited only)**
0
50
Refer below
Indue Limited exposures are allowable as part of HQLA. Minimum holding requirements are prescribed by Indue
Limited on an as required basis, which is typically revised quarterly, (refer Note 9).
Management of credit risk – equity investments
In respect of equity investments, the Board must approve any equity holding, and will have regard to the size and risks
associated with any proposed investment to ensure it will not have a detrimental effect on QSCU’s capital position.
The Board has approved the holding of membership and participation equity in Indue Limited and future equity
subscriptions. The equity may be in the form of shares and/or subordinated debt. The level of equity is based on
the assets of QSCU and is reviewed twice yearly. The Constitution of Indue Limited also provides for deferral of
equity subscriptions if, in Indue Limited’s assessment, it holds sufficient capital. QSCU is required at all times to hold
sufficient equity in Indue Limited to support the services sourced from them, which may be raised from time to time.
Indue Limited is an ADI supervised by APRA. The Credit Union will obtain APRA’s approval before committing to any
exposure to an unrelated entity in excess of prescribed limits.
Exposure to credit risk – loans and advances to Members
2011
2010
$000
$000
1,765,323
1,587,425
Carrying amount
Collectively impaired - mortgage loans
90 days & less than 182 days
182 days & less than 273 days
Carrying amount
325
-
-
-
325
-
Collectively impaired – personal loans
30 days & less than 60 days
483
484
60 days & less than 90 days
258
261
90 days & less than 182 days
270
253
182 days & less than 273 days
95
61
273 days & less than 365 days
52
100
1
-
1,159
1,159
Greater than 365 days
Carrying amount
Annual Report 2011
47
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
27. Financial Risk Management (continued)
Exposure to credit risk – loans and advances to Members (cont’d)
2011
2010
$000
$000
Overdrawn / Overlimit
14 days & less than 90 days
134
348
90 days & less than 182 days
87
77
182 days & over
93
58
Carrying amount
314
483
1,798
1,642
(1,524)
(1,517)
274
125
-
(188)
Gross amount – Collectively Impaired
Collective Provision
Carrying amount
Specific Provision Past due but not impaired
30 days & less than 60 days
2,693
1,074
60 days & less than 90 days
927
-
1,438
-
377
-
5,435
1,074
Neither past due nor impaired
1,759,614
1,586,415
Total loans & advances to Members
1,765,323
1,587,425
90 days & less than 182 days
182 days & less than 365 days
Carrying amount
Impaired loans
Loans for which the Credit Union determines that it is probable that it will be unable to collect all principal and
interest due according to the contractual terms of the loan.
Past due but not impaired loans
Loans where contractual interest or principal payments are past due, but the Credit Union believes that impairment
is not appropriate on the basis of the level of security / collateral available and / or the stage of collection of amounts
owed to the Credit Union.
48
Loans with renegotiated terms
Loans that have been restructured due to deterioration in the borrower’s financial position and where the Credit
Union has made concessions that it would not otherwise consider. Once the loan is restructured it remains in this
category independent of satisfactory performance after restructuring. Currently, QSCU has no renegotiated loans.
Allowances for impairment
The Credit Union establishes an allowance for impairment losses that represents its estimate of incurred losses in
its loan portfolio. The main component of this allowance is the collective loan loss allowance established for the
Credit Union in respect of loan losses that have been incurred but have not been identified, subject to individual
assessment for impairment.
Write-off policy
Bad debts are written off as determined by management and the Board of Directors when it is reasonable to expect
that the recovery of the debt is unlikely. Bad debts are written off as expenses in the Statement of Comprehensive
Income or against the provision for impairment.
Where the Credit Union holds collateral against loans and advances to Members, it is in the form of mortgage
interests over property, other registered securities over assets, and guarantees. Estimates of fair value are based
on the value of collateral assessed at the time of borrowing, and generally are not updated except when a loan is
individually assessed as impaired.
An estimate of the fair value of collateral and other security enhancements held against past due and impaired
financial assets are shown below:
Loans and advances to Members
2011
2010
$000
$000
Past due but not impaired
5,435
1,074
Collateral – Property 7,660
2,420
Collectively impaired - mortgage loans
325
-
Collateral – Property
360
-
It is the Credit Union’s policy to dispose of repossessed properties in an orderly fashion. The proceeds are used to
reduce or repay the outstanding claim. The Credit Union does not use or take repossessed properties for business
use. During the year ended 30 June 2011, the Credit Union took possession of nil collateral (30 June 2010: nil)
The Credit Union monitors concentration of credit risk by purpose. An analysis of concentrations of credit risk at the
reporting date is shown below:
2011
2010
$000
$000
1,649,193
1,465,526
117,654
123,604
1,766,847
1,589,130
Residential loans
Personal loans
Total gross loans
Annual Report 2011
49
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
27. Financial Risk Management (continued)
The Credit Union also monitors the investment options in the market based on the credit rating of the counter party.
An analysis of concentrations of investment credit risk at the reporting date is shown below:
2011
2010
$000
$000
Short Term Rating
A1
252,082
251,492
A2
187,948
103,434
29,361
28,287
469,391
383,213
Unrated (Indue Limited)
Total
(c)
Liquidity risk
Liquidity risk is the risk that the Credit Union will encounter difficulty in meeting Member withdrawal requests in
a timely manner.
Management of liquidity risk
The Credit Union’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient
funds available to meet its liabilities under both normal and stressed conditions, without incurring unacceptable losses.
The Credit Union maintains a portfolio of short term liquid assets to ensure that sufficient liquidity is maintained for
daily operational requirements.
The Credit Union has documented its strategy to manage liquidity risk in a liquidity policy and liquidity management
plan which includes the following activities by Management:
• On a daily basis, an assessment is made of the daily cash position and the investment action to be undertaken.
• On a daily basis, a summary of the Credit Union’s liquidity position, including movements in major liquid assets
and liabilities is reviewed.
• On a monthly basis, the liquidity position is reported to the Board, including an explanation of significant
movements and corrective action taken, where applicable.
• Periodically liquidity forecasts and associated “stress-tested” worst-case scenarios are modeled and reported
to the Risk Committee.
• Regularly reporting current and emerging liquidity management trends to the Risk Committee and highlighting
risk areas and relevant market conditions/expectations.
Management provides an annual budget to the Board, which includes details of the Credit Union’s forecast liquidity
position. Monthly Board reporting includes tracking against the budgeted forecast position.
APRA Prudential Standards require at least 9% of total adjusted liabilities be held as liquid assets capable of being
converted to cash within 48 hours. As at the 30th June 2011, the Credit Union’s policy was to apply a minimum target
of 12% of funds as liquid assets to maintain adequate funds for meeting daily cash flow needs. A trigger level of 13%
was set for a detailed review of liquidity levels by the Credit Union to provide sufficient time for remedial action to be
taken. In July 2011 this policy was updated by the Credit Union to apply a minimum target of 16% and a trigger level
for detailed review at 17%. The Credit Union’s actual ratio of liquid assets to adjusted liabilities was at least 20.97%
during the twelve months ended 30 June 2011.
The liquidity policy and management plan are reviewed at least annually by the Risk Committee, with the policy then
approved by the Board.
50
The liquidity ratio is calculated based on the formula prescribed by APRA in APS 210 as can be seen below:
2011
2010
$000
$000
483,876
387,976
High quality liquid assets Liability base
- Total liabilities
- Add: Capital per Statement of Financial Position
- Less: Capital per APRA standard
- Add: Loans approved not advanced
Total Liabilities Base 2,100,295
1,847,529
156,674
140,917
(157,899)
(141,398)
35,352
39,849
2,134,422
1,886,897
22.67%
20.56%
Liquidity Ratio Annual Report 2011
51
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
27. Financial Risk Management (continued)
Exposure to liquidity risk
Details of the reported Credit Union liquidity ratio at the reporting date and during the reporting period were as follows:
2011
2010
At 30 June
22.67%
20.56%
Average for the period
23.32%
19.78%
Maximum for the period
24.86%
22.17%
Minimum for the period
20.97%
16.10%
The residual contractual maturities of the financial liabilities are outlined in the table below:
30 June 2011
On statement of
Note
Carrying financial position amount
Gross
nominal
(outflows)
Less than 1-3 months
1 month
Deposits
13
2,084,005
2,107,108
1,541,280
208,822
353,985
3,021
Creditors and accruals
14*
2,677
2,677
2,677
-
-
-
2,086,682
2,109,785
1,543,957
208,822
353,985
3,021
Off statement of
financial position
Loans approved not advanced
21
35,352
35,352
35,352
-
-
-
Subtotal
Total
208,822
3 months 1-5 years
to 1 year
2,122,034
2,145,137
1,579,309
353,985
3,021
On statement of
Note
Carrying financial position amount
Gross
nominal
(outflows)
Less than 1-3 months
1 month
Deposits
13
1,824,902
1,848,641
1,359,112
168,950
314,293
6,286
Creditors and accruals
14*
7,704
7,704
7,704
-
-
-
1,832,606
1,856,345
1,366,816
168,950
314,293
6,286
Off statement of
financial position
Loans Approved not advanced
21
39,849
39,849
39,849
-
-
-
30 June 2010
Subtotal
Total
* excluding interest payable and PAYG tax
52
1,872,455
1,896,194
1,406,665
168,950
3 months 1-5 years
to 1 year
314,293
6,286
(d)
Market risk
Market risk is the risk that changes in market prices, such as interest rates, equity prices or foreign exchange rates
will affect the Credit Union’s income or the value of its holdings of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable parameters, while optimizing the
return on risk.
Management of market risks
The Credit Union is exposed to interest rate risk arising from changes in market interest rates. However, the Credit
Union is not exposed to currency risk and other price risk as the Board prohibits trading in financial instruments.
Overall authority for market risk is vested in the Board. The Risk Committee is responsible for the development of
detailed risk management policies (subject to review and approval by the Board) and review of their implementation.
Exposure to market risks
The principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations in the future cash
flows or fair values of financial instruments because of a change in market interest rates. The main tool used to
measure and control market risk exposure within the Credit Union’s non-trading portfolio is Value at Risk (VaR). The
VaR of the non-trading portfolio is the estimated loss that will arise on the portfolio over a specified period of time
(holding period) from an adverse market movement with a specified probability (confidence level). The VaR model
used by the Credit Union is based upon a 99% confidence level and assumes a 20-day holding period. The VaR
model used is based mainly on historical simulation, taking account of market data from the previous two years, and
observed relationships between different markets and prices. The model generates a wide range of plausible future
scenarios for market price movements.
Although VaR is an important tool for measuring market risk, the assumptions on which the model is based do give
rise to some limitations, including the following:
• A 20-day holding period assumes that it is possible to hedge or dispose of positions within that period. This is
considered to be a realistic assumption in almost all cases but may not be the case in situations in which there
is severe market illiquidity for a prolonged period.
• A 99 percent confidence level does not reflect losses that may occur beyond this level. Even within the model
used, there is a one percent probability that losses could exceed the VaR.
• A 250-day observation period. The use of historical data as a basis for determining the possible range of future
outcomes may not always cover all possible scenarios, especially those of an exceptional nature.
• The VaR measure is dependent upon the Credit Union’s position and volatility of market prices. The VaR of an
unchanged position reduces if the market price volatility declines and vice versa.
Annual Report 2011
53
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
The Credit Union uses VaR limits for interest rate risk. The interest rate risk policy which details the overall structure
of VaR limits is subject to review and approval by Risk Committee and the Board. The VaR limit has been set at a
maximum of 3% of Capital. VaR is measured monthly and reported to the Board at each meeting. A detailed VaR
report is provided to the Risk Committee on a monthly basis.
A summary of the VaR position of the Credit Union’s non-trading portfolio at 30 June is as follows:
2011
(% of Capital)
2010
(% of Capital)
0.47%
0.75%
At 30 June
A summary of the Credit Union’s interest rate gap position can be seen in note 19.
The management of interest rate risk also involves the monitoring of the sensitivity of the Credit Union’s financial
assets and liabilities to a parallel shift across the yield curve. An analysis of the Credit Union’s sensitivity to a 200
basis points increase in market interest rates is as follows:
2011
(% of Capital)
2010
(% of Capital)
2.32%
2.30%
At 30 June
(e)
Operational risk
Operational risk is a risk of direct or indirect loss arising from a wide variety of causes associated with the Credit Union’s
processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity
risks (such as those arising from legal and regulatory requirements and generally accepted standards of corporate
behaviour). Operational risks arise from all of the Credit Union’s operations and are faced by all business entities.
The Credit Union’s objective is to manage operational risk so as to balance the avoidance of financial loss and damage
to the Credit Union’s reputation, against excessive cost and control procedures that restrict initiative and creativity.
The primary responsibility for the development and implementation of controls to address operational risk is assigned
to senior Management within each business unit. This responsibility is supported by the development of the Credit
Union’s overall standards for management of operational risk in the following areas:
• Compliance with regulatory and other legal requirements
• Third party supplier relationships
• Business continuity and contingency planning
• People & key person risk including training and professional development
• Outsourcing risk associated with materially outsourced services
• Competition risk
• Fraud risk
• Requirements for appropriate segregation of duties, including the independent authorisation of transactions
• Requirements for the reconciliation and monitoring of transactions
• Documentation of controls and procedures
• Requirements for the periodic assessment of operational risks faced, and the adequacy of controls and
procedures to address the risks identified
• Requirements for the reporting of operational losses and proposed remedial action
54
• Ethical and business standards
• Risk mitigation, including insurance where this is effective
Compliance with the Credit Union’s standards is supported by a program of periodic reviews undertaken by Internal
Audit and Compliance. The results of these reviews are discussed with the management of the business unit to
which they relate and are reported to the Audit & Compliance Committee.
(f)
Capital management
The Credit Union is licensed as an ADI under the Banking Act 1959 and is subject to prudential supervision by
APRA. APRA has issued a series of prudential standards to implement the Basel II capital framework which took
effect from 1 January 2008.
The Credit Union has documented its strategy to manage capital in a capital policy and capital management plan.
The Standards include APS 110 Capital Adequacy which:
(a) Imposes on the Board a duty to ensure that the Credit Union maintains an appropriate level and quality of capital
commensurate with the level and extent of the risks to which the Credit Union is exposed from its activities; and
(b) Obliges the Credit Union to have in place an Internal Capital Adequacy Assessment Process (ICAAP).
Three Pillars – There are three pillars to the Basel II capital framework.
Pillar 1 – involves specific capital charges for credit risk, operational risk, and the risk of financial market
trading activities.
Pillar 2 – involves the Credit Union making an assessment of any additional capital necessary to cover other risks
not included in Pillar 1.
Pillar 3 – involves increased reporting by the Credit Union to APRA.
The Board has determined that, for the Credit Union, the prudent level of capital is the sum of the following:
•
the specific capital charge for Pillar 1 risks
•
the additional capital required to cover Pillar 2 risks, where applicable
•
a buffer to cover other capital factors, where applicable
The Credit Union’s regulatory capital is analysed into two tiers:
•
Tier 1 capital, which includes general reserves and current year earnings.
• Tier 2 capital, which includes upper tier 2 capital of general reserve for credit losses and asset revaluation
reserves, and lower tier 2 capital of subordinated debt.
Various limits are applied to elements of the capital base. Deductions from capital include deferred tax assets,
intangible assets and equity investments in other ADIs. APRA may require an ADI to hold more than 50% of
its required prudential capital in the form of Tier 1 capital and there are restrictions on the amount of collective
impairment allowances that may be included as part of Tier 2 capital.
The Credit Union is required to maintain at least 11% capital. The Credit Union’s policy is to apply a minimum target of
12% capital. A trigger level of 13% has been set by the Board to provide sufficient time for remedial action to be taken.
Annual Report 2011
55
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
The Credit Union’s regulatory capital position at 30 June was as follows:
2011
2010
$000
$000
Tier 1 Capital
General reserves
140,550
125,224
16,370
15,415
Less: Deferred tax assets
(967)
(971)
Less: Intangible assets
(357)
(375)
(1,629)
(1,629)
153,967
137,664
Current year earnings Less: Equity investment in other ADI’s
Total
Tier 2 Capital
Collective impairment reserve
Less: Equity investment in other ADI’s
Total
5,561
5,363
(1,629)
(1,629)
3,9323,734
Total regulatory capital
157,899
141,398
Risk weighted assets
Credit risk
837,605
790,985
Operational risk
125,261
104,864
Total risk weighted assets
962,866895,849
Capital ratios
56
16.40%
15.78%
28. Subsequent Events
The MEAA Funding No. 1 Trust (Trust) was established on the 11th July 2011 to provide the Credit Union access to emergency
liquidity support in the event of a systemic liquidity crisis.
Two classes of notes were issued by the Trust. Both are fully owned by the Credit Union and accordingly there was neither impact on
the balance sheet nor material impact on the profit and loss. The Class A Notes ($110.2 million) are AAA rated by Moody’s and are
eligible securities for repurchase agreements with the Reserve Bank of Australia (RBA). The Class B Notes ($12.3 million) are not rated
and are not eligible securities for repurchase agreements with the RBA. Principal losses should they arise are allocated to the Class B
Notes prior to the Class A Notes and as such the Class B Notes are necessary to ensure a AAA rating on the Class A notes.
Annual Report 2011
57
Qantas Staff Credit Union Limited
A.B.N. 53 087 650 557
Incorporated in Australia
30 June 2011 – Annual Financial Statements
Registered Office: 420 Forest Road Hurstville NSW 2220