5.1     Analysis of budgeted financial statements

An analysis of the primary causes of movements in the budgeted Indigenous Business Australia departmental financial statements is provided below. The 2005-06 estimated actual results are used as the comparative year in the analysis.

Budgeted agency income statement

Indigenous Business Australia is budgeting for an Operating Result of $43.6m in 2006-07, which is similar to that of the estimated actual for 2005-06 of $44.8m. There are however significant changes in revenue and expenses across the two financial years explained as follows:

• An increase in total revenue of $17.2m, primarily due to the effect of extra government appropriation for Indigenous Business Australia’s  three measures in 2006-07, totalling $5.8m in appropriation revenue, and other increases interest earned from loans $7.1m and profit on sale of investments $3.5m.
• Expenses also will increase $18.4m, with employee expenses up by $4.5m, and suppliers by $6.4m.
• This increase is mainly due to the increase in activity driven by Indigenous Business Australia’s three new budget measures in 2006-07, and that 2006-07 will be the first year of full impact on corporate and administration costs of absorption in 2004-05 of two ex-ATSIC programmes, being the Home Ownership and Business Development and Assistance programmes.

Budgeted agency balance sheet

The budgeted net assets for 2006-07 of $758.8m, represents an increase of $100.7m over estimated actual 2005-06 primarily driven by:

• Capital injections from government of $57.1m including a total of $43.4m relating to the three new measures; and
• Accumulated surpluses increase by $43.6m due to the predicted 2006-07 operating surplus.

A noticeable trend is the steady increase in financial assets receivables and investments which continue to grow as Indigenous Business Australia continues its lending and equity investing activities to deliver on its stated purpose of enabling Indigenous Australians into business activity and home ownership. 

 Statement of Cash Flows

The above movements are also largely reflected in the budgeted 2006-07 Statement of Cash Flows, however a noticeable trend is the re-investment of dividends into equity investments (purchase of equity instruments) and continuation of a high level of lending (advances made), which does spike in 2006-07 due to the effect of higher government capital injections.

5.2     Budgeted financial statements tables

Table 5.7: Schedule of budgeted income and expenses administered on behalf of government (as at 30 June)

Indigenous Business Australia has no income and expenses administered
on behalf of government.

Table 5.8: Schedule of budgeted assets and liabilities administered on behalf of government (as at 30 June)

Indigenous Business Australia has no assets and liabilities administered on behalf
of government.

Table 5.9: Schedule of budgeted administered cash flows (for the period ended 30 June)

Indigenous Business Australia has no administered cash flows.

Table 5.10: Schedule of administered capital budget

Indigenous Business Australia has no administered capital budget.

Table 5.11: Schedule of administered property, plant, equipment and intangibles – summary of movement

Indigenous Business Australia has no administered non-financial assets.

5.3 Notes to the financial statements

The budgeted financial statements have been prepared in accordance with the requirements of the Finance Minister’s Orders issued by the Minister for Finance and Administration. The statements are prepared on an accrual accounting basis.

The statements have been prepared:

• on an accrual accounting basis;
• in compliance with Australian Accounting Standards and Australian Equivalents to International Financial Reporting Standards (AEIFRS) and other authoritative pronouncements of the Australian Accounting Standards Boards and the Consensus Views of the Urgent Issues Group; and
• having regard to Statements of Accounting Concepts.

Revenue from government

Represents appropriation from government to Indigenous Business Australia for the delivery of IBA‘s four outputs in pursuit of its single Outcome. Increases in the ordinary annual appropriations are a result of new measures and variations explained in Section 2.

Expenses – employees

This item represents payments made and net increase/decrease in entitlements owed to employees for their services provided in the relevant financial year.

Expenses – suppliers

This item represents payments to suppliers for goods and services.

Expenses – grants

This item represents payments made to clients and third parties in the delivery
of IBA‘s outputs.

Expenses – depreciation and amortisation

Property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives using, in all cases, the straight-line method of depreciation. Leasehold improvements are amortised on a straight-line basis over the lesser of the estimated useful life of the improvements or the unexpired period of the lease. Properties held for investment purposes are not subject to a depreciation charge.

Depreciation/amortisation rates (useful lives) and methods are reviewed at each balance date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate.  Residual values are re-estimated for a change in prices only when assets are revalued. Depreciation and amortisation rates applying to each class of depreciable assets are based on the following: Office Equipment 33 per cent, Furniture and Fittings 20 per cent, and Leasehold Improvements 20 per cent.

Financial Assets – receivables

Includes loans and advances made by Indigenous Business Australia to clients in the delivery of its outputs, in addition to amounts owing to Indigenous Business Australia for delivery of goods and services, and dividends owed to Indigenous Business Australia from subsidiaries, associates and investments.

Assets – non-financial

Apart from any re-valued assets, reported value of plant and equipment represents the purchase price paid less depreciation incurred. The reported land and buildings are carried at valuation and are held for investment purposes hence not depreciated.

Liabilities – provisions – employees

Liabilities for services rendered by employees are recognised at the reporting date to the extent that they have not been settled. Liabilities for wages and salaries (including non-monetary benefits), annual and long service leave.

Other employee benefits expected to be settled within 12 months of their reporting date are also measured at their nominal amounts. The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability. All other employee benefit liabilities are measured as the present value of the estimated future cash outflows to be made in respect of services provided by employees up to the reporting date.

Employee entitlements provided for include annual leave and long service leave. No provision has been made for sick leave.

Liabilities – payables – suppliers

This liability represents payments owing to suppliers or goods and services as at balance date.