annual financial report...applied for the entire financial year ended 30 june 2017. the constitution...

Annual Financial Report

for the year ended 30th June 2017

The Broken Hill Community Credit Union LtdABN: 12 087 650 762

AGENDA

1 Welcome to members and guests

2 Apologies

3 Confirmation of minutes of the forty-third Annual General Meeting

4 Capacity for the Chairperson to vary the agenda

5 Election of Directors - 2 vacancies

6 Directors' Report

7 Statement of Profit or Loss and Other Comprehensive Income, Statement of Financial Position

& Auditor's Report

8 Directors' Remuneration

10 Close and refreshments

By Order of the Board

The Broken Hill Community Credit Union Ltd

Secretary: Mr Andrew J. Pellizzer

Date: 26th September 2017

General Business of which due notice has been received in accordance with the Constitution of the

Credit Union

NOTICE OF THE FORTY-FORTH ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the ANNUAL GENERAL MEETING of The Broken Hill Community Credit Union

Ltd will be held at the Registered Office 2 Chloride Street, Broken Hill NSW 2880, on

Thursday 23rd November 2017

a) Mrs Judith Hoare retires by rotation in accordance with the provisions of the Constitution and,

being eligible, offers herself for re-election.

b) Mr Gary Crase retires by rotation in accordance with the provisions of the Constitution and, being

eligible, offers himself for election.

1


Registered office: 2 Chloride Street

I/We …………………………………………………………………………………..

of …………………………………………………………………………………..

being a member/members of The Broken Hill Community Credit Union Ltd hereby appoint

………………………………………………………………………………..

of …………………………………………………………………………………..

or in his/her absence …………………………………………………………………….

of ………………………………………………………………………………….

signed this day of

Signature of Shareholder/s:

Agenda Item No: FOR AGAINST ABSTAIN

Confirmation of Minutes

Capacity for Chairperson to vary the agenda

Election & appointment of Directors

a) Judith Hoare

b) Gary Crase

Directors' Report

Directors' Remuneration

Statement of Profit or Loss and Other

Comprehensive Income, Statement of Financial

Position & Auditor's Report

A member entitle to attend and vote is entitled to appoint a proxy to attend and vote in their stead. That person

need not be a member of the Credit Union but should be a natural person over the age of 18 years. Forms

must be lodged at the registered office of the Credit Union not less than 48 hours before the timing of the

meeting.

An Appointment of Proxy Form is contained within this notice. It includes instructions on how to vote using a

proxy. Please read these instructions carefully.

APPOINTMENT OF PROXY FORM

or in his/her absence, the Chairperson of the Meeting as my/our general/special proxy to vote on my/our behalf

at the Annual General Meeting of the Credit Union to be held on Thursday 23rd November 2017

2


Board of Directors

The Board has adopted the following key responsibilities:

□ Act in the best interests of the Credit Union as a whole

□

□ Compliance with APRA Prudential Standards

□ Enhance member value

In order to meet these responsibilities, the key functions of the Board include:

□ Establishing and making delegations to Board Committees

□

□

□ Reviewing, determining and monitoring the strategic direction and objectives

□

□

□

□

□ Ensuring the Credit Union acts legally and responsibly on all matters

□ Ensuring that appropriate ethical standards are maintained

□

□ Reporting to the members on the Board's stewardship as required

Board Composition

Board Independence

All Directors have been assessed as independent.

CORPORATE GOVERNANCE STATEMENT

Unless disclosed below, all the best practice recommendations of the ASX Corporate Governance Council have been

applied for the entire financial year ended 30 June 2017.

The Constitution of the Credit Union stipulates that the Board may have up to 7 Directors, or such lower number as

determined by the Board. The Board may also appoint up to 3 Directors in addition to elected Directors. There is no

maximum period of service for Directors, however elected Directors serve a three year term and retire in rotation but

may stand for re-election.

The skills, experience and expertise relevant to the position of each Director who is in office at the date of the annual

report and their term of office are detailed in the Directors' Report.

When determining whether a non-executive Director is independent the Board is of the view that it would ordinarily

expect a relationship to be considered material when it accounts for more than 5% of the total services provided by the

member or supplier or more than 10% of the total supplies of the Credit Union.

Independent Directors have the right to seek independent professional advice in the furtherance of their duties as

Directors at the Credit Union's expense. Written approval must be obtained from the Chairperson prior to incurring

any expense on behalf of the Credit Union.

Observe their duties as Directors in terms of the Corporations Act, the Credit Union's Constitution

and other relevant legislation

Appointing, delegating to, supporting, evaluating and rewarding the General Manager and having in

place a succession plan

Reviewing, approving and monitoring policy, within a policy and compliance framework

Ensuring a process is in place for the maintenance of the integrity of internal controls, and financial

and management information systems

Reviewing, determining and monitoring the skills and performance of the Board as a whole,

Directors as individuals and Board Committees.

Seek to achieve a diverse and effective Board, with appropriate skills, operating standards and

procedures for the Board and its Committees

Reviewing, approving and monitoring the strategic plan including financial and non-financial

performance measures

Ensuring that the principal business risks have been identified and the implementation and

monitoring by management of a framework to manage those risks

3


Performance Evaluation

Audit Committee

The Committee's role includes:

□

□ Reviewing and considering any changes to accounting policies

□

□

□

□

□

□ Monitor the Credit Union's compliance with legal obligations to which it is subject

□

Risk Committee


□

□

□ Monitor the Credit Union's compliance with legal obligations to which it is subject

□


Performance evaluations of the Board and all Board members are conducted annually. A questionnaire for all Board

members is completed to provide feedback on how they thought the Board had performed. The Chairperson may also

speak to each Director individually regarding their role as Director, if necessary. The results from the quesionnaire are

collated and developed into a series of recommendations to improve performance. These recommendations are

presented to the Board at which time an action plan is developed to implement the recommendations and set the

performance criteria and goals for the next year.

Facilitate communication between the internal auditor, the external auditors and the Board

Receiving and considering reports from management so as to determine the effectiveness of the

Credit Union's risk management systems

If necessary, requiring the internal auditor or senior management undertake any audit or

compliance project and report on such

Reviewing legal and regulatory matters that may have a material impact on the Credit Union's

compliance policies and programs and reports received from APRA

Assist the Board and management in monitoring risk management, controls and corporate

governance performance

Considering and reviewing with the external auditors, the internal auditor and management the

adequacy of internal controls and any related significant findings and recommendations

Consider and review with management and the internal auditor significant findings during the year,

any difficulties encountered in the course of the internal audits, including any restrictions on the

scope of their work, any changes required in the planned scope of the internal audit plan, and the

internal budgets and staffing

Reviewing legal and regulatory matters that may have a material impact on the Credit Union's

compliance policies and programs and reports received from APRA.

Considering and reviewing the policies and procedures for the selection, appointment and

reappointment of the external auditor, the rotation of external audit engagement partners and the

terms of any such appointment

Assist the Board and management in monitoring risk management, controls and corporate

governance performance

4


Corporate Governance & Remuneration Committee


□

□ Reviewing and reporting to the Board on corporate governance issues

□

□

□

□

□

□

□

□

□

Ethical Standards

The Board regularly reviews all its policies to ensure their continued relevance and effectiveness.

There are no schemes for retirement benefits other than statutory superannuation for non-executive Directors.

The core values of the Credit Union centre on improving the quality and efficiency of financial service delivery by

providing products and services to help members meet their financial goals. To this end the Credit Union is committed

to maintaining the highest ethical standards in delivering products and services to its members.


Providing recommendations to the Board on technical or professional development courses to

assist Directors in keeping up to date with relevant issues and practices

To ensure there is a proper performance management process in place throughout the

organisation and that it is operating effectively

Providing recommendations to Board on effective policies and procedures to ensure effective

communication of the Credit Union's corporate governance policies to members, media, analysts

and industry participants.

To review and recommend to the Board remuneration policies and packages for the Board of

Directors and Executive Management

To recommend to the Board any changes in remuneration policy including superannuation, other

benefits and remuneration structures

Providing recommendations to the Board on corporate governance practices after assessment and

review

Reviewing and reporting to the Board on the Credit Union's compliance with APRA Prudential

Standard CPS510 Governance and the best pratice recommendations of the ASX Corporate

Governance Council

Reviewing disclosure of corporate governance policies and information on the Credit Union's

website

Reviewing and reporting to the Board on best practice developments in corporate governance

Reviewing and reporting to the Board on current corporate governance policies and review

outcomes

The Credit Union acknowledges that personal financial information is sensitive and subject to privacy legislation. To

this end, the Credit Union is committed to ethical and appropriate practices and compliance with relevant privacy

legislation. It has in place processes to maintain the expectations of the community and members for the security,

privacy and integrity of personal financial information.

The Board has adopted Codes of Conduct which set out the expectations for Directors and staff in their business

affairs and in dealings with members. The Codes of Conduct require high standards of personal integrity and honesty

in all dealings, a respect for privacy of members and others and observance of the law.

Where necessary, at Board meetings, Directors report on any interest that could potentially conflict with those of the

Credit Union and report on any Director related transactions in the Notes to the Annual Financial Statements.

5


Communication with Members

□

□

□ The Credit Union website

Other Information

Further information relating to the Credit Union's corporate governance practices and policies has been made publicly

available on the Credit Unions website at <www.bhccu.com.au>

The Annual Report is distributed to all members who request it and includes information about the

operations of the Credit Union during the year, changes in the state of affairs of the Credit Union

and details future developments, in addition to other disclosures requried by the Corporations Act

2001

When the Credit Union becomes aware of information which in the view of the Board requires

members to be notified immediately a letter is sent to members

The Board aims to ensure that members are informed of all major developments affecting the state of affairs of the

Credit Union. Information is communicated to members as follows:


6


Directors

The names of Directors in office at any time during or since the end of the year are:

Mr Allan Carter

Mrs Judith Hoare

Mr Gary Oldman

Mr William Hiscox

Mr Kym Visser

Mrs Lorelle Emmett

Mr Gary Crase

Credit Union Secretary

The following person held the position of Credit Union secretary at the end of the financial year:

Principal Activities

Operating Results

Dividends Paid or Recommended

Review of Operations

Significant Changes in State of Affairs

After Balance Date Events

DIRECTORS' REPORT

Your Directors present their report on The Broken Hill Community Credit Union Ltd (the Credit Union) for the financial year

ended 30 June 2017.

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

Mr Andrew Pellizzer - Diploma of Financial Services. Andrew has worked for The Broken Hill Community

Credit Union Ltd for the past 33 years, and is currently the General Manager. Andrew was appointed Credit

Union secretary on 1st July 2004.

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 as the Credit Union is limited by guarantee and cannot distribute dividends by virtue of the

provisions of its Constitution.

There are no major developments planned for the immediate future, that will affect significantly the operating results of the

Credit Union in future years.

The results of the Credit Union's operations from its activities of providing financial services to its members did not change

significantly from those of the previous year. The Credit Union finalised a significant refurbishment of the head office during

2017, with the head office subsequently revalued after completion.

The principal activities of the Credit Union during the year were the provision of retail financial services to members in the

form of taking deposits and giving financial accommodation as prescribed by the Constitution. No significant changes in the

nature of these activities occurred during the year.

The loss of the Credit Union before providing for income tax amounted to $656,745 (2016 $98,892 profit).

There were no significant changes in the state of affairs of the Credit Union during the year, other than the completion of the

head office refurbishment.

Likely Developments

There were no significant events subsequent to balance date.

8


Information on Directors

Mr Allan K Carter Chairperson

Qualifications/Memberships BHSM (Op) MBA FAICD FIPA MAMI

Experience

Interest in Shares 1 Member Share in The Broken Hill Community Credit Union Ltd

Mrs Judith E Hoare Vice-Chairperson

Qualifications/Memberships MAHRI MAMI

Experience


Mr Gary Oldman Director

Qualifications/Memberships B.IT MACS (Snr) CP MAMI

Experience


Mr William A Hiscox Director

Qualifications/Memberships FIPA ACIS MAMI JP

Experience


Allan is an accountant with extensive experience in the Aged Care and Health

sectors. He is the Auditor for a number of local community organisations. He has

been a Director since 1993 and Chairperson since 2002 and is a member of the

Australasian Mutuals Institute. Allan is a member of the Corporate Governance &

Remuneration Committee and is the Committee's Chairperson.

DIRECTORS' REPORT

Tony is an accountant and has previously worked for Broken Hill City Council and

with OACC as its Small Business Field Officer. He plays an active part in the Broken

Hill community through his involvement with Southern Cross Care (Broken Hill) Ltd

and the Rotary Club of Broken Hill South. Tony has been a Director since August

2007 and is a member of the Australasian Mutuals Institute. Tony is a member of the

Audit Committee and the Risk Committee.

Judi has a Professional Diploma in Human Resource Management and a Certificate

IV in Work, Health & Safety and was the Office Manager for Austen Brown

Thompson Solicitors, Accountants & Financial Planners from 1986 until 2001 when

she became the Resource Manager at Southern Cross Care (Broken Hill) Ltd. Judi

has been a Director since 1998 and is a member of the Australasian Mutuals

Institute. Judi is the Chair of the Audit Committee and is a member of the Risk

Committee.

Gary has a Degree in Information Technology, Certificates in Electrical Engineering

and Electronics & Communications and is a senior member of the Australian

Computer Society. He has held the position of IT Manager with the Royal Flying

Doctor Service since 1990, prior to that Gary was Chief Communications Officer.

Gary has been with the RFDS since 1979 and is a member of the Australasian

Mutuals Institute. He has been a Director since April 2007 and is the Chairperson of

the Risk Committee. Gary is also a member of the Audit Committee.

9


Mr Kym J Visser Director

Qualifications/Memberships Dip. Law LPAB MAMI

Experience


Director

Experience

Director

Experience

Interest in

Shares

Director Benefits

Public Prudential Disclosure

No Director has received or became entitled to receive during or since the end of the financial year, a benefit because of a

contract made by the Credit Union, 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 interest.

In accordance with the APS 330 Public Disclosure requirements, the Company is to publicly disclose certain information in

respect of:

- both qualitative disclosure and quantitative disclosures for Senior Managers and material risk-takers.

- details on the composition and features of capital and risk weighted assets; and

These disclosures can be viewed on the Credit Union's website: http://bhccu.com.au/disclosure/public-disclosure-of-

information (under Prudential Information section).

Gary is an accountant and prior to retirement was General Manager of the Broken

Hill Health Service. Previous to this Gary was Director Corporate Services at Far

West Area Heath Service and held a similar position with Broken Hill City Council.

Gary is a Fellow of CPA Australia, an associate of the Chartered Secretaries of

Australia and a member of the Australasian Mutuals Institute. Gary is a life member

of BH St Patricks Race Club with seven years as the Club's Treasurer. Gary has

been a Director of the Credit Union since 2011 and is a member of the Audit

Committee and the Risk Committee.

Benefits received by the directors of the Credit Union have been disclosed in Note 23 of the financial statements.

1 Member Share in The Broken Hill Community Credit Union Ltd

DIRECTORS' REPORT

FCPA ACIS ACSA MAMI

Lorelle has had considerable management experience in retailing and

accommodation industries, a qualification in road design, and was employed with the

NSW Government at locations within the state. Lorelle is currently a company

director and is a life member of two local community organisations. Lorelle has been

a Director of the Credit Union since July 2011 and is a member of the Australasian

Mutuals Institute. Lorelle is a member of the Corporate Governance & Remuneration

Commitee.

Qualifications/Memberships

Mrs Lorelle Emmett

1 Member Share in The Broken Hill Community Credit Union Ltd

MAMI JP

Interest in Shares

Qualifications/Memberships

Kym is a solicitor with the law firm Visser & Walton Solicitors Pty Limited. Kym has

over 25 years experience working in a legal firm, previously working with Austen

Brown Boog since 1989. Kym was admitted as a solicitor in 1999. Kym has been a

Director of the Credit Union since 2010 and is a member of the Law Society and the

Australasian Mutuals Institute. Kym is a member of the Corporate Governance &

Remuneration Committee.

Mr Gary Edward Crase

10

12 Crowe Horwath Albury is a member of Crowe Horwath International, a Swiss verein. Each member firm of Crowe Horwath is a separate and independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of

financial services licensees.

Crowe Horwath Albury

ABN 16 673 023 918 Member Crowe Horwath International

Audit and Assurance Services 491 Smollett Street Albury NSW 2640 Australia

PO Box 500 Albury NSW 2640 Australia

Tel 02 6021 1111 Fax 02 6041 1892

www.crowehorwath.com.au

Auditor Independence Declaration under Section 307C of the

Corporations Act 2001 to the Directors of The Broken Hill

Community Credit Union Ltd

I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year

ended 30 June 2017 there have been no contraventions of:

(1) The auditor independence requirements as set out in the Corporations Act 2001 in relation to

the audit; and

(2) Any applicable code of professional conduct in relation to the audit.

CROWE HORWATH ALBURY

BRADLEY D BOHUN Partner Dated at Albury this 26

th day of September 2017.


Note 2017 2016

$ $

REVENUE

Interest Revenue 2a 3,123,038 3,102,737

Interest Expense 2b (437,798) (453,961)

Net Interest Income 2,685,240 2,648,776

Non-Interest Revenue 2c 749,059 698,903

NET OPERATING INCOME 3,434,299 3,347,679

EXPENSES

Auditor Remuneration 3a (60,064) (60,115)

General Administration Expenses 3b (1,788,143) (1,755,321)

Revaluation Decrement 4 (763,254) -

Other Expenses 5 (1,018,149) (1,014,980)

Electronic Data Processing Expenses (461,434) (418,371)

TOTAL EXPENSES (4,091,044) (3,248,787)

Profit/(loss) before income tax (656,745) 98,892

Income tax benefit/(expense) 6 92,242 (22,947)

Profit/(loss) after income tax (564,503) 75,945

OTHER COMPREHENSIVE INCOME/(LOSS)

Revaluation of Property (net of tax) (684,129) -

Other Comprehensive Income/(Loss) for year (684,129) -

TOTAL COMPREHENSIVE INCOME (LOSS) (1,248,632) 75,945

Total Comprehensive Income/(Loss) attributed to members of the entity (1,248,632) 75,945

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE, 2017

The accompanying notes should be read in conjunction with these financial statements

13


Note 2017 2016

$ $

ASSETS

Cash and Cash Equivalents 9 6,927,647 4,339,324

Receivables from other Financial Institutions 10 18,514,099 11,537,009

Receivables 11 90,426 114,447

Prepayments 12 84,465 69,391

Loans and Advances 13 48,275,555 43,093,077

Other Financial Assets 14 186,765 196,765

Property, Plant & Equipment 15 3,959,124 4,722,745

Investment Properties 16 155,000 295,000

Current Tax Refundable 7 19,240 -

Deferred Tax Assets 8 327,753 246,736

TOTAL ASSETS 78,540,074 64,614,494

LIABILITIES

Member Deposits 17a 69,454,200 52,823,279

Payables-other 17c 667,577 1,803,783

Current Tax Payable 7 - 30,506

Provisions - Leave Entitlements 18 504,803 490,377

Deferred Tax Liability 8 18,880 323,303

TOTAL LIABILITIES 70,645,460 55,471,248

NET ASSETS 7,894,614 9,143,246

MEMBER'S EQUITY

Capital Reserve Account 19a 74,986 73,088

Asset Revaluation Reserve 19b 161,000 845,129

General Reserve for Credit Losses 19c 177,050 153,197

Card Fraud Reserve 19d 30,000 30,000

Retained Earnings 7,451,578 8,041,832

TOTAL EQUITY 7,894,614 9,143,246

STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE, 2017


14


2017

Capital

Reserve

Asset

Revaluation

Reserve

Retained

Profits

Reserve for

Credit Losses

Card

Fraud

Reserve Total

$ $ $ $ $ $

Balance at 30/06/16 73,088 845,129 8,041,832 153,197 30,000 9,143,246

Profit attributable to members - - (564,503) - - (564,503)

- (684,129) - - - (684,129)

1,898 - (25,751) 23,853 - -

Other comprehensive income

Movements in Reserves

Balance at 30/06/2017 74,986 161,000 7,451,578 177,050 30,000 7,894,614 -

2016

Capital

Reserve

Asset

Revaluation

Reserve

Retained

Profits

Reserve for

Credit Losses

Card

Fraud

Reserve Total

$ $ $ $ $ $

Balance at 30/06/15 70,182 845,129 7,980,173 141,817 30,000 9,067,301

Profit attributable to members - - 75,945 - - 75,945

Other comprehensive income - - - - - -

Movements in Reserves 2,906 - (14,286) 11,380 - -

Balance at 30/06/2016 73,088 845,129 8,041,832 153,197 30,000 9,143,246

STATEMENT OF CHANGES IN EQUITY



15


Note 2017 2016

$ $

CASH FLOW FROM OPERATING ACTIVITIES

Interest received-Loans & Advances 2,687,047 2,658,766

Interest received-Investments 416,053 452,315

Other Income 791,500 648,332

Interest Paid (435,076) (498,413)

Cash payments in the course of operations (3,217,541) (2,942,148)

Income tax refunded/(paid) (49,746) 8,872

Sub-total 192,237 327,724

Members Loans (net) (5,182,258) (126,648)

Member Deposits (net) 16,630,921 1,068,246

Net cash provided by (used in) operating

activities 22 11,640,900 1,269,322

CASH FLOWS FROM INVESTING ACTIVITIES

Receivables from other Financial Institutions (net) (6,977,090) 478,573

Investment in Special Service Providers - (20,000)

Payments for property, plant & equipment (2,109,487) (1,564,653)

Proceeds from the disposal of property, plant & equipment 34,000 36,000

Net cash provided by (used in) investing

activities (9,052,577) (1,070,080)

Net increase in cash held 2,588,323 199,242

Cash at beginning of financial year 4,339,324 4,140,082

Cash at end of financial year 9 6,927,647 4,339,324

STATEMENT OF CASH FLOWS



16


NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

Basis of Measurement

Accounting Policies

a) Loans to Members

(i) Basis of Recognition

(ii) Interest Earned

(iii) Fees on Loans

Loan establishment fees are initially deferred as part of the loan balance, and are brought to account as income

over the expected life of the loan as interest revenue in accordance with the effective interest rate method. The

expected life of the loan has been determined based on an analysis of the Credit Union's loan portfolio.

Fees charged on loans after origination of the loan are recognised as income when the service is provided or costs

are incurred.

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 against impairments for

debts considered doubtful. A loan is classified as impaired where recovery of the debt is considered unlikely as

determined by the board of directors.

Not-for-profit status

Term loans - interest is calculated on the basis of the daily balance outstanding and is charged in arrears to a

member's account on the last day of each month.

Overdraft - interest is calculated initially on the basis of the daily balance outstanding and is charged in arrears to a

member account on the last day of each month.

Non accrual loan interest - while still legally recoverable, interest is not brought to account as income where the

Credit Union is informed that the member has deceased, or where a loan is impaired.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017

The financial statements are prepared for The Broken Hill Community Credit Union Ltd (the Credit Union) as a single credit

union, for the year ended 30 June 2017. The report was authorised for issue on 28th September 2017 in accordance with a

resolution of the Board of Directors. The financial report is presented in Australian dollars. The financial report is a general

purpose financial report which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian

Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board.

Under Australian Accounting Standards, there are requirements that apply specifically to not-for-profit entities that are not

consistent with International Financial Reporting Standards (IFRS) requirements. The Credit Union has analysed its purpose,

objectives and operating philosophy and determined that it does not have profit generation as a prime objective. Consequently

where appropriate the Credit Union has elected to apply options and exemptions within Australian Accounting Standards that are

applicable to not-for-profit entities.

The financial statements have been prepared on an accruals basis, and are based on historical costs, which do not take into

account changing money values or current values on non-current assets (except for real property and available for sale

investments which are stated at fair value). The accounting policies are consistent with the prior year unless otherwise stated.

All loans are initially recognised at fair value, net of loan origination fees and inclusive of transaction costs incurred.

Loans are subsequently measured at amortised cost. Any difference between the proceeds and the redemption

amount is recognised in the statement of profit or loss and other comprehensive income over the period of the

loans using the effective interest rate method.

17


NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

b) Loan Impairment

(i) Specific and collective provision for impairment

0

(ii) Reserve for Credit Losses

(iii) Reserve for Card Fraud

(iv) The various components of impaired assets are as follows:

Non-accrual loans

Non-accrual loans are loans and advances:

Restructured Loans

Past Due Loans

(v) 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 against the provisions for

impairment, if a provision for impairment had previously been recognised. If no provision had been recognised, the

write-offs are recognised as expenses in the statement of profit or loss and other comprehensive income.

b) which does not meet the definition of a restructured loan only because it yields less than the Credit Union's

average cost of funds.

Loans which are subject to renegotiated terms which would have otherwise been impaired do not have the

repayment arrears diminished and interest continues to accrue to income. Each renegotiated loan is retained at the

full arrears position until normal repayments are re-instated and brought up to date and maintained for a specific

period of time.


A provision for losses on impaired loans is recognised when there is objective evidence that the impairment of a

loan has occurred. Estimated impairment losses are calculated on either a portfolio basis for loans of similar

characteristics, or on an individual basis. The amount provided is determined by management and the Board to

recognise the probability of loan amounts not being collected in accordance with terms of the loan agreement. The

critical assumptions used in the calculation are as set out in Note 13. Note 20 details the credit risk management

approach for loans.

a) for which there is reasonable doubt that the Credit Union will be able to collect all amounts of principal and

interest in accordance with the terms of the agreement; or

Assets acquired through the enforcement of security are assets acquired in full or partial settlement of a loan

or similar facility through the enforcement of security arrangements.

The APRA Prudential Standards require a minimum provision to be maintained, based on specific percentages on

the loan balance which are contingent upon the length of time the repayments are in arrears. This approach is

used to assess the collective provisions for impairment.

A loan or similar facility in arrears which has not been operated within its key terms by the borrower for at least 90

days and which is not an impaired loan.

An assessment is made at each balance date to determine whether there is objective evidence that a specific

financial asset or a group of financial assets is impaired. Evidence of impairment may include indications that the

borrower has defaulted, is experiencing significant financial difficulty, or where the debt has been restructured to

reduce the burden to the borrower.

In addition to the above specific provision, the Board of Directors has recognised the need to make an allocation

from retained earnings to ensure there is adequate protection for members against the prospect that some

members will experience loan repayment difficulties in the future. The general reserve for credit losses is based on

an estimation of potential risk in the loan portfolio.

In addition to the above specific provision, the Board of Directors has recognised the need to make an allocation

from retained earnings to ensure there is adequate protection for members against the prospect that some

members will experience card fraud in the future. The card fraud reserve is based on an estimation of potential risk

in the card portfolio.

18



(c) Cash and cash equivalents

(d) Property, Plant & Equipment

Owner Occupied Property

Investment Property

Plant and Equipment

Depreciation

- Buildings 40 years

- Plant & Equipment 3 - 5 years

(e) Receivables from Other Financial Institutions

The fair value model is applied to all investment property. It is the policy of the Credit Union to have an

independent valuation every three to five years, with annual assessments being made by the Board of Directors.

Values are based on an active liquid market and are performed by a registered independent valuer.

For the purposes of the statement of cash flows, cash and cash equivalents includes cash on hand and deposits

held at call with Authorised Deposit-taking Institutions (ADIs) net of bank overdrafts. Where bank overdrafts are

held, they are shown within short term borrowings in current liabilities on the statement of financial position.

A revaluation surplus is credited to the asset revaluation reserve included within equity unless it reverses a

revaluation decrease on the same class of asset previously recognised in the statement of profit or loss and other

comprehensive income. A revaluation deficit is recognised in the statement of profit or loss and other

comprehensive income unless it directly offsets a previous revaluation surplus on the same class of asset in the

asset revaluation reserve. On disposal, any revaluation reserve relating to sold assets is transferred to retained

earnings.

The carrying amount of property, plant and equipment is reviewed annually by the Board of Directors to ensure it is

not in excess of the recoverable amount of these assets. The recoverable amount is assessed on the basis of

expected net cash flows that will be received from the asset's employment and subsequent disposal. Any

decrement in the carrying amount is recognised as an impairment expense in the net profit or loss in the reporting

period in which the impairment loss occurs. The expected net cash flows have been discounted to their present

values in determining recoverable amounts.

Property, 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 life to the Credit Union. The useful lives are adjusted if

appropriate at each reporting date. Estimated useful lives as at the balance date are as follows:

Term deposits - with other financial institutions are unsecured and have a carrying amount equal to their principal

amount. Interest is paid on the daily balance at maturity. All deposits are in Australian currency.

Capital Works in Progress


Plant and equipment are measured on the cost basis less depreciation and impairment losses.

Freehold land and buildings are measured at their fair value, being the amount for which as asset could be

exchanged between knowledgeable, willing parties in an arms length transaction, less subsequent depreciation. It

is the policy of the Credit Union to have an independent valuation every three years, with annual assessments

being made by the Board of Directors.

Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the

asset and the net amount is restated to the revalued amount of the asset.

Capital works in progress is stated at historical cost. Historical cost includes expenditure that is directly attributable

to the acquisition of items. Items are transferred from capital works in progress to other categories of property,

plant and equipment when the asset is ready for intended use. Capital works in progress is not depreciated.

Negotiable Certificates of Deposit (NCD) - a discount security issued by other financial institutions with a

confirmed obligation to pay the face value upon maturity. In contrast to term deposits, NCD's provide the Credit

Union with a highly liquid asset that is tradeable on the secondary market.

HQLA Bonds - a security that pays a defined distribution (coupon) for a given period of time (term) and repays the

face value of the security on maturity. The coupon is adjusted to a running or market yield by buying the security at

a discount or premium, as determined by the market. These investments relate to Senior Bank debt or better of

Australian ADI's and International Rated Banks.

The accrual for interest receivable is calculated on a proportional basis of the expired period of the term of the

investments. Interest receivable is included in the amount of the receivables in the statement of financial position.

19



(f) Member Deposits

(i) Basis for Measurement

(ii) Interest Payable

(g) Provision for Employee Benefits

Wages, salaries and annual leave

Superannuation plans

(h) Goods and Services Tax (GST)

(i) Impairment of Assets

The Credit Union's obligation in respect of long service leave is the amount of future benefits that employees have

earned in return for their service in the current and prior periods. The obligation is calculated using expected future

increases in wage and salary rates including related on-costs and expected settlement dates and is discounted

using the rates attached to high quality corporate bond rates at the balance date which have maturity dates

approximating to the terms of the Credit Union's obligations.

Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST). To the extent

that the full amount of the GST incurred is not recoverable from the Australian Taxation Office (ATO), the GST is

recognised as part of the cost of acquisition of the asset or as part of an item of the expense.


As a financial institution, the Credit Union is input taxed on all income except for income from commissions and

some fees. An input taxed supply is not subject to GST collection, and similarly the GST paid on related or

apportioned purchases cannot be recovered. With other sources of income which are subject to GST collection,

the GST on related or apportioned purchases are generally recoverable on a proportionate basis. In addition

certain prescribed purchases are subject to reduced input tax credits (RITC) of which 75% of the GST paid is

recoverable.

Member savings and term investments are quoted at the aggregate amount of money owing to depositors.

At each reporting date the Credit Union assess 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 profit or loss and other 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 the recoverable amount of an individual asset,

recoverable amount is determined for the cash-generating unit to which the asset belongs.

Interest on savings is calculated on the daily balance and posted to the accounts periodically, or on maturity of the

term deposit. Interest on savings is brought to account on an accrual basis in accordance with the interest rate

terms and conditions of each savings and term deposit account as varied from time to time. The amount of the

accrual is shown as part of amounts payable.

Long service leave

Contributions to the employee's superannuation funds are recognised as an expense as they are incurred.

Liabilities for employee benefits for wages, salaries and annual leave expected to be settled within 12 months

represent present obligations resulting from employees' services provided to reporting date and are calculated at

undiscounted amounts based on remuneration wage and salary rates that the Credit Union expects to pay as at

reporting date including related on-costs such as workers compensation insurance and payroll tax. Annual leave

expected to be taken after 12 months is discounted back to present value using the rates attached to high quality

corporate bond rates at the balance date.

Receivables and payables are stated with the amount of GST included. 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 cash flow statement 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.

20



(j) Income Tax

(k) Accounting Estimates and Judgements

• Note 13 - Impairment of loans and advances

• Note 15 - Fair value assumptions used for land and buildings

• Note 16 - Fair value assumptions used for investment properties

• Note 21 - Fair value measurement

(l) Fair Value Measurement

For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is

either not available or when the valuation is deemed to be significant. External valuers are selected based on

market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one

period to another, an analysis in undertaken, which includes a verification of the major inputs applied in the last

valuation and a comparison, where applicable, with external sources of data.


The income tax expense shown in the statement of profit or loss and other comprehensive income is based on the

profit 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 balance sheet liability method in

respect of temporary differences arising between the tax 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.

Management has been involved in the development, selection and disclosure of the Credit Union's critical

accounting policies and estimates and the application of these policies and estimates. In particular, information

about areas of estimation uncertainty and critical judgements in applying accounting policies that have the most

significant effect on the amount recognised in the financial statements are described in the following notes:

Fair value is measured using the assumptions that market participants would use when pricing the asset or liability,

assuming they act in their economic best interest. For non-financial assets, the fair value measurement is based on

its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient

data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising

the use of unobservable inputs.

The Credit Union is required to classify assets and liabilities, measured at fair value, using a three level hierarchy,

based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted

prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement

date; Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability,

either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is

required to determine what is significant to fair value and therefore which category the asset or liability is placed can

be subjective.

Deferred tax assets and liabilities are recognised for all 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 liability will become payable. These differences are presently

assessed at 30%.

The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These

include discounted cash flow analysis or the use of observable inputs that require significant adjustments based on

unobservable inputs.

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 an income tax

benefit to be obtained.

Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects

the significance of the inputs used in making the measurements. Classifications are reviewed each reporting date

and transfers between levels are determined based on a reassessment of the lowest level input that is significant to

the fair value measurement.

When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes,

the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date; and assumes that the transaction will take place

either: in the principle market; or in the absence of a principle market, in the most advantageous market.

21



(m) New Accounting Standards and Interpretations not yet mandatory or early adopted

Application

Date Impact on Initial Application

AASB 9

Financial Instruments

Under the expected credit loss

model, the Credit Union will be

required to consider a broader range

of information when assessing credit

risk and measuring expected credit

losses, including past experience of

historical losses for similar financial

instruments.Management are developing an implementation

project to quantify the impact of this standard

during the 2018 financial year. To date,

management have focused on analysing past

history credit losses to enable a starting point for

this implementation project.

Based on the nature of the Credit Union's

financial assets, the classification and

measurement of financial assets are not expected

to have a material change. The Credit Union

does not conduct any hedge accounting, so these

changes are not applicable.

This is expected to impact the level of the

provision for impairment (Note 10) and the credit

asset impairment reserve (at Note 21). APRA

released guidance in July 2017 highlighting the

prudential reporting approach with regards to

AASB 9.Furthermore, AASB 9 introduces a

new 'expected' credit loss model for

calculating impairment on financial

assets. This moves away from the

current 'incurred' loss model required

under AASB 139.

The quantitative impact of the expected credit

loss model has not yet been determined by the

Credit Union.

AASB 9 replaces the existing

guidance in AASB 139 Financial

Instruments: Recognition and

Measurement.

Periods

beginning on

or after 1

January 2018

The Credit Union has conducted a high-level

diagnostic on the impact of this standard.

AASB 9 includes revised guidance

on the classification and

measurement of financial

instruments, as well as the general

hedge accounting requirements.

This highlighted that the move to an expected

credit loss model for impairment will impact the

Credit Union with earlier recognition of expected

credit losses.

Certain accounting standards and interpretations have been published that are not mandatory for the 30th June

2017 reporting period. The Credit Union's assessment of the impact of these new standards and interpretations is

set out below. Changes that are not likely to materially impact the financial report of the Credit Union have not

been reported.

AASB Reference Nature of Change


22



(m) New Accounting Standards and Interpretations not yet mandatory or early adopted (continued)

Application

Date Impact on Initial Application

AASB 15

AASB 16

Leases

AASB 16 requires all leases to be

accounted for 'on-balance sheet' by

lessees, other than short term and

low value asset leases. It also

provides new guidance on the

application of the definition of lease

and on sale and lease back

accounting and requires new and

different disclosures about leases.

Periods

beginning on

or after 1

January 2019

The Credit Union currently has a number of lease

arrangements, in which it is the leasor. The

Credit Union does not act as a leasee in any

arrangements.

Revenue from

Contracts with

Customers

Based upon a preliminary assessment, the

Standard is not expected to have a material

impact upon the transactions and balances

recognised when it is first adopted, as most of the

Credit Union's revenue arises from the provisions

of financial services which are governed by AASB

9 Financial Instruments.It replaces most of the existing

standards and interpretations relating

to revenue recognition including

AASB 118 Revenue.

Based on the Credit Union's preliminary

assessment, the Credit Union does not expect the

change in accounting standard to have a material

effect on the financial statements when AASB 16

is first adopted.


AASB Reference Nature of Change

There are limited revenue transactions of the

Credit Union that are impacted by AASB 15.

AASB 15 establishes a

comprehensive framework for

determining whether, how much and

when revenue is recognised.

Periods

beginning on

or after 1

January 2018

AASB 9 continues the effective interest rate

method for financial instruments carried at

amortised cost. This is the method currently

required under AASB 139.

The standard shifts the focus from

the transaction level to a contract-

based approach. Recognition is

determined based on what the

customer expects to be entitled to,

while measurement encompasses

estimation by the Credit Union of the

amount expected to be entitled for

performing under the contract.

23


2017 2016

a) Interest Revenue $ $

Cash deposits at call 72,436 39,842

Deposits with other Financial Institutions 363,555 404,129

Loans & other Advances 2,687,047 2,658,766

TOTAL INTEREST REVENUE 3,123,038 3,102,737

2017 2016

b) Interest Expense $ $

Member deposits 417,183 433,158

Borrowings 828 260

Amortisation of HQLA Bonds 19,787 20,543

TOTAL INTEREST EXPENSE 437,798 453,961

2017 2016

$ $

Loan fee income 71,008 70,129

Other fee income 373,166 346,430

Insurance commissions 54,910 52,241

Other commissions 31,276 31,809

530,360 500,609

Dividends 25,042 25,042

Bad debts recovered 3,074 5,176

Other Revenue

Rent received - Investment Properties 27,503 27,239

Rent received - Other Property 13,846 7,909

Other revenue 149,234 132,928

749,059 698,903


Total Fee and Commission Income

Fee and Commission Revenue

OTHER REVENUE & OTHER INCOME

NOTE 2. INTEREST REVENUE & EXPENSE

TOTAL NON-INTEREST REVENUE

c) Non Interest Revenue

24


NOTE 3A. AUDITOR'S REMUNERATION 2017 2016

$ $

Remuneration of the auditor for:

Auditing of the financial report and financial services licence 60,064 60,115

TOTAL AUDITOR REMUNERATION 60,064 60,115

Non-Audit Services

2017 2016

$ $

Taxation services 7,200 7,200

Total 7,200 7,200


The following fees for non-audit services were paid/payable to Crowe Horwath during the year ended 30 June 2017:

The Board of Directors, in accordance with advice from the Audit Committee, are satisfied that the provision of non-audit services

during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The

Directors are satisfied that the services disclosed below did not compromise the external auditor's independence for the following

reasons:

- all non-audit services are reviewed and approved by the Audit Committee prior to commencement to ensure they do not adversely

affect the integrity and objectivity of the auditor; and

- the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with

APES110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

25


NOTE 3B. GENERAL ADMINISTRATION EXPENSES

2017 2016

$ $

Employee Benefits 1,332,539 1,399,638

Depreciation 235,395 133,473

Lease Expenses 3,108 2,849

Other Administration Expenses 217,101 219,361

1,788,143 1,755,321

NOTE 4. REVALUATION DECREMENT 2017 2016

$ $

Land & buildings fair value adjustment 623,254 -

Investment property fair value adjustment 140,000 -

TOTAL REVALUATION DECREMENT 763,254 -

NOTE 5. OTHER EXPENSES 2017 2016

$ $

Marketing & Promotion 112,594 125,252

Member Protection & Benefits 165,194 155,776

Building Expenses - Other Properties 94,179 86,508

Building Expenses - Investment Properties 18,079 19,382

Loans Administration 8,586 7,071

Impairment-Loans and Advances 1,298 40,615

ATM Card & Transaction Processing 447,123 431,039

Board & Committee Expenses 100,985 86,297

Goods & Services Tax 70,111 63,040

TOTAL OTHER EXPENSES 1,018,149 1,014,980

TOTAL GENERAL ADMINISTRATION EXPENSES


26


NOTE 6. INCOME TAX EXPENSE/(BENEFIT) 2017 2016

$ $

Income tax expense/(benefit) (92,242) 22,947

Recognised in statement of comprehensive income

Current year tax expense - 45,137

Under/(over) provision in prior years - -

(11,225) (6,258)

(81,017) (15,932)

(92,242) 22,947

Reconciliation between income tax expense and pre-tax profit

Profit/(loss) before income tax (656,745) 98,892

(180,605) 29,668

Increase/(decrease) in income tax expense due to:

Tax rate applicable to medium size credit unions (11,716) -

Restate of DTA/DTL due to change in company tax rate (6,381) -

Other temporary differences - impairment 108,991 -

Non deductible expenses 619 791

Imputation credits on dividends (3,151) (7,512)

- -

(92,242) 22,947

NOTE 7. CURRENT TAX PAYABLE/(REFUNDABLE)

2017 2016

$ $

Current Income Tax payable/(refundable) (19,240) 30,506

Total (19,240) 30,506


Prima facie tax payable/(receivable) on profit before income tax at 27.5%

tax rate (2016: 30%)

Under/(over) provision in prior years

(Increase)/decrease in deferred tax assets

Income tax expense/(benefit) comprises amounts set

aside as:

Increase/(decrease) in deferred tax liabilities (excluding impact of

revaluation)

27



NOTE 8. DEFERRED TAX ASSETS & LIABILITIES

Deferred tax assets and liabilities are attributable to the following:

Assets Liabilities Assets Liabilities Assets Liabilities

2017 2017 2016 2016 2017 2017

$ $ $ $ $ $

Loans and advances 54,408 - 65,361 (10,953) -

Other Receivables 2,750 - - - 2,750 -

Property, plant and equipment 92,063 - - 323,303 92,063 (323,303)

Prepayments - 18,880 - - - 18,880

Trade and other payables 15,595 - 11,850 - 3,745 -

Employee benefits 138,821 - 147,113 - (8,292) -

Intangible Assets 19,486 - 22,412 - (2,926) -

Tax value of loss as carried forward 4,630 4,630

Tax (assets)/liabilities 327,753 18,880 246,736 323,303 81,017 (304,423)

Movements

28



NOTE 9. CASH AND CASH EQUIVALENTS

2017 2016

$ $

Cash on hand 508,151 508,034

Cash at Bank & Deposits at Call 6,419,496 3,831,290

6,927,647 4,339,324

(a) Credit Quality

Cash and cash equivalents includes cash at hand and deposits at call invested with CUSCAL rated A-1.

NOTE 10. RECEIVABLES FROM OTHER FINANCIAL INSTITUTIONS

2017 2016

$ $

Term deposits 9,000,010 2,000,010

NCD's 3,993,803 2,996,927

HQLA Bonds 5,520,286 6,540,072

18,514,099 11,537,009

(a) Credit Quality

The exposure values associated with each credit quality step are as follows:

ADI's rated AA and above 3,993,803 3,997,612

ADI's rated below AA 7,020,286 5,539,387

Unrated 7,500,010 2,000,010

18,514,099 11,537,009

NOTE 11. RECEIVABLES 2017 2016

$ $

45,709 25,771

Sundry Debtors 1,919 26,443

Other 42,798 62,233

90,426 114,447

NOTE 12. PREPAYMENTS 2017 2016

$ $

Prepayments 84,465 69,391

84,465 69,391

Interest receivable on deposits with other

Financial Insitutions

The Credit Union uses the ratings of reputable ratings agencies to assess the credit quality of all investment exposures,

where applicable, using the credit quality assessment scale in APRA prudential guidance note AGN 112. The credit

quality assessment scale within this standard has been complied with.

29



NOTE 13. LOANS AND ADVANCES 2017 2016

$ $

Amount due comprises:

Overdraft 1,614,437 1,376,819

Term loans 46,858,965 41,934,129

Gross Loans and Advances 48,473,402 43,310,948

Less: Deferred loan establishment fees (115,726) (117,244)

Total Loans and Advances 48,357,676 43,193,704

Less: Provision for impairment (82,121) (100,627)

NET LOANS & ADVANCES 48,275,555 43,093,077

(a) Concentration of Risk

Broken Hill NSW 44,351,186 39,850,158

Other Australian locations 4,122,216 3,460,790

TOTAL 48,473,402 43,310,948

Purpose dissection

Residential 43,099,743 38,249,018

Personal 3,861,522 3,660,319

Commercial 1,512,137 1,401,611

TOTAL 48,473,402 43,310,948

(b) Credit Quality of Loans

Exposure to grouping of individual loans which concentrate risk within particular geographical segments are as follows:

The Credit Union does not have any significant exposure to any particular industry sectors or other groupings of clients, other than

those loans which are predominantly for residential housing purposes.

A majority of the portfolio of the loan book is secured on residential property in Australia. Therefore, the Credit Union is exposed to

risks in the reduction of the loan to valuation ratio (LVR) cover should the property market be subject to decline. The risk of losses

from loans is primarily reduced by the nature and quality of the security obtained.

It is not practical to value all collateral as at the balance date due to the variety of asset and their nature and condition. A breakdown

of the quality of the mortgage security on the portfolio basis is as follows:

30



NOTE 13. LOANS AND ADVANCES (continued)

2017 2016

$ $

LVR less than 80% 34,457,326 32,170,805

LVR more than 80% not mortgage insured 3,505,887 1,880,638

LVR more than 80% with an acceptable LMI 3,294,139 2,454,930

41,257,352 36,506,373

Partly secured by goods mortgage 2,192,389 1,947,910

Secured other 370,135 220,728

Wholly unsecured 4,653,526 4,635,937

TOTAL 48,473,402 43,310,948

(c) Provision for Impairment

Opening balance 100,627 66,429

Doubtful debts provided for during the year 1,298 40,615

Bad debts written off (19,804) (6,417)

TOTAL 82,121 100,627

(d) Impairment Expense

Specific Provision 1,298 40,615

Bad debts recognised directly as expense - -

1,298 40,615

Secured by Mortgage over Residential

Property

31


NOTE 13. LOANS AND ADVANCES (continued)

(e) Past Due and Impaired Loans

Less than 3

months past

due

3-6 months

past due

6-12 months

past due

More than

12 months

past due

Gross Loan

balance

Impairment

Provision

Net Carrying

Value (not

considered

impaired)

2017 $ $ $ $ $ $ $

Impaired Loans

Personal Loans - 20,581 25,501 53,126 99,208 (76,658) 22,550

Mortgage Loans - - - - - - -

Overdrawn Savings 857 431 453 3,722 5,463 (5,463) -

857 21,012 25,954 56,848 104,671 (82,121) 22,550

Past due not impaired

Personal Loans 82,109 - - - 82,109 - 82,109

Mortgage Loans 744,847 60,067 55,050 - 859,964 - 859,964

Overdrawn Savings - - - - - - -

826,956 60,067 55,050 - 942,073 - 942,073

TOTAL 827,813 81,079 81,004 56,848 1,046,744 (82,121) 964,623

According to the Credit Union's Impaired Asset Decision Tree overdrawn savings less than 90 days are not considered impaired

Less than 3

months past

due

3-6 months

past due

6-12 months

past due

More than

12 months

past due

Gross Loan

balance

Impairment

Provision

Net Carrying

Value (not

considered

impaired)

2016 $ $ $ $ $ $ $

Impaired Loans

Personal Loans - 36,664 23,275 62,855 122,794 (94,252) 28,542

Mortgage Loans - - - - - - -

Overdrawn Savings 5,089 598 378 310 6,375 (6,375) -

5,089 37,262 23,653 63,165 129,169 (100,627) 28,542

Past due not impaired

Personal Loans 98,345 - - - 98,345 - 98,345

Mortgage Loans 558,129 - - 23,530 581,659 - 581,659

Overdrawn Savings - - - - - - -

656,474 - - 23,530 680,004 - 680,004

TOTAL 661,563 37,262 23,653 86,695 809,173 (100,627) 708,546

2017 2016

$ $

Real estate acquired through the enforcement of security - -

Specific provision for impairment - -

Balance at the end of the financial year - -

Net fair value of real estate assets acquired through the

enforcement of security during the financial period - -

Net fair value of other assets acquired through the

enforcement of security during the financial period -

however the Credit Union takes a conservative approach and raises a 100% provision against such balances.


Past due loans are those where repayments by the borrower have not been maintained in accordance with the loan agreement. Past due

loans are not considered impaired where they are well secured, generally over residential property, or where lenders mortgage insurance has

been obtained, and as a result, it is expected that the Credit Union will not suffer any loss in the event of continuing default by the borrower.

f) Assets acquired through enforcement of security

This approach has been applied for both the current year, table above, and the prior year, table below.

32


NOTE 14. INVESTMENTS

2017 2017 2016

Other Financial Assets $ $

Shares in CUSCAL Ltd 176,765 72436 176,765

Other unlisted shares 10,000 363555 20,000

TOTAL 186,765 2,687,047 196,765

a) Shares in CUSCAL Ltd2017

54910

NOTE 15. PROPERTY, PLANT & EQUIPMENT 25042

2017 3074 2016

LAND & BUILDINGS $ $

41349

Freehold Land - at valuation 330,000 330,000

Total Land 330,000 149,234 330,000

Buildings at valuation 2,328,000 1,727,000

Less accumulated depreciation (23,918) (43,397)

Total Buildings 2,304,082 1,683,603

Total Land and Buildings 2,634,082 2,017 2,013,603

PLANT AND EQUIPMENT

At cost 2,952,823 60064 1,768,672

Less accumulated depreciation (1,633,874) (1,459,774)

Total Plant and Equipment 1,318,949 308,898

CAPITAL WORKS IN PROGRESS 6,093 2,400,244

Total Property, Plant and Equipment & Capital WIP 3,959,124 4,722,745

Valuations of Land and Buildings

Refer to Note 21 for further information on fair value measurement.


The shareholding in CUSCAL - refer Note 14 above - is measured at its cost value in the Statement of Financial Position.

This company supplies services to the member organisations which are all mutual banks and credit unions. The credit

union holds shares in CUSCAL to enable the Credit Union to receive essential banking services (refer to Note 26a). The

shares are able to be traded but within a market limited to other mutual ADI's. The volume of shares traded in the shares

is low.

Management have used the unobservable inputs to assess the recoverable amount of the shares. The financial reports of

CUSCAL record net tangible asset backing of these shares exceeding their cost value. Based on the net assets of

CUSCAL, any fair value determination on these shares is likely to be greater than their cost value, but due to the absence

of a ready market, a market value is not able to be determined readily. Management has determined that the cost value

of $0.60 per share is a reasonable approximation of fair value based on the likely value available on a sale.

The Credit Union is not intending to dispose of these shares.

The basis of the valuation of land and buildings is fair value, being the amounts for which assets could be exchanged

between willing parties in an arm's length transaction, based on current prices in an active market for similar properties in

the same location and condition. The land and buildings were last revalued on 1st February 2017 based on independent

assessment by Smith & Hickey Valuation Services. The directors do not believe that there has been a material

movement in fair value since the revaluation date.

33


NOTE 15. PROPERTY, PLANT & EQUIPMENT (continued) 7200

2017

Freehold

Land Buildings

Plant &

Equipment

Capital Works

in Progress TOTAL

$ $ $ $ $

Balance at the beginning of the year 330,000 1,683,603 308,898 2,400,244 4,722,745

Additions - - 436,428 665,118 1,101,546

Transfers 2,268,284 790,985 (3,059,269) -

Disposals - - (29,191) - (29,191)

Depreciation expense - (47,224) (188,171) - (235,395)

Revaluation increment/(decrement) (1,600,581) - - (1,600,581)

Carrying amount at the end of the year 330,000 2,304,082 1,318,950 6,092 3,959,124

2016

Freehold

Land Buildings

Plant &

Equipment

Capital Works

in Progress TOTAL

$ $ $ $ $

Balance at the beginning of the year 330,000 1,727,000 239,905 20,515 2,317,420

Additions - - 192,865 2,379,729 2,572,594

Disposals - - (33,796) - (33,796)

Depreciation expense - (43,397) (90,076) - (133,473)

Revaluation increment/(decrement) - - -

Carrying amount at the end of the year 330,000 1,683,603 308,898 2,400,244 4,722,745

NOTE 16. INVESTMENT PROPERTIES

2017 2016

At Fair Value $ $

Balance at beginning of the year 295,000 295,000

Fair value adjustments (140,000) -

Balance at the end of the year 155,000 295,000

Refer to Note 21 for further information on fair value measurement.


The basis of the valuation of investment properties is fair value, being the amounts for which the properties could be

exchanged between willing parties in an arm's length transaction, based on current prices in an active market for similar

properties in the same location and condition, subject to similar leases and takes into consideration occupancy rates and

returns on investment. In estimating the fair value of the properties, the highest and best use of the properties is their

current use. The investment properties are revalued annually by Directors. The last independent assessment was on 30th

June 2017 by Smith & Hickey Valuation Services.

Movement in the carrying amount for each class of property, plant & equipment between the beginning and the end of the

current financial year:

Valuations of Investment Properties

b) Movements in Carrying Amounts

34


NOTE 17. PAYABLES

2017 2016

$ $

At Call Deposits 51,363,547 37,583,734

Fixed Term Deposits 18,013,517 15,163,029

Sub-Total 69,377,064 52,746,763

Member Shares 77,136 76,516

TOTAL DEPOSITS & SHARES 69,454,200 52,823,279

2017 2016

$ $

Broken Hill Residents 62,265,751 48,144,941

Other 7,111,313 4,601,822

Total 69,377,064 52,746,763

2017 2016

$ $

Member related clearing accounts 408,111 548,248

Interest payable on deposits 157,257 154,535

Sundry creditors and accruals 102,209 1,101,003

Total 667,577 1,803,786

NOTE 18. PROVISIONS

a) Leave Entitlement Employee Benefits

Entitlements Annual Leave

Long Service

Leave Total

$ $

Opening balance at 1 July 2016 95,147 395,230 490,377

Adjustments to provisions 4,247 10,179 14,426

Balance at 30 June 2017 99,394 405,409 504,803


a) Member Deposits

b) Concentration of Member Deposits

The deposits above do not include any deposits from individual clients representing 10% or more of total liabilities.

c) Payables - Other

A provision has been recognised for employee entitlements relating to long service leave. In calculating the present value

of future cash flows in respect of long service leave, the probability of long service being taken is based on historical data.

The measurement and recognition criteria relating to employee benefits has been included in Note 1 to the report.

35


NOTE 19. RESERVES

a) Capital Reserve Account 2017 2016

$ $

Balance at the beginning of the year 73,088 70,182

1,898 2,906


b) Asset Revaluation Reserve 2017 2016

$ $

Asset Revaluation reserve - Land & Buildings 161,000 845,129

Total 161,000 845,129

Movements in Reserves

Asset Revaluation Reserve - Land & Buildings


Decrease on revaluation of land & buildings (977,327) -

Deferred tax effect on revaluation 293,198 -



Transfer from retained earnings on share

redemptions

Under the Corporations Act 2001, redeemed preference shares (members' shares) may only be redeemed out of the

Credit Union's profit or through a new issue of shares for the purpose of the redemption. The Credit Union has transferred

the value of member shares redeemed from 1st July 1999 to the date of this report from retained earnings to the Capital

Reserve Account. The value of member shares for existing members is disclosed in Note 17.

The asset revaluation reserve accounts for the unrealised gains on assets due to revaluations to fair value.

36


NOTE 19. RESERVES (continued)

c) General Reserve for Credit Losses 2017 2016

$ $

General Reserve for Credit Losses 177,050 153,197



Increase/(decrease) transferred from retained earnings 23,853 11,380


d) Card Fraud Reserve 2017 2016

$ $


Increase/(decrease) transferred from retained earnings - -



The card fraud reserve is maintained to cover the general fraud risks inherent to issuing cards.

In accordance with APRA Prudential Regulations a General Reserve for Credit Losses is maintained. This reserve is

designed to cover, at a minimum, credit losses prudently estimated but not certain to arise over the full life of all the

individual facilities making up the business of the Credit Union.

37


NOTE 20. FINANCIAL RISK MANAGEMENT

Introduction

a)

b) Capital Management

Capital is the cornerstone of an ADI's strength.

The primary role of capital is to:

-

- Absorb unanticipated losses from activities

-

- Improving the Credit Union's profitability

-

-

The Board of Directors has overall responsibility for the establishment and oversight of the risk management

framework. The Board has established a Risk Committee, which is responsible for developing and monitoring the risk

management policies. The Committee reports regularly to the Board of Directors on its activities.

The Broken Hill Community Credit Union Ltd is bound by the prudential standards as set by the prudential regulator,

the Australian Prudential Regulation Authority (APRA). The Credit Union is subject to minimum capital requirements

imposed by APRA based on guidelines developed by the Basel Committee on Banking Supervision. The Credit Union

reports to APRA under Basel III capital requirements and uses the standardised approach for credit and operational

risk. APRA requires Authorised Deposit-taking Institutions (ADI's) to have a minimum ratio of capital to risk weighted

assets of 8%. Under the standards governing capital, APRA determines a minimum Prudential Capital Requirement

(PCR) for The Broken Hill Community Credit Union Ltd above which capital levels must be maintained at all times. The

Board has established an Internal Capital Adequacy Assessment Process (ICAAP) to ensure that it holds sufficient

capital above this regulatory minimum.


Prudent management of the Credit Union's interest rates to ensure that products are priced adequately to

reflect the various levels of risk associated with the product

Risk management policies are established to identify and analyse the risks faced by the Credit Union, to set

appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and

systems are reviewed regularly to reflect changes in market conditions and the Credit Union's activities. The Credit

Union through its training and management standards and procedures, aim to develop a disciplined and constructive

control environment in which all employees understand their roles and obligations.

The Credit Union has, to date, sourced capital from profits generated from the business, general reserves, asset

revaluation reserve and general reserve for credit losses. In an organic environment, the Credit Union will endeavour

to manage its capital ratio via normal operating conditions. This will include such initiatives as:

The Risk Committee oversees how management monitors compliance with the Credit Union's risk management

policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by

the Credit Union. The Risk Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both

regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Risk

Committee.

Maintain a cushion against loss to enable the Credit Union to trade through difficult times

Ensure safety of deposits thereby maintaining public confidence in the financial soundness and stability of

the Credit Union

The Credit Union has undertaken the following strategies to minimise the risks arising from financial instruments.

Managing the Credit Union's asset portfolio to ensure that the Credit Union is not over exposed in higher

risk weighted assets

38


NOTE 20. FINANCIAL RISK MANAGEMENT (continued)

b) Capital Management (continued)

- Ensure that the Credit Union is adequately protected from market risk

-

- Managing rate of growth

Common Equity Tier 1 Capital

Additional Tier 1 Capital

Additional Tier 1 Capital consists of instruments issued by an ADI that are not included in Common

Equity Tier 1 Capital but which meet the criteria for inclusion in Additional Tier 1 Capital as set out in the

Prudential Standard.

Tier 2 Capital

Tier 2 capital generally comprises:

- General Reserve for Credit Losses

(b) are freely available to absorb losses

(c) do not impose any unavoidable servicing charge against earnings; and

(d) rank behind the claims of depositors and other creditors in the event of winding up of the issuer

Common tier 1 capital consists of retained earnings and realised reserves. From 1 January 2013 it also consists of the

asset revaluation reserves. Deductions from tier 1 capital are made for intangible assets, certain capitalised expenses,

deferred tax assets and equity investments in other ADI's.

Tier 1 capital can contain both common equity tier 1 capital and additional tier 1 capital. Common equity tier 1 capital

comprises the highest quality components of capital that fully satisfy all of the following characteristics:

(a) provide a permanent and unrestricted commitment of funds

On a monthly basis, Management reviews actual accounting results against budgeted results. Management will also

review the capital adequacy ratio on a monthly basis. Such results are provided to the Board each month.


The Broken Hill Community Credit Union Ltd prepares an annual multiple year budget. The annual budget contains

financial forecasts which provide management and the Board with an indication of the financial estimates for the

coming 24 months of The Broken Hill Community Credit Union Ltd's strategies and operations. Included in the financial

reports is a forecast of the Credit Union's capital adequacy ratio. Management reviews the budgeted profit levels to

ensure that the Credit Union achieves a return on assets which keeps capital adequacy above internal limits.

Ensure that other risks facing the Credit Union are effectively monitored and managed

Tier 2 capital consists of capital instruments that combine the features of debt and equity in that they are structured as

debt instruments, but exhibits some of the loss absorption and funding flexibility features of equity, together with other

components of equity. There are a number of criteria that capital instruments must meet for inclusion in Tier 2 capital

resources as set down by APRA.

39



b) Capital Management (continued)

Capital in the Credit Union is made up of: 2017 2016

$ $

Common Equity Tier 1

Retained earnings 7,451,578 8,041,832

General reserves - Card Fraud Reserve 30,000 30,000

- Capital Reserve 74,986 73,088

- Asset Revaluation Reserve 161,000 845,129

Less prescribed deductions

Shares in special service providers (176,765) (176,765)

Deferred tax assets in excess of deferred tax liabilities (308,873) -

Information technology software costs (62,154) (27,065)

7,169,772 8,786,219

Tier 2

General reserve for credit losses 177,050 141,817

Adjusted prudential capital 7,346,822 8,887,488

% %

18.70 26.00

-

-

-

-

-


The Credit Union manages its internal capital levels for both current and future activities though a combination of various

committees. The outputs of the individual committees are reviewed by the Board in its capacity as the primary governing body.

The capital required for any change in the Credit Union's forecasts for asset growth, or unforeseen circumstances, are assessed

by the Board. The finance department then update the forecast capital resources models produced and the impact upon the

overall capital position of the Credit Union is reassessed.

The ratio of capital to risk weighted assets at

the end of the financial year was:

Public Disclosure of Capital

In accordance with the APS 330 Public Disclosure requirements, the Credit Union is required to include details on the

composition and features of capital and risk weighted assets in the Regulatory Disclosure section on their website.

Internal Capital Adequacy Management

Events impacting the additional costs of retention of liquid funds and exercising available liquidity

drawdown facilities.

In relation to the operational risks, the major measurements for additional capital are recognised by the monitoring and stress

testing for:

Fraud risk - additional capital held to cover fraud risk $30,000 (2016: $30,000)

Asset impairment - the impact of economic and employment factors on loan losses and/or recovery of

investments

Property value decline - the impact on property values declining and the related exposure to higher capital

required to recognise potential losses or risk weight on assets.

Interest rate risk - measures the impact on capital from changes in interest rates impacting the net interest

margin and net surplus.

40



c) Market Risk

The interest rate risk is managed by:

-

- Projecting the interest spread forward to future periods

-

Sensitivity Analysis

2017 2016

Plus 2% (200 Basis Points) 473,780 426,075

Less 2% (200 Basis Points) (1,165,009) (935,164)

This method includes a variety of behavioural assumptions including average term repricing and the inability to match

repricing stress on both sides of the statement of financial position.

d) Credit Risk

Credit risk - Loans

The Credit Union has established policies over the:

-

-

- Reassessing and review of the credit exposures on loans and facilities

-

- Debt recovery procedures

- Review of compliance with the above policies


Continuously monitoring the "gap" between the yield on loans and investments and the cost of funds

The Credit Union is primarily exposed to interest rate risk arising from changes in market interest rates due to mismatches

between repricing terms of financial assets and liabilities. Financial instruments held by the Credit Union do not give rise to any

material exposures to currency or equity price risk.

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, 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 optimising the return.

Amending interest rates on loans and/or deposits to ensure that an appropriate spread is maintained

The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date. At 30 June

2017, if interest rates had moved, as illustrated in the table below, with all other variables constant, post tax profit would have

been affected as follows:

The interest rate sensitivity analysis method projects performance based on balances of assets and liabilities that exist on report

date, applying the actual rates associated with those balances for the full 12 month period. The outcome above simulates the

dynamics of a 200bps rate decrease/increase on assets and liabilities for the period.

Establishing appropriate provisions to recognise the impairment of loans and facilities

Credit risk is the risk of financial loss to the Credit Union if a borrower, customer or counterparty to a financial instrument fails to

meet its contractual obligations, and arises principally from the Credit Union's receivables from customers and investment

securities.

The method of managing credit risk is by way of strict adherence to the credit assessment policies before the loan is approved

and close monitoring of defaults in the repayment of loans thereafter on a weekly basis. The credit policy has been endorsed

by the Board to ensure that loans are only made to members that are creditworthy (capable of meeting loan repayments).

Credit assessment and approval of loans and facilities covering acceptable risk assessment and security

requirements

Limits of acceptable exposure over the value to individual borrowers, non mortgage secured loans,

commercial lending and concentrations to geographic and industry groups considered at high risk of

default

41



d) Credit Risk (continued)

Credit risk - Liquid investments

- 50% of capital base to unrelated ADI's

- 10% of capital base to other counterparties

- 500% of capital base for exposures to CUSCAL as approved by APRA

This policy applies to liquidity which is in excess of the Credit Union's obligations to CUSCAL for CUFSS.

Refer to Note 10(a) with regards to credit quality of placements with other financial institutions.

Maximum exposure to credit risk

2017 2016

On-balance sheet exposures $ $

Loans and receivables (amortised cost) - gross 48,473,402 43,310,948

Placements with other financial institutions 18,514,099 11,537,009

Trade and other receivables 90,426 114,447

67,077,927 54,962,404

Off-balance sheet exposures

Loans approved not yet funded 1,030,995 1,090,418

Undrawn loans and overdrafts 1,504,368 1,285,692

2,535,363 2,376,110

Maximum exposure to credit risk 69,613,290 57,338,514

e) Liquidity Risk

The Credit Union manages liquidity risk by:

- Continuously monitoring actual daily cash flows and longer term forecast cash flows

- Monitoring the maturity profiles for financial assets and liabilities

-

2017 2016

The high quality liquid asset ratio was: 22.44% 23.94%

Total liquidity was: 36.63% 30.06%

The risk of losses from the liquid investments undertaken is reduced by the nature and quality of the independent rating of the

investee and the limits to concentration on one entity. The Board has a liquid assets mix policy which limits its exposures to:


The Credit Union is required to maintain at least 9% of total adjusted liabilities as liquid assets capable of being converted to

cash within 48 hours under the APRA prudential standards. The liquidity ratio is checked daily. Should the liquidity ratio fall

below triggers set above this level Management and the Board address the matter by ensuring that liquid funds are obtained

from new deposits and available borrowing facilities.

The Credit Union's maximum exposure to credit risk, including both on balance sheet and off-balance sheet exposures is:

Information on the credit quality and collateral obtained in relation to these credit exposures is detailed in Notes 10 and 13.

Liquidity risk is the risk that the Credit Union will not be able to meet its financial obligations as they fall due. The Credit Union's

approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities

when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Credit

Union's reputation.

Maintaining adequate reserves, liquidity support facilities and reserve borrowing facilities

42



f) Repricing Analysis of Assets and Liabilities


Financial Assets 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

$ $ $ $ $ $ $ $ % %

Cash and cash

equivalents 6,419,496 3,831,290 - - - - 508,151 508,034 6,927,647 4,339,324 1.81 0.94

Receivables from other

Financial Institutions - - 18,514,099 11,537,009 - - - - 18,514,099 11,537,009 2.62 2.91

Loans and advances

(gross) 48,473,402 43,310,948 - - - - - - 48,473,402 43,310,948 5.79 6.00

Other Receivables - - - - - - 90,426 114,447 90,426 114,447 N/A N/A

Total Financial Assets 54,892,898 47,142,238 18,514,099 11,537,009 - - 598,577 622,481 74,005,574 59,301,728

Financial Liabilities

Deposits 34,916,816 25,755,541 14,989,721 14,025,209 3,023,796 1,137,820 16,523,867 11,904,709 69,454,200 52,823,279 0.67 0.73

Accounts payable &

other liabilities - - - - - - 667,577 1,803,786 667,577 1,803,786 N/A N/A

Total 34,916,816 25,755,541 14,989,721 14,025,209 3,023,796 1,137,820 17,191,444 13,708,495 70,121,777 54,627,065


Floating Interest Rate 1 year or less

Fixed Interest Rate maturing in:

Over 1 to 5 years Non-interest bearing

The Credit Union's exposure to interest rate risks and the effective interest rates of financial assets and financial liabilities recognised in the statement of financial position, are as follows. The time bandings reflect

the earlier of the next contractual repricing date or the maturity date of the asset or liability.

Total carrying amount as

per the Statement of

Financial Position

Weighted Average Effective

Interest Rate

43



g) Maturity Profile of Assets and Liabilities


Financial Assets 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

Cash and cash

equivalents 6,927,647 4,339,324 - - - - 6,927,647 4,339,324 6,927,647 4,339,324

Receivables from other

Financial Institutions 11,051,380 5,014,591 4,099,818 1,023,221 3,754,807 6,069,007 - - 18,906,005 12,106,819 18,514,099 11,537,009

Loans and Advances 2,525,743 2,304,539 4,343,440 4,134,692 20,971,358 19,815,404 42,763,784 35,720,552 70,604,325 61,975,187 48,473,402 43,310,948

Total Financial Assets 20,504,770 11,658,454 8,443,258 5,157,913 24,726,165 25,884,411 42,763,784 35,720,552 96,437,977 78,421,330 73,915,148 59,187,281

Financial Liabilities

Deposits 57,400,591 44,068,934 9,371,354 7,930,222 3,092,699 1,163,269 - - 69,864,644 53,162,425 69,454,200 52,823,279

Total 57,400,591 44,068,934 9,371,354 7,930,222 3,092,699 1,163,269 - - 69,864,644 53,162,425 69,454,200 52,823,279


Total Cash flows

Total Carrying Amount per

Statement of Financial

PositionWithin 3 months From 3 to 12 months From 1 to 5 years Beyond 5 years

Monetary assets and liabilities have different maturity profiles depending on the contractual terms, and in the case of loans the repayment amount and frequency. The table below shows the period in which the

different monetary assets and liabilities will mature and be eligible for renegotiation or withdrawal. In the case of loans, the table shows the period over which the principal outstanding will be repaid based on the

remaining period to the repayment date assuming contractual repayments are maintained, and is subject to change in the event repayment conditions are varied. Financial assets and liabilities are at the

undiscounted values (including future interest expected to be earned or paid). Accordingly, these values will not agree to the carrying amounts of the Statement of Financial Position.

44




h) Financial Instruments Fair Value

-

-

-

-

-

-

-

Financial assets where the carrying amount exceeds net fair values have not been written down as the Credit

Union intends to hold these assets to maturity.

The Credit Union has assessed that at balance date, the carrying amount of all financial instruments

approximates fair value.

Cash and liquid assets due from other financial instruments: The carrying amount

approximates fair value because of their short-term to maturity or because they are receivable on

demand.

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.

The following methods and assumptions are used to determine the net fair values of financial assets and

liabilities:

Other financial liabilities: This includes interest payable and trade payables for which the carrying

amount is considered to be a reasonable estimate of net fair value.

Short term borrowings: The carrying amount approximates fair value because of their short-term

to maturity.

Long-term borrowings: The fair values of long-term borrowings are estimated using discounted

cash flow analysis, based on incremental borrowing rates for similar types of borrowing

arrangements.

The Credit Union has assessed it own credit risk in regards to the fair value of deposits, and has

assessed that no material valuation adjustment is required based on the capital management

system utilised by the Credit Union as outlined at note 20(b).

Loans and advances: All of the Credit Union's loans are variable rate loans. The carrying amount

of these loans is considered to approximate fair value. The net fair value of impaired loans was

calculated by discounting expected cash flows using a rate which includes a premium for the

uncertainty of the flows.

Deposits from members: The fair value of call and variable rate deposits, and fixed rate deposits,

is the amount shown in the statement of financial position. The carrying amount approximates fair

value because of the short-term to maturity of these deposits. The maximum term for fixed term

deposits accepted by the Credit Union is 36 months.

Fair value is required to be disclosed where financial instruments are not measured at fair value in the

statement of financial position. However, disclosure of fair value is not required when the carrying amount is a

reasonable approximation of fair value.

45

NOTE 21. FAIR VALUE MEASUREMENT

Fair Value Hierarchy

Level 1:

Level 2:

Level 3:

2017 Level 1 Level 3

$ $

Asset measured at fair value

Land and buildings - -

Investment properties - 155,000

Total assets - 155,000

2016 Level 1 Level 3

$

Asset measured at fair value

Land and buildings - -

Investment properties - 295,000

Total assets - 295,000

Valuation techniques for fair value measurements categorised with level 2 and level 3.

Level 3 assets and liabilities

Balance at 30 June 2016

Additions

Depreciation expense

Revaluation increment/(decrement) (140,000) (140,000)

Balance at 30 June 2017

- Rental amount (allowing $29,372 rent per annum, or $112 per m² per annum)

- Rental yield (allowing for 11% for the older style commercial premises)

Long-term vacancy rate (assuming full occupancy, based on current lease arrangements)

- Rental growth & discount rate - minimal impact when considered together

- Required repairs for the property

- Additional value attributable to the storage available in flats based on a comparative sales basis

The level 3 unobservable inputs in regards to lease capitalisation basis for investment properties are:

Any changes in the above inputs would have a different impact on the profit of the Credit Union, as investment

properties are held at fair value. Refer to Note 16.


The following table highlights the Credit Union's asset and liabilities, measured or disclosed at fair value, using a three

level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:

Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at

the measurement date

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either

directly or indirectly

295,000 295,000

Unobservable inputs for the asset or liability

Level 2

$

Total

$

Level 2 Total

$

2,634,082

-

2,634,082

155,000

2,634,082

155,000

2,789,082

2,013,603 2,013,603

- 295,000

2,013,603 2,308,603

The Credit Union has assessed that at balance date, the carrying amount of all financial instruments approximates fair

value. Refer to Note 20(h).

Investment Properties Total

Movements in level 2 and level 3 assets and liabilities during the current and previous financial year are as set out

below:

Land and buildings have been valued based on similar assets, location and market conditions.

Investment properties have been valued on a lease capitalisation basis supported by comparable sales.

$ $

- -

- -

155,000

46


NOTE 22. RECONCILIATION OF CASH FROM OPERATING ACTIVITIES

2017 2016

$ $

Profit after income tax (564,503) 75,945

Loss/(gain) on disposal of fixed assets (4,809) (2,204)

Proceeds for intangible assets - -

Add/(Less) non cash items:

Depreciation 235,395 133,473

Charges to Employee Benefits 14,426 16,991

Charge for bad debts 1,298 40,615

Deferred loan establishment fees (1,518) (7,262)

Land & buildings fair value adjustment 623,254 -

Investment property fair value adjustment 140,000 -

Impairment - unlisted shares 10,000 -

Changes in assets/liabilities

(Increase)/decrease in member loans (net) (5,182,258) (126,648)

Increase/(decrease) in member deposits (net) 16,630,921 1,068,246

(Increase)/decrease in sundry debtors 24,021 (34,965)

(Increase)/decrease in prepayments (15,074) 14,093

Increase/(decrease) in creditors (exc.capital creditors) (128,265) 59,219

(Increase)/decrease in deferred tax assets (81,017) (15,932)

Increase/(decrease) in current tax payable (49,746) 54,009

Increase/(decrease) in deferred tax liability (11,225) (6,258)

11,640,900 1,269,322

a) Cash flows presented on a net basis

Cash flows arising from the following activities are presented on a net basis in the statement of cash flows:

(i) member deposits to and withdrawals from deposit accounts

(ii) borrowings and repayments on loans, advances and other receivables

(iii) receivables from other financial institutions

Bank Overdraft Facility

The balance of the utilised portion of the facility at 30th June, 2017 was $Nil (2016: Nil).

From 21st November 2016 the Credit Union is now required to maintain a separate security deposit with CUSCAL for

$500,000.


Reconciliation of cash from operations to

accounting profit

The Credit Union has an overdraft facility to the extent of $500,000 (2016: $500,000) provided by CUSCAL Ltd and

incurs interest at 5.50% (2016: 5.75%).

Add/(Less) items classified as investing/financing activities:

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NOTE 23. KEY MANAGEMENT PERSONNEL (KMP)

The Directors and key management personnel of The Broken Hill Community Credit Union Ltd at any time

during the period were:

Non-Executive Directors Executives

Allan Keith Carter Andrew John Pellizzer General Manager

Judith Eileen Hoare Louise Caroline Hunt Assistant General Manager

Gary David Oldman Tracy Lee Harman Risk & Compliance Manager

William Anthony Hiscox Christopher Day Business Development Manager

Kym John Visser Kristy Ann Ryan Business Development Manager

Lorelle Emmett (Kristy ceased employment effective 13th February 2017)

Gary Edward Crase

REMUNERATION OF KEY MANAGEMENT PERSONNEL (KMP)

2017 2016

$ $

Short term employment benefits 593,193 569,698

Other long term employment benefits 18,335 16,522

Post employment benefits 52,613 52,409

664,141 638,629

The Credit Union does not pay any share-based payments to KMP.

LOANS TO KEY MANAGEMENT PERSONNEL

Details regarding the aggregate of loans made to key management personnel at balance date are as

follows:

2017 2016

$ $

Loans to key management personnel 1,202,266 1,179,517

All loans to key management personnel and their related parties by the Credit Union have been made in the

normal course of business and on the normal commercial terms and conditions which applied to members

for each type of loan. There are no loans to key management personnel or their related parties which are

considered impaired.

Loans totalling $118,221 (2016 $80,135) were made to key management personnel during the year

2017 2016

$

Interest received on loans to key management personnel 64,763 67,173

DEPOSITS FROM KEY MANAGEMENT PERSONNEL AND OTHER RELATED PARTIES

2017 2016

Total value term and savings deposits from key management $ $

personnel 231,605 167,085

230 334

Public Disclosure of Remuneration

Total interest paid on deposits to key management personnel (cash

basis)

The Credit Union's policy for receiving deposits from key management personnel and their related parties is that all

transactions are approved and deposits accepted on the same terms and conditions which applied to members for

each type of deposit.

In accordance with the APS 330 Public Disclosure requirements, the Credit Union is required to include both

qualitative and quantitative disclosures for senior managers and material risk-takers in the Regulatory Disclosure

secion on their website.


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NOTE 23. KEY MANAGEMENT PERSONNEL (KMP) (Continued)

Key Management Personnel Transaction 2017 2016

$ $

K Visser Legal services 86 465

2017 2016

$ $

Current receivables - -

Other receivables - -

Current payables - -

Trade and other payables - -

NOTE 24. FINANCIAL COMMITMENTS

2017 2016

a) Outstanding loan commitments $ $

Loans approved but not funded 1,030,995 1,090,418

b) Undrawn loan facilities

Total value of facilities approved 5,197,915 2,662,510

Less: Amounts advanced (3,693,547) (1,376,818)

Net Undrawn value 1,504,368 1,285,692

Total Loan Commitments 2,535,363 2,376,110

A number of these entities transacted with the Credit Union in the reporting period. The terms and conditions of the

transactions with key management personnel and their related parties were no more favourable than those available,

or which might reasonably be expected to be available, on similar transactions to non-key management personnel

related entities on an arm's length basis.

These commitments are contingent on

members maintaining credit standards and

ongoing repayment terms on amounts drawn.


Amounts receivable and payable to key management personnel and other related parties at reporting date arising from

these transactions were as follows:

A number of key management persons of the Credit Union, or their related parties, hold positions in other entities that

result in them having control or significant influence over the financial or operating policies of these entities.

Kym Visser is a solicitor with the law firm Visser & Walton Solicitors Pty Ltd. The Credit Union uses this law firm for

legal services across the financial year.

Loan facilities available to members for

undrawn loans, overdrafts and line of credit

loans are as follows:

The aggregate amounts recognised during the year relating to key management personnel and other related parties

were as follows:

From time to time the key management personnel of the Credit Union and their related parties may conduct banking

related transactions with the Credit Union. These transactions are on the same terms and conditions as those entered

into by other members. Each Director holds one share in the Credit Union in their capacity as a member.

OTHER KEY MANAGEMENT PERSONNEL TRANSACTIONS WITH THE CREDIT UNION

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NOTE 24. FINANCIAL COMMITMENTS (Continued)

c) Operating Lease Receivables

Non-cancellable operating lease commitments (including GST) on these premises are as follows:

2017 2016

$ $

Not later than one year:

Investment Property 30,969 30,349

Other Property 5,667 867

Later than one year and not later than five years:

Investment Property 61,903 3,734

Other Property 2,800 -

101,339 34,950

2017 2016

d) Capital Expenditure Commitments $ $

Capital expenditure commitments contracted for the purchase of:

- Property, plant & equipment (not later than 1 year) - 665,202

- Intangibles (not later than 1 year) - -

- 665,202

NOTE 25. CONTINGENT LIABILITIES

Guarantees

Liquidity Support Scheme

The Credit Union is a member of the Credit Union Financial Support Scheme Limited (CUFSS), a company limited by

guarantee, established to provide financial support to member Credit Unions in the event of a liquidity or capital

problem. As a member the Credit Union is committed to maintaining 3% of total assets as deposits with CUSCAL Ltd.


Under the terms of the Industry Support Contract (ISC), the maximum call for each participating Credit Union would be

3% of the Credit Union's total assets. This amount represents the participating Credit Union's irrevocable commitment

under the ISC. At the balance date there were no loans issued under this arrangement.

The Credit Union receives rental income from various tenants who lease land and buildings and investment property

owned by the Credit Union.

The Credit Union has issued guarantees on behalf of members for the purpose of lease and trade credit facilities. The

amounts of the guarantees are $10,000. The guarantee is payable only on the member defaulting on the contractual

repayments to the lessor/supplier. The guarantees are fully secured against deposit liabilities.

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NOTE 26. OUTSOURCING ARRANGEMENTS

The Credit Union has arrangements with other organisations to facilitate the supply of services to members.

a) CUSCAL

b) Data Action Pty Ltd

This entity operates a computer bureau which operates the main Credit Union processing system.

NOTE 27. EVENTS OCCURRING AFTER BALANCE DATE

NOTE 28. SEGMENT INFORMATION

NOTE 29. CREDIT UNION DETAILS

The registered office of the Credit Union is at:

2 Chloride Street

Broken Hill NSW 2880

The financial institution operates predominantly within one business and geographical segment, being the finance

industry in Australia, primarily within Broken Hill, New South Wales.

CUSCAL is an Approved Deposit Taking Institution registered under the Corporations Act 2001 and the Banking Act.

The Credit Union has equity in the company. This organisation:

(iii) provides Treasury and money market facilities to the Credit Union. The Credit Union invests a part of its liquid

assets with CUSCAL to comply with the Liquidity Support Scheme requirements.

(ii) operates the computer network used to link Redicards and Visa cards operated through Reditellers and other

approved ATM providers to the Credit Union's EDP system

There were no significant events subsequent to balance date.

(i) provides the license rights Visa Card in Australia and settlement for other institutions for ATM, Visa card and cheque

transactions, direct entry transactions, as well as the production of Visa and Redicards for use by members.


51

Crowe Horwath Albury is a member of Crowe Horwath International, a Swiss verein. Each member firm of Crowe Horwath is a separate and independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees.

53

Crowe Horwath Albury

ABN 16 673 023 918 Member Crowe Horwath International

Audit and Assurance Services 491 Smollett Street Albury NSW 2640 Australia

PO Box 500 Albury NSW 2640 Australia

Tel 02 6021 1111 Fax 02 6041 1892

www.crowehorwath.com.au

Broken Hill Community Credit Union Ltd

Independent Auditor’s Report to the Members of Broken Hill Community Credit Union Ltd

Opinion

We have audited the financial report of Broken Hill Community Credit Union Ltd (the Credit Union),

which comprises the statement of financial position as at 30 June 2017, the statement of profit or loss

and other comprehensive income, the statement of changes in members’ equity and the statement of

cash flows for the year then ended, and notes to the financial statements, including a summary of

significant accounting policies, and the directors’ declaration.

In our opinion, the accompanying financial report of the Credit Union is in accordance with the

Corporations Act 2001, including:

(a) giving a true and fair view of the Credit Union’s financial position as at 30 June 2017 and

of its financial performance for the year then ended; and

(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.

Basis for Opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under

those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial

Report section of our report. We are independent of the Credit Union in accordance with the auditor

independence requirements of the Corporations Act 2001 and the ethical requirements of the

Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional

Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also

fulfilled our other ethical responsibilities in accordance with the Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis

for our opinion.

Other Information

The directors are responsible for the other information. The other information comprises the directors’

report included in the Credit Union’s annual report for the year ended 30 June 2017, but does not

include the financial report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and accordingly we do not

express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information

and, in doing so, consider whether the other information is materially inconsistent with the financial

report or our knowledge obtained in the audit or otherwise appears to be materially misstated.

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If, based on the work we have performed, we conclude that there is a material misstatement of this

other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Report

The directors of the Credit Union are responsible for the preparation of the financial report that gives a

true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001

and for such internal control as the directors determine is necessary to enable the preparation of the

financial report that gives a true and fair view and is free from material misstatement, whether due to

fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the Credit

Union to continue as a going concern, disclosing, as applicable, matters related to going concern and

using the going concern basis of accounting unless the directors either intend to liquidate the Credit

Union or to cease operations, or have no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is

free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that

includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that

an audit conducted in accordance with the Australian Auditing Standards will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered material

if, individually or in the aggregate, they could reasonably be expected to influence the economic

decisions of users taken on the basis of this financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing

and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar3.pdf. This

description forms part of our auditor’s report.

CROWE HORWATH ALBURY

BRADLEY D BOHUN

Partner

Dated at Albury 26th day of September 2017.

http://www.auasb.gov.au/auditors_files/ar3.pdf

annual financial report...applied for the entire financial year ended 30 june 2017. the constitution...

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