TERRITORY BANKING ACCOUNT
Objectives
The Territory Banking Account objectives are to effectively manage capital market functions through the maximisation of returns on investments, within relevant risk tolerances; to achieve competitive borrowing rates commensurate with the Territory’s credit rating; and to develop effective financial risk management strategies.
Treasury provides services to the Government including financial asset and liability management through the establishment of investment and borrowing policies and objectives, and the coordination and implementation of investment and borrowing activities.
Treasury, through the Territory Banking Account (TBA), recognises and manages the general government’s investment assets and debt liabilities.  Revenues on behalf of the Territory are transferred to the TBA and fortnightly appropriation disbursements are made to agencies from the TBA.
2010‑11 Priorities
Strategic and operational issues to be pursued in 2010-11 include:
•	managing the General Government Sector’s debt portfolio and associated risks;
•	managing, monitoring and reviewing, as necessary, the TBA investment portfolio in accordance with the established investment policies; and
•	undertaking policy research and development for the implementation of value-adding investment strategies for the TBA investment portfolio.
Business and Corporate Strategies
Assets are managed in accordance with guidelines set out in the Financial Management (Investment and Borrowing) Guidelines 2005.  These guidelines set investment and credit risk parameters for general government investments.  The investment performance of the institutional funds managers contracted to manage investments is also monitored and reviewed.  Monitoring of investment performance is undertaken in conjunction with the Territory’s investment adviser and the Investment Advisory Board.
Debt is managed in accordance with a debt management policy that balances interest rate risk and budget volatility.  This involves ensuring that debt is managed within tolerances set out in the current policy.
Estimated Employment Level
2008‑09
Actual 		2009-10
Budget	2009-10
Est. Outcome	2010-11
Budget	
-	Staffing (FTE)1	-	-	-	
Note:
1.	The officers responsible for undertaking the functions of the TBA are employees of the Department of Treasury.

Strategic Indicators
Strategic Indicator 1
Investment Returns Meeting or Exceeding Benchmark
The investment performance is measured against a standard market benchmark.  The conservative policy for general government investments is such that returns equal to or marginally in excess of the benchmark are expected.

Strategic Indicator 2
Borrowing Portfolio in Line with Benchmark
General government borrowings are managed to minimise excess interest rate and market risk.  The strategy for managing the general government debt portfolio is to strike an appropriate balance between the risks associated with debt that has a floating (variable) interest rate and is therefore exposed to volatility in market interest rates and the costs associated with a fixed rate of interest.
The strategic indicator for the management of the debt portfolio is a maximum of 30 per cent of the general government debt portfolio be exposed to floating (variable) interest rates.

Output Classes
	Total Cost
	Payment for Expenses on Behalf of the Territory	
	2009-10
Est. Outcome
$’000	2010-11
Budget
$’000 	2009-10
Est. Outcome
$’000 	2010-11
Budget
$’000 	
EBT 1: 
Territory Banking Account	3,723,283	3,987,634	11,376	11,839	
Output EBT 1:  Territory Banking Account	3,723,283	3,987,634	11,376	11,839	
Description
This output includes the management of the investment and borrowing activities.
The key outputs to be delivered in 2010-11 include:
•	investment management — maximising the return on investments within acceptable risk tolerances;
•	borrowing management — achieving competitive borrowing rates commensurate with the ACT Government’s credit rating; and
•	risk management — developing and maintaining effective financial risk management strategies.

Accountability Indicators
	2009‑10
Targets	2009-10
Est. Outcome	2010-11
Targets	
1.1:  Territory Banking Account	
a.	Difference between the net investment earnings rate and the benchmark is to be > 01	> 0	1.55	> 0	
b.	Exposure of debt portfolio to floating interest rates	< 30%	19.60%	< 30%	
Note:
1.	The cash enhanced fund component of the investment portfolio has a large exposure to debt instruments.  Following a recovery in credit markets significant capital gains are now being recognised.  The benchmark index does not include securities with similar credit exposure.

Changes to Appropriation
Changes to Appropriation - Territorial						
 	2009-10	2010-11	2011-12	2012-12	2013-14	
Payment for Expenses on Behalf of Territory	Est. Out.	Budget	Estimate	Estimate	Estimate	
 	$'000	$'000	$'000	$'000	$'000	
						
2009-10 Budget	10,671	10,939	31,079	31,052	31,052	
						
2010-11 Budget Technical Adjustments						
Interest Rate Adjustment	712	1,679	4,871	4,871	4,886	
Interest on Borrowings	(7)	(779)	(4,273)	1,978	1,820	
						
2010-11 Budget	11,376	11,839	31,677	37,901	37,758	

Changes to Appropriation - Territorial						
 	2009-10	2010-11	2011-12	2012-12	2013-14	
Capital Injections	Est. Out.	Budget	Estimate	Estimate	Estimate	
 	$'000	$'000	$'000	$'000	$'000	
						
2009-10 Budget	214	214	214	214	214	
						
2010-11 Budget	214	214	214	214	214	

Territory Banking Account
Statement of Income and Expenses on Behalf of the Territory
  2009-10			  2009-10	   2010-11		  2011-12	    2012-13	  2013-14		
    Budget			Est.Outcome	   Budget	     Var	  Estimate	    Estimate	  Estimate		
    $'000			    $'000	   $'000	      %	    $'000	     $'000	   $'000		
		Income								
		Revenue								
10,671		Payment for Expenses on Behalf of Territory	11,376	11,839	4	31,677	37,901	37,758		
89,493		Interest	97,245	107,713	11	109,861	124,228	129,452		
120,134		Other Revenue	151,146	123,526	-18	111,747	101,728	92,209		
3,095,043		Transfer Revenue	3,241,986	3,230,322	..	3,405,782	3,612,403	3,726,244		
3,315,341		Total Revenue	3,501,753	3,473,400	-1	3,659,067	3,876,260	3,985,663		
		Gains								
0		Total Gains	0	0	-	0	0	0		
3,315,341		Total Income	3,501,753	3,473,400	-1	3,659,067	3,876,260	3,985,663		
		Expenses								
77,119		Borrowing Costs	88,641	101,011	14	125,814	140,848	140,923		
855		Other Expenses	1,572	362	-77	262	287	287		
3,697,460		Transfer Expenses	3,633,070	3,886,261	7	3,697,405	3,619,659	3,608,181		
3,775,434		Total Ordinary Expenses	3,723,283	3,987,634	7	3,823,481	3,760,794	3,749,391		
-460,093		Operating Result	-221,530	-514,234	132	-164,414	115,466	236,272		
0		Increase/(Decrease) in Other Reserves	2,647	-1	-100	-3	1	1		
0		Total Other Comprehensive Income	2,647	-1	-100	-3	1	1		
-460,093		Total Comprehensive Income	-218,883	-514,235	-135	-164,417	115,467	236,273		

Territory Banking Account
Statement of Assets and Liabilities on Behalf of the Territory
    Budget			Est.Outcome	    Planned		   Planned	   Planned	   Planned		
as at 30/6/10			as at 30/6/10	as at 30/6/11	   Var	as at 30/6/12	as at 30/6/13	as at 30/6/14		
   $'000			   $'000	     $'000	    %	    $'000	    $'000	    $'000		
		Current Assets								
684		Cash and Cash Equivalents	5,000	5,000	-	5,087	7,305	4,770		
301,075		Receivables	344,520	360,708	5	335,968	366,082	431,605		
412,354		Investments	990,926	428,639	-57	450,190	565,724	780,170		
2,149		Other	1,476	1,476	-	1,476	1,476	1,476		
716,262		Total Current Assets	1,341,922	795,823	-41	792,721	940,587	1,218,021		
		Non Current Assets								
1,032,740		Receivables	965,185	1,306,109	35	1,465,315	1,454,764	1,441,643		
190,285		Investments	217,659	158,653	-27	154,841	150,805	146,696		
1,223,025		Total Non Current Assets	1,182,844	1,464,762	24	1,620,156	1,605,569	1,588,339		
1,939,287		TOTAL ASSETS	2,524,766	2,260,585	-10	2,412,877	2,546,156	2,806,360		
		Current Liabilities								
7,709		Payables	4,061	4,061	-	4,061	4,061	4,061		
467,878		Interest Bearing Liabilities	871,067	580,897	-33	546,912	576,965	616,033		
475,587		Total Current Liabilities	875,128	584,958	-33	550,973	581,026	620,094		
		Non Current Liabilities								
1,220,606		Interest Bearing Liabilities	1,094,965	1,632,354	49	1,980,779	1,966,269	1,948,863		
9,504		Other	1,632	1,632	-	1,632	1,632	1,632		
1,230,110		Total Non Current Liabilities	1,096,597	1,633,986	49	1,982,411	1,967,901	1,950,495		
1,705,697		TOTAL LIABILITIES	1,971,725	2,218,944	13	2,533,384	2,548,927	2,570,589		
233,590		NET ASSETS	553,041	41,641	-92	-120,507	-2,771	235,771		
		REPRESENTED BY FUNDS EMPLOYED								
243,128		Accumulated Funds	554,742	43,343	-92	-118,802	-1,067	237,474		
-9,538		Reserves	-1,701	-1,702	..	-1,705	-1,704	-1,703		
233,590		TOTAL FUNDS EMPLOYED	553,041	41,641	-92	-120,507	-2,771	235,771		

Territory Banking Account
Budgeted Statement of Cash Flows on Behalf of the Territory
  2009-10			  2009-10	   2010-11	Var	  2011-12	    2012-13	  2013-14		
    Budget			Est.Outcome	   Budget	%     Var	  Estimate	    Estimate	  Estimate		
    $'000			    $'000	   $'000	      %	    $'000	     $'000	   $'000		
		CASH FLOWS FROM OPERATING ACTIVITIES								
		Receipts								
10,671		Cash from Government for EBT	11,376	11,839	4	31,677	37,901	37,758		
88,640		Interest Received	123,687	99,489	-20	101,244	115,609	120,727		
125,115		Other Revenue	123,333	123,917	..	111,398	101,374	92,013		
3,114,460		Territory Receipts transferred from Agencies	3,253,113	3,232,817	-1	3,374,990	3,600,887	3,679,050		
3,338,886		Operating Receipts	3,511,509	3,468,062	-1	3,619,309	3,855,771	3,929,548		
		Payments								
78,307		Borrowing Costs	89,543	92,889	4	117,204	132,238	132,215		
75		Other	103	32	-69	24	26	26		
56,709		Payments to PTE Agencies for Outputs	57,419	53,812	-6	51,896	51,886	50,758		
2,147,324		Payments to GGS Agencies for Outputs	2,150,567	2,314,013	8	2,342,567	2,421,940	2,509,267		
526,476		Payments to Agencies for EBT	536,734	504,943	-6	558,678	621,308	665,973		
2,808,891		Operating Payments	2,834,366	2,965,689	5	3,070,369	3,227,398	3,358,239		
529,995		NET CASH INFLOW/ (OUTFLOW) FROM OPERATING ACTIVITIES	677,143	502,373	-26	548,940	628,373	571,309		
		CASH FLOWS FROM INVESTING ACTIVITIES								
		Receipts								
789,323		Proceeds from Sale/Maturities of Investments	263,663	621,293	136	0	0	0		
16,734		Repayment of Advance	20,522	19,307	-6	91,114	19,988	22,487		
0		Other	41,575	0	-100	33,838	26,166	32,324		
3,366		Capital Distributions from Government Agencies	1,423	2,473	74	1,907	1,907	1,907		
809,423		Investing Receipts	327,183	643,073	97	126,859	48,061	56,718		
		Payments								
0		Purchase of Investments	0	0	-	17,739	111,499	210,336		
278,000		Advances Issued to Government Agencies	338,000	350,000	4	167,000	0	0		
985,382		Capital Payments to Government Agencies	905,459	1,021,798	13	759,593	540,375	398,033		
310,840		Other Payments	0	304,527	-	0	2,600	0		
1,574,222		Investing Payments	1,243,459	1,676,325	34	944,332	654,474	608,369		
-764,799		NET CASH INFLOW/ (OUTFLOW) FROM INVESTING ACTIVITIES	-916,276	-1,033,252	-13	-817,473	-606,413	-551,651		
		CASH FLOWS FROM FINANCING ACTIVITIES								
		Receipts								
214		Capital Injection from Government	214	214	-	214	214	214		
235,251		Borrowings Received	311,934	531,219	70	268,960	0	0		
235,465		Financing Receipts	312,148	531,433	70	269,174	214	214		
		Payments								
555		Repayment of Borrowings	554	554	-	554	19,956	22,407		
555		Financing Payments	554	554	-	554	19,956	22,407		
234,910		NET CASH INFLOW/ (OUTFLOW) FROM FINANCING ACTIVITIES	311,594	530,879	70	268,620	-19,742	-22,193		
106		NET INCREASE/ (DECREASE) IN CASH HELD	72,461	0	-100	87	2,218	-2,535		
578		CASH AT BEGINNING OF REPORTING PERIOD	-67,461	5,000	107	5,000	5,087	7,305		
684		CASH AT THE END OF THE REPORTING PERIOD	5,000	5,000	-	5,087	7,305	4,770		
Territory Banking Account.
Statement of Changes in Equity on Behalf of the Territory
    Budget			Est.Outcome	    Planned		   Planned	   Planned	   Planned		
as at 30/6/10			as at 30/6/10	as at 30/6/11	   Var	as at 30/6/12	as at 30/6/13	as at 30/6/14		
   $'000			   $'000	     $'000	    %	    $'000	    $'000	    $'000		
		Opening Equity								
696,169		Opening Accumulated Funds	771,277	554,742	-28	43,343	-118,802	-1,067		
-9,541		Opening Other Reserve	-4,348	-1,701	-61	-1,702	-1,705	-1,704		
686,628		Balance at the Start of the Reporting Period	766,929	553,041	-28	41,641	-120,507	-2,771		
		Comprehensive Income								
-460,093		Operating Result for the Period	-221,530	-514,234	132	-164,414	115,466	236,272		
3		Increase/(Decrease) in Other Reserves	2,647	-1	-100	-3	1	1		
-460,090		Total Comprehensive Income	-218,883	-514,235	135	-164,417	115,467	236,273		
0		Total Movement in Reserves	0	0	-	0	0	0		
		Transactions Involving Owners Affecting Accumulated Funds								
214		Capital Injections	214	214	-	214	214	214		
3,514		Capital Distributions	1,572	2,621	67	2,055	2,055	2,055		
3,324		Increase/(Decrease) in Net Assets due to Admin Restructure	3,209	0	-100	0	0	0		
7,052		Total Transactions Involving Owners Affecting Accumulated Funds	4,995	2,835	-43	2,269	2,269	2,269		
		Closing Equity								
243,128		Closing Accumulated Funds	554,742	43,343	-92	-118,802	-1,067	237,474		
-9,538		Closing Other Reserve	-1,701	-1,702	..	-1,705	-1,704	-1,703		
233,590		Balance at the End of the Reporting Period	553,041	41,641	-92	-120,507	-2,771	235,771		

Notes to the Budget Statements
Many of the variations within the TBA budget statements are driven by agency activity during and between financial years.  This will be disclosed within the relevant explanations below.
Significant variations are as follows:
Statement of Income and Expenses on Behalf of the Territory
•	payment for expenses on behalf of the Territory:  represents the appropriation paid to meet the debt servicing expenses incurred on general government borrowings:
–	the actual debt servicing interest costs are directly influenced by prevailing market interest rates; and
–	variances reflect the difference between budgeted interest rates and actual interest rates.
•	interest:  represents investment interest returns received from banks and fund managers and interest paid by agencies for loans provided from the TBA:
–	the net increase of $7.752 million in the 2009‑10 estimated outcome from the original budget is due mainly to higher returns as a result of increases to cash rates during the year; and
–	the increase of $10.468 million in the 2010‑11 Budget from the 2009‑10 estimated outcome comprises a decrease in investment earnings due to a lower level of funds to be held on investment during the year ($17.596 million), and a net increase in loan interest mainly due to new ACTEW Corporation borrowings ($27.885 million).
•	other revenue:  represents market gains from investments and notional CSS and PSS employer superannuation contributions from agencies:
–	the net increase of $31.012 million in the 2009-10 estimated outcome from the original budget is mainly due to capital gains from investments resulting from the improvement in credit markets.  The level of these gains is an irregular event for the cash enhanced investment portfolio and is a result of the credit crisis experienced during 2008-09; and
–	the net decrease of $27.620 million in the 2010-11 Budget from the 2009-10 estimated outcome reflects a return to normal investment returns for the investment portfolio with no significant capital gains expected ($26.879 million) and a reduction in agency employer superannuation contributions ($0.741 million).  Variances from agency employer superannuation contributions are driven by agency activities.
•	transfer revenue:  represents the transfer from agencies of revenue received on behalf of the Territory and includes taxes, fees, fines and grants.  Variances are driven by agency activity.
•	borrowing costs:  represents interest payments made in respect of borrowings for the general government sector and ACTEW Corporation, and investment interest payments to agencies:
–	the net increase of $11.522 million in the 2009‑10 estimated outcome from the original budget mainly reflects higher payments of investment interest to agencies than originally anticipated due to a higher return rate on funds under investment ($21.237 million), partially offset by lower interest costs on borrowings due to lower variable interest rates ($9.715 million); and
–	the net increase of $12.370 million in the 2010‑11 Budget from the 2009‑10 estimated outcome is mainly due to increased interest payments for borrowings undertaken on behalf of ACTEW Corporation ($26.681 million), partially offset by lower payments of investment interest to agencies due to lower balances of funds under investment ($14.311 million).
•	other expenses:  represents investment related management fees for the investments managed through the TBA and unrealised investment capital losses:
–	the increase of $0.717 million in the 2009‑10 estimated outcome from the original budget is due to investment management fees from higher balances of funds under investment ($0.275 million) and unrealised investment capital losses ($0.442 million); and
–	the decrease of $1.210 million in the 2010‑11 Budget from the 2009‑10 estimated outcome reflects a return to normal investment returns for the investment portfolio with no significant capital losses expected ($0.442 million) and a reduction in investment related management fees due to a lower level of funds under investment ($0.768 million).
•	transfer expenses:  represents the transfer of appropriated funds to agencies for outputs, expenditure on behalf of the Territory and capital injections.  Variances are driven by agency activity.
Statement of Assets and Liabilities on Behalf of the Territory
•	cash and cash equivalents:  the increase of $4.316 million in the 2009‑10 estimated outcome from the original budget reflects the amount of cash held at bank as opposed to being held under investment.
•	current and non current receivables:
–	the net decrease of $24.110 million in the 2009‑10 estimated outcome from the original budget is mainly due to a decrease in loans receivable from ACTEW Corporation ($67.555 million), partially offset by an increase in trade debtors receivable from agencies ($46.482 million); and 
–	the increase of $357.112 million in the 2010‑11 Budget from the 2009‑10 estimated outcome is mainly due to an increase in trade debtors receivable from agencies ($14.743 million) and an increase in loans receivable from ACTEW Corporation ($339.130 million).
•	current and non current investments:
–	the increase of $605.946 million in the 2009‑10 estimated outcome from the original budget is due to net higher than expected levels of investment, comprising of TBA ($249.435 million), the cash investments of the Superannuation Provision Account which are invested through the TBA ($308.623 million) and agencies ($47.888 million); and
–	the decrease of $621.293 million in the 2010‑11 Budget from the 2009‑10 estimated outcome predominantly reflects a reduction in the cash investments of the Superannuation Provision Account as they are reallocated to other asset classes ($308.623 million) and a reduction in the cash investments of the TBA to meet funding commitments.
•	other non current liabilities:  represents the fair value of the interest rate swaps transacted to manage the interest rate and duration of the general government component of the borrowing portfolio.  The decrease of $7.872 million in the 2009-10 estimated outcome from the original budget reflects the impact on the fair value of the interest rates swaps as a result of  increases to interest rates during the 2009-10 year;
•	current and non current interest bearing liabilities:  comprises agencies’ investment deposits with the TBA and external market borrowings.  External borrowings include electronic promissory notes and indexed annuity bonds.  The 2009‑10 estimated outcome comprises $1,214.100 million external borrowings and $751.932 million agency investments.  The 2010‑11 Budget comprises $1,756.804 million external borrowings and $456.447 million agency investments.
Statement of Changes in Equity on behalf of the Territory 
Variances in the statement are explained in the notes above.