good shepherd microfinance abn: 36 151 124...

GOOD SHEPHERD MICROFINANCE

ABN: 36 151 124 408

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

Good Shepherd MicrofinanceABN 36 151 124 408

Contents30 June 2012

Page

Financial Statements

Directors' Report 1 - 5

Auditor's Independence Declaration under Section 307C of the Corporations Act 2001 6

Statement of Comprehensive Income 7

Statement of Financial Position 8

Statement of Changes in Equity 9

Statement of Cash Flows 10

Notes to the Financial Statements 11 - 19

Directors' Declaration 20

Independent Audit Report 21


Directors' Report30 June 2012

Your directors present their report on Good Shepherd Microfinance for the financial year ended 30 June 2012.

Directors

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

Names Position Appointed/Resigned

Rhonda Lea Cumberland Appointed 26/05/2011 - Resigned 30/06/2012

Robyn Gaye Roberts Appointed 26/05/2011 - Resigned 30/06/2012

Michael Yore Appointed 26/05/2011 - Resigned 30/06/2012

John Hutchings Appointed 26/05/2011 - Resigned 30/06/2012

John Date Appointed 26/05/2011 - Resigned 30/06/2012

Beverley Connors Appointed 26/05/2011 - Resigned 30/06/2012

Christine Nixon Chair Appointed 01/07/2012

Denice Pitt Appointed 01/07/2012

Ian Clyde Appointed 01/07/2012

John Langmore Appointed 01/07/2012

Shelley Jones Appointed 01/07/2012

Therese Ryan Appointed 01/07/2012

Vinita Godinho Appointed 01/07/2012

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

Information on directors

The names, qualification and experience of each person who has been a director during the year and to the date ofthis report are:

Rhonda Lea Cumberland

Qualifications Bachelor of Arts, Diploma of Education, Graduate DiplomaCommunity Development, Master of Social Work, Doctor ofPhilosophy

Experience CEO Welfare Agency

Robyn Gaye Roberts

Qualifications Bachelor of Arts, Diploma of Education, Bachelor of Social Work

Experience CEO Welfare Agency

Michael Yore

Qualifications Bachelor of Arts, Master of Theology, Graduate Diploma of SocialStudies

Experience Research & Development Manager

John Hutchings

Qualifications Lawyer, with significant experience in law, governance, leadership,strategic planning and implementation

Experience Lawyer

John Date

Qualifications Lawyer, with Masters degree in Canon Law

Experience Lawyer

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Information on directors continued

Beverley Connors

Qualifications Beverley Connors

Experience Religious sister. Qualified Primary School Teacher

Christine Nixon

Qualifications APM (Australian Police Medal); Masters in Public Administration(MPA) Harvard; BA Macquarie University: Diploma Labour LawSydney University, honoury doctorates

Experience Chief Commissioner of Victoria Police 2001 - 2009, Chair of VictorianBushfire Reconstruction and Recovery Authority 2009 - 2010

Denice Pitt

Qualifications Master of Business in Management

Experience CEO UCMS 2006 - 2009, CEO Aegis 2009 - 2011, CEO SwinburneOnline – 2011 to current

Ian Clyde

Qualifications LLM - Master of Law

Experience Chair Uniform Consumer Credit Code Management Committee 2004- 2009, Assistant Director for Social Policy, Consumer Affairs Victoria2008 - 2009, Chair Business Licensing Authority 2009 - 2012

John Langmore

Qualifications Bachelor of Commerce and Diploma of Social Studies University ofMelbourne and Master in Economics Monash University

Experience Director of UN Division for Social Policy & Development (NY)1996 -2001, Representative of the International Labour Organisation, Professorial fellow in the school of Social and Political SciencesUniveristy of Melbourne

Shelley Jones

Qualifications Master of Education (Melb Uni), Bachelor of Commerce (MelbUni),Bachelor of Eduction (Melb Uni)

Experience Executive HR Leadership roles at Commonwealth Bank of Australia1998 - 2004, Principal Consultant at The Mettle Group 2004 - 2007,General Manager HR for Ok Tedi Mining 2007 - 2010, Official Visitorto NSW Department of Justice, Corrective Services at Long Bay Gaol2011, Australian Civil Corps, AusAID 2011 - current

Therese Ryan

Qualifications Bachelor of Laws (LLB) - Melb; FAIM; Graduate of the AustralianInstitute of Company Directors (GAICD)

Experience VP and General Counsel for General Motors International Operations2006 - 2010, Non-Executive Director of Victorian Managed InsuranceAuthority 2010 – current, Fitted for Work 2011 – current and GoodShepherd Youth and Family Services 2010 – current

Vinita Godinho

Qualifications PhD Candidate, MBA, BSc honours

Experience Senior Leadership roles at ANZ within Risk & Business areas 1992 -2011, Principal Consultant for Financial Inclusion & ProjectManagement to the non for profit sector 2011 - present

2



Information on directors continued

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

Principal activities

The principal activity of Good Shepherd Microfinance during the financial year was was to provide a range of servicesnationally to low income individuals and communities, who have been excluded from traditional financial services,through the provision of small loans and other financial services.

The following significant changes in the nature of the principal activities occurred during the financial year:

! The company was incorporated on 26 May 2011 and started operating on 1 January 2012 therefore this financial

report is only for the period from 1 January 2012 until 30 June 2012.

Short term objectives

The company's short term objectives are to:

! Develop a whole of agency approach to delivering service to financially excluded clients; and

! Provide direct and immediate support to people on low incomes and experiencing the effects of poverty,

homelessness, abuse and unemployment by providing:

! Financial relief, through microfinance;

! Support community managed microfinance providers; and

! Training of personnel to educate and counsel people on low incomes on financial matters.

Long term objectives

The company's long term objectives are to:

! Strengthen capability and manage growth to underpin and develop our services in the provision of microfinance,

applying core Good Shepherd values and in accordance with the philosophy of the Sisters of Good Shepherd;

! Partner with those we serve, the Good Shepherd Australia New Zealand (GSANZ) network and those who join us

to further justice and systematic change;

! Develop targeted responses to new communities of need, supported by research, good practice and community

education; and

! Challenge those structures and beliefs that diminish human dignity and to constantly explore innovative and

creative ways of enabling people of all culture, religious and social backgrounds to enjoy the fullness of life.

Strategy for achieving the objectives

To achieve these objectives, the company has adopted the following strategies:

3



Strategy for achieving the objectives continued

! Implementation of the existing Good Shepherd Youth & Family Services Strategic plan incorporating a specific

microfinance strategy for the period 2010 to 2015; and

! Development of Programs, partnerships and community education to assist people to move along the financial

continuum ranging from financial crisis to financial independence and resilience. Some of the key programs are:

! NILS – A community-based program offering applicants on a low income no interest loans to the value of up

to $1,200 for essential household goods and services. Applicants must be in receipt of a current concession

card. Repayments are made in affordable amounts for a period of between 12 and 18 months. This program

not only services clients who access the service of their own accord, but provides other organisations

utilising the service, with tools, to provide an holistic approach to the client’s financial circumstances;

! StepUp – This program provides low interest loans to people on low income and holding a current

Centrelink Concession Card or receiving Family Tax Benefit Part A, through community providers across

Australia. The loan can range from $800 - $3000 for personal or household purposes and interest charged

at a fixed low rate which is to be repaid within three years; and

! Good Money – The community finance hubs offer safe, affordable and responsible finance services using a

service delivery model operating out of stand- alone retail store fronts. This program provides customers

with an integrated way of accessing financial assistance and support such as NILS, StepUp and financial

counselling (provided by local community agencies), and access to information to enhance the customers

financial capacity and increase their understanding of personal finances, all under the one roof.

How principal activities assisted in achieving the objectives

The principal activities assisted the company in achieving its objectives by:

! Undertaking research and implementing the findings in some service areas;

! Reviewing services annually with the current quality system;

! Recording 19,224 active NILS loans and 1,044 Step Up loan applications; and

! Records supporting increased take up in Indigenous clients accessing NILS services – 2072 (21.8%) ; StepUp

services – 291 (9%) compared to prior year.

Performance measures

The following measures are used within the company to monitor performance:

! Registration and accreditation to government standards and requirements;

! Administrative cost to service delivery ratio;

! Worksafe compliance around OH&S;

! Number of individuals and families and communities assisted in 2011/12; and

! Accurate and transparent management and financial reports tracking expenditure commitment to Funding

organisations.

4


Statement of Comprehensive IncomeFor the Period Ended 30 June 2012

Note

2012

$

Revenue 2 8,162,236

Transfers to other agencies (6,034,752)

Employee benefits expense (964,031)

Depreciation and amortisation expense (19,391)

Rent (108,719)

Program costs (132,698)

Computer expenses (54,530)

Corporate services (290,586)

Consulting and professional fees (186,531)

Other expenses 3 (252,561)

Total comprehensive income for the year 118,437

The accompanying notes form part of these financial statements.7


Statement of Financial PositionAs At 30 June 2012

Note

2012

$

ASSETS

CURRENT ASSETS

Cash and cash equivalents 4 32,740,979

Trade and other receivables 5 94,596

Other assets 7 65,514

TOTAL CURRENT ASSETS 32,901,089

NON-CURRENT ASSETS

Property, plant and equipment 6 201,696

TOTAL NON-CURRENT ASSETS 201,696

TOTAL ASSETS 33,102,785

LIABILITIES

CURRENT LIABILITIES

Trade and other payables 8 6,422,340

Employee benefits 10 28,118

Other liabilities 9 26,521,050

TOTAL CURRENT LIABILITIES 32,971,508

NON-CURRENT LIABILITIES

Employee benefits 10 12,840

TOTAL NON-CURRENT LIABILITIES 12,840

TOTAL LIABILITIES 32,984,348

NET ASSETS 118,437

EQUITY

Retained earnings 118,437

TOTAL EQUITY 118,437



Statement of Changes in EquityFor the Period Ended 30 June 2012

2012

Retainedearnings

$

Balance at 1 July 2011 -

Surplus for the period 118,437

Balance at 30 June 2012 118,437



Statement of Cash FlowsFor the Period Ended 30 June 2012

Note

2012

$

CASH FLOWS FROM OPERATING ACTIVITIES:

Receipts from government and other funders 37,818,762

Payments to suppliers and employees (2,179,821)

Transfers to other agencies (2,830,513)

Interest received 3,046

Other receipts 41,890

Net cash provided by (used in) operating activities 15 32,853,364

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property, plant and equipment (112,385)

Net cash used by investing activities (112,385)

CASH FLOWS FROM FINANCING ACTIVITIES:

Net increase (decrease) in cash and cash equivalents held 32,740,979

Cash and cash equivalents at beginning of year -

Cash and cash equivalents at end of financial year 4 32,740,979



Notes to the Financial StatementsFor the Period Ended 30 June 2012

The financial statements are for Good Shepherd Microfinance as an individual entity, incorporated and domiciled inAustralia. Good Shepherd Microfinance is a not-for-profit company limited by guarantee.

1 Summary of Significant Accounting Policies

Basis of preparation

The financial statements are general purpose financial statements that have been prepared in accordance withAustralian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements ofthe Australian Accounting Standards Board and the Corporations Act 2001.

Material accounting policies adopted in the preparation of these financial statements are presented below andhave been consistently applied unless otherwise stated.

The financial statements have been prepared on an accruals basis and are based on historical costs modified,where applicable, by the measurement at fair value of selected non-current assets, financial assets andfinancial liabilities.

(a) Revenue

The company recognises revenue when the amount of revenue can be reliably measured, it is probable thatfuture economic benefits will flow to the entity and specific criteria have been met for each of Good ShepherdMicrofinance's activities as discussed below.

Grant revenue, where the transaction is assessed to be a reciprocal transaction, is recogised in the statementof comprehensive income on a pro-rata basis following the satisfaction of funding requirements. Expenditureson each program are taken up when incurred in accordance with the grants' requirements and in accordancewith the program costs. Where programs are not completed at balance date the unused proportion of the grantfunds received is carried forward as grants received in advance to cover expenditures to be incurred afterbalance date. Non-reciprocal grants received are recognised in the statement of comprehensive income whenreceived.

Revenue from fund raising activities is brought to account on a cash basis as it is not possible to identifyincome from donations and other fund raising until received.

Donations of goods and services from volunteers and suppliers are not taken up in the accounts as they are notable to be quantified accurately.

Interest revenue is recognised when the right to receive the interest has been established.

Revenue from rendering of a service is recognised upon delivery of the service to the clients.

All revenue is stated net of the amount of goods and services tax (GST).

(b) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquidinvestments with original maturities of three months or less which are convertible to a known amount of cashand subject to an insignificant risk of change in value, and bank overdrafts. Bank overdrafts are shown withinshort-term borrowings in current liabilities on the statement of financial position.

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1 Summary of Significant Accounting Policies continued

(c) Property, plant and equipment

Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable,any accumulated depreciation and impairment losses.

Freehold land and buildings that have been contributed at no cost, or for nominal cost are valued andrecognised at the fair value of the asset at the date it is acquired.

Plant and equipment

Plant and equipment are measured on the cost basis less depreciation and impairment losses. Cost includesexpenditure that is directly attributable to the asset.

Plant and equipment that have been contributed at no cost, or for nominal cost are valued and recognised atthe fair value of the asset at the date it is acquired.

Depreciation

The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excludingfreehold land, is depreciated on a reducing balance basis over the asset's useful life to the companycommencing from the time the asset is held ready for use. Leasehold improvements are depreciated over theshorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

The depreciation rates used for each class of depreciable assets are:

The assets' residual values, depreciation methods and useful lives are reviewed, and adjusted if appropriate, atthe end of each reporting period.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amountis greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gainsand losses are included in the statement of comprehensive income.

(d) Income tax

No provision for income tax has been raised as the company is exempt from income tax under Div 50 of theIncome Tax Assessment Act 1997.

(e) Goods and services tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GSTincurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised aspart of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in thestatement of financial position are shown inclusive of GST.

Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component ofinvesting and financing activities, which are disclosed as operating cash flows.

12



1 Summary of Significant Accounting Policies continued

(f) Impairment of assets

At the end of each reporting year, the company reviews the carrying values of its tangible and intangible assetsto determine whether there is any indication that those assets have been impaired. If such an indication exists,the recoverable amount of the asset, being the higher of the asset's fair value less costs to sell and value inuse, is compared to the asset's carrying value. Value in use is either the discounted cash flows relating to theasset or depreciated replacement cost if the criteria in AASB 136 'Impairment of Assets' are met. Any excess ofthe asset's carrying value over its recoverable amount is expensed to the statement of comprehensive income.To 30 June 2012, no impairment losses have been recorded.

(g) Employee benefits

Provision is made for the company's liability for employee benefits arising from services rendered by employeesto the end of the reporting year. Employee benefits that are expected to be settled within one year have beenmeasured at the amounts expected to be paid when the liability is settled.

Employee benefits payable later than one year have been measured at the present value of the estimatedfuture cash outflows to be made for those benefits. In determining the liability consideration is given toemployee wage increases and the probability that the employee may not satisfy vesting requirements. Thosecash outflows are discounted using market yields on national government bonds with terms to maturity thatmatch the expected timing of cashflows.

Contributions are made by the company to an employee superannuation fund and are charged as expenseswhen incurred.

(h) Leases

Lease payments for operating leases, where substantially all of the risks and benefits remain with the lessor,are charged as expenses on a straight-line basis over the life of the lease term.

(i) Economic dependence

Good Shepherd Microfinance is dependent on the federal government for the majority of its revenue used tooperate the business. At the date of this report the directors have no reason to believe the federal governmentwill not continue to support Good Shepherd Microfinance.

(j) Adoption of new and revised accounting standards

During the current year, the company adopted all of the new and revised Australian Accounting Standards andInterpretations applicable to its operations which became mandatory. The adoption of these Standards has nothad a significant impact on the recognition, measurement and disclosure of transactions.

(k) New accounting standards for application in future periods

The AASB has issued new and amended Accounting Standards and Interpretations that have mandatoryapplication dates for future reporting periods.The company has decided against early adoption of theseStandards but does not expect the adoption of these standards to have any impact on the reported position orperformance of the company.

13



2012

$

2 Revenue

- operating grants 7,256,125

- contributions 804,417

- interest received 59,804

- donations 150

- other revenue 41,740

Total Revenue 8,162,236

3 Other expenses

Other expenses for the year includes the following specific expenses

- Auditor's remuneration 14,000

- Administration and management fees 655

- Advertising 28,247

- Motor vehicle expenses 15,801

- Printing and stationery 20,043

- Telephone and fax 19,454

- Training & development 31,157

- Travel 46,136

- Other expenses 77,068

252,561

4 Cash and Cash Equivalents

Cash on hand 150

Cash at bank 32,740,829

32,740,979

5 Trade and Other Receivables

CURRENT

Trade receivables 13,990

Deposits 33,243

Other receivables 47,363

94,596

At 30 June 2012 there are no balances within trade receivables that contain assets that are impaired and are past due.It is expected these balances will be received when due. Impaired assets are provided for in full.

14



2012

$

6 Property, Plant and Equipment

Motor vehicles

At cost 97,487

Accumulated depreciation (9,266)

Total motor vehicles 88,221

Office equipment

At cost 19,506

Accumulated depreciation (541)

Total office equipment 18,965

Computer software

At cost 15,288


Total computer software 13,195

Improvements

At cost 88,805


Total improvements 81,315

Total property, plant and equipment 201,696

(a) Movements in Carrying Amounts

Movement in the carrying amounts for each class of property, plant and equipment between the beginning andthe end of the current financial year:

MotorVehicles

$

OfficeEquipment

$

ITEquipment

$

LeaseholdImprovements

$

Total

$

Balance at the beginning of the period - - - - -

Additions 97,487 19,506 15,288 88,806 221,087

Depreciation expense (9,266) (542) (2,093) (7,490) (19,391)

Balance at 30 June 2012 88,221 18,964 13,195 81,316 201,696

15



2012

$

7 Other Assets

CURRENT

Prepayments 8,756

Accrued income 56,758

65,514

8 Trade and Other Payables

CURRENT

Unsecured liabilities

Trade payables 3,862,106

GST payable 2,380,781

Employee benefits 143,554

Sundry payables and accrued expenses 35,899

6,422,340

9 Other Liabilities

CURRENT

Income in advance 26,521,050

As described in Note 1 (a) Income In Advance represents reciprocal transfers of grant funds where funding conditionshave not been met and programs are not complete at balance date. The unused proportion of the grant funds iscarried forward as Income in Advance to cover expenditures to be incurred after balance date..

10 Employee Benefits

CURRENT

Long service leave 28,118

NON-CURRENT

Long service leave 12,840

11 Interests of Key Management Personnel

The totals of remuneration paid to the key management personnel of Good Shepherd Microfinance during the year areas follows:

Short-term employee benefits 102,398

Post-employment benefits 10,879

113,277

16



2012

$

12 Capital and Leasing Commitments

Operating lease commitments

Non-cancellable operating leases contracted for but not capitalised in the financial statements

Payable - minimum lease payments:

- no later than 1 year 197,417

- between 1 year and 5 years 244,559

441,976

Operating leases have been have been taken out for the premises in Dandenong, Collingwood and Geelong.Lease payments are increased on an annual basis to reflect market rentals.

13 Financial Risk Management

The main risks Good Shepherd Microfinance is exposed to through its financial instruments are credit risk, liquidity riskand interest rate risk.

The company's financial instruments consist mainly of deposits with banks, accounts receivable and payable.

(a) Credit risk

The company has no significant concentration of credit risk with any single counterparty or group ofcounterparties. Details with respect to credit risk of Trade and Other Receivables are provided in Note 5.

(b) Interest rate risk

Exposure to interest rate risk arises on financial assets and financial liabilities recognised at reporting datewhereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financialinstruments. At 30 June 2012 the company does not believe it is exposed to any material interest rate risk.

(c) Liquidity risk

Liquidity risk arises from the possibility that the company might encounter difficulty in settling its debts orotherwise meeting its obligations related to financial liabilities. At 30 June 2012 the company does not believe itis exposed to any material liquidity risk.

17



13 Financial Risk Management continued

The table/s below reflect an undiscounted contractual maturity analysis for financial liabilities.

Financial liability maturity analysis

Within 1Year Total

2012

$

2012

$

Financial liabilities due for payment

Trade and other payables (excluding estimated annualleave and GST) 3,300,178 3,300,178

Total contractual outflows 3,300,178 3,300,178

The timing of expected outflows is not expected to be materially different from contracted cashflows.

(d) Net Fair Values

The company has assessed the fair value of asset and liabilities as at 30 June 2012 and believes there are nodifferences between the carrying values and fair values of those assets and liabilities.

14 Related Party Transactions

Transactions between related parties are on normal commercial terms and conditions no more favourable than thoseavailable to other parties unless otherwise stated.

The following transactions occurred with related parties:

Payments Receipts

Good Shepherd Australia & New Zealand

Revenue 12,375 -

Admin services charge 34,911 -

Reimbursements 39,548 1,056

86,834 1,056

Good Shepherd Youth and Family Service

Revenue 57,192 -

Expenses 12,058 -

Reimbursements 247,669 -

Transfers - 1,430,300

316,919 1,430,300

Rosemount Good Shepherd Youth and Family Service

Revenue 24,289 -

Reimbursements 5,619 -

29,908 -

18



2012

$

15 Cash Flow Information

Reconciliation of result for the year to cashflows from operating activities

Surplus for the year 118,437

Non-cash flows in surplus:

- depreciation 19,391

- net transfer of fixed assets from GSYFS (108,702)

Changes in assets and liabilities:

- (increase)/decrease in trade and other receivables (94,596)

- (increase)/decrease in other assets (65,514)

- increase/(decrease) in income in advance 26,521,050

- increase/(decrease) in trade and other payables 6,422,340

- increase/(decrease) in employee benefits 40,958

Cashflow from operations 32,853,364

16 Company Details

The registered office of the company is:

Ground Floor

192-198 High Street

Northcote Vic 3070

19

good shepherd microfinance abn: 36 151 124...

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