northcott financial report 2011

Northcott Disability Services

Annual Financial Report

30 June 2011

The Northcott Society (A company limited by guarantee) and its controlled entity ABN 87 302 064 152

Contents

The Northcott Society and its controlled entity Directors’ report....................................................................... 11. Directors ........................................................................................................................................................ 12. Company secretary ........................................................................................................................................ 23. Director’s meetings ........................................................................................................................................ 24. Principal activities, objectives and strategies .................................................................................................... 35. Operating and financial review ....................................................................................................................... 56. Events subsequent to reporting date ............................................................................................................... 67. Likely developments ....................................................................................................................................... 68. Environmental regulation ................................................................................................................................ 69. Indemnification and insurance of officers ....................................................................................................... 610. Lead auditor’s independence declaration ....................................................................................................... 7

The Northcott Society and its controlled entity Statements of comprehensive income ..................................... 8

The Northcott Society and its controlled entity Statements of changes in equity .............................................. 9

The Northcott Society and its controlled entity Statements of financial position ............................................. 10

Statements of cash flows ................................................................................................................................... 111. Reporting Entity ............................................................................................................................................ 122. Basis of preparation ...................................................................................................................................... 123. Significant accounting policies ...................................................................................................................... 134. Determination of fair values ......................................................................................................................... 195. Financial risk management ........................................................................................................................... 196. Expenses ...................................................................................................................................................... 207. Auditors remuneration ................................................................................................................................. 218. Net financing income ................................................................................................................................... 219. Cash and cash equivalents ............................................................................................................................ 2210. Trade and other receivables .......................................................................................................................... 2211. Inventories ................................................................................................................................................... 2212. Other financial assets ................................................................................................................................... 2213. Other assets ................................................................................................................................................. 2314. Property, plant and equipment ..................................................................................................................... 2415. Trade and other payables ............................................................................................................................. 2616. Employee benefits ........................................................................................................................................ 2617. Other liabilities ............................................................................................................................................. 3218. Capital and reserves ..................................................................................................................................... 3219. Financial Instruments .................................................................................................................................... 3320. Company limited by guarantee ..................................................................................................................... 3621. Operating leases ........................................................................................................................................... 3622. Consolidated entities .................................................................................................................................... 3723. Reconciliation of cash flows from operating activities .................................................................................... 3724. Key management personnel disclosures ........................................................................................................ 3825. Segment reporting ........................................................................................................................................ 3826. Subsequent events ....................................................................................................................................... 3827. Fundraising appeals conducted during the financial year............................................................................... 39

The Northcott Society and its controlled entity Declaration by Chief Executive Officer in respect of fundraising appeals ...................................................................................................................... 41

The Northcott Society and its controlled entity Directors’ declaration ............................................................ 42

Independent auditor’s report to the members of The Northcott Society and its controlled entity .................. 43

Lead auditor’s independence declaration ......................................................................................................... 45

Financial Year ending 30 June 2011 1

The Northcott Society and its controlled entity Directors’ report

The directors present their report together with the financial report of The Northcott Society (“the Society”) and of the Group being The Society and its controlled entity for the year ended 20 June 2011 and the auditor’s report thereon.

1. DiRectoRsThe directors of the Society at any time during or since the end of the financial year are:

NAme AND quAliFicAtioNs expeRieNce, speciAl RespoNsibilities AND otheR DiRectoRships

Mr M BriggsB Comm, ACA, ACIS, MBAChairman

Appointed 27 March 2003Chairman, The Northcott SocietyMember, Finance and Properties CommitteeDirector, Tennyson Strategic Solutions Pty LimitedDirector, Antec Engineering Pty LimitedPartner, Anchorage Capital Partners Pty LimitedDirector, SCECGS Redland LimitedChairman, Acrow Formwork and Scaffolding Pty Limited

Mr A J MansourB Ec LLB (Hons)

Appointed 30 August 2010Partner, Allens Arthur Robinson

Mr R BlaiklockB Comm, MBA

Appointed 19 November 2003Member, Nomination CommitteeChairman, Baresque Australia Pty Ltd and affiliated companies

Ms D HeitmannB Admin, MBA,FCA,FTIAFCA – Financial Planning Specialist, Registered Tax Agent

Appointed 1 April 2009Chair, Finance and Properties CommitteeDirector and Chair Finance Committee, Joint Accreditation System of Australia and New ZealandCEO, Hado Investments Pty LimitedMember, Venture Capital Committee of Innovation Australia BoardDirector, Ayers Alliance Holdings Pty LimitedKey Responsible Manager, Ayers Alliance Australian Financial Services Licence

Mr A D AbrahamsB Com (Hons) LLB MPhil (Econ) MBA

Appointed 21 September 2010Co-founder and CEO, Access Innovation MediaMember, Australian Institute of Company DirectorsRhodes Scholar

Dr C JanssenMB, BS, MBA (IMD)

Appointed 27 November 1986Member, Finance and Properties CommitteeManaging Director, GPC Electronics Pty Limited and affiliated companies

Ms M LaforestB.Bus, MAICD

Appointed 25 July 2007Chair, Nomination CommitteeManaging Director Asia Pacific, Harlequin Enterprises (Australia) Pty Limited

Dr R Silberstein LLB (Hons) MHL MBBS MIP GDipLegPrac, FIPTA

Appointed 1 April 2009Australian and New Zealand IP Counsel, Alphapharm Pty Limited

Northcott Disability Services Annual Financial Report 2011 2


NAme AND quAliFicAtioNs expeRieNce, speciAl RespoNsibilities AND otheR DiRectoRships

Mr JF SurianBA (Econ), G.DipAppFin (Sec Inst), F Fin

Appointed 14 December 2000Licensee and Principal, Raine & Horne Commercial ParramattaMember, Finance and Properties Committee

Dr HEC TaylorMB, BS

Appointed 19 April 1990Director and Founder of the Taylor Group of Investment Companies

Ms K StubbsManaging Director and Chief Executive OfficerBA (Hons), MA (Hons), Grad Cert Writing, MAICD

Appointed 27 February 2008Telstra Business Women’s Awards – 2007 NSW IBM Community &Government Award Winner Director, e-Water Ltd Director, Ability First Australia Director, Health Services Association LtdDirector, SpineCare FoundationDirector, Cerebral Palsy AustraliaDirector, National Accreditation Authority for Translators and Interpreters Ltd Member, Finance and Investment Committee, University of Western Sydney Board of Trustees

In accordance with the Society’s Constitution, one third of the directors retire from the Board of directors at the forthcoming Annual General Meeting of members and being eligible, offer themselves for re-election.

2. compANy secRetARyMr LJ Carpenter (ACMA, Grad Cert Bus Admin, CPA, MBA, MAICD) was appointed to the position of company secretary in May 2008. Mr Carpenter is the Chief Operating Officer of the Northcott Society and also a Director of SpineCare Foundation.

3. DiRectoR’s meetiNgsThe number of directors’ meetings and number of meetings attended by each of the directors of Northcott during the financial year are:

DiRectoR boARD meetiNgs FiNANce AND pRopeRties committee meetiNgs

NomiNAtioN committee meetiNgs

Attended Held* Attended Held* Attended Held*

Mr R Blaiklock 8 8 - - 1 1

Mr M Briggs 8 8 8 9 1 1

Dr C Janssen 5 8 8 9 - -

Mr JF Surian 6 8 7 9 - -



DiRectoR boARD meetiNgs FiNANce AND pRopeRties committee meetiNgs

NomiNAtioN committee meetiNgs

Attended Held* Attended Held* Attended Held*

Dr HEC Taylor 7 8 - - - -

Ms M Laforest 2 8 - - 1 1

Ms K Stubbs 8 8 8 9 1 1

Ms D Heitmann 6 8 8 9 - -

Mr A Abrahams 6 6 - - - -

Mr A Mansour 6 7 - - - -

Dr R Silberstein 5 8 - - - -

* Number of meetings held during the time the director held office during the period The Northcott Society and its controlled entity

4. pRiNcipAl Activities, obJectives AND stRAtegiesThe principal activities of the consolidated entity during the course of the financial year were the provision of individual and family support, respite, recreation and leisure programs, day programs, accommodation, employment, equipment and technology, specialist services and therapy services to people with disabilities in New South Wales.

There were no significant changes in the nature of the activities of the Group during the year.

The Society’s long term objective: The Society’s long term objective is to help build an inclusive society. We do this in partnership with our clients and stakeholders to ensure we provide services that are professional, client-focused and designed to assist people with disabilities and their communities achieve their goals and aspirations.

In order to ensure the long term objectives are being met, the Society will: � Be innovative in our service

delivery, to ensure service provision best meets the needs of our clients.

� Strive to become a provider of choice for both current and prospective clients.

� Grow our services in areas of identified need, particularly regional NSW and within indigenous communities.

� Develop mutual and long-term partnerships with our

stakeholders, to ensure our clients have access to the best level of service delivery.

� Develop our knowledge and expertise in person centred planning, which involves identifying what is important to our clients and acting upon it, as well as piloting some person centred services in new areas.

� Develop a number of mechanisms to encourage research development, including

a targeted and holistic program which translates research into practice. This ensures the services we offer our clients are indicative of best practice and are validated and measured.

� Develop a client consultation strategy, so that clients can be more meaningfully involved in planning services and evaluating what we do.



The Society’s short term objectives:The Society’s short term objectives are based on the organisation’s 2011-2012 Strategic Plan, which identifies six key priorities for Northcott:

1. ouR clieNts Continue to strive to provide the best quality and cost effective services we can.

2. ouR people AND cultuRe Create a culture where people are skilled, satisfied, knowledgeable and devoted to the best outcomes for clients.

3. ouR stRuctuRes AND systems Ensure good structures and systems are in place to help

make things easier for all of our stakeholders.

4. gRowth Continue to grow where there are gaps in service provision or opportunities for Northcott to improve services for people with disabilities and their communities.

5. bRAND AwAReNess Increase awareness of Northcott in the broader community, to let

prospective clients know what services are available, as well as increase the opportunity for Northcott to attract funds from donors of all kinds.

6. FiNANciAl stAbility Ensure the income for our services covers the cost, and any additional funds raised are used wisely to develop new or additional services for current and future clients.

In order to ensure the short term objectives are being met, the Society will:

1. ouR clieNts � Involve clients in our decision

making processes.

� Develop our knowledge and expertise in person centred planning, which involves identifying what is important to our clients and acting upon it, as well as piloting some person centred services in new areas.

� Review the way we manage our client records to make the system more accessible, consistent, and less complicated for clients.

� Review our complaints policy and processes.

� Involve clients in planning for the future of Northcott.

2. ouR people AND cultuRe � Train our staff in the skills they

need, and particularly develop our managers.

� Put extra emphasis on training for all staff in 2011-2012 in key areas of need that will benefit clients.

� Pay people appropriately and encourage career development.

� Measure staff satisfaction and improve where we need to.

� Communicate information effectively to staff throughout Northcott.

3. ouR stRuctuRes AND systems � Put in place a Quality

Management system to ensure we are consistent and reliable in how we do things.

� Develop a good incident management system to ensure we respond appropriately when things go wrong.

� Review the way we manage and store our files and documents.

� Make sure all staff members know the limits of their responsibilities and give them the authority to make appropriate and timely decisions.



4. gRowth � Continue to look for

opportunities for growth in regional and rural NSW.

� Continue to look for growth opportunities in areas of great need, eg. Indigenous communities.

� Develop a 3 year strategic plan to take us to 2014.

5. bRAND AwAReNess � Continue to use Client and

Celebrity Ambassadors to speak on behalf of Northcott.

� Continue to increase our profile in the media.

� Establish how well Northcott is known throughout the NSW community through focus groups and surveys.

6. FiNANciAl stAbility � Develop a new fundraising

strategy.

� Ensure our overhead costs are kept on target.

� Increase our efficiency in the delivery of services to ensure that funds for client services are maximised.

� Vary the sources of our funding.

Company performance is constantly measured against the following KPI’s: � A range of Financial indicators.

� Investment returns compared to benchmarks.

� Client activity performance including client numbers, client outputs and unit costs.

� Staffing measures including the number of staff, full time

equivalents, recruitment and retention.

� Occupational Health and Safety measures including the number and type of incidents and lost time injuries.

� Fundraising performance and cost of fundraising ratio.

� Client Satisfaction measures including compliments and complaints.

� Government income to cover direct cost and contribute appropriately to overheads.

� The ratio of successful tenders over tenders applied for.

Northcott also undertakes regular surveys of Client and Staff satisfaction.

5. opeRAtiNg AND FiNANciAl Review

Review and result of operationsThe operations for the year ended 30 June 2011 resulted in a consolidated net surplus of $523,876 (2010: $1,432,908).

Income from government funding was greater than that achieved last year, primarily due to an expansion in Ageing, Disability and Home Care (ADHC) programs. Income from estates and bequests was lower than last year, mainly due to a significant sum received from one estate in the prior year. Investment returns on managed funds generated a positive return.

Expenditure on client programmes was significantly higher than last year mainly due to an increase in the expenses associated with setting up and running the new programs. Expenditure in all other areas was in accordance with expectations.

Significant changes in the state of affairsIn the opinion of the directors there were no significant changes in the state of affairs of the Group that occurred during the financial year under review.



6. eveNts subsequeNt to RepoRtiNg DAteThere has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Society, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.

7. likely DevelopmeNtsThe directors do not believe that there will be any significant change in the Group’s operations for the next twelve months.

8. eNviRoNmeNtAl RegulAtioNThe Group’s operations are not subject to any significant environmental regulation under either Commonwealth or State legislation. However, the Board believes that the Group has adequate systems in place for the management of its environmental requirements and is not aware of any significant breaches of those requirements as they apply to the Group.

9. iNDemNiFicAtioN AND iNsuRANce oF oFFiceRs

IndemnificationNorthcott has agreed to indemnify the current and former directors of the Society and its controlled entity against all liabilities to another person (other than Northcott or a related body corporate) that may arise from their position as directors of the Society and its controlled entity except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Society will meet the full amount of any such liabilities, including costs and expenses.

Insurance premiumsSince the end of the previous financial year the Society has paid insurance premiums in respect of directors’ and officers’ liability and legal expenses’ insurance contracts, for current and former directors and officers, including executive officers of the Society and directors and executive officers and secretaries of its controlled entity. The insurance premiums relate to:

• costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and whatever their outcome; and

• other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain a personal advantage.

Under the terms of the contract of insurance, further details of the insurance cover are not permitted to be disclosed.



10. leAD AuDitoR’s iNDepeNDeNce DeclARAtioNThe Lead auditor’s independence declaration is set out on page 43 and forms part of the directors’ report for financial year ended 30 June 2011

This report is made with a resolution of the directors:

__________________________

M. Briggs

Director

Dated at Sydney this 14 September 2011


The Northcott Society and its controlled entity Statements of comprehensive income

iN AuD coNsoliDAteD the society

Note 2011 2010 2011 2010

Government funding 23,118,562 20,400,667 23,109,362 20,439,667

Revenue from estates and bequests 771,145 2,061,330 771,145 2,061,330

Revenue from sale of goods 1,579,807 1,703,981 1,579,807 1,703,981

Revenue from fundraising and donations 1,313,246 1,736,775 1,280,190 1,708,973

Revenue from rental and accommodation 657,007 675,502 657,007 675,500

Revenue from royalties 107,455 79,566 107,455 79,566

Profit from sale of non-current assets 79,807 79,725 79,807 79,725

Other revenue 996,082 606,040 887,372 646,442

28,623,111 27,343,586 28,472,145 27,395,184

Cost of sales (946,850) (1,129,601) (946,850) (1,129,601)

Client programme expenses (21,352,624) (19,984,902) (21,352,624) (19,984,902)

Fundraising expenses (484,747) (681,935) (484,747) (681,935)

Corporate support expenses (7,058,729) (5,840,836) (6,776,169) (5,756,457)

Deficit before financing income (1,219,839) (293,688) (1,088,245) (157,711)

Financial income 8 1,743,715 1,726,596 1,598,670 1,549,036

Net financing income 1,743,715 1,726,596 1,598,670 1,549,036

Surplus for the period 523,876 1,432,908 510,425 1,391,325

Other comprehensive income

Defined benefit plan actuarial (losses) 16 (43,434) (53,267) (43,434) (53,267)

Total comprehensive income for the year 480,442 1,379,641 466,991 1,338,058

The statements of comprehensive income are to be read in conjunction with the notes to the financial statements set out on pages 12 to 40.


The Northcott Society and its controlled entity Statements of changes in equity

coNsoliDAteD iN AuD

ReseRves RetAiNeD eARNiNgs/ (Accumulated losses)

totAl equity

Balance at 1 July 2009 25,932,153 (1,659,913) 24,272,240

Total comprehensive income for the period

Profit for the periodActuarial losses on defined benefit superannuation plansTransfer to Research and Innovation Reserve

--

144,069

1,432,908(53,267)

-

1,432,908(53,267)

144,069

Other comprehensive income for the period - - -

Balance at 30 June 2010 26,076,222 (280,272) 25,795,950

Balance at 1 July 2010 26,076,222 (280,272) 25,795,950


Profit for the periodActuarial losses on defined benefit superannuation plans

--

523,876(43,434)

523,876(43,434)


Balance at 30 June 2011 26,076,222 200,170 26,276,392

the society iN AuD

Balance at 1 July 2009 25,932,153 (3,910,043) 22,022,110


Profit for the periodActuarial losses on defined benefit superannuation plansTransfer to Research and Innovation Reserve

--

144,069

1,391,325(53,267)

-

1,391,325(53,267)144,069


Balance at 30 June 2010 26,076,222 (2,571,985) 23,504,237

Balance at 1 July 2010 26,076,222 (2,571,985) 23,504,237


Profit for the periodActuarial losses on defined benefit superannuation plans

--

510,425(43,434)

510,425(43,434)


Balance at 30 June 2011 26,076,222 (2,104,994) 23,971,227

The statements of changes in equity are to be read in conjunction with the notes to the financial statements set out on pages 12 to 40.


The Northcott Society and its controlled entity Statements of financial position


Note 2011 2010 2011 2010

Assets

Cash and cash equivalents 9 5,110,432 6,137,130 4,540,644 5,679,756

Trade and other receivables 10 1,341,432 1,347,170 1,129,554 1,141,120

Inventories 11 387,834 453,332 387,834 453,332

Other financial assets 12 16,870,265 15,952,746 16,237,727 15,385,965

Other 13 172,322 174,101 172,322 174,101

Total current assets 23,882,284 24,064,479 22,468,081 22,834,274

Trade and other receivables 10 441,024 624,567 - -

Other financial assets 12 472,020 451,940 - -

Employee benefits 16 176,300 186,990 176,300 186,990

Property, plant and equipment 14 20,155,252 20,222,516 20,155,252 20,222,516

Total non-current assets 21,244,596 21,486,013 20,331,552 20,409,506

Total assets 45,126,880 45,550,492 42,799,632 43,243,780

Liabilities

Trade and other payables 15 1,308,406 1,924,213 1,286,323 1,909,214

Employee benefits 16 2,753,981 2,481,966 2,753,981 2,481,966

Other 17 14,566,177 15,192,920 14,566,177 15,192,920

Total current liabilities 18,628,564 19,599,099 18,606,481 19,584,100

Employee benefits 16 221,924 155,443 221,924 155,443

Total non-current liabilities 221,924 155,443 221,924 155,443

Total liabilities 18,850,488 19,754,542 18,828,405 19,739,543

Net assets 26,276,392 25,795,950 23,971,227 23,504,237

Accumulated funds

General accumulated funds 18 200,170 (280,272) (2,104,994) (2,571,985)

Reserves 18 26,076,222 26,076,222 26,076,222 26,076,222

Total accumulated funds 26,276,392 25,795,950 23,971,227 23,504,237

The statements of financial position are to be read in conjunction with the notes to the financial statements set out on pages 12 to 40.


Statements of cash flows


Note 2011 2010 2011 2010

Cash flows from operating activities

Cash receipts from customers, donations and grants 30,916,427 32,578,735 29,744,184 31,999,095

Cash paid to suppliers and employees (31,263,941) (27,961,286) (30,144,905) (27,424,649)

Cash generated from/(used in) operations (347,514) 4,617,449 (400,721) 4,574,446

Dividends received 123,061 191,611 123,061 182,549

Interest received 438,213 136,885 379,006 65,192

Net cash from operating activities 23 213,760 4,945,945 101,346 4,822,187

Cash flows from investing activities

Proceeds from sale of non-current assets 531,559 809,916 531,559 809,916

Proceeds from sale/(acquisition) of managed fund investments held for trading 244,842 (4,929,734) 244,842 (4,929,734)

Acquisition of property, plant and equipment (2,016,859) (2,588,362) (2,016,859) (2,588,362)

Net cash from/(used in) investing activities (1,240,458) (6,708,180) (1,240,458) (6,708,180)

Net increase/(decrease) in cash and cash equivalents (1,026,698) (1,762,235) (1,139,112) (1,885,993)

Cash and cash equivalents at 1 July 6,137,130 7,899,366 5,679,756 7,565,749

Cash and cash equivalents at 30 June 9 5,110,432 6,137,130 4,540,644 5,679,756

The statements of cash flows are to be read in conjunction with the notes to the financial statements set out on pages 12 to 40.


The Northcott Society and its controlled entity Notes to the consolidated financial statements

1. RepoRtiNg eNtityThe Northcott Society (the ‘Society’) is a company limited by guarantee and domiciled in Australia. The consolidated financial report of the Society for the financial year ended 30 June 2011 comprises the Society and its controlled entity (together referred to as the ‘Group’).

The financial report was authorised for issue by the directors on 14 September 2011.

2. bAsis oF pRepARAtioN

a. Statement of complianceThe financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Accounting Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001.

b. Basis of measurementThe financial report is presented in Australian dollars.

The financial report is prepared on the historical cost basis except for financial instruments classified for as held for trading which are stated at their fair value.

c. Estimates and judgementsThe estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The preparation of a financial report in conformity with Australian Accounting Standards requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

d. Issued standards not early adoptedA number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 July 2010 and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the Society, except for AASB 9 Financial Instruments, which becomes mandatory for the Society’s 2014 financial statements and could change the classification and measurement of financial assets. The Society does not plan to adopt this standard early and the extent of the impact has not been determined.



3. sigNiFicANt AccouNtiNg policiesThe accounting policies set out below have been applied consistently to all periods presented in these financial statements, by the company and its controlled entity.

a. Basis of consolidation

(i) subsiDiARiesSubsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that currently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group.

(ii) tRANsActioNs elimiNAteD oN coNsoliDAtioNIntragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements.

b. Financial Instruments

(i) NoN-DeRivAtive FiNANciAl iNstRumeNtsNon-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below.

Cash and cash equivalents comprise cash balances and call deposits.

Where payment terms for disposed assets are deferred for more than twelve months, the receivable is discounted to its present value. The unwinding of the discount is recognised as interest income.

Financial assets at fair value through profit or loss

An instrument is classified as at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group’s documented risk management or investment strategy. Upon initial recognition, attributable transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss.

OtherOther non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses.



c. Property, plant and equipment

(i) owNeD AssetsItems of property, plant and equipment are stated at cost or deemed cost less accumulated depreciation (see below) and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Impairment of assets is discussed in Note 3 (e).

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

(ii) leAseD AssetsLeases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Other leases are classified as operating leases. Lease payments are accounted for as described in accounting policy in Note 3(j).

(iii) subsequeNt costsThe Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied within the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in the income statement as an expense as incurred.

(iv) DepReciAtioNWith the exception of freehold land, depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated.

Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the entity will obtain ownership by the end of the lease term.

The estimated useful lives in the current and comparative periods are as follows:

� Buildings 40 years

� Leasehold improvements 3 years

� Plant and equipment 4 – 10 years

The residual value, the useful life and the depreciation method applied to an asset are reassessed at least annually.

d. InventoriesInventories of raw material, parts, supplies and work in progress expended and assembled by Northcott are valued using the weighted average cost method and are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Cost includes direct materials, direct labour and other direct costs necessary to bring inventories to their present location and condition.



e. Impairment

(i) FiNANciAl AssetsA financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in profit or loss.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost the reversal is recognised in profit or loss.

(ii) NoN-FiNANciAl AssetsThe carrying amounts of the Group’s non-financial assets, other than inventories, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. As the Group is a not-for-profit organisation, value in use is determined as being the asset’s depreciated replacement cost.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

f. Employee benefits

(i) DeFiNeD coNtRibutioN plANsA defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as a personnel expense in profit or loss when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

(ii) DeFiNeD beNeFit plANsA defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognised past service costs and the fair value of any plan assets are deducted.



The discount rate is the yield at the reporting date on AA credit-rated or government bonds that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognised asset is limited to the total of any unrecognised past service costs and the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. An economic benefit is available to the Group if it is realisable during the life of the plan, or on settlement of the plan liabilities.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised in profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in profit or loss. The Group recognises all actuarial gains and losses arising from defined benefit plans directly in equity immediately.

(iii) otheR loNg teRm employee beNeFitsThe Group’s net obligation in respect of long-term employee benefits other than defined benefit plans is the amount of future benefit that employees have earned in return for their service in the current and prior periods plus related on-costs.

(iv) shoRt teRm beNeFitsShort-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(v) teRmiNAtioN beNeFitsTermination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy.

g. ProvisionsA provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

h. RevenueRevenues are recognised at fair value of the consideration received net of the amount of goods and services tax (GST) payable to the taxation authority.

Sale of goodsRevenue from the sale of goods is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. Revenue from services rendered is recognised in the income statement in proportion to the stage of completion of the transaction at the balance sheet date



(i) gooDs solD AND seRvices ReNDeReDThe stage of completion is assessed by reference to estimates of work performed. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, the costs incurred or to be incurred cannot be measured reliably, there is a risk of return of goods or there is continuing management involvement with the goods.

(ii) ReNtAl AND AccommoDAtioNRevenue from rental and accommodation is recognised in the income statement on a straight line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income.

(iii) goveRNmeNt FuNDiNgGovernment funding comprises grants for ongoing funding and specific purposes. These are recognised as income in the income statement in the period to which the funding relates to the extent that expenditure has been incurred in accordance with the terms and conditions attaching to individual government grants.

Where funding in a period exceeds related expenditure, unspent amounts are either:

� Deferred and recognised as unearned income in the balance sheet if they are repayable to related government bodies under the terms and conditions of the funding;

� Deferred and recognised as unearned income in the balance sheet if amounts are not repayable but related expenditure has not yet been incurred in accordance with the terms and conditions of the funding; or

� Recognised as income if the amounts are not repayable and no obligation exists to incur expenditure in accordance with specified terms and conditions.

Amounts deferred are presented within “Current liabilities – Other”.

(iv) DisposAl oF NoN-cuRReNt AssetsThe net gain on disposal of non-current assets is recognised as revenue at the date control of the asset passes to the buyer, usually when an unconditional contract of sale is signed.

The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of disposal and the net proceeds on disposal (including incidental costs).

(v) DoNAtioNsDonations are recognised as they are received or, where special terms and conditions are attached to these, in accordance with those terms and conditions.

(vi) coNtRibutioN oF AssetsContribution of assets and contributions to assist in the acquisition of assets, being non-reciprocal transfers, are recognised as revenue at the fair value of the asset received when the Group gains control of the contribution.

(vii) estAtes AND bequestsEstates and bequests received are recognised as income by the Group in accordance with the terms and conditions of the bequests. Where no specific terms and conditions exist, these are recognised as income as follows:

� Cash distributions from estates at the time of receipt; and

� Shares, real property and other securities at the estimated market value when the risks and benefits pass to the Society.



(viii) DiviDeNDsDividend income is recognised in the period in which dividends are receivable.

i. Finance income and expenseFinance income comprises interest income on funds invested, dividend income and changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method.

Finance expenses changes in the fair value of financial assets at fair value through profit or loss, and impairment losses recognised on financial assets.

j. Expenses

(i) opeRAtiNg leAse pAymeNtsPayments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense and spread over the lease term.

k. Income taxThe Group is exempt from income tax under the Income Tax Assessment Act, 1997, as amended.

l. Segment reportingA segment is a distinguishable component of the Group that is engaged in either providing goods or services (business segment) or in providing goods and services within a particular economic environment (geographical segment), which is subject to risk and rewards that are different from those of other segments.

m. Goods and services taxRevenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

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 liability in the balance sheet.

Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

n. Reclassification of financial informationComparative information within the Society’s financial statements have been reclassified where necessary to reflect a more accurate recording and classification.



4. DeteRmiNAtioN oF FAiR vAluesA number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

(i) iNvestmeNt iN equity secuRitiesThe fair value of financial instruments classified as held for trading is their quoted bid price at the balance sheet date.

5. FiNANciAl Risk mANAgemeNtThe Group has exposure to the following risks from their use of financial instruments:

� Credit risk

� Liquidity risk

� Market risk

This note presents information about the Group’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout this financial report.

The Directors have overall responsibility for the establishment and oversight of the risk management framework. The Board has established the Finance and Properties Committee to develop and monitor financial risk management and investment policies.

Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Investment policies are reviewed regularly to reflect changes in market conditions and the Group’s activities.

(i) cReDit RiskCredit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities.

Trade and other receivablesThe Group’s exposure to credit risk is influenced mainly by the individual characteristics of each debtor, which include government departments as well as individual customers. The Group has established an allowance for impairment that represents their estimate of incurred losses in respect of trade and other receivables.

InvestmentsThe Group limits its exposure to credit risk by investing with reputable fund managers. Management does not expect any of these counterparties to fail to meet their obligations.

(ii) liquiDity RiskLiquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity 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 Group’s reputation. This is achieved by ensuring an appropriate balance between cash at call and the amount of cash used for investing activities.



(iii) mARket pRice RiskMarket price risk is the risk that changes in market prices, such as equity prices and interest rates will affect the Group’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.

The Group holds a number of investments in managed funds and bonds which are subject to market price risk, and therefore there is a need to re-evaluate the investment mix on a regular basis. The Directors have adopted a more conservative investment strategy that reviewed the needs of the organisation and market conditions.

6. expeNses


Other expenses 2011 2010 2011 2010

Depreciation 1,687,160 1,525,549 1,687,160 1,525,549

Impairment loss (reversal) on trade receivables (3,187) (16,052) (3,187) (16,052)

Operating lease rental expense 420,989 417,575 420,869 417,575

2,104,962 1,927,072 2,104,962 1,927,072

Personnel expenses

Wages and salaries 17,768,101 16,600,592 17,768,101 16,600,592

(Decrease) in asset for defined benefit superannuation plans (28,596) (30,961) (28,596) (30,961)

Contributions to defined contribution superannuation plans 1,561,610 1,477,844 1,561,610 1,477,844

Increase in liability for annual leave 173,913 180,845 173,913 180,845

Increase in liability for long service leave 108,810 158,432 108,810 158,432

19,583,838 18,386,752 19,583,838 18,386,752



7. AuDitoRs RemuNeRAtioN


2011 2010 2011 2010

Audit services

Auditors of the Society

KPMG Sydney:

Audit of financial reports 50,400 50,400 43,500 43,500

50,400 50,400 43,500 43,500

Other services

Auditors of the Society

KPMG Sydney:

Other assurance services 29,500 46,500 29,500 46,500

29,500 46,500 29,500 46,500

8. Net FiNANciNg iNcome

Interest income – unwinding of discount - 50,202 - -

Interest income – other parties 438,213 86,683 379,006 65,192

Dividend income 123,061 191,611 123,061 182,549

Gain from managed fund investments 1,182,441 1,398,100 1,096,604 1,301,295

Financial income 1,743,715 1,726,596 1,598,671 1,549,036

Net financing income 1,743,715 1,726,596 1,598,671 1,549,036



9. cAsh AND cAsh equivAleNts


Current 2011 2010 2011 2010

Cash on hand 15,420 17,020 15,420 17,020

Cash at bank 3,081,027 2,392,170 2,656,224 2,359,736

Short term deposits 2,013,985 3,727,940 1,869,000 3,303,000

Cash and cash equivalents in the statements of cash flows 5,110,432 6,137,130 4,540,644 5,679,756

10. tRADe AND otheR ReceivAbles

Current

Trade receivables 1,113,288 1,068,310 907,018 879,920

Less: Impairment losses (9,496) (4,778) (9,496) (4,778)

1,103,792 1,063,532 897,522 875,142

Other receivables 237,640 283,638 232,032 265,978

1,341,432 1,347,170 1,129,554 1,141,120

Non-current

Other receivables 441,024 624,567 - -

441,024 624,567 - -

Non current receivables have been discounted to their present value using a discount rate of 5.0% (2010: 5.0%)

11. iNveNtoRies

Raw materials, supplies and parts – at cost 364,991 388,910 364,991 388,910

Less: Provision for inventory obsolescence (110,091) (101,726) (110,091) (101,726)

Work in progress 132,934 166,148 132,934 166,148

387,834 453,332 387,834 453,332



12. otheR FiNANciAl Assets


Current 2011 2010 2011 2010

Financial assets designated at fair value through profit or loss 16,870,265 15,952,746 16,237,727 15,385,965

Non-current

Financial assets designated at fair value through profit or loss 472,020 451,940 - -

The financial assets designated at fair value through profit or loss are equity securities that otherwise would have been classified as available for sale.

The Group’s exposure to credit, currency and interest rate risks related to other investments is disclosed in note 19.

13. otheR Assets

Current

Prepayments 172,322 174,101 172,322 174,101



14. pRopeRty, plANt AND equipmeNt

iN AuD coNsoliDAteD

Freehold land Buildings

Leasehold improvements

Capital work in progress

Plant and equipment

Total

Balance at 1 July 2009 2,137,193 16,460,371 79,455 - 7,955,375 26,632,394

Acquisitions - 28,542 274,763 - 2,285,057 2,588,362

Disposals - - - - (2,357,893) (2,357,893)

Balance at 30 June 2010 2,137,193 16,488,913 354,218 - 7,882,539 26,862,863

Balance at 1 July 2010 2,137,193 16,488,913 354,218 - 7,882,539 26,862,863

Acquisitions 77,505 5,135 423,942 1,510,277 2,016,859

Disposals - - - (1,043,045) (1,043,045)

Balance at 30 June 2011 2,137,193 16,566,418 359,353 423,942 8,349,771 27,836,677

Depreciation

Balance at 1 July 2009 - 2,601,238 79,455 - 4,007,017 6,687,710

Depreciation charge for the year - 411,244 25,411 - 1,088,894 1,525,549

Disposals - - - - (1,627,702) (1,627,702)

Balance at 30 June 2010 - 3,012,482 104,866 - 3,468,209 6,585,557

Balance at 1 July 2010 - 3,012,482 104,866 - 3,468,209 6,585,557

Depreciation charge for the year - 412,928 91,458 - 1,182,774 1,687,160

Disposals - - - - (591,292) (591,292)

Balance at 30 June 2011 - 3,425,410 196,324 - 4,059,691 7,681,425

Carrying amounts

At 1 July 2009 2,137,193 13,859,133 - - 3,893,568 19,889,894

At 30 June 2010 2,137,193 13,476,432 249,352 - 4,359,539 20,222,516

At 1 July 2010 2,137,193 13,476,432 249,352 - 4,414,330 20,222,516

At 30 June 2011 2,137,193 13,141,008 163,029 423,942 4,290,080 20,155,252



iN AuD the society

Freehold land Buildings

Leasehold improvements

Capital work in progress

Plant and equipment

Total

Balance at 1 July 2009 2,137,193 16,460,371 79,455 - 7,955,375 26,632,394

Acquisitions - 28,542 274,763 - 2,285,057 2,588,362

Disposals - - - - (2,357,893) (2,357,893)

Balance at 30 June 2010 2,137,193 16,488,913 354,218 - 7,882,539 26,862,863

Balance at 1 July 2010 2,137,193 16,488,913 354,218 - 7,882,539 26,862,863

Acquisitions - 77,505 5,135 423,942 1,510,277 2,016,859

Disposals - - - (1,043,045) (1,043,045)

Balance at 30 June 2011 2,137,193 16,566,418 359,353 423,942 8,349,771 27,836,677

Depreciation

Balance at 1 July 2009 - 2,601,238 79,455 - 4,007,017 6,687,710

Depreciation charge for the year- 411,244 25,411 - 1,088,894 1,525,549

Disposals - - - - (1,627,702) (1,627,702)

Balance at 30 June 2010 - 3,012,482 104,866 - 3,468,209 6,585,557

Balance at 1 July 2010 - 3,012,482 104,866 - 3,468,209 6,585,557

Depreciation charge for the year 412,928 91,458 - 1,182,774 1,687,160

Disposals - - - - (591,292) (591,292)

Balance at 30 June 2011 - 3,425,410 196,324 - 4,059,691 7,681,425

Carrying amounts

At 1 July 2009 2,137,193 13,859,133 - - 3,893,568 19,889,894

At 30 June 2010 2,137,193 13,476,432 249,352 - 4,359,539 20,222,516

At 1 July 2010 2,137,193 13,476,432 249,352 - 4,414,330 20,222,516

At 30 June 2011 2,137,193 13,141,008 163,029 423,942 4,290,080 20,155,252



In 2011 an independent valuation of land and buildings was carried out on the basis of open market values by R.G Furney Projects Pty Limited for existing use resulting in a valuation of $18,500,000, which is in excess of the carrying amount at 30 June 2011. As land and buildings are carried at cost, the carrying value has not been adjusted to reflect this valuation.

15. tRADe AND otheR pAyAbles


2011 2010 2011 2010

CurrentTrade payables Other Payables

974,516333,889

726,4211,197,794

970,541315,782

726,4211,182,793

1,308,406 1,924,213 1,286,323 1,909,214

16. employee beNeFits

Current

Accrued wages 441,877 452,584 441,877 452,584

Liability for long service leave 753,692 644,882 753,692 644,882

Liability for annual leave 1,558,412 1,384,500 1,558,412 1,384,500

Total liability for employee benefits 2,753,981 2,481,966 2,753,981 2,481,966

Non-current

Liability for long-service leave 221,924 155,443 221,924 155,443

Total liability for employee benefits 221,924 155,443 221,924 155,443

Recognised asset for defined benefit obligations (176,300) (186,990) (176,300) (186,990)




Defined benefit superannuation plans 2011 2010 2011 2010

Present value of funded obligations 596,252 543,175 596,252 543,175

Fair value of plan assets - funded (1,036,880) (951,060) (1,036,880) (951,060)

Surplus in excess of recovery available from plans 264,328 220,895 264,328 220,895

Recognised net asset for defined benefit obligations (176,300) (186,990) (176,300) (186,990)

Amounts in the balance sheet:

Assets 176,300 186,990 176,300 186,990

Liabilities - - - -

Net asset 176,300 186,990 176,300 186,990

Movements in the net asset for defined benefit obligations recognised in the balance sheet

Net asset for defined benefit obligations at 1 July (186,990) (217,950) (186,990) (217,950)

Contributions received - - - -

Expense recognised in the income statement (28,596) (22,307) (28,596) (22,307)

(Benefit)/expense recognised in equity 43,434 53,267 43,434 53,267

Net asset for defined benefit obligations at 30 June (176,300) (186,990) (176,300) (186,990)

Amounts for the current and previous periods are as follows:

Defined benefit obligation 596,252 543,175 596,252 543,175

Plan assets (1,036,880) (951,059) (1,036,880) (951,059)

Plan net surplus (440,629) 186,990 (440,629) 186,990

Experience adjustments on plan liabilities (491) 6,604 (491) 6,604

Experience adjustments on plan assets (3,657) (9,372) (3,657) (9,372)

a. Liability/(asset) for defined benefit obligationThe Group makes contributions to two defined benefit superannuation plans that provide defined benefit amounts for employees upon retirement.




Changes in the present value of the defined benefit obligation are as follows: 2011 2010 2011 2010

Opening defined benefit obligation 543,175 478,547 543,175 478,547

Service cost 24,840 24,858 24,840 24,858

Interest cost 27,671 26,513 27,671 26,513

Actuarial gains (491) 6,604 (491) 6,604

Contributions by plan participants 10,785 12,752 10,785 12,752

Benefits paid (9,728) (6,100) (9,728) (6,100)

Closing defined benefit obligation 596,252 543,175 596,252 543,175

Changes in the fair value of plan assets are as follows:

Opening fair value of plan assets 951,060 861,357 951,060 861,357

Expected return 81,106 73,677 81,106 73,677

Actuarial gains/(losses) 3,657 9,372 3,657 9,372

Contributions by employer - - - -

Contributions by plan participants 10,785 12,752 10,785 12,752

Benefits paid (9,728) (6,100) (9,728) (6,100)

1,036,880 951,060 1,036,880 951,060

Surplus on excess of recovery available from plans (264,328) (220,895) (264,328) (220,895)

772,552 730,165 772,552 730,165

The major categories of plan assets as a percentage of total plan assets are as follows:

Australian equities 33% 31% 33% 31%

Overseas equities 30% 27% 30% 27%

Australian fixed interest securities 6% 6% 6% 6%

Overseas fixed interest securities 3% 4% 3% 4%

Property 10% 10% 10% 9%

Cash 5% 10% 5% 10%

Other 13% 13% 13% 13%



The Society’s defined benefit superannuation plans form part of wider multi-employer State Government plans. As such, the Group’s investment policies and strategies for the defined benefit superannuation plans are determined by State Government appointed fund managers, actuaries and administrators and do not use target allocations for the individual asset categories. The plans’ investment goals are to maximize returns subject to specific risk management policies. The funds address diversification by the use of underlying investments in domestic and international fixed income securities, domestic and international equity securities, property and cash.


Expense recognised in the income statement 2011 2010 2011 2010

Current service costs 24,840 24,858 24,840 24,858

Interest on obligation 27,671 26,513 27,671 26,513

Expected return on plan assets (81,106) (73,678) (81,106) (73,678)

Surplus in excess of recovery available from shares - - - -

(28,596) (22,307) (28,596) (22,307)

The expense is recognised in the following line items in the income statement:

Client programme expenses (28,596) 22,307 (28,596) 22,307

Amounts recognised in equity:

Actuarial losses/ (gains) 43,434 53,267 43,434 53,267

Principal actuarial assumptions at the balance sheet date:

Discount rate at 30 June 5.5% 5.6% 5.5% 5.6%

Expected return on plan assets backing current pension liabilities at 30 June 8.3% 8.3% 8.3% 8.3%

Expected return on plan assets backing other liabilities at 30 June 7.3% 7.3% 7.3% 7.3%

Future salary increases 4.0% 3.5% 4.0% 3.5%

Expected rate of CPI increases 2.5% 2.5% 2.5% 2.5%

Proportion of employees opting for early retirement Nil% Nil% Nil% Nil%

The overall expected long-term rate of return on assets is 8.3%. The expected long-term rate of return is determined by weighting the expected long-term return for each asset class by the target allocation of assets to each class. The returns used for each class are net of investment tax and investment fees.



b. Surplus/(deficit) for each defined benefit superannuation plan on a funding basis - Group and The Society

In AUD 2011

Fund assets

(ii)

Accrued benefit

(iv)

Plan excess/ (deficit)

Contribution recommendations

(per year) (iii)

Plans sponsored by the Group: State Authorities Superannuation Scheme 807,914 493,779 314,135 0%

State Authorities Non-contributory Superannuation Scheme 228,966 102,473 126,494 0%

Total for plans sponsored by the Group 1,036,880 596,252 440,629

(i) Fund assets at net market value, and accrued benefits have been calculated at 30 June 2010, being the date of the most recent financial statements of the funds.

(ii) Fund assets at net market value and accrued benefits were calculated at 30 June 2011, being the date of the most recent financial statements of the funds.

(iii) Contribution recommendations are based on a funding methodology that will result in adequate funding for payments expected to be made to existing members. The levels of the contributions to the plans are reassessed annually.

(iv) Accrued benefits are benefits which the plans are presently obliged to pay at some future date, as a result of membership of the plans and calculated in accordance with AASB 25. Accordingly, the excess/(deficit) does not always equal the defined benefit obligation.

The Group has a legal liability to make up a deficit in the funds and to benefit from any surplus in the funds, in the form of a reduction in the required contribution rate, depending on the advice of the plan’s actuaries.



In AUD 2010

Fund assets

(i)

Accrued benefits

(iv)

Plan excess/ (deficit)

Contribution recommendations

(per year) (iii)

Plans sponsored by the Group: State Authorities Superannuation Scheme 739,651 448,033 291,618 0%

State Authorities Non-contributory Superannuation Scheme 211,409 95,142 116,267 0%

Total for plans sponsored by the Group 951,059 543,175 407,885

coNsoliDAteD the society

The principal economic assumptions used in making these recommendations include: 2011 2010 2011 2010

Expected return on plan assets backing current pension liabilities 8.3% 8.3% 8.3% 8.3%

Expected return on plan assets backing other liabilities 7.3% 7.3% 7.3% 7.3%

Future salary increases 4.0% 4.0% 4.0% 4.0%

Expected rate of CPI increase 2.5% 2.5% 2.5% 2.5%



17. otheR liAbilities


Current 2011 2010 2011 2010

Unearned income – government grants 14,175,821 15,046,117 14,175,821 15,046,117

Unearned income – other sources 390,356 146,803 390,356 146,803

14,566,177 15,192,920 14,566,177 15,192,920

18. cApitAl AND ReseRves

iN AuD RecoNciliAtioN oF movemeNt iN cApitAl AND ReseRves

Allocated capital funds

Services development

fund

Estates and bequests reserve

General Accumulated

funds

Research and Innovation

reserve

Total equity

CONSOLIDATED

Balance at 1 July 2010 17,122,994 5,350,000 3,459,159 (280,272) 144,069 25,795,950

Total recognised income and expense - - - 480,442 - 480,442

Balance at 30 June 2011 17,122,994 5,350,000 3,459,159 200,170 144,069 26,276,392

THE SOCIETy

Balance at 1 July 2010 17,122,994 5,350,000 3,459,159 (2,571,985) 144,069 23,504,237

Total recognised income and expense - - - 466,991 - 466,991

Balance at 30 June 2011 17,122,994 5,350,000 3,459,159 (2,104,994) 144,069 23,971,227



Allocated capital fundsIn accordance with the Society’s long term requirements, the Board has set aside from general accumulated funds a reserve to provide for the replacement of property, plant and equipment.

Services development fundIn accordance with the Society’s long term requirements, the Board has set aside from general accumulated funds a special reserve to provide funding for the acquisition and development of facilities to enhance services to persons with disabilities.

Estates and bequests reserveIn accordance with the Society’s long term requirements, the Board has set aside from general accumulated funds a special reserve to provide a fund to equalise the effect of major variations in the level of income from estates and bequests.

Research & Innovation reserveIn accordance with the Society’s long term requirements, the Board has set aside from general accumulated funds a special reserve to provide funding for Northcott’s research and innovation program.

19. FiNANciAl iNstRumeNtsExposure to credit and interest rate risks arise in the normal course of the Group’s business. The Group does not use derivatives to minimise the risk and these will fluctuate in accordance with movements in the market interest rates.

Credit riskCredit risk represents the loss that would be recognised if counter parties failed to perform as contracted.

RecogNiseD FiNANciAl iNstRumeNtsThe credit risk on financial assets, excluding investments of the Group, which have been recognised in the balance sheet, is the carrying amount, net of any impairment loss on trade receivables. The Group minimises concentrations of credit risk by undertaking transactions with a large number of customers and is not materially exposed to risks associated with any individual customer except for Royal Rehabilitation Centre, Sydney. In a prior financial year, SpineCare Foundation disposed of its leasehold improvements in the Spinecare Village to Royal Rehabilitation Centre, Sydney. The total receivable will be paid over 6 years, by 2013. The Group is exposed to credit risk as $645,094 of its total receivables balance amounting to $652,902 is due from one entity: Royal Rehabilitation Centre.

Investments in managed funds have been recognised in the balance sheet at fair value. Holdings in managed fund investments are carried at fair value as determined by reference to the bid unit price calculated by the respective institutions. The Group minimises its investments risk by only investing in managed funds held by reputable fund managers and by maintaining a spread of investments with several fund managers.

Impairment lossThe Group has recognised an allowance for impairment losses on trade receivables of $9,496 (2010: $4,778).

Interest rate riskIn respect of interest bearing financial assets and financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they reprice.



2011

In AUDEffective

interest rate Total6 months

or less6-12

months1-2

years2-5

yearsMore than

5 years

coNsoliDAteD

Cash balances 4.57% 3,096,447 3,096,447 - - - -

Short term deposits* 6.08% 2,013,985 2,013,985 - - - -

Other receivables* 5.00% 645,094 - 204,070 204,070 236,954 -

5,755,526 5,110,432 204,070 204,070 236,954 -

*These assets/liabilities bear interest at a fixed rate.

THE SOCIETy

Cash balances 4.50% 2,671,644 2,671,644 - - - -

Short term deposits* 6.17% 1,869,000 1,869,000 - - - -

4,540,644 4,540,644 - - - -

*These assets/liabilities bear interest at a fixed rate.

Cash Flows sensitivity analysis for variable rate instrumentsA change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit by the amounts shown below.

2011

pRoFit oR loss pRoFit oR loss

100bp increase

100bp decrease

100bp increase

100bp decrease

CONSOLIDATED

Variable rate instruments 57,555 (57,555) 30,964 (30,964)

Cash flow sensitivity 57,555 (57,555) 30,964 (30,964)

THE SOCIETy





2010

In AUDEffective

interest rate Total6 months

or less6-12

months1-2

years2-5

yearsMore than

5 years

coNsoliDAteD

Cash balances 4.47% 2,409,191 2,409,191 - - - -

Short term deposits* 6.08% 3,727,940 1,858,940 1,869,000 - - -

Other receivables* 5.00% 828,637 - 204,070 204,070 420,497 -

6,965,768 4,268,131 2,073,070 204,070 420,497 -

THE SOCIETy

Cash balances 4.50% 2,376,756 2,376,756 - - - -

Short term deposits* 6.17% 3,303,000 1,434,000 1,869,000 - - -

5,679,756 3,810,756 1,869,000 - - -

2010

pRoFit oR loss pRoFit oR loss

100bp increase

100bp decrease

100bp increase

100bp decrease

CONSOLIDATED



THE SOCIETy





cuRReNcy RiskThe Company had no exposure to foreign currency risk at balance date as all payables and receivables were in Australian dollars (2010: Nil).

FAiR vAluesThe carrying amount of financial assets and financial liabilities approximate fair value.

estimAtioN oF FAiR vAluesThe following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the table.

iNvestmeNts iN mANAgeD FuNDsThe fair value of investments in managed funds classified as held for trading is their quoted bid price at balance date.

20. compANy limiteD by guARANteeThe liability of members is limited to 50 cents upon the winding up of Northcott.

21. opeRAtiNg leAses


leAses As lessee

Non-cancellable operating lease rentals are payable as follows: 2011 2010 2011 2010

Less than one year 326,910 384,889 326,910 384,889

Between one and five years - 326,910 - 326,910

326,910 711,799 326,910 711,799

The Group leases property under non-cancellable operating leases expiring from one to five years. Leases generally provide the Group with a right of renewal at which time all terms are renegotiated.

During the financial year ended 30 June 2011, $420,989 was recognised as an expense in the income statement in respect of operating leases (2010: $417,575).

LEASES AS LESSOR

The Group leases out part of its property under an operating lease. The future minimum lease payments under non-cancellable leases are as follows: 2011 2010 2011 2010

Less than one year 287,968 287,968 287,968 287,968

Between one and five years 574,559 862,527 574,559 862,527

More than five years - - - -

862,527 1,150,495 862,527 1,150,495

During the financial year ended 30 June 2011, $352,160 was recognised as rental income in the income statement (2010: $378,754).



22. coNsoliDAteD eNtities

owNeRship iNteRest

2011 2010

Parent entity

The Northcott Society

Subsidiary

Spinecare Foundation 100% 100%

23. RecoNciliAtioN oF cAsh Flows FRom opeRAtiNg Activities


2011 2010 2011 2010

cAsh Flows FRom opeRAtiNg Activities

Net surplus/(deficit) for the period 480,442 1,432,908 466,991 1,391,325

Adjustments for:

Depreciation 1,687,160 1,525,549 1,687,160 1,525,549

Impairment - - - -

Transfer of funds to research and innovation reserve - 144,069 - 144,069

Change in fair value of investments (1,182,441) (1,398,100) (1,096,604) (1,301,295)

Gain on sale of property, plant and equipment (79,807) (79,725) (79,807) (79,725)

Operating surplus/(deficit) before changes in working capital and provisions 905,354 1,624,701 977,740 1,679,923

(Increase)/decrease in receivables 189,281 (100,191) 11,566 (279,640)

(increase)/decrease in other current assets 1,779 (25,871) 1,779 (25,871)

(Increase)/decrease in inventories 10,709 70,360 10,709 70,360

Increase/ (decrease) in other liabilities (626,743) 3,355,770 (626,743) 3,355,770

Increase/(decrease) in trade and other payables (615,807) (236,922) (622,891) (236,451)

Increase in provisions and employee benefits 392,620 258,096 392,620 258,096

Net cash from operating activities 213,760 4,945,945 101,346 4,822,187



24. key mANAgemeNt peRsoNNel DisclosuRes

tRANsActioNs with key mANAgemeNt peRsoNNelIn addition to their salaries, the Group also contributes to post-employment defined contribution funds on behalf of key management personnel.

key mANAgemeNt peRsoNNel compeNsAtioNThe key management personnel compensation included in personnel expenses are as follows:


2011 2010 2011 2010

Short-term employee benefits 1,174,903 1,206,726 1,174,903 1,206,726

Other long term benefits - - - -

1,174,903 1,206,726 1,174,903 1,206,726

otheR RelAteD pARty tRANsActioNsFrom time to time directors of Northcott, or their director related entities, may purchase from or supply goods and services to Northcott. These dealings are on the same terms and conditions as those entered into by other Northcott employees, customers and suppliers.

During the year there were no transactions with directors of Northcott or their director related entities.

25. segmeNt RepoRtiNgThe Group is engaged in the provision of goods and services to persons with disabilities and operates wholly within New South Wales.

26. subsequeNt eveNtsThere has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Society, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.



27. FuNDRAisiNg AppeAls coNDucteD DuRiNg the FiNANciAl yeAR

Fundraising appeals conducted during the financial year included various fundraising projects and general receiving of indirectly solicited donations.


2011 2010 2011 2010

(i) Results of fundraising appeals

Gross proceeds from fundraising 1,313,246 1,736,775 1,280,190 1,708,973

Less: Direct costs of fundraising appeals (484,747) (681,935) (484,747) (681,935)

Net surplus obtained from fundraising appeals 828,499 1,054,840 795,443 1,027,038

(ii) Application of net surplus obtained from fundraising appeals

Distributions (expenditure on direct services) 21,352,624 19,984,902 21,352,624 19,984,902

Recurrent administration expenses 7,058,729 5,818,529 6,776,169 5,734,150

28,411,353 25,803,431 28,128,793 25,719,052

(iii) Application of net surplus obtained from fundraising appeals The shortfall between the net surplus available from fundraising appeals and total expenditure was provided from the following sources:

Government grants 23,118,562 20,400,667 23,109,362 20,439,667

Financial income 1,743,715 1,726,596 1,598,670 1,549,036

Gain from sale of goods 632,957 574,380 632,957 574,380

Other income 2,611,496 3,502,163 2,502,786 3,542,565

Transfer from/(to) general accumulated funds (523,876) (1,432,908) (510,425) (1,391,325)

27,582,854 24,770,898 27,333,350 24,714,323



coNsoliDAteD the society

2011 2010 2011 2010

$ % $ % $ % $

(iv) Comparisons of certain monetary figures and percentages

Total cost of fundraising / 484,747 37 681,935 39 484,747 38 681,935

Gross income from fundraising 1,313,246 1,736,775 1,280,190 1,708,973

Net surplus from fundraising / 828,499 63 1,054,840 61 795,443 62 1,027,037

Gross income from fundraising 1,313,246 1,736,775 1,280,190 1,708,972

Total cost of services / 21,352,624 72 19,984,902 72 21,352,624 72 19,984,902

Total expenditure 29,823,354 27,637,274 29,560,390 27,552,895

Total cost of services / 21,352,624 75 19,984,902 73 21,352,624 75 19,984,902

Total income received from operating activities

28,543,304 27,263,861 28,392,338 27,315,460


The Northcott Society and its controlled entity Declaration by Chief Executive Officer in respect of fundraising appeals

I, Kerry Stubbs, Chief Executive Officer of The Northcott Society, declare that in my opinion:

a. The financial report gives a true and fair view of all income and expenditure of the Group with respect to fundraising appeal activities for the financial year ended 30 June 2011;

b. The balance sheet gives a true and fair view of the state of affairs of the Group with respect to fundraising appeal activities as at 30 June 2011;

c. The provisions of the Charitable Fundraising (NSW) Act 1991 and Regulations under the Act and the conditions attached to the authority have been complied with during the year ended 30 June 2011; and

d. The internal controls exercised by the Group are appropriate and effective in accounting for all income received and applied by the Group from any of its fundraising appeals.

Dated at Sydney this 14 September 2011.

Signed in accordance with a resolution of the directors:

_______________________

Kerry Stubbs

Chief Executive Officer


The Northcott Society and its controlled entity Directors’ declaration

In the opinion of the directors of The Northcott Society (“the Society”):

a. the financial statements and notes set out on pages 8 to 40 are in accordance with the Corporations Act 2001, including:

i. giving a true and fair view of the financial position of the Society and the Group as at 30 June 2011 and of their performance, as represented by the results of their operations and their cash flows for the financial year ended on that date; and

ii. complying with the Accounting Standards in Australia (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and

b. there are reasonable grounds to believe that the Society will be able to pay its debts as and when they fall due.

Dated at Sydney this 14 September 2011.

Signed in accordance with a resolution of the directors:

_______________________

M Briggs

Director

...building an inclusive society

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www.northcott.com.au

northcott financial report 2011

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