Minimum Financial Requirements

Transcription

1 Minimum Financial Requirements Effective 1 July 2017

2 Contents 1. Financial Requirements Financial Requirements Objectives Application of this policy Information provided by an Applicant or Builder Forms Net Tangible Assets Financial Requirement - Net Tangible Assets Demonstrating Sufficient Net Tangible Assets Decreases in Net Tangible Assets Negative Net Tangible Assets Asset Valuations Related Entity Loans and Investments Assets Deed of Covenant and Assurance Turnover Limits Financial Requirement Maximum Turnover Calculating Maximum Turnover Limits Exceeding Maximum Revenue Current Ratio Financial Requirement Current Ratio Calculating the Current Ratio Determining Current Assets and Current Liabilities based on Builder Structure Financial Monitoring Financial Requirement Financial Monitoring Provision of ASIC or ASX Reports to SecureBuild Provision of Internal Management Accounts to SecureBuild P a g e

3 6. Accepted Independent Accountants Qualifications for Accepted Independent Accountants Another Responsible Person Notice to Accepted Independent Accountants for MFR Reports Warning to Accepted Independent Accountants Reporting Requirements for Accepted Independent Accountants Determining Collectability of Related Entity Loans or Investment Assets Implied Warranty by Accepted Independent Accountant Submission of Financial Information to SecureBuild Applicants for Registration with SecureBuild Existing Builders Applying for an increase in Turnover Limit Financial information Applicants and Builders subject to ASIC Audit Requirements Applicant and Builders not previously audited who become subject to ASIC Audit Requirements Applicants and Builders Not Required by ASIC to be Audited Overseas Companies Compliance Audit Builder s financial circumstances must at all times satisfy Minimum Financial Requirements Documents that may be provided to satisfy SecureBuild Restructure of Builder Assessment of Financial Information by SecureBuild Assessment of financial information Failure to meet minimum financial requirements Payment of Debts Payment of debts When this will not apply Documents and evidence to be provided to SecureBuild Incorrect Information Confidentiality Definitions P a g e

4 Tables Table 1 - Possible Assurers Deeds of Covenant and Assurance 10 Table 2 - Ratio Structure 13 Table 3 - Accepted Independent Accountant Categories 15 Table A - Minimum Financial Requirements 4 P a g e

5 Attachments Attachment 1 - Statement of Financial Position Covenantors 32 Attachment 2 - Review Control Sheet 33 Attachment 3 - MFR Report 36 5 P a g e

6 1. Financial Requirements 1.1 Financial Requirements Builder s registering with SecureBuild for cover under the HBCF scheme are required to meet the minimum financial requirements (MFR s) set by SecureBuild. These requirements ensure that builders have sufficient capital to run their building business and avoid insolvency/bankruptcy events SecureBuild s MFR s focus on the builder s: Net Tangible Assets (chapter 2); Turnover Limits (chapter 3); Current Ratio (chapter 4); Financial Monitoring (chapter 5); and Payment of Debts (chapter 9). 1.2 Objectives The objectives of the Minimum Financial Requirements in this policy, are to promote financially viable building businesses and foster and support professional business practices in the building industry in New South Wales. To achieve these objectives and minimise the risk of losses to home owners, this policy requires all applicants and registered builders to comply with the Minimum Financial Requirements (MFR s). 1.3 Application of this policy This policy applies to all applicants registering with SecureBuild for cover under the Home Building Compensation Fund Scheme. All relevant current Australian Accounting Standards must be applied to the financial information of the builder. The Minimum Financial Requirements are additional requirements that are to be applied after all relevant Australian Accounting Standards have been applied. Where the policy mentions Australian Accounting Standards, its meaning is to be taken as a reference to the current standard in place. 1.4 Information provided by an applicant or builder To allow SecureBuild to assess an application for registration or an increase in turnover limit, SecureBuild s Terms and Conditions require the applicant or builder to provide the specified financial report and other relevant evidence to support their application for cover, or for an increase in their turnover limit. If SecureBuild has concerns about the adequacy or accuracy of the information provided, it can request further information. This may include information or evidence about their continued compliance with the financial requirements in this policy. If an applicant or builder fails to comply with a notice requesting this information, their registration may be cancelled. A person who provides false or misleading documents or information to SecureBuild about an applicant or builder s compliance with this policy may be liable for prosecution under NSW legislation. 6 P a g e

7 1.5 Forms The forms required by SecureBuild to demonstrate an applicant or builder s compliance with this policy, are attached to this document, and may be reissued by SecureBuild from time to time. These forms can be downloaded for appropriate use from SecureBuild s website at Forms submitted with alterations, other than the completion of the spaces provided, will not be accepted by SecureBuild. If the requirements of this policy are not applied as prescribed, the information submitted in the forms will not be accepted by SecureBuild. In the case of an application for registration, the application will be deferred until such time as the correct information is provided or the application is declined. 7 P a g e

8 2. Net Tangible Assets Definitions for Section 2: In this section: Assets means assets owned both legally and beneficially by the entity (that is, it does not include assets which are held on trust for another person or corporation) and includes but is not limited to the following: (a) Cash (b) Construction Contract Work in Progress (c) Debtors (if collectible) (d) Inventory (e) Investments (if collectible) (f) Investments valued using equity accounting methodology only where included in general purpose financial statements (g) Motor vehicles (h) Plant and equipment at written down value (i) Real estate (j) Related Entity loans and investments (only if assessed as collectible) (k) Shares in publicly listed companies; (l) Tools of trade. Assets do not include the following: (a) Intangible assets (b) Assets not assessed as collectible (c) Boats, ships, jet skis, planes, helicopters, race horses and racing cars (d) Collectors items (e.g. paintings, stamps, coins) (e) Contingent assets (f) Furniture (personal) (g) Investments or shares in companies that are not publicly listed companies (h) Investments valued using equity accounting methodology where included in special purpose financial statements (i) Trade or barter dollars and any equivalent scheme (j) Trust assets (k) Units in trusts that are not publicly listed (l) Unvested superannuation benefits (m) Life or income protection insurance policy benefits. For clarity and calculation purposes, excluded assets at (b) to (m) above are Disallowed Assets. Liabilities means all debts or obligations owed by an applicant or builder, which are payable on demand, legally enforceable or a statutory requirement. Liabilities include all amounts owed by the builder to any Related Entities, and any deficiency in trusts for which the builder is trustee. Where a builder has received notification of a breach of banking or loan covenants, the full amount of the loan or finance facility is classified as a current liability until the lender has waived their rights in relation to the breach. 8 P a g e

9 Net Tangible Assets is calculated using the following formula: NTA = Assets - Liabilities - Intangible Assets Disallowed Assets 2.1 Financial Requirement - Net Tangible Assets It is a financial requirement that applicants and builders must have sufficient Net Tangible Assets (NTA) in their own right. The NTA has to be sufficient for their turnover limit. The higher the turnover level of applicant or builder, the higher the NTA required. Turnover limit categories and the relevant NTA is set out in Table A. Applicants and builders may rely upon a Deed of Covenant and Assurance in order to meet this financial requirement (refer section 2.7) 2.2 Demonstrating Sufficient Net Tangible Assets NTA may be evidenced through the provision of a MFR Report, or other report completed by the Accepted Independent Accountant depending on the entity s turnover category. In determining the building entity s NTA position, the person completing the report must consider the entity s entire financial position, including Related Entities and those entities providing Deeds of Covenant and Assurance in order for the entity to meet the Minimum Financial Requirements. Only the net realisable amount of the entity s assets should be brought to account. All liabilities, intangible assets and disallowed assets of the entity must be deducted in calculating NTA in accordance with this policy. 2.3 Decreases in Net Tangible Assets SecureBuild s Terms and Conditions of Registration require the builder to notify SecureBuild when the building entity s NTA position has decreased by more than 30% from its last advice to SecureBuild, unless the Builder provides a new MFR Report within 30 days of the decrease occurring. The MFR Report must substantiate the builder s adjusted NTA position. This includes a decrease in the Net Real Unencumbered Assets which have been assured to the builder by Deed of Covenant and Assurance. In the event a builder has a decrease in NTA by more than 30% from its last advice to SecureBuild, and does not provide the relevant financial information within 30 days of the decrease occurring, the builder will have breached SecureBuild s Terms and Conditions of registration. This may result in the suspension or cancellation of the builder s registration. For clarification, the 30 days notice period to SecureBuild commences when the builder realises or ought reasonably have realised that they have breached the 30% reduction in NTA. Refer to section 5 which states that internal management accounts are to be prepared at least quarterly. 2.4 Negative Net Tangible Assets Builders and Applicants must have an NTA position in their own right of not less than $12,000. Entities which have a negative (deficit) NTA position do not meet the Minimum Financial Requirements, and are not permitted to rely upon a Deed of Covenant and Assurance to cover the deficiency. 9 P a g e

10 2.5 Asset Valuations Builders and Applicants are permitted to value assets that are to be relied upon in support of Net Tangible Assets, provided those values can be substantiated and the revalued assets are non-current assets. Any assets valued at sale price may not be included as current assets. Where required by SecureBuild, such valuations are to be substantiated via a valuation by an accredited, registered or recognised valuer. 2.6 Related Entity Loans and Investments Assets Related Entity Loans and Investments recorded as an asset in the entity s accounts, must not be included or relied upon in determining the entity s NTA unless the Accepted Independent Accountant preparing the MFR Report or other report has independently verified that the related entity loan or investment asset is collectible. It is not sufficient for the Accepted Independent Accountant to accept the Directors advice without performing reasonable checks or tests. The Accepted Independent Accountant preparing the report is required to specify in the report that they have independently verified the collectability of the Related Entity Loan or Investment asset. When required by SecureBuild, the Accepted Independent Accountant must provide evidence of the verification of collectability of the Related Entity Loan or Investment asset. 2.7 Deed of Covenant and Assurance In order to meet the NTA requirement, and where an eligible builder or applicant does not have sufficient NTA in its own right for the level of turnover requested or required, the builder or applicant may, dependent on the entity s structure, rely upon a Deed of Covenant and Assurance based on the Net Real Unencumbered Assets from a covenantor as permitted under this policy. The Covenantor must have and continuously maintain sufficient Net Real Unencumbered Assets in their own right to meet the value of the Defined Amount stated in the MFR Report. The Net Real Unencumbered Assets of the Covenantor may not include any Related Entity Loans or Investments owed to the covenantor by the builder. All liability amounts owing by the covenantor to the applicant or builder must be brought to account. Assets held in trust (by any entity) cannot be assured to the applicant or builder by way of Deed of Covenant and Assurance. Building entities relying upon a Deed of Covenant and Assurance must provide a MFR Report, and must at a minimum meet NTA requirements in accordance with Table A. The original Deed of Covenant and Assurance is required to be submitted to SecureBuild together with the MFR Report. It is required to be retained by SecureBuild unless a Liquidator or Trustee in bankruptcy is appointed to the builder, in which case the original will be provided to the Liquidator or Trustee in bankruptcy. The Accepted Independent Accountant completing a MFR Report or other report relying on a Deed of Covenant and Assurance will be required to: a) State in the report the full name and the relationship of each covenantor to the applicant or builder, b) State within the report the defined amount that is secured by the Deed, or if multiple deeds, each Deed; and 10 P a g e

11 c) Provide a Statement of Financial Position (Attachment 1) and any other appropriate documentation detailing each covenantor s financial position at the time the report was signed. The report is required to be based on accounts no earlier than the year end date on which the Report has been written. The Covenantor s Statement of Financial Position is required to be completed by the same Accepted Independent Accountant completing the Report, signifying that all reasonable checks have been made with regard to each covenantor s entire financial position, and to ensure the existence, collectability and unencumbered value of assets being assured to the entity. A builder who no longer wishes to rely on amounts assured by way of a Deed of Covenant and Assurance is required to provide an updated MFR Report demonstrating sufficient Net Tangible Assets held in their own right. Covenantors who have assured assets by way of a Deed of Covenant and Assurance to a builder who become insolvent may be called upon by a Liquidator or Trustee in bankruptcy to pay the defined amount relied upon by the builder at the time any outstanding debts were incurred by the builder, regardless of whether the builder relied on a Deed of Covenant and Assurance to meet the requirements of this policy at the time of appointment of the Liquidator or Trustee in bankruptcy. Table 1 Possible Assurers Applicant or Builder Structure Possible Assurers Individual Sole Trader None available Company Trading as a stand-alone Company Company Trading as part of a group of companies Individual or Company trading in a Partnership Directors of the Builder company Associated company Directors of the Builder company Associated company Other companies in the group Other partners within the Partnership Directors of the Company (for Company builders) Associated Company (for Company builders) Individual or Company acting as Trustee Beneficiaries of the trust administered by the Builder as Trustee* Directors of the Company (for Company builders) Associated Company (for Company builders) * limited to only those direct beneficiaries which are not subject to or under a legal disability, and have sufficient assets in their own right to assure to the applicant or builder. 11 P a g e

12 3. Turnover Limits Definitions for Section 3: In this section: Turnover Limit means the maximum value of work (or number of projects) a builder may undertake at any one time. The turnover limit issued to a builder applies to the licensed entity in combination with all trusts or partnerships through which it is trading. In the case of a company trading as part of a group of companies under ASIC class order 98/1418, the turnover limit applies to the entity as it has reported to SecureBuild under this policy: either the consolidated group; closed group or the company on a stand-alone basis. Turnover means the total value of projects (or number) being worked on by a builder at any one time. 3.1 Financial Requirement Maximum Turnover It is a financial requirement that a builder must not exceed their Maximum Turnover Limit (MTL) by more than 20% within a financial year. 3.2 Calculating Maximum Turnover Limits A Builder s Maximum Turnover is calculated based on the Net Tangible Asset (NTA) position of the applicant or builder as stated in the MFR Report by applying the formula stated in Table A. Amounts being assured by way of one or more Deeds of Covenant and Assurance may be added to the NTA of the Builder when calculating Maximum Turnover Limits. SecureBuild will advise an applicant or builder of the Maximum Turnover Limit that it may undertake per financial year upon granting registration and upon acceptance of updated MFR Reports. The Maximum Turnover Limit applies for all financial years until such time as it is updated by the provision of a new MFR Report and SecureBuild has notified the builder of the new Maximum Turnover Limit. 3.3 Exceeding Maximum Revenue Pursuant to SecureBuild s Term s and Conditions, it is a condition that builders must not exceed their Maximum Turnover Limit by more than 20% within a financial year without first providing a new MFR Report to SecureBuild substantiating sufficient NTA to support a higher turnover level. Builders who exceed their Maximum Turnover by more than 20%, and do not report this to SecureBuild as required do not meet the Minimum Financial Requirements and may be subject to a change in their risk rating and/or deregistration. 12 P a g e

13 4. Current Ratio Definitions for Section 4: In this section: Current Assets means assets: a) which are realised, sold or consumed in the normal operating cycle of the business, b) which are realised within twelve months after the reporting period, c) which are held primarily for the purpose of trading (refer AASB 139), d) which are cash or a cash equivalent (as defined in AASB 107) unless the asset is, restricted from being exchanged or used to settle a liability. Related Entity loans and/or investments included as current assets must be collectible and convertible into cash as at the balance date. Real property listed as a current asset is to be shown at the lower of cost, or net realisable value. Trade debtors that are a current asset and not contingent are only included to the extent they are collectible, and as a minimum requirement overdue debtors must be written off as follows: a) trade debtors at or over 180 days old from invoice date, to be 50% written off, and b) trade debtors at or over 365 days old from invoice date, to be 100% written off. Current Assets do not include: a) Any Related Entity loans or investments assets which are not collectible, b) Contingent assets, c) Intangible assets, d) Real property not currently listed on the market for sale, e) Disallowed assets. Current Liabilities means liabilities: a) which are expected to settle in the normal operating cycle of the business, b) which are due to be settled within 12 months after the reporting period, c) which are held primarily for the purpose of trading, d) the entity does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. Current liabilities include: a) the amount of any non-current liabilities which must be paid by the applicant or builder in the 12 months following the reporting period, and b) all Related Entity loans payable by the applicant or builder in the 12 months following the end of the reporting period, c) the full amount of all bank loans or finance facilities where the lender or syndicate of lenders has notified the applicant or builder of a breach of bank or lending covenants. Current Ratio -means the ratio calculated by using the following formula: Current Assets Current Liabilities 13 P a g e

14 To meet the requirements an Applicant or Builder s current ratio must be at least 1: Financial Requirement Current Ratio It is a financial requirement that applicants and builders must meet the Current Ratio requirement at time of application and at all times that the registration with SecureBuild is held. 4.2 Calculating the Current Ratio The Current Ratio is calculated in accordance with the defined formula. Current assets included in the calculation of the Current Ratio must be in accordance with the definition of current assets in this policy. SecureBuild may require the applicant, builder or Accepted Independent Accountant to provide evidence of the classification of an asset as a current asset. Where such evidence is not provided, SecureBuild may automatically reclassify such assets as non-current assets without further notice to the applicant or builder. All current liabilities of an applicant or builder must be included in the calculation of the Current Ratio, including any loans to Related Entities payable by the applicant or builder in the 12 months following the end of the reporting period. Amounts assured by way of a Deed of Covenant and Assurance must not be included in calculating the Current Ratio. The Current Ratio is required to be expressed as a ratio, and must not be rounded up. 4.3 Determining Current Assets and Current Liabilities based on Builder Structure Depending on the structure of the applicant or builder s business, the Current Ratio may only be met from current assets and current liabilities, as follows: Table 2 Ratio Structure Structure of applicant or builder: Individual Sole Trader Company trading as stand-alone company Company - trading as part of a group of companies under ASIC Class Order 98/1418 or similar Individual or Company trading in partnership Individual or Company - acting as trustee Current assets and liabilities of: Individual only Company only Stand alone, closed group or consolidated group, as per reporting to the Individual or Company in combination with partnership/s Individual or Company in combination with trust/s 14 P a g e

15 5. Financial Monitoring Definitions for Section 5: In this section: Internal Management Accounts -means reports prepared by the builder showing the financial position and performance of the builder s business. Internal Management Accounts include at a minimum: a) Statement of Financial Performance (also known as a Trading and Profit and Loss Statement), b) Statement of Financial Position (also known as a Balance Sheet), c) Aged listings of trade debtors and creditors, and d) Statement of Cash Flows. 5.1 Financial Requirement Financial Monitoring It is a financial requirement that a builder must prepare and maintain internal management accounts at quarterly intervals in each financial year at a minimum. 5.2 Provision of ASIC or ASX Reports to SecureBuild If a builder or any company within its group of companies is required to provide an auditor s report or review report to the ASIC or ASX, then within 30 days of the report being signed and/or submission to the ASIC or ASX a copy of the report must be submitted to SecureBuild. Failure to provide the required information is in breach of SecureBuild s Terms and Conditions and may result in SecureBuild determining that the builder does not meet the Minimum Financial Requirements. 5.3 Provision of Internal Management Accounts to SecureBuild Builders are required to submit their internal management accounts if requested by SecureBuild. SecureBuild may notify any builder of the requirement to provide their internal management accounts after the end of a quarter. SecureBuild will notify the builder of the timeframe to provide the information. Failure to provide the required information may result in SecureBuild determining that the builder does not meet the Minimum Financial Requirements. 15 P a g e

16 6. Accepted Independent Accountant Definitions for Section 6: In this section: Accepted Independent Accountant Means a person with the qualifications specified in this policy who is permitted to complete MFR Reports regarding the financial position of an applicant or builder. An Accepted Independent Accountant must be independent of the applicant or builder and must not be: a) A director, secretary or employee of the applicant or builder or their Related Entities, or b) A spouse of the applicant or builder; or c) A business partner of the applicant or builder or their Related Entities, or d) An investor or shareholder of the applicant or builder or their Related Entities. An Accepted Independent Accountant does not include a person who: a) Has been convicted of, or plead guilty to providing false or misleading information to SecureBuild about an applicant or builders satisfaction of the financial requirements pursuant to s53b of the Act, or b) Has been notified in writing the SecureBuild considers that they have provided incorrect information about an applicant or builders satisfaction of the financial requirements,or c) Has been notified in writing the SecureBuild considers that they have failed to appropriately apply the requirements of this policy. 5.4 Qualifications for Accepted Independent Accountants The qualifications required of Accepted Independent Accountants for completion of MFR Reports or other reports are set out in Table 3. Table 3 Accepted Independent Accountant Categories Qualification May complete MFR Report for Registered company auditor holding professional indemnity insurance of at least $250,000 Holder of a current public practising certificate from the Australian Society of Certified Practising Accountants (CPA) Holder of a current public practising certificate from the Institute of Chartered Accountants in Australia (ICAA) Holder of a current public practising certificate from the National Institute of Accountants (NIA) Holder of a current public practising certificate from the Association of Taxation and Management Accountants (ATMA) Holder of a current public practising certificate from the National Tax & Accountants Association (NTAA) Holder of at least Membership status of one of the above professional associations Categories 3 to 5 Category 1 to 5 Category 1 to 5 Category 1 to 5 Category 1 to 5 Category 1 to 5 Category 5 Only 16 P a g e

17 Registered Tax Agent Another Responsible Person in extraordinary circumstances Category 5 Only At the discretion of and only with the prior approval of SecureBuild 5.5 Another Responsible Person Where a MFR Report or other report is provided by another responsible person, details of the extraordinary circumstances and the reporter s professional qualifications, audit experience (if any), business relationship and length of time of association with the applicant or builder must be provided. Approval as another responsible person will only be given on a case by case basis and is entirely at the discretion of SecureBuild. 5.6 Notice to Accepted Independent Accountants for MFR Reports The following Australian Accounting Standards are mandatory when submitting MFR Reports or other reports to the SecureBuild: AASB 101 Presentation of Financial Statements AASB 102 Inventories AASB 107 Cash Flow Statements AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors AASB 110 Balance Sheet becomes Reporting Period AASB 111 Construction Contracts AASB 136 Impairment of Assets AASB 137 Provisions, Contingent Liabilities and Contingent Assets AASB 139 Financial Instruments: Recognition and Measurement AASB 1048 Interpretation of Standards Plus any other standards relevant to the Builder s business. All MFR Reports are to be prepared by an Accepted Independent Accountant based on the financial information of the applicant or builder. MFR Reports are required to be completed by the Accepted Independent Accountant at the time of an initial registration application (new builders seeking turnover > category 5 do not need to provide an MFR Report) and from time to time as the need arises in accordance with this policy. A review of the applicant or builder s financial position is required to be conducted by the Accepted Independent Accountant in order to provide the MFR Report. The processes and utilisation of the Review Control Sheet (Attachment 2) is a minimum requirement only. Applicants and builders may opt to have their financial situation reviewed on a more rigorous basis. 5.7 Warning to Accepted Independent Accountants Accepted Independent Accountants have obligations under the Act not to provide false or misleading information. It is an offence for a person to provide SecureBuild with any information that is false or misleading in circumstances where the person has either knowingly provided the information, or has not taken 17 P a g e

18 appropriate steps to ensure the information is not false or misleading. The maximum penalty for providing false or misleading information to SecureBuild is $22,000. SecureBuild may require an Accepted Independent Accountant to provide evidence of the tests and checks performed in completing a MFR Report or other report at any time. 5.8 Reporting Requirements for Accepted Independent Accountants The Accepted Independent Accountant providing Reports must make appropriate enquiries of the applicant or builder, and seek independent evidence that is appropriate in the circumstances, in their professional opinion, to justify the information stated in the MFR Report. The Accepted Independent Accountant providing the MFR Report must carry out all tests and checks referred to in the Review Control Sheet as a minimum requirement. MFR Reports or any other reports to the SecureBuild will be deemed incomplete for assessment where they are qualified by disclaimer clauses or emphasis of matter clauses by the Accepted Independent Accountant giving the Report. 5.9 Determining Collectability of Related Entity Loans or Investment Assets The Accepted Independent Accountant must determine collectability of any Related Entity loan or investment assets based on the financial position of the Related Entity as at the same balance date as the MFR Report or other report. As a minimum, the Accepted Independent Accountant is required to view the balance sheet of the Related Entity, for the relevant balance date and ensure the Related Entity loan or investment is shown as a liability for the same amount and classification, as stated by the applicant or builder. The Related Entity must then have a positive net asset position in its own right as at the relevant balance date. Where the Related Entity in question is owed loans by other Related Entities, the Accepted Independent Accountant must also determine those loans are collectible or deduct those amounts from the Related Entities net assets. Where a Related Entity has a deficiency of assets, any loans owed to the applicant or builder by that Related Entity must be deducted from the Net Tangible Assets and Current Ratio of the Applicant or Builder. Evidence of collectability is required to be provided to the SecureBuild upon request Implied Warranty by Accepted Independent Accountant Where an Applicant or Builder is relying upon one or more Deeds of Covenant and Assurance to meet the Minimum Financial Requirements, the Accepted Independent Accountant signing the Report is warranting to SecureBuild that they have conducted all reasonable checks, pursuant to Australian Auditing and Accounting Standards, into each Covenantor s entire financial position to ensure they have Net Real Unencumbered Assets to cover the amount secured by the Deed. Where amounts are considered not collectable, have not been sufficiently evidenced with regard to their value or ownership, are intangible, or are disallowed assets, the Accepted Independent Accountant signing the Report must reduce the covenantor s total Net Real Unencumbered Asset position by that disallowed amount. The Accepted Independent Accountant accepts that SecureBuild relies upon this warranty in order to grant or maintain the building entity s registration for cover under the HBCF. 18 P a g e

19 6. Submission of Financial Information to SecureBuild 6.1 Applicants for Registration with SecureBuild Applicants for a licence must satisfy the relevant financial requirements stated in this policy. Applicants are required to advise SecureBuild on application the financial year applicable to the building entity applying for registration. For Australian residents and most companies incorporated in Australia the financial year applicable will be 1 July to 30 June. However, for overseas companies or for Australian companies where ASIC has approved a different financial year, the applicant is to notify SecureBuild of the applicable financial year. If no notification is given, the applicant or builders financial year will be 1 July to 30 June. Applicants must demonstrate at the time of application, satisfaction of the relevant financial requirements for the Maximum Turnover Limit being sought per financial year by providing information in the form set out in Table A. 6.2 Existing Builders Applying for an increase in Turnover Limit Where a builder holds current registration with SecureBuild and is seeking to increase its Maximum Turnover Limit, it is required to submit new financial information. This will be in the form of an up-to- date MFR Report prepared by an Accepted Independent Accountant. 6.3 Financial information The applicant or builder s financial information in the MFR Report or other report can be no more than FOUR months in age, from the end of the financial reporting period being relied upon, at the time the Accepted Independent Accounts signs the Report, unless otherwise stated in this policy, or as approved by SecureBuild. To comply with this requirement, the financial information may be based on the applicant or builder s most recent financial information, being either: a) last financial year end accounts, or b) the current financial year to date accounts. The Report must not be signed more than 30 days prior to the date the Report is provided to SecureBuild. A copy of the signed financial statements being relied upon must accompany the Report. 6.4 Applicants and Builders subject to ASIC Audit Requirements Applicants or builders subject to ASIC audit requirements, shall if required by SecureBuild, provide a MFR Report based on the most recently audited financial statements. These accounts may be more than FOUR months in age. A copy of the signed audited financial statements on which the Report is based must accompany the Audit Report. If the applicant or builder is operating as a stand-alone company, the MFR Report is to be based on the company in its own right. 19 P a g e

20 If the applicant or builder is a company operating within a group of companies, and is party to a Deed of Cross Guarantee (ASIC Class Order 98/1418), the MFR Report is to be based on either: a) the consolidated group of companies, b) the closed group of companies, being only those companies subject to the Deed of Cross Guarantee, or c) the applicant or builder in its own right as a stand-alone company. The applicant or builder will be required to provide evidence the Class Order was in place for the period of review on which the Report is based. In the event the Accepted Independent Accountant is providing an MFR Report or other report to SecureBuild based on qualified audited financial statements or emphasis of matter, that qualification or emphasis of matter must be notified to SecureBuild in writing and attached to the MFR Report. 6.5 Applicant and Builders not previously audited who become subject to ASIC Audit Requirements An applicant or builder who has not been audited previously and becomes subject to ASIC audit requirements shall, if required by SecureBuild, provide a MFR Report completed by the Registered Company Auditor based on the first set of financial statements prepared which have been audited. If the applicant or builder is operating as a stand-alone company, the MFR Report is to be based on the company in its own right. If the applicant or builder is a company operating within a group of companies, and is party to a Deed of Cross Guarantee (ASIC Class Order 98/1418), the MFR Report is to be based on either: a) the consolidated group of companies, b) the closed group of companies, being only those companies subject to the Deed of Cross Guarantee, or c) the builder in its own right as a stand-alone company. The applicant or builder will be required to provide evidence the Class Order was in place for the period of review on which the Report is based. 6.6 Applicants and Builders Not Required by ASIC to be Audited An applicant or builder who is not currently subject to ASIC audit requirements and expect to continue to be relieved from such requirements under the Corporations Act 2001, shall if required by SecureBuild, submit a MFR Report and a copy of the signed financial statements on which the Report is based. The applicant or builder that is a company may be required to provide information evidencing the exemption to ASIC audit requirements. SecureBuild reserves the right to require a company to be audited for the purposes of demonstrating compliance with the Minimum Financial Requirements. Where SecureBuild exercises this right, written notice of the audit requirement will be issued to the builder or applicant. In considering whether an applicant or builder should be audited, SecureBuild will consider whether the applicant or builder is currently, or will be, subject to audit requirements pursuant to Section 45A(3) of the Corporations Act 2001, and one of the following: Individuals Small proprietary companies Large Proprietary companies with Class Order 98/1417 or similar Overseas companies. 20 P a g e

21 Where an applicant or builder has obtained relief from ASIC audit requirements under Class Order 98/1417 or similar, evidence the Class Order was in place for the period of the financial statements is required to be provided with the Report. 6.7 Overseas Companies If an applicant or builder is based overseas and does not have its financial accounts audited by an Australian Registered Company Auditor, the applicant or builder shall, if required by SecureBuild rely upon an MFR Report with any appropriate qualifications as agreed to by SecureBuild, signed by an Australian Registered Company Auditor. The financial information stated in the Report is required to be stated in Australian Dollar (AUD) equivalents. If the company is audited overseas, it may rely on its last audited accounts, and can be older than FOUR months in age. If the company is not audited overseas, it shall, if required by SecureBuild provide a Report based on accounts no older than FOUR months in age. A copy of the signed financial statements for the respective period in review must be provided with the Report and are required to be translated into English. 6.8 Compliance Audit Pursuant to SecureBuild s Terms and Conditions, SecureBuild may give written notice to a builder requiring delivery of, or access to, specified financial records in circumstances where SecureBuild is satisfied that because of information received, there are reasonable grounds for concern that the builder does not satisfy the Minimum Financial Requirements stated in this policy. If builders do not comply with SecureBuild s written notice within 21 days, the builder will have contravened SecureBuild s Terms and Conditions and SecureBuild may change the builder s risk rating or deregister the builder. 6.9 Builder s financial circumstances must at all times satisfy Minimum Financial Requirements In keeping with clause 2.1 of SecureBuild s Terms and Conditions and these Minimum Financial Requirements, a builder must at all times satisfy the Minimum Financial Requirements and all variations in the contractor s turnover and assets must be notified and approved in accordance with the Minimum Financial Requirements. The Terms and Conditions of Registration also provide that if SecureBuild has reason to believe that a builder may have insufficient financial resources to meet possible liabilities in relation to its building work, that SecureBuild may reduce the builder s turnover limit, risk rating or deregister the builder Documents that may be provided to satisfy SecureBuild Where SecureBuild has concerns regarding a builder complying with the Terms and Conditions of Registration then SecureBuild may require a Production of Documents and an MFR Report: Where SecureBuild requires a Production of Documents and MFR Report then: financial statements provided shall be general purpose financial statements, audited or reviewed by a registered Company Auditor all of the recognition and measurement standards of the Australian Accounting and Auditing Standards must be applied (irrespective of the Company s adopted Accounting Standards). 21 P a g e

22 6.11 Restructure of Builder When a builder undertakes a restructure in relation to its ownership, management or financial structure, updated financial information may be required to satisfy SecureBuild that the builder continues to comply with this policy. Restructures will usually result in a change to the builder s financial position from that last advised to SecureBuild. Such restructures may include, but are not limited to: changes of ownership or officeholders restructure to partnership or trust structure change or withdrawal of covenantors. In instances where a restructure has occurred, the builder is required to provide an MFR Report, and if necessary new Deed/s of Covenant and Assurance, which reflect the builder s new business structure or financial position. Upon receipt of the financial information which meets the requirements of the policy, SecureBuild will advise the builder of its adjusted Turnover Limit based on the builder s Net Tangible Assets in relation to its new financial position. 22 P a g e

23 7. Assessment of financial information by SecureBuild 7.1 Assessment of financial information SecureBuild has the right to assess applicants and builders financial information at the times set out below: on application for registration where the Turnover Limit requires adjustment where the Net Tangible Asset position has decreased by more than 30% on request by the builder, or at the discretion of SecureBuild. Where the requirements of this policy have been met, the applicant or builder will be notified of the Turnover Limit that applies per financial year. 7.2 Failure to meet minimum financial requirements If an applicant fails to meet the requirements of this policy their application will be rejected. Builders are required to notify SecureBuild at any time if they fail to meet any of the requirements stated in this policy. If a builder fails to meet the requirements of this policy their registration may be cancelled. To reinstate a cancelled registration, the builder will be required to demonstrate to SecureBuild s satisfaction that they meet the requirements of this policy. Where the builder has submitted a Report relying upon a Deed of Covenant and Assurance, regardless of whether the builder meets the requirements of this policy, SecureBuild may accept the defined amount stated in the Report and advise the builder of any other deficiency. The covenantor is liable for the defined amount stated in the Report, despite any other deficiencies until at least a compliant Report is provided and accepted by SecureBuild. If a registration is cancelled the builder is required to reapply for registration and satisfy all of the requirements that are applicable at the time that the new application is made. 23 P a g e

24 8. Payment of Debts Definitions for Section 9: In this section: Creditor - means the entity owed an amount of money by a builder or applicant. Debt - means an amount of money owing by a licensed contractor for the provision of goods or services, or for a legally enforceable obligation or statutory obligation. Industry Trading Terms - means: a) payment within 25 business days of invoice date for debts owing to subcontractors, b) payment within 30 days of invoice date for debts owing to suppliers,or c) terms as agreed between the parties in writing. 8.1 Payment of debts SecureBuild will monitor the payment of debts of the builders who have registration with it as these are an indicator as to whether the builder meets SecureBuild s Minimal Financial requirements. An increase in a builder s payment terms may indicate that the builder has financial difficulties. In these circumstances SecureBuild may request that the builder demonstrate to SecureBuild s satisfaction that they meet the requirements of this policy. This may require providing an MFR Report to SecureBuild. 8.2 When this will not apply The financial requirement stated in paragraph 9.1 will not apply if SecureBuild is satisfied that one or more of the following apply to the unpaid debt: a) the debt owed is the subject of a genuine dispute by the applicant or builder and evidence of the reasons for the dispute is provided to SecureBuild b) in the case of a genuine dispute, any undisputed portion of the debt has been paid c) the creditor has extended the terms for payment of the debt, and documents exist to evidence the extended trading terms d) the builder or applicant and the creditor have entered into a payment arrangement in relation to the debt, and the licensed contractor is not in breach of that arrangement e) legal proceedings have commenced in relation to the debt and have not yet concluded f) a court or adjudicator has made a determination that the builder or applicant does not owe the debt g) the builder or applicant has appealed the decision of the court or tribunal h) the order of the court or tribunal has been set aside or the builder or applicant has made an application to have the order set aside. 24 P a g e

25 8.3 Documents and evidence to be provided to SecureBuild Where a builder or applicant has an unpaid debt, SecureBuild may require the provision of any documents or evidence deemed necessary to determine whether the builder or applicant meets SecureBuild s Minimum Financial Requirements. SecureBuild will notify the builder or applicant of a timeframe to provide the information. Failure to provide the required information may result in SecureBuild determining the builder or applicant fails to meet the Minimum Financial Requirements. 25 P a g e

26 9. Incorrect Information It is an offence, with a maximum penalty of $22,000, for a person to give a document to SecureBuild about an applicant or builder s satisfaction of the Minimum Financial Requirements stated in this policy where: (a) (b) the person knows the document contains information that is false or misleading,or the document contains information that is false or misleading and the person did not take reasonable steps to make sure that the information was not false or misleading. SecureBuild may refuse to accept MFR Reports or other financial information from a person who has provided incorrect information to SecureBuild. 26 P a g e

27 10. Confidentiality The Privacy and Personal Information Protection Act 1998 applies to information and documents held by SecureBuild containing personal information. The Government Information (Public Access) Act 2009 applies to all information and documents held by SecureBuild. Information provided about an applicant or builder s compliance with this policy may be disclosed by SecureBuild to another party with the consent of the applicant or builder, or as otherwise authorised or required by law. In addition, SecureBuild may provide all or some of this information to a financial specialist engaged by SecureBuild to provide advice relevant to the applicant or Builder s ability to satisfy the Minimum Financial Requirements Policy. An application may be made under the Government Information (Public Access) Act 2009 for access to personal information by the person to whom that information relates. An application may be made to the SecureBuild, or the State Government, under the GIPA Act seeking access to information held by SecureBuild. Applications will be reviewed in accordance with legislative requirements. The GIPA Act provides the builder with the right to review a decision made by an GIPA Officer. For further information refer to SecureBuild s website at 27 P a g e

28 11. Definitions Act - means the Home Building Act Applicant - means an applicant for registration with SecureBuild for cover under the HBCF Scheme. Associated entity - means an entity that: a) is related to the applicant or builder within the meaning of section 50 of the Corporations Act 2001, or b) has the same shareholders and directors as the applicant or builder. ASIC - means Australian Securities and Investment Commission. ASX - means Australian Stock Exchange. Builder - means an individual or company carrying out building work for which a builder or equivalent licence is required under the Home Building Act Collectible - means convertible to cash as at balance sheet date. For Related Entity Loan or Investment assets it means the Related Entity has net current assets and net tangible assets as at balance sheet date sufficient to repay the loan in full. Contingent Asset - means an asset which is not recognised in the financial statements of the builder because it s recovery is contingent on an outcome which is not within the control of the builder, regardless of prospects. For example, a debt owed to the builder which is the subject of legal action where the matter has not been heard, a judgment made or where no amount has been awarded or agreed to. Contingent assets must be determined in accordance with the current relevant Australian Accounting Standard. Contingent assets cannot be included in the calculation of Net Tangible Assets or Current Ratio. Contingent assets that are determined to no longer be contingent, for example where legal proceedings have concluded, may be brought to account and included in the financial statements only after collectability has been established. Evidence of collectibility is required to be provided to the SecureBuild upon request. Contractor - means the holder of a contractor s licence. Contractor s Licence - means a licence pursuant to the Home Building Act Construction Contract Work in Progress - means revenue and costs associated with construction contracts. Construction contract work in progress is to be valued in accordance with AASB 111, Construction Contracts. 28 P a g e

29 Deed of Assurance - means the Deed of Covenant and Assurance which is attached to this policy. Defined Amount - means the amount determined pursuant to the Minimum Financial Requirements, as being the amount assured by the covenantor to the builder by Deed of Covenant and Assurance, as stated in the MFR Report provided to SecureBuild from time to time. The amount is the difference between the Net Tangible Assets held by the builder and the Net Tangible Assets required for the builder s turnover limit. Directors - has the meaning given to it in the Corporations Act 2001 and also includes an Officer (refer definition of an Officer). Disallowed Assets - means an entity s assets, or portion thereof, which are unable to be relied upon for the purposes of meeting the requirements in this policy, and include but are not limited to: a) assets expressly not included, as set out in the Definition of Assets at section 2., such as uncollectible debts, excluded Related Entity Loan and Investment assets, superannuation benefits (yet to vest), units in unlisted trusts, and b) personal Net Tangible Asset requirement of a builder who provides a Deed of Covenant and Assurance to another entity, and c) the total of all defined amounts being assured to another entity by way of Deed of Covenant and Assurance. Entity - means: a) a company b) a partnership c) an unincorporated body d) an individual e) for a trust --the trustee/s. Intangible Assets - means identifiable, non-monetary assets without physical substance and include, but are not limited to: a) Goodwill b) Right of Indemnity c) Intellectual Property d) Formation Expenses e) Value of Trademark f) Patents g) Borrowing Expenses, and h) Net Deferred Tax Assets. Inventory - includes raw materials, work in progress (including contract work in progress) and finished stock. Inventory, except for construction contract work in progress, is to be valued for balance sheet purposes at the lower of cost or net realisable value as set out in AASB 102 Inventories. 29 P a g e

30 Investments - means only investments that are assessed as collectible. Investments do not include: a) shares in companies that are not publicly listed b) units trusts that are not publicly listed c) investments in Related Entities d) investments valued using equity accounting methodology. Builder - means the holder of a builder, contractor licence issued under the Home Building Act Net Real Unencumbered Assets - means the maximum amount a covenantor can assure to an applicant or builder by way of a Deed of Covenant and Assurance. A covenantor s Net Real Unencumbered Assets are to be calculated using the same process in determining an applicant or builder s Net Tangible Assets. The entire financial position of the covenantor/s must be taken into account in determining Net Real Unencumbered Assets, that is all assets and all liabilities from all sources. Where assets are jointly owned, only the covenantor s share of equity within an asset can be included. Net real unencumbered assets do not include: a) assets subject to securities or encumbrances, other than to the extent to which the real value of those assets can be shown to exceed the liability under all encumbrances provided (including personal guarantees, indemnities and the like) b) assets being assured by a Deed of Covenant and Assurance to another Applicant or Builder c) all Related Entity loans and/or investments assets owed to the covenantor. In the case of beneficiaries of trusts, net real unencumbered assets do not include any assets that are held in trust on behalf of the beneficiary, unless there is an existing right not subject to a legal disability under the trust for the beneficiary to call for transfer of the asset into the beneficiary s name and the transfer is called for and completed prior to the Accepted Independent Accountant sign off of the MFR Report and Covenantor s Statement of Financial Position. Non-Reporting Entity - means any entity which is not a reporting entity. See definition below for a Reporting Entity. Officer - has the meaning given to it in the Corporations Act 2001 and Associations Incorporation Act Production of Documents MFR Report - means the Production of Documents MFR Report (Attachment 2). Related Entity - for a company means: a) an associated entity (as that term is defined in the Corporations Act 2001) b) a director or shareholder of the company or an associated entity c) a spouse or de facto of a director or shareholder of the company or an associated entity d) a parent, step-parent, son, step-son, daughter, step-daughter, brother, half-brother, step- brother, sister, half-sister or step-sister of a director or shareholder of the company or an associated entity 30 P a g e

31 e) a company over which one or a combination of the above persons have control f) a parent entity, sibling entity or subsidiary entity of the company. For an individual means: a) spouse or de facto, parent, step-parent, son, step-son, daughter, step-daughter, brother, half-brother, stepbrother, sister, half-sister or step-sister b) any entities in which the individual is a director, officer, shareholder or business partner. For a builder that is a trustee of a trust means: a) a trust beneficiary or unit holder b) a spouse or de facto, parent, step-parent, son, step-son, daughter, step-daughter, brother, half-brother, stepbrother, sister, half-sister or step-sister of a beneficiary or unit holder. Related Entity Loans and Investments - means only Related Entity Loans and Investments with debit balances that are assessed by an Accepted Independent Accountant as collectible from Related Entities. Related Entity Loan liabilities owed by the builder may not be deducted from the calculation of Net Tangible Assets or the Current Ratio under any circumstances. Report - means the MFR Report. Reporting Entity - has the meaning given to it in Statement of Accounting Concepts 1 (SAC1). Review Control Sheet means the review control sheet contained this policy (Attachment 6). Signed Financial Statements For an MFR Report means: A complete set of financial statements, including the notes, and any statement by those responsible for the financial report. The notes must at least comprise a summary of significant accounting policies. At a minimum SecureBuild requires, special purpose financial statements prepared to all relevant accounting standards and significant accounting policies which at least contain the following: a) A statement of Financial Performance (Profit and Loss Statement) b) A statement of Financial Position (Balance Sheet) c) Notes to the financial statements which at least comprise a summary of significant accounting policies d) A signed proprietors/directors declaration For a Production of Documents MFR Report means: For Reporting Entities (See MFR Definition for Reporting Entities): Financial Statements shall be general purpose financial statements as defined in the Corporations Act The provisions of sections 295A, 296, 297 and 298 must also be incorporated in the financial statements irrespective of reporting date, audited or reviewed by a registered Company Auditor. For non- reporting entities, up to and including Licence Category 4: 31 P a g e

32 Financial Statements shall be, at a minimum, special purpose financial statements containing at least the following: A statement of Financial Performance (Profit and Loss Statement) A statement of Financial Position (Balance Sheet) A signed proprietors/directors declaration. Statements are prepared with all of the recognition and measurement standards of the Australian Accounting and Auditing Standards applied (irrespective of the Company s adopted Accounting Standards), including the notes and any statement by those responsible for the financial report. The notes must at least comprise a summary of significant accounting policies. Special Purpose Vehicle has the meaning given to it in the Queensland Building and Construction Commission Act Trade Contractor means an individual or company carrying out building work for which a trade licence is required under the Act Trade Debtors means only debtors that are collectible. Trade debtors does not include: a) 50% of trade debtors that are 180 days or older from invoice date; b) 100% of trade debtors that are 365 days or older from invoice date; and c) trade debtors that are contingent. 32 P a g e

33 CURRENT ASSETS Cash Assets Receivables Inventories Other Total Current Assets (a) Attachment 1 Statement of Financial Position - Covenantors Covenantor s Statement Of Financial Position As At (Date) (must be no earlier than the year end date on which the MFR Report has been based) Covenantor s Full Name:.. (as stated in the Report and Deed of Covenant and Assurance) $ $ $ $ $ (a) NON CURRENT ASSETS Receivables $ Property, Plant and Equipment $ Other $ Total Non Current Assets (b) $ (b) TOTAL ASSETS (e) =(a+b) $ (e) CURRENT LIABILITIES Payables $ Interest-Bearing Liabilities $ Current Tax Liabilities $ Provisions $ Other $ Total Current Liabilities (c) $ (c) NON CURRENT LIABILITIES Interest-bearing Liabilities $ Deferred Tax Benefits $ Provisions $ Other $ Total Non Current Liabilities (d) $ (d) TOTAL LIABILITIES (f) =(c+d) $ (f) NET ASSETS (y) =(e-f) $ (y) DISALLOWED AND INTANGIBLE ASSETS (z) $ (z) NET REAL UNENCUMBERED ASSETS * =(y-z) $ * This figure must at least equal the Defined Amount figure stated in the MFR Report If the Covenantor has any contingent liabilities or is involved in any legal proceedings attach a separate list detailing each contingent liability and legal matter.... (Date) (Name of Accepted Independent Accountant) (Signature of Accepted Independent Accountant) PRIVACY NOTICE SecureBuild is collecting the information on this form to ascertain whether your client satisfies the financial requirements of SecureBuild for cover under the Home Building Compensation Fund Scheme. The information you have provided may be disclosed by SecureBuild to another party with your client s 1 July 2017 consent or as authorised or required by law. In addition, SecureBuild may provide all or some of this information to a financial specialist engaged by SecureBuild to provide expert advice as to financial matters relevant to your client s ability to satisfy the Minimum Financial Requirements policy. For further information visit SecureBuild s website at 32 P a g e

34 Attachment 2 Review Control Sheet Review Control Sheet Client Name: Date: Address: Contact Person: Telephone: Reviewed by: Program No. Details 1.1 Obtain an understanding of the client s business Completed date/initial Work Paper Reference Comments/Further Action through discussions with client. 1.2 Inquire with management that all relevant financial information is included in the financial statements. 1.3 Compare previous year financial statements and discuss with management any significant account balance differences. 1.4 Review the classification of items in the financial statements including the allocation between current and non-current. 1.5 Are there any Related Entity items or transactions in the financial statements? 1.6 Have there been any significant changes in the client s business structure or nature of business during the year? If yes, discuss with client the reasons for the changes. 2.1 Examine the last bank statements and bank reconciliations for the period and match to balance sheet. Ensure large reconciliation items have been subsequently cleared by examining subsequent bank statements and reconciliations and that all unpresented cheques have been promptly cleared. 1 July P a g e

35 Program No. Details 3.1 Review aged debtors and creditors list and agree with trial balance. Completed date/initial Work Paper Reference Comments/Further Action 3.2 Discuss with client any long outstanding debtors listed on aged debtors ledger (including retentions) and assess prospects of recovery. 3.3 Verify major debtors, either through circularisation or by checking payments since the date of the debtors ledger. 3.4 Examine creditors list with client to assess if any amounts have been omitted 3.5 Test cut off of creditors to ensure that the liability for delivery of inventory has been recognised. This can be performed by reviewing delivery of inventory just prior to, and just after, the reporting date. 3.6 Examine timeliness of payments for PPS, Group Tax and Superannuation Guarantee Levy by examining the dates that cheques were cleared for each. 4.1 Inquire as to the nature and extent of any contingent liabilities such as guarantees, potential legal action or rectification work 5.1 Inquire whether debtors have been pledged, factored or discounted and whether any other assets have been pledged or are subject to financing arrangements. 5.2 Enquire whether or not any debtors are subject to legal processes for collection of any kind. If so set out full particulars and if you have determined the accounts have not become contingent assets, please explain. 6.1 Inquire whether work in progress is completely recoverable. Test recoverability with post balance date transactions (billings, cash receipts etc.). 1 July P a g e

36 Program Details No. 7.1 Obtain a schedule of property including accumulated depreciation (for example a tax depreciation schedule) and agree the totals to the trial balance. Completed date/initial Work Paper Reference Comments/Further Action 7.2 Discuss with client any financing arrangements in place (leases, mortgages etc.). 7.3 Consider the basis of valuation of assets and, if those assets are material, obtain an independent valuation (such as a kerbside valuation from a licensed real estate agent). 8.0 Ensure any joint venture operations, joint ownership or joint and several ownerships are fully disclosed in the notes hereto. 8.1 Ensure any real property owned by the builder is registered in its name and is fully owned by it any exceptions to be fully disclosed. For example, by sighting the most recent rates notice or a current title search. 9.1 Examine loan documents and correspondence with lenders and make enquiries of directors to ensure there have been no breaches of loan covenants. If there have been breaches assess impact on classification of those debts. Reviewed by: Partner Date Note: Working papers are to be maintained in accordance with Australian Auditing Standard AUS 208 Documentation. PRIVACY NOTICE SECUREBUILD is collecting the information on this form to ascertain whether your client satisfies the financial requirements of the Queensland Building and Construction Board for a contractor s licence under the Queensland Building and Construction Commission Act The information you have provided may be disclosed by SECUREBUILD to another party with your client s consent or as authorised or required by law. In addition, SECUREBUILD may provide all or some of this information to a financial specialist engaged by SECUREBUILD to provide expert advice as to financial matters relevant to your client s ability to satisfy the Minimum Financial Requirements policy. For further information visit the SECUREBUILD website at 1 July P a g e

37 Minimum Financial Requirements Report (MFR) TO: SecureBuild Australia Pty Ltd (SB) RE: (Name of Builder, Builder SB Registration Number or Builder Licence number) I, of (name) (Business name and address) being an Accepted Independent Accountant by virtue of (professional qualification) and being a holder of a public practicing certificate state the following regarding the financial information ( the Client ) for the period ended (name of Client) (date) This MFR Report has been compiled and prepared for distribution to the Client and SB, for the purpose of reporting on whether the Client meets the minimum financial requirements for Home Building Compensation (HBC) cover with SecureBuild Australia Pty Ltd. I acknowledge SB relies on this report to determine the Client s eligibility for HBC cover and that I may be required to provide evidence of the tests and checks conducted in the preparation of this report to SB. I disclaim any assumption of responsibility for any reliance on this report, or on the financial information to which it relates to any person other than the Client and SB, or for any purpose other than that for which it was prepared. Review Engagements [ ] I have undertaken a review of the Client s financial information. My review has been conducted in accordance with Australian Accounting and Auditing Standards applicable to review engagements. I have not performed an audit and accordingly, I do not express an audit opinion. I confirm the tests or checks I have conducted, and the evidence sighted, comply with those set out in the Minimum Financial Requirements. I have applied the Minimum Financial Requirements Policy and all relevant Australian Accounting Standards and significant accounting policies to the financial information presented below. Based on my review of the Client s financial Information, which is NOT an audit, and the application of the Minimum Financial Requirements and all relevant Australian Accounting Standards and significant accounting policies I provide the financial information below for the Client as at and for the period ended as stated above. Minimum Financial Requirements Report (MFR)

38 Audit Engagements [ ] I have conducted an independent audit of the Client s financial information to express an opinion on it to the Client and SB. The audit has been conducted in accordance with Australian Auditing Standards. The procedures for the audit included examination, on a test basis, of evidence supporting the information included in the Client s financial information. These procedures have been undertaken to form an opinion whether, in all material respects, the financial information is presented fairly in accordance with Australian Accounting Standards and other mandatory professional reporting requirements. The Minimum Financial Requirements of SB have then been applied to the financial statements to present the financial information below. The audit opinion expressed in this report has been formed on the above basis. Financial Information of the Client Current Assets $ Disallowed and Intangible Current Assets $ Current Liabilities $ Current Ratio: (please state as a ratio) : Assets: $ Disallowed Assets $ Intangible Assets $ Liabilities $ NTA (at least) $ Total of Related Entity Loan or Investment Asset amounts included in NTA $ Revenue: $ Deed of Assurance provided to Client (if applicable): Full and Correct Name(s) of each Covenantor Amount Assured Defined Amount Relationship to Client Original Deed Previously Provided (Yes/No) Minimum Financial Requirements Report (MFR)

39 Please choose one of the following: [ ] The Client meets the Minimum Financial Requirements. Nothing has come to my attention that causes me to believe that the Client does not meet the Minimum Financial Requirements as at and for the period end date as stated above. Based on the Client s NTA, the Turnover the client may earn per financial year is $ or [ ] The Client does not meet the Minimum Financial Requirements for the following reasons: I CERTIFY THAT this MFR report has not been altered from the MFR report attached to the Minimum Financial Requirements policy other than by the completion of information in the spaces provided. To confirm the above statement, attached to this MFR report are the signed financial statements for the Client, as at and for the period end date as stated above which are the financial statements the report is based on. Where Deeds of Assurance have been relied upon, I have attached a verified Statement of Financial Position for each Covenantor. (Name of Accepted Independent Accountant) (Signature of Accepted Independent Accountant) (Address and Telephone Number) (Date) Client declaration regarding MFR Report I/we have viewed the financial information presented in this report including the turnover I/the company may earn per financial year. I/we acknowledge the information contained in this report will be relied upon by SecureBuild in determining my/the company s eligibility for home building compensation cover. I/we are responsible for the information given to the Accepted Independent Accountant in order to prepare this report and we are of the opinion it represents a true and fair view of my/the company s financial position. I/we are aware it is an offence to give SecureBuild false or misleading information regarding my/the company s financial position. Client/Director Signature Client/Director Name (& Position if a Company) Date Client/Director Signature Client/Director Name (& Position if a Company) Date Client/Director Signature Client/Director Name (& Position if a Company) Date Minimum Financial Requirements Report (MFR)