Controlled Entity Dividend Guideline

Document Number000984
Date Approved2 December 2011
  

1.        Introduction

The University has established a number of subsidiary entities over which it exercises control. That control enables the University to govern the financial and operating policies of each entity for the benefit of the University in fulfilling its objects and conducting its functions. In the course of their operations, controlled entities may accumulate surpluses that are distributable via a dividend payment to the University. This policy sets out the University’s requirements of its controlled entities relating to the payment of dividends to the University.

2.        Scope

This guideline applies to all controlled entities of the University whose corporate structure enables them to pay a dividend.

3.        Policy Intent

This guideline is designed to confirm the requirement for controlled entities to provide a maximum return on capital invested to the University in the form of a cash dividend. This policy also recognises the need for controlled entities to maintain sufficient cash for operational purposes and, where appropriate, future development and growth.

4.        Relevant Definitions

In the context of this document:

Capital expenditure means expenditure approved by the controlled entity board for the purpose of acquiring assets to be utilised in the ordinary operating activities of the controlled entity according to the most recent approved annual budget

Financial year means the University’s annual accounting period, currently ending 31 December

Future development requirements refers to the amount of cash that the controlled entity requires to accumulate or have accumulated at the end of the current financial year for use on operating or capital expenditure activities in future financial years. This amount, together with an outline of the planned future activities shall be described and incorporated into the most recent approved annual budget

Operating expenditure means expenditure on ordinary operating activities

Ordinary operating requirements refers to the amount of cash that the controlled entity requires on a daily basis for the conduct of its ordinary operating activities. It should generally equate to no more than the average total operating expenditure incurred in one month according to the most recent approved annual budget

Retained surplus has the same meaning as retained profits under Australian Accounting Standards and may also be referred to as retained earnings or accumulated surpluses. It is reported on each entity’s balance sheet and represents the net balance of the entity’s operating results achieved over its lifetime that have not been returned to the University.

5.        Policy Provisions

5.1      Dividends  

i.              Prior to the end of each financial year a controlled entity shall declare a dividend to the University.

ii.              Such dividend declared shall be paid to the University within 30 days of the end of the financial year.

iii.            The amount of the dividend shall be maximised and be calculated using the Controlled Entity Dividend Calculation Schedule as the lesser of:

           a.  cash and investments held by the controlled entity that are surplus to its Ordinary operating requirements, Capital expenditure, and Future development requirements, and

           b.  the expected balance of Retained surpluses at the end of the financial year.

iv.             In the event that a controlled entity seeks to reduce the dividend amount for cash flow purposes it shall request specific written approval from the Vice Chancellor of the University by providing:

           a.  A description of the reasons for a reduced dividend amount supported by operational and capital expenditure plans.

           b.  Relevant supporting financial information to enable the University to undertake an assessment of the entity’s financial performance, position and cash flow requirements.

6.        Essential Supporting Documents

Governance Framework for Controlled Entities Policy 000863

Controlled Entity Dividend Calculation Schedule

7.        Related Documents

University of Newcastle Act 1989

Controlled Entity Reporting Requirements Schedule 000903

 

 

Approval AuthorityCouncil
Date Approved2 December 2011
Date for Review2 December 2014
Policy SponsorVice-Chancellor
Policy OwnerChief Financial Officer
Policy ContactFinancial Controller
Amendment History

Guideline approved by Council on 2 December 2011 (Resolution C11:240, Doc FC11:063a - Attachment 1).