Climate Change Adjustment Program (CCAP)

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Climate ChangeAdjustment Program (CCAP)

• Farm Business Analysis and Financial Assessment
  template
• This presentation consists of
• Background
• Model Structure/Assessment Criteria
• Completing the template

NOTE Use the navigation keys at bottom left of
screen to move between slides
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Climate ChangeAdjustment Program (CCAP)

• Background

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Background

• The Climate Change Adjustment Program (CCAP) is
  part of the Australias Farming Future initiative
  (AFF), which helps primary producers adapt and
  respond to climate change.

• The CCAP assists farmers in financial difficulty
  who are, or are likely to be, adversely impacted
  by climate change, including those experiencing
  hardship due to drought to
• develop options for on farm climate change
  strategies and practices
• seek specific professional advice and adjustment
  training
• obtain re-establishment assistance for those who
  decide to leave farming.

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Background

• The program provides assistance to
• Undertake professional advice and adjustment
  training of up to 5,500 (GST inclusive).
• Undertake a farm business analysis and financial
  assessment to provide farmers with a clear
  understanding of their financial situation and
  future prospects, in the context of the future
  climatic (and financial) environment.
• Develop a Climate Change Action Plan which
  outlines options for on-farm climate change
  adaptation strategies and practices through
  access to professional advice, information and
  training.

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Background

• The Farm Business Analysis and Financial
  Assessment is a compulsory assessment of the
  farmers financial situation.

• Assessing the farmers financial situation is
  important because it
• provides the farmer with an independent appraisal
  of their financial position, and
• helps them to decide what is best for the future
  of their farming business and their family.

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Background

• Determining the level of assistance

• Centrelink undertakes an initial Income and
  Assets Test to confirm eligibility.
• Centrelink issues the farmer with a voucher to
  undertake a Farm Business Analysis and Financial
  Assessment with a Prescribed Adviser.
• The result of the Financial Assessment will
  determine the level of assistance required by the
  farmer to develop their Climate Change Action
  Plan.

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Climate ChangeAdjustment Program (CCAP)

• Model Structure/Assessment Criteria
  

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Model Structure and Assessment Criteria

• The Financial Assessment is based on four tests
  that are designed to assess the financial status
  of the farmer and the farm business.
• A financially sound business would usually have
  the following elements

• an ability to earn profits or surpluses
• an ability to generate sufficient cash flow
• sufficient liquidity to meet short term cash flow
  obligations
• a sound financial structure whereby the entity is
  not over leveraged and has a sufficient level of
  assets to operate its business.

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Model Structure and Assessment Criteria

• The four tests used to determine eligibility for
  assistance are

• Farm business income and non-farm income
• Non-farm assets
• Liquidity
• Debt to equity position

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Model Structure and Assessment Criteria

• TEST 1 - Farm business income and non-farm income

NewStart Allowance Income Test Rate
Non-farm income
Farm business cash flow (estimated 12 months)
is less than
A farmer earning insufficient income to cover
their familys living costs is unlikely to be in
a position where they can fully consider their
future adjustment needs. Centrelink applies the
personal income test for NewStart Allowance and
the estimate of income aligns with Centrelink
adjustments.
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Model Structure and Assessment Criteria

• TEST 2 - Non-farm assets

NewStart Allowance Asset Test Rate
Non-farm assets
Non-farm debt
is less than

• This test ensures that the farmer does not have
  significant net non-farm assets that should be
  used before seeking assistance from the
  Government.
• To be eligible, the value of the farmers
  non-farm net assets must be less than the
  applicable NewStart Allowance asset test limit
  taking into account their homeowner status and
  marital status.  

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Model Structure and Assessment Criteria

• TEST 3 - Liquidity

Cash and trade debtors
Current liabilities
1.0
is less than

• The ratio of cash debtors/current liabilities
  is the most appropriate measure of liquidity for
  a farm business. This test is calculated by
  dividing the farmers balance of cash by current
  liabilities (quick ratio).
• Farmers may be eligible for the CCAP Program if
  they have a quick ratio of less than 1.0.
•  

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Model Structure and Assessment Criteria

• TEST 4 - Debt to equity position

Total Farm debt
Total Farm assets (less total farm liabilities)
1.0
is greater than

• A farmer with a low level of debt compared to
  assets should be able to extend their borrowings
  before seeking financial assistance from the
  Government.  

A debt to equity ratio greater than 1.0 will be a
pass as it indicates the farm may not be able to
increase its borrowings.
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Model Structure and Assessment Criteria

• Total Net Assets Cap

TOTAL NET ASSETS
1.5 million
A farmer with total net assets worth more than
1.5 million is automatically ineligible for
assistance.
In order to ensure that assistance is provided to
the correct target group for the Climate Change
Adjustment Program, it is considered appropriate
that eligibility for assistance be subject to a
net asset cap.
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Climate ChangeAdjustment Program (CCAP)

• Completing the template

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Completing the Financial Assessment template

• The Financial Assessment template is an excel
  spreadsheet
• used to assess the level of assistance required
  by the farmer to develop their Climate Change
  Action Plan, based on their financial position
• completed by a prescribed adviser
• part of the Farm Business Analysis and Financial
  Assessment form

Note The Financial Assessment template is also
available on CD. Please call 1800 638 746 to
request a copy.
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What informationdo I need to complete the
template?

• The farmer should provide
• Copies of the last 3-5 years tax returns and
  financial statements
• Details of current income, including Centrelink
  payments, income from off-farm employment or
  rental income
• Any superannuation payments, annuities and other
  income 

• Details of assets and investments, including bank
  and building society accounts, Farm Management
  Deposits, shares or managed investments
• Details of any debts
• Details of planned expenditure (Childrens
  education, house maintenance etc).
•  

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Completing the template

• The Financial Assessment template can be
  downloaded from www.daff.gov.au/climatechange/aus
  tralias-farming-future/climate-change-adjustment-a
  ssistance
• To open the template, click on the Financial
  Assessment template link.
• Select the Enable Macros option.

Note The income and asset test levels in the
template are based on the Centrelink NewStart
Allowance rates. The income test rate is revised
in March and September each year, while the asset
test rate is revised annually in July. The
template is updated in conjunction with these
rate changes. Please check the DAFF website for
the latest template version.
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Navigating through the template

• There are 6 steps to completing the template
• Complete the Farmer and Prescribed Adviser
  details on tab 1.
• Complete the Cash Flow and Historical Data tables
  on tab 2.
• Complete the Assets and Liabilities Data tables
  on tab 3.
• Assess the farmers eligibility on tab 4.
• View the eligibility calculation summary and
  result on tab 5.
• Save and Copy the assessment.

• Tabs 6, 7 and 8 contain Guidance and Explanatory
  information and a Glossary of terms.
• NOTE You can navigate through the fields by
  clicking in the fields or using the Tab button on
  your keyboard.

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STEP 1Complete the Farmer and Prescribed
Adviser details

• Click in the blue fields in the Introduction
  worksheet and type in
• the name of the farmer
• the name of the prescribed adviser
• the name of the prescribed advisers organisation
• the date of the assessment.
• Go to STEP 2 by clicking on the Cash Flow
  Historical Data tab.

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STEP 2Cash Flow and Historical Data

• Enter the financial year end in the blue field at
  the top of the page.
• Dates for current and future years will be
  automatically shown in the cash flow table.
• Dates for previous years will be automatically
  shown in the historical data table.

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STEP 2Part A Cash Flow Data

• For the current (including next 3 months) and
  next two financial years, enter the farmers
• Anticipated Income
• Estimated Expenditure
• Cash Balance position.
• The Cash Flow Surplus (or Deficit) and Closing
  Bank Balance are automatically calculated here.

NOTE The total of Farm Business related income
should exclude amounts to be paid to the farmer
as drawings or salaries to avoid double counting
this income.
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IMPORTANT!

• Make sure all the columns and rows have a value
  entered in order for the calculations to work
  correctly!

• That completes Part A of STEP 2.
• Part B requires you to complete historical
  income, operating costs and debt details...

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STEP 2Part B Historical Data
For the previous four financial years, enter the
farmers

• Income (sales income is to be shown as gross)
• Expenditure, as Drawings and Operating
  CostsThe Operating Surplus is automatically
  calculated here.
• Enter the farmers Debt history here.
• Note The Average is automatically calculated.

A glossary of terms used in the Cash Flow
Historical Data tables is provided on the
Glossary tab.
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STEP 2Part B Historical Data

• The Operating Ratios of the farm business are
  automatically calculated here.

• You can also view a summary of the farmers Cash
  Flow and Historical data presented in graphs and
  charts...

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STEP 2Part C Graphs and Charts

• Scroll down the spreadsheet on the Cash Flow
  Historical Data tab to view graphs and charts of
  the calculated components, which have been
  automatically produced from the data entered into
  the tables.

• There are ten graphs and charts available to view.

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STEP 2Part B C Historical Data, Graphs and
Charts

• That completes Parts B C of STEP 2.
• STEP 3 requires you to complete the Assets and
  Liabilities tab...

• Go to STEP 3 by clicking on the Assets and
  Liabilities tab.

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STEP 3Part A Assets

• Enter details of the farmers current asset
  position, including

• Cash at Bank
• Farm Management Deposit
• Tax Credit
• Vehicles
• Produce on hand
• Farm Value
• Stock on hand
• Livestock
• Off-farm investments

• Plant Machinery/Equipment
• Non-farm assets
• Agricultural holdings
• Other assets.

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STEP 3Part B Liabilities

• Enter details of the farmers current liability
  position, including

• Tax Liability
• Overdraft
• Trade creditors
• Mortgage
• Loans (Personal, Family)
• Lien
• Non-Farm Debt.

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STEP 3Part C Equity Table

• After the Assets and Liabilities tables have been
  completed, the spreadsheet automatically
  calculates the farmers Equity position.

• In the example above, the farmers equity
  position is rated on the borderline of being
  Critical.

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STEP 3Part A, B C Assets, Liabilities
Equity

• That completes Parts A, B C of STEP 3.
• STEP 4 contains the Eligibility Assessment...

• Go to STEP 4 by clicking on the Eligibility
  Assessment tab.

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STEP 4Eligibility Assessment

• The figures in the blue fields are automatically
  populated by data entered in the Cash Flow
  Historical Data and Assets and Liabilities tabs.
• The data in the blue boxes can be manually
  adjusted to show a more reasonable representation
  of the farmers financial position if required
  (for example, due to timing or seasonal
  fluctuations).

• For explanations of the figures calculated, hover
  your mouse over each of the blue fields.
• Further explanations are available on the
  Guidance tab.

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STEP 4Eligibility Assessment

• To assess the farmers eligibility, scroll down
  the worksheet to the Press here to assess
  eligibility button.
• To see the result of the eligibility assessment
  click on the Eligibility Calculation Tab, which
  will display the Overall Eligibility
  determination.

Note the eligibility assessment is not
determined by the prescribed adviser, but is
automatically calculated by the template based on
the farmers financial details.
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STEP 4Eligibility Assessment

• That completes STEP 4.
• STEP 5 contains the Eligibility Calculation...

• Go to STEP 5 by clicking on the Eligibility
  Calculation tab.

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STEP 5Eligibility Calculation

• The Eligibility Calculation tab shows the income
  and asset test limits which are equivalent to the
  NewStart Allowance.
• Financial ratios are used to assess the farmers
  eligibility based on their financial details.
• The farmers circumstances are assessed into one
  of three eligibility groups based on four tests
  including

• Farm business income and non-farm income
• Non-farm assets
• Liquidity
• Debt to equity position.

Note In addition to the four tests, farmers need
to pass the total net assets cap of 1.5 million.
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STEP 5Eligibility Calculation
Farmers are categorised into 3 groups

• Group 1 Climate Change Action Plan to be
  developed with a rural financial counsellor (case
  managed)The farm enterprise is borderline or not
  viable, with no prospect of recovery or
  insufficient liquidity and assets necessary to
  operate the farm business. Changes are required
  to return to a viable position.

• Group 2 Climate Change Action Plan to be
  developed with assistance from Centrelink (self
  managed)The farm enterprise is financially
  viable with sufficient liquidity and assets to
  operate the business, however viability is at
  risk due to ongoing drought, and changes are
  required to ensure ongoing viability.

• Group 3 Total Net Assets Exceed Allowable
  CapThe farm enterprise has sufficient liquidity
  and assets to operate business with no Government
  assistance.

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STEP 6Save and copy the assessment

• For your records, you can print and/or save the
  completed assessment template on your computer or
  other device.

• As part of the assessment, print Tabs 1, 2, 3, 4
  and 5, and attach a copy to the Farm Business
  Analysis and Financial Assessment Form.
• You need to return the Farm Business Analysis and
  Financial Assessment form, including the
  completed financial assessment template to
  Centrelink with a completed voucher for payment.
• Provide a copy of the completed Farm Business
  Analysis and Financial Assessment form and
  financial assessment template to the farmer to
  take to their rural financial counsellor or
  Centrelink to develop their Climate Change Action
  Plan.

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Guidance and Explanations

• Further guidance on completing the Financial
  Assessment template is available on the Guidance,
  Explanations and Glossary tabs in the template.

You have now completed the Financial Assessment
template.
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Further information

• Call the Australias Farming Future Information
  Line on 1800 638 746
• Visit the DAFF website at www.daff.gov.au/farmingf
  uture
• Call Centrelinks Farmer Assistance Line on
• 1800 050 585
• Visit the Centrelink website at
  www.centrelink.gov.au
• Call the Rural Financial Counselling Service
  Program on 1800 686 175