Annual Report 2005-06
Delivering Results
Highlights 2005-06
Contract awarded Rapid mobilisation Major milestone The contract was awarded Kamco mobilised its In June 2006 Kamco completed in July 2005 to Kamco to international and local staff documentation of the NTS implement and operate the and established its operations design and operational New Ticketing Solution (NTS) in Melbourne in a very requirements to form the over the next 12 years. short time. basis of solution development.
Successful Continuing operator Service negotiations development support Transactional banking An end-to-end software Access agreements have services and initial network-wide prototype was successfully been completed to ensure all retail agency agreements were developed, representing a operators agree to facilitate successfully negotiated. critical element in reducing installation works according the project risk and ensuring to plan. the solution will work for all Victorians.
Transport Ticketing Authority – Annual Report 2005-06 1 The Honourable Peter Batchelor MP Minister for Transport Level 26 80 Collins Street Melbourne Victoria 3000
The Honourable John Brumby MP Treasurer of Victoria 1 Treasury Place Melbourne Victoria 3001
Dear Ministers,
Transport Ticketing Authority (TTA) 2005-06 Annual Report
I have pleasure in submitting the Transport Ticketing Authority’s annual report for the year ended 30 June 2006, in accordance with the provisions of the State Owned Enterprises Act 1992 and the Financial Management Act 1994.
Yours sincerely,
Prof Michael Pryles Chairman Transport Ticketing Authority (Public Transport Ticketing Body)
23 August 2006
2 Transport Ticketing Authority – Annual Report 2005-06 Contents
1 Highlights 2005-06
4 Chairman’s report
5 CEO’s report
7 Report of operations
16 Financial overview
21 Accountable Officers’ and Chief Finance and Accounting Officer’s declaration
22 Auditor General’s report
24 Income statement
25 Balance sheet
26 Statement of recognised income and expense
27 Cash flow statement
28 Notes to and forming part of the financial statements
Transport Ticketing Authority – Annual Report 2005-06 3 Chairman’s report
Governing TTA The Board has consistently advocated that the real test of good governance is not just in formal compliance with rules and regulations, but in giving effect to those principles in practice. TTA strongly embraces the Victorian Public Sector values of impartiality, integrity, accountability and transparency inherent in the Code of Conduct.
Although the Auditor General’s investigation is still continuing into an alleged breach of the NTS tender probity during 2004-05, the Board has full confidence in TTA’s employees and the rigour with which our Probity Auditor oversaw compliance with the strict probity protocols.
Looking ahead It gives me great pleasure to report that for its third consecutive TTA’s work to date has largely been ‘behind the scenes’ and year, TTA continues its strong record of delivery and achievement. not visible to most Victorians. Over the coming year, Victorians will start to see the first evidence of the project roll out, as the Developing Victoria’s New Ticketing Solution NTS equipment is installed on vehicles, in stations and transport interchanges, and the simplicity of smartcards becomes On 12 July 2005, the contract to develop, implement and operate apparent. We look forward to the challenges of the next two the major components of the New Ticketing Solution (NTS) over years for the intensive installation and roll-out, and the staged the next 12 years was awarded to Keane Australia Micropayment program planned for transitioning Victoria’s ticketing to the NTS. Consortium Pty Ltd (Kamco). Critical to the success of this contract is the collaborative teamwork and productive partnership between On behalf of the Board, I wish to thank TTA’s management TTA and Kamco. I am pleased to report that, thanks to the and staff, led by our CEO, Mr Vivian Miners, for their diligence, exceptional effort and commitment from both organisations, enthusiasm and performance during the past year. We look the first three phases of the contract have been completed forward to another year of significant achievements! to TTA’s high standards.
The focus of the NTS work during the year has been on the development and refinement of TTA’s solution requirements. TTA and Kamco have worked in consultation with Transport Operators to ensure the solution will meet their and the community’s needs. This collaboration culminated in the Michael Pryles Transport Operators formally confirming that the detailed Chairman solution will meet their requirements.
In addition, Kamco demonstrated its prototype for the integrated technology underlying the NTS, re-confirming TTA’s industry-leading approach to delivering proven, interoperable technology within challenging timeframes.
Managing Melbourne’s existing ticketing Meanwhile, performance of the existing OneLink ticketing system has continued to attain high levels, including throughout the Commonwealth Games period.
During the transitional stage of the NTS, Metlink will continue with the day-to-day management of the existing system. At the same time TTA’s strategic and operational management role will increase as the new system is rolled-out.
4 Transport Ticketing Authority – Annual Report 2005-06 CEO’s report
make; the system will automatically calculate the lowest appropriate fare. We believe this to be the first of its kind in the world.
During the last year, TTA has developed plans to facilitate customers’ first encounters with the NTS. A mobile, interactive discovery centre and comprehensive customer information program have been developed and are set to be launched in the coming year.
Smart for operators This is a project with significant technical challenges with a fundamental goal being customer acceptance. However, productive relationships with Public Transport Operators have been viewed as imperative throughout all stages of the project. Positive stakeholder collaboration and cooperation has helped TTA and the Government in making important design decisions such as assessing device types and customer design options. TTA’s third year has been another intensive one, with real I would like to acknowledge all of the Transport Operators for achievements and progress being made towards delivering their efforts and collaboration. a world-class ticketing solution for Victoria. TTA continues to work collaboratively with the Transport Operators Making good progress to ensure the NTS will address their requirements for improved Following the NTS contract award in July 2005, Kamco rapidly business information, amongst other things. established its offices, key resources and corporate operations in Melbourne, meeting the requirements of the NTS contract’s Smart for Government first phase – Mobilisation. International experience on similar While our prime focus is on delivering a public transport ticketing projects indicates that Kamco achieved a very fast and solution, flexibility is being built into the solution to ensure expansion comprehensive project mobilisation. is possible in the future. With technological and commercial interoperability at its centre, the NTS will provide a platform for The contract with Kamco is business outcome-based with future access and micro-payment usage beyond public transport. appropriate performance measures and Key Performance TTA’s emphasis on applying an ‘open standard’ at the heart Indicators. To ensure these are delivered, the second phase of Victoria’s transport solution will ensure its technological documented the solution requirements in exhaustive detail; interoperability with non-proprietary hardware and software, potential issues were identified but resolved early in the project enabling other potential applications to be developed to use this cycle to further increase the likelihood of an on-time solution smartcard and its infrastructure. It also allows development of rollout starting in 2007. flexible solutions for the next generation and beyond.
In parallel, Kamco also delivered the third project milestone, Making it happen a prototype of the final solution demonstrating the ‘end-to-end’ The scale of our challenge over the next 18 to 24 months can be technology integration and capability to deliver Government’s summarised as: fare policy. This prototype forms the foundation for subsequent releases of the ‘system integration’ proving incremental delivery. • five million Victorians to inform and transition to NTS • 20,000 new devices to install This approach forms a significant element of TTA’s risk management regime by providing early visibility and progressive proof of • 8,300 transport operators’ staff to be trained in the usage successful delivery. This is a significant improvement over similar of the NTS. smartcard ticketing projects. To deliver this, TTA successfully implemented an organisational Smart for customers re-structure during June and July 2006. This restructure will The whole NTS project has the customer at the forefront of the position the organisation to deliver on these challenges over design. The NTS will be easy, simple to use, fast and will make the coming 12 months. public transport more accessible. I have pleasure in formally acknowledging the terrific teamwork A critical element of the customer value proposition is the ability and commitment from all TTA’s employees and contractors, to not have to worry about zones, products or complex fare and am confident the team will ensure that we continue to attain rules. In addition, for customers, there will be two levels of ‘fares our goals in delivering a world class ticketing solution to a world capping’. The first will be based on daily travel with travel cost class city. determined by the system based on zones travelled and time across the day. The other will be a ‘weekly cap’ and based on the customer’s weekly travel patterns. The solution will allow maximum flexibility for customers by allowing them to change travel plans and not be locked into a set pre-paid price. In both Vivian Miners cases, customers will only pay the appropriate cost of the trips they Chief Executive Officer
Transport Ticketing Authority – Annual Report 2005-06 5 customers
6 Transport Ticketing Authority – Annual Report 2005-06 Report of operations
What is TTA? Transport Ticketing Authority (TTA) is a special-purpose entity established by the Victorian Government in June 2003 specifically to: • manage the State’s interests in the OneLink Transit (OLT) public transport ticketing contract •procure, deliver and manage the New Ticketing Solution (NTS) on expiry of the OLT contract. The public transport ticketing system has an important role to play in meeting the Government’s objectives for growing and linking all of Victoria. In its policy, ‘Connecting Victorian Communities’, the Government made a commitment to develop a new smartcard-based ticketing solution to replace the current Metcard system when the OLT ticketing contract expires. A smooth ride
The NTS will operate across metropolitan Melbourne and regional TTA has adopted a highly customer-focused approach Victoria, making it easier for regional customers travelling to to its NTS marketing and communications strategy, which Melbourne to transfer to the metropolitan public transport system is aimed at early engagement with the wider community. on their arrival. It will improve the attractiveness of public transport The goal is to build a positive base of customer trust in by making it simpler to use, including for those with disabilities. It the NTS that will encourage an easy and early take-up will also provide valuable information for planning future transport of smartcards. service needs. To date, Customer Attitude Tracking surveys have TTA’s primary objectives are therefore to ensure: been successfully completed. These will allow TTA to • delivery of a world-class ticketing solution based on smartcard monitor the success of its customer information and technology, on time and on budget, meeting the needs of communications campaigns in building customer customers, transport and Government acceptance of the NTS.
• continuously high performance standards of both the NTS and Regular surveys to monitor customer attitudes and OLT systems are maintained, including achievement of ongoing perceptions have commenced, and will continue value for money of the ticketing infrastructure and operations. throughout the delivery and implementation phases.
2005-06 achievements As part of the broad customer migration program, Delivering a world class ticketing solution the TTA has embarked on a community-focused program After a comprehensive and robust tender process, TTA entered to allow Victorians to experience the ticketing solution into a contract for the development and operation of the NTS in prior to roll-out. An interactive discovery centre will travel July 2005. The $494 million contract was awarded to the Keane throughout Victoria to schools, community groups and Australia Micropayment Consortium Pty Ltd (Kamco). events commencing in late 2006 and continuing during 2007. Following contract award and mobilisation, TTA and Kamco commenced specifying the detailed requirements of the NTS, In addition, TTA has undertaken extensive strategic working closely with customers, transport operators and other analysis and market research on the proposed brand stakeholders. This work (the ‘solution requirements’ phase of name and positioning strategy for the NTS smartcard. the project) was successfully concluded in June 2006. The brand strategy aims to foster trust in the NTS and to reinforce customer control and ownership. In addition, Kamco developed and delivered the integrated software prototype, demonstrating the first of the end-to-end processes to deliver Government’s fare policy. This prototype forms the foundation for proving incremental integration and customisation. As such, it is a critical element of TTA’s strategy for reducing risk by delivering a ticketing solution that works from the outset, and ensuring that the project will be delivered on time and on budget.
Transport Ticketing Authority – Annual Report 2005-06 7 innovation
8 Transport Ticketing Authority – Annual Report 2005-06 Report of operations continued
The NTS project involves the installation of some 20,000 units of new equipment across metropolitan and regional Victoria on rail stations, trams, tram superstops, buses, bus interchanges and all bus and tram depots. This is complicated by the need to install the new equipment adjacent to existing equipment and ensure they both function. Access agreements to allow these works to be undertaken have been negotiated with the respective transport operators.
The NTS will require a range of specialised transactional banking services. Westpac has been appointed to provide banking services for the NTS as a negotiated extension to its whole-of-Government contract.
In addition, a premium-branded retail chain has been appointed as an important element of the main retail strategy to sell smartcards A world first and provide electronic re-load facilities when the NTS rolls out. TTA has set new international benchmarks for As part of a broad customer migration program, TTA has the introduction of a smartcard ticketing solution embarked on a program of community awareness which includes by developing an open architecture specification the construction of the interactive discovery centres. for micropayments as the base for the request for tender (RFT). These suites will allow Victorians to experience the new ticketing solution prior to its roll-out. The mobile suite will travel Victoria TTA’s output-based specification was unique in the visiting schools, community groups and other community gatherings. smartcard ticketing industry for its risk management focus on proven components and its open architecture Customers – the heart of NTS specification upon which tenderers could base their bids. Victoria’s public transport users – our customers – are at the TTA’s comprehensive approach to the development core of all TTA activity, from the management of the existing of the RFT not only attracted a world class field but ticketing system, through to design and development of the also resulted in one of the fastest and most effective NTS. Customer acceptance and take-up of smartcard ticketing procurement processes ever experienced for a project will be the key measure of success for the NTS. of this scale: tender launch to contract award took less than 12 months. Detailed planning for the NTS communications program commenced in 2005-06. A major ‘customer profiling’ study There has been significant interest in TTA’s approach has provided further insights into benefits and potential and it is expected that other projects will capitalise on barriers to using standard smartcards for different customer opportunities to apply their expertise in several major groups. This will be used to help TTA communicate productively cities seeking to introduce smartcard ticketing. with different customers, addressing their specific needs and concerns.
Key components of TTA’s initial communications program are the interactive discovery centres which will provide customers with their first view of the NTS. The discovery centres will inform customers how the NTS works and how they will use it on public transport, and will be launched in the coming months.
Recognising special needs TTA is committed to providing a NTS for all Victorians, including those who may have special needs in public transport ticket purchase and use.
TTA’s early priority has been to build trust with special interest groups through a dedicated communications program. The program aims to work with peak bodies representing the main disability groups, to design a solution that their members will be happy to use.
Transport Ticketing Authority – Annual Report 2005-06 9 mission
10 Transport Ticketing Authority – Annual Report 2005-06 Report of operations continued
During 2005-06, TTA continued its program of consultation meetings with special interest groups. Meetings were also held with Disability Access and Rural Access officers throughout Victoria.
Working with our stakeholders TTA recognises the importance of the NTS to the Public Transport Operators’ businesses and the criticality of their role in building a world class ticketing solution. TTA continues to develop a strong partnership with the Transport Operators’ management and staff.
During 2005-06, TTA and Kamco have worked constructively with the Transport Operators’ management and staff to finalise the detail of the ticketing solution. TTA values the Transport Operators’ significant commitment which culminated in their confirmation that the design of the NTS would meet their requirements. This represents a critical element in the successful implementation and ongoing operation of the NTS.
In addition, regular briefings have been held with union industry leaders to assist in the timely identification and resolution of strategic issues and opportunities. TTA has also continued to work closely with customers and special interests groups to ensure the solution was optimised to meet the needs of all Victorians.
Technological innovation Kamco has developed and tested the software prototype of the solution, to prove that it will meet TTA’s and Transport Operators’ objectives. Kamco successfully delivered an ‘end-to- end’ technology prototype, which demonstrated that the software can handle the Government’s proposed fares concept. Most international projects do not achieve this ‘end-to-end’ connectivity until a much later stage and typically, this can be a key cause for project delay.
Managing the existing ticketing system TTA continues to work with OLT, provider of the existing ticketing system and services, to ensure passengers continue to experience high levels of availability of ticketing machines. The day-to-day contract management of the OLT system is undertaken by Metlink as TTA’s agent.
Excellent performance of the existing ticketing system and services was maintained throughout the Commonwealth Games period, thanks to the collaborative planning and cooperation of all parties involved, ensuring a smooth ride for passengers. Similar planning and cooperation between parties on a daily basis ensures ongoing minimal disruption to ticketing services due to major projects including the Southern Cross Station development.
TTA’s strategic involvement with OLT will ramp up during the coming 12 to 24 months as the detailed, intensive equipment installation and decommissioning plans are finalised and implemented. TTA’s focus will remain on passengers, ensuring there is a seamless transition from the present ticketing system to the NTS.
Transport Ticketing Authority – Annual Report 2005-06 11 Report of operations continued
Moving forward – 2006-07 •creating and implementing a state-wide customer communication The priorities for 2006-07 will be focused on the delivery stage of and information program to facilitate rapid ‘migration’ to the solution. This includes: smartcards, operator staff training and change management programs • thorough testing of the solution’s integrated software, hardware •fully integrating management of the transition of the new and support services, which will be pilot tested prior to roll-out solution from the incumbent ticketing system and service • installation of around 20,000 units of new equipment across provider to create a ‘seamless’ customer experience, ongoing metropolitan and regional Victoria on rail stations, trams, tram high levels of machine reliability and minimal revenue impact superstops, buses, bus interchanges and all bus and tram depots • continuing the collaboration and cooperation with all Transport • establishing channels to distribute up to two million smartcards Operators. and managing the respective concession entitlements for about 50 per cent of public transport users The following diagram of Project Timeframes outlines TTA’s work • establishing new channels to allow value ‘top-ups’ on cards, to date and the focus of the next 12 to 24 months on testing, including via vending machines, retail outlets, online internet rolling out and operating the NTS. arrangements, a new call centre and automatic re-loads from the customer’s bank account (auto re-load)
Project Timeframes
12 Transport Ticketing Authority – Annual Report 2005-06 Prof Michael Pryles Mr Peter Harris Ms Christine Gibbs Board Chairman Board Director Board Director
Governance During 2005-06, eight Board meetings were held and one As a special purpose body formed under the State Owned ‘between meetings’ issue was resolved. All Board members Enterprises (SOE) Act 1992, TTA reports to the Minister for attended all meetings. Transport (the ‘Relevant Minister’ in the SOE Act) for transport policy matters and the Treasurer (the ‘Responsible Minister’ Remuneration and performance review for TTA’s CEO and under the SOE Act) for matters pertaining to the SOE Act. executives is undertaken by the Board.
TTA’s governance arrangements are designed to support its Audit and risk review objectives and achievements by promoting focused project The Audit Committee’s charter encompasses responsibility for: delivery, effective risk management and flexible management •reviewing the statutory and other financial information provided structures and reporting arrangements to both the Minister by TTA to Ministers for Transport and the Treasurer. •reviewing the effectiveness and efficiency of TTA’s internal control TTA’s corporate structure means that the project is overseen environment, operations and financial management by a small, highly focused and experienced Board and a • overseeing TTA’s compliance with applicable laws and regulations management team with a strong customer and commercial • overseeing TTA’s effective operation of the risk management orientation. As such, there is a single point of accountability framework. for the project while Government retains a high level of visibility. TTA maintains and periodically reviews its comprehensive risk The Government has appointed three Directors to TTA’s Board: register and management plan for the NTS. Prof Michael Pryles TTA has outsourced its program of internal audit of TTA’s financial Board Chairman management policies and practices to William Buck, Chartered Appointed Director and Chairman on 14 October 2003. Prof Pryles Accountants. The findings from these reviews have provided is a commercial and corporate lawyer with an international assurance to the Board and management that TTA satisfactorily arbitration practice. complies with legislated and regulatory standards for sound financial management. Mr Peter Harris Board Director, Audit Committee Chairman During 2005-06, four Audit Committee meetings were held and Appointed 17 June 2003, Founding Director and Chairman until one ‘between meetings’ issue was resolved. All members attended 14 October 2003. Mr Harris is a senior Public Servant, formerly all meetings for which they were required to attend. Director of Public Transport.
Ms Christine Gibbs Board Director Appointed Director on 15 March 2005. Ms Gibbs is a senior statutory authority officer with substantial marketing and communications expertise.
Transport Ticketing Authority – Annual Report 2005-06 13 Report of operations continued
Mr Christopher Niall Mr Richard Parker Mr Duncan Bryce Mr Matthew Brennan Senior Project Manager General Manager – Operations Solution Architect Head of Commercial
Probity review Our people On 14 July 2005, the day after the announcement of the successful TTA’s Chief Executive Officer, Mr Vivian Miners was appointed bidder for the NTS contract, the Herald Sun newspaper printed in August 2003 and leads a small executive team to direct and an article containing allegations of a probity breach during TTA’s manage TTA: tender evaluation process. The allegations related to leaking of • Chris Niall, Senior Project Manager and certain financial analysis documents created in early March 2005. Principal’s Representative for the NTS contract TTA had established procedures to ensure the highest •Richard Parker, General Manager – Operations standards of probity at every stage of the complex tendering • Duncan Bryce, Solution Architect process. Upon publication of these allegations, the Board immediately commissioned probity and forensic investigations • Matthew Brennan, Head of Commercial. to determine whether, in the light of the allegations, the tender process had been compromised. The Minister for Transport During June and July 2006, TTA restructured its organisation also asked the Auditor General to conduct an external review to better facilitate delivery of the NTS project and to ensure the of this matter. resources and systems are in place to operate the NTS from day one. Accordingly, project delivery managers were appointed The TTA Probity Auditor’s independent investigations reconfirmed to head important workstreams and ensure the essential the integrity of the tender process. The detailed forensic collaboration between workstreams. investigations undertaken by PricewaterhouseCoopers did not find evidence to establish how or when the information was The project delivery managers report directly to the CEO and acquired by the media. It also found no evidence that the receive strategic advice and direction from the executive team. unauthorised disclosure of information detracted from the The project delivery continues to be facilitated by the Corporate final determination and selection of the tenderer. Operations team.
The TTA Board and management continue to provide full support All employees, consultants and contractors to TTA are required to the Auditor General’s investigation which has yet to conclude. to comply with the Victorian Public Sector code of conduct.
A key focus of TTA’s human resources strategy will be on retaining corporate knowledge and resources through to the end of the project delivery. In response to this, TTA has recently refined its employee development and performance management approach to emphasise developing employees’ careers at TTA and beyond.
Exceptionally high performance and commitment are recognised and rewarded by TTA, based on merit and equity.
14 Transport Ticketing Authority – Annual Report 2005-06 Executive officers and workforce disclosures The number and gender of executives (employees whose total annual remuneration exceeds $100,000) at the end of the financial year is included in the staffing profile summary below. The significant increase in employee numbers reflects resource levels needed to meet the demands of the NTS as it moves through its project delivery cycles.
Workforce disclosures As at 30 June 2006 As at 30 June 2005 Male Female Total Male Female Total Ongoing Executives 1 0 1 1 0 1 Other Executive and Accountable Shared goals and values Employees 3 1 4 3 1 4 Since its inception in June 2003, TTA has moved Special Project through several important stages in the development of Executives 7 4 11 6 3 9 the NTS. Each project stage has its own distinct key Non-executive goals. Employees 7 19 26 9 13 22 Total 18 24 42 19 17 36 In its first year, TTA’s focus was on mobilising resources, determining project feasibility and the business case, Special Project Executives are those executives engaged and developing strategies for procurement. specifically and for a fixed term to address the Government’s priorities as reflected in TTA’s charter. TTA’s second year was spent procuring the NTS – finalising tender documentation, evaluating bids, The notes to the financial statements regarding executive negotiating with short-listed bidders and awarding remuneration indicate the amounts paid to executive and the contract. ‘accountable’ employees during the reporting period. From mid-2006, TTA’s activities shift to the ‘delivery’ Occupational health and safety stage of the project. TTA promotes the personal and professional development of its employees to achieve ongoing improvements in output Successful solution delivery and transition are crucial quality and efficiency in meeting its objectives. It actively to the NTS and having the right shared values and goals promotes safe work practices, career development and will support the success of the business during this a productive, non-discriminatory working environment. important stage. The goals have been determined as: • the solution is trusted by our customers and operators There were no significant incidents or lost time due to injuries • the solution is delivered successfully for the past year. •preparation for operations stage TTA’s General Manager – Operations oversees the implementation • development of people. and maintenance of appropriate OH&S policies, procedures and programs to address staff needs. Programs implemented in The shared values underlying these goals are: the past year including subsidising influenza immunisation, gym membership and team participation fees for the BRW • delivery Corporate Cup. • team work •respect for each other and our stakeholders.
The new organisation structure reinforces the ‘embedding’ of these goals and values in our daily work practices and behaviours.
Transport Ticketing Authority – Annual Report 2005-06 15 Financial overview
Summary of financial results TTA operates within Government’s rigorous standard of integrity and accountability for public funds, and ensures sound financial management practices are inherent in its daily operations.
TTA receives funding from Government as investment in the development of the NTS and for its operations. For the year ended 30 June 2006, TTA’s expenditure on developing the NTS assets and corporate operations was slightly under the agreed budget, representing a good result for the year. The underspend was largely due to significant risks not materialising at this stage of the project, as a result of TTA’s continued proactive and rigorous risk management.
Financial Year to 30 June 2006 Funding $’000 Funds received from Government Operations 8,748 Investment in project development 35,128 Other funds received Interest 391 Total funds received 44,267 Net operating surplus 2,592 Net assets at year end 61,513
Consultancies commissioned A key element of TTA’s resources strategy includes using expert consultants and contractors to supplement TTA’s core in-house staff. This results in a very flexible workforce that enables TTA to resource the changing demands for specialist skills and capacity throughout the dynamic phases of the NTS project.
Consequently, a significant proportion of NTS project development expenditure was incurred on professional services fees of expert consultants, engaged through TTA’s pre-qualified and selected panel of expert consultants.
The following table highlights the number of consultancy engagements and total fees incurred: Fees Over $100,000 Fees Less Than $100,000 Number of projects 23 Number of projects 71 Total expenditure $4.4m Total expenditure $3.5m
16 Transport Ticketing Authority – Annual Report 2005-06 The following schedule summarises the consultancy projects which were committed in 2005-06 where approved fees exceed $100,000.
Total Fees Total Fees Budget Incurred Consultant Summary of Project Scope $’000 $’000
Axiom Consulting Customer surveys, data modelling, analysis, design, management and reporting 179 181 Booz Allen & Hamilton NTS Transition Strategy: Scope and work planning for location of NTS devices 175 182 (Australia) Booz Allen & Hamilton NTS Transition Strategy: Planning roll-out and implementation of NTS Equipment (Australia) and customer migration planning and delivery 250 251 Burns Bridge Transaction NTS and civil works procurement and packaging strategy advice, offers evaluation and commercial negotiations – Q2 and Q3 2006 250 131 Burns Bridge Transaction Retail support for NTS 200 195 Burns Bridge Transaction Advice for procurement development, packaging strategy and project management – ongoing engagement to December 2006 100 32 Clemenger Harvie Development of brand communication and strategy including awareness and Edge Pty Ltd implementation of smartcards – ongoing 324 99 Clayton Utz Legal advice: Finalisation of the NTS Project Agreement Phase 210 202 Clayton Utz Legal advice: NTS Project Agreement Post-Completion Advice Phase 110 94 Clayton Utz Legal advice: NTS Mobilisation Phase 250 244 Clayton Utz Legal advice: NTS Solution Requirements Phase 250 269 Clayton Utz Legal advice: NTS Solution Requirements (extension) and NTS Release 0 & Prototyping Phase 170 160 Clayton Utz Legal advice: NTS Solution Requirements (extension), NTS Release 0 & Prototyping (extension) and Front Office Design and Hardware FAT Phase 150 137 Cornwell Design Design and development of mobile and static discovery centres 200 160 Firecone Ventures Pty Ltd Advised on NTS strategic business development 100 102 LEK Consulting Major Solution Design: Analysis and work plan development 225 226 LEK Consulting Extended application product development 145 127 LEK Consulting Development of Disability Discrimination Act Compliance (project scope and resources subsequently reduced) 208 80 LEK Consulting Development of customer migration and ticketing strategy 164 100 SAHA International Ltd Financial advice, development of initial business model for smartcard applications 240 212 SAHA International Ltd Development of business model for smartcard applications 240 281 The Klein Partnership Qualitative customer profiling study 153 161 The Klein Partnership Demographic research for composition of customers (demographic, lifestyle, behaviour, hobbies, sporting participation, technological sophistication, etc.) – parts A & B 268 274 Transaction Resources Financial support for NTS banking services procurement – parts A & B 277 240 Transaction Resources Banking relationship strategy and banking marketing analysis 150 164 Transaction Resources Advice on banking relationship strategy and banking marketing analysis (extended scope) 250 255 Trevor Rowe & Associates Corporate communications support: April 2005 to December 2006 120 94
Transport Ticketing Authority – Annual Report 2005-06 17 Financial overview continued
Change in financial position National Competition Policy All agreements and understandings between the former Public Under National Competition Policy, the guiding legislative principle Transport Corporation (PTC) and OLT were allocated to TTA is that legislation, including future legislative proposals, should not when the PTC wound up in June 2003. At the same time, the restrict competition unless it can be demonstrated that the benefits Department of Infrastructure, as successor in law to the PTC, of the restriction to the community as a whole outweigh the costs, received funds relating to the OLT obligations. TTA’s financial and that the objectives of the legislation can only be achieved by position therefore reflects the net liability for the OLT contract restricting competition. and the off-setting funding receivable from the Department of Infrastructure to meet that obligation. Both liability and receivable TTA has complied with the requirements of the National have reduced during the reporting period by the scheduled Competition Policy. quarterly payments. Disclosure of major contracts In addition, TTA received $35.1 million via Parliamentary On 12 July 2005 the Premier and Minister for Transport formally appropriations, increasing the balance of contributed capital awarded the NTS contract to Keane Australia Micropayment to $50.2 million. Some $39.1 million project expenditure was Consortium Pty Ltd, trading as Kamco Pty Ltd. Under this capitalised as ‘work in progress’ – intangible and physical 12-year, $494 million contract, Kamco will design, build, roll assets. This treatment reflects the State’s ongoing investment out and operate the NTS throughout Victoria. in developing the NTS assets. Victorian Industry Participation Policy Freedom of Information The Victorian Industry Participation Policy Act 2003 requires public The Freedom of Information Act 1982 provides for members entities to apply Victorian Industry Participation Policy (VIPP) in all of the public to obtain information held by Transport Ticketing tenders over $3 million in metropolitan Melbourne and $1 million Authority. The General Manager – Operations is the Principal in regional Victoria, and to report on its implementation. Officer for the purpose of administering the requirements of the Act. TTA received a total of six applications for the 2005-06 Through its Victorian Industry Participation Plan statement, Kamco period, five from Members of Parliament and one from an has committed to 70 per cent local content in the NTS contract. individual. All requests were non personal. Kamco has also committed to establishing Keane Australia in Requests for documents under the Freedom of Information Melbourne as a new Asia-Pacific regional headquarters for general legislation should be made in writing and accompanied by the IT outsourcing services. This business is proposed to pursue IT statutory fee of $21 and addressed in the first instance to: opportunities beyond ticketing and can be expected to create Freedom of Information Officer up to 250 new jobs in Victoria. Transport Ticketing Authority PO Box 18023 In addition, Kamco will create a ‘centre of excellence’ in Melbourne Collins Street East to bid for interstate and offshore ticketing contracts. Melbourne, Victoria 3001 Telephone (03) 9651 8153 Compliance with the Building Act 1993 TTA does not own or control any Government buildings. Availability of additional information In compliance with the requirements of the Directions of the Directions from the Minister Minister for Finance, TTA retains information applicable to the TTA received no entity-specific Directions from the Minister entity, which is available on request to relevant Ministers, Members during the reporting period. of Parliament and the public (subject to the Freedom of Information requirements).
18 Transport Ticketing Authority – Annual Report 2005-06 Whistleblowers Protection Act The Whistleblowers Protection Act 2001 became law in Victoria in January 2002. The Act is designed to protect people who disclose information about serious wrongdoing by public officers and public bodies. It also provides a framework for the investigation of these matters and for rectifying action to be taken. The key objectives of the Act are to: •promote a culture in which people feel safe to make disclosures •protect these people from recrimination •provide a clear process for investigating allegations • ensure that investigated matters are properly dealt with.
In accordance with the legislation, TTA adopted a Support to Whistleblowers policy. This policy and procedures can be found on TTA’s website www.doi.vic.gov.au/tta. The procedures establish a system for reporting disclosures of improper conduct or detrimental action by TTA and its employees. Disclosures relating to TTA or its employees may be made to either TTA’s Protected Disclosure Coordinator or directly to the Ombudsman. Disclosures may be made by TTA’s employees, consultants, contractors or the public.
Whistleblowers report No disclosures under the Whistleblowers legislation relating to TTA or its employees were received during the reporting period. In accordance with Sections 104 and 105 of the Whistleblowers Protection Act, TTA reports the following:
Topic Report
Current procedures TTA has adopted the guideline procedures of the Ombudsman and modified these to TTA’s specific situation Number and type of disclosures made during the year Nil Number of complaints referred to Ombudsman as to whether pubic interest disclosures Nil Number and type of disclosed matters referred by the Authority to Ombudsman to investigate Nil Number and type of investigations of disclosed matters taken over by Ombudsman Nil Number and type of investigations of disclosed matters taken over by Ombudsman Nil Number and type of requests made under Section 74 to Ombudsman to investigate disclosed matters Nil Number and types of disclosed matters that the Authority has declined to investigate Nil Number and types of disclosed matters substantiated on investigation and action taken Nil Recommendations to the Ombudsman Nil
Transport Ticketing Authority – Annual Report 2005-06 19 Financial overview continued
Disclosure index This annual report is prepared in accordance with all relevant Victorian legislation. This index has been prepared to facilitate identification of compliance with statutory disclosure requirements.
Legislation Requirement Page
Report of Operations Charter and purpose FRD 22A Objectives, functions, powers and duties 7 FRD 22A Nature and range of services provided 7 FRD 22A Manner of establishment and the relevant Ministers 13
Management and structure FRD 22A Organisational structure 13
Financial and other information FRD 22A Statement of workforce data and merit and equity 15 FRD 22A Summary of the financial results for the year 16 FRD 22A Significant changes in financial position during the year 18 FRD 22A Operational and budgetary objectives and performance against objectives 7-18 FRD 22A Major changes or factors affecting performance 7-18 FRD 22A Subsequent events n/a FRD 22A Application and operation of Freedom of Information Act 1982 18 FRD 22A Statement on National Competition Policy 18 FRD 22A Application and operation of the Whistleblowers Protection Act 2001 19 FRD 22A Details of consultancies over $100,000 16 FRD 22A Details of consultancies under $100,000 16 FRD 22A Statement of availability of other information 18 FRD 22A Occupational health and safety 15 FRD 15A Executive officer disclosures 15 FRD 25 Victorian Industry Participation Policy disclosures 18 FRD 12A Disclosure of major contracts 18 FRD 10 Disclosure index 20 FRD 22A Compliance with building and maintenance provisions of Building Act 1993 19
Financial Statements Financial statements required under Part 7 of the FMA SD 4.2(b) Operating statement (income statement) 24 SD 4.2(b) Balance sheet 25 SD 4.2(b) Cash flow statement 27 SD 4.2(a) Statement of recognised income and expense 26 SD 4.2(c) Compliance with Australian accounting standards and other authoritative pronouncements 28 SD 4.2(c) Compliance with Ministerial Directions 19 SD 4.2(c) Accountable officer’s declaration 21 SD 4.2(d) Rounding of amounts 31
Other disclosures in notes to the financial statements FRD 11 Disclosure of ex-gratia payments 38 FRD 21A Responsible person and executive officer disclosures 38
Legislation Freedom of Information Act 1982 18 Whistleblowers Protection Act 2001 18 Victorian Industry Participation Policy Act 2003 18 Building Act 1993 19 Financial Management Act 1994 21 Audit Act 1994 22
20 Transport Ticketing Authority – Annual Report 2005-06 Accountable Officer’s and Chief Finance and Accounting Officer’s declaration
We certify that the attached financial statements for the Transport Ticketing Authority (TTA) have been prepared in accordance with Standing Direction 4.2 of the Financial Management Act 1994, applicable Financial Reporting Directions, Australian accounting standards and other mandatory professional reporting requirements.
We further state that, in our opinion, the information set out in the income statement, balance sheet, cash flow statement, statement of recognised income and expenditure and notes to and forming part of the financial statements, presents fairly the financial transactions during the year ended 30 June 2006 and financial position of TTA as at 30 June 2006.
We are not aware of any circumstance which would render any particulars included in the financial statements to be misleading or inaccurate.
Peter Harris Director Transport Ticketing Authority
Vivian Miners Chief Executive Officer Transport Ticketing Authority
Mary Philip Chief Finance Officer and Corporate Administrator Transport Ticketing Authority
Melbourne 31 August 2006
Transport Ticketing Authority – Annual Report 2005-06 21 Auditor General’s report
22 Transport Ticketing Authority – Annual Report 2005-06 Transport Ticketing Authority – Annual Report 2005-06 23 Income statement For the year ended 30 June 2006
2006 2005 Note $000 $000
Income Revenue 2(a) 388 119 Output appropriations 2(b) 8,748 12,267 Other income 2(c) 1 - Total income 9,137 12,386
Expenses Employee benefits expense 2(d) 2,665 1,701 Depreciation and amortisation expense 2(e) 145 78 Supplies and services 2(f) 3,735 3,811 Total expenses 6,545 5,590 Net result for the period 2,592 6,796
The above income statement should be read in conjunction with the accompanying notes.
24 Transport Ticketing Authority – Annual Report 2005-06 Balance sheet As at 30 June 2006
2006 2005 Note $000 $000
Current assets Cash and cash equivalents 3 38 4,020 Receivables 4 10,642 10,815 Other assets 5 51 47 Total current assets 10,731 14,882
Non-current assets Receivables 4 - 6,413 Intangible assets 6 58,162 22,169 Property, plant and equipment 7 4,508 424 Total non-current assets 62,670 29,006 Total assets 73,401 43,888
Current liabilities Payables 8 2,025 2,268 Interest bearing liabilities 9 28 - Provisions 10 9,729 11,340 Total current liabilities 11,782 13,608
Non-current liabilities Provisions 10 106 6,488 Total non-current liabilities 106 6,488 Total liabilities 11,888 20,096
Net assets 22 (c) 61,513 23,792
Equity Contributed capital 11 50,164 15,036 Accumulated surplus 12 11,349 8,756 Total equity 61,513 23,792
Commitments 23 521,864 585,643 Contingent liabilities 24 Not Measurable
The above balance sheet should be read in conjunction with the accompanying notes.
Transport Ticketing Authority – Annual Report 2005-06 25 Statement of recognised income and expense For the year 1 July 2005 to 30 June 2006
2006 2005 Note $000 $000
Gain/(loss) on property revaluation Available-for-sale investments: Gain/(loss) taken to equity Transferred to profit or loss for the period Other Net income recognised directly in equity - - Net result for the period 2,592 6,796 Total recognised income and expense for the period 2,592 6,796
Effects of changes in accounting policy 25 (226) Effects of correction of errors 1.9 (488) - (714)
The above statement of recognised income and expense should be read in conjunction with the accompanying notes.
26 Transport Ticketing Authority – Annual Report 2005-06 Cash flow statement For the year ended 30 June 2006
2006 2005 Note $000 $000
Cash flows from operating activities Receipts from Government 8,748 12,267 Interest received 391 119 Goods and services recovered from the ATO 2,482 1,641 Goods and services paid to ATO (4,147) (1,835) Payments to employees (2,562) (1,522) Payments to suppliers (3,818) (3,006) Net cash provided by/(used in) operating activities 13 1,094 7,664
Cash flows from investing activities Payments for property, plant and equipment (3,819) (194) Payments for Intangible assets (36,376) (16,512)
Net cash provided by/(used in) investing activities (40,195) (16,706)
Cash flows from financing activities Proceeds from capital contribution by Victorian Government 11 35,128 10,500 Proceeds from Victorian Government 8,273 8,184 43,401 18,684 Automated Ticketing liability (8,273) (8,184) Repayment of motor vehicle finance lease liability (9) - Net cash provided by/(used in) financing activities 35,119 10,500
Net increase/(decrease) in cash held (3,982) 1,458
Cash and cash equivalents at the beginning of the financial year 4,020 2,562 Cash and cash equivalents at the end of the financial year 3 38 4,020
The above cash flow statement should be read in conjunction with the accompanying notes.
Transport Ticketing Authority – Annual Report 2005-06 27 Notes to and forming part of the financial statements
1. Accounting policies 1.1. Statement of compliance This general purpose financial report of the Transport Ticketing Authority (TTA) has been prepared on an accrual basis in accordance with the Financial Management Act 1994, Australian Accounting Standards, and Urgent Issues Group Interpretations. Accounting standards include Australian equivalents to International Financial Reporting Standards (‘A-IFRS’).
The financial statements were authorised for issue by Vivian Miners (Chief Executive Officer – Transport Ticketing Authority).
1.2. Basis of preparation The financial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets.
In the application of A-IFRS, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Judgements made by management in the application of A-IFRS that have significant effects on the financial statements and estimates with a significant risk of material adjustments in the next year are disclosed throughout the notes in the financial statements.
Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.
The TTA changed its accounting policies on 1 July 2005 to comply with A-IFRS. The transition to A-IFRS is accounted for in accordance with Accounting Standard AASB 1 ‘First-time Adoption of Australian Equivalents to international Financial Reporting Standards’, with 1 July 2004 as the date of transition. An explanation of how the transition from superseded policies to A-IFRS has affected the TTA’s financial position, financial performance and cash flows is discussed in Note 25.
The TTA has also elected to apply Accounting Standard AASB 2005-4 and 2005-6 ‘Amendments to Accounting Standards’ (June 2005), even though the Standard is not required to be applied until annual reporting periods beginning on or after 1 January 2006.
The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2006, the comparative information presented in these financial statements for the year ended 30 June 2005, and in the preparation of the opening A-IFRS balance sheet at 1 July 2004, the TTA’s date of transition, except for the accounting policies in respect of financial instruments. The TTA has not restated comparative information for financial instruments, including derivatives, as instruments applicable to the comparative information and the impact of the changes in these accounting policies are discussed further in Note 1.19.
1.3. Commencement The Public Transport Ticketing Body (trading as Transport Ticketing Authority – TTA) was created under the State Owned Enterprises Act 1992 on 17 June 2003 and commenced operating on 1 July 2003. It is wholly owned by the Victorian Government. The only transaction that occurred in the period prior to the commencement of trading was the allocation by the former Public Transport Corporation to TTA of all agreements and understandings between the former Public Transport Corporation and OneLink Transit Systems Pty Ltd relating to the existing Automated Ticketing System together with minor office furniture and equipment.
1.4. Objectives and funding TTA’s primary objectives are: • to manage the existing automated ticketing system; and •to deliver and manage the New Ticketing Solution (NTS) on expiry of the existing ticketing system contract.
28 Transport Ticketing Authority – Annual Report 2005-06 TTA is predominantly funded by capital contributions from Government as investments in the developing NTS and accrual-based parliamentary appropriations.
TTA’s primary output is the procurement, development, implementation and operational management of the NTS.
1.5. Acquisition of assets All capital expenditure costing more than $1,000 is capitalised. The cost method of accounting is used for all acquisitions of assets. Cost is measured as the cost of the assets or liabilities undertaken at the date of acquisition plus incidental costs directly attributable to the acquisition.
1.6. Revenue recognition Pursuant to the Financial Management Act 1994, funds received from Government in the nature of output appropriations are recognised as income at the time TTA gains control of these funds.
Interest is brought to account when the interest is credited or received and an accrual is made to recognise interest accrued to balance date.
1.7. Contributed capital Appropriations for additions to net assets have been designated as contributed capital. Other transfers that are in the nature of contributions or distributions have also been designated as contributed capital.
1.8. Intangible assets Intangible assets represent identifiable non-monetary assets without physical substance. Costs incurred subsequent to initial acquisition are capitalised when it is expected that additional future economic benefits will flow to the TTA.
Intangible assets with finite useful lives are amortised on a straight-line basis over the asset’s useful life. Amortisation begins when the asset is available for use, that is, when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each annual reporting period. In addition, an assessment is made at each reporting date to determine whether there are indicators that the intangible asset concerned is impaired. If so, the assets concerned are tested as to whether their carrying value exceeds their recoverable amount.
Intangible assets are stated at cost less accumulated amortisation and impairment, and are amortised on a straight-line basis over their useful lives to TTA as follows: Capitalised software development costs 3-5 years Capitalised intangible Work in Progress 10 years
1.9. Work in progress The Work in Progress (WIP) has been separated into two major categories, being tangible and intangible assets.
The tangible asset is categorised as Property Plant and Equipment (PP&E) and includes all costs directly incurred in developing, designing and installing the physical components of the NTS project such as fare payment devices and ticketing machines. These costs include professional fees and costs of employee benefits attributed directly to the development of the PP&E asset.
All costs associated in designing, developing and installing the NTS micropayments infrastructure have been capitalised in accordance with AASB 138 as an intangible asset. This includes expenditure on employee benefits, consultants’ fees and other services and supplies where these are attributable to development of the NTS micropayments infrastructure (see Note 6).
Applied research costs previously capitalised under A-GAAP standards as intangible WIP asset were derecognised at the date of transition to A-IFRS with the resulting adjustment made against accumulated funds. The effect of the above requirement on the Balance Sheet as at 1 July 2005 was to reduce the intangible WIP asset by $225,745.
In addition, the 2004-05 accounts incorrectly capitalised $487,500 as part of the intangible WIP asset. This is corrected in the 2005-06 accounts, with the effect of increasing supplies and services operating expense and decreasing retained earnings by this amount.
No amortisation expense relating to either tangible or intangible WIP assets has been incurred as at 30 June 2006 as the assets are still being developed.
Transport Ticketing Authority – Annual Report 2005-06 29 Notes to and forming part of the financial statements continued
1.10. Impairment of assets Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested annually for impairment whenever there is an indication that the asset may be impaired. All other assets are assessed annually for indications of impairment, except for assets arising from employee benefits.
For the year ended 30 June 2006 there were no adjustments made for impairment to assets.
1.11. Depreciation and amortisation of property plant and equipment Depreciation is calculated on a straight line basis over the asset’s expected useful life to TTA. Estimates of the remaining useful lives for all assets are reviewed annually. The expected useful lives and depreciation rates for property, plant and equipment have remained unchanged from the previous year. For the financial years ending 30 June 2006 and 30 June 2005, the expected useful lives for the following assets are:
Expected Useful Life to TTA Depreciation Rate % Computers 3 years 33.3 Printers 4 years 25.0 Equipment 5 years 20.0 Furniture 10 years 10.0 Leasehold improvements 3 years 33.3 WIP – PP&E 2 years Still under construction Motor vehicle (Display) 2 years Still under construction Audio visual equipment (Display) 2 years Still under construction NTS equipment (Display) 2 years Still under construction
1.12. Employee benefits Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.
Provisions made in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement and are recognised as current liabilities.
Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the TTA in respect of services provided by employees up to reporting date. These provisions are recognised as non-current liabilities.
1.12.1. Wages, salaries and annual leave Liabilities for salaries and annual leave expected to be settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date. They are measured as the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.
1.12.2. Long service leave The liability for long service leave expected to be settled within 12 months of the reporting date is recognised in the provision for employee benefits and is measured in accordance with 1.12.1 above. The liability for long service leave expected to be settled more than 12 months from the reporting date is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future salary levels, experience of employee departures and periods of service. Expected future payments are discounted using interest rates on national Government guaranteed securities with terms to maturity that match, as closely as possible, the estimated future cash outflows.
1.12.3. Employee benefit on-costs Employee benefit on-costs are recognised and included in employee benefit liabilities and costs when the employee benefits to which they relate are recognised as liabilities.
1.12.4. Superannuation The amount charged to the income statement in respect of superannuation represents the contributions made by TTA to superannuation funds in respect of current TTA staff (see note 21).
30 Transport Ticketing Authority – Annual Report 2005-06 1.13. Receivables All debtors are recognised at the amount receivable. The ability to collect receivables is reviewed on an on-going basis and debts that are known to be uncollectable are written off. A provision for doubtful debts would be raised where some doubt as to collection exists.
1.14. Payables All payables represent liabilities for goods and services provided to TTA prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
1.15. Cash and cash equivalents Cash on hand and in the bank account is stated at nominal value. For the purposes of the cash flow statement, cash includes cash on hand and in the bank account.
1.16. Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of GST except where the amount of GST incurred is not recoverable, in which case it is recognised as part of the cost of acquisition of an asset or part of an item of expense. The net amount of GST recoverable from, or payable to, the Australian Taxation Office (ATO) is included as part of receivables or payables in the balance sheet. Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.
1.17. Interest bearing liabilities/leased assets Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the TTA at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.
Finance lease assets are amortised on a straight-line basis over the estimated useful life of the asset.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
1.18. Rounding All amounts shown in the financial statements are expressed by reference to the nearest thousand dollars unless otherwise specified.
1.19. Comparative information – financial instruments The TTA has elected not to restate comparative information for financial instruments within the scope of AASB 132 ‘Financial Instruments: Disclosure and Presentation’ and AASB 139 ‘Financial Instruments: Recognition and Measurement’, as permitted on the first-time adoption of A-IFRS.
The accounting policies applied to accounting for financial instruments in the current financial year are detailed in notes 1.15, 1.16 and 1.17. The following accounting policies were applied to accounting for financial instruments in the comparative financial year: (a) Payables Payables represent liabilities for goods and services provided to the Authority prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
(b) Receivables All debtors are recognised at the amounts receivable as they are due for settlement at no more than 30 days from the date of recognition.
Collectability of debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful debts is raised when some doubt as to collection exists.
Transport Ticketing Authority – Annual Report 2005-06 31 Notes to and forming part of the financial statements continued
2. Net results from operations 2006 2005 Note $000 $000
Income (a) Revenue Interest on bank deposits 388 119 388 119 (b) Income from Government Output appropriations 8,748 12,267 8,748 12,267 (c) Other income Gain/(loss) on disposal of property, plant and equipment (2) - Other 3 - 1 - Total income 9,137 12,386
Expenses (d) Employee benefits expense Salaries and wages 2,277 1,390 Superannuation 130 94 Annual leave and long service leave expense 141 119 Other on-costs (fringe benefits, payroll tax and work cover levy) 117 98 2,665 1,701
(e) Depreciation and amortisation expense Computer equipment 55 36 Furniture and equipment 25 16 Software/licences 50 26 Leasehold improvements 11 - Motor vehicle under lease 4 - Total depreciation and amortisation 145 78
(f) Supplies and services Professional and consultancy services 2,222 875 OLT Transition Amendment Deed costs reimbursement 129 2,048 Communications services and supplies 79 281 Accommodation 269 204 IT services 246 165 Other services and supplies 769 217 Audit fees 2.1 21 21 3,735 3,811 Total expenses 6,545 5,590
32 Transport Ticketing Authority – Annual Report 2005-06 2.1. Remuneration of auditors 2006 2005 $000 $000
Victorian Auditor General’s Office Audit of the financial report – expensed 21 21 21 21
No other services were provided by the Victorian Auditor General’s Office.
3. Cash and cash equivalents Cash at bank and on hand 38 4,020 38 4,020
Cash at the end of the year as shown in the Statement of Cash Flows is reconciled to the cash assets above.
4. Receivables Current Amounts owing – Department of Infrastructure 8,783 10,621 Goods and Services Tax recoverable 1,859 194 10,642 10,815
Non-current Amounts owing – Department of Infrastructure - 6,413 Total receivables 10,642 17,228
5. Other assets Prepayments: Accommodation rent 40 40 Car parking 2 2 Software maintenance 5 5 Other 4 - Total prepayments 51 47
6. Intangible assets 2006 2005 Professional & Other Professional & Other Employee Consultancy Service Software/ Employee Consultancy Service Software/ Benefits Services & Supplies Licences Benefits Services & SuppliesLicences
At cost 7,465 15,647 34,899 227 3,812 11,698 6,512 173 Amortisation ---(76) ---(26) 7,465 15,647 34,899 151 3,812 11,698 6,512 147
Transport Ticketing Authority – Annual Report 2005-06 33 Notes to and forming part of the financial statements continued
6. Intangible assets continued Reconciliation of intangible assets The reconciliation of the carrying amount of each class of intangible asset at the beginning and end of the current reporting period is set out below: Professional and Employee Consultancy Other Service Benefits Services and Supplies Total Expenditure Capitalised as Work in Progress $000 $000 $000 $000
Balances at 1 July 2004 994 4,258 383 5,635 Additions 2,818 7,619 6,664 17,101 Disposals Impairment losses charged to net result Depreciation/amortisation (note 2e) Correction of 2004-05 error (488) (488) A-IFRS adjustment (179) (47) (226) Balance at 1 July 2005 3,812 11,698 6,512 22,022 Additions 3,653 3,949 28,387 35,989 Disposals Impairment losses charged to net result Depreciation/amortisation (note 2e) Carrying amount at 30 June 2006 7,465 15,647 34,899 58,011
Other Intangibles Software/Licences Balances at 1 July 2004 - Additions Disposals Impairment losses charged to net result Depreciation/amortisation (note 2e) A-IFRS adjustment 147 Balance at 1 July 2005 147 Additions 54 Disposals Impairment losses charged to net result Depreciation/amortisation (note 2e) (50) Carrying amount at 30 June 2006 151
Net book value As at 30 June 2005 22,022 As at 30 June 2006 58,162
The 2004-05 accounts incorrectly capitalised $487,500 as part of the intangible WIP asset instead of expensing it. This error is corrected in these accounts by adjustment to the carrying value of the intangible asset and retained earnings as at 30 June 2005.
34 Transport Ticketing Authority – Annual Report 2005-06 7. Property, plant and equipment 2006 2005 $000 $000
Computer equipment At cost 191 156 Less: accumulated depreciation 94 42 97 114 Motor vehicle At cost 708 - Less: accumulated depreciation - - 708 - Furniture and equipment At cost 260 147 Less: accumulated depreciation 41 17 219 130 Motor vehicle under lease At cost 32 - Less: accumulated amortisation 4 - 28 - Leasehold improvements At cost 370 180 Less: accumulated amortisation 11 - 359 180 WIP – TTA At cost 2,033 - Less: accumulated depreciation - - 2,033 - WIP – Kamco At cost 1,064 - Less: accumulated depreciation - - 1,064 -
Total property, plant and equipment 4,508 424
Reconciliation of assets The reconciliation of the carrying amount of each class of equipment at the beginning and end of the current reporting period is set out below: Computer Furniture and Motor Leasehold Leased WIP WIP Equipment Equipment Vehicle Improvement Vehicle TTA Kamco Total $000 $000 $000 $000 $000 $000 $000 $000
Balances at 1 July 2004 63 30 36 129 Additions 88 115 180 383 Disposals (36) (36) Depreciation/amortisation (note 2e) (37) (15) (52) Balance at 1 July 2005 114 130 - 180 - - - 424 Additions 41 115 708 190 32 2,033 1,064 4,183 Disposals (3) (1) (4) Depreciation/amortisation (Note 2e) (55) (25) (11) (4) (95) Carrying amount at 30 June 2006 97 219 708 359 28 2,033 1,064 4,508
Transport Ticketing Authority – Annual Report 2005-06 35 Notes to and forming part of the financial statements continued
8. Payables 2006 2005 Note $000 $000
Creditors 1,632 1,764 Amounts payable to other Government entities/agencies 393 504 2,025 2,268
9. Interest bearing liabilities Secured Current lease liabilities 28 - Non-current lease liabilities - - 28 -
10. Provisions Current Employee benefits 10.1 967 718 Automated Ticketing liability 8,762 10,622 Aggregate carrying amount of provisions 9,729 11,340
Non-current Employee benefits 10.1 106 75 Automated Ticketing liability - 6,413 Aggregate carrying amount of provisions 106 6,488
10.1. Employee benefits Current All annual leave and long service leave entitlements representing seven plus years of continuous service: • Short-term employee benefits, that fall due within 12 months after the end of the period measured at nominal value 182 237 • Other long-term employee benefits that do not fall due within 12 months after the end of the period measured at present value 132 20
Other short-term employee benefits, that fall due within 12 months after the end of the period measured at nominal value 653 461 Total current 967 718
Non-current Long service leave representing less than seven years of continuous service measured at present value 106 75
11. Contributed capital Balance as at 1 July 15,036 4,536 Capital contribution during the year by Victorian Government 35,128 10,500 Balance as at 30 June 50,164 15,036
12. Accumulated surplus Balance at beginning of financial year 8,756 1,960 Net result for the reporting period 2,592 7,510 Adjustment on adoption of A-IFRS (226) Correction of error (488) Total accumulated surplus at the end of the reporting period 11,349 8,756
36 Transport Ticketing Authority – Annual Report 2005-06 13. Reconciliation of result from ordinary activities to net cash inflow from operating activities 2006 2005 $000 $000
Net result for the year 2,592 7,510 Correction of error 2004-05 (488) Depreciation and amortisation of non-current assets 145 78 Loss (gain) on disposal of property, plant and equipment 2 - Increase in provisions for employee entitlements, services and supplies 97 645 Increase (decrease) in current payables (8) - Increase (decrease) in other current liabilities (55) - Decrease (increase) in receivables (1,666) (82) Other current assets (17) - Non-current provisions 4 - Net cash from operating activities 1,094 7,664
14. Tax status The activities of TTA are exempt from income tax.
15. Responsible persons and executive officers disclosures Responsible Minister The Hon. P Batchelor, MP – Minister for Transport
Board Members Prof Michael Pryles, Chairman Mr Peter Harris Ms Christine Gibbs
Accountable Officer Mr Vivian Miners, Chief Executive Officer
16. Remuneration of responsible persons Base Remuneration Total Remuneration Base Remuneration Total Remuneration Income Band 2005-06 2005-06 2004-05 2004-05
$0 22 22 $60,000 – 69,999 11 11 $390,000 – 399,999 1 $400,000 – 409,999 11 $430,000 – 439,999 1 Total numbers 44 44 Total amount $477,013 $477,013 $467,395 $546,922
Transport Ticketing Authority – Annual Report 2005-06 37 Notes to and forming part of the financial statements continued
17. Executive officers’ remuneration Base Remuneration Total Remuneration Base Remuneration Total Remuneration Income Band 2005-06 2005-06 2004-05 2004-05
$130,000 – 139,999 1 $140,000 – 149,999 2 $150,000 – 159,999 1 $160,000 – 169,999 2 1 $190,000 – 199,999 1 1 $200,000 – 209,999 2 $210,000 – 219,999 1 $230,000 – 239,999 1 $240,000 – 249,999 1 $250,000 – 259,999 1 $260,000 – 269,999 1 Total numbers 44 44 Total amount $724,630 $805,954 $733,974 $819,655
The variation in number of executive officers between 2005-06 and the previous year is due to the exclusion of Special Project Officers from the 2005-06 figures.
Responsible officers disclosures The Chief Executive Officer (CEO) has a shareholding in Headstrong Inc, a private, un-listed company that is sub-contractor to Kamco Pty Ltd. The B-class shares have a par value of $US1,580 and represent 0.3 per cent of the total outstanding shares. The value to Headstrong Inc of its involvement in the NTS contract is estimated at 1 per cent of the total contract value.
This matter was disclosed to the Board and the Probity Auditor in 2004-05, and was recognised by the TTA at the time the CEO was employed. In the NTS tender process, the Probity Auditor, together with independent legal counsel, advised that the CEO took all appropriate steps to disclose his shareholdings.
18. Ex-gratia payments TTA reports total ex-gratia payments of $3,500 ($5,000 in 2005) were made to employees in recognition of their contribution to TTA’s achievements during the reporting period.
19. Employee numbers There were 45 employees at 30 June 2006 (37 in 2005). The average number of full time employees for the reporting period is 44 employees (30.5 in 2005).
20. Long service leave The following assumptions were adopted in measuring present values for long service leave: 2006 2005
Weighted average rates of increase in annual employee entitlements to settlement of the liabilities 4.75% 4.75% Weighted average discount rates 5.79% 5.15% Weighted average terms to settlement of the liabilities 15 years 15 years
21. Superannuation scheme contributions and liabilities All employer contributions are made in accordance with the Commonwealth Superannuation Guarantee Legislation. The name of the major employee superannuation funds and employer contributions made by TTA are as follows: 2006 2005 $000 $000
VicSuper scheme 162 247 Australian Retirement Fund 108 - Various other superannuation schemes 72 82
No employer contributions were outstanding at year end. All superannuation payments were made to accumulation funds.
38 Transport Ticketing Authority – Annual Report 2005-06 22. Financial instruments (a) Credit risk exposures The credit risk on financial assets of TTA which have been recognised in the statement of financial position is the carrying amount, net of any provisions for doubtful debts. TTA’s receivables are within the Government sector.
(b) Interest rates risk TTA’s exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets and liabilities is set out below.
Exposures arise predominantly from assets and liabilities bearing variable interest rates.
Floating Fixed Interest Fixed Interest Weighted Interest Maturing in 1 Maturing in Non-Interest Average < 1 Year Year or Less 1 to 5 Years Bearing Total 2006 Note Interest Rate $000 $000 $000 $000 $000
Financial assets Cash assets 3 5.43% 38 - - - 38 Receivables 4---10,642 10,642 38 - - 10,642 10,680 Financial liabilities Payables 8---2,025 2,025 Lease liabilities 9 6.5% 28 - - - 28 Automated Ticketing liability 10 - - - 8,762 8,762 28 - - 10,787 10,815 Net financial assets (liabilities) 10 - - (145) (135)
Floating Fixed Interest Fixed Interest Weighted Interest Maturing in 1 Maturing in Non-Interest Average < 1 Year Year or Less 1 to 5 Years Bearing Total 2005 Note Interest Rate $000 $000 $000 $000 $000
Financial assets Cash assets 3 5.07% 4,020 - - - 4,020 Receivables 4 - - - - 17,228 17,228 4,020 - - 17,228 21,248 Financial liabilities Payables 8 - - - 2,268 2,268 Automated Ticketing liability 10 - - - - 17,034 17,034 ---19,302 19,302 Net financial assets (liabilities) 4,020 - - (2,074) 1,946
(c) Reconciliation of net financial assets to net assets 2006 2005 Note $000 $000
Net financial assets as above (135) 1,946 Prepayments 5 51 47 Equipment 7 4,508 424 Intangible – software/other 6 151 147 Intangible – work in progress 6 58,011 22,022 Employee provisions 10 (1,073) (793) Net assets 61,513 23,792
Transport Ticketing Authority – Annual Report 2005-06 39 Notes to and forming part of the financial statements continued
22. Financial instruments continued (d) Net fair value disclosure of financial assets and liabilities The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets and financial liabilities of TTA approximates their carrying value.
The carrying amounts and net fair values of financial assets and liabilities at reporting date are: Carrying Amount Net Fair Value Carrying Amount Net Fair Value 2006 2006 2005 2005 $000 $000 $000 $000
Financial assets Cash 38 38 4,020 4,020 Receivables 10,642 10,642 17,228 17,228 10,680 10,680 21,248 21,248 Financial liabilities Automated Ticketing liability 8,762 8,762 17,034 17,034 Payables 2,025 2,025 2,268 2,268 Lease liabilities 28 28 -- 10,815 10,815 19,302 19,302
23. Commitments Estimated expenditure commitments not included Within 1 Year 1 – 5 years Later Than 5 Years Total in the accounts at 30 June 2006 $000 $000 $000 $000
OLT Transition Amendment Deed – capital (note a) 2,145 - - 2,145 OLT Transition Amendment Deed – operations (note a) 1,430 3,795 - 5,225 NTS Contract – capital (note b) 55,057 108,805 891 164,753 NTS Contract – operations (note b) 53,882 174,728 120,215 348,825 Capital commitments - - - - Operating leases 428 488 - 916 Total commitments 112,942 287,816 121,106 521,864
Estimated expenditure commitments not included in the accounts at 30 June 2005
OLT Transition Amendment Deed (note a) 3,300 36,610 - 39,910 NTS Contract – capital (note b) 40,179 153,769 891 194,839 NTS Contract – operations (note b) 8,782 168,350 171,693 348,825 Capital commitments 286 - - 286 Operating lease 554 1,229 - 1,783 Total commitments 53,101 359,958 172,584 585,643
Figures include GST. Note (a) The OLT Transition Amendment Deed provides for full assistance and cooperation from the incumbent ticketing services provider throughout the NTS transition and implementation phases. Commitments which are the responsibility of the Department of Infrastructure (DOI) have been excluded from the figures for the year ended 30 June 2006, although $32.5m of these were included in TTA’s books for the year ended 30 June 2005. Note (b) The NTS contract was awarded in July 2005 for the design, build and operation of the new public transport ticketing solution using smartcard technology. The operation period will run to 2017.
40 Transport Ticketing Authority – Annual Report 2005-06 24. Contingent liability OneLink Transit performance bonus TTA recognises a contingent liability relating to the performance bonus component of the contract with OneLink Transit (OLT) systems. It is more likely than not that system and equipment availability and overall performance achievements in 2005-06 through to the end of the contract in March 2007 may be higher than the originally forecast level set for performance bonus payments.
However, it is not possible to accurately measure the amount of potential performance bonus payments as this will be impacted by variables, such as patronage growth, equipment performance and vandalism. In particular, performance of these variables will be impacted by the reliability of equipment which is nearing the end of its ‘design life’. As a result, the future sacrifice of economic benefits is less than probable, but more than remote.
No offset would be due to TTA as a result of payments of the contingent liability.
Kamco performance-related payments TTA recognises a contingent liability relating to performance-related payments associated with the NTS contract with Kamco Pty Ltd (Keane Australia Micropayments Consortium Pty Ltd). It is more likely than not that performance standards will be achieved to a standard which attracts performance bonuses but it is too early to accurately forecast these amounts.
Transport Ticketing Authority – Annual Report 2005-06 41 Notes to and forming part of the financial statements continued
25. Impacts of adopting Australian equivalents to International Financial Reporting Standards TTA changed its accounting policies, other than its accounting policies for financial instruments, on 1 July 2004 to comply with A-IFRS. The transition to A-IFRS is accounted for in accordance with Accounting Standard AASB 1 ‘First-time Adoption of Australian Equivalents to International Financial Reporting Standards’ with 1 July 2004 as the date of transition. TTA changed its accounting policies for financial instruments effective from 1 July 2005.
An explanation of how the transition for superseded policies to A-IFRS has affected TTA’s financial position and financial performance is set out in the following tables.
Table 1: Effect of A-IFRS on the balance sheet as at 1 July 2004 Superseded Effect of Transition Policies* to A-IFRS A-IFRS $000 $000 $000
Current assets Cash and cash equivalents 2,562 - 2,562 Receivables 8,458 - 8,458 Other Assets 40 - 40 Total current assets 11,060 - 11,060
Non-current assets Receivables 16,872 - 16,872 Intangible assets 5,635 - 5,635 Property, plant and equipment 129 - 129 Total non-current assets 22,636 - 22,636
Total assets 33,696 - 33,696
Current liabilities Payables 1,670 - 1,670 Interest bearing liabilities 4 - 4 Provisions 8,589 17 8,606 Total current liabilities 10,263 17 10,280
Non-current liabilities Interest bearing liabilities 32 - 32 Provisions 16,905 (17) 16,888 Total non-current liabilities 16,937 (17) 16,920 Total liabilities 27,200 - 27,200
Net assets 6,496 - 6,496
Equity Contributed capital 4,536 - 4,536 Accumulated surplus 1,960 - 1,960 Total equity 6,496 - 6,496
* Reported financial position for the financial year ended 30 June 2004.
42 Transport Ticketing Authority – Annual Report 2005-06 Table 2: Effect of A-IFRS on the operating statement for the financial year ended 30 June 2005 Superseded Effect of Transition Policies* to A-IFRS A-IFRS $000 $000 $000
Income Revenue 119 - 119 Output appropriations 12,267 - 12,267 Other income - - - Total income 12,386 - 12,386
Expenses Employee benefits expense 1,701 - 1,701 Depreciation and amortisation expense 78 - 78 Supplies and services 3,585 226 3,811 Total expenses 5,364 226 5,590
Net result for the year 7,022 (226) 6,796
* Reported financial results for the year ended 30 June 2005.
Transport Ticketing Authority – Annual Report 2005-06 43 Notes to and forming part of the financial statements continued
25. Impacts of adopting Australian equivalents to International Financial Reporting Standards continued Table 3: Effect of A-IFRS on the balance sheet as at ended 30 June 2005 Superseded Effect of Transition Policies* to A-IFRS A-IFRS $000 $000 $000
Current assets Cash and cash equivalents 4,020 - 4,020 Receivables 10,815 - 10,815 Other Assets 47 - 47 Total current assets 14,882 - 14,882
Non-current assets Receivables 6,413 - 6,413 Intangible assets 22,248 (79) 22,169 Property, plant and equipment 571 (147) 424 Total non-current assets 29,232 (226) 29,006
Total assets 44,114 (226) 43,888
Current liabilities Payables 2,268 - 2,268 Provisions 11,320 20 11,340 Total current liabilities 13,588 20 13,608
Non-current liabilities Provisions 6,508 (20) 6,488 Total non-current liabilities 6,508 (20) 6,488 Total liabilities 20,096 - 20,096
Net assets 24,018 (226) 23,792
Equity Contributed capital 15,036 - 15,036 Accumulated surplus 8,982 (226) 8,756 Total equity 24,018 (226) 23,792
Commitments 585,643 - 585,643 Contingent Liabilities Not Measurable
* Reported financial position for the financial year ended 30 June 2005. Commitments include GST.
44 Transport Ticketing Authority – Annual Report 2005-06
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