ANNUAL REPORT Local Government Finance Authority of

2018 Member Councils Contents As at 30 June 2018

City of Board of Trustees 2 Notes to and Forming Part of the 30 Council District Council of Mount Remarkable Financial Statements Chairman’s Review 3 Note Index 30 Rural City of Murray Bridge Economic Conditions 4 Objectives of the Local Government 31 Naracoorte Lucindale Council Lending Activities 5 Finance Authority of South Australia The State Local Government Statement of Accounting Policies 31 Barunga West Council City of Norwood, Payneham & St Peters Infrastructure Partnership (SLGIP) 6 Other Income 36 Investment Activity 6 Administration Expenses 36 Information Technology 7 Other Expenses 36 District Council of Orroroo Carrieton Compliance 7 Cash and Liquid Assets 36 Campbelltown City Council District Council of Peterborough The Board 8 Accrued Interest Receivable 37 The Staff 9 Investment Securities 37 District Council of Ceduna Marketing and Sponsorship 10 Other Assets 37 City of Port Adelaide Enfield Net Loans and Advances 37 Clare & Gilbert Valleys Council Port Augusta City Council The Authority Profile 12 Property, Plant & Equipment 37 District Council of Cleve The Authority 12 Deposits from Councils and 38 Members 12 Local Government Bodies District Council of Coober Pedy Port Pirie Regional Council Guarantee 12 Accrued Interest Payable 38 Income Tax Equivalents 12 Borrowings 38 Bonus 13 Derivatives 38 State Wide Coverage 13 Provisions 39 District Council of Elliston Other Liabilities 39 The Municipal Council of Roxby Downs Profit Before Income Tax Equivalents 14 Superannuation Commitments 39 District Council of Franklin Harbour Notes to Statement of Cash Flows 40 Southern Mallee District Council Case Studies 15 Key Management Personnel 41 Copper Coast Sport and Leisure Centre 16 Employee Remuneration 42 Goyder Regional Council District Council of Streaky Bay Northern Adelaide Waste Contingent Assets and Liabilities 43 District Council of Grant Management Authority (NAWMA) 20 Financial Risk Management 44 State Local Government Transactions with South Australian 48 Infrastructure Partnership (SLGIP) 22 Government District Council of Tumby Bay Fair Value of Financial Instruments 48 District Council of Karoonda East Murray The Financial Report 25 District Council of Kimba Statement of Comprehensive Income 26 Certification of the Financial Statements 51 Kingston District Council Wakefield Regional Council Statement of Financial Position 27 Statement of Changes in Equity 28 Independent Auditor’s Report 52 Corporation of the Statement of Cash Flows 29 District Council of Lower District Council of Loxton Waikerie Corporation of the District Council of Yankalilla Mount Barker District Council Council

LGFA Annual Report 2018 1 Board of Trustees

Mr John Comrie Ms Heather Watts Chairman Director Commercial Operations JAC Comrie Pty Ltd Department of Treasury and Finance LGA Nominee South Australian Government Financing Authority (SAFA) Appointee of the Treasurer Heather was appointed on 23 October 2017 Mr Craig Fowler's term expired on 22 October 2017 Chairman’s Review Cr John Frogley Ms Susan McCormick Deputy Chairman Deputy Director Councillor State Recovery Office Now into my second year as Councils and prescribed bodies continued City of Norwood, Payneham Appointee of the Chairman, I am very pleased to use increasing levels of floating rate debt & St Peters Minister for Finance to report that the LGFA to give them flexibility to actively manage Susan’s position ceased upon her LGFA Elected Member resignation in December 2017 continues to perform well in their cash flows, although there was still a serving the local government healthy demand for principal and interest Awaiting appointment of new Appointee sector and that further (credit foncier), fixed term funds to support progress has been made. infrastructure projects.

The Board has taken a Our financial performance this year was Mr Matt Pinnegar Ms Annette Martin keen interest in corporate excellent. An operating profit of $6.28 Chief Executive Officer Manager Financial Services governance with policies million was achieved against a budget of Local Government Association reviewed and strengthened. $5.24 million. This is the second highest City of Charles Sturt Mr John Comrie Deputy: Mr Chris Russell profit achieved in our 34 year history and LGFA Elected Member Chairman Strategic Adviser I am pleased to report it is pleasing to report that much of this that the Auditor General’s Department and increase was achieved by active interest rate Galpins (Auditors), who review our Financial risk management in the balance sheet, not Management Compliance Programme, have wider margins. This performance means a given the LGFA a very good report card. win–win for local government. An increased tax equivalent payment will be made The LGFA has again managed to provide available for local government research and our Members with a range of products and development purposes and the bonus paid to Dr Andrew Johnson services that continue to ensure the very members will be increased from $2 million to AK Johnson & Associates best financial outcomes. During the year $2.3 million. LGFA retained earnings will also LGA Nominee we provided 100% of all loans advanced to increase and this strengthens the capacity of councils in South Australia and our share of the organisation to continue to serve local available deposit funds was in excess of 85%. government in future. While pleased with these results, we are keen to improve our deposit raising performance I would like to sincerely thank all Members as every dollar raised from our members, for their support and the Government for its means one less dollar that we need to borrow guarantee and liquidity via SAFA. externally, including, from the State.

2 LGFA Annual Report 2018 3 Chairman’s Review Economic Conditions Lending Activities

Economic Conditions Lending Activities to councils and the State will make an annual The global economy improved over the last “The Reserve Bank of Australia The level of loans outstanding as at 30 June contribution to the LGA over ten years to year as the US, most of Asia and the Eurozone (RBA) left the official cash rate on 2018, has increased by around $74 million enable the loan to be repaid). experienced declining unemployment and hold at 1.5% over the past financial from last year. This is mainly attributable to higher economic growth, during a period of the increase in the amount drawn-down Interestingly, new CAD facilities established benign inflation. year. The cash rate has been on under the popular Cash Advance Debenture this year totalled just under $162 million, hold since August 2016 with this (CAD) product of $66 million. which we feel highlights council’s future plans The US Federal Reserve increased the target being its longest period of stability for capital expenditure and the flexibility and federal funds rate by 0.75% over the past year on record. Total loans at balance date were $714 million ease of use of the CAD product. It also hopefully and is currently targeting a range of between (last year $640 million) which comprised suggests that councils are becoming more 1.75 - 2.00%. This change to the federal funds fixed rate loans of $455 million and CAD comfortable with more flexible use of debt. rate caused volatility in short term funding and facilities of $259 million. bond markets around the globe as US fund The Australian economy improved over Long term fixed interest rates have moved managers repatriated funds to take advantage the past year. Australian Gross Domestic The increase in lending levels is pleasing to in a relatively tight range this year with ten of these higher yields. In December, President Product (GDP) rose from 2.0% to 3.1% per note, although the Board believes that many to twenty-year rates still in the mid 4% per Trump delivered one of his campaign promises annum. The unemployment rate fell from councils could benefit their communities by annum range. when the US senate approved major changes 5.6% to 5.4%, however low wage growth and further prudent increased strategic use of to US Tax law. The changes saw tax rates for underemployment pointed out some of the debt having regard to their circumstances corporates and individuals reduced and the structural issues within the employment market. and nature of their responsibilities. This stimulatory effects of cuts saw equity markets Housing prices in Australia’s two largest capital was a finding of the South Australian Local rise around the globe. In March, President cities fell or moderated over the past year with Government Financial Sustainability Inquiry Trump announced trade tariffs on Chinese flow on effects from the bank royal commission in 2005 and is still relevant today. aluminium and steel. This started a round of expected to dampen property markets further. tit for tat tariff announcements between the The Australian Dollar (AUD) ranged between countries with some commentators calling this $0.74 and $0.80 USD over the year in review Total loans at balance date were the start of a trade war between the economic ending the year at the low point of $0.74 USD. $714 million (last year $640 giants. The Eurozone improved remarkably over the last year highlighted by an improved The Reserve Bank of Australia (RBA) left the million) which comprised fixed labour market and strong economic growth official cash rate on hold at 1.5% over the past rate loans of $455 million and and reached a point where the European financial year. The cash rate has been on hold CAD facilities of $259 million Central Bank is considering when and how to since August 2016 with this being its longest stop their stimulatory bond buying program. period of stability on record. The RBA left rates Chinese economic growth remained steady on hold as stronger economic growth and an over the past year with a highly indebted improving labour market was tempered by Our new fixed rate lending to Members public sector and the trade tariffs issues with low wages growth and benign inflation. RBA totalled around $62 million. This included the US creating some cause for concern. Bond concerns about exponential house price growth, the loan raised for approximately yields in most advanced economies around the in Sydney and Melbourne have dissipated over $24 million for the Local Government globe rose over the past year on the back of an the past year as prices in the two capital cities Association of SA in regard to the improved economic outlook highlighted by the having fallen or moderated. State Local Government Infrastructure US 10-year Treasury Bond Yield appreciating Partnership projects grant. (Under this around 0.5%. arrangement, up-front grants were made

4 LGFA Annual Report 2018 5 Chairman’s Review Infrastructure Partnership and Investment Activity Information Technology and Compliance

State Local Government Investment Activity Information Technology Compliance Infrastructure Partnership Deposit funds at call with the LGFA currently The Quantum Treasury Management System The Authority has a Board appointed Audit The State Local Government Infrastructure attract the official RBA cash rate. The LGFA was upgraded to the latest version (V6.5) Committee in place to complement the Partnership (SLGIP) consists of thirty two at call rate remained steady at 1.5% over the during the year by the software supplier (FIS). extensive auditing programme conducted each successful projects having a total value of $121.9 past year. This system has now been in place at LGFA year by the Auditor General’s Department. The million. This is a great example of Local and for nineteen years and continues to fulfil our Authority is required to comply with Treasurer’s State government working in partnership to Competition for deposits amongst Australian treasury and accounting requirements. Instructions TI 2 Financial Management and drive economic development. In January 2018, major banks was relatively subdued over TI 28 Financial Management Compliance successful councils received a grant from the the first half of the financial year, however, Changes were also made to the Quantum Program (FMCP). Performance relative to the State Government of up to 20% of the project’s competition increased in the latter half of Treasury Management System to provide FMCP was reviewed by an independent audit total cost. the year when short term funding costs interest on maturity for fixed term deposit firm, Galpins. spiked as a result of a number of rate hikes transactions as well as monthly interest on at The LGFA’s contribution to the scheme is via in the US. In the latter half of the year LGFA call deposits due to commence on 1 July 2018. A report detailing the FMCP results has been subsidised loans to fund the remaining cost increased term deposit rates in response to This has replaced the long-standing method delivered to the Authority and the Auditor (eighty percent) of successful projects. These this competitive pressure. of paying interest calendar quarterly. General’s Department. The FMCP report subsidised loans will be around 0.5 - 0.7% per and associated working papers form part of annum lower than our already market leading The average daily deposit level of $501 An agreement was entered into during the year the Auditor General’s Department interim rates and will save councils around the state million (2016-2017 $431 million) was higher with Enee Solutions to provide programming audit which is then followed by the financial millions of dollars in interest costs over the life of when compared to the previous year and support. They have been creating reports statement audit. the loans. is the first time the Authority has averaged to assist with the implementation of system more than half a billion dollars of deposits changes being undertaken including reports Following the extensive internal control The subsidised loans have been available since in any one year. This result was achieved by for Members being uploaded to the webpage. risk assessment workshops conducted by January 2018, and the lending will be on a ten- management directing marketing efforts on They have also been involved in the creation Galpins in the previous year, the ControlTrack year fixed rate basis. We envisage that all loans Members who are not 100% supporters of of a transaction database which is to be software has now been successfully associated with the partnership will be drawn by the Authority. LGFA is focused on attracting utilised in providing more detailed transaction implemented and loaded with the internal December 2018. all available deposits in the sector so that we confirmations and statements from 1 July 2018. controls and associated risk assessment of continue to predominately fund our lending the Authority. This is the same software that activities internally. Aish Solutions continue to provide support councils utilise to monitor effectiveness of for our computer network including regular internal controls. A subset of these internal Deposits from Members are highly valued maintenance and upgrades of our hardware controls has been selected to form part by banks and other financial institutions and software requirements. Internet security of a Fraud Control Plan which has been alike, as deposits are considered more stable is critical in the function they perform and included in the Board approved Corruption, than other market segments. Considering during the year a Data Security Policy was Misconduct and Maladministration Policy. the LGFA’s strategic directions, the LGFA produced to document the effective controls will continue to strive to attract 100% of in place to protect against these threats. During the year Galpins conducted a workshop available deposits in the sector and despite for the review of the LGFA Strategic Risk the propensity to run down cash reserves and A new look webpage was launched during Assessment document with audit committee use Cash Advance Debenture (CAD) facilities the year which provides Members with an members and management in attendance. for cash flow purposes, we aim to increase the enhanced format and better reporting. Further The review considered a broad range of deposit levels in the 2018 - 2019 financial year. improvements are planned for the website external factors affecting the finance industry, in the coming year to continually improve compliance requirements and ICT risks. Member’s online experience with LGFA.

6 LGFA Annual Report 2018 7 Chairman’s Review The Board The Board

The Board Farewell to Chris Russell Board Meetings Attended by Board Members The Authority is managed by a Board of Trustees, which consists of seven members, plus up to two Number of meetings held: 6 independent members, who can be appointed by the Board from time to time as required. Mr John Comrie 6 Ms Susan McCormick 3 (Eligible 3)

Every two years the Board is subject to election, Councillor John Frogley 5 Mr Craig Fowler 2 (Eligible 2) appointment or re-appointment of various members. Two trustees are nominated by the Mr Matt Pinnegar 5 Ms Heather Watts 4 (Eligible 4) Local Government Association of South Australia Ms Annette Martin 5 Mr Chris Russell 1 (LGA), one trustee is the CEO of the LGA, two (Deputy for Mr Matt Pinnegar) members are elected by councils, one trustee is Dr Andrew Johnson 6 appointed by the Treasurer and the other is the Chris Russell and Paul Slater Minister’s representative. We currently have no independent trustees. Chris Russell attended his first LGFA Board meeting on 21 September 1988, as deputy The Staff Craig Fowler completed his term as an appointee for Jim Hullick. Thirty years later, during of the Treasurer on 22 October 2017 and was which time he has continued to act as deputy replaced by Heather Watts who commenced her for LGA CEO’s in their role as a trustee, we two-year term on 23 October 2017. say goodbye to Chris who has retired from the Local Government Association of SA. Susan McCormick resigned from her position We thank Chris for his knowledge, wisdom of appointee of the Minister in December 2017. and input over the years and we wish him Due to the change of the state government, this good luck on his next chapter. His efforts and position was still vacant as of 30 June 2018. judgements have continuously contributed positively to the LGFA’s standing. Paul Slater Robert Hardy Davin Lambert Geoff Hollitt Megan Button Oly Dimadis Karren Smith We would like to thank Craig and Susan for their dedicated and valued service to the Authority The Staff and wish them well with future endeavours. Our staff have again made a critical Our office functions well for staff, auditors and contribution to the success of the Authority visiting local government representatives, The Board continues to use a Balanced Scorecard and have continued to drive our services to especially those from regional South Australia to complement the CEO’s Report, which is meet challenging business conditions this year. who can seamlessly work from one of our hot Since last year we farewelled Mary Loveday, desks. Our board room has continued to be produced monthly for Board trustees and retiring after eleven years of service. We thank utilised for meetings and seminars by various highlights the LGFA’s continuing achievement of her for her dedicated service and loyalty and local government groups. its’ Key Performance Indicators. wish her well. We welcomed Megan Button as Mary’s replacement in November 2017. The LGFA Trustee Handbook has also been Staff have attended conferences, training updated, along with the LGFA Management seminars and workshops to enhance their Handbook to provide clarity and consistency knowledge and expertise, especially in the with all management systems and procedures, financial services and workplace, health and in support of the strategic and business plans safety arenas. monitored by the Board.

8 LGFA Annual Report 2018 9 Chairman’s Review Marketing and Sponsorship

Marketing Sponsorship The main marketing activity of the LGFA LGFA sponsors a number of organisations continues to be our calling program on and events that have strong links to the Local Members where we promote our products, Government Sector. provide insight into best practice treasury management and speak about the • Local Government Professionals SA: advantages of utilising debt financing. Over Diamond Partner the past few years the Authority have shifted our marketing approach from focusing solely • South Australian Local Government Financial on council management teams to now also Management Group (SALGFMG): targeting the ultimate decision makers being Platinum Sponsor the mayors, chairs and councillors. Over the past year staff have spoken directly to many • LGA AGM & Showcase mayors and chairs. They have attended a number of council meetings and workshops • LGA Mayors and Chairs Forum & CEO's Forum and each time, amongst other things have actively promoted the responsible use of debt.

LGFA’s marketing plan targeted Members who were not 100% supporters of the Authority. We have seen positive results from this approach and will continue strive to attract 100% of the sector’s lending requirements and investment needs. (From left to right - Craig Birrell, Brett Jaggard, Mathen Allen, Tony Lines and Davin Lambert from LGFA)

LGFA also keeps council staff, mayors, chairs LGFA was the proud sponsor of the LG Their winning project was the Open Space and councillors informed via our newsletter “In The Loop”, which was distributed via Professionals Leadership in Strategic Financial Transformation Project; where the City of Marion e-mail in April and December this year. Over Management award this year and was also reduced their block pruning program from 14 the last year we have used this publication a guest judge. LG Professionals received two years to 3 years which in turn has reduced the to highlight the LGFA’s role in the State Local high quality nominations that were shortlisted: customer-initiated call outs by 40%. The project Government Infrastructure Partnership City of Marion and City of Tea Tree Gully. The is also estimated to save the council around (SLGIP) and how interest only long-term debt two finalists then gave a ten-minute telephone $500,000 annually once fully implemented. financing could help in a possible future rate presentation on their project and a winner was The LGFA felt that the project was a real success capping environment. declared and announced on the night of the LG because the customer and the council both Professionals Annual Excellence Gala Awards benefited from the project. Dinner held in April.

Leadership in Strategic Financial Management Winner: City of Marion

John Comrie September 2018

10 LGFA Annual Report 2018 11 Authority Profile

The Authority Bonus State Wide Coverage The Local Government Finance Authority The bonus payment is a mechanism which At LGFA we pride ourselves on our of South Australia, a body corporate, was enables the Authority to share its success continuing ability to meet local government established in January 1984 under the Local with member councils and prescribed local needs in both metropolitan and regional Government Finance Authority Act, 1983 and government bodies. areas. Our calling program is planned to is administered by a Board of Trustees. cover diverse local government communities Since its introduction in 1985, an amount of throughout our geographically large state, The Authority is a statutory authority $39.665 million has been distributed with with regular communications, meetings established for the benefit of councils and a further $2.3 million to be paid in respect and conference attendances, including other prescribed local government bodies of the year ended 30 June 2018. This year’s presentations and at times, sponsorship. We within the state. It is not a part of the Crown, payment of $2.3 million when combined have worked closely this year with the LGA nor is it an agency or instrumentality of the with previous special allocations for local to ensure optimal responsiveness despite Crown. government purposes of $2.875 million will remoteness of some councils and busy result in overall payments benefiting the local schedules. Members government community of $44.84 million. All local authorities are automatically members of the Finance Authority, but use In line with past practice, the bonus payment of the Authority for investments and loans is has been calculated to relate to average entirely voluntary. deposit and loan levels held with the Authority during the course of the financial Guarantee year. The deposit activity was recognised In accordance with Section 24 of the Local by an allocation of $1.775 million with the Government Finance Authority Act, 1983 balance of $525,000 allocated to loans. all the liabilities of the Authority (including The bonus payment was increased to $2.3 monies accepted on deposit from local million this year to reflect our strong level of authorities) are guaranteed by the Treasurer of profitability. South Australia. Proudly contributing to Income Tax Equivalents South Australia LGFA makes payments equivalent to company income tax. The equivalent liability is calculated/applied on an accounting profits basis and the amounts are paid into an account established with the State Treasurer entitled the “Local Government Taxation Equivalents Fund”. The funds are then available for local government development purposes as recommended by the Local Government Association of South Australia and agreed to by the Minister for Local Government.

12 LGFA Annual Report 2018 13 Profit Before Income Tax Equivalents

0 1000 2000 3000 4000 5000 6000 7000

2018 6276 2017 5150 2016 6227 2015 5626 5122 4350 3772 4683 2010 4772 2659 5248 4537 3843 2005 3391 3278 2843 2612 Profit since 4019 2000 3620 inception 3965 Case Studies 3934 $140 Million 4151 3504 1995 3534 LGFA is proud to utilise a selection of innovative and 4052 5099 representative case studies to show the results of our 6509 lending to the local government sector. We are proud 5221 to provide the funding and expertise that deliver better 1990 4964 outcomes to South Australian communities. 3946 3496 2980 2372 1985 851

0 1000 2000 3000 4000 5000 6000 7000 This graph illustrates Profit before Income Tax Equivalents for the Local Government Finance Authority of South Australia since 1985. (All profits as $’000)

14 LGFA Annual Report 2018 15 Case Study Copper Coast Council COPPER COAST SPORT AND LEISURE CENTRE

Construction of the Kadina and District Recreation "After serving the community for 40 years, the original "The focus for the new hub was to provide A total budget of $10.3 million was finalised with Centre started with a vision driven by the Kadina facility was tired and in need of major maintenance to a community space that would offer a combined $7.8 million of grant funding through community in the 1970s. Through much of the same meet current safety and building codes together with improved health and wellbeing in a growing federal and state government departments, Kadina hard work involved with the current redevelopment, a community standards and expectations," Copper Coast population balanced with economic Memorial School, local clubs, businesses, individuals sporting hub was built and opened on December 19, Council mayor Paul Thomas said. development for the community and wider and the sale of community unmade roads. 1976. It was named the Kadina and District Recreation Yorke Peninsula region," Mr Thomas said. Centre and officially opened by the Minister of Tourism, "The Copper Coast literally faced the loss of this "The initial phase was to scope a project that Funding partners included: Recreation and Sport Tom Casey, Senator Harold Young 40-year-old community recreation hub." would be affordable for our community. representing the Commonwealth Government, and • $4,803,424 Australian Government Kadina Mayor John Olsen. Copper Coast Council, in consultation with its community, "After much hard work and perseverance, • $900,000 Office of Sport and Recreation made the decision to investigate design possibilities thousands of pages of plans and grant • $1,500,000 Department of Education The community recreation hub had arrived! for a new, improved facility that would be able to applications, the project goal was within • $500,000 Kadina Memorial School accommodate the growing community in the long term. reach." • $100,000 + of Community Donations

16 LGFA Annual Report 2018 17 Case Study Copper Coast Council COPPER COAST SPORT AND LEISURE CENTRE

Wallaroo Hospital, Novita Children’s Services and Flex Physiotherapy all use the pool for their hydrotherapy services.

The leisure centre is also open to hosting other sports and activities in the centre. “We want to offer the community the sports and activities they want, so this is a great opportunity for us to gauge interest.” Amanda said it is rewarding to see so many people making use of the facility.

The LGFA currently provide long term loan Manager Amanda Carmichael said anyone is The facility has already hosted major regional funds and flexible convertible cash advance welcome to come in at any time and utilise the events but this is only the very beginning. debenture facilities to the Copper Coast programs or services, or simply meet up with Council which enable the Council to create friends for coffee and lunch. There is flexibility, scope and diversity for the intergenerational equity for their community. entire community locally, and beyond. The centre is being used by hundreds of people The dream became a reality. In June 2016, a of all ages every week. Many user groups are The centre was officially opened on 26 July contract with builder Unique Urban Built was utilising the centre with a variety of activities 2018, with a plaque unveiled by Deputy Prime signed. That month, the first sod was turned including MKA karate, Kadina Gymnastics Club, Minister Michael McCormack. Federal Member by Mr Thomas and federal Member for Grey Kadina Tennis Club, Kadina and District Netball for Grey Rowan Ramsey and official guests Rowan Ramsey, then construction began. Association, Bears and Kadina Basketball Clubs, attended. and Yorkers basketball development program”. "The new facility comprising the program pool, This information was provided by Peter Harder, show court, three additional indoor courts, The leisure centre runs social netball, basketball Copper Coast Council’s Chief Executive Officer as squash courts, gymnasium, upgraded outdoor and Futsal competitions, sports ability group well as Mayor Paul Thomas and Centre Manager, courts, playground, car park, café, créche, programs and kindergym. The new squash Amanda Carmichael. changerooms, meeting and conference rooms courts will be available from August 1. and community spaces is being well utilised," Photographs courtesy of the Yorke Peninsula Mr Thomas said. The leisure centre’s swimming pool is used Country Times. daily for swim school, hydrotherapy and aqua The new leisure centre has been built as a hub aerobics. The pool is fully heated so the classes for the whole Copper Coast community. can be run year-round.

18 LGFA Annual Report 2018 19 Case Study Northern Adelaide Waste Management Authority (NAWMA) MATERIALS RECOVERY FACILITY (MRF) Most notably, the plant has been designed to Most importantly, the MRF provided nineteen future proof NAWMA, and more broadly, South full time jobs in northern Adelaide at the same Australia. A single shift five workday operation time as Holden was closing. The generation of full dutifully processes the current 30,000 tonnes time employment in advanced manufacturing per annum delivered by NAWMA constituent at such a historic moment in South Australian and client councils, and rural and regional manufacturing was not lost on Minister Hunter council customers. However, the operation has when he officially opened the facility on 06 capacity to run 24/7, and could process up to October 2017. 90,000 tonnes per annum if required. In terms of tonnes per hour, and a “basket of The result of this project has been goods” revenue stream, the MRF is a business transformational for NAWMA, and the constituent leader for NAWMA. It drives the way we councils, but also more broadly for the northern communicate with our community and councils, precinct and South Australia in general. The as everything we do is prefaced with how to development of this state of the art facility has get more material into the MRF and out of doubled the recyclables processing capacity in landfill. NAWMA’s “cost of doing business” is far The NAWMA Materials Recovery Facility from the sale of quality sorted paper, glass, South Australia, resulting in more yellow top less in the MRF than it is in our landfill stream, (MRF) is a recycling plant delivering local plastic, steel and aluminium into local and bin recyclables being processed locally and and therefore it is an economic leader as well outcomes of global importance with significant international markets. supporting the South Australian recycling industry. as an environmental one. The new state of the environmental, economic and social benefits art MRF has proven that NAWMA can couple for current and future generations. The MRF is a NAWMA’s key performance criteria is to Operationally, the MRF has sorted approximately environmental leadership with economic credit to the NAWMA technical working group, reduce the amount of material being sent to 25,000 tonnes in its’ first ten months of operation, development. board and constituent councils of Salisbury, landfill, while our strategic intent is governed producing high quality finished goods such Playford and Gawler. The 30,000 tonnes per/ by principles of circular economy, advanced as paper, plastics, glass, aluminium and steel, NAWMA’s management team have “opened the annum recycling plant represents not only manufacturing and secondary remanufacturing, which are marketed locally in Australia and doors” to the recycling industry to better educate excellence in environmental leadership, but under a lens of innovation. Long gone are the internationally. Pointing to the success of councils and the community on every aspect of testament to councils working collaboratively days of viewing these types of facilities as a waste the design, construction and operation of the complex operation. From the importance as a regional waste management subsidiary to management tool, rather, NAWMA’s MRF is a the MRF. Housed inside a large purpose- of lower contamination in the yellow top bin, deliver economies of scale and efficiencies in leader in resource recovery infrastructure of state modified industrial building of some 3800 to the use of high tech ballistic separators to service and infrastructure delivery. significant importance. sqm, the MRF is a combination of trommels, sort out the paper and cardboard, down to the magnets, eddy-currents, ballistic separators, finished goods that are loaded into a purpose- One of only two large scale MRF’s operating Implementing a strategy direction of and manual picking stations, fed by almost half built loading dock and following the shipping in SA, and the only one owned and operated vertical integration, the NAWMA board and a kilometre of conveyor belts. It is an entirely containers to outer harbour ready for their by local government, the MRF is a state of the management set about delivering a vision of impressive plant, that is fronted by NAWMA’s journey to both local and international markets. art facility for sorting household recycling running South Australia’s newest and most corporate administration office, boardroom and bins. Balancing innovation and technology technologically advanced MRF. The planning environmental education centre. This information was provided by Amy Quintrell, with localised employment opportunities, commenced in 2013, and after various iterations Executive Assistant, NAWMA. the MRF is meeting its’ key performance of design, specification and location, the Economically, the MRF provides a significant criteria for diverting approximately 2500 development application was approved in July revenue stream for NAWMA’s constituent LGFA provided NAWMA with flexible loan tonnes per month from landfill, while 2017. The culmination was an investment of councils, while reducing exposure to the often- funding facilities which were used during the realising a multimillion dollar revenue stream $8.05 million by the constituent councils. fickle commercial recycling industry. construction of the facility.

20 LGFA Annual Report 2018 21 Case Study State Local Government Infrastructure Partnership SLGIP

Mid Murray Council: Better Roads for Growth- Eudunda Road Upgrade project City of Mitcham: Mitcham Library and Brown Hill Creek Precinct Development SOD Turning Ceremony (From left to right) Paul Slater, John Comrie, Mayor Glenn Spear, The LGFA’s contribution to the scheme is via 10-year fixed rate basis and we envisage that City of Mitcham, Lorraine Rosenberg, President of LGA, James Bruce, Chairman of the Libraries Board of SA subsidised loans to fund the remaining cost all loans associated with the Partnership will and Annabel Digance, Member for Elder, representing the Treasurer and the Minister (80%) of successful projects. These subsidised be drawn by December 2018. loans will be around 0.5 - 0.7% per annum lower LGA advocacy secured a $25 million major events such as floods and storms and than our already market leading rates and will The first council’s receiving the loans: State Government commitment to local that provided ongoing economic, social or save councils around the State millions of dollars • Coorong District Council government infrastructure projects in environmental benefit beyond the initial in interest costs over the life of the loans. • Mid Murray Council late 2016. The State Local Government construction phase were given preference. • City of Mitcham Infrastructure Partnership provided councils The subsidised loans were available from • City of Prospect with an upfront grant of up to 20% to bring In early 2018, the LGA facilitated the January 2018 and the lending will be on a forward infrastructure projects already distribution of this funding to 28 councils identified in their long-term planning. Projects for 32 projects worth around $122 million. that offered employment opportunities, Projects funded through this program will particularly in areas of high unemployment, support 190 jobs a year over the next three provided mitigation against the impacts of years. .

Coorong District Council: Meningie Stormwater Infrastructure Upgrade City of Prospect: Alexandra Street Road Reconstruction

22 LGFA Annual Report 2018 23 Financial Report Statement of Statement of Comprehensive Income Financial Position For the Year Ended 30 June 2018 As at 30 June 2018

2018 2017 2018 2017 Note $’000 $’000 Note $’000 $’000 INCOME ASSETS Interest on Investments 2(c) 1,633 1,343 Cash and Liquid Assets 6 1 54 Interest on Loans and Advances 2(c) 39,485 39,669 Accrued Interest Receivable 7 4,084 3,437 Other Income 3 37 156 Investment Securities 2(f),8 42,000 28,000 Other Assets 9 275 235 TOTAL INCOME 41,155 41,168 Net Loans and Advances 2(g),10 744,548 676,130 Property, Plant & Equipment 2(j)(ii),2(k),11 2,073 1,974 EXPENSES Interest on Deposits from Councils and Local Government Bodies 2(d) 9,282 8,453 TOTAL ASSETS 792,981 709,830 Interest on Borrowings 2(d) 22,129 23,975 Fees for the Guarantee of the Treasurer of S.A. on Liabilities 24 1,309 1,207 LIABILITIES Administration Expenses 4 2,148 2,064 Deposits from Councils and Local Government Bodies 2(l),12 498,932 462,145 Other Expenses 2(h),2(j)(i),5 11 319 Accrued Interest Payable 13 2,407 2,306 Borrowings 14 199,228 150,674 TOTAL EXPENSES 34,879 36,018 Derivatives 2(i),2(j)(i),15 21,769 27,120 Provisions 2(m),16 3,850 3,030 PROFIT BEFORE INCOME TAX EQUIVALENTS 6,276 5,150 Other Liabilities 17 300 282

Income Tax Equivalent Expense 2(e) 1,883 1,545 TOTAL LIABILITIES 726,486 645,557

PROFIT AFTER INCOME TAX EQUIVALENTS 4,393 3,605 NET ASSETS 66,495 64,273

OTHER COMPREHENSIVE INCOME EQUITY Items that will not be reclassified to Profit Before Income Tax Equivalents General Reserve 2(n) 65,700 63,600 Change in Revaluation Reserve 2(j)(ii),11 129 - Retained Profits 666 673 Revaluation Reserve 2(j)(ii),11 129 - TOTAL COMPREHENSIVE RESULT 4,522 3,605 The profit after income tax equivalents and comprehensive result are attributable to the owners. TOTAL EQUITY 66,495 64,273 The equity is attributable to the owners. Contingent Assets and Liabilities 22

The above statement should be read in conjunction with the accompanying notes. The above statement should be read in conjunction with the accompanying notes.

26 LGFA Annual Report 2018 27 Statement of Statement of Changes in Equity Cash Flows For the Year Ended 30 June 2018 For the Year Ended 30 June 2018

General Retained Revaluation 2018 2017 Total Reserve Profits Reserve Note $’000 $’000 $’000 $’000 $’000 Inflows Inflows (Outflows) (Outflows) Balance at 30 June 2016 62,000 668 - 62,668 CASH FLOWS FROM OPERATING ACTIVITIES Interest and Bill Discounts Received 40,776 41,298 Profit After Income Tax Equivalents for 2016/17 - 3,605 - 3,605 Interest Paid (31,543) (32,784) Fees Paid re Guarantee provided by Treasurer of S.A. (1,294) (1,205) Total Comprehensive Result for 2016/17 - 3,605 - 3,605 Cash Payments to Suppliers and Employees (1,936) (1,863) Fees Received 34 67 Transfer to Bonus Payment Provision - (2,000) - (2,000) Income Tax Equivalents Paid (1,384) (1,958) Transfer to General Reserve 1,600 (1,600) - - NET CASH PROVIDED BY OPERATING ACTIVITIES 19(c) 4,653 3,555 Balance at 30 June 2017 63,600 673 - 64,273 CASH FLOWS FROM INVESTING ACTIVITIES Profit After Income Tax Equivalents for 2017/18 - 4,393 - 4,393 Loans to Councils and Local Government Bodies (74,507) (15,463) Gain on Revaluation of Building Floorspace - - 129 129 Investment Securities 14,000 13,396 Payments for Property, Plant & Equipment (153) (107) Total Comprehensive Result for 2017/18 - 4,393 129 4,522 Proceeds from Sale of Property, Plant & Equipment 41 33

Transfer to Bonus Payment Provision - (2,300) - (2,300) NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES (88,619) (2,141) Transfer to General Reserve 2,100 (2,100) - - CASH FLOWS FROM FINANCING ACTIVITIES Promissory Notes (652) (1,485) Balance at 30 June 2018 65,700 666 129 66,495 Deposits from Councils and Local Government Bodies 36,786 78,234 All changes in equity are attributable to the owners. Short Term Money Market Facilities 25,132 (76,219) Fixed Term Borrowings 24,070 - Bonus Payment to Councils and Local Government Bodies (2,000) (2,000) Other 573 50

NET CASH USED IN FINANCING ACTIVITIES 83,913 (1,420)

NET INCREASE/(DECREASE) IN CASH HELD (53) (6)

Cash at 1 July 54 60

CASH AT 30 JUNE 19(a) 1 54

The above statement should be read in conjunction with the accompanying notes. The above statement should be read in conjunction with the accompanying notes.

28 LGFA Annual Report 2018 29 Notes to and Forming Part of the Financial Statements For the Year Ended 30 June 2018

Note Index 1. Objectives of the Local Government Finance accordance with the historical cost convention, Authority of South Australia except for certain financial instruments that Objectives of the Local Government Finance Authority of South Australia NOTE 1 have been valued in accordance with the Statement of Accounting Policies NOTE 2 The Local Government Finance Authority valuation policy applicable. Other Income NOTE 3 of South Australia (the Authority) is a for- profit Public Authority and was established The Statement of Cash Flows has been Administration Expenses NOTE 4 pursuant to the Local Government Finance prepared on a cash basis. Other Expenses NOTE 5 Authority Act, 1983. The functions of the Cash and Liquid Assets NOTE 6 Authority are as follows: b) Classification of Financial Instruments Accrued Interest Receivable NOTE 7 Management determines the classification a) to develop and implement borrowing and of its investments at initial recognition and Investment Securities NOTE 8 investment programmes for the benefit of at each reporting date in accordance with Other Assets NOTE 9 councils and prescribed local government AASB 139 Financial Instruments: Recognition Net Loans and Advances NOTE 10 bodies; and and Measurement. The Authority classifies its investments into the following categories, which Property, Plant & Equipment NOTE 11 b) to engage in such other financial activities determines the applicable accounting treatment: Deposits from Councils and Local Government Bodies NOTE 12 as are determined by the Minister, after Accrued Interest Payable NOTE 13 consultation with the Local Government Loans and receivables Borrowings NOTE 14 Association, to be in the interests of local Measured at amortised cost. The Authority government. classifies Loans and Advances, Accrued Derivatives NOTE 15 Interest Receivable, Cash and Liquid Assets Provisions NOTE 16 The financial statements have been prepared and Other Assets under this category. Other Liabilities NOTE 17 based on a twelve month period and Superannuation Commitments NOTE 18 presented in Australian currency. Held to maturity financial assets Measured at amortised cost. The Authority Notes to Statement of Cash Flows NOTE 19 2. Statement of Accounting Policies did not have any assets in this category at Key Management Personnel NOTE 20 balance date. Employee Remuneration NOTE 21 a) Basis of Accounting Contingent Assets and Liabilities NOTE 22 The financial report is a general purpose Available-for-sale financial assets financial report. The accounts have been Measured at fair value. The Authority did not Financial Risk Management NOTE 23 prepared in accordance with applicable have any assets in this category at balance Transactions with South Australian Government NOTE 24 Australian Accounting Standards and the date. Fair Value of Financial Instruments NOTE 25 requirements of the Treasurer’s Instructions relating to financial reporting by statutory Financial assets or financial liabilities at fair authorities, which are issued pursuant to the value through profit and loss Public Finance and Audit Act 1987. Measured at fair value with fair value changes taken to the Statement of The Authority’s Statement of Comprehensive Comprehensive Income. The Authority Income, Statement of Financial Position and classifies derivative instruments that are not Statement of Changes in Equity have been classified as effective hedging instruments prepared on an accrual basis and are in under this category (Note 2(i) Refer).

30 LGFA Annual Report 2018 31 Notes to and Forming Part of the Financial Statements For the Year Ended 30 June 2018

Fair Value Hedge e) Income Tax Equivalents relation to the State-Local Government organisations to swap certain rights and Measured at fair value with hedge The Authority is required to make Infrastructure Partnership (SGLIP). obligations (Note 23 Refer). accounting adjustments taken to the payments equivalent to Company The Specific Security Deed grants the Statement of Comprehensive Income. Income Tax under the Taxation Authority a first ranking security interest Interest Rate Swaps are categorised as The Authority classifies derivatives which Equivalent Payment System. The over certain cash flows arising from the Fair Value Hedges and Futures Contracts are effective hedging instruments (Note equivalent Company Income Tax liability SGLIP agreement. are categorised as financial assets or 2(i) Refer) and the corresponding hedged is calculated/applied on an accounting financial liabilities at fair value through items (Note 2(h) Refer), which are all fixed profits basis. Due to the high level of security provided profit and loss. rate debenture loans under this category. for loan agreements no specific or general f) Investment Securities provision for doubtful debts has been j) Revaluations Financial Liabilities at amortised cost Investment securities held by the made. The Authority classifies all liabilities under this Authority are mainly Australian bank i) Financial Instruments category, other than derivative instrument term deposits which are categorised The Authority has not incurred any bad AASB13 Fair Value Measurement liabilities which are not classified as effective as Loans and receivables and therefore debts since its inception in 1984. stipulates the method for revaluing hedging instruments (Note 2(i) Refer). accounted for at amortised cost. financial instruments. A credit value h) Hedge Accounting adjustment (CVA) is required to c) Interest Income g) Loans and Advances Loans which are not effectively hedged be applied to financial instrument The following security is held over by a derivative financial instrument are revaluations where the adjustment Interest on Investments loan agreements entered into by the recorded in the accounts on the basis of amount is considered to be material. This item includes interest income from Authority: historical cost. Loans which are effectively The Authority utilises a portfolio of investment assets which are classified as hedged by a derivative financial long dated, high dollar value interest Loans and receivables, Available-for-sale i) Debentures over Council General instrument are recorded using hedge rate swaps to manage interest rate financial assets and Financial assets at fair Revenue accounting. risk. After revaluation this portfolio value through profit and loss. The interest Loan agreements with Councils are is a liability, therefore the resulting income is calculated on an accruals basis. secured by debentures which provide a The Authority uses interest rate swaps adjustment required is a gain, known charge over Council general revenue. to hedge the interest rate risk associated as a debit value adjustment (DVA), Interest on Loans and Advances with long term fixed rate debenture which is included in the fair value This item includes interest income ii) Schedule 2 of the Local Government loans to Councils and Prescribed calculation. from loan assets classified as Loans and Act 1999 bodies. Hedge Accounting is used receivables as well as interest income from Loans to Prescribed Local Government where it has been determined that the ii) Building Floorspace derivatives that are classified under the Bodies which are Council subsidiaries hedge is highly effective and has been The Authority obtains a valuation Fair Value Hedge category. The interest rely upon the constitutional obligations documented according to AASB 139 appraisal from a professionally income is calculated on an accruals basis. of Councils in the guarantee of the Financial Instruments: Recognition and qualified valuer of its owned and liabilities incurred or assumed by Measurement. occupied building floorspace every five d) Interest Expense subsidiaries as per Schedule 2 of the years in accordance with APFIII Asset Local Government Act 1999. The hedges used by the Authority are Accounting Framework. Interest on Deposits from Councils and classified as Fair Value Hedges and the Local Government Bodies iii) First Registered Mortgage and hedged items are all long term fixed rate The latest market valuation appraisal This item includes interest paid to Councils Specific Security Deed debenture loans. The hedged amount was provided by WBP Property Group and Local Government Bodies and is Loan agreements with the Local of the loan is recorded at fair value with as at 5 October 2017. calculated on an accruals basis. Government Association of South the non-interest rate risk component or Australia (LGA) are secured by First credit margin recorded on an accrual Any accumulated depreciation as at Interest on Borrowings Registered Mortgage over their accounting basis. the revaluation date is eliminated This item includes interest expense on other building at 148 Frome Street, Adelaide, against the gross carrying amount of liabilities used in funding lending activity and SA, 5000. In addition to this a Specific i) Derivative Transactions the building floorspace and the net interest expense on derivative instruments, Security Deed was entered into The Authority has entered into amount is restated to the revalued and is calculated on an accruals basis. between the Authority and LGA in agreements with high credit status amount.

32 LGFA Annual Report 2018 33 Notes to and Forming Part of the Financial Statements For the Year Ended 30 June 2018 k) Property, Plant and Equipment This payment is made pursuant to Section p) Comparative Information considers based on our initial assessment Property, Plant & Equipment are brought to 22(2)(b) of the Local Government Finance The presentation and classification of items that there will be no material financial account at cost less, where applicable, any Authority Act, 1983. in the financial statements are consistent impact when it is due to be adopted in the accumulated depreciation. with prior periods except where specific financial year ending 30 June 2019. The A reconciliation of movements in this The depreciable amount of all property, provision is provided at Note 16(i). accounting standards and accounting table below summarises the significant plant and equipment is depreciated on policy statements have required a change. areas of changes in accounting for financial a straight-line basis over their estimated Income Tax Equivalents Where presentation or classification of instruments that AASB 9 requires and useful lives from the time the asset is A provision is made for Tax Equivalents items in the financial statements has been potential impacts on LGFA: held ready for use. The useful life of each payable as at 30 June 2018 (Note 2(e) Refer). amended, comparative amounts have category is as follows: been reclassified unless reclassification is Classification and measurement A reconciliation of movements in this Office Equipment 3 Years provision is provided at Note 16(ii). impracticable. LGFA expects that the changes to the Office Furniture 5 Years The restated comparative amounts do not classification of financial instruments will Computer Software 2.5 Years to 3 Years n) General Reserve replace the original financial statements for result in changes to our written disclosures Motor Vehicles 5.5 Years to 10 Years The General Reserve has been accumulated the preceding period. for reporting purposes, but this will have no Building Floorspace 70 Years from profits earned in previous years. The financial impact. purpose of the reserve is to provide the q) Rounding l) Concentrations of Deposits Authority with a strong financial position All amounts in the financial statements Impairment The Authority is an industry specific financial and to safeguard against any future adverse institution which operates under the Local conditions that may be encountered. Further have been rounded to the nearest In accordance with AASB 9 impairment on Government Finance Authority Act, 1983. profits are earned through the reinvestment thousand dollars ($’000). financial assets is based on the expected The Authority is restricted by legislation to of the reserve funds. credit losses while current accounting is accepting deposits from Councils and Local r) New and Revised Accounting Standards based on incurred credit losses. Government Bodies operating in South o) Accounting Judgements, Estimates and Australian accounting standards and Management has performed an assessment Australia. Assumptions interpretations that have recently been of the quantitative impact of the change. m) Provisions Significant accounting judgements issued or amended but are not yet Based on the low default rates on loans In the process of applying the Authority’s effective, have not been adopted by the experienced historically and the value Employee Benefits accounting policies, management has made Authority for the period ending 30 June of the security provided by the member A provision is made in respect of the judgements in the classification of financial 2018. councils the impact is considered minimal. Authority’s liability for annual leave and instruments which has had a significant long service leave as at balance date. Long effect on the amounts recognised in the The Authority did not voluntarily change any Hedge Accounting service leave is accrued for all employees financial statements. In particular, the of its accounting policies during 2017-18. AASB 9 allows entities to continue with from the date of commencement of classification of derivatives and long term service. The amount included in the fixed rate debenture loans as Fair Value the hedge accounting rules applied under accounts is the undiscounted amount Hedges has enabled management to utilise The Authority has assessed the impact AASB 139. LGFA intends to continue with expected to be paid. the hedge accounting provisions of AASB of the new and amended standards and AASB 139 hedge accounting. As LGFA 139 Financial Instruments: Recognition and interpretations and considers there will does not intend to adopt AASB 9 hedge No provision is made in the accounts for Measurement. be no material impact on the accounting accounting there will not be any impact on sick leave entitlements. policies or the financial statements of the the financial statements arising from the Significant accounting estimates and Bonus Payment assumptions Authority. hedge accounting component of IFRS 9. A provision is made for the annual bonus The fair values of hedged long term fixed to clients which is based on their average rate debenture loans and derivatives are With regard to impending Accounting account balances for loans and deposits based on observable market rates as at Standards, the Authority has assessed the during the financial year. balance date. impact of AASB 9 Financial Instruments and

34 LGFA Annual Report 2018 35 Notes to and Forming Part of the Financial Statements For the Year Ended 30 June 2018

3. Other Income 2018 2017 7. Accrued Interest Receivable* 2018 2017 $’000 $’000 $’000 $’000 Fee Income 32 59 Interest Receivable - Loans to Councils and Local Government Bodies 3,625 2,774 Gain on Sale of Available-for-Sale Assets - 86 Interest Receivable - Investment Securities 459 663 Gain on Sale of Fixed Assets 5 11 4,084 3,437 37 156 * The accrued interest receivable on Investment Securities, Net Loans and Advances and Derivatives which are required to be recorded at fair value have been transferred to the respective line item. 4. Administration Expenses 8. Investment Securities Audit Fees 75 108 Deposits and Securities issued by Banks 42,000 28,000 Consultancy Fees 60 19 Depreciation 150 170 9. Other Assets Occupancy Expenses 33 34 Sundry Debtors and Prepayments 275 235 Salaries & On-Costs 1,174 1,121 Software License Fees 113 111 10. Net Loans and Advances Sponsorships 107 94 Advances 237,937 178,317 Other Administration Expenses 436 407 Term Loans 476,382 461,495 2,148 2,064 Loans and Advances - at Cost 714,319 639,812 Fair Value Adjustment (Note 2(h) Refer) 30,229 36,318 The amounts received, or due and receivable in respect of this financial Net Loans and Advances 744,548 676,130 year by the Auditors in connection with: Auditing work performed by the Auditor-General’s Department* 55 58 Unrecognised Commitments - Loans and Advances Financial Management Compliance Program by an external audit firm 20 50 Unused Cash Advance facilities 522,872 458,565 75 108 Term loans approved not advanced 1,320 2,006 * Audit fees paid/payable to the Auditor-General's Department relating to work performed under the Public Finance and Audit Act 1987. 524,192 460,571 No other services were provided by the Auditor-General’s Department. The number and dollar amount of consultancies paid/payable that fell 11. Property, Plant & Equipment within the following bands: Plant, Equipment, and Motor Vehicles: No. No. - at cost 1,069 984 Below $10,000 3 8 1 2 less, accumulated depreciation (791) (701) $10,000 to $50,000 2 52 1 17 Building Floorspace: 60 19 - at revaluation (Note 2(j)(ii) Refer) 1,814 1,799 less, accumulated depreciation (19) (108) 5. Other Expenses Total Property, Plant & Equipment 2,073 1,974 Fair Value Hedge Accounting Loss 11 319

6. Cash and Liquid Assets Cash at Bank 1 54

36 LGFA Annual Report 2018 37 Notes to and Forming Part of the Financial Statements For the Year Ended 30 June 2018

11. Property, Plant & Equipment (cont.) 2018 2017 16. Provisions 2018 2017 $’000 $’000 $’000 $’000 Reconciliation of Property, Plant & Equipment Employee Benefits 420 399 Carrying Amount at 1 July 1,974 2,060 Fringe Benefits Tax 20 20 Acquisitions 156 107 Bonus Payment to Councils and Local Government Bodies 2,300 2,000 Disposals (36) (23) Provision for Income Tax Equivalents 1,110 611 Revaluation 129 - 3,850 3,030 Depreciation (150) (170) Carrying Amount at 30 June 2,073 1,974 Movements of major provisions during the year (i) Bonus Payment to Councils and Local Government Bodies 12. Deposits from Councils and Local Government Bodies Opening Balance 1 July 2,000 2,000 At Call 256,282 232,366 Increase in Provision 2,300 2,000 Fixed Term 242,650 229,779 Amounts Paid (2,000) (2,000) 498,932 462,145 Closing Balance 30 June 2,300 2,000

13. Accrued Interest Payable (ii) Provision for Income Tax Equivalents Interest Payable on : Opening Balance 1 July 611 1,024 - Deposits from Councils and Local Government Bodies 1,811 2,150 Increase in Provision 1,883 1,545 - Borrowings* 596 156 Amounts Paid (1,384) (1,958) 2,407 2,306 Closing Balance 30 June 1,110 611 * The accrued interest payable on interest rate swaps which are required to be recorded at fair value has been transferred to the Derivatives line item. 17. Other Liabilities Employee On-costs 46 44 14. Borrowings Sundry Creditors 254 238 Short Term Money Market Facility 128,987 103,855 300 282 Fixed Term Borrowings 49,074 25,000 Promissory Notes 21,167 21,819 18. Superannuation Commitments 199,228 150,674 The Authority contributes to superannuation funds as chosen by individual employees. There is no liability for payments to beneficiaries as they have been assumed by the superannuation scheme. 15. Derivatives The only liability outstanding at reporting date relates to any contributions due but not yet paid. Swap Principal Receivable (6,837) (7,492) Interest Receivable - Interest Rate Swaps (953) (865) Interest Payable - Interest Rate Swaps 3,507 3,807 Fair Value Adjustment 25,984 31,762 Interest Rate Swaps* 21,701 27,212 Futures Contracts 68 (92) 21,769 27,120 * Interest rate swaps are shown as the net of the fixed rate leg and the floating rate leg.

38 LGFA Annual Report 2018 39 Notes to and Forming Part of the Financial Statements For the Year Ended 30 June 2018

19. Notes to Statement of Cash Flows Note 2018 2017 20. Key Management Personnel $’000 $’000 (a) Reconciliation of Cash Key management personnel who have responsibility for the strategic direction and management of the Cash at the end of the financial year as shown in the Authority include members of the Board and the Chief Executive Officer. Statement of Cash Flows is reconciled to the related items in the Statement of Financial Position as follows: a) Board Members Appointments to the Board are made pursuant to Section 7 of the Local Government Finance Cash and Liquid Assets 6 1 54 Authority Act, 1983.

The following persons held the position of governing Board member during the financial year: (b) Cash Flows Presented on a Net Basis Cash flows arising from the following activities are presented on a Mr John Comrie (Chair) LGA representative net basis in the Statement of Cash Flows: Cr John Frogley (Deputy Chair) Council representative (i) Client Deposits and Withdrawals; Mr Craig Fowler Appointee of the Treasurer to 22 October 2017 (ii) Sales and Purchases of Money Market Securities; Dr Andrew Johnson LGA representative (iii) Drawdown and Repayment of Loans and Investments; and Ms Annette Martin Council representative (iv) Fees Paid and Received Ms Susan McCormick Appointee of the Minister to 31 December 2017 Mr Matt Pinnegar LGA Chief Executive Officer (c) Reconciliation of Net Cash Provided by/(Used in) Operating Ms Heather Watts Appointee of the Treasurer from 23 October 2017 Activities to Profit after Income Tax Equivalents. b) Other Key Management Personnel PROFIT AFTER INCOME TAX EQUIVALENTS 4,393 3,605 The following person also held a position of authority and responsibility for planning, directing Decrease/(Increase) in Interest Receivable (342) 286 and controlling the activities of the Authority, directly or indirectly during the financial year: Decrease/(Increase) in Sundry Debtors 41 (28) Increase/(Decrease) in Interest Payable (131) (356) Mr Paul Slater Chief Executive Officer Increase/(Decrease) in Other Liabilities 16 30 c) Related Party Transactions Increase/(Decrease) in Provisions 520 (374) The Authority operates independently under its own legislation and has no other controlled Depreciation 150 170 entitities. Revaluation Loss/(Gain) 11 319 Loss/(Gain) on Disposal of Available-for-Sale Assets - (86) Related parties of the Authority include all key management personnel and their close family Loss/(Gain) on Disposal of Fixed Assets (5) (11) members and any entity that is controlled or jointly controlled by those persons. Close family NET CASH PROVIDED BY OPERATING ACTIVITIES 4,653 3,555 members are defined in AASB 124 to include children, spouse or partner, children of the spouse or partner and dependants of the key management personnel or the spouse or partner.

There are no transactions to disclose for key management personnel and related parties.

The Authority transacts with Councils, Prescribed Bodies and State Government Agencies of which Board members may be key management personnel on terms which are consistent with the Authority's normal commercial arrangements.

40 LGFA Annual Report 2018 41 Notes to and Forming Part of the Financial Statements For the Year Ended 30 June 2018

d) Key Management Personnel Remuneration 22. Contingent Assets and Liabilities Registered Mortgage over their building The compensation for key management personnel is set out below: at 148 Frome Street, Adelaide, SA, 5000. In The Authority incurs contingent assets and addition to this a Specific Security Deed 2018 2017 liabilities as part of its normal operations in was entered into between the Authority $’000 $’000 providing borrowing and investment services and LGA in relation to the State-Local Salaries and other short-term employee benefits 446 439 to Local Government in South Australia as are Government Infrastructure Partnership contemplated by its enabling legislation. (SGLIP). The Specific Security Deed grants Post-employment benefits 47 42 the Authority a first ranking security 493 481 Contingent Assets interest over certain cash flows arising from the SGLIP agreement. e) Board Members Remuneration a) Guarantee of the Treasurer of SA on As at 30 June 2018 the total loans secured The number of governing Board members whose remuneration received or receivable falls within the Liabilities by First Registered Mortgage and Specific Under Section 24 of the Local Security Deed was $24.074 million. following bands: Government Finance Authority Act, 2018 2017 1983, all financial obligations incurred or Contingent Liabilities assumed by the Authority are guaranteed No Remuneration 3 2 by the Treasurer on behalf of the State of a) Financial Guarantee $1 - $9,999 3 6 South Australia. The Authority has issued a financial guarantee $10,000 - $19,999 1 2 on behalf of the Workers Compensation As at 30 June 2018 the total liabilities Scheme of the Local Government Association $20,000 - $29,999 1 - guaranteed was $726.486 million. of South Australia in favour of the Return to 8 10 Work Corporation of South Australia. The b) Security for Loan Agreements guarantee is fully secured against depositor The total remuneration received or receivable by those governing Board members was $61,400 ($60,267) funds held, the value of which will not be less which includes salary and superannuation. Note, these amounts are also disclosed in note 20(d) above. i) Debentures over Council General than the value of any liability that might be Revenue incurred. In accordance with the Premier and Cabinet Circular No. 016, SA Government employees did not receive Loan agreements with Councils are any remuneration for governing Board duties during the financial year. The amount payable in respect secured by debentures which provide a As at 30 June 2018 the amount guaranteed of the Chief Executive Officer of the Local Government Association of South Australia is paid to the Local charge over Council general revenue. was $21.995 million. Government Association of South Australia. As at 30 June 2018 the total loans secured by debenture was $659.784 b) Performance Bond/Guarantees 21. Employee Remuneration million. i) Northern Adelaide Waste Management The number of employees whose remuneration received or receivable falls within the following bands: ii) Schedule 2 of the Local Government Act 1999 Authority Loans to Prescribed Local Government The Authority has issued a performance 2018 2017 Bodies which are Council regional bond/guarantee on behalf of the $149,001 - $159,000 1 - subsidiaries rely upon the constitutional prescribed local government body, $199,001 - $209,000 1 1 obligations of Councils in the guarantee Northern Adelaide Waste Management of the liabilities incurred or assumed Authority, a regional subsidiary of the City $419,001 - $429,000 - 1 by subsidiaries as per Schedule 2 of the of Playford, Corporation of the Town of $429,001 - $439,000 1 - Local Government Act 1999. Gawler and City of Salisbury in favour of the 3 2 As at 30 June 2018 the total loans Environment Protection Authority. secured by Schedule 2 of the Local As at 30 June 2018 the amount guaranteed The table includes all employees who received remuneration equal to or greater than the Department of Government Act 1999 was $30.461 was $1.350 million. Treasury and Finance base executive remuneration level of $149,000 ($147,000) during the year. million. Note: Pursuant to Schedule 2 of the Local Remuneration of employees reflects all costs of employment including salary, payments in lieu of leave, iii) First Registered Mortgage and Specific Government Act 1999, liabilities incurred Security Deed or assumed by a regional subsidiary are superannuation contributions, living away from home allowance, salary sacrifice benefits and fringe benefits Loan agreements with the Local guaranteed by the constituent councils. and any fringe benefits tax paid or payable in respect of those benefits. The total remuneration received by Government Association of South personnel in this table for the year was 785,518 ($621,632). Australia (LGA) are secured by First

42 LGFA Annual Report 2018 43 Notes to and Forming Part of the Financial Statements For the Year Ended 30 June 2018

23. Financial Risk Management Interest Rate Risk Principal Principal Balance +0.5% -0.5% Balance +0.5% -0.5% Interest rate risk is the risk that the fair value or 30/06/18 30/06/17 a) Risk Management Policies and Procedures future cash flows of a financial instrument will $’000 $’000 $’000 $’000 $’000 $’000 The Treasurer issued a revised consent dated fluctuate because of changes in market interest Variable Rate Financial Assets 28 October 2016, for the Authority to enter rates. The Authority’s exposure to interest rate Investment Securities 38,000 190 (190) 13,000 65 (65) into a range of financial instruments as risk arises where mismatches occur between Loans and Advances 237,937 1,190 (1,190) 178,317 892 (892) part of its normal operations of providing the maturities of financial assets and financial borrowing and investment services to Local liabilities. In order to mitigate this risk the Variable Rate Financial Liabilities Government in South Australia and for Authority has entered into interest rate swap Council Deposits 424,891 (2,124) 2,124 382,142 (1,911) 1,911 managing the associated risks. contracts and interest rate futures contracts to Short Term Money Market Facility 128,987 (645) 645 103,855 (519) 519 hedge actual financial transactions. Promissory Notes 21,167 (106) 106 21,819 (109) 109 All financial instrument transactions and internal control activities are conducted i) Fair Value Sensitivity Analysis for Fixed Rate Variable Rate Derivatives within a Board approved Risk Policy Instruments Interest Rate Swaps (Notional Principal) 431,218 2,156 (2,156) 448,591 2,243 (2,243) document. A Treasury Management System The Authority had a number of fair value Futures (Notional Principal/Bond Formula) 11,000 312 (312) 10,000 226 (226) is in place which provides comprehensive hedges in place at the reporting date. As the accounting and reporting of financial hedging instrument and hedged items have instrument transactions which in turn allows matching fixed rate positions which directly Profit/(Loss) Interest Rate Sensitivity 973 (973) 887 (887) for compliance with the Risk Policy to be offset each other there would be no material monitored closely. effect on profit or loss if interest rates change.

The risk management process is subject ii) Sensitivity Analysis for Variable Rate to regular and close senior management Instruments scrutiny, including regular Board and It is estimated that a change of 50 basis points other management reporting. An Asset applied to the risk exposures in existence at and Liability Committee (ALCO) has been the reporting date would have increased/ appointed to direct and monitor risk (decreased) profit for the reporting period management operations in accordance with by the amounts shown in the adjacent table. the Risk Policy and is accountable to the For the purpose of this analysis variable rate Board. instruments include all variable rate interest bearing financial instruments which are due b) Market Risk to be repriced within 90 days of the reporting Market risk for the Authority is primarily date. through interest rate risk. There is no exposure to foreign currency risk.

44 LGFA Annual Report 2018 45 Notes to and Forming Part of the Financial Statements For the Year Ended 30 June 2018 c) Credit Risk Debt servicing levels are analysed on receipt of d) Liquidity Risk A liquidity policy is included in the Authority’s Credit risk is the risk that one party to a each loan application and the Board approved Liquidity risk is the risk that an entity will Risk Policy document which provides for financial instrument will cause a financial loss percentages are reviewed annually. Credit encounter difficulty in meeting obligations regular management reporting in order to for the other party by failing to discharge risk is considered minimal as the majority of associated with financial liabilities. The closely monitor the liquidity position. The an obligation. The Authority’s exposure to loan agreements are secured by debentures Authority’s exposure to liquidity risk arises Risk Policy requires that sufficient funds are credit risk arises from the potential default by providing a charge over the Council’s general where a mismatch of cash flows between available at all times to meet any reasonable counterparties with whom financial assets are revenue. short term financial liabilities and long term calls on its liabilities. held. financial assets exists. The Authority has not incurred any bad debts The following are the remaining contractual Included in the Authority’s Risk Policy document since its inception in 1984. The Authority has a State Government maturities of financial liabilities, including is a Credit Risk Limits policy which stipulates Guarantee covering all liabilities which estimated interest payments: counterparty credit limits as follows: A concentration of credit risk occurs in relation enables it to borrow funds as required from to loans and advances as under the Local the financial markets at favourable rates. In i) Investments and Derivatives Government Finance Authority Act, 1983, loans order to cover seasonal shortfalls in funding Individual counterparties are assessed and advances made are restricted to Councils and the Authority has access to short term based on Standard & Poor’s Credit Local Government Bodies (Note 2(g) Refer). borrowing arrangements with the South Ratings and a limit applied based on that Australian Government Financing Authority rating. Specific approvals are given for Non-derivative financial assets are shown below (SAFA). counterparties that are outside of this at face value or amortised cost and derivative criteria. Regular reporting of investment financial assets are shown at their fair value plus Carrying Contracted 0 - 3 3 - 12 1 - 5 > 5 and derivative credit exposures are the credit conversion factors in line with the APRA 2018 provided to the Board and management. Guidelines. The Authority uses Standard and Poor’s Amount Cash Flows Months Months Years Years credit ratings to assess the credit quality of the $’000 $’000 $’000 $’000 $’000 $’000 ii) Loans and Advances counterparties it invests with. Loans to Councils Non-Derivative Financial Liabilities Credit limits are applied to individual and Local Government bodies are shown as No Deposits from Councils and Local councils based on debt servicing levels not Rating (NR) in the following analysis as they are Government Bodies 500,743 (500,743) (426,703) (64,022) (10,018) - exceeding Board approved percentages. not required to be rated in this manner. Borrowings 199,824 (199,824) (151,789) (26,056) (9,040) (12,939)

Short Term Rating Long Term Rating Derivative Financial Liabilities 2018 A1+ A1 A2 AA- A NR Total Interest Rate Swaps - Outflow 229,706 (251,327) (8,051) (43,606) (140,418) (59,252) $’000 $’000 $’000 $’000 $’000 $’000 $’000 Interest Rate Swaps - Inflow (208,005) 217,049 10,538 32,603 122,607 51,301 Cash and Liquid Assets 1 - - - - - 1 Carrying Contracted 0 - 3 3 - 12 1 - 5 > 5 Investment Securities 28,000 5,000 9,000 - - - 42,000 2017 Amount Cash Flows Months Months Years Years Loans and Advances - - - - - 714,318 714,318 $’000 $’000 $’000 $’000 $’000 $’000 Derivatives - - - 3,500 1,600 - 5,100 Non-Derivative Financial Liabilities Total 28,001 5,000 9,000 3,500 1,600 714,318 761,419 Deposits from Councils and Local Government Bodies 464,295 (464,295) (384,291) (24,004) (56,000) - Short Term Rating Long Term Rating Borrowings 150,830 (150,830) (125,830) - (25,000) - 2017 A1+ A2 AA- A BBB+ NR Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 Derivative Financial Liabilities Cash and Liquid Assets 54 - - - - - 54 Interest Rate Swaps - Outflow 267,428 (295,417) (10,113) (41,046) (168,045) (76,213) Investment Securities 13,000 1,000 10,000 - 4,000 - 28,000 Interest Rate Swaps - Inflow (240,216) 246,946 12,290 27,764 142,996 63,896 Loans and Advances - - - - - 639,812 639,812 Derivatives - - 3,400 1,900 - - 5,300 Total 13,054 1,000 13,400 1,900 4,000 639,812 673,166

46 LGFA Annual Report 2018 47 Notes to and Forming Part of the Financial Statements For the Year Ended 30 June 2018

24. Transactions with South Australian Government a) Fair Value of Financial Assets and Deposits from Councils and Prescribed Local Financial Liabilities Government Bodies The following expense transactions were undertaken during the financial year between the Authority and the South Australian Government: The following methods and assumptions are The fair value is estimated using discounted used to determine the fair values of financial cash flow analysis based on current market 2018 2017 assets and liabilities: rates for deposits having substantially the same terms and conditions. $’000 $’000 Investment Securities Interest Paid - Short Term Money Market Facility 1,832 2,392 Borrowings Interest Paid - Fixed Term Borrowings 812 482 The fair value of Fixed Term Deposits Interest Paid - Promissory Notes 352 385 held with Banks is estimated based on a The fair value is estimated using discounted Fees for the Guarantee of the Treasurer of S.A. on Liabilities 1,309 1,207 discounted cash flow analysis utilising a cash flow analysis based on current market Income Tax Equivalents Expense 1,883 1,545 zero coupon curve which is representative rates for borrowings having substantially the Audit Fees 55 58 of the market rates used for unwinding such same terms and conditions. instruments. Payroll Tax 16 23 Derivatives The following financial liabilities were outstanding at the end of the financial year between the Net Loans and Advances Authority and the South Australian Government: The fair value of interest rate swaps is The fair value is estimated based on a discounted estimated based on a discounted cash flow 2018 2017 cash flow analysis utilising a zero coupon curve analysis utilising a credit adjusted zero $’000 $’000 which is representative of the market rates coupon curve in accordance with AASB13 Fair Short Term Money Market Facility 128,987 103,855 used for unwinding such instruments. Value Measurement. Promissory Notes 21,167 21,819 Fixed Term Borrowings 49,074 25,000 Interest Payable - Short Term Money Market Facility 193 97 Interest Payable - Promissory Notes 40 36 Interest Payable - Fixed Term Borrowings 363 23 2018 2017 Audit Fees 55 58 BOOK FAIR BOOK FAIR VALUE VALUE VALUE VALUE $’000 $’000 $’000 $’000 25. Fair Value of Financial Instruments All Derivative Financial Instruments have Financial Assets Category (Note 2(b) Refer) been recorded at fair value, including Investment Securities Loans and Receivables 42,459 42,520 28,663 28,864 The book value of financial assets and accrued interest, in the accounts. A financial liabilities shown in the table portion of Net Loans and Advances has Net Loans and Advances Loans and Receivables 287,087 309,552 196,689 218,874 includes principal, accrued interest and, been recorded at fair value using hedge Net Loans and Advances Fair Value Hedge 461,086 461,086 482,214 482,214 where applicable, a fair value adjustment. accounting with the remainder recorded at Financial Liabilities Category (Note 2(b) Refer) The distribution of accrued interest to asset amortised cost. Deposits from Councils and Prescribed Bodies Financial Liabilities at Amortised Cost 500,742 501,036 464,295 464,785 and liability categories which are recorded Borrowings Financial Liabilities at Amortised Cost 199,824 200,223 150,830 150,853 at amortised cost in the accounts will cause The fair value of Other Assets and Other Derivatives Fair Value Hedge 21,701 21,701 27,212 27,212 the amounts shown as book values to differ Liabilities is not required as the book value is Derivatives Financial Assets at Fair Value 68 68 (92) (92) from those shown on the Statement of a reasonable approximation of fair value. Financial Position.

48 LGFA Annual Report 2018 49 Notes to and Forming Part of Certification of the the Financial Statements Financial Statements For the Year Ended 30 June 2018 b) Fair Value Hierarchy Level 2 – fair values that are based on inputs We certify that the: that are directly or indirectly observable for The recognised fair values of financial the asset/liability (other than unadjusted • financial statements of the Local Government Finance Authority of South Australia: assets and liabilities are classified according quoted price). to the following fair value hierarchy that -- are in accordance with the accounts and records of the authority; and reflects the significance of the inputs used in Level 3 – fair values that are derived from data making the measurements. not observable in a market. The Authority does -- comply with relevant Treasurer’s instructions; and not have any financial assets or liabilities which Level 1 – fair values that reflect unadjusted are required to be valued using this method. -- comply with relevant accounting standards; and quoted prices in active market for identical assets/liabilities. All financial asset and liabilities are classified as level 2. -- present a true and fair view of the financial position of the authority at the end of the financial year and the result of its operations and cash flows for the financial year.

• Internal controls employed by the Local Government Finance Authority of South Australia over its financial reporting and its preparation of the financial statements have been effective throughout the financial year.

PA Slater GC Hollitt Chief Executive Officer Manager Corporate Services

JAC Comrie Chairman

30 August 2018

50 LGFA Annual Report 2018 51 Independent Auditor’s Report

To the Chairman Basis for opinion Responsibilities of the Chief Executive Auditor's responsibilities for the audit of Local Government Finance Authority of Officer and the Board of Trustees for the the financial report South Australia I conducted the audit in accordance with financial report the Public Finance and Audit Act 1987 My objectives are to obtain reasonable As required by section 31(1)(b) of the Public and Australian Auditing Standards. My The Chief Executive Officer is responsible for assurance about whether the financial Finance and Audit Act 1987 and section 33(2) of responsibilities under those standards the preparation of the financial report that report as a whole is free from material the Local Government Finance Authority Act 1983, are further described in the 'Auditor's gives a true and fair view in accordance with misstatement, whether due to fraud or error, I have audited the financial report of the Local responsibilities for the audit of the financial the Treasurer's Instructions issued under the and to issue an auditor's report that includes Government Finance Authority of South Australia report' section of my report. I am independent provisions of the Public Finance and Audit my opinion. Reasonable assurance is a high for the financial year ended 30 June 2018. of Local Government Finance Authority of Act 1987 and the Australian Accounting level of assurance, but is not a guarantee South Australia. The Public Finance and Audit Standards, and for such internal control as that an audit conducted in accordance with Opinion Act 1987 establishes the independence of the management determines is necessary to Australian Auditing Standards will always Auditor-General. In conducting the audit, the enable the preparation of the financial report detect a material misstatement when it exists. In my opinion, the accompanying financial relevant ethical requirements of APES 110 that gives a true and fair view and is free from Misstatements can arise from fraud or error report gives a true and fair view of the financial Code of Ethics for Professional Accountants material misstatement, whether due to fraud and are considered material if, individually or position of the Local Government Finance have been met. or error. in the aggregate, they could reasonably be Authority of South Australia as at 30 June 2018, expected to influence the economic decisions their financial performance and their cash flows I believe that the audit evidence obtained is In preparing the financial report, the Chief of users taken on the basis of this financial for the year then ended in accordance with sufficient and appropriate to provide a basis Executive Officer is responsible for assessing report. the Treasurer's Instructions issued under the for my opinion. the entity's ability to continue as a going provisions of the Public Finance and Audit Act concern, disclosing, as applicable, matters As part of an audit in accordance with 1987 and Australian Accounting Standards. related to going concern and using the going Australian Auditing Standards, I exercise concern basis of accounting unless the entity professional judgement and maintain The consolidated financial report comprises: is to be liquidated or to cease operations, or professional scepticism throughout the audit. has no realistic alternative but to do so. I also: • a Statement of Comprehensive Income for the year ended 30 June 2018 The Board of Trustees is responsible for • identify and assess the risks of material overseeing the entity's financial reporting misstatement of the financial report, • a Statement of Financial Position as at 30 June 2018 process. whether due to fraud or error, design and perform audit procedures responsive to • a Statement of Changes in Equity for the year those risks, and obtain audit evidence ended 30 June 2018 that is sufficient and appropriate to provide a basis for my opinion. The risk • a Statement of Cash Flows for the year ended of not detecting a material misstatement 30 June 2018 resulting from fraud is higher than for one resulting from error, as fraud may involve • notes, comprising significant accounting collusion, forgery, intentional omissions, policies and other explanatory information misrepresentations, or the override of internal control • a Certificate from the Chairman, Chief Executive Officer and the Manager Corporate Services.

52 LGFA Annual Report 2018 53 Independent Auditor’s Report Notes

• obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances

• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Chief Executive Officer

• conclude on the appropriateness of the entity's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity's ability to continue as a going concern

• evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.

My report refers only to the financial report described above and does not provide assurance over the integrity of electronic publication by the entity on any website nor does it provide an opinion on other information which may have been hyperlinked to/from the report.

I communicate with the Chief Executive Officer and the Board of Trustees about, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during the audit.

Andrew Richardson Auditor-General 5 September 2018

54 LGFA Annual Report 2018

Suite 1205, 147 Pirie St Adelaide SA 5000 T 08 8223 1550 F 08 8223 6085 www.lgfa.com.au