Victorian Ports Corporation (Melbourne)
Street address Level 5, 530 Collins Street Melbourne Victoria 3000 Australia
Postal address GPO Box 261 Melbourne VIC 3001 Australia
Tel: +61 3 8347 8300 Fax: +61 3 8347 8301 www.vicports.vic.gov.au Victorian Ports Corporation (Melbourne) 2018-19 Annual Report
Department of Transport
Authorised by the Victorian Government. This publication is produced by Victorian Ports Corporation (Melbourne). Proudly designed and produced by abCreative productions www.abCreative.com Printed on 100% recycled paper. ANNUAL REPORT 2018-19
Responsible Body’s declaration
The Hon. Melissa Horne MP Minister for Ports and Freight 1 Spring Street Melbourne Victoria 3000
The Hon. Tim Pallas MP Treasurer 1 Treasury Place East Melbourne Victoria 3002
Dear Ministers,
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report
I have much pleasure in submitting to you the Annual Report of Victorian Ports Corporation (Melbourne) for the period 1 July 2018 to 30 June 2019, in accordance with the provisions of the Transport Integration Act 2010 (Vic) and the Financial Management Act 1994 (Vic).
Yours sincerely,
James Cain Chairman
28 August 2019
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 1 2 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Contents
Responsible Body’s declaration 1 Section 1: Year in review 5 From the Chairman 6 From the Chief Executive Officer 7 Mission, vision and values 8 An overview of VPCM 9 Manner of establishment 9 Purpose and responsibilities 9 Functions, objects and powers 10 Significant legislative changes 11 Ministerial Direction 11 Operations review 12 Financial information summary 17 Section 2: Governance and organisational structure 21 Corporate governance 22 Directors 23 Board and Committee meetings 25 Organisational structure 26 Executive Management Team 27 OH&S and employment principles 28 Section 3: Workforce data 31 Our people 32 Public sector values and employment principles 32 Comparative workforce data 32 Section 4: Other disclosures 35 Local Jobs First 36 Disclosure of government advertising expenditure 36 Consultancy expenditure 37 Information and Communication Technology expenditure 37 Disclosure of major contracts 38 Freedom of Information 38 Compliance with building and maintenance provisions of the Building Act 1993 (Vic) 39 Competitive Neutrality Policy 39 Compliance with the Protected Disclosure Act 2012 (Vic) 39 Statement of availability of other information 40 Attestation for financial management compliance with Ministerial Standing Direction 5.1.4 41 Section 5: Financial statements 43 Section 6: Appendices 105 A - Disclosure index 106 B - Statement of Corporate Intent 108
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 3 4 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Section 1: Year in review
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 5 From the Chairman
The international and coastal trade through the port that planning, extensive community consultation is vital to the Victorian economy. Victorian Ports was undertaken to ensure the local community’s Corporation Melbourne (VPCM) is responsible needs and expectations are clearly understood. for providing safe, efficient access to the ports of Melbourne and Geelong, and ensuring these I would like to thank my fellow Board members for gateways for cargo and passengers are open for their contribution over the year. On behalf of the business every day. We are also responsible for the Board, I thank the Chief Executive Officer, Rachel operation of Victoria’s premier passenger terminal Johnson, and the management and staff of VPCM at Station Pier. for their hard work and dedication through another very busy year. Consistent with previous years we find ourselves operating in a changing and increasingly The challenges and opportunities for VPCM exist demanding environment. The global shipping fleet in a complex environment. Looking ahead we are is continuing to change with larger vessels calling at committed to continuing to plan for sustainable Australian ports. At the same time the demand from growth and work cooperatively with our customers, the cruise industry and in particular the appeal of partners and the community to support the Melbourne as a cruise destination has also grown. important contribution the port makes to Victoria. The strength of the Victorian economy and growth in population throughout Melbourne reinforces the need for the port to understand and respond to community expectations.
Our focus is to ensure that the management of vital port infrastructure continues to meet the needs James Cain of customers, stakeholders and the Victorian Chairman community into the future and I am pleased to report that over the 2018-19 year there have again been significant achievements.
VPCM is introducing newer, improved technology to enhance the safety of vessel navigation and management. Last year, the leading edge version of the dynamic under keel clearance system was commissioned to assist safe access to Port Phillip Bay and the port of Melbourne while the project to install a new Vessel Traffic Services system for improved vessel management and safety in port waters continued.
The successful trials for accommodating larger container vessels at Webb Dock and Swanson Dock are continuing. They involve using innovative operating procedures which are made possible through close cooperation between VPCM, Port of Melbourne, the marine pilots, towage companies and the shipping lines.
In terms of infrastructure needs, we have continued our planning for capital works at Station Pier to accommodate the growing cruise industry as well as the daily ferry service to Tasmania. As part of
6 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report From the Chief Executive Officer
The year 2018-19 saw both consolidation and We continued our support for the wellbeing of preparation for a coming growth phase for the the marine environment in Port Phillip Bay by organisation. once again donating to The Nature Conservancy, assisting with its program of re-establishing The growing international cruise ship and domestic shellfish reefs in the bay. ferry industries are central to our planning for Station Pier. It is vital that we can meet the I thank the Chairman and Board of Directors for future needs of these customers by delivering their work in providing direction and support during sustainable growth at the same time as meeting the the year and setting the path for VPCM. I also expectations of the local community. want to thank the Executive Management Team and the staff for their commitment and work during As part of our continued planning for improved another busy year and express my appreciation for infrastructure and operational solutions at the pier everything we achieved together in 2018-19. we consulted widely with industry and the local community to determine their needs and views. To complement our consultation with the cruise lines we undertook a survey of cruise passengers to help us understand their experience at Station Pier and the surrounding area. Rachel Johnson Input from all these groups helped inform our Chief Executive Officer business case for development; this was submitted to the Victorian Government for consideration as the development phase approaches.
Asset management is key to our provision of facilities and services, now and in the future, and we have strengthened our management processes in this area. As part of our asset management, between cruise seasons we continued our maintenance program on the Station Pier structure and both of its terminal buildings.
Our project to install an upgraded Vessel Traffic Services system will ensure we can meet the future marine and navigation needs of shipping lines and the port of Melbourne while delivering enhanced safety, productivity and efficiency.
As part of our commitment to provide a safe workplace for our staff, contractors and visitors we have revised our drug and alcohol policy to require everyone to be drug and alcohol free in our offices and at our work sites. I want to give credit to all our staff for the way they have embraced the new zero tolerance level and participated in the random testing.
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 7 Mission, vision and values
Our mission
We contribute to the enhancement of the economic and social prosperity for the people of Victoria by providing vital infrastructure and services for trade and tourism.
We do this by: • ensuring safe and efficient navigation of vessels • providing essential connectivity to Tasmania • realising Victorian trade and tourism opportunities for seaborne passengers and freight. Our vision
We will be recognised for providing Victoria’s premier gateways for trade and tourism. Our values
• Safety - we lead the way in the provision of safe navigation and services. • Innovation - we deliver excellence in sustainable and practical solutions. • People - we support, respect, and challenge each other – we value diversity. • Customers and communities - we put our customers and communities at the centre of everything we do. • Integrity - always.
8 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report An overview of VPCM
As a result of a Machinery-of-Government change Tourism gateway effective on 1 January 2019, the Department of VPCM manages Station Pier as Victoria’s Economic Development, Jobs, Transport and premier cruise shipping gateway. The pier also Resources (DEDJTR) became the Department accommodates TT-Line’s Spirit of Tasmania of Transport (DoT). DoT assumed the transport passenger ferries and other visiting ships including portfolios of DEDJTR, and the non-transport Australian and international navy vessels. portfolios were transferred to the newly established Department of Jobs, Precincts and Regions. Infrastructure On 1 July 2019, VicRoads and Public Transport VPCM is responsible for maintaining the heritage- Victoria came together with DoT to create a listed Station Pier and the historic Point Lonsdale properly integrated transport department – in step Lighthouse building at the Heads. with other global cities. Trade VPCM is part of Victoria’s integrated transport Station Pier provides a vital trade link with portfolio led by DoT. Tasmania with the Spirit of Tasmania ferries Manner of establishment carrying cargo between Devonport and Melbourne.
Victorian Ports Corporation (Melbourne) (VPCM) is a Victorian Government statutory authority. Established on 1 November 2016, VPCM’s statutory objectives, powers and functions are carried out under the Transport Integration Act 2010 (Vic). Purpose and responsibilities
VPCM is responsible for: • channel management and safe navigation in Melbourne’s port waters • waterside emergency and marine pollution response • the management of Station Pier as Victoria’s premier cruise shipping and interstate passenger ferry facility.
Shipping and navigation VPCM engages a licensed Harbour Master for the port waters of the port of Melbourne in accordance with Chapter 6 of the Marine Safety Act 2010 (Vic). It is also empowered to authorise persons to act as Assistant Harbour Masters, in accordance with section 229 of the Marine Safety Act.
VPCM operates modern vessel traffic services (VTS) at the Port Operations Control Centre in Port Melbourne (Melbourne VTS) and at the Point Lonsdale Lighthouse (Lonsdale VTS). The VTS operates 24-hours a day, seven days a week to support safe navigation services in the port waters of the port of Melbourne.
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 9 Functions, objects and powers b. to manage and develop Station Pier and Transport Integration Act 2010 (Vic) West Finger Pier consistent with the vision statement and the transport system The Transport Integration Act 2010 (Vic) (TIA) objectives. commenced on 1 July 2010. Its purpose was c. if VPCM is a designated State port entity to create a new framework for the provision of (as defined in section 74AA of the Port an integrated and sustainable transport system Management Act 1995), to manage a site in in Victoria consistent with the vision statement the port of Melbourne at which stevedoring contained in section 6 which reads: operations are carried out consistent with the vision statement and the transport system ‘The Parliament recognises the aspirations of objectives. Victorians for an integrated and sustainable transport system that contributes to an inclusive, prosperous and environmentally responsible State.’ Section 141E: Functions The functions of VPCM are: a. to promote and market the port of Melbourne; VPCM is defined as a ‘transport body’ under the b. to establish and manage and to dredge TIA. and maintain channels in port of Melbourne waters; Under section 24 of the TIA, VPCM is required to c. to provide and maintain navigation aids have regard to the ‘transport system objectives’, in connection with navigation in port of ‘decision making principles’ and any applicable Melbourne waters; ‘specified policy principles’ when performing d. to publish information about the depths and its functions or exercising its powers under configurations of channels and berths in port any ‘transport legislation’. Transport legislation of Melbourne waters; applicable to VPCM includes the Port Management e. to provide or maintain systems related to Act 1995 (Vic) and the Marine Safety Act 2010 navigation in port of Melbourne waters (Vic). including systems for managing vessel traffic and vessel communications and scheduling The transport system objectives provide for: and allocating vessels to berths in those • Social and economic inclusion waters; • Economic prosperity f. to generally direct and control, in accordance • Environmental sustainability with the Marine Safety Act 2010, the • Integration of transport and land use movement of vessels in port of Melbourne • Efficiency, coordination and reliability waters; • Safety, health and wellbeing g. to regulate towage services in accordance with the Port Management Act 1995; The decision making principles provide for: h. in relation to Station Pier and West Finger • Integrated decision making Pier: • Triple bottom line assessment • to plan for the development and operation • Equity of the piers; • Transport system user perspective • to provide land, waters and infrastructure • The precautionary principle necessary for the development and • Stakeholder engagement and community operation of the piers; participation • to develop, or enable and control the • Transparency development by others of, the whole or any part of the piers; Section 141D: Object • to manage, or enable and control the The main objects of VPCM are: management by others of, the whole or any a. to ensure that port of Melbourne waters and part of the piers; channels in port of Melbourne waters are • to provide, or enable and control the managed for use on a fair and reasonable provision by others of, services for the basis consistent with the vision statement and operation of the piers; the transport system objectives; and
10 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report • to facilitate the integration of infrastructure and logistics systems in the piers with Significant legislative changes the transport system and other relevant During 2018-19 there were no significant legislative systems outside the piers; changes relevant to VPCM. i. to perform functions in accordance with a direction given by the Minister under section 141H of the Act; Ministerial Direction j. to perform any other functions or duties The following Ministerial Direction was received conferred on VPCM under a Transport during the reporting period: Restructuring Order or by or under the TIA any other Act or any regulations under the TIA or any other Act. Ministerial Directions No. 2 Contracting provisions for public construction – Effective In performing its functions, VPCM must: date: 1 July 2018 a. carry out its functions consistently with State On 1 July 2018, new principles and procedures policies and strategies for the development of were introduced under Ministerial Directions No. the Victorian port and freight networks; and 2 Contracting provisions for public construction b. to the extent that it is possible to do so (Directions No.2). Directions No. 2 replaced consistently with paragraph (a) above, Ministerial Directions No.1 Tendering Provisions operate in a commercially sound manner for Public Construction. Directions No. 2 provides having regard to: a principles-based approach to public construction i. the benefits of increased competition procurement in Victoria and are part of a broader between persons and bodies that provide public governance and accountability framework to services related to the operation of the capture fundamental expectations about how public port of Melbourne; procurement should be conducted. ii. the persons living or working in the immediate neighbourhood of the port of Melbourne; iii. the need to conduct research and collect information relating to the performance of the functions and the operation of the port of Melbourne so as to enable VPCM to meet its primary object; iv. the need to deal efficiently with any complaints relating to the performance of its functions.
Section 152: Powers As a ‘transport corporation’ under the TIA, VPCM has power to do all things that are necessary or convenient to be done for or in connection with, or as incidental to, the achievement of its object and the performance of its functions.
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 11 Operations review
Key achievements
During the reporting period 2018-19: Harbour Master’s Directions • Facilitated 3676 ship visits to Port Phillip Bay. A new edition of Harbour Master’s Directions was • Ensured Victoria’s premier gateway for trade published in March 2019, taking effect from 2 May and tourism remained open for business every 2019. The 11th edition of the publication is available day of the year. for download from the VPCM website, • Successfully managed ongoing trials of larger www.vicports.vic.gov.au. container ships berthing in Melbourne. DUKC upgrade Marine and navigation The Dynamic Under Keel Clearance (DUKC) system has been used to aid safe vessel navigation Vessel traffic services system upgrade in port of Melbourne port waters since 2009. In The program started in 2017-18 to replace and June 2019, a new, upgraded version (Series 5) was upgrade the vessel traffic services (VTS) system introduced for use by ships entering Port Phillip Bay continued during 2018-19. The VTS provides and the port of Melbourne. navigational safety services to vessels calling at Melbourne. The new, web-based user interface affords easier access to the system for masters and pilots while The innovative new system will provide enhanced on board vessels and enables improved system safety for navigation through features such as management by VPCM. provision for expansion, the ability to interface with future innovations as they become available and by Safety taking advantage of features of the advanced radar Safety is a key organisational value and health and system already in place. safety is a priority in everything we do.
Larger container ships We maintain a high level of maritime and workplace To accommodate the increasingly larger container health and safety through continuously reviewing vessels deployed worldwide by shipping lines, risks and risk mitigation strategies. This process is VPCM continued to work with Port of Melbourne to enhanced through good communication and liaison assess opportunities to accommodate these ships with our stakeholders. in Melbourne. Any changes to the risk profile are addressed by revising operational procedures and providing Incremental staged trials for berthing at Swanson appropriate additional treatments to mitigate the and Webb docks were conducted throughout the identified risks. year. The ongoing ‘Steer Clear’ boating safety program The first of the trials was the successful berthing addresses the risk of a vessel interaction between of OOCL Seoul at Webb Dock on 28 August 2018. commercial shipping and small recreational At 325 m length overall (LOA) and with capacity for vessels. Details of this program are given on 8063 TEU (Twenty-foot Equivalent Unit), this was page 15. the largest container ship to visit Melbourne to that date.
The maximum sized vessels to be trialled are as follows: • Swanson Dock – 315 m LOA, beam 42.8 m. • Webb Dock – 336 m LOA, beam 42.8 m.
Larger ships will give Victorian exporters and primary producers access to improved efficiency for overseas markets through economy of scale.
12 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Naval visits The Tasmanian Government announced in 2017 Station Pier hosted three visits by Royal Australian that the current Spirit of Tasmania ferries will be Navy (RAN) ships during the year. replaced by new vessels in 2021.
HMAS Choules, an amphibious Landing Ship Dock, VPCM has been working closely with TT-Line to made two visits, berthing on 28 September 2018 for design the infrastructure and services necessary to a four day visit and again on 1 February 2019 for a accommodate the new vessels. three day visit. Planning for passenger growth HMAS Warramunga, an Anzac class frigate, arrived on 19 October for a three day visit. The Victorian Government allocated $5.8 million in the 2018-19 Budget for VPCM to undertake both During the two visits in spring the RAN conducted planning and cruise-related capital works to grow free public open days on their ships, attracting large the domestic ferry and cruise ship operations in crowds. Victoria. Cruise shipping As part of the funding agreement, $3.15 million of the $5.8 million has been allocated for capital Station Pier welcomed 107 cruise vessels during works to upgrade existing infrastructure at Station the 2018-19 cruise season with a total of 320,927 Pier. Some works were delivered over the reporting passengers and crew using the pier. period and more will be delivered over the 2019-20 financial year. A record equalling 50 of these visits were turnarounds in which all, or some, of the Employee relations passengers disembarked and a new complement embarked. Policy Review Committee VPCM is working closely with employees through Other season highlights included four vessels its Policy Review Committee to strengthen homeporting for the season – Queen Elizabeth, governance and employment arrangements. The Pacific Jewel, Golden Princess and Carnival committee, an initiative of the 2017 enterprise Legend – 16 overnight stays and five ships made agreement, has a membership of employee and their first visit to Melbourne. management representatives.
The Melbourne Cup weekend in November once Drug and Alcohol Policy again saw a full house at Station Pier with all three VPCM is committed to providing and maintaining cruise ship berths in use. A fourth ship berthed at a safe and healthy work environment for all Victoria Dock for the Cup, adding 4952 passengers employees, contractors, visitors and the general and crew. public. For this reason the revised Drug and Alcohol Policy now requires all staff and those working for, To help improve the overall customer experience for or on, VPCM sites to abide by a zero tolerance drug cruise passengers, VPCM began work after the end and alcohol policy. of the 2018-19 season to enhance the appearance of the two terminal buildings on the pier. For details To monitor compliance, random drug and alcohol about these works, see Infrastructure maintenance testing of all employees is conducted and will be on the following page. extended to include contractors and visitors during the latter part of 2019. Passenger ferries
The TT-Line ferry service between Station Pier and Devonport in Tasmania provided a daily service throughout the year with double sailings during school holiday periods and the summer months.
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 13 Family violence leave provision Restoration In line with our organisational values, VPCM is The heritage-listed East Finger Pier Kiosk is to be committed to building and maintaining a culture restored to its original configuration. that supports respectful relationships and ensuring employees who may be experiencing family Built in 1927, the kiosk has had a variety of uses violence can feel safe and supported in continuing over the years and a number of extensions have employment. Family violence leave is available been added to the building. In June 2019, works to support employees who may be experiencing began to demolish those non-heritage extensions to personal difficulties. leave just the original structure.
Learning and development After assessment, restoration works will be carried out to preserve it for the future. Employees and management participated in learning and development training throughout the year which included freedom of information, privacy, Asset management mental health awareness, diversity and inclusion, and drug and alcohol awareness. VPCM is responsible for a diverse set of assets in many different and challenging locations on land Corporate values and water. Employees participated in a series of workshops to The assets range from the heritage-listed Station identify and define expected behaviours to ensure Pier to the advanced systems used to ensure safe VPCM upholds each of its corporate values. navigation in Port Phillip Bay. They are located in and around the bay, along the southern Victorian Infrastructure coast and in the waters of Bass Strait.
Maintenance In 2017-18, VPCM started a four-year asset The Station Pier infrastructure maintenance carried management improvement plan. In the second out between the 2017-18 and 2018-19 cruise year of the plan (2018-19) with a solid foundation seasons was completed on time. Activities included established and the formal training of relevant the ongoing pile rehabilitation project and routine employees, VPCM is aiming to achieve full maintenance and repairs to the pier structure. compliance with the Victorian Government’s Asset Management Accountability Framework as well as In April 2019, a program of works was started with the Asset Management ISO 55000 standard. on the two terminal buildings on the pier. Works include painting the exterior of each of the buildings and balcony rehabilitation which will both enhance the appearance and preserve the structure for ongoing use.
The next phase of the pile rehabilitation project for Station Pier and West Finger Pier started in May 2019. With around 7000 piles supporting the Station Pier structure, maintenance is an ongoing project.
All maintenance works on the heritage-listed Station Pier structures are carried out in close consultation with Heritage Victoria and, where necessary, with approval under the Marine and Coastal Act 2018 (Vic).
14 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Pricing
As a designated State Port Entity under section Community Advisory Group 74AB of the Port Management Act 1995 (Vic), An outcome of the consultation was the VPCM may set fees and charges for its services. establishment of an ongoing Community Advisory These are set out in the Reference Tariff Schedule Group. The group meets monthly and consists (RTS) and reviewed annually. of members representing a wide range of local interests including residents, traders, schools, Reference Tariff Schedule 2019 special interest groups and representatives from A new RTS detailing fees and charges effective the City of Port Phillip. from 1 July 2019 was issued in June 2019 to give industry time to prepare for the changes. ‘Steer Clear’ boating safety campaign We continued our ‘Steer Clear’ boating safety Fee changes have been kept to a minimum with an campaign during the reporting period which aims increase of 1.8% across the board, reflecting the to reduce the risk of vessel interactions between Australian Consumer Price Index All Groups CPI commercial shipping and small recreational vessels weighted average of eight capital cities increase for in the port waters of the port of Melbourne. the year ending the December Quarter 2018. The Steer Clear operations saw our Transport The increase was approved by the Governor-in- Safety Officers conducting on-water patrols to Council and gazetted on 14 May 2019. directly advise and educate boat operators, who were out on the water, about the campaign The Reference Tariff Schedule 2019 is available on messages. the VPCM website, www.vicports.vic.gov.au. In addition, senior VPCM staff attended meetings of Community fishing, boating and yacht clubs around Port Phillip Bay to present safety and Steer Clear information Melbourne is a port city with urban communities to educate club members. bordering VPCM’s operations areas and landside links. Recognising the amenity expectations of Queenscliffe Maritime Museum neighbouring communities, we liaise and regularly VPCM supports the Queenscliffe Maritime meet with residents, businesses and local Museum by enabling it to conduct paid public government in the Port Melbourne area. tours of the Point Lonsdale Lighthouse, hosted by knowledgeable Museum volunteers. These tours Community consultation are available from 9.30 am to 1 pm every Sunday In late 2018, VPCM conducted wide ranging and by appointment, for groups, on other days. community consultation about future development of the Station Pier precinct in order to understand Waterfront Welcomers what matters most to the local community. City of Port Phillip community volunteers continued their meet and greet service for cruise ship More than 400 community members provided input passengers, giving a warm welcome to visitors at on planning, access, traffic management, retail and Station Pier during the cruise season. tourism activities. City of Melbourne volunteers Community input was captured via an online survey, community pop-up stands and consultation The long-running cruise passenger information workshops. A report of the findings from this work is service on Station Pier is provided by City of available on the VPCM website, Melbourne volunteers who help with advice www.vicports.vic.gov.au. about tourism events and locations in the greater Melbourne area. It is the longest running such service in Australasia having started in 1997.
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 15 Environment Emergency response
VPCM is again demonstrating its commitment VPCM provides operational capability for marine to the wellbeing of the natural environment by pollution and casualty management for the area continuing its support of The Nature Conservancy from Cape Schanck to Cape Otway and for Port Australia in its work to re-establish shellfish reefs in Phillip Bay. Port Phillip Bay. Staff continue to participate in state and national This year’s donation of $25,000 will be used to emergency response exercises and workshops establish a bay-wide assessment for oyster reef in the areas of marine pollution and casualty restoration, gathering information on water quality, response. During the reporting period, VPCM marine habitats, oyster lifecycles, recreational use, staff who are members of the state response cultural sites, shipping, boating and fishing. The team attended the State Maritime Emergencies data will be critical in helping determine the most Workshop and the Australian Maritime Safety suitable locations for future oyster reef restoration. Authority Complex Maritime Emergencies Workshop. The reefs are replacing those that have been lost as a result of human activities in the bay. The Safety and Environment reintroduction of oysters and other shellfish which purify water enhances the overall health of the bay. Management Plan
VPCM operated under its Safety and Environment Management Plan (SEMP) which was independently audited in 2015-16 and valid for three years. The plan is prepared in accordance with Ministerial Guidelines Port Safety and Environment Management Plans (November 2012), as required by section 91G of the Port Management Act 1995 (Vic).
This plan is subject to internal audit on an annual basis and a report of the findings and safety metrics is presented to the Minister for Ports and Freight.
This year the SEMP was externally audited by accredited safety and environment auditors as required triennially under the Port Management Act. This audit report found that the VPCM SEMP was in full conformance with all of the requirements of the Port Management Act and Ministerial Guidelines.
16 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Financial information summary
Five-year financial summary
The table below shows VPCM’s five-year financial summary.
(iv) (i) (ii) (ii) 2019 2018 2017 2016 2015 $m $m $m $m $m
Income from transactions 36.9 34.1 146.9 394.2 381.7
Expenses from transactions 36.2 31.6 101.0 266.8 330.4
Operating profit after tax 0.6 1.7 30.4 95.8 45.9
Net result for the period - 4.8 4.1 106.8 4,225.5 1,046.2
Net cash flow from operating activities 7.2 16.5 21.8 258.6 105.6
(iii) Total assets 159.0 150.9 145.7 10,225.0 4,245.9
(iii) Total liabilities 51.0 39.5 42.6 110.9 880.5
(i) In accordance with directions given by the Premier to the Port Corporation pursuant to section 20(2) of the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic), the financial summary represents consolidated financial information for: Port of Melbourne Operations Pty Ltd (Port Manager) for the period 1 July 2016 - 31 October 2016, Melbourne Port Lessor Pty Ltd (Port Lessor) for the period 1 July 2016 - 31 October 2016, Port of Melbourne Corporation (renamed Victorian Ports Corporation (Melbourne) on 1 November 2016) for the period 1 July 2016 - 30 June 2017. (ii) The financial summary represents consolidated financial information for Port of Melbourne Corporation. (iii) A minor change to the 2018 total assets and total liabilities relates to the reclassification of the Goods and Services Tax (GST). GST was previously disclosed as a statutory receivable and a statutory payable. GST has been netted off in 2019 with a restatement of the balance sheet in 2018. (iv) The 2018 financial summary has been restated to correct the understatement of the provision for income tax and overstatement of employee benefit reserve.
Overview Financial performance – The financial statements presented in this report are prepared in accordance with the Financial operating statement Management Act 1994 (Vic) and applicable VPCM’s operating profit after tax for 2018-19 Australian accounting standards. was $0.6 million, a $1.1 million or 65% decrease against the previous year total of $1.7 million. VPCM’s scope of business activities was consistent with the year immediately prior. It was reduced from The net result for the period is -$4.8 million two years prior as a result of the Port of Melbourne compared to $4.1 million in the prior year. This is Lease Transaction (PLT). The financial statements due to a negative movement in employee benefit for the year ended 30 June 2017 represent the four reserves of $6.7 million based on the months of the consolidated entity known as the Port re-measurement of the net defined benefit liability of Melbourne Corporation Group and eight months for the Port of Melbourne Superannuation Fund. operations of the stand-alone entity, VPCM. VPCM’s income tax expense decreased to The 2017-18 Annual Report includes VPCM’s $0.1 million from $0.8 million due primarily to first full year financial statements as an individual a lower profit before income tax generated reporting entity. in 2018-19. VPCM delivered a profit after tax of $0.6 million for the year ended 30 June 2019.
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 17
Operating revenue for 2018-19 totalled $36.9 million compared to $34.1 million in the Balance sheet previous year. The increase of $2.8 million is due The balance sheet of VPCM as at 30 June 2019 primarily from the government funding for the reports net assets of $108.0 million Station Pier redevelopment project and an (2018: $111.4 million). increase in the Site Occupation Charge. • Total assets increased by $8.0 million over the Operating expenses for 2018-19 totalled year to $159.0 million. This is due to the following: $36.2 million compared to $31.6 million in the – Cash and cash equivalents have increased previous year. The increase of $4.6 million is by $4.1 million due primarily to the funding due mainly to higher contractors and consultant received for the Station Pier Transition expenses of $2.0 million, a once-off cost for Project and introduction of the Site surrender of a lease of $0.8 million, increase in Occupation Charge. employee benefit expenses of $0.8 million and – Deferred tax assets have increased increase in depreciation and amortisation by $3.2 million due to the reduction in expenses of $0.6 million. the Commonwealth Government Bond Discount Rate (“discount rate”) from 3% in Finance costs 2017-18 to 1.8% in 2018-19. This discount rate is used to value the Port of Melbourne Cash reserves increased by $4.1 million to Superannuation Fund net defined benefit $24.0 million compared to $19.9 million in the liability. previous year. There were no borrowings during • Total liabilities increased by $11.5 million over the year. the year to $51.0 million. This is due to the Port of Melbourne Superannuation Fund net defined Capital expenditure liability increasing $10 million and the amount payable by VPCM to creditors at year-end VPCM’s capital expenditure was $6.2 million increasing $2.5 million over the prior year. and included the Station Pier Piles Rehabilitation project, Vessel Traffic Services Equipment Upgrade Statements of Changes in and Station Pier Balcony Deck Refurbishment. Equity
Cash flow The statement of changes in equity records a decrease of $3.4 million to $108.0 million. The Net cash inflows from operating activities were movement in this statement reflects the $7.2 million compared with $16.5 million in re-measurement of the net defined benefit liability 2017-18. This decrease of $9.3 million was due for the Port of Melbourne Superannuation Fund primarily to the income tax refund received in ($6.7 million), increase in reserves due to the 2017-18 of $13.9 million offset with an increase capital contribution from Department of Transport in receipts from customers of $2.5 million and a for the Station Pier Project $1.3 million, revaluation decrease in payments to suppliers of $2.9 million of buildings $1.3 million and profit for the year compared to the prior year. $0.6 million.
Cash outflows from investing activities were $4.6 million compared to $7.5 million in 2017-18.
Cash inflows from financing activities were $1.3 million compared to $5.0 million in 2017-18 as a result of a capital contribution from the Department of Transport.
18 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report
Significant changes in financial position
There were no significant matters which changed VPCM’s financial position during the reporting period.
Significant changes or factors affecting performance
There were no significant changes or factors which affected VPCM’s performance during the reporting period.
Capital projects
In 2018–19 VPCM did not have any capital projects with a total estimated investment of $10 million or more.
Subsequent events
There have been no events subsequent to the balance date at 30 June 2019 which may significantly affect operations in subsequent reporting periods.
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 19 20 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Section 2: Governance and organisational structure
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 21 Corporate governance
Board of Management
The VPCM Board of Management is established under the Transport Integration Act 2010 (Vic). The Board consists of not less than three and not more than nine members, each of whom is appointed by the Governor in Council. It is the duty of the Board to act consistently with the functions and objectives of VPCM, act as a sounding base for good corporate governance and to act honestly, fairly and diligently in accordance with the applicable legislation. Management of the operations and administration is delegated by the Board to the Chief Executive Officer.
VPCM reported to the following Ministers during the reporting period: • The Hon. Melissa Horne MP, Minister for Ports and Freight • The Hon. Tim Pallas MP, Treasurer
The primary responsibility of the VPCM Board is to ensure that the port of Melbourne waters and channels in port of Melbourne waters are managed for use on a fair and reasonable basis and to manage and develop Station Pier and West Finger Pier consistent with the vision statement and transport system objectives as set out in the Transport Integration Act 2010 (Vic) (TIA).
With the aim of achieving best practice, the Board has developed and endorsed a set of governance principles which are in line with its responsibilities under the TIA. As a result, the primary focus of the Board is on: • setting the strategic direction of VPCM including the approval and oversight of the corporate plan, annual operating and capital budgets, risk management framework and policy and strategy, corporate policies and all delegations of authority (including financial delegations) made pursuant to section 170 of the TIA • having regard to the transport system objectives, the decision-making principles and any relevant statement of policy principles in carrying out its functions and exercising its powers • ensuring accountabilities to the Minister for Ports and Freight and the Treasurer of Victoria under the legislation are understood by VPCM • approving capital projects where the total project value exceeds $1 million (or any other capital projects of strategic significance) • monitoring compliance with legislative and regulatory requirements, ethical standards and external commitments • monitoring VPCM’s operational performance • overseeing the adequacy of VPCM’s financial controls • approving and overseeing VPCM’s operating and capital budgets • appointing and reviewing the performance of the Chief Executive Officer • promoting safety as a matter of priority having regard to the safety and security of the port of Melbourne.
Conflict of interest The Directors are governed in respect of conflicts of interest by the relevant provisions of the Public Administration Act 2004 (Vic) and binding codes issued by the Victorian Public Sector Commission. They are required to declare any pecuniary interest in any matter being considered by the Board or in any other matter in which VPCM is concerned. The Board is provided at each of its meetings a consolidated list of registered interests disclosed by Directors.
22 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Directors
James Cain, Chairman Janice van Reyk, Deputy Chair
James Cain was appointed Chairman of Victorian Janice van Reyk was appointed Deputy Chair of Ports Corporation (Melbourne) on 2 November Victorian Ports Corporation (Melbourne) on 2016 and reappointed on 1 February 2018. 2 November 2016 and reappointed on 1 February 2018. James was Deputy Chair of Port of Melbourne Corporation from July 2010 until the medium-term Janice was a Director of Port of Melbourne lease of the port of Melbourne became effective in Corporation from 2011 until the medium-term November 2016. lease of the port of Melbourne became effective in November 2016. He has an extensive background in project development management in property and She is an experienced non-executive Director with infrastructure, in both the public and private sectors. broad based business skills gained as a senior executive in listed industrial companies. James’ professional experience includes 12 years with property and construction company Lend She is a non-executive Director of Lochard Lease in various roles including General Manager Energy Group, Chair of its Audit Committee; for Victoria, Tasmania and South Australia, and five a non-executive Director of Australian Naval years with the Victorian Government as Executive Infrastructure, Chair of its Audit & Risk Committee; Director of Major Projects Victoria, the Victorian a non-executive Director of Citywide, Chair of its Government’s major capital works agency. Safety Risk and Environment Committee and a member of its Audit and Finance Committee; a non-executive Director of Tennis Australia, Chair of Since 2006, James has developed his interests its Audit & Risk Committee; a trustee of Melbourne in commercial, infrastructure and property areas & Olympic Parks Trust; a member of the Northern through his own consulting business. Territory Environment Protection Authority; and a member of the VicRoads Risk Audit & Governance James was Chair of the Industry Superannuation Committee. Property Trust (ISPT) between 2009 and April 2018. He was also Chair of Port of Hastings Corporation Janice has an extensive professional background until September 2010 and was a Director of in major capital projects, infrastructure, finance Victorian Rail Track (VicTrack) between April 2008 and capital markets, mergers and acquisitions, and July 2010. commercial negotiations, risk management, environmental management and stakeholder Board Committee membership: engagement. • Chair, Remuneration and People Committee • Risk Committee Janice also holds a Master of Commerce, a Master • Audit and Finance Committee of Environment (Hons), Bachelor of Laws (Hons) and a Bachelor of Arts (Economics). Janice is a Fellow of the Australian Institute of Company Directors, a CPA and a Leadership Victoria Fellow.
Board Committee membership: • Chair, Audit and Finance Committee • Risk Committee
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 23
Deb Beale Peter Tuohey
Deb Beale was appointed a Director of Victorian Peter Tuohey was appointed a Director of Victorian Ports Corporation (Melbourne) on 2 November Ports Corporation (Melbourne) on 2 November 2016 and reappointed on 1 February 2018. 2016 and reappointed on 1 February 2018.
Deb’s broad experience includes the areas of Peter is a fifth generation grain, wool and prime finance, corporate governance, public relations and lamb producer whose experience in freight and risk management. She has served, and continues logistics has seen him appointed to a number of to serve, on a number of government, public, advisory roles. private and not-for-profit boards. Peter is Chair of the Victorian Government’s Grains She began her working career in the finance Logistics Taskforce, Chairman of Melbourne Market industry where she was employed by Merrill Lynch Authority, Chairman of V/Line Rail Freight Advisory for over a decade. She then moved to Ernst & Council, a member of the Ministerial Freight Young where she specialised in risk management, Advisory Council and a member of the Victorian government relations and governance. Water Board Selection Panel.
Deb has a Bachelor of Commerce from the At the Victorian Farmers Federation (VFF) he University of Melbourne, a Graduate Diploma from served as President from 2012 to 2016 and the Securities Institute of Australia and a Masters of Vice President from 2009 to 2012. He was also Business Administration from Melbourne Business Chair of the VFF’s Farm Business and Regional School. Development Committee from 2010 to 2013. At the national level, Peter was a Board Director of the Board Committee membership: National Farmers Federation from 2012 to 2016 • Chair, Risk Committee and served on its Economics Committee. • Remuneration and People Committee Peter was also a member of the Victorian Freight and Logistics Council from 2009 to 2012.
Board Committee membership: • Audit and Finance Committee • Remuneration and People Committee
24 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Board and Committee meetings
Audit and Finance Committee membership and roles
The Audit and Finance Committee consisted of the following members in 2018-19: Ms Janice van Reyk, Chairperson (independent) Mr Peter Tuohey (independent) Mr James Cain (ex officio member)
The responsibilities of the Audit and Finance Committee are set out in Standing Direction 3.2.1.1. The key responsibilities of the committee are to: • review and report independently to the board on the annual report and all other financial information published by VPCM • assist the board in reviewing the effectiveness of VPCM’s internal control environment covering: – effectiveness and efficiency of operations – reliability of financial reporting – compliance with applicable laws and regulations • determine the scope of the internal audit function and ensure its resources are adequate and used effectively, including coordination with the external auditors • maintain effective communication with external auditors • consider recommendations made by internal and external auditors and review the implementation of actions to resolve issues raised. Remuneration and People Committee
The Remuneration and People Committee assists the Board to fulfil its governance responsibilities by ensuring that VPCM has executive remuneration policies guidelines and practices that are consistent with government policy and by reviewing policies and processes relating to the development of VPCM’s people and its culture. Risk Committee
The primary role of the Risk Committee is to oversee the effective operation of the risk management framework to assist the Board in fulfilling its governance responsibilities. The committee also evaluates the effectiveness of risk identification and management and ensures compliance with internal guidelines and external requirements. Attendance at Board and Board Committee meetings
Number attended/eligible to attend
Chairman / Director Board Committee Audit and Finance Remuneration and Risk People J Cain (Chairman) 10/10 4/4 2/2 4/4
J van Reyk (Deputy Chair) 9/10 4/4 - 4/4
D Beale 10/10 - 2/2 4/4
P Tuohey 10/10 4/4 2/2 -
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 25 Organisational structure
Board
Audit and Finance Remuneration and Risk Committee Committee People Committee
Chief Executive Officer
Finance and Corporate Business, Information Marine and Navigation Infrastructure Support and Strategy
Station Pier / Marine and Navigation Finance Assets and Infrastructure Cruise Shipping
Business Resilience Legal Information Technology Major Projects
Health and Safety Board Secretariat Property Management
Security People and Culture Strategy and Risk
Corporate Affairs Contract Management
Business Support
26 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Executive Management Team
Rachel Johnson, Chief Executive Officer
Rachel Johnson took up the role of inaugural Chief Executive Officer of VPCM in November 2016.
Rachel has wide ranging experience of Australian freight and logistics businesses and the development and operation of transport infrastructure in both the public and private sectors. She has held senior positions in New South Wales government bodies as well as in a number of high profile private sector companies. Captain Roy Stanbrook, Harbour Master/ Executive General Manager – Marine and Navigation
Roy is the Harbour Master of the port of Melbourne and leads the Marine and Navigation division. His division is responsible for safe navigation in the port waters of the port of Melbourne through Vessel Traffic Services as well as emergency management, health and safety, and security. Jeff Bazelmans, Executive General Manager – Business, Information and Strategy
Jeff leads a diverse division that includes the management of Victoria’s premier cruise shipping facility at Station Pier, cruise tourism, tenant management, environment, information technology services, business strategy and risk. Yin Chen, Acting Executive General Manager – Finance and Corporate Support
Yin leads the division responsible for finance and the corporate support areas of Board secretariat, legal counsel, corporate affairs, human resources and business support. Executive General Manager – Infrastructure
The Assets and Infrastructure department and the Major Projects department reported directly to the Chief Executive Officer during the reporting period.
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 27 OH&S and employment principles
Occupational health and safety
VPCM is committed to a safety culture that ensures the health, welfare and safety of its workers. This commitment extends to ensuring that VPCM operations do not place the wider port community at unnecessary risk of injury or illness.
As an integral part of advancing the safety culture, VPCM takes a proactive approach to managing its occupational health and safety responsibilities and delivers initiatives and programs designed to prevent safety incidents and injuries.
Some of the key health and safety initiatives delivered during the period include:
• continuing support of the Port of Melbourne Health Safety Environment Consultative Forum which brings together the safety teams from all organisations working in the port • surveying all users of the port’s dangerous goods system, DG Hub. This survey was completed by more than 15% of all registered users with generally positive feedback • Port Authorised Officers from the Port Safety Team conducting 362 audits to monitor hazardous port activities across the port as well as reviewing work practices on VPCM-operated sites • implementing a revised drug and alcohol policy which includes random staff drug and alcohol testing • conducting educational training sessions for staff on renewed employee assistance program services, diversity and mental health awareness.
VPCM is working to enhance its positive safety culture. To help achieve this, it has a key strategic objective to increase the reporting of hazards, near misses and incidents. During 2018-19 employees and contractors were encouraged to be vigilant and report every hazard or incident no matter how small. As a result, there was a marked increase in the number of reports compared with previous years with a total of two injuries and 30 hazards.
There were no notifiable injuries nor lost time injuries to VPCM staff during 2018-19.
Workplace Health and Safety Representatives give staff a voice through the organisation’s OHS Committee which meets throughout the year.
Performance against OHS management measures
Measure KPI 2018-19 2017-18 2016-17 *
Number of hazards/incidents 32 0 2.0 Incidents Rate per 100 FTE 0 0 3.6
Number of lost time standard claims 0 0 0.0
Claims Rate per 100 FTE 0 0 0.0
Average cost per standard claim 0 0 0.0
Fatalities Fatality claims 0 0 0.0
FTE = Full-time equivalent staff
* Due to the Victorian Government’s lease of the commercial operations of the port of Melbourne, VPCM began operations on 1 November 2016. Therefore, the 2016-17 reporting period included four months of Port of Melbourne Corporation operations.
28 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Employment and conduct principles
VPCM is committed to applying merit and equity principles when appointing staff. The selection processes ensure that applicants are assessed and evaluated fairly and equitably on the basis of the key selection criteria and other accountabilities without discrimination. Employees have been correctly classified in workforce data collections.
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 29 30 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Section 3: Workforce data
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 31 Our people
Public sector values and employment principles
We aspire to be an effective, sustainable, diverse and fair organisation, with a culture that creates high levels of employee engagement and performance.
Our strategic intent is to: • develop and maintain a contemporary organisation design and fit-for-purpose people policies, procedures and enabling systems • drive engaged leadership that motivates and inspires employees • develop a strong employee value proposition that attracts and retains people with the right capabilities • create and sustain market-leading capabilities in the workforce through workforce planning, professional development and succession planning • build a culture of innovation, growth, engagement, high performance, inclusivity and wellbeing.
These objectives align with our corporate plan objectives which are to provide an effective workplace and port community organisation and to deliver value to customers and stakeholders through efficient internal systems, processes and innovation. Comparative workforce data Annualised total salary, by $20,000 bands, for executives
Income band (salary) Executives < $160,000 0 $160,000 - $179,999 3 $180,000 - $199,999 0 $200,000 - $219,999 6 $220,000 - $239,999 1 $240,000 - $259,999 1 $260,000 - $279,999 0 $280,000 - $299,999 1 $300,000 - $319,999 0 $320,000 - $339,999 1 Total 13
32 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Details of employment levels in 2018 and 2019 The following table discloses the headcount and full-time staff equivalent (FTE) of all VPCM employees, employed in the last full pay period in June of the current reporting period, and in the last full pay period in the previous reporting period.
June 2019 All employees Ongoing Fixed term and casual Number FTE Full-time Part-time FTE Number FTE (headcount) (headcount) (headcount) (headcount) Gender Male 48 47.2 28 0 28.0 20 19.2 Female 18 16.6 3 1 3.8 14 12.8 Age 15-24 0 0.0 0 0 0.0 0 0.0
data 25-34 3 2.0 0 0 0.0 3 2.0 35-44 21 20.2 8 1 8.8 12 11.4 Demographic 45-54 12 12.0 8 0 8.0 4 4.0 55-64 28 27.6 14 0 14.0 14 13.6 65+ 2 2.0 1 0 1.0 1 1.0 EBA employees 53 51.4 31 1 31.8 21 19.6 Senior employees
data Executives 13 12.4 0 0 0.0 13 12.4 Total employees 66 63.8 31 1 31.8 34 32.0 Classification
June 2018 All employees Ongoing Fixed term and casual Number FTE Full-time Part-time FTE Number FTE (headcount) (headcount) (headcount) (headcount) Gender Male 45 42.8 28 0 28 17 14.8 Female 14 13.8 4 0 4 10 9.8 Age 15-24 0 0.0 0 0 0 0 0.0
data 25-34 3 3.0 0 0 0 3 3.0 35-44 18 17.8 10 0 10 8 7.8 Demographic 45-54 13 12.1 8 0 8 5 4.1 55-64 24 22.7 13 0 13 11 9.7 65+ 1 1.0 1 0 1 0 0.0 EBA employees 47 45.2 32 0 32 15 13.2 Senior employees
data Executives 12 11.4 0 0 0 12 11.4 Total employees 59 56.6 32 0 32 27 24.6 Classification
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 33 34 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Section 4: Other disclosures
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 35 Local jobs first The Local Jobs First Act 2003 (Vic) introduced in August 2018 brings together the Victorian Industry Participation Policy (VIPP) and Major Project Skills Guarantee (MPSG) policy which were previously administered separately.
Public sector bodies are required to apply the Local Jobs First policy in all projects valued at $3 million or more in metropolitan Melbourne or for statewide projects, or $1 million or more for projects in regional Victoria.
MPSG applies to all construction projects valued at $20 million or more. The MPSG guidelines and VIPP guidelines will continue to apply to MPSG applicable and VIPP applicable projects respectively where contracts have been entered before 15 August 2018.
Project commenced – Local Jobs First Standard During 2018-19, VPCM commenced three Local Jobs First Standard projects totalling $15.47 million: • The projects were located in metropolitan Melbourne. • A Local Industry Development Plan (LIDP) was required for each project. • MPSG did not apply to these projects.
The outcomes expected from the implementation of the Local Jobs First policy to these projects where information was provided, are as follows: • A commitment to 89.56 per cent local content was made • Twenty-eight jobs (annualised employee equivalent (AEE)) were committed, including the creation of six new jobs and the retention of 22 existing jobs (AEE) • Eighteen positions for new apprentices, trainees and cadets were committed, including the creation of seven new apprenticeships/traineeships/cadets and the retention of 11 apprenticeships/traineeships/ cadets.
Disclosure of government advertising expenditure In 2018-19 VPCM did not undertake any advertising campaigns with a total media spend of $100,000 or greater (exclusive of GST).
36 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Consultancy expenditure Details of consultancies under $10,000 During the period 1 July 2018 to 30 June 2019, eight consultants were engaged where the value of the consultancy was less than $10,000. The total expenditure on these eight consultancies was $56,000 excluding GST.
Details of consultancies over $10,000 During the period 1 July 2018 to 30 June 2019, 19 consultants were engaged where the value of the consultancy was greater than $10,000.
The total value of consultancies for the 12 months ended 30 June 2019 was $2.6 million excluding GST.
Details of individual consultancies can be found on VPCM’s website at www.vicports.vic.gov.au.
Information and Communication Technology (ICT) expenditure For the 2018-19 reporting period, VPCM had a total ICT expenditure of $3.3 million, with the details shown below.
All operational ICT ICT expenditure related to projects to create or enhance ICT capabilities expenditure Business As Usual Non-Business as Usual (non-BAU) Operational Capital (BAU) ICT expenditure ICT expenditure expenditure expenditure Total = OPEX + CAPEX (OPEX) (CAPEX)
$3.1 million $0.2 million Nil $0.2 million
Note: • ICT expenditure refers to VPCM’s costs in providing business enabling ICT services within the current reporting period. It comprises Business As Usual (BAU) ICT expenditure and Non-Business As Usual (Non-BAU) ICT expenditure. • Non-BAU ICT expenditure relates to extending or enhancing VPCM’s current ICT capabilities. • BAU ICT expenditure is all remaining ICT expenditure which primarily relates to ongoing activities to operate and maintain the current ICT capability.
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 37 Disclosure of major contracts VPCM did not award any major contracts (valued at $10 million or more) during 2018-19.
Freedom of information The Freedom of Information Act 1982 (Vic) (FOI Act) enables members of the public to obtain information held by VPCM.
Making a request FOI requests to VPCM should be addressed to:
Freedom of Information Officer Victorian Ports Corporation (Melbourne) GPO Box 261 Melbourne VIC 3001
FOI requests can also be lodged electronically to [email protected].
An application fee of $28.90 applies. Access charges may also be payable if the document pool is large and the search for material is time consuming.
When making an FOI request, applicants should ensure requests are in writing and clearly identify what types of material/documents are being sought.
FOI statistics/timelines During 2018-19, VPCM received four FOI requests. Three requests came directly from the public and one request was received from a commercial entity.
VPCM made two FOI decisions during the 12 months ending 30 June 2019. One FOI decision was made within the statutory 30-day time period and the other decision was made after an extension of time to allow third party consultation. The average time taken to finalise a decision was 19.5 days. One of these decisions is currently under review with the Office of the Victorian Information Commissioner (OVIC).
In addition, one request was withdrawn, and one request remains outstanding and awaiting the applicant to consult with VPCM in respect of their request.
There is also one decision that was made in the period 2017-18, that remains under review with OVIC.
Further information Further information regarding the operation and scope of FOI can be found in the FOI Act, the regulations made under the FOI Act and from the Office of the Victorian Information Commissioner (OVIC): www.ovic.vic.gov.au.
Further information regarding the process for making an FOI request to VPCM can be found on VPCM’s website: www.vicports.vic.gov.au.
38 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Compliance with building and maintenance provisions of the Building Act 1993 (Vic) Buildings were maintained in accordance with relevant building and maintenance provisions in the Building Act 1993 (Vic) and Building Regulations 2018.
To ensure buildings conform with building standards, VPCM retains experienced building maintenance contractors who are required to be up to date with all relevant standards.
VPCM uses an asset management system for recording maintenance requests, essential service inspections, reporting, scheduling, and rectification and maintenance works on existing buildings.
During the reporting period the following applied to buildings owned by VPCM: • One major works project (greater than $50,000) was completed. This project was started in the previous year, 2017-18. • One major works project (greater than $50,000), was started. • Two building permits and one certificate of final inspection were issued. • No emergency orders or building orders were issued. • No buildings were brought into conformity with building standards.
Competitive Neutrality Policy Competitive neutrality requires government businesses to ensure where services compete, or potentially compete with the private sector, any advantage arising solely from their government ownership be removed if it is not in the public interest. Government businesses are required to cost and price these services as if they were privately owned. Competitive neutrality policy supports fair competition between public and private businesses and provides government businesses with a tool to enhance decisions on resource allocation. This policy does not override other policy objectives of government and focuses on efficiency in the provision of service.
VPCM continues to comply with the requirement of the Competitive Neutrality Policy and conformance with the instructions for public construction procurement.
Compliance with the Protected Disclosure Act 2012 (Vic) The purpose of the Protected Disclosure Act 2012 (Vic) (PDA) is to encourage and facilitate disclosure of improper conduct by public officers and public bodies and to provide protection for persons who make those disclosures.
VPCM is a public body and disclosures under the PDA can therefore be made about VPCM or VPCM’s members, officers or employees.
Reporting procedures Disclosures of improper conduct or detrimental action by VPCM or any of its members, officers or employees must be made directly to the Independent Broad-based Anti-corruption Commission (IBAC) at:
Independent Broad-based Anti-corruption Commission Level 1, North Tower, 459 Collins Street Melbourne VIC 3000
Tel: 1300 735 135 Internet: www.ibac.vic.gov.au Email: See the IBAC website for the secure email disclosure process which also provides for anonymous disclosures.
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 39 Further information VPCM’s Protected Disclosure Procedures which outline the system for reporting disclosures of improper conduct or detrimental action by VPCM or any of its members, employees or officers are available on VPCM’s website: www.vicports.vic.gov.au.
Statement of availability of other information Additional information available on request The following information relating to VPCM, relevant to the period 1 July 2018 to 30 June 2019, has been prepared and is available to the Ministers, Members of Parliament and the public on request: • A statement that declarations of pecuniary interests have been duly completed by all relevant officers. • Details of publications produced by VPCM about VPCM and how these can be obtained. • Details of changes in prices, fees, charges, rates and levies charged by VPCM. • Details of any major external reviews carried out on VPCM. • Details of major research and development activities undertaken by VPCM. • Details of overseas visits undertaken including a summary of the objectives and outcomes of each visit. • Details of major promotional, public relations and marketing activities undertaken by VPCM to develop community awareness of the organisation and its services. • A general statement on industrial relations within VPCM and details of time lost through industrial accidents and disputes. • A list of major committees sponsored by VPCM, the purposes of each committee and the extent to which the purposes have been achieved. • Details of all consultancies and contractors including consultants/contractors engaged, services provided; and expenditure committed to for each engagement.
Additional information included in the report The following details are included in the Annual Report on the pages indicated: • Details of assessments and measures undertaken to improve the occupational health and safety of employees. See page 28.
Information that is not applicable to VPCM • Details of shares held by a senior officer as nominee or held beneficially in a statutory authority or subsidiary.
40 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Attestation for financial management compliance with Ministerial Standing Direction 5.1.4
Victorian Ports Corporation (Melbourne) Financial Management Compliance Attestation Statement I James Cain, on behalf of the Responsible Body, certify that Victorian Ports Corporation (Melbourne) has complied with the applicable Standing Directions 2018 under the Financial Management Act 1994 (Vic) and Instructions.
James Cain Chairman
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 41 42 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Section 5: Financial Statements
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 43 Victorian Ports Corporation (Melbourne) Table of contents For the year ended 30 June 2019
How this report is structured
Victorian Ports Corporation (Melbourne) (VPCM) has presented its audited general purpose financial statements for the financial year ended 30 June 2019 in the following structure to provide users with the information about VPCM's stewardship of resources entrusted to it.
Financial Comprehensive operating statement 49 statements Balance sheet 50 Statement of changes in equity 51 Cash flow statement 53
Notes to the 1. About this report 54 financial The basis on which the financial statements have been prepared and statements compliance with reporting regulations
2. Funding delivery of our services Revenue recognised from taxes, grants, sales of goods and services and other sources 2.1 Revenue 58 2.2 Finance income 59 2.3 Other income 59
3. The cost of delivering services Operating expenses of the entity 3.1 Summary of expenses incurred in delivery of services 60 3.2 Employee benefits 60 3.3 Other operating expenses 69
4. Key assets available to support output delivery Land, property, infrastructure, plant and equipment, intangible assets and joint operations 4.1 Property, plant and equipment 70
5. Other assets and liabilities Working capital balances and other key assets and liabilities 5.1 Receivables 75 5.2 Payables 76 5.3 Other non-financial assets 77 5.4 Other liabilities 77
6. How we financed our operations Borrowings, cash flow information, leases, trusts and commitments 6.1 Leases 78 6.2 Cash flow information and balances 79 6.3 Commitments for expenditure 80
2 44 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Table of contents For the year ended 30 June 2019
Notes to the 7. Taxation and transactions with the State financial Items subject to taxation and transactions with the State statements 7.1 Income tax 81 (continued) 7.2 Deferred tax 83 7.3 Dividends 84 7.4 Correction of prior period error 85
8. Risks, contingencies and valuation judgements Financial risk management, contingent assets and liabilities as well as fair value determination 8.1 Financial instruments specific disclosures 86 8.2 Contingent assets and contingent liabilities 91 8.3 Fair value determination 92
9. Other disclosures 9.1 Ex-gratia expenses 94 9.2 Equity disclosure 95 9.3 Responsible persons 97 9.4 Remuneration of executives 98 9.5 Related parties 99 9.6 Remuneration of auditors 101 9.7 Subsequent events 101 9.8 Australian Accounting Standards issued that are not yet effective 102
3 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 45 Victorian Ports Corporation (Melbourne) Certification of Financial Statements 30 June 2019
We certify that the attached financial statements for Victorian Ports Corporation (Melbourne) have been prepared in accordance with the Direction 5.2 of the Standing Directions of the Assistant Treasurer under the Financial Management Act 1994 , applicable Financial Reporting Directions, Australian Accounting Standards, including Interpretations and other mandatory professional reporting requirements.
We further state that, in our opinion, the information set out in the Comprehensive Operating Statement, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and notes to and forming part of the financial statements, presents fairly the financial transactions during the year ended 30 June 2019 and financial position of Victorian Ports Corporation (Melbourne) as at 30 June 2019.
At the time of signing, we are not aware of any circumstances which would render any particulars included in the financial statements to be misleading or inaccurate.
We authorise the attached financial statements for issue on 28 August 2019.
Mr J Cain Ms R Johnson Ms Y Chen Chairman Chief Executive Officer Chief Financial Officer 28 August 2019 28 August 2019 28 August 2019
46 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report
Independent Auditor’s Report To the Board of the Victorian Ports Corporation (Melbourne)
pinion I have audited the financial report of the Victorian Ports Corporation (Melbourne) (the corporation) which comprises the:
• balance sheet as at 30 June 2019 • comprehensive operating statement for the year then ended • statement of changes in equity for the year then ended • cash flow statement for the year then ended • notes to the financial statements, including significant accounting policies • certification of financial statements. In my opinion the financial report presents fairly, in all material respects, the financial position of the corporation as at 30 June 2019 and their financial performance and cash flows for the year then ended in accordance with the financial reporting requirements of Part 7 of the Financial Management Act 1994 and applicable Australian Accounting Standards.
sis or I have conducted my audit in accordance with the Audit Act 1994 which incorporates the pinion Australian Auditing Standards. I further describe my responsibilities under that Act and those standards in the Auditor’s Responsibilities for the Audit of the Financial Report section of my report. My independence is established by the Constitution Act 1975. My staff and I are independent of the corporation in accordance with the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to my audit of the financial report in Victoria. My staff and I have also fulfilled our other ethical responsibilities in accordance with the Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.
o rd’s The Board of the corporation are responsible for the preparation and fair presentation of responsi i ities the financial report in accordance with Australian Accounting Standards and the Financial or t e Management Act 1994, and for such internal control as the Board determine is necessary to in n i enable the preparation and fair presentation of a financial report that is free from material report misstatement, whether due to fraud or error. In preparing the financial report, the Board are responsible for assessing the corporation’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is inappropriate to do so.
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 47
Auditor’s As re ired the Audit Act res onsi ilit is to e ress an o inion on the financial r s o si i iti s re ort ased on the a dit o ecti es for the a dit are to o tain reasona le ass rance or t udit a o t hether the financial re ort as a hole is free fro aterial isstate ent hether o t i i due to fraud or error, and to issue an auditor’s report that incl des o inion easona le r ort ass rance is a high le el of ass rance t is not a g arantee that an a dit cond cted in accordance ith the A stralian A diting Standards ill al a s detect a aterial isstate ent hen it e ists isstate ents can arise fro fra d or error and are considered aterial if indi id all or in the aggregate the co ld reasona l e e ected to infl ence the econo ic decisions of sers ta en on the asis of this financial re ort As art of an a dit in accordance ith the A stralian A diting Standards e ercise rofessional dge ent and aintain rofessional sce ticis thro gho t the a dit also
• identif and assess the ris s of aterial isstate ent of the financial re ort hether d e to fra d or error design and erfor a dit roced res res onsi e to those ris s and o tain a dit e idence that is s fficient and a ro riate to ro ide a asis for o inion he ris of not detecting a aterial isstate ent res lting fro fra d is higher than for one res lting fro error as fra d a in ol e coll sion forger intentional o issions isre resentations or the o erride of internal control • o tain an nderstanding of internal control rele ant to the a dit in order to design a dit roced res that are a ro riate in the circ stances t not for the r ose of e ressing an o inion on the effecti eness of the cor oration’s internal control • e al ate the a ro riateness of acco nting olicies sed and the reasona leness of acco nting esti ates and related disclos res ade the Board • concl de on the a ro riateness of the Board’s use of the going concern basis of acco nting and ased on the a dit e idence o tained hether a aterial ncertaint e ists related to e ents or conditions that a cast significant do t on the cor oration’s ability to continue as a going concern. If I conclude that a material ncertaint e ists a re ired to dra attention in my auditor’s report to the related disclos res in the financial re ort or if s ch disclos res are inade ate to odif o inion concl sions are ased on the a dit e idence o tained to the date of my auditor’s report. However, future events or conditions a ca se the cor oration to cease to contin e as a going concern • e al ate the o erall resentation str ct re and content of the financial re ort incl ding the disclos res and hether the financial re ort re resents the nderl ing transactions and e ents in a anner that achie es fair resentation co nicate ith the Board regarding a ong other atters the lanned sco e and ti ing of the a dit and significant a dit findings incl ding an significant deficiencies in internal control that identif d ring a dit
E B E Si one Bohan 0 A g st 01 as dele ate for the Auditor eneral of ictoria
48 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Comprehensive Operating Statement For the year ended 30 June 2019 2019 2018 Notes $'000 $'000
Revenue 2.1 33,041 31,680 Finance Income 2.2 307 174 Other Income 2.3 3,588 2,258 Total 36,936 34,112
Expenses 3.1 (36,198) (31,558) Finance costs 8.1.2 (5) (9) Total expenses (36,203) (31,567)
Profit/(Loss) before income tax 733 2,545 Income tax benefit /(expense) 7.1 (147) (799)
Profit/(Loss) after income tax 586 1,745
Other comprehensive income Items that will not be reclassified to profit after income tax Asset revaluation reserve movement 9.2.2 1,319 2,132 Employee benefits reserve movement 9.2.2 (6,673) 266 Other comprehensive income/(loss) for the year, net of tax (5,354) 2,398
Total comprehensive income/(loss) for the year (4,768) 4,143
The above Comprehensive Operating Statement should be read in conjunction with the accompanying notes.
VPCM has adopted AASB15 Revenue from Contracts with Customers from 1 July 2018 using the modified retrospective approaach and has not restated comparatives. The comparatives have been prepared using AASB118 and related interpretations. VPCM has not restated comparatives when initially applying AASB9 Financial Instruments.
5 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 49 Victorian Ports Corporation (Melbourne) Balance Sheet As at 30 June 2019 2019 2018 Notes $'000 $'000
Financial assets Cash and cash equivalents 6.2 23,928 19,914 Receivables 5.1 6,580 5,214 30,508 25,128
Non-financial assets Property, plant and equipment 4.1 118,345 118,719 Intangible assets 214 309 Other non-financial assets 5.3 783 843 Deferred tax assets 7.2 9,101 5,914 128,443 125,784
Total assets 158,951 150,912
Liabilities Payables 5.2 4,465 2,127 Provisions - employee benefits 3.2.2 29,682 19,346 Other provisions 79 75 Other liabilities 5.4 385 430 Current tax liabilities 7.1 1,097 1,372 Deferred tax liabilities 7.2 15,270 16,155 Total liabilities 50,978 39,507
NET ASSETS 107,973 111,406
Equity Contributed capital 9.2.1 7,335 6,000 Reserves 9.2.2 37,483 42,837 Retained profits 63,155 62,568
TOTAL EQUITY 107,973 111,406
The above Balance Sheet should be read in conjunction with the accompanying notes.
VPCM has adopted AASB15 Revenue from Contracts with Customers from 1 July 2018 using the modified retrospective approach and has not restated comparatives. The comparatives have been prepared using AASB118 and related interpretations. VPCM has not restated comparatives when initially applying AASB9 Financial Instruments.
6 50 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Balance Sheet Statement of Changes in Equity As at 30 June 2019 For the year ended 30 June 2019 2019 2018 Notes $'000 $'000 Contributed Asset Employee Retained Total capital revaluation benefits profits equity Financial assets reserve reserve Cash and cash equivalents 6.2 23,928 19,914 $'000 $'000 $'000 $'000 $'000 Receivables 5.1 6,580 5,214 30,508 25,128 Balance at 1 July 2018 6,000 40,458 2,379 62,568 111,406
Non-financial assets Profit for the year - - - 586 586 Property, plant and equipment 4.1 118,345 118,719 Intangible assets 214 309 Other comprehensive income - 1,319 (6,673) - (5,354) Other non-financial assets 5.3 783 843 Deferred tax assets 7.2 9,101 5,914 Total comprehensive income - 1,319 (6,673) 586 (4,768) 128,443 125,784 for the year Transactions with owners Total assets 158,951 150,912 in their capacity as owners: Contributions/(distributions) of 1,335 - - - 1,335 Liabilities equity, net of transaction costs Payables 5.2 4,465 2,127 1,335 - - - 1,335 Provisions - employee benefits 3.2.2 29,682 19,346 Balance at 30 June 2019 7,335 41,777 (4,294) 63,155 107,973 Other provisions 79 75 Other liabilities 5.4 385 430 Current tax liabilities 7.1 1,097 1,372 Deferred tax liabilities 7.2 15,270 16,155 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. Total liabilities 50,978 39,507 VPCM has adopted AASB15 Revenue from Contracts with Customers from 1 July 2018 using the modified retrospective approach and has not restated comparatives. The comparatives have been prepared using AASB118 and related interpretations. VPCM has not restated NET ASSETS 107,973 111,406 comparatives when initially applying AASB9 Financial Instruments.
Equity Contributed capital 9.2.1 7,335 6,000 Reserves 9.2.2 37,483 42,837 Retained profits 63,155 62,568
TOTAL EQUITY 107,973 111,406
The above Balance Sheet should be read in conjunction with the accompanying notes.
VPCM has adopted AASB15 Revenue from Contracts with Customers from 1 July 2018 using the modified retrospective approach and has not restated comparatives. The comparatives have been prepared using AASB118 and related interpretations. VPCM has not restated comparatives when initially applying AASB9 Financial Instruments.
6 7 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 51 Victorian Ports Corporation (Melbourne) Statement of Changes in Equity For the year ended 30 June 2019
Contributed Asset Employee Retained Total capital revaluation benefits profits equity reserve reserve $'000 $'000 $'000 $'000 $'000
Balance at 1 July 2017 1,000 38,327 2,113 60,824 102,263 Profit for the year - - - 1,745 1,745 Other comprehensive income - 2,132 266 - 2,398 Total comprehensive income for the - 2,132 266 1,745 4,142 year
Transactions with owners in their capacity as owners: Contributions/(distributions) of 5,000 - - - 5,000 equity, net of transaction costs 5,000 - - - 5,000 Balance at 30 June 2018 6,000 40,458 2,379 62,568 111,406
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. VPCM has adopted AASB15 Revenue from Contracts with Customers from 1 July 2018 using the modified retrospective approach and has not restated comparatives. The comparatives have been prepared using AASB118 and related interpretations. VPCM has not restated comparatives when initially applying AASB9 Financial Instruments.
8 52 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Statement of Changes in Equity Cash flow Statement For the year ended 30 June 2019 For the year ended 30 June 2019 2019 2018 Contributed Asset Employee Retained Total Notes $'000 $'000 capital revaluation benefits profits equity reserve reserve Cash flows from operating activities $'000 $'000 $'000 $'000 $'000 Receipts from customers 37,938 37,085 Payments to suppliers and employees (26,900) (29,399) Balance at 1 July 2017 1,000 38,327 2,113 60,824 102,263 Interest received 307 174 Profit for the year - - - 1,745 1,745 Interest paid (6) (9) Other comprehensive income - 2,132 266 - 2,398 Income tax instalments (paid)/refund (2,200) 9,830 Total comprehensive income for the Goods and Services Tax (paid)/refund (1,906) (1,136) - 2,132 266 1,745 4,142 year Net cash inflow/(outflow) from operating activities 6.2.1 7,233 16,544
Transactions with owners Cash flows from investing activities in their capacity as owners: Payments for property, plant and equipment (4,717) (7,474) Contributions/(distributions) of Proceeds from sale of property, plant and equipment 163 - 5,000 - - - 5,000 equity, net of transaction costs Net cash (outflow) from investing activities (4,554) (7,474) 5,000 - - - 5,000 Balance at 30 June 2018 6,000 40,458 2,379 62,568 111,406 Cash flows from financing activities Repayment of borrowings - (4,000) The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. Proceeds from borrowings - 4,000 Capital contribution from Owner 9.2.1 1,335 5,000 VPCM has adopted AASB15 Revenue from Contracts with Customers from 1 July 2018 using the modified Net cash inflow/(outflow) from financing activities 1,335 5,000 retrospective approach and has not restated comparatives. The comparatives have been prepared using AASB118 and related interpretations. VPCM has not restated Net increase/(decrease) in cash and cash equivalents 4,014 14,070 comparatives when initially applying AASB9 Financial Instruments. Cash and cash equivalents at the beginning 6.2 19,914 5,845 of the financial year
Cash and cash equivalents at end of the financial year 6.2 23,928 19,914
The above Cash flow Statement should be read in conjunction with the accompanying notes. VPCM has adopted AASB15 Revenue from Contracts with Customers from 1 July 2018 using the modified retrospective approach and has not restated comparatives. The comparatives have been prepared using AASB118 and related interpretations. VPCM has not restated comparatives when initially applying AASB9 Financial Instruments.
8 9 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 53 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
1 ABOUT THIS REPORT
Corporate information Victorian Ports Corporation (Melbourne) (VPCM) is a Government Business Enterprise established by the Victorian Government under the Transport Integration Act 2010 (Vic) (TIA). The Board of VPCM is directly accountable to the Victorian Government through the Minister for Ports and the Treasurer.
VPCM is responsible for navigation of commercial shipping in Port Phillip Channels, waterside emergency and marine pollution response and the management of Station Pier and West Finger Pier as Victoria's premier cruise shipping and Tasmanian passenger ferry facility. VPCM has responsibility for Harbour Master, Station Pier and West Finger Pier, relevant safety and environmental regulation, waterside emergency management and marine pollution response.
These financial statements incorporate all activities of VPCM.
Basis of preparation The financial statements have been prepared on an accruals and a historical cost basis, except for property, plant and equipment which, subsequent to acquisition, are measured at a revalued amount being their fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent impairment losses. Cost is based on the fair values of the consideration given in exchange for assets. 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.
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.
Judgements, estimates and assumptions are required to be made about financial information being presented. The significant judgements made in the preparation of these financial statements are disclosed in the notes where amounts affected by those judgements are disclosed. Estimates and associated assumptions are based on professional judgements derived from historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. Critical judgements that management has made in the process of applying VPCM’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements are:
(i) Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable that future taxable profits will be available to utilise these temporary differences.
(ii) Fair value of property, plant and equipment All non-current physical assets are measured initially at cost and subsequently revalued at fair value in accordance with FRD 103H.
10 54 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
1 ABOUT THIS REPORT (iii) Defined benefit superannuation plan Corporate information The value of the defined benefit superannuation plan has been calculated using the Projected Unit Credit Victorian Ports Corporation (Melbourne) (VPCM) is a Government Business Enterprise established by the method, as required by AASB 119. The objective under this method is to expense each member's benefits Victorian Government under the Transport Integration Act 2010 (Vic) (TIA). The Board of VPCM is directly in the Fund as they would accrue, taking into consideration future salary increases and the benefit accountable to the Victorian Government through the Minister for Ports and the Treasurer. allocation formula. Thus the total benefit to which each member is expected to become entitled is broken down into units, each associated with a year of past or future credited service.
VPCM is responsible for navigation of commercial shipping in Port Phillip Channels, waterside emergency The financial statements have been prepared on a going concern basis. and marine pollution response and the management of Station Pier and West Finger Pier as Victoria's premier cruise shipping and Tasmanian passenger ferry facility. VPCM has responsibility for Harbour (iv) Adoption of new and revised Accounting Standard Master, Station Pier and West Finger Pier, relevant safety and environmental regulation, waterside In the current year VPCM have adopted the following new Australian Accounting Standards, emergency management and marine pollution response. Interpretations and Amendments issued by the AASB which were mandatorily effective for accounting periods on or after 1 January 2019. These financial statements incorporate all activities of VPCM. (v) Impact of initial application of AASB 9 Financial Instruments Basis of preparation AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement for The financial statements have been prepared on an accruals and a historical cost basis, except for reporting periods beginning on or after 1 January 2018 bringing together all three aspects of accounting property, plant and equipment which, subsequent to acquisition, are measured at a revalued amount for financial instruments: classification and measurement, impairment and hedge accounting. Hedge being their fair value at the date of revaluation less any subsequent accumulated depreciation and accounting is not relevant to VPCM. Additionally, VPCM adopted consequential amendments to AASB 7 subsequent impairment losses. Cost is based on the fair values of the consideration given in exchange for “Financial Instruments: Disclosures” that were approved to the disclosures this year to the comparative assets. Revisions to accounting estimates are recognised in the period in which the estimate is revised if period. 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. (vi) Classification and measurement of financial assets The date of initial application is 1 July 2018. Accordingly, VPCM has applied the requirements of AASB 9 to Accounting policies are selected and applied in a manner which ensures that the resulting financial instruments that continue to be recognised as at 1 July 2018 and has not applied the requirements to information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the instruments that have already been derecognised as at 1 July 2018. underlying transactions or other events is reported. All recognised financial assets that are within the scope of AASB 9 are required to be subsequently measured at amortised cost or fair value on the basis of VPCM’s business model for managing the financial Judgements, estimates and assumptions are required to be made about financial information being assets and the contractual cash flow characteristics of the financial assets. presented. The significant judgements made in the preparation of these financial statements are disclosed in the notes where amounts affected by those judgements are disclosed. Estimates and associated Specifically: assumptions are based on professional judgements derived from historical experience and various other · Debt investments that are held within a business model whose objective is both to collect the factors that are believed to be reasonable under the circumstances. Actual results may differ from these contractual cash flows and to sell the debt instruments, and that have contractual cash flows that are estimates. solely payments of principal and interest on the principal amount outstanding, are subsequently Critical judgements that management has made in the process of applying VPCM’s accounting policies and measured at fair value through other comprehensive income (FVOCI). that have the most significant effect on the amounts recognised in the financial statements are: · Debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, are subsequently measured at amortised cost. (i) Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences as management considers that it · Equity investments are subsequently measured at fair value through profit or loss (FVTPL). is probable that future taxable profits will be available to utilise these temporary differences. · Debt instruments that are measured at amortised cost are subject to impairment assessment.
(ii) Fair value of property, plant and equipment All non-current physical assets are measured initially at cost and subsequently revalued at fair value in accordance with FRD 103H.
10 11 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 55 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
Management of VPCM have reviewed and assessed VPCM’s existing financial assets as at 1 July 2018 based on facts and circumstances that existed at that date and concluded that the initial application of AASB 9 has had the following impact on VPCM’s financial assets regardless of their classification and measurement. · Financial assets classified as held to maturity and loans and receivables under AASB 139 that were measured at amortised cost continue to be measured at amortised cost under AASB 9 as they are held within a business model to collect contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding. None of the other reclassifications of financial assets under AASB 9 have had impact on the VPCM’s financial position, profit or loss, other comprehensive income or total comprehensive income in either year.
(vii) Impairment of financial assets In relation to the impairment of financial assets, AASB 9 requires an expected credit loss model as opposed to an incurred credit loss model under AASB 139. The expected credit loss model requires VPCM to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. Specifically, AASB 9 requires VPCM to recognise a loss allowance for expected credit losses on: · Debt instruments measured subsequently at amortised cost, and · Trade receivables. In particular, AASB 9 requires VPCM to measure the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses (ECL) if the credit risk on that financial instrument has increased significantly since initial recognition, or if the financial instrument is a purchased or originated credit-impaired financial asset. However, if the credit risk on a financial instrument has not increased significantly since initial recognition (except for a purchased or originated credit-impaired financial asset), VPCM is required to measure the loss allowance for that financial instrument at an amount equal to 12- months ECL. AASB 9 also requires a simplified approach for measuring the loss allowance at an amount equal to lifetime ECL for trade receivables, contract assets and lease receivables in certain circumstances.
Based on our assessment, there is no material impact to VPCM as impairment was previously performed on debt instruments and trade receivables have been previously assessed for impairment based on expected credit losses model. There is no change to our expected credit losses assumptions under AASB 9. The consequential amendments to AASB 7 have also resulted in more extensive disclosures about VPCM’s exposure to credit risk in the financial statements (see Note 8.1.3.).
(viii) Classification and measurement of financial liabilities AASB 9 has introduced in the classification and measurement of financial liabilities relates to the accounting for changes in the fair value of a financial liability designated as at FVTPL attributable to changes in the credit risk of the issuer. The application of AASB 9 has had no impact on the classification and measurement of VPCM’s financial liabilities. For further details, refer to Note 8.1.3.
12 56 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
Management of VPCM have reviewed and assessed VPCM’s existing financial assets as at 1 July 2018 based on facts and circumstances that existed at that date and concluded that the initial application of (ix) Impact of application of AASB 15 Revenue from Contracts with Customers AASB 9 has had the following impact on VPCM’s financial assets regardless of their classification and In current year, VPCM has applied AASB 15 Revenue from Contracts with Customers which is effective for measurement. an annual period that begin on or after 1 January 2018. AASB 15 introduced a 5-step approach to revenue · Financial assets classified as held to maturity and loans and receivables under AASB 139 that were recognition. Far more prescriptive guidance has been added in AASB 15 to deal with specific scenarios. measured at amortised cost continue to be measured at amortised cost under AASB 9 as they are held Details of the new requirements as well as their impact on VPCM’s financial statements are described within a business model to collect contractual cash flows and these cash flows consist solely of payments below. of principal and interest on the principal amount outstanding. None of the other reclassifications of financial assets under AASB 9 have had impact on the VPCM’s VPCM’s accounting policies for its revenue stream are disclosed in detail in Note 2 below. Apart from financial position, profit or loss, other comprehensive income or total comprehensive income in either providing more extensive disclosure for VPCM’s revenue transactions, the application of AASB 15 has not year. had a significant impact on the profit or loss or balance sheet of VPCM. The amount of adjustment for each financial statement line item affected by the application of AASB 15 is illustrated below. (vii) Impairment of financial assets In relation to the impairment of financial assets, AASB 9 requires an expected credit loss model as VPCM has adopted modified retrospective. Therefore, there is no restatement made to comparatives. opposed to an incurred credit loss model under AASB 139. The expected credit loss model requires VPCM to account for expected credit losses and changes in those expected credit losses at each reporting date to AASB 15 uses the terms ‘contract asset’ and ‘contract liability’ to describe what might more commonly be reflect changes in credit risk since initial recognition of the financial assets. Specifically, AASB 9 requires known as ‘accrued revenue’ and ‘deferred revenue’, however the Standard does not prohibit an entity VPCM to recognise a loss allowance for expected credit losses on: from using alternative descriptions in the statement of financial position. VPCM has adopted the · Debt instruments measured subsequently at amortised cost, and terminology used in AASB 15 to describe such balances. · Trade receivables.
In particular, AASB 9 requires VPCM to measure the loss allowance for a financial instrument at an amount (x) Statement of compliance equal to the lifetime expected credit losses (ECL) if the credit risk on that financial instrument has The financial statements of VPCM are general purpose financial statements in accordance with the increased significantly since initial recognition, or if the financial instrument is a purchased or originated Financial Management Act 1994 (Vic) and applicable Australian Accounting Standards and Interpretations credit-impaired financial asset. However, if the credit risk on a financial instrument has not increased (AAS). VPCM has been designated a "for profit" entity. significantly since initial recognition (except for a purchased or originated credit-impaired financial asset), VPCM is required to measure the loss allowance for that financial instrument at an amount equal to 12- The annual financial statements were authorised for issue by the Board of VPCM on xx August 2019. months ECL. AASB 9 also requires a simplified approach for measuring the loss allowance at an amount equal to lifetime ECL for trade receivables, contract assets and lease receivables in certain circumstances. (xi) Compliance with International Financial Reporting Standards (IFRS) Based on our assessment, there is no material impact to VPCM as impairment was previously performed The Board of VPCM is of the view that the 2018-19 financial statements of VPCM also comply with IFRS as on debt instruments and trade receivables have been previously assessed for impairment based on issued by the International Accounting Standards Board (IASB). expected credit losses model. There is no change to our expected credit losses assumptions under AASB 9. The consequential amendments to AASB 7 have also resulted in more extensive disclosures about VPCM’s (xii) Rounding of amounts exposure to credit risk in the financial statements (see Note 8.1.3.). Amounts in the financial statements have been rounded to the nearest $1,000, unless otherwise stated. Discrepancies in tables between totals and sums of components reflect rounding. Percentage variations in all tables are based on the underlying unrounded amounts. (viii) Classification and measurement of financial liabilities AASB 9 has introduced in the classification and measurement of financial liabilities relates to the accounting for changes in the fair value of a financial liability designated as at FVTPL attributable to changes in the credit risk of the issuer. The application of AASB 9 has had no impact on the classification and measurement of VPCM’s financial liabilities. For further details, refer to Note 8.1.3.
12 13 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 57 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
2 FUNDING DELIVERY OF OUR SERVICES
Introduction This section provides additional information about how VPCM is funded and the accounting policies that are relevant for an understanding of the items recognised in the financial statements.
Structure 2.1 Revenue from contracts with customers 2.2 Finance income 2.3 Other income
2.1 Revenue from contracts with customers 2019 2018 $'000 $'000 Wharfage fees 10,981 10,564 Anchorage fees 709 794 Berth hire and Site Occupation charge 2,783 1,784 Port Manager contribution 15,608 15,290 Other charges for services 2,960 3,248 Total revenues 33,041 31,680
For comparative year Revenue is recognised and measured at fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to VPCM and the income can be reliably measured. Where applicable, amounts disclosed as income are net of concessions, allowances, duties and taxes.
For current year Under AASB 15, VPCM recognises revenue when or as performance obligation is satisfied i.e when “control” of the goods or services underlying the particular performance obligation is transferred to the customer. Revenue is recognised at a point of time or over time depending upon the satisfaction of performance obligations. Please refer below for further details.
Revenue is recognised for the major business activities as follows: (i) Wharfage fees Wharfage fees are charged per unit of quantity, volume or weight of cargo for all cargoes loaded on or discharged from vessels or between vessels in the Port of Melbourne. Revenue is recognised after the vessel’s departure from its designated berth, at a point in time. (ii) Anchorage Anchorage fees are charged for the provision of an area for use by vessels seeking safe anchorage in lieu of mooring at a Port of Melbourne berth or mooring in the Port of Geelong. Fees are charged based on time spent in Port waters with a minimum charge of 24 hours. Revenue is recognised over time. (iii) Berth hire and Site Occupation Charge Berth hire is a time-based fee charged for the provision of berths for the purpose of loading or discharging specialised cargo and lay-up or other purpose approved by VPCM. Berth hire is not applicable to passenger vessels to which a Site Occupation Charge (SOC) will be levied. The SOC is a charge levied in reference to both the number of incoming passengers arriving on the cruise vessel and the amount of time for which the site was reserved or occupied by such cruise vessel. Revenue is recognised over time.
58 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
2.1 Revenue from contracts with customers (continued) 2 FUNDING DELIVERY OF OUR SERVICES (iv) Port Manager contribution Introduction Contribution by the Port Manager under the Port Concession Deed and Port Operations Service Deed. This section provides additional information about how VPCM is funded and the accounting policies that are Revenue is recognised on an annual basis over the term of the Deed. relevant for an understanding of the items recognised in the financial statements. (v) Other charges for services Other charges for services is recognised at the time the service to which the revenue relates is provided or Structure work is undertaken and the revenue is receivable. 2.1 Revenue from contracts with customers 2.2 Finance income 2.3 Other income (vi) Disaggregation of revenue from contracts with customers 2019 2018 $'000 $'000 2.1 Revenue from contracts with customers 2019 2018 Timing of revenue recognition 10,981 - $'000 $'000 At a point in time Wharfage fees 10,981 10,564 Over time 22,060 - Anchorage fees 709 794 Total revenues 33,041 - Berth hire and Site Occupation charge 2,783 1,784 Port Manager contribution 15,608 15,290 2.2 Finance Income Other charges for services 2,960 3,248 2019 2018 Total revenues 33,041 31,680 $'000 $'000 Interest revenue 307 174 For comparative year Total Finance Income 307 174 Revenue is recognised and measured at fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to VPCM and the income can be reliably measured. Where (i) Interest revenue applicable, amounts disclosed as income are net of concessions, allowances, duties and taxes. Interest revenue is recognised as the interest accrues to the net carrying amount of the financial asset using the effective interest rate method.
For current year Under AASB 15, VPCM recognises revenue when or as performance obligation is satisfied i.e when “control” 2.3 Other income of the goods or services underlying the particular performance obligation is transferred to the customer. 2019 2018 Revenue is recognised at a point of time or over time depending upon the satisfaction of performance $'000 $'000 obligations. Please refer below for further details. Rent and licence fees 893 879 Government project funding 2,190 1,213 Revenue is recognised for the major business activities as follows: Other revenue 504 167 (i) Wharfage fees Total other incomes 3,588 2,258 Wharfage fees are charged per unit of quantity, volume or weight of cargo for all cargoes loaded on or discharged from vessels or between vessels in the Port of Melbourne. Total revenues 36,936 34,112 Revenue is recognised after the vessel’s departure from its designated berth, at a point in time. (ii) Anchorage (i) Rent and licence fees Anchorage fees are charged for the provision of an area for use by vessels seeking safe anchorage in lieu of Revenue from operating leases is recognised when earned and accrued in accordance with the terms and mooring at a Port of Melbourne berth or mooring in the Port of Geelong. Fees are charged based on time conditions implicit in the leasing contract. spent in Port waters with a minimum charge of 24 hours. (ii) Government project funding Revenue is recognised over time. Revenue from Government project funding is recognised when expenses have been incurred in accordance with the terms and conditions implicit in the contract with the relevant Government department. When the (iii) Berth hire and Site Occupation Charge amounts relate to the purchase of property, plant and equipment, they are deferred and are recognised on Berth hire is a time-based fee charged for the provision of berths for the purpose of loading or discharging a straight line basis over the expected useful lives of the related assets. specialised cargo and lay-up or other purpose approved by VPCM. Berth hire is not applicable to passenger vessels to which a Site Occupation Charge (SOC) will be levied. The SOC is a charge levied in reference to both the number of incoming passengers arriving on the cruise vessel and the amount of time for which the (iii) Other revenue site was reserved or occupied by such cruise vessel. All other revenue from major business activities is recognised at the time the service to which the revenue Revenue is recognised over time. relates is provided or work is undertaken and the revenue is receivable.
15 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 59 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
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Introduction This section provides additional information about how VPCM's funding is applied and the accounting policies that are relevant for an understanding of the items recognised in the financial statements.
Structure 3.1 Summary of expenses incurred in delivery of services 3.2 Employee benefits 3.3 Other operating expenses
3.1 Summary of expenses incurred in delivery of services 2019 2018 Notes $'000 $'000 Employee benefits expense 3.2.1 12,751 11,924 Depreciation and amortisation 4.1.1 8,444 7,829 Other operating expenses 3.3 15,003 11,805 Total expense incurred in delivery of services 36,198 31,558
3.2 Employee benefits
3.2.1 Employee benefits in the comprehensive operating statement 2019 2018 $'000 $'000 Defined contribution superannuation expense 1,188 1,103 Defined benefit superannuation expense 824 948 Salaries and employee benefits expenses 10,739 9,873 Total employee expenses 12,751 11,924
Employee benefits expenses include all costs related to employment including wages and salaries, fringe benefits tax, leave entitlements, redundancy payments, WorkCover premiums, defined benefits superannuation plans, and defined contribution superannuation plans. VPCM does not recognise any defined benefit liability in respect of the State Superannuation Scheme. Department of Treasury and Finance (DTF) recognises and discloses the defined benefit liabilities for the State Superannuation Scheme in its financial report. The amount recognised in the comprehensive operating statement in relation to superannuation is the employer contributions for members of both defined benefit and defined contribution superannuation plans that are paid or payable during the reporting period. Defined Benefits under the Port of Melbourne Superannuation Fund is disclosed under Note 3.2.3
3.2.2 Employee benefits in the balance sheet Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave (LSL) for services rendered to the reporting date inclusive of on-costs and recorded as an expense during the period the services are delivered.
16 60 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
3 THE COST OF DELIVERING SERVICES 3 THE COST OF DELIVERING SERVICES
Introduction 3.2.2 Employee benefits in the balance sheet (continued) 2019 2018 This section provides additional information about how VPCM's funding is applied and the accounting $'000 $'000 policies that are relevant for an understanding of the items recognised in the financial statements. Current employee benefits: Annual leave entitlements Unconditional and expected to wholly settle within 12 months 663 482 Structure Long service leave entitlements 3.1 Summary of expenses incurred in delivery of services Unconditional and expected to wholly settle within 12 months 398 357 3.2 Employee benefits Unconditional and expected to wholly settle after 12 months 1,171 1,091 3.3 Other operating expenses Defined benefits superannuation fund liability 26,867 16,878
Provision for on-costs 3.1 Summary of expenses incurred in delivery of services Unconditional and expected to wholly settle within 12 months 136 112 2019 2018 Unconditional and expected to wholly settle after 12 months 179 167 Notes $'000 $'000 Total current employee benefits and on-costs 29,413 19,086 Employee benefits expense 3.2.1 12,751 11,924 Depreciation and amortisation 4.1.1 8,444 7,829 Non-current employee benefits Other operating expenses 3.3 15,003 11,805 Long service leave entitlements 233 226 Total expense incurred in delivery of services 36,198 31,558 On-costs 36 35 Total non-current employee benefits and on-costs 269 260 3.2 Employee benefits Total employee benefits and related on-costs 29,682 19,346
3.2.1 Employee benefits in the comprehensive operating statement Reconciliation of movement in on-cost provision 2019 2018 $'000 $'000 Opening balance 313 308 Defined contribution superannuation expense 1,188 1,103 Additional provision recognised 137 259 Defined benefit superannuation expense 824 948 Reductions arising from payments (101) (254) Salaries and employee benefits expenses 10,739 9,873 Closing balance 350 313 Total employee expenses 12,751 11,924 Current 314 279 Employee benefits expenses include all costs related to employment including wages and salaries, fringe Non-current 36 35 benefits tax, leave entitlements, redundancy payments, WorkCover premiums, defined benefits superannuation plans, and defined contribution superannuation plans. VPCM does not recognise any defined benefit liability in respect of the State Superannuation Scheme. Department of Treasury and Finance (DTF) recognises and discloses the defined benefit liabilities for the State Superannuation Scheme in its financial report. The amount recognised in the comprehensive operating statement in relation to superannuation is the employer contributions for members of both defined benefit and defined contribution superannuation plans that are paid or payable during the reporting period. Defined Benefits under the Port of Melbourne Superannuation Fund is disclosed under Note 3.2.3
3.2.2 Employee benefits in the balance sheet Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave (LSL) for services rendered to the reporting date inclusive of on-costs and recorded as an expense during the period the services are delivered.
16 17 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 61 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
3 THE COST OF DELIVERING SERVICES
3.2.2 Employee benefits in the balance sheet (continued)
Wages, salaries and sick leave
Liabilities for wages and salaries, expected to be settled within 12 months of the reporting date, are measured at their nominal amounts (including on-costs) using the remuneration rates expected to apply at the time of the settlement and are recognised as current liabilities. VPCM does not have an unconditional right to defer settlement of these liabilities. No liability is recognised for non-vesting sick leave as the anticipated pattern of future sick leave taken indicates that accumulated non-vesting leave will not be used.
Annual leave Annual leave entitlements are accrued on a pro-rata basis in respect of services provided by employees up to the reporting date, having regard to rates expected to apply when the liabilities are settled. The entire obligation has been recognised as a current liability as VPCM does not have an unconditional right to defer settlement. Those liabilities which are expected to be wholly settled within 12 months of the reporting period, are measured at their undiscounted (nominal) values. Those liabilities that are not expected to be wholly settled within 12 months are also recognised in the provision for employee benefits as current liabilities, but are measured at present value of the amounts expected to be paid when the liabilities are settled using the remuneration rate expected to apply at the time of settlement.
Long service leave Long service leave entitlements are assessed at balance date having regard to expected employees’ remuneration rates on settlement, employment related on-costs and other factors including expected accumulated years of employment on settlement and past experience. Commonwealth bond rates are used for discounting future cash flows.
Unconditional long service leave is disclosed as a current liability even when the liability is not expected to settle within 12 months as VPCM does not have an unconditional right to defer the settlement. Those liabilities which are expected to be wholly settled within 12 months of the reporting period, are measured at their undiscounted (nominal) values. Those liabilities that are not expected to be wholly settled beyond 12 months are measured at present value.
Conditional long service leave is disclosed as a non-current liability as there is an unconditional right to defer the settlement of the entitlement until the employee has completed the requisite years of service. Conditional long service leave is disclosed as a non-current liability measured at present value.
18 62 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
3 THE COST OF DELIVERING SERVICES THE COST OF DELIVERING SERVICES
3.2.2 Employee benefits in the balance sheet (continued) 3.2.3 Defined benefit superannuation
Wages, salaries and sick leave Defined benefit superannuation plan A liability in respect of the Port of Melbourne Superannuation Fund (Fund) is recognised in the Statement of Liabilities for wages and salaries, expected to be settled within 12 months of the reporting date, are Financial Position, and is measured as the present value of the Defined Benefit Obligation at year end less the fair measured at their nominal amounts (including on-costs) using the remuneration rates expected to apply at value of the superannuation fund’s assets at that date and any unrecognised past service cost. The value of the the time of the settlement and are recognised as current liabilities. VPCM does not have an unconditional defined benefit superannuation plan has been calculated using the Projected Unit Credit method, as required by right to defer settlement of these liabilities. No liability is recognised for non-vesting sick leave as the AASB 119. The objective under this method is to expense each member's benefits in the Fund as they would anticipated pattern of future sick leave taken indicates that accumulated non-vesting leave will not be used. accrue, taking into consideration future salary increases and the benefit allocation formula. Thus the total benefit to which each member is expected to become entitled is broken down into units, each associated with a year of Annual leave past or future credited service. Annual leave entitlements are accrued on a pro-rata basis in respect of services provided by employees up to the reporting date, having regard to rates expected to apply when the liabilities are settled. The entire Future taxes, such as taxes on investment income and employer contributions, are taken into account in the obligation has been recognised as a current liability as VPCM does not have an unconditional right to defer actuarial assumptions used to determine the relevant components of VPCM’s defined benefit liability. settlement. Those liabilities which are expected to be wholly settled within 12 months of the reporting The Fund only has defined benefit members and is closed to new members. Members receive pension benefits on period, are measured at their undiscounted (nominal) values. Those liabilities that are not expected to be retirement, death and disablement. On withdrawal, members have a choice of receiving a lump sum benefit wholly settled within 12 months are also recognised in the provision for employee benefits as current and/or a deferred pension benefit. liabilities, but are measured at present value of the amounts expected to be paid when the liabilities are settled using the remuneration rate expected to apply at the time of settlement. As at 30 June 2019, the Fund has 1 active member (2018: 3), 1 deferred pension member (2018: 1) and 30 members drawing a pension (2018: 28). Long service leave The Superannuation Industry Supervision (SIS) legislation governs the superannuation industry and provides the Long service leave entitlements are assessed at balance date having regard to expected employees’ framework within which superannuation plans operate. The SIS Regulations require an actuarial valuation to be remuneration rates on settlement, employment related on-costs and other factors including expected performed for each defined benefit superannuation plan every three years, or every year if the plan pays defined accumulated years of employment on settlement and past experience. Commonwealth bond rates are used benefit pensions. for discounting future cash flows. The Fund’s Trustee is responsible for the governance of the Fund. The Trustee has a legal obligation to act solely Unconditional long service leave is disclosed as a current liability even when the liability is not expected to in the best interests of Fund beneficiaries. The Trustee has the following roles: settle within 12 months as VPCM does not have an unconditional right to defer the settlement. Those - Administration of the Fund and payment to the beneficiaries from Fund assets when required in accordance liabilities which are expected to be wholly settled within 12 months of the reporting period, are measured with the Fund rules; at their undiscounted (nominal) values. Those liabilities that are not expected to be wholly settled beyond - Management and investment of the Fund assets; and 12 months are measured at present value. - Compliance with superannuation law and other applicable regulations.
The Fund is regulated by the Australian Prudential Regulation Authority (APRA). The prudential regulator, APRA, Conditional long service leave is disclosed as a non-current liability as there is an unconditional right to defer licenses and supervises regulated superannuation plans. the settlement of the entitlement until the employee has completed the requisite years of service. Conditional long service leave is disclosed as a non-current liability measured at present value. Contribution recommendations Employer contributions to the defined benefit superannuation plan are based on recommendations by the plan’s actuary. Actuarial assessments are made annually and the last such assessment was made at 30 June 2019. The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the time they become payable. VPCM has no legal obligation to settle this liability with an immediate contribution or additional one-off contributions.
18 19 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 63 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
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3.2.3 Defined benefit superannuation (continued)
Funding method The method used to determine the employer contribution recommendations at the last actuarial review was the aggregate funding method. The method adopted affects the timing of the cost to VPCM.
Nature of asset/liability The Port of Melbourne Superannuation Fund does not impose a legal liability on VPCM to cover any deficit that exists in the fund. If the fund were wound up, there would be no legal obligation on VPCM to make good any shortfall. The Trust Deed of the fund states that if the fund winds up, the remaining assets are to be distributed by the Trustee of the fund in an equitable manner as it sees fit. VPCM may, at any time by notice to the Trustee, terminate its contributions. VPCM has a liability to pay the contributions due before the effective date of the notice, but there is no requirement for it to pay further contributions, irrespective of the financial condition of the fund. However, VPCM does have a constructive obligation for the fund and therefore has recognised a current liability in the Statement of Financial Position in respect of its defined benefit superannuation arrangements. Refer to Note 3.2.2.
The Fund typically exposes VPCM to actuarial risks such as legislative risk, pension risk, inflation risk, investment risk, salary growth risk and inflation risk as outlined in more detail below: Legislative risk - the risk that legislative changes could be made which increase the cost of providing the defined benefits.
Pension risk - the risk that, firstly pensioner mortality will be lower than expected, resulting in pensions being paid for a longer period. Secondly, that a greater proportion of eligible members will elect to take a pension benefit, which is generally more valuable than the corresponding lump sum benefit.
Inflation risk - the risk that inflation is higher than anticipated, increasing pension payments, and thereby requiring additional employer contributions.
Investment risk - the risk that investment returns will be lower than assumed and VPCM will need to increase contributions to offset the shortfall.
Salary growth risk - the risk that salaries or wages (on which future benefit amounts will be based) will rise more rapidly than assumed, increasing defined benefit amounts and thereby requiring additional employer contributions.
Timing of members leaving service - as the fund is a small fund (i.e. has a small number of members), if members with high benefits leave, this may impact on the financial position of the fund at the time they leave. The impact may be positive or negative depending on the circumstances and timing of withdrawal.
The defined benefit assets are invested in the BT Institutional Retirement PST and the Schroder Balanced Fund Professional Class. The assets are diversified within these investment options and therefore the Fund has no significant concentration of investment risk. There were no plan amendments affecting the defined benefits payable, curtailments or settlements during the year.
20 64 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
3 THE COST OF DELIVERING SERVICES 3 THE COST OF DELIVERING SERVICES
3.2.3 Defined benefit superannuation (continued) 3.2.3 Defined benefit superannuation (continued)
Funding method (a) Reconciliation of the Net Defined Benefit Liability/(Asset) The method used to determine the employer contribution recommendations at the last actuarial review was the aggregate funding method. The method adopted affects the timing of the cost to VPCM. Movements in the net defined benefit liability/(asset) were as follows: 2019 2018 Nature of asset/liability Notes $'000 $'000 The Port of Melbourne Superannuation Fund does not impose a legal liability on VPCM to cover any deficit that Net defined benefit liability/(asset) at start of the year 16,878 16,900 exists in the fund. If the fund were wound up, there would be no legal obligation on VPCM to make good any Current services cost 393 471 shortfall. The Trust Deed of the fund states that if the fund winds up, the remaining assets are to be distributed by Net interest 430 469 the Trustee of the fund in an equitable manner as it sees fit. Actual return on Fund assets less interest income (991) (1,639) Actuarial losses/(gain) arising from changes in financial assumptions 10,897 2,408 VPCM may, at any time by notice to the Trustee, terminate its contributions. VPCM has a liability to pay the Actuarial gain arising from changes in liability experience (374) (1,149) contributions due before the effective date of the notice, but there is no requirement for it to pay further Employer contributions (366) (582) contributions, irrespective of the financial condition of the fund. However, VPCM does have a constructive Net defined benefit liability/(asset) at end of the year 3.2.2 26,867 16,878 obligation for the fund and therefore has recognised a current liability in the Statement of Financial Position in respect of its defined benefit superannuation arrangements. Refer to Note 3.2.2. (b) Reconciliation of Fair Value of Fund Assets The Fund typically exposes VPCM to actuarial risks such as legislative risk, pension risk, inflation risk, investment risk, salary growth risk and inflation risk as outlined in more detail below: Movements in the fair value of the Defined Benefit Fund assets were as follows: 2,019 2,018 Legislative risk - the risk that legislative changes could be made which increase the cost of providing the defined benefits. $'000 $'000 Fair value of Fund assets at beginning of the year 31,727 30,513 Interest income 929 992 Pension risk - the risk that, firstly pensioner mortality will be lower than expected, resulting in pensions being Actual return on Fund assets less interest income 991 1,639 paid for a longer period. Secondly, that a greater proportion of eligible members will elect to take a pension Employer contributions 366 582 benefit, which is generally more valuable than the corresponding lump sum benefit. Contributions by Fund participants 13 36 Benefits paid (1,655) (1,641) Taxes, premiums and expenses paid (414) (394) Inflation risk - the risk that inflation is higher than anticipated, increasing pension payments, and thereby Fair value of Fund assets at end of the year 3.2.3 (d) 31,957 31,727 requiring additional employer contributions.
(c) Reconciliation of Defined Benefit Obligation Investment risk - the risk that investment returns will be lower than assumed and VPCM will need to increase contributions to offset the shortfall. Movements in the defined benefit obligation were as follows: 2019 2018 Salary growth risk - the risk that salaries or wages (on which future benefit amounts will be based) will rise more $'000 $'000 rapidly than assumed, increasing defined benefit amounts and thereby requiring additional employer Present value of Defined Benefit Obligation at beginning of the year 48,605 47,413 contributions. Current service cost 393 471 Interest cost 1,359 1,461 Timing of members leaving service - as the fund is a small fund (i.e. has a small number of members), if members with high benefits leave, this may impact on the financial position of the fund at the time they leave. The impact Contributions by Fund participants 13 36 may be positive or negative depending on the circumstances and timing of withdrawal. Actuarial losses /(gain) arising from changes in financial assumptions 10,897 2,408 Actuarial gain arising from changes in liability experience (374) (1,149) Benefits paid (1,655) (1,641) The defined benefit assets are invested in the BT Institutional Retirement PST and the Schroder Balanced Fund Taxes, premiums and expenses paid (414) (394) Professional Class. The assets are diversified within these investment options and therefore the Fund has no 3.2.3 (g) significant concentration of investment risk. Present value of Defined Benefit Obligation at end of the year 58,824 48,605 There were no plan amendments affecting the defined benefits payable, curtailments or settlements during the year.
20 21 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 65 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
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3.2.3 Defined benefit superannuation (continued)
(d) Fair value of Defined Benefit Fund assets
As at 30 June Carrying Fair value measurement at reporting period amount Level 1 Level 2 Level 3 Asset category $'000 $'000 $'000 $'000 Investment funds 31,957 - 31,957 - Total 31,957 - 31,957 -
The fair value of the Fund assets does not include amounts relating to VPCM's own financial instruments or any property occupied, or other assets used.
(e) The percentage invested in each asset class at reporting date 2019 2018 % % Australian equity 30 33 International equity 24 24 Fixed income 17 15 Property 2 3 Alternatives/Other 15 14 Cash 12 11 100 100
(f) Significant actuarial assumptions at the reporting date 2019 2018 Assumptions to determine Defined Benefit Cost % % Discount rate 3.0 3.3 Expected salary increase rate 3.0 3.0 Expected pension increase rate 2.5 2.5 Mercer Mercer Pension mortality Standard Standard
Assumptions to determine Defined Benefit Obligation 2019 2018 % % Discount rate 1.8 3.0 Expected salary increase rate 3.0 3.0 Expected pension increase rate 2.5 2.5 Mercer Mercer Pension mortality Standard Standard
22 66 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
3 THE COST OF DELIVERING SERVICES 3 THE COST OF DELIVERING SERVICES
3.2.3 Defined benefit superannuation (continued) 3.2.3 Defined benefit superannuation (continued)
(d) Fair value of Defined Benefit Fund assets (g) Sensitivity Analysis The Defined Benefit Obligation as at 30 June 2019 under several scenarios is presented below. As at 30 June Carrying Fair value measurement at reporting period Scenario A: 0.5% per annum lower discount rate sensitivity amount Level 1 Level 2 Level 3 Scenario B: 0.5% per annum higher discount rate sensitivity Asset category $'000 $'000 $'000 $'000 Scenario C: 0.5% per annum lower salary increase rate sensitivity Investment funds 31,957 - 31,957 - Scenario D: 0.5% per annum higher salary increase rate sensitivity Total 31,957 - 31,957 - Scenario E: 90% per annum of the Mercer Standard pensioner mortality sensitivity Scenario F: 110% per annum of the Mercer Standard pensioner mortality sensitivity The fair value of the Fund assets does not include amounts relating to VPCM's own financial instruments or any Scenario G: 0.5% per annum lower pension increase rate sensitivity property occupied, or other assets used. Scenario H: 0.5% per annum higher pension increase rate sensitivity
(e) The percentage invested in each asset class at reporting date 2019 2018 Base Scenario Scenario Scenario Scenario % % Case A B C D Australian equity 30 33 Discount rate 1.8% pa -0.5% pa +0.5% pa International equity 24 24 Salary increase rate 3.0% pa -0.5% pa +0.5% pa Fixed income 17 15 Pension increase rate 2.5% pa Property 2 3 Mercer Pensioner mortality assumption Alternatives/Other 15 14 Standard Cash 12 11 Defined Benefit Obligation 58,824 64,351 53,915 58,751 58,899 100 100 ($'000)
(f) Significant actuarial assumptions at the reporting date 2019 2018 Assumptions to determine Defined Benefit Cost % % Base Scenario Scenario Scenario Scenario Discount rate 3.0 3.3 Case E F G H Expected salary increase rate 3.0 3.0 Discount rate 1.8% pa Expected pension increase rate 2.5 2.5 Salary increase rate 3.0% pa Mercer Mercer Pension increase rate 2.5% pa -0.5% pa +0.5% pa Pension mortality Standard Standard Mercer Pensioner mortality assumption -10% pa +10% pa Standard Assumptions to determine Defined Benefit Obligation 2019 2018 Defined Benefit Obligation 58,824 60,872 57,029 54,129 64,039 % % ($'000) Discount rate 1.8 3.0 Expected salary increase rate 3.0 3.0 Expected pension increase rate 2.5 2.5 Mercer Mercer Pension mortality Standard Standard
22 23 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 67 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
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3.2.3 Defined benefit superannuation (continued)
(h) Funding arrangements The financing objective adopted for the year ended 30 June 2019 was for the Fund to maintain the value of its assets at least equal to: - 110% (2018: 110%) of Vested Benefits over a five year period - to ensure full funding of the Actuarial Value of Accrued Benefits over a three year period; and - to achieve, as far as possible, a stable level of future Employer contributions. For the year ended 30 June 2019, based on the actuary's recommendation, VPCM contributed the following to the Fund: - 20% (2018: 20%) of superannuation salaries; and - additional lump sum contributions of $25,000 per month (2018: $25,000) to finance expected administration and insurance costs. - additional contribution of $nil per month (2018: $20,000) to address a projected funding gap from FY 2019-20 onwards.
(i) Expected contributions 2020 $'000 Expected employer contributions 503
(j) Maturity profile of Defined Benefit Obligations
The weighted average duration of the defined benefit obligation as at 30 June 2019 is 16 years (2018: 16 years). $'000 30 June 2020 1,754 30 June 2021 1,788 30 June 2022 1,825 30 June 2023 1,862 30 June 2024 1,898 Following 5 years 10,394
(k) Asset-Liability matching strategies
There are no asset and liability matching strategies adopted by the Fund.
24 68 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
3 THE COST OF DELIVERING SERVICES 3 THE COST OF DELIVERING SERVICES
3.2.3 Defined benefit superannuation (continued) 3.3 Other operating expenses 2019 2018 (h) Funding arrangements $'000 $'000 The financing objective adopted for the year ended 30 June 2019 was for the Fund to maintain the value of its Contractors and consultant expenses 10,513 8,562 assets at least equal to: Operating lease expenses - minimum lease payments 1,314 520 - 110% (2018: 110%) of Vested Benefits over a five year period Other expenses 3,175 2,722 - to ensure full funding of the Actuarial Value of Accrued Benefits over a three year period; and Total operating expenses 15,003 11,805 - to achieve, as far as possible, a stable level of future Employer contributions. For the year ended 30 June 2019, based on the actuary's recommendation, VPCM contributed the following to the Fund: - 20% (2018: 20%) of superannuation salaries; and - additional lump sum contributions of $25,000 per month (2018: $25,000) to finance expected administration Other operating expenses from transactions are recognised as they are incurred and reported in the and insurance costs. financial year to which they relate. Operating expenses generally represent day-to-day running costs - additional contribution of $nil per month (2018: $20,000) to address a projected funding gap from FY 2019-20 incurred in normal operations. onwards.
(i) Expected contributions 2020 $'000 Expected employer contributions 503
(j) Maturity profile of Defined Benefit Obligations
The weighted average duration of the defined benefit obligation as at 30 June 2019 is 16 years (2018: 16 years). $'000 30 June 2020 1,754 30 June 2021 1,788 30 June 2022 1,825 30 June 2023 1,862 30 June 2024 1,898 Following 5 years 10,394
(k) Asset-Liability matching strategies
There are no asset and liability matching strategies adopted by the Fund.
24 25 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 69 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
4. KEY ASSETS AVAILABLE TO SUPPORT OUTPUT DELIVERY
Introduction VPCM controls land, infrastructure and other plant and equipment that are utilised in fulfilling its objectives and conducting its activities. They represent the resources that have been entrusted to VPCM for delivery of those outputs.
Structure 4.1 Property, plant and equipment 4.1.1 Depreciation and impairment 4.1.2 Reconciliation of movements in carrying amount
4.1.0 Property, plant and equipment
Gross carrying amount Accumulated depreciation Net carrying amount 2019 2018 2019 2018 2019 2018 Total Total Total Total Total Total $'000 $'000 $'000 $'000 $'000 $'000 Land 16,951 16,951 - - 16,951 16,951 Infrastructure 106,299 102,801 (23,538) (17,094) 82,761 85,707 Plant and equipment & 21,654 21,184 (7,524) (5,772) 14,131 15,412 motor vehicles Capital works in progress 4,502 649 - - 4,502 649 Net carrying amount 149,407 141,585 (31,062) (22,866) 118,345 118,719
Initial recognition Property, plant and equipment represent non-current assets comprising land, buildings and improvements, and plant and equipment used by VPCM in its operations. All non-current physical assets are measured initially at cost and subsequently revalued at fair value less accumulated depreciation and impairment.
26 70 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
4. KEY ASSETS AVAILABLE TO SUPPORT OUTPUT DELIVERY 4. KEY ASSETS AVAILABLE TO SUPPORT OUTPUT DELIVERY
Introduction 4.1 Property, plant and equipment (continued) VPCM controls land, infrastructure and other plant and equipment that are utilised in fulfilling its objectives and conducting its activities. They represent the resources that have been entrusted to VPCM for delivery of those Initial recognition (continued) outputs. Non-current physical assets measured at fair value are revalued in accordance with Financial Reporting Direction (FRD) 103H Non-Financial Physical Assets . This revaluation process occurs every five years, based upon the asset’s Structure classification under the Government Purpose Classification, but may occur more frequently if fair value assessments 4.1 Property, plant and equipment indicate material changes in values. Revaluation increments or decrements arise from differences between an 4.1.1 Depreciation and impairment asset’s carrying value and fair value. 4.1.2 Reconciliation of movements in carrying amount If an asset's carrying amount is increased as a result of a revaluation, the increase is credited directly to equity under 4.1.0 Property, plant and equipment the heading of asset revaluation reserve net of applicable tax. However, the increase is recognised in profit or loss to the extent that it reverses a revaluation decrease previously recognised in profit or loss in respect of that asset. Gross carrying amount Accumulated depreciation Net carrying amount 2019 2018 2019 2018 2019 2018 Total Total Total Total Total Total If an asset's carrying amount is decreased as a result of a revaluation, the decrease is recognised in profit or loss. $'000 $'000 $'000 $'000 $'000 $'000 However, the decrease is debited directly to equity under the heading of asset revaluation reserve to the extent of Land 16,951 16,951 - - 16,951 16,951 any credit balance existing in the revaluation reserve in respect of that asset. Infrastructure 106,299 102,801 (23,538) (17,094) 82,761 85,707 Plant and equipment & 21,654 21,184 (7,524) (5,772) 14,131 15,412 Gains and losses on disposals of assets are determined by comparing proceeds from sale with the carrying amount motor vehicles and selling costs. These are included in profit or loss. Upon disposal or derecognition, any revaluation reserve Capital works in progress 4,502 649 - - 4,502 649 relating to the particular asset being sold or written off is transferred to retained profits. Net carrying amount 149,407 141,585 (31,062) (22,866) 118,345 118,719
Initial recognition 4.1.1 Depreciation and amortisation Property, plant and equipment represent non-current assets comprising land, buildings and improvements, and 2019 2018 plant and equipment used by VPCM in its operations. Total Total All non-current physical assets are measured initially at cost and subsequently revalued at fair value less Depreciation $'000 $'000 accumulated depreciation and impairment. Infrastructure (6,445) (5,838) Plant and equipment & vehicles (1,905) (1,911) Total depreciation (8,349) (7,749)
Amortisation Intangible Assets (95) (80) Total amortisation (95) (80) Total depreciation and amortisation (8,444) (7,829)
26 27 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 71 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
4. KEY ASSETS AVAILABLE TO SUPPORT OUTPUT DELIVERY
4.1.1 Depreciation and amortisation (continued)
Depreciation expense
Land held by VPCM is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives (or, in the case of leasehold improvements and certain leased plant and equipment, the lease term if shorter) as follows:
2019 2018 Infrastructure 2 - 85 years 2 - 85 years Plant and equipment 1 - 25 years 1 - 25 years Intangible assets 4 years 4 years
Change in accounting estimates The estimated useful lives, residual values and depreciation method are reviewed at the end of each financial reporting period and, where revised, are accounted for as a change in an accounting estimate. Where depreciation rates or methods are changed, the net written down value of the asset is depreciated from the date of the change in accordance with the new depreciation rate or method.
Acquisition The purchase method of accounting is used for all acquisitions of assets, being the fair value of the assets provided as consideration at the date of acquisition plus any incidental costs attributable to the acquisition. Where assets are constructed by VPCM, the costs at which they are initially recorded include an appropriate share of labour costs incurred directly in the construction of the asset. All items with a cost or value in excess of $1,000 (2018: $1000) and with a useful life greater than one year are recognised as assets. All items within the threshold of $91 to $1,000 (2018: $91 to $1000) and with a useful life greater than one year are grouped and recognised as assets within the Low Value Asset Pool. All other items are expensed as acquired.
28 72 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
4. KEY ASSETS AVAILABLE TO SUPPORT OUTPUT DELIVERY 4. KEY ASSETS AVAILABLE TO SUPPORT OUTPUT DELIVERY
4.1.1 Depreciation and amortisation (continued) 4.1.1 Depreciation and amortisation (continued)
Depreciation expense Recoverable amount: An asset’s carrying amount is written down immediately to its recoverable amount if the Land held by VPCM is not depreciated. Depreciation on other assets is calculated using the straight-line method to asset’s carrying amount is greater than its estimated recoverable amount (impairment of assets). Where an asset’s allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives (or, in the case carrying value exceeds its recoverable amount, the difference is written off by a charge to profit or loss except to the of leasehold improvements and certain leased plant and equipment, the lease term if shorter) as follows: extent that the write-down can be debited to an asset revaluation reserve amount applicable to that specific asset. The recoverable amount for an asset is measured at the higher of the present value of future cash flows expected to be obtained from the asset and fair value less costs to sell. 2019 2018 Infrastructure 2 - 85 years 2 - 85 years Repairs and maintenance: Routine maintenance, repair costs and minor renewal costs are expensed as incurred. Plant and equipment 1 - 25 years 1 - 25 years Where the repair relates to the replacement of a component of an asset and the cost exceeds the capitalisation Intangible assets 4 years 4 years threshold, the cost is capitalised and depreciated.
Change in accounting estimates 4.1.2 Reconciliation of movements in carrying amount The estimated useful lives, residual values and depreciation method are reviewed at the end of each financial reporting period and, where revised, are accounted for as a change in an accounting estimate. Where depreciation Land Infrastructure Plant and Capital Total rates or methods are changed, the net written down value of the asset is depreciated from the date of the change in equipment works accordance with the new depreciation rate or method. in progress Year ended 30 June 2019 Notes $'000 $'000 $'000 $'000 $'000 Acquisition The purchase method of accounting is used for all acquisitions of assets, being the fair value of the assets provided Carrying amount 1 July 2018 16,951 85,707 15,412 649 118,719 as consideration at the date of acquisition plus any incidental costs attributable to the acquisition. Where assets are Transfer of capital works in progress - 1,511 787 (2,298) - constructed by VPCM, the costs at which they are initially recorded include an appropriate share of labour costs Additions - 6,151 6,151 incurred directly in the construction of the asset. Disposals (163) (163) Revaluation adjustments - 1,987 - - 1,987 All items with a cost or value in excess of $1,000 (2018: $1000) and with a useful life greater than one year are Depreciation charge - (6,445) (1,905) - (8,349) recognised as assets. All items within the threshold of $91 to $1,000 (2018: $91 to $1000) and with a useful life Carrying amount 30 June 2019 16,951 82,761 14,131 4,502 118,345 greater than one year are grouped and recognised as assets within the Low Value Asset Pool. All other items are expensed as acquired. At 30 June 2019 Fair value 2018 16,951 106,299 21,654 - 144,905 Cost - 4,502 4,502 Accumulated depreciation - (23,538) (7,524) - (31,062) Net book amount 8.3.1(a) 16,951 82,761 14,131 4,502 118,345
28 29 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 73 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
4. KEY ASSETS AVAILABLE TO SUPPORT OUTPUT DELIVERY
4.1.2 Reconciliation of movements in carrying amount (continued)
Capital Land Infrastructure Plant and works Total equipment in progress Year ended 30 June 2018 Notes $'000 $'000 $'000 $'000 $'000
Carrying amount 1 July 2017 13,905 77,499 16,765 8,030 116,199 Transfer from capital works in progress - 13,971 558 (14,855) (326) Additions - 75 - 7,474 7,549 Disposals - - - - - Revaluations adjustments 3,046 3,046 Depreciation charge - (5,838) (1,911) - (7,749) Carrying amount 30 June 2018 16,951 85,707 15,412 649 118,719
At 30 June 2018 Fair value 2018 16,951 102,801 21,184 - 140,936 Cost - - - 649 649 Accumulated depreciation - (17,094) (5,772) - (22,866) Net book amount 8.3.1(b) 16,951 85,707 15,412 649 118,719
30 74 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
4. KEY ASSETS AVAILABLE TO SUPPORT OUTPUT DELIVERY 5 OTHER ASSETS AND LIABILITIES
4.1.2 Reconciliation of movements in carrying amount (continued) Introduction This section sets out any other assets and liabilities that arose from VPCM's operations. Capital Land Infrastructure Plant and works Total Structure equipment in progress 5.1 Receivables Year ended 30 June 2018 Notes $'000 $'000 $'000 $'000 $'000 5.2 Payables 5.3 Other non-financial assets 5.4 Other liabilities Carrying amount 1 July 2017 13,905 77,499 16,765 8,030 116,199 Transfer from capital works in progress - 13,971 558 (14,855) (326) 5.1 Receivables Additions - 75 - 7,474 7,549 2019 2018 Disposals - - - - - Notes $'000 $'000 Revaluations adjustments 3,046 3,046 Current Depreciation charge - (5,838) (1,911) - (7,749) Contractual Carrying amount 30 June 2018 16,951 85,707 15,412 649 118,719 Trade receivables (i) 8.1.1 6,580 5,214 6,580 5,214 At 30 June 2018 Fair value 2018 16,951 102,801 21,184 - 140,936 (i) Ageing analysis of contractual receivables Cost - - - 649 649 0 - 30 days 2,215 5,162 Accumulated depreciation - (17,094) (5,772) - (22,866) 31 - 60 days 4,365 7 Net book amount 8.3.1(b) 16,951 85,707 15,412 649 118,719 61 - 90 days - 38 91 - 120 days - 7 6,580 5,214
Receivables consist of contractual receivables. Contractual receivables mainly include trade receivables in relation to goods and services and are classified as financial instruments in Note 8. Trade receivables are amounts due for services rendered to customers of VPCM in the ordinary course of business and generally due for settlement within 30 days and therefore are all classified as current. Trade receivables are held with the objective to collect contractual cashflows and therefore measured at amortised cost using the effective interest method, less provision for impairment. VPCM applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for trade receivables. Details of VPCM's Impairment Policy are set out in Note 8.1 (iii). No provision for expected credit loss has been recognised given the low level of historical impairment loss and current year collection statistics.
In the prior year Goods and Services Tax (GST) input tax credits recoverable were disclosed as a statutory receivable. GST receivable has been netted-off with GST payable in 2018 and 2019 with a restatement of the balance sheet in 2018.
30 31 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 75 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
5 OTHER ASSETS AND LIABILITIES
5.2 Payables 2019 2018 Notes $'000 $'000 Current Contractual Trade payables (i) 1,439 1,186 Accrued expenses (i) 2,927 672 8.1.1 4,366 1,858 Statutory FBT (receivable)/payable 22 28 GST payable 77 242 99 270
4,465 2,127
(i) Maturity analysis of contractual payables Less than 1 month 4,364 1,752 1 - 3 months 2 106 3 months - 1 year - - 1 - 5 years - - 5+ years - - 4,366 1,858
Payables consist of contractual payables and statutory payables. Contractual payables include mainly trade payables' creditors in relation to goods and services. Statutory payables include GST payable, fringe benefits tax and other tax payable. Contractual payables are classified as financial instruments in Note 8. Statutory payables are not classified as financial instruments as they do not arise from a contract.
Trade payables are carried at amortised cost. Due to their short-term nature they are not discounted. They represent liabilities for goods and services provided to VPCM prior to the end of the financial year that are unpaid as at year end. The amounts are unsecured and are usually paid within 30 days of recognition.
32 76 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
5 OTHER ASSETS AND LIABILITIES 5 OTHER ASSETS AND LIABILITIES
5.2 Payables 5.3 Other non-financial assets 2019 2018 2019 2018 Notes $'000 $'000 $'000 $'000 Current Current Contractual Prepayments 755 814 Trade payables (i) 1,439 1,186 Other assets 28 29 Accrued expenses (i) 2,927 672 783 843 8.1.1 4,366 1,858 Statutory Other non-financial assets include prepayments which represent payments in advance of receipt of goods or FBT (receivable)/payable 22 28 services or that part of expenditure made in one accounting period covering a term extending beyond that GST payable 77 242 period. 99 270 5.4 Other liabilities 4,465 2,127 2019 2018 $'000 $'000 (i) Maturity analysis of contractual payables Current Less than 1 month 4,364 1,752 Rent received in advance 183 176 1 - 3 months 2 106 Lease incentive 53 53 3 months - 1 year - - 236 229 1 - 5 years - - 5+ years - - Non-current 4,366 1,858 Lease incentive 149 201 149 201 Payables consist of contractual payables and statutory payables. Contractual payables include mainly trade payables' creditors in relation to goods and services. Statutory payables include GST payable, fringe benefits 385 430 tax and other tax payable. Contractual payables are classified as financial instruments in Note 8. Statutory payables are not classified as financial instruments as they do not arise from a contract. Rent received in advance is recognised as a reduction of rental income Lease incentives are recognised as a reduction of rental expense over the lease term, on a Trade payables are carried at amortised cost. Due to their short-term nature they are not discounted. They straight-line basis. represent liabilities for goods and services provided to VPCM prior to the end of the financial year that are unpaid as at year end. The amounts are unsecured and are usually paid within 30 days of recognition.
32 33 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 77 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
6 HOW WE FINANCED OUR OPERATIONS
Introduction This section provides information on the sources of finance utilised by VPCM during its operations, along with interest expenses (the cost of borrowings) and other information related to financing activities of VPCM.
Structure 6.1 Leases 6.2 Cash flow information and balances 6.3 Commitments for expenditure
6.1 Leases 2019 2018 $'000 $'000 Operating leases Non-cancellable operating lease receivable - within one year 682 826 - later than one year but not later than five years 1,648 2,554 - later than five years - - 2,330 3,380
VPCM has entered into a number of short-term leases and preferential berthing licences for land, buildings and infrastructure. The leases and licences terms range from one year to five years.
Generally, rental income under leases was reviewed to market at two or three-yearly intervals. Some leases provide for annual or biennial CPI reviews or an agreed fixed increase.
2019 2018 $'000 $'000 Non-cancellable operating lease payable - within one year 433 397 - later than one year but not later than five years 1,338 1,604 - later than five years 408 367 2,179 2,367
The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense in the year in which they are incurred. This reflects the pattern of benefits derived by VPCM.
As lessor Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease agreement.
As lessee Operating lease payments are recognised as an expense on a straight-line basis over the term of the lease, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
34 78 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
6 HOW WE FINANCED OUR OPERATIONS 6 HOW WE FINANCED OUR OPERATIONS
Introduction 6.2 Cash flow information and balances This section provides information on the sources of finance utilised by VPCM during its operations, along with interest expenses (the cost of borrowings) and other information related to financing activities of VPCM. Cash and deposits, including cash equivalents, comprise cash on hand and cash at bank, deposits at call and those highly liquid investments with an original maturity of three months or less, which are held for the purpose of meeting short-term cash commitments rather than for investment purposes, and are readily Structure convertible to known amounts of cash and are subject to an insignificant risk of changes in value. 6.1 Leases 2019 2018 6.2 Cash flow information and balances Notes $'000 $'000 6.3 Commitments for expenditure Cash and cash equivalents 6.1 Leases Cash at bank and in hand (i) 1,428 1,414 2019 2018 Deposits (ii) 22,500 18,500 $'000 $'000 8.1.3 23,928 19,914 Operating leases Non-cancellable operating lease receivable (i) Cash at bank earns a weighted average interest rate of 0.98% at 30 June 2019 (2018: 1.00%). - within one year 682 826 (ii) Deposits earn a weighted average interest rate of 1.43% at 30 June 2019 (2018: 1.45%). - later than one year but not later than five years 1,648 2,554 - later than five years - - 2,330 3,380 6.2.1 Reconciliation of profit after income tax to net cash inflow from operating activities 2019 2018 VPCM has entered into a number of short-term leases and preferential berthing licences for land, buildings $'000 $'000 and infrastructure. The leases and licences terms range from one year to five years. Net result for the period 586 1,745
Generally, rental income under leases was reviewed to market at two or three-yearly intervals. Some leases Non-cash movements in income and expense provide for annual or biennial CPI reviews or an agreed fixed increase. Depreciation and amortisation 8,444 7,829 Defined Benefit Superannuation Scheme adjustment 457 358 Revaluation of non financial assets (103) - 2019 2018 $'000 $'000 Change in operating assets and liabilities Non-cancellable operating lease payable Increase in receivables (2,800) (258) - within one year 433 397 (Increase)/decrease in deferred tax assets (327) 144 - later than one year but not later than five years 1,338 1,604 Decrease/(increase) in other operating assets 60 (67) - later than five years 408 367 Increase/(decrease) in payables 2,261 (3,873) 2,179 2,367 (Decrease)/increase in provision for income taxes payable (275) 11,640 Decrease in deferred tax liabilities (1,450) (1,508) The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the Increase in current provisions 607 375 risks and benefits of ownership of the leased item, are recognised as an expense in the year in which they (Decrease)/increase in non current provisions (45) 234 are incurred. This reflects the pattern of benefits derived by VPCM. Decrease in other liabilities (182) (75) Net cash from operating activities 7,233 16,544 As lessor Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease agreement.
As lessee Operating lease payments are recognised as an expense on a straight-line basis over the term of the lease, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
34 35 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 79 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
6 HOW WE FINANCED OUR OPERATIONS
6.3 Commitments for expenditure Commitments for future expenditure include operating and capital commitments arising from contracts. These commitments are recorded below at their nominal value and inclusive of GST. These future expenditures cease to be disclosed as commitments once the related liabilities are recognised in the balance sheet.
(a) Commitments for expenditure 2019 2018 $'000 $'000 Capital expenditure commitments Commitments for the construction and acquisition of property, plant and equipment, contracted for at balance date but not incurred or recognised as liabilities 10,254 288 Total capital expenditure commitments (net of GST) 10,254 288
Operating expenditure commitments Commitments for the payments of operating expenditure excluding lease commitments contracted for at balance date but not incurred or recognised as liabilities 13,518 9,746 Total operating expenditure commitments (net of GST) 13,518 9,746
Total commitments for expenditure (net of GST) 23,772 10,034
(b) Commitments for expenditure payable
Capital expenditure commitments payable - within one year 10,254 288 - later than one year but not later than five years - - - later than five years - - Total capital expenditure commitments (net of GST) 10,254 288
Operating expenditure commitments payable (excluding lease commitments) - within one year 5,302 6,975 - later than one year but not later than five years 8,216 2,771 - later than five years - - Total operating expenditure commitments (excluding lease commitments) 13,518 9,746
Total commitments for expenditure payable (net of GST) 23,772 10,034
36 80 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
6 HOW WE FINANCED OUR OPERATIONS 7 Taxation and transactions with the State VPCM is subject to the National Tax Equivalent Regime (NTER). In accordance with this legislation, VPCM is 6.3 Commitments for expenditure required to pay to the State Government Consolidated Fund, amounts determined to be equivalent to the Commitments for future expenditure include operating and capital commitments arising from contracts. amounts that would be payable by VPCM if it was subject to the Income Tax Assessment Act 1936 (Cwlth) These commitments are recorded below at their nominal value and inclusive of GST. These future and Income Tax Assessment Act 1997 (Cwlth). expenditures cease to be disclosed as commitments once the related liabilities are recognised in the balance sheet. Structure 7.1 Income tax (a) Commitments for expenditure 7.2 Deferred tax 2019 2018 7.3 Dividends $'000 $'000 Capital expenditure commitments 7.1 Income tax Commitments for the construction and acquisition of 2019 2018 property, plant and equipment, contracted for at balance Restated date but not incurred or recognised as liabilities $'000 $'000 10,254 288 (a) Income tax expense Total capital expenditure commitments (net of GST) 10,254 288 Current tax/(benefit) 7.1(c) 1,956 2,196 Movement in deferred tax (1,734) (1,356) Under/(over) (75) (41) Operating expenditure commitments Commitments for the payments of operating expenditure Income tax expense/(benefit) recognised in the statement of 147 799 excluding lease commitments contracted for at balance date comprehensive income but not incurred or recognised as liabilities Deferred income tax (benefit)/expense included in income tax 13,518 9,746 expense comprises: Total operating expenditure commitments (net of GST) 13,518 9,746 (Increase)/decrease in deferred tax assets 7.2(a) (251) 145 (Decrease) in deferred tax liabilities 7.2 (b) (1,483) (1,501) Total commitments for expenditure (net of GST) 23,772 10,034 (1,734) (1,356)
(b) Commitments for expenditure payable The tax expenses or income represents the tax payable on the current year's taxable income or tax loss based on the prevailing income tax rate, adjusted for changes in deferred tax assets and liabilities. Capital expenditure commitments payable - within one year 10,254 288 - later than one year but not later than five years - - - later than five years - - Total capital expenditure commitments (net of GST) 10,254 288
Operating expenditure commitments payable (excluding lease commitments) - within one year 5,302 6,975 - later than one year but not later than five years 8,216 2,771 - later than five years - - Total operating expenditure commitments (excluding lease commitments) 13,518 9,746
Total commitments for expenditure payable (net of GST) 23,772 10,034
36 37 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 81 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
7.1 Income tax expense (continued) 2019 2018 $'000 $'000 (b) Numerical reconciliation of income tax expense to prima facie tax payable Profit/(loss) before income tax expense 733 2,545 Tax at the Australian tax rate of 30% (2018 - 30%) 220 763 Under/(over) (75) (41) Tax effect of sundry amounts which are not deductible/(taxable) 2 77 Income tax (benefit)/expense 147 799
(c) Tax expense/(income) relating to items of other comprehensive income Asset revaluation reserve 565 914 Employee benefits reserve (2,860) 114 (2,295) 1,028
Current tax asset - - Income tax liabilities 1,097 1,372 1,097 1,372
Movement in current tax (assets)/liabilities: Carrying amount 1 July 1,372 (10,735) Charged to income tax expense 7.1(a) 1,956 2,196 Under/(over) provision in prior year (32) (33) Employee benefits reserve - correction of error - 114 Income tax instalment (paid)/refund (2,200) 9,830 Carrying amount 30 June 1,097 1,372
38 82 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
7.1 Income tax expense (continued) 2019 2018 2019 2018 $'000 $'000 $'000 $'000 7.2 Deferred tax (b) Numerical reconciliation of income tax expense to prima facie tax payable (a) The balance comprises temporary differences attributable to: Profit/(loss) before income tax expense 733 2,545 Employee benefits 8,905 5,803 Tax at the Australian tax rate of 30% (2018 - 30%) 220 763 Provision (13) (35) Under/(over) (75) (41) Income received in advance 55 53 Tax effect of sundry amounts which are not deductible/(taxable) 2 77 Lease Incentive Liability 60 - Income tax (benefit)/expense 147 799 Accrued expenses 94 92 9,101 5,914
(c) Tax expense/(income) relating to items of other comprehensive income Movement in deferred tax assets: Asset revaluation reserve 565 914 Carrying amount 1 July 5,914 6,058 Employee benefits reserve (2,860) 114 Credited/(charged) to Comprehensive Operating Statement 7.1(a) 251 (145) (2,295) 1,028 Under/(over) 76 - (Credited)/charged to Statement of Equity 2,860 - Current tax asset - - Carrying amount 30 June 9,101 5,914 Income tax liabilities 1,097 1,372 1,097 1,372 (b) Deferred tax liabilities Movement in current tax (assets)/liabilities: Carrying amount 1 July 1,372 (10,735) The balance comprises temporary differences attributable to: Charged to income tax expense 7.1(a) 1,956 2,196 Depreciation 13,792 15,241 Under/(over) provision in prior year (32) (33) Revalued land 914 914 Employee benefits reserve - correction of error - 114 Revalued buildings 565 - Income tax instalment (paid)/refund (2,200) 9,830 15,271 16,155 Carrying amount 30 June 1,097 1,372 Movement in deferred tax liabilities: Carrying amount 1 July 16,155 16,750 (Credited)/charged to Comprehensive Operating Statement 7.1 (a) (1,483) (1,501) Under/(over) 33 (8) (Credited)/charged to Statement of Equity 565 914 Carrying amount 30 June 15,270 16,155
38 39 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 83 Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2018
7.4 Correction of prior period error 7.2 Deferred tax (continued) Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of During the 2018 and prior financial years, the Corporation did not properly account for the movement in assets and liabilities and their carrying amounts for financial reporting purposes. Provision for PMA Super booked against the Employee Benefits Reserve in calculating its NTER tax liability. This error had the effect of understating the Provision for Income Tax and overstating the Employee Benefits Reserve balance by $1,019,400 as at 30 June 2018 (1 July 2017: $905,000). The Employee benefits Deferred income tax assets are recognised for deductible temporary differences as management considers reserve movement in Other Comprehensive Income for the year ended 30 June 2018 was also overstated by that it is probable that future taxable profits will be available to utilise these temporary differences. $114,000. The prior period error did not affect the deferred tax balance attributable to the Provision for PMA Super. Deferred income tax liabilities are recognised for all taxable temporary differences.
The error has been corrected by restating each of the affected financial statement line items for the years in No deferred tax assets and liabilities will be recognised from the initial recognition of an asset or liability, which the error occurred, as follows: excluding a business combination where there is no effect on accounting or taxable profit or loss.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused 2018 tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against Previously which the deductible temporary differences and the carry-forward of unused tax credits and unused tax Note 7.1(c) Movement in current tax (assets)/liabilities 2018 Restated reported losses can be utilised. Carrying amount 1 July (10,735) (11,640) Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) Charged to income tax expense 2,196 2,196 when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that Under/(over) provision in prior year (33) (33) have been enacted or substantively enacted by the reporting date. Employee benefits reserve - correction of error 114 - Income tax instalment (paid)/refund 9,830 9,830 Carrying amount 30 June 1,372 353 Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and VPCM intends to settle its current tax assets and liabilities on a net basis.
2018 7.3 Dividends Previously VPCM pays dividends in accordance with a determination of the Treasurer of Victoria under the Transport Note 9.2.2(a) Movement in employee benefits reserve 2018 Restated reported Integration Act 2010 (Vic). The obligation to pay a dividend arises after consultation between VPCM’s Board, Carrying amount 1 July 2,113 3,018 the Minister for Ports and the Treasurer of Victoria. Following this consultation process, the Treasurer makes Movements in actuarial gains/losses 266 380 a formal determination. Only dividends declared on or before reporting date are recognised as a liability. Carrying amount 30 June 2,379 3,398 For the current reporting period, the dividends declared was nil (2018: Nil).
40 41 84 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2018
7.4 Correction of prior period error 7.2 Deferred tax (continued) Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of During the 2018 and prior financial years, the Corporation did not properly account for the movement in assets and liabilities and their carrying amounts for financial reporting purposes. Provision for PMA Super booked against the Employee Benefits Reserve in calculating its NTER tax liability. This error had the effect of understating the Provision for Income Tax and overstating the Employee Benefits Reserve balance by $1,019,400 as at 30 June 2018 (1 July 2017: $905,000). The Employee benefits Deferred income tax assets are recognised for deductible temporary differences as management considers reserve movement in Other Comprehensive Income for the year ended 30 June 2018 was also overstated by that it is probable that future taxable profits will be available to utilise these temporary differences. $114,000. The prior period error did not affect the deferred tax balance attributable to the Provision for PMA Super. Deferred income tax liabilities are recognised for all taxable temporary differences.
The error has been corrected by restating each of the affected financial statement line items for the years in No deferred tax assets and liabilities will be recognised from the initial recognition of an asset or liability, which the error occurred, as follows: excluding a business combination where there is no effect on accounting or taxable profit or loss.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused 2018 tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against Previously which the deductible temporary differences and the carry-forward of unused tax credits and unused tax Note 7.1(c) Movement in current tax (assets)/liabilities 2018 Restated reported losses can be utilised. Carrying amount 1 July (10,735) (11,640) Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) Charged to income tax expense 2,196 2,196 when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that Under/(over) provision in prior year (33) (33) have been enacted or substantively enacted by the reporting date. Employee benefits reserve - correction of error 114 - Income tax instalment (paid)/refund 9,830 9,830 Carrying amount 30 June 1,372 353 Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and VPCM intends to settle its current tax assets and liabilities on a net basis.
2018 7.3 Dividends Previously VPCM pays dividends in accordance with a determination of the Treasurer of Victoria under the Transport Note 9.2.2(a) Movement in employee benefits reserve 2018 Restated reported Integration Act 2010 (Vic). The obligation to pay a dividend arises after consultation between VPCM’s Board, Carrying amount 1 July 2,113 3,018 the Minister for Ports and the Treasurer of Victoria. Following this consultation process, the Treasurer makes Movements in actuarial gains/losses 266 380 a formal determination. Only dividends declared on or before reporting date are recognised as a liability. Carrying amount 30 June 2,379 3,398 For the current reporting period, the dividends declared was nil (2018: Nil).
40 41 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 85 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
8 RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS
Introduction
VPCM is exposed to risk from its activities and outside factors. In addition, it is often necessary to make judgements and estimates associated with recognition and measurement of items in the financial statements. This section sets out financial instrument specific information, (including exposures to financial risks) as well as those items that are contingent in nature or require a higher level of judgement to be applied, which for VPCM related mainly to fair value determination.
Structure 8.1 Financial instruments specific disclosures 8.2 Contingent assets and contingent liabilities 8.3 Fair value determination
8.1 Financial instruments specific disclosures
Introduction Financial instruments arise out of contractual agreements that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Due to the nature of the VPCM’s activities, certain financial assets and financial liabilities arise under statute rather than a contract (for example taxes, fines and penalties). Such assets and liabilities do not meet the definition of financial instruments in AASB 132 Financial Instruments: Presentation.
Categories of financial instruments
(i) Financial assets at amortised cost
Financial assets measured at amortised cost are financial instruments which meet both of the following criteria and are not designated at fair value through profit or loss: - it is held within a business model whose objective is to hold assets to collect contractual cashflows; and - its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
VPCM recognises the following financial assets in this category: - cash and deposits - receivables (excluding statutory receivables); and - term deposits.
42 86 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
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Introduction 8.1 Financial instruments specific disclosures (continued)
VPCM is exposed to risk from its activities and outside factors. In addition, it is often necessary to make (ii) Financial liabilities at amortised cost judgements and estimates associated with recognition and measurement of items in the financial Financial instrument liabilities are initially recognised on the date they are originated. They are initially statements. This section sets out financial instrument specific information, (including exposures to financial recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, risks) as well as those items that are contingent in nature or require a higher level of judgement to be these financial instruments are measured at amortised cost with any difference between the initial applied, which for VPCM related mainly to fair value determination. recognised amount and the redemption value being recognised in profit and loss over the period of the interest-bearing liability, using the weighted average interest rate method. Structure 8.1 Financial instruments specific disclosures 8.2 Contingent assets and contingent liabilities Financial instrument liabilities measured at amortised cost include VPCM's leased motor vehicles, 8.3 Fair value determination contractual payables, deposits held and advances received, and interest-bearing arrangements other than those designated at fair value through profit or loss. 8.1 Financial instruments specific disclosures (iii) Impairment of financial assets Introduction AASB 9 replaces the 'incurred loss' model in AASB 139 with an 'expected credit loss' (ECL) model. The new Financial instruments arise out of contractual agreements that give rise to a financial asset of one entity impairment model applies to financial assets measured at amortised cost. Under AASB 9, credit losses are and a financial liability or equity instrument of another entity. Due to the nature of the VPCM’s activities, recognised earlier than under AASB 139. The financial assets at amortised cost consist of trade receivables, certain financial assets and financial liabilities arise under statute rather than a contract (for example taxes, cash and cash equivalents, revenue receivable and term deposits. fines and penalties). Such assets and liabilities do not meet the definition of financial instruments in AASB 132 Financial Instruments: Presentation. Under AASB 9, loss allowances are measured on either of the following bases:
Categories of financial instruments • 12-month ECLs: these are ECLs that result from possible default events within the 12 months after the • lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a (i) Financial assets at amortised cost financial instrument. VPCM measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are Financial assets measured at amortised cost are financial instruments which meet both of the following measured as 12-month ECLs: criteria and are not designated at fair value through profit or loss: - it is held within a business model whose objective is to hold assets to collect contractual cashflows; and • debt securities that are determined to have low credit risk at the reporting date; and - its contractual terms give rise on specified dates to cash flows that are solely payments of principal and • other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the interest on the principal amount outstanding. expected life of the financial instrument) has not increased significantly since initial recognition.
VPCM recognises the following financial assets in this category: - cash and deposits No provision for Expected Credit Loss has been recognised given the low level of historical impairment loss - receivables (excluding statutory receivables); and and current year collection experience. - term deposits.
42 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 87 Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
8 RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS 8 RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS 2019 2018 $'000 $'000 8.1.3 Financial risk management objectives and policies (continued) 8.1.1 Financial instruments: Categorisation Financial risk management Contractual financial assets VPCM maintains a comprehensive Risk Management System which is integrated with its business planning Current assets processes. There is a formally documented Risk Management Policy, Risk Management Procedures and a Cash and cash equivalents 23,928 19,914 framework which are consistently applied across all levels of the business. A Financial Risk Management Receivables - Trade receivables 6,580 5,214 Assessment is presented to the Audit and Finance Committee of the Board on an annual basis in line with the Total contractual financial assets 30,508 25,129 requirements of the Standing Directions of the Minister for Finance, under the Financial Management Act 1994 (Vic). In addition, a quarterly risk status report is presented to the Risk Committee and the Board Contractual financial liabilities outlining VPCM's significant material risks including financial risks. Each risk is reviewed regularly against the Liabilities at amortised cost risk matrix to ensure the level of risk is appropriate and the treatment and controls are adequate. Current liabilities Payables 4,366 1,858 Financial instruments: Liquidity risk Total contractual financial liabilities 4,366 1,858 Liquidity risk is the risk that VPCM will be unable to meet its financial obligations as and when they fall due. VPCM, cognisant of the seasonal nature of the cruise industry, manages its liquidity risk to ensure that 8.1.2 Financial instruments: Net holding gain/(loss) adequate cash funds are available at all times to meet its commitments as they arise. This objective is met on financial instruments by category through: Interest income on contractual financial assets (i) 307 174 - sound cash management practices; Interest expense on contractual financial liabilities (ii) (5) (9) - regular identification and monitoring of the maturity profile of liquid assets and liabilities together with Total 302 164 regular cash flow forecasting; - having sufficient temporary purpose financial accommodation from Treasury Corporation of Victoria; and (i) The net holding gain/(loss) on contractual financial assets equates to the interest income on cash - investments that are limited to highly liquid and secure assets. and cash equivalents.
(ii) The net holding gain/(loss) on contractual financial liabilities equates to the interest expense on VPCM's maximum exposure to liquidity risk is the carrying amount of financial liabilities as disclosed in Note interest bearing liabilities. 5.2.
8.1.3 Financial risk management objectives and policies Financial instruments: Credit risk As a whole, VPCM’s financial risk management program seeks to manage these risks and the associated Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in a volatility of its financial performance. financial loss to VPCM. The carrying amount of VPCM's financial assets recognised in the Statement of Financial Position, net of any provisions for doubtful debts, represents VPCM's maximum exposure to credit Details of the significant accounting policies and methods adopted, including the criteria for recognition, the risk from financial assets. basis of measurement, and the basis on which income and expenses are recognised, with respect to each VPCM actively manages its credit risk using a range of proocesses and procedures. These include performing class of financial asset, financial liability and equity instrument above are disclosed in the relevant notes. credit checks for new and existing customers as required, obtaining bank guarantees where considered appropriate and monitoring the performance of significant trading partners on an ongoing basis. The main purpose in holding financial instruments is to prudentially manage VPCM's financial risks within the VPCM does not engage in hedging for its contractual assets and only deals with banks with high credit State Government's policy parameters. VPCM's main financial risks include liquidity risk and interest rate risk. ratings. VPCM manages these financial risks in accordance with its Treasury Management Policy. No provision for impairment of financial assets has been recognised based on past experience and current and expected changes in client's credit ratings. VPCM's exposure to credit risk is low as detailed in the ageing anaysis provided in Note 5.1.
44 45 88 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
8 RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS 8 RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS 2019 2018 $'000 $'000 8.1.3 Financial risk management objectives and policies (continued) 8.1.1 Financial instruments: Categorisation Financial risk management Contractual financial assets VPCM maintains a comprehensive Risk Management System which is integrated with its business planning Current assets processes. There is a formally documented Risk Management Policy, Risk Management Procedures and a Cash and cash equivalents 23,928 19,914 framework which are consistently applied across all levels of the business. A Financial Risk Management Receivables - Trade receivables 6,580 5,214 Assessment is presented to the Audit and Finance Committee of the Board on an annual basis in line with the Total contractual financial assets 30,508 25,129 requirements of the Standing Directions of the Minister for Finance, under the Financial Management Act 1994 (Vic). In addition, a quarterly risk status report is presented to the Risk Committee and the Board Contractual financial liabilities outlining VPCM's significant material risks including financial risks. Each risk is reviewed regularly against the Liabilities at amortised cost risk matrix to ensure the level of risk is appropriate and the treatment and controls are adequate. Current liabilities Payables 4,366 1,858 Financial instruments: Liquidity risk Total contractual financial liabilities 4,366 1,858 Liquidity risk is the risk that VPCM will be unable to meet its financial obligations as and when they fall due. VPCM, cognisant of the seasonal nature of the cruise industry, manages its liquidity risk to ensure that 8.1.2 Financial instruments: Net holding gain/(loss) adequate cash funds are available at all times to meet its commitments as they arise. This objective is met on financial instruments by category through: Interest income on contractual financial assets (i) 307 174 - sound cash management practices; Interest expense on contractual financial liabilities (ii) (5) (9) - regular identification and monitoring of the maturity profile of liquid assets and liabilities together with Total 302 164 regular cash flow forecasting; - having sufficient temporary purpose financial accommodation from Treasury Corporation of Victoria; and (i) The net holding gain/(loss) on contractual financial assets equates to the interest income on cash - investments that are limited to highly liquid and secure assets. and cash equivalents.
(ii) The net holding gain/(loss) on contractual financial liabilities equates to the interest expense on VPCM's maximum exposure to liquidity risk is the carrying amount of financial liabilities as disclosed in Note interest bearing liabilities. 5.2.
8.1.3 Financial risk management objectives and policies Financial instruments: Credit risk As a whole, VPCM’s financial risk management program seeks to manage these risks and the associated Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in a volatility of its financial performance. financial loss to VPCM. The carrying amount of VPCM's financial assets recognised in the Statement of Financial Position, net of any provisions for doubtful debts, represents VPCM's maximum exposure to credit Details of the significant accounting policies and methods adopted, including the criteria for recognition, the risk from financial assets. basis of measurement, and the basis on which income and expenses are recognised, with respect to each VPCM actively manages its credit risk using a range of proocesses and procedures. These include performing class of financial asset, financial liability and equity instrument above are disclosed in the relevant notes. credit checks for new and existing customers as required, obtaining bank guarantees where considered appropriate and monitoring the performance of significant trading partners on an ongoing basis. The main purpose in holding financial instruments is to prudentially manage VPCM's financial risks within the VPCM does not engage in hedging for its contractual assets and only deals with banks with high credit State Government's policy parameters. VPCM's main financial risks include liquidity risk and interest rate risk. ratings. VPCM manages these financial risks in accordance with its Treasury Management Policy. No provision for impairment of financial assets has been recognised based on past experience and current and expected changes in client's credit ratings. VPCM's exposure to credit risk is low as detailed in the ageing anaysis provided in Note 5.1.
44 45 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 89 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
8 RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS
8.1.3 Financial risk management objectives and policies (continued)
Interest rate risk and financial liability and financial asset maturity analysis The exposure to interest rate risks, the effective weighted average interest rates for financial assets and financial liabilities and their maturity profiles at the reporting date are as follows:
2019 Floating Non-interest Total interest bearing 1 year or less $'000 $'000 $'000 Financial assets Cash and cash equivalents 23,928 - 23,928 Receivables - Trade receivables - 6,580 6,580 23,928 6,580 30,508 Weighted average interest rate 1.21% -% -%
Financial liabilities Payables - 4,366 4,366 - 4,366 4,366 Weighted average interest rate 1.42% -% -%
Net financial assets/(liabilities) 23,928 2,214 26,142
2018 Floating Non-interest Total interest bearing 1 year or less $'000 $'000 $'000 Financial assets Cash and cash equivalents 19,914 - 19,914 Receivables - Trade receivables - 5,214 5,214 19,914 5,214 25,129 Weighted average interest rate 1.43% -% -%
Financial liabilities Payables - 1,858 1,858 - 1,858 1,858 Weighted average interest rate 1.67% -% -%
Net financial assets/(liabilities) 19,914 3,357 23,271
46 90 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
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8.1.3 Financial risk management objectives and policies (continued) 8.2 Contingent assets and contingent liabilities Contingent assets and contingent liabilities are not recognised in the balance sheet, but are disclosed by Interest rate risk and financial liability and financial asset maturity analysis way of a note and, if quantifiable, are measured at nominal value. Contingent assets and liabilities are The exposure to interest rate risks, the effective weighted average interest rates for financial assets and presented inclusive of GST receivable or payable respectively. financial liabilities and their maturity profiles at the reporting date are as follows: Contingent assets 2019 Floating Non-interest Total Contingent assets are possible assets that arise from past events, whose existence will be confirmed only interest bearing by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control 1 year or less of the entity. $'000 $'000 $'000 These are classified as either quantifiable, where the potential economic benefit is known, or Financial assets non-quantifiable. Cash and cash equivalents 23,928 - 23,928 Receivables - Trade receivables - 6,580 6,580 VPCM has no contingent assets as at the reporting date (2018: $Nil). 23,928 6,580 30,508 Weighted average interest rate 1.21% -% -% Contingent liabilities Contingent liabilities are: Financial liabilities - possible obligations that arise from past events, whose existence will be confirmed only by the Payables - 4,366 4,366 occurrence or non-occurrence of one or more uncertain future events not wholly within the - 4,366 4,366 control of the entity; or Weighted average interest rate 1.42% -% -% - present obligations that arise from past events but are not recognised because: - it is not probable that an outflow of resources embodying economic benefits will be required to settle Net financial assets/(liabilities) 23,928 2,214 26,142 the obligations; or - the amount of the obligations cannot be measured with sufficient reliability.
2018 Floating Non-interest Total An internal governance review conducted this year has identified potential issues in the way Enterprise interest bearing Agreement business rules have been interpreted for the purposes of payroll. VPCM considers it has an 1 year or less exposure in this regard but cannot reliably quantify the potential dollar value involved. An analysis of $'000 $'000 $'000 VPCM’s historical payroll data is continuing as part of a formal independent assurance review to finalise Financial assets the quantum relating to these historical payroll inaccuracies. The review will also advise the steps required Cash and cash equivalents 19,914 - 19,914 for remediation and the process is expected to be completed within six months from the date of this Receivables - Trade receivables - 5,214 5,214 report (2018: $Nil). 19,914 5,214 25,129 Weighted average interest rate 1.43% -% -%
Financial liabilities Payables - 1,858 1,858 - 1,858 1,858 Weighted average interest rate 1.67% -% -%
Net financial assets/(liabilities) 19,914 3,357 23,271
46 47 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 91 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
8 RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS
8.3 Fair value determination VPCM's property, plant and equipment assets are measured and disclosed at fair value for financial reporting purposes as per Note 4.1. None of VPCM's financial assets and liabilities are disclosed at fair value for financial reporting purposes after initial recognition. In order to determine fair value of an asset or a liability, VPCM uses market-observable data to the extent it is available. The carrying value of all of VPCM's financial assets and liabilities approximate their fair value.
8.3.1 Net fair value of non-financial physical assets Land, infrastructure assets and plant and equipment VPCM engages external, independent and qualified valuers to determine the fair value of its fixed assets every five years. The last full independent valuation was performed as at 30 June 2015.
In accordance with FRD103H: Non-Financial Physical Assets requirements , as at each balance date, management assesses the compounded impact of movement in the fair value inputs since the last full revaluation date. To the extent that the compounded movement in the fair value inputs is greater than 10 % but not in excess of 40%, a managerial revaluation will be performed. To the extent that the compounded movement in the fair value inputs equals or exceeds 40%, a full revaluation by external, independent and qualified valuers will be performed. No adjustment to carrying amount is required if the compounded movement in the fair value inputs is less than or equal to 10%.
As at 30 June 2019, a managerial revaluation was completed for Buildings as the compounded movement in the fair value inputs since the last full revaluation date was between 10 % and 40 %.
A managerial revaluation was completed for land in the prior financial year 2018.
As the compounded movement in the fair value inputs for Infrastructure and Plant and equipment was less than 10 %, management assessed that no adjustment to carrying amount is required. Values calculated during the 30 June 2015 full independent valuation were escalated to 30 June 2019 with relevant consumer price indices and depreciation rates to estimate the magnitude of the compound movement in the fair value inputs.
(a) Fair value measurement hierarchy for assets as at 30 June 2019
Carrying Fair value measurement amount at reporting period using Level 1 Level 2 Level 3 Asset class $'000 $'000 $'000 $'000 Land 16,951 - 16,951 - Infrastructure 82,761 - - 82,761 Plant and equipment 14,131 - - 14,131 Total 113,843 - 16,951 96,892
It should be noted that since the fair value of the Land has been determined on the basis of market-based evidence its classification with respect to the fair value hierarchy has been determined as being Level 2 in nature. This is consistent with the prior year.
92 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
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8.3 Fair value determination 8.3.1 Net fair value of non-financial physical assets (continued) VPCM's property, plant and equipment assets are measured and disclosed at fair value for financial reporting purposes as per Note 4.1. None of VPCM's financial assets and liabilities are disclosed at fair value for Reconciliation of Level 3 fair value as at 30 June 2019: Infrastructure Plant and financial reporting purposes after initial recognition. In order to determine fair value of an asset or a liability, equipment VPCM uses market-observable data to the extent it is available. The carrying value of all of VPCM's financial $'000 $'000 assets and liabilities approximate their fair value. Opening balance - 1 July 2018 85,707 15,412 Transfer from Capital Work-In-Progress (CWIP) 1,511 787 8.3.1 Net fair value of non-financial physical assets Disposals - (163) Land, infrastructure assets and plant and equipment Revaluation 1,987 - VPCM engages external, independent and qualified valuers to determine the fair value of its fixed assets every Depreciation (6,445) (1,905) five years. The last full independent valuation was performed as at 30 June 2015. Closing balance - 30 June 2019 82,761 14,131
In accordance with FRD103H: Non-Financial Physical Assets requirements , as at each balance date, (b) Fair value measurement hierarchy for assets as at 30 June 2018 management assesses the compounded impact of movement in the fair value inputs since the last full revaluation date. To the extent that the compounded movement in the fair value inputs is greater than 10 % Carrying Fair value measurement but not in excess of 40%, a managerial revaluation will be performed. To the extent that the compounded amount at reporting period using movement in the fair value inputs equals or exceeds 40%, a full revaluation by external, independent and Level 1 Level 2 Level 3 qualified valuers will be performed. No adjustment to carrying amount is required if the compounded Asset class $'000 $'000 $'000 $'000 movement in the fair value inputs is less than or equal to 10%. Land 16,951 - 16,951 - Infrastructure 85,707 - - 85,707 As at 30 June 2019, a managerial revaluation was completed for Buildings as the compounded movement in Plant and equipment 15,412 - - 15,412 the fair value inputs since the last full revaluation date was between 10 % and 40 %. Total 118,070 - 16,951 101,119
A managerial revaluation was completed for land in the prior financial year 2018. Reconciliation of Level 3 fair value as at 30 June 2018: Infrastructure Plant and As the compounded movement in the fair value inputs for Infrastructure and Plant and equipment was less equipment than 10 %, management assessed that no adjustment to carrying amount is required. Values calculated during $'000 $'000 the 30 June 2015 full independent valuation were escalated to 30 June 2019 with relevant consumer price Opening balance - 1 July 2017 77,498 16,765 indices and depreciation rates to estimate the magnitude of the compound movement in the fair value inputs. Transfer from Capital Work-In-Progress (CWIP) 14,046 558 Depreciation (5,838) (1,911) Closing balance - 30 June 2018 85,707 15,412 (a) Fair value measurement hierarchy for assets as at 30 June 2019
Carrying Fair value measurement amount at reporting period using Level 1 Level 2 Level 3 Asset class $'000 $'000 $'000 $'000 Land 16,951 - 16,951 - Infrastructure 82,761 - - 82,761 Plant and equipment 14,131 - - 14,131 Total 113,843 - 16,951 96,892
It should be noted that since the fair value of the Land has been determined on the basis of market-based evidence its classification with respect to the fair value hierarchy has been determined as being Level 2 in nature. This is consistent with the prior year.
2 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 93 Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
9 OTHER DISCLOSURES 9 OTHER DISCLOSURES
Introduction 9.2 Equity disclosure This section includes additional material disclosures required by accounting standards or otherwise, for the understanding of this financial report. 9.2.1 Contributed capital Consistent with applicable Australian reporting requirements and the Financial Management Act 1994 (Vic) , Structure transfers and appropriation for additions of net assets between VPCM and State Government Departments 9.1 Ex-gratia expenses designated as contributed capital, are recognised as capital transactions. 9.2 Equity disclosure Transfers of net assets arising from administrative restructures and/or from all other arrangements which are 9.3 Responsible persons deemed to be contributions by owners, where there is insufficient contributed capital for distribution, are 9.4 Remuneration of executives recognised as an expense by the transferor and income by the transferee in accordance with FRD 119A - 9.5 Related parties Transfers through Contributed Capital. Alternatively, if the transferor has approval to reclassify sufficient 9.6 Remuneration of auditors accumulated funds to contributed capital prior to, or at, the time of the asset transfer date then a 9.7 Subsequent events distribution from contributed capital can occur. 9.8 Australian Accounting Standards issued that are not yet effective 2019 2018 $'000 $'000 Carrying amount 1 July 6,000 1,000 9.1 Ex-gratia expenses Capital contribution from the Department of Transport 1,335 5,000 In accordance with FRD 11A Disclosure of Ex-Gratia Expenses VPCM must disclose in aggregate the total amount of material (greater than $5,000) expenses. Carrying amount 30 June 7,335 6,000
For 2018-19, VPCM incurred no ex-gratia expenses (2018: $0). Capital management VPCM manages capital risk through the monitoring and reporting of key ratios to the Board on a monthly basis. The key ratios monitored are based on DTF's Treasury Management Guidelines and that future decisions regarding capital investment and funding requirements ensure that VPCM does not breach these key ratios. Target maximum gearing is between 0% - 35%. There have been no changes to the general processes and procedures that are applied by VPCM in managing capital risk since 2018. VPCM does not have any externally imposed debt-related covenants, financial ratios or any other capital requirements.
50 94 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
9 OTHER DISCLOSURES 9 OTHER DISCLOSURES
Introduction 9.2 Equity disclosure This section includes additional material disclosures required by accounting standards or otherwise, for the understanding of this financial report. 9.2.1 Contributed capital Consistent with applicable Australian reporting requirements and the Financial Management Act 1994 (Vic) , Structure transfers and appropriation for additions of net assets between VPCM and State Government Departments 9.1 Ex-gratia expenses designated as contributed capital, are recognised as capital transactions. 9.2 Equity disclosure Transfers of net assets arising from administrative restructures and/or from all other arrangements which are 9.3 Responsible persons deemed to be contributions by owners, where there is insufficient contributed capital for distribution, are 9.4 Remuneration of executives recognised as an expense by the transferor and income by the transferee in accordance with FRD 119A - 9.5 Related parties Transfers through Contributed Capital. Alternatively, if the transferor has approval to reclassify sufficient 9.6 Remuneration of auditors accumulated funds to contributed capital prior to, or at, the time of the asset transfer date then a 9.7 Subsequent events distribution from contributed capital can occur. 9.8 Australian Accounting Standards issued that are not yet effective 2019 2018 $'000 $'000 Carrying amount 1 July 6,000 1,000 9.1 Ex-gratia expenses Capital contribution from the Department of Transport 1,335 5,000 In accordance with FRD 11A Disclosure of Ex-Gratia Expenses VPCM must disclose in aggregate the total amount of material (greater than $5,000) expenses. Carrying amount 30 June 7,335 6,000
For 2018-19, VPCM incurred no ex-gratia expenses (2018: $0). Capital management VPCM manages capital risk through the monitoring and reporting of key ratios to the Board on a monthly basis. The key ratios monitored are based on DTF's Treasury Management Guidelines and that future decisions regarding capital investment and funding requirements ensure that VPCM does not breach these key ratios. Target maximum gearing is between 0% - 35%. There have been no changes to the general processes and procedures that are applied by VPCM in managing capital risk since 2018. VPCM does not have any externally imposed debt-related covenants, financial ratios or any other capital requirements.
50 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 95 Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
9 OTHER DISCLOSURES OTHER DISCLOSURES
9.2.1 Contributed capital (continued) 9.3 Responsible persons VPCM’s Treasury Management Policy and procedures are in compliance with the Borrowing and Investment In accordance with the Ministerial Directions issued by the Assistant Treasurer under the Financial Powers Act 1987 (Vic), the DTF's Treasury Management Guidelines and Standing Direction 4.5.6 Treasury Management Act 1994 , the following disclosures are made regarding responsible persons for the reporting Risk Management. period.
(a) Names In accordance with the Borrowings and Investment Powers Act 1987 (Vic), the Treasurer granted a The names of persons who held the positions of Ministers and Accountable Officers in VPCM at any time temporary purpose financial accommodation of $20 million to VPCM for the reporting period 1 July 2018 to during the financial year were: 30 June 2019 (2018: $20 million), which has also been extended for the year ending 30 June 2020.
Responsible Ministers: 9.2.2 Reserves The Hon. Luke Donnellan MP Minister for Ports(Jul 18 to Dec 18) 2019 2018 The Hon. Melissa Horne MP Minister for Ports and Freight (Dec 18 to Jun 19 ) $'000 $'000 The Hon. Tim Pallas MP Treasurer of Victoria Reserves Asset revaluation reserve 41,777 40,458 Directors Employee benefits reserve (4,294) 2,379 Mr J Cain Chairman 37,483 42,837 Ms J van Reyk Deputy Chair Ms D Beale Movement in asset revaluation reserve: Mr P Tuohey Carrying amount 1 July 40,458 38,326 Gain from asset revaluation 1,884 3,046 Accountable Officer: Tax effect from asset revaluation (565) (914) Ms R Johnson Chief Executive Officer Total movement in asset revaluation reserve 1,319 2,132 Carrying amount 30 June 41,777 40,458 (b) Remuneration Remuneration received or receivable by responsible persons in connection with the management of VPCM during the reporting period was: VPCM has a separate asset revaluation reserve for Land, Infrastructure and Plant and equipment. The 2019 2018 reserves record the increments and decrements in the fair value of the assets net of the tax effect. Income band $'000 $'000 $20,000 to $29,999 - 1 Movement in employee benefits reserve: $50,000 to $59,999 3 3 Carrying amount 1 July 2,379 2,113 $80,000 to $89,999 1 1 $320,000 to $329,999 - 1 Movements in actuarial gains/(losses) (9,533) 380 $400,000 to $409,999 1 - Tax effect from movements in actuarial gains/(losses) 2,860 (114) Total number of responsible persons 5 6 Total movement in employee benefits reserve (6,673) 266 Total remuneration ($ 000s) $ 656 $ 513 Carrying amount 30 June (4,294) 2,379
This reserve has been set up in accordance with the revised AASB 119 Employee Benefits to capture the movements in the actuarial gains and losses in respect of the Port of Melbourne Superannuation Fund. Refer to Note 3.2.3 for further details.
2 96 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
9 OTHER DISCLOSURES OTHER DISCLOSURES
9.2.1 Contributed capital (continued) 9.3 Responsible persons VPCM’s Treasury Management Policy and procedures are in compliance with the Borrowing and Investment In accordance with the Ministerial Directions issued by the Assistant Treasurer under the Financial Powers Act 1987 (Vic), the DTF's Treasury Management Guidelines and Standing Direction 4.5.6 Treasury Management Act 1994 , the following disclosures are made regarding responsible persons for the reporting Risk Management. period.
(a) Names In accordance with the Borrowings and Investment Powers Act 1987 (Vic), the Treasurer granted a The names of persons who held the positions of Ministers and Accountable Officers in VPCM at any time temporary purpose financial accommodation of $20 million to VPCM for the reporting period 1 July 2018 to during the financial year were: 30 June 2019 (2018: $20 million), which has also been extended for the year ending 30 June 2020.
Responsible Ministers: 9.2.2 Reserves The Hon. Luke Donnellan MP Minister for Ports(Jul 18 to Dec 18) 2019 2018 The Hon. Melissa Horne MP Minister for Ports and Freight (Dec 18 to Jun 19 ) $'000 $'000 The Hon. Tim Pallas MP Treasurer of Victoria Reserves Asset revaluation reserve 41,777 40,458 Directors Employee benefits reserve (4,294) 2,379 Mr J Cain Chairman 37,483 42,837 Ms J van Reyk Deputy Chair Ms D Beale Movement in asset revaluation reserve: Mr P Tuohey Carrying amount 1 July 40,458 38,326 Gain from asset revaluation 1,884 3,046 Accountable Officer: Tax effect from asset revaluation (565) (914) Ms R Johnson Chief Executive Officer Total movement in asset revaluation reserve 1,319 2,132 Carrying amount 30 June 41,777 40,458 (b) Remuneration Remuneration received or receivable by responsible persons in connection with the management of VPCM during the reporting period was: VPCM has a separate asset revaluation reserve for Land, Infrastructure and Plant and equipment. The 2019 2018 reserves record the increments and decrements in the fair value of the assets net of the tax effect. Income band $'000 $'000 $20,000 to $29,999 - 1 Movement in employee benefits reserve: $50,000 to $59,999 3 3 Carrying amount 1 July 2,379 2,113 $80,000 to $89,999 1 1 $320,000 to $329,999 - 1 Movements in actuarial gains/(losses) (9,533) 380 $400,000 to $409,999 1 - Tax effect from movements in actuarial gains/(losses) 2,860 (114) Total number of responsible persons 5 6 Total movement in employee benefits reserve (6,673) 266 Total remuneration ($ 000s) $ 656 $ 513 Carrying amount 30 June (4,294) 2,379
This reserve has been set up in accordance with the revised AASB 119 Employee Benefits to capture the movements in the actuarial gains and losses in respect of the Port of Melbourne Superannuation Fund. Refer to Note 3.2.3 for further details.
2 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 97 Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
9 OTHER DISCLOSURES 9 OTHER DISCLOSURES
9.4 Remuneration of executives 9.5 Related parties The number of executive officers, other than ministers and accountable officers, and their total VPCM is a wholly owned and controlled entity of the State of Victoria. remuneration during the reporting period are shown in the table below. Total annualised employee Related parties of VPCM include: equivalents provides a measure of full-time equivalent executive officers over the reporting period. - all key management personnel and their close family members and personal business Remuneration comprises employee benefits in all forms of consideration paid, payable or provided by the interests (controlled entities, joint ventures and entities they have significant influence over); entity, or on behalf of the entity, in exchange for services rendered, and is disclosed in the following - all Cabinet Ministers and their close family members; and categories. - all departments and public sector entities that are controlled and consolidated into the Short-term employee benefits include amounts such as wages, salaries, annual leave or sick leave that are whole of state consolidated financial statements. usually paid or payable on a regular basis, as well as non-monetary benefits such as allowances and free or subsidised goods or services. All related party transactions have been entered into on an arm’s length basis. Post-employment benefits include pensions and other retirement benefits paid or payable on a discrete basis when employment has ceased. Significant transactions with government-related entities Other long-term benefits include long service leave, other long service benefits or deferred compensation. The Victorian State Government prepares consolidated financial statements relating to its controlled entities. For the purpose of preparing the State Government's Annual Financial Termination benefits include termination of employment payments, such as severance packages. Report (AFR), transactions which VPCM has undertaken with other State Government controlled entities will be eliminated in the State Government's AFR. The aggregate amounts of VPCM's transactions conducted during the year and its assets and Remuneration of executive officers 2019 2018 liabilities at the end of the year which relate to State Government controlled entities are as (Including Key Management Personnel - see related parties note) $'000 $'000 follows: Short-term employee benefits 2,354 2,348 Post-employment benefits 206 173 2019 2018 Other long-term benefits 67 49 $'000 $'000 Total remuneration 2,627 2,570 Operating revenue and expenses Total number of executives (i) 14 13 CGU Workers' Compensation (58) (57) Total annualised employee equivalents (ii) 11.1 10.2 Department of Economic Development, Jobs & Precinct - 1,089 Department of Health and Human Services (61) - (i) The total number of executive officers includes persons who meet the definition of Key Management Department of Transport 2,190 - Personnel (KMP) of the entity under AASB 124 Related Party Disclosures and are also reported within the State Revenue Office (522) (482) related parties note disclosure. South East Water (63) (123) Victorian Auditor General's Office (54) (86) (ii) Annualised employee equivalent is based on paid working hours of 38 ordinary hours per week over the Vic Roads - (182) 52 weeks for a reporting period. Visit Victoria - (22) Other revenue and expenses (95) (76) Finance charges Treasury Corporation of Victoria - (9) Income tax instalments Department of Treasury and Finance (2,200) 9,830 Capital contribution Department Of Transport 1,335 - Department of Treasury and Finance - 5,000
54 98 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
9 OTHER DISCLOSURES
9.5 Related parties VPCM is a wholly owned and controlled entity of the State of Victoria. Related parties of VPCM include: - all key management personnel and their close family members and personal business interests (controlled entities, joint ventures and entities they have significant influence over); - all Cabinet Ministers and their close family members; and - all departments and public sector entities that are controlled and consolidated into the whole of state consolidated financial statements.
All related party transactions have been entered into on an arm’s length basis.
Significant transactions with government-related entities The Victorian State Government prepares consolidated financial statements relating to its controlled entities. For the purpose of preparing the State Government's Annual Financial Report (AFR), transactions which VPCM has undertaken with other State Government controlled entities will be eliminated in the State Government's AFR. The aggregate amounts of VPCM's transactions conducted during the year and its assets and liabilities at the end of the year which relate to State Government controlled entities are as follows:
2019 2018 $'000 $'000 Operating revenue and expenses CGU Workers' Compensation (58) (57) Department of Economic Development, Jobs & Precinct - 1,089 Department of Health and Human Services (61) - Department of Transport 2,190 - State Revenue Office (522) (482) South East Water (63) (123) Victorian Auditor General's Office (54) (86) Vic Roads - (182) Visit Victoria - (22) Other revenue and expenses (95) (76) Finance charges Treasury Corporation of Victoria - (9) Income tax instalments Department of Treasury and Finance (2,200) 9,830 Capital contribution Department Of Transport 1,335 - Department of Treasury and Finance - 5,000
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 99 Victorian Ports Corporation (Melbourne) Victorian Ports Corporation (Melbourne) Notes to the Financial Statements Notes to the Financial Statements For the year ended 30 June 2019 For the year ended 30 June 2019
9 OTHER DISCLOSURES 9 OTHER DISCLOSURES
9.5 Related parties (continued) 9.6 Remuneration of auditors During the year the following fees were paid or payable for services provided by the auditors Key management personnel (KMP) are those who, directly or indirectly, have authority and of VPCM: responsibility for planning, directing and controlling the activities of VPCM. This includes responsible Ministers, Directors, Chief Executive Officer and Executive General Managers. Victorian Auditor-General's Office 2019 2018 KMP for 2019 are detailed as follows: $'000 $'000 Mr J Cain - Chairman Audit of financial reports 58 56 Ms J van Reyk - Deputy Chair Ms D Beale - Director 9.7 Subsequent events Mr P Tuohey - Director Since 30 June 2019 to the date of this report, no matter or circumstance has arisen that, in Ms R Johnson - Chief Executive Officer the opinion of the Directors, has significantly affected or may significantly affect the Mr J Bazelmans - EGM Business Information and Strategy operations of VPCM, the results of those operations, or the state of affairs of VPCM in future Captain R Stanbrook - EGM Marine and Navigation financial years. Mr M Beattie - EGM Finance and Corporate Support (until 6 February 2019)
The compensation detailed below excludes the salaries and benefits the Portfolio and Shareholder Ministers receive. The Ministers' remuneration and allowances are set by the Parliamentary Salaries and Superannuation Act 1968 (Vic) and are reported within the Department of Parliamentary Services' Financial Report. 2019 2018 Compensation of KMP (i) $'000 $'000 Short-term employee benefits 1,344 1,426 Post-employment benefits 75 77 Other long-term benefits 30 32 Total 1,449 1,535
(i) Note that KMPs are also reported in the disclosure of remuneration of responsible persons (Note 9.3) and executive officers (Note 9.4).
Transactions and balances with key management personnel and other related parties Given the breadth and depth of State government activities, related parties transact with the Victorian public sector in a manner consistent with other members of the public e.g. stamp duty and other government fees and charges. Further employment of processes within the Victorian public sector occur on terms and conditions consistent with the Public Administration Act 2004 (Vic) and Codes of Conduct and Standards issued by the Victorian Public Sector Commission. Procurement processes occur on terms and conditions consistent with the Victorian Government Procurement Board requirements. The terms and conditions of transactions entered into with responsible persons’ related entities occurred within a normal customer and supplier relationship on terms and conditions no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to other entities on an arm’s length basis. No transactions have occurred with KMP and their related parties. There are no outstanding balances, including commitments, with such parties.
2 57 100 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Notes to the Financial Statements For the year ended 30 June 2019
9 OTHER DISCLOSURES
9.6 Remuneration of auditors During the year the following fees were paid or payable for services provided by the auditors of VPCM:
Victorian Auditor-General's Office 2019 2018 $'000 $'000 Audit of financial reports 58 56
9.7 Subsequent events Since 30 June 2019 to the date of this report, no matter or circumstance has arisen that, in the opinion of the Directors, has significantly affected or may significantly affect the operations of VPCM, the results of those operations, or the state of affairs of VPCM in future financial years.
57 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 101 Victorian Ports Corporation (Melbourne) Notes to the Financial Statements 9.8 Australian Accounting Standards issued that are not yet effective (continued) For the year ended 30 June 2019 Application Impact on VPCM’s financial Reference Summary date statements 9 OTHER DISCLOSURES AASB 2018-7 This Standard principally amends AASB 1 Jan 2020 The standard is not expected to Amendments 101 Presentation of Financial Statements have a significant impact on the 9.8 Australian Accounting Standards issued that are not yet effective to Australian and AASB 108 Accounting Policies, public sector. Accounting Changes in Accounting Estimates and Certain new accounting standards and interpretations that are deemed relevant to VPCM have been Standards – Errors . The amendments refine and clarify published, but are not mandatory for the 30 June 2019 reporting period. VPCM has not adopted these Definition of the definition of material in AASB 101 and standards early in accordance with DTF stating that entities must not early adopt Material its application by improving the wording and aligning the definition across AASB Assessment of the impact of those new standards and interpretations which affect VPCM is set out below: Standards and other publications. The amendments also include some supporting requirements in AASB 101 in Application Impact on VPCM’s financial the definition to give it more prominence Reference Summary date statements and clarify the explanation accompanying AASB 16 AASB 16 was issued in January 2016 and it 1 Jan 2019 The assessment has indicated that the definition of material. Leases replaces AASB 117 Lease. AASB 16 sets out most operating leases, with the the principles for the recognition, exception of short term and low measurement, presentation and disclosure value leases will come on to the of leases and requires lessees to account balance sheet and will be for all leases under a single on-balance recognised as right of use assets sheet model similar to the accounting for with a corresponding lease In addition to the new standards and amendments above, the AASB has issued a list of other amending finance leases under AASB 117. The liability. standards that are not effective for the 2018-19 reporting period (as listed below). In general, these standard includes two recognition In the operating statement, the amending standards include editorial and references changes that are expected to have insignificant impacts exemptions for lessees – leases of 'low- operating lease expense will be on public sector reporting. value’ assets (e.g. printing and replaced by depreciation expense · AASB 2017-4 Amendments to Australian Accounting Standards – Uncertainty over Income Tax photocopying machines) and short-term of the asset and an interest Treatments leases (i.e. leases with a lease term of 12 charge. · AASB 2017-6 Amendments to Australian Accounting Standards – Prepayment Features with months or less). There will be no change for Negative Compensation The key changes introduced by AASB 16 lessors as the classification of · AASB 2018-1 Amendments to Australian Accounting Standards – Annual Improvements 2015 – include the recognition of most operating operating and finance leases 2017 Cycle leases (which are currently not remains unchanged. · AASB 2018-2 Amendments to Australian Accounting Standards – Plan Amendments, Curtailment recognised) on balance sheet. On initial recognition as at 1 July or Settlement 2019 right of use assets and lease · AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business liabilities will increase by approximately $2.1M.
58 59 102 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Victorian Ports Corporation (Melbourne) Notes to the Financial Statements 9.8 Australian Accounting Standards issued that are not yet effective (continued) For the year ended 30 June 2019 Application Impact on VPCM’s financial Reference Summary date statements 9 OTHER DISCLOSURES AASB 2018-7 This Standard principally amends AASB 1 Jan 2020 The standard is not expected to Amendments 101 Presentation of Financial Statements have a significant impact on the 9.8 Australian Accounting Standards issued that are not yet effective to Australian and AASB 108 Accounting Policies, public sector. Accounting Changes in Accounting Estimates and Certain new accounting standards and interpretations that are deemed relevant to VPCM have been Standards – Errors . The amendments refine and clarify published, but are not mandatory for the 30 June 2019 reporting period. VPCM has not adopted these Definition of the definition of material in AASB 101 and standards early in accordance with DTF stating that entities must not early adopt Material its application by improving the wording and aligning the definition across AASB Assessment of the impact of those new standards and interpretations which affect VPCM is set out below: Standards and other publications. The amendments also include some supporting requirements in AASB 101 in Application Impact on VPCM’s financial the definition to give it more prominence Reference Summary date statements and clarify the explanation accompanying AASB 16 AASB 16 was issued in January 2016 and it 1 Jan 2019 The assessment has indicated that the definition of material. Leases replaces AASB 117 Lease. AASB 16 sets out most operating leases, with the the principles for the recognition, exception of short term and low measurement, presentation and disclosure value leases will come on to the of leases and requires lessees to account balance sheet and will be for all leases under a single on-balance recognised as right of use assets sheet model similar to the accounting for with a corresponding lease In addition to the new standards and amendments above, the AASB has issued a list of other amending finance leases under AASB 117. The liability. standards that are not effective for the 2018-19 reporting period (as listed below). In general, these standard includes two recognition In the operating statement, the amending standards include editorial and references changes that are expected to have insignificant impacts exemptions for lessees – leases of 'low- operating lease expense will be on public sector reporting. value’ assets (e.g. printing and replaced by depreciation expense · AASB 2017-4 Amendments to Australian Accounting Standards – Uncertainty over Income Tax photocopying machines) and short-term of the asset and an interest Treatments leases (i.e. leases with a lease term of 12 charge. · AASB 2017-6 Amendments to Australian Accounting Standards – Prepayment Features with months or less). There will be no change for Negative Compensation The key changes introduced by AASB 16 lessors as the classification of · AASB 2018-1 Amendments to Australian Accounting Standards – Annual Improvements 2015 – include the recognition of most operating operating and finance leases 2017 Cycle leases (which are currently not remains unchanged. · AASB 2018-2 Amendments to Australian Accounting Standards – Plan Amendments, Curtailment recognised) on balance sheet. On initial recognition as at 1 July or Settlement 2019 right of use assets and lease · AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business liabilities will increase by approximately $2.1M.
58 59 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 103 104 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Section 6: Appendices
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 105 A: Disclosure index
The annual report of VPCM is prepared in accordance with all relevant Victorian legislations and pronouncements. This index has been prepared to facilitate identification of VPCM’s compliance with statutory disclosure requirements.
Legislation Requirement Page Standing Directions and Financial Reporting Directions (FRD) Report of operations Charter and purpose FRD 22H Manner of establishment and the relevant Ministers 1, 9, 22 FRD 22H Purpose, functions, powers and duties 9-11 FRD 22H Nature and range of services provided 9 Management and structure FRD 22H Organisational structure 26 Financial and other information FRD 10A Disclosure index 104 FRD 10A Statement of Corporate Intent pursuant to section 79Q of the Transport Integration Act 106 2010 (Vic) FRD 12B Disclosure of major contracts 19, 38 FRD 15E Executive officer disclosures 98 FRD 22H Occupational health and safety policy 28 FRD 22H Employment and conduct principles 29 FRD 22H Summary of the financial results for the year 17 FRD 22H Significant changes in financial position during the year 19 FRD 22H Major changes or factors affecting performance 19 FRD 22H Subsequent events 19 FRD 22H Application and operation of Freedom of Information Act 1982 (Vic) 38 FRD 22H Compliance with building and maintenance provisions of Building Act 1993 (Vic) 39 FRD 22H Statement on Competitive Neutrality Policy 39 FRD 22H Application and operation of the Protected Disclosure Act 2012 (Vic) 39-40 FRD 22H Details of consultancies over $10,000 37 FRD 22H Details of consultancies under $10,000 37 FRD 22H Disclosure of government advertising expenditure 36 FRD 22H Disclosure of ICT expenditure 37 FRD 22H Statement of availability of other information 40 FRD 25D Local Jobs First 36 FRD 29C Workforce data disclosures 32 FRD 30D Standard Requirements for the design and print of annual reports 1-117 Compliance attestation and declaration SD 5.1.4 Attestation for compliance with Ministerial Standing Direction 41 SD 5.2.3 Declaration in report of operations 1 Financial statements SD 5.2.2 Declaration in financial statements 46
106 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Legislation Requirement Page Standing Directions and Financial Reporting Directions (FRD) Other requirements under Standing Direction 5.2 SD 5.2.1 (a) Compliance with Ministerial Directions 57 SD 5.2.1 (a) Compliance with Australian accounting standards and other authoritative pronouncements 57 Other disclosures as required by FRDs in the notes to the financial statements FRD 03A Accounting for Dividends 84 FRD 17B Long Service Leave, Wage Inflation and Discount Rates 62 FRD 21C Responsible persons and Executive officers in the Financial Report 97-98 FRD 103G Non-Financial Physical Assets 70-74 FRD 100A Financial Reporting Directions - Framework 78 FRD 105B Borrowing Costs 78 FRD 106B Impairment of Assets 56 FRD 108C Classification of Entities as For-Profit 57 FRD 109A Intangible Assets 50 FRD 110A Statement of Cash Flows 53, 79 FRD 112D Defined Benefit Superannuation Obligations 63-69 FRD 114B Financial Instruments 86-88 FRD 119A Contributions by Owners 95-96 FRD 120L Accounting and Reporting Pronouncements applicable to the 2018-19 Reporting Period 102-103
Legislation Borrowing and Investment Powers Act 1987 (Vic) 52 Building Act 1993 (Vic) 39 Financial Management Act 1994 (Vic) Various Freedom of Information Act 1982 (Vic) 38 Marine Safety Act 2010 (Vic) 9, 10 Parliamentary Salaries and Superannuation Act 1968 (Vic) 56 Port Management Act 1995 (Vic) 10, 15, 16 Protected Disclosure Act 2012 (Vic) 39 Public Administration Act 2004 (Vic) 22, 56 Transport Integration Act 2010 (Vic) Various Victorian Industry Participation Policy Act 2003 (Vic) 36 Income Tax Assessment Act 1936 (Cwlth) 81 Income Tax Assessment Act 1997 (Cwlth) 81
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 107 B: Statement of Corporate Intent
1 Statement of Corporate Intent
VPCM is required to prepare the following Statement of Corporate Intent under the Transport Integration Act 2010 (Vic) Clause 166.
VPCM overview and assets VPCM is a statutory authority created by the Victorian Government following the successful completion of the lease of the Port of Melbourne Corporation commercial operations. This transaction is commonly referred to as the Port Lease Transaction (PLT). VPCM commenced operations on 1 November 2016.
VPCM has responsibility for those functions and activities which remain with the State, including Vessel Traffic Services for safe navigation, waterside emergency management, towage regulation and management of the Station Pier terminal and West Finger Pier. Station Pier is Victoria’s primary cruise vessel and Tasmania passenger ferry terminal.
2 VPCM operating environment
We’re part of Victoria’s integrated transport portfolio, led by the Department of Transport. The Department of Transport brings Victoria’s transport sector agencies together under one umbrella. This coordinated approach fosters collaboration and integrated decision-making and positions the government to meet the transport challenges facing Victoria. VPCM legislative framework overview The legislative framework that guides VPCM’s roles, responsibilities and activities is primarily outlined in the Transport Integration Act 2010 (TIA), the Port Management Act 1995 (PMA) and the Marine Safety Act 2010 (MSA).
Transport Integration Act 2010 (TIA) The TIA sets out VPCM’s objects, functions and powers and roles as a transport corporation, a transport body and a sector transport agency.
The main objects of VPCM include: • to ensure that port of Melbourne waters and channels in port of Melbourne waters are managed for use on a fair and reasonable basis consistent with the vision statement and the transport system objectives; • to manage and develop Station Pier and West Finger Pier consistent with the vision statement and the transport system objectives; • to ensure, in collaboration with relevant responsible bodies, that the port of Melbourne waters, Station Pier and West Finger Pier are effectively integrated with the transport system and other systems of infrastructure in the State.
The functions and powers of VPCM address key areas, including: • direction and control of vessel movements in port of Melbourne waters, including scheduling and allocation of vessels to berths in the port of Melbourne; • channels, navigation aids and systems in connection with navigation in port of Melbourne waters; • development, management and operation of Station Pier and West Finger Pier; and • promotion and marketing of the port of Melbourne.
108 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Port Management Act 1995 (PMA) The PMA establishes the operating framework for Station Pier and allocates specific operational and regulatory responsibilities to VPCM. The purposes of the Act are: • to provide for the establishment, management and operation of commercial trading ports and local ports in Victoria; • to provide for the economic regulation of certain port services; • to provide for the imposition of certain port charges or fees; • to require the engagement of licensed harbour masters in certain circumstances and set out their functions; • to provide for the transfer of property, rights and liabilities and the management of Crown land and to make provision with respect to the rights of staff.
For VPCM, the PMA specifies operational and regulatory responsibilities in relation to the following: • as a Committee of Management under the Crown Land (Reserves) Act 1978 (Vic) for Crown Land reserved for the purposes of the port of Melbourne, including Station Pier and the West Finger Pier • towage services within the port of Melbourne • wharfage and channel fees • powers to restrict access to areas • hazards and polluting activities or things on port of Melbourne land, that is not leased port of Melbourne land, or into port of Melbourne waters • abandoned or unclaimed goods or things in port of Melbourne waters or on port of Melbourne land that is not leased port of Melbourne land.
Marine Safety Act 2010 (MSA) The MSA provides the framework for safe marine operations within Victoria by, among other things: • imposing a range of safety duties on owners, managers, designers, manufacturers, suppliers of vessels, marine safety infrastructure and marine safety equipment; marine safety workers; masters and users of recreational vessels; and passengers on vessels; • providing for the registration of recreational vessels and for the licensing of masters of recreational vessels and regulated hire and drive vessels; • providing for the regulation and management of the use of, and navigation of vessels on, State waters; • requiring port management bodies to engage harbour masters and providing for the licensing of persons to act as harbour masters and the authorisation of persons to act as assistant harbour masters; • providing for the registration of pilotage service providers and the licensing of pilots; and • requiring the use of pilots in declared parts of State waters.
The objects of the MSA are to promote: • the safety of marine operations; • the effective management of safety risks in marine operations and in the marine operating environment; • continuous improvement in marine safety management; • public confidence in the safety of marine operations; • involvement of relevant stakeholders in marine safety; and • a culture of safety among all participants in the marine operating environment.
The purpose and objects are underpinned by principles of marine safety: shared responsibility; accountability for managing safety risks; integrated risk management; enforcement; transparency; participation, consultation and involvement of all affected persons; and equity of use of Victorian waterways.
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 109 Ministerial directions and expectations Our Statement of Expectations (SOE), issued by the Minister for Ports and Freight, provides a confirmation of the role and direction of VPCM. In addition, the SOE identified two compliance and administrative processes undertaken by VPCM which could be reviewed and streamlined to enhance the customer experience. The processes are: • application and notification procedures including a review of the dangerous goods notification process; and • review of Harbour Master’s Directions to ensure regulatory clarity and engagement with commercial operators. 3 VPCM objectives
Our objectives respond to the challenges, opportunities and risks while supporting delivery of the portfolio strategic focus areas.
Table 1 – VPCM Strategic objective 1 – Safety, Security & Sustainability
What When Who Year 1 Year 2 Year 3 Year 4 2019-20 2020-21 2021-22 2022-23 Strategic objective 1 – Safety, Security & Sustainability focus Deliverable: provide a safe VPCM working environment for VPCM people and network users and protect the port environment from environmental and security threats and hazards.
Prepare VPCM infrastructure and stakeholders Marine & for revised air FY19/20 • emission and fuel Navigation type standards in port areas Enhance port Marine & safety and security Ongoing • • • • Navigation
Develop and implement Business, Beginning in a VPCM Information • • • FY20/21 Sustainability & Strategy programme
Measuring performance • All injury frequency rate. The all injury frequency rate (AIFR) is a measure of all reportable injuries: lost time injuries, restricted work injuries and medical treatment cases per 120,000 hours worked. The target for VPCM is zero, to be reported quarterly. • Reportable environmental regulation breaches. Number of VPCM reportable environmental regulation breaches during the period. The target for VPCM is zero in the period, to be reported quarterly. • Reportable security regulation breaches. Number of VPCM reportable security regulation breaches during the period. The target for VPCM is zero in the period, to be reported quarterly. • Vessel Traffic Services: 98 per cent availability (100 per cent achieved in FY2017-18).
110 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Table 2 – Strategic objective 2 – Commercial Performance Focus
What When Who Year 1 Year 2 Year 3 Year 4 2019-20 2020-21 2021-22 2022-23 Strategic objective 2 – Commercial Performance Focus Deliverable: to create a long-term financial plan that ensures VPCM’s financial sustainability by: • maintaining an adequate operating surplus in outward years to ensure VPCM is able to meet its ongoing financial commitments • maintaining sound financial governance to promote commercial decision-making • operating efficiently and managing financial risk effectively • ensuring operating and capital budgets are managed efficiently.
Bring a commercial focus to our decisions by articulating Ongoing All divisions • • • • costs and benefits for all decisions
Review VPCM Procurement Finance & Policy and Ongoing Corporate • • • • procedures Support
Secure grant funding for capacity Ongoing Infrastructure • • • • expansion projects
Measuring performance • Achieve an operating profit while operating within approved budgets. • Ensure cash balance will remain in excess of $5 million to meet standing obligations. • Compliance of VPCM policies.
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 111 Table 3 – Strategic objective 3 – Customer Focus
What When Who Year 1 Year 2 Year 3 Year 4 2019-20 2020-21 2021-22 2022-23 Strategic objective 3 – Customer Focus Deliverable: respond to changes in the marine operating environment with safe navigation support systems and infrastructure capacity and tourism at Station Pier.
Ensure navigation safety support systems for the Marine & channels in port of Ongoing • • • • Melbourne waters Navigation meet customer needs Enhance marine and navigation Marine & services to Port Ongoing • • • • Navigation Phillip Bay users
Collaborate with stakeholders to ensure port of Business, Melbourne waters Information & and Station Pier Ongoing Strategy • • • • are effectively integrated with the Infrastructure transport network
Promote and market the port of Melbourne (VPCM functions) Business, Ongoing Information & • • • • Strategy
Measuring performance • Customer reputation. The reputation of VPCM with customers will be calculated from customer survey data to be collected annually. The areas of satisfaction to be measured are: responsiveness, cost effectiveness, collaboration and communication. The target is to be rated by customers over 75 per cent. • Payment of financial penalties. The Port Operations Service Deed between VPCM and Port of Melbourne includes provision for payment of penalties for non-compliance in delivery of services to the Port of Melbourne. The target is zero penalty payments.
112 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Table 4 – Strategic objective 4 – Productivity Focus
What When Who Year 1 Year 2 Year 3 Year 4 2019-20 2020-21 2021-22 2022-23 Strategic objective 4 – Productivity Focus Deliverable: manage port of Melbourne waters and channels in port of Melbourne waters on a fair and reasonable basis and efficiently manage Station Pier and the West Finger Pier. Deliver capital development and capital maintenance projects on time Ongoing All divisions • • • • and on budget to meet market demand Investigate navigation safety options to maximise the capacity of the Marine & port of Melbourne Ongoing • • • • channels and Navigation facilities to cater for projected increase in vessel size
Engage with road network managers and Business public transport Information & operators to Strategy provide landside Ongoing • • • • network capacity for expanded and Infrastructure ongoing Station Pier operations
Measuring performance • Assets management accountability framework in support of development and maintenance projects. VPCM has developed a four-year improvement plan to promote a good asset management culture, in line with the Minister of Finance Standing Directions (2016) and closely aligned to the ISO 55000 Asset Management Standard Series. The plan includes ten major tasks to ensure compliance, including the development of: - a strategic asset management plan in FY19/20, taking into consideration stakeholder requirements, levels of service and future assets required by VPCM - good asset management, governance, training and culture procedures.
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 113 - Systems availability. Key operational systems needed for management of port of Melbourne waters and channels within the port of Melbourne are required to achieve availability levels for customer use as follows: Dynamic Under Keel Clearance (DUKC). Percentage availability of the DUKC during the period – the target is no less than 98 per cent availability and no critical failures measured quarterly. • Vessel Traffic Service (VTS). Supporting navigation safety. Percentage availability of the VTS during the period – the target is no less than 98 per cent availability and no critical failures measured quarterly. • Trade volume. The volume of cargo transhipped through the port of Melbourne is a derived demand based on factors such as the level of economic activity in the hinterland of the port, population, international events and national productivity. The function of VPCM is to facilitate trade through delivery of services and facilities. By measuring cargo volume throughput at the VPCM managed facilities relative to those managed by the Port of Melbourne ensures that the VPCM services and facilities are fit for purpose and priced appropriately. This measure is the overall cargo volume measured in revenue tonnes through sites managed by VPCM where stevedoring operations are carried out (currently only Station Pier). The comparison volume is an estimate of the volume of trade through port of Melbourne facilities catering for the Bass Strait RoRo trade (currently Webb Dock East). This gross measure of performance seeks to measure the relative efficiency and attractiveness of VPCM managed facilities compared to substitute facilities within the port. The target is relative parity with port of Melbourne Bass Strait volume, to be measured annually. • Cruise vessel visits and passenger throughput. Like cargo volume, the number of cruise vessel calls and passenger throughput are a derived demand. Measuring the number of vessel calls and passenger throughput ensures that the services and facilities provided by VPCM are fit for purpose and priced appropriately. The overall number of cruise vessel calls and passenger throughput at Station Pier should increase in line with the number of cruise vessels operating in Australian waters. • The growth in the number of vessels calling to Station Pier and passenger throughput should increase in line with vessel calls to Port Jackson (Sydney) given the similar sizes of the port catchment area for domestic passengers. This indicator of performance measures the relative efficiency and attractiveness of VPCM managed facilities compared to similar facilities in the main cruise port in Australia. The VPCM target is relative parity with Port Jackson cruise vessel calls and passenger throughput to be measured annually.
114 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report Table 5 - Strategic objective 5 – People, Culture & Community Relations Focus
What When Who Year 1 Year 2 Year 3 Year 4 2019-20 2020-21 2021-22 2022-23 Strategic objective 5 – People, Culture & Community Relations Focus Deliverable: Maintain an effective, sustainable, diverse and fair organisation, with a culture that creates high levels of employee engagement and performance by: • ensuring well documented governance policies and processes are in place (incorporating clear processes for ongoing review and updates) and effectively communicated to all VPCM personnel to achieve the following: - Decision-making is transparent, compliant with VPCM policies and aligns with the Victorian Government standards. - Acting in accordance with all applicable legislative requirements. - Having staff represent our values and act with integrity, honesty and in the best interests of the business when making decisions. - Ensuring our internal processes are clear, consistent, understood and used by staff. Continual focus on the VPCM People Ongoing All divisions • • • • & Culture Strategy
Continual focus on VPCM Community Ongoing All divisions • • • • Relations
Measuring performance • Employee engagement metrics will continuously improve. • No instances of non-compliance with VPCM policies. • Community reputation. The reputation of VPCM with the local community will be calculated from community stakeholder survey data to be collected annually. The areas of satisfaction to be measured are: responsiveness, collaboration and communication. The target is to be rated by community stakeholders at over 75 per cent.
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 115 4 Service delivery performance measures and targets
To monitor and measure performance, VPCM utilises a range of lead and lag indicators.
VPCM will report KPI quarterly to our shareholding Ministers in the quarterly business performance report. A summary of the KPI are shown in Table 6.
Table 6 - VPCM Key Performance Indicators (KPI)
Strategic objective KPI and remarks Target Strategic objective 1 All Injury Frequency Rate (AIFR) Zero Safety, Security & Sustainability Reportable environmental Zero regulation breaches
Reportable security regulation Zero breaches
Vessel Traffic Services 98 per cent availability
Strategic objective 2 Operating profit As per budget Commercial Focus Return on Capital Employed As per budget (ROCE)
Debtor management No outstanding debts receivable greater than 60 days
Cash at bank Ensure >$5 million cash on hand
Policy compliance No instances of policy non-compliance
Strategic objective 3 Customer reputation Rated over 75 per cent Customer Focus Payment of financial penalties Zero penalty payments
Strategic objective 4 Systems availability DUKC and VTS to achieve no less than 98 per cent Productivity Focus availability and no critical failures Trade volume Station Pier cargo throughput to maintain relative parity with port of Melbourne Bass Strait volumes and cruise passenger numbers to maintain relative parity with Port Jackson Strategic objective 5 Employee engagement and Rated over 75 per cent People, Culture & alignment Community Relations Community reputation Rated over 75 per cent Focus
116 Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 5 Accounting policies
Preparation of financial budget and forecast Pricing – Tariffs. VPCM’s Reference Tariff Schedule fees for 2019-20 will increase by 1.8 per cent based on the most recent Consumer Price Index (CPI) released by the Australian Bureau of Statistics (December quarter 2017 to December quarter 2018 - weighted average of eight capital cities). This increase is a standard price increase to maintain VPCM’s operational activities.
Application of the Revised Reference Tariff Schedule. The revised VPCM Reference Tariff Schedule applies from 1 July 2019. Annual review of the RTS will occur with CPI used as the primary adjustment factor.
Salary increases. The assumed rate of increase is 3 per cent for all years in the forecast period for Enterprise Agreement staff and 2 per cent for Executives.
Pricing – Rent. Revenue from land rentals in 2019-20 will continue in accordance with specific terms of the leases.
Capital expenditure. Total capital expenditure to 30 June 2019 is $8.4 million spent in 2018-19 mainly on Station Pier redevelopment project, Station Pier facility activities and the works associated with the replacement of the VTS and radar.
Summary of significant accounting policies Basis of accounting. The financial forecasts have been prepared as a general purpose financial report in accordance with all applicable standards, frameworks and regulation from Government.
Income tax. Pursuant to the State Owned Enterprise Act 1992 (Vic), VPCM is subject to the National Income Tax Equivalent Regime. In accordance with this legislation, VPCM is required to pay to the Victorian Government’s Consolidated Fund an amount determined as equivalent to the amount that would be payable by VPCM if it was subject to the Commonwealth Income Tax Assessment Act 1936 (Cwlth). The financial results have been prepared using tax effect accounting.
Valuation of fixed assets. Accounting standards require the fair valuation of fixed assets be applied and the impact reflected in the profit and loss statement and balance sheet.
Capital works expenditure In accordance with VPCM’s capital investment procedures, each proposed project more than $1.0 million will be subject to the completion of a satisfactory financial evaluation prior to management approval to proceed with the project.
Borrowings The TIA confers borrowings and investment powers to VPCM under the Borrowing and Investment Powers Act 1987 (Vic).
Victorian Ports Corporation (Melbourne) 2018-19 Annual Report 117
Victorian Ports Corporation (Melbourne)
Street address Level 5, 530 Collins Street Melbourne Victoria 3000 Australia
Postal address GPO Box 261 Melbourne VIC 3001 Australia
Tel: +61 3 8347 8300 Fax: +61 3 8347 8301 www.vicports.vic.gov.au Victorian Ports Corporation (Melbourne) 2018-19 Annual Report
Department of Transport
Authorised by the Victorian Government. This publication is produced by Victorian Ports Corporation (Melbourne). Proudly designed and produced by abCreative productions www.abCreative.com Printed on 100% recycled paper. ANNUAL REPORT 2018-19