annual report 2007-08 08 The Honourable Lynne Kosky MP Minister for Public Transport Level 16 121 Exhibition Street Melbourne Victoria 3000
The Honourable John Lenders MP Treasurer 1 Treasury Place Melbourne Victoria 3001
Dear Ministers,
Transport Ticketing Authority 2007-08 Annual Report
I have pleasure in submitting the Transport Ticketing Authority’s annual report for the year ended 30 June 2008, in accordance with the provisions of the State Owned Enterprises Act 1992 and the Financial Management Act 1994.
Yours sincerely,
Michael Pryles Chairman
Transport Ticketing Authority (Public Transport Ticketing Body)
12 September 2008 Contents
2 Chairman’s report 3 CEO’s report 5 About the Transport Ticketing Authority 6 Board of Directors 9 Report of operations 17 Accountable Officer’s and Chief Finance and Accounting Officer’s Declaration 18 Auditor-General’s report 20 Operating statement 21 Balance sheet 22 Statement of changes in equity 23 Cash flow statement 24 Notes to the financial statements
Transport Ticketing Authority – Annual Report 2007-08 1 Chairman’s report
The development of Victoria’s new public transport ticketing system Governance is a very important Victorian infrastructure project. The Board recently appointed Mr Gary Thwaites as CEO. He brings significant project management experience to the Authority. Project timeframes In the past year the Transport Ticketing Authority (TTA) faced The Board has been enhanced with the addition of two new a number of challenges. The most significant challenges were members – Mr John Peoples and Mr John McMillan. The Board caused by the fact that the delivery of the project will take acknowledges the significant contribution made by Mr Peter much longer than was originally planned. The contractor and Harris, who stepped down this year. the Authority underestimated the time that would be required for the development and full testing of the new software to operate The Board also established a new committee, the Project Delivery the system. Comparison of delivery timeframes for similar projects Committee, to oversee the more detailed project delivery policy overseas (many of which are less complex than myki, our ticketing and execution issues. This committee meets approximately system), shows that the rate of progress we have experienced is fortnightly and is chaired by Mr John Peoples. generally similar or better than in other cities that have implemented smartcard ticketing systems. The future Notwithstanding the issues faced during the year, there has There are no shortcuts to getting the software right for a been significant progress, including a comprehensive program major ticketing system and its development is complex and of equipment installation. In recent months the contractor has time consuming. Some commentators have suggested that also achieved required milestones in preparation for roll-out the Authority should have procured an off the shelf system in the next calender year. already operating in another city. This is not possible, however, because the detailed operating environments, fare structures, The Authority, and its contractors, will continue to make steady policies and enforcement rules of ticketing systems are all different progress towards delivery of the system. On behalf of the Board, and have evolved in response to specific local circumstances. I wish to thank the TTA’s management and staff for their ongoing commitment, dedication and hard work to deliver Victoria’s new The timeframes required for the delivery of the new ticketing ticketing system. system has now been re-established and roll-out is now expected in the next calender year with completion in 2010. In response to these extended timeframes, the Government has approved an increase to the funding envelope for the Authority. This funding envelope includes the operating costs for the system over the next 10 years, and the costs of operating the existing Metcard system Michael Pryles until the transition is finalised, as well as the capital costs of the Chairman system during the project development phase.
2 Transport Ticketing Authority – Annual Report 2007-08 CEO’s report
Implementing smartcard ticketing systems is a complex task. In order to support the delivery of the new system, the TTA has undergone significant organisational change realigning the Victoria’s new ticketing system extends to regions in Victoria, business to better equip it for the delivery and operational phases. as well as metropolitan Melbourne, making it the largest smartcard ticketing system in the world, by public transport service types Public transport operators are integral to the successful introduction and geographic area covered. of the new system. The operators continue to make a significant contribution to the delivery of what will be a major change to Project delays have led to significant frustration being expressed their operations. at many levels. These extended timeframes have been principally due to delays in software development. I would like to thank the Board and TTA staff for their efforts.
Despite the project’s inherent challenges, and although there The year ahead will be full of challenges and the TTA is committed is still a long way to go, significant progress is being made. to meeting those challenges. A challenging part of getting ready for the new ticketing system involves complex technological and engineering preparation.
During the year, 100 per cent of available trams and 95 per cent of buses across Victoria were pre-wired for the new Gary Thwaites system and 289 of the 292 metropolitan and regional stations Chief Executive Officer are now completed.
A lynchpin in the delivery of the new system is the work of the key contractor Kamco and, in turn, its relationship with its key subcontractors – Affiliated Computer Services (ACS) and Giesecke & Devrient (G&D). Relationships with Kamco have been strengthened this year and there is a renewed sense of collaboration and commitment to achieving the same goal – delivery of the system within the recalibrated timeframes.
The project also reached the stage where field testing could take place with encouraging results. Of the 124 scenarios tested on buses in Geelong in April 2008, some 112 were successful and most of those remaining were rectified during the testing period. The focus on testing will continue in the year ahead as the TTA moves toward the roll-out of the system in the next calender year – with completion expected in 2010.
Transport Ticketing Authority – Annual Report 2007-08 3 About the Transport Ticketing Authority
The role of the Transport Ticketing Authority is to oversee:
• Victoria’s current Metcard public transport ticketing system contract; and • the design, build and delivery of the new ticketing system.
The system will help to integrate public transport in metropolitan and regional Victoria, improving the accessibility and connectivity of public transport for customers throughout the State.
On 1 July 2007, a number of functions that were previously managed by Metlink were transferred to the TTA. These include:
• the revenue clearing and settlement function for the metropolitan public transport system, involving management, distribution and reporting of public transport revenues • revenue audit of public transport operators’ cash and ticket handling procedures and practices • retail agents’ network management • OneLink Transit operational contract management and performance assessment.
The TTA’s prime objective for the new ticketing system is to ensure it meets the needs of customers and public transport operators. In addition, the TTA aims to ensure:
• the smooth transition to the system throughout metropolitan and regional Victoria • that customers trust and accept the new ticketing system • that the system meets the requirements of public transport operators and provides them with opportunities to enhance service value • that the new ticketing system and the OneLink Transit ticketing systems achieve high levels of system performance, including the ongoing integrity and value for money of ticketing infrastructure and operations.
The performance of the TTA will be measured by: • delivery of the new ticketing system project within the revised schedule and budget • a smooth transition to the system for customers and transit operators • customers’ assessment of smartcard convenience, reliability and ease-of-use, as reflected in the rate of ‘take up’ of the system across Victoria • public transport operators’ confirmation that the delivered system meets their agreed requirements • ongoing achievement of high levels of system performance.
4 Transport Ticketing Authority – Annual Report 2007-08 Transport Ticketing Authority – Annual Report 2007-08 5 Board of Directors
Prof Michael Pryles Board Chairman Appointed Director and Chairman on 14 October 2003. Professor Pryles is a commercial and corporate lawyer with an international arbitration practice.
Deputy Chairman of the Audit Committee.
Mr Peter Harris Board Director Appointed 17 June 2003 and founding Director and Chairman until 14 October 2003. Mr Harris is a senior public servant, formerly Director of Public Transport. He resigned from the Board effective 4 February 2008.
Chairman of the Audit Committee until 4 February 2008.
Ms Christine Gibbs Board Director Appointed on 15 March 2005, Ms Gibbs is a communications and marketing specialist with experience in the public and private sectors.
John Peoples Board Director Appointed on 1 November 2007, Mr Peoples is a project advisor on a range of commercial projects to public and private sector organisations.
Chairman of the Project Delivery Committee since its inception in April 2008.
John McMillan Board Director Appointed on 1 November 2007, Mr McMillan currently serves as Chairman of Metlink.
Chairman of the Remuneration Committee from 1 July 2008.
6 Transport Ticketing Authority – Annual Report 2007-08 Transport Ticketing Authority – Annual Report 2007-08 7 8 Transport Ticketing Authority – Annual Report 2007-08 Report of Operations
Project timeframes staff act as customers, conducting over 100 scenarios to test the This year saw many challenges in delivering Victoria’s new ticketing reliability of the system. The tests yielded encouraging results with system, resulting in re-established timeframes and revised budget. a success rate of more than 90 per cent. Roll-out is now expected in the next calender year with completion in 2010. Further tests will commence later this calendar year.
Business partners Retail agents The TTA’s key contractor is Keane Australia Micropayment The engagement of retail agents for the new ticketing system Consortium Pty Ltd (Kamco). Kamco has been engaged to design, commenced in 2007. A substantial proportion of the metropolitan build, implement and operate major components of the system. area has been signed up and the engagement process is Kamco is fully owned by Keane Inc, a private global organisation continuing in inner metropolitan areas. based in California that delivers IT services worldwide. Retailers for additional and new public transport routes are also A number of key sub-contractors are engaged by Kamco being signed up. to deliver the project. These include Affiliated Computer Services (ACS) and Giesecke & Devrient (G&D). Meeting the needs of customers In order to be successful, the system must meet the needs Support for front-line operator staff of customers and key stakeholders. The TTA continues to The front-line staff of Victoria’s transport operators will be trained collaborate with transport operators, customers and special in operations and procedures for the new system. This will enable interest groups in order to ensure their specific needs are around 8,500 staff to assist customers with the new system when considered in the development of the system. it is introduced. Training and information requirements are being tailored and delivered to meet the specific needs of operators It is only through the input, support and cooperation of across Victoria. these stakeholders that the TTA will deliver on its objectives.
In consultation with operators, the TTA has developed an Marketing ambassador program. Under the program each business The introduction of the new ticketing system will involve significant will appoint front-line staff to become experts in the new change for customers and appropriate communication to raise ticketing system. awareness about the system is therefore critical.
Installing equipment Marketing and communication framework for the community Over 20,000 items of equipment will make up the new ticketing education campaign is well advanced. system and a range of pre-installation works are required to enable the new system to be delivered across all modes of transport in Auditor-General’s report Victoria. During the year, 289 of the 292 metropolitan and regional On 31 October 2007, the Victorian Auditor-General’s Office train stations were pre-wired to accept system devices. This work tabled a report on the TTA tender process. The TTA welcomed was undertaken with no disruption to passenger services. the report as providing sound and independent assurance to the community that the new ticketing system tender process One hundred percent of available trams and 95 per cent of was properly conducted. buses across Victoria were also pre-wired for the new system. Optimum performance of the existing ticketing system Testing the system The TTA aims to ensure a seamless customer experience during Kamco has adopted a testing process that runs in parallel with the transition from the Metcard ticketing system to the new system. further development of the system. This process will ensure that the new ticketing system is reliable and robust. During the year, customers experienced high levels of availability of Metcard ticketing machines and Metcard order numbers Testing of the system continued throughout the year at Kamco’s increased by 9 per cent over the previous year. testing facility. During November and December 2007 the system was tested on buses in Geelong. A further phased trial was The OneLink Transit System continues to perform well. conducted in Geelong in 2008. This testing program saw Kamco
Transport Ticketing Authority – Annual Report 2007-08 9 Report of Operations continued
The TTA reports to the Minister for Public Transport for transport policy matters and the Treasurer for matters pertaining to the SOE Act.
The capacity of the TTA’s Board was enhanced during the year with the addition of two new members who have considerable experience in the public transport sector.
The Board of the TTA met 13 times during the year. Senior managers from the Department of Treasury and Finance and the Department of Transport attend most Board meetings as observers.
Project Delivery Committee On 2 April 2008, the Board established a new sub-committee, the Project Delivery Committee, to provide advice on specific project deliverables. Meeting fortnightly and reporting to the Board, the committee is chaired by John Peoples, with John McMillan and Christine Gibbs as members.
The new ticketing system Audit Committee The Board appointed Dr Len Gainsford as its new Audit Committee The new ticketing system will be able to be used Chairman with effect from 1 July 2008. Dr Gainsford is the Director on train, tram and bus services in Melbourne, across Audit and Assurance in the Department of Transport. V/Line services, and progressively rolled-out across key regional bus services. Customers will no longer In accordance with the Standing Directions of the Minister have to make sure they buy the right ticket. The system for Finance under the Financial Management Act (FMA) 1994, will calculate the best fare for customers and charge the Audit Committee charter includes: it to their card. • reviewing statutory and other financial information provided In order to receive the best fare, customers will scan on by the TTA to Ministers at the beginning of their journey and scan off at the end. • reviewing the effectiveness and efficiency of the TTA’s internal control environment, operations and financial management • overseeing the TTA’s compliance with applicable laws, regulations and directions Our organisation • overseeing the effective operation of the TTA’s risk management Governance framework as required by the Standing Direction 4.5.5 of the The Public Transport Ticketing Body was established in June FMA and the Victorian Government Risk Management Framework. 2003 through an Order in Council under section 14 of the State Owned Enterprises Act 1992 (SOE Act). The Public Transport The Audit Committee oversees the Internal Audit program. The Audit Ticketing Body operates as the TTA. On 30 October 2007, the Committee appointed RSM Bird Cameron in December 2007 as Governor in Council varied the Establishing Order so that the internal auditors for the TTA’s internal audit program from 2007 Board was comprised of a Chairman and not less than one, to 2010. and not more than six, other Directors.
10 Transport Ticketing Authority – Annual Report 2007-08 Meetings of Directors Audit Project Delivery Meeting Board Committee Committee Eligible to Number Eligible to Number Eligible to Number Attend Attended Attend Attended Attend Attended Prof Michael Pryles 13 13 5 5 - - Mr Peter Harris 10 10 3 3 - - Ms Christine Gibbs 13 13 5 5 2 2 Mr John McMillan 8 8 3 3 6 5 Mr John Peoples 8 8 3 3 6 6
Our people The TTA will take a workforce planning approach to future The TTA human resource management practices are based on human resource requirements, underpinned by the performance the principles of equity, merit and fairness. All staff, contractors management system ‘my progress @ TTA’. A staff professional and consultants are required to comply with the Victorian Public development system also supports capability building for the future. Sector code of conduct. Occupational health and safety During 2007-08, the TTA’s approach to human resource The TTA promotes safe work practices, career development management was focused on the delivery phase of the new and a productive, non-discriminatory working environment. The ticketing system project and the roles and responsibilities of TTA’s General Manager – Operations oversees the implementation our people were structured accordingly. The next 12 months and maintenance of appropriate occupational health and safety will see a change in approach as the system is finalised and policies, procedures and programs to address staff needs. There we move on to the operations phase. were no workplace injuries during the past year.
Organisational management structure
Board
CEO
Governance PMO Support
Corporate COO Project Delivery Operations
Metcard Policy & Customer Human & myki Stakeholder Media & Finance Legal myki Setup Marketing & Communications (CFO) Resources Counsel Operations Communications Management
Transport Ticketing Authority – Annual Report 2007-08 11 Report of Operations continued
Workforce information TTA’s staffing profiles for the end of the financial year – 2007-08 are set out below. Non-executive staff are those who earn a total remuneration package of less than $120,000 per annum. Special project executives are those that earn more than $100,000, but who are engaged on short term contracts to meet specific project needs. Other executives are also employed on fixed term contracts until project implementation completion. There has been an overall reduction in staff members due to natural and strategic attrition following organisation review and realignment.
Workforce disclosures As at 30 June 2008 As at 30 June 2007 Male Female Total Male Female Total Non-executive Employees 13 29 42 21 35 56 Management Executives 2 1 3 3 1 4 Special Project Executives 9 8 17 8 5 13 Total (Non-executive employees and executives) 24 38 63 32 41 73
The note to the financial statements regarding executive remuneration indicates the amounts paid to Responsible Officers and Management Executives during the reporting period.
Financial management The TTA receives almost all of its funding through parliamentary appropriations via the Department of Transport, which provides grants to support operating expenditure and capital contributions for the development of the new ticketing system. Summary financial results since the TTA’s inception are as follows: Year to Year to Year to Year to Year to 30 June 2008 30 June 2007 30 June 2006 30 June 2005 30 June 2004 $’000 $’000 $’000 $’000 $’000 Funding Funds received from Government: Parliamentary appropriations 58,974 37,912 8,748 12,267 3,930 Investment in project development 87,348 26,665 35,128 15,036 4,520
Other funds received: Interest and sundry income 545 195 391 119 25 Total funds received 146,867 64,772 44,267 27,422 8,475 Net operating surplus/(deficit) 1,154 (305) 2,592 6,796 1,960 Increased value of NTS assets under development 87,820 27,745 39,086 17,101 5,635 Net assets at year end 176,375 87,873 61,513 23,792 6,496
12 Transport Ticketing Authority – Annual Report 2007-08 A modest surplus has been recorded for the year, consistent During 2007-08 and as part of contractual milestone payments, with the TTA’s efforts to align the timing of funding draw-downs TTA acquired over 9,500 items of equipment from Kamco worth so as to meet its financial obligations as and when they fall due. more than $20 million, mainly comprising bus driver consoles and The correlation as at 30 June 2008 between current assets myki scanners. The value of equipment is included in TTA’s balance (in total $14.3 million) and current liabilities ($11.8 million) sheet ‘Work In Progress – NTS property, plant and equipment’. is consistent with this aim. Consultancies commissioned The TTA’s primary function is to develop and oversee delivery The TTA uses expert consultants and contractors to provide of the new ticketing system. Hence, a substantial share of its the necessary flexibility of resources to meet the rapidly changing expenditure is recognised as ‘Work In Progress’ in developing the demands for specialist skills and capacity throughout the different major system assets – equipment, cabling infrastructure and civil phases of the system project. Such flexibility enables the TTA works, together with the intangible micropayments infrastructure to deliver quality outputs and meet challenging timeframes, asset. From the above table, it can be seen that the Government’s while core staff retain essential corporate knowledge. investment in project development closely aligns with the annual increase in system assets under development. A total of $3.1 million was expended on professional fees during the financial year. The following table summarises the number Change in financial position of consultancy engagements and the total fees incurred: 2007-08 was a significant year in the development of the Consultancy projects infrastructure required for the new ticketing system, and notably, the completion of civil works and pre-wiring requirements. At the Fees over $100,000 Fees less than $100,000 same time, the micropayments system and software continued to Number of projects 8 Number of projects 26 develop. The increase in value of system assets under development Total expenditure Total expenditure during 2007-08 reflects this stage in project delivery. Of the $87.8 commitment $ 2.4 million commitment $ 0.7 million million spent on project development for the year, $77.5 million was on civil works, pre-wiring and equipment, (2006-07, The following schedule summarises the consultancy projects $9.4 million) and $10.3 million was on intangible assets in 2007-08 where approved fees exceed $100,000. (2006-07, $18.4 million).
Total Fees Total Fees Budget Incurred 2007-08 2007-08 Consultant Summary of Project Scope $’000 $’000 Axiom Consulting Provision of market research expertise. 147 143 Booz Allen & Hamilton (Australia) Cards and concession management. Strategy and planning support. Development and coordination of implementation plans for each concession entitlement category. 175 131 Clayton Utz Legal advice on various aspects of the project. 750 720 Firecone Ventures Pty Ltd Facilitate and support commercial negotiations regarding scope variations and ongoing delivery strategy. 378 390 KPMG Australia Development and analysis of financial impacts and implications of contractual and strategic issues and options. 365 361 Saha International Ltd Development and preparation of pilot operator procedures. 191 191 Various assignments: assessment of the business model for TTA partners; assisting in the establishment of business rules; development of a Bulk agent transition plan and a myki reservation centre. 267 267 Transaction Resources Provision of specialist retail expertise. Engagement of supplier discontinued. 210 172
Transport Ticketing Authority – Annual Report 2007-08 13 Report of Operations continued
Subsequent events Victorian Industry Participation Policy No significant events have occurred since 30 June 2008 that As part of the tender for the new ticketing system project in 2005, would substantially impact the TTA’s financial position. Kamco and its parent organisation Keane entered the Australian marketplace and stated the company’s intent to build its presence Compliance in Victoria. Freedom of Information The Freedom of Information Act 1982 provides for members Specifics were outlined in the Victorian Industry Participation of the public to obtain information held by the TTA. The General Policy: Manager – Operations is the Principal Officer for the purpose • establishing a new Asia-Pacific regional headquarters for general of administering the requirements of the Act. IT outsourcing services, involving 100-250 new jobs in Victoria • 70 per cent local content For the 12 months ending June 2008, the TTA received 32 requests. Of these, 15 were from Members of Parliament and • creation of a testing facility in Victoria the remainder were from the media. Three were referred to Internal • leveraging the system open architecture to foster and Review with none progressing to appeal at the Victorian Civil and encourage import replacement in the supply of additional Administrative Tribunal. ticketing equipment and/or equipment components over the life of the system’s contract. Requests for documents under the Freedom of Information legislation should be made in writing, accompanied with the Keane has also established an Australian business and IT consulting statutory fee of $22.70 and addressed in the first instance to: firm, Keane Australia. The business’ headquarters are in Melbourne. Freedom of Information Officer It will leverage its global parent’s and local partner companies’ Transport Ticketing Authority expertise to build a substantial mid-tier business consulting firm. PO Box 18023 Substantial progress has already been achieved in meeting Collins Street East these commitments, in line with Kamco’s VIPP plan: Melbourne Victoria 3001 Telephone (03) 9651 8153 • established Asia-Pacific Keane regional headquarters office in Melbourne CBD in August 2005 employing 131 people Availability of additional information • established world class Integrated Testing Facility in In compliance with the requirements of the Directions of the inner-suburban Melbourne in May 2006 Minister for Finance, the TTA retains information applicable • creation of 105 new jobs in Victoria, as at 30 June 2008. to the entity, which is available on request to relevant Ministers, Members of Parliament and the public (subject to the Freedom Whistleblowers Protection Act 2001 of Information requirements). The Whistleblowers Protection Act 2001 became law in Victoria National Competition Policy in January 2002. The Act is designed to protect people who disclose information about serious wrongdoing by public officers Under National Competition Policy, the guiding legislative and public bodies. It also provides a framework for the investigation principle is that legislation, including future legislative proposals, of these matters and for rectifying action to be taken. should not restrict competition unless it can be demonstrated
that the benefits of the restriction to the community as a whole In accordance with the legislation, the TTA adopted a Support outweigh the costs, and that the objectives of the legislation to Whistleblowers policy. This policy can be found on the TTA’s can only be achieved by restricting competition. website http://www.transport.vic.gov.au. These procedures establish a system for reporting disclosures of improper conduct The TTA has complied with the requirements of the National or detrimental action by the TTA and its employees. Competition Policy.
Disclosure of major contracts The TTA has not entered into any new major contracts during the reporting period.
14 Transport Ticketing Authority – Annual Report 2007-08 Disclosures of improper conduct by the TTA or its employees may be made to the following officers:
The Protected Disclosure Coordinator Jo Verity Transport Ticketing Authority PO Box 18023 Collins Street East Melbourne Victoria 8003 Telephone 61 (3) 9 651 7520
Or alternatively directly to:
George Brouwer The Ombudsman, Victoria Level 22, 459 Collins Street Melbourne Victoria 3000 Telephone 61 (3) 9613 6222 Direct 61 (3) 9613 6202 Toll Free 1800 806 314 Email [email protected]
Disclosures may be made by the TTA’s employees, consultants, contractors or the public.
No disclosures under the Whistleblowers legislation relating to the TTA or its employees were received during the reporting period. In accordance with sections 104 and 105 of the Whistleblowers Protection Act 2001, the TTA reports the following: Topic Report Number and type of disclosures made during the year Nil Number of complaints referred to Ombudsman as to whether public interest disclosures Nil Number and type of disclosed matters referred by the Authority to Ombudsman to investigate Nil Number and type of investigations of disclosed matters taken over by Ombudsman Nil Number and type of requests made under Section 74 to Ombudsman to investigate disclosed matters Nil Number and types of disclosed matters that the Authority has declined to investigate Nil Number and types of disclosed matters substantiated on investigation and action taken Nil Recommendations to the Ombudsman Nil
Compliance with the Building Act 1993 Risk Attestation The TTA does not own or control any Government buildings. The TTA has in place a corporate risk management plan, processes and procedures, assessments, register, quarterly report and an Directions from the Minister annual risk calendar, which are consistent with the Australian/ The TTA received no entity-specific Directions from the Minister New Zealand Risk Management Standard (AS/NZS 4360:2004). during the reporting period. The TTA is in the process of reviewing and updating its approach to risk management with the assistance of PricewaterhouseCoopers and the Victorian Managed Insurance Authority (VMIA).
Transport Ticketing Authority – Annual Report 2007-08 15 Report of Operations continued
Disclosure index This annual report is prepared in accordance with all relevant Victorian legislation. This index has been prepared to facilitate identification of compliance with statutory disclosure requirements.
Legislation Requirement Page Ministerial Directions Report of Operations SD 4.2(j) Accountable Officer’s declaration 17 Charter and purpose FRD 22B Objectives, functions, powers and duties 4 FRD 22B Nature and range of services provided 4 FRD 22B Manner of establishment and the relevant Ministers 10 Management and structure FRD 22B Organisational structure 11 Financial and other information FRD 22B Statement of workforce data and merit and equity 12 FRD 22B Summary of the financial results for the year 12 FRD 22B Significant changes in financial position during the year 13 FRD 22B Operational and budgetary objectives and performance against objectives 4-13 FRD 22B Employment and conduct principles 11 FRD 22B Major changes or factors affecting performance 13 FRD 22B Subsequent events 14 FRD 22B Application and operation of Freedom of Information Act 1982 14 FRD 22B Statement on National Competition Policy 14 FRD 22B Application and operation of the Whistleblowers Protection Act 2001 14-15 FRD 22B Details of consultancies over $100,000 13 FRD 22B Details of consultancies under $100,000 13 FRD 22B Statement of availability of other information 14 FRD 22B Occupational health and safety 11 FRD 29 Workforce Data disclosures 12 FRD 15B Executive officer disclosures 12 FRD 25 Victorian Industry Participation Policy disclosures 14 FRD 12A Disclosure of major contracts 14 FRD 10 Disclosure index 16 FRD 22B Compliance with building and maintenance provisions of Building Act 1993 15 SD 4.5.5 Risk Attestation 15 Financial Statements Financial statements required under Part 7 of the FMA SD 4.2(b) Operating statement (income statement) 20 SD 4.2(b) Balance sheet 21 SD 4.2(a) Statement of changes in equity 22 SD 4.2(b) Cash flow statement 23 Other requirements under Standing Directions 4.2 SD 4.2(c) Compliance with Australian accounting standards and other authoritative pronouncements 24 SD 4.2(c) Compliance with Ministerial Directions 15 SD 4.2(c) Accountable officer’s declaration 17 SD 4.2(d) Rounding of amounts 28 Other disclosures in notes to the financial statements FRD 21A Responsible person and executive officer disclosures 36 Legislation Freedom of Information Act 1982 14 Whistleblowers Protection Act 2001 14 Victorian Industry Participation Policy Act 2003 14 Building Act 1993 15 Financial Management Act 1994 17 Audit Act 1994 18
16 Transport Ticketing Authority – Annual Report 2007-08
Accountable Officer’s and Chief Finance and Accounting Officer’s Declaration
We certify that the attached financial report for the Transport Ticketing Authority (TTA) has been prepared in accordance with Standing Direction 4.2 of the Financial Management Act 1994, applicable Financial Reporting Directions, Australian accounting standards and other mandatory professional reporting requirements.
We further state that, in our opinion, the information set out in the operating statement, balance sheet, statement of changes in equity, cash flow statement and notes forming part of the financial reports, presents fairly the financial transactions during the year ended 30 June 2008 and financial position of TTA as at 30 June 2008.
We are not aware of any circumstance which would render any particulars included in the financial report to be misleading or inaccurate. Authorised for issue:
Michael Pryles Chairman Transport Ticketing Authority
Richard Parker Acting Chief Executive Officer Transport Ticketing Authority
Mary Philip Chief Financial Officer and Corporate Administrator Transport Ticketing Authority
Melbourne 12 September 2008
Transport Ticketing Authority – Annual Report 2007-08 17 Auditor-General’s report
18 Transport Ticketing Authority – Annual Report 2007-08 Transport Ticketing Authority – Annual Report 2007-08 19 Operating statement For the financial year ended 30 June 2008
2008 2007 Note $000 $000
Income Revenue 2(a) 356 194 Grants 2(b) 58,974 37,912 Other income 2(c) 189 1 Total income 59,519 38,107
Expenses Employee benefits expense 3(a) 5,065 3,308 Depreciation and amortisation expense 3(b) 905 517 Cost of decommissioning existing ticketing system 3(c) - 4,123 Supplier and services 3(d) 52,395 30,464 Total expenses 58,365 38,412 Net result for the period 1,154 (305)
The above operating statement should be read in conjunction with the accompanying notes.
20 Transport Ticketing Authority – Annual Report 2007-08 Balance sheet As at 30 June 2008
2008 2007 Note $000 $000
Current assets Cash and cash equivalents 4 3,031 11,102 Receivables 5 11,198 3,341 Other assets 6 77 94 Total current assets 14,306 14,537
Non-current assets Intangible assets 7 86,750 76,487 Property, plant and equipment 8 91,493 14,665 Total non-current assets 178,243 91,152 Total assets 192,549 105,689
Current liabilities Payables 9 10,545 12,352 Interest bearing liabilities 10 75 9 Provisions 11 1,151 994 Total current liabilities 11,771 13,355
Non-current liabilities Interest bearing liabilities 10 32 72 Provisions 11 4,371 4,389 Total non-current liabilities 4,403 4,461 Total liabilities 16,174 17,816
Net assets 176,375 87,873
Equity Contributed capital 13 164,177 76,829 Accumulated surplus 14 12,198 11,044 Total equity 176,375 87,873
The above balance sheet should be read in conjunction with the accompanying notes.
Transport Ticketing Authority – Annual Report 2007-08 21 Statement of changes in equity For the period ended 30 June 2008
2008 2007 $000 $000
Total equity at beginning of financial year 87,873 61,513 Net result for the period 1,154 (305) Capital contributions 87,348 26,665 Total equity at end of period 176,375 87,873
The above statement of changes in equity should be read in conjunction with the accompanying notes.
22 Transport Ticketing Authority – Annual Report 2007-08 Cash flow statement For the period ended 30 June 2008
2008 2007 Note $000 $000
Cash flows from operating activities Receipts Receipts from Government 56,560 37,912 Receipts from other entities 748 1 Interest received 356 194 Goods and services tax recovered from the ATO 10,891 5,140 Total receipts 68,555 43,247 Payments Payments to employees (4,984) (3,225) Payments to suppliers (66,192) (32,129) Total payments (71,176) (35,354) Net cash provided by operating activities 15 (2,621) 7,893
Cash flows from investing activities Proceeds from disposal of property, plant and equipment 1 26 Payment for property, plant and equipment (77,827) (10,195) Payment for intangible assets – WIP and software/licenses (12,025) (13,328) Net cash provided by/(used in) investing activities (89,851) (23,497)
Cash flows from financing activities Proceeds from capital contribution by Victorian Government 84,375 26,665 Proceeds from Victorian Government - 8,761 84,375 35,426 Automated ticketing liability - (8,761) Repayment for finance leases 26 3 Net cash provided by/(used in) financing activities 84,401 26,668
Net increase/(decrease) in cash and cash equivalents (8,071) 11,064 Cash and cash equivalents at the beginning of the financial year 11,102 38 Cash and cash equivalents at the end of the financial year 4 3,031 11,102
The above cash flow statement should be read in conjunction with the accompanying notes.
Transport Ticketing Authority – Annual Report 2007-08 23 Notes to the financial statements For the financial year ended 30 June 2008
1. Summary of accounting policies 1.1. Statement of compliance The financial report is a general purpose financial report which has been prepared on an accrual basis in accordance with the Financial Management Act 1994, applicable Australian Accounting Standards (AAS), which includes the Australian accounting standards issued by the Australian Accounting Standards Board (AASB), interpretations and other mandatory professional requirements.
The financial report complies with relevant Financial Reporting Directions (FRDs) issued by the Department of Treasury and Finance, and relevant Standing Directions (SD) authorised by the Minister for Finance.
1.2. Basis of preparation The financial report has been prepared on a historical cost basis. Cost is based on the fair values of the consideration given in exchange for assets.
In the application of AASs, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision, and future periods if the revision affects both current and future periods.
Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.
The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2008 and the comparative information presented for the year ended 30 June 2007.
1.3. Reporting entity The financial report covers the Public Transport Ticketing Body, trading as Transport Ticketing Authority (TTA) as an individual reporting entity.
The TTA was created under the State Owned Enterprises Act 1992 on 17 June 2003 and commenced operating on 1 July 2003. It is wholly owned by the Victorian Government. Its principal address is:
Transport Ticketing Authority Level 38, 55 Collins Street Melbourne Victoria 3000
The financial statements include all the controlled activities of the Transport Ticketing Authority.
1.4. Events after reporting date Assets, liabilities, income or expenses arise from past transactions or other past events. Where the transactions result from an agreement between TTA and other parties, the transactions are only recognised when the agreement is irrevocable at or before balance date. Adjustments are made to amounts recognised in the financial statements for events which occur after the reporting date and before the date the statements are authorised for issue, where those events provide information about conditions which existed at the reporting date. Note disclosure is made about events between the balance date and the date the statements are authorised for issue where the events relate to condition which arose after the reporting date and which may have a material impact on the results of subsequent years.
24 Transport Ticketing Authority – Annual Report 2007-08 1.5. Taxation 1.5.1. Goods and services tax (GST) Income, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow.
1.5.2. Income tax status The activities of TTA are exempt from income tax.
1.6. Income recognition Funds received from Government as non-reciprocal grants are recognised as income at the time TTA gains control of these funds, which is deemed to be when the grant is received or receivable.
Interest is brought to account when the interest is credited or received and an accrual is made to recognise interest accrued to balance date.
Any gain or loss on disposal of property, plant and equipment is recognised at the date control of the asset is passed to the buyer and is determined after deducting from the proceeds the carrying value of the asset at that time.
Other income relates to recovery of expenditure from public transport division. This is recognised as income on receipt of payments.
1.7. Expenses 1.7.1. Employee benefits Employee benefits expenses include all costs related to employment including wages and salaries, leave entitlements, redundancy payments and superannuation contributions. These are recognised when incurred, except for contributions in respect of defined benefit plans.
1.7.2. Depreciation and amortisation of property, plant and equipment Depreciation and amortisation are calculated on a straight line basis so as to write off the net cost or other revalue amount of each asset over its expected useful life to its estimated residual value. Leasehold improvements are amortised over the period of the lease or estimated useful life, whichever is the shorter, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period. The expected useful lives and depreciation rates for property, plant and equipment have remained unchanged from the previous year. For the financial years ending 30 June 2008 and 30 June 2007, the expected useful lives for the following assets are:
Expected Useful Life to TTA Depreciation Rate %
Computer equipment 3-4 years 25-33.3 Furniture and equipment 5-10 years 10-20 Leasehold improvements 2-3 years 33.3-50 Work In Progress – NTS property, plant and equipment 10 years Still under construction Mobile discovery trailer 2.5 years 40 Motor vehicles under lease 3 years 33.3
1.7.3. Impairment of assets Intangible assets with indefinite useful lives (and intangible assets not yet available for use) are tested annually for impairment and whenever there is an indication that the asset may be impaired. All other assets are assessed annually for indications of impairment, except for:
• inventories • financial assets • non-current assets held for sale.
For the year ended 30 June 2008 (2007 – nil), there was no impairment to assets.
Transport Ticketing Authority – Annual Report 2007-08 25 Notes to the financial statementscontinued For the financial year ended 30 June 2008
1.7.4. Supplies and services Supplies and services generally represent the day-to-day running costs incurred in the normal operations of TTA. These items are recognised as an expense in the reporting period in which they are incurred.
1.7.5. Existing ticketing system decommissioning costs In February 2007, the legacy ticketing system equipment assets transferred to TTA from Department of Transport (formerly Department of Infrastructure). In accordance with A-IFRS, TTA recognised the estimated decommissioning costs associated with those assets in its accounts as at end June 2007, being the contracted decommissioning costs included in the present civil works and de-installation program.
1.8. Assets 1.8.1. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and cash at bank.
For the cash flow statement presentation purposes, cash comprises cash on hand and cash at bank.
1.8.2. Receivables Receivables consist predominantly of GST input tax credits recoverable.
Receivables are recognised initially at fair value. A provision for doubtful receivables is made when there is objective evidence that the debts will not be collected. Bad debts are written off when identified.
1.8.3. Work In Progress The Work In Progress (WIP) relates to the myki system and has been separated into two major categories, being tangible and intangible assets.
The tangible assets are categorised as Property Plant and Equipment (PP&E) and include all costs directly incurred in developing, designing and installing the physical components of the NTS project such as fare payment devices and ticketing machines. These costs include professional fees and costs of employee benefits attributed directly to the development of the PP&E asset.
All costs associated in designing, developing and installing the NTS micropayments system have been capitalised as an intangible asset. This includes expenditure on employee benefits, consultants’ fees and other services and supplies where these are attributable to development of the NTS micropayments infrastructure (see Note 7).
No amortisation expense relating to either tangible or intangible WIP assets has been incurred as at 30 June 2008 as the assets are still being developed.
1.8.4. Intangible assets Intangible assets represent identifiable non-monetary assets without physical substance. Costs incurred subsequent to initial acquisition are capitalised when it is expected that additional future economic benefits will flow to the TTA.
Intangible assets with finite useful lives are amortised on a straight-line basis over the asset’s useful life. Amortisation begins when the asset is available for use, that is, when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each annual reporting period. In addition, an assessment is made at each reporting date to determine whether there are indicators that the intangible asset concerned is impaired (refer Note 1.7.3 Impairment of Assets).
Intangible assets are stated at cost less accumulated amortisation and impairment, and are amortised on a straight-line basis over their useful lives to TTA as follows:
2008 2007
Capitalised software licences 3-5 years 3-5 years Capitalised system development costs (still under construction) 10 years 10 years
26 Transport Ticketing Authority – Annual Report 2007-08 1.8.5. Property, plant and equipment Plant and equipment are measured at cost less accumulated depreciation and impairment.
Corporate capital expenditure costing more than $1,000 is capitalised, whereas new ticketing system capital expenditure costing more than $2,000 is capitalised. The cost method of accounting is used for all acquisitions of assets other than land and buildings. Cost is measured as the cost of the assets undertaken at the date of acquisition plus incidental costs directly attributable to the acquisition.
1.8.6. Leases Leases of property, plant and equipment are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Finance leases are recognised as assets and liabilities at amounts equal to the fair value of the lease property or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. The lease asset is depreciated over the shorter of the estimated useful life of the asset or the term of the lease. Minimum lease payments are allocated between the principal component of the lease liability, and the interest expense calculated using the interest rate implicit in the lease, and charged directly to the operating statement. Contingent rentals associated with finance leases are recognised as an expense in the period in which they are incurred. Operating lease payments, including any contingent rentals, are recognised as an expense in the operating statement on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern of the benefits derived from the use of the leased asset.
1.9. Liabilities 1.9.1. Payables Payables consist predominantly of creditors and other sundry liabilities.
Payables are initially recognised at fair value, then subsequently carried at amortised cost and represent liabilities for goods and services provided to TTA prior to the end of the financial year and which are unpaid, and arise when TTA becomes obliged to make future payments in respect of the purchase of these goods and services. Fair value is determined in the manner described in Note 21(d).
1.9.2. Interest bearing liabilities Interest bearing liabilities are recorded initially at fair value, net of transaction costs.
Subsequent to initial recognition, interest bearing liabilities are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in profit and loss over the period of the interest bearing liability using the effective interest rate method. Fair value is determined in the manner described in Note 21(d).
1.9.3. Provisions Provisions are recognised when TTA has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
1.9.4. Provision for removal of existing ticketing system In accordance with A-IFRS, TTA recognised the estimated decommissioning costs associated with removal of the current ticketing system assets in its accounts as at end June 2007. At the same time, TTA has recorded an equal and offsetting provision for the decommissioning costs, which will be incurred after commissioning of the new ticketing system.
Transport Ticketing Authority – Annual Report 2007-08 27 Notes to the financial statementscontinued For the financial year ended 30 June 2008
1.9.5. Employee benefits (i) Wages and salaries, annual leave and sick leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in the provision for employee benefits in respect of employee services up to the reporting date, classified as current liabilities and measured at their nominal values.
Those liabilities that are not expected to be settled within 12 months are recognised in the provision for employee benefits as current liabilities, 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.
(ii) Long service leave Liability for long service leave (LSL) is recognised in the provision for employee benefits.
Current liability – unconditional LSL is disclosed as a current liability even where TTA does not expect to settle the liability within 12 months because it will not have the unconditional right to defer the settlement of the entitlement should an employee take leave within 12 months: The components of this current LSL liability are measured at:
• present value – component that TTA does not expect to settle within 12 months; and • nominal value – component that TTA expects to settle within 12 months.
Non-current liability – conditional LSL is disclosed as a non-current liability. There is an unconditional right to defer the settlement of the entitlement until the employee has completed the requisite years of service.
This non-current LSL liability is measured at present value.
(iii) Employee benefit on-costs Employee benefits on-costs (payroll tax, workers compensation, superannuation, annual leave and LSL accrued while on LSL taken in service) are recognised separately from provision for employee benefits.
1.10. Commitments Commitments include those operating, capital and other outsourcing commitments arising from non-cancellable contractual or statutory sources and are disclosed at their nominal value.
1.11. Contributed capital Appropriations for additions to net assets are recognised as contributed capital. Other transfers that are in the nature of contributions or distributions have also been designated as contributed capital.
1.12. Rounding of amounts Amounts in the financial report have been rounded to the nearest thousand dollars, unless otherwise stated.
28 Transport Ticketing Authority – Annual Report 2007-08 1.13. New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2008 reporting period. The Department of Treasury and Finance assesses the impact of these new standards and advises departments and other entities of their applicability and early adoption where applicable.
As at 30 June 2008, the following standards and interpretations had been issued but were not mandatory for financial years ending 30 June 2008. TTA has not, and does not intend to, adopt these standards early.
Applicable for Annual Reporting Periods Beginning Impact on Departmental Standard/Interpretation Summary or Ending on Financial Statements
Interpretation 4 Determining Where arrangements might fall both within Beginning 1 Jan 2008 May or may not lead to certain whether an Arrangement this Interpretation and Interpretation 12, arrangements being reclassified. contains a Lease (revised) Interpretation 12 will take precedence. At this stage, the financial impact is unknown as it depends on whether Interpretation 12 only applies to the private there are arrangements being sector operation and the AASB is still reclassified. considering public sector accounting for these arrangements. Revised AASB 1004 AASB decided to relocate requirements Beginning 1 Jul 2008 Impact expected to be insignificant. Contributions on contributions from AAS 31, substantively unamended, into AASB 1004 as part of its short-term review of AAS 31. AASB2007-3 Amendments An accompanying amending standard, Beginning 1 Jan 2009 Impact expected to be insignificant. to Australian Accounting also introduced consequential Standards arising from amendments into other Standards. AASB 8 (AASB 5, AASB 6, AASB102, AASB107, AASB119, AASB127, AASB134, AASB136, AASB1023 & AASB1038) AASB 2007-8 Editorial amendments to Australian Beginning 1 Jan 2009 Impact expected to be insignificant. Amendments to Australian Accounting Standards to align with Accounting Standards arising IFRS terminology. from AASB 101
2. Income 2008 2007 $000 $000
(a) Revenue Interest on bank deposits 356 194 356 194 (b) Income from Government Grants 58,974 37,912 58,974 37,912 (c) Other income Gain/(loss) on disposal of property, plant and equipment (4) - Other 193 1 189 1 Total income 59,519 38,107
Transport Ticketing Authority – Annual Report 2007-08 29 Notes to the financial statementscontinued For the financial year ended 30 June 2008
3. Expenses 2008 2007 Note $000 $000
(a) Employee benefits expense Salaries and wages 4,212 2,709 Superannuation 284 180 Annual leave and long service leave expense 348 230 Other on-costs (fringe benefits, payroll tax and workcover levy) 221 189 5,065 3,308 (b) Depreciation and amortisation expense Computer equipment 103 83 Furniture and equipment 38 36 Software/licences 72 72 Leasehold improvements 386 101 Mobile discovery suite 288 216 Motor vehicle under and amortisation 18 9 Total depreciation and amortisation 905 517 (c) Cost of decommissioning existing ticketing system - 4,123 (d) Supplies and services Professional and consultancy services 1,457 2,271 OLT Transition Amendment Deed costs reimbursement 3,374 1,877 Communications services and supplies 224 275 Accommodation 442 316 IT services 362 243 Other services and supplies 3.1 46,476 25,442 Audit fees – audit of the financial report 3.2 60 40 52,395 30,464 Total expenses 58,365 38,412
3.1.Other services and supplies Operational and related payments – existing ticketing system (Note (a)) 40,438 12,995 Fixed service delivery charges – Kamco - 10,621 Access payments to operators 4,683 904 Other 1,355 922 46,476 25,442
Note (a): Responsibility to make operational payments to the operator of the existing ticketing system was transferred to the Transport Ticketing Authority from the Department of Transport on 1 March 2007.
3.2. Remuneration of auditors Victorian Auditor General’s Office Audit of the financial report 60 40 60 40
4. Cash and cash equivalents Cash at bank and on hand 3,031 11,102 3,031 11,102
Cash at the end of the year as shown in the Cash Flow Statement is reconciled to the cash assets above.
30 Transport Ticketing Authority – Annual Report 2007-08 5. Receivables 2008 2007 $000 $000
Amounts owing from Department of Transport 5,878 1,050 Goods and Services Tax recoverable 5,320 2,291 11,198 3,341
6. Other assets Current Prepayments: Accommodation rent 66 74 Car parking 1 5 Software maintenance 8 12 Other 2 3 77 94
7. Intangible assets 2008 2007 $000 $000 Professional & Other Professional & Other Employee Consultancy Service & Software/ Employee Consultancy Service & Software/ Benefits Services Supplies Licences Benefits Services Supplies Licences
At cost 20,420 19,449 46,814 287 13,444 18,192 44,712 287 Less amortisation - - - (220) - - - (148) 20,420 19,449 46,814 67 13,444 18,192 44,712 139 Total 86,750 76,487
The TTA has capitalised costs for the development of the new ticketing system. Amortisation of the carrying amount of the capitalised development costs will commence when the system becomes operational.
7.1. Reconciliation of intangible assets The reconciliation of the carrying amount of each class of intangible asset at the beginning and end of the current reporting period is set out below: Professional & Other Employee Consultancy Services & Software/ Benefits Services Supplies Licences Total Expenditure Capitalised as Work In Progress and Other Intangibles $000 $000 $000 $000 $000
Balance as at 1 July 2006 7,465 15,647 34,899 151 58,162 Additions 5,979 2,545 9,813 60 18,397 Depreciation/amortisation (Note 3(b)) - - - (72) (72) Balance as at 1 July 2007 13,444 18,192 44,712 139 76,487 Additions 6,976 1,257 2,102 - 10,335 Depreciation/amortisation (Note 3(b)) - - - (72) (72) Carrying amount at 30 June 2008 20,420 19,449 46,814 67 86,750
Transport Ticketing Authority – Annual Report 2007-08 31 Notes to the financial statementscontinued For the financial year ended 30 June 2008
8. Property, plant and equipment Classification by ‘Transportation and Communications’ Purpose Group. 2008 2007 $000 $000
Computer equipment At cost 455 427 Less: accumulated depreciation 276 175 179 252 Furniture and equipment At cost 297 287 Less: accumulated depreciation 115 77 182 210 Leasehold improvement At cost 1,318 1,222 Less: accumulated depreciation 497 111 821 1,111 Work In Progress – NTS plant and equipment At cost 89,990 12,505 Less: accumulated depreciation - - 89,990 12,505 Mobile discovery trailer At cost 721 721 Less: accumulated depreciation 505 216 216 505 Motor vehicle under lease At cost 132 88 Less: accumulated depreciation 27 6 105 82
Total property, plant and equipment 91,493 14,665
8.1. Reconciliation of assets The reconciliation of the carrying amount of each class of equipment at the beginning and end of the current reporting period is set out below: Computer Furniture & Leasehold WIP NTS Discovery Leased Equipment Equipment Improvement Plant & Equip Trailer Vehicles Total $000 $000 $000 $000 $000 $000 $000
Balance at 1 July 2006 97 219 359 3,097 708 28 4,508 Additions 240 27 853 9,408 13 87 10,628 Disposals (2) - - - - (24) (26) Depreciation/amortisation (Note 3(b)) (83) (36) (101) (216) (9) (445) Balance at 1 July 2007 252 210 1,111 12,505 505 82 14,665 Additions 31 10 96 77,485 - 41 77,663 Disposals (1) - - - - - (1) Depreciation/amortisation (Note 3(b)) (103) (38) (386) - (289) (18) (834) Carrying amount at 30 June 2008 179 182 821 89,990 216 105 91,493
32 Transport Ticketing Authority – Annual Report 2007-08 9. Payables 2008 2007 $000 $000
Other payables 9,995 11,799 Amounts payable to other Government entities/agencies 550 553 10,545 12,352
Note: The average credit period is less than 30 days. No interest is charged on creditors or amounts payable to other government entities/agencies.
(a) Maturity analysis of payables Please refer to Note 21 for the ageing analysis of payables.
10. Interest bearing liabilities Secured Current lease liability 75 9 Non-current lease liability 32 72 107 81
Note: Secured by the assets leased.
(a) Maturity analysis of interest bearing liabilities Please refer to Note 21 for the ageing analysis of interest bearing liabilities.
11. Provisions Current Employee benefits Unconditional and expected to be settled within 12 months 821 810 Unconditional and expected to be settled after 12 months 295 159 1,116 969 Provisions related to employee benefit on-costs Unconditional and expected to be settled within 12 months 14 15 Unconditional and expected to be settled after 12 months 21 10 35 25 Total current provisions 1,151 994 Non-current Employee benefits 234 249 Provisions related to employee benefit on-costs 15 18 Provision for removal of ATS 4,122 4,122 Total non-current provisions 4,371 4,389 Total provisions 5,522 5,383
Transport Ticketing Authority – Annual Report 2007-08 33 Notes to the financial statementscontinued For the financial year ended 30 June 2008
11.1. Employee benefits and related on-costs 2008 2007 $000 $000
Current employee benefits Annual leave entitlements 378 229 Performance bonus 600 580 Unconditional long service leave entitlements 138 -
Non-current employees benefits Conditional long service leave entitlements 234 249 Total employee benefits 1,350 1,058
Current on-costs 35 25 Non-current on-costs 15 18 Total on-costs 50 43 Total employee benefits and related costs 1,400 1,101
12. Leases 12.1. Finance leases arrangements Finance leases related to vehicles with lease terms of three years. TTA does not have an option to purchase the leases at the expiry of the lease period. Present Value of Minimum Future Minimum Future Lease Payments Lease Payments 2008 2007 2008 2007 $000 $000 $000 $000
Finance lease liabilities payable Not longer than one year 78 21 75 9 Longer than one year and not longer than five years 34 73 32 72 Longer than five years - - - - Minimum future lease payments 112 94 107 81 Less future finance payments (5) (13) - - Present value of minimum lease payment 107 81 107 81 Included in the financial statements as: Current interest bearing liabilities (Note 10) 75 9 Non-current interest bearing liabilities (Note 10) 32 72 107 81
Note: Minimum future lease payments include the aggregate of all lease payments and any guaranteed residual.
34 Transport Ticketing Authority – Annual Report 2007-08 12.2. Operating leasing arrangements Operating leases relate to the following:
• Office premises – lease terms of between three and seven years, with an option to extend for a further three years. • Static discovery centre – lease term of one year, with an option to extend for a further one year. • Warehouse storage – lease term of one year, with an option to extend for a further six months.
All operating lease contracts contain market review clauses in the event that the TTA exercises its option to renew. The TTA does not have an option to purchase the lease assets at the expiry of the lease period.
2008 2007 $000 $000
Non-cancellable operating leases payable (accommodation/discovery suite) Not longer than one year 839 982 Longer than one year and not longer than five years 1,379 2,067 Longer than five years - - 2,218 3,049
13. Contributed capital Balance at beginning of financial year 76,829 50,164 Capital contribution during the year by Victorian Government 87,348 26,665 Balance at end of the reporting period 164,177 76,829
14. Accumulated surplus Balance at beginning of financial year 11,044 11,349 Net result for the reporting period 1,154 (305) Total accumulated surplus at the end of the reporting period 12,198 11,044
15. Reconciliation of result from ordinary activities to net cash inflow from operating activities Net result for the year 1,154 (305) Non-cash movements: Depreciation and amortisation of non-current assets 905 517 Loss from disposal of property, plant and equipment (1) (15) Changes in net assets and liabilities: (Increase)/decrease in assets: Current receivables (4,883) (433) Other current assets 13 (28) Increase/(decrease) in liabilities: Current payables 132 3,878 Provisions 56 32 Other current liabilities 9 72 Non-current provisions (6) 4,175 Net cash from/used in operating activities (2,621) 7,893
Transport Ticketing Authority – Annual Report 2007-08 35 Notes to the financial statementscontinued For the financial year ended 30 June 2008
16. Responsible persons and executive officers disclosures In accordance with the Ministerial Directions issued by the Minister for Finance under the Financial Management Act 1994, the following disclosures are made regarding responsible persons for the reporting period.
Names The persons who held the positions of Ministers, Board Members and Accountable Officers in the TTA are as follows:
Responsible Minister Minister for Public Transport – The Hon. L Kosky, MP
Board Members Prof Michael Pryles, Chairman Mr Peter Harris (resigned 4 February 2008) Ms Christine Gibbs Mr John McMillan (commenced 1 November 2007) Mr John Peoples (commenced 1 November 2007)
Accountable Officer Mr Vivian Miners (1 July 2007 to 31 March 2008) Mr Howard Woodall (1 to 30 April 2008)1 Mr Ray Van Kuyk (1 May 2008 to 9 Jun 2008) Mr Gary Thwaites (10 June 2008 ongoing)
Remuneration Remuneration received or receivable by Board Members and the Accountable Officer in connection with the management of the TTA during the reporting period was in the ranges:
Base Remuneration Total Remuneration Base Remuneration Total Remuneration Income Band 2007-08 2007-08 2006-07 2006-07
$0 1 1 2 2 $10,000 – 19,999 1 1 - - $20,000 – 29,999 2 2 - - $40,000 – 49,999 1 1 - - $60,000 – 69,999 1 1 1 1 $100,000 – 109,999 1 1 - - $320,000 – 329,999 1 - - - $380,000 – 389,999 - 1 - - $400,000 – 409,999 - - 1 - $540,000 – 540,999 - - - 1 Total numbers 8 8 4 4 Total amount $594,063 $648,319 $477,642 $639,162
2006-07 Total Remuneration received included conditional payment of previous years’ earned bonuses that were retained by the TTA as part of its key persons retention strategy. These payments are subject to full repayment in the event of the Key Person’s early resignation from the TTA.
Amounts relating to Ministers are reported in the financial report of the Department of Premier and Cabinet.
Related party transactions The former Chief Executive Officer, Vivian Miners, has a shareholding in Headstrong Inc, a private, un-listed company that is a sub-contractor to Kamco Pty Ltd. The B-class shares have a par value of $US1,580 and represent 0.3 per cent of the total outstanding shares. As there is no market for these shares, attempts to sell these shares by the CEO were unsuccessful. The value to Headstrong Inc of its involvement in the new ticketing system contract is estimated at 1 per cent of the total contract value.
This matter was disclosed to the Board and the Probity Auditor in 2004-05, and was recognised by the TTA at the time the CEO was employed. In the NTS tender process, the Probity Auditor, together with independent legal counsel, advised that the CEO took all appropriate steps to disclose his shareholdings.
1. Disclosed under Note 17. Executive officers’ remuneration.
36 Transport Ticketing Authority – Annual Report 2007-08 17. Executive officers’ remuneration The number of executive officers, other than Ministers and the Accountable Officer, and their base and total remuneration during the 2007-08 financial year are shown in the first two columns in the table below in their relevant income bands. The same for the 2006-07 financial year are in columns three and four. Base remuneration is exclusive of bonus payments.
Base Remuneration Total Remuneration Base Remuneration Total Remuneration Income Band 2007-08 2007-08 2006-07 2006-07
$150,000 – 159,999 - - 2 - $160,000 – 169,999 2 - - - $170,000 – 179,999 - - - 2 $180,000 – 189,999 - 2 - - $190,000 – 199,999 1 1 1 - $210,000 – 219,999 1 1 - - $240,000 – 249,999 - - 1 - $250,000 - 259,999 1 - - 1 $280,000 – 289,999 - 1 - - $290,000 – 299,999 - 1 Total numbers 5 5 4 4 Total amount $1,000,602 $1,071,390 $763,357 $854,263
During the year, two executives discontinued their employment with the TTA and one new executive joined.
Note: ‘Total remuneration’ includes conditional payment of previous years’ earned bonuses that were retained by the TTA as part of its Key Persons Retention Strategy. These payments are subject to full repayment in the event of the Key Person’s early resignation from the TTA.
18. Employee numbers There were 63 employees at 30 June 2008 (74 in 2007). The average number of full time employees for the reporting period is 80 employees (64 in 2007).
19. Long service leave The following assumptions were adopted in measuring present values for long service leave:
2008 2007
Weighted average rates of increase in annual employee entitlements to settlement of the liabilities 4.75% 4.50% Weighted average discount rates 6.55% 6.39% Weighted average terms to settlement of the liabilities 7 years 7 years
20. Superannuation scheme contributions and liabilities All employer contributions are made in accordance with the Commonwealth Superannuation Guarantee Legislation. The names of the major employee superannuation funds and employer contributions made by the TTA are as follows: 2008 2007 $000 $000
VicSuper scheme 154 133 Australian Retirement Fund 380 243 Various other superannuation schemes 138 89
No employer contributions were outstanding at year end. All superannuation payments were made to accumulation funds.
Transport Ticketing Authority – Annual Report 2007-08 37 Notes to the financial statementscontinued For the financial year ended 30 June 2008
21. Financial instruments (a) Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement, and the basis on which income and expenses are recognised, with respect to each class of financial assets, financial liability and equity instrument are disclosed in Note 1 to the financial statements.
(b) Categorisation of financial instruments Carrying Carrying Amount Amount $000 $000 Note Category 2008 2007
Financial assets Cash and cash equivalents N/A 3,031 11,102 Receivables (a) 5 Receivables 5,878 1,050
Financial liabilities Payables 9 Financial liabilities 10,545 12,352 Interest bearing liabilities 10 Financial liabilities measured at amortised cost 107 81
(a) The amount of receivables disclosed here exclude statutory receivables (i.e. amounts owing from Victorian Government and GST input tax credit recoverable).
(c) Credit risk exposures The TTA’s exposure to credit risk arises from the potential default of counter party on their contractual obligations resulting in financial loss to the TTA. Credit risk is measured at fair value and is monitored on a regular basis.
Credit risk associated with the TTA’s financial assets is minimal because the main debtor is the Victorian Government.
Currently the TTA does not hold any collateral as security nor credit enhancements relating to any of its financial assets.
(d) Liquidity Risk Liquidity risk arises when the TTA is unable to meet its financial obligations as they fall due. The TTA operates under the Government fair payments policy of settling financial obligations within 30 days and in the event of a dispute, make payments within 30 days from the date of resolution. It also continuously manages risk through monitoring future cash flows.
(e) Interest rates exposure and maturity analysis Exposure to interest rate risk is insignificant and might arise primarily through the TTA’s interest bearing liabilities. Minimisation of risk is achieved by mainly undertaking fixed rate or non-interest bearing financial instruments. For financial liabilities, the TTA mainly undertake financial liabilities with relatively even maturity profiles. The TTA’s interest bearing liabilities are managed by Department of Transport.
The TTA’s exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets and liabilities follows. Exposures arise predominantly from assets and liabilities bearing variable interest rates.
38 Transport Ticketing Authority – Annual Report 2007-08 Interest Rate Exposure Maturity Dates Weighted Fixed Variable Less Avererage Carrying Interest Interest Non Nominal than 1 1-3 3 Months 1-5 Interest Amount Rate Rate Interest Amount Month Months -1 Year Years 2008 Note Rate $000 $000 $000 $000 $000 $000 $000 $000 $000 Financial assets Cash and cash equivalents 4 6.87% 3,031 - 3,031 - 3,031 3,031 - - - Receivables 5 5,878 - - 5,878 5,878 5,878 - - - 8,909 - 3,031 5,878 8,909 8,909 - - - Financial liabilities Payables - Other payables 9 9,995 - - 9,995 9,995 9,969 23 3 - - Amounts payable to other Government entities/agencies 9 550 - - 550 550 550 - - - Lease liabilities 10 7.25% 107 - 107 - 107 - - 75 32 10,652 - 107 10,545 10,652 10,519 23 78 32 Net financial assets (liabilities) (1,743) - 2,924 (4,667) (1,743)
Interest Rate Exposure Maturity Dates Weighted Fixed Variable Less Avererage Carrying Interest Interest Non Nominal than 1 1-3 3 Months 1-5 Interest Amount Rate Rate Interest Amount Month Months -1 Year Years 2007 Note Rate $000 $000 $000 $000 $000 $000 $000 $000 $000 Financial assets Cash assets 4 6.05% 11,102 - 11,102 - 11,102 11,102 - - - Receivables 5 1,050 - 1,050 1,050 1,050 1,050 - - - 12,152 - 12,152 1,050 12,152 12,152 - - - Financial liabilities Payables - Other payables 9 11,799 - - 11,799 11,799 11,799 - - - - Amounts payable to other Government entities/agencies 9 553 - - 553 553 553 - - - Lease liabilities 10 7.12% 81 - 81 - 81 - - 9 72 12,433 - 81 12,352 12,433 12,352 - 9 72 Net financial assets (liabilities) (281) - 12,071 (11,302) (281)
(f) Reconciliation of net financial assets to net assets 2008 2007 Note $000 $000
Net financial assets as above (1,743) (281) GST recoverable 5,320 2,291 Prepayment 6 77 94 Equipment 8 91,493 14,665 Intangible – software/other 7 67 139 Intangible – Work In Progress 7 86,683 76,348 Employee provisions 11 (1,400) (1,261) Provisions for removal of ATS 11 (4,122) (4,122) Net assets 176,375 87,873
(g) Net fair value disclosure of financial assets and liabilities The fair values and net fair values of financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.
Transport Ticketing Authority – Annual Report 2007-08 39 Notes to the financial statementscontinued For the financial year ended 30 June 2008
Carrying Net Fair Carrying Net Fair Amount Value Amount Value 2008 2008 2007 2007 $000 $000 $000 $000
Financial assets Cash 3,031 3,031 11,102 11,102 Receivables 11,198 11,198 3,341 3,341 14,229 14,229 14,443 14,443 Financial liabilities Payables 10,545 10,545 12,352 12,352 Lease liabilities 107 107 81 81 10,652 10,652 12,433 12,433
22. Commitments Within Later than Estimated Expenditure Commitments not Included in the 1 year 1-5 years 5 years Total Financial Statements as at 30 June 2008 $000 $000 $000 $000
OLT Transition Amendment Deed – operations (Note (a)) 46,435 39,667 - 86,103 NTS Contract – capital (Note (b)) 101,669 83,189 - 184,857 NTS Contract – operations (Note (b)) 22,273 217,230 207,152 446,655 Total commitments not recognised in the financial statements 170,377 340,086 207,152 717,615
Within Later than Estimated Expenditure Commitments not Included in the 1 year 1-5 years 5 years Total Financial Statements as at 30 June 2007 $000 $000 $000 $000
OLT Transition Amendment Deed – operations (Note (a)) 46,384 15,612 - 61,996 NTS Contract – capital (Note (b)) 77,636 81,826 890 160,352 NTS Contract – operations (Note (b)) 14,025 183,537 139,481 337,043 Yarra Trams – tram installations 8,083 - - 8,083 Total commitments not recognised in the financial statements 146,128 280,975 140,372 567,473
Note (a): The OneLink Transit Systems Transition Amendment Deed provides for full assistance and cooperation from the incumbent ticketing services provider throughout the new ticketing system transition and implementation phases. Ongoing services payments were the responsibility of the Department of Transport (DOT) in previous years since 1 July 2003 and consequently, were excluded from the TTA’s commitment figures. However, responsibility for ongoing services payments transferred from DOT to the TTA from 1 March 2007 and so outstanding commitments as at 30 June 2008 are included in the TTA’s 2007-08 accounts. The commitment assumes eventual cessation of the existing ticketing system by 2010. Note (b): The new ticketing system contract was awarded in July 2005 for the design, build and 10 year operation of the new public transport ticketing system using smart card technology.
23. Contingent liabilities OneLink Transit Systems performance bonus The TTA recognises a contingent liability relating to the performance bonus component of the contract with OneLink Transit Systems. It is more likely than not that system and equipment availability and overall performance achievements in 2007-08 through to the end of the contract may be higher than the originally forecast level set for performance bonus payments.
However, it is not possible to accurately measure the amount of potential performance bonus payments as this will be impacted by variables, such as patronage growth, equipment performance and vandalism. In particular, performance of these variables will be impacted by the reliability of equipment which is nearing the end of its ‘design life’. As a result, the future sacrifice of economic benefits is less than probable, but more than remote.
No offset would be due to the TTA as a result of payments of the contingent liability.
Kamco Performance-related Payments The TTA recognises a contingent liability relating to performance-related payments associated with the new ticketing system contract with Kamco Pty Ltd (Keane Australia Micropayments Consortium Pty Ltd). It is more likely than not that performance standards will be achieved to a standard which attracts performance bonuses but it is too early to accurately forecast these amounts.
40 Transport Ticketing Authority – Annual Report 2007-08 Designed and produced by MDM Design Level 38 55 Collins Street Melbourne Victoria 3000 PO Box 18023 Collins Street East 8003 Telephone 03 9651 8111 Facsimile 03 9651 7578 www.transport.vic.gov.au/tta [email protected]