Following a direction by the Minister of Government Enterprises pursuant to the TAB (Disposal) Act 2000, the South Australian Totalizator Agency Board (TAB) was registered as a proprietary company (SA TAB PtyLtd) under the Corporations Law on 26 April 2001. As a result, two sets of financial statements are included herein covering the periods 1 July 2000 to 25 April 2001 and 26 April 2001 to 30 June 2001.
The following comments relate to the operations of the TAB for the full 12 month period.
The TAB is empowered by the Racing Act 1976, to conduct off-course totalizator betting on thoroughbred, harness and greyhound races held within or outside Australia, and to act as the agent of an authorised racing club in the conduct by that club of on-course totalizator betting. The TAB is also empowered to conduct off-course totalizator betting on football and other sporting events, including fixed odds betting, held within or outside Australia as approved by the Minister.
The TAB is the licence holder of TABRadio. This investment provides for the availability of race broadcasting of events covered by the TAB and other racing information.
The controlling authorities for the three racing codes and football are:
Thoroughbred Racing SA
Harness Racing SA
Greyhound Racing SA
South Australian National Football League Inc
The structure of the TAB is represented as follows:
In February 1998, the South Australian Government announced that it was considering the sale of the TAB. A scoping review was undertaken to determine whether a sale was the best option for the State. As a result of the review, the South Australian Government agreed in principle to the sale of the TAB in February 2000 and commenced a sale process.
In August 2001, the Minister for Government Enterprises announced that the TAB had been purchased by TAB Queensland Limited. Final settlement of the sale is expected to occur in January 2002, subject to probity checks by the Gaming Supervisory Authority.
A transitional Board has been appointed to oversee the transition process of integrating the operations of both organisations.
Changes to the Racing Act 1976, operative from 1 July 2000, included amendments relating to the distribution of funds, to take account of the impact of the Goods and Services Tax (GST). The amendments include a payment of a State tax and a payment to the controlling authorities based on a percentage of net gambling revenue. Any surplus funds continue to be distributed on the basis of 45 percent to government and 55 percent to the controlling authorities.
The change in distribution is designed to ensure that the controlling authorities receive the same level of distribution as pre-GST. The reduction in distribution to the Government will be offset through GST revenue grants from the Commonwealth.
Turnover for the year was $634.3million ($619.7million), an increase of $14.6million (decrease $600000). The turnover attributable to Footypunt was $1.9million ($3.3million).
Fixed odds Sportsbet commenced in December 2000. Turnover was $2.2million.
Expenditure increased by $15.9million to $68.2million.
$786000 was transferred from accumulated capital for distribution.
The amount available for distribution was $40.8million.
The total distributions available to the Government and the Racing Industry were $8.1million and $32.5million respectively.
Expenses relating to the GST and State tax were $9million and $5.9million respectively.
Turnover by PubTABs was $313.8million ($305.9million) an increase of $7.9million ($2.1million).
Section 58 of the Racing Act 1976, provided for the Auditor-General to audit the accounts of the South Australian Totalizator Agency Board.
Subsection 31(1)(b) of the Public Finance and Audit Act 1987 provides for the Auditor-General to audit the accounts of the SA TAB Pty Ltd in respect of each financial year.
The audit covered the major financial systems of the TAB and included an assessment of the adequacy of internal controls within those systems. The extent of audit coverage was influenced by the work performed by the Audit Department of the TAB. The specific areas of audit attention included:
wagering system, including bets and dividends
expenditure, including accounts payable and salaries and wages
budgetary control and management reporting
non-current assets, including adequacy of asset register maintenance
internal audit activities
distributions.
A letter has been forwarded to the Chief Executive, together with the Independent Audit Reports, advising of the scope of audit and indicating that no major issues were noted.
The overall internal control structure of the TAB was assessed as satisfactory.
As required by subsection 36(1)(a)(iii) of the Public Finance and Audit Act 1987, the audits of the South Australian Totalizator Agency Board and the SA TAB Pty Ltd included an assessment of the controls exercised in relation to the receipt, expenditure and investment of money, the acquisition and disposal of property and the incurring of liabilities. The assessment also considered whether those controls were consistent with the prescribed elements of the Financial Management Framework as required by Treasurer’s Instruction 2 ‘Financial Management Policies’.
Audit formed the opinion that the controls exercised by the South Australian Totalizator Agency Board and the SATAB Pty Ltd in relation to the receipt, expenditure and investment of money; the acquisition and disposal of property; and the incurring of liabilities, were sufficient to provide reasonable assurance that the financial transactions of the organisations were conducted properly and in accordance with the law.
An unqualified audit opinion has been provided with respect to the financial statements of the South Australian Totalizator Agency Board.
Qualification
In accordance with the requirements of Auditing Standard AUS 702 ‘The Audit Report on a General Purpose Financial Report’, attention is drawn to the following:
(a) As disclosed in Note 1(c) to the financial statements, the financial accounting treatment accorded to certain non-current assets differs from the requirements of Accounting Standard AASB 1021 ‘Depreciation’. The difference in treatment arises from specific legislative provisions of the Racing Act 1976, with which there has been compliance.
(b) As disclosed in Note 1(a) to the financial statements, the financial accounting treatment accorded to income tax differs from the requirements of Accounting Standard AASB 1020 ‘Income Taxes’. The difference in treatment arises from specific legislative provisions of the Public Finance and Audit Act 1987 in particular, the Treasurer’s Instructions promulgated pursuant to that Act, and the Racing Act 1976, with which there has been compliance.
Qualified Audit Opinion
In my opinion, except for the effects on the financial report of the matters referred to in the qualification paragraphs, the financial report of the SA TAB Pty Ltd is in accordance with:
(a) the Corporations Act 2001, including:
(i) giving a true and fair view of the SA TAB Pty Ltd’s financial position as at 30June 2001 and of its performance for the period ended on that date; and
(ii) complying with Accounting Standards and Corporations Regulations; and
(b) other mandatory professional reporting requirements
In 1999-2000, there was a lower than expected turnover and therefore a shortfall in distribution to the controlling authorities. The TAB met the shortfall through the utilisation of funds within accumulated capital (other capital). These funds represented a portion of the proceeds from the sale of assets over a number of years.
The amount remaining from those proceeds, $786000, has been distributed, in accordance with subsection69(2) of the Racing Act 1976, to the controlling authorities $432 000 and to the Treasurer $354 000.
Turnover increased by $14.6million to $634.3million. The following graph shows the turnover for the last five years.
Five Year Analysis of Turnover
The sources of turnover, for the last five years, from racing are summarised as follows:
Sources of Turnover
In 2000-01, 85percent of investments with the TAB were returned, by way of dividends, to customers. The percentage distribution of turnover is represented in the following manner:
Distribution of Turnover for 2000-01
Racing Turnover by State Event 2000-01
Expenditure — Deduction, Distribution to Government and the Racing Industry and TAB Expenditure
The introduction of the GST and the legislative changes, as previously mentioned, has caused some distortion in comparative information.
Expenditure in relation to GST was $9million and for State tax was $5.9million. Both amounts are included under ‘other expenses from ordinary activities’ and are the principal reasons for the increase in TAB expenditure and the reduction in the total amount available for distribution.
The reduction in distribution available to the Government is the result of legislative changes with respect to the distribution of funds.
Income tax expense has reduced as a result of a reduction in distributions available to the Government.
Sportsbet, which commenced in December 2000, provides for betting on a range of sports conducted in Australia and around the world. All odds are set by the Victorian TABCorp and are fixed at the time the bet is placed.
Commission earned was $246000 but after taking into account operating expenses, there was a loss of $285000. This loss has been borne by the Government $128000 and the Controlling Authorities $157 000.
The Racing Act 1976 does not provide for the treatment of a loss on Sportsbet, however, the TAB has recognised the loss in accordance with subsection 69(2)(b) of the Act.
The following table shows turnover for the past three years:
|
2000-01 |
1999-2000 |
1998-99 |
||||
|
% of |
% of |
% of |
||||
|
$’000 |
Turnover |
$’000 |
Turnover |
$’000 |
Turnover |
|
|
Sales outlets |
226 637 |
36 |
221 495 |
36 |
227 159 |
37 |
|
PubTABs |
313 812 |
49 |
305 881 |
49 |
303 847 |
49 |
|
Telephone betting |
93 830 |
15 |
92 293 |
15 |
89 294 |
14 |
|
634 279 |
100 |
619 669 |
100 |
620 300 |
100 |
|
The number of sales outlets and PubTABs operating at 30 June was 74 (77) and 303 (306) respectively.
Net assets were $13.7million, a decrease of $1.7million. Reflecting in this was:
a net decrease in property, plant and equipment of $1.2million to $9.5million which included:
-
acquisitions of plant and equipment of $3.4million
-
depreciation charges of $4.2million
-
proceeds from the sale of property, plant and equipment of $94000
-
net recoverable amount write-downs of $263000;
a decrease in short-term investments of $1.4million.
Since August 2000, relevant parties, with an interest in the TAB Staff Superannuation Fund, have held discussions in relation to the treatment of surplus funds in the Fund, in the event of a sale of TAB.
In January 2001, all members of the Fund, with the exception of those on the Trustee Board, requested the wind up of the Fund prior to a sale.
A Ministerial direction, dated June 2001, directed the SA TAB Pty Ltd to negotiate with the Trustee and the members of the Fund in relation to a course of action to be taken for the winding up of the Fund and distribution of surplus funds.
The Trustee has commenced proceedings in the Supreme Court relating to the future administration of the Fund and the entitlements of the members.
At the time of finalising this Report, the matter had not been resolved.