To provide an understanding, and to assist with readability, this section of the Report comments on two activities relating to the South Australian Ports Corporation, namely:
Ports Corporation Sale Lease Proceeds — an account that contains and accounts for the proceeds from the sale/lease of the business and assets of the South Australian Ports Corporation.
South Australian Ports Corporation — which contains the operating activities of the Corporation to the date of transfer to the new operator on 1 November 2001 and activities to wind down the assets and liabilities of the Corporation to 30 June 2002.
In October 2001, Cabinet authorised the Minister for Government Enterprises to execute the Sale/Lease Agreement with Flinders Ports and authorised the Minister for Transport to execute the Port Operating Agreements with Flinders Ports. These agreements resulted in the sale of the plant and equipment assets of the South Australian Ports Corporation, the rights to operate the ports previously operated by the Corporation and the lease of the land upon which the ports assets resided.
To account for the settlement of the Sale/Lease and Port Operating Agreements, an interest bearing Special Deposit Account was created at Treasury. The account is titled, ‘Ports Corp Sale/Lease - Proceeds’ and was established under section 8 of the Public Finance and Audit Act 1987. The responsibility for the account rests with the Department of Treasury and Finance, which has been assigned to process and account for related transactions.
The South Australian Ports (Disposal of Maritime Assets) Act 2000 (the Act) was proclaimed in January 2001. The purpose of the legislation includes: to facilitate the divestment of the business and key operating assets of the South Australian Ports Corporation by way of Sale/Lease Agreements and to provide for dissolution of the South Australian Ports Corporation (Ports Corp).
The purpose of the Ports Corp Sale/Lease - Proceeds Account is ‘… to apply proceeds of the sale/lease in accordance with Section 12 of the South Australian Ports (Disposal of Maritime Assets) Act 2000 and to account for the net proceeds’.
Under section 12(1) of the Act, the proceeds of a sale/lease agreement must be applied for one or more of the following purposes:
(a) defraying the cost of restructuring and disposal of maritime assets and the necessary preparatory work;
(b) work to deepen, extend or clear a harbour or port or other work to develop or improve such a harbour or port;
(c) improving services and facilities related to a port or infrastructure associated with a port;
(d) retiring State debt;
(e) making provision of up to $100 million for the State’s superannuation liabilities.
Under section 12(2) of the Act, if the proceeds are not applied immediately to a purpose mentioned under section 12(1), they must be kept in a separate account at Treasury, and any income from investment of the money standing to the credit of the account must be applied towards retiring State debt.
Subsection 31(1)(a) of the Public Finance and Audit Act 1987 provides for the Auditor-General to audit the public accounts in respect of each financial year and under the Act, Special Deposit Accounts are included as part of the public accounts.
The audit program covered all major financial systems relevant to the Ports Corp Sale/Lease - Proceeds Account and was primarily directed towards obtaining sufficient evidence to enable an audit opinion to be formed with respect to the financial statements and internal control.
During 2001-02 specific areas of audit attention included:
proceeds from the sale/lease of the business and assets of the South Australian Ports Corporation
income from the investment of funds of the Special Deposit Account
payment towards the State’s Superannuation Liabilities
superannuation compensation under Schedule 3, section 5 of the Act
reimbursement for preparatory work and disposal costs incurred by Department for Administrative and Information Services (DAIS).
No formal letter was sent to the Department of Treasury and Finance regarding the Ports Corp Sale/Lease - Proceeds Account as no matters of significance were noted during the course of the Audit.
The review of the internal control structure of the Ports Corp Sale/Lease - Proceeds Account concluded that an adequate system of internal control was in place and that transactions processed were subject to internal check, were duly authorised by an appropriate officer and that major financial transactions were supported by duly executed contracts or agreements. As the transactions reflected in the Ports Corp Sale/Lease - Proceeds Account are processed by the Financial Services Section of the Department of Treasury and Finance, further commentary on general financial controls is detailed under the Department of Treasury and Finance section of this Report.
The computer information systems environment surrounding the processing of transactions relating to the Ports Corp Sale/Lease - Proceeds Account is the same environment as the Department of Treasury and Finance. Accordingly, commentary on the Computer Information Systems Environment is provided under the Department of Treasury and Finance section of this Report.
As required by subsection 36(1)(a)(iii) of the Public Finance and Audit Act 1987, the audit of the Ports Corp Sale/Lease - Proceeds Account 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 Ports Corp Sale/Lease - Proceeds Account 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 organisation were conducted properly and in accordance with law.
Expenses from ordinary activities amounted to $99 million. The most significant of the total expenditure relates to subsection 12(1)(e) of the Act, which requires the proceeds of a sale/lease agreement to be applied towards making provision of up to $100 million for the State’s superannuation liabilities. The Account paid $90 million to Funds SA as a contribution towards the unfunded superannuation liabilities of the State.
Revenues include $132.5 million proceeds received from the sale/lease of the business and assets of the South Australian Ports Corporation. The sale/lease and the sale/lease price was approved by Cabinet, which is consistent with other Government asset sales practices. Interest income of $1.6 million has been earned in accordance with section 12(2) of the Act, which requires the investment of proceeds standing to the credit of the account.
The cash balance of the Ports Corp Sale/Lease Proceed Account at 30 June 2002 amounted to $34.9 million. This represents proceeds from sale/lease of the business and assets of the South Australian Ports Corporation after payments towards the unfunded State’s superannuation liability, superannuation compensation and reimbursements of disposal costs. $100 000 of the cash balance is accrued towards the further reimbursement of costs incurred by DAIS in the disposal process. The remainder is committed for one or more of the reasons outlined under section 12 of the Act, which includes improving services and facilities related to a port or infrastructure associated with a port. In accordance with this, an undertaking has been given by the State to the South Australian Grains Industry to upgrade infrastructure on Le Fevre Peninsula to complement a planned new panamax capable grain berth at Outer Harbour. In addition, funds have been retained for the application of interest income towards retirement of State debt.
The net cash provided by operating activities amounted to $34.9 million. This is due to the inflow of proceeds from sale/lease of the business and assets of the South Australian Ports Corporation of $132.5 million and interest income on investment of the proceeds yet to be applied of $1.4 million which exceeded outflows of payments towards superannuation liabilities of $90 million, superannuation compensation under Schedule 3, section 5 of the Act of $400 000 and reimbursement to DAIS for costs incurred for preparatory work and disposal of $8.6 million.