The Department of Primary Industries and Resources (PIRSA), a key agency for economic development, is focused on delivering services that increase the prosperity of South Australians and ensuring the sustainable development of the State’s resource base for future generations.
The Department:
contributes to the development of new and existing industries across the agricultural, fisheries, minerals and petroleum sectors in South Australia;
contributes to the management of resources across the agricultural, aquaculture, environment and natural resources, fisheries, minerals and petroleum sectors;
provides a range of policy advice, decision advice and support, legislation development and review which covers all primary industry and resource sectors and other services to the Minister and Government;
contributes to the health, welfare and safety of the communities in the rural and metropolitan areas of South Australia.
Net cost of services increased by $18 million to $113.6 million.
The cost of supplies and services increased by $9.3 million to $72.5 million.
Advances and grants received decreased by $4.4 million to $25.5 million.
Assets with a book value of $3.4 million were transferred to the Department for Water Resources for no consideration.
The Brukunga mine site was purchased for $3.2 million. The assets were written down to $1.2 million.
Subsection 31(1)(b) of the Public Finance and Audit Act 1987 provides for the Auditor-General to audit the accounts of the Department in respect of each financial year.
The audit covered the main areas of financial activity and entailed an assessment of the adequacy of financial accounting systems and processes (including internal control practices) and the test verification of financial transactions processed and recorded during the year.
During 1999-2000 specific areas of audit attention included:
expenditure, including accounts payable and payroll;
revenue, incorporating grants, fees and user charges;
non-current assets, including adequacy of asset register maintenance.
In addition, Audit ascertained whether the Department had adequately prepared for both the introduction of the Goods and Services Tax (GST) and the whole-of-government procurement reform strategy.
Issues arising from the audit were communicated in a letter forwarded to the Chief Executive and a satisfactory response was received.
Although the Department’s general financial control environment was assessed as satisfactory, a number of areas were identified where internal controls could be further strengthened.
The response received from the Department regarding these issues indicated that appropriate action would be taken to address the matters raised.
Previous Reports have commented on the action taken by the Department, in accordance with the Financial Management Framework, to document and implement policies, systems and processes that will assist the Chief Executive and the responsible Minister to discharge accountability in relation to important matters, such as, financial management and reporting, internal control systems and risk management. Furthermore, last year’s Report noted the Department’s intention to develop, in 1999-2000, a Risk Management Framework.
During the year, an external review, initiated by the Department, identified the high level strategic risks and recommended the development of an overall Risk Management Framework. This task has not been undertaken as a Risk Manager has not yet been appointed.
As required by subsection 36(1)(a)(iii) of the Public Finance and Audit Act 1987, the audit of the Department of Primary Industries and Resources 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 Department of Primary Industries and Resources 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 the law.
The net cost of services increased by $18 million to $113.6 million as a result of an increase in operating expenses of $13.9 million and a reduction in operating revenues of $4.1 million.
The principal increases in expenses were employee costs $5.5 million, professional services $4.4 million and utility and property costs $2 million.
A decrease of $4.4 million in advances and grants was the main reason for the reduction in operating revenues.
On 1 March 2000, staff and assets relating to Groundwater and Drilling Services were transferred to the Department for Water Resources which was established on the same date. No consideration was received for the assets which had a book value of $3.4 million. The assets transferred included the Borehole Network with a book value of $3 million.
Notes 4 and 5 to the financial statements make comments on costs of $5 million for adverse events. The major costs related to the locust and grasshopper plague programs $2 million ($2.1 million) and the fruit fly eradication program $1.6 million ($1.3 million).
Although Cabinet approved the transfer of the Brukunga Mine site from SA Water in May 1997, the transfer did not occur until 1999-2000. The consideration paid for the land and buildings, site improvements and plant and equipment was $3.2 million which was specifically provided for in the Department’s appropriation. The assets were written down to $1.2 million as a result of a departmental valuation.
The Targeted Exploration Initiative South Australia (TEISA) was launched in December 1998 and is a $23.2 million four year program. Funds will be expended over the period 1998-2002 on a phased, regional exploration strategy for minerals, petroleum and groundwater aimed at accelerating resource exploration. Expenditure in 1999-2000 was $3.6 million and total expenditure to date is $4.1 million.
A Resources Task Force was established in February 1999 to prepare a five year Mineral Resources Plan to create growth in the minerals sector. A report completed in November 1999 stated that:
… There is a prime opportunity for a strong focus, funded by private industry, with high quality technical and administrative support from the Government, to produce minerals worth $3 billion, processed mineral output of another $1 billion, and exploration and development investments of $300 million a year by 2020 …
This compares with an expected aggregate value of mineral exploration, production and processing investment and output of $1.9 billion in 2000.
The Mineral Resources Plan identified nine objectives, with related strategies and actions to create the necessary business environment for the minerals industry to reach the targets identified in the Report. The Task Force identified three key objectives that required immediate action namely, making land more accessible, stimulating vigorous exploration activity and a supportive and responsive government.
In May 2000, the State Government responded to the Task Force Report by commenting on each of the nine objectives.
An Industry Development Board is to be established to support the Government’s response to the Mineral Resources Plan, report on the performance of the industry and to provide strategic advice to Government.
In June 1995 Cabinet endorsed an integrated catchment management plan to address the problems of dryland salinity and flooding in the Upper South East of South Australia. The Department is responsible for the implementation of the management plan.
The drainage component of the Upper South East Dryland Salinity and Flood Management Plan will be constructed in three stages over six years. Construction of the first stage of the drainage works commenced in October 1997. The project is funded on the basis of the State and Commonwealth each contributing 37.5 percent and the local community contributing 25 percent of the cost. The estimated total project cost is $24 million. Infrastructure works ownership is transferred to the South Eastern Water Conservation and Drainage Board (SEWCDB) at nil consideration at the completion of each stage.
During 1999-2000 expenditure on this project was $4.5 million with total program costs to date being $11 million. Levies received from the local community were $873 000 ($1.1 million) and Commonwealth funding was $674 000 ($1.5 million).
This is a continuing program of refurbishment of the irrigation distribution infrastructure and upgrading the pumps for the existing district and including areas for new development outside the current boundaries of the Loxton Irrigation District. The estimated total project cost is $40 million with the State’s share being $16 million over the projected construction period of five years.
During 1999-2000 expenditure on the project was $1.9 million with total program costs to date being $3.7 million. External funding received during 1999-2000 was $700 000 ($1.2 million).
The Department assumed sole responsibility for electricity supply and service of customers in the areas covered by the Remote Areas Energy Scheme (RAES) Electricity Distribution Systems.
During 1999-2000 subsidies paid relating to RAES amounted to $3 million ($2.9 million). In this period RAES electricity sales totalled $791 000 ($784 000).
The following graph shows that over the last seven years the pattern of assistance provided to the rural sector have changed with the emphasis from lending funds to providing grants.
Assistance to the rural sector was $4.3 million ($5 million) comprising:
|
|
|
2000 |
1999 |
|
|
|
$’000 |
$’000 |
Grants (i) |
|
|
3 636 |
4 650 |
Loans |
|
|
704 |
324 |
|
|
|
4 340 |
4 974 |
(i) Includes:
- Interest rate subsidy $412 000 ($2.1 million)
- The Eyre Peninsula Regional strategy $1.9 million ($2.3 million). This strategy is part of a Strategic Plan developed under the provision of a Memorandum of Understanding between the Commonwealth, the State of South Australia and the Eyre Peninsula Strategic Task Force for the Eyre Peninsula Rural Partnership Project. Support is either by way of a re-establishment grant or interest rate subsidy.
- The FarmBis program $786 000 ($39 000). The program, which is part of the Commonwealth Government’s Agriculture - Advancing Australia package, is a $14.5 million initiative to provide grants to farmers to improve their business management skills.
As at 30 June 2000 the rural sector had balances of loans outstanding totalling $34 million ($40 million).
These loans have been made under various schemes and conditions. For example, Commercial Rural Loans were made on a commercial basis which required equity of at least 60 percent in the security provided. On the other hand, loans made under the Rural Assistance Scheme (RAS) were generally at a concessional rate of interest with a lower level of security being required.
The reduction in the loan portfolio can be attributed to the decision to cease to provide loans under both schemes. The existing loans are being managed to completion. New loans continued to be provided under the loans to Co-operative Scheme and the Rural Industry Adjustment and Development Fund (RIADF) The following chart shows the composition of the outstanding loan portfolio as at 30 June 2000 divided into the schemes under which the loans were made.
Total advances for the year amounted to
$704 000 ($324 000) and $6.7 million ($13.3 million) was repaid by the
rural sector.
Included in the Program Schedule of Departmental Administered Expenses and Revenues for the 1999-2000 financial year are the following:
The Natural Heritage Trust of Australia Reserve was established by the National Heritage Trust of Australia Act 1997 (Commonwealth). The Trust is a major capital initiative aimed at conserving and managing Australia’s bio-diversity, land, water, vegetation and sea on an ecologically sustainable basis. Funds provided by the Commonwealth will be spent on the environment, sustainable agriculture and natural resources management.
The Commonwealth’s objectives are to:
provide a framework for strategic capital investment, to stimulate additional investment in the natural environment;
achieve complementary environmental protection, including bio-diversity conservation, sustainable agriculture and natural resources management outcomes consistent with agreed national strategies;
provide a framework for co-operative partnerships between communities, industry and all levels of government.
For the 1999-2000 financial year Commonwealth Grants were $25.1 million ($23.9 million). Expenditure was $25.5 million ($22.6 million).
On 1 September 1995, the Natural Gas Authority of South Australia (NGASA) became operative pursuant to the provisions of the Pipelines Authority (Sale of Pipelines) Amendment Act 1995.
The principal activities of NGASA are:
the purchase, sale and delivery of gas;
administration of gas supply contracts with respect to the South Australian Cooper Basin, South West Queensland Cooper Basin and Katnook;
the administration of downstream gas sale contracts for Terra Gas Trader Pty Ltd and Origin Energy;
gas price reviews, gas nominations, reserves and adequacy, take-or-pay and Trade Practice Commission issues;
gas billing, gas quality and measurement.
Under the terms of the contracts, NGASA is responsible for invoicing and collecting payments from Terra Gas Trader Pty Ltd and Origin Energy for gas purchased and the subsequent forwarding of those monies to the gas producers.
The transactions pertaining to this activity are processed through a Special Deposit Account. During 1999-2000 receipts from the major customers were $209.2 million ($187 million) and payments to gas producers totalled $209.2 million ($187 million).
The Extractive Areas Rehabilitation Fund (the Fund) was established pursuant to section 63 of the Mining Act 1971.
The Fund, which is administered by the Department (refer to Notes 2(b) and 30 to the Financial Statements), is operated through a Deposit Account and is credited with the proceeds of a levy on minerals extracted by mining companies. Funds are applied for the purposes of the rehabilitation of land disturbed by mining operations and also for measures designed to limit damage to the environment caused by such mining operations.
An analysis of operations on account of this Fund over the past five years is as follows:
|
|
|
|
Funds held |
Financial Year |
|
Receipts |
Payments |
at 30 June |
|
|
$’000 |
$’000 |
$’000 |
1995-96 |
|
826 |
876 |
4 922 |
1996-97 |
|
806 |
817 |
4 911 |
1997-98 |
|
1 025 |
790 |
5 146 |
1998-99 |
|
887 |
885 |
5 148 |
1999-2000 |
|
1 104 |
1 441 |
4 811 |
Royalties received in respect to mineral and petroleum production and gas licences increased by $15 million to $81.5 million during 1999-2000. The increase is the result of a reduction of $3 million in royalties from gas licences due to a decrease in the gas sales levy, an increase of $9.5 million in royalties from natural gas/liquids mainly as a result of an increase in oil prices and a lower exchange rate, and an increase of $8.8 million in royalties from minerals following increased production after commissioning of a new plant at Roxby Downs.