On 14 January 1999 the TransAdelaide (Corporate Structure) Act 1998 (the Act) was proclaimed. The Act provides for the continuation of TransAdelaide as a statutory corporation to which the provisions of the Public Corporations Act 1993 apply.
Pursuant to the Act, TransAdelaide continues in existence and is subject to control and direction by the Minister for Transport and Urban Planning.
The Act establishes a Board of Directors as the governing body of TransAdelaide.
The key objectives of TransAdelaide are to:
ensure efficient, relevant and reliable services;
undertake activities which build client support and use of the public transport system;
maintain infrastructure to a standard that ensures the efficient and reliable delivery of passenger transport services.
Pursuant to the Public Corporations Act 1993, TransAdelaide has established two subsidiaries. The following diagram depicts the structure of TransAdelaide as an economic entity.
* Hills Transit was dissolved on 30 June 2000 pursuant to the Public Corporations (Hills Transit Dissolution) Regulations 2000.
TransAdelaide is a statutory corporation subject to the provisions of the Public Corporations Act 1993. That Act requires a charter and performance statement to be prepared by the Minister and the Treasurer after consultation with the TransAdelaide Board.
The TransAdelaide Corporation Charter and TransAdelaide Performance Statement were approved in August 1999.
The charter for TransAdelaide outlines:
The nature and scope of commercial and non-commercial activities, including the commercial operations of TransAdelaide’s subsidiary corporations, namely AUSTRICS and Hills Transit (dissolved 30 June 2000).
Financial standards and reporting, including providing interim reports on operations; the form and content of accounts and financial statements; and accounting and internal auditing systems and practices.
Operating principles, including primary functions of TransAdelaide.
Compliance with government policies, and the Public Finance and Audit Act 1987.
The Passenger Transport Board, established on 1 July 1994, progressively offered for open tender the provision of various passenger transport services previously provided exclusively by TransAdelaide. The Passenger Transport Board separated portions of these passenger transport services into 14 bus contract parcels and 4 contract parcels covering the rail and tram operations.
During 1995-96 the Passenger Transport Board awarded three bus contract parcels, one to TransAdelaide, one to Hills Transit (a subsidiary of TransAdelaide) and one to a private contractor.
The remainder of the contract parcels were awarded or negotiated in 1996-97 with TransAdelaide gaining the right to operate a further 10 bus contracts and the four rail and tram contracts.
In late 1998 the Passenger Transport Board advised that it wished to enter into negotiations with TransAdelaide to extend all bus and rail contracts which expired in January 1999 and June 1999 respectively, for a minimum period of 12 months. A Memorandum of Understanding between TransAdelaide and the Passenger Transport Board was signed to reflect this extension.
In February 1999, the Passenger Transport Board released an Expression of Interest document outlining the timeframe and process for the next round of competitive tendering for the bus contracts.
Although TransAdelaide submitted bids for the bus contracts as part of that process, it was not successful in winning any of the contracts in its own right. As a result, TransAdelaide ceased all bus operations from 23 April 2000.
Notwithstanding this, TransAdelaide retains an interest in one bus contract through its involvement in a joint venture with Australian Transit Enterprises (ATE). The joint venture entitled, Adelaide Hills, came into operation on 28 May 2000.
Hills Transit, the subsidiary of TransAdelaide was subsequently dissolved on 30 June 2000 pursuant to the Public Corporation (Hills Transit Dissolution) Regulations 2000.
At the time of preparing this Report TransAdelaide is in the process of re-negotiating the Metropolitan Train and Tram service contracts.
Further commentary relating to passenger transport contracts is detailed below under the heading ‘Interpretation and Analysis of Financial Statements’.
As mentioned above, a Joint Venture Agreement was established during 1999-2000 between TransAdelaide and Australian Transit Enterprises (ATE) to manage a bus contract entered into with the Passenger Transport Board. The joint venture is known as the ‘Adelaide Hills’ joint venture. The following diagram illustrates this relationship:
As the joint venture only commenced operations late in the financial year, TransAdelaide did not receive any distribution of profits in 1999-2000.
Operating profit before abnormal items and income tax was $9 million (loss $1.5 million).
Extraordinary items associated with TransAdelaide’s disengagement from the bus passenger business were $2.3 million (refer Note 9.2).
Provisions (largely attributable to employee entitlements) decreased by $13.8 million to $21.8 million.
Separation packages totalling $37.8 million ($6.4 million) were paid during the year due to a reduction of 935 (163) employees.
Receivables increased by $5.2 million to $13.9 million.
Permanent Way non-current assets at cost increased by $9.2 million to $11.9 million.
Subsection 32(4) of the Public Corporations Act 1993 provides for the Auditor-General to audit the accounts of TransAdelaide in respect of each financial year. The authority for the Auditor-General to audit the subsidiaries of TransAdelaide is provided by subclause 13(3) of the Schedule to the Public Corporations Act 1993.
The audit program covered all major financial systems and was directed primarily towards obtaining sufficient evidence to enable an audit opinion to be formed with respect to the financial statements and internal control.
During 1999-2000 a specific area of audit attention was the payment of termination payments.
During the year Audit attended meetings with management to discuss matters mentioned in the audit management letters issued. All audit management letters were forwarded to the General Manager. Satisfactory responses have been received with respect to the matters raised by Audit.
Section 31 of the Public Corporations Act 1993, requires a public corporation to establish an Audit Committee and that the composition of the committee include members of the Corporation Board.
In accordance with the above requirements TransAdelaide has established a Finance and Audit Committee whose membership comprises TransAdelaide Board members.
The primary function of the Finance and Audit Committee as outlined in the Finance and Audit Committee Charter ‘is to assist the Board in effectively fulfilling responsibilities for financial management and reporting, risk management, internal control and achieving good corporate governance’.
The General Manager attends the Finance and Audit Committee meetings in an ex-officio capacity. Audit representatives attend Finance and Audit Committee meetings as observers.
In accordance with section 31 of the Public Corporations Act 1993, TransAdelaide has established an internal audit function. The authority and responsibility of the internal audit function are detailed in the Internal Audit Charter. The objective of the internal audit function, as set out in the Charter, is to provide an independent review of all aspects of TransAdelaide’s activities, including administrative controls and procedures, and to assist management in the effective discharge of its responsibilities.
During 1999-2000 TransAdelaide contracted out its internal audit function.
Internal audit reports are provided to the General Manager and the Finance and Audit Committee.
The TransAdelaide Board seeks representations concerning the discharge of management responsibilities through a Directors’ questionnaire which accompanies the financial statements presented to the Board. The questionnaire is extensive and seeks specific representations from TransAdelaide’s management concerning such matters as the controls exercised over cash, receivables, assets, liabilities, borrowings, commitments, insurance, as well as relating to issues of legal compliance, environmental considerations, and fraud control.
The audit included consideration of the general control environment within TransAdelaide. TransAdelaide has recognised the need to undertake a review of the internal control environment with a view to identifying and assessing the risks to which it is exposed. During 1999-2000 TransAdelaide internal audit prepared a Business Risk Profile and Internal Audit Plan with the aim ‘for the audit function to adopt a risk-focused approach, and to improve the alignment of the audit approach to the goals and strategic plans of the organisation’. A corporation wide risk review was conducted, with the outcome forming the basis of the audit plan.
The audit of TransAdelaide’s financial systems encompassed a review of the CIS control environment, covering system access controls, processing controls, data integrity and back-up and recovery procedures. The overall assessment was that the CIS control environment was satisfactory.
As required by subsection 36(1)(a)(iii) of the Public Finance and Audit Act 1987, the audit of TransAdelaide 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.
Audit formed the opinion that the controls exercised by TransAdelaide 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 passenger transport contracts require TransAdelaide to provide passenger services in the specified service area in return for contract payments. The contract payments are based on a fixed component plus an incentive component based on patronage. All ticket revenue collected by TransAdelaide is remitted to the Passenger Transport Board.
In addition, under the contracts TransAdelaide must maintain public liability insurance, comprehensive motor vehicle insurance and compulsory third party insurance.
Income from the Passenger Transport Board relating to contracts for the provision of passenger services represented 87 percent (91 percent) of TransAdelaide’s revenue. The reliance on contract payments creates a high degree of financial dependency on the Passenger Transport Board. This dependency has been recognised in Note 1 to the Financial Statements.
TransAdelaide achieved a consolidated operating profit before abnormal items and income tax of $9 million (loss $1.5 million). While revenue decreased by $4.7 million, the result was due mainly to a reduction in operating expenses of $12.8 million, largely resulting from decreased employee expenses of $4.9 million and reduction in transfer to workers compensation provision of $4.6 million.
Receivables increased by $5.2 million due mainly to a $4.8 million receivable from the Passenger Transport Board for funding made available by the State Government.
Permanent Way assets at cost increased by $9.2 million to $11.9 million during the year. This is due to major upgrades of rail lines.
Buildings at cost increased by $1.9 million to $3.7 million as a result of building improvements to the Elizabeth and Noarlunga rail stations.
These increases have been offset by a decrease in work in progress by $4.6 million to $9.9 million.
During 1999-2000 provisions which are primarily for employee entitlements, decreased by $13.8 million to $21.8 million. This decrease in liabilities is due to the reduction of 935 (163) employees as a result of the disengagement of TransAdelaide from the provision of bus services.
During 1999-2000 the net cash provided by operating activities increased by $4.6 million to $18.4 million. This is due to an increase in receipts of $36.7 million which is primarily as a result of an increase in government funding of $16.8 million to $22.8 million.
Government funding in 1999-2000 was received by TransAdelaide for accrued annual leave and long service leave entitlements of $13 million paid to those employees who received a separation package, $2 million for incentive payments to those employees who remained with TransAdelaide after the disengagement from the provision of bus services, and $7.6 million for employee redeployment costs.
AUSTRICS is a wholly-owned subsidiary of TransAdelaide established by regulations under the Public Corporations Act 1993.
The regulations establish AUSTRICS as a body corporate with board members being appointed by TransAdelaide. The functions of the subsidiary are to carry out research and to develop computer software and associated products within TransAdelaide’s area of expertise, to market and to promote these products, to provide consultancy and other services, and any other function conferred by TransAdelaide.
The results of the audit indicated that the control environment within AUSTRICS was satisfactory.
For the 1999-2000 financial year AUSTRICS achieved an operating profit before income tax of $259 000 (loss $76 000).
A summary of AUSTRICS operating result and financial position is detailed below:
|
|
|
2000 |
1999 |
Operating Result: |
|
|
$’000 |
$’000 |
Revenue |
|
|
2 273 |
1 445 |
Expenditure |
|
|
2 014 |
1 521 |
Operating Profit (Loss) Before Tax |
|
|
259 |
(76) |
Income tax expense |
|
|
100 |
27 |
OPERATING PROFIT (LOSS) AFTER ABNORMAL ITEMS AND TAX |
|
159 |
(49) |
|
|
|
|
|
|
Financial Position: |
|
|
|
|
Total Assets |
|
|
1 333 |
895 |
Total Liabilities* |
|
|
992 |
563 |
NET ASSETS |
|
|
341 |
332 |
|
|
|
|
|
* Includes $484 000 owing to TransAdelaide. |
|
|
|
|
Hills Transit commenced operations on 24 September 1995 as a wholly-owned subsidiary of TransAdelaide established by regulations under the Public Corporations Act 1993.
The regulations established Hills Transit as a body corporate with board members being appointed by TransAdelaide. The functions of the subsidiary were to undertake and carry on the business of providing passenger transport services, enter into service contracts with the Passenger Transport Board and carry out any other functions conferred upon Hills Transit by TransAdelaide.
The Hills Transit contract to provide bus services to the Adelaide Hills area ceased in April 2000. As a result, Hills Transit ceased trading and was subsequently dissolved on 30 June 2000 pursuant to the Public Corporation (Hills Transit Dissolution) Regulations 2000.
Audit observed that the general control environment was characterised by reliance on one or two individuals for the preparation and processing of transactions with minimal independent checking to ensure transactions and processes were complete and accurate.
A number of specific issues were raised with Hills Transit and a satisfactory response was received.
Hills Transit achieved an operating profit before income tax of $39 000 ($160 000).
A summary of Hills Transit operating result and financial position is detailed below:
|
|
|
2000 |
1999 |
Operating Result: |
|
|
$’000 |
$’000 |
Revenue |
|
|
5 707 |
6 030 |
Expenditure |
|
|
5 477 |
5 870 |
Operating Profit Before Extraordinary Items |
|
|
230 |
160 |
Extraordinary items charged |
|
|
(191) |
- |
Operating Profit Before Tax |
|
|
39 |
160 |
Income tax attributable to operating profit |
|
|
14 |
58 |
Write off of income tax expense |
|
|
58 |
- |
OPERATING (LOSS) PROFIT AFTER ABNORMAL ITEMS AND TAX |
|
(33) |
102 |
|
|
|
|
|
|
Financial Position: |
|
|
|
|
Total Assets |
|
|
- |
1 381 |
Total Liabilities |
|
|
- |
999 |
NET ASSETS* |
|
|
- |
382 |
|
|
|
|
|
* Assets and liabilities have been transferred to TransAdelaide (parent entity) in accordance with the Public Corporations Act 1993. |
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