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Annual Report — 2018
Construction Industry
Long Service Leave Board
A fresh coat and a bright approach
PORTABLE LONG
SERVICE LEAVE
The business name of the Construction
Industry Long Service Leave Board
ADDRESS
155 Fullarton Road
Rose Park SA 5067
TELEPHONE
(08) 8332 6111
1800 182 124 (toll free)
INTERNET
www.portableleave.org.au
BOARD MEMBERS
Marie Boland (Presiding Officer)
John Camillo
Aaron Cartledge
Erin Hennessy
Estha van der Linden
Steven Minuzzo
Larry Moore
CHIEF EXECUTIVE
OFFICER
Adam Warchol
ACTUARY
Mercer
6/70 Franklin Street
Adelaide SA 5000
AUDITORS
BDO
Level 7, 420 King William Street
Adelaide SA 5000
PRIMARY LAWYERS
Lynch Meyer
190 Flinders Street
Adelaide SA 5001
PRIMARY ASSET
CONSULTANT
JANA Investment Advisers
Level 6, 255 George Street
Sydney NSW 2000
Our vision is to refresh and reinvigorate the South Australian construction industry through portable long service leave
Presiding Officer Report 05
Chief Executive Officer Report 08
Scheme Statistics 11
Finance and Investment 13
Operations 23
Governance 30
People 35
Financial Statements 37
Independent Auditor’s Report 58
Table of Contents
Presiding Officer’s Report
This year in presenting the annual report I am looking back on 12 months where the current
Board (appointed in July last year) has settled in well, consolidated the work of the previous
Board and also initiated a number of new projects to ensure the continued improvement of
the management of the Construction Industry Long Service Leave Fund (the Fund).
One of the key decisions this year was to replace our information system which has become
outdated. Significant consultation has taken place with businesses and workers to ensure that
the new system meets the needs of the end users and ensures efficient, effective and speedy
service delivery.
We also saw the result of some legislative changes and welcomed the inclusion of data cabling
into the Fund. Data Cablers became eligible to accrue portable long service leave from 1
July 2018. I acknowledge the significant work over the last 4 years of all of those involved in
achieving this outcome. We have some remaining legislative amendments which we hope will
pass through Parliament before the end of 2018.
“Data Cablers became eligible
to accrue portable long service
leave from 1 July 2018”
Increased promotion of the Fund and field and compliance activities have led to an all-
time high in employer and worker registrations. Regular engagement by the CEO with
industry stakeholders is increasing confidence in the management of the Fund with audits
and data matching against other agency data also improving the Board’s capacity to ensure
appropriate coverage. Investment returns have been solid and the Board has kept a close eye
on developments such as the Royal Commission into the banking sector and continues to take
advice from JANA Investment Advisors on exposure to the Fund’s portfolio. This year we have
built on the outgoing Board’s legacy, retaining a sound financial position for the fund with a
solvency ratio of 126.6% and a fund surplus of almost $31 million.
“...retaining a sound financial
position for the fund with a
solvency ratio of 126.6% and a fund
surplus of almost $31 million”
As we look to the future we will continue to assess the Board’s financial position
with a view to ensuring that the levy is based on a fair analysis of the current financial position,
the sustainability of the fund and anticipated growth into the future. Within this context, we
have engaged a new Actuary (the previous Actuary had been engaged for the last 9 years) to
Presiding Officer Report 05
take a fresh look at the Board’s accrued liabilities. Board Members will also be undertaking
professional development in August 2018 to ensure that they keep their financial skills
up to date.
This year we also welcomed a new Minister for Industrial Relations, the Honorable Rob
Lucas MP, and we look forward to working with him to support the administration of the
Construction Industry Long Service Leave Act.
Finally, I would like to thank the CEO and staff at Portable Long Service Leave for their fantastic
work over the last financial year and for supporting me in the role of Presiding Officer and the
Board Members more generally. I look forward to working with them and with the members
of the Board to continue to maintain and improve the operation of the fund for the benefit of
workers and employers in the construction industry.
Marie Boland
Presiding Officer
Presiding Officer Report 06
CEO’s Report
The theme of this year’s annual report is a fresh lick of
paint. Following on from a year of incremental and
structural changes in 2016/2017 - this year has been one
of consolidation, process review and enhancement with a
focus on organisational performance.
“...streamline, simplify
and give the gift of time
back to our customers.”
We adopted the mantra of asking ourselves ‘Do we know
why we do this?’, ‘Do we need to do this?’, ‘Can we do this
better?’ A key trigger to this mindset was a step forward
in the replacement of our core information system. An
off the shelf product has been selected and a significant
planning exercise was undertaken in the last half of the
financial year resulting in a root and branch review of key
processes, tasks, and documentation. The key aim being
to streamline, simplify and give the gift of time back
to our customers.
I must once again express thanks to our dedicated team of staff who undertook over 16 design
and planning workshops whilst ensuring the organisation continued to run smoothly and for
engaging in a substantial amount of knowledge transfer amongst each other. Well done!
Local conditions in the South Australian construction sector appear to remain buoyant,
represented by a larger workforce. This along with a renewed field strategy has led to
employer and worker registrations reaching an all time high of 2,486 and 27,815 respectively.
This was further reflected in levy revenue rounding out at $16.2 milion, another all-time high.
Wage inflation also returned to more average levels at approximately 2.5% following a flat
year last year.
Investment returns were also solid with an average return of 6.8% across all asset classes.
Market volatility remained an issue with a few wobbles during the year. The Royal Commission
into the banking sector was an influencing factor in this space impacting the valuation of
the Big Four Banks along with privacy concerns impacting the valuation of some large US
technology companies both of which the Board has exposure to in its portfolio.
Chief Executive Officer Report 08
One of Australia’s oldest financial institutions AMP was also rocked by claims of misconduct
during the year. The Board is a unit holder in an unlisted infrastructure fund with AMP Capital
– a majority owned subsidiary of AMP. Whilst AMP Capital is a separate entity to AMP the
Board reviewed the investment including its governance arrangements but did not result in a
need for divestment.
“This has been a seamless transition
from the Board’s perspective...”
Our asset consultant, JANA Investment Advisors previously a wholly owned subsidiary of
the National Australia Bank completed a management buyout in the first quarter of FY2018.
This has been a seamless transition from the Board’s perspective and seen as a positive step
as it increases JANA’s independence, agility and service offering. Throughout the year JANA
worked with the Board to conduct a series of in-house training sessions on different asset
classes to increase general investment acumen. This will continue in FY2019.
That rounds out summation of the years activities. FY2019 promises to be another busy
year as we finally implement a long awaited new information system which I’m confident
will deliver significant time savings to customers, improve the Board’s efficacy and reduce
business risk in this area.
The Board’s strong financial position also sets the scene for a levy rate reduction which will
be considered by the Board before the end of the calendar year.
Adam Warchol
Chief Executive Officer
Chief Executive Officer Report 09
Scheme Statistics
Financial Year 2014
Financial Year 2015
Financial Year 2016
Financial Year 2017
Financial Year 2018
Clients
Active registered workers (Employed or less than allowable absence)
25,260 24,548 23,664 23,882 27,815
Currently employed registered workers 17,476 17,343 16,338 17,980 21,777
Registered employers 2,190 2,251 2,260 2,385 2,486
Contractors/Working Directors registered 520 519 649 681 654
Operations and Administration
Salaries & related on costs $1,094,000 $1,027,000 $964,000 $960,000 $944,962
Administration $503,000 $500,000 $644,000 $660,000 $585,129
Total administration costs $1,597,000 $1,527,000 $1,608,000 $1,620,000 $1,530,091
Claims
No of long service leave claims 1,885 1,967 2,200 1,991 1,963
Value of long service leave claims $11,690,000 $12,630,000 $14,514,000 $13,280,000 $13,173,111
Financial
Total assets $115,190,000 $126,560,000 $126,495,000 $135,589,000 $146,844,000
Total liabilities $103,280,000 $106,190,000 $110,300,000 $111,000,000 $115,994,000
Funds under management $110,950,000 $122,750,000 $121,880,000 $130,701,000 $140,575,000
Investment income $12,500,000 $10,790,000 $2,590,000 $9,834,000 $9,684,000
Investment return 11.6% 9.0% 2.1% 7.8% 6.8%
Levy rate 2.25% 2.25% 2.25% 2.15% 2.15%
Levy income $15,760,000 $14,670,000 $13,500,000 $14,140,000 $16,204,000
Contractors/Working Directors contribution rate $210 $220 $225 $230 $235
Contractors/Working Directors interest rate 2.80% 2.70% 2.10% 2.00% 2.00%
Operating cashflow excluding investment income $2,610,000 $516,000 ($2,627,000) ($1,262,000) $837,000
Fund surplus/(deficit) $11,900,000 $20,370,000 $16,194,000 $24,589,000 $30,850,000
Human Resources
FTE headcount 11.7 11.0 10.8 9.5 9.6
Economic
CPI 2.9% 1.2% 0.7% 1.6% 2.1%
Industry wage growth 2.4% 2.4% 2.9% 0.1% 2.5%
Average weekly earnings $1,187 $1,216 $1,251 $1,252 $1,284
Performance indicators
Administration cost per client $57.10 $55.90 $60.51 $60.12 $49.43
Management expense ratio 1.4% 1.2% 1.3% 1.2% 1.0%
Benefits expense ratio 91.6% 90.8% 92.0% 89.4% 89.6%
Leave utilisation rate 7.5% 8.0% 9.3% 8.3% 7.1%
Solvency ratio 111.5% 119.2% 114.7% 122.2% 126.6%
Scheme Statistics 11
Finance and Investment
State of the Fund
As at 30th June 2018 the Fund retains a surplus of $30.9M and a solvency ratio of 126.6%.
Summary of Financial Year
In FY2018 an operating surplus of $6.3M was achieved.
Levy revenue increased (15%) from FY2017 to $16.2M
representative of increased registrations.
Investment income totalled $9.67M due to positive returns
across all investment classes.
Worker Payment expenditure is consistent with FY2017 with
only a slight decrease in the number of claims for long service
leave taken.
The Worker Payment Provision increased by $4.7M due to
changes in financial, usage and service accrual assumptions
used by the newly appointed Actuary along with a change
in methodology. The financial assumption changes include
adoption of a short-term measure of investment returns and
wage inflation for a period of 5 years before returning to the long
term assumption.
Operating expenses remained slightly below the prior year.
Total assets increased to $146.8M as a result of investment gains.
Cash flows from Operating activities (excluding investment
income) were positive in FY2018 reflecting increased levy
collections. No redemptions were required from investments,
however a cash distribution was received of $0.4M.
Actual 2017/18 ($ Million) Budget 2017/18 ($ Million)
Income
Levies 16.2 13.83
Investments (including cash holdings) 9.67 8.28
Other 0.03 0.01
Total Income 25.90 22.12
Expenditure
Long Service Leave Payments 13.17 14.00
Increase in accrued LSL liability 4.68 7.80
Salaries & Related Costs 0.95 0.92
Operating Costs 0.84 1.09
Total Expenditure 19.64 23.81
Surplus/(Deficit) 6.26 (1.69)
Finance and Investment 13
Asset & Liability — 10 Year Trend
$160,000,000 140%
120%
100%
80%
60%
40%
20%
$140,000,000
$120,000,000
$100,000,000
$80,000,000
$60,000,000
$40,000,000
$20,000,000
$0 0%Financial year • Total assets • Total liabilities • Solvency ratio (RHS)
Dol
lars
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Operating Cashflow excluding Investment Income
$20,000,000
$15,000,000
$10,000,000
$5,000,000
$0
-$5,000,000
Dol
lars
Financial year • Levy income • Value of long service leave claims
• Total administration costs
200
9
2010
2011
2012
2013
2014
2015
2016
2017
2018
Administration Cost Per Client — 10 Year Trend
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0
Dol
lars
Financial year • Administration cost per client
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Finance and Investment 14
Investment
As part of its overall organisational strategy, the Board utilise
an implemented consultancy model to achieve investment
objectives. Being a small organisation, this strategy is the most
effective in order to leverage the wide research and investment
skills required to manage over one hundred and forty million
dollars of investment. JANA Investment Advisers are the
Board’s primary investment consultant and have a long standing
relationship with Portable Long Service Leave, as well as being
an industry leader in their field. During the year JANA completed
a management buyout from the National Australia Bank resulting
in a new ownership structure and improved service offering.
The Board views the change as positive, increasing JANA’s
independence in the services they provide.
Investments form an important part of the scheme,
supplementing levy revenues in order to ensure the Fund is able
to meet future long service liabilities whilst maintaining a low
levy rate.
The investment objectives for the 2017/2018 financial year were:
— A high probability the net return exceeds
the inflation rate (CPI) by at least 3% per
annum over rolling five year periods;
— Limiting the probability of a negative annual return
to one year in every four years, on average; and
— A high probability that the Fund will maintain
a solvency ratio between 100% and 115%
During the year the Board commenced its annual review of
investment strategy and is anticipated to complete this in
early FY2019.
As mentioned in the CEO report, investment returns for the year
have remained strong. This is despite the fact that there have
been several periods of volatility in the Financials and Technology
sectors. Diversification of the Board’s investment portfolio has
provided some protection. In FY2019 the Board is considering
further diversification into Unlisted Property.
Financial Year 2018 — Asset Allocation
Australian Shares
Global Shares Unhedged
Global Shares Hedged
Global Listed Property
Unlisted Infrastructure*
Alternatives (Growth)
All Maturity Debt
Short-Maturity Debt
Alternatives (Defensive)
Cash**Cash*
16% 15 % 4%
3% 7% 2% 20%
23%
3% 3% 4%
Finance and Investment 15
All asset classes performed positively for the year notably:
Australian Shares 13.46%
International Shares (Unhedged) 13.61%
International Shares (Hedged) 11.48%
Unlisted infrastructure 11.31%
Note: Performance calculated on a weighted rate of return and may vary slightly from those published by Investment Advisors.
No redemptions (withdrawals) were required during the year. An addition of $0.5M was added to the Portfolio based on surplus operating
cash flow requirements and a cash distribution of $0.4M was received from the AMP Capital Diversified Infrastructure Trust largely
representative of a realised capital gain from the sale of its Interlink toll road asset.
Financial Year 2018 Investment Movement by Class
This graph illustrates the movement in value of each investment class from the start of the financial year to 30th June 2018. The green
bars illustrate an increase in value.
145
140
135
130
125
120
Inve
stm
ent a
s at
30t
h Ju
ne 2
017
Aus
tral
ian
Shar
es
Glo
bal S
hare
s U
nhed
ged
Glo
bal S
hare
s H
edge
d
Glo
bal L
iste
d Pr
oper
ty
Unl
iste
d In
fras
truc
ture
*
Alte
rnat
ives
All
Mat
urit
y D
ebt
Shor
t-M
atur
ity
Deb
t
Alte
rnat
ives
Cas
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Cas
h*
Dep
osti
/(W
ithd
raw
al)
Inve
stm
ent a
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30t
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018
Inve
stm
ent b
alan
ce (m
illio
ns)
Investment class
The five year average return on investments held by the Board is 7.45%.
The Board received realised gains of $7.8M and unrealised gains of $1.8M leading to a total investment gain of $9.7M.
Finance and Investment 16
5 Year Investment Return
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
0.0%
2.0%
2014
2015
2016
2017
2018
• Investment return • Investment return 5 year return
Perc
ent
Financial year
Self-Employed Contractor / Working Director Fund
The Self-Employed Contractor / Working Director Fund is a voluntary
fund established to facilitate the preservation of previously accrued
service when a construction worker transitions from an employee
to a self-employed contractor or working director.
The fund is characterised as an accumulation fund as registrants
will receive their original contributions plus investment return in
the form of interest when they reach entitlement and/or exit the
fund. This is in addition to any accrued entitlement that has vested
in the construction worker fund.
This fund is segregated from the core investment portfolio due to
its defined purpose and different operating rules.
Members can exit this fund at any stage therefore a different
investment risk profile is applied ensuring sufficient liquidity.
The Self-Employed Contractor / Working Director Fund has
returned an average of 4.2% since its inception in 2006.
As at 30th June 2018 the balance held in investment was $5,750,559
against a liability of $5,760,881.
Actuarial Services
In 2018 the Board undertook a review of its actuarial services. Following an evaluation of service offerings from 4 service providers the
Board engaged Mercer to provide actuarial services for FY2018 that included:
— An annual report on the valuation of the
scheme’s long service leave liabilities at 30th
June, sufficiency of the Construction Industry
Fund and appropriateness of the levy rate;
— Sensitivity Analysis on the future funding of
the scheme including projected cash flows
and liabilities over the next eight years;
— Recommendations to the Board on the contribution rate
and interest payable on account balances under the
Self-Employed Contractor / Working Director Fund;
— Providing short term liability forecasts
for budget purposes.
— An update to actuarial assumptions used
including exit rates and usage rates.
The Board’s valuation process is cyclic with a comprehensive review scheduled every 3 years known as a ‘triennial review’. A triennial
review was conducted in the 2017/18 financial year.
Finance and Investment 17
Valuation
The FY2018 valuation estimates the Board’s liability (excluding self-employed contractors and working directors) to be $109.9M with
Vested Benefits being $94.9M.
Financial Year 2017 Value of Liability (excluding self-employed contractors and working directors)
Leaving Industry Vested Benefits (excluding self-employed contractors and working directors)
Value of liability $109,940,000 $94,922,000
The FY2018 valuation estimates the Board’s liability in relation to self-employed contractors and working directors to be $5.7M. The
contribution rate and interest rate for the Self-Employed Contractors / Working Directors Fund for FY2018 was set at $235.00 and 2.0%
respectively.
Financial Year 2018 Financial Year 2017
Contribution rate (bi-monthly) $235.00 $230.00
Interest rate 2.0% 2.0%
Self-employed contractors & working directors $5,760,881 $5,449,636
The FY2018 valuation estimates the Board’s total liability to be $115.7M.
Financial Year 2017 Financial Year 2017
Construction workers $109,940,000 $105,257,000
Self-employed contractors & working directors $5,760,881 $5,449,636
Total provision long service leave entitlements $115,700,881 $110,706,636
Finance and Investment 18
Assumptions
The Actuary uses a number of experiential and economic
assumptions in order to estimate the Board’s liabilities.
Experiential assumptions include:
— whether workers are active or inactive in the industry;
— the rates at which workers will accrue
service credits in future;
— the rates at which workers will leave the Fund due to
death, incapacity, retirement and leaving the industry; and
— the rates at which workers will take their
long service leave entitlements.
Economic Assumptions include:
— the average long term rates of wage inflation; and
— the average long term investment return rate.
This year the Actuary revised both the experiential and
economic assumptions used by the previous Actuary along
with the methodology used to calculate the liability. These
changes resulted in a net reduction of $1.6M to the liability for
these components.
The key changes to the economic assumptions are as follows:
Adoption of a short-medium term set of assumptions for the next
5 years for both wage inflation and investment returns before
reverting to a long term set of assumptions.
Assumption First 5 Years Thereafter
Average Weekly Earnings
(Wage Inflation)
3.0% pa 4.0% pa
Investment Return 4.5% pa 7.0% pa
The short term set of assumptions were adopted based on the
expectation that (in the short term) both wage inflation and
investment returns will be more constrained than the long term
historical trend.
Average Weekly Earnings increased in FY2018 by 2.5% to $1,284
(.1% in FY2017).
The Average Investment Return was 6.8% in FY2018
(7.8% in FY2017).
The Actuary has advised that the Fund is in a satisfactory financial position as at 30th June 2018 with a surplus (total assets exceeding
total liabilities) of $30.9M.
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0
15.0%
10.0%
5.0%
0.0%
(5.0%)
(10.0%)
(15.0%)
Financial year • Average weekly earnings • Industry wage growth (RHS) • Investment return (RHS)
2009
2010
2011
2012
2013
2014
2015
2016
2017
Dol
lars
2018
Finance and Investment 19
Employer Return Management
An Employer Return is the legislative mechanism used for an employer to declare who has worked for them over the prescribed return
period (2 months).
Employer Return Management is a shared responsibility across the organisation encompassing automatic reminders, data entry and
review, customer education and communication, error correction and investigation, statutory fines, debt collection and prosecution.
Employer Return Management activities undertaken in FY2018 consisted of:
Financial Year 2018
Issued Received on time Late Fines
Return period Number Number % Number % Number % Amount
May/Jun 2017 (Due July) 2,028 1,778 88% 250 12% 82 4% $6,150
Jul/Aug 2017 (Due Sep) 2,061 1,796 87% 265 13% 50 2% $3,750
Sep/Oct 2017 (Due Nov) 2,086 1,483 71% 603 29% 131 6% $9,825
Nov/Dec 2017 (Due Jan) 2,068 1,738 84% 330 16% 93 4% $6,975
Jan/Feb 2018 (Due Mar) 2,090 1,812 87% 278 13% 65 3% $4,875
Mar/Apr 2018 (Due May) 2,092 1,795 86% 297 14% 57 3% $4,275
Financial Year 2017
Issued Received on time Late Fines
Return period Number Number % Number % Number % Amount
May/Jun 2016 (Due July) 2,160 1,713 79% 447 21% 191 9% $14,325
Jul/Aug 2016 (Due Sep) 1,941 1,660 86% 281 14% 146 8% $10,950
Sep/Oct 2016 (Due Nov) 1,947 1,638 84% 309 16% 160 8% $12,000
Nov/Dec 2016 (Due Jan) 1,962 1,684 86% 278 14% 189 10% $14,175
Jan/Feb 2017 (Due Mar) 1,968 1,700 86% 268 14% 89 5% $6,675
Mar/Apr 2017 (Due May) 1,990 1,716 86% 274 14% 67 3% $5,025
Finance and Investment 20
Employer Return Lodgement
Paper Post
Internet
Paper Email
9% 4% 8
7%
During the year the Board wrote off $81K of bad debt from 30 employers.
Bad debt write off Financial Year 2018 Financial Year 2017 Financial Year 2016 Financial Year 2015 Financial Year 2014
No 30 45 28 46 24
Value $81,817 $66,876 $255,000 $134,900 $127,900
Finance and Investment 21
Operations
Legislation
Last year we reported that a suite of proposed legislative
amendments to the Construction Industry Long Service Leave
Act 1987 were referred to the Minister for Industrial Relations.
We’re pleased to advise that 2 of the amendments were
accepted and introduced into Parliament in 2017/18 in Statutes
Amendment (Attorney-General’s Portfolio No 3).
These changes involved the explicit addition of data cabling
into the definition of Construction Industry and clarification to
Schedule 15 of the Act. The Board sees both of these changes
as a positive step for both the organisation and the industry and
look forward to a smooth transition as these are implemented in
2018/2019 financial year.
Following the change in State Government in March 2018 the
remaining changes are being reviewed by the new Government
and we hope they are passed into legislation in the first
quarter of 2018/2019 financial year along with an update to the
Construction Industry Long Service Leave Regulations 2003.
Information Systems
Information Systems have been a focus in 2018. At the Boards
Strategic Planning session in October 2017 the Board undertook
to proceed with the design/configuration of an off the shelf
product to replace the old outdated system following a thorough
evaluation process.
From January 2018 the team have engaged in 16 workshops to
detail existing processes, workflows, functions and calculations
in order to ensure a smooth transition.
Employers and Workers were consulted with a number of
workshops, surveys, face to face input, and prototypes.
The Board engaged KPMG in both a change management
capacity and project management capacity to assist in this
process. The design deliverable is due for completion in the
first quarter of 2018/2019. The Board will then evaluate prior to
proceeding to implementation.
Operations 23
Communications and Field
Implementation of our communication and field strategy
continued in 2017/2018.
Increased engagement with stakeholder groups including
Employer Associations and Unions was undertaken to ensure
their members were adequately informed about Portable Long
Service Leave. This involved advertising and editorial content in
member based publications, and attendance at member related
functions by Portable Long Service Leave staff.
We also began engagement with a number of Bookkeeping
Associations to ensure their members were aware of Portable
Long Service Leave. A significant number of construction
businesses utilise the services of Bookkeepers and this initiative
was well received.
A social media presence was established as an additional
medium of engagement.
During the year we continued to regularly communicate with
members:
— to keep members informed of legislative and
policy updates, scheme coverage issues, statutory
obligations, and general scheme matters
— to notify workers of approaching leave
entitlements or when they may lose service
credits due to industry absences
This was achieved by:
— issuing electronic and paper service statements,
and notifications to actively registered workers
— sending email/SMS reminders prior to the
due date for returns lodgement to assist
employers comply with scheme obligations
— Publishing news articles on our website
Our website www.portableleave.org.au was regularly accessed with approximately 25,000 unique users over the course of the year
across all States and Territories.
Users by Region
Victoria
New South Wales
Queensland
Western Australia
Northern Territory
OtherSouth Australia
9.4% 8.3% 5.1%
6.7%
65.
2%
Operations 24
Field activities have increased with a focus on the proactive activities of education and promotion rather than reactive compliance
activities. This has included:
Field Activities Financial Year
2018
Financial Year
2017
Financial Year
2016
Communication Site Visits 152 166 36
Apprentice Presentations 19 28 24
Employer Meetings 285 130 0
Worker Meetings 20 13 0
Industry Stakeholder Meetings 27 3 0
Letters to Prospective Employers 813 0 357
Regional Trips 11 2 0
Compliance Employer Audit 7 0 0
Unregistered Service Investigation 254 340 247
Outcomes Employer Registration Requests 367 322 251
Contractor Registration Requests 115 77 79
Total Activities 2059 1081 994
Additional Levies Identified $952,180 $940,000 $698,000
Interest Imposed $102,098 $46,236 $19,456
Increased presence in regional areas was a focus with 11 trips
undertaken during the year covering:
— Eyre Peninsula — Mid North
— Fleurieu Peninsula — Riverland
— Yorke Peninsula — South East
— Kangaroo Island
An internal audit program was initiated in FY2018 to check
compliance of employers with the Act. Audits are selected based
on random and targeted methodologies and check accuracy of
declared information against payroll data. The volume of audits
is scheduled to increase in FY2019.
Data matching techniques using external sources of information
has further assisted to identify possible non-compliant employers
and allow the Board to initiate communication.
An additional $1M in non-compliant levies and interest were
collected in FY2018.
During the year, the Board was respondent to a worker appeal
in the South Australia Employment Tribunal in accordance with
Section 34 of the Act. The matter was in relation to application
of the Act to the work based on coverage rules. On Friday 2
February 2018 the Tribunal upheld the Board’s decision.
Operations 25
Registrations
FY2018 saw a large increase in registered
workers (16%) and employers (4%) leading
to the highest registration count since the
inception of the Scheme at 27,815.
This increase is reflective of improved
economic conditions in parts of the South
Australian construction industry along with
improved communication and field operations
where significant effort has been applied.
Financial Year
2018
Financial Year
2017
Change Percent
Active registered workers
(Employed or less than
allowable absence)
27,815 23,882 16%
Currently employed
registered workers
21,777 17,980 21%
Registered employers 2,486 2,385 4%
Contractors / Working
Directors registered
654 681 (4)%
Age demographics remain consistent with previous years with a significant proportion of registrations
being under the age of 50 (81%).
Usage of Long Service Leave
Leave utilisation continued to decline in
FY2018 marginally from a high in FY2016 to 7%.
Usage of leave is spread broadly across age
bandings however 65% of leave utilised is
for persons under the age of 50 indicating
employees are utilising long service leave
during their working years rather than waiting
until retirement.
It is worthwhile to note however that the
utilisation rate increases with age with a
higher utilisation rate for the age brackets 50
and above.
On average 59% of employees take long
service leave whilst working in the industry.
Approximately 29% of employees take a
pro rata payment as they exit the industry
or transition into a role no longer covered by
the scheme.
Operations 26
Registrations
15,000
20,000
25,000
30,000
35,000
0.0%
4.0%
2.0%
6.0%
8.0%
10.0%
Financial year • Active registered workers (employed or less than allowable absence)
• Registered employers
• Contractors / Working Directors registered
• Leave Utilisation Rate (rhs)
200
9
2010
2011
2012
2013
2014
2015
2016
2017
2018
Dol
lars
*Utilisation rate is total long service leave claims divided by total registrations.
Financial Year 2018 Long Service Leave Registrations by Age
39%
<30
25%
30–39
17%
40–49
13%
50–59
6%
60+
Financial Year 2018 Long Service Leave Claims by Age
8%
<30
35%
30–39
22%
40–49
20%
50–59
15%
60+
Financial Year 2018 Apprentice Profile
13%
Apprentice Worker
87%
Operations 27
Long Service Leave Claims by Type
100%
90%
80%
70%
60%
50%
200
9
2010
2011
2012
2013
2014
2015
2016
2017
2018
Prop
ortio
n
Financial year • Combination state & portable • Leave taken
• Pro-Rate (Exiting Industry) • Interstate
Financial Year 2018 Utilisation by Age
10000
9000
8000
7000
6000
5000
4000
20%
15%
10%
5%
0%
Vol
ume
• Registrations • Payments / claims • Utilisation Rate (RHS)Age Band
<30 40-4930–39 50-59 60+
*Utilisation rate is total long service leave claims divided by total registrations.
Operations 28
Governance
Portable Long Service Leave is the Business Name of the
Construction Industry Long Service Leave Board. The Board is
responsible for the administration of the Construction Industry
Long Service Leave Act 1987 (the Act).
Composition
Portable Long Service Leave is the Business Name of the
Construction Industry Long Service Leave Board. The Board is
responsible for the administration of the Construction Industry
Long Service Leave Act 1987 (the Act).
Appointments
Membership of the Board is determined in accordance with
Section 7 of the Act and comprises of three members appointed
to represent the interests of employers and three members
appointed to represent the interests of workers. The Presiding
Officer is nominated by the Minister for Industrial Relations.
Governance 30
Board Meetings
During the 2017/2018 financial year the Board met on 11 occasions, excluding sub committees and working parties.
Board members Meetings available to attend Meetings attended
Ms Marie Boland Presiding Officer 11 8
Mr Aaron Cartledge SA Unions 11 6
Mr John Camillo SA Unions 11 1
Ms Erin Hennessy SA Unions 11 10
Mr Larry Moore National Electrical and
Communications Association
11 9
Ms Estha van der Linden Business SA 11 8
Mr Steve Minuzzo Master Builders Association 11 10
Deputies
Mr Derek Stapleton SA Unions 6 6
Mr Peter Bauer SA Unions 10 6
Mr John Adley SA Unions 2 1
Ms Thina Mariappan Master Builders Association 3 1
Ms Karen van Gorp Business SA 4 2
Mr Peter Salveson Master Builders Association 2 2
Board Committees
Due to its small size and frequency of meetings the Board does not have standing subcommittees. Instead the Board establish sub
committees on an as required basis in order to provide closer attention to important areas facing the organisation. In the 2017/2018
financial year the Board established the following subcommittees:
— CEO contract renewal and salary review
Governance 31
Overseas Travel
During the 2017/2018 financial year, no members of the Board engaged in overseas travel in the capacity as a member of
the Board.
Board Training & Development
During the 2017/2018 year the Board undertook the following training and development activities:
— Board induction for new Board
members and deputies
— Portable Long Service Leave National Conference
— Investment Briefings
— Asset Class Training
— JANA Investment Advisers Annual Conference
— Strategic Planning
— Individual Board member training within
policy limits or self funded including:
— University studies
— Governance and Risk Training
— Investment Trustee Training
Strategic Planning
A Strategic Planning session was undertaken in October 2017 whereby the Board reviewed its information technology
strategy and commenced towards its implementation.
Risk Management
The Board has a structured approach to Risk Management via a Risk Management Framework and Risk Register
that is reviewed regularly by an internal Risk Review Committee made up of representatives from different areas
of the organisation. The Risk Review Committee met once during the year in October 2017 and reported to the Board
in November 2017.
Annual Report
The 2016/2017 Annual Report was tabled in Parliament in accordance with the Act.
Governance 32
Actuary Report
The 2016/2017 Actuary Report was tabled in Parliament in accordance with the Act.
Board Remuneration
Board members are remunerated in accordance with Department of Premier and Cabinet (DPC)
Circular 16 – Remuneration for Government Appointed Part Time Boards and Committees.
In 2016/2017 the Board requested a remuneration review in accordance with the remuneration
framework for Government Boards and Committees.
In December 2017 the Board were advised by the Department of Premier and Cabinet that a
remuneration review had been undertaken resulting in a reclassification from Category 2, Level 3 to
Category 1, Level 6.
Financial Performance
The Board received an Unqualified Audit Report from BDO for the 2017/2018 year.
Fraud
No instances of fraud were reported or detected during the year.
Delegations
The Board maintains a schedule of financial delegations that is reviewed annually. It was last reviewed
in the June 2018 Board Meeting.
Day to day management of the Fund’s affairs and the implementation of strategy and policy are
delegated to the Chief Executive Officer and Management.
Insurance
The Board has insurance coverage through SAICORP.
Governance 33
People
— Employees as at 30th June 2018 totalled 9.64 FTE.
— This was a slight increase from the prior year mainly due
to a minor increase in hours by a part time staff member.
— During the year a minor restructure was undertaken
resulting in the rationalisation of 2 management roles into
one and expansion and minor adjustment of front line staff.
— The Board recognises and values the contribution of
its staff members ensuring transparent and equitable
remuneration, flexible working arrangements,
training and development opportunities, and input
into policies and procedures where applicable.
— The Staff code of conduct was reviewed during
the year with input from staff members.
— No Workplace Health and Safety incidents of
significance occurred during the year.
— An Employee Assistance Program was
made available throughout the year.
— Flu vaccinations were made available during
the year to those wishing to participate.
— Staff members participated in the Corporate Cup (a
program designed to improve fitness with teammates)
over a 16 week period and also hosted Australia’s Biggest
Morning Tea raising valuable funds for cancer.
— Staff members run an independent social club and
footy tips competition and have shared lunches
at periodic times throughout the year.
Field Officer
Field Officer
Business Support Officer / Executive Assistant
Business Support Officer
Customer Support Officer
Records System
Coordinator
Senior Finance Officer
Finance Officer
Board
Chief Executive Officer
Finance & Operations Manager
People 2014 2015 2016 2017 2018
Full time 8 8 9 8 8
Part time 5 4 3 2 2
Total 13 12 12 10 10
FTE 11.7 11 10.8 9.533 9.64
People 35
Financial Statements
STATEMENT BY THE BOARD
In the opinion of the Board:
1 (a) The accompanying Statement of Comprehensive Income gives a true and
fair view of the surplus of the Construction Industry Fund for the year ended
30th June 2018;
(b) The accompanying Statement of Financial Position gives a true and fair view of the
state of affairs of the Construction Industry Long Service Leave Board as at 30th
June 2018;
(c) The accompanying Statement of Cash Flows gives a true and fair view of cash
flows of the Construction Industry Long Service Leave Board for the year ended
30th June 2018; and
(d) The internal controls over financial reporting have been effective throughout the
reporting period.
2 At the date of this statement there are reasonable grounds to believe the Construction
Industry Long Service Leave Board can meet its debts as and when they fall due.
This statement is made in accordance with a resolution of the Board and is signed for and on
behalf of the Board.
Steve Minuzzo
Acting Presiding Officer
18th September 2018
Adam Warchol
Chief Executive Officer
Financial Statements 37
CONSTRUCTION INDUSTRY LONG SERVICE LEAVE BOARD
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2018
Note 2018
$000’s
2017
$000’s
Revenue From Ordinary Activities
Levies 3 16,204 14,140
Realised Investment Income 3 7,847 7,327
Unrealised Investment Gain/(Loss) 3 1,837 2,507
Other 18 39
Total Income 25,906 24,013
Expenses From Ordinary Activities
Worker Payments 11 17,856 13,726
Contractor Interest 107 101
Employee Benefits Expense 14 945 960
Depreciation 7 46 62
Allowance for Doubtful Debts (Impairment Loss) 5 106 109
Administration 585 660
Total Expenses 19,645 15,618
Total Surplus / (Deficit) 6,261 8,395
The above statement should be read in conjunction with the accompanying notes.
Financial Statements 38
CONSTRUCTION INDUSTRY LONG SERVICE LEAVE BOARD
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
Note 2018
$000’s
2017
$000’s
Assets
Cash and Cash Equivalents 4 3,089 2,288
Receivables 5 3,006 2,447
Investments 6 140,575 130,701
Property, Plant & Equipment 7 147 153
Intangible Assets 8 27 -
Total Assets 146,844 135,589
Liabilities
Trade and other Payables 9 152 133
Employee Benefits 10 141 160
Worker Payments 10 109,940 105,257
Registered Contractor Contribution Fund 10 5,761 5,450
Total Liabilities 115,994 111,000
Net Assets 30,850 24,589
Equity
Accumulated Surplus / (Deficit) 30,850 24,589
The above statement should be read in conjunction with the accompanying notes.
Financial Statements 39
CONSTRUCTION INDUSTRY LONG SERVICE LEAVE BOARD
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018
Note 2018
$000’s
Inflows
(Outflows)
2017
$000’s
Inflows
(Outflows)
Cash Flows From Operating Activities
Receipts From Levies & Operations 15,538 13,711
Payments to Workers (13,173) (13,280)
Payments to Suppliers & Employees (1,547) (1,706)
Interest Received 19 13
Net Cash Provided by / (Used In) Operating Activities 16 837 (1,262)
Cash Flows From Investing Activities
Redemption of Investments 397 1,000
Purchase of Investments (500) -
Payments from Registered Contractors Fund 97 251
Payments for Plant & Equipment (60) (97)
Proceeds from Sale of Plant & Equipment 30 13
Net Cash Provided by / (Used In) Investing Activities (36) 1,167
Net Increase / (Decrease) in Cash Held 801 (95)
Cash at the Beginning of the Year 2,288 2,383
Cash at the End of the Year 4 3,089 2,288
The above statement should be read in conjunction with the accompanying notes.
Financial Statements 40
CONSTRUCTION INDUSTRY LONG SERVICE LEAVE BOARD
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
Retained Earnings
$000’s
Total Equity
$000’s
Balance at 30 June 2016 16,194 16,194
Surplus for 2017 8,395 8,395
Balance at 30 June 2017 24,589 24,589
Surplus for 2018 6,261 6,261
Balance at 30 June 2018 30,850 30,850
The above statement should be read in conjunction with the accompanying notes.
Financial Statements 41
CONSTRUCTION INDUSTRY LONG SERVICE LEAVE BOARD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
1 — Objectives of the Construction Industry Long Service Leave Board
The Construction Industry Long Service Leave Board is responsible for administering the Construction Industry Fund which controls
levies collected from employers to provide portable long service leave for employees in the construction industry.
2 — Summary of Significant Accounting Policies
The financial report is a special purpose financial report. The reporting entity is The Construction Industry Long Service Leave Board,
a statutory scheme created pursuant to the Construction Industry Long Service Leave Act, 1987. The Board operates in the State of
South Australia.
The financial statements have been prepared in accordance with the recognition and measurement requirements specified by the
Australian Accounting Standards and Interpretations, Treasurer’s Instructions and Accounting Policy Statements promulgated under the
provisions of the Public Finance and Audit Act, 1987 for a not-for-profit entity.
(a) Basis of Preparation
The Board’s Statement of Comprehensive Income, Statement of
Financial Position and Statement of Changes in Equity have been
prepared on an accruals basis and are based on historical costs
modified by the revaluation of financial instruments for which
the fair value basis of accounting has been applied.
The Cash Flow Statement has been prepared on a gross basis.
The financial report has been prepared based on a twelve
month operating cycle and presented in Australian currency and
rounded to the nearest thousand dollars ($000).
(b) Comparative Information
The presentation and classification of items in the financial
report are consistent with prior periods except where a specific
Accounting Policy Statement or Australian Accounting Standard
have required change.
The accounting policies have been consistently applied, unless
otherwise stated.
Financial Statements 42
(c) Taxation
The Construction Industry Long Service Leave Board is not
subject to income tax. The Board is liable for fringe benefits tax
(FBT) and goods and services tax (GST).
Revenue, expenses and assets are recognised net of the
amount of GST except where the amount of GST incurred is not
recoverable from the Australian Taxation Office, in which case
the GST is recognised as part of the cost of acquisition of the
asset or as part of the expense item applicable. Receivables and
payables are stated with the amount of GST included.
(d) Presentation of Statement of
Financial Position on a Liquidity Basis
The Board have taken the view in complying with the requirements
of the AASBs, the treatment of worker payments as current
liabilities does not reflect the true liquidity of the entity as these
liabilities are not likely to be repaid in the next 12 months.
Accordingly, the Board has chosen to present its statement of
financial position under the liquidity presentation method (AASB
101 Presentation of Financial Statement) on the basis it presents
a more reliable and relevant view.
(e) Estimation Uncertainty
When preparing the financial statements the Board undertakes a
number of judgements, estimates and assumptions about recognition
and measurement of assets, liabilities, revenue and expenses.
The actual results may differ from the judgements, estimates and
assumptions made by management, and will seldom equal the
estimated results.
Information about significant judgements, estimates and
assumptions that have the most significant effect on recognition
and measurement of assets, liabilities, revenue and expenses is
provided below.
3 — Revenue
Revenue is measured at the fair value of the consideration received or receivable.
The levy rate prescribed in accordance with regulations under the Act for the Construction Industry Fund was 2.15% of total remuneration
paid to employees. Levies are recognised when returns are received with an accrual to recognise levies received from employers after
the end of the reporting period but relating to the May/June billing cycle. The service related to these contributions are included in the
actuarial assessment of worker payment liabilities.
Realised and unrealised gains and losses arising from changes in the fair value of financial assets designated ‘at fair value through profit
or loss’ are included in revenue in the period in which they arise.
Interest is included in revenue in the period in which it is earned.
Financial Statements 43
4 — Cash and Cash Equivalents
Cash and cash equivalents recorded in the Statement of Financial Position and Statement of Cash Flows include cash on hand and
demand deposits. Cash is measured at nominal value. For the purpose of the Statement of Cash Flows, cash includes all bank balances.
Cash at the end of the reporting period as shown in the Statement of Cash Flows is reconciled to the related items in the Statement of
Financial Position as follows:
2018
$000’s
2017
$000’s
Cash at Bank and in Hand 3,089 2,288
Total Cash and Cash Equivalents 3,089 2,288
Financial Statements 44
5 — Receivables
Receivables include amounts receivable from employer debtors (levies) less an allowance for doubtful debts, accruals, sundry debtors
and prepayments.
Employer debtors arise in the normal course of collecting levies from employers and are generally receivable 21 days following the end
of the two monthly billing cycle. The allowance for doubtful debts is recognised when there is objective evidence (calculated on past
experience and current and expected changes in credit rating) that a receivable is impaired.
An allowance for doubtful debts (impairment loss) has been recognised in expenses for specific debtors and debtors assessed on a
collective basis for which such evidence exists.
Accrued contributions are levies received from employers after the end of the reporting period but relating to the May/June billing cycle.
The service related to these contributions are included in the actuarial assessment of worker payment liabilities.
2018
$000’s
2017
$000’s
Current
Employer Debtors 628 490
Allowance for Doubtful Debts (136) (112)
492 378
Accrued Contributions 2,077 2,011
Sundry Debtors & Prepayments 437 58
Total Receivables 3,006 2,447
Movements in the allowance for doubtful debts (impairment loss) between the beginning and the end of the financial year were as follows:
Carrying amount at the Beginning of the Year 112 70
Amounts Written Off (82) (67)
Increase/(Decrease) in Allowance Recognised in Profit or Loss 106 109
Carrying Amount at the End of the Year 136 112
Credit Risk
Receivables are due from employers in the construction industry. Other than as recognised in the allowance for doubtful debts, it is not
anticipated that counterparties will fail to discharge their obligations. The carrying amount of receivables approximates net fair value
due to being receivable on demand. There is no concentration of credit risk.
Financial Statements 45
6 — Investments
Investments are designated as financial assets at fair value through profit or loss. The investments are managed funds, classified as
financial assets held for trading as they are part of a portfolio of identified instruments that are managed together in accordance with a
documented investment strategy.
Financial instruments are recognised when the entity becomes a party to contractual provisions of the instrument. Trade date accounting
is adopted for financial assets and established by marketplace convention. Financial instruments are initially measured at fair value.
Subsequent to initial recognition, the fair value of financial assets at fair value through profit or loss is determined as the amount for which
an asset could be exchanged, between knowledgeable, willing parties in an arm’s length transaction at the quoted market price on an
active market.
The fair value of a portfolio of financial instruments is the product of the number of units of the instrument and its quoted market prices.
Realised and unrealised gains and losses arising from changes in the fair value of financial assets designated ‘at fair value through profit
or loss’ are included in the Statement of Comprehensive Income in the period in which they arise.
At the end of the reporting period, the Board assesses whether there is objective evidence that a financial instrument has been impaired.
There were no indications of impairment of financial assets at 30 June 2018.
2018
$000’s
2017
$000’s
Term Deposits 4,196 3,589
Managed Funds 136,379 127,112
Total Investments 140,575 130,701
Financial Statements 46
7 — Property, Plant & Equipment
Property, plant and equipment are measured at cost less depreciation and impairment losses. The residual values, useful lives and
depreciation/amortisation methods of all major assets held by the Board are reviewed and adjusted if appropriate on an annual basis.
Leasehold improvements are amortised over their estimated useful life or the unexpired portion of the relevant lease, whichever is the shorter.
Depreciation of assets is determined as follows:
Class of Asset Depreciation Basis Depreciation Rate
Plant & Equipment Diminishing Value 40%
Motor Vehicles Diminishing Value 22.5%
Furniture & Fittings Diminishing Value 13.5%
Leasehold Improvements Prime Cost 20%
All items of property, plant and equipment are tested for indications of impairment at the end of the reporting period. An asset’s carrying
amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These gains or losses are included in the
Statement of Comprehensive Income.
2018
$000’s
2017
$000’s
Leasehold Improvements at Cost 46 46
Less Accumulated Depreciation (16) (7)
30 39
Office Equipment at Cost 169 164
Less Accumulated Depreciation (152) (142)
17 22
Office Furniture & Fittings at Cost 27 27
Less Accumulated Depreciation (10) (7)
17 20
Motor Vehicles at Cost 120 129
Less Accumulated Depreciation (37) (57)
83 72
Total Plant & Equipment at Cost 362 366
Less Accumulated Depreciation (215) (213)
Total Plant & Equipment 147 153
Financial Statements 47
Movements in the carrying amounts of each class of plant and equipment between the beginning and the end of the financial year were as follows:
Leasehold
Improvements
$000’s
Office
Equipment
$000’s
Office
Furniture
$000’s
Motor
Vehicles
$000’s
Total
$000’s
2017
Balance at Beginning of Year 42 9 86 137
Additions 46 7 20 24 97
Disposals — (3) (5) (11) (19)
Depreciation Expense (7) (24) (4) (27) (62)
Balance at End of Year 39 22 20 72 153
2018
Balance at Beginning of Year 39 22 20 72 153
Additions — 8 — 52 60
Disposals — (2) — (18) (20)
Depreciation Expense (9) (11) (3) (23) (46)
Balance at End of Year 30 17 17 83 147
Impairment
There were no indications of impairment of property, plant or equipment at 30 June 2018.
Financial Statements 48
8 — Intangible Assets
An intangible asset is an identifiable non-monetary asset without physical substance. Intangible assets includes the development plan
and design for the production of a new information system, and is currently work in progress. The Board is contractually committed to
the remaining design for $33,000 (2017: Nil). An intangible asset shall be recognised if, and only if it is probable that the expected future
economic benefits that are attributable to the asset will flow to the entity; and the cost of the asset can be measured reliably. Intangible
assets are initially recognised at cost and subsequently recognised at cost less amortisation and any impairment. Amortisation will
commence when the current work in progress is complete in accordance with the contract.
Amortisation is calculated on a straight line basis over the estimated useful life of the intangible asset. There were no indications of
impairment of intangible assets at 30 June 2018.
2018
$000’s
2017
$000’s
Work in Progress - Software Development 27 —
Total Intangible Assets 27 —
9 — Trade and Other Payables
Payables include trade creditors, worker payments and accruals, including goods and services received prior to the end of the reporting
period that are unpaid at the end of the period. Payables are measured at their nominal value and are normally settled within the terms
of payment stipulated by the supplier.
2018
$000’s
2017
$000’s
Trade Creditors 44 34
Sundry and Other Creditors 108 99
Total Payables 152 133
Financial Statements 49
10 — Provisions
Provisions are recognised when the Board has a legal or
constructive obligation, as a result of past events, for which it
is probable that an outflow of economic benefits will result and
that outflow can be reliably measured. Provisions are measured
using the best estimate of amounts required to settle the
obligation at the end of the financial year.
Provision is made for amounts due to construction industry
employees under the current legislation based on an annual
independent actuarial assessment of worker payment liabilities.
The actuarial assessment is based on information as at 30
June 2018 and uses a “best estimate” method incorporating
assumptions on expected actual investment returns, wage
inflation, exit rates, take up of long service leave whilst in
service, future service credits and an allowance for the operating
expenses of the fund.
Registered contractor funds are voluntary contributions by
registered contractors and working directors to fund their
own long service leave and include accrued interest that is
credited monthly.
Employee benefits accrue for employees as a result of services
provided up to the end of the financial year that remain unpaid,
and include annual and long service leave entitlements plus an
allowance for on-costs.
Annual leave liability is measured at the undiscounted amount
expected to be settled within 12 months.
The liability for long service leave is measured as the present
value of expected future payments to be made and based on
assumptions including expected future salary and on-costs,
experience of employee departures and periods of service.
Any re-measurements arising for changes in assumptions
are recognised in profit or loss in the period in which the
changes occur.
The unconditional portion of the long service leave provision is
expected to be settled within 12 months as the Board does not
have an unconditional right to defer settlement of the liability for
at least 12 months after reporting date. The unconditional portion
of long service leave relates to an unconditional legal entitlement
to payment arising after 7 years of service and measured at
nominal value.
The liability for long service leave for employees who do not
have an unconditional right to payment has been measured at
the present value of the future cash outflows to be made for
these benefits accrued to the reporting date expected to be
settled after 12 months.
No provision has been made for personal leave as all personal
leave is non-vesting.
Financial Statements 50
2018
$000’s
2017
$000’s
Worker Payments
Expected to be settled within 12 months 14,500 14,000
Expected to be settled after 12 months 95,440 91,257
Total Worker Provisions 109,940 105,257
Registered Contractor Contribution Fund
Expected to be settled within 12 months 500 500
Expected to be settled after 12 months 5,261 4,950
Total Registered Contractor Provisions 5,761 5,450
Employee Benefits
Annual Leave expected to be settled within 12 months 49 41
Long Service Leave expected to be settled within 12 months 71 106
Long Service Leave expected to be settled after 12 months 21 13
Total Employee Provisions 141 160
Movements in the carrying amounts of each provision between the beginning and the end of the financial year were as follows:
Annual Leave
$000’s
Long Service Leave
$000’s
Worker Payments
$000’s
2017
Carrying Amount at Beginning of Year 52 131 104,811
Provision Used (72) (21) (13,280)
Additional Provisions Recognised 61 9 13,726
Carrying Amount at End of Year 41 119 105,257
2018
Carrying Amount at Beginning of Year 41 119 105,257
Provision Used (50) (39) 13,173
Additional Provisions Recognised 58 12 17,856
Carrying Amount at End of Year 49 92 109,940
Financial Statements 51
11 — Worker Payments
2018
$000’s
2017
$000’s
Actuarial Assessment of 30 June Liability 109,940 105,257
Worker Payments during the Year 13,173 13,280
Actuarial Assessment in Previous Year (105,257) (104,811)
Worker Payments Expense 17,856 13,726
12 — Auditor’s Remuneration
2018
$000’s
2017
$000’s
Remuneration of the Auditor of the Board for Auditing the Financial Statements 20 20
20 20
13 — Operating Lease Commitments
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in
the period in which they are incurred.
Commitments in relation to operating leases contracted for at the reporting date but not recognised as liabilities are payable as follows:
2018
$000’s
2017
$000’s
Payable - Minimum Lease Payments:
Not Later than 12 Months 98 77
Between 12 Months and 5 Years 216 314
Greater than 5 Years — —
Total 314 391
The Board’s operating leases are for office accommodation.
Financial Statements 52
14 — Employee Benefits Expense
2018
$000’s
2017
$000’s
Salaries and Wages 782 829
Long Service Leave 12 9
Annual Leave 14 (11)
Employment on-costs - Superannuation 68 76
Employment on-costs - Other 35 40
Board Fees 34 17
Total Employee Benefits Expense 945 960
The number of employees at 30 June 2018 was 10 (2017: 10).
Financial Statements 53
15 — Board Members Remuneration
Total income received, or due and receivable, by Board Members or their employers was $34,000 (2016: $17,000).
All other transactions with Board Member related parties are on normal commercial terms and conditions no more favourable than
those available to other parties.
The number of Board Members whose income from the entity falls within the following band is:
Band 2018
No. Of Members/Deputies
2017
No. Of Members/Deputies
$0 to $11,999 13 13
The names of Board/Deputy Members who have held office during the financial year are:
Ms Marie Boland
Ms Estha van der Linden Ms Karen Van Gorp (Deputy)
Mr Steven Minuzzo Mr Peter Salveson (Deputy)
Mr Laurence Moore Ms Thina Mariappan (Deputy)
Mr Aaron Cartledge Mr Derek Stapleton (Deputy)
Ms Erin Hennessy Mr John Adley (Deputy)
Mr John Camillo Mr Peter Bauer (Deputy)
The Board was appointed by the Governor on 27 June 2017 effective 1 July 2017 for a period of 5 years.
Financial Statements 54
16 — Reconciliation of Net Cash Provided
by Operating Activities to Operating Surplus
2018
$000’s
2017
$000’s
Operating Surplus / (Deficit) 6,261 8,395
Non Cash Flow Items in Operating Surplus / (Deficit):
Depreciation 46 62
Loss /(Gain) on Sale of Plant & Equipment (11) 6
Movement in Provisions 4,707 488
Registered Contractors' Interest 107 101
Investment / (Gain) Loss (9,664) (9,821)
Movement in Assets and Liabilities
Increase / (Decrease) in Payables 2 (98)
(Increase) / Decrease in Receivables (611) (395)
Net Cash Provided By Operating Activities 837 (1,262)
Financial Statements 55
16 — Financial Risk Management
The Board faces a number of risks in performing its statutory
functions. The Board has implemented policies and processes
to manage risk across all sectors of its operations.
The Board invests in financial assets for the purpose of obtaining
income which is critical in the context of increasing scheme
liability and the levy rate.
The investments of the Fund are managed by JANA Investment
Advisors (and include Australian and global equities, fixed
interest, property, fixed interest securities). As a manager
of managers, JANA is required to invest the funds under
management in accordance with an investment mandate
approved by the Board.
The Fund’s investments are subject to interest rate risks and
the return on investments will fluctuate in accordance with
movements in the market interest rate.
The inclusion of global equities in the investment portfolio
subjects the Board to currency risk. The Board has determined
that a percentage of this investment be currency hedged. This
ensures risks associated with currency exposure are minimised.
An actuarial review of the state and sufficiency of the Fund is
conducted annually. This review confirms the current position
and predicts whether income (levy and investment) will provide
sufficient monetary reserves to meet future liabilities.
(a) Interest Rate Risk Exposure
The Board manages its exposure to interest rate fluctuations
through a formal set of policies and procedures approved
by the Board.
The Board does not engage in any significant transactions
that are speculative in nature.
The Board has exposures to interest rate risks on financial
assets. The Board has cash at bank as at 30 June 2018
of $3,089,000 (2017: $2,288,000), which bears variable
interest rates. The effective weighted average interest rate
as at 30 June 2018 was 0.5% (2017: 0.7%).
The Board’s only exposure to interest rate risk on financial
liabilities is in relation to the Registered Contractor
Contribution Fund as at 30 June 2018 of $5,761,000 (2017:
$5,450,000), which bears variable interest rates. The
interest rate applicable to the year ending 30 June 2019 is
2.3% (2018: 2.0%).
(b) Credit Risk Exposures
The maximum credit risk exposure of financial assets of
the Board is represented by the carrying amount of assets
recognised in the Statement of Financial Position, net of
any allowances for impairment losses.
Apart from the foregoing the Board had no significant
concentrations of credit risk with any single counterparty or
group of counterparties. Operational practices ensure trans-
actions occur with clients with a strong capacity to meet their
financial commitments.
Financial Statements 56
Independent Auditor’s Report
BDO Centre Level 7, 420 King William Street Adelaide SA 5000 GPO Box 2018 Adelaide SA 5001 Australia
Tel: +61 8 7324 6000 Fax: +61 8 7324 6111 www.bdo.com.au
BDO Audit (SA) Pty Ltd ABN 33 161 379 086 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (SA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees).
INDEPENDENT AUDITOR'S REPORT
TO THE PRESIDING OFFICER OF THE CONSTRUCTION INDUSTRY LONG SERVICE LEAVE BOARD
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Construction Industry Long Service Leave Board (the Entity), which comprises the statement of financial position as at 30 June 2018, the statement of comprehensive income the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies, and the Statement by the Board.
In our opinion the accompanying financial report presents fairly, in all material respects, the financial position of the Entity as at 30 June 2018 and of its financial performance and its cash flows for the year then ended in accordance with the basis of accounting described in Note 2.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Entity in accordance with ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of matter – Basis of accounting
We draw attention to Note 2 to the financial report, which describes the basis of accounting. The financial report has been prepared to assist the Entity to meet the requirements of the Public Finance and Audit Act 1987 pursuant to the Construction Industry Long Service Leave Act 1987. As a result, the financial report may not be suitable for another purpose. Our opinion is not modified in respect of this matter.
Responsibilities of Board Members for the Financial Report
Board Members is responsible for the preparation and fair presentation of the financial report, and have determined that the basis of preparation described in Note 2 is appropriate to meet the requirements of the Public Finance and Audit Act 1987 pursuant to the Construction Industry Long Service Leave Act 1987 and for such internal control as Board Members determines is necessary to enable the preparation and fair presentation of a financial report that is free from material misstatement, whether due to fraud or error.
Independent Auditor’s Report 58
In preparing the financial report, Board Members are responsible for assessing the Entity’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless Board Members either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity’s financial reporting process.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: http://www.auasb.gov.au/auditors_responsibilities/ar4.pdf
This description forms part of our auditor’s report.
BDO Audit (SA) Pty Ltd
Andrew Tickle Director
Adelaide, 18 September 2018
Independent Auditor’s Report 59
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www.portableleave.org.au