lord howe island board annual report 2010 draft · lord howe island board annual report for 2009-10...

Lord Howe Island Board Annual Report

2009-10

MISSION To provide for the well being of the Island community and the protection of the Island environment for the benefit of all

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TABLE OF CONTENTS 1. INTRODUCTION 5

i) The Board’s Charter and Responsibilities 5

ii) Board Membership 6

iii) Executive and Senior Staff 6

iv) Board Meetings 6

v) Access 7

2. THE YEAR IN REVIEW – Chairperson’s Report 7

3. PERFORMANCE IN KEY RESULT AREAS – LHIB Corporate Plan 2008-10 9

NATURAL ENVIRONMENT AND CULTURAL HERITAGE 9

TRADING ACTIVITIES 14

PUBLIC UTILITIES, SERVICES AND INFRASTRUCTURE 17

LAND ADMINISTRATION AND ENVIRONMENTAL PLANNING 21

CORPORATE GOVERNANCE AND SUPPORT 24

COMMUNITY WELL-BEING AND HEALTH 27

4. STATUTORY REPORTING 29

i) Transfer and subletting of Perpetual Leases to non-Islanders 29

ii) Granting of Perpetual Leases 29

iii) Funds Granted to Non-Government Community Organisations 29

iv) Legislative Changes to the Lord Howe Island Act 1953 29

v) Research and Development 29

vi) Government Information Public Access and Privacy Applications 30

vii) Disclosure Log 30

viii) Register of Government Contracts 30

ix) Equal Employment Opportunity Statement 32

x) Equity and Ethnic Affairs Policy Statement Status Report 33

xi) Staffing 33

xii) Consultants 35

xiii) Occupational Health and safety and Risk Management 35

xiv) Analysis of Financial performance 36

xv) Cost of Printing and Report Availability 42

5. FINANCIAL STATEMENTS FOR 2009-10 43 Cover Photo Credits 1. Aerial of Lord Howe Island ©: Michael Legge-Wilkinson 2. Rock Pools – Lord Howe Island©: Michael Legge-Wilkinson

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The Hon. Frank Sartor, MP Minister for Climate Change and the Environment Level 35, Governor Macquarie Tower 1 Farrer Place Sydney NSW 2000 Dear Minister, We have pleasure in submitting the 57th Annual Report of the Lord Howe Island Board for presentation to Parliament in accordance with the provisions of the Annual Reports (Statutory Bodies) Act, 1984 and the Lord Howe Island Act 1953 for the year ended 30th June, 2010. Yours sincerely,

Alistair Henchman Barney Nichols Chairperson Board Member

LORD HOWE ISLAND BOARD Administrative Office, PO Box 5 Lord Howe Island NSW 2898 Phone: (02) 6563 2066 Fax: (02) 6563 2127 E-mail: [email protected]

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Lord Howe Island Board Annual Report for 2009-10

LORD HOWE ISLAND ACT, 1953 Section 36A of the Lord Howe Island Act provides that: 1) The Board shall, as soon as practicable but not later than six months after the end of each financial year of

the Board, prepare and submit to the Minister a report on the operations of the Board during that financial year.

2) The Board shall include in its report under this section particulars of any transfers or subletting of leases under this Act to persons other than Islanders.

3) The Minister shall lay the report, or cause it to be laid, before both houses of Parliament as soon as practicable after receipt of the report.

Division 3 of the Public Finance and Audit Act, 1983 provides that statutory bodies are to prepare and submit to the Auditor-General a statement of accounts and that the Auditor-General is to furnish an opinion stating that the accounts have been audited, indicating whether the financial statements comply with the Act and setting forth any qualifications subject to which the opinion is given. Part 2 of the Annual Reports (Statutory Bodies) Act, 1984 provides that a statutory body shall, not later than 4 months after the end of the financial year of the statutory body, submit its annual report in relation to that financial year, including the financial statements with the opinion of the Auditor-General thereon, to the appropriate Minister for presentation to Parliament. In accordance with these provisions the Lord Howe Island Board furnishes the accompanying Report and Statement of Accounts for the 12 months period ended 30th June 2010.

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REPORT OF THE LORD HOWE ISLAND BOARD FOR THE YEAR ENDED 30TH JUNE 2010

1. INTRODUCTION

This is the fifty-seventh report of the Lord Howe Island Board since the passing of the Lord Howe Island Act, 1953 and covers the period 1st July 2009 to 30th June 2010. i) The Board's Charter & Responsibilities The Lord Howe Island Board is a statutory body established under the provisions of the Lord Howe Island Act, 1953. The Board is charged with the responsibility of administering the affairs of the Island. "Island" as defined by the Act includes Lord Howe Island and all adjacent Islands and coral reefs within one marine league of the Island. Ball's Pyramid and adjacent Islands are also included in this definition. Under the Act, the Board has the following responsibilities:

to provide directly or on behalf of other levels of government, adequate, equitable and appropriate services and facilities for the Island community and to ensure that those services and facilities are managed efficiently and effectively,

to exercise community leadership, to exercise its powers, authorities, duties and functions in a manner that is consistent with and actively

promotes the principles of multiculturalism, to promote and to provide and plan for the needs of children, to manage, protect, restore, enhance and conserve the Island's environment in a manner that is consistent

with and promotes the principles of ecologically sustainable development, to manage, protect, restore, enhance and conserve vacant Crown lands, and reserves, including the Lord

Howe Island Permanent Park Preserve, in a manner that recognises the World Heritage values in respect of which the Island is inscribed on the World Heritage List referred to in the United Nations Convention Concerning the Protection of the World Cultural and Natural Heritage ,

to promote the Island as a tourist destination, to have regard to the long term and cumulative effects of its decisions, to bear in mind that it is the custodian and trustee of public assets and to effectively account for and

manage the assets for which it is responsible, to facilitate the involvement of members of the Board, members of the public, users of facilities and services

and the Board's staff in the development, improvement and co-ordination of the Board's powers, authorities, duties and functions,

to raise funds for Island community purposes by the fair imposition of charges and fees, by income earned from investments and, when appropriate, by borrowings and grants,

to keep the Island community and the State government (and through it, the wider community) informed about its activities,

to ensure that, in the exercise of its regulatory powers, authorities, duties and functions, it acts consistently and without bias, particularly where an activity of the Board is affected and,

to be a responsible employer.

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ii) Board Membership During the reporting period membership of the Board was as follows:

Name Position Term(s)

Mr Alistair Henchman Chairperson & Ministerial Appointed Member (Regional Director Southern, Parks and Wildlife Division, Department of Environment, Climate Change and Water).

02/04/08 to 01/04/11

Mr Stan Fenton Deputy Chairperson & Elected Member. 17/02/09 to 16/02/12

Mr Jeff Angel Ministerial Appointed Member representing the interests of conservation. 28/11/06 to 27/11/09 and

28/11/09 to 27/11/12

Mr Robert Pallin Ministerial Appointed Member representing the interests of business and tourism.

08/09/07 to 01/11/10

Mr Gary Crombie Elected Island Member. 17/02/09 to 16/02/12

Mr Barney Nichols Elected Island Member. 17/02/09 to 16/02/12

Mr Des Thompson Elected Island Member. 17/02/09 to 16/02/12

Island members are elected by the resident Island community every three years. The most recent poll for elected Island members was held on 12 February 2009 with the above four (4) members being declared re-elected by the Minister for Climate Change and The Environment for a period of three years from 17 February 2009. Mr Jeff Angel was re-appointed by the Minister for a further three (3) year term representing the interests of conservation. iii) Executive and Senior Staff During the reporting period the following persons held executive and senior positions within the Board’s administration:

Name Position

Mr Stephen Wills Chief Executive Officer

Mr Greg Pierce Manager Operations (up to 15th March 2010)

Mr Michael Smith Manager Business & Corporate Services

Mr Nicholas Holt Manager Infrastructure & Engineering Services

Mr David Kelly Manager Environment & Community Development

In recent years the functions of the Lord Howe Island Board has undergone significant change due to legislative amendments and a greater emphasis on environmental planning, development inspection and compliance, and corporate governance. The Board has also assumed responsibility for public health matters such as food safety and waste water management and these functions have been progressively integrated into the Board’s operations. In undertaking these functions the Board recognised that a new range of skill sets was required to carry out these functions in an effective and efficient manner. During the reporting period the Board completed an organisational restructure of the senior management team deleting the Executive Officer and Manager Operations positions, and creating management positions for the Infrastructure and Engineering Services and Environment and Community Development business units. iv) Board Meetings During the reporting period, the Board met on the Island on the following occasions:

September 2009 - all Board members in attendance December 2009 - all Board members in attendance March 2010 - all Board members in attendance

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May 2010 - all Board members in attendance The Board also met by teleconference in June 2010 to consider and approve the annual budget for the 2010/11 financial year and the Corporate and Operations Plan. Board meetings are generally held in public with the exception of items relating to commercial and business affairs, staff and personnel issues, legal matters and items affecting the private affairs of individuals. Members of the public are informed of the outcome of meetings through publication of minutes of the meetings. The Board has adopted a Code of Conduct which includes meeting procedures and copies of the Code are available to the public free of charge. v) Access The Board's principal place of business is on the Island. The Board can be contacted through the Chief Executive Officer, Lord Howe Island Board, PO Box 5, Lord Howe Island, NSW 2898, or by telephoning (02) 6563 2066 or facsimile (02) 6563 2127. The Board's office is open during normal business hours (8:30 am to 4:30 pm, Mon-Fri).

2. THE YEAR IN REVIEW – Chairperson’s Report

The 2009/10 year was a busy and productive period for the Board with significant activity delivering environmental and community benefits and improvements in the way the Island is administered. The highlight was the “community conversation” which brought together 250 members of the community – a remarkable 68% of the Island’s population - to discuss how we can work together to plan for a sustainable future. Peter Kenyon from consultant firm Bank of IDEAS and his colleague Denis Pontin facilitated the conversation and brought a huge amount of energy to the program. Over 10 days Peter and Denis conducted over 46 different focus groups and meetings with 530 participants, culminating in an event attended by over 140 residents, which identified the next steps in realising our goals. It was great to see the enthusiasm of community members and their willingness to work together for mutual benefit. A community development group will now work to develop a comprehensive strategy to guide the Board and the community in achieving the identified objectives. Good progress was made towards long term environmental goals for the eradication of weeds of national significance and rodents from the Island, improving waste water treatment systems and implementing a comprehensive food safety monitoring and inspection regime. The Island‘s “War on Weeds” is entering its fifth year and some amazing results achieved to date. The entire island has now been mapped into blocks and weed densities recorded. Over 85% of the Island has now been searched and follow up treatments completed on more than 70% of the Island. To date, over 1,600,000 weeds have been removed with mature dense infestations of priority weeds targeted with all works carefully monitored to ensure that they are carried out in an efficient manner using the latest techniques and practices. Over $3,000,000 has been invested in the program since Nov 2004. This has created valuable employment opportunities for local people. In addition to local jobs, over 20,000 volunteer hours have been invested in weed control by Board sponsored bush regeneration volunteers and the Friends of Lord Howe. The Board also released the Draft Lord Howe Island Rodent Eradication Plan which has been prepared to guide the planning and implementation of a programme to eradicate rats and mice from the Lord Howe Island Group of Islands. As part of the ongoing consultation with the community the Draft Plan was placed on public exhibition for a period of 28 days. Community members, whether as individuals or as members of community interest groups, were invited to comment on the draft Plan. We are working with State and Commonwealth Governments to seek the resources to undertake this challenging task. The Lord Howe Island Wastewater Management Committee was formed to undertake a risk and cost benefit analysis of options to improve sewerage management on Lord Howe Island. The Board contracted Worley Parsons to assist the committee. This Committee has considered not only the environmental and technical issues but also the community and financial implications of various wastewater management models. The Board has now successfully taken on the new responsibility for food safety with the latest round of inspections by the Board‘s visiting Senior Environmental Health Officer showing a significant increase in compliance with the Food Safety Act 2003 with most of the ‘structural’ issues identified in early inspections now compliant. There is good

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cooperation between the inspector and local businesses and a training seminar was also undertaken. Given the transient nature of many hospitality staff there will be an ongoing need for food handling training. This is a very positive result for public health management on the Island and food retail businesses are to be congratulated for their cooperation and diligence. The Board, supported by the Australian Government through the Remote Renewable Power Generation Program, also funded free Home Energy Reviews for residences on the Island. The reviews identified opportunities to improve energy efficiency in each home including lighting retrofits, replacement of old fridges and freezers and roofing insulation, with over 50 Island households opting to participate by installing energy efficient appliances and lighting. In September 2009 the Board adopted a revised Code of Conduct based on the model 2008 Local Government Code of Conduct. This means the Code has been updated to provide guidance on such matters as the disclosure of developer contributors, disclosure of non-pecuniary interests and procedures for complaint handling for breaches of the Code. The Board also amended its Code of Meeting Practice to schedule an increased number of matters to be dealt with in public sessions and implemented the Government Information Public Access Act, providing greater public access to documents. The Board also implemented a new staffing structure to adapt to its changing work environment and role. The functions of the LHIB have undergone significant change due to legislative amendments and a greater emphasis on environmental planning, development inspection and compliance, and corporate governance. The organisational changes have now been implemented enabling the Board to provide improved services to the community whilst delivering significant salary savings in the first year of operation. The Minister for Planning recently approved the Lord Howe Island Local Environment Plan 2010 following changes to the State’s planning legislation in 2008. The legislative changes required the existing LHI Regional Environment Plan be changed to a Local Environmental Plan. No change to the existing policy limiting new dwelling numbers to 25 over a 20-year period was made, however land zonings were changed to allow for release of new dwelling sites. Once subdivisions are finalised the Category B allocation can occur. This will be conducted consistent with the published land release policy by way of a ballot for eligible Islanders. The Board is developing a Sustainable Operations Discussion Paper to stimulate debate on a sustainable revenue model for the Island and to assess the efficiency and effectiveness of current service provision. For 2010/11 the Board has adopted an Operating Budget that reduces its operating deficit by over 60% and is progressively moving towards cost recovery for municipal services. The Discussion Paper represents the next step in the process for the Board in achieving sustainable and equitable financial outcomes for the delivery of essential services in the future. The Island’s Powerhouse was severely damaged by fire on 14th November 2009. The quick response of the local RFS brigade with the support of other community members saved the building and the four generators housed inside. However, the roof of the building was destroyed and the walls were badly damaged with an internal steel gantry system preventing the total collapse of the building. The Board is continuing negotiations with its insurers on repair / rebuild options for the building superstructure and replacement of the electrical circuitry destroyed in the fire. The reporting period also saw the Minister re-appoint Mr Jeff Angel of the Total Environment Centre as the representative for conservation on the Board. I look forward to working closely with Mr Angel to deliver key outcomes within the Board’s Charter. I’d like to thank the staff of the Board for their focussed and professional work throughout the year.

Mr ALISTAIR HENCHMAN Chairperson

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3. PERFORMANCE IN KEY RESULT AREAS – LHIB CORPORATE PLAN 08-10 KEY RESULT AREA: NATURAL ENVIRONMENT & CULTURAL HERITAGE CORPORATE OBJECTIVE: To protect, enhance and promote the Island’s natural environment and cultural heritage and World Heritage values. In this chapter

3.1 Eradicating priority pest animals 3.2 Control of pest animals to reduce impacts on biodiversity 3.3 Implementing the LHI Biodiversity Management Plan 3.4 Implementing the LHI Quarantine Strategy 3.5 Promoting awareness and support for conservation of the natural environment and cultural

heritage 3.6 Eradicating priority pest plants 3.7 Integrated approach for the reintroduction of native and endemic flora and fauna 3.8 Facilitating research 3.9 Ensuring the protection and conservation of LHI threatened species 3.10 Protecting and conserving cultural heritage Treating Bitou Bush on Lord Howe Island

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3.1 Eradicating priority pest animals The Lord Howe Island Board has committed to planning and investigating a rodent eradication program for Lord Howe Island (LHI). Rats have been implicated in the extinction of 5 endemic birds and at least 13 invertebrate species on LHI. The Draft Lord Howe Island Rodent Eradication Plan 2009 recognises rodents to threaten at least 13 other bird species, 2 reptiles, 51 plant species, 12 vegetation communities and numerous threatened invertebrates. In the LHI Biodiversity Management Plan rats have been identified as having adverse impacts on 49 plant species, 12 vegetation communities, 13 bird species, 2 species of reptile and at least 3 species of threatened invertebrates. The Board has obtained the assistance of DECCW to investigate and plan for an eradication of rodents from Lord Howe Island. A detailed draft eradication plan has been prepared for peer review and subsequent public exhibition. The Board placed the Draft Lord Howe Island Rodent Eradication Plan on public exhibition for a period of 28 days commencing 30 October 2009. The Plan provided an opportunity for the community to make written submissions in regard to the proposed rodent eradication. Submissions have been collated for reporting back to the Board. A total of 83 submissions were received from a range of individuals, groups and organisations and were registered on a spreadsheet. Those which sought an extension prior to the close of the exhibition period are not considered as being late. All submissions were handled in accordance with the Privacy and Personal Information Protection Act, 1998 and the NPWS Guide for Privacy and Handling Submissions (2002) was utilised for the collection, use, storage and disclosure of all personal information contained in the submissions. The Board has also commissioned an independent human health risk assessment to review the draft rodent eradication plan to ascertain potential human health risks and prepare a human health risk assessment relevant to the plan. 3.2 Control of pest animals to reduce impacts on biodiversity During the reporting period the Board continued its current baiting program to control rodents on Lord Howe Island. The Board schedules servicing of approximately 1,400 rat bait stations located throughout the Island at select periods throughout the year. To maximise the effectiveness of this program the Board also issues the control bait to local residents free of charge for use in the settlement area. In 2010 the Board increased the number of bait stations at four priority palm seed locations, which are also important for biodiversity. This also enabled trialling the use of another first generation anti coagulant (Coumatetralyl). In 2009/10 the Board also continued control measures for the Mallard x Pacific Black Duck Hybrids on Lord Howe Island. Mallard x Pacific Black Duck Hybrids are not native to Australia or New Zealand and are therefore not protected fauna under the NSW National Parks and Wildlife Act 1974. The Mallard x Pacific Black Duck hybrids pose obvious direct and indirect economic, social and environmental impacts to Lord Howe Island. Impacts include the suppression of native Pacific Black Ducks and unquantified negative social and economic impacts to aesthetics, natural values and tourism. They are also carriers of avian influenza and other viruses potentially important for the wellbeing of endemic fauna (in particular the woodhen) and human health. Ducks are a known reservoir of influenza viruses, are more likely to carry these viruses than any other species on the island, and have a high degree of contact with humans. The Board has mapped the distribution and extent of African Big-headed Ants and developed a treatment and surveillance methodology to enact their eradication. Baiting is scheduled for summer of 2010-11. 3.3 Implementing the LHI Biodiversity Management Plan The Lord Howe Island Biodiversity Management Plan is overseen by the LHI BMP Implementation Group (LHI BMP IG). This working group comprises two island community representatives, three DECCW staff and the LHIB Manager Environment/World Heritage. The group identifies priority actions from the LHI BMP for implementation or targeting for gaining external funding. On-ground works are delivered by LHIB staff, DECCW staff, researchers and volunteers. The LHI BMP IG provides a forum for reviewing biodiversity related plans, policies and strategies developed by the Board and their role is advisory with the primary aim of ensuring priority actions from the LHI BMP are implemented. To ensure works are

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budgeted and reported against the LHIB include priority actions in the LHIB Operations Plan and budget. This ensures priority actions are implemented to deliver effective on-ground works that benefit the islands biodiversity. In 2009/10, DECCW provided funding to research threatened plants of LHI, the breeding ecology of the LHI Placostylus and undertake targeted surveys for the Large Forest Bat. The latter project will be completed by December 2010. The LHIB provided funds to support the LHI BMP IG and support priority research identified within the plan. Funds were allocated to assist offshore seabird and weed surveys, undertake monitoring and weed control at threatened plant locations and to purchase two micro-bat harp nets. In house training in bush regeneration techniques was delivered to improve on-ground outcomes and efficiency. Other priority research undertaken in 2009/10 in accordance with the LHI BMP includes: surveying the offshore islands for seabirds and weeds, commencement of research into the LHI Gecko, LHI Skink and the introduced Bleating Tree-frog, ecology of the introduced Masked Owl, rodent eradication, plastic ingestion by the Flesh-footed Shearwater, research into all the endemic Palms, detailed surveys of the islands Bryophytes and the collection of seed samples for the Millennium Seed Bank. 3.4 Implementing the LHI Quarantine Strategy There were two pest animal incursions that were intercepted in December 2009. An Asian House Gecko was heard calling at a local Restaurant by Board staff, who caught the animal and submitted it to the Australian Museum for permanent record. A Green Tree Frog was also caught on a Perpetual Lease near the jetty that has a pond. The leaseholders caught the frog, froze it and handed it to Board Environmental staff who submitted it to the Australian Museum for permanent record. Shipping containers carrying the back up generators had Red-backed Spiders on their underside. Stevedores notified the Board, who had the undersides of the containers sprayed with insecticide. It is thought that the gecko arrived via freight, most likely from fresh produce purchased via the Brisbane markets (as Asian House Gecko’s are common in Brisbane). The Green Tree Frog most likely arrived with freight carrying the back up generators as it was found the night the ship docked. All incursions were intercepted and treated and regular checks of the vessel Island Trader continue. African Big Headed Ants are present on the main Island of Lord Howe at a number of locations. The presence of African Big Headed Ants on Lord Howe Island potentially has serious implications for the environment, infrastructure and tourism industry. Further baiting is required following the identification of new colonies of this pest species. The Board is currently mapping these new infestations and will commence baiting in the near future. The Manager Environment World Heritage also reviewed the acceptability of importing Sugarcane mulch, as many Islanders have sought mulch for garden use. The importation of mulch requires approval of the Board as it is part of a plant. The processing and storage cycles of sugarcane mulch production was investigated and determined to be suitable for importation via an application process that requires applicants to complete a checklist when opening the sealed mulch bag. An application form and checklist has been prepared. 3.5 Promoting awareness and support for conservation of the natural environment and cultural heritage The Lord Howe Island Central School and the Board recently ran a number of after-school activities with 5 students as part of a newly developed Junior Environmental Ranger Program. The Program is being held one afternoon a week for a month, including activities such as walking track maintenance, propagation and planting as part of the Board’s revegetation program, weeding, and threatened species management. The program is designed to stimulate the children’s interest and understanding of the natural environment and possibly encourage students to pursue a career in this area in the future. All the students appeared to really enjoy the programs offered and it is hoped that this can be an ongoing arrangement between the Board and the School. National Tree Day was also sponsored by the Board with over 100 trees and shrubs planted in about one hour by the LHI Central School students opposite the school. The Board has since watered the plants in, setup a sarlon wind break, and mulched the site using palm thatch.

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3.6 Eradicating priority pest plants The LHI weed eradication program formally commenced in November 2004. In the past year over 11 ha of primary treatment of dense widespread Ground Asparagus was undertaken at Transit Hill weed blocks 23 & 24, which was part funded by the NSW Environment Trust and the Board. The work involved targeted spray, snip & drip and hand removal. Follow up treatment of 8 ha of Ground Asparagus and Sweet Pittosporum has been undertaken from Nth west Transit Hill. In the past year a total of 121,078 individual weed plants were removed, including 23,500 Ochna, 9,000 Sweet Pittosporum, 20,000 Cherry Guava, 77 Umbrella Tree, 450 Cotoneaster, 200 Bitou Bush, 49 Coffee, 9 Silky Oak, 2 Flame Tree, 1 Lantana and 1 Small leaved Privet. Over 58,000 Ground Asparagus were dug totalling 570 kg’s, 1600 Bridal Creeper totalling 560kg’s and 4,100 Climbing Asparagus totalling 30kg. Approximately 150 kg of Madeira vine was removed from priority sites. The low weight figure for Climbing Asparagus reflects a movement away from digging to snip and drip and spray applications. There are no figures for the Settlement as this data has not yet been processed, which includes Madeira vine, Castor Oil Plant and White Cedar. Targeted control of Glory Lily continues from known sites with over 750 individual plants controlled in the past year. Data for Ground Asparagus, Climbing Asparagus, Bridal Creeper and Madeira vine are skewed as many plants are controlled through spray based and snip/drip & scrape/paint techniques which do not collect numbers of individuals treated or weight dug. The LHIB bush regeneration team commenced high elevation works in the Southern Mountains where they unfortunately found Cherry Guava and other priority weeds. Significant financial investment has been put to the program to date from Federal and State Government and the Board. To help keep up the momentum on weed eradication the Board is supporting four positions dedicated to weed eradication through its own recurrent funding in the absence of external grants. In the last 2 years over $700,000 dollars from external grants has been attracted to the program by the Board‘s Flora Management Officer. The Board have also committed $300,000 to employ local people to continue the fight. Current grants include the Catchment Management Authority Biodiversity grant which is currently employing an additional 6 casuals; Environmental Trust Battle for Transit Hill program employing a team of contractors and casual positions and Shearwater project provision of funding for trees; light management and volunteer support costs. At least $400,000 per year for the next four years is required to achieve critical knockdown in weed densities across the Island including Ground Asparagus. More community involvement, ideas for attracting funding for the program and volunteers for weeding are required to make the program a success. External Grant opportunities are limited largely to State and Federal Grant programs; and these have specific criteria. Environmental restoration based external grants often require a demonstration of community support and volunteer component. The Board is targeting the eradication of the fifteen priority invasive weed species from across the Island by 2014. The program aims to remove all mature weeds & significantly reduce other weed densities and will then move into a search and monitoring phase. 3.7 Integrated approach for the reintroduction of native an endemic flora and fauna The reintroduction of native fauna to Lord Howe Island is contingent on the successful eradication of rodents from the main island. This would enable the re-establishment of nesting colonies of White-bellied Storm-petrel, Kermadec Petrel and the LHI Phasmid, which are all highly vulnerable to predation by rodents. It would also enable the re-introduction of ecologically similar subspecies of species extirpated from the Island such as the Lord Howe Gerygone, Grey Fantail and Red Crowned Parakeet. The Board manages the revegetation of priority areas with locally native plants to reconstruct plant communities as similar to those that are predicted to have occurred at such locations prior to clearing. Works are conducted according to the LHI Revegetation Strategy and have focussed on infill planting and maintenance of existing plantings including the Endangered Ecological Community Sallywood Swamp Forest, extending corridor plantings at Transit Hill, Old Settlement and Middle Beach and establishing plantings along the lagoon foreshore. 3.8 Facilitating research During the reporting period the Board sponsored and supported research on the Island’s biodiversity to assist in effectively managing the Island’s substantial world renowned natural values. The Board supports research priorities contained within the Lord Howe Island Biodiversity Management Plan and during the reporting period provided assistance for the following studies.

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The Board supported the Imperial College London, Royal Botanic Gardens Kew (UK) and Sheffield University in estimating the germination rate and early survival of Howea forsteriana and H. belmoreana in different environments and identifying the key factors that explain the distribution of these two species across Lord Howe Island. The researchers estimated the effect of light, temperature, water availability, soil pH and type, and seed density on germinations rates of Howea species and hybrids.

The CSIRO also conducted research with Board support on Flesh-footed shearwater Puffinus carneipes plastic ingestion. The study was undertaken to determine the concentration of trace elements, PCBs, and polybrominated diphenyl ether contamination in shearwaters.

The Board also continued research on the introduced masked owl as part of the feasibility study for eradicating rodents on Lord Howe Island. The research undertaken by the Threatened Fauna Ecology Unit (TFEU) of DECCW aims to develop techniques to eradicate the masked owls, a major predator on threatened birds of Lord Howe Island.

In 2009/10 Caring for Our Country funding was also utilised to monitor populations of the Lord Howe Island currawong and its interaction with threatened seabirds.

The TFEU is working in partnership with the Board to eradicate exotic rodents from the Island. Activities carried out in 2009/10 on the Rodent Eradication Program include the assessment of rats and mice to resistance to anticoagulant toxicants and the toxicity of brodifacoum to the endangered Flax Snail.

The Board also provided in-kind support for the use of the Research Facility to the Marine Park Authority to assist in the monitoring of marine pests, the impact of fish feeding at Ned’s Beach and Reef Life Survey monitoring.

3.9 Ensuring the protection and conservation of LHI threatened species The Board has undertaken targeted rare plant species surveys and associated weed control at priority sites. This work identified an additional 12 rare plant locations, including additional sites for the critically endangered LHI Wheat Grass Elymus multiflorus ssp. kingianus. Rat bait stations have been established around the LHI Wheat Grass sites to reduce seed predation and the extension of rat bait stations at four priority palm seed locations also provides considerable biodiversity benefits as all sites support threatened species that are impacted by rodents. The Board’s ongoing weed eradication strategy works to reduce threats to a range of threatened species and the proposed rodent eradication plan will reduce threats to most species listed as threatened species on LHI. The Endangered Ecological Community (EEC) Sallywood Swamp Forest has been almost completely cleared within the lowlands, with only one small in tact patch remaining. Revegetation works targeting the reconstruction of the EEC will ensure this plant community survives into the future and provides suitable habitat for other threatened species such as the Woodhen, LHI Currawong, LHI Silvereye, LHI Golden Whistler and the LHI skink. Revegetation works at Middle Beach to Searles Point are focussed on re-establishing breeding habitat for the threatened Flesh-footed Shearwater. To offset impacts associated with disturbing Sooty Terns from breeding within the flight path on Blinky Beach dune the Board has sprayed out grass in locations identified as being suitable for nesting Sooty Tern. The DECCW and LHIB prepared Woodhen feeding guidelines which were distributed to the community. Annual Woodhen surveys continue to monitor population dynamics and have found the population to be relatively stable. Priority research undertaken by research institutes and DECCW and LHIB staff informs staff on the most appropriate measures to ensure the protection and conservation of the islands threatened species. The LHI Local Environment Plan 2010 provides additional measures for the protection and conservation of threatened species through environmental protection zoning. The LHI Permanent Park Preserve Plan of Management provides further protection and conservation measures for the Island’s threatened species. 3.10 Protecting and conserving cultural heritage The LHI Local Environment Plan 2010 provides for the protection and conservation of the islands cultural history. A heritage study was commissioned to identify important cultural heritage items. A historic bottle dump was located on the lagoon foreshore and a heritage assessment was undertaken to ascertain whether it contained any items of cultural heritage value. The assessment found the dump to be fairly recent and not contain any items of significant value. The bottle dump has since been removed.

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KEY RESULT AREA: TRADING ACTIVITIES

CORPORATE OBJECTIVE: To sustain and improve returns to the Board for the benefit of the community and the Island

In this Section 3.11 Adopting a strategic, market based approach for business activities of the Board 3.12 Extending palm plantations on Lord Howe Island 3.13 Research and development on seedling production 3.14 Diversifying business operations 3.15 Bio-prospecting on Lord Howe Island Kentia Palms – Lord Howe island Board Nursery

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3.11 Adopting a strategic, market based approach for business activities of the Board In 2009/10 the Board’s trading activities produced mixed results in generating funds for use in programs and investment in community infrastructure. The Board’s Liquor Store produced a strong trading result for the 2009/10 financial year realising a net surplus of $322,986 from its wholesale / retail operations in comparison to a budgeted surplus of $281,468. Whilst this is an excellent result for this operation the Liquor Store is now faced with increased opposition from on-line mainland suppliers who now service the residents of Lord Howe Island. Shipping services to the Island have relocated from the port of Yamba to Port Macquarie and this has greatly improved the range and number of service providers able to supply the Island with goods and services, including the supply of liquor. The Nursery suffered a disappointing operating loss of $198,448 for the 2009/10 financial year. Whilst a significant portion of the operating loss was for the write-down in the value of native plant stocks, the Nursery was unable to generate sufficient export quality kentia palm seedlings for sale to meet demand due to poor seed collections in the preceding two years. For 2009/10 the Board was able to increase the quantity of kentia palm seed collected for planting by 76% and this will ensure that sufficient kentia palm seedlings are available for export in the 2010/11 financial year returning the Nursery to an operating profit. The Board also committed resources to extend palm plantations on the Island and commenced a trial of a systemic pellet based insecticide for the control of a native moth that kills the kentia palm flower during the moth’s breeding cycle. If the trial of the insecticide is successful this could increase the yield of kentia palm seed collected from plantations by up to 90% and provide some assurance of a stable seed collection for future years. During the reporting period the Board also completed an organisational restructure of the Nursery realising a reduction of approximately $65,000 in staff overheads and is investigating mechanisation options for some of the labour intensive operations, including the planting of seed. 3.12 Extending palm plantations on Lord Howe Island During the reporting period the Board commenced preparation for the expansion of an existing palm plantation with an additional 800 kentia palm trees. The works on this plantation will be completed in September 2010, and once planted, these trees should be producing seed within a ten to fifteen year time frame. The Board has also identified a number of other sites that are suitable for palm plantations with irrigation using waste water being considered. To date, the existing palm plantations have not been intensively farmed and maintained but recent research indicates that the Board may be able to generate sufficient seed from plantation palms to reduce the need to collect seed from the remote areas of the Island, which can be back breaking work for seeders. The Board is also harvesting a number of plantation palms to be exported as mature trees to the middle-east. Whilst this practice is not sustainable in the long term, the removal of these palms will improve the growing conditions of the remaining trees as the initial spacing of the plantations trees is impairing growth rates due to lack of sunlight penetration and nutritional deficiencies in the soil. 3.13 Research and development on seedling production The Board continues to explore options to improve the yield and germination rates of kentia palm seed. Research in this area has been restricted in recent years due to the low seed collections with all seed being retained for kentia palm seedling production. Despite the shortage of seed for research purposes, the Board was able to refine the collection and planting processes to achieve significant reductions in the cost of production in 2009/10 and is now investigating options to mechanise some labour intensive processes. The efficiency gains achieved by the Nursery help to allay some of the additional costs associated with exporting seedlings from a remote location with only one airline permitted to operate on the Lord Howe Island to Sydney route. 3.14 Diversifying business operations In 2009/10 the Board expanded the range of products available at the Nursery to include the sale of a number of endemic plants to the mainland. The Nursery is also negotiating with a mainland provider to undertake plant breeder trials on native species that have been identified as having a commercial value, and if successful, these plants will be marketed in the long term on the mainland and for export.

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The Nursery also commenced propagating a range of vegetable and fruit seedlings for sale to residents and retail shops on the Island. The production of local fruit and vegetables provides residents and businesses access to fresh produce and assists in reducing packaging waste from imported goods. The Liquor Store also sponsored a number of wine tasting throughout the reporting period with good support from suppliers and local business operators. The opportunity to display new products on the Island constantly refines and improves the range of wines available for sale and mitigates high freight costs with mainland suppliers actively competing for market share. 3.15 Bio-prospecting on Lord Howe Island The Board has not actively supported bio-prospecting on the Island as research proposals are prioritised in accordance with the Lord Howe Island Biodiversity Management Plan. The Board’s limited resources are targeted towards the priority actions contained within this Plan, including eradication of feral animals and weeds, and rehabilitation of degraded areas.

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KEY RESULT AREA: PUBLIC UTILITIES, SERVICES AND INFRASTRUCTURE

CORPORATE OBJECTIVE To provide and maintain equitable, affordable, reliable and efficient services, utilities and infrastructure to meet current and future social, environmental and economic needs

In this Section 3.16 Managing Board Assets and Infrastructure 3.17 Renewable Energy programs for Lord Howe Island 3.18 Telecommunications, services and infrastructure 3.19 Waste Minimisation on Lord Howe Island 3.20 Powerhouse Fire Damage Lord Howe Island public recycling bins

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3.16 Managing Board Assets and Infrastructure The Board continued to manage its assets through ongoing routine maintenance. The assets maintained included Board residential properties, commercial properties and roads including associated infrastructure. Routine maintenance included maintenance of public domain including grass mowing, vegetation pruning and servicing of public composting toilets. The Board also maintained the electricity generation and distribution system including undertaking scheduled servicing of diesel generators and associated equipment, repairs to electrical transformers and switchboards, maintenance of the islands streetlight network. In addition to Public Infrastructure, the Board undertook a condition audit of the Board residences and completed minor refurbishments of several residences in preparation for commencement of new relocated staff. This work included removal of old carpet and replacement with timber veneer floating floors and installation of a new solar hot water system. The Board also undertook modifications to the Boards Administrative offices to cater for the new organisational structure and additional office staff. An Upgrade of the Nurses accommodation at the hospital was undertaken with the addition of a second bedroom to one of the flats. 3.17 Renewable Energy programs for Lord Howe Island In 2009/10 the Board implemented the Household Energy Efficiency Program. The Program has a very clearly defined objective – to reduce electrical energy consumption on Lord Howe Island through the provision of energy efficient upgrades to residential properties on the Island. The initial targets for the Program were:

1. Home Energy Reviews. Energy Reviews targeted for completion at all 137 houses on the Island. 2. Lighting Retrofits. The implementation of lighting retrofits at 100 houses. The lighting retrofit is expected to

include, on average: a. 11 compact fluorescent bulbs replacing incandescent bulbs; and b. 12 x 35W IRC with electronic transformers replacing 50W low voltage down-lights with magnetic

ballasts. 3. Refrigerator & Freezer Replacement. Replacement of old refrigerators and/or separate freezer units with

new, high efficiency versions in 30 houses; and 4. Insulation. The installation of roof insulation under the Australian Government’s stimulus package.

Funding for the Program was sourced by approximately 33% from residents of the Island, 32% from the LHIB and 35% from the Australian Government’s Renewable Remote Power Generation Program (RRPGP). Audits to 100 homes have been completed and approximately 50 homes have submitted order forms for the offered products. The Board is currently discussing available funding for the installation of large scale renewable energy generation, based on solar photovoltaic and/or wind technologies. Initial discussions have suggested that up to $600,000 may be available through the RRPGP, on a dollar for dollar basis. The NSW Dept of Industry & Investment (DI&I), which includes former Dept of Energy staff, have been assisting the Board in the development and implementation of the LHI Sustainable Energy Program. Through DI&I a consultant was engaged to prepare a grant application for submission to the Australian Government’s Remote Renewable Power Generation Program. The grant application is for $600,000 on a 50:50 basis with the NSW Government and the Lord Howe Island Board. The preliminary application was submitted to the Australian Government on 13 May 2010. 3.18 Telecommunications, services and infrastructure In 2009/10 the Board installed an Automated Weather Information Broadcast system (AWIB) at the Meteorology Office and now broadcasts via VHF the weather data stream on demand to inbound/outbound Aircraft. This follows the Bureau of Meteorology decision to withdraw voice relayed weather transmissions by bureau personnel. The Board also installed solar powered Permanent Emergency Runway Lighting at the LHI Aerodrome. The lighting negates the requirement for LHI Board staff to set out temporary lighting for RAAF night exercises and,

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pending the installation of a navigational beacon, will allow the NSW Air Ambulance to conduct operations beyond normal daylight hours, thereby providing a more reliable and cost effective medivac service to the Island. Positive feedback has already been received from both the RAAF and Qantaslink who have advised the lights may assist the Dash-8 series aircraft during daylight landings affected by poor weather visibility conditions. The emergency lighting was jointly funded by the Commonwealth Government’s Regional and Local Community Infrastructure Program and the Lord Howe Island Board. The Board also completed a much needed redevelopment of the Island’s only sporting oval. The extensive works include the levelling and returfing of the oval, the installation of mini goal / soccer posts and the relaying of the cricket pitch. The posts are removable so they can be taken out for cricket matches or school athletics competitions. The oval will be set out for Mod Rugby league and junior soccer, which are suitable for children up to 12 years of age. During the reporting period the Board also commenced a total reseal of Lagoon Road, the Island’s main arterial roadway running north to south on the Island. The reseal program is being funded through the Federal Government’s Roads to Recovery Program and the NSW Government through the annual Community Service Obligation payment. Regional and Local Community Infrastructure (RLCIP) funding has been approved for the replacement of four (4) fender piles at the Island’s wharf ($25,000). The Board has sourced a supply of turpentine logs suitable for use in the marine environment and these are currently being shipped to the Island to replace the rotted piles. 3.19 Waste Minimisation on Lord Howe Island In 2009/10 the Board commenced a review of Lord Howe Island Waste Management. A review over the past 10 years since the commencement of the Waste Minimisation and Management Strategy has been completed. Key findings of the review are as follows:

1. Total waste generation has continually increased from 213 tonnes in 2004/05 to 619 tonnes in 2009/10. 2. Significant increases in most waste streams have been recorded:

Plastics has doubled;

General waste, glass and scrap metal have trebled;

Cardboard and paper quadrupled;

Building waste increased by five times;

Food has increased by a third; and

Green waste has remained static. 3. From 2004/5 to 2009/10 the amount of material recycled increased from 15 tonnes to 171 tonnes p.a. 4. The diversion rate of waste from landfill fell from a high of 90% in 2004/5 to a low of just 57% in 2007/08 due to

the lack of glass recovery. In 2009/10 when glass was recovered for five months an increase from 62% to 75% has been achieved. If glass recovery occurred over the last few years diversion rate could have been above 80%.

Whilst the Board is concerned about the general increase in waste volumes over the period there a number of positives that the community can be justifiably be proud of. The diversion rate of waste from landfill is trending towards 80% with the re-commissioning of the glass crusher and conveyor equipment at the Waste Management Facility. The Board has been able to utilise the crushed glass in its road works program as a substitute for road base in certain areas, reducing overall shipping costs associated with this program. The crushed glass has also been utilised as a filter in a number of waste water reed beds trials as long term options for the replacement of septic tanks on the Island. The second stage of the Strategic Review of the Waste Minimisation and Management Strategy to be carried out in 2010/11 will explore the issues, challenges and opportunities and include consultation with LHIB, stakeholders and the community. New waste diversion targets will be recommended based on the current performance and waste diversion achieved to date and in consideration of the state government targets.

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3.20 Powerhouse fire damage The Island‘s powerhouse was extensively damaged by fire early on Saturday 14th November 2009. The quick response of the local RFS brigade with the support of other community members saved the building and the four generators housed inside. However, the roof of the building was destroyed and the walls were badly damaged with an internal steel gantry system preventing the total collapse of the building. Engineers from NSW Public Works, experienced in emergency response situations, visited the Island soon after the fire and provided advice on the best approach to temporarily stabilise the structure to prevent collapse. These works have been completed with a temporary roof now constructed to protect the generators and switchboards, in addition to stabilising the building superstructure. Three backup generators were transported to the Island to provide power during demolition of the damaged roof and the Board wishes to acknowledge the quick response from LHI Sea Freight who provided an additional voyage to bring the generators out on the vessel Island Trader. Without these back-up generators, the majority of tourists and many of the island’s residents would have been required to relocate to the mainland as many of the Island’s services, including water reticulation, are dependent on a constant supply of electricity. The Board is continuing negotiations with its insurers on repair / rebuild options for the building superstructure and replacement of the electrical circuitry destroyed in the fire. Powerhouse fire damage - propping of the external walls to prevent collapse

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KEY RESULT AREA: LAND ADMINISTRATION & ENVIRONMENTAL PLANNING

CORPORATE OBJECTIVE: To ensure that statutory land administration and environmental planning obligations are met in a way that effectively address current and future social, environmental and economic needs

In this Chapter 3.21 Ensuring the fair, transparent and sustainable allocation of vacant Crown Land for

residential development to Islander’s who do not have access to land within an existing Perpetual Lease

3.22 Ensuring that systems and processes are established so that the Lord Howe Island Local Environment Plan is implemented and administered responsively efficiently and transparently so that the objectives of the plan, and legislative requirements are met

3.23 Investing in resources and systems to enhance the Board’s capacity as a land administrator and consent authority

3.24 Ensuring that Board policies relating to land administration and environmental planning are consistent with legislative requirements and aligned to broader Government policy directions

3.25 Audit and monitoring of compliance with legislative and policy matters under the control of the Board

3.26 Ensuring that the Permanent Park Preserve is managed in accordance with an adopted Plan of Management

Lord Howe Island – looking North West from the Transit Hill Viewing Platform

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3.21 Ensuring the fair, transparent and sustainable allocation of vacant Crown Land for residential development to Islander’s who do not have access to land within an existing Perpetual Lease

During the reporting period the Board revised the Allocation and Granting of Dwelling Entitlements Policy to cover the period October 2010 to October 2015. The Lord Howe Island Local Environment Plan 2010 does not permit the consent authority (the Board), to approve any more than 25 new dwellings during the twenty (20) year period from 28 October 2005 to 28 October 2025. The revised Policy will therefore be the mechanism by which the Board applies the quota on residential development established under the expired Lord Howe Island Regional Environment Plan 2005. The Policy guides the Board in recommending to the Minister the granting of Owner Consent under clause 49 (3) of the Environmental Planning and Assessment Regulation 2000 to lodge a development application for the creation or construction of a dwelling. The policy applies to dwellings created or constructed on land sourced from Vacant Crown Land (VCL), or the subdivision of an existing Perpetual Lease (P/L) to create a new Portion and P/L, or dual or multiple occupancy of an existing Perpetual Lease. 3.22 Ensuring that systems and processes are established so that the Lord Howe Island Local

Environment Plan is implemented and administered responsively efficiently and transparently so that the objectives of the plan, and legislative requirements are met

In 2009/10 the Board continued the engagement of an external consultant to provide independent planning advice and professional assessment of compliance with local planning instruments and the Environmental Planning and Assessment Act 1979. During the reporting period the Board also sought legal advice from Department of Environment, Climate Change and Water Legal Services, NSW Department of Planning on leasing and development matters and interpretation of the Lord Howe Island Local Environment Plan 2010. The recent conversion of the LHI Regional Environment Plan 2005 to the LHI Local Environment Plan 2010 was a simple switch to a Local Environment Plan format without any comprehensive review or revision of existing planning controls being undertaken. The Board also considers and determines all development matters in accordance with its delegated authority and regularly reviews policies and procedures relating to land administration and environmental planning to ensure consistency with legislation and broader Government policy directions. 3.23 Investing in resources and systems to enhance the Board’s capacity as a land administrator and

consent authority The Board continues to liaise with NSW Department of Planning following the conversion of the Regional Environment Plan (REP) to a Local Environment Plan (LEP) as a consequence of amendments to the Environmental Planning and Assessment Act 1979. The detailed process for undertaking a comprehensive review is not yet agreed and will require negotiations between the Board and the NSW Department of Planning. Any comprehensive LEP, Development Control Plan and related policy review requires further consultation with the Island Community, NSW government agencies, including the NSW Department of Planning, to identify issues relevant to planning controls on Lord Howe Island. 3.24 Ensuring that Board policies relating to land administration and environmental planning are

consistent with legislative requirements and aligned to broader Government policy directions A review of Lord Howe Island’s town planning system forms part of the Consultant Town Planner’s contract with the Lord Howe Island Board. During the reporting period the Consultant Town Planner reviewed the Board’s planning system and identified a range of improvements for implementation to improve customer service and assessment timeframes, ensure statutory compliance with planning legislation and assist in the early identification of key application issues. Regular planning system reviews are valuable in identifying improvements to existing system and to encourage provision of a high level of planning advice and service to the Island Community and all others who are involved in and interact with Lord Howe Island’s planning system. In 2009/10 all Owner Consent and Development Applications approved under delegation by the Administration were also submitted to the quarterly Board meetings for the information of Board members.

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3.25 Audit and monitoring of compliance with legislative and policy matters under the control of the Board The Board’s Consultant Town Planner also completed bi-annual audits of the Development Application processing time from Lodgement to Issue of Notice of Determination. The audits identified that the average development application processing time is 47.5 days per application. The Board is currently reviewing and amending its procedures for accepting development applications, including the establishment of an electronic lodgement system for planning applications, and provision of electronic access to the Board’s application forms, revised DA Guide and relevant policies to reduce the average processing time to below 40 days. 3.26 Ensuring that the Permanent Park Preserve is managed in accordance with an adopted Plan of

Management The Lord Howe Island Act 1953 requires that a Plan of Management for the Permanent Park Preserve (PPP) be prepared outlining how the Preserve will be managed by the Lord Howe Island Board. A Plan of Management was adopted in 1986 for the PPP and a revised Plan of management has been drafted and includes updated information and management strategies. The revised Plan of Management for the LHI Permanent Park Preserve has been submitted to the Minister for approval.

Pandanus palms – Lord Howe Island Permanent Park Preserve

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KEY RESULT AREA: CORPORATE GOVERNANCE & SUPPORT CORPORATE OBJECTIVE: To ensure that the Board operates in accordance with the highest standards of corporate governance and provides responsive and effective administration and service delivery to the community and government

In this Chapter 3.27 Establishing systems, processes and corporate culture which ensure that the operations

of the Board are consistent with the highest standards of governance 3.28 Enhancing community awareness, understanding and support for the Board’s activities 3.29 Enhancing the Board’s financial performance and ensuring that budget processes are

transparent, strategic and responsive 3.30 Implementing an efficient, effective and comprehensive risk management and internal

control framework 3.31 Provide relevant and timely policy and other advice to Government on matters affecting

the management of the Island 3.32 Compliance with the LHIB Code of Conduct is regularly monitored and breaches

addressed quickly and effectively

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3.27 Establishing systems, processes and corporate culture which ensure that the operations of the

Board are consistent with the highest standards of governance The Board continues to review and develop policies that improve corporate governance and ethical behaviour in line with best practice guidelines issued by the Independent Commission Against Corruption, Department of Local Government and other state agencies. During the reporting period the Board adopted a revised Code of Conduct based on the Model Code of Conduct for Local Councils contained in the Local Government Act 1993. The Board’s revised Code of Conduct has been updated to provide guidance on the handling and disclosure of developer contributors, disclosure of non-pecuniary interests and procedures for complaint handling for breaches of the Code. The Code of Meeting Practice was also amended to schedule an increased number of matters to be dealt with in public sessions and implemented the Government Information Public Access Act, providing greater public access to documents. The Board also developed and adopted a Policy for Internal Reporting and Protected Disclosures. This policy establishes an internal reporting system for the reporting of disclosures of corrupt conduct, maladministration or serious and substantial waste of public money by the Lord Howe Island Board or its staff, and is designed to complement normal communication channels between supervisors and staff.

The Internal Reporting and Protected Disclosure Policy aims to encourage and facilitate the disclosure, in the public interest, of corrupt conduct, maladministration and serious and substantial waste in the public sector. This is achieved by:

• enhancing and augmenting established procedures for making disclosures concerning such matters,

• protecting people from reprisals that might otherwise be inflicted on them because of these disclosures, and

• providing for those disclosures to be properly investigated and dealt with. 3.28 Enhancing community awareness, understanding and support for the Board’s activities During the reporting period the Board published monthly Newsletters providing information on progress on environmental activities and projects, pesticides use notifications for weed control and educational material on waste minimisation and recycling, groundwater and sewerage management issues. The Board also publicly advertised all amended policies on exhibition for a period of 28 days to provide opportunity for the community to comment on issues, and where required, facilitated public workshops and meetings. During the period the Board sponsored a “community conversation” engaging the consulting firm Bank of IDEAS to develop a community strategy to guide and assist in achieving this objective. From this process the Board, assisted by a community development group, will develop a comprehensive strategy to guide the Board and the community in achieving the identified objectives. Peter Kenyon from Bank of IDEAS and Denis Pontin facilitated the conversation and brought a huge amount of energy to the program. Over 10 days Peter and Denis conducted over 46 different focus groups and meetings with 530 participants including 250 different people, an amazing commitment from the community. 3.29 Enhancing the Board’s financial performance and ensuring that budget processes are transparent,

strategic and responsive For 2009/10 the Board developed annual budget parameters and exhibited these to the community for comment. The Board also developed and adopted an Operations Plan for 2009/10 as a basis for the Annual Budget and Fees and Charges. The Board reviews the Annual Budget on a quarterly basis, endorsing amendments to the Budget where the Board is successful in receiving additional external grant funds, or where savings were identified in the Expenditure Budget. The Board also commenced development of a discussion paper to look at a number of options for developing a sustainable and equitable revenue model to fund current and future programs and secure long term funding for environmental programs, and development and maintenance works in the Island’s Permanent Park Preserve.

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3.30 Implementing an efficient, effective and comprehensive risk management and internal control

framework At the December meeting the Board endorsed a Risk Management Policy and Procedures Manual to identify and mitigate risk exposures of the Board. The risk management policy set out in these documents is intended to help ensure identified risks are managed systematically, efficiently and effectively. The Board’s risk management policies and procedures are based on the Australian/New Zealand Risk Management Standard, and so are consistent in their approach and methodology. The procedures establish consistent practices in managing risk have been developed to provide guidance to staff on implementation of the policy. The procedure outlines the seven key steps in the LHIB risk management process, including risk identification, analysis, evaluation and treatment, and the various management and staff accountabilities. The procedures effectively address the actions raised by the Board’s internal auditors, PricewaterhouseCoopers (PwC) in the 2007 audit. 3.31 Provide relevant and timely policy and other advice to Government on matters affecting the

management of the Island During the reporting period the Minister for Climate Change and the Environment was provided with copies of each Board meeting held. In addition, the Board’s Administration provided the Minister with a quarterly briefing on matters of interest and regular briefings on current major projects including the feasibility of eradicating rodents from the Island. In 2009/10 the Board dealt with all matters requiring action on behalf of the Minister effectively and within the required deadlines. 3.32 Compliance with the LHIB Code of Conduct is regularly monitored and breaches addressed quickly

and effectively In September 2009 the Board adopted a revised Code of Conduct based on the model 2008 Local Government Code of Conduct prescribed under the Local Government Act 1993. The June 2008 version has been updated to provide guidance on the handling and disclosure of developer contributors, disclosure of non-pecuniary interests and procedures for complaint handling for breaches of the Code. The Board’s revised Code of Conduct contains all of the mandatory provisions of the Model Code – June 2008 issued by the Department of Local Government. The Code is comprised of three parts:

Context – this part of the Code is explanatory and does not contain enforceable standards. It establishes the Code’s purpose and the principles used to interpret it. It also provides some information that can be used as a guide to making ethical decision.

Standards of Conduct – this part of the Code sets out the conduct obligations of Board officials. These are the enforceable standards of conduct.

Procedures – this part of the Code contain the complaint handling process, complaints assessment criteria and the operating guidelines for the conduct of the review committee / reviewer and should be used to guide the management of complaints about breaches of the Code of Conduct.

Board members, members of staff of the Board, members of Board committees, and delegates of the Board must comply with the applicable provisions of the Board’s code of conduct in carrying out their functions as Board officials.

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KEY RESULT AREA: COMMUNITY WELL-BEING & HEALTH CORPORATE OBJECTIVE: To enhance the wellbeing and welfare of individuals and the Island’s community by providing social, community and economic services, programs and facilities that develop, support and safeguard the well-being and health of current and future communities

In this Chapter 3.33 Investing in programs and projects which build local skills, capacity and employment

opportunities 3.34 Developing partnerships with other organisations which further the Board’s objectives and

provide an overall benefit to the Island 3.35 Develop programs and projects which protect and enhance public health 3.36 Developing and implementing a ground water management strategy to protect and

enhance social and economic services provided by groundwater

Santa Claus arriving at Lord Howe Island

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3.33 Investing in programs and projects which build local skills, capacity and employment opportunities During the reporting period the Board continued to offer scholarships under the Young Islander University Scholarship Program. In 2009/10 the Board offered scholarships valued at up to $5,000 per annum for young Islanders undertaking tertiary studies on the mainland. The Board wishes to build self-sufficiency and create opportunities within the local community by supporting young Islanders in their tertiary studies and to return to the Island to contribute to its social, environmental and economic life. This year’s recipient of the scholarship, Ms Courtney Turner, is undertaking a Bachelor of Animal Science and Veterinary Bioscience at Sydney University. 3.34 Developing partnerships with other organisations which further the Board’s objectives and provide

an overall benefit to the Island In 2009/10 the Board commenced negotiations with Port Macquarie Hastings Council (PMHC) to create a strategic alliance to strengthen economic, operational and social cooperation between the two organisations. PMHC manages an area with over 70,000 residents and an annual budget of $120 million. The Council has extensive resources and has recently provided assistance to the Board in establishing new service contracts such as waste management. The relocation of the Island’s shipping service from the Clarence region to Port Macquarie has increased the existing business, tourism and political links between the region and Lord Howe Island. PMHC estimates that the commercial wharf will be worth at least $22.3 million annually to their regional economy, $12 million directly and about $10.3 million indirectly. The finalisation of the alliance agreement will enable the Board to access the extensive resources and expertise of PMHC and further enhance the existing links between Lord Howe Island and the Port Macquarie region. The Board continues to utilise the resources provided by the Department of Environment, Climate Change and Water on a contract arrangement including Legal Services and environmental health staff for food safety inspections. 3.35 Develop programs and projects which protect and enhance public health The latest round of food safety inspections by the Board‘s visiting Senior Environmental Health Officer were completed in late November 2009. A training seminar was also provided for interested businesses. The inspections highlighted the following:

A high degree of cooperation between the inspector and businesses

A significant increase in compliance with the Food Safety Act 2003 with a more than 50% reduction in non compliances observed.

A shift in non compliances from structural / fit-out issues to behavioural issues e.g. food handling practices associated with seasonal itinerant staff.

Food retail businesses are to be congratulated for this positive result. An ongoing commitment is required from both proprietors and staff to maintain the current high standards of food safety on the Island. 3.36 Developing and implementing a ground water management strategy to protect and enhance social

and economic services provided by groundwater The Board recognises that septic tank effluent represents a threat to public health and the Island’s World Heritage Values. To mitigate the impact of septic tank effluent the Board has resolved to have all septic tanks removed or upgraded by 2013. During the May 2008 Board meeting it was resolved that the Lord Howe Island Wastewater Management Committee (LHIWMC) be formed to undertake a risk/cost benefit analysis of proposed options, finalise options and the implementation strategy for final long term sewerage management on Lord Howe Island. The Board’s appointed contractor, Worley Parsons, have now completed preliminary investigations based on statutes and guidelines developed in similar situations on the mainland. These show that due to the relatively high rainfall on the Island substantial storage is required if effluent irrigation only occurred when there was an identified soil moisture

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deficit in any potential or existing irrigation area. This storage would be costly and potentially could have an adverse visual impact. The Board also contracted a specialist, Agsol, to undertake an assessment of the Island’s soils to determine irrigation suitability and storage requirements. A draft report has been received and has assessed the properties of the soils in the developed parts of Lord Howe Island and the suitability of the soils for beneficial irrigation and for effluent disposal The final draft of the LHI Wastewater Management Report is currently being finalised by the contractor and will be distributed to the committee in the near future.

4. STATUTORY REPORTING

i) Transfer and Subletting of Perpetual Leases to Non-Islanders under the Lord Howe Island Act 1953 (the Act) Under the terms of Section 36A of the Act, the Board is required to include in its Annual Report, particulars of any transfers and subletting of leases to persons other than Islanders within the meaning of the Act. During the reporting period no leases were transferred to non-Islanders under the Lord Howe Island Act 1953. ii) Granting of Perpetual Leases Leases in perpetuity for the purpose of residence may be granted by the Minister to Islanders as defined under the Act. During the reporting period no new Perpetual Leases were granted to Islanders by the Minister for residential development. iii) Funds Granted to Non-Government Community Organisations During the reporting period, the following funds were granted by the Board to non-government community organisations:

Community Group 2009/10 Allocation $

Purpose

Lord Howe Island Tourist Association 42,000 Tourism support

Lord Howe Island Golf Club 8,500 Improvements to the Clubhouse

Lord Howe Island Bowling Club 1,500 Event sponsorship and promotion

Lord Howe Island Radio Station 2,500 Ongoing station operations and purchase of equipment

Lord Howe Island Museum 13,770 Upgrade Museum website and employment of an archivist

Lord Howe Island Aquatic Club 3,000 Installation of a wind sock on Blackburn island and building alterations

Seventh Day Adventist Church 3,000 Funding support for child activities

iv) Legislative Changes to the Lord Howe Island Act 1953 During the reporting period no changes were made to the Lord Howe Island Act 1953. The Minister, through the Department of Environment, Climate Change and Water, commenced a review of the Act to evaluate the impact of amendments made in 2004 and it is anticipated that this process will be completed in 2011. v) Research and Development Lord Howe Island is a hot spot of endemism and species extinction. The Island is home to a unique array of plants and animals, many of which are threatened and found nowhere else in the world. The Island is a World Heritage area with global environmental significance, and NSW and Australian governments have local and international obligations to manage effectively the Island’s substantial world renowned natural values. The Board supports research priorities contained within the Lord Howe Island Biodiversity Management Plan and during the reporting period sponsored the following studies.

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The Board supported the Imperial College London, Royal Botanic Gardens Kew (UK) and Sheffield University in estimating the germination rate and early survival of Howea forsteriana and H. belmoreana in different environments and identifying the key factors that explain the distribution of these two species across Lord Howe Island. The researchers estimated the effect of light, temperature, water availability, soil pH and type, and seed density on germinations rates of Howea species and hybrids.

The CSIRO also conducted research with Board support on Flesh-footed shearwater Puffinus carneipes plastic ingestion. The study was undertaken to determine the concentration of trace elements, PCBs, and polybrominated diphenyl ether contamination in shearwaters.

The Board also continued research on the introduced masked owl as part of the feasibility study for eradicating rodents on Lord Howe Island. The research undertaken by the Threatened Fauna Ecology Unit (TFEU) of DECCW aims to develop techniques to eradicate the masked owls, a major predator on threatened birds of Lord Howe Island.

In 2009/10 Caring for Our Country funding was also utilised to monitor populations of the Lord Howe Island currawong and its interaction with threatened seabirds.

The TFEU is working in partnership with the Board to eradicate exotic rodents from the Island. Activities carried out in 2009/10 on the Rodent Eradication Program include the assessment of rats and mice to resistance to anticoagulant toxicants and the toxicity of brodifacoum to the endangered Flax Snail.

The Board also provided in-kind support for the use of the Research Facility to the Marine Park Authority to assist in the monitoring of marine pests, the impact of fish feeding at Ned’s Beach and Reef Life Survey monitoring.

vi) Government Information Public Access and Privacy Applications The Board is bound by the provisions of the Government Information (Public Access) Act 2009 and is required to publish a range of public access information. This information includes our disclosure log, details of information not disclosed, detail of documents tabled in Parliament, policy documents, publication guide and a register of government contracts. The Privacy and Personal Information Act 1998 and the Health Records and Information and Privacy Information Act 2002 regulates the way the Board deals with personal and health information and gives people a legally enforceable right of access to their information. Applications can be made to access, or amend, personal information held by the Board that may be in-complete, incorrect, misleading or out-of-date. To reduce the costs associated with the processing of GIPA applications to both the applicant and the Board, and to enhance community understanding of their rights regarding access to information, the Board has informed the community that it will provide access to documents of the nature listed in Section 12, NSW Local Government Act 1993, where such documents are relevant to the Board’s structure and function, to all members of the public upon request. Contact the Chief Executive Officer, Lord Howe Island Board at PO Box 5, Lord Howe Island, NSW 2898, or by e-mail at [email protected]. vii) Disclosure Log The Board is yet to receive any access applications under the Government Information (Public Access) Act 2009 (GIPA Act). No documents have been tabled in Parliament by or on behalf of the Board during the reporting period. viii) Register of Government Contracts The Board has not entered into any contracts to the value of more than $150,000 with private sector bodies during the reporting period. As such contracts are established, the Board will publish these in a register of government contracts. The information will include details on the name of the contractor and any related company involved in the contract, the start date and duration of the contract, the good and services to be provided under the contract, the amount payable to the contractor, any renegotiation provisions, tender methods if applicable, and any payment provisions for operational or maintenance services under the contract.

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The Board's principal place of business is on the Island. Mail may be addressed to the Chief Executive Officer, PO Box 5, Lord Howe Island, NSW 2898, or by e-mail at [email protected].

EFFECT OF THE BOARD'S FUNCTIONS ON MEMBERS OF THE PUBLIC As can be seen from the previous section much of the Board's operation relates to local government functions. The Board's decisions affect Island residents in regard to:

Owner Consent, Development Applications and Construction Certificates.

Fees and charges for any service or commodity and licence fees for tourist and commercial undertakings.

Local government charges including electricity tariffs. Importation of motor vehicles, flora and fauna. Regulations into the gathering and collection of palm seed. Public Health safety including food safety inspections and groundwater management.

ARRANGEMENTS FOR PUBLIC PARTICIPATION IN POLICY FORMULATION Board meetings are held on the Island and are open to the public except for sections dealing with the trading operations, finances, staff matters, lease matters and legal matters. Individuals are permitted to participate in discussion and local community groups are encouraged to make representation on policy issues which are considered by the Board. Elected Island members are available for discussion with Island residents on particular issues which may be taken into consideration by Board members in the decision making process. All amendments to public policy are placed on public exhibition for up to 28 days.

DESCRIPTION OF THE TYPE OF DOCUMENTS HELD BY THE LORD HOWE ISLAND BOARD Most of the Board's documentation is stored as files relating generally to:

Administration - all aspects of internal administration including Board minutes, budget and financial matters, correspondence, internal audit, management information systems and the Board's own agendas and reports. Island residents' land tenure files and palm marketing operation.

Capital Works - all aspects of capital works programs including working papers and plans. Ministerial Parliamentary Enquiries. All correspondence to and from members of Parliament in relation to the Board activities. Staff Matters.

All files relating to recruitment and training of staff and staff members personal files. Staff may have access to their personal files.

Contracts and Tendering Documentation. The Board is a major purchaser of goods and services for its operation. Purchasing and tendering procedures are well documented and are in accordance with the Board's Procurement Policies and Procedures Manual. Many documents in this category contain commercially sensitive matters, though in terms of government policy, the names and prices of successful tenderers are available.

POLICY AND PROCEDURES The policies and procedures of the Board are determined by the Lord Howe Island Act, 1953 and the Lord Howe Island Regulations. Documents generally available are: Lord Howe Island Act $13.20 Lord Howe Island Regulations $10.50 Local Environmental Plan $25.50 These instruments are available from the Board’s office or on-line at www.legislation.nsw.gov.au. The documents are also available from the Government Information Office, Sydney.

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PUBLICATIONS, BROCHURES, PAMPHLETS The Board produces a wide range of publications ranging from brief information sheets to substantial technical reports. Significant publications are listed below. Brochure and Pamphlets Geology Map of the Island Free Exploring Lord Howe Island (walking tracks) Free Birds of L.H.I. Posters $3.30 Natures Sentinels DVD $26.00 Plants of LHI $9.90 Information Sheets Free Statement and Summary of Affairs Free

REPORTS Numerous reports and studies relating to the Island's environment and planning issues are available for inspection at the Administration Office. Extracts may be made by the public on a cost only basis.

INFORMATION ACCESS ARRANGEMENTS Access to Policy Documents Policy documents may be inspected during normal business hours (8.30 am to 4.30 pm Monday to Friday) at the Board's administrative office. Sweeping reforms to New South Wales’ right to information system took effect on 1 July 2010 with the Government Information (Public Access) Act 2009 (GIPA Act) replacing the Freedom of Information Act 1989 (NSW). The reforms are a direct response to the community’s desire for more transparency in government. Access to files The Board's files are not generally available for public inspection. Wherever possible, informal access will be arranged and if copies of documents are required reasonable copying charges will be levied. Where informal access is not possible a Government Information Public Access (GIPA) application should be lodged and GIPA fees will apply. Access to Documents Published by the Board Most of the Board's published documents may be accessed through the Board's administrative office. Business Hours are 8.30 am to 4.30 pm, Monday to Friday. Access to Documents Concerning Personal Affairs Members of the public seeking access to documents about their personal affairs should apply for access under the Government Information (Public Access) Act to the GIPA Coordinator. Staff do not need to use the GIPA Act to access their personal files. A request to access one's personal file should be directed to the Chief Executive Officer. Amendment of Documents about Personal Affairs Members of the public seeking to amend agency documents about their personal affairs should contact the GIPA Coordinator at the Board's administrative office. In most cases a written application will be required in terms of the GIPA Act. Proof of the amendments being requested will also be required - what such proof may be may vary from case to case and should be discussed with the GIPA Coordinator. Staff who seek to amend documents on their personal files should contact the Chief Executive Officer. Staff who to amend documents about their personal affairs which are held by the Board in a location other than their personal file should contact the GIPA Coordinator. ix) Equal Employment Opportunity Statement The following Equal Employment Opportunity statistics disclosure for staff employed under the Crown Employees (Lord Howe Island Board Salaries and Conditions 2009) Award was generated from Workforce Profile data collected using software provided by the Office of the Director of Equal Opportunity in Public Employment.

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A. Trends in the Representation of EEO Groups % of Total Staff

EEO Group Benchmark

or Target 2007 2008 2009 2010

Women 50% 30% 29% 30% 25%

Aboriginal People and Torres Strait Islanders 2% - - - -

People whose first language was not English 20% 6% 6% 7% 5%

People with a disability 12% 7% - 7% 8%

People with a disability requiring work-related adjustment 7% 5.6% - 2.3% 7.5%

B. Trends in the Distribution of EEO Groups

The distribution index is not calculated as the EEO group or non-EEO group numbers are less than 20. x) Equity and Ethnic Affairs Policy Statement Status Report The Board has adopted an Ethnic Affairs Policy Statement (EAPS). The Board is committed to adopting the Government’s principles of cultural diversity and ensuring that people from ethnic communities are an integral part of the social, cultural and economic future of New South Wales. The Board will continue to identify and assess the needs of the community, in particular people from racial, ethnic or ethno-religious minority groups. xi) Staffing The Lord Howe Island Board consists of seven members appointed by the Minister for the Environment. Four are elected Islanders. There is a place designated under the Act for an officer of DECCW. The Chairperson is appointed by the Minister. The Board has a permanent staff establishment of 40.7 with the Chief Executive Officer responsible for the overall day-to-day management and administration. The following employee numbers for staff employed under the Crown Employees (Lord Howe Island Board Salaries and Conditions 2009) Award are based on the annual reference period average Full Time Equivalent (FTE) figures generated from Workforce Profile (WP) data collected on behalf of the Department of Premier and Cabinet: Number of FTE Employees Area Category 2009/10 2008/09 2007/08 2006/07 Administration Snr. Management 2.0 2.0 2.2 2.4 Administration 4.0 4.2 4.2 4.2 Visitor Centre 0.8 0.8 0.8 0.8 Operations Works 14.2 13.0 16.9 15.6 Powerhouse 1.0 1.0 1.0 1.0 Environmental Environment 12 14.1 13.2 14.6 Community Development Public Health 1.0 - - -

Trading Nursery 4.8 5.9 6.2 7.2 Liquor Store 1.2 1.4 1.1 1.4 Total 41 42.4 45.6 47.2

The Board’s staff team deliver the following services through management sections and supporting units. Administration This area is responsible for:

General administration of the Board including trading operations, business management practices, services, correspondence, records and reporting on changing conditions affecting the Island.

Financial management including budget forecasting and monitoring and control of funds. Human Resource Management including salaries, industrial relations and staff development.

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All local government functions including the processing of Development and Building Applications and management of appropriate planning controls.

Management of land tenure including leases in perpetuity for residence. Maintenance, development and implementation of information technology. Maintenance of functions of other government departments including the Passports Office, and

Registry of Births, Deaths and Marriages. Infrastructure and Engineering Services This area is responsible for provision of local government functions which include:

Road construction and maintenance. Servicing recreation and tourist facilities. Generally promoting and preserving public health, safety and convenience. Operate and maintain a safe and efficient airport in compliance with CASA regulations. Management of generation and reticulation of electricity. Construction and maintenance of Board and community buildings.

Other service operations include: Maintenance of moorings and the safety of vessels in the lagoon. Control and maintenance of the Island wharf. Maintenance of waste disposal areas.

Environment The Board is responsible for the protection of the environment and conservation of flora and fauna. The Board is also responsible for the day to day management and protection of the World Heritage Values of the Lord Howe Island Group. The functions of this unit are:

Management of the Lord Howe Island Permanent Park Preserve. Develop and implement a plan for the environmental management of the Lord Howe Island Region. Monitor and report on the status of the Island's World Heritage Values and obligations. Implementation and supervision of environmental works programs. Public interpretation and education. Protection and conservation of fauna and flora. Monitor flora and fauna populations. Identify and prioritise research programs. Monitor and control feral animal species.

Trading The Board has two trading operations. Kentia Palm Industry The Lord Howe Island Act provides for the regulation of the Kentia Palm Industry. The Board operates a Nursery on the Island for the germination of Kentia palm seeds. The functions of the Nursery management include:

Receiving of palm seed from local collectors. Germination of palms. Organising sales of palm seedlings both locally and abroad. Packing and shipping to domestic and overseas buyers. Producing palms and other native plants for reforestation.

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Liquor Trading The Board controls the sale and distribution of liquor on Lord Howe Island. The functions of the Board's Liquor Store are:

Ordering of all stock. Promotion and sale of liquor. Stock control.

Community Development The Board’s role in Community Development is to enhance the wellbeing and health of the Island community. Through this unit the Board invests in programs and projects that protect and enhance public health and facilitates the building of local skills, capacity and employment opportunities. The functions of the Community Development Unit are:

Undertaking periodic inspection of premises for compliance with the Food Safety Act. Developing and supporting the Community Strategy. Collection of mosquito vectoring data and groundwater monitoring. Septic and waste water watering compliance monitoring. Administration of the Annual Islander Scholarship Program. Administration of the Community Grants Program.

xii) Consultants The Board paid the sum of $199,566 during the current financial year to various technical consultants. These payments were made for the following purposes. Consultants engaged at a cost of $30,000 or greater:

Consultant Project Actual Costs Manta Consulting Town Planning Consultancy Services $54,027 Dept of Environment & Climate Change Legal Advice $30,000

Engagements costing less than $30,000 categorised by the nature of the consultancy: Nature of Consultancy Number of Engagements Total Cost Engineering 1 $1,500 Quality Assurance 1 $2,093 Environmental 6 $106,920 Aerodrome Operation Certification 2 5,026

xiii) Occupational Health & Safety and Risk Management The Board aims to achieve the targets set out in the NSW Workplace Health and Safety Strategy. The Workplace Injuries chart shows that claims for 2009/10 have decreased by 2 incidents (18.9%) over the corresponding period for 2008/09. Whilst a decrease in injuries over the previous reporting is a good result, the Board will continue to reinforce the requirement for proper job safety analysis and risks assessment of worksites to be carried out prior to commencing project works.

Workplace Injuries for 2009/10

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During the reporting period the Board re-emphasised the requirement for all staff to adopt safe work practices and use Personal Protective Equipment provided when carrying out their duties. Contemporary preventative and case management initiatives continue to be implemented across the Board to prevent injuries and contain claims costs. The chart below, “Activity by Department”, highlights the type of activity being carried out by the claimant by Service Unit for the reporting period. The number of incidents occurring in the track maintenance activity is indicative of the arduous and difficult terrain that the maintenance crews sometimes operate in with all injuries relating to slips / trips causing sprains and soft tissue bruising.

During the reporting period the Board was not prosecuted under the Occupational Health and Safety Act 2000 for any incident during the reporting period. xiv) Analysis of Financial Performance The Board completed the financial year ended 30th June 2010 with a reported net operating loss from ordinary Activities of $1,499,041. This was against a budgeted net operating loss of $1,312,431. The net operating result for the previous year was a loss of $649,031. For 2009/10 the Board as required to make an unbudgeted provision for superannuation liabilities in excess of $270,000 based on the actuarial assessment of employee superannuation funds. In respect to the adjustments for superannuation, the Board is an out of sector budget agency and is required to make provision for the actuarial adjustments in the Statement of Financial Position (see also Note 8 of the Financial Statements). The adjustments for this year reflect the poor performance of the superannuation funds in the short term with the reserve account balances falling short of the accrued liabilities. For other government agencies, these liabilities are assumed by the Crown. During the reporting period the Board also revalued Land and Buildings, Airport and Marine Facilities Asset classes resulting in a net increment to the Asset Revaluation Reserve of $16,746,257. A copy of the Statement of Financial Position, Changes in Equity, Comprehensive Income and Cash Flows, together with the full set of notes and policies, are provided for information as part of the financial reports. Comparison of result with previous year The variation in the result for the year compared to the previous period is attributed to the following factors.

Variance in Operating Result - 2008/09 to 2009/10 Budget Component $ Variance$

Decrease in funds from Trading Operations # (108,448)

Increase in funds from Service Operations (309,118)

Decrease in State Government funding (189,683)

Decrease in Commonwealth funding (242,761)

Total change in operating result (850,010)

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Commonwealth subsidies for World Heritage and Natural Heritage Trust programs decreased from $432,720 during the year to $294,727 to continue weed eradication programs and salary costs for the Board’s Environment / World Heritage Officer. The Board also received $36,000 from Department of Infrastructure, Transport, Regional Development and Local Government for roads maintenance and construction under the Roads to Recovery. NSW Treasury provided a Community Service Obligation payment of $1.407 million to supplement costs for electricity generation, maintenance of the Island’s road network and salary costs for senior management of the Board. Total trading operations generated a surplus of $124,538 compared to a surplus of $232,986 in the previous year. The Palm Nursery operations showed an operating deficit of $198,448 compared to an operating deficit of $95,448 for the previous year. The Nursery has endured two consecutive years of lower than average seed collections, resulting in a shortage in seedling stock for sale to customers. Seedling sales for the year totalled approximately 806,550 compared to a sales projection of 1.325 million seedlings for 2009/10. Total income from Nursery operations was $564,907, down from $585,871 for last year, with operating expenses for the period totalling $763,355. This expenditure includes production costs of $38,418 for endemic native plants that are used exclusively by the Board in rehabilitation and revegetation works on the Island and payments for the collection of 704 bushels of palm seed. Nursery seed and seedling stocks on hand at 30 June 2010 are valued as biological assets under the accounting standard AASB 141 – Agriculture. Their fair value was determined as $479,042 compared to $462,706 for the previous year. Palm plantations were valued at $200,533 compared to $70,344 in 2008/09. The valuation calculates the future production from palm plantations using figures based on a five year average of seed collected up to and including the current year. The five year average used for 2010 was 547 bushels (539 bushels in 2008/09) with actual seed collected totalling 704 bushels, up from 400 bushels in 2008/09. The Liquor Store returned a net surplus of $322,986 compared to the prior year result of $328,534. Sales for the Liquor Store operation increased by $7,990 from $1,515,988 to $1,523,978 with operating costs also increasing by $13,538 from $1,187,454 to $1,200,992 in 2010. Liquor Stock on hand increased by $22,458 from $209,242 to $231,699 during the reporting period. Excluding government grants and subsidies, the Board’s Service operations recorded a deficit for the year of $3,732,646, an increase in expenditure of $309,118 over the previous period. Available Cash Reserves The Board recorded a decrease in cash reserves of $1.423 million dollars (budgeted decrease of $924,181), inclusive of payments for capital equipment totalling $675,934, with a closing cash balance of $4.035 million. There are a number of factors that have contributed to the increased cash outflows including:

An increase of $430,094 in Accounts Receivable balances including $301,000 outstanding from the Treasury Managed Fund for the Powerhouse fire damage.

Reduced cash inflows of $80,195 from the Nursery not meeting its revenue budget of $684,000 due to a lack of seedling stock for sale.

A decrease in the balance of Creditors of $133,909 (this means that the Board has paid its creditors for services provided and reduced liabilities in the Statement of Financial Position).

Total cash reserves compared to the previous period are detailed below.

Available Cash 30 June 2009 $

30 June 2010 $

Variance $

Core Board Activities 5,105,988 3,835,483 (1,270,505)

Special Purpose project funding 452,341 299,723 (152,618)

Total Available Cash 5,558,329 4,135,206 (1,423,123)

The balance of Special Purpose project funding at 30 June 2010 is held for programs from the following organisations.

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Organisation $

NSW Treasury 110,000

Department of Environment and Climate Change 89,587

NSW Environment Trust 4,653

Natural Heritage Trust 49,559

Other 45,924

Total 299,723

Australian Accounting Standard AASB 141 – Agriculture For the year ended 30 June 2010, application of the Standard produced a non-cash increment of $146,525, consisting of an increase of $130,189 in the value of palm plantation assets and an increase in the value of seed and plant stocks on hand totalling $16,366. Revaluation of Assets In accordance with NSW Treasury Policy and Guidelines Paper “Valuation of Physical Non-Current Assets at Fair Value” TPP 07-1, the Board is required to revalue its assets every five years to ensure that the carrying amount of each asset in the class does not differ materially from its fair value at reporting date. During the reporting period the Board revalued Land and Buildings, Airport and Marine Facilities Asset classes resulting in a net increment to the Asset Revaluation Reserve of $16,746,257. The Board is of the opinion that the written down cost of asset classes, Land, Buildings, Marine and Airport Facilities, Hospital Equipment, Office Equipment, Motor Vehicles, Mooring Facilities, Roads and Plant and Equipment is a fair approximation of their Fair Values. Additions to fixed assets are included at cost of acquisition, or value as determined by government authorities. Capital Expenditure The Board’s budget provided for capital expenditure of $759,600 including purchase and improvements to plant and equipment, infrastructure and buildings. The Board capitalised expenditure to 30 June 2010 totalling $807,265 and this was allocated to the following programs.

Capital Expenditure Program $

Airport 33,780

Electricity Supply 13,510

Motor Vehicles 146,291

Office Equipment 21,388

Plant and Equipment 135,874

Roadworks 343,499

Total 807,265

The major expenditures for the year included the purchase of motor vehicles, including replacement of a 4 tonne tipper truck, road reseal works carried out using Roads to Recovery funding and installation of solar powered emergency lighting at the Island’s airport. Departmental Performance – Service Activities Airport The operation of the Airport function returned a net operating surplus of $357,097 for the year compared to an operating surplus of $244,111 for the previous period. During the reporting period the Board allocated revenue from

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Airport Passenger Levies to the Airport Service Activity in accordance with an operating agreement negotiated with Qantas and in accord with Maximum Allowable Revenue guidelines issued by the ACCC. Electricity Supply Electricity operations incurred a net operating loss of $351,180 (excluding grants and subsidies) for the period compared to a loss of $553,313 for the 2008/09 reporting period. Electricity sales to consumers increased from $571,821 in 2008/09 to $638,693 in the 2009/10 period. Diesel fuel costs for electricity production totalled $643,350 in 2009/10, a decrease of $103,785 from 2008/09 due to continued improvements in fuel efficiency from the new generating units, this being their first full year in operation following installation in September 2008. NSW Treasury provided a Community Service Obligation subsidy of $803,315 to help offset the high cost of generating electricity on the Island. Electricity Generation The Board continues to operate the Island’s power generation plant and reticulate electricity on the Island. The State Government provides a Community Service Obligation payment to the Board which assists in meeting the differences between the cost of electricity supply and revenues raised from consumer charges. The Board currently services 273 customer installations. Generation Plant – Three fuel efficient 4 stroke diesel MTU Detroit generators are installed in the powerhouse. Each generating unit has a capacity of 300 kW. This provides a firm capacity of 600 kW whilst allowing for any single unit being out of service. These fuel efficient diesel generators continue to provide substantial fuel savings since their installation in 2008. One 424 kW stand alone MTU Detroit diesel generator is installed in the powerhouse for standby purposes. Total Generation 2,284,010 kWh – 2009 / 2010 2,321,280 – 2008 / 2009 Total Fuel Use 582,100 litres – 2009 / 2010 606,900 litres – 2008 / 2009 Maximum Demand 451 kW 2009 / 2010 533 kW – 2008 / 2009 As a result of the installation of the 3 new fuel efficient diesel generators the powerhouse fuel efficiency continues to improve. Fuel efficiency for the year 08/09 was 3.82 kWH / litre compared to 3.92 kWH / litre in 09/10. Photovoltaic Array 99 panels with an area of 64m² and an output of 8 kWatts. Total Generation 5,219 kWh – 2009 / 2010 Maximum daily Output 24.3 kWatts Average daily output 14.29 kWh The MTU Detroit standby diesel generator continued to provide backup supply in cases of major breakdown or during maintenance of the main generation equipment. One distribution substation was upgraded following a transformer replacement due to increased localized demand. The upgrade to this substation provides a 33% increase in electrical capacity to the customers serviced by this equipment. Upgrades to street lighting, and distribution pillars were undertaken during the year. These upgrades were designed to provide an increase in electrical supply quality and reliability. The street lighting upgrades have provided improved lighting amenity for both tourists and vehicle drivers. Portable electrical data recording equipment continues to enable on-going distribution system monitoring to be undertaken. The information obtained from this monitoring program provides data that is used to improve both system load sharing and system power quality and also the planning of proposed renewable energy installation on the Island. A fire occurred at the powerhouse on November 14th 2009. This resulted in substantial damage to the roof and wall structures of the building. This damage resulted in the installation of 3 temporary standby generators on the island whilst emergency repairs were undertaken. The powerhouse is currently operating at full capacity. Planning is presently underway for the repair / replacement of the damaged structure.

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Hospital Services Net expenditure for the operation of the Gower Wilson Memorial Hospital was $51,972 compared to the previous year’s expenditure of $61,403. The major expenditure items for this service are depreciation of the hospital buildings totalling $34,984 and grounds and building maintenance of $15,625 for 2009/10. Environmental Activities For 2009/10 the Board’s Environment section continued its weed eradication, rehabilitation and revegetation programs with reduced financial support from grants and subsidies. The Board also invested in the continuation of a feasibility study for the proposed eradication of rodents from Lord Howe Island which is being carried out by scientists from the Department of Environment and Climate Change. A net operating deficit of $922,303 was realised for 2009/10 compared to an operating deficit of $748,243 for the previous period. The Board is concerned that a small community such as Lord Howe Island is required to underwrite long term environmental programs in a World Heritage listed area and is endeavouring to secure long term environmental funding from the State and Commonwealth governments. Local Authority Services Local authority services incorporates the functions of waste, parks and visitor facilities, wharf management, communication facilities, the Island’s road network and other community services. Waste Services The provision of waste services on Lord Howe Island incurred an operating loss of $213,424 compared to a loss of $171,157 for the previous reporting period. Revenue collected from waste fees for residents and commercial businesses increased by $24,080 whilst operating expenditures increased by $83,863 due to increased waste volumes being delivered to the Waste Management Facility. Waste fees to residents and commercial operators recovered 49.9% of total operating costs, including depreciation, in comparison to 48.8% for the previous year. Parks and Visitor Facilities Parks and Visitor Facilities incurred an operating deficit of $131,035 for 2009/10 compared to an operating deficit of $127,731 for the previous year. The Board incurred increased costs in servicing and cleaning BBQ facilities, including the provision of gas and wood free of charge, and general maintenance of visitor facilities. Wharf Activities Wharf operations generated an operating surplus of $47,057 for the reporting period compared to a net surplus of $66,005 for 2008/09. The Board’s revenue from wharfage decreased by $22,795 due to a reduction in the number of voyages made in the reporting period. Television and Radio Facilities For 2009/10 the Board incurred an operating loss of $16,769 being depreciation, electricity and maintenance costs for the radio transmission sites. Roads The Board incurred an operating loss of $190,510 in maintaining the Island’s road network compared to a loss of $109,181 in the previous reporting period. The Board received a community service obligation subsidy of $78,105 from NSW Treasury and $36,000 from Roads to Recovery programmes for road maintenance and construction on Lord Howe Island. Expenditure totalled $304,615 for the period with depreciation expense of $224,416 and maintenance costs totalling $80,200. This includes costs for pavement and drainage maintenance, road verge mowing and sealing of the jetty cargo handling area. General Local Authority Services General local authority activities, including building maintenance, asset management works and plant and equipment maintenance, incurred an operating loss of $606,047 compared to a loss of $275,863 for the previous period.

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The major cost overrun is for works associated in temporary repairs to the Powerhouse building superstructure following the fire. The majority of these costs will be covered by the Board’s insurance policies with NSW Treasury Managed Fund and will be recouped in 2010/11. Land Administration and Planning An operating deficit of $16,463 was generated for this activity compared to a prior year operating surplus of $41,592. The Board generated revenue totalling $127,142 from lease rental fees, development application fees and Permissive Occupancy rentals. Corporate Governance and Support Corporate Governance and Support activities incurred an operating loss of $722,371 in comparison to a loss of $501,427 for the previous period. The operating result is slightly higher than budget due to an increase in superannuation provisions with the Board recognising actuarial losses of $271,988 through the Statement of Comprehensive Income. Community Well-Being and Health This program incurred an operating loss of $156,473 with the Board investing funds in the development of a food safety inspection and monitoring regime to comply with its regulatory role as prescribed by the Food Safety Act 2003. The Board also sponsored a “community conversation” to guide the development of a Community Strategy 2010 - 2015. Over 250 of the Islands resident population of 390 persons participated in the focus groups with nominations now being called for the Community Development Group to progress agreed actions of the Plan. Summary of performance in key result areas A summary of the operating performance of all activities, grouped under the Key Result Areas in the Board’s Corporate Plan is shown in the following table. The table details actual to budget performance and a comparison of the performance for the previous year and includes all grants and subsidies allocated to each function as well as all project expenditures.

Performance by Key Result Area 1 – including revenue from Grants and Subsidies

Key Result Area / Function

Actual 2009/10

Surplus / (Loss)

$

Budget 2009/10

Surplus / (Loss)

$

Actual 2008/09

Surplus / (Loss)

$ 1. Natural Environment & Cultural Heritage Environment General and Permanent Park Preserve (381,692) (573,531) 27, 721 2. Trading Activities Liquor Store 322,986 281,468 328, 535 Nursery (198,449) (43,549) (95,548) Sub Total for Trading Activities 124,538 237,919 232,986 3. Public Utilities, Services & Infrastructure Electricity 452,135 373,946 238, 502 Waste Management (213,424) (125,819) (171,157) Asset Management (1,111) (87,500) (8,129) Airport 363,988 437,323 276,273 Road Works (190,511) (217,703) (109,181) Wharf 47,057 (28,306) 66,005 Television / Radio (16,769) (15,576) (34,467) Buildings (215,009) (96,480) (70,532) Visitor Facilities (131,035) (113,455) (127,731) Local Authority General (389,927) (326,572) (275,863)

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Key Result Area / Function

Actual 2009/10

Surplus / (Loss)

$

Budget 2009/10

Surplus / (Loss)

$

Actual 2008/09

Surplus / (Loss)

$ Hospital (51,972) (55,714) (61,403) Sub Total for Public Utilities, Services & Infrastructure (346,579) (255,856) (277,683) 4. Land Administration & Environmental Planning Land Administration & Planning (16,463) 795 51, 592 5. Corporate Governance & Support Corporate Governance (113,751) (227,872) (31,266) Administration (608,620) (185,956) (470,161) Sub Total for Corporate Governance & Support (722,371) (413,828) (501,427) 6. Community Well-Being and Health Public Health (126,243) (220,430) (167,134) Community Well-Being (30,230) (87,500) (5,087) Sub Total for Community Well- Being and Health (156,473) (307,930) (172,220) Total all Key Result Areas (1,499,041) (1,312,431) (649,031)

xv) Cost of Printing & Report Availability Total external costs incurred in the production of this report were $2,500. Hard copies or electronic versions of current reports are available on request from the Board’s Administration Office.

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LORD HOWE ISLAND BOARD FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30TH JUNE 2010

Pursuant to Section 41C (1B) and (1C) of the Public Finance and Audit Act, 1983, and in accordance with a resolution of the members of the Lord Howe Island Board, we declare on behalf of the Board that in our opinion:- 1. The accompanying financial statements exhibit a true and fair view of the financial position of the Lord Howe

Island Board as at 30th June 2010 and transactions for the year then ended. 2. The statements have been prepared in accordance with the provisions of the Public Finance and Audit Act

1983, the Public Finance and Audit Regulation 2010, and the Treasurer's Directions. Further, we are not aware of any circumstances that would render any particulars included in the financial statements to be misleading or inaccurate.

Mr Stan Fenton Mr Des Thompson Deputy Chairperson Elected Member

Dated: 11 October 2010

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LORD HOWE ISLAND BOARD STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2010

2010 2009 Note $ $ CURRENT ASSETS Cash and Cash Equivalents 13.1 4,135,206 5,558,329 Receivables 3.1 1,238,192 808,098 Inventories 3.2 423,057 435,062 Biological Assets 5.2 479,042 462,706 TOTAL CURRENT ASSETS 6,275,497 7,264,195 NON-CURRENT ASSETS Other Assets 8 49,077 46,269 Biological Assets 5.2 200,533 70,345 Property, Plant & Equipment 4.1 43,224,923 26,926,772 Intangible Assets 4.5 151 1,337 Capital Works in Progress 4.4 83,157 214,848 TOTAL NON-CURRENT ASSETS 43,557,841 27,259,571 TOTAL ASSETS 49,833,338 34,523,766 CURRENT LIABILITIES Payables 6 562,573 696,482 Other Liabilities 7 8,549 1,100 Provisions 9 735,885 826,860 TOTAL CURRENT LIABILITIES 1,307,007 1,524,442 NON-CURRENT LIABILITIES Provisions 8, 9 492,447 212,656 TOTAL NON-CURRENT LIABILITIES 492,447 212,656 TOTAL LIABILITIES 1,799,454 1,737,098 NET ASSETS 48,033,884 32,786,668 EQUITY Accumulated Funds 10 6,952,350 8,451,391 Reserves 10 41,081,534 24,335,277 TOTAL EQUITY AT END OF THE PERIOD 48,033,084 32,786,668

The accompanying notes form part of these financial reports.

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LORD HOWE ISLAND BOARD

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2010

Notes Accumulated Funds

Asset Revaluation

Reserve

Total

$ $ $ BALANCE AS AT 1 JULY 2009 8,451,391 24,335,277 32,786,668

Surplus / (Deficit) for the Year (1,499,041) 0 (1,499,041) Other Comprehensive Income

Net Increase / (Decrease) in Asset Revaluation Reserve

4, 10 0 16,746,257 16,746,257

Total Comprehensive Income for the Year (1,499,041) 16,746,257 15,247,216 BALANCE AS AT 30 JUNE 2010 6,952,350 41,081,534 48,033,884 BALANCE AS AT 1 JULY 2008 9,100,423 24,335,277 33,435,700

Surplus / (Deficit) for the Year (649,031) 0 (649,031) Other Comprehensive Income

Net Increase / (Decrease) in Asset Revaluation Reserve

0 0 0

Total Comprehensive Income for the Year (649,031) 0 (649,031) BALANCE AS AT 30 JUNE 2009 8,451,391 24,335,277 32,786,668


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LORD HOWE ISLAND BOARD STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2010

Notes 2010 2009 $ $ ORDINARY ACTIVITIES Trading Operations Nursery Sales 2.1.1 418,382 677,282 Less Deemed Cost of Sales 2.1.1 (265,194) (395,733) Add Net Increment in Net Market Value at Reporting Date 2.1.1 411,719 304,322 Net Revenue from Nursery Operations Adjusted for AASB 141 Agriculture 2.1.1 564,907 585,871 Liquor Store Operations 2.1 1,523,978 1,515,988 Total Revenue from Trading Operations 2.1 2,088,885 2,101,859 Expenditure from Trading Operations 2.1 (1,964,347) (1,868,873) NET RESULT FROM TRADING OPERATIONS 124,538 232,986 Service Operations Revenue from Service Operations 2.2 3,537,925 3,253,399 Expenditure from Service Operations 2.2 (7,270,571) (6,676,927) NET RESULT FROM SERVICE OPERATIONS (3,732,646) (3,423,528) FINANCIAL ASSISTANCE FROM GOVERNMENT Government Grants & Subsidies 2.3 2,109,067 2,541,511 NET SURPLUS/(DEFICIENCY) FROM ORDINARY ACTIVITIES (1,499,041) (649,031) Other Comprehensive Income Net increase / (decrease) in Property, Plant and Equipment Asset Revaluation Reserve

1 (j) 16,746,257 0

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 15,247,216 (649,031)


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STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2010

2010 2009

$ $ Notes Inflows Inflows

(Outflows) (Outflows) CASHFLOW FROM OPERATING ACTIVITIES Cashflow from Trading Operations Receipts from Customers 1,958,695 2,193,270 Payments to Suppliers & Employees (1,890,295) (1,854,246) Net Cash Provided by Trading Operations 68,400 339,024 Cashflow from Service Operations User Charges and other Receipts 2,865,639 3,314,897 Payments to Suppliers & Employees (6,024,168) (4,536,476) Interest Earned 227,146 287,817 Net Cash Provided by Service Operations (2,931,383) (933,762) Cashflow from Government Receipts from State Government 1,661,246 1,850,929 Receipts from Commonwealth Government 447,821 690,582 Net Cash Provided by Government 2,109,067 2,541,511 Net Cash Provided by Operating Activities 13.2 (753,916) 1,946,773 CASHFLOW FROM INVESTING ACTIVITIES Payment for Purchase of Capital Items (675,934) (1,351,954) Proceeds from Sale of Plant & Equipment 6,727 220,423 Net Cash Provided/(Used) by Investing Activities (669,207) (1,131,531) Net Increase (Decrease) in Cash Held (1,423,123) 815,242 Cash and Cash Equivalents at beginning of period 5,558,329 4,743,087 Cash and Cash Equivalents at end of period 13.1 4,135,206 5,558,329


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NOTES TO AND FORMING PART OF THE FINANCIAL REPORTS FOR THE YEAR ENDED 30 JUNE 2010

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Reporting Entity The Lord Howe Island Board (The Board) is a statutory body established under the provisions of the Lord Howe Island Act 1953. The Board's primary function is administering the affairs of Lord Howe Island. The Lord Howe Island Board is a NSW Government agency, a Not-for-Profit entity and has no cash generating units. This financial report for the year ended 30 June 2010 has been authorised for issue by the Lord Howe Island Board on 11 October 2010. (b) Basis of Preparation. The Board’s financial report is a general-purpose financial report, which has been prepared in accordance with:

Applicable Australian Accounting Standards (which include Australian Accounting Interpretations);

The requirements of the Public Finance and Audit Act (1983) and Regulation. Where there are inconsistencies between the above requirements, the Public Finance and Audit Act and Regulations prevail. Property, plant and equipment and biological assets are measured at fair value. Other financial report items are prepared in accordance with the historical cost convention. Judgements, key assumptions and estimations made by management are disclosed in the relevant notes to the financial report. All amounts are rounded to the nearest dollar and are expressed in Australian currency. (c) Statement of Compliance These financial statements and notes comply with Australian Accounting Standards, which include Australian Accounting Interpretations. (d) Recognition of Income (i) Sale of Goods and Services Revenue from the sales of goods or services comprises revenue from the provision of products or services, i.e. user charges. Income arising from the sale of goods and the provision of services is recognised when:

the Board has passed control of the goods or other assets to the buyer;

the Board controls a right to be compensated for services rendered;

the Board controls a right relating to the consideration payable for the provision of investment assets;

it is probable that the economic benefits comprising the consideration will flow to the Board; and

the amount of the income can be measured reliably. (ii) Grants and Contributions Contributions from other bodies (including Government Grants and Subsidies) are recognised as revenues when the Board obtains control over the assets comprising the contribution. Control over the contribution is usually obtained upon the receipt of cash. (iii) Investment Income Interest revenue is recognised using the effective interest method as set out in AASB 139 Financial

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Instruments: Recognition and Movement. (iv) Operating Leases In accordance with accounting standard AASB 117, revenues from leased premises comprising staff housing and other commercial shops and offices, are recognised in accordance with individual lease arrangements, which generally require 2 weeks rent in advance. 2010 2009 $ $ Gross value of leased assets at reporting date was 3,923,500 3,205,132 Accumulated depreciation was 973,400 1,242,977 Depreciation recognised as an expense for the period was 132,388 128,585 Total rental received from leased premises amounted to 132,914 136,975

There were no lease commitment receivables or contingent rentals recognised as at the reporting date. (e) Personnel Services Board staff are designated as being employed by the Government of NSW in the service of the Crown to provide personnel services to enable the statutory body to exercise its functions. Accounting Standard AASB 119 requires employee entitlements to be recognised as liabilities in the financial statements where there is a present obligation to make payments or to provide certain benefits in the future based on the services rendered by the employees up to the end of the financial year. The Standard requires recognition of future benefits payable to employees in excess of 12 months after the reporting date to be calculated on a net present value basis. However, NSW Treasury (TC 09/04 June 2009) provides that the Board may use either the net present value method or the nominal (short hand) method for calculation of employee benefits on the assumption that the difference between the two methods will not be material. The Board has compared the two methods and chosen the nominal method for recognition of employee benefits as at 30 June 2010. Provision for Long Service Leave and Annual Leave represents the assessed liability for these items as at balance date. The provision for Long Service Leave covers the full accrued Long Service entitlements of employees with five or more year’s service as at 30 June 2010. Under the Board's terms and conditions of employment, sick leave is non-vesting. The Board is of the opinion that total sick leave paid in any one year will not exceed leave entitlements for that year and therefore no liability exists in respect of leave accumulated to balance date. (f) Insurance The Board's insurance activities are conducted through the NSW Treasury Managed Fund Scheme of self-insurance for Government agencies. The expense (premium) is determined by the Fund Manager based on past claim experience. (g) Goods & Services Tax Revenues, expenses and assets are recognised net of the amount of GST, except:

The amount of GST incurred by the agency as a purchaser that is not recoverable from the Australian Taxation Office is recognised as part of the cost of acquisition of an asset or as part of an item of expense; and

Receivables and payables are stated GST inclusive. Cash flows are included in the statement of cash flows on a gross basis. The amount of recoverable GST in respect to cash flows from financing and investing activities is disclosed as operating cash flows. (h) Acquisition of Assets. The cost method of accounting is used for the initial recording of all acquisitions of assets controlled by the Board. Assets acquired at no cost or for nominal consideration are initially recognised at their fair value at

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the date of acquisition. (i) Capitalisation Thresholds From 1 July 2007 the Board adopted a revised threshold for capitalisation of assets, increasing the capitalisation threshold from $1,000 to $5,000. Property, Plant, Equipment and Intangible Assets costing $5,000 and above individually (or forming part of a network costing more than $5,000) are capitalised. All Property, Plant, Equipment and Intangible Assets purchased prior to this date have been retained in the Board’s Asset Register until such time as they have been revalued or written off. (j) Revaluation of Property, Plant and Equipment. Physical non-current assets are valued in accordance with the "Valuation of Physical Non-Current Assets at Fair Value" Policy and Guidelines Paper TPP 07-1. This policy adopts fair value in accordance with AASB 116 Property Plant and Equipment. Property, plant and equipment is measured on an existing use basis, where there are no feasible alternative uses. However, in the limited circumstances where there are feasible alternative uses, assets are valued at their higher and best use. Fair value of property, plant and equipment is determined based on the best available market evidence including current market selling prices for the same or similar assets. Where there is no available market evidence the asset's fair value is measured at its market buying price, the best indicator of which is depreciated replacement cost. The Board revalues each class of property, plant and equipment each five years to ensure that the carrying amount of each asset in the class does not differ materially from its fair value at reporting date. The Board is of the opinion that the written down cost of Buildings, Marine Facilities, Airport Facilities, Hospital Equipment, Office Equipment, Roadworks, Motor Vehicles, Mooring Facilities, Electricity Network and Plant and Equipment is a fair approximation of their Fair Value. Revaluation increments are credited directly to the asset revaluation reserve, except to the extent that an increment reverses a revaluation decrement in respect of that class of asset previously recognised as an expense. In that case, the increment is recognised immediately as revenue. Revaluation decrements are recognised immediately as expenses, except where a credit balance exists in the asset revaluation reserve in respect of the same class of assets. In that case, the decrement is debited directly to the asset revaluation reserve. The Board revalued the following asset classes during the reporting period in accordance with NSW Treasury Policy Paper 07-01:

Land and Buildings;

Airport; and

Marine Facilities. (k) Impairment of Property, Plant and Equipment As a not-for-profit entity with no cash generating units, the Board is effectively exempted from AASB 136 Impairment of Assets and impairment testing. (l) Depreciation Depreciation of plant and equipment has been calculated on a straight-line basis over the expected useful life of the assets to the Board based upon cost/value. The useful lives and depreciation rates of assets are reviewed annually. The useful lives of assets in major categories are:

Buildings 25 yearsRoads - Pavement (Formation) 25 yearsRoads - Surface 5 yearsAirport See belowWharf See belowPlant & Equipment 5 yearsTelevision Installation 20 yearsMotor Vehicles 5 years

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Electricity Assets See belowInfrastructure 50 years

(i) Airport Assets The separate components of the assets comprising the Airport have been valued individually and are assessed as having economic lives of between 5 and 100 years respectively, in accordance with the equivalent class of Non-Current Assets applicable to each component. The asset components and their respective economic lives are identified below:

Earthworks, site clearance, culvert excavation, top soil and turf 100 years

Concrete culvert headwalls 70-100 years

Compacted earthworks, armoured revetment and anchor blocks 50-100 years

Boundary fencing 50 years

Concrete segment paving 15 years

Bitumen seal, painting, signage and miscellaneous 5-12 years

(ii) Marine Facilities The separate components of the assets comprising the Marine Facilities function have been valued individually and are assessed as having economic lives of between 10 and 50 years respectively, in accordance with the equivalent class of Non-Current Assets applicable to each component. The asset components and their respective economic lives are identified below:

Jetty pylons and main deck, bollards and fenders 10-50 years

Walkway and viewing platform 10-50 years

(iii) Electricity Assets The separate components of the assets comprising the Electricity function have been valued individually and are assessed as having economic lives of between 3 and 80 years respectively, in accordance with the equivalent class of Non-Current Assets applicable to each component. The asset components and their respective economic lives are identified below:

Computer equipment 3 years

Load control and other office and workshop tools & equipment 10-15 years

Powerhouse/Workshop buildings 40 years

Generating Plant 20-30 years

Transformer equipment 30 years

Electrical Substations 50 years

Reticulation 40-80 years

(m) Amortisation Amortisation of Intangible Assets has been calculated on a straight-line basis over the expected useful life of the assets to the Board based upon cost/value. The useful lives and amortisation rates of assets are reviewed annually. The useful lives of assets in major categories are:

Computer Software 5 years

(n) Maintenance Day to day servicing costs or maintenance are charged as expenses as incurred, except where they relate to the replacement of a part or a component of an asset in which case the costs are capitalised and depreciated.

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(o) Receivables All trade debtors are recognised at face value of amounts receivable at balance date. Collectability of trade debtors is reviewed on an ongoing basis. Debts known to be un-collectable are written off. An allowance for impairment is raised when there is objective evidence that the Board will not be able to collect all the amounts due. The allowance is provided for 100% of any debts considered unrecoverable at year-end assessment. The credit risk is the carrying amount (net of any allowance for impairment). No interest was earned on trade debtors. The carrying amount approximates net fair value. Sales are generally made on 30-day terms. The sale of palm seedlings under contract is on 90 day terms. (p) Inventories Inventories held for distribution are stated at the lower of cost and current replacement cost. Inventories (other than those held for distribution) are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average cost method. Diesel stocks held for the generation and reticulation of power on the Island are valued at cost, which includes freight inwards charges. Costs were assigned to closing stocks by using the average cost method. Stores on Hand are valued at cost, which includes freight inwards charges. Costs were assigned to closing stocks by using the average cost method. Liquor stock is valued at cost, which includes freight inwards charges. (q) Biological Assets The Board has plantations of kentia palms for the purposes of producing seed for propagation. The Board has estimated the value of kentia palm plantations in accordance with the methodology outlined in Note 5. Seeds are valued at cost of collection. Seedlings are valued at the cost of collection plus the cost of planting. Plantations are valued at fair value estimated by the net present value of future cash flows method. These valuation methods are in compliance with AASB 141 Agriculture (r) Financial instruments Financial instruments give rise to positions that are financial assets or liabilities (for equity instruments) of the Board. These include Cash at Bank, Receivables, Investments, Accounts Payable and Borrowings. Classes of instruments are recorded at cost and carried at net fair value. (s) Cash Cash comprises Cash on Hand, at bank and cash held in Hourglass at Call Facility Trusts with NSW Treasury Corporation (TCorp). 2010 2009 Interest was earned on daily bank balances at an average rate of 2.94% 3.98% Interest rate at 30 June 4.00% 2.76% Cash in the TCorp Cash Facility Trust earned interest at an average rate of 4.62% 5.35% Interest rate at 30 June 4.46% 4.17%

(t) Investments As noted above, the Board has cash held in TCorp's Hourglass facilities. The Board's investment is represented by a number of units of a managed investment pool, with each particular pool having different investment horizons and being comprised of a mix of asset classes appropriate to that investment horizon. TCorp appoints and monitors fund managers, and establishes and monitors the application of appropriate investment guidelines.

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The Hourglass Investment Facilities are designated at fair value through profit and loss. The movement in the face value of the Hourglass Investment Facilities incorporates distributions received as well as unrealised movement in fair value and is reported in the line item “Interest on Investments” in Note 2.2. The cash held with TCorp can be redeemed with twenty-four hours notice. The value of the cash held can decrease as well as increase depending upon market conditions. The value that best represents the maximum credit risk exposure is the fair value. The value of the investment represents the Board’s share of the value of the underlying assets of the facility and is stated at fair value, based on the market value. Funds held at call in the TCorp Cash Facility totalled $4,091,092 as at 30 June 2010 (2009: $5,322,205). (u) Payables Trade creditors and accruals are recognised as amounts due to be paid in the future for goods or services received, whether or not invoiced. Payables are recognised initially at fair value, usually based on the transaction cost or fair value. Short term payables with no stated interest rate are measured at the original invoice amount when the effect of discounting is immaterial. Amounts owing to suppliers (which are unsecured) are settled in accordance with the policy set out in Treasurer's Direction 219.01. If trade terms are not specified, payment is made no later than the end of the month following the month in which an invoice or statement is received. Treasurer's Direction 219.01 allows the Minister to award interest for late payment. No interest was applied during the year. (v) Bank Overdraft The Board does not have a bank overdraft facility. (w) Comparative Information Comparatives have been reclassified where necessary to enhance comparability in respect of changes in the current year. (x) New Australian Accounting Standards Issued but not Effective At reporting date a number of Australian Accounting Standards have been issued but are not yet effective. These have not been early adopted by the Board. The possible impact of these Standards, if any, in the period of their initial application is discussed as part of Note 20.

2. DESCRIPTION OF MATERIAL ITEMS OF REVENUE & EXPENDITURE FOR BOARD PROGRAMS & ACTIVITIES Trading Operations The Board operates a Palm Nursery for the collection and propagation of native kentia palms and other endemic species, which are exported to world markets, predominantly in Europe. The Board also manages the Islands only liquor outlet for supply of liquor to the Island’s accommodation and business establishments and for retail supply to residents and visitors. General Administration This includes all costs associated with the general administration of the Board and funding of tourist promotion activities of the Island, with the exception of a proportion relating to the Electricity, Health and Environmental Service functions. Local Authority Services This includes all costs associated with the provision of general services to the Island community such as maintenance of public facilities (e.g. roads, buildings, wharf, parks & reserves), garbage disposal facilities, wharf and mooring facilities, motor vehicle inspection facilities and television and radio receiving facilities. This function also includes the care and maintenance of public tourism facilities. Environmental Services Environmental Services include the protection and maintenance of the Island's natural resources and, in particular, the care and maintenance of the Permanent Park Preserve. Health Services The South Eastern Sydney & Illawarra Area Health Service (SESIAHS) of the NSW Department of Health

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provides health services with the Board providing building infrastructure. The Board provides minor administrative support. Costs shown against this program are generally for the maintenance of the buildings and grounds of the Gower Wilson Memorial Hospital. Electricity Supply The Board has overall management and financial responsibility for the supply of electricity on Lord Howe Island and receives a Community Service Obligation payment from NSW Treasury to cover part of the shortfall between user charges and the cost of providing electricity. Country Energy provided technical assistance. Airport Operation The Board owns and has overall management and financial responsibility for the operation of the Lord Howe Island Airport. Personnel Services Personnel services expensed by the Board in 2009/10 amounted to $2,983,540 (2009: $3,031,347).

2.1 Details of Revenue and Expenditure from Trading Operations Revenue Expenditure Surplus/(Deficit) Prior year Result $ $ $ $ Palm Nursery Operations** 564,907 (763,355) (198,448) (95,548) Liquor Store Operations 1,523,978 (1,200,992) 322,986 328,534 Total 2,088,885 (1,964,347) 124,538 232,986 **Refer also note 2.1.1

2.1.1 Reconciliation of Revenue from Sale of Biological Assets 2010 2009 $ $ Total actual sales revenue from Nursery Operations 418,382 677,282 Deduct revenue from Non Biological Asset sales (17,925) (70,883) Actual revenue from sale of Biological Assets during the period 400,457 606,399 Less deemed cost of seedlings sold (265,194) (395,733) Deemed profit/(loss) from Biological Asset sales 135,263 210,666 Add: Increase in Fair Value of Biological Assets at reporting date recognised as Revenue - Seeds/Seedlings 281,530 355,486 - Plantations 130,189 (51,164) Total Revenue recognised for the period from Biological Assets 546,982 514,988 Add back Revenue from Non Biological Asset sales 17,925 70,883 Net Revenue from Nursery Operations 564,907 585,871

2.2 Details of Revenue and Expenditure from Service Operations

Revenue Expenditure Operating Result Surplus / (Deficit)

Prior Year Operating Result

$ $ $ $ Airport Operations 669,260 (312,163) 357,097 244,111 Electricity Supply 638,693 (989,873) (351,180) (553,313) Health Services 0 (51,972) (51,972) (61,403) Environmental Services 612,638 (1,534,941) (922,303) (748,243) Local Authority Services 1,209,786 (2,489,503) (1,279,717) (1,062,256) Land Administration & Planning 127,142 (143,605) (16,463) 41,592 Corporate Governance & Support 52,930 (1,591,711) (1,538,781) (1,399,613) Interest on Investments 227,146 0 227,146 287,817 Community Well Being and Health 330 (156,803) (156,473) (172,220) 3,537,925 (7,270,571) (3,732,646) (3,423,528)

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2.3 Government Grants and Subsidies Funding from State grants and subsidies for the year ended 30 June 2010

2010 2009 Unexpended $ $ 30-Jun-10 Treasury 1,407,000 1,378,000 0 Rural Fire Service 6,700 9,220 0 Local Government Grants Commission 154,780 188,858 0 Northern Rivers Catchment Management Authority 32,000 42,642 0 Dept of Environment & Climate Change 50,964 10,000 44,793 Environmental Trust 7,880 197,943 0 Department of Industry and Investment 1,922 4,000 0 State Emergency Services 0 20,266 0 1,661,246 1,850,929 44,793

Funding from Commonwealth grants and subsidies for the year ended 30 June 2010: 2010 2009 Unexpended $ $ 30-Jun-10 Environment Australia 80,204 0 0 Natural Heritage Trust 294,727 432,720 49,559 Australian Council Of Local Government 36,890 100,000 0 Australian Airports Association 0 32,162 0 Dept of Infrastructure, Transport, Regional Development & Local Government

36,000 125,700 0

Other 0 0 0 447,821 690,582 49,559

Total funding from grants and subsidies for the year ended 30 June 2010: 2010 2009 Unexpended $ $ 30-Jun-10 Total Grants and Subsidies 2,109,067 2,541,511 94,352

The Board is holding $94,352 in un-expended grant funds received in 2009/10 and $196,823 from prior years for environmental programs, floodplain management and capital works projects including the replacement of the Island’s VHF radio network and emergency management projects.

3.1 Receivables Receivables at 30 June 2010 comprised: 2010 2009 $ $ Palm Sales Debtors 160,310 129,949 Other Trade Debtors & Accruals 577,187 61,455 Electricity Sales Accruals 70,136 37,363 Sundry Debtors & Accruals 430,559 579,331 Total Receivables 1,238,192 808,098

A detailed review of debtors was undertaken as at 30 June 2010 and the Board has not created an allowance for impairment for the 2010 financial year (2009: $0).

3.2 Inventories Inventory and stock on hand at 30 June 2010 comprised: 2010 2009 $ $ Held for Distribution Diesel Fuel - Powerhouse 78,487 64,788 Stores on hand 45,388 51,030

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2010 2009 $ $ 123,875 115,818 Held for Resale Non Biological Asset Plant & Seed Stock 47,830 93,256 Nursery Merchandise 13,279 10,838 Tourist Literature & Videos 6,374 5,909 Liquor 231,699 209,241 299,182 319,244 Total Inventory 423,057 435,062

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4. PROPERTY, PLANT AND EQUIPMENT AT FAIR VALUE

Asset Class Opening Balance Acquisitions Disposals Reclassifications Valuation Inc / (Dec) Balance 30 June 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010

Airport 8,092,431 8,069,827 0 33,780 0 0 (22,604) 0 0 6,500,875 8,069,827 14,604,482 Buildings 7,259,939 7,080,089 65,046 0 267,500 0 22,604 0 0 1,355,551 7,080,088 8,435,640 Electricity Supply 5,444,516 5,485,849 731,332 13,510 690,000 0 0 0 0 0 5,485,849 5,499,359 Hospital Equipment 27,657 25,553 0 0 2,104 1,100 0 0 0 0 25,553 24,453 Household Contents 80,643 75,779 0 0 4,863 15,796 0 0 0 0 75,779 59,983 Land 6,800,000 6,800,000 0 0 0 0 0 0 0 4,250,000 6,800,000 11,050,000 Marine Facilities 3,430,291 3,430,291 0 0 0 0 0 0 0 (199,744) 3,430,291 3,230,547 Moorings 69,515 69,515 0 0 0 0 0 0 0 0 69,515 69,515 Motor Vehicles 677,903 683,534 80,131 146,291 74,499 23,149 0 0 0 0 683,534 806,676 Office Equipment 152,430 132,961 3,940 21,388 23,408 9,365 0 0 0 0 132,961 144,984 Other Infrastructure 3,590,402 3,590,402 0 113,283 0 0 0 0 0 0 3,590,402 3,703,685 Plant & Equipment 1,413,231 1,793,862 404,562 135,874 23,931 5,493 0 0 0 0 1,793,862 1,924,243 Roadworks 8,648,410 8,648,410 0 343,499 0 0 0 0 0 0 8,648,410 8,991,909 Television Facility 161,686 161,686 0 0 0 0 0 0 0 0 161,686 161,686

Total Assets 45,849,054 46,047,758 1,285,011 807,625 1,086,306 54,903 0 0 0 11,906,682 46,047,757 58,707,162

ACCUMULATED DEPRECIATION Asset Class Opening Balance Depreciation Write Back on Disposal Reclassifications Write Back on Revaluation Balance 30 June

2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 Airport 4,399,557 4,586,070 190,043 138,736 0 0 (3,530) 0 0 (2,771,569) 4,586,070 1,953,237 Buildings 2,387,158 2,571,944 294,426 284,049 113,170 0 3,530 0 0 (787,577) 2,571,944 2,068,416 Electricity Supply 2,877,859 2,388,035 132,921 128,885 622,745 0 0 0 0 0 2,388,035 2,516,920 Hospital Equipment 27,657 25,553 0 0 2,104 1,100 0 0 0 0 25,553 24,453 Household Contents 69,797 69,920 4,547 2,166 4,424 14,312 0 0 0 0 69,920 57,774 Land 0 0 0 0 0 0 0 0 0 0 0 0 Marine Facilities 1,412,904 1,634,095 221,191 221,191 0 0 0 0 0 (1,280,429) 1,634,095 574,857 Moorings 23,713 26,609 2,896 2,896 0 0 0 0 0 0 26,609 29,505 Motor Vehicles 559,181 538,683 49,452 40,442 69,950 23,149 0 0 0 0 538,683 555,976 Office Equipment 89,279 85,815 19,508 18,736 22,972 8,966 0 0 0 0 85,815 95,585 Other Infrastructure 673,606 744,572 70,966 71,834 0 0 0 0 0 0 744,572 816,406 Plant & Equipment 1,243,476 1,271,020 51,093 110,077 23,549 5,493 0 0 0 0 1,271,020 1,375,604 Roadworks 4,873,680 5,085,740 212,060 224,416 0 0 0 0 0 0 5,085,740 5,310,156 Television Facility 82,508 92,929 10,421 10,421 0 0 0 0 0 0 92,929 103,350

Total Assets 18,720,375 19,120,985 1,259,524 1,253,849 858,914 53,020 0 0 0 (4,839,575) 19,120,985 15,482,239

60


4.1 Reconciliation of carrying amounts for Property, Plant and Equipment at 30 June 2010

Gross Value Accumulated Depreciation Written Down Value 30/06/2010 30/06/2009 30/06/2010 30/06/2009 30/06/2010 30/06/2009 $ $ $ $ $ $ Airport 14,604,482 8,069,827 1,953,237 4,586,070 12,651,245 3,483,757 Buildings 8,435,640 7,080,089 2,068,416 2,571,944 6,367,224 4,508,145 Electricity Supply 5,499,359 5,485,848 2,516,920 2,388,035 2,982,439 3,097,813 Hospital Equipment 24,453 25,553 24,453 25,553 0 0 Household Contents 59,983 75,779 57,774 69,920 2,209 5,859 Land 11,050,000 6,800,000 0 0 11,050,000 6,800,000 Marine Facilities 3,230,547 3,430,291 574,857 1,634,095 2,655,690 1,796,196 Moorings 69,515 69,515 29,505 26,609 40,010 42,906 Motor Vehicles 806,676 683,534 555,976 538,683 250,700 144,851 Office Equipment 144,984 132,961 95,585 85,815 49,399 47,146 Other Infrastructure 3,703,685 3,590,402 816,406 744,572 2,887,279 2,845,830 Plant & Equipment 1,924,243 1,793,862 1,375,604 1,271,020 548,639 522,842 Roadworks 8,991,909 8,648,410 5,310,156 5,085,740 3,681,753 3,562,670 Television Facility 161,686 161,686 103,350 92,929 58,336 68,757 58,707,162 46,047,757 15,482,239 19,120,985 43,224,923 26,926,772


4.2 Depreciation and Amortisation Property, Plant and Equipment depreciation charges for 2009/10 totalled $1,253,849 (2009: $1,259,524)

and Intangibles amortisation totalled $1,186 (2009: $1,480). The Board’s policy in respect to the valuation of Non-Current Assets is detailed in Note 1 (j)

4.3 Acquisition and Disposal of Assets During the year the Board acquired and disposed of assets in accordance with the following table:

Asset Class Acquisitions (at

cost) Disposals (at

cost) Disposals

(WDV) Proceeds Profit/(Loss) on

Disposal $ $ $ $ $ Airport 33,780 0 0 0 0 Electricity Supply 13,510 0 0 0 0 Hospital Equipment 0 1,100 0 0 0 Household Contents 0 15,796 1,483 0 (1,483) Motor Vehicles 146,291 23,149 0 6,727 6,727 Office Equipment 21,388 9,365 399 0 (399) Other Infrastructure 113,283 0 0 0 0 Plant & Equipment 135,874 5,493 0 0 0 Roadworks 343,499 0 0 0 0 807,265 54,903 1,882 6,727 4,845

4.4 Works in Progress As at 30 June 2010 the Board has incomplete Capital Work in Progress totalling $83,157 (2009: $214,848). These works are not included as Property Plant and Equipment in the Balance Sheet and the accompanying notes as the final cost of the items cannot be measured reliably and the items are not available for use.

4.5 Intangible Assets

Software 2010 $

2009 $

Opening gross carrying value 73,454 73,454 Reclassifications 0 0 Closing gross carrying value 73,454 73,454 Accumulated Amortisation Opening balance (72,117) (70,637) Reclassifications 0 0 Amortisation (1,186) (1,480) Closing balance (73,303) (72,117) Net carrying value at the period end 151 1,337

4.6 Reconciliation of Intangible Assets at 30 June 2010 2010 2009 $ $

Net carrying amount at start of year 1,337 2,817 Additions 0 0 Disposals 0 0 Amortisation in period (1,186) (1,480) Net carrying amount at end of period 151 1,337

5. NURSERY ASSETS - RECOGNITION OF BIOLOGICAL ASSETS The Board manages and maintains a kentia palm nursery primarily for the purpose of propagation and export of native kentia palm seedlings. The Board has assessed that part of the activities of the Nursery come within the definition of “Biological Assets” as defined in AASB 141 Agriculture.


5.1 Determination of Assets Meeting the Definition of Biological Assets. For the purpose of the Standard, the following assets meet the terms of paragraph 1 of AASB 141(Scope and application) and have been recognised as biological assets: a. Palm plantations established by the Board for the primary purpose of profit generation; and

b. Seeds obtained from the native palm forests and plantations scattered throughout the Island and which are owned by the Board at reporting date, and the seedlings which have been propagated from those seeds for the purpose of export sale.

The Board has assessed that the following assets do not meet the terms of paragraph 1 and have therefore not been classified as biological assets: c. Palm trees that grow naturally throughout the Island. These include forests growing in the areas of

the Island’s Permanent Park Preserve (equivalent to National Park status under the World Heritage convention) and other Crown or leasehold lands, which have not been specifically established for the purpose of profit;

d. Palm plants and stocks of other native species which have been propagated at the Nursery for the primary purpose of providing a rotational plant hire service to Island businesses, and those stocks which do not meet the required specification for export sale but which may be sold as incidental stock to visiting tourists; and

e. Native species (including kentia palms), which have been propagated for the purpose of reforestation.

Those assets included in Note 5.1 (d) and (e) have been recognised as inventories in accordance with AASB 102 and are included in the table at Note 3.2.

5.2 Nature and Details of Biological Assets The nature of the biological assets identified in Note 5.1 (a), namely the Board’s kentia palm plantations, and the details of their physical quantity are shown in the following table:

Plantation

No

Nature of

Plantation

No of Palms

planted Date of planting

Commence Seed Collection

Annual Average

Yield (bushels)

Estimated Viable Years for Harvest

1 Kentia Palm (howea forsteriana) 360 1986/87 2000/01 18 152 Kentia Palm (howea forsteriana) 200 1993 2006/07 10 153 Kentia Palm (howea forsteriana) 189 1993 2006/07 9 154 Kentia Palm (howea forsteriana) 289 1990 2003/04 14 155 Kentia Palm (howea forsteriana) 350 1994 2007/08 18 155a Kentia Palm (howea forsteriana) 157 1999 2012/13 8 155b Kentia Palm (howea forsteriana) 49 1999 2012/13 2 157 Kentia Palm (howea forsteriana) 249 2001 2014/15 12 159 Kentia Palm (howea forsteriana) 303 2001 2014/15 15 1511 Kentia Palm (howea forsteriana) 143 2001 2014/15 7 1512 Kentia Palm (howea forsteriana) 131 2001 2014/15 7 1514 Kentia Palm (howea forsteriana) 409 2002 2015/16 20 15

2,829 142

Prior to 2004-05, provisions of the Lord Howe Island Act (1953) gave the Board full right of ownership of seed produced from leasehold plantations. During 2004-05 a decision by the Minister under the Lord Howe Island Regulation 2004 gave the ownership of palm trees and palm tree products on perpetual leases to the lessee. This decision effectively removed 37% of the palm plantations from the Board’s control, however as the Board’s Palm Nursery is the only current and active market for palm seed, this decision has had no significant effect on the operation of the Nursery and the finances of the Board. The fair value of the Board’s kentia palm plantations has been determined using the net present value method at $200,533 (2009: $70,344). For the agricultural produce identified in Note 5.1 (b), the Board held quantities of seeds and seedlings to a total value of $479,042 (2009: $462,706) comprising seeds which had been received but not planted, seeds which had been planted but not yet germinated and stocks of saleable seedlings. (See also Note 2.1.1)

5.3 Restrictions Affecting Fair Value Board policy prohibits the export and importation of palm seeds from / to the Island in order to preserve the


quality and integrity of the native species. Seeds are therefore germinated and propagated in the nursery environment prior to export as marketable seedlings. In this form, there are currently no restrictions imposed that would materially affect the fair value of the produce from the biological assets.

5.4 Methodology for Determination of Fair Value Palm Plantations: Although the market value of seedlings may be determined by reference to the sale price, there is currently no active and liquid market for the palm trees which bear the seeds. The Board has therefore calculated the fair value by determining the net present value of future cash flows arising from the biological assets in accordance with paragraph 20 of AASB 141. Only those biological assets of the type identified in Note 5.1 (a) have been included in the calculation of net present value. Palm Seeds: The export of seed from the Island is prohibited by Board policy and there is no current and active liquid market for the sale of seed. The Board used to sell small quantities to local growers at cost but has not made any sales since 2003. Palm Seedlings: Palm seedlings are grown primarily for the purpose of export sale. There is therefore an active and liquid market for seedlings and the fair value is calculated by determining the current average sale price, less the cost of realising the sales, i.e.: picking, marketing, selling and distribution costs, in accordance with paragraph 9 of AASB 141.

5.5 Significant Assumptions for Calculation of Fair Value in Respect to Plantations The following significant assumptions have been made in calculating the net market value of plantations using the net present value method:

a) Each plantation will begin to yield consistent quality and quantity of seed 15 years after planting. Because of the ability of the Board to control nurturing, maintenance and watering during the growing years, seasonal climatic variations and weather patterns are not expected to materially alter the maturation period, or the quantity of seed produced;

b) The economic harvest life of each palm tree is estimated to be 15 years from the date of commencement of harvest;

c) Saleable yield from plantations is estimated at 63% of seed harvested. The Board has achieved yield rates of between 55% and 62% in recent years from seeds collected from the natural forest areas. Given the ability of the Board to increase control over growing conditions in the plantations, a higher saleable yield is considered achievable;

d) Sale price for the marketable produce is estimated at current average sale price per seedling sold. e) Non-export sales (sales to locals and visitors) are estimated at a further 2.0% of total harvest; f) Production, selling and distribution costs for plantation produce are calculated by volume on a per bushel

basis as a percentage of total Nursery operating costs; g) Calculations are based on a 5-year average of actual seed collected for Nursery operations up to and

including the current year. For 2009-10 the average was 547 bushels; h) Each bushel contains 4,600 seeds; i) Establishment costs for plantations which were incurred up to 30 June 2003 have been expensed and are

not included in the calculation of net market value; j) Annual plantation maintenance costs are estimated at $6,124 per annum. This includes minor mowing,

replacement of tree guards, infrequent fertilising, watering and de-leafing. After initial establishment annual maintenance requirements are minimal;

k) Average time from germination to sale of seedlings is 1 year. Cash inflows from export sales and cash outflows from selling and distribution costs therefore occurs 1 year after production costs;

l) The discounted cash flow analysis to determine net present value has been calculated over the estimated future life of the current plantations;


m) The discount rate applied is 10% (pre-tax real). All cash flows are therefore in today’s dollars and no allowance has been made for the effects of inflation. This rate represents an after inflation (nominal) discount rate of approximately 12.6% where inflation is estimated to remain constant at around 3% per annum. The discount rate is considered to adequately represent the risk associated with the future sale of seedlings, given the current annual world demand and the respected quality and reliability of the Lord Howe Island product in world markets.

5.6 Value of Increment Arising from Determination of Fair Value The calculation of fair value for plantations using the net present value method has resulted in a net increase (revenue) for the year of $130,189 (2009: decrease of $51,164). At 30 June 2010, stocks of seed and seedlings identified in Note 5.1 (b) have been valued using the fair value method in accordance with AASB 141 and Note 5.4. The valuation methodology has resulted in a net increment (revenue) of $281,530 in the value of nursery stocks at 30 June 2010 (2009: $355,486).

6. PAYABLES Payables represented by trade creditors and other accrued expenditure as shown in the following table have been determined by identifying actual creditors and accruals at balance date. 2010 2009 $ $ Trade and Sundry Creditors (5,420) 57,285 Accrued Personnel Services Expenses 35,808 40,171 Accrued Expenses - Other 532,185 599,026 Total Payables 562,573 696,482

7. OTHER LIABILITIES Other liabilities at 30 June 2010 comprised the following amounts held on behalf of individuals, other community groups and organisations and retention on contracted works: Organisation Purpose 2010 2009 $ $ D Chlumsky Dog Bond 1,100 1,100 N Turk Dog Bond 1,100 0 A Moores Electricity Bond 250 0 Renewable Energy Energy Efficiency Packages 6,099 0 8,549 1,100

8. PROVISION FOR SUPERANNUATION Pillar Administration has advised the Board of the estimated surplus/unfunded liability of the Superannuation Schemes to which Board contributes. This advice takes into account any legislative changes made in respect of superannuation. The surplus in SASS and SSS are included in the Balance Sheet as a Non-Current Asset. The unfunded liability in respect of the Basic Benefit scheme has been included as a Non-Current Liability. Superannuation contributions made by the Board to these funds and to First State Super Fund, totalled $225,555 (2009: $235,083). All references in this note are to the July 2007 version of AASB 119. General description of the type of plan – Paragraph 120A (b) The Pooled Fund holds in trust the investments of the closed NSW public sector superannuation schemes: State Authorities Superannuation Scheme (SASS) State Superannuation Scheme (SSS) Police Superannuation Scheme (PSS) State Authorities Non-contributory Superannuation Scheme (SANCS).


These schemes are all defined benefit schemes where at least a component of the final benefit is derived from a multiple of member salary and years of membership. All the Schemes are closed to new members. Superannuation position as at 30 June 2010 SASS SANCS SSS TOTAL

30-Jun-10 30-Jun-10 30-Jun-10 30-Jun-10 Superannuation Position for AASB 119 purposes $ $ $ $ Accrued liability 1,229,919 72,218 0 1,302,137 Estimated reserve account balance (919,177) 75,359 (49,077) (892,895) 310,742 147,577 (49,077) 409,242 Future Service Liability (Note 1) (90,133) (24,933) 0 (115,066) Surplus in excess of recovery available from schemes 0 0 0 0 Net (asset)/liability to be disclosed in Balance Sheet 310,742 147,577 (49,077) 409,242 Superannuation position as at 30 June 2009 SASS SANCS SSS TOTAL

30-Jun-09 30-Jun-09 30-Jun-09 30-Jun-09 Superannuation Position for AASB 119 purposes $ $ $ $ Accrued liability 1,331,191 126,933 0 1,458,124 Estimated reserve account balance (1,276,977) 5,184 (46,269) (1,318,062) 54,214 132,117 (46,269) 140,062 Future Service Liability (Note 1) (130,675) (51,047) 0 (181,722) Surplus in excess of recovery available from schemes 0 0 0 0 Net (asset)/liability to be disclosed in Balance Sheet 54,214 132,117 (46,269) 140,062 Note 1: The Future Service Liability (FSL) does not have to be recognised by an employer. It is only used to determine if an asset ceiling limit should be imposed (as per July 2004 version AASB 119, paragraph 58). Under AASB 119, any prepaid superannuation asset recognised cannot exceed the total of any unrecognised past service cost and the present value of any economic benefits that may be available in the form of refunds from the plan or reductions in future contributions to the plan. Where the "surplus in excess of recovery" is zero, no asset ceiling limit is imposed.

Arrangements for employer contributions for funding – Paragraph AUS 121.1 The following is a summary of the 30 June 2010 financial position of the Fund calculated in accordance with AAS 25 - Financial Reporting by Superannuation Plans. SASS SANCS SSS

30 June 2010 30 June 2010 30 June 2010 $ $ $

Accrued benefits 933,308 65,290 0 Net market value of Fund assets (919,177) 75,359 (49,077) Net (surplus)/deficit 14,131 140,649 (49,077) Recommended contribution rates for the entity are: SASS SANCS SSS multiple of

member contributions

% of member salary

multiple of member

contributions 1.90 2.50 1.60

The method used to determine the employer contribution recommendations in the triennial actuarial review was the Aggregate Funding method. The method adopted affects the timing of the cost to the employer. Under the Aggregate Funding method, the employer contribution rate is determined so that sufficient assets will be available to meet benefit payments to existing members, taking into account the current value of assets and future contributions. The economic assumptions adopted for the 2010 actuarial review of the Fund are:


Weighted-Average Assumptions Expected rate of return on Fund assets backing current pension liabilities 8.3% pa Expected rate of return on Fund assets backing other liabilities 7.3% pa Expected salary increase rate 4.0% pa Expected rate of CPI increase 2.5% pa Nature of asset/liability – Paragraph AUS 121.2 If a surplus exists in the employer's interest in the Fund, the employer may be able to take advantage of it in the form of a reduction in the required contribution rate, depending on the advice of the Fund's actuary. Where a deficiency exists, the employer is responsible for any difference between the employer’s share of fund assets and the defined benefit obligation.

9. PROVISION FOR PERSONNEL SERVICES Movements in the provision for employee benefits for the year ended 30 June 2010 are shown in the following table: Annual Leave Long Service Leave Total 2010 2009 2010 2009 2010 2009 $ $ $ $ $ $ Opening Balance 230,001 208,310 623,184 509,525 853,185 717,835 Transfer to/(from) Provision (46,924) 21,691 (36,248) 113,659 (83,172) 135,350 Closing Balance 183,077 230,001 586,936 623,184 770,013 853,185

The apportionment of the Provision as at 30 June 2010 is:

Current Liabilities Non-Current

Liabilities Total

$ $ $ Annual Leave 183,077 0 183,077 Long Service Leave 552,808 34,128 586,936 Total 735,885 34,128 770,013

In accordance with AASB 101 and TC 09/04 for any liability line item that combines amounts to be settled no more than 12 months after the reporting date and amounts to be settled more than 12 months after the reporting date an entity must disclose the amount expected to be settled after more than 12 months. All the Annual Leave is expected to be settled within 12 months. Of the Long Service Leave it is expected that $44,225 will be settled within 12 months and $542,711 after 12 months.

10. EQUITY Total Equity held by the Board at 30 June 2010 is represented by:

Accumulated Funds Asset Revaluation Reserve Total Equity Note 2010 2009 2010 2009 2010 2009 $ $ $ $ $ $ Opening Balance 8,451,391 9,100,423 24,335,277 24,335,277 32,786,668 33,435,700 Movements: Net Surplus/(Loss) from Operations

(1,499,041) (649,031) 0 0 (1,499,041) (649,031)

Revaluation of Assets # 1(j)

0 0 16,746,257 0 16,746,257 0

Closing Balance 6,952,350 8,451,391 41,081,534 24,335,277 48,033,884 32,786,668 # Revaluation increments are credited directly to the asset revaluation reserve, except that, to the extent that an increment reverses a

revaluation decrement in respect of that class of asset previously recognised as an expense in the surplus / deficit, the increment is recognised immediately as revenue in the surplus / deficit.

11. EMOLUMENTS TO MEMBERS OF THE BOARD Amounts paid and payable to Board members in respect of the 2009-10 financial year totalled $38,922 (2009: $38,922).


12. AUDIT FEES Fees payable to the Audit Office of New South Wales for 2009-10 will total $46,970 (2009: $46,970). This is inclusive of GST. The Board meets the cost of travel and accommodation for audit staff. No other benefits were provided to The Audit Office.

13. NOTES TO THE STATEMENT OF CASH FLOWS 13.1 Reconciliation of Cash Assets

For the purpose of the statement of cash flows, cash assets include cash on hand, in bank, and at TCorp. Cash assets at the end of the reporting period as shown in the statement of cash flows are reconciled to the related items in the statement of financial position as follows: 2010 2009 $ $ Cash on Hand and at Bank 44,114 236,124 Cash at TCorp 4,091,092 5,322,205 Total Cash Assets 4,135,206 5,558,329

Of the total cash assets available at balance date, amounts totalling $299,723 are restricted, being $8,548 in bonds shown in Note 7 and $291,175 in unexpended grant funding shown in Note 2.3.

13.2 Reconciliation of Net Cash provided by Operating Activities to Operating Result for the Year Ending 30 June 2010 2010 2009 $ $ Operating Surplus/(Loss) (1,499,041) (649,031) Adjustments for Items not Involving Cash: Depreciation and Amortisation 1,255,035 1,261,004 Loss/(Gain) on Disposal of Assets (4,845) 6,971 Decrease / (Increase) in Superannuation Asset Reserve (2,808) 228,200 Decrease / (Increase) in Accounts Receivable & Prepayments (430,094) 312,285 Decrease / (Increase) in Inventories 12,005 58,186 Non-cash movements in SGARA’s (AAS 35) (146,525) 91,411 Provision for Employee Entitlements (83,170) 135,349 Increase / (Decrease) in Superannuation Liabilities 271,988 68,407 Increase / (Decrease) in Other Liabilities 7,448 (15,144) Increase / (Decrease) in Creditors & Accruals (133,909) 449,135 Net Cash Provided by Operating Activities (753,916) 1,946,773

14. DEBTS DUE TO THE BOARD, BY BOARD MEMBERS AND EMPLOYEES At balance date, a total of $2,332 was owed by members and employees (2009: $3,994), in respect of general accounts relating to Board services.

15. CONSULTANTS FEES The Board paid the sum of $199,566 during the current financial year to various technical consultants (2009: $216,004). These payments were made for the following purposes:


2010 2009 $ $ Asset and Property Valuations 0 6,105 Corporate Governance/Legislation 0 6,400 Electrical Engineering 0 11,225 Engineering Services 1,500 11,662 Legal/Professional Advices 30,000 42,255 Nursery Quality Assurance 2,093 2,744 Environmental Assessments 106,920 22,776 Town Planning and Development Assessment 54,027 101,963 Traffic Management 0 10,874 Airport Services 5,026 0 199,566 216,004

16. CONTINGENT LIABILITIES The Board is not aware of any significant or material contingent liability in existence at balance date, or which has emerged subsequent to balance date, which would materially impact on the financial position of the Board as shown in the Financial Statements with the following exceptions. A claim for damages was lodged against the Board during 1995-96 by a visitor who was injured from a shark attack. The Board has received advice that the parties to the claim have now agreed to settle the matter following mediation with costs covered by the Board’s Public Liability insurance policies.

17. MATERIAL ASSISTANCE PROVIDED AT NO COST No unfunded material assistance was provided to the Board during 2009-10 by the Defence forces or any other external agency.

18. COMMITMENTS 2010 2009 $ $ (i) Capital Expenditure Commitments Total Capital Expenditure contracted for at balance date but not provided for in the Financial Statements 70,246 30,025 (Payable no later than one year) (ii) Operating Expenditure Commitments Total purchase orders committed for at balance date but not provided for in the Financial Statements 186,291 154,100 (Payable no later than one year) GST in above amounts 23,322 16,739

Amounts payable by the Board in respect to GST for the above commitments is claimable as an Input Tax Credit.

19. FINANCIAL INSTRUMENTS The Board’s principal financial instruments are outlined below. These financial instruments arise directly from the Board’s operations or are required to finance the Board’s operations. The Board does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The Board’s main risks arising from financial instruments are outlined below, together with the Board’s objectives, policies and procedures for measuring and managing risk. Further quantitative and qualitative disclosures are included throughout this financial report. The Chief Executive Officer has overall responsibility for the establishment and oversight of risk management and reviews and agrees policies for managing of these risks. Risk management policies are established to identify and analyse the risks faced by the Board, to set risk limits and controls to monitor


risks. Compliance with policies is reviewed by the Board’s internal auditors on a continuous basis. (a) Financial Instrument categories

Financial Assets Note Category Carrying Amount

Carrying Amount

2010 2009 Class: $ $ Cash and cash equivalents

N/A 4,135,206 5,558,329

Receivables ¹ Loans and receivables (at amortised cost)

1,238,192 808,098

Other financial assets

Loans and receivables (at amortised cost)

0 0

Financial Liabilities

Note Category Carrying Amount

Carrying Amount

2010 2009 Class: $ $ Payables ² Financial Liabilities measured at

amortised cost 562,573 696,482

Notes 1. Excludes statutory receivables and prepayment (i.e. not within scope of AASB 7). 2. Excludes statutory payables and unearned revenue (i.e. not within scope of AASB 7).

(b) Credit Risk Credit risk arises when there is a possibility of the Board’s debtors defaulting on their contractual obligations, resulting in a financial loss to the Board. The maximum exposure to credit risk is generally represented by the carrying amount of the financial assets (net of any amount for impairment). Credit risk arises from the financial assets of the Board, including cash, receivables and authority deposits. No collateral is held by the Board. The Board has not granted any financial guarantees. Credit risk associated with the Board’s financial assets, other than receivables, is managed through the selection of counterparties and establishment of minimum credit rating standards. Authority deposits held with NSW TCorp are guaranteed by the State. Cash

Cash comprises cash on hand and bank balances within the Board’s Operating Bank Account and NSW Treasury Corporation Hour Glass cash facility. Interest is earned on the daily bank balance. The Board has placed funds on deposit with TCorp, which has been rated “AAA” by Standards and Poor’s. These deposits are similar to money market or bank deposits and have been placed “at call”. The deposit at balance date was earning an average interest rate of 4.62% (2009: 5.35%) on a weighted average balance during the year. None of these assets are past due or impaired. Receivables – trade debtors

All trade debtors are recognised as amounts receivable at balance date. Collectability of trade debtors is reviewed on an ongoing basis. Procedures as established in the Treasurer’s Directions are followed to recover outstanding amounts, including letters of demand. Debts which are known to be uncollectible are written off. An allowance for impairment is raised when there is objective evidence that the entity will not be able to collect all amounts due. This evidence includes past experience, and current and expected changes in economic conditions and debtor credit ratings. No interest is earned on trade debtors. Sales are made on 30 days terms, excepting palm seedling sales to Europe which are 90 days. The Board is not materially exposed to concentrations of credit risk to a single trade debtor or group of debtors. The only financial assets that are past due or impaired are Receivables in the Balance Sheet.


Receivables Totals ¹; ²

$

Past due but not impaired

$

Considered impaired

$ 2010 < 3 months overdue 156,011 156,011 0 3 months – 6 months overdue 10,218 10,218 0 > 6 months overdue 89,242 89,242 0 Totals 255,471 255,471 0 2009 < 3 months overdue 756,055 674,881 0 3 months – 6 months overdue 412 412 0 > 6 months overdue 51,632 51,632 0 Totals 808,099 726,925 0

Notes 1. Each column in the table reports ‘gross receivables’. 2. The ageing analysis excludes statutory receivables, as these are not within the scope of AASB 7 and excludes receivables that are not past due and not impaired. Therefore, the ‘total’ will not reconcile to the Receivables total recognised in the Balance Sheet.

(c) Liquidity Risk Liquidity Risk is the risk that the Board will be unable to meet its payment obligations when they fall due.

During the current and prior yeas, there were no defaults or breaches on any loans payable. No assets have been pledged as collateral. The Board’s exposure to liquidity risk is deemed insignificant based on prior periods’ data and current assessment of risk.

The Board has no current stand-by credit arrangements or unused loan facilities in place. The liabilities are recognised for amounts due to be paid in the future for goods or services, whether or not

invoiced. Amounts owing to suppliers (which are unsecured) are settled in accordance with the policy set out in Treasurer’s Direction 219.01. If trade terms are not specified, payment is made no later than the end of the month following the month in which an invoice or statement is received. Treasurer’s Direction 219.01 allows the Minister to award interest for late payment. No interest for late payment was made during the 2009-10 year (2008-09: $0).

The table below summarises the maturity profile of the Board’s financial liabilities.

Maturity Analysis Carrying Amount

$ <1 Year

$ 1 - 5 Years

$ > 5 Years

$ 2010 Financial Liabilities Payables 562,573 562,573 0 0 Other Liabilities 8,548 8,548 0 0 Provisions 1,228,333 44,225 725,789 458,319 1,799,454 615,346 725,789 458,319 2009 Financial Liabilities Payables 696,483 696,483 0 0 Other Liabilities 1,100 1,100 0 0 Provisions 1,039,516 47,749 805,436 186,331

1,737,099 745,332 805,436 186,331

(d) Market Risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because

of changes in market prices. The Board’s exposure to market risk is primarily through interest rate risk associated with the unit price of the Hour Glass Investment Facilities. The Board has no exposure to foreign currency risk and does not enter into commodity contracts.


(e) Interest Rate Risk The Board has no interest bearing liabilities or borrowings. The Board does not account for any fixed rate

financial instruments at fair value through profit or loss or as available-for-sale. Therefore, for these financial instruments, a change in interest rates would not affect profit or loss or equity. A reasonably possible change of +/- 1% is used, consistent with current trends in interest rates. The basis will be reviewed annually and amended where there is a structural change in the level of interest rate volatility. The Board’s exposure to interest rate risk is set out below.

-1% 1%

Carrying Amount

$ Profit

$ Equity

$ Profit

$ Equity

$ 2010 Financial Assets Cash and cash equivalents 4,135,206 (41,352) (41,352) 41,352 41,352 Receivables 1,238,192 0 0 0 0 Financial Liabilities Payables 562,573 0 0 0 0 Borrowings 0 0 0 0 0 Total Increase / (Decrease) (41,352) (41,352) 41,352 41,352 2009 Financial Assets Cash and cash equivalents 5,558,329 (55,583) (55,583) 55,583 55,583 Receivables 808,098 0 0 0 0 Financial Liabilities Payables 696,483 0 0 0 0 Borrowings 0 0 0 0 0 Total Increase / (Decrease) (55,583) (55,583) 55,583 55,583

(f) Fair value compared to carrying amount Financial instruments are generally recognised at cost, with the exception of the TCorp Hour-Glass facilities, which are measured at fair value. The value of the Hour-Glass Investments is based on the Board’s share of the value of the underlying assets of the facility, based on the market value. All of the Hour-Glass facilities are valued using ‘redemption’ pricing. The carrying amount of receivables less any impairment provision and payables is a reasonable approximation of their fair value due to their short term nature. (g) Fair value recognised in the Statement of Financial Position. The Board uses the following hierarchy for disclosing the fair value of financial instruments by valuation technique:

Level 1 – Derived from quoted prices in active markets for identical assets / liabilities.

Level 2 – Derived from inputs other than quoted prices that are observable directly or indirectly.

Level 3 – Derived from valuation techniques that include inputs for the asset / liability not based on observable market data (unobservable inputs).

Financial Assets at Fair Value Level 1 $

Level 2 $

Level 3 $

2010 Total $

Derivatives 0 0 0 0 TCorp Hour-Glass Investment Facility 0 4,091,092 0 4,091,092 Shares 0 0 0 0 0 4,091,092 0 4,091,092

The table above only includes financial assets, as no financial liabilities were measured at fair value in the Statement of Financial Position.


20. MANDATES OF OPTIONS AND MAJOR POLICY DECISIONS UNDER AUSTRALIAN ACCOUNTING STANDARDS

Australian Accounting Standards, which include the Australian equivalents to International Reporting Standards (AEIFRS), require the selection of certain accounting policy options. These options were mandated as part of the adoption of AEIFRS in 2005/06, to ensure consistency at the whole of government level.

At 30 June 2010, a number or amended accounting standards or interpretations had been approved but were not yet effective. The Board has not early adopted any of the new or amended accounting standards or interpretations. The Board considers that the new or amended accounting standards or interpretations will not have a material impact on the Board’s financial report when adopted in future periods.

21. AFTER BALANCE DAY EVENTS The Board is unaware of any other matters or events occurring after balance day that would be likely to have any material impact on the Board’s finances or on the presentation of these accounts.

END OF FINANCIAL STATEMENTS


LORD HOWE ISLAND BOARD PO Box 5 Lord Howe Island, NSW 2898 Phone: (02) 6563 2066 Fax: (02) 6563 2127 Email: [email protected]