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2015-16 Annual Reportwww.navycanteens.com.au

ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

RANCCB - Royal Australian Navy Central Canteens Board (Trading as Navy Canteens) ABN 50 616 294 781

www.navycanteens.com.au

RANCCB ANNUAL REPORT 2015-16 | Royal Australian Navy Central Canteens Board

II

Royal Australian Navy Central Canteens Board | RANCCB ANNUAL REPORT 2015-16

III

1. Corporate Directory 1

2. Chairman’s Message 2

3. Report of Operations 3

3.1 Enabling Legislation and Responsible Minister 3

3.2 Principal Activities 6

3.3 Significant Events 12

3.4 Significant Changes 13

3.5 Effects of Ministerial Directions 13

3.6 Statement on Governance 13

3.7 Risk, Compliance and Audit Committee 13

3.8 Grants Committee 14

3.9 Remuneration Committee 14

3.10 Conflicts of Interest 14

3.11 Ethical Standards 14

3.12 Directors Benefits 14

3.13 Gender Diversity 14

3.14 Insurance of Officers 14

3.15 Legal Expenses 15

3.16 Meetings of Directors 15

3.17 Directors Qualifications 16

4. Annual Performance Statement 17

4.1 Introductory Statement 17

4.2 Entity Purposes 17

4.3 Results 18

4.4 Analysis of Performance 20


Iv

5. Corporate Governance 21

5.1 Objectives and Strategic Intent 21

5.2 Charter 21

5.3 Risk, Compliance and Audit Committee 22

5.4 Remuneration Committee 23

5.5 Grants Committee 23

5.6 Chief of Navy Directive 23

6. Financial Statements 24

6.1 Independent Audit Report 24

6.2 Statement by the Accountable Authorities, Chief Executive Officer and Chief Financial Officer 26

6.3 Statement of Comprehensive Income 27

6.4 Statement of Financial Position 28

6.5 Statement of Changes in Equity 29

6.6 Cash Flow Statement 30

6.7 Notes to the Financial Statements 31


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NAVY CANTEENS 2015-2016 ANNUAL REPORT

1. CORPORATE DIRECTORY

Legislation

The Royal Australian Navy Central Canteens Board was established by the Navy (Canteens) Regulations 1954 under the Naval Defence Act 1910 and as at 30 June 2016 is a Corporate Commonwealth Entity under the Public Governance, Performance and Accountability Act 2013.

Responsible Minister

The Honourable Stuart Robert MP, Assistant Minister For Defence, The Honourable Darren Chester MP, Assistant Minister For Defence and The Honourable Michel McCormack MP, Assistant Minister For Defence, had portfolio responsibility for the Royal Australian Navy Central Canteens Board during the 2016 financial year.

Principal

The Chief of Navy, Vice Admiral Tim Barrett, AO, CSC, RAN acted as principal of the Royal Australian Navy Central Canteens Board.

Management Structure

Chairman: Commodore Ian Murray, RAN, CAHRI, FCILT, GAICD

Chief Executive Officer: Mr Stephen Gregory, FAMI, CPM, FAIM, GAICD

Chief Financial Officer: Mr Harish Anand, ICAI, CPA

Head Office

Address: CP3-1-132, Campbell Park Offices, Canberra ACT 2600

Telephone: (02) 6266 4932

Facsimile: (02) 6266 2966

Website: www.navycanteens.com.au

Bankers

Australian Military Bank

Solicitors

Griffin Legal

Auditors

Australian National Audit Office (ANAO)


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2. CHAIRMAN’S MESSAGE

Navy Canteens exists to support Navy people and benefit the broader Navy family. The business is defined as a Corporate Commonwealth Entity under the Public Governance Performance and Accountability Act 2013 and is governed by a Board of Directors appointed by the Chief of Navy. The Chief of Navy expects the Board to generate profit from commercial undertakings in order to return that profit to serving Navy personnel through distributions, grants and services. Most notably the distributions and grants provided by Navy Canteens sustain the Navy’s Relief Trust Fund and Navy Sport. The services provided by Navy Canteens include canteen services on Navy establishments, as well as the very popular Navy Canteens Ticketing agency and discounted holiday accommodation opportunities at BIG4 Bungalow Park on Burrill Lake (NSW), Amblin Holiday Park in Busselton (WA), Forster Holiday Village (NSW) and a holiday apartment near Tweed Heads (NSW).

To achieve its objectives Navy Canteens maintains a close collaborative relationship with Navy to ensure profit is generated and proceeds directed to where they are needed most.

For the first time, Navy Canteens has operated canteens on all Navy establishments for the entire financial year, with the exception of HMAS Harman. The experience of a full year of operations has provided a valuable insight for the Board and the Executive as to the benefits and costs arising from delivery of quality canteen services to Navy personnel serving ashore. Significant resource investment and staff effort has achieved some very profitable and successful operations, but also demonstrated businesses where further management focus is required to increase profit generation in the years to come. During the year notable progress has also been made in providing support to ships and Navy people at sea through contracted services and support facilitated by Navy Canteens. The performance of our holiday parks and the Win with Navy raffle has also made an important contribution to Navy Canteens enabling growth in own source revenue to $17,379,000 in 2016, an increase of over $1,000,000 on the 2015 result. Recognising the importance of the support provided to Navy by Navy Canteens, annual grants totalling $515,000 have been provided comprising; $135,000 to the RAN Relief Trust Fund, $195,000 to Navy Sport and $141,000 to Navy establishments and $44,000 for other motivational and sporting activities. At the conclusion of the 2016 financial year Navy Canteens delivered a deficit of $458,000 (which includes disbursement of $515,000 to Navy) and had approximately $18.8m in assets.

Navy Canteens staff are employed across Australia supporting Navy. Their hard work and support of Navy is greatly appreciated by the Board and is key to Navy Canteens success. In recognition of this, a significant staff training investment program has been introduced in FY 2016 to increase the professionalism of our workforce.

This annual report provides an insight into Navy Canteens achievements during FY 2016. The report contains much to be proud of and also points to opportunities where we will continue to strive to improve in future years. I commend the report to you.

Ian Murray Commodore RAN Chairperson RAN Central Canteens Board (Trading as Navy Canteens)


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3. REPORT OF OPERATIONS

The Honourable Dan Tehan MP Minister for Defence Personnel

Dear Minister,

The Directors of the Royal Australian Navy Central Canteens Board (RANCCB) have pleasure in submitting their Annual Report for the year ended 30 June 2016.

3.1 Enabling Legislation and Responsible Minister

The RANCCB delivers welfare and lifestyle benefits, products and services to the officers and sailors of the Royal Australian Navy in accordance with the Navy (Canteens) Regulations 1954. These Regulations provide that the Directors shall, subject to and in accordance with the Regulations, apply monies and property of the Board; provide grants, loans and benefits for members of the Royal Australian Navy and further provide grants to the Royal Australian Navy Relief Trust Fund (RANRTF).

The Honourable Stuart Robert MP, Assistant Minister For Defence, The Honourable Darren Chester MP, Assistant Minister For Defence and The Honourable Michel McCormack MP, Assistant Minister For Defence, assumed portfolio responsibility for the RANCCB during the financial year.

As at 30 June 2016 the RANCCB remains a Corporate Commonwealth Entity under the Public Governance, Performance and Accountability Act 2013.


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3.1.1 ORGANISATIONAL STRUCTURE

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The RANCCB is a Statutory Authority with body corporate status and perpetual succession. Operations are overseen by a Board of seven Directors appointed by the Chief of Navy by means of a delegation from the Minister under the provisions of the Navy (Canteens) Regulations 1954. The business is headed by a Chief Executive Officer (CEO) assisted by a Chief Financial Officer (CFO), line management and administrative staff. Core affairs of the organisation are managed from Campbell Park Offices in Canberra ACT.

The RANCCB trades as Navy Canteens across Australia and also uses a number of other trading names for various business units. Ancillary businesses are physically operated and located in Fyshwick (ACT), Cairns (QLD), Tweed Heads (NSW), Forster (NSW), Sydney (NSW), Nowra (NSW), Jervis Bay (ACT), Crib Point (VIC), Rockingham (WA), Busselton (WA) and Darwin (NT).

The ABN for the organisation is 50 616 294 761.

3.1.2 WORK HEALTH AND SAFETY ACT 2011

Navy Canteens complies with the Work Health and Safety (WHS) Act 2011. The Board, Executive and employees are actively involved in ways that promote and support a positive safety culture and exercise due diligence to ensure that the RANCCB meets its work health and safety obligations. The Chief of Navy, the Board and the Executive constitute Persons Conducting a Business Undertaking (PCBU) in accordance with the WHS Act 2011.

A series of decisions and actions taken in concert with legal advice (Norton Rose Fulbright Australia) and specialist industry advice (Worklaw Health and Safety Pty Ltd) has resulted in introduction of a WHS policy statement, a WHS policy manual, reporting process, and a training and support framework for our Holiday Centres, Navy Service Canteens network and retail businesses. Safety Australia Pty Ltd provides WHS consulting services to the organisation.

3.1.3 ECOLOGICAL SUSTAINABLE DEvELOPMENT

This report is made in accordance with s516A(6)(a) of the Environmental Protection and Biodiversity Conservation Act 1999. The activities of the RANCCB are not directly relevant to ecological sustainable development in terms of the principles identified in the Act. However, the organisation has historically taken a number of steps to reduce energy consumption, waste production and water consumption. Specific examples are the introduction of power saving lights and water saving devices attached to outlets, as well as the introduction of recycling at our holiday parks with co-mingle recycling bins and solar heat pumps for amenity blocks. BIG4 Bungalow Park has been awarded a Silver Gumnut Award by the Caravan and Camping Association for substantial environmental protection actions introduced.

3.1.4 FREEDOM OF INFORMATION ACT

There was one application for information received in the reporting period from an employee in respect to a complaint made from another employee about him. No expenses were incurred for the handling of information. Details on the RANCCB’s organisational structure, change of directorships and a list of documents available for inspection has been lodged with the relevant department. Access to information under the Freedom of Information Act 1982 can be secured by writing to the CEO, CP3-1-132, Campbell Park Offices, Canberra ACT 2600.


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3.1.5 JUDICIAL DECISIONS OR EXTERNAL REPORTS

The RANCCB was not subject to any parliamentary, judicial, administrative tribunal, Ombudsman or other external investigations or reports in the reporting year besides the report on financial operations.

3.2 Principal Activities

The principal activities of the Board are to operate profitable and sustainable businesses in order to provide welfare and lifestyle related benefits and services to Navy members.

As part of its strategic plan, and as agreed by Chief of Navy, the RANCCB operates canteen services on all Navy establishments, excluding HMAS Harman in Canberra. This activity applies standardised business practices, policies and strategies to ensure more efficient, productive and profitable canteen services to meet the increasing member demands for welfare, lifestyle, sport and recreational support.

3.2.1 PRODUCTS AND BENEFITS

The RANCCB, trading as Navy Canteens, operates the following core businesses:

a. Holiday Centres – Accommodation and amenities are provided at BIG4 Bungalow Park on Burrill Lake (NSW), Amblin Holiday Park in Busselton (WA), Forster Holiday Village in Forster (NSW) and a serviced holiday apartment at Pandanus Pocket in Tweed Heads (NSW). These operations generate revenue and provide discounted holiday accommodation to Navy and other Defence members.

b. Navy Canteens Ticketing – An entertainment ticketing agency providing discounted pricing and preferential seating to Navy, as well as other Defence and Australian Public Service (APS) members.

c. SALT – An on-line merchandise solution generating revenue from the sale of a comprehensive range of Navy branded clothing, accessories and memorabilia to the general public and ADF.

d. Win with Navy Raffle – A fortnightly raffle for Navy members to generate supplementary revenue for grants and/or reinvestment into other benefit generating assets.

e. Fleet Air Arm Museum Shop – A retail merchandise shop in the Fleet Air Arm Museum, Nowra Hill to support the museum and generate further revenue.

f. Canteens – Canteens are operated directly by Navy Canteens at HMAS Cairns, HMAS Albatross, HMAS Creswell, HMAS Cerberus, HMAS Stirling, Garden Island Defence Precinct, RAN Heritage Centre, HMAS Kuttabul, HMAS Watson, HMAS Waterhen, HMAS Penguin, HMAS Coonawarra, Defence Establishment Berrima and Larrakeyah Barracks.

The results from these businesses are combined to enable grants and loans to the Royal Australian Navy Relief Trust Fund (RANRTF), the Navy Sports Council (NSC) and Ships Company Amenity Funds (SCAF’s) along with RANCCB’s own grant program.


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TOTAL BENEFITS

The total of all tangible benefits provided to Navy members and their families, and other Defence members, for the financial year is as follows:

TOTAL TANGIBLE BENEFITS

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BENEFITS427

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FINANCIAL YEAR END

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2015 2016

BENEFITS252

BENEFITS411

BENEFITS393

BENEFITS583

GRANTS515

GRANTS811

GRANTS614

GRANTS260

GRANTS298

3.2.2 REvIEW OF OPERATIONS, OPERATIONAL DEvELOPMENTS, FINANCIAL PERFORMANCE AND FUTURE PROSPECTS

OvERvIEW

Consolidation of canteen operations was a focus during the 2016 financial year. The RANCCB continues to strengthen its operational capability in the core areas of governance, performance management and procedural rigour.

The RANCCB routinely reviews the execution of its strategy. Its key operating assets, products and services are being managed to provide support to Navy in the form of consistent and sustainable benefits throughout the financial year. The directors, executive, managers and staff of the RANCCB are dedicated to providing innovative, tangible and valued benefits to Navy members and the wider Navy family.

The RANCCB remains in a sound fiscal position, however the 2016 financial year presented a number of challenges for the organisation which have collectively resulted in an operational loss. This result is largely attributable to the maintenance of distributions to Navy, increased investment in training of personnel, some large losses at a small number of shore canteen businesses, the rebuilding of Win with Navy Raffle participation and some legacy costs incurred due to a longstanding infrastructure issue at Amblin Holiday Park which has been remedied in the 2016 financial year. Canteen performance up to 30 June 2016 has been reviewed by the Board with decisions subsequently made for adjustment to certain operations in order to reduce costs and grow the profitability of the canteen group.

The full RANCCB portfolio of businesses again delivered a year of mixed but noteworthy performance with an increase in total own source revenue of $17,379,000 (2015: $16,270,000), but a trading deficit of $458,000 (which includes disbursements to Navy of $515,000) (2015 deficit $116,000) excluding revaluation adjustments.


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The following graph is a representation of the surplus/(deficit) declared by the RANCCB since 30 June 2012:

RANCCB - SURPLUS / (DEFICIT)

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2012 2013 2014

FINANCIAL YEAR END

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2015 2016

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The performance of the various individual business units of Navy Canteens is addressed in the following sections.

WIN WITH NAvY RAFFLE

The rebuilding of Win with Navy Raffle participation and revenue using the Direct Debit system continues. This change was necessary due to the discontinuation of allotments from the ADF Pay System to the Win with Navy Raffle. FY 2016 is the first full year of trading since this change. Revenue has fallen 18% during the financial year. However the Win with Navy Raffle continues to be very profitable delivering a net surplus of $218,014 (2015 net surplus of $331,177). Restoring participation levels continues to be a management focus and has resulted in a positive trend. Improvement in communication with Navy members and variation to the mix of cash prizes on offer has assisted achievement of this trend.

HOLIDAY CENTRES

Navy Canteens’ holiday centres are continually improved to provide a quality holiday experience. Upgrades to existing amenities, introduction of new amenities, innovative alternate camping facilities and remodelling of landscapes and vistas to capture new clientele and retain the existing base remain critical to the business. In FY 2016 there was significant investment to improve the quality of the infrastructure at BIG4 Bungalow Park on Burrill Lake (NSW) including a new games room.

New management of both Amblin Holiday Park and Forster Holiday Village have delivered positive results. The overall result for holiday centres as a group was an increase in total revenue of 8% on the previous year (2016: $3,683,300, 2015: $3,418,281). All properties except Pandanus Pocket achieved higher revenues than the previous financial year.


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Individual business performances were a net surplus of $229,013 for BIG4 Bungalow Park on Burrill Lake (2015: net surplus of $403,083); a net surplus of $158,432 for Amblin Holiday Park (2015: net surplus of $94,653); a net surplus of $7,685 for Forster Holiday Village (2015: net surplus of $1,638) and a net surplus of $1,088 for Pandanus Pocket (2015: net loss of $793). The BIG4 Bungalow Park on Burrill Lake result was the only profit result lower than the previous financial year and was due to infrastructure maintenance.

Rising costs, increased competition and the continued demands of infrastructure maintenance and development create financial pressure and these factors are unlikely to change in the years ahead. On a positive note there is continued increased participation by the retiree market segment which provides solid patronage outside of peak holiday periods. The impact of the change in general “customer holiday behaviour” towards camping and reduced occupancy in fixed or luxury accommodation, which has been experienced by all tourism and accommodation businesses in Australia, continues to be monitored and capitalised upon where possible.

NAvY CANTEENS TICKETING

Navy Canteens Ticketing is located in Defence Plaza, Pitt Street, Sydney (NSW). Navy Canteens Ticketing provides discounted and free tickets as well as preferential seating sourced from on-sellers such as Ticketek, Ticketmaster and other event co-ordinators and venues. Navy Canteens Ticketing has remained very popular. In 2016 Navy Canteens Ticketing achieved ticket sales valued at $984,322, being $294,261 below the previous year figure of $1,278,583. Ticket discounts totalling $426,827 were achieved for Navy, other Defence and APS personnel. In all, a total of 11,980 tickets (2015: 14,475 tickets) were sold during the 2016 financial year.

Navy Canteens Ticketing is provided as a service benefit that recognises the limitations deployed personnel face when it comes to acquiring tickets to popular shows. Where possible, Navy Canteens Ticketing assesses demand and purchases tickets for offer to deployed personnel and receives many acknowledgements every year for this service. However, this service benefit is provided at a cost. Navy Canteens Ticketing generated a net loss in 2016 of $110,720 (2015: net loss of $112,255).

0

100

200

300

400

500

600

700

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Value of Tickets Discounts Recd

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Cost of Service

464452

539

694

558

252

411 393

583

427

121 113 120 112 111

2012

2013

2014

2015

2016

NAvY CANTEENS TICKETING


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SALT

Navy Canteens’ on-line merchandise business, SALT, is managed by Brandnet Pty Ltd, located in Fyshwick (ACT). SALT returned a net surplus of $2,839 for the financial year (2015: $28,399), which was well below budgeted profitability. Higher manufacturing and import costs have continued to put pressure on margins and will have an ongoing impact on future sales. The SALT business relies on competitive pricing and quality product.

The focus for additional revenue generation remains capturing the business of Navy in addition to selling to the general public and individual Navy members and their families. However, there has also been a concentrated effort on sales of merchandise through canteens on naval establishments during FY 2016.

The Fleet Air Arm Museum Shop in Nowra, which sells SALT merchandise, performed below budget for both revenue and profit. Revenue for the year was equivalent to the previous year but higher cost of goods sold and wages reduced profitability. Revenue in FY 2016 was $143,582 (2015: $144,066), whilst the surplus achieved was $9,885 (2015: $12,977).

NAvY SHORE BASED CANTEENS

The canteens business of the RANCCB remains the primary management focus to ensure delivery of a quality service to Navy, whilst managing the impact on profitability from labour costs, the challenges of remote locations, a limited customer base and working within Defence establishments.

In FY 2016 the aim has been to stabilise all canteen operations, learn from practical operational experience and focus on improving profitability. There has been a significant investment in training and professionalisation of the Navy Canteens workforce to formally recognise and develop skills, to ensure a standardised level of service and product is delivered, and to improve workforce stability and retention.

In FY 2016 litigation arising from the termination of contracts with Leisure Management Australia Pty Ltd for canteen operations at HMAS Penguin, HMAS Creswell, HMAS Kuttabul and HMAS Stirling during FY 2015 was settled. The lessons learnt from this matter have been applied to all contracts entered into by Navy Canteens.


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Individual canteen results for the 2016 financial year (including 2015 comparative data) were as follows:

ESTABLISHMENT 2016 $

2015 $

Arrow Bar - HMAS Coonawarra and Barnacle Bar - Defence Establishment Berrima (Darwin, NT)

135 -18,569

Café 1, Garden Island (Sydney, NSW) 30,392 -44,992

Café 51, Garden Island (Sydney, NSW) 1,284 56,682

HMAS Albatross (incl. FAAM) (Nowra, NSW) -114,243 -80,890

HMAS Cairns (Cairns, QLD) -78,427 -27,338

HMAS Cerberus (Crib Point, VIC) 597,910 523,649

HMAS Coonawarra (Darwin, NT) -16,631 -70,016

HMAS Creswell (Jervis Bay, ACT) -27,024 -34,335

HMAS Kuttabul (Sydney, NSW) 73,319 54,571

HMAS Penguin (Sydney, NSW) -14,291 -50,294

HMAS Stirling (Rockingham, WA) 322,857 366,783

HMAS Waterhen (Sydney, NSW) 31,987 -8,222

HMAS Watson (Sydney, NSW) 36,525 551

Larrakeyah Café, Larrakeyah Barracks (Darwin, NT) -247,056 -159,186

Salthorse Café, RAN Heritage Centre Garden Island (Sydney, NSW) -38,232 -172,152

Whilst there have been very good results achieved at many sites such as HMAS Cerberus, HMAS Kuttabul, HMAS Waterhen and HMAS Watson, major profitability concerns still impact operations in Cairns and Darwin. The Flight Deck Café (FAAM Nowra, NSW) and Salthorse Café (RAN Heritage Centre, Garden Island NSW) have continued to underperform with adjustments to operations being introduced to reduce costs.

The unprofitable canteen operation at HMAS Creswell (Jervis Bay, ACT) is an example of where a service is being intentionally provided at a cost to Navy Canteens to support Navy personnel in a remote location. This service is in effect being subsidised by other profitable Navy Canteen operations. This deliberate approach allows smaller sites to exist whereas ordinarily such sites would be deemed not commercially viable and operations closed.

Key objectives to improve profitability across all sites include increased quality and service of coffee, refining labour costs and reducing the cost of goods sold. The significant training investment made in the Navy Canteens workforce aims to develop staff and increase workforce retention to support these objectives. The quality of the food product offered in canteens has continued to evolve, and is being further developed under the guidance of our qualified chefs to meet demands for contemporary, diverse and healthy food options.


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3.2.3 CAPITAL INvESTMENT

The Board has continued its capital investment program, commenced four years ago, aimed at renovating, upgrading and replacing core infrastructure at its Holiday Centres. This focus has helped to mitigate the risk of declining revenue within a soft domestic tourism and accommodation sector.

The Board’s approval in the 2014 financial year of the new canteen group in Sydney and Darwin resulted in a very large capital investment in plant and equipment that continues to generate significant depreciation charges.

3.2.4 DISBURSEMENTS

The key purpose of the endeavours of the RANCCB is to support Navy people through various activities such as funding the RAN Relief Trust Fund, sponsoring Navy sport, providing grants, as well as supporting other lifestyle and entertainment activities. The overall financial performance in FY 2016 restricted the ability of the RANCCB to disburse cash for these purposes during the financial year. A total of $515,000 was disbursed. The total cash disbursements for the year, compared to previous years, are as follows:

RANCCB - GRANT DISBURSEMENTS

0

200

400

600

800

1000

$586

2012 2013 2014

FINANCIAL YEAR END

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2015 2016

811

614

260298

515

3.2.5 LOANS

The RANCCB issued loans of $14,625 to various ships and establishments to assist in the provision of recreational activities and amenities to sailors.

3.3 Significant Events

The strategic focus over the last three financial years has been on improving the performance of existing business units of the RANCCB and completing the goal of establishing profitable canteens on Navy establishments. There have been no significant events during FY 2016, with the focus being upon stabilising the canteen group to attain sustainable profitability.


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3.4 Significant Changes

In the opinion of the Directors there has not been any matter or circumstance that has arisen since the end of the financial year that has significantly affected or may affect the Board’s operations, the result of those operations, or the Board’s state of affairs in the financial years following the period under review.

Of note however, since the end of the FY, the Navy (Canteen) Regulations 1954 ceased to be in effect and have been replaced by the Navy (Canteen) Regulations 2016, following amendments to the Defence Act 1903 which came into effect on 1 October 2016.

3.5 Effects of Ministerial Directions

There were no directions received, nor any notification of general policies of the Commonwealth Government to be applied to the authority, by the responsible Minister.

3.6 Statement on Governance

This statement provides an outline of the key corporate governance practices of the RANCCB throughout FY 2016.

The Board directs a number of committees to assist in the execution of its responsibilities. They are the Risk Compliance and Audit Committee, the Grants Committee and the Remuneration Committee. These committees reflect the Board’s commitment to ensuring business activities are correctly governed.

All committees have specific charters providing a robust management framework including a set of internal controls to assist with assessments of risk and complying with reporting requirements.

The Board convened eight scheduled meetings during FY 2016 and where necessary approved via email, or other means, correspondence ‘out of session’ where a more immediate response was required. At each meeting the Board reviewed monthly and year to date financial results, Work Health and Safety reports, key performance indicators, approved budgets and capital expenditure requests, and reviewed policies.

In FY 2016 the RANCCB implemented an internal board evaluation process following external research of best practice. The evaluation identified opportunities for reform and improved management, but overall demonstrated that the Board was performing effectively.

3.7 Risk, Compliance and Audit Committee

The Risk, Compliance and Audit Committee’s role is to monitor Board responsibilities relating to accounting and reporting, internal and external audit processes, Work Health and Safety reporting, risk management measures and performance and compliance with policies of the organisation. Notably the Committee delivered two internal audits facilitated through independent auditors, which have led to improvement and reform. The Chair of the Committee was Captain Guy, Blackburn RAN. This committee of three RANCCB Directors is assisted by the CEO and CFO.


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3.8 Grants Committee

The Grants Committee’s role is to assess all applications for grants, and where appropriate, approve funds for relevant or specific activities and causes, as well as contributions towards more general or day to day requirements in support of Navy personnel. The Chair of the Committee is Lieutenant Commander Heidi Rossendell, RANR. This committee of three RANCCB Directors is assisted by Ms Katrina Pawley (National Marketing Manager) who collates grant requests and attends to administrative queries.

3.9 Remuneration Committee

The Remuneration Committee’s role is to make an annual recommendation on the remuneration of the CEO and direct reports to the CEO, as well as review compliance with relevant employment legislation. The Chair of the Committee is Commodore Ian Murray, RAN. This committee of three RANCCB Directors is assisted by the CEO.

3.10 Conflicts of Interest

The Directors, Executive management and staff are expected to comply with the Conflict of Interest policy and declare any potential conflict according to the policy at the start of each Board and/or Committee meeting.

3.11 Ethical Standards

Directors, Executive management and staff are expected to act with integrity. The RANCCB has several policies including Code of Conduct, Code of Ethics and a Policy on Bullying to assist and guide staff on acceptable standards of behaviour within the organisation.

3.12 Directors Benefits

Defence and Australian Public Service personnel appointed to the Board are not entitled to any remuneration as stated by the Navy (Canteens) Regulations 1954.

3.13 Gender Diversity

The RANCCB recognises the benefits of having diversity in the boardroom. During FY 2016 there were three female Directors on the Board (Captain Fiona Sneath, RAN (part year), Lieutenant Adelaide O’Connor, RAN (part year), Commander Sophia White, RAN and Lieutenant Commander Heidi Rossendell, RANR) representing 43% of the Board membership.

3.14 Insurance of Officers

The RANCCB paid premiums of $6,616 for the year ended 30 June 2016 in respect of directors and officer’s liability and company insurance policies. The liabilities included costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the RANCCB.


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3.15 Legal Expenses

The Legal Services Directions 2005 requires Australian Government Agencies to report on legal expenses. The legal expenses incurred by the RANCCB in the financial year 2016 were $130,771 (2015: $91,568).

3.16 Meetings of Directors

Directors are appointed by the Chief of Navy who takes advice from the Chairman of the Board. All Directors are required to undertake a formal process of education on their responsibilities and rights, typically through the completion of the Australian Institute of Company Directors course. During this reporting period the Board also approved funding for ongoing Director training.

The following outlines the number of meetings attended by each Director during the reporting period:

Committees

Board Meetings Remuneration Risk Compliance and Audit

Grants Notes

Director Experience Eligible Attended Eligible Attended Eligible Attended Eligible Attended

Commodore Ian Murray, RAN

2 8 8 2 2

Captain Fiona Sneath, RAN

1 1 1 1 1 2 1Part Year

Commander Sophia White, RAN

1 8 7 7 5

Captain Guy Blackburn, RAN

2 8 7 7 7

Captain John Metzl, RAN

1 8 8 2 2 7 7

Lieutenant Commander Heidi Rossendell, RANR

1 8 8 4 4

Lieutenant Adelaide O’Connor, RAN

1 6 5 1 1 Part Year

Warrant Officer Stephen Downey

1 8 7 4 4

Notes: 1. All Directors are Non Executive Directors.2. Directors share equal responsibilities.3. Experience denotes the number of Board memberships held.


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3.17 Directors Qualifications

DIRECTOR QUALIFICATIONSCommodore Ian Murray, RAN BA, Grad Dip HRM, Master of Defence Studies, Master

of Arts, MBA, CAHRI, FCILT, GAICD

Captain John Metzl, RAN BSC, Master Of Operations, GAICD, FCILT

Captain Fiona Sneath, RAN Dip Law, Grad Dip Leg Prac, LLM, MST (Intl. Human Rights Law, Grad Cert Maritime Studies, Grad Cert Dispute Resolution

Fleet Command Warrant Officer Stephen Downey GAICD

Commander Sophia White (formerly Hill), RAN Bachelor of Law (UQ), Grad Dip (Military Law) (Melb), Master of Laws (Maritime Law) (UQ), MAICD, Master of Military and Defence Studies

Captain Guy Blackburn, RAN BSC, MMS (Maritime Studies), MA (Strategy and Policy), MA (International Relations), Grad Dip (Info Mgmt Sys), JP, GAICD

Lieutenant Commander Heidi Rossendell, RANR BSC (Hons), MAICD

Lieutenant Adelaide O’Connor, RAN B Business(Accounting), B Information Technology, Master of Management Studies (Project Management), Grad Dip Education (Senior Years) CPA, GAICD

I G Murray A Z O’Connor Commodore, RAN Lieutenant, RAN Director Director

13 October 2016 13 October 2016


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4. ANNUAL PERFORMANCE STATEMENT

4.1 Introductory Statement

The annual performance statement is for s39(1)(a) of the PGPA Act for the 2016 financial year and accurately presents the entity’s performance in accordance with s39(2) of the PGPA Act.

4.2 Entity Purposes

Under the Navy (Canteens) Regulations 1954, Navy Canteens exists to make grants to the Royal Australian Navy Relief Trust Fund (RANRTF), and to make grants and loans to persons operating canteens, clubs, cinemas or other institutions or facilities for the welfare and entertainment of serving Naval members. These regulations provide that the Directors shall, subject to and in accordance with the Regulations apply monies and property of the organisation; provide grants; loans and benefits for members of the Royal Australian Navy and further provide grants to the RANRTF.

Navy Canteens aims to fulfil this purpose by providing relevant, sustainable recreation and welfare alternatives for serving members of the Navy, and the wider Navy family, that enhance and recognise the unique nature of Naval service.

This will be enabled by Navy Canteens growing sustainable profitability through commercial business undertakings, delivering valued benefits to the Navy community, and maintaining efficient and effective governance of the Navy Canteens organisation.


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4.3 Results

BUSINESS ACTIvITY PERFORMANCE MEASUREMENT RESULTCanteen operations on Naval establishments

Comparison of actual net profit to budgeted net profit within 10% Criterion Source: 2016 Corporate Plan

The target of 10% was not achieved.

Labour % (Total Labour Cost as % of Gross Revenue) of 35% Criterion Source: 2016 Corporate Plan

For canteen operations a labour cost of 34% was achieved.

COGS % (Total COGS as % of Gross Revenue) of 52% Criterion Source: 2016 Corporate Plan

For canteen operations COGS of 52% was achieved.

Staff retention rate (%) of 70% Criterion Source: 2016 Corporate Plan

The targeted staff retention rate of 70% was not achieved. Nationally, the rate sat at 61% but was negatively impacted by a high volume in turnover of casual positions especially in the major Sydney population centre. Recruitment processes have been modified to ensure a better fit with the organisation, tighter referee checks and inclusion in recruiting material of training provided.

Annual Customer satisfaction survey – overall satisfaction level of satisfied or better at 70% Criterion Source: 2016 Corporate Plan

A paper based survey was conducted in Feb 2016 and showed satisfaction levels of 97% which achieved the measure. Electronic Satisfaction surveys were not implemented as planned due to compatibility issues of the online survey tool with the Defence network.

Other services to Navy

Number of Major Fleet Unit customers supplied - 2 Criterion Source: 2016 Corporate Plan

Navy Canteens supplied HMA Ships Canberra, Adelaide, Choules, Sirius, Newcastle, Success, Bathurst, Broome, Melville, Maitland, Glenelg and APV Cape Byron with Coca Cola Amatil product. Navy Canteens also supplied HMAS Canberra with canteen related goods other than Coca Cola Amatil product. This performance exceeded the measure.


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BUSINESS ACTIvITY PERFORMANCE MEASUREMENT RESULTNavy Merchandise Total revenue growth (over previous year)

of 5% Criterion Source: 2016 Corporate Plan

Revenue growth was not achieved for SALT merchandise sold online. However, Navy merchandise sold through canteens operated by Navy Canteens increased from $203,430 in 2015 to $226,962 in 2016, a growth of 11.56%.

Holiday Centres Total revenue growth (over previous year) of 3% Criterion Source: 2016 Corporate Plan

The overall result for holiday centres as a group was an increase in total revenue of 8% on the previous year (2016: $3,683,300) (2015: $3,418,281), which exceeded the measure.

Total number of customer complaints received annually of 36 Criterion Source: 2016 Corporate Plan

The number of customer complaints received across all four properties was three. BIG4 Bungalow Park on Burrill Lake was the only property with written complaints which related to the behaviour of fellow guests, not actual complaints about Navy Canteens or its employees.

Win With Navy Raffle

Number of Navy participants at 4,000 Criterion Source: 2016 Corporate Plan

The targeted participation level was not achieved with the number of Win with Navy raffle participants at 30 June 2016 totalling 3,023. Nevertheless this result represented positive participation growth.

Navy Canteens Ticketing

% Number of tickets sold to Navy at 50% Criterion Source: 2016 Corporate Plan

The % of tickets sold to Navy equated to 55% of all ticket sales, which achieved this measure.

Total number of ticket sold to Defence of 14,500 Criterion Source: 2016 Corporate Plan

The target of 14,500 tickets was not achieved. 11,980 tickets were sold.

Total Navy Grants $510,000 inclusive of Navy Sports Council, RANRTF, Shore establishments, RANCCB grants program. Criterion Source: 2016 Corporate Plan

Grants totalling $514,855 were paid for the FY 2016 including:

· $195,000 Navy Sports Council

· $135,080 RANRTF

· $141,000 Shore establishments

· $43,775 RANCCB grants program.


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4.4 Analysis of Performance

Factors that have contributed to the entity’s performance in achieving its purposes that have had a significant impact in the reporting period include:

Canteen operations on Naval establishments – Canteen trading is still being stabilised including menu, staffing (including full time equivalents), supply chain management and base relationships to better understand customer demand. The very good performances at many canteen sites have been counterbalanced by large trading losses incurred in Darwin, Cairns and Nowra to negatively impact the whole canteen group’s performance.

Other services to Navy – Supply to ship canteens continued to grow during FY 2016, with initiatives being taken to improve the supply chain and grow internal awareness within Navy to ensure continued growth of these new services.

SALT Merchandise – Competitor pricing remains a challenge for securing SALT orders within Navy. Some quality issues have also been identified and are being addressed.

Holiday Centres – The Holiday Centres once again delivered a good performance during FY 2016. The increased expenditure required in FY 2016 at BIG4 Bungalow Park on Burrill Lake reduced profitability. However the works were required to maintain the premium position the park holds within BIG4.

Win with Navy Raffle – A slow but continual growth in participation has been achieved during FY 2016. The new direct debit payment model for participants has added additional administrative work for staff and led to participants more frequently re-evaluating their participation.

Navy Canteens Ticketing – Whilst delivering a creditable outcome, Navy Canteens Ticketing did not meet the ticketing target set for FY 2016. This outcome is attributable in part to the availability of reduced price tickets to shows and human resource limitations in the Navy Canteens Ticketing office.

Total Navy Grants – The payment of grants as an expenditure item, rather than from profits, impacted the end of year result. However, the Board considered that payments to Navy were important to maintain support of Navy welfare and recreational activities that are not able to be provided from Commonwealth funds. Financially the organisation remains in a sound financial position and able to sustain the loss incurred as a result of grant payments in FY 2016.


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5. CORPORATE GOvERNANCE

5.1 Objectives and Strategic Intent

5.1.1 The directors of the RANCCB have the following objectives:

a. ensure a safe working environment for our staff and customers;

b. ensure strong governance of Navy Canteens;

c. deliver and grow valued benefits to the Navy family;

d. grow profitability through sustainable businesses; and

e. foster strong collaborative relationships with Navy and other stakeholders.

5.1.2 The function of the Board is outlined in the Navy (Canteens) Regulations 1954 and includes the following as outlined in Regulation 10. The Board may make recommendations to the Minister or to the Chief of Navy concerning:

a. the opening, conducting and closing of canteens;

b. the imposition and variation of levies in respect of canteens trading;

c. the authorisation of persons to open and conduct clubs, cinemas and other institutions and facilities for the welfare or entertainment of members of the Navy, and the closing of those clubs, cinemas, institutions and facilities; and

d. matters incidental to the exercise by the Minister or the Chief of Navy of powers in respect of a matter referred to in any of the preceding paragraphs.

5.1.3 The powers of the Board are outlined in the Navy (Canteens) Regulations 1954 and more specifically Regulation 11.

5.2 Charter

5.2.1 The RANCCB is committed to continuous improvement of its corporate governance.

5.2.2 The Board applies relevant governance principles in a manner that is best suited to the business and to best address the accountability of directors and stakeholders of the organisation. This intent is supported by an organisational commitment to risk management assessments, legislative compliance, superior standards of service and required financial and ethical behaviour.

http://www.austlii.edu.au/au/legis/cth/consol_reg/nr1954261/s2.html#the_board


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5.2.3 A description of the Board’s main governance structure is outlined below:

a. the Charter of the Board is supported by the Navy (Canteens) Regulations 1954;

b. the Minister delegates to the Chief of Navy;

c. the Chief of Navy appoints a Chairman and six other Navy members (as Directors); and

d. a CEO is appointed by the Board.

5.2.4 The Board operates its committees and meets its board responsibilities, obligations and requirements according to its Governance Charter.

5.3 Risk, Compliance and Audit Committee

5.3.1 The Chairman of the Committee was Captain Guy Blackburn, RAN. The CEO attends all the meetings at the discretion and invitation of the committee.

5.3.2 This committee is a standing committee and members operate under a charter. The main responsibilities of the Committee are to:

a. review the monthly and annual financial statements prior to their consideration by the Board;

b. assess any proposed changes in accounting practices or policies (by February each year), prior to their consideration by the Board;

c. review jointly with management, the external auditors and, if necessary, legal counsel, any litigation, claim or other contingency, including tax assessments, which could have a material effect upon the financial position or operating results of the RANCCB. The Committee will also review the manner in which these matters have been disclosed in the financial statement;

d. consider any other matter, which affects its recommendation to the Board concerning the adoption of the financial statements;

e. monitor the standard of corporate conduct in transactions with related parties;

f. monitor the adequacy of financial information provided to the Board;

g. ensure a summary of the Committee’s responsibilities and the action it has taken to fulfill those responsibilities is included in the RANCCB’s Annual Report;

h. ensure the Board’s Risk Management matrix is reviewed at each Committee meeting and are further reviewed by the Board on a regular basis; and

i. ensure the Board and the Committee review and update the Work Health and Safety Policy annually and monitor the Near Miss and Incident Reports and associated documents at every Board meeting.


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5.4 Remuneration Committee

5.4.1 The remuneration of the CEO is determined by the Board on the recommendation of the Remuneration Committee, which is chaired by Commodore Ian Murray, RAN.

5.4.2 The key functions of the committee are to:

a. oversee CEO and executive staff remuneration; and

b. provide a forum for the CEO to raise issues of concern regarding compliance with employment legislation or issues of employee management.

5.5 Grants Committee

5.5.1 The Chairperson of the Committee was Lieutenant Commander Heidi Rossendell, RANR. The CEO attends the meetings at the discretion and invitation of the Committee to address questions of the Committee.

5.5.2 The main responsibilities of the Committee are to ensure:

a. the grants and provisions for grants are approved and executed according to the grant and sponsorship rules of the Board; and

b. that the Board is operating within the approved budget.

5.6 Chief of Navy Directive

5.6.1 On 7 July 2015 the Chief of Navy issued a Directive to the Chairperson of the RANCCB. The Directive sets out the Chairperson’s general and specific responsibilities to the Chief of Navy in the role of Chairperson of the RANCCB (trading as Navy Canteens). The Directive also sets out the Chief of Navy’s expectations for the Chairperson to comply with relevant legislative and financial requirements, particularly those laid out in the PGPA Act 2013 as they apply to Navy Canteens and for which the Chief of Navy has certain responsibilities. The Directive also sets out the basis on which the Chief of Navy will assess the performance of the Chairperson of the RANCCB. A full copy of the Directive can be viewed at the Navy Canteens website www.navycanteens.com.au.


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6. FINANCIAL STATEMENTS

6.1 Independent Auditors Report

GPO Box 707 CANBERRA ACT 2601 19 National Circuit BARTON ACT 2600 Phone: (02) 6203 7300 Fax: (02) 6203 7777

INDEPENDENT AUDITOR’S REPORT To the Minister for Defence PersonnelI have audited the accompanying annual financial statements of the Royal Australian Navy Central Canteens Board for the year ended 30 June 2016, which comprise:

Statement by the Accountable Authorities, Chief Executive Officer and Chief Financial Officer;

Statement of Comprehensive Income; Statement of Financial Position; Statement of Changes in Equity; Cash Flow Statement; and Notes to the financial statements comprising significant accounting policies and other

explanatory information.

OpinionIn my opinion, the financial statements of the Royal Australian Navy Central Canteens Board:

(a) comply with Australian Accounting Standards and the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015; and

(b) present fairly the financial position of the Royal Australian Navy Central Canteens Board as at 30 June 2016 and its financial performance and cash flows for the year then ended.

Accountable Authority’s Responsibility for the Financial Statements The directors of the Royal Australian Navy Central Canteens Board are responsible under thePublic Governance, Performance and Accountability Act 2013 for the preparation and fair presentation of annual financial statements that comply with Australian Accounting Standards and the rules made under that Act and are also responsible for such internal control as the directors determine is necessary to enable the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility My responsibility is to express an opinion on the financial statements based on my audit. I have conducted my audit in accordance with the Australian National Audit Office Auditing Standards, which incorporate the Australian Auditing Standards. These auditing standards require that I comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.


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6.2 STATEMENT BY THE ACCOUNTABLE AUTHORITIES, CHIEF EXECUTIvE OFFICER AND CHIEF FINANCIAL OFFICER

In our opinion, the attached financial statements for the year ended 30 June 2016 comply with subsection 42(2) of the Public Governance, Performance and Accountability Act 2013 (PGPA Act), and are based on properly maintained financial records as per subsection 41(2) of the PGPA Act.

In our opinion, at the date of this statement, there are reasonable grounds to believe that the Royal Australian Navy Central Canteens Board will be able to pay its debts as and when they fall due.

This statement is made in accordance with a resolution of the directors.

Signed…………………………………. Signed………………………………….

Commodore I Murray Captain G Blackburn Accountable Authority Accountable Authority


Signed…………………………………. Signed………………………………….

Mr S J Gregory Mr H K Anand Chief Executive Officer Chief Financial Officer



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6.3 STATEMENT OF COMPREHENSIvE INCOME

FOR THE YEAR ENDED 30 JUNE 2016

2016 2015

Note $’000 $’000

EXPENSESEmployee Benefits 2.1A 6,349 5,656

Suppliers 2.1B 10,146 9,536

Grants 2.1C 515 298

Depreciation and amortisation 2.1D 741 698

Write Down and Impairment of Assets 2.1E 86 198

Total expenses 17,837 16,386

LESS: OWN SOURCE INCOMEOWN-SOURCE REvENUESale of Goods and Rendering of Services 2.2A 17,101 15,954

Interest 2.2B 93 125

Dividends 2.2C - 2

Other Revenue 2.2D 185 189

Total own-source revenue 17,379 16,270

Total own-source income 17,379 16,270

Net cost of services (458) (116)

(Deficit) attributable to the Australian Government (458) (116)

OTHER COMPREHENSIvE INCOMECHANGES IN ASSET REvALUATION RESERvESNet gain / (loss) on revaluation of Land - 846

Net gain / (loss) on revaluation of Building - 391

Net gain / (loss) on revaluation of other PP&E - 146

Net gain / (loss) on revaluation of Financial Assets - -

Other comprehensive income - 1,383

Total comprehensive (loss) attributable to the Australian Government (458) 1,267 The above statement of comprehensive income is to be read in conjunction with the attached notes.


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6.4 STATEMENT OF FINANCIAL POSITION

AS AT THE YEAR ENDED 30 JUNE 2016

2016 2015

Note $’000 $’000

ASSETSFINANCIAL ASSETSCash and Cash Equivalents 3.1A 4,021 4,511

Trade and Other Receivables 3.1B 410 266

Other Investments 3.1C 44 72

Total financial assets 4,475 4,849

NON – FINANCIAL ASSETSLand and Buildings 3.2A 12,015 11,803

Property, Plant and Equipment 3.2B 1,747 1,867

Computer Software 3.2C 27 -

Inventories 3.2F 516 722

Other Non – Financial Assets 3.2G 17 36

Total non-financial assets 14,322 14,428

Total assets 18,797 19,277

LIABILITIESPayables 3.3A 578 717

Grants 3.3B 135 48

Other Payables 3.3C 1,216 1,245

Total payables 1,929 2,010

PROvISIONSEmployee Provisions 5.1A 601 542

Total provisions 601 542

Total Liabilities 2,530 2,552

Net Assets 16,267 16,725

EQUITY Contributed equity 1,616 1,616

Reserves 8,541 8,541

Retained surplus 6,110 6,568

Total Equity 16,267 16,725

The above statement of financial position is to be read in conjunction with the attached notes.


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6.5 STATEMENT OF CHANGES IN EQUITY


Note Retained Earnings

Asset Revaluation Surplus

Contributed Equity/Capital

Total Equity

2016 2015 2016 2015 2016 2015 2016 2015

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Opening balance

Balance carried forward from previous period

6,568 6,744 8,541 7,158 1,616 1,616 16,725 15,518

Adjustment for restatements

- - - - - - - -

Opening balance 6,568 6,744 8,541 7,158 1,616 1,616 16,725 15,518

Comprehensive Income

Other comprehensive income

- - - 1,383 - - - 1,383

(Deficit) for the period (458) (116) - - - - (458) (116)

Adjustment for restatements

- (60) - - - - - (60)

Total comprehensive income of which:

(458) (176) - 1,383 0 0 (458) 1,207

Attributable to the Australian Government

6,110 6,568 8,541 8,541 1,616 1,616 16,267 16,725

Transactions with owners

Contributions by owners

Restructuring - - - - - - - -

Sub-total transactions with owners

- - - - - - - -

Closing balance attributable to the Australian Government

6,110 6,568 8,541 8,541 1,616 1,616 16,267 16,725

The above statement of changes in equity is to be read in conjunction with the attached notes.


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6.6 CASH FLOW STATEMENT


Note 2016 2015

$’000 $’000

OPERATING ACTIvITIESCASH RECEIvEDGoods and services 18,548 17,137

Canteen loans repaid 5 (4)

Insurance claims received - 17

Total cash received 18,553 17,150

CASH USEDEmployees (6,410) (5,655)

Suppliers (10,748) (9,796)

Grants (428) (347)

Net GST paid (757) (446)

Total cash used (18,343) (16,244)

Net cash flows from operating activities 4.1 210 906

INvESTING ACTIvITIESCASH RECEIvEDInterest received 93 128

Dividend received - 2

Disposal of property, plant and equipment 113 -

Total cash received 206 130

CASH USEDPurchase of property, plant and equipment (906) (421)

Total cash used (906) (421)

Net cash flows (used by) investing activities (700) (291)

Net increase or decrease in cash held (490) 615

Cash and cash equivalents at the beginning of the reporting period

4,511 3,896

Cash and cash equivalents at the end of the reporting period 3.1A 4,021 4,511

The above statement of cash flows is to be read in conjunction with the attached notes.


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6.7 NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. OvERvIEW

1.1 Objectives of The Royal Australian Navy Central Canteens Board 32

1.2 Basis of preparation of the Financial Statements 32

1.3 Significant Accounting Judgements and Estimates 32

1.4 New Australian Accounting Standards 33

1.5 Taxation 35

1.6 Events After the Reporting Period 35

1.7 Previous Years Figures 35

NOTE 2. FINANCIAL PERFORMANCE

2.1 Expenses 36

2.2 Revenue 38

NOTE 3. FINANCIAL POSITION

3.1 Financial Assets 40

3.2 Non-Financial Assets 43

3.3 Payables 49

NOTE 4. FUNDING

4.1 Cash Flow Reconciliation 50

NOTE 5. PEOPLE AND RELATIONSHIPS

5.1 Employee Provisions 51

5.2 Senior Management Personnel Remuneration 52

5.3 Related Party Disclosures 53

NOTE 6. MANAGING UNCERTAINTIES

6.1 Contingent Assets and Liabilities 54

6.2 Financial Instruments 54

6.3 Fair Value Measurement 57

6.6 CASH FLOW STATEMENT


Note 2016 2015

$’000 $’000

OPERATING ACTIvITIESCASH RECEIvEDGoods and services 18,548 17,137

Canteen loans repaid 5 (4)


Total cash received 18,553 17,150

CASH USEDEmployees (6,410) (5,655)

Suppliers (10,748) (9,796)

Grants (428) (347)

Net GST paid (757) (446)

Total cash used (18,343) (16,244)

Net cash flows from operating activities 4.1 210 906

INvESTING ACTIvITIESCASH RECEIvEDInterest received 93 128

Dividend received - 2

Disposal of property, plant and equipment 113 -

Total cash received 206 130

CASH USEDPurchase of property, plant and equipment (906) (421)

Total cash used (906) (421)

Net cash flows (used by) investing activities (700) (291)

Net increase or decrease in cash held (490) 615

Cash and cash equivalents at the beginning of the reporting period

4,511 3,896

Cash and cash equivalents at the end of the reporting period 3.1A 4,021 4,511

The above statement of cash flows is to be read in conjunction with the attached notes.


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NOTE 1. OvERvIEW

The Royal Australian Navy Central Canteens Board (RANCCB) is an Australian Government controlled entity. It is a not-for-profit entity.

1.1 Objectives of The Royal Australian Navy Central Canteens Board

The Royal Australian Navy Central Canteens Board (RANCCB) was established by the Navy (Canteens) Regulations 1954. These Regulations provide that the Directors shall, subject to and in accordance with the Regulations, apply monies and property of the Fund; provide grants, loans and benefits for members of the Royal Australian Navy and further provide grants to the Royal Australian Navy Relief Trust Fund (RANRTF).

The continued existence of the RANCCB is dependent upon the Chief of Navy requiring the provision of services elaborated above.

1.2 Basis of preparation of the Financial Statements

The Financial Statements and notes are required by section 42 of the Public Governance and Accountability Act 2013.

The Financial Statements and notes have been prepared in accordance with:

· Financial Reporting Rule (FRR) for reporting periods ending on or after 1 July 2014; and

· Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The Financial Statements have been prepared on an accrual basis and is in accordance with historical cost convention, except for certain assets at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position.

The Financial Statement is presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified. Rounding may cause totals to differ from the sum of the components.

1.3 Significant Accounting Judgements and Estimates

In the process of applying the accounting policies listed in this note, the RANCCB has made the following judgements that have the most significant impact on the amounts recorded in the financial statements.

The fair value of leasehold improvements have been taken to be the market value of similar properties as determined by an individual valuer. In some instances, entity buildings are purpose-built and may in fact realise more or less in the market.


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With the absence of records reflecting the cost of the RANCCB Holiday Centres at acquisition date, the allocation of costs between land, buildings and other plant and equipment at acquisition date and subsequent additions to land and buildings; management has relied upon land records, where available, to determine the allocation of revaluation surpluses. Revaluation surpluses have been allocated in the first instance to land and the residual apportioned between buildings and other infrastructure plant and equipment based on the carrying costs of those assets. The RANCCB Holiday Centres were acquired between the early 1970’s to mid 1980’s.

Commentary on the accounting judgement and estimates used in valuing employee provisions can be found in the accounting policy section under note 5.1.

1.4 New Australian Accounting Standards

The following standard has been adopted earlier than the application date as stated in the standard.

Standard Nature of change in accounting policy, transitional provisions, and adjustment Standard to financial statements

AASB 2015-7 Amendments to Australian Accounting Standards — Fair Value isclosures of Not-for-profit Public Sector Entities

The amendment provides relief from certain disclosures required by AASB 13 — Fair Value Measurement for fair value measurements categorised within level 3 of the fair value hierarchy. These disclosures include qualitative information about significant unobservable inputs, total gains and losses attributable to unrealised gains or loss relating to the asset at the end of the reporting period and narrative descriptions of the sensitivity to changes in unobservable inputs. These disclosures are not included in Note 6.

The following new, revised and amending standards and interpretations were issued by the AASB prior to the signing of the statement by the Accountable Authority and Chief Financial Officer, for which the RANCCB is still assessing the potential impact on the financial statements.

Standard Nature of change in accounting policy, transitional provisions, and adjustment Standard to financial statements

AASB 2015-6 Amendments to Australian Accounting Standards - Extending Related Party Disclosures to Not-for-profit Public Sector Entities

The amendments extend the scope of AASB 124 Related Party Disclosures to include application by not-for-profit public sector entities. Implementation guidance is included to assist application of the Standard by not-for-profit public sector entities, including: identification of key management personnel; identification of related party transactions; and disclosure of key management personnel compensation.


34


FUTURE AUSTRALIAN ACCOUNTING STANDARD REQUIREMENTS

The following new standards were issued by the AASB prior to the signing of the statement by the accountable authority, chief executive and chief financial officers:

Standard/ Interpretation

Application date

Nature of impending changes and likely impact on initial application

AASB 9 Financial Instruments

1 July 2018

The main changes impacting the RANCCB are described below:

a. Financial assets that are debt instruments will be classified based on (1) the objective of the entity’s business model for managing the financial assets; (2) the characteristics of the contractual cash flows.

b. Allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument.

The RANCCB is currently evaluating the likely impact of adopting AASB 9. It is reasonable to expect that certain financial assets will be classified differently and that it will involve a larger provision for impairment based on the change to the expected-loss model.

AASB 15 Revenues from Contracts with Customers

1 July 2018

AASB 15 specifies the accounting treatment for revenue arising from contracts with customers (except for contracts within the scope of other accounting standards such as leases or financial instruments). The core principle of AASB 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The RANCCB is currently evaluating the likely impact of adopting AASB 15. Given the nature of the existing contracts with customers it is unlikely that the adoption of this standard will not have a material impact on RANCCB’s revenue recognition.

AASB 16 Leases

1 July 2019

AASB 16 effectively does away with the distinction between an operating lease and a finance lease as lessees are required to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.

Given that the RANCCB does not have any leases it is it is not anticipated that the adoption of this standard will have any impact on the financial performance of the RANCCB.


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1.5 Taxation

The RANCCB is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).

1.6 Events After the Reporting Period

No other matters or circumstances have arisen since the end of period which significantly affected the operations of RANCCB, the results of those operations or the state of affairs of the RANCCB in the financial year subsequent to 30 June 2016.

1.7 Previous Years Figures

Non material restatements have been incorporated in the previous years figures where required.


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NOTE 2. FINANCIAL PERFORMANCE

2.1 EXPENSES

2016 2015

$’000 $’000

2.1A: EMPLOYEE BENEFITSWages and salaries 5,452 4,878

Superannuation 528 445

Leave and other entitlements 364 291

Separation and redundancies 5 42

Total employee benefits 6,349 5,656

ACCOUNTING POLICY

Employee Benefits

Accounting policy for employee related expenses is contained in the People and Relationships section.

2.1B: SUPPLIERSGoods and Services

Direct Expenses 6,809 6,422

Administrative Expenses 1,221 1,481

Operating Expenses 1,639 1,200

Other Expenses 303 335

Total suppliers 9,972 9,438

Suppliers are made up of:

Cost of goods sold – external parties 6,538 6,156

Provision of goods – external parties 1,602 1,312

Rendering of services – external parties 1,832 1,970

Total suppliers 9,972 9,438

The Navy (Canteens) Regulations 1954 state the purpose of the RANCCB is to provide welfare and amenities to the members of the Navy through the provision of funding otherwise unfunded welfare activities and the payments of grants to the Royal Australian Navy Relief Trust Fund. In order to assist with the provision of services the Royal Australian Navy (RAN) allows the RANCCB the use of buildings at Navy establishments across Australia 2016 $99,000 (2014-15: $172,000).

The expenses above include an audit fee of $84,000 (2014-15: $84,000) payable to the Australian National Audit Office for the audit of the financial statements.


37


2016 2015

$’000 $’000

OTHER SUPPLIER EXPENSESWorkers compensation premiums 174 98

Total Other Supplier Expenses 174 98

Total Supplier Expenses 10,146 9,536

2.1C: GRANTSPublic sector:

· Australian Government Entities (related entities) 135 48

· Non profit organisation 380 250

Total Grants 515 298

2.1D: DEPRECIATION AND AMORTISATIONDepreciation:

· Buildings 259 230

· Property, plant and equipment 468 468

· Amortisation 14 -

Total depreciation and amortisation 741 698

2.1E: WRITE – DOWN AND IMPAIRMENT OF ASSETSAsset write – down and impairments from

· Plant and equipment 2 46

· Inventory 109 31

· Impairment of Financial Instruments (25) 121

Total write – down and impairment of assets 86 198

An amount of $29,000 recoverable from a net payable resulting from a dispute with a supplier in 2014-15 was written back this year.


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2.2 REvENUE

2016 2015

$’000 $’000

2.2A: SALES OF GOODS AND RENDERING OF SERvICESProvision of goods 12,416 11,354

Rendering of services 4,685 4,600

Total sale of goods and rendering of services 17,101 15,954

ACCOUNTING POLICY

Revenue

Revenue from the sale of goods is recognised when:

a) the risks and rewards of ownership have been transferred to the buyer;

b) the entity retains no managerial involvement or effective control over the goods;

Receivables for goods and services, which have 30/60 day terms, are recognised at the nominal amounts due less any impairment allowance account. Collectability of debts is reviewed at end of the reporting period. Allowances are made when collectability of the debt is no longer probable.

2.2B: INTERESTDeposits 93 125

Total interest 93 125

ACCOUNTING POLICY

Interest

Interest is recognised using the effective interest method.

2.2C: DIvIDENDSOther listed companies - 2

Total Dividends - 2

2.2D: OTHER REvENUEProfit on sale of assets 43

Donations 43 -


Resources received free of charge 99 172

Total other revenue 185 189


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The Navy (Canteens) Regulations 1954 state the purpose of the RANCCB is to provide welfare and amenities to the members of the Navy through the provision of funding otherwise unfunded welfare activities and the payments of grants to the Royal Australian Navy Relief Trust Fund. In order to assist with the provision of services the RAN allows the RANCCB the use of buildings at Navy establishments across Australia $99,000 (2015: $172,000).

ACCOUNTING POLICY

Resources Received Free of Charge

Resources received free of charge are recognised as revenue when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense. Resources received free of charge are recorded as either revenue or gains depending on their nature.

Sale of Assets

Gains from disposal of assets are recognised when control of the asset has passed to the buyer.


40


NOTE 3. FINANCIAL POSITION

3.1 FINANCIAL ASSETS

2016 2015

$’000 $’000

3.1A: CASH AND CASH EQUIvALENTSCash on hand or on deposit 4,021 4,511

Total cash and cash equivalent 4,021 4,511

ACCOUNTING POLICY

Cash Cash is recognised at its nominal amount. Cash and cash equivalents includes:

a) cash on hand;

b) demand deposits in bank accounts with an original maturity of 12 months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

3.1B: TRADE AND OTHER RECEIvABLESGoods and services 136 197

Total receivables for goods and services 136 197

Other receivables:

· Canteen loans 5 10

· Interest 9 9

· Levies 10 51

· Other receivables 259 117

Total trade and other receivables (gross) 419 384

Less impairment allowance account

for Goods and services 9 118

Total trade and other receivable (net) 410 266

Receivables are expected to be recovered in:

No more than 12 months 410 266

More than 12 months - -

Total trade and other receivables (net) 410 266


41


2016 2015

$’000 $’000

Receivables are aged as follows:

Not overdue 349 221

Overdue by:

0 to 30 days 44 22

31 to 60 days 8 20

61 to 90 days - 3

More than 90 days 18 118

Total receivables (gross) 419 384

The impairment allowance account is aged as follows:

Overdue by:

30 to 60 days - -

61 to 90 days - -

More than 90 days 9 118

Total impairment allowance account 9 118


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RECONCILIATION OF THE IMPAIRMENT ALLOWANCE ACCOUNT

Goods & services

Other receivables

Total

$’000 $’000 $’000

MOvEMENTS IN RELATION TO 2016

As at 1 July 2015 118 - 118

Amounts written off - - -

Amounts recovered and reversed - - -

Increase/decrease recognised in net surplus (109) - (109)

Total as at 30 June 2016 9 - 9

Goods & services

Other receivables

Total

$’000 $’000 $’000

MOvEMENTS IN RELATION TO 2015

As at 1 July 2014 9 - 9

Recognised in restructure - - -

Amounts recovered and reversed - - -

Increase/decrease recognised in net surplus 109 - 109

Total as at 30 June 2015 118 - 118

Trade receivables are non-interest bearing and are generally on 60 days terms for the SALT and the Canteens. A combination of payments in advance and monthly in arrears for storage van owners at the holiday parks. A provision for impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired. An impairment gain of $25,000 (2015: -$118,000) has been recognised by the RANCCB.

ACCOUNTING POLICY

Loans and Receivables

Trade receivables, loans and other receivables that have fixed or determinable payments and that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method less impairment.

2016 2015

$’000 $’000

3.1C: OTHER INvESTMENTSShares in listed companies - 28

Post office license 44 44

Total other investments 44 72


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3.2 NON-FINANCIAL ASSETS

2016 2015

$’000 $’000

3.2A: LAND AND BUILDINGLand at Fair Value 7,079 7,113

Buildings on freehold land:

· Fair value 5,195 4,688

· Accumulated depreciation (259) -

Total land and buildings on freehold land 12,015 11,801

Leasehold improvements

· Fair value - 2

· Accumulated depreciation - -

Total leasehold improvements - 2

Total land and buildings 12,015 11,803

3.2B: PLANT AND EQUIPMENTPlant and equipment:

· Fair value 2,217 1,867


Total Plant and equipment (non-current) 1,747 1,867

3.2C: COMPUTER SOFTWAREComputer Software

· Fair value 41 -


Total Plant and equipment (non-current) 27 -

All revaluations were conducted in accordance with the revaluation policy under the Financial Position section. Valuations were made on the basis of open market value. Any revaluation adjustments are charged to the Asset Revaluation Reserve in equity.

There were no revaluation adjustments for 2015-16. (Revaluation adjustments for 2014-15 were: land increment $846,000, buildings increment of $391,000, other PP&E an increment of $146,000).

No indicators of impairment were found for property, plant and equipment. No property plant or equipment is expected to be sold or disposed of within the next 12 months.


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3.2D: RECONCILIATION OF THE OPENING AND CLOSING BALANCES OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLES (2016)

Item Land Buildings Total Land &

Buildings

Other PP & E

Computer Software

Total

$’000 $’000 $’000 $’000 $’000 $’000

As at 1 July 2015

Gross book value 7,113 4,690 11,803 1,867 - 13,670

Accumulated depreciation/amortisation and impairment

- - - - - -

Net book value 1 July 2015 7,113 4,690 11,803 1,867 - 13,670

Additions by

Purchases during the year - 509 509 382 - 891

Restructure - - - - - -

Reclassification - - - (41) 41 -

Revaluations and impairments recognised in other comprehensive income

- - - - - -

Depreciation/amortisation expense - (259) (259) (468) (14) (741)

Impairments recognised in the operating result

- - - (2) - (2)

Disposals (34) (7) (41) - - (41)

Net book value 30 June 2016 7,079 4,933 12,012 1,738 27 13,777

Net book value as of 30 June 2016 represented by:

Gross book value 7,079 5,192 12,271 2,208 41 14,520

Net Capital work in progress - 3 3 9 - 12


- (259) (259) (470) (14) (743)

Total as at 30 June 2016 7,079 4,936 12,015 1,747 27 13,789


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3.2E: RECONCILIATION OF THE OPENING AND CLOSING BALANCES OF PROPERTY, PLANT AND EQUIPMENT (2015)

Item Land Buildings Total Land &

Buildings

Other PP & E

Total

$’000 $’000 $’000 $’000 $’000

As at 1 July 2014

Gross book value 6,267 4,728 10,995 2,271 13,266


- (237)

(237)

(388)

(625)

Net book value 1 July 2014 6,267 4,491 10,758 1,883 12,641

Additions by

Purchases during the year - 38 38 376 414

Capital work in progress - - - 12 12

Restructure - - - - -

Reclassification - - - - -

Adjustments directly in retained earnings - - - (36) (36)

Revaluations and impairments recognised in other comprehensive income

846 391 1,237 146 1,383

Depreciation/amortisation expense - (230) (230) (468) (698)

Impairments recognised in the operating result - - - (46) (46)

Net book value 30 June 2015 7,113 4,690 11,803 1,867 13,670

Net book value as of 30 June 2015 represented by:

Gross book value 7,113 4,690 11,803 1,867 13,670


- - -

- -

Total as at 30 June 2015 7,113 4,690 11,803 1,867 13,670


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ACCOUNTING POLICY

Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value plus transaction costs where appropriate.

Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and income at their fair value at the date of acquisition, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amounts at which they were recognised in the transferor’s accounts immediately prior to the restructuring.

Asset Recognition Threshold

Purchases of property, plant and equipment are recognised initially at cost in the statement of financial position, except for purchases costing less than $500, which are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).

Revaluations

Following initial recognition at cost, property, plant and equipment are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets did not differ materially from the assets’ fair values as at the reporting date. The regularity of independent valuations depended upon the volatility of movements in market values for the relevant assets.

Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reversed a previous revaluation decrement of the same asset class that was previously recognised in the surplus/deficit. Revaluation decrements for a class of assets are recognised directly in the surplus/deficit except to the extent that they reversed a previous revaluation increment for that class.

Any accumulated depreciation as at the revaluation date is:

a) eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount.

Depreciation

Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the entity using, in all cases, the straight-line method of depreciation.

Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate.

Depreciation rates applying to each class of depreciable asset are based on the following useful lives:

Description 2016 2015

Building From 5 to 50 Years From 5 to 50 Years

Property, Plant and Equipment From 2 to 5 Years From 2 to 5 Years


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Impairment

All assets were assessed for impairment at 30 June 2016. Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount.

The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash

flows, and the asset would be replaced if the entity were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Derecognition

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Intangibles

The entity’s intangibles comprise externally developed software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Software is amortised on a straight-line basis over its anticipated useful life. The useful lives of the entity’s software are 3 years (2014-15 3 years).

All software assets were assessed for indications of impairment as at 30 June 2016.

Accounting Judgements and Estimates

For the purpose of determining the fair value of land, buildings and property, plant and equipment, the management has relied on third party independent evaluators

With the absence of records reflecting the cost of the RANCCB Holiday Centres at acquisition date, the allocation of costs between land, buildings and other property plant and equipment at acquisition date and subsequent additions to land and buildings; management has relied upon land records, where available, to determine the allocation of revaluation surpluses. Revaluation surpluses have been allocated in the first instance to land and the residual apportioned between buildings and other property plant and equipment based on the carrying costs of those assets. The RANCCB Holiday Centres were acquired between the early 1970’s to mid 1980’s.


48


2016 2015

$’000 $’000

3.2F: INvENTORIESInventories held for sale

· Finished goods 516 722

Total inventories 516 722

The total impairment loss recognised in the Statement of Comprehensive Income during the period amounted to $86,000 (2014-15: $198,000). This relates to plant and equipment identified as impaired for $2,000, impairment of financial assets -$25,000 and inventory for $109,000.

ACCOUNTING POLICY

Inventory

Inventories held for sale are valued at the lower of cost and net realisable value.

Inventories held for distribution are valued at cost, adjusted for any loss of service potential.

Costs incurred in bringing each item of inventory to its present location and condition are assigned as follows:

a) raw materials and stores – purchase cost on a average cost basis; and

b) finished goods and work-in-progress – cost of direct materials and labour plus attributable costs that can be allocated on a reasonable basis.

Inventories acquired at no cost or nominal consideration are initially measured at current replacement cost at the date of acquisition.

3.2G: OTHER NON–FINANCIAL ASSETSPrepayments 17 36

Total other non–financial assets 17 36

Total other non-financial assets are expected to be recovered in:


Total other non-financial assets 17 36


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3.3 PAYABLES

2016 2015

$’000 $’000

3.3A: SUPPLIERS PAYABLESTrade creditors 578 717

Total supplier payables 578 717

Supplier payables are expected to be settled within 12 months

Related Entities - -

External Parties 578 717

Total supplier payables (External Parties) 578 717

Settlement is usually within 30 days

3.3B: GRANTSAustralian Government entities 135 48

Total Australian Government entities 135 48

Total grants are expected to be settled in:


Total grants 135 48

3.3C: OTHER PAYABLES · Prepayments from customers 475 435

· Accrual expenses 372 346

· Salaries and wages 19 151

· Superannuation 12 1

· GST payable 186 183

· Other payables 152 129

Total other payables 1,216 1,245

Total other payables are expected to be settled in:

No more than 12 months 1,216 1,245

Total other payables 1,216 1,245


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NOTE 4. FUNDING

4.1 CASH FLOW RECONCILIATION

Reconciliation of cash and cash equivalents as per Statement of Financial Position to Cash Flow Statement.

2016 2015

$’000 $’000

Report cash and cash equivalent as per:

Cash Flow Statement 4,021 4,511

Statement of Financial Position 4,021 4,511

Discrepancy - -

Reconciliation of net cost of services to net cash from/ (used by) operating activities:

Net Cost of Services (458) (116)

Adjustments for non cash items

Depreciation / amortisation 741 698

Net write down of non-financial assets (41) 46

Other non-cash items - 12

Transfer of interest income to financing activities (93) (128)

Changes in assets / liabilities

(Increase)/ decrease in net receivables (140) 15

(Increase)/ decrease in inventories 206 (255)

(Increase)/ decrease in prepayments 14 (18)

Increase/ (decrease) in employee provisions 59 12

Increase/ (decrease) in other provisions - -

Increase/ (decrease) in supplier payables (136) 360

Increase/ (decrease) in prepayments received 39 43

Increase/ (decrease) in GST payable 3 119

Increase/ (decrease) in Grants payable 87 (50)

Increase/ (decrease) in other payables (71) 168

Net cash from/ (used by) operating activities 210 906


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NOTE 5. PEOPLE AND RELATIONSHIPS

5.1 EMPLOYEE PROvISIONS

2016 2015

$’000 $’000

5.1A: EMPLOYEE PROvISIONSLeave 601 542

Total employee provisions 601 542

Employee provisions are expected to be settled in:


More than 12 months 377 201

Total employee provisions 601 542

ACCOUNTING POLICY

Employee Provisions

Liabilities for ‘short-term employee benefits and termination benefits expected within twelve months of the end of reporting period are measured at their nominal amounts.

Other long-term employee benefits are measured as net total of the present value of the defined benefit obligation at the end of the reporting period minus the fair value at the end of the reporting period of plan assets (if any) out of which the obligations are to be settled directly.

Leave

The liability for employee benefits includes provision for annual leave and long service leave.

The leave liabilities are calculated on the basis of employees’ remuneration at the estimated salary rates that will be applied at the time the leave is taken, including the entity’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

Separation and Redundancy

Provision is made for separation and redundancy benefit payments. The entity recognises a provision for termination when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.


52


Superannuation

The entity’s staff are members of other superannuation funds held outside the Australian Government. Contributions are made by the RANCCB to employee superannuation funds and are charged as expenses when incurred.

The liability for superannuation recognised as at 30 June represents outstanding contributions.

Accounting Judgements and Estimates

For the purpose of determining employee entitlements assumptions have been made on future increases in wages and salaries, future on cost rates and employee departure and period of service.

5.2 SENIOR MANAGEMENT PERSONNEL REMUNERATION

2016 2015

$’000 $’000

Short-term employee benefits:

Salary 339,158 322,870

Total short-term employee benefits 339,158 322,870

Post-employment benefits:

Superannuation 36,870 35,445

Total post-employment benefits 36,870 35,445

Other long-term benefits:

Annual leave accrued 27,488 26,817

Long-service leave 10,357 5,003

Total other long-term benefits 37,845 31,820

Total senior executive remuneration expenses 413,873 390,135

The Board of Directors are appointed by the Chief of Navy under the Navy (Canteens) Regulations 1954. In accordance with the Regulations, members of the Defence Force serving on the Board are restricted from receiving remuneration.

The total number of senior management personnel disclosed above are 2 (2015: 2).

The total number of Directors disclosed above are 7 (2015: 7) In accordance with the Navy (Canteens)Regulations 1954, members of the Defence Force serving on the Board are restricted from receiving remuneration.


53


5.3 RELATED PARTY DISCLOSURES

DIRECTORS

The following persons were directors of RANCCB during the financial year:

Commodore I Murray (Chairman) Lieutenant Commander H Rossendell Captain G Blackburn Captain J Metzl Warrant Officer S Downey Lieutenant A Connor Commander S White Captain F Sneath (part year)

TRANSACTIONS WITH DIRECTORS OR DIRECTOR-RELATED ENTITIES

There were no transactions with directors or director related parties (2015: $Nil). Directors who have a conflict or feel they may be perceived as having a conflict are required to excuse themselves from voting and from taking part in the deliberations.

OTHER TRANSACTIONS WITH DIRECTORS OR DIRECTOR-RELATED ENTITIES

There were no other transactions with directors or director related entities.

SENIOR EXECUTIvES

The following persons also had authority and responsibility for planning, directing and controlling the activities of RANCCB, directly or indirectly during the financial year:

Stephen Gregory - Chief Executive Officer Harish Anand – Chief Financial Officer Jack Lissing – National Operations Manager Sally Mills – National HR Manager

OTHER RELATED PARTY TRANSACTIONS

The Board is empowered to make grants to the RANRTF under section 11(1) (c) of the Navy (Canteens) Regulations, 1954. The total amount of grants provided during the year amounted to $135,000 (2015: $48,000).


54


NOTE 6. MANAGING UNCERTAINTIES

6.1 CONTINGENT ASSETS AND LIABILITIES

There are no contingent assets or liabilities as at 30 June 2016 (2015: $Nil).

6.2 FINANCIAL INSTRUMENTS

2016 2015

$’000 $’000

6.2A CATEGORIES OF FINANCIAL INSTRUMENTSFinancial Assets

Held-to-maturity financial assets

Deposits 2,277 3,114

Cash with Banks and on hand 1,744 1,397

Total held-to-maturity financial assets 4,021 4,511

Loans and receivables

Goods and Services 127 183

Canteen Loans 5 10

Interest Receivable 9 9

Other Receivables 269 64

Total loans and receivables 410 266

Available-for-sale financial assets

Shares in listed companies - 28

Post office license 44 44

Total available-for-sale financial assets 44 72

Total financial assets 4,475 4,849

Financial Liabilities

Trade Creditors 578 717

Grants payable 135 48

Other payables 1,216 1,245

Total financial liabilities 1,929 2,010


55


2016 2015

$’000 $’000

6.2B NET INCOME AND EXPENSE FROM FINANCIAL ASSETSHeld-to-maturity

Interest revenue 93 125

Net gain/(loss) held-to-maturity 93 125

Available for sale

Dividend - 2

Net gain/(loss) available for sale - 2

Net gain/(loss) from financial assets 93 127

6.2C FAIR vALUE OF FINANCIAL INSTRUMENTS.The carrying value of all financial assets and liabilities approximate their fair values.

6.2D CREDIT RISKThe RANCCB trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the RANCCB’s policy to securitise its trade and other receivables. It is the RANCCB’s policy to consider the credit worthiness of all customers who wish to trade on credit terms.

The following table illustrates gross exposure to credit risk, excluding any collateral or credit enhancements.

Financial assets

Held-to-maturity financial assets 4,021 4,511

Loans and receivables financial assets 410 266

Available for sale financial assets 44 72

Total 4,475 4,849

CREDIT QUALITY OF FINANCIAL INSTRUMENTS NOT PAST DUE OR INDIvIDUALLY DETERMINED AS IMPAIRED

Not Past Due Nor Impaired

Not Past Due Nor Impaired

Past Due or Impaired

Past Due or Impaired

2016 2015 2016 2015

$’000 $’000 $’000 $’000

Loans and receivables financial assets 349 221 70 163

Total 349 221 70 163

The RANCCB’s activities expose it to normal commercial risks. As a result of the RANCCB’s business and internal policies, the exposure to credit risk is considered low.


56


AGEING OF FINANCIAL ASSETS THAT ARE PAST DUE BUT NOT IMPAIRED FOR 2016

0 to 30 days 31 to 60 Days

61 to 90 Days

90+ Days Total

$’000 $’000 $’000 $’000 $’000

Loans and receivables financial assets 44 8 - 18 70

Total 44 8 - 18 70

AGEING OF FINANCIAL ASSETS THAT ARE PAST DUE BUT NOT IMPAIRED FOR 2015

0 to 30 days

31 to 60 Days

61 to 90 Days

90+ Days Total

$’000 $’000 $’000 $’000 $’000

Loans and receivables financial assets 22 20 3 - 45

Total 22 20 3 - 45

6.2E LIQUIDITY RISKThe RANCCB manages liquidity risk by monitoring cash flow and maturity profiles of financial assets and liabilities. The RANCCB is reliant on the sale of goods and services and the collection of levies to fund their operations. The impact on the RANCCB’s ability to meet its obligations is considered minimal in view of the cash resources held by the Board.

The following tables illustrates the maturities for non-derivative financial liabilities 2016:

On Demand Within 1 year 1 to 5 years > 5 years Total

2016 2016 2016 2016 2016

$’000 $’000 $’000 $’000 $’000

Trade creditors - 578 - - 578

Grants payable - 135 - - 135

Other payables - 1,216 - - 1,216

Total - 1,929 - - 1,929


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The following tables illustrates the maturities for non-derivative financial liabilities 2015:

On Demand Within 1 year 1 to 5 years > 5 years Total

2015 2015 2015 2015 2015

$’000 $’000 $’000 $’000 $’000

Trade creditors - 717 - - 717

Grants payable - 48 - - 48

Other payables - 1,245 - - 1,245

Total - 2,010 - - 2,010

6.2F INTEREST RATE RISKThe RANCCB has some fixed term deposits and is therefore not exposed to interest rate risk.

6.2G MARKET RISKRANCCB primarily holds basic financial instruments that are not exposed to market risk namely currency and price risk.

2016 2015

$’000 $’00

6.2H FINANCIAL ASSETS RECONCILIATIONFinancial Assets

Total financial assets per balance sheet 4,475 4,849

Less: non-financial instrument components: - -

4,475 4,849

6.3 Fair value Measurement

The following tables provide an analysis of assets and liabilities that are measured at fair value. The different levels of the fair value hierarchy are defined below.

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either, directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.


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Fair value measurements at the end of the

reporting periodFor Levels 2 and 3 fair value

measurements

2016 2015 Category (level 1,2

or 3)

Technique Valuation

Inputs Used

$’000 $’000

6.3A: FAIR vALUE MEASUREMENT, vALUATION TECHNIQUES AND INPUTS USED.Financial Assets

Shares in listed companies - 28 1 Market Based

ApproachQuoted prices from the Australian Stock ExchangeTotal financial assets - 28

Non-financial assets

Land 7,079 7,113 2 Cash Flow Approach

Price per rental bay. Capitalisation Rates based on yields analysed from sales evidence

Buildings on freehold land 4,936 4,690 2 Cash Flow Approach

Price per rental bay. Capitalisation Rates based on yields analysed from sales evidence

Other property plant and equipment

- 29 2 Market Based Approach

Market sales data


1,774 1,874 3 Depreciated Replacement Cost

Replacement cost, consumed economic benefitTotal non-financial assets 13,789 13,706

Total fair value measurements of assets in the statement of financial position

13,789 13,734


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DESCRIPTION OF vALUATION TECHNIQUES

Market Based Approach

This approach seeks to estimate the fair value of an asset with reference to recent market transactions involving identical or comparable assets.

Cash Flow Approach

This approach analyses future cash flow projections and discounts them to arrive at a present value which is used to estimate the value of the asset.

Depreciated Replacement Cost

This approach seeks to arrive at a fair value of an asset by reducing the value of a new asset by taking into account the effect of accumulated depreciation.

Recurring Level 3 Fair value Measurements - sensitivity of inputs

The significant unobservable inputs used in the fair value measurement of the entities other property plant and equipment are the adjustments required for physical deterioration and all forms of obsolescence. Significant increases (decreases) in any of those inputs in isolation would result in a significantly higher (lower) fair value measurement.

Fair value Measurements - highest and best use differs from current use for non-financial assets (NFA’s)

The highest and best use of all non-financial assets is the same as their current use.

6.3B: RECONCILIATION FOR RECURRING LEvEL 3 FAIR vALUE MEASUREMENTSRecurring level 3 fair value measurements - reconciliation for assets.

Non Financial Assets

Total

2016 2015 2016 2015

$’000 $’000 $’000 $’000


As of 1 July 1,838 1,883 1,838 1,883

Total gains/(losses) recognised in net cost of services (484) (514) (484) (514)

Total gains/(losses) recognised in retained earnings - (36) - (36)

Total gains/(losses) recognised in other comprehensive income - 146 - 146

Purchases 391 388 391 388

Transfers into Level 3 - - - -

Transfers out of Level 3 - (29) - (29)

Total as of 30 June 1,745 1,838 1,745 1,838


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2015-16 navt canteens annual reportnavycanteens.com.au/wp-content/uploads/2016/09/navy... ·...

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