2016-2017 Annual Report - Navy Canteens · ANNUAL REPORT FOR THE FINANCIAL ... (Canteen) Regulations (1954 ... Both Watches Café Anchorage Bar Cerberus Museum Recruit School …

2016-2017 Annual Reportwww.navycanteens.com.au

ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

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

www.navycanteens.com.au

RANCCB ANNUAL REPORT 2016-2017 | Royal Australian Navy Central Canteens Board

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Royal Australian Navy Central Canteens Board | RANCCB ANNUAL REPORT 2016-2017

III

1. Corporate Directory 1

2. Chairman’s Message 2

3. Report of Operations 4

3.1 Enabling Legislation and Responsible Minister 4

3.2 Principal Activities 6

3.3 Significant Events 13

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 14

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 15

3.13 Gender Diversity 15

3.14 Insurance of Officers 15

3.15 Legal Expenses 15

3.16 Audit Fees to the Australian National Audit Office (ANAO) 15

3.17 Meetings of Directors 16

3.18 Directors Qualifications 17

4. Annual Performance Statement 18

4.1 Introductory Statement 18

4.2 Entity Purposes 18

4.3 Performance Against Goals 18

4.4 Performance by Activity 21

4.5 Measurement and Assessment 23

4.6 Analysis of Performance 25


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5. Corporate Governance 26

5.1 Objectives and Strategic Intent 26

5.2 Functions and Powers 26

5.3 Charter 27




5.7 Chief of Navy Directive 29

6. Financial Statements 30

6.1 Independent Auditor’s Report 30

6.2 Statement by the Accountable Authorities, Chief Executive Officer 32 and Chief Financial Officer

6.3 Statement of Comprehensive Income 33

6.4 Statement of Financial Position 34

6.5 Statement of Changes in Equity 35

6.6 Cash Flow Statement 36

6.7 Notes to the Financial Statements 37


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NAVY CANTEENS 2016-2017 ANNUAL REPORT

5. Corporate Governance 26

5.1 Objectives and Strategic Intent 26

5.2 Functions and Powers 26

5.3 Charter 27




5.7 Chief of Navy Directive 29

6. Financial Statements 30

6.1 Independent Auditor’s Report 30

6.2 Statement by the Accountable Authorities, Chief Executive Officer 32 and Chief Financial Officer

6.3 Statement of Comprehensive Income 33

6.4 Statement of Financial Position 34

6.5 Statement of Changes in Equity 35

6.6 Cash Flow Statement 36

6.7 Notes to the Financial Statements 37

1. CORPORATE DIRECTORY

LEGISLATION

The Royal Australian Navy Central Canteens Board was established by the Navy (Canteen) Regulations (1954) under the Naval Defence Act 1910 and as at 30 June 2017 is a Corporate Commonwealth Entity under the Public Governance, Performance and Accountability Act 2013.

The Navy (Canteen) Regulations (1954) have ceased to be in effect and have been replaced by the Navy (Canteen) Regulation (2016), following amendments to the Defence Act (1903) which came into effect on 1 October 2016.

RESPONSIBLE MINISTER

The Honourable Dan Tehan MP, Minister for Defence Personnel, had portfolio responsibility for the Royal Australian Navy Central Canteens Board during the 2017 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 (retired December 2016) Commodore Michael Miko, RAN, FCILT, GAICD (appointed December 2016)Chief Executive Officer: Mr Stephen Gregory FAMI, CPM, FAIM, GAICD Chief Financial Officer: Mr Harish Anand ICAI, CPA (ceased March 2017) Mr Matthew Doogan, CPA (commenced March 2017)

NATIONAL SUPPORT OFFICE

Street Address: CP3-1-132, Campbell Park Offices, Canberra ACT 2600 Postal Address: CP3-1-132, Campbell Park Offices, Canberra ACT 2600 Telephone: (02) 6266 4932Facsimile: (02) 6266 4378Website: www.navycanteens.com.au

BANKERS SOLICITORS

Australian Military Bank Griffin Legal, Aulich Civil

AUDITORS

Australian National Audit Office (ANAO)


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2. CHAIRMAN’S MESSAGE

Navy Canteens exists to support Navy people and benefit the 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 has issued me with a personal Directive and 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 (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.

I commenced as a Director in July 2016 and subsequently Chair in December 2016, taking over from Commodore Ian Murray who served on the board for a period of nine years, the last three as chair. As part of a broader succession plan, three other new Directors and the longstanding CFO changed during the financial year. Navy Canteens is a complex business which has grown into a medium level enterprise over the past three years with an asset base of $18M, over 150 employees and a $16M annual turnover. This rapid expansion has challenged the organisation but a strong, Board led execution of a long term strategy is in place to guide the change.

Operations continue to evolve. Adjustments to the operating model has seen closure of the Larrakeyah Café (NT) and Flight Deck Café (NSW) with an increased footprint at HMAS Coonawarra and a vending solution implemented at the Heritage Centre (NSW) for weekend trade and the Fleet Air Arm Museum (NSW). A new supply chain and point of sale system are being rolled out and this will provide efficiencies of scale for purchasing and increased stock control. Notable progress has continued in providing support to ships and Navy people at sea through contracted services and support facilitated by Navy Canteens. Performance highlights include increased profitability from Holiday Parks and the Win with Navy Raffle which was unfortunately offset by a poor performance in the Canteens Group. In keeping with the RANCCB vision of “Benefitting the Navy Family”, annual grants totalling $327K have been provided comprising: $123K to the RAN Relief trust Fund, $170K to the Navy Sports Council, $24K in general grants and $10K to NUSHIPS (commissioning warships). In addition to the $327K annual grants, the RANCCB contributed $50K towards the construction of a hard stand at HMAS Coonawarra directly benefitting personnel at this base. At the conclusion of the 2017 Financial Year, Navy Canteens delivered a deficit of $468K (which includes disbursement to Navy of $327K) and has approximately $18M in assets.


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Navy Canteens staff are employed across Australia supporting Navy. Their hard work and support is greatly appreciated by the Board and is key to Navy Canteens success. In recognition of this, Navy Canteens is conducting a structured staff training program to increase the professionalism of our workforce.

This annual report provides an insight into the Enterprise and our achievements during FY 2017. The report contains much to be proud of and points to future opportunities to improve the services provided and deliver against the RANCCB vision. I commend the report to you.

Michael H J Miko 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 2017.

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 (Canteen) Regulation (2016). Regulation 8 of the Navy (Canteen) Regulation (2016) outlines the functions and powers of Navy Canteens. These include making grants of money from the Navy Fund to the Navy Relief Trust Fund (RANRTF); grants and loans to persons conducting canteens, clubs, cinemas or other institutions or facilities for the welfare and entertainment of serving Naval members.

As at 30 June 2017 the RANCCB remains a Corporate Commonwealth Entity under the Public Governance, Performance and Accountability Act 2013.

3.1.1 ORGANISATIONAL STRUCTURE

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 (Canteen) Regulation (2016). 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.

Navy Canteens has in place a WHS policy statement, 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.


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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 Centres with co-mingle recycling bins and solar heat pumps for amenity blocks. BIG4 Bungalow Park has previously been awarded a Silver Gumnut Award by the Caravan and Camping Association for substantial environmental protection actions introduced. Amblin Holiday Park in Western Australia also received a Busselton Waterwise Business of Action certificate following a significant year on year water usage reduction.

3.1.4 FREEDOM OF INFORMATION ACT

There were nil applications for information received in the reporting period. 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 can be secured by writing to the CEO, CP3-1-132, Campbell Park Offices, Canberra ACT 2600.

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 and HMAS Moreton in Brisbane. 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.


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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 and Defence Establishment Berrima.

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.

TOTAL BENEFITS

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

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BENEFITS367

2013 2014 2015

FINANCIAL YEAR END

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2016 2017

BENEFITS411

BENEFITS393

BENEFITS583

BENEFITS427

GRANTS327

GRANTS614

GRANTS260

GRANTS298

GRANTS515

TOTAL TANGIBLE BENEFITS


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

OvERvIEW

Consolidation of canteen operations continued to be a focus during the 2017 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 2017 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 and losses at a small number of shore canteen businesses. Canteen performance up to 30 June 2017 has been reviewed by the Board with ongoing adjustment to certain operations in order to reduce costs and grow the profitability of the canteen group.

The full RANCCB portfolio of businesses delivered a year of mixed but noteworthy performance with our own source revenue totalling $16.5M ($2016: $17.4M). A trading deficit of $468K (which includes disbursements to Navy of $327K) (2016 deficit $458K) excluding revaluation adjustments was incurred.

The following graph is a representation of the surplus/(deficit) declared by the RANCCB since 30 June 2013:

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

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WIN WITH NAvY RAFFLE

The rebuilding of Win with Navy Raffle participation and revenue using the Direct Debit system continues. This change was necessary in early 2015 due to the discontinuation of allotments from the ADF Pay System to the Win with Navy Raffle. FY 2017 is the second full year of trading since this change. In FY 2017 revenue of $799K was achieved (2016: $678K). Profit for the Raffle increased from $218K in FY 2016 to $439K in FY 2017. Building participation levels continues to be a management focus. Continued communication with Navy members and multiple cash prizes on offer has supported the continued growth.

HOLIDAY CENTRES

Navy Canteens Holiday Centres continue to be a valued part of the Enterprise which offset losses from the canteen group. All properties are continually improved to provide a quality holiday experience. Ensuring each property is relevant to contemporary offerings requires 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 2017 there was again significant investment to improve the quality of the infrastructure including underground water pipes, a new pool liner and new pool roof at Amblin Holiday Park, shade sails and room overhauls at Forster Holiday Village.

New management commenced at BIG4 Bungalow Park on Burrill Lake following the retirement of long term management couple Steve and Judy Clarke in October 2016.

All properties achieved higher revenues than the previous financial year. Individual business performances were a net surplus of $439K for BIG4 Bungalow Park on Burrill Lake (2016: net surplus of $229K); a net surplus of $272K for Amblin Holiday Park (2016: net surplus of $158K); a net loss of $8K for Forster Holiday Village (2016: net surplus of $8K) and a net surplus of $10K for Pandanus Pocket (2016: net surplus of $1K). The Forster Holiday Village result was due to increased infrastructure maintenance in the second half of the year.

NAvY CANTEENS TICKETING

Navy Canteens Ticketing is located in Defence Plaza, Pitt Street, Sydney (NSW). Navy Canteens Ticketing provides discounted tickets (as well as preferential seating and free tickets when possible) sourced from on-sellers such as Ticketek, Ticketmaster and other event co-ordinators and venues. Navy Canteens Ticketing has remained very popular. In 2017 Navy Canteens Ticketing experienced a drop in ticket sales from $984K in FY 2016 to $440K in FY 2017. Ticket discounts totalling $367K (2016: $427K) were achieved for Navy, other Defence and APS personnel. In all, a total of 8,978 tickets (2016: 11,980 tickets) were sold during the 2017 financial year. Fewer tickets for concerts have been procured due to difficulties with promoters. Greater communication within Navy and Defence is required as there has been an increasing change in recent years of contact points on bases within Defence. Navy Canteens ticketing is targeting an increase in social media communications which should increase utilisation of this service.

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 2017 of $102K (2016: loss of $111K).


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SALT

Navy Canteens’ online merchandise business, SALT, is managed by Brandnet Pty Ltd, located in Fyshwick (ACT). SALT returned a net surplus of $13K for the financial year (2016: $28K), which was above budgeted profitability of $10K. Higher manufacturing and import costs continue to put pressure on margins. 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. Merchandise sales through canteens on naval establishments vary, largely dependent upon the size of the canteen and base population. Canteen merchandise sales are recorded as canteen revenue and are not reflected in the on-line merchandise business revenue. During FY 2017 $179K was recorded by canteens for merchandise sales.

The Fleet Air Arm Museum Shop in Nowra, which sells SALT merchandise, performed below budget for both revenue and profit. Revenue for the year of $130K was below both budget ($150K) and the previous year ($144K). The shop incurred a small loss of $64 against a budgeted surplus of $14K and last year’s surplus of $10K. The closure of Flight Deck Café and less foot traffic into the Museum negatively impacted revenue.

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, development of the supply chain, a limited customer base and working within Defence establishments.

In FY 2017 the aim has again been to stabilise all canteen operations, learn from practical operational experience and focus on improving profitability. There has been a continued 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.

0

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200

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539

694

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427

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2013

2014

2015

2016

2017

NAVY CANTEENS TICKETING


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In April 2017 the Board approved both a new point of sales system and a new supply chain which is being implemented in FY 2018. This is anticipated to result in a leaner supply chain, reduced cost of goods sold and added operational transparency.

Individual canteen results (by base) for the 2017 financial year (including 2016 comparative data) were as follows:

ESTABLISHMENT 2017 $

2016 $

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

3K 135

Café 1, Garden Island, (Sydney, NSW) -47K 30K

Café 51, Garden Island, (Sydney, NSW) -23K 1K

HMAS Albatross (Nowra, NSW) -69K -114K

HMAS Cairns (Cairns, Qld) -49K -78K

HMAS Cerberus (Crib Point, Vic) 405K 598K

HMAS Coonawarra (Darwin, NT) -39K -17K

HMAS Creswell (Jervis Bay, ACT) -22K -27K

HMAS Kuttabul (Sydney, NSW) 61K 73K

HMAS Penguin (Sydney, NSW) -26K -14K

HMAS Stirling ( Rockingham, WA) 204K 323K

HMAS Waterhen (Sydney, NSW) 37K 32K

HMAS Watson (Sydney, NSW) 58K 37K

Larrakeyah Café, Larrakeyah Barracks (Darwin, NT) -188K -247K

Salthorse Café, RAN Heritage Centre Garden Island, (Sydney, NSW) -29K -38K

Overall, small canteen operations in Sydney remain very profitable. The struggle remains with large bases close to external options and management of peaks and troughs throughout the day. Changes in base populations also impact revenue and HMAS Cerberus is a good example where lower recruit/training numbers have manifested in lower canteen revenue. The ebb and flow of contractors on bases also impacts the canteens.

Following a board review of operations during FY 2017 a number of sites were considered for closure with some adjustments to operations implemented. Flight Deck Café and Heritage Centre in NSW, both with large historical losses, had adjustments made. Weekend trade at Heritage Centre was halted and a vending offer established in its place. At Flight Deck Café (within FAAAM), daily trade was ceased and a vending offer established to meet the needs of individuals. Group and event catering are still provided at Flight Deck Café on a demand basis.

Adjustments were made to trading hours for Larrakeyah Café in NT but the Café was subsequently closed due to continued poor profitability. Operations on the waterfront at HMAS Coonawarra were enhanced in June 2017.


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Canteen operations at HMAS Creswell (Jervis Bay, ACT) and HMAS Penguin (Balmoral, NSW) are provided at a cost to Navy Canteens to support Navy personnel in a remote location. This service is being subsidised by other profitable Navy Canteen operations.

Coffee continues to be a key driver for canteen sales. Quality and service are being constantly monitored. The working partnership with Grinders (a business unit of Coca Cola Amatil) has continued focussed barista training nationally and supply to canteens of both coffee bean and equipment.

3.2.3 CAPITAL INvESTMENT

The Board has continued its capital investment program in the 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 (RANRTF), sponsoring Navy sport, providing grants, as well as supporting other lifestyle and entertainment activities. The overall financial performance in FY 2017 restricted the ability of the RANCCB to disburse cash for these purposes during the financial year. However, a total of $327K was disbursed. $123K was paid to the RANRTF, $170K to Navy Sports Council, $24K in general grants, and $10K to NUSHIPs (commissioning warships). A further $50K was provided to HMAS Coonawarra to facilitate construction of the new hardstand providing a sheltered general use on base facility outside the Navy Canteens operation. The total cash disbursements for the year, compared to previous years, are as follows:

RANCCB - GRANT DISBURSEMENTS

0

100

200

300

400

500

600

700

800

$586

2013 2014 2015

FINANCIAL YEAR END

$000

,s

2016 2017

614

260298

515

327


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3.2.5 LOANS

The RANCCB issued loans of $35K during FY 2017 (2016: $15K) 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 2017, with the focus being upon stabilising the canteen group to attain sustainable profitability.

3.4 SIGNIFICANT CHANGES

During the past twelve months, the RANCCB has experienced significant change with a change of Chair in December 2016, the succession of three Directors and the change of CFO in March 2017. This change is actively managed through longer term Directors providing additional assistance as new Directors gain experience. This risk has been actively managed through a deliberate succession plan going forward.

The greatest risk remains around our Navy Canteens workforce which is being actively managed through education and strengthened governance frameworks. An independent chair of the Risk Compliance and Audit Committee has provided additional oversight to the management of risk.

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 2017.

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 2017 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.


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In FY 2017 the RANCCB undertook an internal director only board evaluation process. The evaluation identified opportunities for reform and improved management and highlighted the need for a robust succession management plan. Overall, the evaluation demonstrated that the Board is performing in an effective and collegiate manner.

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. During the financial year CAPT John Metzl RAN chaired the Committee prior to the appointment and commencement of an independent Chair, CAPT Bernard York RAN, in February 2017. This committee comprises two RANCCB Directors and the independent Chair, assisted by the CEO and CFO.

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 was Lieutenant Commander Heidi Rossendell, RANR until December 2016 when CAPT Guy Blackburn RAN assumed the position of Chair. This committee of three RANCCB Directors is assisted by Ms Katrina Pawley (National Marketing Manager) who collates grant requests and attends to administrative matters.

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 to December 2016 was CDRE Ian Murray, RAN after which CDRE Michael Miko RAN assumed the Chair. This committee of two 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.


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3.12 DIRECTORS BENEFITS

Defence personnel appointed to the Board are not entitled to any remuneration as stated by the Navy (Canteen) Regulation (2016).

3.13 GENDER DIvERSITY

The RANCCB recognises the benefits of having gender diversity in the boardroom. During FY 2017 there was strong female representation on the Board including CDRE Stephanie Moles RAN (part year), CMDR Cassandra Ryan RAN (part year), LCDR Marion Donaldson (part year), Lieutenant Adelaide O’Connor RAN (part year), and Lieutenant Commander Heidi Rossendell RANR (part year). At 30 June 2017 there were three female Directors representing 43% of the Board membership.

3.14 INSURANCE OF OFFICERS

The RANCCB paid premiums of $7K for the year ended 30 June 2017 (2016: $7K) 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.

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 2017 were $40K (2016: $131K).

3.16 AUDIT FEES TO THE AUSTRALIAN NATIONAL AUDIT OFFICE (ANAO)

Audit fees incurred for audit of the enterprise by ANAO in respect to the FY 2017 were $98K (2016: $84K).


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3.17 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 4 4 1 1 Part

Year

Commodore Michael Miko, RAN 1 8 8 Part

Year

Commodore Stephanie Moles, RAN

1 2 2 2 2 Part Year

Captain Guy Blackburn, RAN 2 8 8 8 8

Captain John Metzl, RAN 1 8 8 1 1 8 8

Commander Cassandra Ryan, RAN

1 4 4 Part Year

Lieutenant Commander Marion Donaldson, RAN

1 4 4 1 1 1 1 Part Year

Lieutenant Commander Heidi Rossendell, RANR

1 4 3 5 3 Part Year

Lieutenant Adelaide O’Connor, RAN 1 6 5 6 6 Part

Year

Warrant Officer Stephen Downey 1 8 5 9 9

Notes:All Directors are Non Executive Directors.Directors share equal responsibilities.

Experience denotes the number of Board memberships held.

2. Directors share equal responsibilities.3. Experience denotes the number of Board memberships held.


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3.18 DIRECTORS QUALIFICATIONS

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

Master of Arts, MBA, CAHRI, FCILT, GAICD.

Commodore Michael Miko, RAN DipAppSc, Master of Defence Studies, Grad Cert Maritime Studies, FCILT, GAICD.

Commodore Stephanie Moles, RAN BSC, Grad Dip Mgt, Master of Business Administration, GAICD.

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

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

Commander Cassandra Ryan, RAN Mechanical Engineering Degree, Master Sustainment Management, Fellow IMAREST, CEng, CMarEng, GAICD.

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

Lieutenant Commander Marion Donaldson, RAN Bachelor of Arts (Japanese)/Bachelor of Law, Graduate Diploma of Legal Practice, Master of Law, GAICD.

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

Warrant Officer Stephen Downey GAICD.

MHJ Miko C Ryan Commodore, RAN Commander, RAN Director Director 5 October 2017 5 October 2017


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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

The vision for Navy Canteens is stated as “benefitting the Navy family”. The mission for Navy Canteens is stated as “to grow sustainable valued benefits for the Navy family”.

Regulation 8 of the Navy (Canteen) Regulation (2016) outlines the functions and powers of Navy Canteens. These include making grants from the Navy Fund to the Navy Relief Trust Fund (RANRTF); making grants and loans to persons conducting canteens, clubs, cinemas or other institutions or facilities for the welfare and entertainment of serving Naval members.

The mission outlined above, “to grow sustainable valued benefits for the Navy family”, will be enabled by Navy Canteens growing profitability through commercial business undertakings, delivering enhanced benefits to the Navy community, and maintaining efficient and effective governance of the Navy Canteens organisation.

4.3 PERFORMANCE AGAINST GOALS

Goal 1 - Ensure a safe environment 80% achieved

Actions taken during the financial year

Instil Food Safety Hazard Analysis Critical Control Points (HACCP) as routine practice.

Snap audits implemented. Implemented webinars through the Northern Sydney Institute (TAFE).

Develop managers to deliver a healthy workplace culture.

Presentations supporting goals provided to canteen management at Annual Managers Conference 10-11 January 2017. First “Excellence in Customer Service” Medallion implemented and awarded. Ongoing training in respect to workplace behaviours including anti bullying. Culture project identified.

Deliver safety trend analysis and reporting to management and the board.

Work in progress.


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Goal 2 - Ensure strong governance of Actions taken during the financial year Navy Canteens 70% achieved

Define our Navy Canteens business battle rhythm / cycle.

Complete.

Transition to new Navy Canteens Regulation (2016).

New Navy (Canteen) Regulation (2016) in effect.

Continue to have unqualified accounts. 4 Category C findings received in 2016 ANAO audit. These were minor in nature and have been addressed.

Achieve assurance of appropriate fraud management.

Work in Progress. Association of Certified Fraud Examiners 2016 global study on fraud provided to Board and Business Unit Managers. Ongoing dialogue via Risk Compliance and Audit Committee.

Develop and approve a funded ICT refresh program for 2017/2019.

Work in Progress. Supply chain and POS Trial at Café 1 GIDP undertaken and Board subsequently approved new providers Cater Care (supply chain) and ImPOS (POS) to be rolled out during FY 2018 to the Navy Canteens Group.

Apply a revised ABR5101 – Instructions for Service Funds.

Naval Logistics Support Publication ANP3428-4708 was signed on 11 May 2017, superceeding the previous publication for Service Funds (ABR5101) and incorporating changes proposed by the RANCCB.

Goal 3 – Grow and deliver valued Actions taken during the financial year benefits to the Navy family 50% achieved

Rationalise management of grants to increase benefit to Navy family.

Complete. Grants Committee taking a more pragmatic and disciplined approach to approval of grants. Revised grants policy approved.

Better understand what is valued by the Navy family.

Work in Progress. CEO and National Marketing Manager attendance at Navy events.

Communicate to grow brand awareness at sea and ashore.

Work in Progress. Articles in Navy Daily and Navy News. Signals promoting specific actions (ie WWN).


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Goal 4 - Grow profitability through Actions taken during the financial year sustainable businesses 30% achieved

Return a profit for the canteen group for FY 16/17.

Not achieved. Pockets of excellence but unacceptable losses being incurred at some locations. This is being addressed through a series of detailed review of underperforming locations.

Identify new opportunities to partner and grow.

Work in Progress. Exploring relationship with Australian Military Bank and iVend. Partnered with Cater Care to implement a new supply chain solution.

Grow Win with Navy participation to 3,300 members by end of FY 16/17.

Achieved. As at 30 June 2017 there were 3,325 total participants.

Develop and approve a board funded capital works program for 2017/2019.

Not achieved. Capex budgeting forms part of the annual budgeting process. A deliberate longer term Capex program to be developed.

Develop and approve a funded ICT refresh program for 2017/2019.

Work in Progress. A new Point of Sale System is being rolled out. A broader review of RANCCB systems to occur.

Grow profitability from conduct of functions.

Not achieved. Activity in the function space has been disappointing. The recruitment of a dedicated functions manager is Sydney did not deliver expected result and the position has been discontinued. The board has taken a decision to discontinue active marketing of functions and noting losses incurred.

Goal 5 - Foster strong collaborative Actions taken during the financial year relationships 95% achieved

Develop the relationship with the ANAO to improve governance.

Achieved. ANAO audit team appointed and working with CFO on FY 2017 audit.

Finalise and implement agreement with E&IG to support Navy Canteens.

Work in Progress. Agreement between the Commonwealth and Navy Canteens is in draft form.

Develop annual program of engagement with Navy command.

Achieved. Shore establishment CO and XO conferences continue to be addressed by Directors along with CO/XO desig courses being presented to by CEO. Ongoing relationship building activity.

Engage with DGNPSI to incorporate Navy Canteens requirements in the Navy facilities program.

Achieved. Presently engaged in respect to HMAS Cerberus and Larrakeyah Barracks redevelopments. Developed close links with DGNPSI.

Table detailing the performance against goals for the period 2016/2017.


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4.4 PERFORMANCE BY ACTIvITY 2016/2017

The following table shows achievement against intended results detailed in the 2016/17 Corporate Plan.

Purpose To grow sustainable valued benefits for the Navy family

Activity

Canteen operations on Navy establishments

Other services to Navy

Navy merchandise Holiday Centres Win with Navy raffle

Navy Canteens Ticketing

Intended Results

Achieve overall profit for the entire canteen group.

Not achieved. Pockets of excellence - stabilisation continues.

Rationalisation of services where necessary following profitability review of all sites.

Achieved. Nowra Hub – Flight Deck Café closed.

Larrakeyah Barracks – Larrakyah Café closed and repurposed as a production kitchen.

Outpipes Precinct – created an additional outlet.

Increased revenue from National Fleet Pricing on Coca Cola Amatil products.

Achieved.

Canteen goods supply to RAN ships.

Achieved.

Increased revenue from additional vending on all bases.

Achieved. Vending now transferred to Navy Canteens.

Increased revenue from merchandise sales on Navy ships.

Not achieved. Decrease in revenue from previous year

Increased revenue from merchandise sales in Navy canteens

Not achieved. Decrease in revenue from previous year

New merchandise range

Partially achieved. New range delayed in transit, certain items in stock

Increased revenue from greater occupancy.

Achieved.

Increased revenue from additional investment.

Amblin – New pool roof, Underground piping fixed, Continued rectifications across the park.

Bungalow Park – New jumping pillow.

Forster – Continued cottage refurbishment.

Increased revenue through greater participation.

Achieved.

Increased revenue streams through commissions.

Not achieved. Impacted by higher priority operational issues.


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Delivery Strategy

Expansion of food offering.

Achieved. Definite improvement but work still required. A good example is the new menu offering implemented at Both Watches at HMAS Cerberus.

Maintain focus on reducing Cost of Goods Sold.

Achieved. Internal audits undertaken. New supply chain and POS approved at April board meeting.

Maintain focus on control of labour costs.

Ongoing. Develop profitable cost centres across canteen operations.

Ongoing.

Increased direct communication with Navy personnel and circulation of information within Navy.

Ongoing. CO and XO annual conference presentations plus CO/XO design course presentations. Signals sent.

Develop relationships with Fleet Units Maritime Logistics Officers.

Ongoing.


Partially achieved. Increased survey activity. Navy Daily and Navy News coverage.

Better display of merchandise within canteens.

Ongoing.

Address merchandise quality concerns.

Achieved. Investigation into complaints received. Nothing significant identified.

Increased marketing activity.

Achieved. Social media targeted mostly. Review of caravan shows for effectiveness. Increased children’s activity.

Targeted facility development planning and investment.

Not achieved. Lack of available profit to be invested outside of budgeted Capex.


Achieved. Greater Facebook activity. Navy News ads changed to be more vibrant and contemporary. More effective use of DPN.

Variation to prize offerings.

Achieved. Strategy of smaller but more prizes proven to be successful.

Refine management of Direct Debit payment process.

Achieved. Increased activity in managing credit card failures.

Continue development with third parties.

Not achieved. Delaware North luxury resorts outstanding. Discussions in progress with BIG4 Holiday Parks.

Table of achievement against stated performance for the period 2016/2017.


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4.5 MEASUREMENT AND ASSESSMENT 2016/2017

The following table contains the performance measurement targets and achievement by business activity as detailed in the 2016/2017 Corporate Plan.

BUSINESS ACTIvITY PERFORMANCE MEASUREMENT 2016/2017Canteen operations on Naval establishments

Comparison of actual net profit to budgeted net profit

Target: Within 10% Achieved: Actual Net Profit $(276,000) Budgeted Net Profit $530,447

Labour % (Total Labour Cost as % of Gross Revenue)

Target: 33% Achieved:39.2%

COGS % (Total COGS as % of Gross Revenue) Target: 50% Achieved: 50.5%

Staff retention rate (%) Target: 72% Achieved: 56%

Annual Customer satisfaction survey – overall satisfaction level of satisfied or better

Target: 75% Speed of coffee service 90% Quality of coffee bean 67% Taste of coffee 68% Quality of products overall 88.63% Quality of service 90%

Other services to Navy Number of Major Fleet Unit customers supplied Target: 5 Achieved: (6) HMA Ships Melbourne, Perth, Success, Adelaide, Canberra, Choules

Navy merchandise Total revenue growth (over previous year) Target: 10% Achieved: 6.84%

Holiday Centres Total revenue growth (over previous year) Target: 3% Achieved 4.69%

Total number of customer complaints received annually

Target: < 36 Total number of complaints received: 83 Breakdown as follows: BIG4 Bungalow Park - 20 Amblin Holiday Park - 24 Forster Holiday Village - 39

Win with Navy raffle Number of Navy participants Target: 3,300 Achieved: 3,325


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BUSINESS ACTIvITY PERFORMANCE MEASUREMENT 2016/2017Navy Canteens Ticketing

% of tickets sold to Navy Target: 55% Achieved: 59.23%

Total number of ticket sold to Defence Target: 15,000 Achieved: 7,885 Breakdown as follows: Navy - 4,670 Army - 1,080 RAAF - 598 APS - 1,296 Contractors - 241

Commission from Third Party arrangements Target: $10,000 Achieved: Nil

Total Navy Grants Inclusive of Navy Sports Council, RANRTF, Shore establishments, RANCCB grants program

Target: $560,000 Achieved: $388,954

Table of achievement against stated measurement & assessment for the period 2016/2017.


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4.6 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. Influencing factors include rationalisation of menus, staffing (including full time equivalents), supply chain management and base relationships to better understand customer demand. The positive performance at many canteen sites have been offset by trading losses elsewhere within the canteen group which has negatively impacted overall canteen group performance.

Other services to Navy – Supply to ship canteens continued to grow during FY 2017, with initiatives being taken to improve the supply chain and grow internal awareness within Navy to ensure continued growth of these new services.

Navy 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 delivered a good performance during FY 2017.

Win with Navy Raffle – Continued growth in participation has been achieved during FY 2017. The direct debit payment model for participants requires significant effort.

Navy Canteens Ticketing – Whilst delivering a creditable outcome, Navy Canteens Ticketing did not meet the ticketing target set for FY 2017. This outcome is attributable in part to the availability of reduced price tickets to shows, negotiations required to secure concert tickets from promoters and difficulties experienced in points of contacts on military bases for dissemination of offers. Targeting better use of social media to increase the utilisation of this service.

Total Navy Grants – The payment of grants as an expenditure item, rather than from profits, has 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. Distributions to shore establishments were suspended for FY 2017. The Enterprise remains in a sound financial position and able to sustain the loss incurred as a result of grant payments in FY 2017.


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5. CORPORATE GOvERNANCE

5.1 GOALS AND STRATEGIC INTENT

5.1.1 The stated goals of the RANCCB in FY 2017 as detailed in the 2016/17 Corporate Plan are:

a. Ensure a safe working environment;

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.

5.2 FUNCTIONS AND POWERS

5.2.1 Under regulation 8 of Navy (Canteen) Regulation (2016) the Board has the following functions:

a. receive contributions of money to the Navy Fund from canteens trading;

b. to accept gifts and donations of money or other property for the purposes of the Navy Fund;

c. to make grants of money from the Navy Fund to the Navy Relief Trust Fund for the purposes of that Fund;

d. to make grants and loans of money and property from the Navy Fund to persons conducting canteens, clubs, cinemas or other institutions or facilities for the welfare or entertainment of members of the Navy;

e. to purchase, lease, hire or otherwise acquire property for the purpose of providing services, entertainment, recreation or other amenities for members of the Navy;

f. to dispose of any property acquired by, or vested in, the Board;

g. to enter into a contract under which the Board, in consideration of a person rendering assistance in connection with the erection of a building to provide services specified in the contract for members of the Navy, accepts the liability to pay a sum of money to that person if the building ceases to be used to provide those services;

h. to enter into contracts for, or in relation to, the purchase or supply of goods to be sold in canteens or clubs (whether as agent for, or otherwise on behalf of, persons conducting canteens or clubs or for the purpose of resale to those persons);

i. to sell to persons conducting canteens or clubs goods purchased by the Board for the purpose of resale;

j. to do such other things as are incidental to the purposes of the Navy Fund.


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5.2.2 The Board has power to do all things necessary or convenient to be done for and in connection with performing its functions.

5.2.3 The Board may make recommendations to the Chief of Navy as delegate of the Chief of Defence Force about:

a. opening, conducting and closing canteens; and

b. contributions of money to the Navy Fund from canteens trading; and

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

d. matters incidental to those referred to in the paragraphs set out above.

5.3 CHARTER

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

5.3.2 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.

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

a. The Charter of the Board is supported by the Navy (Canteen) Regulation (2016).

b. The Minister delegates to the CDF who inturn delegates to Chief of Navy.

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

d. A CEO is appointed by the Board.

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

5.4 RISK, COMPLIANCE AND AUDIT COMMITTEE

5.4.1 At 30 June 2017 the Independent Chairman of the Committee was Captain Bernard York, RAN. The CEO and CFO attend all the meetings at the discretion and invitation of the committee.

5.4.2 This 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;


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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.

5.5 REMUNERATION COMMITTEE

5.5.1 The remuneration of the CEO is determined by the Board on the recommendation of the Remuneration Committee, which at 30 June 2017 was chaired by Commodore Michael Miko, RAN.

5.5.2 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.

5.6 GRANTS COMMITTEE

5.6.1 The Chairperson of the Committee at 30 June 2017 was Captain Guy Blackburn, RAN. The National Marketing Manager attends the meetings at the discretion and invitation of the Committee to address questions of the Committee.

5.6.2 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.


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5.7 CHIEF OF NAvY DIRECTIvE

5.7.1 On 19 May 2017 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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INDEPENDENT AUDITOR’S REPORT

To the Minister for Defence Personnel

Opinion

In my opinion, the financial statements of the Royal Australian Navy Central Canteens Board for the year ended 30 June 2017:

(a) comply with Australian Accounting Standards – Reduced Disclosure Requirements 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 2017 and its financial performance and cash flows for the year then ended.

The financial statements of the Royal Australian Navy Central Canteens Board, which I have audited, comprisethe following statements as at 30 June 2017 and for the year then ended:

• 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 and other explanatory information.

Basis for Opinion

I conducted my audit in accordance with the Australian National Audit Office Auditing Standards, which incorporate the Australian Auditing Standards. My responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of my report. I am independent of the Royal Australian Navy Central Canteens Board in accordance with the relevant ethical requirements for financial statement audits conducted by the Auditor-General and his delegates. These include the relevant independence requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants to the extent that they are not in conflict with the Auditor-General Act 1997 (the Code). I have also fulfilled my other responsibilities in accordance with the Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Other Information

The Accountable Authority is responsible for the other information. The other information comprises the information included in the annual report for the year ended 30 June 2017 but does not include the financial statements and my auditor’s report thereon.

My opinion on the financial statements does not cover the other information and accordingly I do not express any form of assurance conclusion thereon.

In connection with my audit of the financial statements, my responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard.

GPO Box 707 CANBERRA ACT 260119 National Circuit BARTON ACTPhone (02) 6203 7300 Fax (02) 6203 7777

6. FINANCIAL STATEMENTS

6.1 INDEPENDENT AUDITOR’S REPORT


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Accountable Authority’s Responsibility for the Financial Statements

As the Accountable Authority of the Royal Australian Navy Central Canteens Board the directors areresponsible under the Public Governance, Performance and Accountability Act 2013 for the preparation and fair presentation of annual financial statements that comply with Australian Accounting Standards – Reduced Disclosure Requirements and the rules made under that Act. The directors 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.

In preparing the financial statements, the directors are responsible for assessing the Royal Australian Navy Central Canteens Board’s ability to continue as a going concern, taking into account whether the entity’s operations will cease as a result of an administrative restructure or for any other reason. The directors are also responsible for disclosing matters related to going concern as applicable and using the going concern basis of accounting unless the assessment indicates that it is not appropriate.

Auditor’s Responsibilities for the Audit of the Financial Statements

My objective is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian National Audit Office Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with the Australian National Audit Office Auditing Standards, I exercise professional judgement and maintain professional scepticism throughout the audit. I also:

• identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

• obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control;

• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Accountable Authority;

• conclude on the appropriateness of the Accountable Authority’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor’s report. However, future events or conditions may cause the entity to cease to continue as a going concern; and

• evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

Australian National Audit Office

Garry SutherlandAudit PrincipalDelegate of the Auditor-GeneralCanberra5 October 2017


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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 2017 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 M Miko Commander C Ryan Accountable Authority Accountable Authority

5 October 2017 5 October 2017

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

Mr S J Gregory Mr M J Doogan Chief Executive Officer Chief Financial Officer

5 October 2017 5 October 2017


33


6.3 STATEMENT OF COMPREHENSIvE INCOME

FOR THE YEAR ENDED 30 JUNE 2017

2017 2016

Note $’000 $’000

EXPENSESEmployee Benefits 2.1A 6,345 6,349

Suppliers 2.1B 9,274 10,146

Grants 2.1C 327 515

Depreciation and amortisation 2.1D 854 741

Write Down and Impairment of Assets 2.1E 158 86

Total expenses 16,958 17,837

LESS: OWN SOURCE INCOMEOWN-SOURCE REvENUESale of Goods and Rendering of Services 2.2A 16,291 17,101

Interest 2.2B 68 93

Other Revenue 2.2C 131 185

Total own-source revenue 16,490 17,379

Total own-source income 16,490 17,379

Net cost of services (468) (458)

(Deficit) attributable to the Australian Government (468) (458)

Total comprehensive (loss) attributable to the Australian Government (468) (458) The above statement of comprehensive income is to be read in conjunction with the attached notes.


34


6.4 STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2017

2017 2016

Note $’000 $’000

ASSETSFINANCIAL ASSETSCash and Cash Equivalents 3.1A 3,310 4,021

Trade and Other Receivables 3.1B 284 410

Other Investments 42 44

Total financial assets 3,636 4,475

NON – FINANCIAL ASSETSLand and Buildings 3.2A 12,234 12,015

Property, Plant and Equipment 3.2B 1,672 1,747

Computer Software 3.2C - 27

Inventories 3.2F 533 516

Prepayments 7 17

Total non-financial assets 14,446 14,322

Total assets 18,082 18,797

LIABILITIESPayables 456 578

Grants 3.3A 123 135

Other Payables 3.3B 1,144 1,216

Total payables 1,723 1,929

PROvISIONSEmployee Provisions 4.1A 560 601

Total provisions 560 601

Total Liabilities 2,283 2,530

Net Assets 15,799 16,267

EQUITY Contributed equity 1,616 1,616

Reserves 8,541 8,541

Retained surplus 5,642 6,110

Total Equity 15,799 16,267

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


35


6.5 STATMENT OF CHANGES IN EQUITY


Note Retained Earnings

Asset Revaluation Surplus

Contributed Equity/Capital

Total Equity

2017 2016 2017 2016 2017 2016 2017 2016

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

Opening Balance

Balance carried forward from previous period

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

Adjustment for restatements

- - - - - - - -

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

Comprehensive Income

(Deficit) for the period (468) (458) - - - - (468) (458)

Total Comprehensive Income

(468) (458) - - 0 0 (468) (458)

Attributable to the Australian Government

5,642 6,110 8,541 8,541 1,616 1,616 15,799 16,267

Transactions with Owners

Contributions by Owners

Closing Balance 5,642 6,110 8,541 8,541 1,616 1,616 15,799 16,267

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


36


6.6 CASH FLOW STATEMENT


Note 2017 2016

$’000 $’000

OPERATING ACTIvITIESCASH RECEIvEDGoods and services 17,995 18,548

Canteen loans repaid (13) 5

Total cash received 17,982 18,553

CASH USEDEmployees (6,328) (6,410)

Suppliers (10,360) (10,748)

Grants (339) (428)

Net GST paid (746) (757)

Total cash used (17,773) (18,343)

Net cash flows from operating activities 209 210

INvESTING ACTIvITIESCASH RECEIvEDInterest received 68 93

Disposal of property, plant and equipment - 113

Total cash received 68 206

CASH USEDPurchase of property, plant and equipment (988) (906)

Total cash used (988) (906)

Net cash flows (used by) investing activities (920) (700)

Net increase or decrease in cash held (711) (490)

Cash and cash equivalents at the beginning of the reporting period

4,021 4,511

Cash and cash equivalents at the end of the reporting period 3.1A 3,310 4,021

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


37


6.7 NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. OVERVIEW 38

1.1 Objectives of the Royal Australian Navy Central Canteens Board 38

1.2 Basis of preparation of the Financial Statements 38

1.3 Taxation 38

1.4 Events after the Reporting Period 38

NOTE 2. FINANCIAL PERFORMANCE 39

2.1 Expenses 39

2.2 Revenue 41

NOTE 3. FINANCIAL POSITION 43

3.1 Financial Assets 43

3.2 Non-Financial Assets 45

3.3 Payables 50

NOTE 4. PEOPLE AND RELATIONSHIPS 51

4.1 Provisions 51

NOTE 5. KEY MANAGEMENT PERSONNEL 52

5.1 Key Management Personnel 52

5.2 Related Party Disclosures 52

NOTE 6. MANAGING UNCERTAINTIES 53

6.1 Contingent Assets and Liabilities 53

6.2 Financial Instruments 53

6.6 CASH FLOW STATEMENT


Note 2017 2016

$’000 $’000

OPERATING ACTIvITIESCASH RECEIvEDGoods and services 17,995 18,548

Canteen loans repaid (13) 5

Total cash received 17,982 18,553

CASH USEDEmployees (6,328) (6,410)

Suppliers (10,360) (10,748)

Grants (339) (428)

Net GST paid (746) (757)

Total cash used (17,773) (18,343)

Net cash flows from operating activities 209 210

INvESTING ACTIvITIESCASH RECEIvEDInterest received 68 93

Disposal of property, plant and equipment - 113

Total cash received 68 206

CASH USEDPurchase of property, plant and equipment (988) (906)

Total cash used (988) (906)

Net cash flows (used by) investing activities (920) (700)

Net increase or decrease in cash held (711) (490)

Cash and cash equivalents at the beginning of the reporting period

4,021 4,511

Cash and cash equivalents at the end of the reporting period 3.1A 3,310 4,021

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


38


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 were repealed and replaced by the Navy (Canteen) Regulation (2016). This Regulation provides 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 2015; and

· Australian Accounting Standards and Interpretations reduced disclosure requirements 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 TAXATION

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

1.4 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 2017.


39


NOTE 2. FINANCIAL PERFORMANCE

2.1 EXPENSES

2017 2016

$’000 $’000

2.1A: EMPLOYEE BENEFITSWages and salaries 5,482 5,452

Superannuation 518 528

Leave and other entitlements 345 364

Separation and redundancies - 5

Total employee benefits 6,345 6,349

ACCOUNTING POLICY

Employee Benefits

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

2.1B: SUPPLIERSDirect expenses 6,107 6,809

Administrative expenses 1,228 1,221

Operating expenses 1,406 1,639

Other expenses 321 330

Total suppliers 9,062 9,972

OTHER SUPPLIER EXPENSESWorkers compensation premiums 212 174

Total other supplier expenses 212 174

Total suppliers expenses 9,274 10,146

The expenses above include an audit fee of $98,000 (2015-16: $84,000) payable to the Australian National Audit Office for the audit of the financial statements.


40


2017 2016

$’000 $’000

2.1C: GRANTSPublic sector:

· Australian Government Entities (related entities) 123 135

· Non profit organisation 204 380

Total grants 327 515

2.1D: DEPRECIATION AND AMORTISATIONDepreciation:

· Buildings 314 259

· Property, plant and equipment 540 468

· Computer software - 14

Total depreciation and amortisation 854 741

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

· Property, plant and equipment - 2

· Inventory 131 109

· Impairment of financial instruments 27 (25)

Total write – down and impairment of assets 158 86


41


2.2 REvENUE

2017 2016

$’000 $’000

2.2A: SALES OF GOODS AND RENDERING OF SERvICESProvision of goods 11,261 12,416

Rendering of services 5,030 4,685

Total sale of goods and rendering of services 16,291 17,101

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 68 93

Total interest 68 93

ACCOUNTING POLICY

Interest

Interest is recognised using the effective interest method.

2.2C: OTHER REvENUEProfit on sale of assets - 43

Donations 9 43

Insurance claims received 23 -

Resources received free of charge 99 99

Total other revenue 131 185


42


The Navy (Canteens) Regulations 2016 (2016) 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 to the value of $99,000 in 2016-17, (2015-16: $99,000).

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.


43


NOTE 3. FINANCIAL POSITION

3.1 FINANCIAL ASSETS

2017 2016

$’000 $’000

3.1A: CASH AND CASH EQUIvALENTSCash on hand or on deposit 3,310 4,021

Total cash and cash equivalent 3,310 4,021

ACCOUNTING POLICY

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 34 136

Total receivables for goods and services 34 136

Other receivables:

· Canteen loans 18 5

· Interest 4 9

· Levies 20 10

· Other receivables 222 259

Total trade and other receivables (gross) 298 419

Less impairment allowance account

for Goods and services 14 9

Total trade and other receivable (net) 284 410

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. The impairment loss for 2016-17 was -$27,000 (2015-16: an impairment gain of $25,000) has been recognised by the RANCCB.


44


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.


45


3.2 NON-FINANCIAL ASSETS

2017 2016

$’000 $’000

3.2A: LAND AND BUILDINGLand at fair value 7,079 7,079

Buildings on freehold land:

· Fair value 5,775 5,195

· Accumulated depreciation (620) (259)

Total land and buildings on freehold land 12,234 12,015

3.2B: PLANT AND EQUIPMENTPlant and equipment:

· Fair value 2,641 2,217


Total plant and equipment 1,672 1,747

3.2C: COMPUTER SOFTWAREComputer Software

· Fair value 41 41


Total computer software - 27


46


3.2D: RECONCILIATION OF THE OPENING AND CLOSING BALANCES OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLES (2017)

Item Land Buildings Total Land &

Buildings

Other PP & E

Computer Software

Total

$’000 $’000 $’000 $’000 $’000 $’000

As at 1 July 2016

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

Net Capital Work in Progress - 3 3 9 - 12

Accumulated depreciation/amortisation and impairment

- (259) (259) (456) (14) (729)

Net book value 1 July 2016 7,079 4,936 12,015 1,761 27 13,803

Additions by

Purchases during the year - 483 483 424 - 907

Reclassification - 50 50 - - 50

Depreciation/amortisation expense - (314) (314) (513) (27) (854)

Net book value 30 June 2017 7,079 5,155 12,234 1,672 - 13,906

Net book value as of 30 June 2017 represented by:

Gross book value 7,079 5,728 12,807 2,641 41 15,489

Accumulated depreciation/amortisation and impairment

- (573) (573) (969) (41) (1,583)

Total as at 30 June 2017 7,079 5,155 12,234 1,672 - 13,906


47


ACCOUNTING POLICY

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).

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.

With the absence of records reflecting the cost of the RANCCB holiday parks 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 parks were acquired between the early 1970’s to mid 1980’s.

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

Any revaluation adjustments are charged to the Asset Revaluation Reserve in equity. There were no revaluation adjustments for 2016-17.

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. Asset valuations were last undertaken in June 2015 by Opteon Property Group, Taylor Byrne and Walsh & Monaghan. The next valuations are expected to occur in and around June 2018.


48


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 2017 2016

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

Impairment

All assets were assessed for impairment at 30 June 2017. 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. No indicators of impairment were found for property, plant and equipment.

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. No property plant or equipment is expected to be sold or disposed of within the next 12 months.

Intangibles

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 RANCCB software are 3 years (2015-16 3 years).

All software assets were assessed for indications of impairment as at 30 June 2017.

Leasehold Improvements

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.


49


2017 2016

$’000 $’000

3.2E: INvENTORIESInventories held for sale

· Finished goods 533 516

Total inventories 533 516

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.


50


3.3 PAYABLES

2017 2016

$’000 $’000

3.3A: GRANTSGrants - Australian Government entities 123 135

Total grants 123 135

3.3B: OTHER PAYABLES · Prepayments from customers 506 475

· Accrual expenses 269 372

· Salaries and wages 65 19

· Superannuation 3 12

· GST payable 195 186

· Other payables 106 152

Total other payables 1,144 1,216


51


NOTE 4. PEOPLE AND RELATIONSHIPS

4.1 PROvISIONS

2017 2016

$’000 $’000

4.1A: EMPLOYEE PROvISIONSLeave 560 601

Total employee provisions 560 601

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.

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.


52


NOTE 5. KEY MANAGEMENT PERSONNEL

5.1 KEY MANAGEMENT PERSONNEL

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. The entity has determined the key management personnel to be the Board of Directors who are appointed by the Chief of Navy under the Navy (Canteens) Regulation 2016. In accordance with the Regulations, members of the Defence Force serving on the Board are restricted from receiving remuneration.

The total number of Directors disclosed above are 7 (2015-16: 7).

5.2 RELATED PARTY DISCLOSURES

The entity is an Australian Government controlled entity. Related parties to this entity are Directors, Key Management Personnel and other Australian Government entities.

DIRECTORS

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

Commodore M Miko (Chairman) - part year Commodore I Murray (Chairman) - part year Commodore S Moles – part year Captain J Metzl Captain G Blackburn Commander C Ryan – part year Lieutenant Commander M Donaldson – part year Lieutenant Commander H Rossendell – part year Lieutenant A Connor – part year Warrant Officer S Downey

TRANSACTIONS WITH DIRECTORS OR DIRECTOR-RELATED ENTITIES

There were no transactions with directors or director related parties (2016: $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.


53


NOTE 6. MANAGING UNCERTAINTIES

6.1 CONTINGENT ASSETS AND LIABILITIES

There are no contingent assets or liabilities as at 30 June 2017. (2016 $Nil)

6.2 FINANCIAL INSTRUMENTS

2017 2016

$’000 $’000

6.2A CATEGORIES OF FINANCIAL INSTRUMENTSFinancial assets

Held-to-maturity financial assets

Deposits 1,718 2,277

Cash with banks and on hand 1,592 1,744

Total held-to-maturity financial assets 3,310 4,021

Loans and receivables

Goods and services 20 127

Canteen loans 18 5

Interest receivable 4 9

Other receivables 242 269

Total loans and receivables 284 410

Available-for-sale financial assets

Post office license 42 44

Total available-for-sale financial assets 42 44



Financial Liabilities

Trade creditors 456 578

Grants payable 123 135

Other payables 1,144 1,216

Total financial liabilities 1,723 1,929

Trade creditors settlement is usually within 30 days.


54


2017 2016

$’000 $’000

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

Interest revenue 68 93

Net gain/(loss) held-to-maturity 68 93

Net gain/(loss) from financial assets 68 93



56

luxury apartmentPANDANUS POCKET

AMBLINHOLIDAY PARK

on the beach

on Burrill LakeBIG 4 BUNGALOW PARK

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