SWIMCO - Audit Report 68pp inc cover.indd
Transcription
SWIMCO - Audit Report 68pp inc cover.indd
SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED Annual Report 2011/12 This page has been left blank intentionally Contents Harvey Water at a Glance .......................... 1 About Harvey Water .................................. 2 Chairman’s Report ..................................... 3 General Manager’s Report......................... 5 Management Structure ............................12 Board of Directors .....................................13 Senior Management Team ...................... 15 Corporate Governance............................. 16 Directors’ Report...................................... 19 Statutory Report of the Directors ........... 20 Certificate by the Directors .......................21 Declaration by the General Manager .......21 Financial Report ....................................... 22 Audit Report ............................................. 62 HWIA Map ................................................ 65 Harvey Water at a Glance HEAD OFFICE BOARD OF DIRECTORS James Stirling Place (PO Box 456) HARVEY WA 6220 Telephone: 08 9729 0100 Facsimile: 08 9729 0111 Email: admin@harveywater.com.au Website: www.harveywater.com.au Ian Eckersley Sam Epiro Tom Busher Kevin Depiazzi Len Snell Mike Snell Chairman Deputy Chairman Collie Collie Waroona Non-Member Director SENIOR STAFF General Manager Operations Manager Corporate Services Manager / Accountant Geoff Calder Steve Iceton Susan Boland LEGAL ADVISORS AUDITORS Corrs Chambers Westgarth Sceales & Co Jenni Mattila & Associates AMD Chartered Accountants 28-30 Wellington Street BUNBURY WA 6230 BANKERS INSURANCE BROKERS Westpac Banking Corporation 143 Victoria Street BUNBURY WA 6230 AON Risk Services Australia Ltd Level 32, QV 1, 250 St Georges Terrace PERTH WA 6000 STATISTICS Total Irrigation Area 112,000 ha Total Area of Farms 34,369 ha Total Irrigated Area (2011/12) 5,734 ha Number of Members 720 Number of staff (FTE) Lined Channels* Unlined Channels* Pipelines* 23 85km 171km 489km Average Annual Sales (2001-11) 63.9 GL Number of Supply Points* Total Number of Assets* 1,668 7,338 *statistics relate to entire irrigation system, some assets may actually be owned by SWIAC. 2011/12 HIGHLIGHTS • • Construction of the Somers Road pipeline. Community Involvement – Harvey Water supported local events/organisations, including: Harvey Harvest Festival Brunswick Ag. Society Lions Club of Harvey Rotary Club of Harvey Waroona Ag. Society Harvey Visitor Centre Harvey Golf Club Log Fence Pony Club Brunswick Bowling Club Harvey Agricultural. Society Page 1 Harvey Water Annual Report 2011/12 About Harvey Water South West Irrigation Management Cooperative Ltd (SWIMCO), trading as Harvey Water, is a locally owned, self funded cooperative serving its 720 Members in the Shires of Waroona, Harvey and Dardanup. The Harvey Water Irrigation Area (HWIA) is located to the west of the Darling Scarp on the Swan Coastal Plain, around 100 km south of Perth. Irrigation is long established in the HWIA with Harvey Water assuming responsibility for the management of the assets and the distribution of water in 1996 in response to COAG competition policy. The HWIA covers an area of 112,000 hectares (around 75km long and 15km wide) in three Irrigation Districts: Harvey, Waroona and Collie River. There are currently around 6,000 ha of land under permanent irrigation for dairy farming, beef grazing and horticulture, with a total irrigable area of approximately 34,000 ha. Harvey Water is responsible for the delivery of water to irrigators and the irrigation system delivery infrastructure - a network of channels and pipes: 85km lined channels, 171km unlined channels and 489km of pipeline with about 350 water checks and diversions and 1,600 supply points. The Company is well recognised across Australia for its lateral thinking and creative approach to water use efficiency programmes. Harvey Water has received particular attention with its multi award winning $100 million Pipe Projects gaining national recognition and praise not only for the concepts involved and the benefits brought to the community, but also due to the skill and diligence of Harvey Water’s Board and management who delivered this project on time and on budget. Prior to the major Project the Waroona District was converted to a piped system in 2003. The piped irrigation system allows 24x7x365 access to water under sufficient gravity pressure for operating sprinklers and similar higher technology systems, which leads to more efficient on farm usage of water. The aim is to convert the rest of the system to pipes, particularly the Collie River Irrigation District. Harvey Water is licensed to draw an annual total of 136,360 ML from the seven dams, Waroona, Drakesbrook, Samson Brook, Logue Brook, Stirling, Harvey, Wellington and Burekup Weir, which are the supply sources for the irrigation area. The HWIA is different from most Australian irrigation areas because it does not have a longitudinal river system(s) from which water is diverted or pumped. Water is supplied entirely by gravity flow from dam to farm along a network of channels and pipes. Page 2 Harvey Water Annual Report 2011/12 Chairman’s Report Ian Eckersley - Chairman On behalf of my fellow Directors at Harvey Water, it gives me great pleasure to present the Chairman’s Report for 2011/12. The drying trend as forecast by science and experienced by all in the past decade has continued and resulted in an allocation of just 45% in the Waroona/Logue/Harvey Irrigation Districts. Thankfully, this is more than the 34% last year but still well under the long-term average. In making sense of this it is appropriate to note that four of the driest years in the past century have occurred in the past decade. This lack of runoff into the dams has a significant effect on the costs of water for irrigators. On the other side of the equation, there is less water delivery income for Harvey Water. Collie River irrigators again received 100% allocation but of water quality that we would all prefer to be much better. Another feature of the year was the unusually wet spring which meant that irrigators did not need to draw on their entitlements until quite late in the season. This was a bonus for irrigators but meant that Harvey Water did not make the usual 12 GL of deliveries during that period and so income was down. Page 3 Unhappily, for the first time since Harvey Water was privatised, the company made an operating loss after tax of $1.86 m, largely due to the much lower water delivery income. With expected water sales next year, this disappointing result is not expected to be repeated. The construction phase that the cooperative has been going through has eased off for the present, so cost savings have been made in the Asset Management area. The balance sheet remains strong with a loan of $1M from SWIAC being the main important liability. The Waroona and Logue catchments both performed poorly yet Wokalup Pipehead dam transferred 7.2 GL into Harvey dam compared to 1.2 GL the previous year. It appears that the rainfall is not as heavy or as uniform as before with a big local rainfall/runoff event helping the Wokalup Catchment. With the challenge of low supplies in the Waroona area and Harvey Water’s desire for uniform allocation across Waroona and Harvey Irrigation Districts, a 8km HDPE pipeline was installed along Somers Road at a cost of $2.8M. This enabled water to be transferred from Harvey dam under gravity into the western side of the Waroona Irrigation District. Local meetings were also held to demonstrate the benefits of good scheduling in the Water Delivery section to enable the most effective use of the system. Water quality in the Collie River Irrigation District remains Harvey Water’s biggest challenge. We have been working in conjunction with the South West Development Commission and the Department of Water plus an industry and a government committee, albeit at a frustratingly slow pace, to promote a project to improve the situation for the long term. Harvey Water Annual Report 2011/12 Chairman’s Report (cont.) At Harvey Water’s request, our engineering consultants have completed the design to store diverted water in the upper catchment of the Collie River East Branch. From there, they have also designed a transfer pipeline route to move the high salinity water from the storage to an outfall into the sea. The modelling of this system estimates that by removing the autumn/early winter flows from the river, the salinity in the dam will be reduced to less than 700 mg/l TDS. It remains for a Business Case to be developed which will assess the economics, governance and access regimes for presentation to government. A Special General Meeting was held on 2nd May at the Benger Hall where the members voted on and approved the adoption of the new Rules to enable SWIMCO to operate in compliance with the new WA Cooperatives Act 2009. Subsequently the Board formally accepted the voting and approved the adoption of the Rules at its June meeting. The Rules were then forwarded to the Registrar who agreed that they were compliant with the Act and registered them. These Rules replaced the Articles of Association, under which SWIMCO had operated since 1996. In the main, the new Rules are a repeat of the old Articles with some adjustments to bring SWIMCO into line with the Act. The two notable differences are the ability for a member to resign from the cooperative and a tightening of the active membership provisions that require the Board to cancel the membership of shareholders who are not active according to the Rules. The position the Board has adopted and will continue to apply is to always act in the best interests of all 720 members, to attempt to treat all members equitably and to ensure the financial viability of the company. Any resignations will have the effect of spreading the fixed costs across fewer shares resulting in higher costs for Page 4 remaining members. Harvey Water therefore expects members who are intending to resign to first attempt to trade with existing members by any of a number of means available. At present, this is not an issue in the Waroona and Harvey Irrigation Districts because there is a strong market there but for 2011/12, there was effectively no market in the Collie River Irrigation District. Although SWIMCO and SWIAC have nearly the same shareholders, they are separate companies and so have to operate at legal arm’s length. I am pleased to report that the good relationships between the two cooperatives have been maintained. Our key personnel at Harvey Water, led by General Manager, Geoff Calder and Operations Manager, Steve Iceton and staff have all continued to perform at a high level and deserve congratulations. It is a well-known fact that our shareholders have had to become a lot more efficient over time and Harvey Water management also aspires to continued improvement. Your elected Board has applied themselves constructively to ensure the successful future of Harvey Water. I would like to thank my fellow Directors for their support and efforts over the reporting period. Tom Busher and Len Snell will be completing their 3-year terms at the 2012 AGM and have given advice of their retirement. Their input has been enthusiastic and valuable and I would like to acknowledge their contribution to the Board and cooperative. I would encourage anyone in the Waroona and Collie River Irrigation Districts with an interest in joining the Board to contact fellow Directors or myself for any information and support. Harvey Water Annual Report 2011/12 General Manager’s Report assessments plus the ability to resign and to apply for partial buy-back of shares. These options are stimulating significant interest in the Collie River Irrigation District (CRID). The passage of the new Water Services Act is a major step towards modernising the near 100-year-old water legislation in WA. Geoff Calder – General Manager OVERVIEW The key issue affecting the cooperative’s result this year was the continuing low allocation of 45% in the Waroona/Harvey Irrigation District (W/HID). Combined with the wet spring this led to low deliveries and had a direct influence on the poor financial outcome in 2011/12 where an operating loss after tax of $1.86 m was recorded. This is the first time in 15 years that Harvey Water has made an operating loss. Harvey Water is working hard to mitigate the effects of the drying climate and decided to invest in a pipeline that connected, and thus integrated, the Waroona and Harvey Irrigation Districts allowing a single allocation to apply. Harvey Water’s attempts to stimulate action to reduce salinity in Wellington dam continue to have their ups and downs. However, for the first time the cooperative has real confidence that a project proposal will be provided to government before the end of 2012. The cooperative was required to change its previous Articles of Association to Rules that complied with the new WA Cooperatives Act 2009. This brought significant changes in active membership Page 5 Harvey Water approached the Economic Regulation Authority to review the charges it requires Harvey Water to pay to Water Corporation because of the way these increase the effective cost of water in these drying times. The annual Customer Survey was similar to previous years in which CRID irrigators are generally quite grumpy because of fair and reasonable concerns while W/HID members are more satisfied. The recognition given to past Chairman Dan Norton at the IAL Conference in Launceston was for his Life Membership of ANCID and a proud moment for us all. Annual Water Allocation The effects of the extremely dry 2010 winter followed through to 2011/12. This type of outcome is becoming clearer as we experience more of these very dry events. The allocation in W/HID was 45% of entitlement, more than the 34% in 2010/11 at least, but well below the 15 year average of 70%. Of particular concern for Harvey Water was that the stand-alone allocation for the WID would have been about 15%. In the interest of equitable treatment for members, Harvey Water invested $2.8 m to construct the 8km Somers Road pipeline that connects the HID with the western side of the WID. Harvey Water Annual Report 2011/12 General Manager’s Report (cont.) This allows direct gravity access to the Harvey Dam, taking the pressure off the very low Waroona and Logue Brook Dams and permitted the 45% allocation across both districts. been recorded in the 15 years the cooperative has been functioning. The balance sheet remains strong and the longterm budgets show that this loss will be a one off aberration. This investment further advances Harvey Water’s ambition to integrate the whole irrigation area as far as possible. In the northern districts this effectively allows the four storages to be managed as one, rather than having to access the water in them independently of each other. Collie Kemerton Integrated Water Management Strategy Harvey Water has been involved with government in trying to find ways to reduce the salinity in Wellington Dam since the day we began in 1996. Over the years, there have been multitudes of meetings, discussions and committees that have resulted in slow progress. During 2011/2, the cooperative worked with the South West Development Commission to develop a project proposal to achieve the reduction irrigators need. A good beginning then collided with the needs of government administrative processes with the result that at financial year-end there had not been much to show for the effort that had gone in. Nonetheless, Harvey Water remains confident that there will be funding and progress towards presenting a business case to government by the end of 2012. In response to this further low allocation, Harvey Water engaged a local consultant, Steve Hossen, to provide information and support to irrigators on how to manage their way through low allocation times. This was broadcast on the Local ABC Morning Rural Radio session and Harvey Water adapted the talks to eight Information Bulletins that are available on its website. The allocation in the CRID remained at 100% but of much poorer quality water. Irrigation Water Deliveries The volume of water delivered and as a percentage of entitlement this season was 5,271 ML or 38% for WID, 18,424 ML or 37% for HID and 22,397 ML or 50% for CRID respectively. These are record low results for all districts by a considerable margin. Apart from the low allocation, the much wetter than normal spring meant that 12 GL of deliveries that normally occurred during the spring months were not required because members were able to rely on rainfall instead. Financial Result The financial result from this low volume of deliveries was an operating loss after tax of $1.86 m. This is the first time a loss has Page 6 The cooperative has spent a lot of time and effort in lobbying the various Ministers, politicians and government departments on the importance of the project and has always received a positive response. Cooperatives Legislation The State government passed the WA Cooperatives Act (2009), which is core consistent with similar acts passed in all other Australian states and territories. As a cooperative under this act, Harvey Water was required to replace its Articles of Association with new Rules that conformed to the act. It was also necessary for Harvey Water to ask members whether to accept the Act and adopt the Rules. Members voted on these choices and approved both late in the year. Harvey Water Annual Report 2011/12 General Manager’s Report (cont.) Some significant differences between the new Rules and previous Articles are that there are tighter rules on active membership, members now have the right to resign and they can request the cooperative to buy back some of their shares. Harvey Water had been working on the implications of resignations and partial buy-backs for many months and met with members in May to explain the Rules and the choices, to receive feedback from them. By June, the cooperative was ready to receive applications for resignations and 15 enquiries involving 1,834 shares were recorded by the end of the year. Water Legislation The RIWI Act dates from 1914 so it is well past time that it was updated to modern conditions and to reflect the changes that have occurred nationally with the National Water Initiative and the Commonwealth Water Act. The Water Services Act was passed late in the year but needs to have the regulations added, which describe the detail of how it will operate, before it will receive assent. Harvey Water was required to pay Water Corporation a Water Storage Charge and a Dam Safety Charge based on the nominal entitlement to water stored in the dams. Harvey Water was at all times sceptical of some of the assumptions that were applied but accepted the outcome as the best possible in the end. Since that time, the volume of water in the dams has decreased consistently and markedly so that the impact of these fixed charges has meant that the effective cost of water entitlement has trebled in some years while the risk of dams failing would seem to have diminished considerably. Harvey Water approached ERA to review this issue because irrigators are finding it difficult to afford to use their water at the costs involved. We were very pleased to engage with a group of irrigators who gave excellent input into the submission that went up and we thank them for their contributions. This review was underway during the last months of the 2011/12 year. The development of the Water Resources Management Bill was progressed during the year with Harvey Water represented on the Horticulture/Agriculture Industry Reference Group that is providing input to government. ERA Review Harvey Water stores the water it is licensed to take in dams owned by the Water Corporation so it is fair that it pay charges associated with the operations of this infrastructure. The Economic Regulation Authority (ERA) reviewed these charges during 2006/7 with input and challenge from Harvey Water and Water Corporation. The outcome was that Page 7 Customer Survey The results from the annual customer survey held in May/June were consistent with previous surveys of recent times. CRID irrigators were concerned about the quality of the water from Wellington dam which, when combined with the low Harvey Water Annual Report 2011/12 General Manager’s Report (cont.) profitability in agriculture presently and the high effective cost of water from fixed charges, means that they are quite concerned about the future. To some extent, this is transferred to discontent with the services provided by Harvey Water. On the other hand, irrigators in the W/HID who have good quality water, if of restricted allocations, along with an excellent water delivery system, were more content with what Harvey Water offers. Of concern to Harvey Water was the comment that some members felt that the cooperative was not transparent in its dealings with members. This was disturbing to some extent because the cooperative has no reason to hide anything from members and answers all queries as accurately and fully as they can be, except where they are commercial-in-confidence. It is always a disappointment to Harvey Water that there are rarely more than 30 to 40 people out of our 720 members, at any meeting that we organise and where information can be provided directly. Tariffs A significant portion of the tariffs levied on members is outside of Harvey Water’s control. In a year of full allocation where an irrigator uses all their entitlement, the full cost is $41.03/ML (2011/2) in payments to SWIMCO. The Water Delivery Charge reflects the company operating costs to get water to members. It has increased from $19.80 in 1997/98 to $25.85/ML in 2011/12, which demonstrates how well controlled company costs are, being an average of 2.03% increase per year. There are not many farm input costs that can compete with that. Page 8 On the other hand, the fixed charges collected by Harvey Water and paid fully and directly to Water Corporation amount to $15.06/share irrespective of the allocation. This will continue to increase according to a 10 year price path until the new cost level is reached in 2016/17. These fixed charges are supported by government, which pays a Community Service Obligation amount to Water Corporation to replace the revenue that is not being paid by irrigators. Water Trade Temporary Trade In the WID and HID, trades by volume were at about the long-term average but about 25% below recent years. Prices were 2 to 3 times the long term average and significantly higher than recent years. These results reflected the continuing low allocation. In the CRID, trades were about 25% of the long-term average but prices were steady at the average of $10/ML. This result reflects the growing disenchantment with the water quality. Permanent Trade There were no permanent trades in the WID. In the HID, permanent trades were up about 60% by volume over the average but well down compared to the record highs of the previous two years Prices remained high, being 25% above average but 23% below last year’s record highs. In the CRID, sales were well down compared to the previous 5 years, as were prices. This reflects the declining interest in the CRID due to poor water quality, high fixed charges and low profitability. Auctions The company continues to experiment with the number and timing of auctions to Harvey Water Annual Report 2011/12 General Manager’s Report (cont.) make them of best value to both buyers and sellers because we are aware that the prices become the benchmark for nonauction trades. Two auctions were held with results that suggest that the type of year in terms of initial allocation and in-season rainfall have a major effect on how useful they are. Carry-over Water The issue of carry-over water was raised during the year. The discussions held considered the pros and cons and decided that it was not a sensible idea because it would actually operate in the opposite way to which it was intended. The company felt that the amount of water bought by an individual, its timing and cost were business decisions for the individual alone and Harvey Water could not accept any risk resulting from those decisions if it was to act equitably for all members. Rural Water Sales Water use by RWS customers remains quite steady with only about 80% of supply points active and average use of about 0.85/ML per supply. Asset Management In 2011/12 we completed a piped circuit by installing the Somers Road pipeline that ensures equitable distribution of water to west Waroona irrigators and helps to lessen the load from the Drakesbrook (especially as in 2011 the dam works had only just been completed and the dam was severely lacking in water volume). This pipeline was installed by Harvey Water using our own resources and completed in under 40 workdays and under budget at a cost of $2.8m. Just under 60km of redundant channels have now been filled with a further 40km under discussion for transfer to the Water Corporation as part of the drainage network. Water Corporation has already Page 9 accepted 25km of existing drainage channels. There remain 22km of old channels surveyed; we expect that most of these will also eventually have to be transferred over as part of the drainage system given their importance in collecting and removing run-off water. The cost of channel filling was budgeted for as a part of the Harvey Pipe Project. By filling the old channels we reduce/eliminate our liability and substantially reduce safety and health risks and in so doing we reduce operating costs for a redundant system. In CRID, we have carried out numerous repairs to concrete lined channels and repaired many eroded channels. Of $490k budgeted for repairs and maintenance for the year 60% was spent in the CRID and a further 20% was spent between Cathodic protection and SCADA repairs and upgrade. Rehabilitation Harvey Water was required to rehabilitate a reach of the Wellesley River where it drains the HID as part of the approvals from DoW for the HPP. These works include fencing off access to the river, weed control and planting of native species. The work is progressing satisfactorily with good results being obtained. Research & Development Development Officer Richard Yates has been working on a range of projects of direct and indirect assistance to irrigators. These include support to the Peel Farmers Market where irrigators can capture near full retail prices for their produce on weekends. Customer support to the market has been steady despite a number of changes of venue, which now seems to have settled into a permanent location. Harvey Water was able to assist irrigators to attend Centre Pivot Courses to improve Harvey Water Annual Report 2011/12 General Manager’s Report (cont.) how they manage these to optimise water use. over there. He had many useful things to say to help HWIA irrigators. The Irrigation Systems site at the Wokalup Agricultural College had to be moved and re-established because of the works for the new college. Harvey Water is working with the College staff and students to set the site up again for training to the students, demonstration to irrigators and research opportunities as they arise. The WA government drought pilot project provided funding to allow works on water saving activities. Six Harvey irrigators will pipe approximately 3,300 m of head ditch, including 80 supply points at a cost of about $240,000. Two farmers have opted to try fully automated supply points. Harvey Water was able to assist in collectively negotiating the purchase of the pipes, transporting them and installing them using company labour at cost. The fledgling development of a seed potato project in Waroona has been of great interest to Harvey Water as it provides the type of industrial, semi or fully processed production that is suited to the area, in comparison to the fresh market, which is subject to considerable variation. Harvey Water carried out a pot trial in conjunction with DAFWA to examine the effects of salty water being sprayed onto the leaves of normal rye grass and clover pasture plants growing in a well drained medium. This was to estimate the effects of using water from Wellington dam in a sprinkler based irrigation system. The result showed that ryegrass was little affected, even up to quite high levels whereas clover began to suffer at about 1000 mg/l TDS. Also in conjunction with DAFWA, an examination was made of a proprietary product claimed to eliminate the effects of salty water when used for irrigation. The plant growth trial did not show any significant differences between treated and un-treated plants. Harvey Water coordinated with DAFWA to host a visit by Phil Shannon, a dairy specialist from Victoria who has experienced and survived the long drought Page 10 The export market for seed potatoes is very buoyant and the company has established a grading, packing and cool storage facility in Yarloop with a capacity of 3,000 tonnes. Harvey Water looks forward to assisting with opportunities for irrigators to participate in production for this market. Drying Climate The last decade has seen four of the driest years in the last century along with record dry months leading to very low inflows into the dams. Harvey Water has taken the position that its focus must be on managing what is in front of us, which is low water supplies, and to leave the debate about what is happening, why and how to fix it to others who have the expertise and time to devote themselves to it. Given this drying climate situation, Harvey Water believes it is very important that all irrigators consider what changes may be needed to their individual farming Harvey Water Annual Report 2011/12 General Manager’s Report (cont.) practices and management in both the seasonal and long term to adjust to this situation. Lower Collie Allocation Plan Harvey Water has been involved with DoW in framing the Lower Collie Allocation plan. Harvey Water has confirmed that the practice of scouring is one of the only management practices that can be used to reduce salinity in Wellington dam and we do not want that altered such that it’s effectiveness is reduced. Relationships Harvey Water is one of the 14 major irrigation utilities in Australia so it frequently entertains visitors, attends events, functions and meetings and is a member of various related organisations. Some of the more prominent ones are recorded below. Some of the overseas visitors this year included groups from Vietnam, India and northern Africa. The Chairman met with the Chair and members of the National Water Commission. Harvey Water was asked to participate in the review of water supply to the Myalup strip. It regularly meets with other members of the South West Water Industry Group. It attended the Irrigation Australia Ltd annual conferences in Launceston and Adelaide and supported members to come along as well. We are members of the Bunbury Wellington Economic Alliance and the Bunbury Chamber of Commerce. Harvey Water was very pleased to support the local Federal Member Nola Marino’s promotion of “South West Sensations” in Canberra. The opportunity was taken to meet with senior members of parliament Page 11 and their staff to brief them on our world and our issues. The annual irrigators’ meeting and a meeting with Waroona irrigators were held in September. We were very happy to support the annual Dairy Information Day at Malcolm Hayes property at Cookernup. Staff Harvey Water continues to keep a close eye on staff numbers and has been able to reduce them because of largely completing our construction programs for the medium term. Many people do not appreciate that Harvey Water has a considerable work load in reporting to the National Water Commission, the Bureau of Meteorology, Department of Water and the Economic Regulation Authority plus other less time consuming responses and the normal activities that any business must complete. The cooperative is routinely asked to sit on working groups that discuss aspects of the water industry. We also respond on behalf of members to the many reports and consultation drafts that come out. Our staff are loyal, hard working and dedicated to their roles in supporting irrigators. The national and state situation in Occupational Health and Safety is evolving very rapidly and the cooperative makes sure it is on top of what is required so that we can send our staff home safe and well at the end of each working day. It is very pleasing to everyone in the cooperative to read the overwhelmingly positive reports in the Customer Survey about Harvey Water staff in the field and in the office. We are very proud of them and the jobs they do. Harvey Water Annual Report 2011/12 Management Structure Head Office ADMINISTRATION Geoff Calder Susan Boland Julie Harbour Tammie McDonald Susan Niven Tamara Praed General Manager Corporate Services Manager / Accountant Customer Service Officer Finance / IT Officer Administration Officer Finance Assistant DEVELOPMENT Richard Yates Development Officer OPERATIONS Steve Iceton Operations Manager WATER SERVICES Michael Ward Water Services Coordinator WATER CONTROLLERS Ron Jones Kim Davies Syd Reale Russell Gaston Tim Hooper Robert Clark Julie Marshall Bill Ward Peter Dow Operations PROJECT ADMINISTRATION Steve Iceton Stephen Cook Peter McBeath Project Manager Project Coordinator Works Supervisor OPERATIONS STAFF Todd Wilson Ben Ward Page 12 Harvey Water Annual Report 2011/12 Board of Directors Ian Eckersley, Chairman, is a citrus and wine grape grower from Harvey. Ian was elected to the Board of Harvey Water, by shareholders, at the 2009 AGM and was subsequently elected as Chair by the Directors. Ian previously served 13 years as Chair of the SWIAC Board. Ian is a life member of the Harvey Agricultural Society and is Chairman of the Harvey Agricultural College Advisory Committee. Sam Epiro, Deputy Chair, is a dairy and beef farmer from Harvey. Sam was elected by the Board as Deputy Chair in November 2009. He has worked in Local Government and has completed the Foundations for Leadership course. Sam is also on the Board of the Rural Water Services Company. Tom Busher is a horticulturalist from Dardanup, who has served as Chairman of the South West Sustainable Rural Development Partnership Group. He was previously Chair and Secretary of the Dardanup LCDC. Tom has completed a Bachelor of Business and the AIM course for Company Directors. He is currently Manager of Community Relations with Alcoa. Tom is a Committee. Page 13 member of the Audit Harvey Water Annual Report 2011/12 Board of Directors (cont.) Kevin Depiazzi is a third generation dairy farmer from Dardanup, managing the family farm in partnership since 1981. Kevin has been active in Rural Youth and local community organisations. He has off farm interests in property and the share market. Kevin was elected to the Board in November 2009 and serves on the Audit Committee. He previously served 3 years on the Board of SWIAC. Len Snell graduated from Roseworthy Agricultural College in SA and began farming in Waroona in 1966. Currently the enterprise integrates irrigation with feed lotting and a pastoral property to produce cattle mainly for export. In 1986 he became a member of the Water Advisory Committee, then Promoter Director and an inaugural Director of SWIMCO, before taking a break in 2000. In 2006 he was again elected to represent irrigators of the Waroona district. Len is also Chairman of the Rural Water Services Company. Mike Snell was elected to the SWIMCO Board as a non-member Director at the 2008 AGM. Mike worked for over 30 years with Pricewaterhouse Coopers and since retiring has served on the board of a variety of community organisations. He is also a Director of the South West Irrigation Asset Cooperative Ltd. Mike is a Fellow of the Institute of Chartered Accountants in Australia. Page 14 Harvey Water Annual Report 2011/12 Senior Management Team Geoff Calder – General Manager Geoff has been General Manager of Harvey Water since its inception in 1996. Over the 15 past exciting years Geoff has joined with the Harvey Water irrigators in demonstrating that a locally owned irrigation entity is a viable and progressive way to manage water. Geoff holds a Bachelor of Agricultural Science from UWA, a Graduate Diploma in Business from Curtin University and a Graduate Certificate in Asian Business from Edith Cowan University. Steve Iceton – Operations / Projects Manager Steve has been with Harvey Water from the beginning in the position of Operations Manager. Steve and his asset maintenance team have been instrumental in the overhaul of Harvey Water’s delivery system over the past 15 years including automation of the delivery system using SCADA technology, refurbishment of channels and the introduction of HDPE piping technology for the highly successful, award winning Harvey Pipe Project. Steve holds a Graduate Diploma in Structural Engineering from Longlands College, United Kingdom. Susan Boland – Corporate Services Manager / Accountant Susan commenced with Harvey Water in July 2012. She oversees the Administration and Finance areas and is responsible for the corporate governance. Susan holds a Bachelor of Business from Edith Cowan University and is an Associate member of CPA Australia. Page 15 Harvey Water Annual Report 2011/12 Corporate Governance Board Responsibilities The Board is accountable to members for the performance of the Cooperative. In carrying out its responsibilities, the Board undertakes to serve the interests of members, employees, customers and the broader community honestly, fairly, diligently and in accordance with the Articles of Association, Company Policy, Directors’ Code of Conduct and with applicable laws. In particular, the Board: • Appoints and reviews the performance of the General Manager • Sets and reviews strategic direction • Establishes and reviews policy • Ensures compliance with laws and all appropriate accounting standards • Monitors the operating and financial performance of the Company • Monitors risk management • Ensures adequate and inclusive communication with shareholders. Board Structure The Articles of Association provide for a maximum of seven Directors. This includes two representatives each from the Collie River and the Harvey district, one representative from the Waroona district and may include two non-member Directors with skills, experience or knowledge in the engineering, industrial, legal, commercial or financial sectors. The Board considers that its structure, size, focus, experience and use of committees enables it to operate effectively and add value to the Company. The Board currently comprises of six Directors, five member and one non-member Director. Details of the Directors, as at the date of this report, including their qualifications and experience are set out on pages 13 and 14.. Meetings The Board schedules a minimum of ten meetings per year, generally each month with the exception of January and July. In addition to this, the Board will meet whenever necessary to deal with specific matters. Details of Directors’ attendance at meetings are set out on page 19. The Chairman and the Company Secretary establish meeting agendas to ensure adequate coverage of strategic, financial and risk areas. Directors are encouraged to participate and exercise their independent judgement. Access to Information and Professional Advice Directors receive regular detailed financial and operational reports and have unrestricted access to Company records and information. The members of the Board have the authority to engage independent experts should it be considered necessary. Directors and Officers Insurance and Deeds of Indemnity The Company provides Directors’ and Officers’ Insurance and access to Deeds of Indemnity Insurance to the maximum extent permitted by law. Page 16 Harvey Water Annual Report 2011/12 Corporate Governance (cont.) Director Training All Directors are expected to maintain the skills required to discharge their obligations to the Company. Directors are encouraged to undertake continuing professional education involving industry seminars and approved education courses. All Directors are encouraged to attend industry specific conferences including the annual IAL Conference and the WA Cooperatives Conference. Review of Board and Director Performance The Remuneration Committee is responsible for overseeing the annual evaluation of Board and Director performance. Evaluations are conducted every year and have produced continuing improvements in Board processes and overall efficiency. Committees of the Board The Board has established two standing committees to assist in the discharge of its responsibilities. These are: • Audit Committee • Remuneration Committee Each of the standing committees has its own charter which describes its role and duties. Minutes of the standing committees are provided to all Directors and the proceedings of each meeting are reported by the Chairman of the committee at the next Board meeting. The Board reviews the composition of its committees annually at the first Board meeting following the Annual General Meeting. Audit Committee The role of the Audit Committee is to assist the Board in fulfilling its corporate governance and oversight responsibilities in relation to the Company’s financial reporting, internal control structure, risk management systems, and the internal and external audit functions. Members of the Audit Committee during the twelve months ended 30 June 2012 were: Mike Snell (Chairman) Tom Busher Kevin Depiazzi Remuneration Committee The Remuneration Committee is a joint committee of both SWIAC and SWIMCO. Remuneration issues in respect to Directors are considered as a group rather than individually given the common shareholding. The primary functions of the Remuneration Committee are to: • Make specific recommendations to the Board of SWIMCO and SWIAC (as appropriate) on the remuneration of Directors, the General Manager and, after consultation with the General Manager, senior officers; Page 17 Harvey Water Annual Report 2011/12 Corporate Governance (cont.) • • • • Recommend the terms and conditions of employment for the General Manager and agree with the General Manager, the terms and conditions of employment of senior officers; Undertake a review of the performance of the General Manager at least annually, setting goals for the coming year and reviewing progress in achieving these goals; Oversee the annual evaluation of Board and Director performance; and Review Board succession plans including the appointment of non-member Directors. Members of the Remuneration Committee are: Mike Snell (Chairman) Ian Eckersley (Chair of SWIMCO) Dan Norton (Chair of SWIAC) Communication with Shareholders Directors recognise that shareholders, as the ultimate owners of the Company, are entitled to receive timely and relevant information about the Company. The Board has approved a Communication Policy which aims to promote open and effective communication with shareholders and other stakeholders of the Cooperative. A range of communication means are used including: • • • • • • • • • The Annual Report The Annual General Meeting “Under the Trees” meetings with shareholders Annual Irrigators meeting The website www.harveywater.com.au Harvey Water Video/CD Newspaper advertisements Regular Shareholder mail outs of “The Furphy” General media releases and public comment. Disputes Panel In accordance with Rule 107, the Chairman has determined that the Disputes Panel shall comprise all Directors of the Company and three members who are not Directors. For the period ended 30 June 2012, the non-Director members were: Frank Parravicini Vernon Pitter Terry Treasure The Disputes Panel was not required to convene during the year. Page 18 Harvey Water Annual Report 2011/12 Directors’ Report Directors The following persons held office as Directors of South West Irrigation Management Cooperative Limited at 30 June 2012: Ian Eckersley Tom Busher Kevin Depiazzi Sam Epiro Len Snell Mike Snell Principal Activities The principal activities undertaken by the Company during the financial year comprised managing the supply of water to irrigators, replacing and maintaining irrigation assets within the irrigation area from Waroona to Dardanup and supporting the economic development of the Harvey Water Irrigation Area. Directors’ Interests The relevant interests of the Directors in the share capital of the Company, appearing in the register maintained at the office under Section 232 of the Co-operatives Act 2009 were: Director Ian Eckersley Tom Busher Kevin Depiazzi Sam Epiro Len Snell Mike Snell Shareholding 1,165 172 335 646 1,320 Nil Meetings of Directors The following table sets out the number of meetings of the Directors held during the financial year to 30 June 2012 and the number of Board and Committee meetings attended by each Director. Director I Eckersley T Busher K Depiazzi S Epiro L Snell M Snell Page 19 Scheduled Board Meetings Eligible to Attended Attend 10 10 10 8 10 9 10 10 10 8 10 10 Audit Committee Meetings Eligible to Attended Attend 1 1 1 1 1 1 Remuneration Committee Meetings Eligible to Attended Attend 1 1 1 1 Harvey Water Annual Report 2011/12 Directors’ Report (cont.) Review of Operations A total of 46 GL of water was sold for the year to 30 June 2012. A restricted allocation of 45% applied to Waroona and Harvey, the allocation for Collie was not restricted. Sales in Collie continued to decline due to the salinity of the water from Wellington dam. Significant Changes There were no significant changes in the state of affairs of the Company that occurred during the year which are not otherwise in this report and the accounts. Auditor AMD Chartered Accountants of Bunbury, were appointed auditors of the Company at the Annual General Meeting held 14 December 2011. This report is made in accordance with a resolution of the Directors. Statutory Report of the Directors In accordance with the requirements of Rule 80 and Section 225 of the Co-operatives Act 2009, the Directors report that: 1. In the opinion of the Directors the results of the year’s operations as disclosed in the Statement of Financial Performance have not been materially affected by any items of an abnormal nature. 2. No dividend is recommended Page 20 Harvey Water Annual Report 2011/12 Certificate by the Directors We, (Ian Eckersley and Sam Epiro), being two of the Directors of South West Irrigation Management Cooperative Limited do hereby certify on behalf of the Board that, in our opinion, the accompanying Statement of Financial Position is drawn up so as to exhibit a true and correct view of the state of the Company’s affairs and that, in our opinion, the Statement of Financial Performance is drawn up so as to exhibit a true and correct view of the results of the business of the Company for the year. Declaration by the General Manager I, Geoffrey James Henderson Calder, General Manager of the South West Irrigation Management Cooperative Limited hereby certify: • that any reserves are used in the business • that the accompanying Statements of Financial Performance and Financial Position of the Company are to the best of my knowledge and belief, true in every particular • that the names, addresses and occupations of persons who are Directors of the Company at the date of the Statement are: Ian Roland Eckersley Samuel Michael Epiro Leonard Griffin Snell Kevin F Depiazzi Thomas Raphael Busher Michael Snell Page 21 Farmer Farmer Farmer Farmer Farmer Company Director Harvey Harvey Waroona Collie Dardanup Perth Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED Financial Report 30 June 2012 Page 22 Harvey Water Annual Report 2011/12 This page has been left blank intentionally Page 23 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 2012 Notes $ Operating Revenue Other Income Expenses Administration Expenses Asset Management Expenses Water Services Development Expenses Project Expenses Finance Expenses Other Expenses 2 2 24 3 2011 $ 5,517,756 22,500 5,540,256 6,856,851 5,511,803 12,368,654 651,371 3,626,862 3,202,599 144,436 42,801 664,093 8,332,162 729,629 3,593,404 2,924,490 106,786 466,736 614,169 8,435,214 Surplus / (Deficit) before Income Tax 3 (2,791,906) 3,933,440 Income Tax (Expense) / Revenue 4 925,152 (1,206,844) (1,866,754) 2,726,596 - - (1,866,754) 2,726,596 (1,866,754) 2,726,596 (1,866,754) 2,726,596 Surplus / (Deficit) for the Year Other Comprehensive Income: Other Comprehensive Income Total Comprehensive Income for the Year, Net of Tax Surplus / (Deficit) Attributable to: Members of the Cooperative Total Comprehensive Income Attributable to: Members of the Cooperative The accompanying notes form part of these financial statements. Page 24 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED Notes CURRENT ASSETS Cash and Cash Equivalents Trade and Other Receivables Inventories Current Tax Assets Other Current Assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Trade and Other Receivables Financial Assets Property, Plant &Equipment TOTAL NON-CURRENT ASSETS 5 6 7 8 5 9 10 TOTAL ASSETS 2012 $ 2011 $ 793,573 303,656 1,055,971 69,235 49,412 2,271,847 3,284,804 881,261 1,411,321 86,558 37,397 5,701,341 61,935 1 71,601,926 71,663,862 59,614 1 69,966,039 70,025,654 73,935,709 75,726,995 CURRENT LIABILITIES Trade and Other Payables Financial Liabilities TOTAL CURRENT LIABILITIES 11 12 1,041,731 1,000,000 2,041,731 1,058,092 1,058,092 NON-CURRENT LIABILITIES Long-term Provisions Deferred Tax Liability TOTAL NON-CURRENT LIABILITIES 13 14 83,063 18,814,449 18,897,512 66,034 19,739,601 19,805,635 TOTAL LIABILITIES 20,939,243 20,863,727 NET ASSETS 52,996,466 54,863,268 107,947 13,556,232 39,332,287 107,995 13,917,104 40,838,169 52,996,466 54,863,268 EQUITY Issued Capital Reserves Accumulated Surplus TOTAL EQUITY 15 The accompanying notes form part of these financial statements. Page 25 Harvey Water Annual Report 2011/12 Page 26 - 360,872 39,332,287 (48) 107,947 469,977 40,838,169 107,995 - - - (1,866,754) 2,726,596 - - Accumulated Surplus $ 37,641,596 Issued Capital $ 107,995 7,637 68,047 - - - 10,530 60,410 - - Development Levy Reserve $ 49,880 The accompanying notes form part of these financial statements. Comprehensive Income: Surplus attributable to members of the cooperative Total other comprehensive income for the year Transactions with members in their capacity as members and other transfers: Share buy-back during the year Transfers to accumulated surplus from reserves Balance at 30 June 2012 Balance at 1 July 2011 Comprehensive Income: Surplus attributable to members of the cooperative Total other comprehensive income for the year Transactions with members in their capacity as members and other transfers: Transfers to accumulated surplus from reserves Balance at 30 June 2011 Note SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 52,996,466 (48) - (1,866,754) 54,863,268 - 2,726,596 Total $ 52,136,672 Harvey Water Annual Report 2011/12 (368,509) 13,488,185 - - - (480,507) 13,856,694 - - Future Works and Environmental Reserve $ 14,337,201 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED Notes 2012 $ 2011 $ CASH FLOWS FROM OPERATING ACTIVITIES 5,406,755 290,661 206,367 (6,015,166) (7,837) (42,801) 11,389,399 371,068 184,339 (7,184,381) (144,371) - (162,021) 4,616,054 Payments for Plant & Equipment (3,349,941) (2,600,125) Net Cash used in Investing Activities (3,349,941) (2,600,125) 1,000,000 (139,411) 160,142 1,020,731 (73,912) 116,509 42,597 (2,491,231) 2,058,526 3,284,804 1,226,278 793,573 3,284,804 Receipts from Customers / Grant Funds Receipts from SWIAC – Management Fees Interest Received Payments to Suppliers and Employees Income Tax Paid Finance Costs Net Cash provided by / (used in) Operating Activities 21(b) CASH FLOWS FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Related Party Loan Loans to Members / RWS Customers Repayment of Member / RWS Customer Loans Net Cash provided by Financing Activities Net Increase / (Decrease) in Cash Held Cash at Beginning of Financial Year Cash at End of Financial Year 21(a) The accompanying notes form part of these financial statements. Page 27 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES South West Irrigation Management Cooperative Limited (‘the Company’) is a co-operative limited by shares, incorporated and domiciled in Australia. Basis of Preparation The financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards (including Australian Accounting Interpretations) of the Australian Accounting Standards Board and other mandatory professional reporting requirements. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of the financial statements are presented below and they have been consistently applied unless otherwise stated. The financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. The amounts presented in the financial statements have been rounded to the nearest dollar. (a) Income Tax The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense (revenue) charged (or credited) to the profit or loss is the tax payable (receivable) on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well unused tax losses. Current and deferred income tax expense (income) is charged (or credited) outside profit or loss when the tax relates to items that are recognised outside profit or loss. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Page 28 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont.) Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. (b) Inventories Inventories are measured at the lower of cost and net realisable value. (c) Property, Plant and Equipment Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses. Property Freehold land is measured at cost, and where applicable less impairment losses. Plant and Equipment Plant and equipment are measured on the cost basis and are therefore carried at cost less accumulated depreciation and any accumulated impairment losses. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in the statement of comprehensive income during the financial period in which they incurred. Page 29 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont.) Depreciation The depreciable amount of all fixed assets including buildings but excluding freehold land, is depreciated on a straight line or diminishing value basis over their useful lives to the Company commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Office Improvements Minor Plant & Tools Computer Equipment Office Equipment Software Motor Vehicles Irrigation Assets Depreciation Rate 7.5% 30% 37.5% 10-40% 40% 18.75% 2% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are included in the statement of comprehensive income. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings. (d) Financial Instruments Initial Recognition and Measurement Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument. For financial assets, this is equivalent to the date that the Company commits itself to either purchase or sell the asset (i.e. trade date accounting is adopted). Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified ‘at fair value through profit or loss’ in which case transaction costs are expensed to profit or loss immediately. Classification and Subsequent Measurement Financial instruments are subsequently measured at either fair value, amortised cost using the effective interest rate method or cost. Fair value represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Page 30 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont.) Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition less principal repayments and reduction for impairment, and adjusted for any cumulative amortisation of the difference, if any, between the initial amount and the maturity amount calculated using the effective interest method. The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss. Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arms’ length transactions, reference to similar instruments and option pricing models. (i) Financial Assets at Fair Value through Profit or Loss Financial assets are classified at ‘fair value through profit or loss’ when they are either held for trading for the purpose of short term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss. (ii) Loans and Receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised. Loans and receivables are included in the current assets, except for those which are not expected to mature within 12 months after the end of the reporting period, which will be classified as non-current assets. (iii) Held-to-maturity Investments Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Company’s intention to hold these investments to maturity. They are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised. Held-to-maturity investments are included in non-current assets, except for those which are expected to mature within 12 months after the end of the reporting period, which will be classified as current assets. If during the period the Company sold or reclassified a significant amount of the heldto-maturity investments before maturity, the entire category of held-to-maturity investments would be tainted and would be reclassified as available for sale. Page 31 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont.) (iv) Available-for-sale Financial Assets Available-for-sale financial assets are non-derivative financial assets that are either not capable of being classified into other categories of financial assets due to their nature or they are designated as such by management. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments. They are subsequently measured at fair value with any remeasurements other than impairment losses and foreign exchange gains and losses are recognised in other comprehensive income. When the financial asset is derecognised, the cumulative gain or loss pertaining to that asset previously recognised in other comprehensive income is reclassified into profit or loss. Available-for-sale financial assets are included in non-current assets, except for those which are expected to be disposed of within 12 months after the end of the reporting period, which will be classified as current assets. (v) Financial Liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. Impairment At the end of each reporting period, the Company assesses whether there is objective evidence that a financial instrument has been impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a “loss event”) having occurred, which has an impact on the estimated future cash flows of the financial assets(s). In the case of available-for-sale financial instruments, a significant or prolonged decline in the market value of the instrument is considered to constitute a loss event. Impairment losses are recognised in profit or loss immediately. Also, any cumulative decline in fair value previously recognised in other comprehensive income is reclassified to profit and loss at this point. In the case of financial assets carried at amortised cost, loss events may include: indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments; indications that they will enter bankruptcy or other financial reorganisation; and changes in arrears or economic conditions that correlate with defaults. For financial assets carried at amortised cost (including loans and receivables), a separate allowance account is used to reduce the carrying amount of financial assets impaired by credit losses. After having taken all possible measures of recovery, if management establishes that the carrying amount cannot be recovered by any means, at that point the written-off amounts are charged to the allowance account or the carrying amount of impaired financial assets is reduced directly if no impairment amount was previously recognised in the allowance account. Page 32 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont.) Impairment (cont.) When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the Company recognises the impairment for such financial assets by taking into account the original terms as if the terms have not been renegotiated so that the loss events have occurred are duly considered. Financial Guarantees Where material, financial guarantees issued which require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due, are recognised as a financial liability at fair value on the initial recognition. The fair value of financial guarantee contracts has been assessed using the probability weighted discounted cash flow approach. The probability has been based on: - The likelihood of the guaranteed party defaulting in a year’s period; - The proportion of the exposure that is not expected to be recovered due to the guaranteed party defaulting; and - The maximum loss exposed if the guaranteed party were to default. Financial guarantees are subsequently measured at the higher of the best estimate of the obligation in accordance with AASB 137: Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less, when appropriate, cumulative amortisation in accordance with AASB 118: Revenue. Where the entity gives guarantees in exchange for a fee, revenue is recognised under AASB 118. Derecognition Financial assets are derecognised where the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. (e) Impairment of Assets At the end of each reporting period, the Company assesses whether there is any indication that an asset may be impaired. The assessment will included considering external sources and internal sources of information. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use to the asset’s carrying value. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (eg: in accordance with the revaluation model in AASB 116.) Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other standard. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Page 33 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont.) (f) Employee Benefits Provision is made for the Company’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured by the present value of the estimated future cash outflows to be made for those benefits. Those cash flows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cash flows. (g) Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the statement of financial position. (h) Revenue Revenue from levies and contributions is recognised on the due date. Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets is the rate inherent in the instrument. Revenue from contracts performed is brought to account on the basis of the percentage completion of the relevant contracts and taking account of any future losses that may be incurred. All revenue is stated net of the amount of goods and services tax (GST). (i) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amounts of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities, which are recoverable from or payable to the ATO, are presented as operating cash flows including in receipts from customers or payments to suppliers. Page 34 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont.) (j) Leases Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to entities in the Company are classified as finance leases. Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. Trade and Other Receivables (k) Trade and other receivables include amounts due from customers for goods and services charged in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. Trade and other receivables are initially recognised at fair trade value and subsequently measured at amortised cost using effective interest method, less any provision for impairment. (l) Trade and Other Payables Trade and other payables represent the liability outstanding at the end of the reporting period for goods and services received by the Company during the reporting period, which remain unpaid. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. (m) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. (n) New Accounting Standards for Application in Future Periods The AASB has issued a number of new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods, some of which are relevant to the Company. The Company has decided not to early adopt any of the new and amended pronouncements. The Company’s assessment of the new and amended pronouncements that are relevant to the Company but applicable in future reporting periods is set out below: - AASB 9: Financial Instruments (December 2010) and AASB 2010-7: Amendments to Australian Accounting Standards arising from AASB9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and Interpretations 2, 5, 10, 12, 19 & 127] (applicable for annual reporting periods commencing on or after 1 January 2013). Page 35 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont.) This Standard is applicable retrospectively and includes revised requirements for the classification and measurement of financial instruments, as well as recognition and derecognition requirements for financial instruments. The key changes made to accounting requirements include: - - - simplifying the classifications of financial assets into those carried at amortised cost and those carried at fair value; simplifying the requirements for embedded derivatives; removing the tainting rules associated with held-to-maturity assets; removing the requirements to separate and fair value embedded derivatives for financial assets carried at amortised cost; allowing an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument; requiring financial assets to be reclassified where there is a change in an entity’s business model as they are initially classified based on: (a) the objective of the entity’s business model for managing the financial assets; and (b) the characteristics of the contractual cash flows; and requiring an entity that chooses to measure a financial liability at fair value to present the portion of the change in its fair value due to changes in the entity’s own credit risk in other comprehensive income, except when that would create an accounting mismatch. If such a mismatch would be created or enlarged, the entity is required to present all changes in fair value (including the effects of changes in the credit risk of the liability) in profit or loss. The Company has not yet been able to reasonably estimate the impact of these pronouncements on its financial statements. - AASB 1053: Application of Tiers of Australian Accounting Standards and AASB 2010–2: Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements [AASB 1, 2, 3, 5, 7, 8, 101, 102, 107, 108, 110, 111, 112, 116, 117, 119, 121, 123, 124, 127, 128, 131, 133, 134, 136, 137, 138, 140, 141, 1050 & 1052 and Interpretations 2, 4, 5, 15, 17, 127, 129 & 1052] (applicable for annual reporting periods commencing on or after 1 July 2013). AASB 1053 establishes a revised differential financial reporting framework consisting of two tiers of financial reporting requirements for those entities preparing general purpose financial statements: - Tier 1: Australian Accounting Standards; and - Tier 2: Australian Accounting Standards – Reduced Disclosure Requirements. Tier 2 of the framework comprises the recognition, measurement and presentation requirements of Tier 1, but contains significantly fewer disclosure requirements. Page 36 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont.) Management believes that the company qualifies for the reduced disclosure requirements for Tier 2 entities. However, it is yet to determine whether to adopt the reduced disclosure requirements. - AASB 2010–8: Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets [AASB 112] (applies to periods beginning on or after 1 January 2012). This Standard makes amendments to AASB 112: Income Taxes and incorporates Interpretation 121: Income Taxes – Recovery of Revalued Non-Depreciable Assets into AASB 112. Under the current AASB 112, the measurement of deferred tax liabilities and deferred tax assets depends on whether an entity expects to recover an asset by using it or by selling it. The amendments introduce a presumption that an investment property is recovered entirely through sale. This presumption is rebutted if the investment property is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale. The amendments are not expected to significantly impact the Company. - AASB 13: Fair Value Measurement and AASB 2011 – 2011-8: Amendments to Australian Accounting Standards arising from AASB 13 [AASB 1, 2, 3, 4, 5, 6, 7, 9, 2009-11, 2010-7, 101, 102, 108, 110, 116, 117, 118, 119, 12, 121, 128, 131, 132, 133, 134, 136, 136, 138, 139, 140, 141, 1004, 1023 & 1038 and interpretations 2, 4, 12, 13, 14, 17, 19, 131 & 132] (applicable for annual reporting periods commencing on or after 1 January 2013.) AASB 13 defines fair value, sets out in a single Standard a framework for measuring fair value, and required disclosures about fair value measurement. AASB 13 requires: - Inputs to all fair value measurements to be categorised in accordance with fair value hierarchy: and - Enhanced disclosures regarding all assets and liabilities (including, but not limited to financial assets and financial liabilities) to be measured in fair value. These standards are not expected to significantly impact the company. - AASB 2011-09: Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income [AASB 1, 5, 7, 101, 112, 120, 121, 132, 133, 134, 1039 & 1049] (applicable for annual reporting periods commencing on or after 1 July 2012). Page 37 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont.) The main change arising from this Standard is the requirements for entities to group items presented in other comprehensive income (OCI) on the basis of whether they can potentially be reclassified to profit or loss subsequently. This Standard affects presentation only and is therefore not expected to significantly impact the Company. - AASB 119: Employee Benefits (September 2011) and AASB 2011-10: Amendments to Australian Accounting Standards arising from AASB 19 (September 2011) [AASB 1, AASB 8, AASB 101, AASB 124, AASB 134, AASB 1049 & AASB 2011-8 and Interpretation 14] (applicable for annual reporting periods commencing on or after 1 January 2013). These standards introduce a number of changes to the accounting for and presentation of defined benefit plans. The Company does not have any defined benefit plans and so it is not impacted by the amendment. AASB 119 (September 2011) also includes changes to: - require only those benefits that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service to be classified as short-term employee benefits. All other employee benefits are to be classified as other long term employee benefits, post-employment benefits or termination benefits, as appropriate; and - the accounting for termination benefits that require an entity to recognise an obligation for such benefits at the earlier of: - for an offer that may be withdrawn – when the employee accepts; - for an offer that cannot be withdrawn – when the offer is communicated to affected employees; and - where the termination is associated with a restructuring of activities under AASB 137: Provisions, Contingent Liabilities and Contingent Assets, and if earlier than the first two conditions – when the related restructuring costs are recognised. The Company has not yet been able to reasonably estimate the impact of these changes to AASB 119. Page 38 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 2. OPERATING REVENUE Operating Revenue Delivery and Sale of Water Development Levy Sale of Services SWIAC Management Fee RWS Management Fee Interest Revenue Other Income Government Funding Logue Brook Pipeline Project as per Agreement (refer note 24) Logue Brook Reimbursement as per Agreement (refer note 24) Interest Revenue (a) Interest Revenue from - Other Persons - Members Total Interest Revenue 3. 2012 $ 2011 $ 4,757,861 12,957 191,855 405,146 15,022 134,915 5,517,756 5,888,821 11,879 311,987 379,114 16,834 248,216 6,856,851 22,500 16,500 - 5,202,732 22,500 292,571 5,511,803 131,822 3,093 134,915 238,128 10,088 248,216 SURPLUS FOR THE YEAR 2012 $ 2011 $ The surplus for the year is after the following charges Finance Costs - External - Related Parties Total Finance Costs Depreciation Directors Fees Bad and Doubtful Debts expense Page 39 42,801 42,801 - 1,714,054 138,000 1,650 1,685,407 138,000 - Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 4. INCOME TAX EXPENSE (a) The components of tax expense comprise Current Tax Deferred Tax 2012 $ 2011 $ - 33,666 (925,152) (925,152) 1,173,178 1,206,844 (2,791,906) 3,933,440 (837,572) 1,180,032 1,024,473 (1,112,053) (925,152) 1,604,387 (1,577,575) 1,206,844 33% 31% (b) The prima facie tax payable on surplus / (deficit) from Ordinary Activities before Income Tax is reconciled to the Income Tax Expense as follows Surplus / (deficit) from Ordinary Activities before Income Tax Prima facie tax at 30% Add the tax effect of - Other Non-Allowable Items - Temporary Difference – Pipe Projects The applicable weighted average effective tax rates are as follows Page 40 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 4. Deferred Tax Assets and Liabilities INCOME TAX (cont.) (c) (19,860,266) 120,665 (19,739,601) Balance 30 June 2011 $ (18,675,380) (805) 109,762 (18,566,423) Balance 30 June 2010 $ Charged directly to Equity $ Charged directly to Equity $ - - Net 2012 2011 $ $ (20,355,616) (19,860,266) (3,527) 1,544,695 120,665 18,814,449 (19,739,601) Harvey Water Annual Report 2011/12 (20,355,616) (3,527) 1,544,695 (18,814,449) Balance 30 June 2012 $ (19,860,266) 120,665 (19,739,601) Balance 30 June 2011 $ Liabilities 2012 2011 $ $ (20,335,616) (19,860,266) (3,527) (20,359,143) (19,860,266) (495,350) (3,527) 1,424,030 925,153 Charged to Income $ (1,184,886) 805 10,903 (1,173,178) Charged to Income $ Deferred tax assets and liabilities are attributable to the following: Assets 2012 2011 $ $ 1,544,695 120,665 1,544,695 120,665 Accelerated tax depreciation Income not yet assessable for taxation purposes Expenses not yet deductible for taxation purposes Tax Assets (Liabilities) Movement in temporary differences during the year Accelerated tax depreciation Income not yet assessable for taxation purposes Expenses not yet deductible for taxation purposes Movement in temporary differences during the year Accelerated tax depreciation Income not yet assessable for taxation purposes Expenses not yet deductible for taxation purposes Page 41 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 4. INCOME TAX (cont.) Deferred tax assets not brought to account, the benefits of which will only be realised if the conditions for deductibility set out in Note 1(a) occur: - Temporary differences $Nil (2011: $Nil) - Tax losses: operating losses $Nil (2011: $Nil) 5. TRADE AND OTHER RECEIVABLES CURRENT Trade Receivables Accrued Income GST Receivable Accrued Interest Related Party Receivable – RWS Rural Water Service Customer Loans Somers Road Loans HPP Stage 1 Member Loans HPP Stage 2 Member Loans HPP Stage 3 Member Loans NON-CURRENT Rural Water Service Customer Loans Somers Road Member Loans HPP Stage 1 Member Loans HPP Stage 2 Member Loans 2012 $ 202,800 41,999 11,755 1,961 20,919 7,672 2,800 13,750 303,656 2011 $ 457,728 155,211 116,421 83,207 501 35,645 25,750 6,798 881,261 30,517 23,018 8,400 61,935 45,864 13,750 59,614 (a) Trade Receivables Trade receivables relate to water delivery charges receivable by the Company. (b) Customer Loans Customer Loans relate to amounts not yet paid by members and RWS customers in respect of irrigation system expansion programs. Interest is receivable on the loans. 2012 2011 $ $ 170,404 Beginning of the Year 127,807 Loans Advanced 139,411 73,912 Loan Repayments Received (160,142) (116,509) Interest Charged 11,144 9,624 Interest Received (11,144) (9,624) End of Year 107,076 127,807 Unsecured loans are made to members on an arm’s length basis. Repayment terms are set for each loan, which have a term of five years (unless paid upfront). The interest rate is set when the loan is entered into and remains constant for the life of the loan, with annual principal and interest repayments made over the term of the loan. Page 42 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 5. TRADE AND OTHER RECEIVABLES (cont.) (c) Provision for Impairment of Receivables Current trade and term receivables are non-interest bearing loans and generally on 30-day terms. Non-current trade and term receivables are assessed for recoverability based on the underlying terms of the contract. A provision for impairment is recognised when there is objective evidence that an individual trade or term receivable is impaired. These amounts have been included in the other expenses item. Movement in the provision for impairment of receivables is as follows: Opening Balance 1 July 2011 $ Amounts Receivable from members Opening Balance 1 July 2010 $ Amounts Receivable from members Charge for the year $ - Amounts written off $ - Charge for the year $ Amounts written off $ - - Closing Balance 30 June 2012 $ Closing Balance 30 June 2011 $ - Credit Risk The Company has no significant concentration of credit risk with respect to any single counterparty or group of counterparties. The main source of credit risk to the Company is considered to relate to the class of assets described as ‘trade and other receivables’. The following table details the Company’s trade and other receivables exposed to credit risk with aging analysis and impairment provided for thereon. Amounts are considered as ‘past due’ when the debt has not been settled within the terms and conditions agreed between the Company and the customer or counterparty to the transaction. Receivables that are past due are assessed for impairment by ascertaining solvency of the debtors and are provided for where there are specific circumstances indicating that the debt may not be fully repaid to the Company. This assessment for 30 June 2012 did not identify any debtor impairment. The balances of receivables that remain within initial trade terms (as detailed in the table) are considered to be of high credit quality. Page 43 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 5. TRADE AND OTHER RECEIVABLES (cont.) 2012 Trade and Term Receivables 2011 Trade and Term Receivables Past Due and Impaired $ Within Initial Trade Terms <30 $ 202,800 - 105,070 1,979 20,157 75,594 457,728 - 393,445 (446) 14,299 50,430 Gross Amount $ Past Due but Not Impaired (Days Overdue) 31-60 61-90 $ $ >90 $ The Company does not hold any financial assets for which terms have been renegotiated, but which would otherwise be past due or impaired. (d) Financial assets classified as trade and other receivables Note 2012 $ 2011 $ 303,656 61,935 365,591 881,261 59,614 940,875 1,055,971 1,411,321 CURRENT Current Tax Asset 69,235 86,558 8. OTHER ASSETS Prepayments 49,412 37,397 1 1 Trade and Other Receivables - Total Current - Total Non-Current Financial Assets 30 (e) Collateral pledged No collateral is held over trade and other receivables. 6. INVENTORIES CURRENT Materials at Cost 7. TAX ASSETS 9. FINANCIAL ASSETS Shares held in Rural Water Services Pty Limited At Cost Page 44 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 10. PROPERTY, PLANT AND EQUIPMENT 2012 $ 2011 $ 32,485 32,485 Computer Equipment – at Cost Less Accumulated Depreciation 134,052 (115,998) 18,053 129,090 (100,905) 28,185 Motor Vehicles – at Cost Less Accumulated Depreciation 156,032 (120,481) 35,551 156,032 (109,059) 46,973 Other Plant & Equipment – at Cost Less Accumulated Depreciation 1,938,274 (1,225,041) 713,233 1,843,184 (1,048,185) 794,999 Harvey Pipe Project – at Cost (Refer Note 23) Less Accumulated Depreciation 58,509,758 (6,050,191) 52,459,567 58,509,758 (4,879,999) 53,629,759 Benger Pipe Project At Cost Less Accumulated Depreciation 7,978,894 (477,603) 7,501,291 7,978,894 (318,027) 7,660,867 Logue Brook Pipeline Project (Refer Note 24) - at Cost Less Accumulated Depreciation 5,472,366 5,472,366 (218,899) 5,253,467 (109,447) 5,362,919 Brunswick Pipe Project - at Cost Less Accumulated Depreciation 2,570,603 (59,276) 2,511,327 2,417,912 (8,060) 2,409,852 Somers Pipe Project - at Cost Less Accumulated Depreciation 3,046,984 (20,251) 3,026,733 - - 50,219 - 71,601,926 69,966,039 Land – at Cost Wokalup Pipe Project – In Progress Page 45 Harvey Water Annual Report 2011/12 PROPERTY, PLANT AND EQUIPMENT (cont.) - - 32,485 Disposals / Asset Write Off* Depreciation Expense Balance – 30 June 2011 - 32,485 Depreciation Expense Balance – 30 June 2012 Page 46 - - - - - 32,485 - - - (271,819) - Additions Disposals/ Asset Write Off Balance – 30 June 2011 - 271,819 $ 32,485 $ Land Additions Balance – 1 July 2010 Capital WIP 18,053 (15,093) - 28,185 4,961 28,185 (27,428) (7,330) 6,182 56,761 $ Computer Equipment 35,551 (11,422) - 46,973 - 46,973 (15,130) - - 62,103 $ Motor Vehicles Movements in Carrying Amounts during the Year 10. 713,233 (176,852) - 794,999 95,086 794,999 (196,134) (3,198) 413,470 580,861 Other Plant & Equipment $ 52,459,567 (1,170,192) - 53,629,759 - 53,629,759 (1,170,195) - - 54,799,954 $ HPP SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 7,501,291 (159,576) - 7,660,867 - 7,660,867 (159,013) - 28,239 7,791,641 $ BPP 5,253,467 (109,452) - 5,365,919 - 5,362,919 (109,447) - 6,141 5,466,225 $ LBPP - 2,511,327 (51,216) - 2,409,852 152,691 2,409,852 (8,060) - 2,417,912 $ BWKPP - - - - - - - - - - 50,219 - - 50,219 WOKALUP $ TOTAL 71,601,926 (1,714,054) - 69,966,039 3,349,941 69,966,039 (1,685,407) (282,347) 2,871,944 69,061,849 Harvey Water Annual Report 2011/12 3,026,733 (20,251) - 3,046,984 SOMERS SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 10. PROPERTY, PLANT AND EQUIPMENT (cont.) The Somers Pipe Project was completed March 2012 and was first ready for use March 2012; accordingly four months depreciation charge has been recognised for the Somers Pipe Project asset. *The Disposals/Asset Write off for Capital WIP in the prior year was for the upgrade to the customer information and billing database (BOB). The upgrade occurred over a number of years, with costs allocated to Capital WIP. The upgrade was completed in October 2010 and the full cost of the project was transferred from Capital WIP to the software asset account under Other Plant and Equipment. 11. TRADE AND OTHER PAYABLES CURRENT Unsecured Liabilities: Trade Payables Sundry Payables and Accrued Expenses Related Party Creditor – SWIAC Employee Benefits (Note 13) (a) Financial liabilities at amortised cost classified as trade and other payables Trade and Other Payables Total Current Total Non-Current Less annual leave entitlements (Note 13) Financial Liabilities as Trade and Other Payables (Note 30) 12. 2012 $ 2011 $ 163,091 108,481 580,150 190,009 1,041,731 321,707 225,722 312,571 198,092 1,058,092 1,041,731 1,041,731 (190,009) 1,058,092 1,058,092 (198,092) 851,722 860,000 FINANCIAL LIABILITIES Loans from related parties on commercial terms in accordance with loan agreement. CURRENT Loans from Related Party Page 47 1,000,000 - Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 13. PROVISIONS CURRENT Employee Benefits (Note 11) NON-CURRENT Cash Received in Advance for Issue of Share Capital Long-term Employee Benefits 2012 $ 2011 $ 190,009 198,092 4,121 78,942 83,063 4,073 61,961 66,034 Provision for Long-Term Employee Benefits A provision has been recognised for employee benefits relating to long service leave for employees. In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave taken is based upon historical data. The measurement and recognition criteria for employee benefits have been included in Note 1(f). 14. TAX LIABILITIES 2012 $ Deferred Tax Liability 15. 18,814,449 2011 $ 19,739,601 ISSUED CAPITAL 107,947 (2011 – 107,995) Fully Paid Ordinary Shares 107,947 107,995 The Company has authorised share capital amounting to 112,068 shares. (a) Ordinary Shares At the Beginning of Reporting Period Shares Issued During the Year Share Buy Back At Reporting Date No. 107,995 (48) 107,947 No. 107,995 107,995 At the members annual general meeting each voting member is entitled to one vote when a poll is called. Page 48 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED (b) Capital Management Management and the Directors control the capital of the Company to ensure the Company funds its operations for members. The Company’s capital includes ordinary share capital. There are no externally imposed capital requirements. Management effectively manages the Company’s capital by assessing financial risks and adjusting its capital structure in response to member share transfers. There have been no changes in the strategy adopted by management to control the capital of the Company since the prior year. 16. EXPENDITURE COMMITMENTS (a) Operating Lease Commitments Non-cancellable operating leases contracted for but not capitalised in the financial statements. Payable – minimum lease payments - Not later than 12 months - Between 12 months and five years - Greater than five years 2012 $ 2011 $ 169,740 21,546 191,286 149,046 105,707 254,753 (b) Capital Expenditure Commitments There were no capital commitments at 30 June 2011 or 30 June 2012. 17. AUDITORS REMUNERATION Remuneration of the Auditors of the Company for: - Audit or reviewing the financial report - Other Services - Taxation Services provided by related division of audit practice - Business Services provided by related division of audit practice Page 49 2012 $ 26,850 13,210 2011 $ 25,890 3,900 7,290 7,770 6,680 54,030 37,560 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 18. RELATED PARTY TRANSACTIONS (a) Directors Names The Directors of the Company during the financial year were: Chairman Deputy Chairman Director Director Director Director 18. I Eckersley S Epiro K Depiazzi T Busher L Snell M Snell Harvey District Harvey District Collie River District Collie River District Waroona District Non-member Director RELATED PARTY TRANSACTIONS (cont.) (b) Remuneration of Directors Income paid to the Directors of the Company totalled $138,000 for the period from 1 July 2011 to 30 June 2012 (2011: $138,000). The number of Directors whose total income was within the specified bands were as follows: $ 0 10,000 20,000 30,000 40,000 - $ 2012 2011 9,999 19,999 29,999 39,999 49,999 2 3 1 2 3 1 (c) Directors’ Shareholdings The aggregate number of fully paid and ordinary shares of the Company held by the Directors in office at balance date, or their related entities, was 3,638 (2011 – 3,288). (d) Transactions of Directors concerning Shares Director, Ian Eckersley purchased 350 shares on the 18 November 2011. There were no other shares purchased or sold by Directors in office at balance date, during the year ending 30 June 2012. Page 50 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED (e) Other Transactions of Directors During the financial year, the following Directors, or their related entities, received and paid for irrigation services under normal trading terms and conditions: - I Eckersley K Depiazzi T Busher S Epiro L Snell 2012 $ Aggregate Amount for Irrigation Services: 87,433 2011 $ 75,651 (f) Other Related Party Transactions The Company entered into an agreement effective 1 July 2006 to lease a property (Lot 500 Turnbull Street, Harvey) from South West Irrigation Asset Cooperative Limited for a 10 year period. A portion of this property has been sub-leased to Rural Water Services Pty Ltd for the same period. 19. KEY MANAGEMENT PERSONNEL COMPENSATION Short-Term Benefits Other Long Term Benefits Post Employee Benefits Termination Benefits 20. 2012 $ 418,805 24,101 442,906 2011 $ 479,410 26,942 506,352 SEGMENT INFORMATION The Company operates in the Harvey Water Irrigation Area of Western Australia and the main function is the supply of irrigation water and related services. Page 51 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 21. CASH FLOW INFORMATION (a) Reconciliation of Cash Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows: Cash on Hand (b) 2012 $ 793,573 2011 $ 3,284,804 Reconciliation of cash flow from operations with surplus / (deficit) after income tax: Surplus / (Deficit) after Income Tax Depreciation Loss / (Surplus) on Disposal of Assets Change in Assets and Liabilities: Increase / (Decrease) in Leave Provisions Increase / (Decrease) in Provision for Income Tax Increase / (Decrease) in Deferred Tax Liability (Increase) / Decrease in Inventories Increase / (Decrease) in Creditors and Accruals (Increase) / Decrease in Receivables and Other Assets (Increase) / Decrease in Accrued Income Net Cash Flow from/(used in) Operating Activities Page 52 2012 $ (1,866,754) 1,714,054 - 2011 $ 2,726,596 1,685,407 10,528 8,898 17,323 (925,152) 355,350 (9,738) 1,148 (137,147) 1,173,178 120,027 (493,457) 388,787 155,211 (162,021) (251,138) (219,088) 4,616,054 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 22. CONTINGENT LIABILITIES Contributions to Water Corporation’s Dam Safety Program The Water Corporation is currently in the process of undertaking a Dam Safety Program (DSP) throughout the South West Region. Water Corporation's DSP includes safety upgrades and improvements in respect of irrigation dams which supply the Company. By agreement with Water Corporation in 1996, the Company will contribute towards the DSP relating to some irrigation dams. The Economic Regulation Authority (ERA) conducted an Inquiry into the Bulk Water pricing of the Company which included considerations of the cost of Water Storage and the cost of Dam Safety. This report has now received full formal approval by government, Water Corporation and Harvey Water. The Dam Safety Program (DSP) costs recommended from that review are now being levied on irrigators over a 10 year increasing price path and amount to $1,272,849 in 2011/12 (estimated to be $1,436,144 in 2012/13). Harvey Water’s contribution to the Dam Safety Program relates only to works on Waroona and Wellington dams and works on those two dams are now complete. The report required that extra payments be made for those items in 2007/8. These payments took into account previous payments for Water Storage and Dam Safety made by the Company. These fixed charges have become increasingly burdensome to irrigators from the very low allocations in the past 5 years in the Waroona/Harvey districts which drive up the effective cost of water on a per unit volume basis. As well, the high salinity and therefore low productivity from Wellington dam water makes the profitability of irrigation in the Collie River district much harder than in Waroona/Harvey. In response to these financial difficulties, Harvey Water wrote to the ERA requesting a review of the situation, taking into account the real changes in water supply which have occurred since the 2007 review. ERA agreed to this request and at year end this review was under way as part of a review of costs and charges of Water Corporation and other water utilities. The ERA approved price path is as per the table below: Page 53 Harvey Water Annual Report 2011/12 CONTINGENT LIABILITIES (cont.) Total $m CPI* Formula $m $/month Annual $ 154.3 2006/07 2007/08 0.925235 155.6 1.008 0.933030 77,753 2008/09 1.077561 162.2 1.051 1.132731 94,394 1,132,731 2009/10 1.229886 166.2 1.077 1.324738 110,395 1,324,738 Page 54 0.988461 1.095443 91,287 1,095,443 1.111492 1.272849 106,071 1,272,849 1.234524 1.436144 119,679 1,436,144 The formula is used to convert the price path number in 2006 Dollars to the price path year eg 2009/10, dollars. The method is to divide the lagged year CPI by the 2006 CPI and multiply the product by the price path number. 0.865429 0.932173 77,681 932,173 Formula - Dollar amounts are in June 2006 dollars and need to be increased by CPI for each year. CPI is average for 8 Capital Cities from April to March lagged from the previous year from ABS data. 0.452339 0.526214 43,851 526,214 CPI* 0.742398 0.780408 65,034 780,408 0.619366 0.423045 0.484459 40,372 484,459 DSP $m $/month Annual DSP $ 0.393751 0.436367 36,364 436,367 2012/13 1.686863 179.5 1.163 1.962358 163,530 1,962,358 ERA Actual 0.364457 0.392565 32,714 392,565 2011/12 1.534538 176.7 1.145 1.757310 146,442 1,757,310 WSC $m $/month Annual WSC $ 0.335163 0.352323 29,360 352,323 2010/11 1.382212 171.0 1.108 1.531810 127,651 1,531,810 ERA Actual 0.305869 Break Down between Water Storage Charge (WSC) & Dam Safety Program (DSP) Actual ERA WATER PRICES (table and calculations provided by the ERA) 22. SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED - 1.357555 0.481634 2013/14 1.839189 - 1.603618 0.540222 2015/16 2.143840 - 1.726650 0.569516 2016/17 2.296166 Harvey Water Annual Report 2011/12 - 1.480587 0.510928 2014/15 1.991514 - 1.726650 0.569516 2017/18 2.296166 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 23. EXTENSION TO THE HARVEY PIPE PROJECT The effects of the very dry winter in 2010 extended into 2011/2 with both Waroona and Logue Brook dams having very low water levels. If it had only been possible to deliver water to the Waroona district from the Waroona dam, the allocation would have been 9%. Consistent with Harvey Water’s objective of integrating the Waroona and Harvey Irrigation Districts, and because of the very low level of water in the dams, a pipeline was constructed from the northern end of the Harvey system to the western edge of the Waroona system to augment the water supply system. This allowed the joint allocation in the Harvey and Waroona districts to be 45%, which was a major benefit to Waroona irrigators. The pipeline cost of $3m was internally funded and was constructed, largely using internal resources, between September and December 2011. 24. RATIONALISATION OF WATER SOURCES After the completion of the Harvey Pipe Project, the situation was that Harvey Water and Water Corporation both owned water in Samson, Logue Brook and Stirling dams, which are dams all suitable for potable purposes. Harvey Water owned all the water in Waroona, Drakesbrook and Harvey dams and most of the water in Wellington dam, which are all dams with water only suitable for non-potable purposes. The logistics of two organisations owning and sharing water in the dams – known as capacity sharing – was onerous and the disruptions to Harvey Water’s supply service caused by technicians making adjustments to the release and measuring systems without reference to Harvey Water caused the cooperative to suggest a rationalisation of this situation such that Harvey Water would own all the water that is suitable for irrigation (nonpotable) and for Water Corporation to own all the water that is suitable for drinking. This is a sensible concept and makes the best use of water resources. The outcome will be that Water Corporation owns all the water in Samson and Stirling dams and Harvey Water owns all the water in Waroona, Drakesbrook, Logue Brook, Harvey and Wokalup Pipehead Dam. Negotiations are at an advanced stage and should be completed during 2012. 25. COLLIE-KEMERTON INTEGRATED WATER MANAGEMENT SYSTEM Harvey Water has always considered the salinity in Wellington Dam water the most serious problem it has and has been working with the relevant government agencies to try to stimulate actions to reduce it. Funding ($15M each) was provided to DoW under the National Program for Water Quality and Salinity but after 5 years no acceptable result was obtained and the remaining funds returned. The South West Development Commission then asked Harvey Water to take the lead role in developing a Business Case for funding and action. Harvey Water accepted this opportunity with great pleasure and has commenced the design and costing of a technical solution along with the cost/benefit study and governance of the project. Page 55 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 25. COLLIE-KEMERTON INTEGRATED WATER MANAGEMENT SYSTEM (cont.) A local Industry Reference Group has considered Harvey Water’s ideas and accepted them for consideration by an Intergovernmental Department Consultative Committee, which has agreed that funding can be approved for the Business Case. It is anticipated that the full package will be available to be considered by government late in 2012. Funding will be a government decision but Harvey Water has offered to construct a 70 km pipeline at its own internal cost of around $10 m. This contribution is an important matter as government is much more likely to approve a project that has real and tangible support from the proponents. 26. EVENTS SUBSEQUENT TO REPORTING DATE There are no events subsequent to reporting date that materially impact on this financial report. 27. TRANSITION TO THE NEW CO-OPERATIVES ACT 2009 The new company Rules, which replace the previous Articles of Association, were approved by members and then by the Regulator in June 2012. The new Rules require active membership and allow for the cancellation of membership of those who do not actively use their water. A significant outcome is that members can now resign from membership and have their shares cancelled. Six members have sought to take this option in the Collie River Irrigation District as at August 2012. The cooperative is required to accept these resignations but can apply a Termination Fee. As well, members can also apply to hand back part of their shareholding but the cooperative is not obliged to accept these and can also apply an Excision Charge. The cooperative is considering the implications of these options because the outcome would be that the lost income for fixed charges would have to be shared amongst the remaining members and the equity of this has to be resolved. The cooperative is actively working through the difficult issues involved and will communicate the decisions to members as soon as possible. 28. THIRD PARTY AGREEMENTS (a) Perdaman Chemicals and Fertilisers (PCF) Harvey Water signed a time-limited agreement with PCF on 15 November 2010 for the sale of industrial water from Wellington dam. Commencement of the agreement is dependent upon various conditions that are yet to be fulfilled. The supply and payment, upon enactment of the agreement, is guaranteed both ways that will provide an underpinning income stream for the Company, which may allow it to fund infrastructure works. The supply will commence when construction of the plant is complete. The PCF project is being held up by legal issues and a best-case scenario is that water supply will commence in 2015. Page 56 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 28. THIRD PARTY AGREEMENTS (cont.) (b) Alcoa Harvey Water is negotiating the medium term supply of a guaranteed volume of industrial water to Alcoa Wagerup. Subsequent to financial year-end, August 2012, a Letter of Intent has been received with the final details being negotiated. The supply is intended to come ultimately from Wellington dam via Harvey dam through infrastructure funded by Harvey Water that will be repaid by Alcoa. Modelling and DAFWA advice show that water quality issues in Harvey dam are not likely to cause significant plant growth issues. 29. RESERVES (a) Development Reserve The development reserve records funds set aside for future research and development. The development levy charged to members is placed within the reserve with expenditure on research and development for the year allocated against the reserve. (b) Future Works and Environmental Reserve The future works and environmental reserve is required under the Harvey Pipe Project agreements with Water Corporation and Department of Water. These agreements require works on approximately 210km of redundant channels and the environment. The redundant channels require rehabilitation where not required by other stakeholders. Environmental works relate to rehabilitating a stretch of the Wellesley River and enhancing fish migration in the Bancell, Clarke and Logue Brooks. These works will take some time to negotiate and complete. During the 2011/12 financial year, $368,509 of works were completed and allocated against the reserve. SWIMCO has agreed with SWIAC that as it has constructed pipelines which have caused the SWIAC channel assets to now become redundant, it will be financially and administratively responsible for the works required to achieve the agreed level of rehabilitation. 30. FINANCIAL RISK MANAGEMENT The Company’s financial instruments consist mainly of deposits with banks, local money market instruments, short-term investments, accounts receivable and payable, loans to and from members and related parties. The Company does not have any derivative instruments at 30 June 2012. The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these financial statements, are as follows: Page 57 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 30. FINANCIAL RISK MANAGEMENT (cont.) Note 2012 $ 2011 $ Financial Assets Cash and Cash Equivalents Trade and Other Receivables 21(a) 5 793,573 365,591 1,159,164 3,284,804 940,875 4,225,679 Financial Liabilities Financial Liabilities at Amortised Cost: - Trade and Other Payables 11(a) 851,722 851,722 860,000 860,000 Financial Risk Management Policies The Board meet on a regular basis to analyse financial risk exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. The Board’s overall risk management strategy seeks to assist the Company in meeting its financial targets, whilst minimising potential adverse effects on financial performance. Management operates under policies approved by the Board of Directors. Risk management policies are approved and reviewed by the Board on a regular basis. These include credit risk policies and future cash flow requirements. Specific Financial Risk Exposures and Management The main risks the Company is exposed to through its financial instruments are interest rate risk, liquidity risk and credit risk, which are further detailed below: (a) Interest Rate Risk Exposure to interest rate risk arises on financial assets and financial liabilities recognised at reporting date whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The Company is also exposed to earnings volatility on floating rate instruments. The Company has no borrowings at balance date and is not exposed to fluctuations in interest rates on borrowings. (b) Liquidity Risk The Company manages liquidity risk by budgeting and monitoring forecast cash flows. Page 58 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED FINANCIAL RISK MANAGEMENT (cont.) 30. Financial Liability and Financial Asset Maturity Analysis The table below reflects the undiscounted contractual maturity of financial liabilities. 1 to 5 years 2012 2011 $ $ Over 5 years 2012 2011 $ $ - 2012 $ Total 793,573 365,591 1,159,164 2011 $ 3,284,804 940,875 4,225,679 2011 $ 59,614 59,614 2012 $ 860,000 860,000 - Cash flows realised from financial assets reflect management expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The timing of cash flows presented in the table to settle financial liabilities reflect the earliest contractual settlement dates and do not reflect management expectations that banking facilities will be rolled forward. Within 1 Year 2012 2011 $ $ Financial Assets – cash flows realisable 3,284,804 881,261 4,166,065 851,722 851,722 61,935 61,935 793,573 303,656 1,097,229 - 3,365,679 Cash and Cash Equivalents Receivables Total Anticipated Inflows - 307,442 2011 $ - - 2012 $ - - 1 to 5 years 2012 2011 $ $ 851,722 851,722 59,614 Harvey Water Annual Report 2011/12 61,935 Within 1 Year 2012 2011 $ $ Financial Liabilities – due for payment Trade and Other Payables Total Expected Outflows 245,507 3,306,065 860,000 860,000 Net (Outflow) / Inflow on Financial Instruments Page 59 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 30. FINANCIAL RISK MANAGEMENT (cont.) (c) Foreign Currency Risk The Company is not exposed to fluctuations in foreign currencies. (d) Credit Risk The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. There are no material amounts of collateral held as security at 30 June 2012. Credit risk is managed by management and reviewed regularly by the Board of Directors. It arises from exposures to customers deposits with financial institutions. Management monitors credit risk by actively assessing the rating quality and liquidity of counter parties: - Only banks and financial institutions with ratings as outlined within the investment policy are utilised; and Customers that do not pay on a timely basis are subject to recovery actions in accordance with Board policy and may ultimately have services restricted. The Company does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into. The trade receivables balances at 30 June 2012 and 30 June 2011 do not include any counter parties with external credit ratings. Customers credit worthiness is monitored monthly and actions taken where applicable in accordance with Board policy. (e) Price Risk The Company is not exposed to any material commodity price risk. Sensitivity Analysis The following table illustrates sensitivities to the Company’s exposures to changes in interest rates. The table indicates the impact on how profit and equity values reported at balance date would have been affected by changes in the relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the movement in a particular variable is independent of other variables. Profit $ Equity $ Year ended 30 June 2012 +/- 2% in interest rates +/- 15,871 +/- 15,871 Year ended 30 June 2011 +/- 2% in interest rates +/- 65,696 +/- 65,696 The above interest rate sensitivity analysis has been performed on the assumption that all other variables remain unchanged. Page 60 Harvey Water Annual Report 2011/12 SOUTH WEST IRRIGATION MANAGEMENT COOPERATIVE LIMITED 30. FINANCIAL RISK MANAGEMENT (cont.) Net Fair Values Fair Value Estimation The fair values of financial assets and financial liabilities are presented in the following table and can be compared to their carrying values as presented in the statement of financial position. Fair values are those amounts at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Fair values derived may be based on information that is estimated or subject to judgment, where changes in assumptions may have a material impact on the amounts estimated. Areas of judgment and the assumptions have been detailed below. Where possible, valuation information used to calculate fair value is extracted from the market, with more reliable information available from markets that are actively traded. In this regard, fair values for listed securities are obtained from quoted market bid prices. Where securities are unlisted and no market quotes are available, fair value is obtained using discounted cash flow analysis and other valuation techniques commonly used by market participants. Foot note 2012 Carrying Net Fair Amount Value $ $ 2011 Carrying Net Fair Amount Value $ $ Financial Assets Cash and Cash Equivalents Trade and Other Receivables (i) (i) 793,573 365,591 1,159,164 793,573 365,591 1,159,164 3,284,804 940,875 4,225,679 3,284,804 940,875 4,225,679 Financial Liabilities Trade and Other Payables (i) 851,722 851,722 851,722 851,722 860,000 860,000 860,000 860,000 The fair values disclosed in the above table have been determined on the following methodologies: (i) Cash and cash equivalents, trade and other receivables and trade and other payables are short term instruments in nature whose carrying value is equivalent to fair value. Trade and other payables exclude amounts provided for relating to annual leave which is not considered a financial instrument. Fair values are in line with carrying values. Financial Instruments Measured at Fair Value The financial instruments recognised at fair value in the statement of financial position have been analysed and classified using a fair value hierarchy reflecting the significance of the inputs used in making the measurements. The hierarchy consist of the following levels: - Quoted prices in an active market for identical assets or liabilities (Level 1); - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and - Inputs for the asset or liability that are not based on an observable market data (unobservable inputs) (Level 3). All financial instruments for the year ended 30 June 2011 and 30 June 2012 are classified as Level 1. Page 61 Harvey Water Annual Report 2011/12 Audit Report Page 62 Harvey Water Annual Report 2011/12 This page has been left blank intentionally HWIA Map