A fresh coat and a bright approach - portableleave.org.au · Estha van der Linden Steven Minuzzo Larry Moore CHIEF EXECUTIVE OFFICER Adam Warchol ACTUARY Mercer 6/70 Franklin Street

Annual Report — 2018

Construction Industry

Long Service Leave Board

A fresh coat and a bright approach

PORTABLE LONG

SERVICE LEAVE

The business name of the Construction

Industry Long Service Leave Board

ADDRESS

155 Fullarton Road

Rose Park SA 5067

TELEPHONE

(08) 8332 6111

1800 182 124 (toll free)

EMAIL

[email protected]

INTERNET

www.portableleave.org.au

BOARD MEMBERS

Marie Boland (Presiding Officer)

John Camillo

Aaron Cartledge

Erin Hennessy

Estha van der Linden

Steven Minuzzo

Larry Moore

CHIEF EXECUTIVE

OFFICER

Adam Warchol

ACTUARY

Mercer

6/70 Franklin Street

Adelaide SA 5000

AUDITORS

BDO

Level 7, 420 King William Street

Adelaide SA 5000

PRIMARY LAWYERS

Lynch Meyer

190 Flinders Street

Adelaide SA 5001

PRIMARY ASSET

CONSULTANT

JANA Investment Advisers

Level 6, 255 George Street

Sydney NSW 2000

Our vision is to refresh and reinvigorate the South Australian construction industry through portable long service leave

Presiding Officer Report 05

Chief Executive Officer Report 08

Scheme Statistics 11

Finance and Investment 13

Operations 23

Governance 30

People 35

Financial Statements 37

Independent Auditor’s Report 58

Table of Contents

Presiding Officer’s Report

This year in presenting the annual report I am looking back on 12 months where the current

Board (appointed in July last year) has settled in well, consolidated the work of the previous

Board and also initiated a number of new projects to ensure the continued improvement of

the management of the Construction Industry Long Service Leave Fund (the Fund).

One of the key decisions this year was to replace our information system which has become

outdated. Significant consultation has taken place with businesses and workers to ensure that

the new system meets the needs of the end users and ensures efficient, effective and speedy

service delivery.

We also saw the result of some legislative changes and welcomed the inclusion of data cabling

into the Fund. Data Cablers became eligible to accrue portable long service leave from 1

July 2018. I acknowledge the significant work over the last 4 years of all of those involved in

achieving this outcome. We have some remaining legislative amendments which we hope will

pass through Parliament before the end of 2018.

“Data Cablers became eligible

to accrue portable long service

leave from 1 July 2018”

Increased promotion of the Fund and field and compliance activities have led to an all-

time high in employer and worker registrations. Regular engagement by the CEO with

industry stakeholders is increasing confidence in the management of the Fund with audits

and data matching against other agency data also improving the Board’s capacity to ensure

appropriate coverage. Investment returns have been solid and the Board has kept a close eye

on developments such as the Royal Commission into the banking sector and continues to take

advice from JANA Investment Advisors on exposure to the Fund’s portfolio. This year we have

built on the outgoing Board’s legacy, retaining a sound financial position for the fund with a

solvency ratio of 126.6% and a fund surplus of almost $31 million.

“...retaining a sound financial

position for the fund with a

solvency ratio of 126.6% and a fund

surplus of almost $31 million”

As we look to the future we will continue to assess the Board’s financial position

with a view to ensuring that the levy is based on a fair analysis of the current financial position,

the sustainability of the fund and anticipated growth into the future. Within this context, we

have engaged a new Actuary (the previous Actuary had been engaged for the last 9 years) to


take a fresh look at the Board’s accrued liabilities. Board Members will also be undertaking

professional development in August 2018 to ensure that they keep their financial skills

up to date.

This year we also welcomed a new Minister for Industrial Relations, the Honorable Rob

Lucas MP, and we look forward to working with him to support the administration of the

Construction Industry Long Service Leave Act.

Finally, I would like to thank the CEO and staff at Portable Long Service Leave for their fantastic

work over the last financial year and for supporting me in the role of Presiding Officer and the

Board Members more generally. I look forward to working with them and with the members

of the Board to continue to maintain and improve the operation of the fund for the benefit of

workers and employers in the construction industry.

Marie Boland

Presiding Officer


CEO’s Report

The theme of this year’s annual report is a fresh lick of

paint. Following on from a year of incremental and

structural changes in 2016/2017 - this year has been one

of consolidation, process review and enhancement with a

focus on organisational performance.

“...streamline, simplify

and give the gift of time

back to our customers.”

We adopted the mantra of asking ourselves ‘Do we know

why we do this?’, ‘Do we need to do this?’, ‘Can we do this

better?’ A key trigger to this mindset was a step forward

in the replacement of our core information system. An

off the shelf product has been selected and a significant

planning exercise was undertaken in the last half of the

financial year resulting in a root and branch review of key

processes, tasks, and documentation. The key aim being

to streamline, simplify and give the gift of time back

to our customers.

I must once again express thanks to our dedicated team of staff who undertook over 16 design

and planning workshops whilst ensuring the organisation continued to run smoothly and for

engaging in a substantial amount of knowledge transfer amongst each other. Well done!

Local conditions in the South Australian construction sector appear to remain buoyant,

represented by a larger workforce. This along with a renewed field strategy has led to

employer and worker registrations reaching an all time high of 2,486 and 27,815 respectively.

This was further reflected in levy revenue rounding out at $16.2 milion, another all-time high.

Wage inflation also returned to more average levels at approximately 2.5% following a flat

year last year.

Investment returns were also solid with an average return of 6.8% across all asset classes.

Market volatility remained an issue with a few wobbles during the year. The Royal Commission

into the banking sector was an influencing factor in this space impacting the valuation of

the Big Four Banks along with privacy concerns impacting the valuation of some large US

technology companies both of which the Board has exposure to in its portfolio.


One of Australia’s oldest financial institutions AMP was also rocked by claims of misconduct

during the year. The Board is a unit holder in an unlisted infrastructure fund with AMP Capital

– a majority owned subsidiary of AMP. Whilst AMP Capital is a separate entity to AMP the

Board reviewed the investment including its governance arrangements but did not result in a

need for divestment.

“This has been a seamless transition

from the Board’s perspective...”

Our asset consultant, JANA Investment Advisors previously a wholly owned subsidiary of

the National Australia Bank completed a management buyout in the first quarter of FY2018.

This has been a seamless transition from the Board’s perspective and seen as a positive step

as it increases JANA’s independence, agility and service offering. Throughout the year JANA

worked with the Board to conduct a series of in-house training sessions on different asset

classes to increase general investment acumen. This will continue in FY2019.

That rounds out summation of the years activities. FY2019 promises to be another busy

year as we finally implement a long awaited new information system which I’m confident

will deliver significant time savings to customers, improve the Board’s efficacy and reduce

business risk in this area.

The Board’s strong financial position also sets the scene for a levy rate reduction which will

be considered by the Board before the end of the calendar year.

Adam Warchol

Chief Executive Officer


Scheme Statistics

Financial Year 2014

Financial Year 2015

Financial Year 2016

Financial Year 2017

Financial Year 2018

Clients

Active registered workers (Employed or less than allowable absence)

25,260 24,548 23,664 23,882 27,815

Currently employed registered workers 17,476 17,343 16,338 17,980 21,777

Registered employers 2,190 2,251 2,260 2,385 2,486

Contractors/Working Directors registered 520 519 649 681 654

Operations and Administration

Salaries & related on costs $1,094,000 $1,027,000 $964,000 $960,000 $944,962

Administration $503,000 $500,000 $644,000 $660,000 $585,129

Total administration costs $1,597,000 $1,527,000 $1,608,000 $1,620,000 $1,530,091

Claims

No of long service leave claims 1,885 1,967 2,200 1,991 1,963

Value of long service leave claims $11,690,000 $12,630,000 $14,514,000 $13,280,000 $13,173,111

Financial

Total assets $115,190,000 $126,560,000 $126,495,000 $135,589,000 $146,844,000

Total liabilities $103,280,000 $106,190,000 $110,300,000 $111,000,000 $115,994,000

Funds under management $110,950,000 $122,750,000 $121,880,000 $130,701,000 $140,575,000

Investment income $12,500,000 $10,790,000 $2,590,000 $9,834,000 $9,684,000

Investment return 11.6% 9.0% 2.1% 7.8% 6.8%

Levy rate 2.25% 2.25% 2.25% 2.15% 2.15%

Levy income $15,760,000 $14,670,000 $13,500,000 $14,140,000 $16,204,000

Contractors/Working Directors contribution rate $210 $220 $225 $230 $235

Contractors/Working Directors interest rate 2.80% 2.70% 2.10% 2.00% 2.00%

Operating cashflow excluding investment income $2,610,000 $516,000 ($2,627,000) ($1,262,000) $837,000

Fund surplus/(deficit) $11,900,000 $20,370,000 $16,194,000 $24,589,000 $30,850,000

Human Resources

FTE headcount 11.7 11.0 10.8 9.5 9.6

Economic

CPI 2.9% 1.2% 0.7% 1.6% 2.1%

Industry wage growth 2.4% 2.4% 2.9% 0.1% 2.5%

Average weekly earnings $1,187 $1,216 $1,251 $1,252 $1,284

Performance indicators

Administration cost per client $57.10 $55.90 $60.51 $60.12 $49.43

Management expense ratio 1.4% 1.2% 1.3% 1.2% 1.0%

Benefits expense ratio 91.6% 90.8% 92.0% 89.4% 89.6%

Leave utilisation rate 7.5% 8.0% 9.3% 8.3% 7.1%

Solvency ratio 111.5% 119.2% 114.7% 122.2% 126.6%

Scheme Statistics 11

Finance and Investment

State of the Fund

As at 30th June 2018 the Fund retains a surplus of $30.9M and a solvency ratio of 126.6%.

Summary of Financial Year

In FY2018 an operating surplus of $6.3M was achieved.

Levy revenue increased (15%) from FY2017 to $16.2M

representative of increased registrations.

Investment income totalled $9.67M due to positive returns

across all investment classes.

Worker Payment expenditure is consistent with FY2017 with

only a slight decrease in the number of claims for long service

leave taken.

The Worker Payment Provision increased by $4.7M due to

changes in financial, usage and service accrual assumptions

used by the newly appointed Actuary along with a change

in methodology. The financial assumption changes include

adoption of a short-term measure of investment returns and

wage inflation for a period of 5 years before returning to the long

term assumption.

Operating expenses remained slightly below the prior year.

Total assets increased to $146.8M as a result of investment gains.

Cash flows from Operating activities (excluding investment

income) were positive in FY2018 reflecting increased levy

collections. No redemptions were required from investments,

however a cash distribution was received of $0.4M.

Actual 2017/18 ($ Million) Budget 2017/18 ($ Million)

Income

Levies 16.2 13.83

Investments (including cash holdings) 9.67 8.28

Other 0.03 0.01

Total Income 25.90 22.12

Expenditure

Long Service Leave Payments 13.17 14.00

Increase in accrued LSL liability 4.68 7.80

Salaries & Related Costs 0.95 0.92

Operating Costs 0.84 1.09

Total Expenditure 19.64 23.81

Surplus/(Deficit) 6.26 (1.69)


Asset & Liability — 10 Year Trend

$160,000,000 140%

120%

100%

80%

60%

40%

20%

$140,000,000

$120,000,000

$100,000,000

$80,000,000

$60,000,000

$40,000,000

$20,000,000

$0 0%Financial year • Total assets • Total liabilities • Solvency ratio (RHS)

Dol

lars

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Operating Cashflow excluding Investment Income

$20,000,000

$15,000,000

$10,000,000

$5,000,000

$0

-$5,000,000

Dol

lars

Financial year • Levy income • Value of long service leave claims

• Total administration costs

200

9

2010

2011

2012

2013

2014

2015

2016

2017

2018

Administration Cost Per Client — 10 Year Trend

$70.00

$60.00

$50.00

$40.00

$30.00

$20.00

$10.00

$0

Dol

lars

Financial year • Administration cost per client

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018


Investment

As part of its overall organisational strategy, the Board utilise

an implemented consultancy model to achieve investment

objectives. Being a small organisation, this strategy is the most

effective in order to leverage the wide research and investment

skills required to manage over one hundred and forty million

dollars of investment. JANA Investment Advisers are the

Board’s primary investment consultant and have a long standing

relationship with Portable Long Service Leave, as well as being

an industry leader in their field. During the year JANA completed

a management buyout from the National Australia Bank resulting

in a new ownership structure and improved service offering.

The Board views the change as positive, increasing JANA’s

independence in the services they provide.

Investments form an important part of the scheme,

supplementing levy revenues in order to ensure the Fund is able

to meet future long service liabilities whilst maintaining a low

levy rate.

The investment objectives for the 2017/2018 financial year were:

— A high probability the net return exceeds

the inflation rate (CPI) by at least 3% per

annum over rolling five year periods;

— Limiting the probability of a negative annual return

to one year in every four years, on average; and

— A high probability that the Fund will maintain

a solvency ratio between 100% and 115%

During the year the Board commenced its annual review of

investment strategy and is anticipated to complete this in

early FY2019.

As mentioned in the CEO report, investment returns for the year

have remained strong. This is despite the fact that there have

been several periods of volatility in the Financials and Technology

sectors. Diversification of the Board’s investment portfolio has

provided some protection. In FY2019 the Board is considering

further diversification into Unlisted Property.

Financial Year 2018 — Asset Allocation

Australian Shares

Global Shares Unhedged

Global Shares Hedged

Global Listed Property

Unlisted Infrastructure*

Alternatives (Growth)

All Maturity Debt

Short-Maturity Debt

Alternatives (Defensive)

Cash**Cash*

16% 15 % 4%

3% 7% 2% 20%

23%

3% 3% 4%


All asset classes performed positively for the year notably:

Australian Shares 13.46%

International Shares (Unhedged) 13.61%

International Shares (Hedged) 11.48%

Unlisted infrastructure 11.31%

Note: Performance calculated on a weighted rate of return and may vary slightly from those published by Investment Advisors.

No redemptions (withdrawals) were required during the year. An addition of $0.5M was added to the Portfolio based on surplus operating

cash flow requirements and a cash distribution of $0.4M was received from the AMP Capital Diversified Infrastructure Trust largely

representative of a realised capital gain from the sale of its Interlink toll road asset.

Financial Year 2018 Investment Movement by Class

This graph illustrates the movement in value of each investment class from the start of the financial year to 30th June 2018. The green

bars illustrate an increase in value.

145

140

135

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Investment class

The five year average return on investments held by the Board is 7.45%.

The Board received realised gains of $7.8M and unrealised gains of $1.8M leading to a total investment gain of $9.7M.


5 Year Investment Return

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

0.0%

2.0%

2014

2015

2016

2017

2018

• Investment return • Investment return 5 year return

Perc

ent

Financial year

Self-Employed Contractor / Working Director Fund

The Self-Employed Contractor / Working Director Fund is a voluntary

fund established to facilitate the preservation of previously accrued

service when a construction worker transitions from an employee

to a self-employed contractor or working director.

The fund is characterised as an accumulation fund as registrants

will receive their original contributions plus investment return in

the form of interest when they reach entitlement and/or exit the

fund. This is in addition to any accrued entitlement that has vested

in the construction worker fund.

This fund is segregated from the core investment portfolio due to

its defined purpose and different operating rules.

Members can exit this fund at any stage therefore a different

investment risk profile is applied ensuring sufficient liquidity.

The Self-Employed Contractor / Working Director Fund has

returned an average of 4.2% since its inception in 2006.

As at 30th June 2018 the balance held in investment was $5,750,559

against a liability of $5,760,881.

Actuarial Services

In 2018 the Board undertook a review of its actuarial services. Following an evaluation of service offerings from 4 service providers the

Board engaged Mercer to provide actuarial services for FY2018 that included:

— An annual report on the valuation of the

scheme’s long service leave liabilities at 30th

June, sufficiency of the Construction Industry

Fund and appropriateness of the levy rate;

— Sensitivity Analysis on the future funding of

the scheme including projected cash flows

and liabilities over the next eight years;

— Recommendations to the Board on the contribution rate

and interest payable on account balances under the

Self-Employed Contractor / Working Director Fund;

— Providing short term liability forecasts

for budget purposes.

— An update to actuarial assumptions used

including exit rates and usage rates.

The Board’s valuation process is cyclic with a comprehensive review scheduled every 3 years known as a ‘triennial review’. A triennial

review was conducted in the 2017/18 financial year.


Valuation

The FY2018 valuation estimates the Board’s liability (excluding self-employed contractors and working directors) to be $109.9M with

Vested Benefits being $94.9M.

Financial Year 2017 Value of Liability (excluding self-employed contractors and working directors)

Leaving Industry Vested Benefits (excluding self-employed contractors and working directors)

Value of liability $109,940,000 $94,922,000

The FY2018 valuation estimates the Board’s liability in relation to self-employed contractors and working directors to be $5.7M. The

contribution rate and interest rate for the Self-Employed Contractors / Working Directors Fund for FY2018 was set at $235.00 and 2.0%

respectively.

Financial Year 2018 Financial Year 2017

Contribution rate (bi-monthly) $235.00 $230.00

Interest rate 2.0% 2.0%

Self-employed contractors & working directors $5,760,881 $5,449,636

The FY2018 valuation estimates the Board’s total liability to be $115.7M.

Financial Year 2017 Financial Year 2017

Construction workers $109,940,000 $105,257,000

Self-employed contractors & working directors $5,760,881 $5,449,636

Total provision long service leave entitlements $115,700,881 $110,706,636


Assumptions

The Actuary uses a number of experiential and economic

assumptions in order to estimate the Board’s liabilities.

Experiential assumptions include:

— whether workers are active or inactive in the industry;

— the rates at which workers will accrue

service credits in future;

— the rates at which workers will leave the Fund due to

death, incapacity, retirement and leaving the industry; and

— the rates at which workers will take their

long service leave entitlements.

Economic Assumptions include:

— the average long term rates of wage inflation; and

— the average long term investment return rate.

This year the Actuary revised both the experiential and

economic assumptions used by the previous Actuary along

with the methodology used to calculate the liability. These

changes resulted in a net reduction of $1.6M to the liability for

these components.

The key changes to the economic assumptions are as follows:

Adoption of a short-medium term set of assumptions for the next

5 years for both wage inflation and investment returns before

reverting to a long term set of assumptions.

Assumption First 5 Years Thereafter

Average Weekly Earnings

(Wage Inflation)

3.0% pa 4.0% pa

Investment Return 4.5% pa 7.0% pa

The short term set of assumptions were adopted based on the

expectation that (in the short term) both wage inflation and

investment returns will be more constrained than the long term

historical trend.

Average Weekly Earnings increased in FY2018 by 2.5% to $1,284

(.1% in FY2017).

The Average Investment Return was 6.8% in FY2018

(7.8% in FY2017).

The Actuary has advised that the Fund is in a satisfactory financial position as at 30th June 2018 with a surplus (total assets exceeding

total liabilities) of $30.9M.

$1,400

$1,200

$1,000

$800

$600

$400

$200

$0

15.0%

10.0%

5.0%

0.0%

(5.0%)

(10.0%)

(15.0%)

Financial year • Average weekly earnings • Industry wage growth (RHS) • Investment return (RHS)

2009

2010

2011

2012

2013

2014

2015

2016

2017

Dol

lars

2018


Employer Return Management

An Employer Return is the legislative mechanism used for an employer to declare who has worked for them over the prescribed return

period (2 months).

Employer Return Management is a shared responsibility across the organisation encompassing automatic reminders, data entry and

review, customer education and communication, error correction and investigation, statutory fines, debt collection and prosecution.

Employer Return Management activities undertaken in FY2018 consisted of:

Financial Year 2018

Issued Received on time Late Fines

Return period Number Number % Number % Number % Amount

May/Jun 2017 (Due July) 2,028 1,778 88% 250 12% 82 4% $6,150

Jul/Aug 2017 (Due Sep) 2,061 1,796 87% 265 13% 50 2% $3,750

Sep/Oct 2017 (Due Nov) 2,086 1,483 71% 603 29% 131 6% $9,825

Nov/Dec 2017 (Due Jan) 2,068 1,738 84% 330 16% 93 4% $6,975

Jan/Feb 2018 (Due Mar) 2,090 1,812 87% 278 13% 65 3% $4,875

Mar/Apr 2018 (Due May) 2,092 1,795 86% 297 14% 57 3% $4,275

Financial Year 2017

Issued Received on time Late Fines

Return period Number Number % Number % Number % Amount

May/Jun 2016 (Due July) 2,160 1,713 79% 447 21% 191 9% $14,325

Jul/Aug 2016 (Due Sep) 1,941 1,660 86% 281 14% 146 8% $10,950

Sep/Oct 2016 (Due Nov) 1,947 1,638 84% 309 16% 160 8% $12,000

Nov/Dec 2016 (Due Jan) 1,962 1,684 86% 278 14% 189 10% $14,175

Jan/Feb 2017 (Due Mar) 1,968 1,700 86% 268 14% 89 5% $6,675

Mar/Apr 2017 (Due May) 1,990 1,716 86% 274 14% 67 3% $5,025


Employer Return Lodgement

Paper Post

Internet

Paper Email

9% 4% 8

7%

During the year the Board wrote off $81K of bad debt from 30 employers.

Bad debt write off Financial Year 2018 Financial Year 2017 Financial Year 2016 Financial Year 2015 Financial Year 2014

No 30 45 28 46 24

Value $81,817 $66,876 $255,000 $134,900 $127,900


Operations

Legislation

Last year we reported that a suite of proposed legislative

amendments to the Construction Industry Long Service Leave

Act 1987 were referred to the Minister for Industrial Relations.

We’re pleased to advise that 2 of the amendments were

accepted and introduced into Parliament in 2017/18 in Statutes

Amendment (Attorney-General’s Portfolio No 3).

These changes involved the explicit addition of data cabling

into the definition of Construction Industry and clarification to

Schedule 15 of the Act. The Board sees both of these changes

as a positive step for both the organisation and the industry and

look forward to a smooth transition as these are implemented in

2018/2019 financial year.

Following the change in State Government in March 2018 the

remaining changes are being reviewed by the new Government

and we hope they are passed into legislation in the first

quarter of 2018/2019 financial year along with an update to the

Construction Industry Long Service Leave Regulations 2003.

Information Systems

Information Systems have been a focus in 2018. At the Boards

Strategic Planning session in October 2017 the Board undertook

to proceed with the design/configuration of an off the shelf

product to replace the old outdated system following a thorough

evaluation process.

From January 2018 the team have engaged in 16 workshops to

detail existing processes, workflows, functions and calculations

in order to ensure a smooth transition.

Employers and Workers were consulted with a number of

workshops, surveys, face to face input, and prototypes.

The Board engaged KPMG in both a change management

capacity and project management capacity to assist in this

process. The design deliverable is due for completion in the

first quarter of 2018/2019. The Board will then evaluate prior to

proceeding to implementation.

Operations 23

Communications and Field

Implementation of our communication and field strategy

continued in 2017/2018.

Increased engagement with stakeholder groups including

Employer Associations and Unions was undertaken to ensure

their members were adequately informed about Portable Long

Service Leave. This involved advertising and editorial content in

member based publications, and attendance at member related

functions by Portable Long Service Leave staff.

We also began engagement with a number of Bookkeeping

Associations to ensure their members were aware of Portable

Long Service Leave. A significant number of construction

businesses utilise the services of Bookkeepers and this initiative

was well received.

A social media presence was established as an additional

medium of engagement.

During the year we continued to regularly communicate with

members:

— to keep members informed of legislative and

policy updates, scheme coverage issues, statutory

obligations, and general scheme matters

— to notify workers of approaching leave

entitlements or when they may lose service

credits due to industry absences

This was achieved by:

— issuing electronic and paper service statements,

and notifications to actively registered workers

— sending email/SMS reminders prior to the

due date for returns lodgement to assist

employers comply with scheme obligations

— Publishing news articles on our website

Our website www.portableleave.org.au was regularly accessed with approximately 25,000 unique users over the course of the year

across all States and Territories.

Users by Region

Victoria

New South Wales

Queensland

Western Australia

Northern Territory

OtherSouth Australia

9.4% 8.3% 5.1%

6.7%

65.

2%

Operations 24

Field activities have increased with a focus on the proactive activities of education and promotion rather than reactive compliance

activities. This has included:

Field Activities Financial Year

2018

Financial Year

2017

Financial Year

2016

Communication Site Visits 152 166 36

Apprentice Presentations 19 28 24

Employer Meetings 285 130 0

Worker Meetings 20 13 0

Industry Stakeholder Meetings 27 3 0

Letters to Prospective Employers 813 0 357

Regional Trips 11 2 0

Compliance Employer Audit 7 0 0

Unregistered Service Investigation 254 340 247

Outcomes Employer Registration Requests 367 322 251

Contractor Registration Requests 115 77 79

Total Activities 2059 1081 994

Additional Levies Identified $952,180 $940,000 $698,000

Interest Imposed $102,098 $46,236 $19,456

Increased presence in regional areas was a focus with 11 trips

undertaken during the year covering:

— Eyre Peninsula — Mid North

— Fleurieu Peninsula — Riverland

— Yorke Peninsula — South East

— Kangaroo Island

An internal audit program was initiated in FY2018 to check

compliance of employers with the Act. Audits are selected based

on random and targeted methodologies and check accuracy of

declared information against payroll data. The volume of audits

is scheduled to increase in FY2019.

Data matching techniques using external sources of information

has further assisted to identify possible non-compliant employers

and allow the Board to initiate communication.

An additional $1M in non-compliant levies and interest were

collected in FY2018.

During the year, the Board was respondent to a worker appeal

in the South Australia Employment Tribunal in accordance with

Section 34 of the Act. The matter was in relation to application

of the Act to the work based on coverage rules. On Friday 2

February 2018 the Tribunal upheld the Board’s decision.

Operations 25

Registrations

FY2018 saw a large increase in registered

workers (16%) and employers (4%) leading

to the highest registration count since the

inception of the Scheme at 27,815.

This increase is reflective of improved

economic conditions in parts of the South

Australian construction industry along with

improved communication and field operations

where significant effort has been applied.

Financial Year

2018

Financial Year

2017

Change Percent

Active registered workers

(Employed or less than

allowable absence)

27,815 23,882 16%

Currently employed

registered workers

21,777 17,980 21%

Registered employers 2,486 2,385 4%

Contractors / Working

Directors registered

654 681 (4)%

Age demographics remain consistent with previous years with a significant proportion of registrations

being under the age of 50 (81%).

Usage of Long Service Leave

Leave utilisation continued to decline in

FY2018 marginally from a high in FY2016 to 7%.

Usage of leave is spread broadly across age

bandings however 65% of leave utilised is

for persons under the age of 50 indicating

employees are utilising long service leave

during their working years rather than waiting

until retirement.

It is worthwhile to note however that the

utilisation rate increases with age with a

higher utilisation rate for the age brackets 50

and above.

On average 59% of employees take long

service leave whilst working in the industry.

Approximately 29% of employees take a

pro rata payment as they exit the industry

or transition into a role no longer covered by

the scheme.

Operations 26

Registrations

15,000

20,000

25,000

30,000

35,000

0.0%

4.0%

2.0%

6.0%

8.0%

10.0%

Financial year • Active registered workers (employed or less than allowable absence)

• Registered employers

• Contractors / Working Directors registered

• Leave Utilisation Rate (rhs)

200

9

2010

2011

2012

2013

2014

2015

2016

2017

2018

Dol

lars

*Utilisation rate is total long service leave claims divided by total registrations.

Financial Year 2018 Long Service Leave Registrations by Age

39%

<30

25%

30–39

17%

40–49

13%

50–59

6%

60+

Financial Year 2018 Long Service Leave Claims by Age

8%

<30

35%

30–39

22%

40–49

20%

50–59

15%

60+

Financial Year 2018 Apprentice Profile

13%

Apprentice Worker

87%

Operations 27

Long Service Leave Claims by Type

100%

90%

80%

70%

60%

50%

200

9

2010

2011

2012

2013

2014

2015

2016

2017

2018

Prop

ortio

n

Financial year • Combination state & portable • Leave taken

• Pro-Rate (Exiting Industry) • Interstate

Financial Year 2018 Utilisation by Age

10000

9000

8000

7000

6000

5000

4000

20%

15%

10%

5%

0%

Vol

ume

• Registrations • Payments / claims • Utilisation Rate (RHS)Age Band

<30 40-4930–39 50-59 60+

*Utilisation rate is total long service leave claims divided by total registrations.

Operations 28

Governance

Portable Long Service Leave is the Business Name of the

Construction Industry Long Service Leave Board. The Board is

responsible for the administration of the Construction Industry

Long Service Leave Act 1987 (the Act).

Composition

Portable Long Service Leave is the Business Name of the

Construction Industry Long Service Leave Board. The Board is

responsible for the administration of the Construction Industry

Long Service Leave Act 1987 (the Act).

Appointments

Membership of the Board is determined in accordance with

Section 7 of the Act and comprises of three members appointed

to represent the interests of employers and three members

appointed to represent the interests of workers. The Presiding

Officer is nominated by the Minister for Industrial Relations.

Governance 30

Board Meetings

During the 2017/2018 financial year the Board met on 11 occasions, excluding sub committees and working parties.

Board members Meetings available to attend Meetings attended

Ms Marie Boland Presiding Officer 11 8

Mr Aaron Cartledge SA Unions 11 6

Mr John Camillo SA Unions 11 1

Ms Erin Hennessy SA Unions 11 10

Mr Larry Moore National Electrical and

Communications Association

11 9

Ms Estha van der Linden Business SA 11 8

Mr Steve Minuzzo Master Builders Association 11 10

Deputies

Mr Derek Stapleton SA Unions 6 6

Mr Peter Bauer SA Unions 10 6

Mr John Adley SA Unions 2 1

Ms Thina Mariappan Master Builders Association 3 1

Ms Karen van Gorp Business SA 4 2

Mr Peter Salveson Master Builders Association 2 2

Board Committees

Due to its small size and frequency of meetings the Board does not have standing subcommittees. Instead the Board establish sub

committees on an as required basis in order to provide closer attention to important areas facing the organisation. In the 2017/2018

financial year the Board established the following subcommittees:

— CEO contract renewal and salary review

Governance 31

Overseas Travel

During the 2017/2018 financial year, no members of the Board engaged in overseas travel in the capacity as a member of

the Board.

Board Training & Development

During the 2017/2018 year the Board undertook the following training and development activities:

— Board induction for new Board

members and deputies

— Portable Long Service Leave National Conference

— Investment Briefings

— Asset Class Training

— JANA Investment Advisers Annual Conference

— Strategic Planning

— Individual Board member training within

policy limits or self funded including:

— University studies

— Governance and Risk Training

— Investment Trustee Training

Strategic Planning

A Strategic Planning session was undertaken in October 2017 whereby the Board reviewed its information technology

strategy and commenced towards its implementation.

Risk Management

The Board has a structured approach to Risk Management via a Risk Management Framework and Risk Register

that is reviewed regularly by an internal Risk Review Committee made up of representatives from different areas

of the organisation. The Risk Review Committee met once during the year in October 2017 and reported to the Board

in November 2017.

Annual Report

The 2016/2017 Annual Report was tabled in Parliament in accordance with the Act.

Governance 32

Actuary Report

The 2016/2017 Actuary Report was tabled in Parliament in accordance with the Act.

Board Remuneration

Board members are remunerated in accordance with Department of Premier and Cabinet (DPC)

Circular 16 – Remuneration for Government Appointed Part Time Boards and Committees.

In 2016/2017 the Board requested a remuneration review in accordance with the remuneration

framework for Government Boards and Committees.

In December 2017 the Board were advised by the Department of Premier and Cabinet that a

remuneration review had been undertaken resulting in a reclassification from Category 2, Level 3 to

Category 1, Level 6.

Financial Performance

The Board received an Unqualified Audit Report from BDO for the 2017/2018 year.

Fraud

No instances of fraud were reported or detected during the year.

Delegations

The Board maintains a schedule of financial delegations that is reviewed annually. It was last reviewed

in the June 2018 Board Meeting.

Day to day management of the Fund’s affairs and the implementation of strategy and policy are

delegated to the Chief Executive Officer and Management.

Insurance

The Board has insurance coverage through SAICORP.

Governance 33

People

— Employees as at 30th June 2018 totalled 9.64 FTE.

— This was a slight increase from the prior year mainly due

to a minor increase in hours by a part time staff member.

— During the year a minor restructure was undertaken

resulting in the rationalisation of 2 management roles into

one and expansion and minor adjustment of front line staff.

— The Board recognises and values the contribution of

its staff members ensuring transparent and equitable

remuneration, flexible working arrangements,

training and development opportunities, and input

into policies and procedures where applicable.

— The Staff code of conduct was reviewed during

the year with input from staff members.

— No Workplace Health and Safety incidents of

significance occurred during the year.

— An Employee Assistance Program was

made available throughout the year.

— Flu vaccinations were made available during

the year to those wishing to participate.

— Staff members participated in the Corporate Cup (a

program designed to improve fitness with teammates)

over a 16 week period and also hosted Australia’s Biggest

Morning Tea raising valuable funds for cancer.

— Staff members run an independent social club and

footy tips competition and have shared lunches

at periodic times throughout the year.

Field Officer

Field Officer

Business Support Officer / Executive Assistant

Business Support Officer

Customer Support Officer

Records System

Coordinator

Senior Finance Officer

Finance Officer

Board


Finance & Operations Manager

People 2014 2015 2016 2017 2018

Full time 8 8 9 8 8

Part time 5 4 3 2 2

Total 13 12 12 10 10

FTE 11.7 11 10.8 9.533 9.64

People 35

Financial Statements

STATEMENT BY THE BOARD

In the opinion of the Board:

1 (a) The accompanying Statement of Comprehensive Income gives a true and

fair view of the surplus of the Construction Industry Fund for the year ended

30th June 2018;

(b) The accompanying Statement of Financial Position gives a true and fair view of the

state of affairs of the Construction Industry Long Service Leave Board as at 30th

June 2018;

(c) The accompanying Statement of Cash Flows gives a true and fair view of cash

flows of the Construction Industry Long Service Leave Board for the year ended

30th June 2018; and

(d) The internal controls over financial reporting have been effective throughout the

reporting period.

2 At the date of this statement there are reasonable grounds to believe the Construction

Industry Long Service Leave Board can meet its debts as and when they fall due.

This statement is made in accordance with a resolution of the Board and is signed for and on

behalf of the Board.

Steve Minuzzo

Acting Presiding Officer

18th September 2018

Adam Warchol



CONSTRUCTION INDUSTRY LONG SERVICE LEAVE BOARD

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2018

Note 2018

$000’s

2017

$000’s

Revenue From Ordinary Activities

Levies 3 16,204 14,140

Realised Investment Income 3 7,847 7,327

Unrealised Investment Gain/(Loss) 3 1,837 2,507

Other 18 39

Total Income 25,906 24,013

Expenses From Ordinary Activities

Worker Payments 11 17,856 13,726

Contractor Interest 107 101

Employee Benefits Expense 14 945 960

Depreciation 7 46 62

Allowance for Doubtful Debts (Impairment Loss) 5 106 109

Administration 585 660

Total Expenses 19,645 15,618

Total Surplus / (Deficit) 6,261 8,395

The above statement should be read in conjunction with the accompanying notes.



STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2018

Note 2018

$000’s

2017

$000’s

Assets

Cash and Cash Equivalents 4 3,089 2,288

Receivables 5 3,006 2,447

Investments 6 140,575 130,701

Property, Plant & Equipment 7 147 153

Intangible Assets 8 27 -

Total Assets 146,844 135,589

Liabilities

Trade and other Payables 9 152 133

Employee Benefits 10 141 160

Worker Payments 10 109,940 105,257

Registered Contractor Contribution Fund 10 5,761 5,450

Total Liabilities 115,994 111,000

Net Assets 30,850 24,589

Equity

Accumulated Surplus / (Deficit) 30,850 24,589




STATEMENT OF CASH FLOWS


Note 2018

$000’s

Inflows

(Outflows)

2017

$000’s

Inflows

(Outflows)

Cash Flows From Operating Activities

Receipts From Levies & Operations 15,538 13,711

Payments to Workers (13,173) (13,280)

Payments to Suppliers & Employees (1,547) (1,706)

Interest Received 19 13

Net Cash Provided by / (Used In) Operating Activities 16 837 (1,262)

Cash Flows From Investing Activities

Redemption of Investments 397 1,000

Purchase of Investments (500) -

Payments from Registered Contractors Fund 97 251

Payments for Plant & Equipment (60) (97)

Proceeds from Sale of Plant & Equipment 30 13

Net Cash Provided by / (Used In) Investing Activities (36) 1,167

Net Increase / (Decrease) in Cash Held 801 (95)

Cash at the Beginning of the Year 2,288 2,383

Cash at the End of the Year 4 3,089 2,288




STATEMENT OF CHANGES IN EQUITY


Retained Earnings

$000’s

Total Equity

$000’s

Balance at 30 June 2016 16,194 16,194

Surplus for 2017 8,395 8,395

Balance at 30 June 2017 24,589 24,589

Surplus for 2018 6,261 6,261

Balance at 30 June 2018 30,850 30,850




NOTES TO THE FINANCIAL STATEMENTS


1 — Objectives of the Construction Industry Long Service Leave Board

The Construction Industry Long Service Leave Board is responsible for administering the Construction Industry Fund which controls

levies collected from employers to provide portable long service leave for employees in the construction industry.

2 — Summary of Significant Accounting Policies

The financial report is a special purpose financial report. The reporting entity is The Construction Industry Long Service Leave Board,

a statutory scheme created pursuant to the Construction Industry Long Service Leave Act, 1987. The Board operates in the State of

South Australia.

The financial statements have been prepared in accordance with the recognition and measurement requirements specified by the

Australian Accounting Standards and Interpretations, Treasurer’s Instructions and Accounting Policy Statements promulgated under the

provisions of the Public Finance and Audit Act, 1987 for a not-for-profit entity.

(a) Basis of Preparation

The Board’s Statement of Comprehensive Income, Statement of

Financial Position and Statement of Changes in Equity have been

prepared on an accruals basis and are based on historical costs

modified by the revaluation of financial instruments for which

the fair value basis of accounting has been applied.

The Cash Flow Statement has been prepared on a gross basis.

The financial report has been prepared based on a twelve

month operating cycle and presented in Australian currency and

rounded to the nearest thousand dollars ($000).

(b) Comparative Information

The presentation and classification of items in the financial

report are consistent with prior periods except where a specific

Accounting Policy Statement or Australian Accounting Standard

have required change.

The accounting policies have been consistently applied, unless

otherwise stated.


(c) Taxation

The Construction Industry Long Service Leave Board is not

subject to income tax. The Board is liable for fringe benefits tax

(FBT) and goods and services tax (GST).

Revenue, expenses and assets are recognised net of the

amount of GST except where the amount of GST incurred is not

recoverable from the Australian Taxation Office, in which case

the GST is recognised as part of the cost of acquisition of the

asset or as part of the expense item applicable. Receivables and

payables are stated with the amount of GST included.

(d) Presentation of Statement of

Financial Position on a Liquidity Basis

The Board have taken the view in complying with the requirements

of the AASBs, the treatment of worker payments as current

liabilities does not reflect the true liquidity of the entity as these

liabilities are not likely to be repaid in the next 12 months.

Accordingly, the Board has chosen to present its statement of

financial position under the liquidity presentation method (AASB

101 Presentation of Financial Statement) on the basis it presents

a more reliable and relevant view.

(e) Estimation Uncertainty

When preparing the financial statements the Board undertakes a

number of judgements, estimates and assumptions about recognition

and measurement of assets, liabilities, revenue and expenses.

The actual results may differ from the judgements, estimates and

assumptions made by management, and will seldom equal the

estimated results.

Information about significant judgements, estimates and

assumptions that have the most significant effect on recognition

and measurement of assets, liabilities, revenue and expenses is

provided below.

3 — Revenue

Revenue is measured at the fair value of the consideration received or receivable.

The levy rate prescribed in accordance with regulations under the Act for the Construction Industry Fund was 2.15% of total remuneration

paid to employees. Levies are recognised when returns are received with an accrual to recognise levies received from employers after

the end of the reporting period but relating to the May/June billing cycle. The service related to these contributions are included in the

actuarial assessment of worker payment liabilities.

Realised and unrealised gains and losses arising from changes in the fair value of financial assets designated ‘at fair value through profit

or loss’ are included in revenue in the period in which they arise.

Interest is included in revenue in the period in which it is earned.


4 — Cash and Cash Equivalents

Cash and cash equivalents recorded in the Statement of Financial Position and Statement of Cash Flows include cash on hand and

demand deposits. Cash is measured at nominal value. For the purpose of the Statement of Cash Flows, cash includes all bank balances.

Cash at the end of the reporting period as shown in the Statement of Cash Flows is reconciled to the related items in the Statement of

Financial Position as follows:

2018

$000’s

2017

$000’s

Cash at Bank and in Hand 3,089 2,288

Total Cash and Cash Equivalents 3,089 2,288


5 — Receivables

Receivables include amounts receivable from employer debtors (levies) less an allowance for doubtful debts, accruals, sundry debtors

and prepayments.

Employer debtors arise in the normal course of collecting levies from employers and are generally receivable 21 days following the end

of the two monthly billing cycle. The allowance for doubtful debts is recognised when there is objective evidence (calculated on past

experience and current and expected changes in credit rating) that a receivable is impaired.

An allowance for doubtful debts (impairment loss) has been recognised in expenses for specific debtors and debtors assessed on a

collective basis for which such evidence exists.

Accrued contributions are levies received from employers after the end of the reporting period but relating to the May/June billing cycle.

The service related to these contributions are included in the actuarial assessment of worker payment liabilities.

2018

$000’s

2017

$000’s

Current

Employer Debtors 628 490

Allowance for Doubtful Debts (136) (112)

492 378

Accrued Contributions 2,077 2,011

Sundry Debtors & Prepayments 437 58

Total Receivables 3,006 2,447

Movements in the allowance for doubtful debts (impairment loss) between the beginning and the end of the financial year were as follows:

Carrying amount at the Beginning of the Year 112 70

Amounts Written Off (82) (67)

Increase/(Decrease) in Allowance Recognised in Profit or Loss 106 109

Carrying Amount at the End of the Year 136 112

Credit Risk

Receivables are due from employers in the construction industry. Other than as recognised in the allowance for doubtful debts, it is not

anticipated that counterparties will fail to discharge their obligations. The carrying amount of receivables approximates net fair value

due to being receivable on demand. There is no concentration of credit risk.


6 — Investments

Investments are designated as financial assets at fair value through profit or loss. The investments are managed funds, classified as

financial assets held for trading as they are part of a portfolio of identified instruments that are managed together in accordance with a

documented investment strategy.

Financial instruments are recognised when the entity becomes a party to contractual provisions of the instrument. Trade date accounting

is adopted for financial assets and established by marketplace convention. Financial instruments are initially measured at fair value.

Subsequent to initial recognition, the fair value of financial assets at fair value through profit or loss is determined as the amount for which

an asset could be exchanged, between knowledgeable, willing parties in an arm’s length transaction at the quoted market price on an

active market.

The fair value of a portfolio of financial instruments is the product of the number of units of the instrument and its quoted market prices.

Realised and unrealised gains and losses arising from changes in the fair value of financial assets designated ‘at fair value through profit

or loss’ are included in the Statement of Comprehensive Income in the period in which they arise.

At the end of the reporting period, the Board assesses whether there is objective evidence that a financial instrument has been impaired.

There were no indications of impairment of financial assets at 30 June 2018.

2018

$000’s

2017

$000’s

Term Deposits 4,196 3,589

Managed Funds 136,379 127,112

Total Investments 140,575 130,701


7 — Property, Plant & Equipment

Property, plant and equipment are measured at cost less depreciation and impairment losses. The residual values, useful lives and

depreciation/amortisation methods of all major assets held by the Board are reviewed and adjusted if appropriate on an annual basis.

Leasehold improvements are amortised over their estimated useful life or the unexpired portion of the relevant lease, whichever is the shorter.

Depreciation of assets is determined as follows:

Class of Asset Depreciation Basis Depreciation Rate

Plant & Equipment Diminishing Value 40%

Motor Vehicles Diminishing Value 22.5%

Furniture & Fittings Diminishing Value 13.5%

Leasehold Improvements Prime Cost 20%

All items of property, plant and equipment are tested for indications of impairment at the end of the reporting period. An asset’s carrying

amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These gains or losses are included in the

Statement of Comprehensive Income.

2018

$000’s

2017

$000’s

Leasehold Improvements at Cost 46 46

Less Accumulated Depreciation (16) (7)

30 39

Office Equipment at Cost 169 164


17 22

Office Furniture & Fittings at Cost 27 27


17 20

Motor Vehicles at Cost 120 129


83 72

Total Plant & Equipment at Cost 362 366


Total Plant & Equipment 147 153


Movements in the carrying amounts of each class of plant and equipment between the beginning and the end of the financial year were as follows:

Leasehold

Improvements

$000’s

Office

Equipment

$000’s

Office

Furniture

$000’s

Motor

Vehicles

$000’s

Total

$000’s

2017

Balance at Beginning of Year 42 9 86 137

Additions 46 7 20 24 97

Disposals — (3) (5) (11) (19)

Depreciation Expense (7) (24) (4) (27) (62)

Balance at End of Year 39 22 20 72 153

2018

Balance at Beginning of Year 39 22 20 72 153

Additions — 8 — 52 60

Disposals — (2) — (18) (20)

Depreciation Expense (9) (11) (3) (23) (46)

Balance at End of Year 30 17 17 83 147

Impairment

There were no indications of impairment of property, plant or equipment at 30 June 2018.


8 — Intangible Assets

An intangible asset is an identifiable non-monetary asset without physical substance. Intangible assets includes the development plan

and design for the production of a new information system, and is currently work in progress. The Board is contractually committed to

the remaining design for $33,000 (2017: Nil). An intangible asset shall be recognised if, and only if it is probable that the expected future

economic benefits that are attributable to the asset will flow to the entity; and the cost of the asset can be measured reliably. Intangible

assets are initially recognised at cost and subsequently recognised at cost less amortisation and any impairment. Amortisation will

commence when the current work in progress is complete in accordance with the contract.

Amortisation is calculated on a straight line basis over the estimated useful life of the intangible asset. There were no indications of

impairment of intangible assets at 30 June 2018.

2018

$000’s

2017

$000’s

Work in Progress - Software Development 27 —

Total Intangible Assets 27 —

9 — Trade and Other Payables

Payables include trade creditors, worker payments and accruals, including goods and services received prior to the end of the reporting

period that are unpaid at the end of the period. Payables are measured at their nominal value and are normally settled within the terms

of payment stipulated by the supplier.

2018

$000’s

2017

$000’s

Trade Creditors 44 34

Sundry and Other Creditors 108 99

Total Payables 152 133


10 — Provisions

Provisions are recognised when the Board has a legal or

constructive obligation, as a result of past events, for which it

is probable that an outflow of economic benefits will result and

that outflow can be reliably measured. Provisions are measured

using the best estimate of amounts required to settle the

obligation at the end of the financial year.

Provision is made for amounts due to construction industry

employees under the current legislation based on an annual

independent actuarial assessment of worker payment liabilities.

The actuarial assessment is based on information as at 30

June 2018 and uses a “best estimate” method incorporating

assumptions on expected actual investment returns, wage

inflation, exit rates, take up of long service leave whilst in

service, future service credits and an allowance for the operating

expenses of the fund.

Registered contractor funds are voluntary contributions by

registered contractors and working directors to fund their

own long service leave and include accrued interest that is

credited monthly.

Employee benefits accrue for employees as a result of services

provided up to the end of the financial year that remain unpaid,

and include annual and long service leave entitlements plus an

allowance for on-costs.

Annual leave liability is measured at the undiscounted amount

expected to be settled within 12 months.

The liability for long service leave is measured as the present

value of expected future payments to be made and based on

assumptions including expected future salary and on-costs,

experience of employee departures and periods of service.

Any re-measurements arising for changes in assumptions

are recognised in profit or loss in the period in which the

changes occur.

The unconditional portion of the long service leave provision is

expected to be settled within 12 months as the Board does not

have an unconditional right to defer settlement of the liability for

at least 12 months after reporting date. The unconditional portion

of long service leave relates to an unconditional legal entitlement

to payment arising after 7 years of service and measured at

nominal value.

The liability for long service leave for employees who do not

have an unconditional right to payment has been measured at

the present value of the future cash outflows to be made for

these benefits accrued to the reporting date expected to be

settled after 12 months.

No provision has been made for personal leave as all personal

leave is non-vesting.


2018

$000’s

2017

$000’s

Worker Payments

Expected to be settled within 12 months 14,500 14,000

Expected to be settled after 12 months 95,440 91,257

Total Worker Provisions 109,940 105,257

Registered Contractor Contribution Fund

Expected to be settled within 12 months 500 500

Expected to be settled after 12 months 5,261 4,950

Total Registered Contractor Provisions 5,761 5,450

Employee Benefits

Annual Leave expected to be settled within 12 months 49 41

Long Service Leave expected to be settled within 12 months 71 106

Long Service Leave expected to be settled after 12 months 21 13

Total Employee Provisions 141 160

Movements in the carrying amounts of each provision between the beginning and the end of the financial year were as follows:

Annual Leave

$000’s

Long Service Leave

$000’s

Worker Payments

$000’s

2017

Carrying Amount at Beginning of Year 52 131 104,811

Provision Used (72) (21) (13,280)

Additional Provisions Recognised 61 9 13,726

Carrying Amount at End of Year 41 119 105,257

2018

Carrying Amount at Beginning of Year 41 119 105,257

Provision Used (50) (39) 13,173

Additional Provisions Recognised 58 12 17,856

Carrying Amount at End of Year 49 92 109,940


11 — Worker Payments

2018

$000’s

2017

$000’s

Actuarial Assessment of 30 June Liability 109,940 105,257

Worker Payments during the Year 13,173 13,280

Actuarial Assessment in Previous Year (105,257) (104,811)

Worker Payments Expense 17,856 13,726

12 — Auditor’s Remuneration

2018

$000’s

2017

$000’s

Remuneration of the Auditor of the Board for Auditing the Financial Statements 20 20

20 20

13 — Operating Lease Commitments

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in

the period in which they are incurred.

Commitments in relation to operating leases contracted for at the reporting date but not recognised as liabilities are payable as follows:

2018

$000’s

2017

$000’s

Payable - Minimum Lease Payments:

Not Later than 12 Months 98 77

Between 12 Months and 5 Years 216 314

Greater than 5 Years — —

Total 314 391

The Board’s operating leases are for office accommodation.


14 — Employee Benefits Expense

2018

$000’s

2017

$000’s

Salaries and Wages 782 829

Long Service Leave 12 9

Annual Leave 14 (11)

Employment on-costs - Superannuation 68 76

Employment on-costs - Other 35 40

Board Fees 34 17

Total Employee Benefits Expense 945 960

The number of employees at 30 June 2018 was 10 (2017: 10).


15 — Board Members Remuneration

Total income received, or due and receivable, by Board Members or their employers was $34,000 (2016: $17,000).

All other transactions with Board Member related parties are on normal commercial terms and conditions no more favourable than

those available to other parties.

The number of Board Members whose income from the entity falls within the following band is:

Band 2018

No. Of Members/Deputies

2017

No. Of Members/Deputies

$0 to $11,999 13 13

The names of Board/Deputy Members who have held office during the financial year are:

Ms Marie Boland

Ms Estha van der Linden Ms Karen Van Gorp (Deputy)

Mr Steven Minuzzo Mr Peter Salveson (Deputy)

Mr Laurence Moore Ms Thina Mariappan (Deputy)

Mr Aaron Cartledge Mr Derek Stapleton (Deputy)

Ms Erin Hennessy Mr John Adley (Deputy)

Mr John Camillo Mr Peter Bauer (Deputy)

The Board was appointed by the Governor on 27 June 2017 effective 1 July 2017 for a period of 5 years.


16 — Reconciliation of Net Cash Provided

by Operating Activities to Operating Surplus

2018

$000’s

2017

$000’s

Operating Surplus / (Deficit) 6,261 8,395

Non Cash Flow Items in Operating Surplus / (Deficit):

Depreciation 46 62

Loss /(Gain) on Sale of Plant & Equipment (11) 6

Movement in Provisions 4,707 488

Registered Contractors' Interest 107 101

Investment / (Gain) Loss (9,664) (9,821)

Movement in Assets and Liabilities

Increase / (Decrease) in Payables 2 (98)

(Increase) / Decrease in Receivables (611) (395)

Net Cash Provided By Operating Activities 837 (1,262)


16 — Financial Risk Management

The Board faces a number of risks in performing its statutory

functions. The Board has implemented policies and processes

to manage risk across all sectors of its operations.

The Board invests in financial assets for the purpose of obtaining

income which is critical in the context of increasing scheme

liability and the levy rate.

The investments of the Fund are managed by JANA Investment

Advisors (and include Australian and global equities, fixed

interest, property, fixed interest securities). As a manager

of managers, JANA is required to invest the funds under

management in accordance with an investment mandate

approved by the Board.

The Fund’s investments are subject to interest rate risks and

the return on investments will fluctuate in accordance with

movements in the market interest rate.

The inclusion of global equities in the investment portfolio

subjects the Board to currency risk. The Board has determined

that a percentage of this investment be currency hedged. This

ensures risks associated with currency exposure are minimised.

An actuarial review of the state and sufficiency of the Fund is

conducted annually. This review confirms the current position

and predicts whether income (levy and investment) will provide

sufficient monetary reserves to meet future liabilities.

(a) Interest Rate Risk Exposure

The Board manages its exposure to interest rate fluctuations

through a formal set of policies and procedures approved

by the Board.

The Board does not engage in any significant transactions

that are speculative in nature.

The Board has exposures to interest rate risks on financial

assets. The Board has cash at bank as at 30 June 2018

of $3,089,000 (2017: $2,288,000), which bears variable

interest rates. The effective weighted average interest rate

as at 30 June 2018 was 0.5% (2017: 0.7%).

The Board’s only exposure to interest rate risk on financial

liabilities is in relation to the Registered Contractor

Contribution Fund as at 30 June 2018 of $5,761,000 (2017:

$5,450,000), which bears variable interest rates. The

interest rate applicable to the year ending 30 June 2019 is

2.3% (2018: 2.0%).

(b) Credit Risk Exposures

The maximum credit risk exposure of financial assets of

the Board is represented by the carrying amount of assets

recognised in the Statement of Financial Position, net of

any allowances for impairment losses.

Apart from the foregoing the Board had no significant

concentrations of credit risk with any single counterparty or

group of counterparties. Operational practices ensure trans-

actions occur with clients with a strong capacity to meet their

financial commitments.


Independent Auditor’s Report

BDO Centre Level 7, 420 King William Street Adelaide SA 5000 GPO Box 2018 Adelaide SA 5001 Australia

Tel: +61 8 7324 6000 Fax: +61 8 7324 6111 www.bdo.com.au

BDO Audit (SA) Pty Ltd ABN 33 161 379 086 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (SA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees).

INDEPENDENT AUDITOR'S REPORT

TO THE PRESIDING OFFICER OF THE CONSTRUCTION INDUSTRY LONG SERVICE LEAVE BOARD

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of Construction Industry Long Service Leave Board (the Entity), which comprises the statement of financial position as at 30 June 2018, the statement of comprehensive income the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies, and the Statement by the Board.

In our opinion the accompanying financial report presents fairly, in all material respects, the financial position of the Entity as at 30 June 2018 and of its financial performance and its cash flows for the year then ended in accordance with the basis of accounting described in Note 2.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Entity in accordance with ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of matter – Basis of accounting

We draw attention to Note 2 to the financial report, which describes the basis of accounting. The financial report has been prepared to assist the Entity to meet the requirements of the Public Finance and Audit Act 1987 pursuant to the Construction Industry Long Service Leave Act 1987. As a result, the financial report may not be suitable for another purpose. Our opinion is not modified in respect of this matter.

Responsibilities of Board Members for the Financial Report

Board Members is responsible for the preparation and fair presentation of the financial report, and have determined that the basis of preparation described in Note 2 is appropriate to meet the requirements of the Public Finance and Audit Act 1987 pursuant to the Construction Industry Long Service Leave Act 1987 and for such internal control as Board Members determines is necessary to enable the preparation and fair presentation of a financial report that is free from material misstatement, whether due to fraud or error.


In preparing the financial report, Board Members are responsible for assessing the Entity’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless Board Members either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Entity’s financial reporting process.

Auditor’s responsibilities for the audit of the Financial Report

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

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: http://www.auasb.gov.au/auditors_responsibilities/ar4.pdf

This description forms part of our auditor’s report.

BDO Audit (SA) Pty Ltd

Andrew Tickle Director

Adelaide, 18 September 2018


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