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National Water Commission Reports 17 December 2004 to 30 June 2005


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Australian G overnm ent

National Water Commission

2004- '5 Annual Report National Water Commission

Australian G overnm ent

National Water Commission

2 0 0 4 -° 5 Annual Report National Water Commission

o

2004-05 Annual Report - National Water Commission i

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© Commonwealth of Australia 2005

ISSN: 1832-9136

ISBN: 1 921107 03 0

© Commonwealth of Australia 2005

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ii 2 0 04-0 5 Annual Report - National Water Commission

Australian Government

National Water Commission

The Honourable John Howard MP Prime Minister Parliament House CANBERRA ACT 2600

Dear Prime Minister

I have pleasure in providing you with the first annual report of the National Water Commission for the year ended 30 June 2005.

This report is provided in accordance with section 45 of the National Water Commission Act 2004. It has been prepared in accordance with the guidelines issued by the Department of the Prime Minister and Cabinet.

Section 45 of the National Water Commission Act 2004 requires that within 60 days after the end of each year ending on 30 June, the Commission provide you with a report on its operations during that year, for presentation to Parliament. This section also requires you to provide a copy of the report to the relevant Minister for each of the parties to the National Water Initiative at the same time as the report is presented to Parliament.

The Requirements for Annual Reports, approved by the Joint Committee of Public Accounts and Audit, requires a copy of the report to be laid before each House of Parliament on or before 31 October in the year in which the report is given.

In presenting this report to you, I would like to express my appreciation to fellow commissioners and staff of the National Water Commission for the invaluable contribution they have made in establishing and making operational our new agency.

Yours sincerely,

Ken Matthews Chairman / Chief Executive Officer

29 August 2005

95 N o rth b o u rn e Avenue CANBERRA ACT 2601 · Telephone: 02 6102 6000 * Facsim ile: 02 6102 6006 Em ail: Ken.m atthews@ nwc.gov.au

2004-0 5 Annual Report - National Water Commission

FOR MORE INFORMATION ABOUT THIS REPORT

Comments on and queries about this report may be directed to:

The Manager, Communications National Water Commission 95 Northbourne Avenue, CANBERRA ACT 2600 Tel: 02 6102 6023 Fax: 02 6102 6011 Email: enquiries@nwc.gov.au

INTERNET ACCESS

A full copy of this report ‘as printed’ is available at www.nwc.gov.au/publications.cfm.

An Internet-friendly version is also available.

The National Water Commission home page is at www.nwc.gov.au.

COMMISSIONERS

To contact the Commissioners of the National Water Commission:

Commission Administration Tel: 02 6102 6002 Fax: 02 6102 6006 Email: enquiries@nwc.gov.au

iv 20 04-0 5 Annual Report - National Water Commission

TABLE OF CONTENTS Transmittal le tte r............... ............., .......... .ill

Guide to the report..................................... ......... ....... 2

SECTION 1 - THE CONTEXT FOR THE COMMISSION 3

Foreword by the Chief Executive Officer and Chairman 4

Droughts and flooding rains - the need for water reform 9

SECTION 2 - AGENCY OVERVIEW ......15

SECTION 3 - PERFORMANCE REVIEW 23

SEC TIO N 4 -CO RPO RATE GOVERNANCE 29

SECTION 5 - FINANCIAL STATEMENTS 43

Appendixes ............. 75

Appendix A: Resource.tables ........................ _.. . . ................................ 76

Glossary.................. ...................................... .......................... 77

Compliance Index................................................ ........ 78

Index.................. 79

20 04-0 5 Annual Report - National Water Commission

GUIDE TO THE REPORT This is the first annual report of the National Water Commission (the Commission), It is provided in accordance with the provisions of section 45 of the National Water Commission Act 2004 and section 70 of the Public Service Act 1999.

The report has been constructed in five sections plus appendixes.

SECTION 1 This section describes the context in which the Commission operates. This is the Commission’s first report as a new agency and therefore two parts are provided under this section.

The Foreword by the Chief Executive Officer and Chairman provides an overview of the Commission’s early months of operation and future directions.

Droughts and flooding rains - the need for water reform describes the background to water reform in Australia leading to the establishment of the Commission as a result of a 2004 Council of Australian Government agreement — the Intergovernmental Agreement on a National Water Initiative.

SECTION 2 This section describes the Commission. It includes an overview outlining the Commission’s role, responsibilities, organisational structure and outcome-output structure.

SECTION 3 This section details performance of the Commission against the approved outcome-output requirements.

SECTION 4 This section describes the corporate governance arrangements that have been developed and implemented in the Commission in its first six months of operation.

SECTION 5 This section presents the Commission’s audited financial statements for the period 17 December 2004 to 30 June 2005.

APPENDIXES The appendixes at the back of the report provide additional information on Commission activities required for reporting.

2 2 0 04-0 5 Annua! Report - National Water Commission

SECTION 1 THE CONTEXT FOR THE COMMISSION Foreword by the Chief Executive Officer and Chairman

Droughts and flooding rains - the need for water reform

FOREWORD BY THE CHIEF EXECUTIVE OFFICER AND CHAIRMAN This is the first annual report of Australia’s National Water Commission (the

Commission). It covers the formation of the Commission, its first months of operations, its challenges, early achievements, and future aspirations.

It tells the story of a new statutory authority created this year by the Australian Government, following the signing last year of an intergovernmental agreement on a

blueprint for better water management - the National Water Initiative (NWI).

The Commission’s role is to help lead the way in meeting one of the country's greatest environmental challenges and largest reform agendas — water.

Key events in the establishment of the Commission are at Figure 1.1.

Australia is the driest inhabited continent on Earth. The Commission’s creation is another step towards Australia using water resources more sustainably and profitably for the future. Fittingly, the Commission held its first meeting on World Water Day and the Prime Minister, who has portfolio responsibility for the

Commission, attended part of that meeting.

Water is a high priority for all governments in Australia. It underpins Australia’s economic growth and is a resource Australia must manage well to succeed socially and

environmentally as a nation. By signing the NWI in June 2004, the Council of Australian Governments (COAG) endorsed an historic blueprint for improving the management of Australia's water resources over the next 10 years.

Figure 1.1. Key events in the establishment of the National Water Commission.

25 June 2004 The Intergovernmental Agreement on a National Water Initiative (NWI) is signed by the

Commonwealth and all states and territories with the exception of Western Australia

and Tasmania at the Council of Australian Governments meeting.

12 September 2004 The Prime Minister announces $2 billion investment in water initiatives, later called the

Australian Government Water Fund.

24 October 2004 The National Water Commission Chief Executive Officer is announced.

17 December 2004 The National Water Commission A c t 2 0 0 4 receives Royal Assent.

15 February 2005 The Commission becomes a Prescribed Agency under Financial Management

Accountability A c t 1997.

10 March 2005 The Chair and commissioners are announced.

22 March 2005 Commissioners hold their inaugural meeting in Canberra on World Water Day.

4 2 0 04-0 5 Annual Report - National Water Commission

The NWI is a comprehensive agreement aimed at, among other things:

• expanding water markets for greater permanent trade in water

• promoting more flexible and profitable water use

• increasing confidence for those investing in the water industry

• improving water planning and accounting

• improving the way water is allocated, used and managed for environmental outcomes, and

• improving the efficient management of water in urban environments.

To support implementation of the NWI the Australian Government has provided $2 billion through the Australian Government Water Fund. This Fund is to be used to invest in water infrastructure and improved management and understanding of Australia’s water resources.

WHO WE ARE AND WHAT WE DO The Commission is an independent statutory agency reporting directly to the Prime Minister. It was formed as a result of the NWI

and established through the National Water Commission Act 2004.

The full responsibilities of the Commission are set out under the National Water Commission Act 2004 and include:

• advising the Prime Minister and state and territory governments on the progress of the NWI, and on national water issues, and

• advising the Prime Minister on financial assistance to be provided from two programmes under the Australian Government Water Fund — the Water

Smart Australia and Raising National Water Standards programmes.

Clarity about the Commission’s role is essential to its success - including the things that are not within the Commission’s area of responsibility. Thus, the Commission is not charged with taking over or duplicating the work of the state and territory water agencies who are the nation’s chief custodians and

managers of water. Rather, the Commission is a strategic body that works across all boundaries to spearhead national change.

In undertaking its role, the Commission seeks to build and maintain collaborative and collegiate relationships with stakeholders. The Commission aims to be rigorous and

transparent in its dealings and ensure that its decisions and recommendations to government and COAG are based on sound evidence and analysis.

These aspirations have been encapsulated as a values statement. The values provide guidance about the Commission's preferred way of working, developing stakeholder

relationships and dealing with colleagues. They are expressed in the following statements:

• In doing our work we will demonstrate rigour, transparency, accountability and decisiveness in the delivery of our responsibilities.

• We strive to develop constructive, engaged and collaborative relationships with our stakeholders.

• We aim to develop a decent and motivating workplace for our staff members. We will work in a collegiate manner and be supportive and inclusive of all members of the Commission.

To give practical effect to the values, the Commission has also described how they can be expressed in specific behaviours in the workplace as detailed in Figure 4.2.

20 04-0 5 Annual Report - National Water Commission 5

SETTING UP A NEW ORGANISATION The Commission was established administratively in October 2004 in advance

of its founding legislation. Initially, it had three employees, resided in borrowed premises within its parent portfolio department — the Department of the Prime Minister and Cabinet — and relied entirely on its parent department's financial, management and other support systems.

By June 2005, seven statutory commissioners and 29 staff had been appointed; foundation governance and business systems had been implemented; new premises had been leased; a distinctive organisational identity was emerging; guidelines on funding programmes and

implementation plans had been produced and the organisation was beginning its contribution towards water reform in Australia.

As a new agency, the Commission was fortunate to start with ‘a blank sheet of paper'. It was not created by amalgamation of pre-existing elements and staff from

other agencies through administrative reorganisation. This presented the Commission with important opportunities to design the agency according to its specific business needs and objectives.

The Commission was free to design its processes and systems, build its culture, hand-pick its staff, and develop terms and conditions of employment tailored to its circumstances and needs.

Nevertheless, as a mainstream agency within the Australian Public Service, the Commission needed to develop the full spectrum of management systems, procedures and accountability measures

required for sound public sector governance and accountability.

Shortly after their appointments, National Water Commissioners gathered in Canberra on World Water Day for their first

meeting. Pictured from left, Mr David Trebeck, Prof Peter Cullen, Mr Peter Corish, Dr John Radcliffe, Ms Chloe Munro,

Dr Wally Cox and Chairman Mr Ken Matthews.

6 2 0 0 4 -0 5 Annual Report - National Water Commission

The Commission identified and addressed eight key steps in its establishment as a new APS agency. These are set out below and described in more detail at Figure 4.8:

1. understand the context in which the agency is to operate

2. understand the authorising environment, including relevant legislation, government directions and expectations

3. establish sound relationships with critical stakeholders

4. decide on the right business model and structure

5. define a corporate identity, values, and culture to characterise the agency

6. establish operational capacity, including facilities, business systems, staff, financial and physical resources

7. actively manage and review implementation, and

8. maintain momentum.

The Commission's external success in the years ahead will be determined by the success of its internal set-up processes in the past six months. Given progress so far, I am confident there are reasons to be optimistic.

KEY ACHIEVEMENTS The Commission formally became operational only in March 2005 when the seven commissioners came together for their first

meeting. In the three months since then, significant progress has been made on implementing actions specified in the NWI and by the Australian Government.

For example:

• The 2005 National Competition Policy water reform assessment framework was developed.

• Guidelines for preparation of NWI implementation plans were issued.

• Guidelines for the Water Smart Australia Programme were developed and implemented, with a call for applications concluding at 30 June 2005.

• The Prime Minister announced seven major projects to be funded under the Australian Government Water Fund — three in Queensland, one in New South Wales and three in Victoria.

• Three Commission meetings were held in the period between March and the end of June 2005. The first meeting was held in Canberra. Subsequent meetings were

held in South Australia and Queensland. The Commission intends to hold meetings in different locations throughout the country to ensure that it is accessible and understands the local circumstances affecting water management across Australia.

WHAT DOES THE FUTURE HOLD? In the year ahead, the Commission will be focusing on key streams of activity including:

• assisting jurisdictions with the development of implementation plans as required by the NWI and accrediting those plans

• undertaking the 2005 National Competition Policy assessment of state and territory progress in implementing water reforms

• developing a baseline assessment of Australia's water resource and governance arrangements as required by the NWI

• assessing project proposals which come forward under the Australian Government’s Water Smart Australia Programme, and

• finalising an investment framework and delivery arrangements for the Australian Government’s Raising National Water Standards Programme.

Over the next three years, the Commission will continue to progress the country’s water agenda and intends to press hard to maintain the momentum on areas critical to reform, including water accounting and

measurement, water access entitlements, water trading, ground water management, and urban water reform.

Collaboration with state and territory governments, local government, the private sector, the research community and other players in the water sector within Australia is essential if the Commission is to succeed in its work.

20Q4--05 Annual Report - National Water Commission 7

Formation of the Commission is an historic initiative at an exciting time for water reform in Australia. Improved water management is vital for Australia’s future. The Commission

has a tremendous opportunity to make a difference for the better. There is enormous goodwill towards water reform as a public policy issue from all levels of government and the community at large.

Finally, may I take this opportunity to thank every staff member of the Commission for their commitment, professionalism and hard work in our first months together. Australia is well served by such a group.

I also want to thank my fellow commissioners. All are people of distinction who have a strong personal commitment to better water management in Australia.

Ken Matthews Chief Executive Officer and Chairman

8 2004-0 5 Annual Report - National Water Commission

DROUGHTS AND FLOODING RAINS - THE NEED FOR WATER REFORM Water is essential to life. We drink it, grow food with it and need it to remain healthy.

It is infused throughout our culture and identity — even our language is bathed in it.

Water touches on Australia’s economic and social health and well-being and is part of our nationhood. In our early years, our waterways were important for transport. Some could argue that without our major river systems we could not have made so much progress on inland settlement — and even terms like

‘droughts and flooding rains’ are part and parcel of describing life in Australia.

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For a long time people seemed to think that lack of water was the driving force behind the need for water reform but we have since come to understand that it is the variability

of our climate and water supplies that is also a major challenge we need to address. The possible impacts of climate change coupled with continuing growth in demand

for water are likely to place increasing pressures on the sustainability of our catchments.

Productively managing our water resources is essential to business growth, regional development, and individual survival. The IP way Australia uses its water resources into I the 21st Century1 will determine the country’s future.

f There has also been growing recognition 5 that future productive use of Australia's | water resources is bound up with the 0 environmental health of the ecosystems | they sustain. Australia has made, and is still

1 making, the shift from resource exploitation ;2 to resource management. This is more than

S- Sheep drink from an artesian bore on Cambridge Downs Station,

i Queensland, in 1894. Great Artesian Basin bores allowed a major part of

| arid Australia to be turned into productive grazing country. Planners have

“ realised the need to carefully manage this precious resource for the future.

Water distribution has seen many changes

since European settlement. In Sydney, water

from Busby’s Bore, was accessed by pumps

such as this one pictured here in the 1930s.

Busby’s bore was the first engineered water

scheme in Australia. It was built by convicts

in the 1820s and piped water from a nearby

swamp (now Centennial Park) through 4km

of tunnels to the Sydney settlement in the

1800s. On its completion it had the capacity

to supply Sydney’s population of 20 000

people with up to 1.5 million litres of water

each day. It was decommissioned in the

1890s after increasing pollution, but was

reconnected to Sydney’s main sewerage

network in the 1950s.

2 0 0 4 -0 5 Annual Report - National Water Commission 9

just conserving water — it is about seeing the water resource as including environmental values.

In practice, this has meant a greater focus on ecological ‘assets' of water systems (such as wetlands), better management of the interconnection between surface and groundwater, and taking account of the impact of stream flows affected by extraction on, for example, the biodiversity in river systems.

Under Australia’s system of federal government the responsibility for managing water resources lies with state and territory governments.

Under this arrangement there has been a tendency for state and territory governments to operate independently, controlling and managing the water resources within their own jurisdictions. Water was extracted and used to support state industry and rural producers with little consideration of impacts on other users downstream or the environment. Water flow, sustainability and water quality issues were not considered as a national issue — problems with water quality or quantity were inherited by ‘downstream’ users and were seen as the responsibility of the receiving state government to address.

Since Federation in 1901, the Australian Government's role has been to provide a national overview of how best to manage and use Australia’s water resources. This has not always been an easy role. A Royal Commission in 1902 to decide the future of the Murray River, highlighted differences between the interests of Victoria and New South Wales seeking irrigation development, and South Australia seeking to use the river for navigation. Two key principles were established by the Royal Commission, namely that:

1. the waters of the Murray must be divided proportionally between the three riparian states, and

2. the whole river must be treated as a unit under joint management of the three states.

Ongoing disagreements between the states led to the development and implementation of the River Murray Waters Agreement of 1914. This agreement established the co­ operative framework to manage the resource

and to protect state rights. The Australian Government provided funding which encouraged state agreement. The Australian Government contributed one million pounds, roughly a quarter of the costs of a series of works that would provide for Irrigation in all states yet maintain easy navigation of the river. This agreement also established the River Murray Commission.

The Australian Government also invested in major water infrastructure projects, including, for example, the Snowy Mountains Scheme. Prior to the development of the Scheme, New South Wales and Victoria had both seen potential for the snow-melt waters of the Snowy. New South Wales saw it as a means of supplementing inland rivers, supplying the rapidly growing Sydney region, developing hydro-electric power and increasing agricultural production. Victoria also saw the potential of power generation

and irrigation in the Murray Valley. The Australian Government, seeing the national implications of any proposal, brought the parties together to discuss the issue and ultimately established the Commonwealth and States Snowy River Committee. The recommendations of this Committee led the Federal Parliament to pass the Snowy Mountains Hydro-electric Power Act 1949. The Scheme now provides a reliable supply of water west of the Great Dividing Range and assists in underwriting the production of $8.5 billion of irrigated agricultural products in the Murray-Darling Basin each year.

Since the 1980s, water availability, water quality and water management began to emerge as significant national issues. There was recognition that our water resources were becoming scarcer; many of our rivers polluted and flowing intermittently; and that our native flora and fauna were being impacted by changes to natural water levels and flows. Alongside these issues, the demands for water from urban, rural and industrial users were increasing every year.

To sustain Australia’s standard of living, maintain economic growth and ensure that Australians not only had water to drink but that our rivers and water systems were environmentally sustainable, we had to change the way we understood, used and managed our water resources. We could not continue with fragmented and parochial water management practices.

10 2 0 04-0 5 Annual Report - National Water Commission

The time for national and collaborative water reform had arrived.

NATIONAL WATER REFORM The current programme of national water reform began in 1994. It was then that the Council of Australian Governments (COAG) agreed on a strategic water management framework aimed at developing a more efficient and sustainable water industry.

The 1994 framework addressed:

• pricing reform and cost-recovery

• the elimination or reduction of cross­ subsidies

• clarification of property rights

• allocation of water to the environment

• adoption of water trading arrangements, and

• public consultation and participation.

In the 10 years since then, all Australian governments have separately, and in partnership, grappled with these issues and made substantial improvements in the way water is priced and managed.

Policy and institutional settings are now very different from those in place in 1994 and a solid programme of institutional and legislative changes has been introduced.

The way Australia treats its water is changing. In Adelaide,

a Reclaimed Water Reticulation Scheme has been

established to service a new suburb at Mawson Lakes.

National Water Commissioners toured the site in May as

part of their com m itm ent to look at innovative approaches

in addressing water issues.

Since 1994, most jurisdictions or regional water catchment authorities have embarked on a significant programme of reforms to their water management regimes, separating

water access entitlements from land titles, separating the functions of water delivery from that of regulation, and making explicit provision for environmental water.

While substantial progress was made, there was still much to be done to address the still critical problems of water shortage, water quality and failing water health. With growing

knowledge and understanding of water issues, it was clear that more action was required.

WHY CONTINUE WITH NATIONAL WATER REFORM? There are many reasons for continuing to push ahead with water reform. These include:

• the urgent need to address the cumulative adverse environmental impacts which are the legacy of poor water management systems

• a heightened understanding of the impact of land use change on water resource allocation, use and quality

• a more holistic view of the interaction between economic, social and environmental dimensions of water use

• steady increases in irrigated agriculture and increased demands for environmental water

• improving scientific understanding of surface and groundwater systems

• improving certainty in water use entitlements to underpin existing and new investment

• disparate progress in water reform across the states and territories, and intractable differences between states and territories

• growing urban water demand

• preventing further decline in the health of our rivers, and

• an opportunity to capitalise on new techniques and technologies to improve the efficiency and effectiveness of water management.

2004-05 Annual Report - National Water Commission 11

THE NATIONAL WATER INITIATIVE AND THE NATIONAL WATER COMMISSION The COAG continued its commitment to water reform in 2004 with the New South Wales, Victorian, Queensland, South Australian, Australian Capital Territory, Northern Territory and Australian governments signing a landmark

Intergovernmental Agreement on a National Water Initiative (NWI). The Tasmanian Government joined the agreement in June 2005.

This ‘blueprint for water reform’ sought to address impediments to the earlier reform framework and current imperatives facing Australia’s water resources.

At the same time, an agreement was signed by the Prime Minister, premiers of New South Wales, Victoria and South Australia, and the Chief Minister of the ACT, to invest $500 million in measures to reduce the level of water over-allocation and achieve specific environmental outcomes for the Murray

Darling Basin.

Responsibility for overseeing the NWI falls to the Natural Resource Management Ministerial Council (NRMMC), comprising the Australian, state and territory government ministers responsible for natural resources, primary industries, the environment and water.

In December 2004, the Australian Government established the National Water Commission (the Commission) to assist with the implementation of the NWI and to drive the COAG water reform agenda (See Figure 1.2).

The signing of the NWI and the establishment of the Commission forms part of the latest and largest commitment to date by Australian and state and territory governments to tackle the challenge of managing and maintaining Australia’s precious water resources.

The NWI encompasses the need to increase the productivity and efficiency of water use and address the health of river and groundwater systems through collaborative and cooperative action.

Through their commitment to national actions and outcomes, member governments acknowledged that our rivers, catchments and aquifers did not stop at state boundaries and that activity in one state or territory could impact on other states or territories.

The NWI will enable Australia’s water management arrangements to adapt to future changes in water availability responsively and fairly in both rural and urban areas. When implemented it is expected to result in:

• expanded water markets for greater permanent trade in water, promoting more profitable and flexible use of water

• more confidence for those investing in the water industry

• more transparent and comprehensive water planning

• allocation of water to meet specific environmental outcomes and improved management of water for those outcomes

• over-allocated systems addressed as a matter of urgency, and

• more efficient management of water in urban environments.

The Commission is addressing a range of issues to support implementation of the NWI and to build better water management in Australia. Major elements of the reform process include financial support, increasing knowledge of resource availability, providing certainty for markets and investors, managing demands from urban users, harnessing opportunities from science and technology and encouraging private investment. These elements are discussed below.

FINANCIAL SUPPORT On 13 September 2004, the Prime Minister announced a $2 billion investment in what was to become the Australian Government Water Fund. This fund is to be used to

invest in water infrastructure and improved management and understanding of Australia’s scarce water resources.

From this fund, three new programmes are supported. The Commission has responsibility for advising on and administering two of those programmes

— the Water Smart Australia Programme and the Raising National Water Standards Programme.

The Water Smart Australia Programme will accelerate the uptake of smart technologies and practices in water use across Australia. Funding of $1.6 billion will be directed to practical on-the-ground water projects.

12 20 04-0 5 Annual Report - National Water Commission

The Raising National Water Standards Programme, providing $200 million in funding, will focus on information resources and practical tools to support good water

management.

The third programme — the Community Water Grants Programme — is jointly administered by the Department of the Environment and Heritage and the

Department of Agriculture, Fisheries and Forestry.

MEASURING OUR WATER RESOURCES Water is a huge and complex resource. If Australia is to improve how we manage our water resources, we need to develop

common standards for collecting and reporting information on its status. It is often said that if you can't measure water, you cannot manage it.

The Commission will undertake a ‘baseline assessment’ of the country's water resources — how much water we have, where it is, where it is going, what it is being used for, and who is entitled to it. This assessment will

build on the Australian Government's earlier work outlined in the National Land and Water Resources Audit 2000.

Issues such as water accounting and measurement, water access entitlements and water trading are also fundamental to improving public confidence in water availability and management and underpin the NWI.

CERTAIN AND SECURE ACCESS TO WATER Water plays an important role in building and maintaining our nation’s economic and social well-being. It is a strong contributor to Australia’s economic growth and wealth creation. As a result, the security and commercial certainty of water access entitlements must be clarified so those who depend on water for their livelihood and

invest in Australia's economic growth through water can face the future with confidence.

In the NWI, governments have agreed to specify entitlements to achieve greater certainty, to clearly assign risk of changes in water allocations and to improve water planning practices so that users and communities are well informed.

INFLUENCING URBAN DEMAND Our cities continue to grow, as does the population living along Australia's coastline. This urban growth continues to put pressure on urban water resources.

While there has been considerable progress in reform in this area over the past 10 years the current drought highlights the vulnerability of our cities and towns. Indeed, water

restrictions are the norm for many urban areas and it is now apparent that existing sources of water in many areas will need to be supplemented to meet ever growing

demand.

This is why the NWI highlights the need and scope for further reform in the urban water sector in areas such as pricing, demand management and water sensitive urban design.

TECHNOLOGY AND SCIENCE Smart use of science and technology can have a big impact on how effectively

we manage and capitalise on our water resources. Innovations in technology have already made substantial contributions in the areas of water recycling, desalination, aquifer storage, and recovery.

There is scope for further targeted investment in infrastructure, systems, technology and knowledge under the Raising National Water Standards Programme. The Commission will be actively seeking ways to enhance the smart use of science and technology to speed up progress in addressing critical water issues.

PRIVATE SECTOR INVOLVEMENT Infrastructure is an important policy issue. There is no reason why investment in water projects should be restricted to governments

only. The Australian Government is clearly seeking more private sector involvement. The Australian Government is able to co-invest with other interested parties and

private sector applicants are welcome. The Commission is actively working to foster markets in water and achieve more rational

pricing to assist with private investment.

GOALS FOR THE FUTURE Australia is currently facing a critical situation that has the capacity, if not addressed, to negatively impact on each and every

2 0 0 4 -0 5 Annual Report - National Water Commission 13

Australian in many aspects of their lives. As a society, now is the time to make sure that our children and their children have water to drink, employment opportunities and clean rivers to enjoy.

There is unprecedented goodwill and commitment from governments, agencies, scientists, academia and members of the Australian community to fix Australia's water resource problems for the long term.

This is not an impossible task, but it is complex and difficult and there needs to be some realism about the expected rate of change. Australia is embarking on a long­ term agenda for reform to address problems

that have developed over the last 100 years of the nation’s history.

The Commission is proud to have been created to play its part in ensuring Australia's water future.

Figure 1.2. Intergovernmental Agreement on a National Water Initiative 2004.

THE NATIONAL WATER INITIATIVE The NWI was signed at the 2004 COAG meeting by the Australian Government and all state and territory governments, with the exception of Western Australia and Tasmania. The Tasmanian Government subsequently signed the National Water Initiative on 9 June 2005.

The NWI builds on, complements and extends the 1994 Water Reform Framework by:

• specifying in detail the characteristics of water access entitlements

• requiring environmental water to have the same security as consumptive water entitlements

• clearly assigning risk of future reductions in water availability between water users and governments

• ensuring the integrity of water access entitlements is not diminished by land use change

• requiring more specific and detailed action to open up water trading

• providing for national benchmarking of pricing and service quality for water delivery

• committing to effective, efficient and accountable water management

• committing to a comprehensive national framework for water accounting systems, and

• committing to addressing significant adjustment issues arising from water reform.

On signing the NWI, governments agreed to immediately commence implementation of its requirements. Some of the requirements are already in the process of being implemented.

Many of the commitments are being progressed through multi-jurisdictional processes to achieve nationally compatible and consistent water management arrangements. In accordance with their

NWI commitments, each jurisdiction is preparing a detailed implementation plan for accreditation by the Commission.

The NWI is available on www.nwc.gov.au/NWI/index. cfm.

14 2 0 0 4 -0 5 Annual Report - National Water Commission

SECTION 2 AGENCY OVERVIEW

AGENCY OVERVIEW The National Water Commission (the Commission) is an independent statutory body in the Prime Minister's portfolio. It was established under the National Water Commission Act 2004, which received Royal assent on 17 December 2004. The Commission is a Statutory Agency under the Public Service Act 1999 and a Prescribed Agency under the Financial Management and Accountability Act 1997.

The responsibilities of the Commission, set out in full under the National Water Commission Act 2004, include:

• advising the Prime Minister and state and territory governments on the progress of the National Water Initiative and national water issues

• providing advice to the Australian Government and the Council of Australian Governments (COAG) on matters of national significance relating to water (including the sustainable management of water resources and access to, and use of, water), and

• assisting with the implementation of the National Water Initiative (NWI) and undertaking activities that promote the objectives and outcomes of the NWI.

In addition, the Commission is responsible for administering two of the programmes under the Australian Government Water Fund — the Water Smart Australia Programme and the Raising National Water Standards Programme.

COMMISSION MEMBERS The Commission is headed by a Chairman who is also the Chief Executive Officer (CEO). There are six other commissioners. The Australian Government nominated the Chairman and three commissioners. The NWI state and territory partners also nominated three commissioners.

The Governor-General appoints commissioners for terms of up to three years Commissioners have been appointed as a result of their expertise in water resource policies and management, relevant scientific disciplines, public sector governance, and administration of natural resource programmes and are not representatives of any jurisdiction.

A profile of commissioners is at Figure 2.1.

ROLES AND RESPONSIBILITIES The functions of the Commission as a whole are described in section 7 of the National Water Commission Act 2004. In this context, the role of commissioners is to:

• provide guidance on the strategic policy framework for the Commission

• provide guidance on major reports or advice to COAG or governments

• promote the Commission and the NWI externally, including speaking for the Commission as agreed within the Commission

• champion certain aspects of NWI reforms, as agreed within the Commission

• monitor the quality of corporate governance within the Commission, and

• review the performance of the Commission.

Drawing on the functions of the Chairman as described in sections 9, 19 and 22 of the National Water Commission Act 2004, the Chairman’s role is to:

• convene and conduct meetings of the Commission

• keep the Prime Minister informed of general operations

• represent and speak on behalf of the Commission externally

16 2 0 0 4 -0 5 Annual Report - National Water Commission

• facilitate a constructive and collegiate mode of operation, and

• manage declarations of interest by, and other arrangements for, commissioners.

In addition to specific responsibilities under section 24 of the National Water Commission Act 2004, the CEO has overall responsibility for the operations of the Commission and is

accountable to the Prime Minister. The CEO’s role is to:

• arrange support for commissioners in discharging their duties

• manage the day-to-day administration of the Commission

• administer the Australian Government Water Fund or other Australian Government programmes, and

Fig 2.1. Commissioners in profile — 30 June 2005.

Chairman Mr Ken Matthews AO Mr Matthews was previously Secretary of the Australian Government Department of Transport and Regional Services, and of the

Department of Agriculture, Fisheries and Forestry.

Mr Peter Corish Mr Corish is currently President of the National Farmers’ Federation, Chair of the

Cairns Group Farm Leaders and Chair of the Agriculture and Food Policy Review Group. Previously, he was Chairman of Cotton Australia Limited.

Dr Wally Cox PSM Dr Cox is currently Chairman of the Western Australian Environmental Protection Authority, Chairman Agriculture Research Western Australia, and President of the Institute of Public Administration of Australia (Western Australia Branch). Previously he was Managing Director of the Water Authority of Western Australia and of the Department of Regional Development and the Northwest.

• discharge the functions of the CEO under other legislation including the Financial Management and Accountability Act 199 7, and the Public Service Act 1999.

COMMISSION MEETINGS Under section 19 of the National Water Commission Act 2004, the Chairman is required to convene at least eight meetings of the Commission in any calendar year.

For its first calendar year of operation, this means that Commission meetings are held at approximately four-weekly intervals.

Three meetings were held between March and June 2005. The inaugural meeting, attended by the Prime Minister, was held on 22 March in Canberra. The second meeting was held at Mount Lofty in South Australia on 4 May, while the third meeting for the

2004-05 financial year was held in Brisbane on 8 June, 2005.

Professor Peter Cullen A0 FTSE

Professor Cullen is an international award­ winning water resource scientist, Currently he is Director of Land and Water Australia and Chair of the Victorian Water Trust Advisory Council.

Ms Chloe Munro Ms Munro is currently Managing Director, Human Resources, of Telstra Corporation. Previously, she was Secretary of Victoria’s Department of Primary Industries and of the Department of Natural Resources and

Environment, and a Murray Darling Basin commissioner.

Dr John Radcliffe AM FTSE Dr Radcliffe is currently Chairman of the South Australia Centre for Natural Resources Management. Previously, he was Deputy Chief Executive of the CSIRO, South Australian Director-General of Agriculture and Murray Darling Basin commissioner.

Mr David Trebeck Mr Trebeck is a company director of Graincorp and Maersk Australia, is an economic consultant with ACIL Tasman, an agricultural scientist and a broad acre cropping and livestock farmer.

20 04-0 5 Annual Report - National Water Commission 17

Commissioners held their second meeting at Mt Lofty, South Australia in May 2005 where they

discussed key areas they considered critical to water reform over the next three years.

Commission decisions are normally made by consensus of commissioners present at a meeting. However, should this not be possible, decisions may be made through a majority vote.

Staff of the Commission present submissions, papers or oral reports on implementing the NWI and programmes. Commissioners can accept recommendations, ask for further investigation or work, or decide on a course of action different from that recommended.

Meeting procedures, business processes and conflict of interest procedures have been agreed by the commissioners.

ORGANISATION STRUCTURE The Commission is organised into three operational groups: the Water Reform Group, Water Programmes Group and Corporate Strategy and Services Group.

WATER REFORM GROUP This group is responsible for assisting with the implementation of the NWI by:

• monitoring and reporting on the progress of governments in implementing their commitments under the NWI, and

* assisting governments to meet their responsibilities to advance water reform.

As at 30 June 2005, seven staff were employed in this group.

WATER PROGRAMMES GROUP This group administers two of the programmes funded from the Australian Government Water Fund (see Figure 2.3):

• The Water Smart Australia Programme — a $1.6 billion programme to accelerate the development and uptake of smart technologies and practices in water use across Australia and provide opportunity for major investment in water infrastructure.

• The Raising National Water Standards Programme — a $200 million programme to assist with development of information and tools for good water management. These programmes are described in more detail on pages 20-21.

As at 30 June 2005, nine staff were employed in this group.

CORPORATE STRATEGY AND SERVICES GROUP This group assists in providing strategic direction to the Commission and corporate services that enable commissioners and staff of the Commission to meet their obligations and commitments.

As at 30 June 2005, nine staff were employed in this group.

Note: Four staff were employed in the Chief Executive Office to provide secretariat support to the CEO and commissioners and general administrative support for the Commission, bringing the full complement of staff at 30 June 2005 to 29.

18 20 04-0 5 Annual Report - National Water Commission

COMMISSION OUTCOME-OUTPUT STRUCTURE 2 0 0 4 -0 5 The Commission’s outcome and output structure was published as part of the Portfolio Additional

Estimates Statement in February 2005. The structure is depicted below in Figure 2.2.

Figure 2.2. Commission’s outcome-output structure for 2004-05.

National Water Commission Chief Executive Officer: Mr Ken Matthews AO

Outcome: Sustainable management and use of Australia’s water resources

Price

Total price of outputs — $6.9 million Total administered expenses — $50.0 million

Γ

Output 1 - Policy advice

Total price — $3,443 million Appropriation — $3,443 million Administered expenses — nil

As the Commission did not have a history of expenditure in relation to its two outputs, a decision was made to allocate the total price for the outcome equally across the two outputs. Allocations for future years will be

based on a more refined approach.

Actual expenditure against total price of outputs and administered items (funding under the Water Smart Australia and Raising National Water Standards programmes) is reported in Section 3 of this report.

As indicated in the Portfolio Additional Estimates Statement, the Commission’s two key responsibilities are to:

1. assess the implementation, and promote the objectives and outcomes of, the NWI intergovernmental agreement, and

2. advise on financial assistance to be provided by the Commonwealth under components of the Australian Water Fund, (The Fund was subsequently renamed the Australian Government Water Fund).

Output 2 - Programme management

Total price — $3,443 million Appropriation — $3,443 million Administered expenses — $50.0 million

THE AUSTRALIAN GOVERNMENT WATER FUND The Australian Government Water Fund is a $2 billion Australian Government programme

to invest in water infrastructure and improve water management and practices in the stewardship of the country's scarce water resources. The Fund will support practical on-ground water projects that will improve Australia’s water efficiency and environmental outcomes.

Projects that help achieve the objectives, outcomes and actions of the NWI will be eligible to receive assistance from the Fund.

The Australian Government Water Fund includes three programmes (Figure 2.3).

The Water Smart Australia Programme and the Raising National Water Standards Programme are administered by the Commission. The third programme

— Community Water Grants — is jointly administered by the Australian Government Department of the Environment and Heritage and the Department of Agriculture Fisheries and Forestry.

2004-05 Annual Report - National Water Commission 19

Figure 2.3. Components of the Australian Government Water Fund.

$200 million

Administered jointly by the

Department of the Environment and

Heritage and the Department of

Agriculture, Fisheries and Forestry

Community Water Grants Programme

$1.6 billion

Administered by the

National Water Commission

Water Smart Australia Programme

$200 million

Administered by the

National Water Commission

Raising National Water Standards Programme

Australian Government Water Fund

$2 billion

THE WATER SMART AUSTRALIA PROGRAMME The Water Smart Australia Programme has been established to accelerate the development and uptake of smart, technologies and better practices in water

use across the country.

It is targeted at large-scale projects that will contribute significantly to the sustainable and efficient management of Australia’s water

resources.

Projects are expected to encourage innovation in water management leading to substantial improvements in areas such as:

• water resource management

• water supply and delivery

• efficiency of water use

• water for the environment, and/or

• water quality and the general health of water systems.

Projects eligible for funding under the programme include those that will:

• improve river flows for better environmental outcomes

• return groundwater aquifers to sustainable levels

• lead to water savings through improvements in irrigation infrastructure

• encourage or advance efficiency improvements in on-farm water use

• desalinate water for use in cities and towns

• recycle and reuse stormwater, ‘grey’ water and waste water from sewage

• provide more efficient storage facilities, such as underground aquifers

• provide alternatives to ocean outfalls and the better management of sewage in our coastal cities, and/or

• develop water efficient housing design.

Water Smart Australia Programme Guidelines were released 19 April 2005 and advertisements were placed in all major metropolitan and regional newspapers

/ -

Water Smart Australia Programme

2 0 2 0 04-0 5 Annual Report - National Water Commission

shortly after. Proposals were invited from all levels of government and the private sector (including industry or other organisations and

community groups). Applications closed on 30 June 2005.

THE RAISING NATIONAL WATER STANDARDS PROGRAMME The Raising National Water Standards Programme offers support for projects that will improve Australia’s national capacity to

measure, monitor, and manage its water resources — to help achieve NWI outcomes.

The following areas have been identified by the Government for specific support under the programme:

• water accounting, associated data and information systems and monitoring to support confidence in decisions by investors in the water market and water

industry more generally

• strategic groundwater assessment to address gaps in understanding and information about groundwater resources and their connectivity to surface water

• improving the conservation of high environmental value water systems through improved knowledge and information and supporting community planning and on­ ground action, and

• establishing and promoting the consen/ation of water in urban households and businesses.

An investment framework for the Raising National Water Standards Programme is being developed and is expected to be released in the second half of 2005.

2 0 04-0 5 Annual Report - National Water Commission 21

22 20 04-0 5 Annual Report - National Water Commission

SECTION 3 PERFORMANCE REVIEW

PERFORMANCE REVIEW The National Water Commission’s (the Commission) performance in this annual report is in relation to the period since 17 December 2004.

The Commission's outcome and output structure was published in the Portfolio Additional Estimates Statement (PAES) in February 2005. The Commission’s outcome

and output groups structure is at Figure 2.2.

As indicated in the PAES, the Commission’s two key responsibilities are to:

• assess the implementation, and promote the objectives and outcomes of the Intergovernmental Agreement on a National Water Intiative (NWI), and

• advise on financial assistance to be provided by the Australian Government under the components of the Australian Government Water Fund.

Under the structure published in the PAES, the Commission reports against three effectiveness indicators and three efficiency indicators, which are detailed in this chapter. In its first six months of operation the Commission made substantial progress against these indicators. Future annual reports will provide performance reporting on a full 12-month period.

EFFECTIVENESS INDICATORS

Water management and use in Australia is moving towards consistency with the objectives of the NWI.

Key inputs to this measure include:

• number of Commission meetings and other forums to discuss strategy and evaluate Commission projects and policy advice against the objectives of the NWI

• progress with assessment of implementation plans under the NWI

• development of national performance indicators for the NWI

• National Competition Policy assessment 2005, and

• helping to facilitate specific areas of national reform.

Commission meetings and forums Under the National Water Commission Act 2004, commissioners are required to meet at least eight times during a calendar year. A schedule of eight meetings for 2005 was agreed at the Commission’s first meeting.

Since the appointment of commissioners in March 2005, the Commission has met three times. The second and third meetings included site visits to enable commissioners to gain a first hand understanding of water resource and management issues in key locations across the country.

The inaugural meeting in Canberra focused on:

• critical milestones to be achieved to meet the commitments of the federal, state and territory governments needed to progress the NWI

• progress of projects under the Australian Government Water Fund, and

• progress with design of the Water Smart Australia Programme.

The second meeting, held in South Australia included a site visit where commissioners viewed first hand key water management issues in the Mount Lofty catchment area and urban water management issues in Adelaide,

commissioners considered:

• further projects under the Australian Government Water Fund

• immediate priorities for the Commission

24 2 0 04-0 5 Annual Report - National Water Commission

The National Water Commission visited key water management sites in Queensland prior to the third Commission

meeting in Brisbane. Here Commissioners are shown some water meters at Gatton Farm. Pictured from left to right:

Property owner Mr Merv Neumann, Mr Graeme Milligan (Qld Department of Natural Resources and Mines), Mr Ken

Matthews and Mr David Trebeck.

• development of a framework for the 2005 National Competition Policy assessments of water reform, and

• key areas they considered critical to water reform over the next three years, including water accounting and measurement, water access entitlements, water trading, a knowledge strategy, groundwater management, urban water reform, the need for improved quality and consistency of socio-economic impact studies and, when necessary, adjustment assessment.

The third meeting, held in Brisbane, focused on:

• the design of the Raising National Water Standards Programme and considered the programme objectives and initial work schedule, and

• an update on the framework for the 2005 National Competition Policy assessment.

Prior to the Brisbane meeting, commissioners viewed a number of water management sites in the Lockyer Valley catchment area and Toowoomba region, focusing on water recycling and ground water management.

In addition to the three Commission meetings and two site visits, key stakeholder dinners were held.

The Chairman met with more than 200 stakeholders since November 2004, promoting and discussing the NWI.

Development of implementation plans under the NWI The preparation of implementation plans by state and territory governments is a

requirement under the NWI. Plans are an important mechanism for mutual accountability of the parties to the NWI, and public accountability in achieving the NWI's objectives, outcomes and actions.

The Commission also sees effective implementation plans as basic tools to assist it in its role in:

• accrediting plans (paragraph 105(ii) of the NWI), and

• assessing jurisdictions against their plans (paragraph 106(a) of the NWI).

There are a range of diverse audiences with an interest in the implementation plans. The ultimate audience for implementation plans

will be the Council of Australian Governments (COAG), which authorised their development and to whom the Commission will report on the accreditation outcomes. The Natural Resource Management Ministerial Council (NRMMC) is another important stakeholder group, given its role of overseeing implementation of the NWI and addressing

2004-05 Annual Report - National Water Commission 25

ongoing implementation issues as they arise. Water stakeholders also have a keen interest in their jurisdictions' plans for meeting NWI commitments.

In the 2004-05 reporting period, the Commission undertook to assist jurisdictions to develop implementation plans by:

• providing guidance on preparation of implementation plans, including a common template for plans, and

• discussing draft plans with jurisdictions (collectively and bilaterally), including the specific issues of NWI implementation planning which may arise in each jurisdiction.

On 13 May the Commission released a guide for states and territories to help them in developing their implementation plans: Guidance on the Preparation of Implementation Plans for the National Water Initiative, May 2005. Among other things, the guide highlighted the requirement for plans to:

• describe how the actions and timelines agreed in the NWI are to be achieved, including milestones for each key element of the Agreement, and

• be developed cooperatively between states and territories which share water resources to ensure appropriate co-development of actions which are of cross-jurisdictional nature, including registries, trading rules, water products, and environmental outcomes.

The Commission held a briefing meeting with all signatories to the NWI on the guide as well as bilateral meetings with each.

As at 30 June 2005 four plans were lodged with the Commission for comment.

National performance indicators for NWI The Commission is working closely with the NRMMC NWI Working Group. During the year, five working group meetings were held to develop a comprehensive national set of performance indicators for the NWf.

2005 National Competition Policy assessment The Commission developed a draft framework for the 2005 National Competition

Policy assessment of water reform. The framework was submitted to the commissioners for consideration in June 2005. Where necessary and appropriate, the framework marries NWI commitments to previous 1994 COAG water reform commitments.

Helping to facilitate specific elements of national water reform The Commission has a role to help drive national water reform. To this end, the Commission has agreed to take a leadership role in facilitating a number of national actions in the NWI (i.e. those requiring collaboration between jurisdictions to achieve nationally consistent or compatible outcomes in water management in Australia).

The Commission is working with the NRMMC NWI Working Group and external stakeholders to progress specific actions in

the NWI. For example, on 20 June 2005, the Commission co-hosted with the Australian Bureau of Statistics a national workshop on water resource accounting. The purpose of the workshop was to develop a shared understanding of the requirements of the NWI actions in this area and the means of meeting these important commitments in practice.

In consultation with officials and stakeholders, the Commission has also been scoping NWI actions in the areas of water trading, compatible water registers and a knowledge strategy for water.

The government is provided with relevant and timely policy advice so that it is able to further its national water reform agenda.

The Commission provided relevant and timely policy advice during the year, including:

• a factual progress report to COAG on 3 June, and

• regular briefs and progress reports to the Prime Minister.

2 6 2 0 0 4 -0 5 Annual Report - National Water Commission

Water improvement programmes and practices are successfully implemented in accordance with agreed plans.

Both programmes under the Australian Government Water Fund are in the process of being implemented in accordance with agreed plans.

WATER SMART AUSTRALIA PROGRAMME The Water Smart Australia Programme is being successfully implemented and drew a high level of interest following release of the

programme guidelines and call for proposals.

The Commission provided seven monthly progress reports to the Prime Minister as well as nine specific briefs and one formal report to COAG .

Total Price: $1.219 million.

Output 1.2 — programme management The Commission is responsible tor implementing water programmes to the satisfaction of Government and key stakeholders. As at 30 June 2005, the

planned number of water programmes is being implemented:

After the 19 April 2005 release of the guidelines for the programme and prior to the closing of applications, the Commission received hundreds of enquiries and provided advice to applicants.

Commission staff held a workshop on 20 June 2005 to discuss the proposed project assessment framework for the Water Smart Australia Programme. The framework was refined and subsequently approved by commissioners for use in the assessment process.

RAISING NATIONAL WATER STANDARDS PROGRAMME The Raising National Water Standards Programme focuses on the information

resources and tools of good water management. In 2004-05, the Commission commenced development of the delivery approach, objectives, investment principles and governance arrangements tor the

programme.

EFFICIENCY INDICATORS Efficiency indicators for Commission outputs cover quality, quantity and price, Given the very short reporting period, the quality and quantity indicators have been addressed together in the text below.

Output 1.1 — policy advice The Commission is responsible for providing quality, relevant and timely advice to Government and to COAG to enable achievement of national water reform objectives.

• the Water Smart Australia Programme was implemented with guidelines released 19 April 2005 and applications closing 30 June 2005, and

• the Commission is meeting its implementation plan as detailed for the Cabinet Implementation Unit of the Department of the Prime Minister and Cabinet.

Mechanisms to measure stakeholder satisfaction are being developed. For the reporting period, stakeholder satisfaction about staff performance was sought from commissioners via a survey. Commissioners

reported high levels of satisfaction with the quality of programme management and briefing they received from Commission staff.

Z 5- wmmm

While in Queensland on site visits, the National Water

Commission visited Atkinson's Dam where water levels

were visibly lower than in previous years.

2004-05 Annual Report - National Water Commission 27

The following elements were rated as good or very good by the cited percentage of commissioners:

• quality of the Watersmart Australia Programme Guidelines - 86 per cent

• quality of the National Competition Policy assessment framework - 86 per cent

• level of commissioner involvement and consultation - 100 per cent, and

• quality of briefing material - 86 per cent.

Total Price: $1,211 million.

Administered item — water programmes During the year funding was announced for seven projects under the Australian Government Water Fund totaling $275 million. The funding was allocated to:

• three projects in Victoria - $188 million in total

• one project in New South Wales - $55 million in total, and

• three projects in Queensland - $32.2 million in total.

Negotiations on formal funding agreements with these three states are well advanced. Initial payments for the approved projects are expected to be made in 2005-06.

Expenditure for 2004-05 for this item relates to remuneration paid to commissioners (other than the Chairman) since March 2005.

Total Price: $51 010.

In accordance with annual report requirements, the resource table for the Commission's outputs is at Appendix A,

28 2 0 0 4 -0 5 Annual Report - National Water Commission

SECTION 4 CORPORATE GOVERNANCE

o

CORPORATE GOVERNANCE The National Water Commission's (the Commission) governance policy recognises that good governance encourages efficient,

effective and ethical use of resources through:

• clearly articulating the accountabilities, responsibilities and authority to act associated with different classification levels and functional roles

• describing the planning and monitoring of inputs and outputs

• the ongoing improvement in governance practices, and

• educating employees and other stakeholders on their roles and responsibilities.

GOVERNANCE FRAMEWORK In its first six months of operation the Commission focused on designing and implementing core elements of its governance framework. This framework, when fully implemented, will form the basis for efficient and accountable public administration while ensuring Commission objectives are met.

A diagrammatic representation of reporting and accountability elements of the framework is at Figure 4.1. The left side of the diagram shows the advisory role that the Chair and commissioners fulfill in relation to the Prime Minister regarding water reform policy, programs and advice. The right side of the diagram depicts the accountability and formal

Figure 4.1, Commission advisory and accountability structure depicting differentiation in

roles and responsibilities for the Chairman/commissioners and the CEO.

Prime Minister

I

i

Commissioners

Water Water Corporate

Reform Programmes Strategy

Group Group & Services

Group

• policy advice • Assess& * accredit NWI recommend • assist with

implementation funding for implementation plans > Water Smart o f NWI through

• assist with Australia other agreed

implementation » Raising National initiatives O f NWI Water Standards • annual

initiatives programmes reporting

Commission corporate management and administration

CEO

Executive Committee

Audit & Fraud Committee

GM Water Reform Group GM Water Programmes

Group

GMCorp Strategy 8 Support Group

1 strategic and Business planning ’ financial management and accountability 1 governance

Accountability Advice

2 0 04-0 5 Annual Report - National Water Commission

reporting arrangements for the Commission’s corporate and governance responsibilities. Thus, while the commissioners provide advice to the Prime Minister and the Council of Australian Governments (COAG), the CEO reports directly, and is accountable to, the

Prime Minister for the effective and efficient operation of the Commission as a Prescribed Agency.

Governance mechanisms and policies developed and implemented by 30 June 2005 as priorities were:

• National Water Commission Statement of Strategic Intent (a precursor to future years' strategic plans)

• governance committees including the Executive Committee and the Audit and Fraud Committee, and

• priority policies including a full set of Chief Executive Instructions, financial and human resource management delegations, a fraud policy statement, conflict of interest protocols and procedures for commissioners, remuneration

arrangements and terms and conditions of employment for staff, and travel and mobile phone policies.

Work also commenced on developing group business plans, a risk management strategy, a performance management framework, privacy policy and a range of human resource management policies. These will be finalised in the first half of the 2005-06 financial year.

STATEMENT OF STRATEGIC INTENT The Commission developed a statement of strategic intent in March 2005 to describe the

Commission’s role, responsibilities and ways of working with our stakeholders and staff members.

The statement identified immediate priorities for the 2005-06 financial year and was used a basis for business planning and subsequent resource allocations. It will also

be used to inform performance planning and management processes for 2005-06.

The statement identified and articulated six primary values essential for the Commission's success. These values provide guidance for all Commission staff about how they fulfil the

responsibilities and manage relationships with stakeholders and colleagues.

These values are intended to foster a collaborative, positive and proactive work environment that inspires all members of the

Commission to contribute to the best of their ability. The behaviours expected as a result of applying the values are described in Figure 4.2.

Figure 4.2. Commission values.

DEMONSTRATING OUR VALUES We will demonstrate our values in the way we do our work and how we relate to our colleagues and stakeholders.

• We will demonstrate rigour when we apply a thorough, analytical evidence- based approach with accuracy,

• We will demonstrate transparency through consistent application of process, clear and articulated ways of operating and regular feedback on

progress.

• We will show decisiveness by being proactive, outcome oriented and delivering what we promise in a timely manner.

• Our relationships will be collaborative when we are responsive and proactive in identifying and addressing stakeholder issues. We will work with stakeholders to

develop mutually satisfactory outcomes,

• We will demonstrate decent working relationships by being courteous, civil, respectful, honest and open to diverse viewpoints. We will be supportive of our colleagues.

• We will have a motivating workplace when we show our willingness to take on Commission roles and activities over and above our own job, when we openly share information and ideas, when we accept a diversity of views from our colleagues and when we participate in professional and social interactions.

20 04-0 5 Annual Report - National Water Commission 31

GOVERNANCE COMMITTEES Two committees were established to support Commission governance arrangements: the Executive Committee and Audit and Fraud Committee.

Executive Committee The Executive Committee comprises the Chief Executive Officer (CEO), general managers and the Chief Financial Officer (when financial management issues are being discussed). The committee’s role is to assist the CEO in relation to governance, strategic and operational business. Specific matters that are likely to be considered by the committee include the Commission’s strategic direction, business performance, policy development and implementation, future business requirements and strategies to address them.

The Executive Committee has met regularly since it was formed in March 2005 and continues to meet approximately fortnightly.

Audit and Fraud Committee

The Audit and Fraud Committee was established in May 2005. The Committee held one meeting in the reporting period.

The Committee provides independent assurance and assistance to the CEO on the Commission’s risk, control and compliance framework and external accountability responsibilities, in accordance with the Financial Management and Accountability Act 1997.

The Committee started work on developing a fraud control plan and internal audit programme for the Commission which will be completed by September 2005.

The Committee comprises three members, appointed by the CEO:

• Ms Linda Holub, General Manager, Corporate Strategy and Services Group, as Chair

• National Water Commissioner Mr David Trebeck, and

• Chief Financial Officer, Department of Agriculture, Fisheries and Forestry, Mr Allan Gaukroger as the independent member.

The CEO attends meetings for selected items and representatives from the Australian National Audit Office are observers to the Committee.

PERFORMANCE PLANNING AND REPORTING The Commission has started developing Group business plans to ensure that it delivers on the government’s priorities and fully implements its responsibilities under its

legislation and the National Water Initiative. These business plans will be completed by September 2005.

In accordance with government requirements, the Commission will report annually against performance measures, outlined both in its annual Portfolio Budget Statement and statement of strategic intent, through its annual report to the Prime Minister and Parliament. In addition, each month, the CEO reports in writing to the Prime Minister about progress with key initiatives and priorities.

For the 2004-05 year, the Commission's performance report (see Section 3) covers the period from 17 December 2004 to 30 June 2005 and is based on performance

information published in the Portfolio Additional Estimates Statement of February 2005.

ACCOUNTABILITY The Commission has introduced a number of measures to ensure that high ethical standards are upheld and maintained in all areas of its operations and that there are mechanisms in place to deal with any potential breaches of these standards should they occur.

Measures include:

• risk management policies

• initial work on a fraud control plan

• policies on maintaining ethical standards and upholding the Australian Public Service values, Code of conduct and Commission values, and

• reference to government external scrutiny requirements.

APPROACH FOR IDENTIFYING AND MANAGING AREAS OF FINANCIAL/OPERATIONAL RISK The Commission commenced development of its risk management policy guidelines and practices.

32 2004-0 5 Annual Report - National Water Commission

Risk management has been incorporated into business planning, audit and fraud management processes to ensure that the Commission considers and manages risk as a normal part of operations.

The Audit and Fraud Committee is overseeing the development of the risk management plan, which will be completed by September 2005.

CERTIFICATION OF FRAUD MEASURES IN PLACE To comply with the Commonwealth Fraud Control Guidelines 2002 and the Financial Management and Accountability Act 1997, the Commission established an Audit and

Fraud Committee and developed an initial fraud policy statement. The statement forms an important component of the Commission’s

broader fraud control plan which will be finalised in the first quarter of the 2005-06 financial year.

The fraud control plan aims to ensure appropriate fraud prevention, detection, investigation and reporting procedures and processes are in place for the Commission.

In accordance with annual reporting requirements and for the period of the Commission’s operations, the CEO of the Commission certifies that:

• fraud risk areas have been identified in the Commission with a full fraud assessment being undertaken in August 2005 as part of the business planning process

• the Commission has drafted a fraud policy statement in line with the Commonwealth Fraud Guidelines to identify, assess and control fraud in the organisation, and

• a reporting framework has been developed to capture fraud information.

To date, there have been no fraudulent acts reported in the National Water Commission.

POLICY AND PRACTICES ON ESTABLISHMENT AND MAINTENANCE OF ETHICAL STANDARDS In addition to developing values as part of the statement of strategic intent, the Commission

is finalising its policies and procedures on maintaining ethical standards in accordance

with the Public Service Act 1999. The procedures, supported by training and education activities will be completed by the end of 2005.

SIGNIFICANT DEVELOPMENTS IN EXTERNAL SCRUTINY In the period to 30 June 2005, there was one instance of external scrutiny of the Commission's operations to report. The ANAO completed an audit of financial statements. The outcome of that process,

reported in this annual report at Section 5, was an unqualified audit report.

There were no decisions or reports by other external bodies such as the Auditor- General, Commonwealth Ombudsman or parliamentary committee, nor were there any judicial or administrative decisions handed

down in relation to Commission activities,

FINANCIAL PERFORMANCE Financial management in 2004-05 focused on supporting the establishment of the Commission's operations. While the Commission was operating effectively at the end of the year, delays in recruiting staff resulted in a higher operating surplus for the year than originally expected.

Administered expenditure was significantly lower than expected due to delays in establishing the Commission. As a result, there have been delays in the Commission’s ability to reach its full level of operation which

has also affected its capacity to spend its appropriation.

ASSET MANAGEMENT Asset management during 2004-05 focussed on acquiring the appropriate asset base to enable the Commission to commence

operations at the earliest possible date. Since the creation of the Commission:

• vacant premises were identified capable of accommodating Commission staff in a single building

• the premises were leased, fitted out and occupied, and

• essential information technology and other infrastructure was acquired and installed.

2004-05 Annual Report - National Water Commission 33

PURCHASING The Commission's purchasing during 2004-05 was mainly based on the use of pre-existing contracts arranged by the Department of the Prime Minister and Cabinet. Purchasing procedures were based on those of that Department and are consistent with the Commonwealth Procurement Guidelines.

CONSULTANCIES IN THE NATIONAL WATER COMMISSION During the six months of operation to 30 June 2005, the Commission entered into three consultancy contracts involving a total expenditure of $32 821.50.

Two consultancies had a value of more than $10 000. In accordance with annual reporting guidelines, details of these consultancy

sen/ices are at Figure 4.3.

CONTRACTS EXEMPT FROM THE PURCHASING AND DISPOSAL GAZETTE There were no contracts entered into during 2004-05 that were exempt from being published in the Purchasing and Disposals Gazette.

ABSENCE OF CONTRACTUAL PROVISIONS FOR ACCESS BY THE AUDITOR-GENERAL There were no such contracts during 2004-05.

MANAGEMENT OF HUMAN RESOURCES The Commission’s human resources (HR) framework is currently being developed. The framework, focusing on creating a high performing organisation, aims to foster:

• strong leadership at all levels

• clear understanding of roles and objectives

• robust and constructive relationships with clients and stakeholders

• sound governance mechanisms to manage both performance and accountability responsibilities

• a values-based culture that fosters collaboration, cooperation and productivity

• policies, systems and processes that help staff work efficiently without unnecessary red-tape

• a people management framework that enables the Commission to:

o recruit the right staff

o provide staff with interesting and challenging work

o coach and mentor staff so they can achieve personal and organisational goals

o recognise and reward good performance, and

o deal fairly and constructively in cases of underperformance, and

• terms and conditions of employment that are fair, flexible and tailored to help staff balance work and home life.

Over the reporting period, the Commission developed a number of policies and procedures to support the above framework, including:

• Australian Workplace Agreement (AWA) templates and processes for negotiation and lodgment with the Office of the Employment Advocate

Figure 4.3. Consultancy services.

Coree Consultants Development of an assessment framework for applications for financial assistance under the Australian Government Water Fund

$10 409 Direct Sourcing Timing of project and expert skill required

Workplace Research Advice and development of performance management $13 860 Select tender Timing and expected value of contract system

34 2 0 04-0 5 Annual Report - National Water Commission

• a draft remuneration policy articulating terms and conditions of employment including financial and non-financial benefits

• human resource management delegations and procedures

• a performance management policy and guidelines for consultation with staff, and

• a Commission values statement.

The next 12 months will see further human resource policy development along with implementation of our performance planning and management framework, learning and development strategy and workforce planning activities.

COMMISSION STAFF By 30 June 2005, the Commission employed 29 staff, three of whom were employed as non-ongoing employees. Two staff members worked part-time while the remaining staff

S taff of the newly formed National Water Commission a t their

headquarters in Canberra. At the time of the photograph, one

staff member was absent.

were employed on a full-time basis. Details of classifications and gender profile of staff as at 30 June are set out in Figures 4.4, 4.5 and 4.6.

For the reporting period, the Commission’s average staffing level was 15.1.

STATISTICS ON STAFFING

Figure 4.4. Number of ongoing and non-ongoing employees by classification and gender as at 30 June 2005.

APS3 1 1 1

APS4 4 4 4

APS6 1 1 1

EL1 1 1 7 310 11

EL2 3 5 8 8

SES Band 1 2 1 3 3

CEO 1 1 1

Total 2 1 3 16 10 26 29

Figure 4.5. Number of Full-time (FT) and Part-time (PT) employees

by classification as at 30 June 2005.

2 0 0 4 -0 5 Annual Report - National Water Commission 35

Figure 4.6. Number of Full-time (FT) and Part-time Figure 4.7. Salary bands for Executive Level and (PT) employees by gender as at 30 June 2005. APS staff.

REMUNERATION AND OTHER TERMS AND CONDITIONS OF EMPLOYMENT All terms and conditions of employment for SES and non-SES staff are negotiated and agreed as AWAs under the Workplace Relations Act 1996.

SES remuneration Within the relevant Commission salary band, remuneration for individual Senior Executive Service employees is decided by the CEO, taking into account the complexity and nature of a staff member’s role, their responsibilities, skills, capabilities and relevant market factors.

Salary bands for SES employees were set after considering:

• annual surveys of SES remuneration and key pay indicators compiled by the Department of Employment and Workplace Relations

• general economic and market conditions, and

• other relevant factors including how staff contribute to the overall success and performance of the Commission.

Non-SES remuneration All ongoing Commission staff have negotiated remuneration and conditions of employment through AWAs. The majority of employees already have an AWA in place with a small number being finalised.

Commission salary bands for Executive Level and APS employees as at 30 June 2005 are set out in Figure 4.7.

Executive Level 2 $79 865-$95 051

Executive Level 1 $68 616-$76 491

APS Class 6 $56 806-$63 836

APS Class 5 $49 775-$53 994

APS Class 4 $44 713-$4S 650

APS Class 3 $40 214-$43 307

APS Class 2 $35 152-$39 088

APS Class 1 $31 215-$34 309

Non-salary benefits provided in AWAs include entitlements such as leave, flexible working arrangements and other standard workplace entitlements. Also included are aspects such as salary packaging, access to available car parking, the Christmas/New Year shut down, relocation assistance, access to home-based work, access to an employee assistance program and employee professional development.

Salary and conditions of employment for non-ongoing staff are provided through non-ongoing employment contracts in conjunction with the Australian Public Service Award 1998. The Commission has three

non-ongoing contracts in place.

Performance pay Since the Commission has not been operational for a full financial year, there have been no payments in relation to performance pay.

OCCUPATIONAL HEALTH AND SAFETY (0H&S) PERFORMANCE The Commission is committed to safeguarding the health, safety and welfare of staff while at work and preventing occupational injury. Key elements of our approach include:

• clear and accessible OH&S policy and service support

• ensuring that new premises meet OH&S legislative requirements

• timely OH&S workstation assessments, and

• access to an external independent employee assistance provider, where necessary.

36 2 0 04-0 5 Annual Report - National Water Commission

OH&S policies are being developed. However, as an immediate priority, the Commission developed a number of important OH&S support documents

and processes to ensure that anyone experiencing some form of health or safety incident had access to appropriate sen/ices and support.

OH&S sen/ices are coordinated through Rel Corp Management Services Pty Ltd, the Commission's human resources and payroll provider. Rel Corp acts as a point of contact for notification of incidents and for the organisation of workplace assessments

and employee rehabilitation planning.

The fit-out of new premises and the move from temporary premises to a permanent home, provided an opportunity to incorporate the best possible OH&S standards, from

design through to fit-out. Workstations and chairs are all ergonomic and, as staff settle into their new accommodation, extra OH&S assistance is being provided where necessary to ensure staff wellbeing.

Rel Corp undertook workstation assessments for Commission staff when located in Prime Minister and Cabinet accommodation. Further workstation assessments have been

scheduled for staff in our new premises early in 2005-06.

OH&S and compensation reporting As at 30 June 2005, the Commission did not have any accidents under section 60 of the

OH&S Act or dangerous occurrences under section 41 or any other section of the Act to report.

The Commission had a nil return in relation to new, ongoing, pending or closed compensation claims and to non­ compensation cases.

There was a nil return in relation to incidents.

ACCESS AND EQUITY Since its inception the Commission has made itself accessible to many stakeholders and interested parties. Up until 30 June 2005, the Commission met with more than 200 stakeholders and interested parties on issues relevant to national water reform and the role and functions of the Commission.

Commission meetings are generally held outside Canberra and include a site visit to relevant water management locations in the state or region where the meeting is being

held. This provides local agencies with the opportunity to better inform the Commission of water management issues and initiatives in their region.

The Commission launched an interim website in March 2005, with a fully operational website launched in early June 2005. This website provides information about the

programmes, initiatives and activities of the Commission and allows users to provide comments to the Commission via email, with other contact information also available. The Commission website meets government accessibility guidelines, with documents available in at least two formats.

The Commission is currently developing a service charter, workplace diversity and disability strategy and access and equity strategy. These documents will be finalised in the first half of 2005-06.

FREEDOM OF INFORMATION The Commission is subject to the Australian Government’s Freedom of Information Act 1982 (Fol Act). Section 8 of the Fol Act

requires Australian Government departments and agencies to make available information about their organisations’ functions and operations and about rules and practices

used in making decisions that affect members of the public.

Procedures and initial contact point

A request for access to documents under the Fol Act must be made in writing, enclosing the required $30 application fee, and must include an address in Australia to which notices can be sent. In certain circumstances the fee is not required or can be remitted. To enable a prompt response and to help

an agency to meet Its obligations under the Fol Act, applicants should provide as much information as possible about the documents

they are seeking. It is also advisable to include a telephone number and/or an electronic mail address to allow officers handling the request to contact the applicant in case any clarification is needed.

2 0 04-0 5 Annual Report - National Water Commission 37

If applicants are dissatisfied with a decision made under the Fol Act, they may apply for an internal review. Requests for internal review are subject to a $40 application fee that must accompany the request.

Requests for information under the Fol Act should be sent to:

Freedom of Information Coordinator National Water Commission 95 Northbourne Ave CANBERRA ACT 2600 Tel: 02 6102 6016 Fax: 02 6102 6011 Email: enquiries@nwc.gov.au

In accordance with the Electronic Transactions Act 7999, requests may be made via electronic mail addressed to enquiries@nwc.gov.au. Flowever, as a request must be accompanied by an application fee, in most cases no action will be taken on a request received by electronic mail until the application fee is received by post or a request has been made for the remission of the application fee.

A reading room and photocopying facilities are available for the examination of documents where access under the Fol Act has been granted. Information on access for people with disabilities can be obtained from the Coordinator.

Types of information available All material held by the Commission is consistent with Australian Archives disposal schedules. There is policy, programme and corporate material held in both hard and electronic copy.

A large range of information is publicly available at the website at www.nwc.gov.au, including programme guidelines, governance documentation and information on the commissioners.

The Commission has not had any requests under Fol since its establishment in December 2004.

ECOLOGICALLY SUSTAINABLE DEVELOPMENT AND ENVIRONMENTAL PERFORMANCE The Commission is reporting in line with the performance indicators provided by the Department of the Environment and Heritage for small agencies.

Sustainable management and use of the Australia’s water resources is core business for the Commission. As such, ecologically sustainable development (ESD) is a key element of its activities.

While the legal and regulatory framework of the Commission does not explicitly refer to ESD, it does address all five ESD principles:

• decision-making processes effectively integrating both long-term and short-term economic, environmental, social and equitable considerations

• if there are threats of serious or irreversible environmental damage, lack of full scientific certainty is not used as a reason for postponing measures to prevent environmental degradation

The National Water Commission website is accessible at www.nwc.gov.au.

38 2 0 04-0 5 Annual Report - National Water Commission

• the present generation should ensure that the health, diversity and productivity of the environment is maintained or enhanced for the benefit of future generations

• the conservation of biological diversity and ecological integrity is a fundamental consideration in decision-making, and

• improved valuation, pricing and incentive mechanisms are being promoted.

These principles are addressed by the following mechanisms:

• the National Water Initiative (NWI) has specific environmental clauses (73, 78 and 79)

• implementation plans from states and territories which detail how each state and territory will meet their obligations under the NWI, and

• Water Smart Australia Programme Guidelines, (the $1.6 billion water programme under the Australian Government Water Fund) require that 'all projects must meet the requirements of the Environment Protection and Biodiversity Conservation Act 1999’ to be eligible for funding.

Resolving conflict in water management is part of the nature of the NWI, as it is the commitment of state and territory governments to address a natural resource crisis in this country. Clause 2 of the NWI reflects this:

...governments have a responsibility to ensure that water is allocated and used to achieve socially and economically beneficial outcomes in a manner that is environmentally sustainable.

This is addressed by the Commission through the engagement of expert staff who consult and collaborate with many stakeholders, including state and territory governments and

Australian Government departments such as Department of the Environment and Heritage.

Staff of the Commission in the policy and programme areas are aware of their role in managing the environmental aspects of their work. Many of them have substantial backgrounds in environmental management and ongoing discussion sessions and

presentations are held on-site to keep staff aware of water issues in Australia.

Given the short period of operation of the Commission there has been no documented instances where decisions have been modified to account for ESD principles.

However, all assessments of implementation plans and Water Smart Australia projects have documented decisions processes on these issues.

In regard to how the conduct of Commission business reflects ESD principles, the Commission has in place paper and plastic recycling processes. In addition, the Commission building has water-wise toilets which are triple ‘A’ rated and one of the most efficient models on the market in Australia.

The Commission is minimising energy in other ways, including through split lighting panels (one area of the floor can be lit while another not being used is unlit). The Commission is also examining how its new accommodation can be further improved to continually minimise its impact on the environment.

ADVERTISING AND MARKET RESEARCH Media advertising organisation HMA Blaze Pty Ltd provided recruitment advertising

and advertising for guidelines for the Water Smart Australia Programme during 2004-05 to the value of $26 483 and $21 187.19 respectively.

However, as payments for these services were not processed before 30 June 2005, they will be reflected in our financial statements for 2005-06.

20 04-0 5 Annual Report - National Water Commission 39

Figure 4.8. Setting up a new Agency - Keys to success.

The Commission identified the following issues as key to its establishment as a new organisation:

1. UNDERSTANDING THE CONTEXT As a new organisation the Commission needed to understand the history and progress to date of water reform in Australia, the respective roles of different levels of government in relation to water management, the contributions and interests of stakeholders and an early understanding of the Government’s priorities. In particular, the Government wanted to see early progress on funding initiatives under the Water Smart Australia Programme and

implementation of specific elements of the NWI.

2. UNDERSTANDING THE AUTHORISING ENVIRONMENT The authorising environment refers to the legislative, policy and other directions from government to an agency about its operations. Collectively they describe the agency’s role, responsibilities and formal accountability obligations and should determine the way the organisation is structured and governed.

The National Water Commission Act 2004 sets out the functions of the Commission. The Commission also operates within the provisions of the Public Service Act

1999, the Financial Management and Accountability Act 1997, Workplace Relations Act 1996 and a suite of other Commonwealth legislation applying to

prescribed statutory agencies.

While the Commission is a creature of the Commonwealth Parliament, its origins are also in the COAG-signed

NWI. The Commission is thus required to be responsive to COAG, while legally responsible to the Prime Minister,

As an early initiative to clarify governance arrangements, at their first meeting, commissioners considered and endorsed statements confirming the roles and responsibilities of the Commission Chairman, commissioners, the CEO and staff within the Commission.

The Commission's outcome/outputs framework was approved by the Prime Minister and the Minister for Finance in December 2004 and used in the Commission’s first Portfolio Additional

Estimates Statement in February 2005. It was subsequently reflected in the Commission’s statement of strategic intent and group business plans.

3. ESTABLISHING SOUND STAKEHOLDER RELATIONSHIPS Commission stakeholders include the Australian Government, state and territory

governments, government agencies and departments, environmental groups at local, regional and national levels, industry groups, the research community, rural, regional and urban water users and a range of private and public agencies. From the outset the Commission endeavoured to communicate a message of openness and even-handedness to all such groups.

4. DECIDING ON A BUSINESS MODEL AND ORGANISATIONAL STRUCTURE Given the breadth of its responsibilities, coupled with its small size, the Commission decided early in its life that it would need a flexible and adaptable business model to deliver its responsibilities. The Commission adopted the principle that services would be provided in-house only where it was clearly the most effective and efficient way to do so and it would establish strong partnerships and service provider relationships to deliver other services and support.

The Commission also adopted the principle that delegations should be assigned at the lowest feasible level — except for certain human resources delegations which were retained at general manager or chief executive officer level to ensure personal attention by the most senior staff to sensitive people issues.

The Commission’s organisational structure was developed to align with its outcome- outputs structure. It incorporates three groups and is described in Section 2.

4 0 2 0 0 4 -0 5 Annual Report - National W ater Commission

5. DEFINING A CORPORATE IDENTITY, VALUES AND CULTURE TO CHARACTERISE THE ORGANISATION A small communications team of two took charge of the need to establish a brand for the Commission, of communicating

externally to the Commission’s many stakeholders and differentiating the new Commission from the crowded stage of other players in the water arena.

A statement of strategic intent and set of Commission values were developed in March 2005 in a workshop involving the CEO and a group of staff. The statement of strategic intent identified business priorities

for the Commission’s first year of operation and has been incorporated into subsequent group business plans. The values are used

to guide the Commission’s approach to its roles and responsibilities.

6. ESTABLISHING OPERATIONAL CAPABILITY This term refers to the process of building the internal capacity of the Commission

(financial resources, people, systems, processes, decision structures, leadership and culture) to deliver the required outputs.

Establishing a new organisation requires a myriad of practical things to be done. To manage these actions the Commission categorised the myriad of corporate services tasks into priority order. This process assisted decisions about timing, sequencing

and resourcing. It also ensured that mandatory tasks were completed on time and enabled the processes to be effectively tracked by the Executive Committee. Consistent with the Commission's flexible business model described above, many of the necessary tasks were developed with the assistance of consultants and contractors.

The Commission progressively moved into new premises at 95 Northbourne Avenue, Canberra between May and June 2005. Decisions were required on facilities and services as diverse as stationery, telephones, computers, office equipment, office aesthetics, travel, office supplies, furniture, kitchen facilities, security systems, mail

services, signage and car parking. The quality and amenity of physical premises was seen as an important factor in building and maintaining staff morale and the future operational capability of the Commission.

7. MANAGING AND REVIEWING IMPLEMENTATION The Commission approached the task of managing and reviewing the establishment

of the new organisation in three ways:

• it established an Executive Committee (the CEO and the general managers) as the principal oversight body for internal management of the Commission’s

operations

• it offered full opportunity for members of staff to have their say about the issues that affect them, through both formal and informal discussion processes, and

• the Commission developed an appropriate level of management and review by commissioners. While the CEO is responsible for administering the organisation, judgements were required about the necessary extent of involvement of commissioners in an administrative oversight role. Eventually, arrangements were implemented whereby the CEO

reported orally to commissioners on the establishment and operation of the organisation.

8. MAINTAINING MOMENTUM As a management team, the CEO and general managers recognised the need to

support and maintain staff morale in times of high workload and keep a cohesive team while trying to progress set-up issues on multiple fronts. These activities included

regular meetings to track progress and celebrate success, social gatherings to ensure staff members were able to establish comfortable and familiar working

relationships with their colleagues and frequent feedback and encouragement. Maintaining momentum remains an opportunity and a risk that requires ongoing management.

20 04-0 5 Annual Report - National W ater Commission 41

42 2004-05 Annual Report - National Water Commission

SECTION 5 FINANCIAL STATEMENTS

o

INDEPENDENT AUDIT REPORT

To the Prime Minister

Scone

The financial statements and Chief Executive's responsibility

The financial statements comprise:

• Statement by the Chief Executive and Chief Finance Officer;

• Statements of Financial Performance, Financial Position and Cash Flows;

• Schedules of Commitments and Contingencies;

• Schedule of Administered Items; and

• Notes to and forming part o f the Financial Statements

of the National Water Commission for the period 17 December 2004 to 30 June 2005.

The National Water Commission’s Chief Executive is responsible for preparing financial statements that give a true and fair presentation of the financial position and performance of the National Water Commission, and that comply with accounting standards, other mandatory financial reporting requirements in Australia, and the Finance Minister’s Orders made under the Financial Management and Accountability Act 1997, The National Water Commission’s Chief

Executive is also responsible for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial statements.

A udit approach

1 have conducted an independent audit of the financial statements in order to express an opinion on them to you. My audit has been conducted in accordance with the Australian National Audit Office Auditing Standards, which incorporate the Australian Auditing and Assurance Standards, in order to provide reasonable assurance as to whether the financial statements are free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgement, selective testing, die inherent limitations of internal control, and the availability of

persuasive, rather than conclusive, evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected.

While the effectiveness of management’s internal controls over financial reporting was considered when determining the nature and extent of audit procedures, the audit was not designed to provide assurance on internal controls.

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

44 2 0 0 4 -0 5 Annual Report - National Water Commission

I have performed procedures to assess whether, in all material respects, the financial statements present fairly, in accordance with the Finance Minister’s Orders made under the Financial Management and Accountability Act 1997, accounting standards and other mandatory financial reporting requirements in Australia, a view which is consistent with my understanding of the National Water Commission’s financial position, and of its performance as represented by the

statements of financial performance and cash flows.

The audit opinion is formed on the basis of these procedures, which included:

• examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial statements; and

• assessing the appropriateness of the accounting policies and disclosures used, and the reasonableness of significant accounting estimates made by the Chief Executive.

Independence

In conducting the audit, I have followed the independence requirements of the Australian National Audit Office, which incorporate the ethical requirements of the Australian accounting profession.

Audit Opinion

In my opinion, the financial statements of the National Water Commission:

(a) have been prepared in accordance with the Finance Minister's Orders made under the Financial Management and Accountability Act 1997', and (b) give a true and fair view of the National Water Commission’s financial position as at 30 June 2005 and of its performance and cash flows for the year then ended, in accordance

with:

(i) the matters required by the Finance Minister’s Orders; and

(ii) applicable accounting standards and other mandatory financial reporting requirements in Australia.

Australian National Audit Office

John Jones' " Executive Director

Delegate of the Auditor-General

Canberra 25 July 2005

2 0 0 4 -0 5 Annual Report - National Water Commission 45

National Water Commission

Financial Statements

for the Period 17 December 2004

to 30 June 2005

20 04-0 5 Annual Report - National Water Commission

NATIONAL WATER COMMISSION

STATEMENT BY THE CHIEF EXECUTIVE AND CHIEF FINANCE OFFICER

In our opinion, the attached financial statements for the period 17 December 2004, the date

of royal assent to the National Water Commission Act 2004, to 30 June 2005 have been prepared based on properly maintained financial records and give a true and fair view of the

matters required by the Finance Minister’s Orders made under the Financial Management and

Accountability Act 1997, as amended.

Signed Signed

Ken Matthews Chief Executive

x ’ i'J u ly 2005

Roger Cobcroft Chief Financial Officer

July 2005

20 04-0 5 Annual Report - National Water Commission 4 7

NATIONAL WATER COMMISSION

STATEMENT OF FINANCIAL PERFORMANCE

for the period 17 December 2004 to 30 June 2005

2005

Notes $

Revenues from Ordinary Activities

Revenues from Government

4A 4,783,000

Revenues from goods and services

-

Other revenues

4B 57,000

Revenues from Ordinary Activities

4,840,000

Expenses from Ordinary Activities

Employees

5A 1,300,497

Suppliers

5B 1,057,524

Depreciation and amortization

5C 39,452

Other expenses

89,115

Expenses from Ordinary Activities

2,486,588

Operating Surplus (or Deficit) from Ordinary Activities 2,353,412

Total Changes in Equity other than those resulting from transactions with Owners as

Owners

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

2,353,412

48 20 04-0 5 Annual Report - National Water Commission

NATIONAL WATER COMMISSION

STATEMENT OF FINANCIAL POSITION

as at 30 June 2005

2005

Notes S

ASSETS

Financial Assets

Cash

Receivables

Total Financial Assets

Non-Financial Assets

Buildings

Infrastructure, plant and equipment

Intangibles

Total Non-Financial Assets

Total Assets

LIABILITIES

Employee provisions

Other provisions

Suppliers

Other payables

Total Liabilities

EQUITY

Contributed equity

Retained surpluses/(accumulated deficits)

Total Equity

Current Assets

Non-current Assets

Current Liabilities

Non-current Liabilities

6A 903,859

6B 4,474,381

5,378,240

7A,7C 676,617

7B,7C 552,267

7D 51,450

1,280,334

6,658,574

8A 1,425,616

8B 89,115

9A 541,077

9B 146,354

2,202,162

2,103,000

2,353,412

4,456,412

5,378,240

1,280,334

1,355,265

846,897

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

2 0 04-0 5 Annual Report - National Water Commission 4 9

for the period 17 December 2004 to 30 June 2005

2005

Notes $

OPERATING ACTIVITIES

Cash Received

Appropriations 1,650,000

Net GST received from ATO -

Other -

Total Cash Received 1,650,000

Cash Used

Employees 665,192

Suppliers 729,960

Cash transferred to the Official Public Account -

Total Cash Used 1,395,152

Net Cash From (or Used by) Operating Activities 11 254,848

NATIONAL WATER COMMISSION

STATEMENT OF CASH FLOWS

INVESTING ACTIVITIES

Cash Received

Proceeds from sales of property, plant and equipment

Total Cash Received -

Cash Used

Purchase of property, plant and equipment 1,136,735

Purchase of intangibles 58,254

Total Cash Used 1,194,989

Net Cash From (or Used by) Investing Activities (1,194,989)

FINANCING ACTIVITIES

Cash Received

Appropriations - contributed equity 1,844,000

Total Cash Received 1,844,000

Net Cash From (or Used by) Financing Activities 1,844,000

Net Increase (or Decrease) in Cash Held 903,859

Cash a t the beginning of the reporting period -

Cash at the End of the Reporting Period 903,859

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

50 2004-0 5 Annual Report - National W ater Commission

NATIONAL WATER COMMISSION

SCHEDULE OF COMMITMENTS

as at 30 June 2005

BY TYPE

Capital commitments

Land and buildings

Infrastructure, plant and equipment

Total Capital Commitments

Other Commitments

Operating leases

2005

$

486,780

107,095

593,875

2,180,758

Other 257,781

Total Other Commitments 2,438,539

Commitments Receivable (175,674)

Net Commitments by Type 2,856,740

BY MATURITY

Capital Commitments

One year or less 593,875

Total Capita! Commitments

Operating Lease Commitments

593,875

One year or less 389,442

From one to five years 1,791,316

Total Operating Lease Commitments 2,180,758

Other Commitments

One year or less 257,781

Commitments Receivable (175,674)

Net Commitments by Maturity 2,856,740

NB: All commitments are GST inclusive where relevant.

Description of leasing arrangements

Nature o f lease General description o f leasing arrangement

Leases for office accommodation The Commission has signed heads of agreement for a lease for office accommodation for a

period of five years with an option to renew for a further five years. There is a six month rent-

free period from the commencement of the lease. Lease payments increase by 3.5% with a

market review at the end of the third year and on the exercise of the option to renew.

Agreements for the provision of

motor vehicles to senior executive

officers

The Commission leases motor vehicles for use by senior executives. No contingent rentals

exist. There are no renewal or purchase options available to the Commission.

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

2 0 0 4 -0 5 Annual R ep o rt-N atio n al Water Commission 51

NATIONAL WATER COMMISSION

SCHEDULE OF ADMINISTERED ITEMS

Notes

Revenues Administered on Behalf of Government

fo r the p e rio d 17 D ecem ber 2 0 0 4 to 3 0 June 2 0 0 5

Non-taxation Revenue

Other sources of non-taxation revenue

Total Revenues Administered on Behalf of Government

Expenses Adm inistered on Behalf of Government

fo r the p e rio d 17 D ecem ber 2 0 0 4 to 3 0 June 2 0 0 5

Grants

Remuneration of Commissioners

Total Expenses Administered on Behalf of Government

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

s

200:

51.010

51.010

52 2 0 04-0 5 Annual Report - National W ater Commission

2005

Notes $

Assets Administered on behalf of Government

as a t 30 June 2005

Financial Assets

Cash 495

Total Assets Administered on Behalf of Government 495

Liabilities Administered on behalf of Government

as a t 3 0 June 2005

Payables

Grants -

Accrued remuneration of Commissioners 25,505

Total Liabilities Administered on Behalf of Government 25,505

NATIONAL WATER COMMISSION

SCHEDULE OF ADMINISTERED ITEMS (continued)

Net Assets Administered on Behalf of Government

Current Assets 495

Non-current Assets -

Current Liabilities 25,505

Non-current Liabilities -

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

2 0 04-0 5 Annual Report - National Water Commission 53

NATIONAL WATER COMMISSION

SCHEDULE OF ADMINISTERED ITEMS (continued)

Administered Cash Flows

fo r the period 17 D ecem ber 2 004 to 30 June 2 00 5

Operating Activities

Cash Received

Other - GST received from ATO

Total Cash Received

2005

S

Cash Used

Grant payments -

Remuneration of Commissioners 25,505

Total Cash Used 25,505

Net Cash from / (Used In) Operating Activities (25,505)

Net Increase (Decrease) in Cash Held (25,505)

Cash at the beginning of the reporting period -

Cash from Official Public Account for:

Appropriations -

Special accounts 26,000

Cash to Official Public Account for:

Appropriations -

Special accounts -

Cash at End of Reporting Period 495

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

54 2 0 04-0 5 Annual Report - National Water Commission

NATIONAL WATER COMMISSION

SCHEDULE OF ADMINISTERED ITEMS (continued)

Administered Commitments

as a t 30 June 2 0 0 5

BY TYPE

Capital Commitments

Other Commitments

Grants1

Other

Total Other Commitments

Commitments Receivable

Net Commitments by Type

BY MATURITY

2005

Notes $

294.160.000

294.160.000

(26,741,818)

267,418,182

Other Commitments

One year or less

From one to five years

Net Commitments by Maturity

44,509,091

222,909,091

267,418,182

NB: All commitments are GST inclusive where relevant.

1 Grants commitments relate to amounts to be paid under grant agreements but which have not yet been recognised as an

expense. The Commission administered two grant programmes -W ater Smart Australia and Raising National Water Standards.

Statement of Activities Administered on Behalf of Government

The major administered activities of National Water Commission are directed towards achieving the outcome described in Note 1 to the

Financial Statements. The major financial activities are the provision of financial assistance for projects relating to Australia’s water

resources. Details of planned activities for the year can be found in the Prime Minister and Cabinet Portfolio Additional Estimates

Statements for 2004-05.

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

2 0 0 4 -0 5 Annual Report - National Water Commission 55

NATIONAL W ATER C O M M ISSIO N

N o te s to a n d fo rm in g p a rt o f th e F in a n c ia l S ta te m e n ts fo r th e ye a r e n d in g 3 0 J u n e 2 0 0 5

Note 1 Summary of Significant Accounting Policies

Note 2 Adoption of Australian Equivalents to International Financial Reporting Standards from 2 0 0 5 -2 0 0 6 .

Note 3 Events Occurring after Reporting Date

Note 4 Operating Revenues

Note 5 Operating Expenses

Note 6 Financial Assets

Note 7 Non-Financial Assets

Note 8 Provisions

Note 9 Payables

Note 10 Analysis of Equity

Note 11 Reconciliation of net surplus to net cash from operating activities

Note 12 Executive Remuneration

Note 13 Remuneration of Auditors

Note 14 Average Staffing Levels

Note 15 Financial Instruments - Departmental and Administered

Note 16 Administered Reconciliation Table

Note 17 Appropriations

Note 18 Specific Payment Disclosures

Note 19 Reporting of Outcomes

5 5 2004-05 Annual Report ■- National Water Commission

NATIONAL WATER COMMISSION

Notes to and fo rm in g p a rt o f th e F in a n cia l S ta te m e n ts fo r th e year e n d in g 30 Jun e 2 0 0 5

Note 1 Summary of Significant Accounting Policies

1.1 The National W ater Commission and its Objectives

The National Water Commission was established on 17 December 2004 with the passage of the National Water Commission A c t 2004. On

15 February 2005, the Commission was made a prescribed agency for the purposes of the Financial Management and Accountability A ct

1997.

The objectives of the National Water Commission are to assess the implementation, and promote the objectives of, the National Water

Initiative Intergovernmental Agreement and to advise on financial assistance to be provided by the Australian Government under the

components of the Australian Water Fund,

The Commission is funded by the Australian Government for a single Outcome: the sustainable management and use of Australia’s water

resources.

Commission activities contributing toward this Outcome are classified as either departmental or administered. Departmental activities

involve the use of assets, liabilities, revenues and expenses controlled or incurred by the Commission in its own right. Administered

activities involve the management or oversight by the Commission, on behalf of the Government, of items controlled or incurred by the

Government.

Departmental activities are identified under two Outputs: Output 1.1 Policy Advice and Output 1.2 Programme Management.

Funding for administered activities is credited to the Australian Water Fund Account, a special account established by Section 40 of the

National Water Commission A ct 2004. Details of the amounts credited and debited to this special account are provided at Note 17C.

The continued existence of the Commission in its present form and with its present programmes is dependent on Government policy and

or continuing appropriations by Parliament for the Commission’s administration and programmes.

1.2 Basis of Accounting

These financial statements are required by Section 49 of the Financial Management and Accountability A c t 199 7 and are a general- purpose financial report.

This report covers the period from the date the National Water Commission was established, 17 December 2004, until 30 June 2005.

Establishment costs of the Commission to 31 December 2004 were met by the Department of the Prime Minister and Cabinet. Because

the Commission did not exist in 2003-04, no comparative financial information is included in this report.

The statements have been prepared in accordance with:

• Finance Minister’s Orders or FMOs, being the Financial M anagem ent and Accountability Orders (Financial Statements fo r reporting

periods ending on o r a fte r 30 June 2005);

• Australian Accounting Standards and Accounting Interpretations issued by the Australian Accounting Standards Board; and

• Consensus Views of the Urgent Issues Group.

The Statements of Financial Performance and Financial Position have been prepared on an accrual basis and are in accordance with the

historical cost convention, except for certain assets which, as noted, are at valuation, Except where stated, no allowance is made for the

effect of changing prices on the results or the financial position.

Assets and liabilities are recognised in the Statement of Financial Position when and only when it is probable that future economic

benefits will flow and the amounts of the assets or liabilities can be reliably measured. However, assets and liabilities arising under

agreements equally proportionately unperformed are not recognised unless required by an Accounting Standard. Liabilities and assets

that are unrecognised are reported in the Schedule of Commitments and the Schedule of Contingencies. There were no contingent assets

or liabilities in 2004-05.

Revenues and expenses are recognised in the Statement of Financial Performance when and only when the flow or consumption or loss of economic benefits has occurred and can be reliably measured.

Administered revenues, expenses, assets, liabilities, cash flows and commitments reported in the Schedule of Administered Items and

related notes are accounted for on the same basis and using the same policies as for Commission items, except where otherwise stated.

There were no administered contingencies during 2004-05.

T3 Revenue

Revenues from Government

Amounts appropriated for Departmental outputs appropriations for the year (adjusted for any formal additions and reductions) are recognised as revenue.

Appropriations receivable are recognised at their nominal amounts.

2 0 04-0 5 Annual Report - National Water Commission 57

NATIONAL WATER COMMISSION

Notes to and form ing part of the Financial Statem ents fo r the year ending 30 June 2005

Resources Received Free o f Charge

Services received free of charge are recognised as revenue when and only when a fair value can be reliably determined and the services

would have been purchased if they had not been donated. Use of those resources is recognised as an expense.

Contributions of assets at no cost of acquisition or for nominal consideration are recognised as revenue at their fair value when the asset

qualifies for recognition, unless received from another government agency as a consequence of a restructuring of administrative

arrangements.

Other Revenue

Revenue from the sale of goods is recognised upon the delivery of goods to customers.

Revenue from rendering of services is recognised by reference to the stage of completion of contracts or other agreements to provide services, The stage of completion is determined according to the proportion that costs incurred to date bear to the estimated total costs of

the transaction.

Receivables for goods and services are recognised at the nominal amounts due less any provision for bad and doubtful debts.

Collectability of debts is reviewed at balance date. Provisions are made when collectability of the debt is judged to be less rather than more likely.

Revenue from disposal of non-current assets is recognised when control of the asset has passed to the buyer.

1.4 Transactions with the Government as Owner

Equity injections

Amounts appropriated which are designated as 'equity injections' for a year (less any savings offered up in Portfolio Additional Estimates

Statements) are recognised directly in Contributed Equity in that year.

1.5 Employee Benefits

Liabilities for services rendered by employees are recognised at the reporting date to the extent that they have not been settled.

Liabilities for wages and salaries (including non-monetary benefits), annual leave and sick leave are measured at their nominal amounts.

Other employee benefits expected to be settled within 12 months of the reporting date are also measured at their nominal amounts.

The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.

All other employee benefit liabilities are measured as the present value of the estimated future cash outflows to be made in respect of

services provided by employees up to the reporting date.

Leave

The liability for employee benefits includes provision for annual leave and long service leave. No provision has been made for personal

leave (which incorporates sick leave and carer’s leave) as all personal leave is non-vesting and the average personal leave taken in future

years by employees of the Commission is estimated to be less than the annual entitlement for sick leave.

The leave liabilities are calculated on the basis of employees' remuneration, including the Commission’s employer superannuation

contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

The liability for long service leave has been determined in accordance with the shorthand' method permitted for small agencies under

FinanceBrief 13 M easurem ent o f Commonwealth Public Sector Leave Entitlements issued by the Department of Fioance and Administration.

Superannuation

Staff of the Commission are members of the Commonwealth Superannuation Scheme and the Public Sector Superannuation Scheme. The

liability for their superannuation benefits is recognised in the financial statements of the Australian Government and is settled by the

Australian Government in due course.

The Commission makes employer contributions to the Australian Government at rates determined by an actuary to be sufficient to meet

the cost to the Government of the superannuation entitlements of the Commission’s employees.

1.6 Leases

A distinction is made between finance leases and operating leases. Finance leases effectively transfer from the lessor to the lessee

substantially all the risks and benefits incidental to ownership of leased non-current assets. In operating leases, the lessor effectively

retains substantially all such risks and benefits.

Where a non-current asset is acquired by means of a finance lease, the asset is capitalised at the present value of minimum lease payments at the beginning of the lease term and a liability recognised at the same time and for the same amount. The discount rate used

is the interest rate implicit in the lease. Leased assets are amortised over the period of the lease. Lease payments are allocated between

the principal component and the interest expense.

58 20 04-0 5 Annual Report - National Water Commission

NATIONAL WATER COMMISSION Notes to and forming part of the Financial Statements for the year ending 30 June 2005 Operating lease payments are expensed on a basis that is representative of the pattern of benefits derived from the leased assets. The net

present value of future net outlays in respect of surplus space under non-cancellable lease agreements is expensed in the period in which

the space becomes surplus.

Lease incentives taking the form of ‘free’ leasehold improvements and rent holidays are recognised as liabilities. These liabilities are

reduced by allocating lease payments between rental expense and reduction of the liability.

The Commission is the lessee of an operating lease of office accommodation and executive vehicles at 30 June 2005. It does not have

any finance leases. There is a lease incentive liability as at 30 June 2005 in the form of a rent-free period for the leased office

accommodation.

1 .7 Cash

Cash means notes and coins held and any deposits held at call with a bank or financial institution. Cash is recognised at its nominal

amount.

1.8 Other Financial Instruments

Trade Creditors

Trade creditors and accruals are recognised at their nominal amounts, being the amounts at which the liabilities will be settled. Liabilities

are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

Contingent Liabilities and Contingent Assets

Contingent liabilities (or assets) are not recognised in the Statement of Financial Position but are discussed in the relevant schedules and

notes. They may arise from uncertainty as to the existence of a liability (or asset), or represent an existing liability (or asset) in respect of

which settlement is not probable or the amount cannot be reliably measured. Remote contingencies are part of this disclosure. Where

settlement becomes probable, a liability (or asset) is recognised. A liability (or asset) is recognised when its existence is confirmed by a

future event, settlement becomes probable or reliable measurement becomes possible.

The Commission did not have any contingent liabilities or assets, remote or otherwise, during 2004-05.

1.9 Acquisition of Assets

Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in

exchange and liabilities undertaken.

Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and revenues at their fair value at the date of

acquisition, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially

recognised as contributions by owners at the amounts at which they were recognised in the transferor agency's accounts immediately

prior to the restructuring.

1.1 0 Property, Plant and Equipm ent (PP&E)

Asset Recognition Threshold

Purchases of property, plant and equipment are recognised initially at cost in the Statement of Financial Position, except for items costing

less than $300, which are expensed in the year of acquisition (other than where they form part of a group of similar items which are

significant in total).

Revaluations

Buildings, plant and equipment are carried at valuation, being revalued annually with sufficient frequency such that the carrying amount

of each asset class is not materially different, at reporting date, from its fair value. The fair values of buildings, plant and equipment at 30

June 2005 are not considered to be materially different from their acquisition cost, because they were acquired close to the end of the

financial year.

Depreciation

Depreciable property plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the

Commission using, in all cases, the straight-line method of depreciation. Leasehold improvements are depreciated on a straight-line basis

over the lesser of the estimated useful life of the improvements or the unexpired period of the lease.

Depreciation rates (useful lives) and methods are reviewed at each reporting date and necessary adjustments are recognised in the

current, or current and future reporting periods, as appropriate. Residual values are re-estimated for a change in prices only when assets

are revalued.

2 0 04-0 5 Annual Report - National Water Commission 59

NATIONAL WATER COMMISSION Notes to and forming part of the Financial Statements for the year ending 30 June 2005

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

Leasehold improvements Lease term

Information Technology 3 years

Furniture and Fittings 7 years

Other Plant and Equipment 7 years

The aggregate amount of depreciation allocated for each class of asset during the reporting period is disclosed in Note 5C.

1.11 Im p a irm e n t of N on-C urrent Assets

Non-current assets carried at up to date fair value at the reporting date are not subject to impairment testing.

Non-current assets carried at cost, which are not held to generate net cash inflows, are assessed for indications of impairment. Where

indications of impairment exist, the asset is written down to the higher of its net selling price and, if the entity would replace the asset's

service potential, its depreciated replacement cost.

1.12 Intangibles

The Commission’s intangibles comprise software purchased for internal use. These assets are carried at cost.

Software is amortised on a straight-line basis over its anticipated useful life. The useful lives of National Water Commission’s software are

2 -3 years.

All software assets were assessed for indications of impairment as at 30 June 2005. No assets were found to be impaired.

1 .1 3 Taxation

The Commission is exempt from all forms of taxation except fringe benefits tax and the goods and services tax (GST). Revenues and

expenses are recognised net of GST except where the amount of GST incurred is not recoverable from the Australian Taxation Office.

Amounts of GST payable and receivable are recognised as liabilities and assets respectively.

1 .1 4 Reporting of A dm inistered Activities

A dm inistered Cash Transfers to and from the Public Account

Revenue collected by the National Water Commission for use by the Government rather than the Commission is Administered Revenue.

Collections are transferred to the Official Public Account (OPA) maintained by the Department of Finance and Administration. Conversely,

cash is drawn from the OPA to make payments under Parliamentary appropriation on behalf of Government. These transfers to and from

the OPA are adjustments to the administered cash held by the Commission on behalf of the Government and reported as such in the

Statement of Cash Flows in the Schedule of Administered Items and in the Administered Reconciliation Table in Note 16. Thus the

Schedule of Administered Items largely reflects the Government’s transactions, through the Commission, with parties outside the Government.

Grants a n d Subsidies

The National Water Commission administers two grant programmes on behalf of the Government - Water Smart Australia and Raising

National Water Standards.

Grant liabilities are recognised to the extent that (i) the services required to be performed by the grantee have been performed or (ii) the

grant eligibility criteria have been satisfied, but payments due have not been made. A commitment is recorded at the eariiest of (i) when

Ministerial approval has been given and publicly announced or (ii) when the Government enters into an agreement to make these grants,

but services have not been performed or criteria satisfied.

Note 2 Adoption of Australian Equivalents to International Financial Reporting Standards from

2005-2006

The Australian Accounting Standards Board has issued replacement Australian Accounting Standards to apply from 2005-06. The new

standards are the Australian Equivalents to International Financial Reporting Standards (AEIFRS). International Financial Reporting

Standards (IFRS) are issued by the International Accounting Standards Board. The new standards cannot be adopted early. The standards

being replaced are to be withdrawn with effect from 2005-06, but continue to apply in the meantime, including for reporting periods ending on 30 June 2005.

The purpose of issuing AEIFRS is to enable Australian reporting entities reporting under the Corporations A c t 2001 to be able to more

readily access overseas capital markets by preparing their financial reports according to accounting standards more widely used overseas.

6 0 2004-05 Annual Report - National Water Commission

NATIONAL WATER COMMISSION Notes to and forming part of the Financial Statements for the year ending 30 June 2005 AEIFRS contain certain additional provisions that will apply to not-for-profit entities, including Australian Government agencies. Some of

these provisions are in conflict with IFRS, and therefore the National Water Commission, as a not-for-profit entity, will be asserting that its

2005-06 financial report has been prepared in accordance with Australian Accounting Standards (including AEIFRS), not IFRS.

AAS 29 Financial Reporting b y Government Departm ents will continue to apply to the Commission under AEIFRS.

Accounting Standard AASB 1047 Disclosing the Im pacts o f Adopting Australian Equivalents to International Financial Reporting Standards

requires that the financial statements for 20 04-0 5 disclose:

• an explanation of how the transition to AEIFRS is being managed;

• narrative explanations of the key policy differences arising from the adoption of AEIFRS;

• any known or reliably estimable information about the impacts on the financial report had it been prepared using the Australian equivalents to IFRS; and

• if the impacts of the above are not known or reliably estimable, a statement to that effect.

Where an entity is not able to make a reliable estimate, or where quantitative information is not known, the entity should update the

narrative disclosures of the key differences in accounting policies that are expected to arise from the adoption of AEIFRS.

The purpose of this Note is to make these disclosures.

2.1 M a n ag em en t of the transition to AEIFRS

The National Water Commission has taken, or planned, the following steps to prepare for the implementation of AEIFRS:

• a review of the likely impacts of the AEIFRS on the Commission's financial statements was conducted in late 2004-05;

« the Audit and Fraud Committee has considered the process for the audit by the Australian National Audit Office of 2004-05 financial

information restated to comply with AEIFRS; and

• the Commission will submit restated audited comparative information for 2004-05 to the Department of Finance and Administration

by 30 September 2005.

2.2 M ajor changes in accounting policy

Changes in accounting policies under AEIFRS are applied retrospectively, i.e. as if the new policy had always applied, except in relation to

the exemptions available under AASB 1 F irst-tim e Adoption o f Australian Equivalents to International Financial Reporting Standards.

Changes to major accounting policies are discussed in the following paragraphs.

Management's review of the quantitative impacts of AEIFRS represents the best estimates of the impacts of the changes as at reporting

date. The actual effects of the impacts of AEIFRS may differ from these estimates due to:

• continuing review of the impacts of AEIFRS on the Commission’s operations;

• potential amendments to the AEIFRS; and

• emerging interpretation as to the accepted practice in the application of AEIFRS.

The Commission’s review of AEIFRS suggested that two changes to accounting policies would be required as a result of the move to

AEIFRS:

• capitalisation of provision for make-good of leases premises; and

• discounting of the non-current portion of annual leave.

Under AASB 116 Property Plant and Equipment, the initial cost of an item of property, plant and equipment includes the initial estimate of

the costs of dismantling and removing the item and restoring the site on which it is located, where the obligation is incurred when the

item is acquired or as a consequence of the entity having used the item during a particular period for purposes other than to produce

inventories during that period. Under the Heads of Agreement for the lease of 95 Northboume Avenue, the Commission has an obligation

to make good the premises at the end of the lease term. The present value of the estimated cost of make-good has been recognised as

an expense and a corresponding liability in the 2004-05 financial report of the Commission. Had AEIFRS applied in 2004-05, the

Commission would have included this amount in the carrying amount of its leasehold improvement asset in lieu of recognising an

expense. The effect would have been to increase the operating surplus for 2004-05 by $88,384 and the carrying amount of the leasehold

improvement asset at 30 June 2005 by the same amount.

Under AASB 119 Employee Benefits, that portion of annual leave that is not expected to be taken within 12 months of reporting date is

required to be discounted to its present value. To the extent that this amount can be estimated, the impact of the change is not expected

to be material.

Had AEIFRS applied in 2004-05, the Commission would also have been required to make additional disclosures in respect of:

• the date the financial report was authorised for issue and the name of the person responsible for authorising its issue;

• judgments made in the process of applying the entity's accounting policies;

• the expected timing and uncertainty of future sacrifices required to settle provisions; and

• Australian Accounting Standards that have not been early adopted.

2 0 04-0 5 Annual Report - National Water Commission 61

N ATIO N AL W ATER C O M M IS S IO N

N o te s to a n d fo rm in g p a rt o f th e F in a n c ia l S ta te m e n ts fo r th e y e a r e n d in g 3 0 J u n e 2 0 0 5

R econciliation o f D e p artm ental Equity u n d e r AGAAP to AEIFRS

Departmental Equity at 30 June 20 05 under AGAAP 4,456,412

Plus: capitalisation of the cost of make-good of leases premises ________ 8 e ·384

Equity at 30 June 20 05 under AEIFRS 4,544,796

Reconciliation o f N e t S urplus (or D eficit) under AGAAP to AEIFRS

Net Surplus (or Deficit) for 20 0 4 /0 5 under AGAAP 2,353,412

Plus: capitalisation of the cost of make-good of leases premises 88,384

Net Surplus(or Deficit) for 2 0 0 4 /0 5 under AEIFRS 2,441,796

Note 3 Events Occurring after Reporting Date

There were no events after reporting date required to be included in this financial report.

Note 4 Operating Revenues

2005

$

Note 4A Revenues from Government

Appropriations for outputs 4,783,000

Total revenues from government 4,783,000

Note 4B O th er R evenues

Resources Received Free of Charge (see Note 13) 57,000

Note 5 Operating Expenses

Note 5A Em ployee Expenses

Wages and Salary

Superannuation

Leave and other entitlements

Other employee expenses

Total employee benefits expense

Workers compensation premiums

Total employee expenses

2005

s

832,182

114,333

335,672

2,401

1,284,588

15,909

1,300,497

62 2 0 0 4 -0 5 Annual Report - National W ater Commission

NATIONAL WATER COMMISSION

N otes to and fo rm in g p a rt o f th e F ina ncial S ta te m e n ts fo r th e ye a r e n d in g 3 0 Jun e 2 0 0 5

2005

Note 5B Supplier Expenses $

Goods from related entities -

Goods from external entities 102,335

Services from related entities 160,692

Services from external entities 639,740

Operating lease rentals* 154,757

Total supplier expenses 1,057,524

* These comprise minimum lease payments only.

2005

Note 5C Depreciation and Amortisation $

(i) Depreciation

Buildings - Leasehold Improvements 11,990

Infrastructure, Plant and Equipment 20,658

Total depreciation 32,648

(ii) Am ortisation

Intangibles - Computer Software 6,804

Total depreciation and amortisation 39,452

Depreciation expenses are less than they would have been had the Commission been operating for the whole of 2004-05.

The aggregate amounts of depreciation or amortisation expensed during the reporting period for each class of depreciable asset are as

follows:

Leasehold improvements 11,990

Information T echnology Equipment 11,796

Other Plant and equipment 8,862

Purchased software 6,804

Total depreciation and amortisation 39,452

No depreciation or amortisation was allocated to the carrying amounts of other assets.

2 0 0 4 -0 5 Annual Report - National Water Commission 63

Note 6 Financial Assets

Note 6A Cash

Departmental (other than special accounts)

Total cash

NATIO N AL W ATER C O M M ISSIO N

N o te s to a n d fo rm in g p a rt o f th e F in a n c ia l S ta te m e n ts fo r th e y e a r e n d in g 3 0 J u n e 2 0 0 5

Note 6B R eceivables

Goods and services 807,623

GST receivable from the Australian Taxation Office 274,758

Appropriations receivable - undrawn appropriation 3,392,000

Total receivables (net) 4,474,381

Receivables are represented by:

Current 4,474,381

Non-current -

Total receivables (net) 4,474,381

All receivables are due from other Australian Government entities. Payment is expected in full and hence no provision for doubtful debts

has been created.

Appropriations receivable undrawn are appropriations controlled by the Commission but held in the Official Public Account under the

Government’s just-in-time drawdown arrangements.

Receivables are aged as follows:

Current 4,474,381

Overdue by: -

Less than 30 days -

30 to 60 days -

61 to 90 days -

More than 90 days -

Total receivables 4,474,381

2005

S

903.859

903.859

Note 7 Non-Financial Assets

Note 7A Buildings

Leasehold improvements

- at fair value

- accumulated amortisation

Total leasehold improvements

Total Buildings (non-current)

2005

S

688,607

(11,990)

676.617

676.617

64 2 0 0 4 -0 5 Annual Report - National W ater Commission

NATIONAL WATER COMMISSION

N otes to and fo rm in g p a rt o f th e F inancial S ta te m e n ts fo r th e y e a r e n d in g 3 0 Ju n e 2 0 0 5

2005

Note 7B Infrastructure, Plant and Equipment $

Infrastructure, plant and equipment

- a t fair value 572,925

-accum ulated depreciation (20,658)

Total Infrastructure, Plant and Equipment (non-current) 552,267

Because the Commission acquired its property, plant and equipment late in 2004-05, the acquisition costs of these assets are considered

to approximate fair value. The Commission's policy on the revaluation of non-current assets is set out at Note 1,10.

Note 7C Analysis of Property, Plant and Equipment

TABLE A - Reconciliation Of Property, Plant And Equipment

Item Buildings -

Leasehold

Improvements

$

IT Equipment

$

Other

Infrastructure,

Plant and

Equipment (IP&E)

$

Total IP&E

$

As at 17 December 2004

Gross book value - - - -

Accumulated depreciation/amortisation - - - -

Opening net book value - - - -

Additions:

by purchase 688,607 167,289 405,636 1,261,532

from acquisition of operations (including restructuring) - - - -

Net revaluation increment/fdecrement) - - -

Depreciation/amortisation expense 11,990 11,796 8,862 32,648

Recoverable Amount write-downs

Disposals:

From disposal of operations - - -

Other disposals - - -

As at 30 June 2005

Gross book value 688,607 167,289 405,636 1,261,532

Accumulated depreciation/amortisation 11,990 11,796 8,862 32,648

Closing net book value 676,617 155,493 396,774 1,228,884

2 0 0 4 -0 5 Annual Report - National Water Commission 65

NATIONAL WATER COMMISSION Notes to and forming part of the Financial Statements for the year ending 30 June 2005

TABLE B - Assets At Valuation

Item Buildings -

Leasehold

Improvements

IT Equipment Other

Infrastructure,

Plant and

Equipment

(IP&E)

Total IP&E

S $ S S

As at 30 June 2005

Gross value 688,607 167,289 405,636 1,261,532

Accumulated depreciation/amortisation 11,990 11,796 8,862 32,648

Net book value 676,617 155,493 396,774 1,228,884

2005

Note 7 0 Intangible Assets $

Computer software:

Purchased ή in use (non-current) 58,254

Accumulated amortisation (6,804)

Total intangibles 51,450

TABLE A - Reconciliation Of Opening And Closing Balances Of Intangibles

Item Computer Software

$

As at 17 December 2004

Gross book value ή

Accumulated depreciation/amortisation ή

Net book value A

Additions by purchase 58,254

Depreciation/amortisation expense 6,804

Recoverable Amount write-downs -

As at 30 June 2005

Gross book value 58,254

Accumulated depreciation/amortisation 6,804

Net book value 51,450

66 2004-05 Annual Report - National Water Commission

Note 8 Provisions

2005

8A Employee Provisions S

NATIONAL WATER COMMISSION

Notes to and fo rm in g p a rt o f th e F in a n cia l S ta te m e n ts fo r th e ye a r e n d in g 3 0 J u n e 2 0 0 5

Salaries and wages 286,354

Leave 1,139,262

Superannuation -

Separations and redundancies -

Aggregate employee entitlement liability 1,425,616

Workers' compensation -

Aggregate employee benefit liability and related on-costs 1,425,616

Current 668,083

Non-current 757,533

8B Other Provisions

Provision for make-good of leased premises 89,115

Total other provisions 89,115

All other provisions are non-current liabilities.

Note 9 Payables

2005

Note 9A Suppliers Payable $

Trade creditors 541,077

Total supplier payables 541,077

All supplier payables are current. Settlement is usually made net thirty days.

Note 9B Other Payables

Lease incentives 146,354

Total other payables 146,354

All other payables are current.

20 04-0 5 Annual Report - National Water Commission 67

NATIONAL W ATER CO M M ISSIO N

N o te s to a n d fo rm in g p a rt o f th e F in a n c ia l S ta te m e n ts fo r th e ye a r e n d in g 3 0 J u n e 2 0 0 5

Note 10 Analysis of Equity

Item Accumulated

Results

Asset

Revaluation

Reserves

Contributed

Equity

TOTAL EQUITY

2005 2005 2005 2005

$ $ $ S

Opening balance as a t 17 December 2004 - - - -

Net surplus/deficit 2,353,412 - - 2,353,412

Net revaluation increment/(decrement) - - - -

Transactions with owner:

Contributions by owner:

Appropriations (equity injections) 2,103,000 2,103,000

Closing balance as at 30 June 2005 2,353,412 - 2,103,000 4,456,412

Note 11 Reconciliation of net surplus to net cash from operating activities

2005

Net surplus (deficit)

S

2,353,412

Depreciation /amortisation 39,452

(Increase) / decrease in net receivables (4,474,381)

Increase / (decrease) in capital receivables 259,000

Increase / (decrease) in GST receivable on capital items 11,797

Increase / (decrease) in employee provisions 1,425,616

Increase / (decrease) in supplier payables 541,077

Increase / (decrease) in other provisions 89,115

Increase / (decrease) in other payables 146,354

Decrease/ (increase) in capital payables (136,594)

Net cash from / (used by) operating activities 254,848

68 2 0 04-0 5 Annual Report - National W ater Commission

Note 12 Executive Remuneration

2005

The number of managers who received or were due to receive total remuneration of $100,000 or more:

$100,000 to $189,999 -

$190,000 to $199,999 1

More than $199,999 -

The aggregate amount of total remuneration of executives shown above: $193,280

Consistent with Finance Ministers Orders, the amounts shown refer to actual remuneration for 2004-0 5. If the Commission had been

operating for a full year, more executives with remuneration over $100,000 would have been included in the above table. As at the 30

June 2005 the Commission employed four executives with remuneration packages with an annual value greater than $100,000. The

aggregate value of these four remuneration packages in 2004-05 was $433,318.

No separation or redundancy/termination payments were made to any executives during the year.

Note 13 Remuneration of Auditors

2005

$

NATIONAL WATER COMMISSION

Notes to and fo rm in g p a rt o f th e F ina ncial S ta te m e n ts fo r th e ye a r e n d in g 30 J u n e 2 0 0 5

Financial statement audit services are provided by the ANAO free of charge to the Commission.

The fair value of the services provided was:

• audit of 2004-05 financial report 57,000

Total 57,000

No other services were provided by the Auditor-General.

Note 14 Average Staffing Levels

2005

The average staffing level for the Commission during the year was: 15,1

The above figure represents the average number of full time equivalent staff from 1 January to 30 June 2005. The actual number of

full-time equivalent staff at 30 June 2005 was 28.8.

2 0 0 4 -0 5 Annual Report - National Water Commission 69

Note 15 Financial Instruments - Departmental and Administered

N et F air Values o f Financial Assets and Liabilities

The net fair values of financial assets and liabilities approximate their carrying amounts. None of these assets or liabilities are traded on

organised markets in a standardised form.

The net fair values of trade creditors are approximated by their carrying amounts.

Credit Risk Exposures

The Department's maximum exposures to credit risk at reporting date in relation to each class of recognised financial assets is the

carrying amount of those assets as indicated in the Statement of Financial Performance.

The Department has no significant exposures to any concentrations of credit risk.

Ail figures for credit risk referred to do not take into account the value of any collateral or other security.

Note 16 Administered Reconciliation Table

2005

$

Opening administered assets less administered liabilities as at 17 December 2004 -

Less: Administered expenses 51,010

Administered transfers to/from Australian Government

Appropriation transfers from OPA

Annual appropriations administered expenses 26,000

Transfers to OPA

Administered revaluations taken to/from reserves -

Currency translation gain/loss -

Change in accounting policies -

Closing administered assets less administered liabilities as at 30 June 2005 (25,010)

NATIONAL W ATER COM M ISSION

N otes to and fo rm in g p a rt o f th e F in a n c ia l S ta te m e n ts fo r th e ye a r e n d in g 3 0 J u n e 2 0 0 5

70 2004-05 Annual Report - National Water Commission

NATIONAL WATER COMMISSION

N otes to and fo rm in g p a rt o f th e F in a n cia l S ta te m e n ts fo r th e y e a r e n d in g 30 Ju n e 2 0 0 5

Note 17 Appropriations

Note 17A Acquittal of Authority to Draw Cash from the Consolidated Revenue Fund (CRF) for Ordinary Annual Services Appropriations

Particulars Administered Departmental Total

expenses

Outcome 1

outputs

Year ended 30 June 2005 $ $ S

Balance carried from previous year - - -

Reductions of appropriations (prior years) - - _

Adjusted Balance carried for previous period - - -

Appropriation Act (No,3) 2 0 0 4 -2 0 0 5 - 4,783,000 4,783,000

Appropriation Act (No.4) 2 0 0 4 -2 0 0 5 50,000,000 - 50,000,000

Sub-total 2 0 0 4 -0 5 Annual Appropriation 50,000,000 4,783,000 54,783,000

Appropriations to take account of recoverable GST (FMAA s30A) - - -

Annotations to ‘net appropriations’ (FMAA s31) - - -

Total appropriations available for payments 50,000,000 4,783,000 54,783,000

Cash payments made during the year (GST inclusive) - 1,395,152 1,395,152

Appropriations credited to Special Accounts (excluding GST) 50,000,000 - 50,000,000

Balance of Authority to Draw Cash from the CRF for Ordinary Annual

Services Appropriations 3,387,848 3,387,848

Represented by:

Cash at bank and on hand 254,848 254,848

Receivable - departmental appropriations - 3,133,000 3,133,000

Receivables - GST receivable from the ΑΤ0 - - -

Total - 3,387,848 3,387,848

Note 17B Acquittal of Authority to Draw Cash from the Consolidated Revenue Fund (CRF) for Other than Ordinary Annual Services Appropriations

Particulars Non-operating

equity

Total

Year ended 30 June 2005 S S

Balance carried from previous year - -

Appropriation Act (No.4) 2004-2005 2,103,000 2,103,000

Sub-total 2004-05 Annual Appropriation 2,103,000 2,103,000

Appropriations to take account of recoverable GST (FMAA s30A) - -

Total appropriations available for payments 2,103,000 2,103,000

Cash payments made during the year (GST inclusive) 1,194,989 1,194,989

Balance of Authority to Draw Cash from the CRF for Other Than Ordinary Annual Services

Appropriations 908,011 908,011

Represented by: - -

Cash at bank and on hand 649,011 649,011

Departmental appropriation receivable 259,000 259,000

GST receivable from the ATO - -

Total 908,011 908,011

2 0 04-0 5 Annual Report - National Water Commission 71

NATIONAL WATER COMMISSION

N otes to and fo rm in g p a rt of th e F inancial S ta te m e n ts fo r th e ye a r e n d in g 3 0 J u n e 2 0 0 5

Note 17C Special Accounts

Australian Water Fund Account (Administered)

Legal Authority: National Water Commission A ct 2004, section 40; Financial Management and Accountability A c t 1997; s21

Purposes:

to provide financial assistance that is awarded by the Minister to particular projects relating to Australia's water resources and

determined by the Minister to be provided from the Account;

to pay or discharge the costs, expenses or other obligations incurred by the Commonwealth in the performance of the NWC’s functions

under the Act or the regulations; or

to pay any remuneration or allowances payable to any person under the Act.

This account is non-interest bearing

2005

S

Balance carried from previous period -

Appropriation Act (No. 4) 20 0 4 -2 0 0 5 50,000,000

Costs recovered -

GST credits (FMAAsSOA) -

Realised investments -

Other receipts (transfer from administered expenses appropriation) -

Available for payments 50,000,000

Payments made

Grants -

Remuneration of Commissioners 25,505

Repayments debited from the Special Account (s28)t -

Investments debited from the Special Account (FMA s39) -

Balance carried to next period 49,974,495

Represented by:

Cash held in the Official Public Account 49,974,000

Cash - held by the Commission 495

GST payable to the OPA -

Total 49,974,495

N o te 1 7 C Special Accounts

Other Trust Monies Special A ccount (Special Public Money)

Legal Authority: Financial Management and Accountability A c t 1997, section 20.

Purpose:

for expenditure of monies temporarily held on trust or otherwise for the benefit of a person other than the Commonwealth.

This account is non-interest bearing.

This account has not been used during the current financial year and has a nil opening and closing balance.

12 20 04-0 5 Annual Report - National Water Commission

NATIONAL WATER CO MMISSION

Notes to and fo rm in g p a rt o f th e F in a n cia l S ta te m e n ts fo r th e ye a r e n d in g 30 Jun e 2 0 0 5

Note 18 Specific Payment Disclosures

For both department and administered items, there were in respect of the Commission during 2004-05:

• no act of grace payments;

• no waivers of debt owing to the Commonwealth;

• no payments under the Compensation for Detriment caused by Defective Administration Scheme; and

• no ex-gratia payments or payments in special circumstances relating to APS employments pursuant to Section 73 of the Public Service A ct 1999.

Note 19 Reporting of Outcomes

Note 19A Net Cost of Outcome Delivery

Outcome 1 Total

2005 2005

$ $

Administered 51,010 51,010

Departmental 2,486,588 2,486,588

Total expenses 2,537,598 2,537,598

Total externa! revenues - -

Net cost of outcome 2,537,598 2,537,598

Outcome 1 is described in Note 1.1 Net costs shown include intra-government costs that are eliminated in calculating the actual Budget.

Note 19B M ajor Classes of Departm ental Revenue and Expenses by Outputs

Output 1.1 Output 1.2 Total Outcome 1

2005 2005 2005

$ $ S

Departmental expenses

Employees 651,053 649,444 1,300,497

Suppliers 534,195 523,329 1,057,524

Depreciation and amortisation 18,941 20,511 39,452

Other expenses 42,784 46,331 89,115

Total departmental expenses 1,246,973 1,239,615 2,486,588

Funded by:

Revenues from Government 2,391,500 2,391,500 4,783,000

Other non-taxation revenues 28,500 28,500 57,000

Total departmental revenues 2,420,000 2,420,000 4,840,000

Indirect expenses are allocated between outputs on the basis of average FTE staffing levels.

2 0 04-0 5 Annual Report - National Water Commission 73

74 20 04-0 5 Annual Report - National Water Commission

APPENDIXES

APPENDIX A RESOURCE TABLES O u t c o m e 1 - S u s t a in a b le m a n a g e m e n t a n d

u s e o f A u s t r a lia ’s w a t e r r e s o u r c e s

Administered Expenses 50 000 51 (49 949)

Price of Departmental Outputs

Output 1.1 - Policy Advice 2 392 1 219 (1173} 5 335

Output 1.2 - Programme Management 2 391 1 211 (1 180) 5011

Revenue from Government (Appropriation) for

Departmental Outputs

4 783 2 373 (2 410) 10 286

Revenue from other Sources - 57 57 60

Total Price of Outputs 4 783 2 430 (2 353) 10 346

TOTAL FOR OUTCOME 1 54 783 2481 (52 302) 326 393

(Total Price of Outputs and Administered

Expenses)

Average Staffing Level 15.1 48

* Full-year budget, including additional estimates ** Budget prior to additional estimates

76 2 0 04-0 5 Annua! Report - National Water Commission

GLOSSARY

ACRONYM TITLE

AGWF Australian Government Water Fund

ANAO Australian National Audit Office

APS Australian Public Service

AWAs Australian Workplace Agreements

COAG Council of Australian Governments

CEO Chief Executive Officer

CFO Chief Financial Officer

ESD Ecologically Sustainable Development

Fol Act Freedom of Information Act 1982

FT Full-time

HR Human resources

NRMMC Natural Resource Management Ministerial Council

NWI National Water Initiative

OH&S Occupational health and safety

PAES Portfolio Additional Estimates Statement

PM&C Department of the Prime Minister and Cabinet

PT Part-time

2 0 04-0 5 Annual Report - National Water Commission 77

Letter of transmittal, iii

Table of contents, 1

Index, 79

Glossary, 77

Contact officers, iv

Internet home page address and Internet address for report, iv

Review by agency head, 4

Overview description of agency, 16

Role and functions, 16

Organisational structure, 18

Outcome and output structure, 19

Review of performance in relation to outputs and contribution to outcomes (including actual performance in relation to performance targets and narrative discussion and analysis of performance), 24

Discussion and analysis of the agency's financial performance, 33

Summary of resource tables by outcome, 76

Statement of the main corporate governance practices in place, 30

Certification of fraud measures in place, 33

Significant developments in external scrutiny (including reports by the Auditor-General and Parliamentary Committees), 33

Assessment of the effectiveness in managing and developing human resources to achieve departmental outcomes, 34

Statistics on staffing, 35

Certified Agreements and AWAs, 36

Performance pay, 36

Assessment of purchasing against core policies and principles, 34

Number of consultancy services contracts let and total expenditure on consultancy services, 34

Absence of contractual provisions allowing access by the Auditor-General, 34

Report on performance in implementing the Commonwealth Disability Strategy, 37

Financial statements, 44

Occupational health and safety, 36

Freedom of Information, 37

Advertising and market research, 39

Ecologically sustainable development and environmental performance, 38

78 2004-05 Annual Report - National Water Commission

access and equity, 37 water entitlements, 13 accidents, 37 accommodation, 6, 33, 37, 39 accountability, 32-3 accounting of resources, 26 administered item/expenses, 28, 33, 75 administrative decisions, 33 advertising, 20-1,39 agency overview, 16-21 allocation of water, 12, 13 assessment of resources, 13 asset management, 33 Audit and Fraud Committee, 32, 33 audits, 33 water resource assessment, 13 Australian Bureau of Statistics, 26 Australian Capital Territory, 12 Australian Government Water Fund, 19-20, 27, 28 Australian National Audit Office (ANAO), 32, 33 Australian Public Service Award 1998, 36 Australian Workplace Agreements (AWAs), 34-5, 36 authorising environment, 40

average staffing level, 35, 75

‘baseline assessment', 13 briefing material, 27, 28 business model, 40 business plans, 32

certainty of water access, 13 Chief Executive Office, 18 Chief Executive Officer (CEO)/Chairman. 16-17, 32 certification of fraud measures in place, 33

report by, 4-8 Chief Financial Officer, 32 cities, 13 classifications of staff, 35-6 commissioners, 16, 17, 32

satisfaction with services received, 27-8 secretariat support, 18 see also meetings and forums committees, 32 Commonwealth Fraud Control Guidelines 2002, 33 Commonwealth Ombudsman, 33 Community Water Grants Programme, 20 compensation reporting, 37 consultancies, 34 contracts, 34 Coree Consultants, 34 corporate governance, 30-41 Corporate Strategy and Services Group, 18, 32

2004-0 5 Annual Report - National Water Commission 79

Council of Australian Governments (COAG), 4, 11, 12, 25 briefs and reports to, 27 see also water reform

dangerous occurrences, 37 Department of Agriculture, Fisheries and Forestry, 20, 32 Department of the Environment and Heritage, 20 Department of the Prime Minister and Cabinet, 6 disability strategy, 37 documents, 37 drought, 13

ecologically sustainable development, 38-9 effectiveness indicators, 24-7 efficiency indicators, 27-8 employees, see staff energy minimisation, 39 environmental performance, 39 equity and access, 37 establishment, 6-7, 16, 40-1 ethical standards, 33 Executive Committee, 32 Executive Level staff, 35, 36 external scrutiny, 33

federal arrangements, 10 female staff, 35-6 finance, 32-4, 44-73 advertising and marketing research, 39

Australian Government Water Fund, 19-20, 27, 28 Murray Darling Basic over-allocation measures, 12 resources tables, 75 staff remuneration, 35, 36 Financial Management and Accountability Act 1997, 16, 33, 40 financial performance, 33 financial risk management, 32-3 financial statements, 33, 44-76 fraud measures in place. 33 freedom of information, 37-8 full-time staff, 35-6 functions, see roles and responsibilities future, 7-8

goals for, 13-14

gender of staff. 35-6 General Managers, 32 goals, 13-14 governance, 30-41 Government Water Fund, 19-20, 27, 28 guidelines, 32

implementation plan preparation, 26 Water Smart Australia Programme, 20-1,28, 39

health and safety, 36-7 HMA Blaze Pty Ltd, 39 human resources, see staff

80 2004-05 Annual Report - National Water Commission

implementation plans under NWI, 25-6, 27 incidents, 37 Intergovernmental Agreement on a National Water Initiative, 4, 12, 14 Internet site, 37, 38

judicial decisions, 33

key achievements, 7 knowledge strategy for water, 26

legislation, 16-17, 33 lighting in Commission's building, 39

male staff, 35-6 market research and advertising, 20-1,39 measurement of resources, 13, 26 meetings and forums, 4, 17-18, 24-5, 37

governance committees, 32 with NWI signatories, 26 workshops, 26, 27, 41 Minister reporting to, 5 Murray Darling Basin, 10, 12 Murray River, 10

National Competition Policy assessment framework, 26, 28 National Land and Water Resources Audit 2000, 13 national performance indicators for NWI, 26 National Water Commission Act 2004, 16-17 National Water Commission Statement of Strategic Intent, 31,41

National Water Initiative (NWI), 4-5. 12-14, 24-6. 39 organisational responsibility for implementation. 18 national water reform, see water reform Natural Resources Management Ministerial Council (NRMMC), 12. 25-6 New South Wales, 10, 12, 28 non-ongoing staff. 35. 36 non-salary benefits, 36 Northern Territory, 12

occupational health and safety, 36-7 office accommodation, 6, 33, 37, 39 Ombudsman, 33

ongoing staff, 35 operating result, 33 operational capability. 41 operational risk management, 32-3 organisation and structure, 16-21,30-1.40 outcome and outputs, 19, 24-8

paper recycling, 39 parliamentary committees, 33 part-time staff, 35-6 performance indicators for NWI. 26 performance pay, 36 performance planning and reporting. 32 performance review, 24-8 personnel, see commissioners; staff

2004-05 Annual Report - National Water Commission 81

planning, 32, 33 plastic recycling, 39 policy advice, 27, 78 population, 13 Portfolio Addition Estimates Statement, 19 portfolio membership, 16 premises, 6, 33, 37, 39 price of departmental outputs, 78 Prime Minister, 4

progress reports to, 27, 32 private sector involvement, 13 programme management, 27-8, 78 Public Service Act 1999, 16, 33, 40 purchasing, 34, 39

Queensland. 12, 25, 28

Raising National Water Standards Programme, 18, 21,27 recycling, 39 Rel Corp Management Services Pty Ltd, 37 relationships with stakeholders, 5, 31, 40 remuneration of staff, 35, 36 reporting arrangements, 32 responsibilities, see roles and responsibilities responsible Minister, 5 risk management, 32-3 River Murray, 10 roles and responsibilities, 5, 16-17, 18

governmental, 10

safety, 36-7 science and technology, 13, 20-1 scrutiny, external, 33 security of water access, 13 Senior Executive Service (SES), 35, 36 service charter, 37 setting up, 6-7, 40-1 sex of staff, 35-6 smart technology uptake, 20-1 Snowy Mountains Scheme, 10 South Australia, 10, 12, 24-5 staff, 6, 18, 34-7

average level, 78 ethical standards, 33 see also Chief Executive Officer; commissioners stakeholders, 5, 25-6, 31,40

satisfaction measures, 27-8 statement of strategic intent, 31,41 states and territories, 10, 12 Australian Government Water Fund projects, 28

Commission meetings held in, 24-5 meeting with NWI signatories, 26

Tasmania, 12 technology and science, 13, 20-1 trading, 26

82 2 0 04-0 5 Annual Report - National Water Commission

urban demand, 13

values statement, 5. 31,41 Victoria, 10, 12, 28

Water Fund, 19-20, 27, 28 Water Programmes Group, 18 water reform, 11-14, 26 National Competition Policy assessment framework, 26, 28

see also National Water Initiative Water Reform Group, 18 water registers, 26 water resources accounting, 26 Water Smart Australia Programme, 20-1,27, 39

commissioner satisfaction with guidelines, 28 organisational responsibility for, 18 water trading, 26 website, 37, 38 women staff, 35-6 workplace agreements, 34-5, 36 workplace diversity strategy, 37 workplace health and safety, 36-7

Workplace Relations Act 1996, 40 Workplace Research (consultancy), 34 workshops, 26, 27, 41 workstation assessments, 37 World Water Day, 4

2004-05 Annual Report - National Water Commission 83

T H E P A R L IA M E N T O F T H E C O M M O N W E A L T H O F A U S T R A L IA

PARLIAMENTARY PAPER N o . 2 6 6 o f 2 0 0 5

O R D E R E D T O B E P R I N T E D IS S N 0 7 2 7 - 4 1 8 1