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Royal Australian Navy Central Canteens Board—Report for 2018-19


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ROYAL AUSTRALIAN NAVY CENTRAL CANTEENS BOARD ANNUAL REPORT 2018-2019

Table of Contents

Corporate Directory 1

Chairman’s Message 2

Report of Operations 4

Enabling Legislation and Responsible Minister 4

Principal Activities 7

Significant Events 10

Significant Changes 10

Effects of Ministerial Directions 10

Statement on Governance 10

Risk, Compliance and Audit Committee 11

Grants Committee 11

Remuneration Committee 11

Conflicts of Interest 12

Ethical Standards 12

Directors Benefits 12

Gender Diversity 12

Insurance of Officers 12

Legal expenses 12

Audit Fees to Australian National Audit Officer (ANAO) 12

Meetings of Directors 12

Directors Qualifications 14

Annual Performance Statement 18

Introductory Statement 18

Entity Purposes 18

Measurement and Assessment 19

Analysis of Performance 20

Corporate Governance 21

Goals and Strategic Intent 21

Functions and Powers 21

Charter 22

Risk, Compliance and Audit Committee 22

Remuneration Committee 23

Grants Committee 23

Chief of Navy Directive 23

Financial Statements 24

Independent Auditor’s Report 24

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

Front cover image: Navy Canteens’ Patti Gaulai - chef at the HMAS Cairns operation

Corporate Directory

Legislation

The Royal Australian Navy Central Canteens Board was established by the Navy (Canteen) Regulations (1954) under the Naval Defence Act 1910 and as at 30 June 2019 is a Corporate Commonwealth Entity under the Public Governance, Performance and Accountability Act 2013.

The Navy (Canteen) Regulations (1954) have ceased to be in effect and have been replaced by the Navy (Canteen) Regulation (2016), following amendments to the Defence Act (1903) which came into effect on 01 October 2016.

Responsible Minister

The Hon. Darren Chester MP, held the position of Minister for Defence Personnel and was responsible for the Royal Australian Navy Central Canteens Board during the 2019 financial year.

Principal

The Chief of Navy, Vice Admiral Michael J Noonan, AO, RAN acted as principal of the Royal Australian Navy Central Canteens Board.

Management Structure

Chairman: Commodore Michael Miko AM, RAN, FCILT, GAICD

Chief Executive Officer: Mr Allan Hansard MAICD

Chief Financial Officer: Mr Matthew Doogan CPA

Head Office

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

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

Telephone: (02) 6127 0207

Website: www.navycanteens.com.au

Banker

Australian Military Bank

Solicitors

Mills Oakley

Meyer Vandenberg Lawyers

Clayton Utz

Auditor

Australian National Audit Office (ANAO)

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CoRPoRAte Di ReCtoR y

Chairman’s Message

Navy Canteens exists to support Navy people and benefit the Navy family. The Enterprise is a Commonwealth Corporate Entity that operates in accordance with the Navy (Canteen) Regulation (2016) and the Public Governance Performance and Accountability Act 2013. The Chief of Navy appoints the Board of Directors with an expectation that the Enterprise generates surpluses which can be disbursed to serving Navy personnel through distributions, grants and services. Most notably, distributions and grants provided by Navy Canteens financially sustain the Navy Relief Trust Fund and the Navy Sports Council as well as providing funds for base welfare activities.

The core of the Enterprise’s businesses is its canteen operations. Navy Canteens operates sixteen canteen facilities on ten Navy bases across Australia. In addition it operates three holiday parks, an apartment near Tweed Heads, the Navy Canteens Ticketing service, the Win with Navy Raffle and Navy Canteens merchandise.

This is my third year as Chair of Navy Canteens, having commenced as Director in July 2016 and subsequently as Chair in December 2016. Over this time, the Enterprise has experienced considerable transformation

across all aspects of its operations. I am pleased to report that the financial performance of the enterprise has returned to a sustainable footing after three consecutive years of losses (FY15, 16, 17) with surpluses in FY 18 of $297k and $492K for FY 19. The most recent result exceeded budget by $273K, the first time in five years that the annual budget has been exceeded.

This performance of the Enterprise is a direct result of the execution of the Corporate Business Strategy (Strategic Plan), involving short and longer term changes, including right sizing of the canteen operations and careful management of cost of goods and labour. Significant work has also been done to better manage capital expenditure, streamline administrative procedures and reduce costs.

The Enterprise continues to build a positive and rewarding work environment, characterised by respect, recognition, employee achievement, engagement, innovation and a high performance culture. Key initiatives include the implementation of a performance framework for managers and the introduction of individual personal development agreements for all full time employees.

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ChAiRMAn’ S MeSSAge

An important contributing factor to the recent success of the Enterprise are the strong partnerships with Navy Commands, Government agencies and private sector entities. These partnerships have enabled the realisation of strategic outcomes in line with the Strategic Plan, while improving tactical efficiency within operations.

This annual report outlines the key achievements for FY 19. In addition it maps out the path for the Enterprise to meet our mission of growing sustainable and valued benefits for the Navy family. I believe the Enterprise is now on a sustainable footing with sound organisational fundamentals and a proven and growing financial track record essential to achieving our mission. I commend the report to you.

Michael H J Miko AM Commodore, RAN

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Report of Operations

Enabling Legislation and Responsible Minister

The RANCCB delivers welfare and lifestyle benefits, products and services to the officers and sailors of the Royal Australian Navy in accordance with the Navy (Canteen) Regulation 2016. Regulation 8 of the Navy (Canteen) Regulation 2016 outlines the functions and powers of Navy Canteens. These include making grants to the RAN Relief Trust Fund (RANRTF) as well as providing grants and loans to persons conducting canteens, clubs, cinemas or other institutions or facilities for the welfare and entertainment of Navy people.

As at 30 June 2019 the RANCCB remains a Corporate Commonwealth Entity under the Public Governance, Performance and Accountability Act 2013.

oRgAniSAtion St RUCt URe

The RANCCB is a Statutory Authority with body corporate status and perpetual succession. Operations are overseen by a Board of seven Directors appointed by the Chief of Navy by means of a delegation from the Minister under the provisions of the Navy (Canteen) Regulation 2016. The business is headed by a Chief Executive Officer (CEO) assisted by a Chief Financial Officer (CFO), line management and administrative staff. Core affairs of the organisation are managed from Campbell Park Offices in Canberra ACT.

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

The ABN for the organisation is 50 616 294 761.

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Figure 1: Organisation Structure as at 30 June 2019

Responsible Minister

Chief of Navy

Royal Australian Navy Central Canteens B oard

Chief Executive Officer

National Operations Manager

Canteens BIG4

Bungalow Park

Amblin H oliday Park

Forster H oliday Village

Pandanus Pocket Villa

Navy Ticketing Financial

Controller

Senior Payroll & H R Officer

Inventory Accountant

Accounts Officer Nowra H ub

Sydney H ub

H MAS

Cerberus

Navy Canteens Merch andise

Marketing Coordinator

H MAS Cairns W in with Navy

H MAS Stirling

H MAS

Coonawarra

National People & Culture Manager

Executive Officer / Company Secretary

Marketing & Public Relations Manager

Chief Financial Officer

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WORK HEALTH AND SAFETY ACT 2011

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

The Navy Canteens Work Health and Safety Management System (WHSMS) applies to all operations and offices of Navy Canteens and any other sites controlled by the company, along with any project involving Navy Canteens’ workers. The purpose of the WHSMS is to establish and maintain a structured approach to the management of health and safety so Navy Canteens can achieve a consistently high standard of safety performance. Safety Australia Pty Ltd provides WHS auditing and consulting services to the organisation.

In addition, Navy Canteens will strive to meet its obligations to ensure a safe workplace for all workers by compliance to all relevant work health and safety legislation and industry best practice. At Navy Canteens, the health and safety of our managers, workers and others is of paramount importance and Navy Canteens strives for continuous improvement. The aim of Navy Canteens WHSMS is to enable a dynamic and systematic workplace. We aim to protect our workers, clients and our brand.

eCoLogiCAL SUSt AinABLe DeVeLoPMent

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

fReeDoM of infoRMAtion ACt

There were no applications for information received in the reporting period. Details on the RANCCB’s organisational structure, change of directorships and a list of documents available for inspection has been lodged with the relevant department. Access to information under the Freedom of Information Act can be secured by writing to the CEO, CP3-1-132, Campbell Park Offices, Canberra ACT 2600.

JUDiCiAL DeCiSionS oR EXTERNAL REPORTS

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

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Principal Activities

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

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

PRoDUCt S AnD Benefit S

Navy Canteens, operates the following businesses:

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

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

§ Navy Canteens Merchandise- A direct marketing and on-line merchandise solution generating revenue from the sale of a selected range of Navy branded clothing, primarily to Navy personnel but also to the general public and wider ADF.

§ Win with Navy Raffle - A fortnightly raffle for Navy members that generates supplementary revenue for grants and/or reinvestment into other benefit generating assets.

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

§ Canteen Services - Canteens are operated directly by Navy Canteens at HMAS Cairns, HMAS Albatross, HMAS Creswell, HMAS Cerberus, HMAS Stirling, Garden Island Defence Precinct, RAN Heritage Centre, HMAS Kuttabul, HMAS Watson, HMAS Waterhen, HMAS Penguin, and HMAS Coonawarra, and Defence Establishment Berrima Darwin. Navy Canteens manages a fleet of mobile food vans that are deployed at HMAS Coonawarra, HMAS Stirling, HMAS Cerberus and HMAS Albatross. Navy Canteens also manages vending machines across all bases, providing food and non alcoholic beverages.

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

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ReVieW of oPeRAtion S, oPeRAtion AL DeVeLoPMent S, finAnCiAL PeRfoRMAnCe AnD fUt URe PRoSPeCt S

overview

Navy Canteens returned its second successive trading surplus of $492K for the 2019 financial year. The outcome for FY 19 exceeded budget by $273K. This turn around is attributed to the Enterprise responding to early reforms initiated as part of the implementation of a Corporate Business Strategy (Strategic Plan), including right sizing of the canteen operations and careful management of costs of goods and labour. Significant work has also occurred to better manage capital expenditure for the holiday park operations, streamline administrative procedures and reduce costs. Navy Canteens will continue its reform program with changes aimed at creating deeper, longer term improvements to the performance of the Enterprise.

The Strategic Plan is changing the nature of the Enterprise and preparing it for sustainable growth in the future. Many of the changes executed as part of the Strategic Plan have not had time to deliver the fully anticipated impact and are expected to yield greater financial performance in later years.

Navy Canteens is now in a sound fiscal position for future growth having rebuilt most of the losses experienced during FY15, 16 and 17. In addition to a surplus for the 2019 financial year, the Enterprise recorded total assets of $19.3M and distributed a total of $297K to the Navy family through the RAN Relief Trust Fund, Navy Sports Council, shore establishment disbursements and general grants. This is an increase of $86K over funds disbursed in the 2018 financial year.

The following graph is a representation of the surplus/(deficit) declared by the Navy Canteens over the past five years:

Figure 2: RANCCB - Surplus / (Deficit)

-600

-400

-200

0

200

400

600

2019 2018 2017 2016 2015

Financial Year End

$ 000s

492

297

( 468 ) ( 458 )

( 116 )

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

Win with Navy raffle

The 2019 financial year was the first year of operation for the Win with Navy Raffle under the management of the National Support Office, resulting in longer term benefits through reduced operating costs and a more structured marketing and promotions focus. In 2019 financial year revenue of $816K was achieved for the operation (FY18:$880K).

holiday centres

Navy Canteens’ Holiday Centres continue to provide a positive and growing return to the enterprise. Properties will continue to be improved through upgrades to amenities, accommodation and attractions to provide a quality holiday experience with contemporary offerings.

The Bungalow Park and Amblin Holiday Park properties achieved improvements in net surpluses in comparison to the previous financial year, while the Forster Holiday Village recorded a small surplus. Individual business performances were a net surplus of $608K for BIG4 Bungalow Park (FY18: $555K); a net surplus of $504K for Amblin Holiday Park (FY18: $302K); a net profit of $3K for Forster Holiday Village (FY18: $16K) and a net loss of $9K for the Pandanus Pocket apartment (FY18: deficit $3K).

navy Canteens ticketing

Navy Canteens Ticketing is provided as a service benefit that recognises the limitations deployed personnel face when it comes to acquiring tickets to popular shows and events. Navy Canteens Ticketing provides discounted tickets (as well as preferential seating and free tickets when possible)

sourced from on-sellers such as Ticketek, Ticketmaster and other event co-ordinators and venues. The objective of the Enterprise is to continue to provide and grow this valued service in the future.

Navy Ticketing was centralised under the NSO in financial year 2019 in order to reduce costs and improve service delivery. A particular focus was to provide event opportunities for Navy personnel who were not located close to major capital cities. This approach has been successful with Navy Canteens Ticketing generating a significantly reduced net deficit in 2019 of $59K (FY18: net deficit of $148K), noting this service is provided as a service to members at cost to Navy Canteens.

navy Canteens merchandise

The management of Navy Canteens’ direct marketing and on-line merchandise business was transferred ‘in house’ in financial year 2019. The business was also restructured with the key focus to provide a core range of high quality Navy merchandise. Navy Canteens Merchandise returned a loss of $59K for 2019 financial year (FY18 $8K), reflecting the liquidation of old stock and building a new range of merchandise. Navy Canteens expects the operation to return to surplus in future years.

The Fleet Air Arm Museum Shop in Nowra, which sells merchandise, performed below budget for both revenue and net profit. Revenue for the year of $122K was below budget ($130K). The shop generated a deficit of $18k.

navy shore based canteens

The canteens operations remain the primary focus of the Board to transform these business units into sustainable profitable ventures. During FY 19, Navy Canteens executed changes in the canteen operations

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as part of the Strategic plan. These changes have involved the implementation of a national menu with standardised pricing and procurement; following a franchise type model of small/medium and large canteens. In conjunction with improved management processes for costs of goods and human resources, these changes have been instrumental in transforming the nature of the operations.

Navy Canteens will continue to implement changes to improve the delivery of a quality food and beverage experience. This will include continued investment in training and professionalisation of the Navy Canteens workforce to formally recognise and develop skills, to ensure a standardised level of service and product is delivered, and to improve workforce stability and retention.

The benefits of the Strategic Plan are evident in the FY 19 results with the canteens achieving a surplus of $727K, an improvement of $682K over the previous year. Whilst $455K of this improved result are attributable to a change of accounting expenses (attribution of $455K expenses to head office), the underlying improvement of performance is $227K.

CAPit AL inVeStM ent

The Board has continued its capital investment program in the enterprise with a focus on maintaining a competitive edge in the Holiday Parks. This focus has contributed to the improved financial results for the Holiday Parks for FY 19.

Navy Canteens has also commenced a focussed capital investments program in canteen operations in line with the Strategic Plan. These investments have contributed to the improved results for the canteen operations over FY 19.

The depreciation charges associated with these investments are expected to be offset by increases in profitability in future years.

DiSBURSeMent S

A key indicator that reflects the ability of the Enterprise to meet its organisational objective is the provision of grants and disbursements to the Navy family. In FY 19, the RANCCB provided disbursements and grants of $297K, an increase of $86K over FY 18. Navy Canteens disbursed $105K to Royal Australian Navy Relief Trust Fund, $60K to Navy Sports Council, $100K to shore bases, $9K for the commissioning of new ships and $23K in general grants.

LoAnS

One of the mechanisms available for the Navy community seeking financial support for major initiatives is to access no interest loans through the Navy Canteens disbursements mechanism. This is an alternate means of obtaining funds where it is deemed that a proposal does not meet the guidelines for a grant , but is deemed to be a worthy proposal that provides positive welfare and recreational benefits for the Navy community. The RANCCB issued loans of $30K during FY 19 to various ships and establishments to assist in the provision of recreational activities and amenities to sailors.

Significant Events

The strategic focus over the last three financial years has been on improving the performance of the existing business units of the RANCCB and establishing sustainably profitable canteens in Navy establishments. The RANCCB is confident the canteen operations are now financially sustainable.

There have been no significant events during FY 19. The focus of the enterprise has been the stabilisation of the canteen group to attain sustainable profitability and developing a long term management and investment plan for the Holiday Park operations.

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Significant Changes

Arising out of the transition to the Navy (Canteen) Regulation (2016), the RANCCB is reviewing its employment structure with the assistance of Defence People Group. This review is likely to result in a simplified enterprise agreement framework and employment structure. Apart from this issue, it is the opinion of the Directors that there has not been any other matter or circumstance that has arisen since the end of the financial year that has significantly affected or may affect the Board’s operations, the result of those operations, or the Board’s state of affairs in the financial years following the period under review.

Effects of Ministerial Directions

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

Statement on Governance

This statement provides an outline of the key corporate governance practices of the RANCCB throughout FY 19.

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

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

The Board convened eight scheduled meetings during financial year 2019 and, where necessary, approved via email, or other means, correspondence ‘out of session’ where a more immediate response was required. At each meeting the Board reviewed monthly and year to date financial results, Work Health and Safety reports, RANCCB Risk Register, key performance indicators, approved budgets and capital expenditure requests, and reviewed policies.

In FY 19, the RANCCB undertook an internal director only board evaluation process. The evaluation identified opportunities for reform and improved management, but overall demonstrated that the Board was performing effectively with a collaborative yet critical relationship with executive management.

Risk, Compliance and Audit Committee

The Risk, Compliance and Audit Committee’s role is to monitor Board responsibilities relating to accounting and reporting, internal and external audit processes, Work Health and Safety reporting, risk management measures and performance and compliance with policies of the organisation. During the financial year Captain Bernard York RAN was the independent chair of the Committee. Captain York is not an appointed Director of the RANCCB. This committee of two RANCCB Directors and the independent Chair is assisted by the CEO and CFO.

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Grants Committee

The Grants Committee’s role is to assess all applications, make recommendations on disbursements and grants and, where appropriate, approve funds for relevant or specific activities and causes, as well as contributions towards more general or day-to-day requirements in support of Navy personnel. This includes deriving policy relating to the overall investment and value for money proposition in annual shore based distributions to deliver transparent outcomes for the stakeholder base. Captain Guy Blackburn RAN was the Chair of the committee until his retirement from the Board in January 2019 at which point WO William Nicol was appointed the Chair of the Committee. This committee of three RANCCB Directors was assisted by Ms Amanda Carter (until November 2018) and Ms Ann Darcey (Board Secretary) who collated grant requests and attended to administrative queries.

Remuneration Committee

The Remuneration Committee’s role is to make an annual recommendation on the remuneration of the CEO and employees who directly report to the CEO, as well as review compliance with relevant employment legislation. The role of the Committee was broadened in FY 19 to include remuneration determinations on all executive management remuneration, as well as that of regional managers. This included establishing a remuneration performance based framework with KPIs linked to performance, sustainability, profitability and stakeholder satisfaction. Arising out of the transition to the Navy (Canteen) Regulation (2016), the Remuneration Committee is leading a review of the RANCCB employment structure with the assistance of Defence People Group. This review is likely to result in a simplified enterprise agreement framework and employment structure. The Chair of the Committee was Commodore Michael Miko AM RAN. This committee of two RANCCB Directors was assisted by the CEO.

Conflicts of Interest

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

Ethical Standards

Directors, Executive management and staff are expected to conduct their activities in accordance with the Navy values of Honour, Honesty, Courage, Integrity and Loyalty. The RANCCB has several policies including Code of Conduct, Code of Ethics and a Policy on Bullying to assist and guide staff on acceptable standards of behaviour within the organisation. The Enterprise includes a values policy and seeks to operate with like organisations of similar value and ethical standards including within their supply chain.

Directors Benefits

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

Gender Diversity

The RANCCB recognises the benefits of having gender diversity in the boardroom. During FY 19 there was strong female representation on the Board including Commodore Stephanie Moles RAN (part year), Commander Cassandra Ryan RAN, Commander Cathy Rice RAN (part year), Commander Nichole Mann RAN (part year), and Lieutenant Commander Alexandra Schaefer RAN (part year). At 30 June 2019 there were three female Directors representing 43% of the Board membership.

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Insurance of Officers

The RANCCB paid premiums of $5K for the year ended 30 June 2019 (FY18:$5K) in respect of directors and officer’s liability and company insurance policies. The liabilities included costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the RANCCB.

Legal expenses

The Legal Services Directions 2005 requires Australian Government Agencies to report on legal expenses.

The legal expenses incurred by the RANCCB in 2019 financial year were $80K (FY18: $35K). This increase reflects legal advice sought for procurement contract renewal.

Audit Fees to Australian National Audit Officer (ANAO)

Audit fees incurred for audit of the enterprise by ANAO in respect to the 2019 financial year were $80K (FY18:$85K).

Meetings of Directors

Directors are appointed by the Chief of Navy who takes advice from the Chairman of the Board. All Directors are required to undertake a formal process of education on their responsibilities and rights, typically through the completion of the Australian Institute of Company Directors course.

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

Committees

Experience

Board meetings

Remuneration

Risk

Grants

Notes

Director

Eligible

Attended

Eligible

Attended

Eligible

Attended

Eligible

Attended

Commodore Michael Miko, RAN

1

8

8

4

4

Commodore Stephanie Moles, RAN

1

5

3

2

2 Part Year

Captain Guy Blackburn, RAN

1

5

5

2

2 Part Year

Captain John Metzl, RAN

1

8

8

3

3

1

1

Commander Cassandra Ryan, RAN

1

8

7

5

4

Commander Cathy Rice, RAN

1

7

5

4

4

Part Year

Commander Cadeyrn Okely, RAN

1

3

3

2

2

Part Year

Commander Nicole Mann

1

3

2

1

1 Part Year

Lieutenant Commander Alexandra Schaefer, RAN

1

1

0

Part Year

Warrant Officer William Nicol

1

8

7

1

1

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

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Directors Qualifications Director Qualifications Other Board roles

Terms RANCCB Board

Other current appointments, i.e. Boards, Committees

Previous board appointments

One or two paragraphs on commercial experience, naval experience, special skills

CDRE MHJ Miko AM, RANMaster of Mgt DipAppSci Grad Cert Maritime Studies Chair FCILT, GAICD

Jul 16 - Dec 19

Nil

Nil

Commodore Miko served 37 years full time in the Navy, transitioning to SERCAT 3 in Mar 19. During his time in Navy he served three tours as a Head of Department (HMAS

Tobruk,

Harman, Success)

and saw operational service in the Middle East

Area of Operation, concluding his full time career as Director General Logistics - Navy.

CAPT J Metzl, RAN BSc (UNSW), MA (Operations) (MGSM), GAICD, FCILT Grants Committee

Jan 2015 - Dec 2019

Defence Fuels Working Group Defence Fuels Management Committee

Member of the Remuneration Committee (2015) Chair (2016-2017) & member of the Risk Compliance & Audit committee (2015-2018) Member of the Grants Committee (2019)

John was appointed by the Chief of Navy to the RANCCB in January 2015 and has served on all of the subordinate committees in that time, including being Chair of the Risk Compliance & Audit committee. He brings practical tactical, operational and strategic level knowledge of Navy Canteen operations and a willingness to partner with industry. John is a Naval Logistician with over 30 years worth of experience in leadership and management positions. In his more recent logistics roles he has nurtured and developed collaborative relationships with industry to provide the best possible support to the Australian Defence Force. John is currently appointed as the Director of Fuel Operations. In this position he is responsible to the Commander of Joint Logistics Commands as the Head of the Defence Fuel Supply Chain.

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Director Qualifications Other Board roles

Terms RANCCB Board

Other current appointments, i.e. Boards, Committees

Previous board appointments

One or two paragraphs on commercial experience, naval experience, special skills

CMDR C Ryan, RAN GAICD, CPEng FIMarEST, MSustMgt, BEng(Mech) RCA Committee

Feb 2017 - Feb 2020

Nil

Nil

Cassandra Ryan is a Marine Engineer Officer, with a young family, who will assume the role of Director Training Authority - Engineering in Jan 20. Currently Cassandra is a Career Manager for Officers in the Directorate of Navy People. In 2017 Cassandra was the Director of Navy Reputation Management following an extensive period working in the ANZAC Class as the ANZAC Sustainment Director (2 years), ASMD Programme Manager (2 years) and ANZAC Sustainment Manager (a year). CMDR Ryan holds an Engineering Degree (mechanical), Masters of Sustainment Management and is a Fellow in IMAREST. Cassandra joined the Navy in 1997 and has completed sea postings in HMAS Adelaide

(AMEO)

, Stuart

(commissioning DMEO)

, Leeuwin

(EO)

,

Melville

(EO)

and

Toowoomba

(MEO).

CMDR C Okely, RAN BEng, CPEng RCA Committee

Jan 2019 - Jan 2022

Nil

Nil

CMDR Okely has over 27 years experience in the Navy, having served in submarines and multiple surface ships. He has served as a non-commissioned officer and in between sea postings has had wide ranging experience as a Specialist recruiter, Weapons Test Engineer and overseas representational posting, helping develop the Nulka Active Missile Decoy system. He is currently serving as Fleet Weapons Electrical Engineer Officer at Fleet Headquarters, Sydney.

CMDR N Mann, RAN Grants committee

Jan 2019 - Jan 2022

Nil

Nil

LCDR Nicole Mann is a Principal Warfare Officer with a passion for Human Resource Management, currently performing duties as Deputy Director Policy and Promotion in NPCMA. Her background is as a former RAAF Air Traffic Controller prior to joining the RAN, serving across a number of Navy platforms.

Royal Australian Navy Central Canteens Board Annual Report 2018-2019

16

RePoRt of oP eRAtion S

Director Qualifications Other Board roles

Terms RANCCB Board

Other current appointments, i.e. Boards, Committees

Previous board appointments

One or two paragraphs on commercial experience, naval experience, special skills

CMDR C Rice, RAN BA, LLM Remuneration Committee

Jul 2018 - Jul 2021

Nil

Nil

Cathy was appointed as a board member in 2018. She is currently posted to Headquarters Joint Operations Command where she provides legal advice regarding Australian Defence Force operations. Cathy has extensive experience advising commanders, senior officers, military personnel and statutory office holders, conducting military law training, has had several operational appointments.

WO W Nicol Grad Dip Business Completed the AICD Company Director’s Course Chair Grants Committee

Mar 2018 - Mar 2021

Member of the Fleet Command Board

Appointed as Command Warrant Officer Fleet Command in March 2018. In this role he is required to represent to the Commander of the Australian Fleet the views, concerns and opinions of Officers and Sailors within Fleet Command. WO Nicol has served in the RAN for 24 years, mostly in the Submarine Force as an Electronic Warfare Submariner. Recent appointments have included Command Warrant Officer positions in NORCOM, HMAS Stirling

, and warships HMAS

Perth

and

Hobart

.

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

Retired as Member in Jan 2019

Annual Report 2018-2019 Royal Australian Navy Central Canteens Board

17

RePoRt of oP eRAtion S

Director Qualifications Other Board roles

Terms RANCCB Board

Other current appointments, i.e. Boards, Committees

Previous board appointments

One or two paragraphs on commercial experience, naval experience, special skills

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

Retired as Member in Jan 2019

Lieutenant Commander Alexandra Schaefer Bachelor of Business (International Business) / Bachelor of Law (Hons), Graduate Diploma of Legal Practice, Graduate Diploma Military Law, AAICD

Retired as member in Jul 2018

Royal Australian Navy Central Canteens Board Annual Report 2018-2019

18

RePoRt of oP eRAtion S

Key Management Personnel Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. The entity has determined the key management personnel to be the Board of Directors who are appointed by the Chief of the Defence Force under the

Navy (Canteen) Regulation 2016

. In accordance with the

Regulation, members of the Defence Force serving on the Board are restricted from receiving remuneration. The total number of Directors disclosed above are 7 (2017-18: 7). During the reporting period ended 30 June 2019, RANCCB had one senior executive. Remuneration Band

Number of Senior Executives

Short-term benefits

Post- employment benefits

Other long-term benefits

Termination Benefits

Total remuneration

Base Salary ($)

Average Bonuses ($)

Average Other benefits and allowances ($)

Average Superannuation contributions

($)

Average Long service leave

($)

Average Other long- term benefits

($)

Average Termination Benefits

($)

Average total remuneration ($)

$220,000 - $240,000

1

213,094

-

-

20,900

2,896

-

-

236,890

Signed …………………………………. Signed …………………………………. MHJ Miko C Rice

Commodore, RAN Commander, RAN

Director Director 4 October 2019 4 October 2019

Annual Report 2018-2019 Royal Australian Navy Central Canteens Board

19

RePoRt of oP eRAtion S

Annual Performance Statement

Introductory Statement

The annual performance statement is for s39(1)(a) of the PGPA Act for the 2019 financial year and accurately presents the entity’s performance in accordance with s39(2) of the PGPA Act.

Entity Purposes

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

Regulation 8 of the Navy (Canteen) Regulation 2016 outlines the functions and powers of Navy Canteens.

These include making money grants from the Navy Fund to the Navy Relief Trust Fund (RANRTF); making grants and loans to persons conducting canteens, clubs, cinemas or other institutions or facilities for the direct welfare and entertainment of serving Navy people.

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

Royal Australian Navy Central Canteens Board Annual Report 2018-2019

20

AnnUAL PeRfoRMAnCe St AteM ent

Measurement and Assessment

The following table contains the performance measurement targets and achievement by business activity as detailed in the 2018/2019 Corporate Strategic Plan.

Business Activity Performance Measurement

Target

18/19

Actual

18/19

Canteen operations on Naval establishments Comparison of actual net profit to budgeted net profit

Within 10% 125%

Total Revenue Growth Achieve Budget (10%)

Labour % (Total Labour Cost as % of Gross Revenue) 30% 41%

COGS (Cost of Goods) % (Total COGS as % of Gross Revenue)

45% 43%

Navy Canteens Merchandise

Total revenue growth (over previous year) (5%) (70%)

Holiday Centres Total revenue growth (over previous year) (1%) 5%

Net Revenue Growth (25%) 27%

Annual Occupancy rate Baseline

40%

37%

Win with Navy Raffle Number of Navy participants in total draw 3,800 3600

Navy Ticketing Number of Navy participants using the service 62% 70%

Annual Report 2018-2019 Royal Australian Navy Central Canteens Board

21

AnnUAL PeRfoRMAnCe St AteM ent

Analysis of Performance

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

Canteen operations on Navy establishments - Canteen performance is now showing the financial and service benefits of changes executed under the Strategic Plan. Changes have included introduction of a national menu and pricing, adopting a staffing model to improve agility of the businesses to adjust to change, improved revenue and cost management, supply chain management and improving base relationships to better understand customer demand. Adoption of a franchise style approach to the canteen operations, classifying them as small/medium/large operations. Canteen operations are now sustainable with operations generating positive returns. Implemented changes are essential for the canteens operations to grow and maintain the competitive edge against on and off base competitors.

Navy Canteens Merchandise - Competitor pricing remains a challenge for securing orders within Navy. Improvements in the supply chain have been implemented and quality issues are being addressed.

Holiday Centres - The Holiday Centres delivered an improved performance during financial year 2019. The focus will remain on the careful management of investment in accommodation infrastructure to maintain market advantage in the highly competitive holiday park market.

Win with Navy Raffle - Participation in the operation has reduced during FY 19 and plans for growth will be implemented during FY 20 in accordance with the Strategic Plan.

Navy Canteens Ticketing - Increases in promotional activity has seen an increase in Navy Participation to 70% against a target of 62% for 2019 financial year.

Total Navy Disbursements - For accounting purposes disbursements (Grants and loans) to the Navy community are included in expenditures, rather than subtracting from the Enterprise’s surplus. As a result, disbursements reduce the end of year financial result. Financial year 2019 recorded an increase in disbursements to $297K. The Enterprise remains in a sound financial position after disbursement of grants and loans in financial year 2019.

Royal Australian Navy Central Canteens Board Annual Report 2018-2019

22

AnnUAL PeRfoRMAnCe St AteM ent

Corporate Governance

Goals and Strategic Intent

The stated goals of the RANCCB in FY 19 are:

a. Ensure a safe working environment;

b. Ensure strong governance of Navy Canteens;

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

d. Grow profitability through sustainable businesses; and

e. Foster strong collaborative relationships.

Functions and Powers

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

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

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

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

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

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

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

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

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

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

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

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

The Board may make recommendations to the Chief of the Defence Force about:

a. opening, conducting and closing canteens; and

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

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

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

Annual Report 2018-2019 Royal Australian Navy Central Canteens Board

23

CoRPoRAte g oVeRnAnCe

Charter

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

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

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

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

b. The Minister delegates to the Chief of the Defence Force who in turn delegates to Chief of Navy.

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

d. A CEO is appointed by the Board.

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

Risk, Compliance and Audit Committee

At 30 June 2019 the independent Chairman of the Committee was Captain Bernard York, RAN. The CEO and CFO attended meetings at the discretion and invitation of the committee.

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

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

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

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

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

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

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

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

h. ensure the RANCCB Risk Register is reviewed at each Committee meeting and is further reviewed by the Board on a regular basis; and

i. ensure the Board and the Committee review and update the Work Health and Safety Policy annually and monitor the near miss and incident reports and associated documents at every Board meeting.

Royal Australian Navy Central Canteens Board Annual Report 2018-2019

24

CoRPoRAte g oVeRnAnCe

Remuneration Committee

The remuneration of the CEO is determined by the Board on the recommendation of the Remuneration Committee, which at 30 June 2019 was chaired by Commodore Michael Miko, AM, RAN.

The key functions of the committee are to:

a. oversee CEO and executive staff remuneration; and

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

Grants Committee

The Chairperson of the Committee at 30 June 2019 was WO William Nicol. The Board Secretariat attends the meetings at the discretion and invitation of the Committee to address questions of the Committee.

The main responsibilities of the Committee are to ensure:

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

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

Chief of Navy Directive

In July 2018 the Chief of Navy issued an updated Directive to the Chairperson of the RANCCB. The Directive sets out the Chairperson’s general and specific responsibilities to the Chief of Navy in the role of Chairperson of the RANCCB, trading as Navy Canteens. The Directive also sets out the Chief of Navy’s expectations for the Chairperson to comply with relevant legislative and financial requirements, particularly those laid out in the PGPA Act 2013 as they apply to Navy Canteens and for which the Chief of Navy has certain responsibilities. The Directive also sets out the basis on which the Chief of Navy will assess the performance of the Chairperson of the RANCCB. A full copy of the Directive can be viewed at the Navy Canteens website www.navycanteens.com.au.

Annual Report 2018-2019 Royal Australian Navy Central Canteens Board

25

CoRPoRAte g oVeRnAnCe

Financial Statements Independent Auditor’s Report

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

INDEPENDENT AUDITOR’S REPORT

To the Minister for Defence Personnel

Opinion

In my opinion, the financial statements of the Royal Australian Navy Central Canteens Board (the Entity) for the year ended 30 June 2019:

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

(b) present fairly the financial position of the Entity as at 30 June 2019 and its financial performance and cash flows for the year then ended.

The financial statements of the Entity, which I have audited, comprise the following statements as at 30 June 2019 and for the year then ended:

• Statement by the Accountable Authorities, Chief Executive Officer and Chief Financial Officer; • Statement of Comprehensive Income; • Statement of Financial Position; • Statement of Changes in Equity; • Cash Flow Statement; and • Notes to the financial statements and other explanatory information.

Basis for Opinion

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

Other Information

The Accountable Authority is responsible for the other information. The other information comprises the information included in the annual report for the year ended 30 June 2019 but does not include the financial statements and my auditor’s report thereon.

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

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

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

Royal Australian Navy Central Canteens Board Annual Report 2018-2019

26

finAnCiAL St AteM entS

Accountable Authority’s Responsibility for the Financial Statements

As the Accountable Authority of the Entity the directors are responsible under the Public Governance, Performance and Accountability Act 2013 for the preparation and fair presentation of annual financial statements that comply with Australian Accounting Standards - Reduced Disclosure Requirements and the rules made under that Act. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

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

Auditor’s Responsibilities for the Audit of the Financial Statements

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

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

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

are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity’s internal control; • evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Accountable Authority; • conclude on the appropriateness of the Accountable Authority’s use of the going concern basis of

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

disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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

Australian National Audit Office

Garry Sutherland Audit Principal

Delegate of the Auditor-General

Canberra

8 October 2019

Annual Report 2018-2019 Royal Australian Navy Central Canteens Board

27

finAnCiAL St AteM entS

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

In our opinion, the attached financial statements for the year ended 30 June 2019 comply with subsection 42(2) of the Public Governance, Performance and Accountability Act 2013 (PGPA Act), and are based on properly maintained financial records as per subsection 41(2) of the PGPA Act.

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

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

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

Commodore M Miko Commander C Rice

Accountable Authority Accountable Authority

4 Oct 2019 4 Oct 2019

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

Mr A Hansard Mr M J Doogan

Chief Executive Officer Chief Financial Officer

4 Oct 2019 4 Oct 2019

Royal Australian Navy Central Canteens Board Annual Report 2018-2019

28

finAnCiAL St AteM entS

Statement of Comprehensive Income

for the year ended 30 June 2019

Note

2019

$’000

2018

$’000

EXPENSES Employee Benefits 2.1A 5,963 5,955

Suppliers 2.1B 7,225 8,081

Grants 2.1C 297 211

Depreciation 2.1D 420 788

Write Down and Impairment of Assets 2.1E 75 115

Total expenses 13,980 15,150

LESS: OWN SOURCE INCOME Own-source revenue Sale of Goods and Rendering of Services 2.2A 14,283 15,234

Interest 2.2B 85 66

Other Revenue 2.2C 104 147

Total own-source revenue 14,472 15,447

Total own-source income 14,472 15,447

Net cost of services 492 297

Surplus / (Deficit) attributable to the Australian Government 492 297

OTHER COMPREHENSIVE INCOME Changes in asset revaluation reserves - 2,723

Total comprehensive gain / (loss) attributable to the Australian Government

492 3,020

The above statement of comprehensive income is to be read in conjunction with the attached notes.

Annual Report 2018-2019 Royal Australian Navy Central Canteens Board

29

finAnCiAL St AteM entS

Statement of Financial Position

as at 30 June 2019

Note

2019

$’000

2018

$’000

ASSETS Financial assets Cash and Cash Equivalents 3.1A 3,946 3,660

Trade and Other Receivables 3.1B 373 256

Other Investments 42 42

Total financial assets 4,361 3,958

Non - financial assets Land and Buildings 3.2A 14,335 14,460

Property, Plant and Equipment 3.2B 1,865 1,784

Computer Software 3.2C 34 29

Inventories 3.2E 378 499

Prepayments 178 189

Total non-financial assets 16,790 16,961

Total assets 21,151 20,919

LIABILITIES Payables 262 440

Grants 3.3A 104 104

Other Payables 3.3B 1,053 1,090

Total payables 1,419 1,634

Provisions Employee Provisions 4.1A 421 466

Total provisions 421 466

Total Liabilities 1,840 2,100

Net Assets 19,311 18,819

EQUITY Contributed equity 1,616 1,616

Reserves 11,264 11,264

Retained surplus 6,431 5,939

Total Equity 19,311 18,819

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

Royal Australian Navy Central Canteens Board Annual Report 2018-2019

30

finAnCiAL St AteM entS

Statement of Changes in Equity For the year ended 30 June 2019

Note

Retained Earnings

Asset Revaluation

Surplus

Contributed Equity/

Capital

Total Equity

2019 $’000

2018 $’000

2019 $’000

2018 $’000

2019 $’000

2018 $’000

2019 $’000

2018 $’000

Balance carried forward from previous period

5,939

5,642

11,264

8,541

1,616

1,616

18,819

15,799

Opening balance

5,939

5,642

11,264

8,541

1,616

1,616

18,819

15,799

Comprehensive Income Changes in asset revaluation reserves

-

-

-

2,723

-

-

-

2,723

(Deficit) for the period

492

297

-

-

-

-

492

297

Total comprehensive income

492

297

-

2,723

-

-

492

3,020

Closing balance

6,431

5,939

11,264

11,264

1,616

1,616

19,311

18,819

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

Annual Report 2018-2019 Royal Australian Navy Central Canteens Board

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finAnCiAL St AteM entS

Cash Flow Statement

For the year ended 30 June 2019

Note

2019

$’000

2018

$’000

OPERATING ACTIVITIES Cash received Goods and services 15,462 16,719

Canteen loans repaid (21) (17)

Net GST received - -

Total cash received 15,441 16,702

Cash used Employees (5,978) (6,059)

Suppliers (7,769) (8,915)

Grants (297) (230)

Net GST paid (815) (768)

Total cash used (14,859) (15,972)

Net cash flows from operating activities 582 730

INVESTING ACTIVITIES Cash received Interest received 85 56

Total cash received 85 56

Cash used Purchase of property, plant and equipment (381) (436)

Total cash used (381) (436)

Net cash flows (used by) investing activities (296) (380)

Net increase or decrease in cash held 286 350

Cash and cash equivalents at the beginning of the reporting period 3,660 3,310

Cash and cash equivalents at the end of the reporting period 3.1A 3,946 3,660

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

Royal Australian Navy Central Canteens Board Annual Report 2018-2019

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finAnCiAL St AteM entS

Notes to the financial statements

for the year ended 30 June 2019

1 OVERVIEW

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

1.1 Objectives of The Royal Australian Navy Central Canteens Board

The Royal Australian Navy Central Canteens Board (RANCCB) was established by the Navy (Canteens) Regulations, 1954. These Regulations were repealed and replaced by the Navy (Canteen) Regulation 2016. This Regulation provides that the Directors shall, subject to and in accordance with the Regulations, apply monies and property of the Fund; provide grants, loans and benefits for members of the Royal Australian Navy and further provide grants to the Royal Australian Navy Relief Trust Fund (RANRTF).

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

1.2 Basis of preparation of the Financial Statements

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

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

§ Financial Reporting Rule (FRR) for reporting periods ending on or after 01 July 2015; and

§ Australian Accounting Standards and Interpretations reduced disclosure requirements issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

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

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

1.3 Taxation

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

1.4 Events After the Reporting Period

In Financial Year 2019 the Board sought advice from the Department of Defence on the employment structure of the Entity. This included the determination of the CEO remuneration. Actions are now underway to address the employment structure of the entity and the determination of the CEO remuneration and this issue should be resolved in Financial Year 2020. Apart from this issue, it is the opinion of the Directors that there has not been any other matter or circumstance that has arisen since the end of the financial year that has significantly affected or may affect the Board’s operations, the result of those operations, or the Board’s state of affairs in the financial years following the period under review.

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finAnCiAL St AteM entS

2.1 EXPENSES

2.1A: Employee benefits

2019

$’000

2018

$’000

Wages and salaries 5,105 5,161

Superannuation 489 490

Leave and other entitlements 328 249

Separation and redundancies 41 55

Total employee benefits 5,963 5,955

Accounting Policy

Employee benefits

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

2.1B: Suppliers

2019

$’000

2018

$’000

Direct Expenses 4,226 5,209

Administrative Expenses 1,539 1,172

Operating Expenses 1,294 1,335

Other Expenses 71 163

Total suppliers 7,130 7,879

Other Supplier Expenses Workers compensation premiums 95 202

Total Other Supplier Expenses 95 202

Total Supplier Expenses 7,225 8,081

The expenses above include an audit fee of $80,000 (2017-18: $85,000) payable to the Australian National Audit Office for the audit of the financial statements

2.1C: Grants

2019

$’000

2018

$’000

Public sector:

Australian Government Entities (related entities) 105 101

Non profit organisation 192 110

Total Grants 297 211

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2.1D: Depreciation

2019

$’000

2018

$’000

Buildings 133 304

Property, plant and equipment 287 484

Total depreciation 420 788

2.1E: Write - Down and Impairment of Assets

2019

$’000

2018

$’000

Asset write - down and impairments from Property, Plant and equipment - 4

Inventory 75 108

Impairment of Financial Instruments - 3

Total write - down and impairment of assets 75 115

2.2 REVENUE

2.2A: Sales of goods and rendering of services

2019

$’000

2018

$’000

Provision of goods 9,151 10,066

Rendering of services 5,132 5,168

Total sale of goods and rendering of services 14,283 15,234

Accounting Policy

Revenue

Revenue from the sale of goods is recognised when:

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

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

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

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2.2B: Interest

2019

$’000

2018

$’000

Deposits 85 66

Total interest 85 66

Accounting Policy

Interest

Interest is recognised using the effective interest method.

2.2C: Other Revenue

2019

$’000

2018

$’000

Donations 5 48

Resources received free of charge 99 99

Total other revenue 104 147

The Navy (Canteen) Regulation 2016 states the purpose of the RANCCB is to provide welfare and amenities to the members of the Navy through the provision of funding otherwise unfunded welfare activities and the payments of grants to the Royal Australian Navy Relief Trust Fund. In order to assist with the provision of services, RAN allows the RANCCB the use of buildings at Navy establishments across Australia to the value of $99,000 in 2018-19, (2018-19: $99,000).

Accounting Policy

Resources Received Free of Charge

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

Sale of Assets

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

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3.1 FINANCIAL ASSETS

3.1A: Cash and Cash Equivalents

2019

$’000

2018

$’000

Cash on hand or on deposit 3,946 3,660

Total cash and cash equivalent 3,946 3,660

Accounting Policy

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

a) cash on hand;

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

3.1B: Trade and Other receivables

2019

$’000

2018

$’000

Goods and services 27 77

Total receivables for goods and services 27 77

Other receivables:

Canteen loans 55 34

Interest 15 15

Levies 9 12

Other receivables 280 131

Total trade and other receivables (gross) 386 269

Less impairment allowance account for Goods and services 13 13

Total trade and other receivable (net) 373 256

Trade receivables are non-interest bearing and are generally on 60 days terms for the SALT and the Canteens. A combination of payments in advance and monthly in arrears for storage van owners at the holiday parks. A provision for impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired. The impairment loss for 2018-19 was $0 (2017-18: an impairment loss of -$3,000) has been recognised by the RANCCB.

Accounting Policy

Loans and Receivables

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

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3.1 NON FINANCIAL ASSETS

3.2A: Land and building

2019

$’000

2018

$’000

Land at Fair Value 7,795 7,795

Buildings on freehold land:

Fair value 6,673 6,665

Accumulated depreciation (133) -

Total land and buildings on freehold land 14,335 14,460

3.2B: Plant and equipment

2019

$’000

2018

$’000

Plant and equipment:

Fair value 2,408 2,056

Accumulated depreciation (543) (272)

Total Plant and equipment 1,865 1,784

3.2C: Computer Software

2019

$’000

2018

$’000

Computer Software Fair value 51 29

Accumulated depreciation 17 -

Total Plant and equipment (non-current) 34 29

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3.2D: Reconciliation of the opening and closing balances of property, plant and equipment and intangibles (2019) Item

Land $’000

Buildings

$’000

Total Land & Buildings

$’000

Other PP & E

$’000

Computer Software

$’000

Total $’000

As at 1 July 2018 Gross book value

7,795

6,665

14,460

2,056

29

16,545

Accumulated depreciation/amortisation and impairment

-

-

-

(272)

-

(272)

Net book value 1 July 2018

7,795

6,665

14,460

1,784

29

16,273

Additions by Purchases during the year

-

8

8

351

22

381

Depreciation/amortisation expense

-

(133)

(133)

(270)

(17)

(420)

Net book value 30 June 2019

7,795

6,540

14,335

1,865

34

16,234

Net book value as of 30 June 2019 represented by: Gross book value

7,795

6,673

14,468

2,408

51

16,927

Accumulated depreciation/amortisation and impairment

-

(133)

(133)

(543)

(17)

(693)

Total as at 30 June 2019

7,795

6,540

14,335

1,865

34

16,234

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Accounting Policy

Asset Recognition Threshold

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

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

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

Revaluations

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

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

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount.

Any revaluation adjustments are charged to the Asset Revaluation Reserve in equity.

For the purpose of determining the fair value of land, buildings and property, plant and equipment, management has relied on third party independent evaluators. Asset valuations were undertaken in June 2018 by Opteon Property Group, Taylor Byrne and Walsh & Monaghan. These valuations were subsequently confirmed by EY in December 2018.

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Depreciation

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

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

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

Description 2019 2018

Buildings From 5 to 50 Years From 5 to 50 Years

Property, Plant and Equipment From 2 to 10 Years From 2 to 10 Years

Impairment

All assets were assessed for impairment at 30 June 2019. Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount.

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

flows, and the asset would be replaced if the entity were deprived of the asset, its value in use is taken to be its depreciated replacement cost. No indicators of impairment were found for property, plant and equipment.

Derecognition

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. No property plant or equipment is expected to be sold or disposed of within the next 12 months.

Intangibles

Intangibles comprise externally developed software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Software is amortised on a straight-line basis over its anticipated useful life. The useful lives of the RANCCB software are 3 years (2017-18 3 years).

All software assets were assessed for indications of impairment as at 30 June 2019.

Leasehold improvements

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

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3.2E: Inventories

2019

$’000

2018

$’000

Inventories held for sale:

Finished goods 378 499

Total inventories 378 499

Accounting Policy

Inventory

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

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

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

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

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

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

3.3 PAYABLES

3.3A: Grants

2019

$’000

2018

$’000

Grants - Australian Government entities 104 104

Total grants 104 104

3.3B: Other Payables

2019

$’000

2018

$’000

Prepayments from customers 507 480

Accrual expenses 185 244

Salaries and wages 83 60

Superannuation 8 1

GST payable 197 179

Other payables 73 126

Total other payables 1,053 1,090

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4.1 PROVISIONS

4.1A: Employee Provisions

2019

$’000

2018

$’000

Leave 421 466

Total employee provisions 421 466

Accounting policy

Employee provisions

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

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

Leave

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

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

Separation and Redundancy

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

Superannuation

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

The liability for superannuation recognised as at 30 June 19 represents outstanding contributions.

Accounting judgements and estimates

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

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5.1 KEY MANAGEMENT PERSONNEL

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

The total number of Directors disclosed above are 7 (2017-18: 7).

5.2 RELATED PARTY DISCLOSURES

The entity is an Australian Government controlled entity. Related parties to this entity are Directors, Key Management Personnel and other Australian Government entities. The Chief of Navy has been delegated by the Chief of the Defence Force to appoint the Board.

Directors

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

Commodore M Miko (Chairman) Commodore S Moles - part year Captain J Metzl Captain G Blackburn - part year Commander C Ryan Commander C Okely - part year Commander C Rice - part year Commander N Mann - part year Lieutenant Commander A Schaefer - part year Warrant Officer W Nicol

t ransactions with directors or director-related entities

There were no transactions with directors or director related parties in 2019 (2018: $Nil). Directors who have a conflict or feel they may be perceived as having a conflict are required to excuse themselves from voting and from taking part in the deliberations.

other transactions with directors or director-related entities

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

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6.1 CONTINGENT ASSETS AND LIABILITIES

There are no contingent assets or liabilities as at 30 June 2019 (2018 $Nil).

6.2 FINANCIAL INSTRUMENTS

6.2A Categories of financial instruments

2019

$’000

2018

$’000

Financial Assets under AASB 139

Held-to-maturity financial assets Deposits - 2,916

Cash with Banks and on hand - 744

Total held-to-maturity financial assets - 3,660

Loans and receivables Goods and Services - 64

Canteen Loans - 34

Interest Receivable - 15

Other Receivables - 143

Total loans and receivables - 256

Available-for-sale financial assets Post office license - 42

Total available-for-sale financial assets - 42

Financial assets at amortised cost Deposits 2,993 -

Cash with Banks and on hand 953 -

Goods and Services 14 -

Canteen Loans 55 -

Interest Receivable 15 -

Other Receivables 289 -

Total financial assets at amortised cost 4,319 -

Financial assets at fair value through other comprehensive income Post Office License 42 -

Total financial assets at fair value through other comprehensive income 42 -

Total financial assets 4,361 3,958

Financial Liabilities Financial liabilities measured at amortised cost Trade Creditors 262 440

Grants payable 104 104

Other payables 1,053 1,090

Total financial liabilities measured at amortised cost 1,419 1,634

Total financial liabilities 1,419 1,634

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Classification of financial assets on the date of initial application of AASB 9 Financial assets class

Note

AASB 139 original classification

AASB 9 new classification

AASB 139 carrying amount at

1 July 2018 $’000

AASB 9 carrying amount at

1 July 2018 $’000

Cash and Cash Equivalents

3.1A

Held-to-maturity

Amortised Cost

3,660

3,660

Goods and Services

3.1B

Held-to-maturity

Amortised Cost

64

64

Canteen Loans

3.1B

Held-to-maturity

Amortised Cost

34

34

Interest Receivable

3.1B

Held-to-maturity

Amortised Cost

15

15

Other Receivables

3.1B

Held-to-maturity

Amortised Cost

143

143

Post Office License

Available-for-sale financial asset

FVOCI

42

42

Total financial assets

3,958

3,958

Reconciliation of carrying amounts of financial assets on the date of initial application of AASB 9. Financial assets at amortised cost

AASB 139 carrying

amount at 30 June 2018

$’000

Reclassification

$’000

Remeasurement

$’000

AASB 9 carrying

amount at 1 July 2018

$’000

Held to maturity Cash and Cash Equivalents

3,660

-

-

3,660

Loans and receivables Goods and Services

64

64

Canteen Loans

34

34

Interest Receivable

15

15

Other Receivables

143

-

-

143

Total amortised cost

3,916

-

-

3,916

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AASB 139 carrying

amount at 30 June 2018 $’000

Reclassification $’000

Remeasurement $’000

AASB 9 carrying amount at 1 July 2018 $’000

Financial assets at fair value through other comprehensive income FVTOCI Post Office License

42

-

-

42

Total fair value through other comprehensive income

42

-

-

42

6.2B Net gain or loss on financial instruments

2019 $’000

2018 $’000

Financial assets at amortised cost Interest revenue

85

66

Net gain/(loss) on financial assets at amortised cost

85

66

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If you have questions about this annual report, please contact:

Royal Australian Navy Central Canteens Board National Support Office Post: CP3 - 01 - 122 Campbell Park Offices, Canberra ACT 2600 Email: tanna.winter@navycanteens.com.au Website: www.navycanteens.com.au

You can find a digital version of our annual report at: www.navycanteens.com.au

© Royal Australian Navy Central Canteens Board 2019

All material presented in this document is provided under a Creative Commons Attribution 3.0 Australia licence.

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This document must be attributed as the: Royal Australian Navy Central Canteens Board Annual Report 2018-2019.

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