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Lord Howe Island Board Annual Report 2007

TABLE OF CONTENTS

1. INTRODUCTION

i) ii) iii) iv) v)

The Board's Charter & Responsibilities Board Membership Executive and Senior Staff Board Meetings Access

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2. THE YEAR IN REVIEW - Chairperson's Report 6

3. I"ERFORMANCE IN KEY RESULT AREAS - LHIB CORI"ORATE PLAN 2004-2007:

NATURAL & CULTURAL ENVIRONMENT 7

TRADING ACTIVITIES 12

PUBLIC UTILITIES, SERVICES & INFRASTRUCTURE 14

LAND ADMINISTRATION & ENVIRONMENTAL PLANNING 18

CORPORATE GOVERNANCE & SUPPORT 22

4. STATUTORY REQUIREMENTS 27

i) Transfer and Subletting of Perpetual Leases to Non-Islanders ii) Granting of Perpetual Leases iii) Funds Granted to Non-Govemment Community Organisations iv) Legislative Change v) Research and Development vii) Freedom of Information viii) Equal Employment Opportunity Statement x) Equity and Ethnic Affairs Policy Statement Status Report xi) Staffing xii) Occupational Health & Safety and Risk Management xiii) Analysis of Financial Performance xiv) Cost of Printing & Report Availability

5. FINANCIAL STATEMENTS 45

(Cover Photographs - M & CRyan)

Lord Howe Island Board Annual Repon 2007

The Hon. Philip Koperberg MP Minister for Climate Change, Environment and Water Level 25, 59-61 Goulburn street Sydney NSW 2000

Dear Minister,

We have pleasure in submitting the 54th Annual Report of the Lord Howe Island Board for presentation to Parliament in accordance with the provisions of the Annual Reports (statutory Bodies) Act, 1984 and the Lord Howe Island Act 1953 for the year ended 30th June, 2007.

Yours sincerely,

Dr Tony Fleming Chairperson

LORD HOWE ISLAND BOARD Administrative Office, PO Box 5 Lord Howe Island NSW 2898 Phone (02) 6563 2066 Fax (02) 65632127

Barney Nichols Vice-Chairperson

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LORD HOWE ISLAND ACT, 1953

Section 36A of the Lord Howe Island Act provides that:

1) The Board shall, as soon as practicable but not later than six months after the end of each financial year of the Board, prepare and submit to the Minister a report on the operations of the Board during that financial year.

2) The Board shall include in its report under this section particulars of any transfers or subletting of leases under this Act to persons other than Islanders.

3) The Minister shall lay the report, or cause it to be laid, before both houses of Parliament as soon as practicable after receipt of the report.

Division 3 of the Public Finance and Audit Act, 1983 provides that statutory bodies are to prepare and submit to the Auditor-General a statement of accounts and that the AuditorGeneral is to furnish al") opinion stating that the accounts have been audited, indicating whether the financial statements comply with the Act and setting forth any qualifications subject to which the opinion is given.

As at 26 October 2007, the Auditor General had not issued an audit opinion in relation to the Board's Annual Financial Statements for the 2006/07 financial year. The Board has not been advised of any issue or qualification that may impact on the Financial Statements contained in this report, but should any alterations be required, the Board will submit an amended report in due course.

Part 2 of the Annual Reports (Statutory Bodies) Act, 1984 provides that a statutory body shall, not later than 4 months after the end of the financial year of the statutory body, submit its annual report in relation to that financial year, including the financial statements without the opinion of the Auditor-General thereon, to the appropriate Minister for presentation to Parliament.

In accordance with these provIsions the Lord Howe Island Board furnishes the accompanying Report and Statement of Accounts for the 12 months period ended 30th June 2007.

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1.

REPORT OF THE lORD HOWE iSLAND BOARD FOR THE YEAR ENDED 30TH JUNE 2007

INTRODUCTION

This is the fifty-fourth report of the Lord Howe Island Board since the passing of the Lord Howe Island Act, 1953 and covers the period 1 st July 2006 to 30th June 2007.

i) The Board'.s Charter & Responsibilities

The Lord Howe Island Board is a statutory body established under the provisions of the Lord Howe Island Act, 1953. The Board is charged with the responsibility of administering the affairs of the Island. "Island" as defined by the Act includes Lord Howe Island and all adjacent islands and coral reefs within one marine league of the Island. Bali's Pyramid and adjacent islands are also included in this definition. Under the Act, the Board has the following responsibilities:

• to provide directly or on behalf of other levels of govemment, adequate, equitable and appropriate services and facilities for the Island community and to ensure that those services and facilities are managed efficiently and effectively,

• to exercise community leadership,

• to exercise its powers, authorities, duties and functions in a manner that is consistent with and actively promotes the principles of multiculturalism,

• to promote and to provide and plan for the needs of children,

• to manage, protect, restore, enhance and conserve the Island's environment in a manner that is consistent with and promotes the principles of ecologically sustainable development,

• to manage, protect, restore, enhance and conserve vacant Crown lands, and reserves, including the Lord Howe Island Permanent Park Preserve, in a manner that recognises the World Heritage values in respect of which the Island is inscribed on the World Heritage List referred to in the United Nations Convention Concerning the Protection of the World Cultural and Natural Heritage,

• to promote the Island as a tourist destination,

• to have regard to the long term and cumulative effects of its decisions,

• to bear in mind that it is the custodian and trustee of public assets and to effectively account for and manage the assets for which it is responsible,

• to facilitate the involvement of members of the Board, members of the public, users of facilities and services and the Board's staff in the development, improvement and co-ordination of the Board's powers, authorities, duties and functions,

• to raise funds for Island community purposes by the fair imposition of charges and fees, by income eamed from investments and, when appropriate, by borrowings and grants,

• to keep the Island community and the State government [and through it, the wider community) informed about its activities,

• to ensure that, in the exercise of its regulatory powers, authorities, duties and functions, it acts consistently and without bias, particularly where an activity of the Board is affected and,

• to be a responsible employer.

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ii) Board Membership

During the reporting period membership of the Board was as follows:

~~~~~~~~.~=~~ ,~,. ,Name ;' "I.~~ ': ,',,' :," ,:,posH~n,,··.:,·j:·.'· ttZ. T~r!p,~:

,~_,~JI~~-=. -"- ____________ _____ ~ __ ~~_ .. ~'-_ ~_. -_' _--'. :.._ -~~~ - =-~ _~~..:,~ =,~,",-~~j~", -- -- , , - - , -Dr Tony Fleming Chairperson & Ministerial Appointed Member [Deputy Director 1/4/2005

General, Parks and Wildlife Division, Department of Environment to and Climate Chanqe} , 1/4/2008

Mr Barney Vice-Chairperson & Elected Member 17/2/06 to Nichols 16/2/09 Mr Jeff Angel Ministerial Appointed Member representing th.e interests of 28/11/06

conservation to 27/11/09

Mr John landau Ministerial Appointed Member representing the interests of 31/8/04 to business and tourism. Resiqned as of October 16, 2006. 31/8/07

MrGary Elected Island Member 17/2/06 to Crombie 16/2/09 Mr stan Fenton Elected Island Member 17/2/06 to

16/2/09 Mr Des Elected Island Member 17/2/06 to Thompson 16/2/09

Island members are elected by the resident island community every three years. The most recent poll for elected Island members was held on 16 February 2006 with the above four (4) members being declared elected by the Minister for the Environment for a period of three years from the 17 February 2006.

iii) Executive and Senior Staff

During the reporting period the following persons held executive and senior positions within the Board's administration:

, ,),,( I;;.e ',}:':,}1 "\'i':':i,"';.·" '~," '''' .' .. ','", .' ". '.,,' ",' '1<:,':: '.·r.· ."u, :'.; :" , .- ~-<<i~-I,~1Ur.4/iiJ:j_"",·- "', ,:>'

Mr. NiCk Riqby Chief Executive Officer Mr. Greq Pierce Manaqer Operations Mr. Greg Thorpe Manager Business & Corporate Services Mr. Rod See Executive Officer

vi) Board Meetings

During the reporting period, the Board met on the Island on the following occasions: • September 2006 - all Board members in attendance • December 2006 - all Board members in attendance • March 2007 - all Board members in attendance • May 2007 - all Board members in attendance

Board meetings are generally held in public with the exception of items relating to commercial and business affairs, staff and personnel issues, legal matters and items affecting the private affairs of individuals. Members of the public are informed of the outcome of meetings through publication of minutes of the meetings. The Board has adopted a Code of Conduct which includes meeting procedures and copies of the Code are available to the public free of charge.

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iv) Access

The Board's principal place of business is on the Island. The Board can be contacted through the Chief Executive Officer, Lord Howe Island Board, PO Box 5, Lord Howe Island, NSW 2898, or by telephoning (02) 65632066 or facsimile (02) 65632127. The Board's office is open during normal business hours (8:30 am to 4:30 pm, Mon-Fri).

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2. THE YEAR IN REVIEW - Chairpersons Report

The 2006-07 reporting period has seen the Board further consolidate its identity as a responsive and transparent decision-making body, guided by sound public policy, and a strong, independent administration. A particular achievement during this period has been the resolution of the long-term issue of vehicle use and management on the Island. The Board undertook exhaustive community consultation on this matter and has now adopted a policy which will guide the application of its statutory powers regarding motor vehicles, so that vehicle and traffic management is aligned with the community's needs and protects the islands environment, and tourist-based economy.

The reporting period also saw the first full financial year of the Islander Board members elected in the February 2006 election, in which all previous elected members were replaced. A particular highlight of the reporting period which was driven principally by

i . new these Board members was the review of the Board's process for allocating vacant l . Crown Land to islanders for residential development. This was a highly complex issue, and I

believe the new Board's revision of the land selection and allocation process, while ~ delivering a conclusion similar to that reached by the previous Board, significantly I i . enhanced public confidence and the perception of the Board's transparency and

[-responsiveness.

I am particularly pleased that the Board's constant progress towards the protection of the island's unique natural heritage continued during the reporting period. The creation and public exhibition of the draft Lord Howe Island Multi-Species Recovery Plan is a particular highlight, and I am confident that this innovative document will provide a sound basis for the challenges ahead in protecting and re-instating biodiversity on the Island. During the reporting period significant gains were achieved in the eradication of key environmental weeds such as Bitou Bush and Red Guava, and toward the eradication of our last mammalian pests, rats and mice. The Board is hopeful that this latter project will be 'achieved within the next three years, although there is much research, planning and conSUltation to be done, and resourcing remains an unresolved challenge. In balance, another year of solid achievement and it has been my privilege to be Chairperson of the Board during this period.

Dr TONY FLEMING Chairperson

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3. PERFORMANCE IN KEY RESULT AREAS - LHIB CORPORATE PLAN 04-07

KEY RESULT AREA: NATURAL & CULTURAL ENVIRONMEN

CORPORATE OBJECTIVE: To protect, enhance and promote the Island's natural environment and cultural heritage

Eradicate feral goats and rodents from the Island, and prepare and implement an integrated feral animal eradication/control strategy for remaining introduced

Key Results 06-07:

Identified feral animal eradication and control targets achieved

Goats, pigs and cats have now been eradicated from the island. The only mammalian pests remaining on the island are the Black Rat (Ratus ratus) and the Common House Mouse (Mus musculus). These animals pose a significant threat to the Island's biodiversity, as well as its economy and public health. They are now targeted for eradication and are an investment priority over the next 2 to 3 years, with the finalisation of the LHI Rodent Eradication strategy expected in June 2009. With the support of a grant of $150,000 through the Commonwealth National Heritage Trust during the reporting period, the Board employed a full time coordinator to assist in facilitating critical research, field trials and licensing requirements required for the eradication strategy. Drafting of the strategy has now commenced. A principle consideration in the eradication process is the potential impact on non-target, native and endemic species, such as the LHI Woodhen. An important component of works to date has been the planning for an on Island field trial scheduled for August 2007. The trial over a forty hectare area will involve a helicopter drop of non toxic bait marked with a dye. The dye becomes visible under fluorescent light and will determine bait uptake by both rodents and non target species.

The trial will also provide information relating to bait decomposition rates and preferred bait size. The Board has been liaising with key agencies in Australia and New Zealand to develop best practices operation guidelines and procedures. An eradication taskforce involving senior Board staff, an elected Board representative and key staff from the NSW DECC is overseeing the project and being kept informed of progress to date. The Board continued to invest in its existing rodent control program, using approximately 1,000 rat-bait stations across the Island. The location of the stations is designed to protect both known threatened species habitat and palm seeds from damage caused by foraging rats. The program is being monitored annually by assessing palm seed damage in baiting and non-baiting areas.

Develop and implement quarantine standards for

Key Results 06c07:

The principle threat of introduction of new pest species is posed by the constant arrival of visitors, freight and other goods. The Board has an adopted Quarantine strategy, which was developed in co-operation with the Australian Quarantine and Inspection Service (AQIS) and Australian Customs. It has continued its efforts to heighten quarantine awareness through the education and training of key stakeholders involved with the movement of freight to the Island. the re was to the mainland I and

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Lord Howe Island Board Annual

transporters to the Island. Each organization and facility was visited, and advised of preferred freight handling and storage procedures as a means to reduce the risk of importing exotic pests and disease. The Board provided each supplier with a Lord Howe Island Quarantine supporter's certificate and has received strong support from the freight providers for the Island's quarantine procedures. The Board's quarantine training and education program has been supported through a $70,000 grant from the NSW Environmental Trust. The Board's trained staff continue to monitor any shipping freight arriving on the Island and regularly inspect potted plants approved for importation under the Board's plant importation policy.

The Island now has a small population of African Big Headed ants (Pheidole megacephala) which is likely to have arrived in irnported soil or plant material. An ant baiting trial targeting this species was conducted to determine the most palatable and effective bait for control. Whilst at this time the ants are largely occupying disturbed settlement areas, they have the potential to create super colonies and occupy large areas of the Island. Big Headed ants are known to overwhelm other invertebrate species and could potentially impact on nesting seabirds. An eradication program using a species specific bait is scheduled for warmer months over spring 2007 to coincide with peak foraging times.

Phytophthora cinimonii is a soil pathogen causing widespread damage to native forests in Western Australia and the south east states. The pathogen is known to occur in one private garden on the Island. The site has been quarantined and treated with repeated fungicidal applications over the last 3 years. Extensive soil sampling has confirrned that the pathogen has not escaped into surrounding bushland areas. Advice from .the Sydney Royal Botanic

! . Gardens and the NSW DECC suggests that with ongoing treatrnent the soil disease can be I contained on this site or possibly eradicated altogether. As part of a broader strategy to

reduce the risk of importing this soil disease into the Perrnanent Park Preserve, boot cleaning kits have been issued to walking tour guides for use by clients prior to clirnbing Mount Gower. Phytophthora is known to spread via mud and infected plant material carried on footwear.

Improve groundwater quality through effective ground and wastewater

Key Results 06·07:

Groundwater quality is a major contributor to the island's environmental, social and economic health, and managing groundwater was an investment priority for the Board during the reporting period. During this period the Board established a water testing laboratory to enable it to monitor groundwater on a quarterly basis. The laboratory monitors key threats to ground water quality for the Island, such as salinity and faecal coliforms. The laboratory is also being used to monitor the effluent quality of the Board's on-site system waste water processing systems. The Board proposes to extend this monitoring to all waste water processing systems on the island during 07-08. Also during the reporting period, the Board appointed a temporary Project Officer, Water Management. This position is overseeing the monitoring of groundwater and is developing strategies for the long term management of the groundwater and wastewater on the Island. The initial stage of this was a comprehensive audit of the Islands on-site systerns. The audit revealed that there are 219 systems on the Island, of which the majority are septic tanks with absorption trenches. The functionality of these systems is critical to healthy groundwater and the audit identified a number of systerns that are in need of maintenance. During the reporting period, the Board commenced a program to ensure that this issue is addressed. An on-site wastewater management strategy has been completed in a draft form and 2007/08 will see this strategy taken to the cornmunity for consultation and implementation. This strategy will ensure regular

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Review the current Noxious Weed Control strategy to n""lnrn!'''' "'nvir,."nrr,,,,nltnl weeds

Key Results 06-07:

tnrn""f~ achieved

The reporting period saw the completion of a three year $1.2 million funded weed program through the NSW Environmental Trust. The grant comprised three major components i.e. eradicating mature Cherry Guava (Psidium catt/eianum), eradicating Bitou Bush (Chrysanthemoides monilifera) from the Island, and supporting research into potential biological controls for the weed Formosa Lily (Ulium formosanum). Best practice methodologies have been developed and refined throughout the program. All weed treatment information is collected and entered on a database, which provides an accurate outcome-based approach to weed treatment effort over time. Up to the end of the reporting period, over 470,000 weeds had been treated and recorded, including over 380,000 Cherry Guava. Cherry Guava is recognised as one of the world's worst woody weeds on oceanic Islands. During the reporting period, the Board secured a further 2 years funding of $323,000 per year, from the Northem Rivers Catchment Management Authority under the Commonwealth NHT program. The grant will support essential follow up treatments of working block areas. The Island has been divided into working blocks and staff systematicallY search for weeds across all accessible areas. The Board's data base provides a valuable tool for recording and monitoring progress with the weeds eradication program.

All weed species (seedlings, juveniles, matures) treated are recorded as are the person hours worked per block. Infestation points are also recorded on a GPS so that staff can assess these hot spots during follow up works, checking for seedling germination. As well as assisting with management, this information will provide valuable feedback on on-ground results to funding agencies.

Promote awareness and support for conservation of the natural environment and cultural heritage and foster community involvement in environmental management programs

Key Results 06-07:

Increasing level of community support and involvement in environmental management programs

During the reporting period the Board continued its successful 'Weedbuster' local volunteer group, with 6 enthusiastic members undertaking regular treatment of Madeira vine and Asparagus species in the settlement area. Volunteers have been provided with tools and equipment and training in bush regeneration techniques. All weed information from visiting and local volunteers is integrated into the Board's weeds database. Ms. Martine Goder, a volunteer from Mauritius visited the Island to assess the Board's approach to weed management and control. Mauritius has a large problem with Cherry Guava infestations and Ms. Goder was able to evaluate the Board's techniques and methodologies for potential application in her homeland. Martine conducted a number of community presentations including a visit to the local school to discuss weed threats and biodiversity on Mauritius and other Islands of the Indian Ocean.

During the reporting period the Board was successful in attracting a grant of $70,000 from the Commonwealth Natural Heritage Trust [NHT) program, to assist private leaseholders with the

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management and control of noxious and environmental weeds on their properties. Under the grant Board staff assisted with the heavier primary treatment works, with leaseholders undertaking follow-up maintenance. Board staff also used the opportunity to discuss with leaseholders best treatment techniques, plant identification, and weed management issues in general. The grant has been particularly useful in raising awareness in the broader community about taking an integrated and 'tenure blind' approach to weed control and eradication and in assisting the community in managing their leasehold areas.

Also during the reporting period, the Board involved the community in monitoring the spread of African Big Headed Ants. Input from the community has assisted the Board in accurately mapping the distribution of this invasive species.

Prepare and implement a vegetation management to restore disturbed

Key Results 06-07:

During the reporting period, approximately 4 hectares of previously cleared land was revegetated by the Board. The Board's focus for revegetation works centred on the continued protection and restoration of low lying creek-lines on the western side of the Island. These projects are part of works to restore remnant Sallywood Swamp Forest communities, a vulnerable vegetation community under the NSW Threatened Species Conservation Act. These areas include both the fresh and intertidal zones of Old Settlement Creek and Soldier Creek. Works involved preparation for in fill planting and weed maintenance across these riparian zones. Stock has been excluded from these areas through electric fencing with a noticeable improvement in water quality recorded. Mangrove species are now regenerating naturally throughout the tidal reach. These revegetation works have been identified as priorities in the Board's adopted Revegetation Strategy and draft Biodiversity Management Plan. Invasive grasses continue to be controlled at the forest boundary of the Permanent Park Preserve (PPP). Treatment of these grasses allows for natural regeneration of native species at the forest edge. Invasive grasses i.e. Buffalo and Kikuyu are also being targeted on the lagoon foreshore as part of a general strategy to regenerate native grasses, vines and sedges in this area.

To provide a greater diversity of species for secondary planting, the Board has continued with its seed collection and propagation program based at the Island's Nursery. A range of endemic species are being germinated or grown from cuttings. Many of these species have not been propagated in a nursery situation before and in the longer term may be made available as garden varieties on the Island. The collection of several rare and endemic species from Mt Gower will also provide a useful insurance program against possible longer term consequences associated with climate change.

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STRATEGY PERFORMANCE INDICATOR

Identify gaps in scientific knowledge, determine management research priorities and encourage and facilitate research in priority areas

Key Results 06-07:

Number of identified priority research programs undertaken

The Board has adopted a Research Policy and Strategy to guide its investment in research. The policy ensures that research investment is aligned to Corporate priorities, and the research strategy is reviewed and updated annually. During the reporting period, a priority area for investment has been research to support the rodent eradication strategy. In

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Lord Howe Island Board Annual Re art 2007

particular, research has been undertaken into the life-cycle and population dynamics of at risk non-target species, such as the endemic LHI Currawong. Officers from the NSW Department of Environment, Conservation and Climate Change (DECC) continued further Currawong banding and observational data collection to determine behavior, population and distribution data. In all, 190 individuals were captured and individually colour banded. The population size was estimated at 215 ± 11 birds [including 48 juveniles). During the breeding season pairs established, occupied and defended a territory of approximately 5.4 ha. Based on the expanse of potential nesting habitat it was estimated that Lord Howe Island can support approximately 124 breeding pairs.

Research to support pest plant eradication has also been a priority. Research continued into the lifecycle functions and processes of the major weed, Tiger Lily. Work includes identifying habitat selection, relationships between above and below ground morphology, reproductive effort, the ecology of the seed-bank on Lord Howe Island and management implications in relation to treatments and control. The work has been conducted under funding by the NSW Environmental Trust. Also during the reporting period, the CSIRO and University of Technology Sydney conducted research to determine migratory distribution and feeding habits of Flesh-footed Shearwaters Puffinus cameipes at sea. The work involved attachment of data loggers to the birds to assess their movements at sea. Information will be used to minimize the risk of Shearwater mortalities from long line fisheries. DECC continued investigation into Little and Big Mountain palm recruitment (Lepidorrhachis mooreana and Hedyscepe canterburyana) success on Mt. Gower. Recruitment is believed to be impacted by seed predation by rats. The University Of Sydney undertook DNA sampling of the introduced rainbow skink Lampropholis delicata to determine the location of the original introduction point. The work is part of a broader study into the impacts and distribution of this species across the pacific.

STRATEGY - . PERfORMANCE INDiCATOR Ensure the protection and conservation of threatened species through the implementation of Recovery Plans and by ensuring that Board decisions and actions do not adversely affect Threatened species

Key Results 06-07:

Threatened species managed in accordance with legislative requirements

During the reporting period the Board and DECC produced and placed on public exhibition, the Lord Howe Island Draft Biodiversity Management Plan. Traditional threatened species recovery planning has focused on individual species. However, the draft plan represents a fresh and innovative approach to threatened species management. It focuses on identifying shared threats and solutions for multiple species and environments across the whole landscape. It will satisfy the recovery planning requirements of the New South Wales Threatened Species Conservation Act 1995 and the Commonwealth Environment Protection and Biodiversity Conservation Act 1999 for all the listed terrestrial threatened species and habitats on Lord Howe Island. The plan will cover a 1 a-year period and will provide a valuable land management tool for prioritising on ground actions and will assist the Board in seeking financial resources for a range of environmental outcomes through public and private funding agencies. A public meeting was hosted and a plain language newsletter was developed as part of a broader public consultation process associated with development of the Plan. A trial has been established adjacent to the Max Nichols track to assess the impacts of invasive grasses on a patch of Ca/ystegia affinis, a threatened plant species. Treatment and control sites have been established to assess plant response. The project is being funded through the DECC.

The Board continues to invest in proqrams to enhance the protection of the Lord Howe Island

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L d H I I dB d A I R rt 2007 o~ owe san oar .nnua epo

Woodhen. To assess the Woodhen's general health and to provide a disease profile for this species, blood and faecal samples were collected from populations throughout the settlement and remote areas, including Mt. Gower. Samples were tested for viral and bacterial infections. A range of other native, introduced and migratory species were also tested. Preliminary results indicate a clean bill of health for all species. The profiles will however provide a valuable benchmark comparison in the event of any future avian disease outbreak. The Board continues to monitor the Woodhen's population through its annual survey. The November 2006 survey indicates that the population remains secure in all key banding locations.

. ..... . . .

. LOCATION ... April ..... Noy . APril . Noy Nov Noy Noy NoV

2001 .2002 2002 200.3 ...•... 2004 .. 2005 2006···· ·20()1 .... .... " .... .c I·,·

Settlement 32 48 41 47 42 81 78 79

Far Flats 19 15 22 10 27 21 22 11

Grey Face 12 22 15 18 No 9 survey 4 16

Boat Harbour 3 2 2 No No No survey survey survey 5 6

Little Slope .13 13 NA 10 No No

No No survey survey survey survey

Erskine Valley 4 3 2 4 0 2 2 2

Mt Gower 34 46 45 43 48 51 61 55

TOTAL NUMBER 85 121 127 132 117 164 172 169

. EstimatedTotaIPoi::HjlatiQn2006"07:300individuals c·,.· . >: ...

. . ..... , .........

..

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KEY RESULT AREA: RADING ACTIVITIES

CORPORATE OBJECTIVE: To sustain and improve retums to the Board for the benefit of the community and the Island

STRATEGY PERFORMANCE INDICATOR A$sist Governm~nt to COniph~f~fhE! National . ¢onipetition Policy revIewofthelord Howe Island Act and implenient chang~srequired

Key Results 06-07:

NatiohalConipetition Policy . review recomnienqgtiohs . implemented within required timefranies ..

The findings of the National Competition Policy review of the Lord Howe Island Act were addressed in the 2004 amendment of that Act.

STRATEGY PERFORMANCE INDICATOR Extend· palm plantatiOns and cohduct rese.arch and development to improve s~ed yields and seedling ..... .wd"d.Vc::tio!l and reduc~V9latility and relial1ce ()n seedco"~cted froni native Forests ".

Key Results 06-07:

Increas~dquantity al1d . reduceq vblafility in arinl}cd amoullt of palm seed ... collected, a~d improved seedlinsaies iel.d.··

During the reporting period the Lord Howe Island Board, through the operations of it's Palm Nursery, established plantations of Kentia palms (Howea forsterianaj on sites that were" identified as suitable for long term regeneration or revegetation of cleared land. These sites include both vacant crown land and leasehold land as defined under the Lord Howe Island Act, 1953. With assistance from the National Heritage Fund and eight landholders on LHI, the Board planted approximately 3,950 Kentia seedlings on a number of sites totalling five hectares. In addition to protecting and enhancing threatened species habitat, the plantations will provide increased future viability for the Board's nursery and reduce dependence upon seed collection from the Permanent Park Preserve, allowing increased natural re-growth in this area. With assistance of the NSW Department of Primary Industries, the Board also commissioned trials to improve the germination and health of Kentia palm seedlings using microbial agents. The project seeks to improve production efficiency specifically by accelerating seedling germination and reducing seedling loss from infection by plant pathogens and improving plant growth rates and fertiliser use efficiency. The trial will identify potential treatments that may be introduced to the Kentia palm seedling production system and potentially increase sales yields by 5% per annum and reduce the total annual Kentia seed harvest.

STRATEGY PERFORMANCE INDICATOR . Manag~ trad,ng adivitiesin accordance with business pl.ans Cll1d~nsuretargetsare achieved

Key Results 06-07:

Business plans ill place. and targetsac!1ieved .

The Board operates a wholesale and retail liquor outlet, and commercial palm nursery to enerate revenue used in rovidin essential communit services. To maximise returns to the

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Board and ensure the long term viability of the business operations, business plans have been developed and implemented in the reporting period for each of the Board's trading units.

The business plans specify key performance targets for each of the trading units in respect to annual sales, operating margins, retums on capital. They provide strategies for the marketing of product, identifying efficiencies in the production cycle and to ensure that operational decisions relating to the activities of the trading units remain consistent with the objectives of the Corporate Plan.

While providing a profitable source of revenue for the Board, the trading units also provide a valuable service to the Island community and to its many visitors. Operational profits are directed entirely towards provision of visitor facilities, public services, environmental management and asset renewal for the benefit of the community at large. The impact of the burden of these profits is spread widely across the local community including visiting tourists

I ' and avoids the very small local community bearing the full burden of altemate forms of l revenue raising to fund Board activities.

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STRATEGY PERFORMANCE INDICATOR Explore opportuhilies to develop additional," , , , c9mmercial,enterprises thatvvillcontribute to Board ' objectives,

Key Results 06-07:

Number of newdiversificciti6n options identified arid. aSSessed for fea~ipility ,

The Nursery has enjoyed a strong market position for many years and has continually been able to sell its entire annual production of seedlings to existing export clients. However, the Board realises that this position may not continue indefinitely and has actively sought to establish new opportunities for the inevitable period when production exceeds demand. This includes a proposal to diversify production to include the propagation and sale of the native Island Bush Orchid [Dendrobium moorei) which is expected to have a strong demand world wide. Negotiations commenced in October 2001 with tissue culture laboratories in Australia, USA and Europe for production with the Board retaining ownership of production rights.

Following the June 2006 Board meeting, approval was granted for 5 orchid plants (Dendrobium mooreii) to be shipped to the Netherlands to commence propagation trials. If the tissue culturing is successful the plants will be protected by the necessary patents, trademark or plant breeder rights. The time from tissue culture to production of the first 5,000 plants is estimated at a further 12 months from the close of this reporting period. The Board is also undertaking negotiations with a number of wineries to establish a "Lord Howe Island" suite of wines for sale through the Liquor store to capitalise on the increasing number of tourists visiting the Island.

STRATEGY PERFORMANCE INDICATOR Prepare and Implement a!1lanagement plan to ensure ecological 5ustainabmtyof palm ~eed .,' , ' harvesting,' ,

Palm seeds hafVested, In accordance with d mClnagement plan which

, ensures ecological " sUstClinabmt 'b 30 June 2004 '

I , Key Results 06-07:

The Board has not im lemented a Harvest Mana ement Plan as the Kentia Howea

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forsterianaj and Curly (Howea belmoreanaj palms are listed as native specimens exempt from export regulations as per the Environment Protection and Biodiversity Conservation Act 1999.

However, the Board has approved the Royal Botanic Gardens, Kew of the United Kingdom to conduct studies on the palm genus Howea on Lord Howe Island to evaluate population structures and genetics for Howea forsteriana and Howea belmoreana. These two palms form the basis of the nursery operations and seed from each species is collected on an annual basis for growing seedlings for sale.

The key outcomes of the June 2006 interim report to date are that the Howea forsteriana and Howea belmoreana species are abundant on Lord Howe Island. Notwithstanding the abundance of palms on Lord Howe Island, the research botanists from Kew Royal Botanic Gardens strongly recommend that a population viability analysis is undertaken to determine the factors affecting Howea populations and the sustain ability of the seed harvest under different regimes.

As the Board is currently exploring the commercial value of other endemic plants on Lord Howe Island, the opportunity exists for a sustainability management plan to be developed that encompasses all Lord Howe Island native flora in 2008/09.

CORPORATE OBJECTIVE: To sustain and improve retums to the Board for the benefit of the community and the Island

Ensure that the waste management facilities are located at the most appropriate long-term site by 30 June 2004

Key Results 06-07:

Waste management facilities are located at the most appropriate long-term site b')'30 June 2004

Development consent and associated approvals under the NSW Environmental Planning and Assessment Act 1979 were granted in 1999 for the construction of the waste management facility (WMF) at its current location. However, the development consent granted required the Board to consider other options for the final location of the facility. To address this, the Board identified the matter as a key Corporate strategy in its 2004-2007 Corporate Plan. A resolution of the Board was passed in December 2003 to retain the facility at its current location. This decision was the culmination of research undertaken by the Board to address the requirement of the development consent. Specifically, in October 2003, the Board engaged a consultant to prepare an options report to determine the most appropriate longterm location for the facility on Lord Howe Island. The report reviewed the existing facility and assessed alternative sites in relation to environmental, social and financial costs and benefits.

Ten alternative sites were considered based either on locations identified in previous studies or identified by cornmunity rnernbers. All of the sites were inspected by LHIB Officers and the consultant in order to confirrn current conditions. Each site was screened for suitability against a variety of siting criteria including a prelirninary review of the likely environrnental impact associated with waste management infrastructure development and operation. Several

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cleared sites with appropriate zoning under the LHI REP 1986 were identified as having potential for the installation of a WMF. The remaining sites were considered inappropriate given social and environmental constraints.

Community consultation was undertaken to assist with preparation of the report including articles in the community newsletter, the release of an issues paper, public meetings and the review of response sheets and correspondence from interested parties following public display of the draft report. The Board consulted on the approvals which would be required for the altemative sites from Environment Australia, NSW Environment Protection Authority and the North Coast Regional Office of the former Department of Infrastructure Planning and Natural Resources. Research and consultation carried out generally supported retaining the facility at its present location.

The Board is continually improving the handling and processing of waste at the facility and have streamlined operations to ensure that all processing remains within the confines of the facility and does not encroach on the surrounding native vegetation or associated habitats.

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Encourage waste minimisation

Key Results 06-07:

Reduction in nonrecyclable/non

blewaste

The Board has produced and adopted a waste minimisation strategy for the Island. The LHI Waste Minimisation and Management strategy is the result of extensive community consultation and stakeholder engagement, and examines all of the issues associated with generation, transport and disposal of waste on the island. The strategy adopted by the Board sought to reduce waste to landfill by 86% through the implementation of a comprehensive range of programs, policies and infrastructure improvements to offset the closing of local landfill and the shipping of all waste and recyclables to the mainland for reprocessing or disposal.

At the commencement of the strategy in June 2000, all of the Island's waste went to landfill, either on or off-Island. The implementation of the strategy has resulted in significant improvements over the subsequent eight years. As at the culmination of the reporting period in June 2007, only 17% (69 tonnes) of the Island's total waste went to landfill, this being exclusively off-Island.

Key actions resulting in the reduction of waste to landfill include: the construction of a composting unit for processing putrescible waste by transforming food waste, paper/cardboard, green waste and septic solids into reusable garden compost; a mechanized sorting conveyor to separate recyclable materials, and; a shredder for paper/cardboard. Waste is separated into four streams - compostable, recyclable, paper/cardboard and rubbish.

Educational and information programs have been developed for all residents and visitors plus a levy was placed on all plastic bags and alternatives provided. The LHI Waste Minimisation and Management Strategy is considered world best practice and will be reviewed in the 07-08 financial year to ensure that it is current and responsive, and to drive the further reduction of waste on the island.

Prepare and implement an effective asset management system

Key Results 06-07:

Assets managed in accordance with a structured asset management system

Board assets are managed using a structured and systematic process. The Board considered various template based asset management systems unique to public works and local government environments. Each system had the ability to provide total asset management, however did not provide the capability to integrate completely with the Boards financial management software. Several management based systems were trialled before it was determined that the most efficient system is a combination of the Boards financial management system and a spreadsheet based asset and maintenance register.

By recording information such as fleet acquisition, operational costs and performance, data can be entered into the financial management system to provide accurate information on

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the performance of Board assets, depreciation and operational costs. Given the number of managed assets are limited to plant & equipment, roads/airport, wharf facilities and structures a highly sophisticated Asset Management System would have proven cumbersome to manage effectively. The back to basics approach to asset management used by the Board has proven to be an effective tool in managing the Board's assets.

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Strategically review levels, quality, costs and charges for general services and facilities to ensure that they reflect community and visitor needs, meet legislative requirements and can be resourced by the Board

Key Results 06-07:

Extent to which services and facilities meet community and visitor needs and can be resourced

The Board continues to respond to rising community expectations by providing a growing range of essential services and infrastructure that underpins the local community and complies with legislative requirements. This expansion in roles and service quality, coupled with significant growth in input prices generally exceeding the average rate of revenue growth, has seen the Board's operating deficit increase over the last five years from an operating loss in 2003 of approximately $350,000 to over $1 ,000,000 in 2007 as per the table below.

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Operating Surplus / (Deficit)

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-200,000.00

-400,000.00

-600,000.00

-800,000.00 . - Lincal- (Surplus I (Deficit» ~

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Clearly, operating deficits of this magnitude are not sustainable in the longer term and in coming years, the Board will be challenged to reform its funding options and the way in which it operates or have no option but to cut back on the level of local community services and infrastructure provided. Options available to the Board include structural and efficiency reforms, outsourcing non-core operations and a major review of its revenue base, including an extensive overhaul of its fees and charges structure.

Continue to pursue installation of additional renewable energy sources to meet the Island's energy requirements, reduce power generation costs and reduce reliance on energy derived from nonrenewable sources

Key Results 06-07:

Increased proportion of energy derived from renewable sources and reduced cost per KWh of power generated

The Island's energy supply is generated by diesel generators which consume approximately 750,000 litres of fuel per annum, at an estimated cost of $1.1 million. In 2004, the NSW Govemment established an Interdepartmental Committee on Renewable Energy Options for Lord Howe Island.

The committee was formed to investigate options to reduce the cost of production and

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enhance the sustainability of the island's energy production. During the reporting period, the Board commenced implementation of the recommendations of the report, which were:

. The development and implementation of a demand management program to reduce the island's energy consumption;

. The purchase and installation of more fuel efficient generators to deliver the island's energy supply;

. Investigation and adoption of a source of renewable energy with a view to supplying around 10% of the Island's energy from this source.

In the coming financial year, the Board will be spending up to $350,000 on reducing energy demand in residential premises. 50% of these funds ($175,000) will be provided by the Australian Greenhouse Office (the AGO), The program will involve the subsidized supply of energy efficient appliances and fittings, household power audits and advisory services. With full subscription by 64 houses (38% of Island residences), this program will reduce residential energy demand by up to 12 % per annum (5% of total consumption). The financial saving will be around $55,000 per annum from reduced fuel consumption. Expressions of interest for involvement in the program will be sought soon. The Board will also be spending $400,000 to buy new, fuel efficient diesel generators. This will provide an estimated 27% reduction in diesel fuel consumption, a saving of $300,000 per annum. The Board is exploring feasible, costeffective options for renewable energy on the island. The AGO has indicated that funds will be available on a $ for $ basis for renewable energy projects. The Board is currently considering the feasibility of installing subsidized individual solar arrays on private residences and public buildings, to achieving a 10% reduction in the island's total energy demand. The delivery of such a project will require extensive community consultation and negotiation with subsidy recipients. The Board's intention is to look into feasibility and carry out consultation during this financial year, with a possible delivery of the program in 2008-09.

Continue to pursue the establishment of a Multi Purpose Service Health Centre on the Island to provide integrated hospital, community health and aged care services

Key Results 06-07:

Viable Multi Purpose Service in place which meets community needs

During the reporting period the Board continued to support the NSW Health Multi-Purpose Centre at Gower Wilson Memorial Hospital through provision of subsidised accommodation to medical and nursing staff, and of rent-free premises for the centre, including the Base Hospital, and maintenance of the buildings and grounds. The Board maintained ongoing liaison with South East Sydney IIlawarra Area Health Service to ensure the maintenance of the current pharmacy arrangements, staffing and resourcing levels, and services. In particular, the Board met with senior NSW Health staff, including a community workshop to identify Island health needs for the coming 5 years. A key outcome of these discussions was the agreed establishment of a Multi-Purpose Centre Community Advisory Committee. The committee is yet to have its first formal meeting.

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CORPORATE OBJECTIVE: To ensure that statutory land administration and environmental planning obligations are met in a way that effectively address social and economic needs

with Department of Planning to complete the review of the Lord Howe Island Regional Environmental Plan

Key Results 06-07:

Revised Regional Environmental Plan in place which is consistent with environmental, social and

The revised Lord Howe Island Regional Environment Plan [LHIREP) was gazetted on Friday, October 28, 2005. The plan does not allow the consent authority, being the Board, to approve any more than 25 new dwellings over the next 20 years, and also requires the Board to specify the number of dwellings it will approve within a given period, e.g. 5 years. The Board developed a policy and strategy to support the implementation of the REP regarding the approval of new dwellings. The policy separated the 20 year period up into 5 year periods and set the number of dwellings to be permitted during those periods.

These are as follows:

• 1 st five-year period • 2nd five-year period • 3rd five-year period • 4th five-year period

[Allocation Round 1) [Allocation Round 2) [Allocation Round 3) [Allocation Round 4)

- 12 dwellings 5 dwellings

- 5 dwellings 3 dwellings

In Allocation Round 1, the Board separated the 12 dwellings to be permitted into two separate categories. These are: Category A, for Islanders wishing to create a new dwelling on a sub-division or multiple occupancy of an existing Perpetual Lease and; Category B, for Islanders wishing to be granted an allotment of vacant Crown Land to create a new Perpetual Lease and dwelling. The Minister, on the recommendation of the Board, did not renew certain Special Leases on the island to make land available for this latter category.

At its meeting of June 5 and 6, 2006, in response to representations from the community, the Board resolved to:

1. Take a fresh look at all potential sources of the 10 blocks required for Category B including, but not limited to land under Special Lease and Vacant Crown Land.

2. Investigate the possibility of giving some preference in the allocation of Category Bland to those persons who held Special Leases which were not renewed after December 31, 2005.

3. Investigate altemative pricing strategies for Category Bland.

4. Develop and implement a comprehensive community consultation process for any proposed changes to Category B, commencing August 2006.

In implementing this review the Board: developed criteria to identify suitable land for housing; I the criteria to the of I

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Lord Howe Island Board Annual 2007

mapped and placed the results on public exhibition for a period of 28 days, and sought the required legal advice. A public workshop was held during the exhibition period to further

f " stimulate public discussion of the issue. The results of the review were presented to the Board ! at its December 2006 meeting.

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Work has commenced on the design of a suitable sub-division. As design of the sub-division is not yet finalised, application to the Minister for Planning for rezoning of surplus land has not yet been made. Most significantly, the SUb-division design process has triggered negotiations with holders of the previous Special Leases over Portions 55, 32, and 329. Negotiations relate to land swaps with the previous leaseholders so that their attachment to the subject land, and the needs of their families can be accommodated whilst progressing with the provision of residential allotments from Crown Land. The non-renewal of Special Leases has been a contentious process, influencing the most recent Board election, and triggering the review cited earlier in this briefing. As a result, the Board has been willing to be responsive and adaptive where a land swap may result in better alignment between the needs of individuals, families, and those of the broader community. The Board considered the progress of the development of Vacant Crown Land for housing at its May 2007 meeting. The Board noted that ongoing consultation and negotiations are being carried out with affected neighbours and previous leaseholders.

Complete the development and implementation of an effective Geographic Information System to assist with land administration and environmental planning and management

Key Results 06·07:

Effective Geographical Information System in place

During the reporting period, the Board continued to build its capacity in the effective use of geographic information systems to support land administration and environmental planning. During this period, all relevant staff were provided with refresher training in the use of ARC VIEW 3.3. This program is the basis of the Board's GIS. A consultant was engaged to consult with key staff to identify data gaps and currency issues. As a result, data layers in the Board's systems, including lease records, REP zoning, and threatened species habitat were updated, greatly assisting land administration and environmental assessment.

policies reiating to iand administration and environmental planning are consistent with legislative requirements and aligned to broader Government policy directions

Key Results 06·07:

Aii Board poiicies reiating to land administration and environmental planning are consistent with legislative requirements and broader

The Board has an ongoing program of reviewing and amending all land administration and environmental planning policy to ensure alignment with legislative obligations, and that policy is current and responsive to community needs. All amended public policy is placed on public exhibition for up to 28 days, and comment received is considered and where possible incorporated into final draft. The Board regularly refers policy to its legal advisors to ensure consistency with legislative requirements.

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During the reporting period, key policies relating to land administration and environmental planning which were developed orreviewed were:

Advertising of lease transfers to non-Islanders: From time to time the Board receives an application to transfer a Perpetual Lease under the Lord Howe Island Act 1953 [the Act) to a person who is not an Islander or able to be deemed an Islander under the Act.

The Act requires that before recommending such a transfer the Board must be satisfied that no Islander desires and is in a position to take up the lease. The Board wishes to adopt an open and consistent approach to how it determines this. This policy sets out procedures and guidelines for the Board in determining such a matter.

Permissive Occupancy Policy: Permissive Occupancies are the most flexible and open mechanism available to the Board to allow private occupation and use of land, given that all other land on the island under the Act must be occupied either by the Board for essential infrastructure or public reserves, or by Perpetual Lease, Special Lease, or lease to a Commonwealth Authority. The Board has developed a policy to ensure that permissive occupancies are allocated fairly and transparently, are well maintained by the holder and are used for the purpose they were granted. The policy ensures that permissive occupancies are made available for purposes which are lawful, consistent with the zoning of the land and with community values and expectations.

Appeals Process: The Board regularly determines applications made under the Lord Howe Island Act and subordinate legislation. To assist in ensuring transparency and administrative faimess, in particular relating to decisions made under delegated authority, the Board has developed and adopted a simple internal decision review and appeal policy. This is a relatively quick and easy way to resolve disputes with applicants and assists in avoiding potentially more expensive external rnerits review rnechanisrns, such as the Land and Environment Court.

Willing of Properties: The Lord Howe Island Act 1953 sets out the circumstances under which a person rnay bequeath a Perpetual Lease. In particular, as with any other form of lease transfer under the Act, Islander preference applies. During the reporting period, the Board undertook a review and public consultant process to deterrnine whether the current legislation relating to the transfer of perpetual leases by willing is appropriate and responsive to cornmunity needs. This included the release of a public discussion paper and a consultation workshop. As a result of this process, and associated legal advice, the Board resolved not to pursue any change to current arrangernents at this tirne, and deemed that additional policy in this regard was not required.

The reporting period saw a continuation of major improvernents in the Board's function as a consent authority under the Environrnental Planning and Assessrnent Act 1979. The Board has made significant investrnent in enhancing understanding and comrnunication within the cornmunity about planning and development matters, including the distribution of a guide to lodging development applications on the island, and improved application lodging and tracking procedures. The Board retains a qualified statutory planner to assess development proposals, audit and improve Board processes and liaise with the community on planning and development matters.

Review and update the Plan of Management for the Permanent Park Preserve

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Revised Plan of Management for the Permanent Park Preserve is in

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Key Results 06-07: Over the reporting period, a final draft of the Plan of Management for the Permanent Park Preserve was adopted by the Board with a recommendation for the draft to proceed to public exhibition. The current draft document is being prepared as a replacement to the adopted plan originally prepared in 1986. While there are significant differences in structure and layout, the proposed management philosophy of the new working draft has not significantly changed. Proposed changes and additions include: • Updated information on the Plan's Legislative and Policy framework including its

integration and consistency with other regional planning documents and other Board policies and plans.

• Reference to other state and Commonwealth environmental legislation which apply to the management of the PPP including the NSW Threatened Species Conservation Act 1995 (TSC Act) and the Commonwealth Environment Protection and Biodiversity . Conservation Act 1999 (EPBC Act).

• Recognition of strategic plans for the Island group which have been developed and adopted since the original Plan was prepared - e.g. the WHA Strategic Plan, the Vegetation Rehabilitation Plan, Strategic Plan for Weed Management and draft Biodiversity Management Plan.

• Inclusion of the Transit Hill additions into the PPP and specific management actions for these areas including ongoir:1g approval for dog walking over Transit Hill but not to the Clear Place.

• Restricting the number of camping areas and limiting camping to Island residents only at the existing facilities at North Bay.

program

Key Results 06-07:

Number of compliance audits undertaken and decreasing percentage of audits where nonrnrn"lirtnr'''' is identified

The Board has adopted an ongoing program of monitoring compliance. During the reporting period, the Board invested in the following priority compliance areas:

• Perpetual Lease Residency: The Lord Howe Island Act 1953 requires that holders of Perpetual Leases reside continuously and in good faith on the subject land, with no other habitual abode. In response to concems that this condition was widely ignored, an audit of residency on Perpetual Leases was carried out. Follow up actions to address compliance has resulted in improved compliance from 77% at commencement of audit to 93% currently.

• Building Approval Audit: Under the NSW Environmental Planning and Assessment Act 1979, the Lord Howe Island Board is the Consent'Authority for development on the island. As well as being a requirement of law, assessment and approval of development is essential to ensure safety, compliance with environmental standards, and consistency with community values. During the reporting period, the Board undertook an audit of all buildings on all Perpetual Leases. This provided the Board with a clear record of development on the island, and allowed verification of building approvals, including compliance with approvals given. Information gathered during the audit is still being collated, and a strategy to address compliance issues will be implemented during 2007-08. The information gathered will also be used to inform other programs, such as rodent eradication, water and wastewater management.

• Waste Water On-Site Audit: An audit of all the on the Island was

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completed during the reporting period. The audit was carried out primarily to locate all the Island's wastewater treatment systems and determine the level of operation and compliance with the relevant standards and guidelines. This audit is a critical component of the Board's Lord Howe Island Water Management strategy, currently in preparation. The audit identified 219 wastewater treatment systems on the Island. A number of properties had more than one treatment system on site, servicing separate houses or units. Issues identified during the audit are now being addressed.

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KEY RESULT AREA: [tIt.';J4.]fl-ij:m.V43il@M~ttIJi:4iljijilt.];ji

CORPORATE OBJECTIVE: To ensure that statutory and policy requirements are met and that effective, innovative and efficient support is provided for Government and Board programs

STRATEGY - - .. .. . PERFORMANCE INDICATOR .

Integrate planning, management and reporting processes to ensure the Board is positioned to maximise opportunities arising from changes to its operating environment, enhance staff understanding of organisational objectives, ensure individual staff accountabilities and improve operational outcomes

Key Results 06-07:

Integrated planning, management and reporting systems in place which improve operational outcomes

The Lord Howe Island Board developed a Corporate Plan for the period 2004-2007. This plan sets out Key Result Areas (KRAs) for the Board's operation. These are:

• Natural Environment and Cultural Heritage • Trading Activities • Public Utilities, Services and Infrastructure • Land Administration and Environmental Planning • Corporate Govemance and Support

In 2005-2006, to improve alignment between investment and delivery of Corporate priorities, and to ensure that its investments are focussed, responsive to changing community, political and organisational requirements, the Board commenced production of an annual Operations and Priority Investment Plan which sets out priority areas for investment over a 12 month period. The Operations and Investment Plan sets out Actions, Investments, Targets and Accountabilities/Responsibilities which will contribute to the delivery of Corporate Strategies, and in turn the Key Result Areas. Through annual workshops, all staff are involved in developing and proposing priority investment projects. The full Board and senior staff select investment priorities by way of an annual strategic planning and budget workshop.

Investment priorities by KRA for the reporting period were:

Natural Environment and Cultural Heritage

• Pest Animal Control - the strategic planning, interagency co-operation, data collection and research to support the eradication of rodents.

• Quarantine - programs which consolidate current practice and enhance resistance to the introduction of pathogens and high risk invertebrates, e.g. fire ants.

• Pest Plant Control - the strategic planning and on ground works to achieve the eradication of key pest plant species across all land tenures.

• Environmental Education. • Restoration of Disturbed Areas. • Research to deliver operational priorities.

Trading Activities

• Review and implement Nursery Business Plan including product development and marketing.

• Nursery OH&S and product processing. • Provide support for Bio-Prospecting to identify potential revenue sources. • Explore opportunities for tissue culturing of endemic native plants such as orchids for

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trademark registration, production and sale.

Public Utilities, Services and Infrastructure

• Improved Waste Management. • Major infrastructure maintenance and upgrades. • Energy efficiency. • Demand management. • Implement recommendations in the IDC report on Renewable Energy Options for Lord

Howe Island. • Designs and on-ground works to improve on-Island communications. • Engineering designs and on-ground works for improved traffic and pedestrian

management. • Research, data collection and monitoring to support groundwater, potable water,

waste water and sewerage management (stage 1). • Engineering designs and on-ground works for foreshore stabilization and protection.

land Administration and Environmental Planning

• IT upgrades to support land management and administration. • Improved compliance with planning implements and building codes. • Improved alignment of planning implements with Corporate priorities such as energy,

water, and waste management.

Corporate Governance and Support

• Implement transition to Public Sector Employment & Management Act 2002, • Facilitate community involvement in policy review and development. • Community capacity building. • Improved Corporate Govemance. • Information technology upgrade to improve service delivery. • Meet statutory requirements and ensure information held by Board is protected from

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misuse. 'I • Improve business licensing to achieve Corporate priorities such as energy and water ,J

use, waste processing and vehicle use.

STRATEGY . PERFORMANCE INDICATOR Foster enhanced community awareness, understanding and support for the Board's activities through improved communications, encouraging community engagement in consultation and decision making processes, and seeking feedback from the community and visitors

Key Results 06-07:

Increasing levels of community understanding and support for Board programs

The Board is continually assessing and reviewing its policies, programs and systems to ensure they are effective, are legislatively compliant. represent good practice, and are responsive to community needs. This is achieved through the receipt of regular community feedback, consultation processes and intemal auditing of performance. All public policy is regularly reviewed and when amended is placed on public exhibition, usually for a period of 28 days. Policy review is often supported by public meetings and workshops facilitated by the Board.

Examples of achievements during the reporting period were:

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Motor Vehicle Policy Review: The Board's regulation of the importation and use of vehicles on the Island has been a long-standing contentious issue. In particular, past tension between the needs and activities of a living community, with tourism values and visitor expectations. Essentially, the community ownership and use of vehicles has been very similar to any other small community; whilst visitors have expected a virtually "vehicle-free" island. Visitor concems were amplified by the island, and broader tourism industry. During the reporting period the Board engaged and consulted with the community and key industry stakeholders with a view to developing a revised vehicle management policy which achieved a balance of community needs, public safety and visitor amenity. The process involved public workshops, and public exhibition of the draft policy, which has now been adopted. Community and visitor concem has reduced significantly since the adoption of the policy.

Crown Land for Residential Development: A more detailed description of this review and consultation process is provided elsewhere in this report (Page 22). Essentially, in response to community concem, the Board undertook a major review of its selection of Crown Land for residential development. The process included the development and public exhibition of revised land selection criteria, re-assessment of all land previously identified, public exhibition and a public workshop regarding the results. This process has significantly reduced community concem about the issue, and has enhanced public understanding of the Board's processes.

Willing of Property under the Lord Howe Island Act 1953 (the Act): The Act prescribes how a person may bequeath a Perpetual Lease on the island. In particular, that "Islander Preference" will apply to such matters, as it does with any other form of Perpetual Lease transfer under the Act. This provision of the Act has caused some concem within sections of the community and as a result. the Board undertook a review and consultation process to clarify the matters of concem and investigate solutions. This included the production of a public discussion paper, and a consultation workshop. Although the Board resolved not to pursue any legislative change at this time regarding the matter, the process greatly enhanced public understanding of the issue, and the Board's role.

Plain Language Guide to the Act: The Lord Howe Island Act 1953, and the Regulation 2004 are complex pieces of NSW legislation which prescribe the care, control and management of Lord Howe Island, NSW. The island is home to a living community of some 350 people and the legislation impacts daily on the lives of these residents in ways rarely replicated in NSW. For example, the legislation controls the importation and use of vehicles, pet and livestock ownership, importation of garden plants, how land can be transferred including who it can bequeathed to by willing. The Board's principle concem was that the legislation is in general pooriy understood by the community so directly affected by it. To address this the Board has produced and made available to the public a series of A4 information sheets which provide a plain language explanation of key aspects of the Act, such as willing of property, lease transfers and permissive occupancy. It is expected that this information will enhance the public's understanding of the legislation affecting them, and build their capacity to engage effectively with it.

Liqour Store Commercial Customer Satisfaction Survey: Under the Lord Howe Island Regulation 2004, sale of liquor on the island requires the approval of the Board. As a condition of approval to commercial establishments, the Board requires the licensee to purchase all stock from the Board-owned liquor store. This arrangement was assessed and endorsed in the National Competition Policy review of the Lord Howe Island Act carried out in 2000. As a result of concem expressed by customers about responsiveness of the Board's business to their needs, and a lack of client focus, the Board undertook a consultation process with all commercial customers to identify performance issues and solutions. Feedback from the survey is currently being used by the Board to improve the operations and performance of

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this lucrative trading activity.

Appeals Process: The Board regularly determines applications made under the Lord Howe Island Act and subordinate legislation. To assist in ensuring transparency and administrative faimess, in particular relating to decisions made under delegated authority, the Board has developed and adopted a simple intemal decision review and appeal policy. This is a relatively quick and easy way to resolve disputes with applicants and assists in avoiding potentially more expensive extemal merits review mechanisms, such as the Land and Environment Court.

Freedom of information (Fol): To reduce the costs as sociated with the processing of Fol applications to both the applicant and the Board, and to enhance community understanding of their rights regarding access to information, the Board has informed the community that it will provide access to documents of the nature listed in Section 12, NSW Local Govemment Act 1993, where such documents are relevant to the Board's structure and function, to all members of the public upon request.

STRATEGY PERFORMANCE INDICATPR Improve the Board's financial position and operating performance and increase community involvement in the budget process

Key Results 06-07:

. Improvement in overall financial position and operating performance and greater community involvement in the budget

rocess

Like many small, remote, rural councils the Board has sizable financial sustain ability issues which require major reforms in the way in which it operates and funds essential services. Input prices such as fuel for electricity generation and waste processing costs have increased markedly over the last three years, exceeding revenue growth over the reporting period. The Board has a constrained revenue source and a lack of economies of scale to generate sufficient funds for the delivery of current services to the community. For example, revenue from essential services is less than 45% of delivery costs.

For the past three (3) years the Board has budgeted for sizable financial operating deficits ranging from $1.3 million to $1 million to carry out essential maintenance on infrastructure assets, expand renewable energy sources and continue environmental programs to maintain the Island's world heritage values. Whilst deficits of such magnitude cannot be sustained in the long term, the Board's Balance Sheet remains in a sound position with a median current ratio [current assets and liabilities) of 6.45 and its cash reserves remain stable. The ratio of 1 is a key threshold for testing liquidity of an entity, with a ratio of less than 1 indicating potential insolvency.

During the reporting period the Board brought forward the annual budget cycle to allow for community and industry comment prior to adoption of the proposed 2007/08 budget. This provides an opportunity for the community to assess proposed increases in fees and charges for services, assess capital works improvements and additions and scrutinise proposals for recurrent maintenance and project expenditures.

STRATEGY . .. . _.. , PERFORMANCE INDICATOR

Implement an efficient, effective and comprehensive risk mana ement and internal control framework

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Declining costs associated with risk mana ement

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Lord Howe Island Board Annual Reoort 2007

I related incidents

Key Results 06-07:

During each reporting period, the Board undertakes a thorough internal audit prior to the preparation of its financial report and this audit is the Board's key risk rnanagernent process for ensuring that fraud will not result in the rnaterial rnisstaternent of the financial report.

During the reporting period, the Board has developed, adopted and abides by an Accounting Manual which sets out best practice systerns and procedures for public finance rnanagement. The Board has developed, adopted and abides by a Code of Conduct for all staff, Board members, and Board officials, and governance is a standard agenda itern at all Board rnanagement and senior management meetings.

During the reporting period, the Board undertook a Governance Audit (2007) using the framework contained in the Governance Health Check: self audit guide to good govemance in local government published by the NSW Local Governrnent Managers Association and ICAC.

Areas identified in the audit where further work is required are:

• Internal Reporting Policy. Although covered in the broadest sense by public sector guidelines, LHIB does not have a policy that satisfies the disclosure provisions of the Protected Disclosures Act 1994. The Governance Audit Action Plan requires that this be completed by December 2007.

• The Board does not have a Corporate Risk Mgt Plan. The Governance Audit Action Plan requires that this be completed by December 2007.

• Although covered in the broadest sense by the Code of Conduct, the annual audit and various systems and processes, the Board does not have Fraud and Corruption Prevention Plan. At this stage, the Board does not propose to produce such a plan and will continue assertion and rnonitoring of the Code of Conduct and continue to adjust systems and processes based on annual audit findings.

Also during the reporting period the Board: • Continued to implement its public risk assessment and rnanagernent system to identify,

address and rnonitor risks associated with public places, infrastructure and services. The Board rnaintains a public risk register and risk management actions are incorporated into works prograrns according to priority. The risk rnanagement system was included in the Board's internal audit and the recomrnendations resulting are currently being implemented to improve the system and its application.

• Continued to implernent its occupational health and safety risk assessment and rnanagernent system to identify, address and monitor risks associated with the workplace, including quarterly reporting to the Board against NSW Premiers OH & S. targets.

~ .

STRATEGY PERFORMANCE INDICATOR Explore opportunities for partnerships with other organisations that will further the Board's objectives and provide an overall benefit to the Island

Key Results 06-07:

Number of partnerships established which have a net financial benefit to the Board

Develooina and maintainina effective and oroductive partnerships with other oroanisations is

Page 31

Lord Howe Island Board Annual Re ort 2007

critical to the Board's operation and success. During the reporting period, the Board developed or maintained the following partnerships:

NSW Health: The Board continues to work strategically with NSW Health to ensure that health services on the island are appropriately aligned with community expectation and need, including the effective operation of the Gower Wilson Memorial Hospital. The reporting period saw the Board and NSW Health agree to the continuation of pharmacy services at the hospital, and the establishment of a community health advisory committee.

NSW Department of Climate Change and Conservation (DECC): The Board continues its close relationship with this agency. During the reporting period, the Board worked closely with DECC on the rodent eradication strategy, including the funding of a dedicated project officer within the agency. The Board continued to work closely with DECC on environmental research projects, and to outsource its legal and Ministerial liaison services from this agency.

NSW Department of Planning (DOP): During the reporting period, the Board continued to work with NSW Planning in the implementation of the recent Lord Howe Island Regionai Environment Plan 2005. In particular, the Board worked closely with this agency in the review of Crown Land identified for residential development, and in investigating potential zoning changes to improve the responsiveness of the plan to Board and community needs.

NSW Maritime (NSWM): Lord Howe Island is an Open Port administered by NSWM under NSW Ports and Marine Administration Act 1995, and any suitable vessel is entitled to the use of the port. To oversee the operations of the port, including the safe arrival and departure of vessels using the port, NSWM employs an island-based Port Operations Manager (POM). The Board continues to work closely with and support NSWM in this area. The Island Traderis currently the only freight vessel servicing the Island, and the NSW State Contracts Control Board (SCCB) holds a contract with Lord Howe Island Sea Freight Ply Ltd to carry the Board's sea freight. being cargo and fuel. The Board's cargo represents only 20% of the total trade to the Island carried out by Lord Howe Island Sea Freight Pty Ltd. NSW State Contracts Control Board, in consultation with the Board, has used the contract as a mechanism to manage safety and environmental risks associated with the overall operations of the vessel.

In particular, to reduce the risk of a maritime incident involving the Island Trader, the State Contracts Control Board, on behalf of the Board, has made it a condition of contract that the vessel does not enter the lagoon unless appropriate arrangements have been made with LHI Port Operations Manager to ensure safe transit of the North Passage.

Australian Quarantine and Inspection Service (AQIS): The Board continued to work cooperatively with AQIS to improve quarantine protection for the island. During the reporting period, the Board and AQIS worked together to provide training to sea freight operators to improve quarantine management.

Australian Customs: Lord Howe Island is a first port of call for many vessels and aircraft and Australian Customs retains a presence on the island. The Board provides rent-free accommodation at the airport for this agency, as well as operational and logistical support when required.

Lord Howe Island Tourism Association (LHITA): LHITA is the peak industry representative body on the Island for tourism and provides a valuable role in product development. promotion and marketing. The Board continued its close relationship with this body through membership on the executive committee and provision of funding.

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L dH II d dA oc owe san BOBf, 2 nnua Report 007

Provide relevant and timely policy and other advice to Minister is aware of Government on matters affecting the management of significant matters affecting the Island management of the Island

and Government requirements dealt with in required timeframes

Key Results 06-07:

During the reporting period, the Minister has been provided with copies of the minutes of each meeting of the Board. In addition, the Board's administration provided the Minister with a quarterly briefing on matters of interest. During the reporting period, all matters requiring action on behalf of the Minister have been dealt with effectively and within the required deadline.

4. STATUTORY REPORTING

i) Transfer and Subletting of Perpetual Leases to Non-Islanders under the Lord Howe Island Act 1953 (the Act)

During the reporting period, two (2) leases were transferred to a non-Islander under the circumstances set out below.

An application was received for consent to transfer Perpetual Lease 1954/12 from Raynor Alan Williams to Gai Nanette Wilson (4/24 share), Kerry Matthew Stokes (5/24 share), Christine Lois Simpson (5/24 share), Peter Rowand Murray (5/24 share) and Ann Murray (5/24 share) as tenants in common. Section 23 of the Lord Howe Island Act, 1953 provides that the Minister, on recommendation of the Board, may consent to the transfer of a lease to two or more persons as joint tenants or tenants in common, and that where the proposed transferee is not an Islander within the meaning of the Act the Board shall not recommend consent unless satisfied that there is no islander who desire? or is in a position to take the transfer. Section 23 further requires that in the case of a transfer to a person other than an islander, the approval of the Govemor is required. Although one of the transferees was an Islander, the Act requires under Section 23 (1 A) that where a transfer to two or more persons who are not all Islanders, that part of the Act shall apply to a person other than an Islander in respect to each transferee who is not an Islander. Therefore it was necessary for the Board, if recommending consent to the Minister, to satisfy itself that no Islander desires or is in a position to take over the transfer of this lease. the Board resolved as follows on the 24th July 2006: That the Board seek the Ministers consent and the Governor's approval to the transfer of Perpetual Lease 1954/12 from Raynor Alan Williams to Gai Nanette Wilson (4/24 share), Kerry Matthew Stokes (5/24 share), Christine Lois Simpson (5/24 share), Peter Rowand Murray (5/24 share) and Ann Murray (5/24 share) as tenants in common, providing no other islander desires and is in a position to take over the transfer.

A notice was exhibited and distributed to all residents on the 25th July 2006 allowing Iskmders a period of 14 days to lodge a submission. This advertising period closed at 4:30 pm on 7 August 2006 with no submissions being received from Islanders. Therefore no objection was raise.d to the proposed transfer as no Islander desired or was in a position to take up the lease. It was therefore recommended to the Minister that consent be given to the transfer of Perpetual Lease 1954/12 from Raynor Alan Williams to Gai Nanette Wilson

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(4/24 share), Kerry Matthew Stokes (5/24 share), Christine Lois Simpson (5/24 share), Peter Rowand Murray (5/24 share) and Ann Murray (5/24 share) as tenants in common in the shares indicated, and that the Minister seek the Govemors approval to the transfer. The transfer was approved by the Minister and the Govemor in August 2006.

Estate of the Late lima Sainsbury to Mrs Shirley Hines - Rich under Section 23 (10) of the Lord Howe Island Act: An application was received for the transfer of Perpetual Lease 1954/48 (Portion 69 LHI) from the estate of the late lima Ermine Lena Sainsbury to Mrs Shirley Hines - Rich under Section 23 (10) of the Lord Howe Island Act. Although Mrs Shirley Hines-Rich was not an Islander under the Act, she was executrix and beneficiary of the estate.

Section 23 (10) of the Act states that: (a) If a lease under this Act devolves under a will or intestacy upon any person, such person may hold the lease for such period after the death of the testator or intestate as the Minister on the recommendation of the Board may permit. (b) Within any such period such person may, upon application and upon the recommendation of the Board obtain a certificate from the Minister that the person is entitled to hold the lease; or such person may, subject to this section, sell and transfer the lease. In December 2006, the Board recommended and the Minister approved "that Mrs Shirley Hines- Rich (Executor & Beneficiary) of the estate of the late lima Ermine Lena Sainsbury, hold Perpetual Lease 1954/48, under Section 23 (10) of the Lord Howe Island Act, for a period of 12 months, or until the lease is transferred by way of sale, whichever is sooner".

ii) Granting of Perpetual Leases

During the reporting period, 1 new Perpetual Lease was issued under the circumstances set out below.

Perpetual Lease 1990/01 was held in the names of Mathew Charles Retmock and Suzy Elizabeth Gillett. Development Consent was granted in April 2006 to subdivide lot 293 (DP 48693) for the purpose of subdividing the two existing dwellings on that allotment. The development application for this subdivision was approved on 21 April 2006, a Subdivision Certificate issued in November 2006, and the Department of Lands advise that this plan was registered on 27 March 2007. An application was subsequently received from the lease holders (Mathew Retmock & Suzy Gillett) to transfer the original lease to one of the current holders and to create a new Perpetual Lease for the other lease holder. Section 21 of the Lord Howe Island Act 1953, provides that the Minister may lease land to an Islander for the purpose of residence. Part 5 of Section 21 requires the Board to report to the Minister as to whether there is any objection in the public interest or otherwise to the granting of the application and generally as to the merits of the application. Section 23 of the Lord Howe Island Act, 1953 provides that the Minister, on recommendation of the Board, may consent to the transfer of a lease, and that where the proposed transferee is not an Islander within the meaning of the Act the Board shall not recommend consent unless satisfied that there is no Islander who desires and is in a position to take the transfer. Section 23 further provides that in the case of transfer (not being a transfer by way of mortgage) to a person other than an Islander, the approval of the Govemor is required. In this instance, both applicants were Islanders under the Act and the Board recommended, and the Minister approved, the transfer of the existing lease and the issuing of a new lease as applied for.

iii) Funds Granted to Non-Government Community Organisations

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During the reporting period, the following funds were granted by the Board to nongovernment community organisations:

- -Organisation Amount Pur ose

LHI Tourism $34,000 Promotion and marketing of island tourism Association LHI Historical Society $26,000 Completion of museum annex LHI Community $ 1,200 Radio station operation Radio LHI P & C Association $ 1,000 NSW School Spectacular attendance LHI Golf Club $ 500 Event sponsorship LHI Bowling Club $ 500 Event sponsorship

iv) Legislative Change

During the reporting period, the Lord Howe Island Act 1953 (the Act) was amended to the effect the Board was not able to directly employ staff.

Prior to 17/3/06, Section 6 of the Act - Employment of Staff stated: (1) The Board's staff are (subject to this section) to be employed under Chapter 2 of the Public Sector Employment and Management Act 2002.(2) The Board may arrange for the use of the services of any staff (by secondment or otherwise) or facilities of a govemment department or public authority. For the purposes of this Act, a person whose services are made use of under this subsection is a member of the Board's staff. (3) The Board may engage consultants for the purposes of getting expert advice.

As of 17/3/06 the Act was amended so that Section 6 - Employment of Staff was omitted and the following was inserted into Section 12 - Powers, Authorities, Duties and Functions of the Board: (3) The Board cannot employ any staff. Note. Staff may be employed under Chapter 1 A of the Public Sector Employment and Management Act 2002 in the Govemment Service to enable the Board to exercise its functions.

v) Research and Development

The Board has supported, sponsored or undertaken the following research during the reporting period.

e NSW Department of Environment Conservation and Climate Change (DECC) -Officers continued further bonding of the Island's endemic Currawong Sfrepera graculina crissaffis and completed observational data collection to determine behaviour, population and distribution information.

• University of New England, Armidale - On going PhD research into gaining greater understanding of the invasive weed, Tiger Lily, Lilium foermosanum. Project objectives include, habitat selection, relationships between above and below ground morphology in the life cycle of Lilium formosanum, reproductive effort, ecology of the seed-bank and management implications.

• CSIRO and UTS - data logging of Flesh-footed Shearwater's Puffinus carneipes to determine migratory distribution, foraging areas at sea and overlaps with longline fisheries.

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• NSW Department of Primary Industries - investigations into beneficial soil microbes to assist with disease suppression and germination of Kentia palms Howea forsteriana.

• NSW Department of Environment, Conservation and Climate [DECC) -investigation into Little Mountain Palm Lepidorrhachis mooreana and Big Mountain Palm Hedyscepe canterburyana recruitment success on Mt. Gower.

• Norfolk Island - Ranger and weeding contractor visited Island to investigate Island's weed eradication program and other conservation initiatives.

• University of Technology Sydney rUTS) undertaking information on recruitment dynamics of juvenile Bluefish.

• Sydney University - D NA sampling of introduced rainbow skink Lampropho/is delicata to determine location of original introduction point. Part of a broader study into the impacts and distribution of this species across the Pacific.

• Lord Howe Island Board - Undertake blood sampling and swabbing to establish base line disease profile of LHI Woodhen Gallirallus sy/vestris and a range of native, endemic and introduced species.

• Lord Howe Island Board - completion of annual Woodhen Gallirallus sy/vestris survey and banding program across settlement and mountain locations as part of Recovery Plan requirements for this species.

vii) Freedom of Information

The Board is bound by the provisions of the Freedom of Information [Fol) Act, 1989 and is required under Section 14[ 1) [a) of that Act to publish a Statement of Affairs at intervals of not more than 12 months. In accordance with this requirement the Board's Statement of Affairs is included at the end of this report. The Board received one application for access to documents under Freedom of Information legislation during the reporting period.

To reduce the costs associated with the processing of Fol applications to both the applicant and the Board, and to enhance community understanding of their rights regarding access to information, the Board has informed the community that it will provide access to documents of the nature listed in Section 12, NSW Local Govemment Act 1993, where such documents are relevant to the Board's structure and function, to all members of the public upon request.

The Lord Howe Island Board is a statutory body established under the provisions of the Lord Howe Island Act, 1953. It is charged with the care, control and management of the Island and of the affairs and trade of the Island. Lord Howe Island and all adjacent Islands and coral reefs within one marine league of the Island are on the World Heritage List and are managed by the Board.

The Board's principal place of business is on the Island. Mail may be addressed PO Box 5, Lord Howe Island, NSW 2898.

EFFECT OF THE BOARD'S FUNCTIONS ON MEMBERS OF THE PUBLIC

As can be seen from the previous section much of the Board's operation relates to local govemment functions. The Board's decisions affect Island residents in regard to:

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o Owner Consent, Development Applications and Construction Certificates.

o Fees and charges for any service or commodity and licence fees for tourist and commercial undertakings.

o Local govemment charges including electricity tariffs.

o Importation of motor vehicles, flora and fauna.

o Regulations into the gathering and collection of palm seed.

ARRANGEMENTS FOR PUBLIC PARTICIPATION IN POLICY FORMULATION

Board meetings are held on the Island and are open to the public except for sections dealing with the trading operations, finances, staff matters, lease matters and legal matters. Individuals are permitted to participate in discussion and local community groups are encouraged to make representation on policy issues which are considered by the Board. Elected Island members are available for discussion with Island residents on particular issues which may be taken into consideration by Board members in the decision making process. All amendments to public policy are placed on public exhibition for up to 28 days.

DESCRIPTION OF THE KINDS OF DOCUMENTS HElD BY THE LORD HOWE ISLAND BOARD

Most of the Board's documentation is stored as files relating generally to:

•

•

• •

Administration - all aspects of intemal administration including Board minutes, budget and financial matters, correspondence, intemal audit, management information systems and the Board's owri agendas and reports. Island residents' land tenure files and palm marketing operation.

Capital Works - all aspects of capital works programs including working papers and plans.

Ministerial Parliamentary Enquiries.

All correspondence to and from members of Parliament in relation to the Board activities.

• Staff Matters.

• All files relating to recruitment and training of staff and staff members personal files. Staff may have access to their personal files.

• Contracts and Tendering Documentation.

I.· The Board is a major purchaser of goods and services for its operation. Purchasing and tendering procedures are well documented and are in accordance with the Board's

i . Procurement Policies and Procedures Manual. Many documents in this category contain I . commercially sensitive matter though in terms of govemment policy, the names and

prices of successful tenderers are available.

POLICY AND PROCEDURES

The policies and procedures of the Board are determined by the Lord Howe Island Act, 1953 and the Lord Howe Island Regulations. Documents generally available are:

Lord Howe Island Act $13.20

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Lord Howe Island Regulations Regional Environmental Plan

$10-50 $25-50

These are available from the Board office or at www.austIiLedu.au. The documents are also available from the Government Information Office, Sydney.

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PUBLICATIONS, BROCHURES, PAMPHLETS

The Board produces a wide range of publications ranging from brief information sheets to substantial technical reports. Significant publications are listed below. Brochure and Pamphlets

REPORTS

Geology Map of the Island Exploring Lord Howe Island (walking tracks) Birds of L.H.I. Posters Natures Sentinels DVD Plants of LHI Information Sheets Statement and Summary of Affairs

Free Free $3-30 $26:00 $9:90

(free) (free)

Numerous reports and studies relating to the Island's environment and planning issues are available for inspection at the Administration Office. Extracts may be made by the public on a cost only basis.

INFORMATION ACCESS ARRANGEMENTS

Access to Policy Documents

Policy documents may be inspected during normal business hours (8.30 am to 4.30 pm Monday to Friday) at the Board's administrative office. Shortages of some items may affect their availability from time to time. Should there be any difficulty in inspecting policy documents please contact the FOI Coordinator by telephone on (02) 65632066 or by fax on (02) 65632127.

Access to files

The Board's files are not generally available for public inspection. Wherever possible, informal access will be arranged and if copies of documents are required reasonable copying charges will be levied. Where informal access is not possible a Freedom of Information application should be lodged and Freedom of Information fees will apply.

Access to Documents Published by the Board

Most of the Board's published documents may be accessed through the Board's administrative office. Business Hours are 8.30 am to 4.30 pm, Monday to Friday.

Access to Documents Concerning Personal Affairs

Members of the public seeking access to documents about their personal affairs should apply for access under the Freedom of Information Act to the FOI Coordinator. Staff do . not need to use the Freedom of Information Act to access their personal files. A request to access one's personal file should be directed to the Chief Executive Officer.

Amendment of Documents about Personal Affairs

Members of the public seeking to amend agency documents about their personal affairs should contact the Freedom of Information Coordinator at the Board's administrative office. In most cases a written application will be required in terms of the Freedom of

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Information Act. Proof of the amendments being requested will also be required - what such proof may be may vary from case to case and should be discussed with the Freedom of Information Coordinator. Staff who seek to amend documents on their personal files should contact the Chief Executive Officer. Staff who seek to amend documents about their personal affairs which are held by the Board in a location other than their personal file should contact the FOI Coordinator.

viii) Equal Employment Opportunity statement

The following Equal Employment Opportunity statistics disclosure for staff employed under the Crown Employees (Lord Howe Island Board Salaries and Conditions 2004) Award was generated from Workforce Profile data collected using software provided by the Office of the Director of Equal Opportunity in Public Employment.

A. Trends in the Representation of EEO Groups

EEO Group Women Aboriginal People and Torres Strait Islanders People whose first language was not English People with a disability People with a disability requiring work-related adjustment

Benchmark or Target

50%

2%

20% 12%

7%

B. Trends in the Distribution of EEO Groups

EEO Group Women Aboriginal People and Torres Strait Islanders People whose first language was not English People with a disability People with a disability requiring work-related adjustment

Noles: 1. Staff numbers are as at 30 June. 2. Excludes casual staff.

Benchmark or Target

100%

100%

100% 100%

100%

% of Total Staff

2004 50%

2005 33%

3% 9%

6.1%

% of Total Staff

2004 2005 n/a n/a n/a n/a

n/a n/a

n/a n/a n/a n/a

2006 33%

3% 6%

2.8%

2006 n/a n/a

n/a

n/a n/a

2007 30%

6% 7%

5.6%

2007 n/a n/a

n/a

n/a n/a

3. A distribution index of 100 indicates that the centre of the distribution of the EEO group across salary levels is equivalent to that of other staff. Values less than 100 mean that the EEO group tends to be more concentrated at lower salary levels than is the case for other staff. The more pronounced this tendency is, the lower the index will be. In some cases the index may be more than 100, indicating that the EEO group is less concentrated at lower salaries. The Distribution Index is automatically calculated by the software provided by ODEOPE: 4. The distribution Index is not calculated where EEO group or non-EEO group numbers are less than 20.

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Lord Howe Island Board Annual Repcc;o"-rt:..:2:.:0"'O'-7 ________________________ _

ix)

Representation of EEO Groups

60% r------i

------------

10% -1----------i 0% .i"-, .• --, ..•.•

j..:>:"'".,."'7~'e_~~"'~"~""'>-_~~"~ __ ~_ "'-"'"':'.~

----- - Ii!I iii 2004 2.005 2006

........c--ViJomen -m-AboriginClI people ilnd Torres Strait Islat,dcts -:.'~ people- whose first langlwge was not English -:-, People-wilh.l disability

Equity and Ethnic Affairs Policy statement status Report

I'll 2007

The Board has adopted an Ethnic Affairs Policy statement (EAPS). The Board is committed to adopting the Govemment's principles of cultural diversity and ensuring that people from ethni.c communities are an integral part of the social, cultural and economic future of New South Wales.

The Board will continue to identify and assess the needs of the community, in particular people from racial, ethnic or ethno-religious minority groups.

xi) staffing

The Lord Howe Island Board consists of seven members appointed by the Minister for the Environment. Four are elected Islanders. There is a place designated under the Act for an officer of DECC. The Chairperson is appointed by the Minister. The Board has a permanent staff establishment of 28 with the Chief Executive Officer responsible for the overall day-to-day management and administration.

The following employee numbers for staff employed under the Crown Employees (Lord Howe Island Board Salaries and Conditions 2004) Award are based on the annual reference period average Full Time Equivalent (HE) figures generated from Workforce Profile (WP) data collected on behalf of the Department of Premier and Cabinet:

Number of FTE Employees Area Category 2006/07 2005/06 2004/05 2003/04 Administration Snr. Management 2.4 2.0 1.8 2.2

Administration 4.2 4.0 3.0 2.8 Visitor Centre 0.8 0.9 0.8 1.0

Operations Works 15.6 13.4 13.7 13.2

Powerhouse 1.0 1.0 1.0 1.0 Environmental Environment 14.6 13.6 9.5 7.4 Trading Nursery 7.2 8_6 9.2 7.4

Liquor Store 1.4 1.4 1.5 1.0

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I I Total I 47.2 44.9 40.5 36.0

The Board's staff team deliver the following services through management sections'and supporting units.

Administration

This area is responsible for:

o General administration of the Board including trading operations, business management practices, services, correspondence, records and reporting on changing conditions affecting the Island.

o Financial management including budget forecasting and monitoring and control of funds.

o Human Resource Management including salaries, industrial relations and staff development.

o All local government functions including the processing of Development and Building Applications and management of appropriate planning controls.

o Management of land tenure including leases in perpetuity for residence.

o Maintenance, development and implementation of information technology.

o Maintenance of functions of other government departments including the Passports Office, and Registry of Births, Deaths and Marriages.

Operations

This area is responsible for provision of local government functions which include:

o Road construction and maintenance.

o Servicing recreation and tourist facilities.

o Generally promoting and preserving public health, safety and convenience.

o Operate and maintain a safe and efficient airport in compliance with CASA regulations.

o Management of generation and reticulation of electricity.

o Operation of the power station and reticulation of electricity.

Other service operations include:

o Maintenance of moorings and the safety of vessels in the lagoon.

o Control and maintenance of the Island wharf.

o Maintenance of waste disposal areas.

Environmental

The Board is responsible for the protection of the environment and conservation of flora and fauna. The Board is also responsible for the day to day management and protection of the World Heritage Values of the Lord Howe Island Group. The functions of this unit are:

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o Management of the Lord Howe Island Permanent Park Preserve.

0

0

0

0

0

0

0

0

Trading

Develop and implement a plan for the environmental management of the Lord Howe Island Region.

Monitor and report on the status of the Island's World Heritage Values and obligations.

Implementation and supervision of environmental works programs.

Public interpretation and education.

Protection and conservation of fauna and flora.

Monitor flora and fauna populations.

Identify and prioritise research programs.

Monitor and control feral animal species.

The Board has two trading operations.

Kenfia Palm Industry

The Lord Howe Island Act provides for the regulation of the Kentia Palm Industry. The' Board operates a Nursery on the Island for the germination of Kentia palm seeds. The functions of the Nursery management include:

o

o

o

o

o

Receiving of palm seed from local collectors.

Germination of palms.

Organising sales of palm seedlings both locally and abroad.

Packing and shipping to domestic and overseas buyers.

Producing palms and other native plants for reforestation.

Liquor Trading

The Board controls the sale and distribution of liquor on Lord Howe Island. The functions of the Board's Bond store are:

o

o

o

Ordering of all stock.

Promotion and sale of liquor.

Stock control.

The Board's staff team deliver the following services through management sections and supporting units.

xii) Consultants

The Board paid the sum of $253,268.42 during the current financial year to various technical consultants. These payments were made for the following purposes.

Consultants engaged at a cost of $30,000 or greater:

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La rd Howe Island Board Annua/ Report 2007

Consultant Project Actual Costs

Cou.ntry Energy Powerhouse Consultancy/SEQ relief $36,881.97

CRC for Aus!. Weed Management Tiger Lily Research $34,817.20 Manta Consulting Town Planning Consultancy Services $72,854.10

Price Waterhouse Coopers Legal Audit Services $31,979.20

Webb McKeown & Associates PL Jetty Maintenance and Upgrade $55,290.02

Engagements costing less than $30,000 categorised by the nature of the consultancy:

Nature of Consultancy Number of Total Cost Engagements Asset and Property Valuations 4 $2,420.00 Corporate Governance/Legislation 1 $114.20 Bio Security Planning 1 $4,611.73

Traffic Management 1 $14,300.00

xiii) Occupaiional Health & Safety and Risk Management

The Workplace Injuries chart shows that claims for 2006/07 have increased by 66% over the corresponding period for 2005/06.

W k I I" f 2006/07 or.KP/ace fJLunes or

25 I::H-Il3-Workplace-tnj-ur'es --

20 . ---15 /

~-

----10

_. / ~

5 .....-

.....-r-

0 Jul Aug Sep Oct NoV Dec Jan Feb Mar Apr 1 May JUI1

1-+-2005'06 2 2 3 3 5 7 7 8 10 12 1 12 12 1 ____ 2006/07 5 9 9 10 11 12 14 14 15 18 I 19 20

During the reporting period the Board implemented new reporting procedures and provided training for staff in Occupational Health and Safety and this has instilled a culture in staff to report injuries, including those of a minor nature that in the past would not have been recorded.

The chart below, "Activity by Department", highlights the type of activity being carried out by the claimant by Service Unit from July 2005. It shows that weeding is the predominant activity leading to claims with 16 incidents in the reporting period.

Further investigation of the ciaims history for this activity shows that no two injuries have been the same and whilst the majority of injuries have been of a minor nature to date, the potential exists for a major injury given the nature of the terrain and inciement weather that staff are required to work in [eye lacerations, head injuries from slips, etc).

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18 16 14 :t2 10

8

Environment

Activity By Department

Nursery \Nerks

During the reporting period the Board was not prosecuted under the Occupational Health and Safety Act 2000 for any incident during the reporting period.

xiv) Analysis of Financial Performance

Subject to the final audit of the accounts, the Board completed the financial year ended 30lh June 2007 with a reported net operating loss of $1 ,001 ,345. This was against a budget net operating loss of $1 ,935,808. The net operating result for the previous year was a loss of $742,509.

The variation from the previous year result is due in part to an operating loss at the Board's Nursery which has been adversely affected by accounting treatments for palm plantations, a decline in overseas markets for product and the requirement to propagate native plants for non-commercial purposes including rehabilitation and revegetation works on Lord Howe Island.

There was also a decrease in funds from the Board's service operations with many of the cost input drivers for essential services such as diesel fuel for electricity generation exceeding revenue growth.

A copy of the Balance Sheet, Statement of Recognised Income and Expense, Income Statement and Cash Flows Statement together with the full set of notes and policies, are provided for information as part of the financial reports.

Comparison of result with previous year

The variation in the result for the year compared to the previous period is attributed to the following factors. .

Variance in Operating Result 200512006 to 200612007

Budget Component

Decrease in funds from Trading Operations #

Decrease in funds from Service Operations

Increase in State Government funding

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Variance $

(273,244)

(276,707)

19,843


Increase in Commonwealth funding

Total change in operating result # Includes revenue adjustments required by AASB 141 Agriculture - refer later sectioJl.

271,273

(258,835)

Commonwealth subsidies for World Heritage and Natural Heritage Trust programs increased from $142,044 during the year to $520,020 to expand weed eradication activities and a celebration for 25 years of World Heritage listing for Lord Howe Island. The Board also received $27,000 from Emergency Management Australia to enhance the Island's capability to manage potential natural disasters such as tsunamis and cyclones.

There was also a slight increase in State Govemment funding including $1.342 million from NSW Treasury for Community Service Obligation services and $445,956 from the NSW Environmental Trust as part of a three year program of weed control and management for the Island. Total trading operations generated a surplus of $64,450 compared to a surplus of $337,694 in the previous year.

The Palm Nursery operations showed an operating deficit of $194,555 compared to a net profit of $77,221 for the previous year. This is a tumaround of $271,776 from 2005/06 and is attributed to a decrease of $119,118 in palm plantation valuations and an increase in impairment allowances of $1 07,100 for outstanding freight charges to Europe. Seedling sales for the year totalled approximately 1.4 million against a sales projection of 1.8 million for 2006/07.

Total income from Nursery operations was $672,673, down from $1,045,721 for last year.

Nursery seed and seedling stocks on hand at 30 June 2007 are valued as biological assets under the accounting standard AASB 141 - Agriculture. Their fair value was determined as $514,062 compared to $481,605 for the previous year. Palm plantations were valued at $88,300 compared to $207,418 in 2005/06. The valuation calculates the future production from palm plantations using figures based on a five year average of seed collected up to and including the current year. The five year average used for 2007 was 683 bushels (667 bushels in 2005/06) with actual seed collected totalling 501 bushels, down from 677 bushels in 2005/06.

Liquor Store trading returned a net surplus of $259,005 compared to the prior year result of $260,472. Sales for the Liquor Store operation increased by $79,702 from $1,293,312 to $1,372,834, whilst operating costs increased by $81 ,169 from $1,032,659 to $1,113,828 in 2007. Purchases for liquor stock for re-sale was the main cost driver with an increase of $23,685 to $987,033 for the reporting period. Liquor Stock on hand decreased by $7,430 from $145,515 to $138,085.

Excluding government grants and subsidies, the Board's Service operations recorded a deficit for the year of $3,525,379, an increase of $276,707 over the previous period.

Available Cash Reserves The Board's total available cash on hand increased by $184,600 from $4,469,794 in 2005/06 to $4,879,394 as at 30 June 2007.

Interest received on cash reserves for the reporting period totalled $303,115 compared to $291,481 in 2005/06.

Total cash reserves compared to the previous period are detailed below.

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Lord Howe Island Board Annual Report 2007 Available Cash 30 June 2006 30 June 2007 Variance

$ $ $

Core Board Activities 4,544,935 4,624,347 79,412

Special Purpose project funding 149,859 255,047 105,188

Total Available Cash 4,694,794 4,879,394 184,600

The balans:;e of Special Purpose project funding at 30 June 2007 is held for programs from the followihg organisations.

Organisation

NSW Department of Environment and Climate Change

NSW Environmental Trust

NSW Department of Arts, Sport and Recreation

DOTARS

National Heritage Trust

Total

$

46,952

2,553

6,000

31,425

168,117

255,047

The following table summarises the Board's cash flow for 2006/07 compared to the previous period.

Net Profit / (Loss)

Add: Depreciation

Non Cash Revenue from movement in Biological Assets

Working capital movements

Cash flow from Operations

Deduct Capital expenditure

Proceeds from sale of assets

Loan repayments from Other Financial Assets

Net Increase / (Decrease) in cash

2005/06 $

(651,361 )

1,204,057

100,013

(489,943)

162,766

(407,127)

29,611

0

(214,750)

2006/07 $

(1,001,345)

1,221,403

86,661

94,975

401,694

(243,890)

18,599

8,197

184,600

This table demonstrates that although there was positive cash flow from operations for the period, the majority of the increase in cash reserves consists of constrained monies for Special Purpose projects.

Australian Accounting Standard AASB 141 - Agriculture For the year ended 30 June 2007, application of the Standard produced a non-cash revenue reduction of $86,661 , consisting of a reduction of $119,118 in the value of palm plantation assets and an increase in the value of seed and plant stocks on hand totalling $32,457.

Revaluation of Assets In accordance with NSW Treasury Policy and Guidelines Paper "Valuation of Physical NonCurrent Assets at Fair Value" TPP 07-1, the Board is required to revalue its assets every five

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. years to ensure that the carrying amount of each asset in the class does not differ materially from its fair value at reporting date.

The Roads asset class was valued by management with effect from 30 June 2006 resulting in a net increment to the Asset Revaluation Reserve of $1 ,266]08.

The Board is of the opinion that the written down cost of asset classes, Land, BUildings, Marine and Airport Facilities, Hospital Equipment, Office Equipment, Motor Vehicles, Mooring Facilities, Electricity Network and Plant and Equipment is a fair approximation of their Fair Values.

Additions to fixed assets are included at cost of acquisition, or value as determined by govemment authorities.

Capitol Expenditure The Board's budget provided for capital expenditure of $393,500, including purchase and improvements to plant and equipment. infrastructure and buildings. The actual total capital expenditure to 30 June 2007 amounted to $261,007 and was allocated to the following programs.

Capital Expenditure Program

Airport

Buildings

Electricity Network

Household Contents

Marine Facilities

Motor Vehicles

Office Equipment

Other Infrastructure

Plant and Equipment

Total

$

22,604

37,490

28,223

3,367

31,349

2,738

22,509

10,581

102,146

261,007

The major expenditures for the year included installation of security cameras at the Board's airport, purchase and commissioning of a waste conveyor sorting bench at the Waste Management Facility, additional water storage tanks for the Nursery and commencement of works to construct a pedestrian walkway at the Jetty facility. The Board also replaced its computer server to enhance data protection and disaster recovery capabilities and carried out improvements to commercial premises.

Departmenlal Performance - Service Activities

Airport The operation of the Airport function retumed a net operating deficit of $133,099 for the year compared to an operating surplus of $180,755 for the previous period. In 2006/07 the Board amalgamated a number of levies, including the Airport Head Tax, into an "Environment Levy" for ease of administration and for this reporting period all funds from this levy have been allocated to the Environmental Services operations.

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Eiectricity Supply Electricity operations incurred a net operating loss of $690,385 (exciuding grants and subsidies) for the period compared to a loss of $717,114 for the 2005/06 reporting period. Electricity sales to consumers decreased by $8,072 from $522,505 in 2005/06 to $514,433 in the 2006/07 period due to a reduction in demand.

NSW Treasury provided a Community Service Obligation subsidy of $750,000 to help offset the high cost of generating electricity on the Island.

Hospital Services Net expenditure for the operation of the Gower Wilson Memorial Hospital was $51,471 compared to the previous year's expenditure of $51,111. The major expenditure items for this service are depreciation of the hospital buildings totalling $34,700 and grounds and building maintenance of $15,410 for 2006/07.

Environmental Activities For 2006/07 the Board's. Environment section continued its weed eradication, rehabilitation and revegetation programs with financial support from grants and subsidies. This inciuded $84,000 from NSW Treasury, $445,956 from the NSW Environmental Trust, Commonwealth World Heritage funding totalling $129,500 and $363,520 from the Natural Heritage Trust.

The Board also invested funds of $97,200 towards a feasibility study and trials for the removal of rodents from Lord Howe Island and enhancing quarantine measures to protect the Island's natural environment.

A net operating surplus of $577,610, inciuding funds from grants and subsidies, was realised for 2006/07 compared to an operating loss of $186,224 for the previous period. The tumaround is due to grant funds received in the reporting period not being fully expended and the allocation of Environment Levy collections to this service unit.

Local Authority Services Local authority services incorporates the functions of waste, parks and visitor facilities, wharf management, communication facilities, the Island's road network and other community services.

Waste Services The provision of waste services on Lord Howe Island incurred an operating loss of $205,231 compared to loss of $195,153 for the previous reporting period. Revenue collected from waste fees for residents and commercial businesses was down by $4,300 whilst operating expenditures remained constant at $3i 7,87i. Waste fees to residents and commercial operators recovered 35.4% of total operating costs, including depreciation, in comparison to 37.5% for the previous year.

Parks and Visitor Facilities Parks and Visitor Facilities incurred an operating loss of $84,478 for 2006/07 compared to an operating surplus of $183,569 for the previous year. The tumaround is directly attributed to the consolidation of the Island Service Levy into the Environment Levy and being apportioned to the Environment section.

Total operating costs for this service reduced by $21,184 from $130,642 in 2006/05 to $109,458 in the current period due to a reform of work practices in the cieaning and servicing of facilities.

Wharf Activities .

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Lord Howe Island Board AnnualRepolt 2007

Wharf operations incurred an operating loss of $8,340 for the reporting period compared to a net operating profit of $27,870 for 2006/05. Wharfage fee collections were down by $2,228 to $239,734 in the reporting period compared to $241,962 in 2005/06. The Board did not receive grant funds of $84,000 from NSW Maritime in the reporting period as budgeted, however, it is expected that these funds will be available in 2007/08 for construction of a pedestrian walkway at the Jetty.

Major maintenance works at the Jetty commenced in the reporting period, including replacement of wom pylons and bollard replacements.

Television and Radio Facilities For 2006/07 the Board incurred an operating loss of $22,843 in providing free to air television and radio transmissions to the Island. The components of the loss include depreciation expense of $1 0.421 and maintenance costs of $12.421. The loss is in line with budget projections for the reporting period.

Roads The Board incurred an operating loss of $165,812 in maintaining the Island's road network compared to a loss of $154,966 in the previous reporting period. The Board received a community service obligation subsidy of $72,000 from NSW Treasury for road maintenance on Lord Howe Island.

Expenditure totalled $237,812 for the period with depreciation expense of $137,638 and maintenance costs totalling $82,240. This includes costs for pavement and drainage maintenance, road verge mowing and completion of a Traffic Management Study.

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General local Authority Services General local authority activities, including building maintenance, asset management works and plant and equipment maintenance incurred an operating loss of $826,230 compared to a loss of $668,000 for the previous period.

Cost over-runs were incurred in assessing and removing dangerous trees, plant and equipment maintenance, and purchase of fuel and oils for plant operations. The Board also commenced Emergency Risk Management works costing $56,500 but it is expected that grants funds will be obtained in 2007/08 to offset this expenditure. .

land Administration and Planning An operating loss of $8,078 was incurred for this activity compared to a budgeted net loss of $237,890. During the reporting period the Board implemented improved procedures for handling and assessing development applications that have reduced overall costs by $78,515. The Board also effected savings of $125,000 in respect to legal fees for reviewing the Regional Environment Plan and was also not required to resume leasehold land for housing development.

Corporate Governance and Support Corporate Governance and Support activities incurred an operating loss of $197,528 in comparison to a budgeted net loss of $279,635 and a loss of $126,435 for the previous period. The operating result is lower than budget due to an increase in revenue of $19,400 for investment interest, a decrease in staff superannuation provision liabilities of $195,931 and a reduction in insurance costs of $14,475 for 2006/07.

Summary of performance in key result areas A summary of the operating performance of all activities, grouped under the Key Result Areas in the Board's Corporate Plan is shown in the following table. The table details actual to budget performance and a comparison of the performance for the previous year and includes all grants and subsidies allocated to each function as well as all project expenditures.

Performance by Key Result Area 1

Actual Budget Actual 2006/2007 2006/2007 2005/2006

Key Result Area 1 Function Surplus 1 Surplus 1 Surplus 1 (Loss) (Loss) (Loss)

$ $ $

1. Natural Environment & Cultural Heritage Environment General and Permanent Park 598,142 (233,233) (186,224) Preserve

2. Trading Activities

Liquor Store 259,005 260,000 260,472

Nursery (194,556) 42,648 77,221

Sub Total for Trading Activities 64,450 302,648 337,694

3. Public Utilities, Services & Infrastructure

Electricity 59,615 (62,488) 11,686

Waste Management (205,231) (142,478) (195,153)

Asset Management (15,908) (14,000) (10,922)

Airport (133,009) (158,280) 183,096

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Lord Howe Island Board Annual Report 2007 Actual Budget Actual

2006/2007 2006/2007 2005/2006 Key Result Area 1 Function Surplus 1 Surplus 1 Surplus 1

(Loss) (Loss) (Loss) $ $ $

Road Works (165,812) (156,438) (154,996)

Wharf (8,340) (86,862) 27,870

Television 1 Radio (22,843) (22,821) (18,313)

Buildings (139,913) (163,909) (175,048)

Visitor Facilities (84,478) (86,750) 183,569

Local Authority General (670,409) (525,938) (482,030)

Hospital (51,471 ) (51,334) (51,111) Sub Total for Public Utilities, Services &

(670,409) (525,938) (681,322) Infrastructure

4. Land Administration & Environmental Planning

Land Administration & Planning (8,078) (237,890) 4,926

5. Corporate Governance & Support

Corporate Governance (17,084) (26,500) (9,961 )

Administration (180,443) (253,135) (116,474)

Sub Total for Corporate Governance & Support (197,528) (279,635) (126,435)

Total all Key Result Areas (1,001,345) (1,935,808) (651,361)

Summary comment on operating result for the year. Whilst the Board incurred an operating loss of $1 ,001 ,345 for the reporting period, the loss is significantly lower than the budgeted forecast deficit of $1 ,935,808. The following major factors have contributed to the final end of year result:

• Poor overseas demand for palm seedlings with total seedlings sales of 1.4 million for 2006/07 compared to a budget forecast of 1 .8 million seedlings.

• Continued escalation of handling costs for waste processing with all waste delivered to the Waste Management Facility either being recycied or removed from the Island by sea freight for landfill on the mainland.

• Increased costs in the Board's plant operations, inciuding maintenance of equipment and fuel/oil costs.

• Increased support from external bodies providing grants and subsidies to supplement the Board's environmental programs.

• Anticipated expenditures relating to jetty maintenance and land management not being required in this reporting period.

Whilst the Board's cash reserves remain steady at $4.879 million as at 30 June 2007, the Board will be challenged in future years to significantly reduce the operating loss of its service operations through prudent financial management, seeking efficiencies in work practices and structural reform and reviewing the capacity to deliver non-essential services to the Island community.

xv) Cost of Printing & Report Availability

Total external costs incurred in the production of this report were $2,500.

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Hard copies or electronic versions of current reports are available on request from the Board's Administration Office.

LORD HOWE ISLAND BOARD

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30TH JUNE 2007

Pursuant to Section 41 C (1 B) and (1 C) of the Public Finance and Audit Act, 19B3, and in accordance with a resolution of the members of the Lord Howe Island Board, we declare on behalf of the Board that in our opinion:-

1. The accompanying financial statements exhibit a true and fair view of the financial position of the Lord Howe Island Board as at 30th June 2007 and transactions for the year then ended.

2. The statements have been prepared in accordance with the provisions of the Public Finance and Audit Act 1983, the Public Finance and Audit Regulation 2005, and the Treasurer's Directions.

Further, we are not aware of any circumstances that would render any particulars inciuded in the financial statements to be misleading or inaccurate.

Chairperson Vice- Chairperson

Lord Howe Island Board Lord Howe Island Board

I . Dated 26 October 2007

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BALANCE SHEET

AS AT 30 JUNE 2007

Note

CURRENT ASSETS Cash and Cash Equivalents 13.1

Receivables 3.1

Inventories 3.2

Biological Assets 5.2

Other Financial Assets at Fair Value 3.3

TOTAL CURRENT ASSETS

NON·CURRENT ASSETS Oiher Financial Asseis at Fair Value Other Assets Biological Assets Property, Plant & Equipment I ntangible Assets TOTAL NON·CURRENT ASSETS TOTAL ASSETS

CURRENT LIABILITIES Payables Other Liabilities Provisions TOTAL CURRENT LIABILITIES

NON·CURRENT LIABILITIES Provisions TOTAL NON·CURRENT LIABILITIES TOTAL LIABILITIES

3.3

8

5.2

4.1

4.5

6

7

9

8,9

. 2007 $

':4,879;~!l4 ' . , ·694,90!l' '.' '318190' , '-. -,-

. 514;OS2 ' .. ··.·2si285·.

.' 6431840' .' _ - _ .J ,'_;;

o ' .. ,3§4l~:H .• ·

.·.8.8,3.QO. , ···27235:990 . ,-- -. ,~' ,- , '-' -:' ~

'4;297 . , 27,682;821 •

34;114,ll61 '. -'" --,'. - "

'. - ,-- -,:.-;- ; !.'

'315'215 '.: , __ "- - ~., 0:- - - ,_~

.... ··.s'~1,~§.~·

... 11829~· '.. -- --:-- - - ~ '--,,---.' .

. • 1,115;591

2006 $

4,694,794 881,241 334,949 481,605

19,070 6,411,659

8,404 240,007 207,418

26,951,092 o

27,406,921 33,818,580

242,428 65,835

583,856 892,119

192,754

192,754 1,084,873

NET ASSETS "32,999,070; 32,733,707

EQUITY Accumulated Funds Reserves TOTAL EQUITY AT END OF THE PERIOD

... :-',

10 ",9,691;310 10 ·23307 760 " ,_. '-'-"-. -:--< --. --:, . .--.: - --. ,.-;

',32,9!l9,07:ir .

The accompanying notes fOml part of these financial reports.

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10,692,655 22,041,052

32,733,707

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Lord Howe Island Board Annual Report 2007 LORD HOWE ISLAND BOARD

STATEMENT OF RECOGNISED INCOME AND EXPENSE

FOR THE YEAR ENDED 30 JUNE 2007

Net increase in Property Plant & Equipment Revaluation Reserve

TOTAL INCOME AND EXPENSE RECOGNISED DIRECTLY IN EQUITY

Surplus/Deficit for the Year

TOTAL INCOME AND EXPENSE RECOGNISED FOR THE YEAR

Accumulated Funds Reserves

TOTAL EQUITY

Note· ·.2007 2006

$ s

1,266,7013

1,266,708

.. (1,0()1.345)· . (742,509)

(1,001,345) (742,509)

·9.691,310 11,435,164 23,307i 76(). 22,041,052

. ·32,~99m(). 32,733,707

The accompanying notes fann part of these financial reports.

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INCOME STATEMENT


ORDINARY ACTIVITIES Trading Operations Nursery Sales Less Deemed Cost of Sales Add Net Increment in Net Market Value at Reporting Date Net Revenue from Nursery Operations Adjusted for AASB 141 Agriculture Liquor Store Operations Total Revenue from Trading Operations

Expenditure from Trading Operations NET RESULT FROM TRADING OPERATIONS

Service Operations Revenue from Service Operations Expenditure from Service Operations NET RESULT FROM SERVICE OPERATIONS

FINANCIAL ASSISTANCE FROM GOVERNMENT Government Grants & Subsidies

NET SURPLUS/(DEFICIENCy) FROM ORDINARY ACTIVITIES

Note . s

2007 ... $

2.1.1

2.1.1

2.1.1

2.1.1

2.1

··714;344: (371\335)'

284,674 i

····~27,.683.j

2.1 .. ·2,OpO,517:

2.11,936,067 ! .• Q.4A50.1

i ___ ..... _j

2.2 ... 2815 81~j i- '.":.~ -., -.- , • _, ",:.--_ -,

2.2 . (6;34'1,191)1 .,. (3,525,379L!

. .

2.3 '~,499;584i

• (1;00.1,345)i

TOTAL REVENUES, EXPENSES & VALUATION ADJUSTMENTS 10

RECOGNISED DIRECTLY IN EQUITY 1,266,798: : ,

2006

$

1,045,721 (440,437)

340,424

945,708 1,293,132 2,238,840

1,901,146 337,694

2,629,268 (5,877,939) (3,248,671 )

2,168,468

(742,509)

TOTAL CHANGES IN EQUITY (Other than those resulting from transactions with Owners as Owners) 265,3631 (742,509)

The accompanying notes fOI1ll part of these financial reports.

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LORD HOWE ISLAND BOARD CASH FLOWS STATEMENT


- ---. -._.--

2007 2006 $ $

Notes '

CASHFLOW FROM OPERATING ACTIVITIES Cashflow from Trading Operations Receipts from Customers Payments to Suppliers & Employees Net Cash Provided by Trading Operations

Cashflow from Service Operations User Charges and other Receipts Payments to Suppliers & Employees I nterest Earned Net Cash Provided by Service Operations

Cashflow from Government Receipts from State Government Receipts from Commonwealth Government Net Cash Provided by Government

Net Cash Provided by Operating Activities

CASHFLOW FROM INVESTING ACTIVITIES Loan Repayments from Other Financial Assets Payment for Purchase of Capital Items Proceeds from Sale of Plant & Equipment Net Cash Providedl(Used) by Investing Activities

Net Increase (Decrease) in Cash Held

Cash and Cash Equivalents at beginning of period

13.2

Cash and Cash Equivalents at end of period 13.1

Inflows Inflows

; (OLitflOV\iS) (Outflows)

2,292,S66·· ... (1,969,321) .

.·333,247

2;4°S.883 (5;1 QOj13S)

303;115 ; .-'. - ,_ 0

.. ;.(:l,3!i1,137) .

·2,459,584 ...

461.694· '. ~'- . ,,-.-

. ... ..;·8,197· . (243.8!lO)

' .. " 18;5"9-9

(~1i;094)

184600 ., -'.-_.

4,694,794·

2,126,265 (1,885,958)

240,307

2,273,357 (4,820,061)

291,481 (2,255,223)

1,919,721 260,840

2,180,561

165,645

(2,879) (407,127)

29,611

(380,395)

(214,750)

4,909,544 4,694,794

The accompanying notes form part of these financial reports.

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NOTES TO AND FORMING PART OF THE FINANCIAL REPORTS


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Reporting Entity

The Lord Howe Island Board (The Board) is a statutory body established under the provisions of the Lord Howe Island Act 1953. The Board's primary function is administering the affairs of Lord Howe Island. The Lord Howe Island Board is a NSW Government agency, is a Not-for-Profit entity and has no cash generating units.

This financial report for the year ended 30 June 2007 has been authorised for issue by the Lord Howe Island Board on 26 October 2007.

(b) Basis of Preparation.

The Board's financial report is a general-purpose financial report, which has been prepared in accordance with:

• Applicable Australian Accounting Standards (which include Australian Equivalent to International Financial Reporting Standards (AEIFRS»;

• The requirernents of the Public Finance and Audit Act (1983) and Regulation; and • Other authoritative pronouncements of the Australian Accounting Standards Board

(AASB) including Interpretations.

Where there are inconsistencies between the above requirements, the Public Finance and Audit Act and Regulations prevail.

Property, plant and equipment and biological assets are measured at fair value. Other financial report items are prepared in accordance with the historical cost convention. Judgements, key assumptions and estimations made by management are disclosed in the relevant notes to the financial report.

All amounts are rounded to the nearest dollar and are expressed in Australian currency.

(c) Statement of Compliance

These financial statements are the second financial statements of the Lord Howe Island Board to be prepared in accordance with Australian Equivalents to International Financial Reporting Standards (AEIFRS). .

(d) Recognition of Income

(i) Sale of Goods and Services Revenue from the sales of goods or services comprises revenue from the provision of products or services, i.e. user charges.

Income arising from the sale of goods and the provision of services is recognised when: • the Board has passed control of the goods or other assets to the buyer; • the Board controls a right to be compensated for services rendered; • the Board controls a right relating to the consideration payable for the provision of

investment assets; • it is probable that the economic benefits comprising the consideration will flow to the

Board; and

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• the amount of the income can be measured reliably.

(ii) Grants and Contributions Contributions from other bodies (including Govemment Grants and Subsidies) are recognised as revenues when the Board obtains control over the assets comprising the contribution. Control over the contribution is usually obtained upon the receipt of cash.

(iii) Investment Income Interest revenue is recognised when it accrues.

(iv) Operating Leases In accordance with accounting standard AASB 117, revenues from leased premises comprising staff housing and other commercial shops and offices, are recognised in accordance with individual lease arrangements, which generally require 2 weeks rent in advance.

Gross value of leased assets at reporting date was Accumulated depreciation was . DepreCiation recognised as an expense for the period was! . Total rental received from leased premises amounted to

2007 $

3,100,454 . 926;072

.120,284 ·· .... ·144;184

2006 $

2,822,250 781,386 112,887 75,052

There were no lease commitment receivables or contingent rentals recognised as at the reporting date.

(e) Personnel Services

In the past, staff were treated as employees of the Board. In 2006, Board staff were designated as being employed by the Govemment of NSW in the service of the Crown to provide personnel services to enable the statutory body to exercise its functions.

Accounting Standard AASB 119 requires employee entitlements to be recognised as liabilities in the financial statements where there is a present obligation to make payments or to provide certain benefits in the future based on the services rendered by the employees up to the end of the financial year. The Standard requires recognition of future benefits payable to employees in excess of 12 months after the reporting date to be calculated on a net present value basis.

However, NSW Treasury (TC 07/07 May 2007) provides that the Board may use either the net present value method or the nominal (short hand) method for calculation of employee benefits on the assumption that the difference between the two methods will not be material. The Board has compared the two methods and chosen the nominal method for recognition of employee benefits as at 30 June 2007.

Provision for Long Service Leave and Annual Leave represents the assessed liability for these items as at balance date.

The provision for Long Service Leave covers the full accrued Long Service entitlements of employees with five or more year's service as at 30 June 2007.

Under the Board's terms and conditions of employment, sick leave is non-vesting.

The Board is of the opinion that total sick leave paid in anyone year will not exceed leave entitlements for that year and therefore no liability exists in respect of leave accumulated to balance date.

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(f) Insurance

The Board's insurance activities are conducted through the NSW Treasury Managed Fund Scheme of self-insurance for Government agencies. The expense (premium) is deterrnined by the Fund Manager based on past claim experience.

(g) Goods & Services Tax

Revenues, expenses and assets are recognised net of the amount of GST, except:

• The amount of GST incurred by the agency as a purchaser that is not recoverable from the Australian Taxation Office is recognised as part of the cost of acquisition of an asset or as part of an item of expense; and

• Receivables and payables are stated GST inclusive.

Cash flows are included in the staternent of cash flows on a gross basis.

The amount of recoverable GST in respect to cash flows from financing and investing activities is disclosed as operating cash flows.

(h) Acquisition of Assets.

The cost method of accounting is used for the initial recording of all acquisitions of assets controlled by the Board. Assets acquired at no cost or for norninal consideration are initially recognised at their fair value at the date of acquisition.

(i) Capitalisation Thresholds

Prop·erty, plant and equipment and intangible assets costing $1,000 and above individually (or forming part of a network costing more than $1,000) are capitalised.

(j) Revaluation of Property, Plant and Equipment.

Physical non-current assets are valued in accordance with the "Valuation of Physical NonCurrent Assets at Fair Value" Policy and Guidelines Paper TPP 07-1. This policy adopts fair value in accordance with AASB 116 Property Plant and Equiprnent.

Property plant and equiprnent is rneasured on an existing use basis, where there are no feasible alternative uses. However, in the limited circumstances where there are feasible alternative uses, assets are valued at their higher and best use.

Fair value of property, plant and equipment is determined based on the best available market evidence including current market selling prices for the same or similar assets. Where there is no available market evidence the asset's fair value is measured at its market buying price, the best indicator of which is depreciated replacement cost.

The Board revalues each class of property, plant and equipment each five years to ensure that the carrying amount of each asset in the class does not differ materially from its fair value at reporting date.

In accordance with the NSW Treasury Policy & Guidelines Paper; "Valuation of Physical Non-Current Assets at Fair Value";

• The Roads asset class was valued by management with effect from 30 June 2006.

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The Board is of the opinion that the written down cost of Buildings, Marine Facilities, Airport Facilities, Hospital Equipment, Office Equipment, Roadworks, Motor Vehicles, Mooring Facilities, Electricity Network and Plant and Equipment is a fair approximation of their Fair Value.

Revaluation increments are credited directly to the asset revaluation reserve, except to the extent that an increment reverses a revaluation decrement in respect of that class of asset previously recognised as an expense. In that case, the increment is recognised immediately as revenue.

Revaluation decrements are recognised immediately as expenses, except where a credit balance exists in the asset revaluation reserve in respect of the same class of assets. In that case, the decrement is debited directly to the asset revaluation reserve.

(k) Impairment of Property, Plant and Equipment

As a not-for-profit entity with no cash generating units, the Board is effectively exempted from AASB 136 Impairment of Assets and impairment testing.

(I) Depreciation

Depreciation of plant and equipment has been calculated on a straight-line basis over the expected useful life of the assets to the Board based upon cost/value. The useful lives and depreciation rates of assets are reviewed annually. The useful lives of assets in major categories are:

Buildings 25 years ROilds - Pavement 25 years (Formation) Roads - Surface 5 years Airport See below Wharf 15 years Plant & Equipment 5 years Television Installation 20 years Motor Vehicles 5 years Electricity Assets . See below Infrastructure 50 years

(i) Airport Assets

The separate components of the assets comprising the Airport have been valued individually and are assessed as having economic lives of between 10 and 100 years respectively, in accordance with the equivalent class of Non-Current Assets applicable to each component.

The asset components and their respective economic lives are identified below:

Earthworks, site clearance, culvert excavation, top soil and 100 years turf

Concrete culvert headwalls 60 years

Compacted earthworks, armoured revetment and anchor 50 years blocks

Boundary fencing 25 years

Concrete segment paving 15-20 years

Page 61


Bitumen seal, painting, signage and miscellaneous 10 years

(ii) Electricity Assets

The separate components of the assets comprising the Electricity function have been valued individually and are assessed as having economic lives of between 3 and 80 years respectively, in accordance with the equivalent class of Non-Current Assets applicable to each component.

The asset components and their respective economic lives are identified below:

Computer equipment 3 years

Load control and other office and workshop tools & 10-15 years equipment

PowerhouselWorkshop buildings 40 years

Generating Plant 20-30 years

Transformer equipment 30 years

Electrical Substations 50 years

Reticulation 40-80 years

(m) Maintenance

Day to day servicing costs or maintenance are charged as expenses as incurred, except where they relate to the replacement of a part or a component of an asset in which case the costs are capitalised and depreciated.

(n) Receivables

All trade debtors are recognised at face value of amounts receivable at balance date. Collectability of trade debtors is reviewed on an ongoing basis. Debts known to be uncollectable are written off. An allowance for impairment is raised when there is objective evidence that the Board will not be able to collect all the amounts due. The allowance is provided for 100% of any debts considered unrecoverable at year-end assessment. The credit risk is the carrying amount (net of any allowance for impairment). No interest was eamed on trade debtors. The carrying amount approximates net fair value. Sales are generally made on 30-day terms. The sale of palm seedlings under contract is on 35-day terms.

(0) Inventories

Inventories held for distribution are stated at the lower of cost and current replacement cost. Inventories (other than those held for distribution) are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average cost method. Diesel stocks held for the generation and reticulation of power on the Island are valued at cost, which includes freight inwards charges. Costs were assigned to closing stocks by using the average cost method. Stores on Hand are valued at cost, which includes freight inwards charges. Costs were assigned to closing stocks by using the average cost method. Liquor stock is valued at cost, which includes freight inwards charges.

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Lord Howe Island Board Annual Report 2007 (p) Biological Assets

The Board has plantations of kentia palms for the purposes of producing seed for propagation. The Board has estimated the value of kentia palm plantations in accordance with the methodology outlined in Note 5. Seeds are valued at cost of collection Seedlings are valued at the cost of collection plus the cost of planting. Plantations are valued at fair value estimated by the net present value of future cash flows method. These valuation methods are in compliance with AASB 141 Agriculture

(q) Financial instruments

Financial instruments give rise to positions that are financial assets or liabilities (for equity instruments) of the Board. These include Cash at Bank, Receivables, Investments, Accounts Payable and Borrowings. Classes of instruments are recorded at cost and carried at net fair value.

(r) Cash

Cash comprises Cash on Hand, at bank and cash held in Hourglass at Call Facility Trusts with NSW Treasury Corporation (TCorp).

Interest was earned on daily bank balances at an average rate of Interest rate at 30 June

··.2007' ... 5:95%i 5,75%

Cash in the TCorp Cash Facility Trust earned interest at an average, rate of ' Interest rate at 30 June

(s) Investments

. 6,13% . 6;41% '.

2006 5.68% 5.25%

5.56% 5.84%

As noted above, the Board has cash held in TCorp's Hourglass facilities. The Board's investment is represented by a number of units of a managed investment pool, with each particular pool having different investment horizons and being comprised of a mix of asset classes appropriate to that investment horizon. TCorp appoints and monitors fund managers, and establishes and monitors the application of appropriate investment guidelines.

The cash held with TCorp can be redeemed with twenty-four hours notice. The value of the cash held can decrease as well as increase depending upon market conditions. The value that best represents the maximum credit risk exposure is the fair value. The value of the investment represents the Board's share of the value of the underlying assets of the facility and is stated at fair value, based on the market value.

Funds held at call in the TCorp Cash Facility totalled $4,708,165 as at 30 June 2007 ($4,520,495 at 30 June 2006).

(t) Payables

Trade creditors and accruals are recognised as amounts due to be paid in the future for goods or services received, whether or not invoiced. Amounts owing to suppliers (which are unsecured) are settled in accordance with the policy set out in Treasurer's Direction 219.01. If trade terms are not specified, payment is made no later than the end of the month following the month in which an invoice or statement is received. Treasurer's Direction 219.01 allows the Minister to award interest for late payment. No interest was applied during the year.

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Lord Howe Island Board Annual Report 2007 (u) Bank Overdraft

The Board does not have a bank overdraft facility.

(v) Comparative Information

Comparatives have been reclassified where necessary to enhance comparability in respect of changes in the current year.

(w) New Australian Accounting Standards Issued but not Effective

At reporting date a number of Australian Accounting Standards have been issued but are not yet effective. These have not been early adopted by the Board. The possible impact of these Standards, if any, in the period of their initial application is discussed as part of Note 20.

2. DESCR!PTION OF MATER!AL ITEMS OF REVENUE & EXPEND!TURE FOR BOARD PROGRAMS & ACTIVITIES

Trading Operations

The Board operates a Palm Nursery for the collection and propagation of native kentia palms and other endemic species, which are exported to world markets, predominantly in Europe. The Board also manages the Islands only liquor outlet for supply of liquor to the Island's accommodation and business establishments and for retail supply to residents and visitors.

General Administration

This includes all costs associated with the general administration of the Board and funding of tourist promotion activities of the Island, with the exception of a proportion relating to the Electricity, Health and Environmental Service functions.

Local Authority Services

This includes all costs associated with the provision of general services to the Island community such as maintenance of public facilities (e.g. roads, buildings, wharf, parks & reserves), garbage disposal facilities, wharf and mooring facilities, motor vehicle inspection facilities and television and radio receiving facilities. This function also includes the care and maintenance of public tourism facilities.

Environmental Services

Environmental Services include the protection and maintenance of the Island's natural resources and, in particular, the care and maintenance of the Permanent Park Preserve:

Health Ser\rices

The South Eastern Sydney & IIlawarra Area Health Service (SESAHS) of the Department of Health provides health services. The Board provides minor administrative support. Costs shown against this program are generally for the maintenance of the buildings and grounds of the Gower Wilson Mernorial Hospital.

Electricity Supply

The Board has overall management and financial responsibility for the supply of electricity on Lord Howe Island and receives a Community Service Obligation payment from NSW Treasury to cover part of the shortfall between user charges and the cost of providing electricity. Country Energy provided technical assistance.

Airport Operation

The Board owns and has overall management and financial responsibility for the operation of the Lord Howe Island Airport.

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Lord Howe Island Board Annual Report 2007 Personnel Services

Personnel services expensed by the Board in 2006/07 amounted to $2,827,501 (2005/06 $2,709,244).

2.1 Details of Revenue and Expenditure from Trading Operations

Palm Nursery Operations" Liquor Store Operations Total

*'Refer also note 2.1.1

Revenue $

627,683 1,372,834 2,000,517

Expenditure' " $

822,238 '. 1,113,828. 1,936,067 •

2.1.1 Reconciliation of Revenue from Sale of Biological Assets

Total actual sales revenue from Nursery Operations Deduct revenue from Non Biological Asset sales

. SurplusI' ,([)eficit):

$

, '. (194,555)! .' 259,0051

'. 64,450 i

20.07 $

714344 i __ :_, J, ..

• (42,230) Actual revenue from sale of Biological Assets during the period Less deemed cost of seedlings sold

'672,1141 (37"1,3~5)

Deemed profit/(Ioss) from Biological Asset sales Add: Increase in Fair Value of Biological Assets at reporting date

300,779 i

recognised as Revenue - Seeds/Seedlings - Plantations

. , ,: .. :_ A~Q3~:7,9~ j (119,1,HI) i

Total Revenue recognised for the period from Biological Assets' Add back Revenue from Non Biological Asset sales Net Revenue from Nursery Operations

2.2 Details of Revenue and Expenditure from Service Operations

§a.§,4§~1 , 42;230.

Prior year Result

$

77,221 260,472 337,694

2006 $

1,045,721 (159,780)

885,941 (440,437)

445,504

356,997 (16,574) 785,928 159,780 945,708

Revenue

. ·.····operafing Result'

SII'rpJlis( .. ' Expenditure. (Deficit)'

Prior Year Operating

Result

Airport Operations Electricity Supply Health Services Environmental Services Local Authority Services General Administration Interest on Investments

$ 161,423 522,428

o 918,253 738,408 187,629 . 287,670

2,815,812

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$ '$ .....

294,432 (133,009) 1,212,814 . (690,385)

51,471 (51,47"1) 1,365,818 (447;565).' 2,157,577 ,(10419,168), 1 ,259,079 '(1.0n,4~O)

O '28-7670' . ,I, ,.

6,341,191 ,". (3,~25,37"9)

$ 180,755

(717,114) (24,301)

(954,798) (938,159)

(1,086,535) 291,481

(3,248,672)

Lord Howe Island Board Annual Report 2007 2.3 Government Grants and Subsidies

Funding from State grants and subsidies for the year ended 30 June 2007

Treasury Rural Fire Service Local Government Grants Commission Marine Park Authority Dept of Arts, Sport and Recreation Dept of Infrastructure Planning & Natural Resources Dept of Environment & Conservation Environmental Trust Department of Primary Industries National Parks Foundation

.. 2007 ... ··l 1,342;000 ;

7,2~5; 136174 ; ,

o .6,OQP .

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445,956. 2,19~

.0.' 1 ,$.39,5Q~ ,

2006 $

1,305,000 11,340

131,215

LJ n~xp~nde9. , 30'Jun"Oi . ···0

._ 0 0' o

·S;OO()

. ;0 . ,'0

456,6241,952 3,140 ;;0

1?,402 .11 1,919,721 ·.7,952

Funding from Commonwealth grants and subsidies for the year ended 30 June 2007:

Environment Australia Natural Heritage Trust other

.2()07. " 2006Ul)eXR§l~~ec;i)

n~i~~~:i 1931~3~'7~~6~7 t ~1~~.:.:.:.i .. . ·· ... ; .• ~7,POQ:

Total funding from grants and subsidies for the year ended 30 June 2006:

"'2007 2006liriexllei1d~tf' '.,.$ $ .•. ' ~o-Jhri-6t

Total Grants and Subsidies>2,4s9;58,r: 2,168,468: ... "'f4~,9~lL

The Board is also holding un-expended grant funds of $79,069 from prior years with unexpended funds for all years totalling $229,065.

3.1 Receivables

Receivables at 30 June 2007 comprised:

Palm Sales Debtors Other Trade Debtors & Accruals Electricity Sales Accruals Sundry Debtors & Accruals Government Grants & Subsidies Total Receivables

2007 ... $ . !:l4,§~2.' 27234··

-. ' .- ';" . 243;593 . 329;500 '

o 694,909.,

2006 $

345,055 47,247

223,623 265,316

o 881,241

A detailed review of debtors was undertaken as at 30 June 2007 and the Board created an allowance for imRairment of $107,101 ($4,160 at 30 June 2006). The increase in the allowance for impairment is related to the recovery of disputed freight charges arising from . seedling sales to Europe.

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Lord Howe Island Board Annual Report 2007 3.2 Inventories

3.3

Inventory and stock on hand at 30 June 2007 comprised:

2007 2006 $ $

Held for Distribution Diesel Fuel - Powerhouse 50,989 59,816 Stores on hand <30,412. 31,669

81401· . -' -'

91,485

Held for Resale Non Biological Asset Plant & Seed Stock 90,72? 90,302 Tourist Literature & Videos 7982·· ,--.'. -

7,646 Liquor ... 138;085) 145,515

236;789. 243,463

Total Inventory 318,190 334,948

Financial Assets

2007 2006 $ $

Current Loan to Golf Club ··8,404. 8,197 Prepaid Expenses ·.· .. 1s,a8r 10,873

25,28.5 19,070 Non Current

- - - -':',

Loan to Golf Club 0 8,404

The Board made an advance during 2002-03 to the Lord Howe Island Golf Club Inc. to assist with improvements to the public golf course and associated facilities. The advance is repayable over 5 years. The final instalments of the advance are to be repaid within 12 months of the reporting date, with a balance of $8,404 included in the Balance Sheet at 30 June 2007 as a current asset.

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Lord Howe Island Board Annual Report 2007 4. PROPERTY, PLANT AND EQUIPMENT

AT FAIR VALUE Asset Class Opening, ~alan,~e Acquis!tio,n~ Di~~o,~~ls Reclassifications Valuation ncl (Dec;::) Balance 30 June

2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 Airport 8.016.900 : ' 8,069.827 52.927 22;604 - 8.069.827 8,092,431 Buildings 7.175.287 i 7,1.79,264

," 20.977 37,490 ' 17,000 - , - 7.179.264 7,216,754

Electricity Supply 4.678.002 : 4,718,697 80,545 ' 28,223 39.850 26;324 4.718.697 4,720J5,96 Hospital Equipment 27.657 i 27,657 ' 27.657 27,657 Household Contents 87,453 : :77;276 2.149 3;367 12.326 ' 77.276 ,80,643 Land 6.800.000 : 6,80q;OOQ': 6.800.000 ' 6,800,000 Marine Facilities 3,125,000 : ' 3,129,169' 4,169 31,349 3,129,169 " 3,160,518, Moorings 69,515 : 69,515, - 69.515 69,515 Motor Vehicles 691.005 711;732 103.953 2,738 ' 83.227 ' "·38,978 - ! 711,732 675,491 Office Equipment 229,673 , 231,908 38.459 22,509 " 36.225 40,769 " (73,454) ~ ; 231.908 140;193 Other Infrastructure 3.557.886 ' 3,579,821 21,934 10,581 - , 3.579,821 3,590A02 Plant & Equipment 1.259,744 ' 1,304;961 82,014 102,146 36,796 : ",15;373 ' - i 1.304,961 1;391,734

Roadworks 5,737,043 i 5,737,043 - , 2;911,367, 5.737.043 8,648,410

Television Facility !

161.686 ' 161,686 - , 161.686 16,1',686 '

Total Assets 41.616.851 ,41,798,554 407.127 '261,007 225.424 121;443 ' (73,454) , 2,911',36'7 ' 41.798.554 ' 44,776,031

ACCUMULATED DEPRECIATION

Asset Class Opening, Bal.a!lce Depreciati~n Write Back~ on D.isp~sal Reclassifications Write Back on Revaluation Balance 30 June

2006 i, 2007 2006 2007 2006 '20·07 2006 2007' 2006 2007 2006 2007

Airport 3.832.700 , .(0.15,941 183.241 19~,312 - . 4.015.941 ~,207,254 '

Buildings 1.528.088 . '1_;80_9~~73 287,165 ,287,740 5.680 - 1,809.573 2~O9'7;31,3

Electricity Supply 2.572.362 ! ' 2;66,8~'124 135.532 .' ' , 1_3,6,7.66 .. 39.770 i23;27°, R ,; 2.668.124 2,781;620

27,657 : " .. 'L •

! Hospital Equipment 27,657 , ' , 27.657 27,6~7

Household Contents 59.888 : ~7,422 9.831 7,096 : . 12.297 ~ !:-'. -, 57,422 64,519

Land : ;'" ._ . .1 - , .

Marine Facilities 780.000., 988;259 208.259 20g,073 - i - 988.259 1;197;332 , ,

.. 2,896 ' Moorings 15.026 17;922, 2.896 17.922 20;81,7

Motor Vehicles 522.788 ::505,061, 55,084 ' , 63;903, 72.812 '-",38,978• ' .- 505.061 ,529,986

Office Equipment 175.259 169,446: 29.627 ' ',17;;649," 35,440 39,518:.' (65;210) - ' -: "'. 169,446 82,367

Other Infrastructure 460.367 .53U63 71.396 70;877 ',":" : 531,763 602,639

Plant & Equipment 1.089.974 ,,1:'127.279 72.966 821,08,5,." 35,661 .. '14,534: ,~':':'!

1.127.279 ',1,19M30 ',: , . .

·137;638 ~;,i 1;~56;632 ' 2.867.350 4,661;620 Roadworks 2.729.713 .:, 2;867,-350:-. 137,637 :,,' , '.10,421 ,61;666 10,421 • . ;' 61.666 "72,087 ' Television Facility 51,245 ' - .

Total Assets 13.845.065 14,847;462 . 1,204.057 : 1,221,403. 201.660 " 116,300" .(65,210):'1 - ; 1,656;632' 14.847,462 "17;540;041

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4.1 Reconciliation of carrying amC)unts for Property, Plant and Equipment at 30 June 2007

Airport Buildings Electricity Supply Hospital Equipment Household Contents Land Marine Facilities Moorings Motor Vehicles Office Equipment Other Infrastructure Plant & Equipment Roadworks Television Facility

Gross Value Accumulated Depreciation ... 30/06/200.7 30/06/2006," '. 30/osi20-07 30/06/2006

$< $$ $ .. a;092,431 8,069,827 " '. 4;2()7,2~4 4,015,941 7,2:16;754 ' 7,179,264 '. . .... 2,0.9;7;313 1,809,573 .

;, .4,720;596. 4,718,697'· ... 2,781;620 2,668,124 ' . .' 27,657 27,657 '. ..27,657 27,657 '80,463 77,276 ", . '·64,519 57,422

.6,aOO,000 6,800,000 '. ,.... "0 0 •... 3,t6(),518 3,129,169 ' , 1,1,97,332 988,259 "69,515' 69,515,20;817, 17,922 675,491' 711,732,529,986 505,061 1'4p,.193 231,908·" .lI2~367 169,446 .

3;590;402 3,579,821 .602,639 531,763 . 1,391,734 1,304,9611;194,830) 1,127,279 8,648;410 5,737,0434,6,li1;620 2,867,350 .'

161',686 161,686 . . . .•... 72;087, 61,666 'M,776';03:L 41,798,556." .17;540,041,' 14,847,463

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Written Down Value .30i06/2007 30/06/2006

$ $ 3;885,177 4,053,885 5,119,440 5,369,691

.1,938;!:l76 2,050,573 0, 0

.16,124 19,854 6;800,000 6,800,000 1,g63,186 2,140,910

48,698 51,594 145,506 206,671 ~7;827 62,461

... 2;987,762 3,048,058 ····196,904 177,683 3;98~,790 2,869,692

89;599 100,020 "271;235;990 26,951,092

4.2 Depreciation

Depreciation charged during 2006/07 amounted to $1,221,403 ($1,204,055 in 05/06).

The Board's policy in respect to the valuation of Non-Current Assets is detailed in Note 1 U)

4.3 Acquisition and Disposal of Assets

During the year the Board acquired and disposed of assets in accordance with the following table:

AcquisitionsDisposals Disposals Profit/(Loss) Asset Class (at cost) (at cost) (WDV) Proceeds on Disposal

$ $ $ $ $ Airport 22,604 Buildings 37,490 Electricity Supply 28,223 26,324 3,054 7,722 4,668 Hospital Equipment Household Contents 3,367 Land Marine Facilities 31,349 Moorings Motor Vehicles 2,738 38,978 14,813 14,813 Office Equipment 22,509 40,769 1,251 (1,251 ) Other Infrastructure 10,581

. Plant & Equipment 102,146 15,373 839 (839) Roadworks Television Facility

261,007 121,444 5,144 22,535 17,391

4.4 Works in Progress

The table in Note 4 includes works in progress or under construction to a value of $46,131 ($33,386 in 2005/06).

4.5 Intangible Assets

During the year the Board reclassified computer software as an Intangible Asset as per the following table.

Software

Opening gross carrying value

Reclassifications

Closing gross carrying value

Accumulated Depreciation

Opening balance

Reclassifications

Closing balance

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·2661 $

·0

·}t3;454. . 73,454·

.. ".0

. (139,157)

2006 $

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Net carrYing value at the period end. 4,297 o

5. NURSERY ASSETS· RECOGNITION OF BIOLOGICAL ASSETS

5.1

5.2

The Board manages and maintains a Kentia palm nursery primarily for the purpose of propagation and export of native Kentia palm seedlings. The Board has assessed that part of the activities of the Nursery come within the definition of "Biological Assets" as defined in AASB 141 Agriculture,

During 2003-04 the Board entered into a 3-year contractual arrangement with a major customer in relation to the purchase and cultivation of palm seedlings. The major assumptions regarding the valuation of biological assets have not been altered as a result of the execution and continued operation of this contract. The contract expired on 31 August 2006 and has not been renewed.

Determination of Assets Meeting the Definition of Biological Assets.

For the purpose of the Standard, the following assets meet the terms of paragraph 1 of AASB 141 (Scope and application) and have been recognised as biological assets:

a. Palm plantations established by the Board for the primary purpose of profit generation; and

b. Seeds obtained from the native palm forests and plantations scattered throughout the Island and which are owned by the Board at reporting date, and the seedlings which have been propagated from those seeds for the purpose of export sale.

The Board has assessed that the following assets do not meet the terms of paragraph 1 and have therefore not been classified as biological assets:

c. Palm trees that grow naturally throughout the Island. These include forests growing in the areas of the Island's Permanent Park Preserve (equivalent to National Park status under the World Heritage convention) and other Crown or leasehold lands, which have not been specifically established for the purpose of profit;

d. Palm plants and stocks of other native species which have been propagated at the Nursery for the primary purpose of providing a rotational plant hire service to Island businesses, and those stocks which do not meet the required specification for export sale but which may be sold as incidental stock to visiting tourists; and

e. Native species (including Kentia palms), which have been propagated for the purpose of reforestation.

Those assets included in Note 5.1 (d) and (e) have been recognised as inventories in accordance with AASB 102 and are included in the table at Note 3.2.

Nature and Details of Biological Assets

The nature of the biological assets identified in Note 5.1 (a), namely the Board's Kentia palm plantations, and the details of their physical quantity are shown in the following table:

No of Commence Annual Estimated Plantation Nature of Palms Date of Seed Average Viable

No Plantation planted planting Collection Yield Years for (bushels) Harvest

1 Kentia Palm (howea forsteriana) 360 1986/87 2000/01 15 15 2 Kentia Palm (howea forsteric;Jna) 200 1993 2006/07 8 15 3 Kentia Palm (howea forsteriana) 189 1993 2006/07 6 15 4 Kentia Palm (howea forsteriana) 289 1990 2003/04 12 15 5 Kentia Palm (howea forsteriana) 350 1994 2007/08 14 15

5a Kentia Palm (howea forsteriana) 157 1999 2012113 4,5 15 5b Kentia Palm (howea forsteriana) 49 1999 2012113 3 15

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No of Commence Annual Estimated Plantation Nature of Palms Date of Seed Average Viabte

No Plantation planted planting Collection Yield Years for (bushels) Harvest

7 Kentia Palm (howea forsteriana) 249 2001 2014/15 6 15 9 Kentia Palm (howea forsteriana) 303 2001 2014/15 8 15 11 Kentia Palm (howea forsteriana) 143 2001 2014/15 4 15 12 Kentia Palm (howea forsteriana) 131 2001 2014/15 3 15 14 Kentia Palm (howea forsteriana) 409 2002 2015/16 12 15

2,829 . 95.5

Prior to 2004-05, provisions of the Lord Howe Island Act (1953) gave the Board full right of ownership of seed produced from leasehold plantations. During 2004-05 a decision by the Minister under the Lord Howe Island Regulation 2004 gave the ownership of palm trees and palm tree products on perpetual leases to the lessee. This decision effectively removed 37% of the palm plantations from the Board's control, however as the Board's Palm Nursery is the only current and active market for palm seed, this decision has had no significant effect on the operation of the Nursery and the finances of the Board.

The fair value of the Board IS Kentia palm plantations has been determined using the net present value method at $88,300 ($207,418 in 2006).

For the agricultural produce identified in Note 5.1 (b), the Board held quantities of seeds and seedlings to a total value of $514,062 ($481,605 in 2006), comprising seeds which had been received but not planted, seeds which had been planted but not yet germinated and stocks of saleable seedlings. (See also Note 2.1.1)

5.3 Restrictions Affecting Fair Value

Board policy prohibits the export of palm seeds from the Island in order to preserve the quality and integrity of the native species. Seeds are therefore germinated and propagated in the nursery environment prior to export as marketable seedlings. In this form, there are currently no restrictions imposed that would materially affect the fair value of the produce from the biological assets.

5.4 Methodology for Determination of Fair Value

Palm Plantations:

Although the market value of seedlings may be determined by reference to the sale price, there is currently no active and liq uid market for the palm trees which bear the seeds. The Board has therefore calculated the fair value by determining the net present value of future cash flows arising from the biological assets in accordance with paragraph 20 of AASB 141. Only those biological assets of the type identified in Note 5.1 (a) have been included in the calculation of net present value.

Palm Seeds:

The export of seed from the Island is prohibited by Board policy and there is no current and active liquid market for the sale of seed. The Board used to sell small quantities to local growers at cost but has not made any sales since 2003.

Palm Seedlings:

Palm seedlings are grown primarily for the purpose of export sale. There is therefore an active and liquid market for seedlings and the fair value is calculated by determining the

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current average sale price, less the cost of realising the sales, i.e.: picking, marketing, . I selling and distribution costs, in accordance with paragraph 9 of AASB 141.

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5.5 Significant Assumptions for Calculation of Fair Value in Respect to Plantations

The following significant assumptions have been made in calculating the net market value of plantations using the net present value method:

a) Each plantation will begin to yield consistent quality and quantity of seed 15 years after planting. Because of the ability of the Board to control nurturing, maintenance and watering during the growing years, seasonal climatic variations and weather patterns are not expected to materially alter the maturation period, or the quantity of seed produced;

b) The economic harvest life of each palm tree is estimated to be 15 years from the date of commencement of harvest;

c) Saleable yield from plantations is estimated at 63% of seed harvested. The Board has achieved yield rates of between 55% and 62% in recent years from seeds collected from the natural forest areas. Given the ability of the Board to increase control over growing conditions in the plantations, a higher saleable yield is considered achievable;

d) Sale price for the marketable produce is estimated at current average sale price per seedling sold.

e) Non-export sales (sales to locals and visitors) are estimated at a further 2.0% of total harvest;

f) Production, selling and distribution costs for plantation produce are calculated by volume on a per bushel basis as a percentage of total Nursery operating costs;

g) Calculations are based on a 5-year average of actual seed collected for Nursery operations up to and including the current year. For 2006-07 the average was 683 bushels;

h) Each bushel contains 4,600 seeds;

i) Establishment costs for plantations which were incurred up to 30 June 2003 have been expensed and are not included in the calculation of net market value;

j) Annual plantation maintenance costs are estimated at $3,683 per annum. This includes minor mowing, replacement of tree guards, infrequent fertilising, watering and de-leafing. After initial establishment annual maintenance requirements are minimal;

k) Average time from germination to sale of seedlings is 1 year. .Cash inflows from export sales and cash outflows from selling and distribution costs therefore occurs 1 year after production costs;

I) The discounted cash flow analysis to determine net present value has been calculated over the estimated future life of the current plantations;

m) The discount rate applied is 10% (pre-tax real). All cash flows are therefore in today's dollars and no allowance has been made for the effects of inflation. This rate represents an after inflation (nominal) discount rate of approximately 12.60/0 where inflation is estimated to remain constant at around 3% per annum. The discount rate is considered to adequately represent the risk associated with the future sale of seedlings, given the current annual world demand and the respected quality and reliability of the Lord Howe Island product in world markets.

5.6 Value of Increment Arising from Determination of Fair Value

The calculation of fair value for plantations using the net present value method has resulted in a net decrease (expense) for the year of $119,118 (expense of $16,574 in 2006).

At 30 June 2007, stocks of seed and seedlings identified in Note 5.1 (b) have been valued using the fair value method in accordance with MSB 141 and Note 5.4. The valuation methodology has resulted in a net increment (revenue) of $403,792 in the value of nursery stocks at 30 June 2007 ($356,997 in 2006).

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6. PAYABLES

Payables represented by trade creditors and other accrued expenditure as shown in the following table have been determined by identifying actual creditors and accruals at balance date.

Trade and Sundry Creditors Accrued Personnel Services Expenses' c

Accrued Expenses - GST Accrued Expenses - Other Total Payables

7. OTHER L1AB!L!T!ES

~(j(j7. .$

66410· -:~.' ---" ., - .

40,183 9;016

199,S05

2006 $

165,791 62,888

6,130 7,619

242,428

Other liabilities at 30 June 2007 comprised the following amounts held on behalf of individuals, other community groups and organisations and also income received in advance:

Organisation Purpose ·.2007 . $ c·

250

The amount showing for Palm seedlings income in advance was for money received in 2005-06 as a down payment on seedlings to be sold in 2006-07 as per the contract for seedling sales. The amount of $65,585 has been transferred to revenue as the seedlings from the 2005 crop have now been sold under the terms of the contract.

8. PROVISION FOR SUPERANNUATION

Pillar Administration has advised the Board of the estimated surplus/unfunded liability of the Superannuation Schemes to which Board contributes. This advice takes into account any legislative changes made in respect of superannuation.

The surplus in SASS is included in the Balance Sheet as a Non-Current Asset.

The unfunded liability in respect of the Basic Benefit scheme and SSS has been included as a Non-Current Liability.

Superannuation contributions made by the Board to these funds and to First State Super Fund, totalled $242,042 ($297,415 in 2006).

All references in this note are to the July 2004 version of AASB 119.

General description of the type of plan - Paragraph 120(b)

The Pooled Fund holds in trust the investments of the closed NSW public sector superannuation schemes: State Authorities Superannuation Scheme (SASS)

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State Superannuation Scheme (SSS) Police Superannuation Scheme (PSS) State Authorities Non-contributory Superannuation Scheme (SANCS).

These schemes are all defined benefit schemes where at least a component of the final benefit is derived from a multiple of member salary and years of membership. All the Schemes are closed to new members.

Superannuation position as at 30 June 2007 SASS SANGS SSS TOTAL 30-Jun-07 30-Jun-07 30-Jun-07 30-Jun-07

Superannuation Position for AASB 119 purposes $ $ $ $

Accrued liability 1,291,565 160,845 545,018 1,997,428

i . (2,328,764 I

t Estimated reserve account balance (1,709,750) (59,003) (560,011) ) (418,185) 101,842 (14,993) (331,336)

Future Service Liability (Note 1) (129,818) (56,847) (65,727) (252,392) Surplus in excess of recovery available from schemes 76,212 0 2,732 78,944 Net (asset)/liability to be disclosed in balance sheet . (341,973) 101,842 (12,261) (252,392)

! ~ . Superannuation position as at 30 June 2006 SASS SANGS SSS TOTAL

30-Jun-06 30-Jun-06 30-Juil-06 30-Jun-06 Superannuation Position for AASB 119 purposes $ $ $ $

Accrued liability 1,164,538 151,497 548,344 1,864,380

r (1,920,841

i Estimated reserve account balance (1,404,545) (43,912) (472,383) ) (240,007) 107,585 75,961 (56,461 )

f Future Service Liability (Note 1) (152,502) (63,474) (83,293) (299,269) I Surplus in excess of recovery available from schemes 0 0 0 0 Net (asset)/liability to be disclosed in balance sheet (240,007) 107,585 75,961 (56,461)

Note 1: The Future Service Liability (FSL) does not have to be recognised by an employer. It is only used to determine if an asset ceiling limit should be imposed (as per July 2004 version AASB 119, paragraph 58). Under AASB 119, any prepaid superannuation asset recognised cannot exceed the total of any unrecognised past service cost and the present value of any economic benefits that may be available in the form of refunds from the plan or reductions in future contributions to the plan. Where the "surplus in excess of recovery" is zero, no asset ceiling limit is imposed.

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Reconciliation of the assets and liabilities recognised in the balance sheet

SASS SANGS SSS Financial Financial Financial Year to Year to Year to 30 June 30 June 30 June

2007 2007 2007 $ $ $

Present value of defined benefit obligations 1,291,565 160,845 545,018 Fair value of plan assets (1,709,750) (59,003) (560,011)

(418,185) 101,842 (14,993) Surplus in excess of recovery available from schemes 76,212 0 2,732 Unrecognised past service cost 0 0 0 Net (asset)/Iiability to be disclosed in balance sheet (341,973) 101,842 (12,261)

Assets invested in entity or in property occupied by the entity - Paragraph 120(d)

All Fund assets are invested by STC at arm's length through independent fund managers.

Movement in net liability/asset recognised in balance sheet - Paragraph 120(e)


2007 2007 2007 $ $ $

Net (asset)/liability at start of year (240,007) 107,585 75,961 Net expense recognised in the income statement (101,966) (5,743) (88,222) Contributions Net (asset)/Iiability to be disclosed in balance sheet (341,973) 101,842 (12,261)

Total expense recognised in income statement - Paragraph 120{f)


2007 2007 2007 $ $ $

Current service cost 25,370 8,488 11,986 Interest on obligation 65,123 8,669 32,679 Expected return on plan assets (102,924) (3,340) (36,314) Net actuarial losses (gains) recognised in year (138,958) (9,841) (85,685) Past service cost Movement in adjustment for limitation on net asset 76,212 2,732 Losses (gains) on curtailments and settlements Total included in "employee benefits expense" (75,176) 3,975 (74,602)

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Actual return on plan assets - Paragraph 120(g)

Actual return on plan assets

SASS Fillancial Year to 30 June

2007 $

204,255

SANGS Financial Year to 30 June

2007 $

6,695

SSS Financial Year to 30 June

2007 $

69,620

Arrangements for employer contributions for funding - Paragraph AUS 121.1

The following is a summary of the 30 June 2007 financial position of the Fund calculated in accordance with AAS 25 - Financial Reporting by Superannuation Plans.

SASS SANGS SSS 30 June 30 June 30 June

2007 2007 2007 $ $ $

Accrued benefits 1,278,267 159,121 493,564 Net market value of Fund assets (1,709,750) (59,003) (560,011) Net (surplus)/deficit (431,483) 100,118 (66,447)

Recommended contribution rates for the entity are: SASS SANGS SSS

multiple of %of multiple of member rnember member

contributions salary contributions 1.90 2.50 0.00

The method used to determine the employer contribution recommendations at the last actuarial review was the Aggregate Funding method. The method adopted affects the tirning of the cost to the ernployer. Under the Aggregate Funding method, the employer contribution rate is determined so that sufficient assets will be available to meet benefit payments to existing members, taking into account the current value of assets and future contributions.

The econornic assumptions adopted for the current actuarial review of the Fund are:

Weighted-Average Assumptions Expected rate of return on Fund assets backing current pension liabilities Expected rate of return on Fund assets backing other liabilities Expected salary increase rate Expected rate of CPI increase

Nature of asset/liability - Paragraph AUS 121.2

7.7% pa 7.0% pa 4.0% pa 2.5% pa

! . If a surplus exists in the employer's interest in the Fund, the employer may be able to take I . advantage of it in the form of a reduction in the required contribution rate, depending on the advice

of the Fund's actuary.

I I l

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Where a deficiency exists, the employer is responsible for any difference between the employer's share of fund assets and the defined benefit obligation.

9. PROVISION FOR PERSONNEL SERVICES

Movements in the provision for employee benefits for the year ended 30 June 2007 is shown in the following table:

Opening Balance Transfer to/(from) Provision Closing Balance

Annual

.2.:.ooT " >i .§.·· .•• I ..• 14S,45S:

.69,1~51 '2146411 .- ,. "_'--'--' -;

Leave Long Service Leave Total 2006'2007] 20062007~ 2006

$ '.$' $$ . $ 135,773 ·'M.t;sOS[ 371,610· 593,064 507,383

9,682 ... 36,O~'51 75,999 · .. 165,220 . 85,681 145,455 .. 48:J,644) 447,609 ..ii:98,284 593,064

The apportionment of the Provision as at 30 June 2007 is:

Current Non-Current Total

Liabilities Liabilities

$ $ $ Annual Leave 214,641 0 214,641 Long Service Leave 467,193 16,450 483,643 Total 681,834 16,450 698,284

In accordance with AASB 101 and TC 07/04 for any liability line item that combines amounts to be sellied no more than 12 months after the reporting date and amounts to be sellied more than 12 months after the reporting date an entity must disclose the amount expected to be settled after more than 12 months.

All the Annual Leave is expected to be settled within 12 months.

Of the Long Service Leave it is expected that $37,375 will be sellied within 12 months and $429,818 after 12 months.

10. EQUITY

Total Equity held by the Board at 30 June 2007 is represented by:

Asset Revaluation Reserve Accumulated Funds Total Equity

Opening Balance Movements: Revaluation of Assets # Net Surplus/(Loss)·from Operations Closing Balance

Note :ZOO?'! 2006'206i: 2006 •...... ' .200.'$}. ::........ 200$6 $ $ ...... $.. $ .... ..,

~2,64t,052 .;22,041 ,052 ;10,~9.2,655i11 ,344,016 )2,73)/7g7,' 33,385,068 . !

10) 1,266,708! . 1.?66,7Q8 . , , '(1,001,345) i (651,361) (1,POj.,345) (651,361) .

23.307;760 i22,041,052 " 9,691,3f6110,692,65532;999,070 32,733,707

# Revaluation increments are credited directly to the asset revaluation reserve, except that, to the extent that an increment reverses a revaluation decrement in respect of that class of asset previously recognised as an expense in the surplus I deficit, the increment is recognised immediately as revenue in the surplus I deficit

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11. EMOLUMENTS TO MEMBERS OF THE BOARD

Amounts paid and payable to Board members in respect of the 2007 financial year totalled $38,118 ($36,138 in 2005-06).

12. AUDIT FEES

Fees payable to the Audit Office of New South Wales for 2006-07 will total $47,300 ($46,085 in 2005-06). This is inclusive of GST. The Board meets the cost of travel and accommodation for audit staff. No other benefits were provided to The Audit Office.

13. NOTES TO THE STATEMENT OF CASH FLOWS

13.1 Reconciliation of Cash Assets

For the purpose of the statement of cash flows, cash assets include cash on hand, in bank, and at TCorp.

Cash assets at the end of the reporting period as shown in the statement of cash flows are reconciled to the related items in the statement of financial position as follows:

:2067'. 2006 ... {.... $

Cash on Hand and at Bank W1,~29i 174,300 Cash at TCorp 4,'7M,16S '4,520,494 Total Cash Assets :4,879;394:4,694,794

Of the total cash assets available at balance date, amounts totalling $229,315 were restricted, being $250 in bonds shown in Note 7 and $229,065 in unexpended grant funding.

13.2 Reconciliation of Net Cash provided by Operating Activities to Operating Result for the Year Ending 30 June 2007

Operating Surplus/(Loss) Adjustments for Items not Involving Cash: Depreciation Loss/(Gain) on Disposal of Assets Provision for Employee Entitlements Increase/(Decrease) in Provision for Superannuation Decrease/(lncrease) in Accounts Receivable & Prepayments Decrease/(lncrease) in Other Liabilities Decrease/(lncrease) in Inventories Increase/(Decrease) in Creditors & Accruals Non-cash movement from recognition of Biological Assets 141 Net Cash Provided by Operating Activities

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. .2007 . ....•.•. :'$' '

.. ' . (1,Ori1,~4~) ."

'. ,·1;221,4Q3. ······('18,1)$9)· . 125;694

'. (1~5;931) . 176,21~ ..

.:. (7:4,412). 16759

. 65'245' .' ,.' - '," -.'.,

86661.: ,. -"-'"

·······4i11,694

2006 $

(742,509)

1,204,057 (5,847) 85,681 15,602

(223,224) (138,537)

(84,241) (45,350)

100,013 165,645

14. DEBTS DUE TO THE BOARD, BY BOARD MEMBERS AND EMPLOYEES

At balance date, a total of $7,512 was owed by members and employees ($8,247 in 2005-06), in respect of general accounts relating to Board services.

15. CONSULTANTS FEES

The Board paid the sum of $253,268 during the current financial year to various technical consultants ($169,523 in 2005-06). These payments were made for the following purposes:

Asset and Property Valuations Corporate Governance/Legislation Electrical Engineering Engineering Services Human Resource Management Legal/Professional Advices Bio-Security Planning Nursery Management & Marketing Public Health Management Quarantine Management Town Planning and Development Assessment Traffic Management

16. CONTINGENT LIABILITIES

2()()7 $

2420. -'c --, . .' ,

.. 114

··~~:~n; ·n.

.M,~l~ ~~~~Z':

..•.•. .•. C' : ··34,!l17.

72;85"4 . 14;SOO.

2006 $

14,414 o

34,814 3,333 6,038

32,878 o

10,724 2,582

27,957 31,261 5,525

169,526

The Board is not aware of any significant or material contingent liability in existence at balance date, or which has emerged subsequent to balance date, which would materially impact on the financial position of the Board as shown in the Financial Statements with the following exceptions.

A claim for damages was lodged against the Board during 1995-96 by a visitor who was injured from a shark attack. Professional advice indicates that public liability insurance will prevent any significant liability eventuating. This claim is still to be finalised.

17. MATERIAL ASSISTANCE PROVIDED AT NO COST

No unfunded material assistance was provided to the Board during 2006-07 by the Defence forces or any other external agency.

18. COMMITMENTS

(i) Capital Expenditure Commitments Total Capital Expenditure contracted for at balance date but not provided for in the Financial Statements (Payable no later than one year)

(ii) Operating Expenditure Commitments

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2M! 2006 .. $ $

o 8,183

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20.

Total purchase orders committed for at balance date but not provided for in the Financial Statements (Payable no later than one year)

GST in above amounts

2007 2006 $ $

23,341 54,034

2;1 ?2.1 5,656

Amounts payable by the Board in respect to GST for the above commitments is claimable as an Input Tax Credit.

FINANCIAL INSTRUMENTS

The financial instruments held by the Board and described elsewhere in these notes arise directly from the operations of the Lord Howe Island Board or are required to finance the Board's operations. The Lord Howe Island Board does not enter into or trade financial instruments for speculative purposes. The Lord Howe Island Board does not use financial derivatives.

STANDARDS ISSUED BUT NOT YET EFFECTIVE

At reporting date a number of Australian Accounting Standards have been issued but are not yet effective. These have not been early adopted by the Board. The following is a list of these standards and their possible impact on the financial report, if any, in the period of their initial application.

AASB Application Application Amendments date of the date for the

Standard Board No impact The following standards issued have been identified as having no impact on the Board.

AASB 1 First Time Adoption of 2005-10 1/01/2007 1/07/2007 AEIFRS

AASB2 Business Combinations 2005-6 1/01/2006 1/07/2006 AASB 101 Presentation of Financial 2004-3 1/01/2006 1/07/2006

Statements AASB 114 Segment Reporting 2005-10 1/01/2007 1/07/2007 AASB 117 Leases 2005-10 1/01/2007 1/07/2007 AASB 119 Employee Benefits New Standard 1/01/2006 1/07/2006 AASB 121 The Effects of Change in 2006-1 1/01/2006 1/07/2006

Foreign Exchange Rates AASB 124 Related Party Disclosures 2004-3 1/01/2006 1/07/2006 AASB7 Financial Instruments: New Standard 1/01/2007 1/07/2007

Disclosure AASB 132 Financial Instruments: Various 1/01/2006 1/07/2006

Disclosure and Presentation

Impact under Evaluation . The effect of the following standard is still being evaluated. At the time of this report the impact cannot reasonably be estimated.

AASB 139 Financial Instruments: 2005-10 1/01/20071/07/2007 Recognition and

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Measurement

No application. The following new standards have no application to the Board. AASB 4 Insurance Contracts AASB 8 Operating Segments AASB 133 Eamings per Share

AASB 1023 AASB 1038

General Insurance Contracts Life Insurance Contracts

21. AFTER BALANCE DAY EVENTS

The Board is unaware of any other matters or events occurring after balance day that would be likely to have any material impact on the Board's finances or on the presentation of these accounts.

END OF FINANCIAL STATEMENTS

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