south australia wins · 2020. 5. 5. · we are pleased to report that sales were $345.1 million, an...
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South Australia
wins
Lotteries Commissionof South AustraliaAnnual Report
2003-04
Reportcontents
Strategic direction – our vision, mission, core values and corporate objectives 01
From the Presiding Member and Chief Executive 02
Our achievements 04
Corporate scorecard – our objectives, targets and performance 05
Ten year financial summary 07
Corporate governance 08
Our commitment 13
Our customers 15
Our games 16
Our agents 21
Our people 22
Our business 24
Our systems 25
Appendix – our organisation 26
Financial statements 29
Independent audit report 56
Glossary 57
Index 59
Profile statement
SA Lotteries has been making wishes come true for South Australians since 29 May 1967, whenSouth Australia's first Division One winner collected$14 000 in the inaugural South Australian lottery.More than 37 years later, SA Lotteries continues tofulfil dreams for countless local players, who haveshared in more than $3.2 billion in prize money.
And it's not just the winners who win with SA Lotteries, as all profits are returned to the
South Australian community via the State HospitalsFund and the Recreation and Sport Fund, withmore than $1.5 billion contributed since 1967.
SA Lotteries is committed to meeting communityexpectation to provide lotteries games within asocially acceptable environment.
Lotteries Commission of South AustraliaAnnual Report 2003-04
01
Strategic directionOur winning formulaOur visionTo be a world class operator of entertaining and profitable games.
Our missionTo achieve our goals in a socially responsible manner, for the
benefit of the community of South Australia.
Our core values• Operate with integrity.
• Be responsible.
• Understand consumer needs.
• Commit to service excellence.
• Be innovative.
• Meet the highest professional standards.
Our corporate objectives• Generate maximum returns to the shareholder.
• Sustain a corporate culture that is socially, financially, economically and
environmentally responsible.
• Provide high standards of quality, service and value for customers.
• Provide innovative and entertaining games.
• Provide high level support to our distribution network.
• Employ the best people and maximise their potential.
• Ensure mutually beneficial relationships with suppliers.
• Pursue and utilise the most effective technology.
Lotteries Commission of South AustraliaAnnual Report 2003-04
02
From the Presiding Member and Chief ExecutiveWinning for all South
The Honourable Kevin Foley, MPTreasurerParliament House, Adelaide SA 5000
It is with pleasure that we present the Annual Report of the LotteriesCommission of South Australia for the year ended 30 June 2004 in accordancewith Section 18B of the State Lotteries Act 1966, as amended.
SA Lotteries either met or exceeded financial performance targets for the 2003-04 financial year.
We are pleased to report that sales were $345.1 million, an increase of $9.2million or 2.7% compared with the previous year.
Players of our games shared prize money of $207.9 million during the year,representing 60.2% of total sales.
Increased sales and reduced costs contributed to a Return to Government of$81.6 million.
SA Lotteries is pleased that the benefits of our operations are distributed byTreasury to the State Hospitals Fund and to the Recreation and Sport Fund.
We continue our strong association with small business operators in SouthAustralia through our network of 528 agents. In 2003-04 commission paid to our agents totalled $25.4 million, an increase of 3% on the previous year.
SA Lotteries has worked with the Independent Gambling Authority and stronglysupports the State Lotteries Responsible Gambling Code of Practice andAdvertising Code of Practice, effective from 30 April 2004.
The implementation of a stricter regulatory environment as a result of thesemandatory Codes of Practice has changed operating, reporting and compliancerequirements relevant to SA Lotteries corporate and every agent in the statewide network.
Agents are commended for the manner in which they have accepted and adoptedthe requirement of responsible play and harm minimisation measures outlined inthe Codes of Practice.
June RoacheChief Executive
Hans J OhffPresiding Member
Australians
Stephen ShirleyCommission Member
Chris CragoCommission Member
Suzanne MackenzieCommission Member
Peter LeMessurierCommission Member
SA Lotteries’ core values of operational integrity, meeting contemporarycommunity expectations and partnering with our agents will guide us inachieving sustainable success.
The challenge for the future is achieving the balance between increasingrevenues and social responsibilities. SA Lotteries’ games are designed to beentertaining while providing benefits to our community.
We are aware of the many opportunities arising from information technologiesand electronic distribution channels and are ensuring that we remainstrategically positioned by adapting to the changing market conditions.
SA Lotteries has secured a long-term lease for the relocation of Head Office tonew premises at Greenhill Road, Wayville. The new premises will consolidate ouroperational activities and are designed to lead to greater efficiency and a friendlyworking environment.
On behalf of the Commission we thank our staff. Their knowledge, commitmentand dedication are reflected in the results of the organisation. The achievementof our corporate objectives is sincerely appreciated.
Hans J OhffPresiding Member
June RoacheChief Executive
Lotteries Commission of South AustraliaAnnual Report 2003-04
03
2003-04
• Sales of $345.1 million.• South Australians won 11.3 million prizes totalling $207.9 million.• $83.6 million paid to the State Hospitals Fund.• $0.3 million paid to the Recreation and Sport Fund.
SINCE 1967
• $1.5 billion distributed to the State Hospitals Fund.• $3.2 billion paid in prize money.
OUTLOOK
SA Lotteries is committed to offering dynamic and innovativegames in a responsible manner for the fun and entertainment of all players to ensure that lotteries in South Australia remains asustainable and attractive industry in the future.
Our achievementsWinning from year to year
Lotteries Commission of South AustraliaAnnual Report 2003-04
04
Phil and Robyn ofVictor Harborenjoyed an $887,000 SA Lotto win inSeptember 2003.
Lotteries Commission of South AustraliaAnnual Report 2003-04
05
Corporate scorecardOur winning performance
at a glanceGenerate maximum returns to the shareholder
Sustain a corporate culturethat is socially, financially,economically andenvironmentally responsible
Provide high standards ofquality, service and value for customers
Provide innovative andentertaining games
Provide high level support toour distribution network
Employ the best people andmaximise their potential
Ensure mutually beneficialrelationships with suppliers
Pursue and utilise the mosteffective technology
• Revenue growth
• Increase productivity
• Provide a responsiblegambling environment
• Ensure efficiency inoperations
• Improve energy efficiency toreduce greenhouse gases
• Return to player
• Provide a high standard ofcustomer service
• Strengthen Easiplay Clubmembership base
• Increase sales within South Australian adult(18+) population
• Maintain mutually beneficialagent relationships
• Maximise employeeeffectiveness
• Best practice management
• Ensure optimal systemsperformance
Corporate Objective Strategy Performance Indicator Target Actual
• Gross sales• Return to Government• Operating expenses as
percentage of gross sales
• Agencies undertakingresponsible gamblingtraining
• Cents spent to generateone sales dollar
• Greenhouse gas emissions
• Prizes as a percentage of sales
• Response time to customerenquiries or complaints
• Number of active EasiplayClub members
• Sales per capita per annum
• Agents visited by SALotteries representatives at least once per quarter
• Sales per full-timeequivalent employee
• Cost per full-timeequivalent employee
• Compliance with SmallBusiness Charter
• Accounts paid by due date
• On-line system operational time
• Terminal reliability (Mean TransactionsBetween Failure)
$340 million $345.1 million$81.6 million $81.6 million
12.6% 10.8%
100% 100%
12.1 cents 10.8 cents
1123 1118tonnes CO2 tonnes CO2
59.6% 60.2%
4 days 2.9 days
190 000 188 261
$287.38 $291.70
100% 100%
$4.1 million $4.5 million
$494 600 $483 200
100% 100%
100% 100%
100% 100%
150 000 227 616
Lotteries Commission of South AustraliaAnnual Report 2003-04
06
SA Lotteries contributed more than $83 million to theState Hospitals Fund in 2003-04.
Lotteries Commission of South AustraliaAnnual Report 2003-04
07
From 1995 to 2004 – a ten year financial summaryA winning streak
*SA Lotto twice-weekly draws on Monday and Wednesday commenced November 2003. * Powerball commenced May 1996. * Thursday Lotto ceased May 1996. ** Other Revenue in 2003 includes $2 968 000 income from hosting the WLA Congress in Adelaide during November 2002. ^ Operating Expenses in 2003 excludes $2 264 000 in costs to host the WLA Congress in Adelaide during November 2002 (2002: excludes $186 000). # State Gambling Tax and GST were introduced on 1 July 2000 and are levied on Net Gambling Revenue (NGR= Gross sales less monetary prizes payable). StateGambling Tax at the rate of 41% of NGR is paid to the State Hospitals Fund/Recreation and Sport Fund. GST at the rate of 9.09% of NGR is paid to the AustralianTaxation Office. Income Tax Equivalent included Sales Tax Equivalent for the period 1996 to 2000.
GROSS SALESLotto 130 825 129 603 123 632 123 023 120 304 115 074 113 220 107 314 116 181 108 431
SA Lotto * 41 706 28 931 23 380 21 468 21 292 18 756 17 635 16 472 15 143 15 072
Oz Lotto 15 467 16 575 17 127 17 133 16 662 16 977 19 590 15 027 15 124 16 220
Powerball * 44 760 51 379 44 526 46 438 34 288 35 200 27 223 25 228 2 884 -
Thursday Lotto * - - - - - - - - 19 972 23 960
Keno 70 425 67 155 64 838 61 689 68 620 69 308 71 818 71 961 70 431 70 425
Instant Scratchies 39 812 39 864 37 920 37 099 30 866 28 860 25 833 25 359 26 298 29 697
The Pools 622 742 605 716 607 609 566 570 787 817
Super 66 1 479 1 662 1 828 2 027 2 379 2 677 2 739 2 718 3 601 4 225
TOTAL GROSS SALES 345 096 335 911 313 856 309 593 295 018 287 461 278 624 264 649 270 421 268 847
Less Agents' Commission 25 443 24 694 23 100 22,707 21 853 20 692 20 104 19 192 19 787 20 592
NET SALES 319 653 311 217 290 756 286 886 273 165 266 769 258 520 245 457 250 634 248 255
Other Revenue ** 6 944 9 846 6 204 7 171 6 520 5 117 5 319 5 171 5 583 4 781
TOTAL REVENUE 326 597 321 063 296 960 294 057 279 685 271 886 263 839 250 628 256 217 253 036
Prizes 207 886 202 336 187 217 180 604 174 519 173 982 169 695 162 978 164 631 162 335
% of gross sales 60.2% 60.2% 59.7% 58.3% 59.2% 60.5% 60.9% 61.6% 60.9% 60.4%
Return to Government
Gambling Tax # 56 256 54 766 51 922 51 480 0 0 0 0 0 0
Income Tax Equivalent 7 516 7 542 7 066 10 099 31 336 31 375 28 589 26 431 27 278 0
Dividend 17 869 17 673 15 369 15 689 53 128 50 028 48 088 44 172 45 595 72 870
81 641 79 981 74 357 77 268 84 464 81 403 76 677 70 603 72 873 72 870
% of gross sales 23.7% 23.8% 23.7% 25.0% 28.6% 28.3% 27.5% 26.7% 26.9% 27.1%
Operating Expenses ^ 37 400 36 558 34 083 32 271 20 297 17 151 16 435 15 453 17 062 15 731
% of gross sales 10.8% 10.9% 10.9% 10.4% 6.9% 6.0% 5.9% 5.8% 6.3% 5.9%
GST (included in Operating Expenses) # 12 474 12 143 11 513 11 415 0 0 0 0 0 0
% of gross sales 3.6% 3.6% 3.7% 3.7% NA NA NA NA NA NA
Year ended 2004 2003 2002 2001 2000 1999 1998 1997 1996 199530 June $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Lotteries Commission of South AustraliaAnnual Report 2003-04
08
SA Lotteries is a Statutory Authority established under the State Lotteries Act.
Corporate governance is the process by which SA Lotteries is governed andmanaged.
This statement outlines the main corporate governance practices that were in placethroughout the financial year ended 30 June 2004.
Responsible for the governance of SA Lotteries, the Commission’s establishedprocesses provide strategic guidance for management towards achievement ofcorporate objectives.
In conjunction with the management team, the Commission strives to achieve bestpractice in meeting these objectives.
THE ROLE OF SHAREHOLDER
For the period 1 July 2003 to 30 June 2004 the Honourable Kevin Foley MP was the appointed Minister responsible for SA Lotteries as Treasurer. The Treasurer is Deputy Premier and his other portfolios are Minister Assisting the Premier inEconomic Development, Minister for Police and Minister for Federal/State Relations.
The Commission aims to ensure that the shareholder, the Government of South Australia, is informed of all major developments affecting the Commission’sstate of affairs via:
• Written reports and meetings with the Treasurer.
• Monthly estimates reports presented to the Department of Treasury and Finance.
• Submission of the Commission’s annual operating and capital budgets to theTreasurer for approval.
• Attendance by a Government observer at Commission and Audit Committeemeetings.
• Distribution of the annual report to the shareholder.
• The Auditor-General’s annual report to Parliament, which includes SA Lotteries.
The Commission ensures compliance with all formal directions issued by theresponsible Minister.
COMPOSITION OF THE COMMISSION
In accordance with the State Lotteries Act, the Commission shall consist of not less than three nor more than five members appointed by the Governor of SouthAustralia, of whom one shall be nominated by the Governor as the PresidingMember of the Commission. The Presiding Member of the Commission is a non-executive member. The Commission comprises non-executive members.
The appointment letter covers the term of the appointment. A member shall beappointed for a term of office not exceeding five years determined by the Governor.On the expiration of the term of office as a member, a member shall be eligible forre-appointment.
Corporate governanceCommitted to winning
Lotteries Commission of South AustraliaAnnual Report 2003-04
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The Commission membership as at 30 June 2004 comprised:
Name: Mr H J Ohff, FIEAust, CPEng, BA (Hons)Position: Presiding MemberExpertise: Engineering
Name: Mr D P LeMessurier, Ass Dip (Man), SIA (aff), FAICD, MSDIA, MBAPosition: MemberExpertise: Stockbroking
Name: Ms S J Mackenzie, BComm (Accounting), LLB (Hons)Position: MemberExpertise: Law
Name: Mr S K Shirley, BEc, CA, CPA, FTIAPosition: MemberExpertise: Accounting
Name: Ms C M Crago, Ass Dip (Bus), BBus (Mktg)Position: MemberExpertise: Marketing
Effective from 1 April 2004, Her Excellency the Governor in Executive Council re-appointed Mr Hans Ohff as Presiding Member and Mr Peter LeMessurier and Ms Suzanne Mackenzie as Commission Members.
The Governor may, by notice in writing served on a member, suspend the member from office for any period not exceeding the balance of the term of office, or remove the member from office, on grounds of misconduct or incapacity to perform the dutiesor functions as a member.
COMMISSION MEETINGS
The Commission meets monthly. The number of meetings during the year andattendance by each member, and each committee member, is detailed within the table‘Attendance at Meetings’.
COMMISSION FEES
Remuneration for a member is $18 700 per annum, plus an attraction and retentionallowance of $2200 per annum. The Presiding Member receives $27 200 per annum,plus an attraction and retention allowance of $2200 per annum.
Further details of members’ remuneration payments are set out in Note 9 to theFinancial Statements.
COMMISSION COMMITTEES
To assist in the delivery of its responsibilities the Commission has established an AuditCommittee and a Superannuation Policy Committee.
Audit Committee
The role of the Audit Committee is to assist the Commission in fulfilling itsresponsibilities in relation to identification of areas of significant business risks by:
• Advising on the establishment and maintenance of a framework for internal controlfor the management of SA Lotteries.
• Monitoring the quality and reliability of financial information prepared for use by theCommission in determining policies or for inclusion in financial statements.
The Audit Committee has a formal charter incorporating its broad functions as follows:
• Reviewing of the annual financial statements prior to their approval by theCommission to ensure that the Statement of Financial Performance, Statement ofFinancial Position and Statement of Cash Flows, together with the notes, present
fairly, in accordance with Statements of Accounting Concepts, applicable AccountingStandards, Urgent Issues Group Consensus Views and the Public Finance and AuditAct 1987, as amended, the financial position of the Lotteries Commission of SouthAustralia as at 30 June and the result of its operations and its cash flows for theyear then ended; and ensuring that internal controls over financial reporting havebeen effective throughout the reporting period.
• Liaising with the Commission’s external auditors, the Auditor-General’s Department,on all matters concerning the outcome of annual audits of the Lotteries Commissionof South Australia.
• Regular reviewing of the adequacy of the accounting, internal auditing, reporting andother financial management systems and practices of the Lotteries Commission ofSouth Australia or any other matter the Commission and/or Audit Committee request.
The internal and external auditors are invited to Audit Committee meetings at thediscretion of the Committee. KPMG was the appointed internal auditor for the 2003-04financial year. The Auditor-General’s Department is SA Lotteries’ external auditor.
In accordance with its charter the members of the Audit Committee are non-executive.During the year membership comprised:
Mr Peter LeMessurier - Chair (from 1 July 2003 to 15 June 2004); Member (from 15 June 2004)
Mr Stephen Shirley - Member (from 1 July 2003 to 15 June 2004); Chair (from 15 June 2004)
Ms Suzanne Mackenzie - Member (from 1 July 2003 to 15 June 2004)
Ms Chris Crago - Member (from 15 June 2004)
Superannuation Policy Committee
Membership of the Superannuation Policy Committee comprises four members: twoemployer-appointed and two member-elected representatives. During the 2003-04financial year membership comprised:
Employer-appointed: From 1 July 2003 to 30 June 2004:Ms Suzanne Mackenzie - ChairMs June Roache - Member
Member-elected: From 1 July 2003 to 30 June 2004:Mr Paul Wright - MemberMr John Favretto - Member
ATTENDANCE AT MEETINGS
# Not a member. * Member for part year only. ^ Chris Crago was invited to attend Audit Committee meetings prior to being appointed an
Audit Committee member.Lotteries Commission of South AustraliaAnnual Report 2003-04
10
Commission Members Commission Audit Committee Superannuation PolicyMeetings (12 held) Meetings (5 held) Committee Meeting (1 held)
Mr Hans Ohff 12 # #
Mr Peter LeMessurier 10 5 #
Ms Suzanne Mackenzie 12 5 1
Mr Stephen Shirley 12 5 #
Ms Chris Crago 10 4*^ #
COMMISSION RELATIONSHIP WITH MANAGEMENT
The Chief Executive is accountable to the Commission for the achievement of SALotteries’ corporate objectives.
In accordance with the State Lotteries Act, the Commission may delegate to any officerof the Commission any of the powers, duties, functions and authorities of theCommission. To this end, the Commission clearly defines management’sresponsibilities and accountabilities through approved management operatingauthorities.
Commission members are involved in the evaluation process for all tenders greaterthan $1 100 000.
INTERNAL CONTROL FRAMEWORK
The Commission acknowledges that it is responsible for the internal controlframework, but recognises that a cost effective internal control system will notpreclude all errors and irregularities. To assist, the Commission has instigated aninternal control framework that can be described under five headings:
Financial reporting – There is a comprehensive budgeting system with an annualbudget approved by the Commission prior to submission to the Treasurer. Monthlyactual results are reported against budget and forecasts for the year are preparedregularly.
Quality and integrity of personnel – The Commission follows guidelines for ethicalconduct that define principles and standards with which all officers and employees areexpected to comply in the performance of their respective functions.
A key element is the requirement that officers and employees are expected to act inaccordance with the law and with the highest standards of propriety.
Operating division controls – Financial controls and procedures, including informationsystems controls are in place. A Commission questionnaire confirms compliance withthese procedures to ensure sound principles of corporate governance andaccountability throughout the organisation.
Functional specialty reporting – The Commission has identified corporate keyperformance indicators, which are subject to regular reporting.
Capital investment appraisal – The Commission has clearly defined guidelines forcapital expenditure. These include levels of authority, annual budgets, detailed costbenefit analysis and post-implementation reviews for large expenditure items.
SA Lotteries’ internal auditor is appointed by the Commission to test compliance withthese internal controls. The findings and recommendations of the internal auditors,coupled with direction and regulation by the Audit Committee, have ensured themaintenance and ongoing refinement of an efficient internal control framework.
ETHICAL STANDARDS
SA Lotteries requires a high standard of ethics, with its core values as the basis of this standard.
Lotteries Commission of South AustraliaAnnual Report 2003-04
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Lotteries Commission of South AustraliaAnnual Report 2003-04
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SA Lotteries’ commitment to thecommunity of South Australia wasdemonstrated through sponsorship ofthe Jacob’s Creek Tour Down Under.
Lotteries Commission of South AustraliaAnnual Report 2003-04
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WE HAVE GENERATED MAXIMUM RETURNS TO OUR SHAREHOLDERAND ENSURED A CORPORATE CULTURE EMBRACING SOCIAL,FINANCIAL, ECONOMIC AND ENVIRONMENTAL RESPONSIBILITY.
In 2003-04 we:
• Generated returns of $83.6 million to the State Hospitals Fund and $0.3 million to the Recreation and Sport Fund.
• Returned $25.4 million in agent commission to our statewide network.
• Achieved compliance with requirements of the State Lotteries ResponsibleGambling and Advertising Codes of Practice by the implementation date of 30 April 2004.
• Conducted sessions around the State to acquaint all agents with therequirements of the Codes of Practice and to provide accredited responsiblegambling training.
• Provided sponsorship support for the following:
- 2003 SANFL Magarey Medal- 2004 Jacob’s Creek Tour Down Under- Adelaide Symphony Orchestra- Australian Dance Theatre- State Theatre Company of South Australia- State Opera South Australia- Art Gallery of South Australia- Migration Museum- Australian Hotels Association (SA), Clubs SA and Newsagency Council of SA- Local charities and community groups via minor sponsorships.
• Complied with the Freedom of Information Act 1991, actioning nine requests for information.
• Provided innovative and entertaining games that returned $207.9 million in prizes to lucky local players.
• Maintained a risk management program to minimise identified risks,incorporating risk assessment for existing operations and new projects.
• Conducted a crisis simulation training exercise in June 2004.
• Maintained certification to the Quality Standard AS/NZS ISO 9001:2000 via an effective Quality Management System, ensuring a focus on continuousimprovement.
• Complied with the requirements of the Information Security Standard ISO/IEC 17799:2000 and AS/NZS 7799:2000, verified via independent biannual audits.
Our commitmentEverybody wins
Lotteries Commission of South AustraliaAnnual Report 2003-04
14
PERFORMANCE AGAINST ANNUAL ENERGY USE TARGETS
• Demonstrated our commitment to the State Government Energy Efficiency Action Plan achieving a reduction in energy use compared to the previous year.
• Achieved a reduction of 5.4% in greenhouse gas emissions compared tothe base year, mainly through whole of Government purchase of 32 000MWh per annum of renewable energy.
• Adopted environmentally responsible practice and reduction in energyconsumption through the use of energy efficient office equipment andplant where possible.
• Commenced upgrading desktop PCs to Liquid Crystal Display (LCD) flat-panel monitors contributing to reductions in greenhouse gases andconsumption of electricity.
• Continued to progressively replace Keno monitors with smaller LCDscreens as a proactive responsible gambling initiative and environmentallyresponsible alternative.
In the year ahead we will:
• Continue to balance our efforts to maximise returns to our shareholderwith a commitment to responsible gambling within a changing andchallenging environment.
• Implement an integrated corporate social responsibility frameworkconsistent with the Australian Standard.
• Manage a coordinated sponsorship program for the benefit of the SouthAustralian community.
• Maintain certification to established quality and information securitystandards.
Period Energy Use Expenditure Greenhouse Gas Emissions(Gjs) ($) (tonnes CO2)
Base Year 2000-01 3834 116 165 1182
Year 2001-02 3961 133 903 1221
Year 2002-03 3897 135 009 1201
Year 2003-04 3861 137 124 1118
Target 2003-04 3642 NA 1123
Target 2009-10 3258 NA 1004
SA Lotteriesconductedinformation andtraining sessionsto acquaint allagents with therequirements ofthe State LotteriesCodes of Practice.
WE HAVE DELIVERED HIGH STANDARDS OF QUALITY, SERVICEAND VALUE TO OUR CUSTOMERS.
In 2003-04 we:
• Exceeded our key performance indicator for customer service with anaverage response time of 2.9 days to complaints or enquiries against atarget of four days.
• Provided automatic payment of unclaimed prizes and storage of favouritenumbers to Easiplay Club members.
• Increased our Easiplay Club membership base by 4.3%.
• Thrilled 25 Easiplay Club members with the ‘phone call of a lifetime’ toadvise of winning a Division One prize.
• Offered an email-based lottery results service.
In the year ahead we will:
• Enhance Easiplay Club member retention via apromotional strategy to encourage members touse their card whenever making a lotteriespurchase.
• Consider options for expansion to our lotteriesresults service.
• Conduct a segmentation study to provide acomparison against the 2002 study and gain abetter understanding of player participation andperception of our games.
Keri won a brandnew Holden AstraConvertible withInstant Scratchies’
‘Scratch, Match & Drive’ promotion.
Our customersOur players are
all round winners
Lotteries Commission of South AustraliaAnnual Report 2003-04
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Lotteries Commission of South AustraliaAnnual Report 2003-04
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Our gamesWe have provided innovative
Win it before someone else does.
Only South Australians get it.
Performance Lotto accounted for 37.9% of total gross sales.
Highlights Seven Megadraws, including a record $30 million Megadraw in December 2003.
Outlook A number of initiatives planned, including marketresearch to contribute towards a refreshedmarketing and communications campaign.
Gross Sales 2003-04 $130.8 million
Variance from 2002-03 $1.2 million or 0.9% increase
Average weekly entries 322 279
Value of prizes won in SA $69.5 million
Division One prize winners in SA 33
Total number of winners in SA 1 308 442
Performance Strong sales growth.
New game initiatives coinciding with game repricing in November.
A successful ‘Buy one Maxi-Pick, get one free’promotion conducted.
Highlights Record-breaking jackpot run for 23consecutive weeks.
Introduction of Wednesday night draw and increased guaranteed Division One prize pool of $400 000 per draw.
Outlook New advertising to reinforce local nature of the game.
Gross Sales 2003-04 $41.7 million
Variance from 2002-03 $12.8 million or 44.2% increase
Average weekly entries 162 999
Value of prizes won in SA $24.6 million
Division One prize winners in SA 19
Total number of winners in SA 653 576
Gross Sales 2000-2004 ($’000)
Gross Sales 2000-2004 ($’000)
120 000
140 000
100 000
80 000
60 000
40 000
20 000
1999-00 2000-01 2001-02 2002-03 2003-040
40 000
45 000
30 000
35 000
25 000
20 000
15 000
10 000
5 000
1999-00 2000-01 2001-02 2002-03 2003-040
Lotteries Commission of South AustraliaAnnual Report 2003-04
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and entertaining games
Life’s different when you’ve won.
Got your winning numbers?
Performance Declining sales performance due to reducednumber of jackpots.
Highlights Tenth anniversary celebrated in February 2004with a promotion in conjunction with LottoMegadraw.
Outlook National initiatives planned to generate renewedappeal for Oz Lotto.
Gross Sales 2003-04 $15.5 million
Variance from 2002-03 $1.1 million or 6.7% decrease
Average weekly entries 41 647
Value of prizes won in SA $4.9 million
Division One prize winners in SA 0
Total number of winners in SA 67 782
Performance Jackpot activity remained at lower levels with only two $20 million jackpots and one $30 million jackpot.
No Division One winners, compared to five winners last year.
Highlights Cross promotion with Keno.
Outlook New advertising campaign.
Gross Sales 2003-04 $44.8 million
Variance from 2002-03 $6.6 million or 12.9% decrease
Average weekly entries 135 549
Value of prizes won in SA $14.2 million
Division One prize winners in SA 0
Total number of winners in SA 700 219
Gross Sales 2000-2004 ($’000)
Gross Sales 2000-2004 ($’000)
16 000
18 000
12 000
14 000
10 000
8 000
6 000
4 000
2 000
1999-00 2000-01 2001-02 2002-03 2003-040
50 000
40 000
30 000
20 000
10 000
1999-00 2000-01 2001-02 2002-03 2003-040
Our gamesA winning combination for
Performance Fourth consecutive year of sales growth, althoughremaining approximately 8% below sales levelprior to introduction of gaming machines in 1994.
Growth achieved through use of advanced monitor graphics, Spot 10 jackpot and advertisingcampaign in conjunction with the AFL.
Highlights Cross promotion linking Keno with Powerball.
Outlook Further use of monitor graphics to promote prizes won.
Gross Sales 2003-04 $70.4 million
Variance from 2002-03 $3.3 million or 4.9% increase
Average weekly entries 218 113
Value of prizes won in SA $54.3 million
Division One prize Spot 10 winners 2winners in SA Spot 9 winners 1
Spot 8 winners 12
Total number of winners in SA 3 409 417
Performance Instant Scratchies sales were maintained.
Highlights The launch of new $3 Extended Play games.
‘Scratch, Match & Drive’ promotion held in May 2004 resulted in incremental sales of 13%.
Outlook New concepts for $1 Instant Scratchies tickets being considered for 2004-05.
Gross Sales 2003-04 $39.8 million
Variance from 2002-03 $0.05 million or 0.1% decrease
Average weekly entries 401 824
Value of prizes won in SA $22.6 million
Division One prize $250 000 winners 1winners in SA $200 000 winners 1
$150 000 winners 6$100 000 winners 3$25 000 winners 4
Total number of winners in SA 5 084 386
Lotteries Commission of South AustraliaAnnual Report 2003-04
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Gross Sales 2000-2004 ($’000)
Gross Sales 2000-2004 ($’000)
Win it by the minute.
It happens.
80 000
60 000
70 000
50 000
40 000
30 000
20 000
10 000
1999-00 2000-01 2001-02 2002-03 2003-040
45 000
40 000
30 000
35 000
25 000
20 000
15 000
10 000
5 000
1999-00 2000-01 2001-02 2002-03 2003-040
fun and entertainment
Performance Super 66 sales continued to decline in 2003-04.
Outlook The game’s viability and profitability will continue to be reviewed on an ongoing basis.
Gross Sales 2003-04 $1.5 million
Variance from 2002-03 $0.2 million or 11% decrease
Average weekly entries 17 918
Value of prizes won in SA $1.0 million
Division One prize winners in SA 1
Total number of winners in SA 26 860
Performance Decrease in sales partly attributable to one $900 000 jackpot in 2003-04, compared to twojackpots in excess of $1 million in 2002-03.
Highlights Promotion conducted in February 2004 inconjunction with Euro 2004 to reward existingplayers.
Outlook New game image and point-of-sale material have been developed to increase presence at store level.
Gross Sales 2003-04 $0.6 million
Variance from 2002-03 $0.1 million or 16.2% decrease
Average weekly entries 3 880
Value of prizes won in SA $0.09 million
Division One prize winners in SA 0
Total number of winners in SA 8 188
Lotteries Commission of South AustraliaAnnual Report 2003-04
19
Gross Sales 2000-2004 ($’000)
Gross Sales 2000-2004 ($’000)
Simply Super.
Play. Score. Win.
2 500
2 000
1 000
1 500
500
1999-00 2000-01 2001-02 2002-03 2003-040
800
600
700
500
400
300
200
100
1999-00 2000-01 2001-02 2002-03 2003-040
More than $25.4 million incommission was returned to ourstatewide network of 528 agents,many small business operators.
Lotteries Commission of South AustraliaAnnual Report 2003-04
20
Lotteries Commission of South AustraliaAnnual Report 2003-04
21
WE HAVE PROVIDED HIGH LEVEL SUPPORT TO OUR DISTRIBUTIONNETWORK.
In 2003-04 we:
• Fostered mutually beneficial partnerships with the 528 members of our agent network and complied with the standards outlined in our Small Business Charter.
• Executed new agreements with all agents, incorporating the requirements of the State Lotteries Responsible Gambling and Advertising Codes of Practice.
• Provided agent training in all aspects of the business including operation of thelotteries terminal, game specifics, customer service and legislative requirements.
• Engaged Wesley 4 Training to provide accredited responsible gambling training for all agents in accordance with the State Lotteries Responsible Gambling Code ofPractice.
• Evaluated the agency network, via the annual Agency Excellence Awards, againstcriteria including sales ranking, audit results and compliance with Codes of Practice.
• Recognised the Glenelg East Newsagency and Card Shop as 2002-03 Agent of the Year in August 2003.
• Maintained our corporate image via progressive installation of a custom-designedagency fit-out, with 310 agents (58.7%) featuring the fit-out as at 30 June 2004.
• Maintained relationships with key industry bodies, including the Newsagency Councilof SA, State Retailers Association of SA, Clubs SA, Australian Hotels Association (SA)and Pharmacy Guild of Australia (SA).
In the year ahead we will:
• Reinforce the requirements of the State Lotteries Codes of Practice and monitorcompliance via an extensive audit and compliance program.
• Provide monthly responsible gambling training sessions for new SA Lotteries agentsand agency staff.
• Continue progressive installation of the corporate fit-out throughout our network toprovide ready identification and distinguish our agencies as legitimate operators.
Our agentsA win-win situation
Business Type Number of Percentage of Number of Percentage of TotalMetro Agents Metro Agents Country Agents Country Agents
Newsagents 118 32.2% 67 41.6% 185Kiosks 12 3.3% 1 0.6% 13Delicatessens 40 10.9% 10 6.2% 50Chemists 26 7.1% 3 1.9% 29Supermarkets 24 6.5% 7 4.4% 31Service Stations 6 1.6% 0 0.0% 6Hotels 113 30.8% 51 31.7% 164Clubs 20 5.4% 11 6.8% 31Others* 8 2.2% 11 6.8% 19TOTAL 367 100.0% 161 100.0% 528
DISTRIBUTION OF AGENTS BY BUSINESS TYPE AS AT 30 JUNE 2004
* Includes SA Lotteries Head Office and Sky City Adelaide Casino.
Lotteries Commission of South AustraliaAnnual Report 2003-04
22
WE HAVE CONTINUED TO EMPLOY THE BEST PEOPLE AND MAXIMISETHEIR POTENTIAL.
In 2003-04 we:
• Coordinated training and development programs, committing 1.98% of totalremuneration costs to training expenditure.
• Demonstrated our commitment to continuous improvement with individualperformance development plans.
• Provided a safe working environment, with no workers’ compensation claims received.
• Conducted an annual Occupational Health & Safety (OH&S)inspection; provided fire warden and first aid training forrelevant employees; and convened quarterly OH&SCommittee meetings.
• Awarded a salary increase of 4%, effective 1 October 2003,in accordance with the Lotteries Commission of SouthAustralia Enterprise Agreement 2003.
• Recorded no breaches of SA Lotteries’ Equal EmploymentOpportunity Policy.
• Demonstrated our commitment to the elimination ofdisability discrimination via our Disability DiscriminationAction Plan developed in accordance with State Governmentpolicy to ensure people with disabilities have access to ourgames and services.
• Recognised two staff members for their contributionthroughout many years of service. Maria Lambis,Cashier/Ticket Seller, achieved the milestone of 25 years of service while Gillian Sharrad, Easiplay Club Clerk, wasrecognised for more than 36 years of service.
In the year ahead we will:
• Continue to identify and address training and development needs.
• Assist staff to ensure a smooth transition during the Head Office relocationprocess.
Our peopleWinning together
Some of the dedicatedSA Lotteries team.
Lotteries Commission of South AustraliaAnnual Report 2003-04
23
Agency Administration
Agency Training
Brand Management
Customer Relationships
Customer Service
Promotions
Public Relations
Sales and Retail Distribution
Business System
Lotteries System
Operations
Systems Administration
Systems Support
Telecommunications
Terminal Maintenance
Agreements/Contracts
Legal Advice
Audit CommitteeCoordination
Commission Coordination
Government Liaison
Head Office Relocation
Agency Accounting
Asset Management
Budgeting
Financial Reporting
Funds Management
Game Administration
Management Accounting
Enterprise Bargaining
Occupational Health and Safety
Payroll
Performance Management
Training and Development
Contract Administration
Records Management
Supply/Distribution
Agency Audits
Building Security
Crisis Planning
Police Liaison
Quality Management
Risk Management
Systems Assurance
LEGALOFFICER
COMPANYSECRETARY
MANAGER FINANCE
MANAGERHUMAN
RESOURCES
MANAGERCORPORATE
SERVICES
MANAGERCOMPLIANCE
COMMISSION
CHIEF EXECUTIVE
AUDIT COMMITTEE
GROUP MANAGER
MARKETING AND SALES
GROUP MANAGER
INFORMATION SYSTEMS
JUNE ROACHEBAcc, ASA, FAICD,FAIM, CPMgr, JP
TAMSYN ALLEYBA(Comm)
GARY FLETCHERAss Dip Elnc Eng
DAVID HARDYLLB, BA, GDLP
JOHN FAVRETTOBA
TONY MUDGECPA, AAIBF BEV
ROHRLACHTERRY
HOLLANDS
PETER McCORMACKBA(Acc), FCPA,
CPMgr, MIIA
Lotteries Commission of South AustraliaAnnual Report 2003-04
24
WE HAVE ENSURED MUTUALLY BENEFICIAL RELATIONSHIPS WITHSUPPLIERS.
In 2003-04 we:
• Selected suppliers fairly based on experience and ability to provide a highstandard of service.
• Developed and maintained associations with small business suppliers inaccordance with the provisions of our Small Business Charter.
• Posted details of relevant contracts on the State Government Tenders andContracts website as a demonstrated commitment to openness andaccountability.
• Embraced a ‘buy local’ philosophy in relation to suppliers where appropriate.
• Entered into an agreement for the lease of new Head Office premises located at 24-25 Greenhill Road, Wayville.
• Achieved account payment performance standards, with payment of allundisputed accounts within 30 days or in accordance with agreed terms.
ACCOUNT PAYMENT PERFORMANCE
• Engaged consultants where necessary to carry out any tasks requiring specialistskills and knowledge not available within the organisation.
CONSULTANTS ENGAGED
In the year ahead we will:
• Ensure mutually beneficial relationships are maintained with suppliers viaefficient selection in accordance with State Government policy and corporatepolicy and procedures.
• Relocate SA Lotteries’ Head Office, following custom fit-out of the new premises.
Our businessWinning partnerships
Particulars Number of Value of Percentage of Accounts Paid Accounts Paid Accounts Paid
Paid by due date 2058 $18.3 million 100.0%
Expenditure Range Consultant Service Provided
$10 000 - $50 000
Above $50 000
• Adelaide Research and Innovation Pty Ltd• PricewaterhouseCoopers• Select Australasia Pty Ltd• McGregor Tan Research
• KPMG• Department for Administrative and
Information Services• Moore Stephens Hughes Fincher• Market Equity SA Pty Ltd
• Statistical services• Post-implementation review• Staff recruitment• Market research
• Internal audit• Project management for Head
Office relocation • Instant Scratchies game audit• Market research
Lotteries Commission of South AustraliaAnnual Report 2003-04
25
WE HAVE PURSUED AND USED THE MOST EFFECTIVETECHNOLOGY.
In 2003-04 we:
• Achieved no on-line lotteries system downtime.
• Recorded 14.7% improvement in terminal reliability.
• Improved access to business information and reporting as a result of theinstallation of the business system.
• Enhanced our Intranet site.
In the year ahead we will:
• Plan for the replacement of the on-line lotteries system.
Our systemsSupport for a winning side
The dedication andexpertise of ouroperations staffensure the reliabilityof our systems.
Appendix - our organisation
Employee Numbers
Persons 80
Full-time Equivalent (FTE) 77.4
Gender Percentage of Persons Percentage of FTEs
Male 51.2 52.9
Female 48.8 47.1
Total 100.0 100.0
Employee Status
Number of persons separated from SA Lotteries during the 2003-04 financial year (includes 15 Targeted Voluntary Separation Packages paid during the year). 24
Number of persons recruited to SA Lotteries during the 2003-04 financial year. 7
EMPLOYEE NUMBERS, GENDER AND STATUS
Classification Contract Tenured Contract Untenured Total
Male Female Male Female Male Female Total
Level D* - 1 - - - 1 1
Level A* 1 1 - - 1 1 2
Total 1 2 - - 1 2 3
NUMBER OF EXECUTIVES IN CURRENT POSITION BY GENDER AND CLASSIFICATION
*Based on Public Sector Management Act 1995 classification of Executive positions. The Chief Executive and Executives are employed under contract and do not have the right to be appointed to anotherposition in the public sector at the end of their contract.
Full-time Equivalent Employees
Ongoing Short-term Long-term Casual TotalContract Contract
Female 34.4 0 2 0 36.4
Male 39 1 1 0 41
Total 73.4 1 3 0 77.4
STATUS OF EMPLOYEES IN CURRENT POSITION
Persons
Ongoing Short-term Long-term Casual TotalContract Contract
Female 37 0 2 0 39
Male 39 1 1 0 41
Total 76 1 3 0 80
26
Percentage ofAge Bracket Female Male Total Percentage South Australian
of Total Workforce*
15-19 - - - - 7.2
20-24 1 1 2 2.5 10.7
25-29 5 8 13 16.2 10.2
30-34 9 8 17 21.3 11.2
35-39 7 4 11 13.8 11.4
40-44 4 5 9 11.2 13.3
45-49 3 8 11 13.8 12.0
50-54 3 3 6 7.5 10.7
55-59 5 4 9 11.2 7.7
60-64 2 - 2 2.5 3.6
65+ - - - - 2.0
Total 39 41 80 100.0 100.0
EMPLOYEES BY AGE BRACKET AND GENDER
Salary Bracket Male Female Total
$0 - $38 000 5 12 17
$38 001 - $49 000 14 14 28
$49 001 - $64 000 11 6 17
$64 001 - $83 000 10 5 15
$83 001 + 1 2 3
Total 41 39 80
NUMBER OF EMPLOYEES BY SALARY BRACKET
Leave Type 2003-04 2002-03 2001-02 2000-01
Sick leave taken 5.7 6.5 8.8 6.8
Family carer’s leave taken 1.0 0.6 0.7 0.6
Special leave with pay 0.3 0.3 0.4 0.4
AVERAGE DAYS LEAVE TAKEN PER FULL-TIME EQUIVALENT (FTE) EMPLOYEE
Working Arrangement Male Female Total
Part-time / job share 0 9 9
Working from home 1 1 2
Flexible hours 1 4 5
NUMBER OF EMPLOYEES USING VOLUNTARY FLEXIBLE WORKING ARRANGEMENTS BY GENDER
Destination Reason for Travel Number of Employees Total Cost
Granada, Spain To attend World Lottery Association Forum 1 $9438
OVERSEAS TRAVEL BY SA LOTTERIES EMPLOYEES
27
*As at March 2004 from ABS Supertable LM8.
2003-04 2002-03 2001-02
1 OH&S Legislative Requirements
Number of notifiable occurrences pursuant to OHS&W Regulations Division 6.6 nil nil nil
Number of notifiable injuries pursuant to OHS&W Regulations Division 6.6 nil nil nil
Number of notices served pursuant to OHS&W Act s35, s39 and s40 nil nil nil
OCCUPATIONAL HEALTH, SAFETY AND INJURY MANAGEMENT
2 Injury Management Legislative Requirements
Total number of employees who participated in the rehabilitation program nil 2 6
Total number of employees rehabilitated and reassigned to alternative duties 1 nil nil
Total number of employees rehabilitated back to their original work nil 1 6
3 WorkCover Action Limits
Number of open claims nil 1 1
Percentage of workers’ compensation expenditure over gross annual remuneration 0.2 0.3 0.5
4 Number of Claims
Number of new workers’ compensation claims in the financial year nil 2 8
Number of fatalities nil nil nil
Number of lost time injuries nil nil 4
Number of medical treatment only 3 2 4
Total number of whole working days lost nil 64 146
5 Cost of Workers’ Compensation
Cost of new claims for financial year nil nil $27 818
Cost of all claims excluding lump sum payments $11 660 $17 753 $27 818
Amount paid for lump sum payments (s42, s43, s44) nil nil nil
Total amount recovered from external sources (s54) nil nil nil
Budget allocation for workers’ compensation $104 560 $113 680 $110 860
6 Trends
Injury frequency rate for new lost-time injury/disease for each million hours worked 0 0 20.8
Most frequent cause (mechanism) of injury - - Slips and trips
Most expensive cause (mechanism) of injury - - Trauma
28
Statement of financial performance 30
Statement of financial position 31
Statement of cash flows 32
Notes to and forming part of the financial statements 33
Certification of the financial report 55
Report of the Auditor-General 56
Lotteries Commission of South AustraliaAnnual Report 2003-04
29
Financialstatements
2004 2003Note $’000 $’000
2004 2003Note $’000 $’000
R E V E N U E S F R O M O R D I N A R Y ACT I V I T I E S
Sales revenue 5 345 096 335 911
Less cost of sales 6 289 585 281 796
Trading surplus 55 511 54 115
Interest 2 463 2 211
Other 7 4 481 7 635
Total revenues from ordinary activities 62 455 63 961
E X P E N S E S F R O M O R D I N A R Y ACT I V I T I E S
Services and supplies 8 13 401 15 297
Goods and services tax 12 474 12 143
Employee expenses 9 7 635 7 063
Depreciation 10 3 463 3 801
Borrowing costs 427 518
Total expenses from ordinary activities 37 400 38 822
O P E R AT I N G P R O F I T F R O M O R D I N A R Y ACT I V I T I E S B E FO R E I N C O M E TA X E Q U I VA L E N T 25 055 25 139
Income tax equivalent expense relating to ordinary activities 22 7 516 7 542
O P E R AT I N G P R O F I T F R O M O R D I N A R Y ACT I V I T I E S A F T E R I N C O M E TA X E Q U I VA L E N T 21 17 539 17 597
Increase (decrease) in asset revaluation reserve 20 1 490 (1 814)
TOTA L C H A N G E I N E Q U I T Y OT H E R T H A N T H O S E R E S U LT I N G F R O M T R A N S ACT I O N S W I T H T H E S TAT E G OV E R N M E N T A S OW N E R 19 029 15 783
The Statement of Financial Performance is to be read in conjunction with the Notes.
Statement of financialperformance
for the year ended 30 June 2004
30
2004 2003Note $’000 $’000
CURRENT ASSETS
Cash 45 349 44 816
Receivables 13 2 591 3 820
Inventories 458 397
Prepayments 178 126
Total current assets 48 576 49 159
N O N - C U R R E N T A S S E T S
Property, plant and equipment 14 17 419 19 010
Total non-current assets 17 419 19 010
TOTAL ASSETS 65 995 68 169
C U R R E N T L I A B I L I T I E S
Payables 15 18 792 19 353
Interest bearing liabilities 1 542 1 452
Provision for employee benefits 16 283 319
Other 17 6 705 8 133
Total current liabilities 27 322 29 257
N O N - C U R R E N T L I A B I L I T I E S
Payables 15 220 208
Interest bearing liabilities 3 887 5 429
Provision for employee benefits 16 769 776
Unclaimed prizes reserve 18 7 061 7 489
Total non-current liabilities 11 937 13 902
TOTAL LIABILITIES 39 259 43 159
NET ASSETS 26 736 25 010
E Q U I T Y
Funds retained for capital purposes 19 2 976 2 976
Reserves 20 23 760 22 034
Retained operating profit 21 - -
TOTA L E Q U I T Y 26 736 25 010
Commitments 25
The Statement of Financial Position is to be read in conjunction with the Notes.
Statement offinancial position
as at 30 June 2004
31
CASH FLOW S FROM OPERATING ACTIVITIE S
Cash inflows
Receipts from customers 324 888 317 973
Interest received 2 434 2 209
GST receipts on sales 422 327 744 624 320 806
Cash outflows
Prizes paid (207 040) (201 117)
Payments to suppliers and employees (excluding GST) (20 808) (22 061)
GST payments to taxation authority (9 161) (8 986)
GST payments on purchases (3 800) (3 954)
Borrowing costs paid ( 449) (241 258) ( 553) (236 671)
Net cash inflows from operating activities 12 (ii) 86 486 84 135
CA S H F LOW S F R O M I N V E S T I N G ACT I V I T I E S
Cash inflows
Proceeds on disposal of non-current assets - 1
Cash outflows
Payments for property, plant and equipment ( 623) ( 405)
Net cash outflows from investing activities ( 623) ( 404)
CA S H F LOW S F R O M F I N A N C I N G ACT I V I T I E S
Cash outflows
Repayment of borrowings (1 452) (1 368)
Distribution to the Hospitals Fund and Recreation and Sport Fund
- gambling tax 22 (56 465) (55 577)
- dividend 22 (17 667) (18 232)
- unclaimed prizes 22 (1 734) (1 461)
Distribution to the Hospitals Fund for income tax equivalent 22 (8 012) (7 787)
Net cash outflows from financing activities (85 330) (84 425)
Net increase (decrease) in cash held 533 ( 694)
Cash at the beginning of the financial year 44 816 45 510
Cash at the end of the financial year 12 (i) 45 349 44 816
The Statement of Cash Flows is to be read in conjunction with the Notes.
2004 2003Note $’000 $’000 $’000 $’000
Inflows Inflows Inflows Inflows(Outflows) (Outflows) (Outflows) (Outflows)
Statement of cash flows
for the year ended 30 June 2004
32
N OT E I N D E X
Objectives of Lotteries Commission of South Australia Note 1
Accounting Policies Note 2
Changes in Accounting Policies Note 3
Segment Reporting Note 4
Revenue Notes
Sales revenue Note 5
Cost of sales Note 6
Other revenues Note 7
Expense Notes
Service and supplies Note 8
Employee expenses Note 9
Depreciation Note 10
Remuneration of auditors Note 11
Asset Notes
Cash reconciliation Note 12
Receivables Note 13
Property, plant and equipment Note 14
Liabilities Notes
Payables Note 15
Employee benefits Note 16
Other liabilities Note 17
Unclaimed prizes reserve Note 18
Equity Notes
Funds retained for capital purposes Note 19
Reserves Note 20
Retained operating profit Note 21
Other Notes
Distribution of funds to Government Note 22
Financial instruments Note 23
Related party disclosures Note 24
Commitments for expenditure Note 25
Superannuation Note 26
Notes to and forming partof the financial statements
as at 30 June 2004
33
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
34
1 . O BJ E CT I V E S O F LOT T E R I E S C O M M I S S I O N O F S O U T H A U S T R A L I A
The Lotteries Commission of South Australia (the Commission) was established under the State Lotteries Act 1966(as amended) to promote and conduct lotteries in South Australia.
2 . AC C O U N T I N G P O L I C I E S
(a) Basis of preparation
The financial report is a general purpose financial report which has been prepared in accordance with the StateLotteries Act 1966, and the Lotteries Rules promulgated under the State Lotteries Act 1966, in addition to theTreasurer's Instructions issued pursuant to the Public Finance and Audit Act 1987 and Accounting PolicyStatements, the Statements of Accounting Concepts, Australian Accounting Standards and Urgent Issues GroupConsensus Views.
The financial statements are based on the historical cost convention and except where stated, have not beenadjusted to take account of current valuations or current costs.
(b) Depreciation of non-current assets
Property, plant and equipment, excluding freehold land, are depreciated by the Commission on the straight linebasis to reflect their decline in service potential over their estimated useful lives.
The depreciation rates used for each class of asset are as follows:
Buildings 2.9 percent and 3.3 percent.Plant and equipment 5 percent, 6.67 percent, 10 percent, 20 percent and 33.3 percent.On-line lotteries system 12.5 percent, 20 percent and 33.3 percent.
(c) Valuation of non-current assets
Property, plant and equipment are brought to account at fair value.
(i) Independent valuations for freehold land and buildings were obtained in June 2004.
The valuation of the 24-26 Payneham Road, Stepney property was obtained from Nick Bell B.Bus.Prop.(Val.), AAPI, Certified Practicing Valuer of Knight Frank Valuations SA and was determined on an in-usevalue, assuming a fully tenanted (subject to a notional five plus five year lease back) basis.
The valuation of the 21-23 Rundle Mall, Adelaide property was obtained from James Pledge B.Bus.Prop.,AAPI, Certified Practicing Valuer of Knight Frank Valuations SA and was determined on an in-use value,assuming a fully tenanted (subject to a notional five plus five year lease back) basis.
(ii) An independent valuation for the on-line lotteries system was obtained in June 2003 from Andrew Lucas,MBA, BappSc (Val), AAPI, ASA, Certified Practicing Valuer of Valcorp Australia Pty Ltd and represents thewritten down current cost of items in this group of assets.
(iii) Plant and equipment is at historical cost.
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
35
(d) Recognition of income
Sales for Lotto, SA Lotto, Oz Lotto, Powerball, Super 66, Keno and The Pools are recognised as at the date of thedraw or competition. Sales for Instant Scratchies are recognised daily. Lotto, SA Lotto, Oz Lotto, Powerball,Super 66 and The Pools sales as at 30 June for draws or competitions subsequent to that date are treated assales in advance.
Interest income is recognised as it accrues, taking into account the effective yield on the financial asset.
(e) Inventories
Inventories include Instant Scratchies tickets, on-line coupons, ticket rolls and ribbons and are carried at actualcost.
(f) Employee benefits
Provision has been made in the financial statements for the Commission's liability for employee benefits arisingfrom services rendered by employees to balance date. Related on-costs consequential to the employment ofemployees have been included in payables in the determination of the liability.
(i) Superannuation
The Commission contributes to externally managed superannuation funds. Contributions are charged as anexpense in the period in which they occur (refer note 26).
(ii) Annual leave
Provision has been made for the unused component of annual leave at balance date. The provision hasbeen determined by estimating the amount expected to be paid at the time the liability is settled.
(iii) Long service leave
Provision has been made for employee benefits for long service leave. An estimate of the present value offuture cash outflows for all eligible employees has been made using a benchmark of seven years’ serviceas a method of estimating long service leave liability. Provision for employees with service benefitsexpected to be settled within the next 12 months is accounted for as a current liability with the balance ofthe provision accounted for as a non-current liability.
(iv) Sick leave
No provision has been made in respect of sick leave which is non-vesting. As sick leave taken by employeesis considered to be taken from the current year's accrual, no liability is recognised.
(v) Workers compensation
A workers compensation levy rate of 1.968 percent is paid to WorkCover Corporation to cover any claims.
(g) Building maintenance reserve
This reserve was established to meet future major building maintenance costs.
(h) Capital asset reserve
This reserve was established to contribute to the financing of the cost of replacement/upgrade of the on-linelotteries system hardware and software, and the purchase of other non-current assets.
(i) Keno prize reserve
This reserve was established to meet a payment for a second and subsequent payment of Keno Spot 10 (10 hits)Jackpot Prize within a financial year.
(j) Receivables
DebtorsDebtor agents and sundry receivables are settled within seven days and 14 days respectively and are carried atamounts due. All debts considered bad or doubtful are written off to bad debt expense in the year in which theyare recognised as irrecoverable.
Prizes receivable from BlocsLotto, Oz Lotto, Powerball, Super 66 and The Pools are games supported by inter-jurisdiction prize poolingarrangements. State lottery operators participating in individual games form Blocs for the relevant games.Amounts receivable from Blocs represent monies due from other jurisdictions for prizes won in South Australia.Settlement of amounts receivable from Bloc members are normally due 14 days after the date of draw.
(k) Cash
For the purpose of the Statement of Cash Flows, cash includes cash on hand and short term deposits at call.
Short term deposits are held with the South Australian Government Financing Authority (SAFA) in At CallDeposit or Cash Management Fund deposits and are valued at cost. Interest is paid at a minimum of SAFA’sovernight at call deposit rate. The deposits principally reflect funds available for unclaimed prizes and fordistribution to the Hospitals Fund and the Recreation and Sport Fund.
(l) Payables
CreditorsCreditors are recognised for amounts to be paid in the future for goods and services received and are normallysettled within 30 days.
Prizes payablePrizes payable represent amounts due to be paid to customers for prizes won in South Australia and to lotteryoperators in other States participating in inter-jurisdictional prize pooling arrangements. State lottery operatorshave formed Blocs to conduct the games of Lotto, Oz Lotto, Powerball, Super 66 and The Pools.
Amounts payable for prizes won in South Australia are generally available for settlement the day following thedraw, or in the case of Instant Scratchies and minor Keno prizes, on the date of sale or draw. Division 1 and 2prizes for Lotto type games are normally settled 14 days after the date of draw in accordance with the LotteriesRules.
Amounts payable to Blocs represents monies due to other lottery operators for prizes won in interstatejurisdictions. Settlement of amounts payable to Bloc members are normally due 14 days after the date of draw.
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
36
(m) Foreign currency
Exchange differences arising up to the date of purchase or sale are deferred and are included in themeasurement of the purchase or sale.
(n) Unclaimed prizes reserve
If a prize in a lottery has not been collected or taken delivery of within 12 months of the date of the draw orrelevant day, the prize is forfeited to the Commission and transferred to the unclaimed prizes reserve.Subsection 16C(4) of the State Lotteries Act 1966 requires the Commission to pay:
• 50 percent of the amount derived from unclaimed prizes in The Pools to the Recreation and Sport Fund; and
• 50 percent of the amount derived from unclaimed prizes in other lotteries to the Hospitals Fund.
The balance in the reserve is applied by the Commission from time to time for the purposes of providingadditional or increased prizes in a subsequent lottery or lotteries, providing prizes in promotional lotteries ormaking ex-gratia payments.
The State Lotteries Act 1966 provides for an ex-gratia payment to a person who satisfies the Commission that heor she is a winner of a prize in a lottery conducted by the Commission, despite the fact that a prize has beenforfeited to the Commission, the winning ticket has been lost or destroyed or a notice of a claim for the prize hasnot been complied with in accordance with the Lotteries Rules.
Ex-gratia payments are charged to the unclaimed prizes reserve. Subsequent payments to either the HospitalsFund or Recreation and Sport Fund are reduced by an amount equivalent to 50 percent of the ex-gratia payment,depending on the game played.
(o) Tax equivalent regime
Pursuant to Treasurer’s Instruction 22, a tax equivalent regime applies to the Commission. The regime requiresthe Commission to pay amounts deemed equivalent to that which would have been paid to the Commonwealth ifit was not exempt from the taxation laws of the Commonwealth.
The accounting profit method of tax effect accounting with respect to income tax has been adopted wherebyincome tax expense is calculated on operating profit from ordinary activities. Permanent and timing differencesdo not arise. Tax due but not paid at balance date is recognised as a current liability.
(p) Goods and Services Tax (GST)
The Commission, as a gambling operator, is required to pay one eleventh of net gambling revenue (NGR),defined as gross sales less total monetary prizes, direct to the Australian Taxation Office (ATO).
Revenues, expenses and non-current assets are recognised net of the amount of GST. The net amount of GSTrecoverable from, or payable to the ATO, is included as a current asset or liability in the Statement of FinancialPosition.
Cash flows from operating activities are included in the Statement of Cash Flows on a gross basis. The GSTcomponent of cash flows arising from investing activities in capital equipment which is recoverable from the ATOis classified as operating cash flows.
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
37
(q) Distribution of funds to Government
In accordance with Subsection 16(3) of the State Lotteries Act 1966, the Commission is required to pay to theHospitals Fund the balance of surplus funds remaining after payment of gambling tax and GST on NGR, makingallowances for operating and capital expenses, applying the net proceeds and gambling tax of The Pools to theRecreation and Sport Fund and retaining funds for certain designated purposes.
As detailed in note 2(o), the Commission is required to make tax equivalent payments as a result of theapplication of the tax equivalent regime. In recognition of the provisions of the State Lotteries Act 1966, and inaccordance with Schedule 1 of Treasurer’s Instruction 22, the transfer of funds to the Hospitals Fund is reflectedin the Financial Statements in the form of:
(i) a gambling tax of 41 percent on NGR in respect of all lotteries conducted by the Commission except sportslotteries and special lotteries;
(ii) an income tax equivalent payment (calculated on the accounting profit method), recorded as an expenseitem in the Statement of Financial Performance;
(iii) an operating profit after income tax equivalent payment, recorded as dividend; and
(iv) unclaimed prizes.
The composition of amounts due and payable to Government on account of the Hospitals Fund and Recreationand Sport Fund is detailed in note 22.
(r) Interest bearing liabilities
Loans are brought to account at their principal amounts. Interest is accrued over the period it becomes due andis recorded as part of other creditors. Borrowing costs are recognised as expenses in the period in which theyare incurred. No borrowing costs have been capitalised in the financial period.
The loans are unsecured and repayments are made six monthly on a credit foncier loan basis, with interestcharged at the lender’s benchmark rate. The carrying amount for borrowings therefore approximates fair value.
(s) Leases
The Commission has an operating lease agreement for a remote computer site at Kidman Park and anaccommodation lease agreement for the new Head Office premises at 24-25 Greenhill Road, Wayville. Thelessors effectively retain all risks and benefits incidental to ownership. Operating lease payments arerepresentative of the pattern of benefits derived from the leased assets and are charged to the Statement ofFinancial Performance in the period in which they occur.
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
38
3 . C H A N G E S TO AC C O U N T I N G P O L I C I E S
(a) No changes to the Commission’s accounting policies, as set out in note 2, have been made during the financial year.
(b) Impact of Adopting Australian Equivalents to International Financial Reporting Standards
Australia will be adopting Australian Equivalents to International Financial Reporting Standards (IFRS) forreporting periods commencing on or after 1 January 2005. The Commission will adopt these standards for thefirst time in the published financial report for the year ended 30 June 2006.
Managing the process
An analysis of exposure drafts issued by the Australian Accounting Standards Board (AASB) will be undertakento identify potential issues that may need to be addressed. A plan to manage the transition to the new standardswill be prepared. The plan will require the identification of:
• major areas of accounting and reporting differences resulting from adoption of the new standards;
• potential changes required to financial systems; and
• key dates for monitoring and reviewing progress.
In addition, changes in Accounting Standards, Treasurer’s Instructions and Accounting Policy Statements (APS)will be monitored by attending exposure draft reference group meetings (facilitated by the Department ofTreasury and Finance (DTF) ) and information forums organised by the DTF and professional accounting bodies.
Expected differences in accounting policies
• Changes in Accounting PolicyA major change is the treatment of accounting policy changes under IFRS. These will now applyretrospectively except for specific exemptions in accordance with AASB 1 First-Time Adopting of AustralianEquivalents to IFRS.
• Non-Current Asset Acquisition and RecognitionThe Australian Equivalent to International Accounting Standards (IAS) 16 “Property, Plant and Equipment” isproposing that non-current assets be revalued on an individual basis (as opposed to current class basis). It isanticipated an APS will continue to require revaluation on a class basis and current thresholds (greater than$1 million and estimated useful life greater than three years) will continue to apply.
• Employee BenefitsSuperannuation contributions paid into the defined benefit fund are currently reported as an expense. IAS 19“Employee Benefits” specifies the method of calculating superannuation expenses for inclusion in theStatement of Financial Performance and will require the net value of the Plan’s assets and liabilities to beshown in the Statement of Financial Position.
• Income Tax EquivalentThe Australian Equivalent to IAS 12 “Income Taxes” is proposing a comprehensive method/balance sheetapproach to account for income tax. It is anticipated that Treasurer’s Instruction 22 will continue to mandatethe accounting profit method. Therefore, it is not anticipated that there will be a change in income taxaccounting for the Commission.
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
39
4 . S E G M E N T R E P O R T I N G
The Commission has not established any partnership, body corporate or trust to carry out any function of itsbusiness operations. The business operations are conducted in the one business and geographical segment, sellinglottery games within the economic environment of South Australia.
5. SALES REVENUE
2004 2003$’000 $’000
Lotto 130 825 129 603
SA Lotto 41 706 28 931
Oz Lotto 15 467 16 575
Powerball 44 760 51 379
Keno 70 425 67 155
Instant Scratchies 39 812 39 864
Super 66 1 479 1 662
The Pools 622 742
345 096 335 911
Sales revenue includes agents' commission.
6. COST OF SALES
2004 2003$’000 $’000
Prizes 207 886 202 336
Gambling tax 56 256 54 766
Agents' commission* 25 443 24 694
289 585 281 796
*Agents’ commission represents the service fee on sale of lottery tickets retained by agents at point-of-sale with net sales being remitted to the Commission.
7 . OT H E R R E V E N U E
2004 2003$’000 $’000
Agents' fees and charges 3 497 3 539
Commission on Head Office sales 376 406
Easiplay Club service fee 324 323
Sundry 284 399
WLA Congress* - 2 968
4 481 7 635
*Revenue from hosting the 2002 World Lottery Association Congress in Adelaide in November 2002.
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
40
8. SERVICES AND SUPPLIES
2004 2003$’000 $’000
Advertising and marketing 5 659 5 398
Computer operations 3 607 3 447
Printing of tickets 1 607 1 543
Other 2 379 2 562
Operating leases 146 75
Bad debts 3 8
WLA Congress* - 2 264
13 401 15 297
*Expenditure incurred in hosting the 2002 World Lottery Association Congress in Adelaide in November 2002.
2004 2003No. $’000 No. $’000
The number and dollar amount of consultancies paid/payable that fell within the following bands:
$1 - $9 999 10 35 14 50
$10 000 - $49 999 4 87 8 232
$50 000 and above 4 404 2 147
Total amount paid/payable to consultancies engaged 18 526 24 429
9 . E M P LOY E E E X P E N S E S
2004 2003$’000 $’000
Wages and salaries 5 484 5 540
Superannuation 686 671
TVSP (refer below) 582 -
Long service leave 166 176
Employment on-costs 602 564
Commission Members' fees 115 112
Total Employee Expenses 7 635 7 063
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
41
2004 2003$’000 $’000
Targeted Voluntary Separation Packages (TVSP)
TVSPs paid to employees during the reporting period 582 -
Annual leave and long service leave accrued over years of service 140 -
722 -
Number of employees who were paid TVSPs during the year 15 -
Remuneration of employees
2004 2003$’000 $’000
The number of employees whose remuneration paid and payable was within the following bands:
$100 000 - $109 999 - 1
$110 000 - $119 999 - 1
$130 000 - $139 999 - 1
$140 000 - $149 999 2 1
$200 000 - $209 999 1 -
$240 000 - $249 999 1 1
Remuneration paid or payable to these employees includes salary, fringe benefit tax and superannuation payments made to or on behalf of employees.
2004 2003$’000 $’000
The total remuneration paid and payable on behalf of employees whose remuneration was $100 000 or more 743 747
Commission members' remuneration
2004 2003No. No.
The number of Commission Members whose remuneration was within the following bands:
$20 000 - $29 999 4 4
$30 000 - $39 999 1 -
$40 000 - $49 999 - 1
Remuneration paid or payable includes fees, superannuation payments and professional indemnity insurance paid on behalf of Commission Members.
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
42
2004 2003$’000 $’000
The total remuneration received, or due and receivable,
by Commission Members 137 135
Number of employees
2004 2003No. No.
Number of employees at 30 June 80 97
Number of full-time equivalent at 30 June 77.4 93.1
10. DEPRECIATION
2004 2003$’000 $’000
Buildings 81 81
Plant and equipment 353 275
On-line lotteries system 3 029 3 445
3 463 3 801
1 1 . R E M U N E R AT I O N O F A U D I TO R S
2004 2003$’000 $’000
Audit fees paid/payable to the Auditor-General's Department 144 130
1 2 . CA S H R E C O N C I L I AT I O N
(i) Reconciliation of cash
Cash at the end of the reporting period as shown in the Statement of Cash Flows is reconciled to the related items in the Statement of Financial Position as follows:
2004 2003$’000 $’000
Cash 45 349 44 816
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
43
(ii) Reconciliation of net cash inflows from operating activities to operating profit from ordinary activities before income tax equivalent.
2004 2003$’000 $’000
Operating profit from ordinary activities before income tax equivalent 25 055 25 139
Add gambling tax 56 256 54 766
Add non-cash items
Depreciation 3 463 3 801
Changes in assets/liabilities
Increase in receivables 1 116 316
Increase in unclaimed prize reserve 1 211 774
(Decrease) increase in prize reserve fund (1 900) 278
Increase (decrease) in payables 1 327 (1 049)
(Decrease) increase in provisions ( 42) 110
Net cash inflows from operating activities 86 486 84 135
13. RECEIVABLES
2004 2003$’000 $’000
Debtor agents 735 1 972
Prizes receivable from Blocs 1 203 1 139
Sundry 653 709
2 591 3 820
1 4 . P R O P E R T Y , P L A N T A N D E Q U I P M E N T
2004 2003$’000 $’000
Freehold land and buildings
Buildings at independent valuation 2 930 2 490
Accumulated depreciation - ( 169)
2 930 2 321
Land at independent valuation 4 110 3 310
7 040 5 631
Plant and equipment
Plant and equipment at historical cost 4 853 4 873
Accumulated depreciation (3 879) (3 729)
974 1 144
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
44
2004 2003$’000 $’000
On-line lotteries system
On-line lotteries system at valuation 12 054 12 054
Accumulated depreciation (2 978) -
9 076 12 054
On-line lotteries system at historical cost 380 181
Accumulated depreciation ( 51) -
329 181
Total on-line lotteries system 9 405 12 235
Total property, plant and equipment 17 419 19 010
Reconciliations of Property, Plant and Equipment
Plant & Land Buildings Equip OLS* Total
2004 $’000 $’000 $’000 $’000 $’000
Reconciliation of Property, Plant and Equipment:
Carrying amount at 1 July 3 310 2 321 1 144 12 235 19 010
Additions - - 183 201 384
Disposals - - - ( 2) ( 2)
Revaluation increment 800 690 - - 1 490
Depreciation - ( 81) ( 353) (3 029) (3 463)
Carrying amount at 30 June 4 110 2 930 974 9 405 17 419
Plant & Land Buildings Equip OLS* Total
2003 $’000 $’000 $’000 $’000 $’000
Reconciliation of Property, Plant and Equipment:
Carrying amount at 1 July 3 310 2 402 941 17 319 23 972
Additions - - 478 181 659
Disposals - - - ( 6) ( 6)
Revaluation decrement - - - (1 814) (1 814)
Depreciation - ( 81) ( 275) (3 445) (3 801)
Carrying amount at 30 June 3 310 2 321 1 144 12 235 19 010
* On-line Lotteries System
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
45
15. PAYABLES
2004 2003$’000 $’000
Current
Creditors 2 784 3 288
Prizes payable 10 035 9 494
Undistributed funds (refer to note 22) 5 973 6 571
18 792 19 353
Non-current
Creditors 220 208
19 012 19 561
1 6 . E M P LOY E E B E N E F I T S
2004 2003$’000 $’000
Current
Provision for employee benefits:
Annual leave 236 266
Long service leave 47 53
On-costs (accounted for in payables) 56 59
Accrued salaries and wages 71 20
410 398
Non-current
Provision for employee benefits:
Long service leave 769 776
On-costs (accounted for in payables) 220 208
989 984
Aggregate employee benefits and related on-costs liabilities 1 399 1 382
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
46
1 7 . OT H E R L I A B I L I T I E S
2004 2003$’000 $’000
Prize reserve fund (i) 5 192 7 092
Sales in advance 1 513 1 041
6 705 8 133
(i) Prize reserve fund
Balance at 1 July 7 092 6 814
Allocated to prize fund 9 633 9 182
16 725 15 996
Applied to prizes (11 533) (8 904)
Balance at 30 June 5 192 7 092
The prize reserve fund allocation comprises the following percentages of net sales (sales revenue less agents’commission) for the following games:
• 5.0 percent for Lotto and SA Lotto;
• 3.5 percent for Oz Lotto and Super 66;
• 2.5 percent for Powerball;
• 2.0 percent for The Pools.
These funds are distributed from time to time as additional or increased prize money in the respective games.
1 8 . U N C L A I M E D P R I Z E S R E S E R V E
2004 2003$’000 $’000
Balance at 1 July 7 489 8 266
Unclaimed monies forfeited 3 278 3 102
10 767 11 368
Monies provided for distribution to the Hospitals Fund (1 638) (1 550)
Monies provided for distribution to the Recreation and Sport Fund ( 1) ( 1)
Promotional tickets (1 058) (1 527)
Additional prizes (1 009) ( 801)
Balance at 30 June 7 061 7 489
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
47
1 9 . F U N D S R E TA I N E D FO R CA P I TA L P U R P O S E S
The Commission has retained funds of $2 976 000, which represent the historical cost of the investment in land andbuildings at 23 Rundle Mall, Adelaide and 26 Payneham Road, Stepney.
20. RESERVES
2004 2003$’000 $’000
Asset revaluation (i) 8 089 6 599
Building maintenance (ii) 94 94
Capital asset (iii) 14 657 13 628
Keno prize (iv) 920 1 713
23 760 22 034
(i) Asset revaluation
Balance at 1 July 6 599 8 413
Transfer to reserve 1 490 -
8 089 8 413
Transfer from reserve - 1 814
Balance at 30 June 8 089 6 599
(ii) Building maintenance
Balance at 30 June 94 94
(iii) Capital asset
Balance at 1 July 13 628 12 567
Transfer to reserve 2 000 2 000
Transfer to retained profit ( 971) ( 939)
Net transfer to reserve 1 029 1 061
Balance at 30 June 14 657 13 628
Capital asset comprises the:
Capital fund account 11 373 9 757
Capital fund assets (at amortised value)* 3 284 3 871
14 657 13 628
Capital fund account
Balance at 1 July 9 757 8 415
Transfer to reserve 2 000 2 000
Assets financed ( 384) ( 658)
Balance at 30 June 11 373 9 757
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
48
2004 2003$’000 $’000
Capital fund assets
Amortised value at 1 July 3 871 4 152
Assets financed 384 658
Depreciation ( 971) ( 939)
Amortised value at 30 June 3 284 3 871
*Assets financed from the capital fund
Balance at 1 July 8 579 7 927
Assets financed 384 658
8 963 8 585
Assets disposed ( 2) ( 6)
Balance at 30 June 8 961 8 579
Accumulated depreciation write-down (5 677) (4 708)
Capital fund assets (at amortised value) 3 284 3 871
(iv) Keno prize
Balance at 1 July 1 713 2 850
Transfer to reserve 566 -
2 279 2 850
Transfer from reserve (1 359) (1 137)
Balance at 30 June 920 1 713
2 1 . R E TA I N E D O P E R AT I N G P R O F I T
2004 2003$’000 $’000
Retained operating profit at 1 July - -
Transfer to capital asset reserve (2 000) (2 000)
Transfer from Keno prize reserve 1 359 1 137
Transfer from capital asset reserve 971 939
Operating profit for year after income tax equivalent 17 539 17 597
Dividend provided for in the current year 17 869 17 673
Transfer to Keno prize reserve from prior profits ( 566) -
Dividend provided for in the current and prior years (17 303) (17 673)
Retained operating profit at 30 June - -
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
49
2 2 . D I S T R I B U T I O N O F F U N D S TO G OV E R N M E N T
Balance Distribution Distribution Balance1 July Provided Paid 30 June$’000 $’000 $’000 $’000
Gambling tax 4 800 56 256 56 465 4 591
Income tax equivalent 498 7 516 8 012 2
Dividend 1 078 17 869 17 667 1 280
Unclaimed prizes 195 1 639 1 734 100
6 571 83 280 83 878 5 973
Comprising:
Distribution to Hospitals Fund
Gambling tax 4 781 56 119 56 316 4 584
Income tax equivalent 498 7 516 8 012 2
Dividend 1 064 17 777 17 567 1 274
Unclaimed prizes 195 1 638 1 733 100
6 538 83 050 83 628 5 960
Distribution to Recreation and Sport Fund
Gambling tax 19 137 149 7
Dividend 14 92 100 6
Unclaimed prizes - 1 1 -
33 230 250 13
Total 2003-2004 6 571 83 280 83 878 5 973
Total 2002-2003 8 096 81 532 83 057 6 571
2 3 . F I N A N C I A L I N S T R U M E N T S
(a) Terms and conditions of financial liabilities
The Commission has six loans from the Department of Treasury and Finance, with fixed interest rates rangingfrom 5.59% to 7.21% together with a 0.75% guarantee fee. All loans are repayable over eight years and thematurity schedule as at 30 June is set out in (b) below.
(b) Interest Rate Risk
The effective weighted average interest rate risk is outlined below for the following financial assets andliabilities.
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
50
Fixed Interest Maturing in:
Floating More Non- WeightedFinancial Interest 1 Year Over 1 to than interest Total averageInstrument Rate or Less 5 Years 5 Years Bearing Amount interest
$'000 $'000 $'000 $'000 $'000 $'000 rate
2004
Financial Assets:
Cash 45 221 - - - 128 45 349 5.16%
Receivables - - - - 2 591 2 591 -
Total 45 221 - - - 2 719 47 940
Financial Liabilities:
Payables - - - - 19 012 19 012 -
Interest bearing liabilities - 1 542 3 887 - - 5 429 6.90%
Total - 1 542 3 887 - 19 012 24 441
Fixed Interest Maturing in:
Floating More Non- WeightedFinancial Interest 1 Year Over 1 to than interest Total averageInstrument Rate or Less 5 Years 5 Years Bearing Amount interest
$'000 $'000 $'000 $'000 $'000 $'000 rate
2003
Financial Assets:
Cash 44 691 - - - 125 44 816 4.83%
Receivables - - - - 3 820 3 820 -
Total 44 691 - - - 3 945 48 636
Financial Liabilities:
Payables - - - - 19 561 19 561 -
Interest bearing liabilities - 1 452 5 423 6 - 6 881 6.84%
Total - 1 452 5 423 6 19 561 26 442
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
51
(c) Foreign exchange risk
The Commission entered into forward exchange contracts to hedge anticipated purchase commitments in US dollars.
The following table sets out the gross value to be paid under foreign currency contracts, the weighted averagecontracted exchange rates and the settlement periods of the outstanding contracts.
2004 2003 2004 2003Weighted Average Rate $’000 $’000
Buying US dollars:
Not longer than one year 0.67 0.59 751 341
Longer than one year but not longer than two years 0.67 - 751 -
Longer than two years but not longer than three years 0.67 - 751 -
2 253 341
(d) Credit risk
The Commission’s maximum exposure to credit risk is represented by the carrying amounts of the financialassets included in the Statement of Financial Position. Credit risk represents the loss that would be recognisedif parties holding financial assets of the Commission at balance date fail to honour their obligations undercontract.
The Commission minimises its credit risk on trade debtors by undertaking its sales transactions with a largenumber of agents and requires those agents to remit outstandings on a twice weekly basis; therefore, theCommission is not materially exposed to credit risk.
(e) Net fair values
The Commission’s accounting policies used to determine the net fair value of financial assets and liabilities aredisclosed in note 2. The aggregate net fair values of recognised financial assets and financial liabilities at thebalance date are equal to the carrying values as per the Statement of Financial Position.
2 4 . R E L AT E D PA R T Y D I S C LO S U R E S
Commission Members
For the full financial year the following persons held the position of Member of the Commission:
Mr H J Ohff, FIEAust, CPEng, BA (Hons) (Presiding Member); Mr D P LeMessurier, Ass Dip (Man), SIA (aff), FAICD, MSDIA, MBA; Ms S J Mackenzie, BComm (Accounting), LLB (Hons); Mr S K Shirley, BEc, CA, CPA, FTIA; and Ms C M Crago, Ass Dip (Bus), BBus (Mktg).
Details of Commission Members’ remuneration are set out in note 9.
No Commission Member has entered into a material contract with the Commission since the end of the previousfinancial year and there were no material contracts involving Commission Members’ interests subsisting at the endof the financial year.
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
52
2 5 . C O M M I T M E N T S FO R E X P E N D I T U R E
2004 2003$’000 $’000
Capital commitments
Commitments in relation to capital commitments contracted for at the reporting date but not recognised as liabilities, payable:
Not later than one year - 183
- 183
Lease commitments
Commitments in relation to operating leases contracted for at the reporting date but not recognised as liabilities, payable:
Not later than one year 604 87
Later than one year and not later than five years 2 307 186
Later than five years and not later than ten years 3 159 -
6 070 273
The operating lease for the remote computer site at Kidman Park is non-cancellable with rental payable monthly in arrears. Contingent rental provisions within the lease agreement require the minimum lease payments to be increased by 5 percent per annum.
The 10 year accommodation lease at 24-25 Greenhill Road is non-cancellable with rent payable monthly in advance. Contingent rental provisions within the lease agreement require lease payments to be increased by 3 percent per annum with a rent review after 5 years. The option for renewal of a further term of 5 years is available prior to the expiration of the current term.
Other commitments
Commitments in relation to other expenditure contracted for, but yet to be supplied, at the reporting date but not recognised as liabilities, payable:
Not later than one year 2 890 1 999
Later than one year and not later than five years 3 014 1 434
5 904 3 433
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
53
2 6 . S U P E R A N N U AT I O N
The Commission contributed to the following employee superannuation schemes:
(a) The Commission has an established superannuation scheme for its employees. The scheme accommodatesboth defined benefit members and accumulation members for benefits payable on resignation, retirement,death or disability.
The scheme is known as Lotteries Commission of South Australia Superannuation Plan (the Plan), a sub-plan of the Corporate Division of the Mercer Super Trust. The assets supporting the defined benefits are invested inthe “Mercer Growth” investment option of the sub-plan.
The Plan is subject to a triennial review and is externally managed. The last full actuarial investigation wasconducted as at 30 June 2003 by Paul Gilbert, FIAA and Richard R Codron, FIAA Superannuation Actuaries. The report was dated 24 February 2004.
Information from the last actuarial report: $’000
Accrued benefits as at 30 June 2003, the last measurement date 7 270
Net market value of assets as at 30 June 2003 7 017
Information from the last audited annual accounts:
Vested benefits as at 30 June 2003 7 100
Net market value of assets as at 30 June 2003 7 017
Net market value of assets as at 30 June 2003 in excess of vested benefits ( 83)
Due to negative investment returns in prior years, the Plan’s assets as at 30 June 2003 were less than its vestedbenefits, resulting in the Plan being in an unsatisfactory financial position (99% coverage). The Trustee put inplace a plan to restore the Plan to a satisfactory financial position by 30 June 2004 by adopting the actuarialrecommended employer contribution rates.
As at 30 June 2004 the Policy Committee for the Plan comprised:
Commission appointed - S J Mackenzie (Chairman)- J R Roache
Member representatives - J Favretto- P H Wright
For defined benefit members, the Commission pays the contribution level recommended by the actuaryappropriate to meet the expected long term cost of benefits being provided. Contribution to the defined benefitplan during the year was $482 000 ($431 000).
The contribution by the Commission for the accumulation benefit members of the Plan during the year was $196 000 ($164 000).
(b) The Commission contributed $3000 ($3000) for superannuation on behalf of an employee who is a member of a private fund.
(c) The Commission contributed $5000 ($19 000) to the State Pension Scheme on behalf of an employee who is a member of that scheme.
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
54
C E R T I F I CAT I O N O F T H E F I N A N C I A L R E P O R T
We certify that:
• the attached General Purpose Financial Report for the Lotteries Commission of South Australia presents fairly,in accordance with the Treasurer’s Instructions promulgated under the provisions of the Public Finance andAudit Act 1987, applicable Accounting Standards and other mandatory professional reporting requirements inAustralia, the financial position of the Lotteries Commission of South Australia as at 30 June 2004, its financialperformance and its operations cash flows for the year then ended; and
• internal controls over the financial reporting have been effective throughout the reporting period and there arereasonable grounds to believe the Lotteries Commission of South Australia will be able to pay its debts as andwhen they become due and payable.
H J OHFF J R ROACHE
PRESIDING MEMBER CHIEF EXECUTIVE
Notes to and forming partof the financial statements
as at 30 June 2004 - continued
55
56
Lotteries Commission of South AustraliaAnnual Report 2003-04
57
GlossaryAgent Entity appointed under Agent Agreement to sell entries in lotteries
conducted by SA Lotteries.
Agency Distribution outlet selling SA Lotteries games.
Corporate Scorecard A performance measurement report linking short-term strategieswith corporate vision.
Division One The highest guaranteed prize in any game.
Easiplay Club SA Lotteries’ free on-line player registration service offering playersa method of safeguarding their winnings and the ability to storefavourite numbers.
Instant Scratchies Instant lottery tickets whereby players scratch away the latex on the ticket to reveal symbols or prizes.
Intranet Site SA Lotteries’ internal information site providing a broad range oforganisational information for staff.
Jackpot Occurs where there are no Division One winning entries in a drawresulting in the Division One prize pool accumulating from draw to draw.
Keno A numbers game of chance whereby 20 numbers are randomlygenerated from a possible 80 every 3.5 minutes. Players can choose from one number (Spot 1) to ten numbers (Spot 10).
Lotto A national game of chance whereby six balls (plus twosupplementary numbers) are randomly drawn from a possible 45 every Saturday night.
Megadraw Lotto draw with millions of dollars available to be won.
On-line Lotteries The central computer system operating SA Lotteries’ games and System associated functions.
Oz Lotto A national numbers game of chance, drawn on Tuesday nights,involving a random draw of six numbered balls (plus twosupplementary numbers) from 45 numbered balls.
Powerball A game of chance drawn nationally on Thursdays offering players the chance to win multi-million dollar prize pools every week. Five balls are randomly drawn from the first barrel of 45 numberedballs and one ball (the Powerball) from the second barrel of 45 numbered balls.
Lotteries Commission of South AustraliaAnnual Report 2003-04
58
Responsible Gambling Occurs when individuals make informed decisions about theirparticipation in lotteries games and play without harm to themselves,others and their communities.
Return to Government Incorporating Gambling Tax, Income Tax Equivalent and Dividend.
SA Lotto A game of chance offered exclusively within South Australia and drawnon Mondays and Wednesdays, with six numbered balls (plus twosupplementary numbers) drawn from 45 numbered balls.
Shareholder The Government of South Australia, on behalf of the community ofSouth Australia.
Small Business Charter A document outlining SA Lotteries’ commitment to lottery outlets insmall business and to small business suppliers.
Spot 10 Jackpot The top prize in a game of Keno, which is won when a player correctlymatches ten of the twenty numbers drawn. The Spot 10 prize pooljackpots with each draw where the top prize is not won.
State Lotteries Mandatory codes for responsible gambling and advertising approved Codes of Practice by the Independent Gambling Authority.
Super 66 A national game of chance whereby the player selects a six-digitnumber combination in the range of 000000 to 999999. To win, playersmatch their selected numbers with the drawn numbers in the orderdrawn.
The Pools A game of chance whereby the winning numbers are based on theresults of United Kingdom or Australian soccer matches.
World Lottery An international member organisation representing lotteries Association (WLA) jurisdictions and industry suppliers.
Agency network 21
Corporate governance 08
Corporate scorecard 05
Easiplay Club 15
Environmental responsibility 14
Financial statements 29
Games 16
Human resource management 22
Independent audit report 56
Instant Scratchies 18
Keno 18
Lotto 16
Organisational chart 23
Organisational overview 26
Oz Lotto 17
Powerball 17
Presiding Member & Chief Executive report 02
SA Lotto 16
Social responsibility 13
Sponsorship 13
Strategic direction 01
Super 66 19
Systems 25
Ten year financial summary 07
The Pools 19
Index
Lotteries Commission of South AustraliaAnnual Report 2003-04
59
Lotteries Commission of South Australia23 Rundle Mall Adelaide South Australia 5000GPO Box 2277 Adelaide South Australia 5001Telephone 61 8 8205 5555Facsimile 61 8 8205 5523