Section 5 : Budgeted Financial Statements
An analysis of AMSA's budgeted financial statements, as reflected in the budgeted departmental financial statements and administered schedules for 2007-08, is provided below.
Budgeted departmental income statement
AMSA has three main sources of income:
- Revenues from Government including appropriation of levy funding for AMSA's safety regulatory and pollution prevention functions and CSO funding for AMSA's search and rescue capability
- Sales of goods and services, and
The Budgeted departmental income statement at table 5.1 indicates that AMSA is budgeting for net deficits of $6.5m in 2007-08 and in the forward year of $2.1m in 2008-09. These deficits result from a one-off factor whereby AMSA is using its accumulated surplus and cash reserves to fund its functions under the Australian Government's NMERA until the rate of the Protection of the Sea Levy is increased to achieve full cost recovery from the shipping industry by 2009 2010. This is discussed further below.
Revenues from Government: Levy Funding
The major part of AMSA's revenue arises from the three levies corresponding to AMSA's three major functions in ship safety regulation (the Regulatory Functions Levy), provision of the national network of marine aids to navigation (the Marine Navigation Levy), and management of the National Plan to Combat Pollution of the Sea by Oil and Other Noxious and Hazardous Substances and the new NMERA (the Protection of the Sea Levy). A detailed description of the levies is included in Section 2.5, Special Appropriations, and Section 4.2 Cost Recovery Arrangements.
AMSA anticipates that the total amount of levies collected from the shipping industry in 2007-08 to be around $57.1m. These are appropriated under Section 48 of the AMSA Act as Special Appropriations. The 2007-08 total levy collection is expected to be $9.4m higher than the projected actual total of $47.7m in 2006-07 mainly resulting from the increased levy collection from the first proposed rate rise in the Protection of the Sea Levy to be operative from 1 July 2007. This begins the recovery of the costs of the NMERA. A small increase is expected in the collection of the Marine Navigation Levy and Regulatory Functions Levy reflecting continued high levels of shipping activity flowing from ongoing strong demand forecast in commodity exports.
The AMSA Act (section 2A) states that one of AMSA's objectives is to promote efficient provision of AMSA services. Since its inception, AMSA has substantially consolidated its asset base and adopted a range of management strategies making considerable efficiency gains in service delivery. This has provided regular opportunities to reduce levy rates on an ongoing basis as reflected in the overall downward trend in the rates of the Marine Navigation Levy and Regulatory Functions Levy.
In November 2005, the Australian, State and Territory Governments agreed at an Australian Transport Council (ATC) meeting to implement the NMERA, which is a comprehensive package of measures for the ongoing protection of Australia's coastal and marine environment. This involved AMSA contracting emergency towage vessels at strategic locations around the Australian coast and establishing management arrangements to regulate, monitor and coordinate emergency response as national decision-maker when there is a significant pollution risk in relation to a ship in Australia's waters and around Australia's coast. The ATC agreed the NMERA would be funded on the basis of full cost recovery from the shipping industry through a proposed increase in the Protection of the Sea Levy.
AMSA proposes to phase-in the required increase in the Protection of the Sea Levy over the next three financial years. The current levy rate of 3.3 cents per Net Registered Ton (NRT), which has not changed since 1 July 1995, is proposed to increase as shown in the table below:
|Year||Date of Proposed Levy
|Proposed Levy Rate|
|2007-2008||1 July 2007||7.7 cents per NRT|
|2008-2009||1 July 2008||9.6 cents per NRT|
|2009-2010||1 July 2009||11.25 cents per NRT|
The changes in the levy rates require regulations to be made pursuant to the Protection of the Sea (Shipping Levy) Act 1981 and is subject t o the usual regulatory approval process.
Revenue from Government: Community Service Obligation Funding
AMSA receives an annual departmental appropriation for providing a search and rescue co ordination service to the community with the amount appropriated for 2007-08 being $39.3m. This includes the additional funding totalling $73.6m over four years allocated to AMSA in the 2004-05 and 2005-06 Budgets for initiatives to strengthen AMSA's search and rescue capability.
In the 2005-06 Budget, a total funding package of $54.7m over four years was allocated to AMSA for the following measures:
- Contracting four turbine engine dedicated search and rescue aircraft to be based at Perth, Cairns, Melbourne and Brisbane. The aircraft are to have a capability for day and night search operations, on-scene coordination, homing to distress beacons, and deploying emergency supplies to people in distress, and
- Improving communications and other search and rescue equipment for existing aircraft that are used for search and rescue operations on an opportunity basis.
This complemented the measures announced in the 2004-05 Budget from a total funding package of $18.9m over four years including:
- Contracting a dedicated turbine engine aircraft in Darwin with the capability to deliver lifesaving equipment and fitted with surface search radar and night search camera
- Upgrading of AMSA's Rescue Coordination Centre to an Emergency Response Centre including improved communication and search coordination systems
- Assisting existing contracted search and rescue aviation operators to address new aviation regulatory requirements planned for introduction in 2005, and
- Developing a new system to deliver lifesaving equipment from turbine engine pressurised aircraft.
AMSA also receives an annual administered appropriation to cover the cost of search and rescue incidents (mainly comprising aircraft/helicopter hire) estimated at $9.6m in 2007-08, which is an increase over the $8.6m projected actual amount in 2006-07.
This primarily results from additional administered appropriations required to fund the higher hourly operating costs of AMSA's new turbine engine dedicated search and rescue aircraft (including increased fuel costs) compared to the hourly rate for previously hired older piston engine aircraft.
Sales of Goods and Services
AMSA may make determinations fixing charges under section 47 of the AMSA Act. Section 47(12) requires AMSA's fees and charges for the sale of its services to be reasonably related to the costs incurred, or to be incurred, by AMSA in their provision. AMSA provides a range of marine services for which it makes a charge based on the average cost of delivering a specific service or the time taken to deliver the service multiplied by a standard hourly rate. Charges may also include waiting time, travelling expenses and cancellation fees associated with particular services.
AMSA marine services include: inspection of ships, cargo, and ships' safety equipment; activities involved with issuing qualifications (certificates of competency) to seafarers (conducting oral practical examinations for navigating and engineering officers and assessing sea time prerequisites for qualifications); issuing and renewing coastal pilot licences; and services provided by the Australian Shipping Registration Office.
In 2007-08, AMSA's total estimated revenue from independent sources is $4.8m compared to the estimated actual total of $5.3m in 2006-07. This includes sales of goods and services amounting to $2.9m ($2.9m in 2006-07) and interest of $1.9m ($2.4m in 2006-07). AMSA anticipates a slight decline in receipts from the sale of goods and services in 2007-08 compared to the estimated actual total in 2006-07. The decline in interest accrual is expected to result from the reduction in accumulated surplus and cash reserves being used to support the phasing in of the increase in the Protection of the Sea Levy over the next two financial years, 2007-08 and 2008-09, until full cost recovery is reached for the NMERA in 2009 10.
The main elements of AMSA's expenses are employee and supplier expenses and depreciation. Employee expenses in 2007-08 of $28.4m are slightly higher compared with the estimated actual of $26.4m in 2006-07. This mainly relates to the small rise in staff numbers mainly in relation to AMSA's new functions under the NMERA.
The increase in supplier expenses anticipated in 2007-08 of $71.2m compared to the estimated actual in 2006-07 of $66.1m (a 7.7% increase) mainly reflects higher expenses on technical consultancy and contract services and information technology services associated with strengthening AMSA's search and rescue capacity and the emergency towage functions under the NMERA.
The following chart shows the overall stable trend in AMSA's revenue and expenses over the four years since 2002 2003, which demonstrates AMSA's efficiency gains in service delivery flowing from its consolidation of its asset base and adoption of a range of management strategies.
The rise in revenue and expenses shown by the chart in the four future years results from two influences. The first is the Budget measures in 2004 2005 and 2005 2006 allocating additional funding to enhance AMSA's search and rescue capability. The second is the proposed rise in levy revenue required to fully recover the costs of AMSA's functions in providing a level of emergency towage response consistent with the NMERA.
AMSA is budgeting for a deficit in the three financial years, from 2006-07 to 2008-09, as a one-off measure to support the proposed staged increase in the levy revenue from the Protection of Sea Levy required to fund the NMERA, with the aim of achieving full cost recovery of the NMERA from the shipping industry in 2009-10. AMSA will draw upon its accumulated surplus and cash reserves to cover the deficit years.
Chart 5.1: Revenue and expenses
(click on the image to view the larger version)
* Financial figures for 2005 2006 and the out years in the above table are based on AMSA's adoption of the Australian Equivalents to International Financial Reporting Standards (AEIFRS). The figures for earlier financial years in this table have not been adjusted for the AEIFRS and so are not strictly comparable.
Table 5.6: Departmental property, plant, equipment and intangibles - summary of movement (Budget year 2007-08)
Table 5.7: Schedule of budgeted income and expenses administered on behalf of government (for the period ended 30 June)
Table 5.8: Schedule of budgeted assets and liabilities administered on behalf of government (as at 30 June)
- Accounting policy
The budgeted financial statements have been prepared on an accrual accounting basis, having regard to Statements of Accounting Concepts, and in accordance with:
- The Finance Minister's Orders
- Australian Accounting Standards
- Other authoritative pronouncements of the Australian Accounting Standards Board, and
- The Consensus Views of the Urgent Issues Group.
- Departmental and administered items
Agency assets, liabilities, revenues and expenses are those items that are controlled by AMSA that are used in producing its outputs and include:
- infrastructure, plant and equipment used in providing goods and services
- liabilities for employee entitlements
- revenue from appropriations or independent sources in payment for outputs, and
- employee, supplier and depreciation expenses incurred in providing agency
Administered items are those items incurred in providing programs that are controlled by the government and managed, or oversighted, by AMSA on behalf of the government. Administered expenses included live search and rescue response activities and administered revenues are appropriated from government.
- Departmental revenue
Revenue from government represents the purchase of outputs from AMSA by the government and is recognised to the extent that it has been received into AMSA's bank account.
Revenue from other sources, representing sales from goods and services, is recognised when:
- the risks and rewards of ownership have been transferred to the buyer
- the seller retains no managerial involvement nor effective control over the goods
- the revenue and transaction costs incurred can be reliably measured; and
- it is probable that the economic benefits associated with the transaction
will flow to the Entity.
- Departmental expenses - employees
Payments and net increases in entitlements to employees for services rendered in the financial year.
- Departmental expenses - suppliers
Payments to suppliers for goods and services used in providing agency outputs.
- Departmental expenses - depreciation and amortisation
Depreciable property plant and equipment, buildings and intangible assets are written-off to their estimated residual values over their estimated useful life to AMSA, using the straight line calculation method.
- Departmental assets - financial assets
The primary financial asset relates to receivables. Financial assets are used to fund AMSA's capital programme, employee entitlements, creditors and to provide working capital.
- Departmental assets - non-financial assets
These items represent future economic benefits that AMSA will consume in producing outputs. The reported value represents the purchase price paid less depreciation incurred to date in using the asset.
- Departmental liabilities - provisions and payables
Provision has been made for AMSA's liability for employee entitlements arising from services rendered by employees. This liability includes unpaid annual leave and long service leave.
Provision has also been made for unpaid supplier expenses as at balance date.
- Administered Assets - Financial Assets
Comprise primarily cash.