43 Explanatory Statement
a) Significant variations between estimates and actual results for the financial year
Details and reasons for significant variations between estimates and actual results are detailed below. Significant variations are considered to be those greater than 10% or $1.0 million.
| 2008 Actual $000 |
2008 Estimate $000 |
Variance $000 |
|
|---|---|---|---|
| Income | 191,909 | 189,407 | 2,502 |
| Cost of Services | 775,106 | 759,313 | (15,793) |
| Net Cost of (Surplus from) Services | 583,197 | 569,906 | (13,291) |
Revenue
Revenue was $2.5 million (1.3%) above the estimate. The positive variations include the following significant items:
- Increased revenue recouped from Department of Education and Training of $1.6 million;
- Resources received free of charge from Landgate of $2.0 million;
- Increase in revenue from External works recoveries of $2.9 million;
- Advertising revenue increased by $3.2 million from changed contractual arrangements;
- Increase in rental revenue of $3.2 million;
- Increase in interest revenue of $1.3 million;
- Service contribution revenue $1.5 million due to joint ticketing of various sporting and entertainment events; and
- This is offset by a reduction in the lease income from the prepaid freight network of $14.8 million due to a change in accounting policy of amortising the deferred lease income to straight-line method.
Total cost of services
Cost of services for the year was $15.8 million (2%) above estimate. There were several significant positive and negative variations that contributed to this overall variation. These variations include:
- Increased grants and subsidies - $9.0 million for the concrete sleepering and loop extensions of the Eastern Goldfields Railway line;
- Increased Transperth bus costs of $10.0 million mainly due to remedial works related to contaminated sites, building maintenance (AS1940 compliance and CNG workshop upgrade to comply with Australian and International Standards), provision of bus replacement services for the connection of the Joondalup and Mandurah line, increased fuel costs, SmartRider costs (partially offset by SmartRider card sale);
- Increased grant to Local Government of $8.5 million due to transfer of roads and associated infrastructure controlled by local government constructed as part of the New MetroRail Project;
- Increased depreciation of $6.3 million mainly due to revaluation of buildings, rollingstock, vessels, buses, and bus infrastructure assets;
- Increased costs of $2.4 million related to railcar maintenance of the Australind and Prospector and provision of coach replacements during track works on the Eastern Goldfields Railway line;
- Increased costs related to external works $2.5 million;
- Notional charge for land valuation provided by Landgate $2.0 million; and
- Loss of $0.8 million mainly due to disposal of buildings and infrastructure at Kewdale.
offset by:
- Reduced interest of $20.0 million due to lower than budgeted interest rate and delay in capital works program including a reduction of $8.0 million on notional interest due to a change in accounting policy of amortising the deferred lease income to straight-line method; and
- Reduced school bus grants and subsidies of $8.0 million mainly due to a revised implementation plan of the school buses seatbelt program.
b) Significant variations between actual revenues and expenditures for the financial year and revenues and expenditures for the immediately preceding financial year
Details and reasons for significant variations between actual results with the corresponding items of the preceding year are detailed below. Significant variations are considered to be those greater than 10% or $1.0 million.
| 2008 Actual $000 |
2007 Actual $000 |
Variance $000 |
|
|---|---|---|---|
| Employee benefit expense | 97,228 | 79,736 | 17,492 |
| Supplies and Services | 154,827 | 131,710 | 23,117 |
| Depreciation and amortisation expense | 114,600 | 85,546 | 29,054 |
| Finance costs | 53,570 | 62,734 | (9,164) |
| Grants and subsidies expense | 332,086 | 249,176 | 82,910 |
| Capital user charge | 0 | 130,340 | (130,340) |
| Energy and fuel | 11,420 | 8,883 | 2,537 |
| Land rationalisation expense | 2,014 | 4,492 | (2,478) |
| Loss on disposal of non-current assets | 782 | 1,031 | (249) |
| User charges and fees | 129,994 | 105,029 | 24,965 |
| Other revenue | 26,279 | 21,999 | 4,280 |
| Commonwealth grants and contributions | 28,112 | 0 | 28,112 |
Employee benefit expense
Increase in employee benefit expense due to increase in transit officers, train drivers and other personnel employed for the Mandurah line.
Supplies and services
- Increased security costs of $5.3 million for revenue protection and security on the Mandurah line;
- Increased maintenance of $5.0 million for the 'B' series railcars mainly due to the expansion of the rail network to Mandurah;
- Increased remediation works on AS1940 compliance and CNG workshop upgrade to comply with Australian and International Standards $2.7 million;
- Increased energy and fuel of $2.5 million mainly due to expansion of the rail network to Mandurah;
- Increased Information Technology maintenance costs $1.9 million to improve the reliability and robustness of the existing network and replace end of life equipment;
- Increased maintenance of Prospector and Australind railcars $1.4 million;
- Increased legal costs of $1.4 million due to the New MetroRail Project (including City Rail project);
- Increased bus fleet registration $1.0 million;
- Increased costs of $1.0 million for coach hire during the track works on the Eastern Goldfields Railway line; and
- Increased cost of sales of $0.8 million due to increase in External Works (this is offset by revenue).
Depreciation and amortisation expense
Increase in depreciation of $29.0 million is mainly due to the Mandurah line including infrastructure and train stations accounting for $12.0 million and $17.0 million for increased depreciation as a result of revaluation of assets to fair value.
Finance costs
Decrease in Finance costs of $9.2 million is mainly due to savings of $14.7 million on the repayment of the New MetroRail debt of $913.0 million in September 2006.
Grants and subsidies expense
Increased Grants and subsidies expense of $82.9 million are mainly due to:
- $37.1 million expenditure for the concrete sleepering and loop extensions of the Eastern Goldfields Railway line.
- $19.2 million expenditure for transfer of roads and paths to Local Government as part of the New MetroRail project.
- $18.0 million increase for the Transperth bus operators mainly due to increase in bus contract cost as a result of feeder services connecting to the Mandurah line, increase in fuel and labour costs.
- $7.0 million increase for the school bus services mainly due to providing seatbelts on school buses, increase in fuel and labour costs.
Capital user charge
Following the enactment of the Financial Management Act 2006, the capital user charge has been abolished from 2007-08.
Land rationalisation expense
Decrease in expenditure due to lower land rationalisation activity.
User charges and fees
Increase due to fare increase based on CPI of 4.8% and increased patronage on the Transperth system including the half year impact of the Mandurah line.
Commonwealth Grants and contributions
Commonwealth Grants of $28.1 million for the concrete re-sleepering and loop extensions of the Eastern Goldfields Railway line.
Other revenue
Increase in other revenue mainly due to the foreign exchange gain on the appreciation of the Australian currency, parking, infringements and rental income.