building services authority 2001/2002 annual report report 2001 - 2002.pdf · building services...
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Building Services Authority 2001/2002 Annual Report
The foundation to build on
BU
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BSA 4484 A/R 2002 Cover SR-FA 28/10/02 11:41 AM Page e
Building Services Authority 2001/2002 Annual Report
ABOUT BSA
BSA is a statutory authority, and is part of the portfolio of
the Minister for Public Works and Minister for Housing, the
Honourable Robert Schwarten. Established under the
Queensland Building Services Authority Act 1991, to
regulate the building industry. Our Charter is to regulate the
building industry through licensing of contractors, educate
consumers about their rights and obligations, make
contractors aware of their legal rights and responsibilities,
handle disputes fairly and equitably, protect consumers
against loss through statutory insurance, implement and
enforce legislative reforms and where necessary prosecute
persons not complying with the law.
In 2001/02 BSA’s had 208.75 full time equivalent positions.
Our income was $24.969M and our operating expenditure
was $24.241M. We provided our services to customers
across Queensland through our Brisbane head office and
seven regional offices.
BSA PRODUCTS
BSA has developed comprehensive resources to support
the needs of licensees and homeowners. Fact Sheets,
booklets, brochures and building contracts are available
from all BSA offices, Queensland Government Agent
Program and local authorities throughout Queensland.
BSA’s website contains a vast
wealth of information including
links to other Government and
building industry websites.
OUR VISION
To be recognised as a leading service provider which adds value to the building industry and
effectively protects its consumers.
OUR MISSION
Is to improve standards, equity and confidence in the building industry.
OUR VALUES (see page 14)
1. Customers: provide superior customer service
2. People: respond to staff needs and acknowledge their achievements
3. Partnership: working with our customers towards shared outcomes
4. Performance: continually innovate and improve in a cost effective manner
Bundaberg
Weipa
Thursday Island
Cairns Office
Tully
Townsville Office
Bowen
Mackay OfficeProserpine
Gladstone
Maryborough
Sunshine CoastOffice
(Maroochydore)
Toowoomba Office
Gold CoastOffice
BRISBANEHead OfficeCunnamulla
Charleville
Mt Isa Cloncurry
Longreach
Normanton
Clermont
Charters Towers
Rockhampton OfficeEmerald
LOCATIONS OF BSA OFFICES
BSA 4484 A/R 2002 Cover SR-FA 28/10/02 11:40 AM Page b
1
COMMUNICATION OBJECTIVE
Our communication objective is to report performance,
financial management and progress towards achieving our
vision for the building industry, to our stakeholders, the
Minister for Public Works and Minister for Housing,
Parliament, builders, trade contractors and other building
industry stakeholders including consumers, community
organisations and industry associations.
OUR THEME
2001/02 has produced many significant outcomes and
developments for BSA and its stakeholders. The successful
nature of our home warranty
insurance scheme attracted
considerable interest from those
conducting reviews of home warranty
schemes in other States. Our research
of the needs and aspirations of
licensees and homeowners has
produced a blueprint for service
delivery and improved organisational
performance for the future. A
comprehensive review of our licensing
structure has provided the catalyst for change to the
licensing system in Queensland. Our better use of
technology to enhance access to our services was a
feature. Greater internal focus has enabled us to develop
strategies that will equip our people with the skills and
abilities to better serve our customers and meet the
challenges that lie ahead.
We believe that the progress made in the year has given
us The Foundation To Build On.
STAKEHOLDER FEEDBACK ON 2000/2001 ANNUAL REPORT
We actively seek feedback on our annual report from
stakeholders. The 2000/01 report underwent significant
change compared to previous reports. To that end
stakeholders said:
“Clear and easy to read”, “factual”, “reflects the
plan for the future of BSA”, “more people focussed
than the past”, “easy to follow”, “overall very well
balanced”, “compared to others received BSA is
very good”.
Our 2001/02 report reflects stakeholder
suggestions on how our report could be
improved. We have responded to the
suggestions by incorporating our views
on the future of the industry, giving
readers a more comprehensive section
on the licensing function and focussing
on our staff.
Page
--> Highlights 2
The building blocks of our success
--> Financial Performance 3
Current and historic financial results
--> Corporate Performance 4
Our corporate framework and ourachievements in 2002 against KPMs
--> Chairman’s Review 6
The strategic milestones for 2002
--> General Manager’s Review 8
The operational milestones for 2002
--> Value for Money 10
BSA provides value for money – a comparative analysis
--> The Future 11
Building a sustainable industry
--> Critical Areas and Values 14
Linking our reporting structure and our values; enabling us to achieve our mission and vision
--> Corporate Governance 16
Providing leadership, and a framework with integrity
--> Customers 28
Meeting the needs of our customers and building on customer value
--> People 38
Helping our staff to reach their potential
--> Legislation and Policy 42
The foundation of equitable regulation
--> Financial Management 50
BSA’s financial management capability
--> Leadership 54
Influencing a national position
--> Financial Overview 56
Financial review and analysis of our performance
--> Financial Statements 62
--> Index IBC
The foundation to build on
Contents
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 1
--> The progress made in the year has given us the Foundation to Build on.
Building Services Authority 2001/2002 Annual Report
Highlights
2
CORPORATE GOVERNANCE
We fully complied with statutory requirements and
developed strategies to monitor and ensure the long term
health of BSA’s financial position. (Refer to page 16.)
CUSTOMERS
BSA established a Customer Continuum to make customer
value an interactive paradigm throughout the organisation
to strengthen its customer focus and ensure its operational
objectives align with customer needs.
Feedback obtained through focus group consultation and
telephone surveys will be used to develop strategies to
better align services to customer needs and expectations.
(Refer to page 28.)
PEOPLE
A significant improvement of 9.5% was achieved in the staff
satisfaction index. Strong emphasis was placed on
development and training of staff.
A Performance Management and Development Scheme
was introduced with a focus on individual development
complemented by coaching and support. (Refer to
page 38.)
LEGISLATION AND POLICY
BSA’s compliance agenda has been re-developed to
ensure activities address all aspects of legislation that is
under BSA’s control. Re-allocation of resources will ensure
delivery across the full range of compliance activities.
Consultation with industry and analysis of all interstate
initiatives resulted in a discussion paper being delivered
to industry proposing reforms to reduce payment issues.
The initiatives in that paper will progress to legislation in
early 2003. (Refer to page 42.)
FINANCIAL MANAGEMENT
BSA’s consolidated position improved, recording a net
asset position of $5.364M as compared to $4.658M in
2000/01. (Refer to page 50.)
LEADERSHIP
Queensland contractors were the only ones in Australia not
affected by the home warranty insurance crisis which
occurred interstate following the collapse of HIH Insurance.
The Licence Class Review has attracted interest from other
States all of whom are seeking to improve their licensing
systems.
BSA took a lead role in contributing to the National Review
of Builders Warranty Insurance and Consumer Protection
and next year will continue to actively participate in
developing an all-state response to the report. (Refer to
page 54.)
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 2
2001/02 2000/01($000) ($000) Change %
Financial Performance
3
COMMENTS
BSA operates two funds being the General Fund and the
Insurance Fund that constitute its consolidated position.
The General Fund operations include licensing, dispute
resolution and building information. The Insurance Fund
covers the operations of BSA’s statutory insurance scheme.
Corporate overheads are apportioned to both funds
according to usage.
There was an improvement of $0.706M in BSA’s
consolidated position during the year. This resulted from
a strong performance by the Insurance Fund, a surplus of
$1.489M, reflecting a buoyant Queensland building industry.
The General Fund recorded a deficit from ordinary activities
of $0.761M brought about by increased service demands,
reduced investment returns and additional legislative
responsibilities. The Fund recorded a net deficit of $0.714M
after the transfer from reserves and with a decrease in
reserves of $0.069M, a total change in equity of $0.783M.
The outlook for 2002–03 is positive at the consolidated level
with the same trend for both funds anticipated to continue.
It is forecast that the Insurance Fund will achieve a surplus
of $1.629M while the General Fund will result in a deficit
of $0.457M.
2001/02 2000/01 1999/00 1998/99 1997/98
Organisational Performance
Financial Management
Profit/(loss) from ordinary activities $M 0.728 (6.952) 2.505 (0.273) (1.882)
Net assets $M 5.364 4.658 11.604 9.168 9.441
Current ratio 1.48 1.51 1.61 1.67 1.57
Financial Performance
Operating revenue 24 969 23 723 5.25
Operating expenses 24 241 30 675 (20.97)
Profit/(loss) fromordinary activities 728 (6 952) 110.90
Financial Position
Total assets 88 057 80 746 9.05
Total liabilities 82 693 76 088 8.68
Net assets 5 364 4 658 15.16
Cash Flow
Net cash provided byoperating activities 4 947 (5 714) 186.58
Cash at the end ofthe financial year 9 364 5 952 57.33
Ratios
Current ratio 1.48 1.51 (1.99)
Liabilities/assets ratio 0.94 0.94 -
Liabilities/equity ratio 15.42 16.33 (5.57)
Consolidated Outcomes
2001/02 2000/01($000) ($000) Change %
Financial Performance
Operating revenue 13 148 16 432* (19.99)
Operating expenses 13 909 16 460 (15.50)
Transfer to General Fund - -
Operating surplus/(deficit) (761) (28) 2 617.86
Financial Position
Total assets 10 070 8 995 11.95
Total liabilities 8 217 6 359 29.22
Net assets 1 853 2 636 (29.70)
* Includes transfer for the Insurance Fund of $5M in 2000/01.
General Fund
2001/02 2000/01($000) ($000) Change %
Financial Performance
Operating revenue 11 821 12 291 (3.82)
Operating expenses** 10 332 14 215 (27.32)
Transfer to General Fund - 5 000 (100.00)
Operating surplus/(deficit) 1 489 (6 924) 121.50
Financial Position
Total assets 77 987 71 751 8.69
Total liabilities 74 476 69 729 6.81
Net assets 3 511 2 022 73.64
** Insurance Fund operating expenses include claims expenses of$4.484M (2001/02) and $8.377M (2000/01).
Insurance Fund
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 3
Building Services Authority 2001/2002 Annual Report
Corporate PerformanceAgainst 2001–2005 Corporate Plan
4
KPM 2001/02StrategiesGoals
Corp
orat
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over
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stom
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Legi
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and
Polic
yPe
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Fina
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--> Unqualified audit report
--> No major corporate governance issues
--> Full compliance with statutoryrequirements
--> Over 98% of approved claimants fullycompensated
--> Over 70% of disputes satisfactorilyresolved
--> Positive movement in the CustomerContinuum
--> Customer satisfaction survey (70% rate service above average)
--> Workforce Attitude Survey Index of 850
--> Unlicensed contractors ≥4% of alllicensees checked via site inspections
--> Number of disputes received to be ≥10% of construction notificationslodged 2 years pervious
--> Number of directions to rectify ≥20% of disputes received in same year
--> 60% of directions complied withsatisfactorily
--> Legislative amendments implemented
--> Produce an operating surplus
--> Loss ratio for 2000/01 <100%
--> Improvement in the net asset position
--> Workforce Attitude Survey Factor B>80% agreement
--> Sound progression to nationalconsistency on key issues within theindustry and government
--> Develop strategies by which the Boardand Executive management canmonitor the health of the organisation
--> Working with our customers towardsshared outcomes in a climate ofintegrity, mutual respect and support
--> Continue to improve our position,image and presence in the industrythrough community, industry andgovernment infrastructures
--> Create a positive, stable andprofessional team within a supportive,safe and discrimination-freeenvironment
--> Increase the opportunity for staff tolearn and demonstrate acquiredcompetencies
--> Involve customers in consultativeprocesses
--> Promote understanding of legislationand policy
--> Develop a comprehensive industrycompliance strategy to identify anddeal with breaches of the legislationand policy
--> Monitor and review legislative andpolicy requirements
--> Regularly review the actuarialperformance of the Insurance Fundwith flexibility to respond quickly tothe need for adjustment of premiumsand policy coverage
--> Develop and implement a 5 yearfinancial management plan for theGeneral Fund (income andexpenditure)
--> Implement a leadership culture whichdrives the values of the organisation
--> Develop, drive and achievegovernment and industry policyinitiatives
--> Continually improve in line with AQCbusiness excellence framework
--> To maintain and enhance a risk aversecorporate governance model includinga focus on knowledge management
--> To ensure our customers know,understand and support us and knowwhat we have achieved
--> To establish a people-oriented culturewhere staff are recognised and able toachieve organisational and personalgoals
--> To ensure that customers understandand comply with legislative and policyrequirements and have the ability toinfluence change
--> To ensure the long term viability of theStatutory Insurance Fund and theGeneral Fund
--> To foster a culture of adaptiveleadership so that we are highlyregarded, trusted and visible withinthe industry and community
Lead
ersh
ip
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 4
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CorporateG
overnanceCustom
ersLegislation and Policy
PeopleFinancial M
anagement
Leadership
Desired Outcome 2005KPM 2005Achievement 2001/02
--> Unqualified report
--> No major issues
--> Fully complied
--> 98.7% of approved claimants werefully compensated
--> 71% of disputes were satisfactorilyresolved
--> Customer Continuum Benchmarkpositions for commitment andsatisfaction established
--> 95% of customers surveyed ratedservice above average
--> Workforce Attitude Survey Index of 949
--> 6% of licensees checked wereunlicensed
--> DNF’s received were 8.5% of CN’slodged 2 years previous
--> DTR’s were 20.8% of DNF’s received
--> 32.2% of DTR’s were complied withsatisfactorily
--> Legislative amendments implementedin accordance with timetable
--> Operating surplus of $728K
--> Loss ratio 99.1%
--> Net assets increased by $690K
--> Net asset position assets/liability ratioreduced by .03 to 1.48
--> Workforce Attitude Survey Factor Bresult 85%
--> Progression toward NationalConsistency
--> Unqualified audit report
--> No major corporate governance issues
--> Full compliance with statutoryrequirements
--> Ongoing positive movement in theCustomer Continuum
--> Customer satisfaction survey (75% rate service above average)
--> Workforce Attitude Survey Index of 880
--> Unlicensed contractors not more than3% of all licensees checked via siteinspections
--> No. of DNF’s received to be not morethan 7% of CN’s lodged 2 yearsprevious
--> No. of DTR’s over DNF’s received insame year not more than 10%
--> 70% of DTR’s complied withsatisfactorily
--> Legislative amendments implemented
--> Average loss ratios since 2001 of <80%
--> Net assets of $9M
--> Administration cost per claim finalised<$2500
--> Average cost per Dispute finalised<$600
--> Average cost per Licence transaction<$50 (application or renewal)
--> Cost neutrality for delivery of definedservices implemented
--> Workforce Attitude Survey Factor B>85% agreement
--> National consistency on key issueswithin the industry and government
--> AQC Quality Award
--> Highly accountable and responsiblefor actions
--> Best practices in corporate governance
--> Recognised as a leading CustomerService Provider
--> Recognised as a people-orientedemployer
--> A better informed, educated andcompliant industry
--> Positive loss ratios
--> Ongoing solvency of the General Fund
--> Reduced Insurance Fundadministration costs
--> Reduced cost structures
--> Best practice organisation
BSA aims to be fully accountable to government, the building industry and stakeholders.
This section of our report records our performance against our Corporate Plan 2001–2005 and the current year’s
projected KPMs and performance against these. KPMs for 2002/03 form part of our 2002–2006 Corporate Plan
and are shown at the end of each critical area report (Corporate Governance – page 27; Customers – page 37;
People – page 41; Legislation and Policy – page 49; Financial Management – page 53; Leadership – page 55).
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 5
Building Services Authority 2001/2002 Annual Report
Chairman’s Review
6
A building regulation system needs an integrated approach
that goes beyond consumer protection to include the
development of a better building industry. Over the past
12 months the Board has worked hard with industry
stakeholders to improve the regulatory environment to
enable better industry performance and provide greater
protection to consumers.
A fundamental element of the regulatory framework is an
effective contractor licence system. Over the past two years
industry has expressed the view that licensing should be
more appropriately aligned to the training agenda and built
on the continual development of all participants in the
framework. In July 2001 the Board responded to this
industry perspective and established a working party to
conduct a comprehensive review of the licensing
framework. The Board’s strategic objectives for the review
were:
• To enhance the technical expertise of building industry
participants;
• To improve the performance standards within the
industry;
• To ensure consumers were provided with greater
protection when engaging contractors.
By late 2001 the working party had developed 21
recommendations. All recommendations were endorsed
by the Board, and this new approach will deliver a
licensing framework that provides better outcomes for both
industry and consumers. Licences will now be aligned to
full trade qualifications under the Australian Qualification
Framework; Certificate II or III for trade contractors and
Certificate IV and up for builders. It is expected that this
will reduce the number of licence classes from 104 to 57.
The introduction of a continuous professional development
framework for licensees is also being contemplated.
The Licence Class Review will also result in greater
legislative clarification on the issue of who needs to be
licensed. It is anticipated that changes will come into
effect in early 2003 where subcontractors who contract to
a licensed trade contractor will no longer be required to
hold a licence. Builders and those individuals who contract
to builders and consumers will continue to be required to
hold a licence. The project is due for completion by
December 2002.
As is the case in most industries, there are a few
unscrupulous or reckless individuals whose actions tarnish
the reputations of the majority. The last 12 months has seen
a greater emphasis on building integrity into the regulatory
model through the development and implementation of
a comprehensive compliance strategy centred on
unlicensed contracting, contractors displaying signs of
financial distress, prosecution of contractors for failure to
rectify defective work, and non-payment of insurance
premiums.
Two state-wide unlicensed contractor blitzes were
performed to remove the unscrupulous operators. The
blitz’s entailed more than 6,400 individual compliance
interviews and through this some 250 cases of suspected
unlicensed contracting were detected. The unlicensed
contracting rate for the year was 6%.
Other compliance activities included conducting 537
financial performance audits of which 418 audits were of
contractors exceeding their annual allowable turnover, as
well as investigations initiated by non-payment of BSA
insurance premiums and non-compliance with the
Domestic Building Contracts Act.
Industry monitoring indicated that adjusting to the financial
requirements over the 1999/2000 and 2000/01 financial
years had created a degree of frustration for the industry.
It is pleasing to report that the reaction to these
requirements has settled and they are starting to have the
desired effect of preventing those individuals with
insufficient equity to sustain operational viability from
entering or continuing to work in the industry.
Some contractors continued to express concern about
the cost of obtaining independent certification and the
bureaucratic process for self-certification. In response to
these concerns, Category 1, 2 and 3 contractors, who are
not required to be audited as their turnover is less than
$10M can elect to change their renewal date to allow them
to provide the appropriate financial information based on
their end of financial year position. This will deliver a
significant cost saving for these contractors.
Since October 2000, contractors with an annual turnover
less than $250,000 have been able to self-certify their
financial position upon licence application and renewal.
This process has required contractors to sign a separate
statutory declaration. A significant number of contractors
continued to experience difficulties in completing the
statutory declaration. In early 2002 a statutory declaration
was incorporated into the application and renewal form
to simplify this requirement.
-->
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 6
7
Security of payment has long been a prominent concern
for the Board. The significant challenge has been to
identify a tool that industry can use to protect itself from
non-payment and defend itself when head contractors are
placed in bankruptcy or liquidation. While the majority of
building contractors conduct their business in an ethical
and professional manner, the highly competitive nature of
the building industry has attracted a relatively small
percentage of operators who, seemingly, use the current
legal system to defer or slow payments to subcontractors,
largely using the excuse of defective or incomplete work
as grounds for non-payment. The lack of an appropriate
solution to this problem has prompted the Board to
formulate a new direction to resolve the issue.
In early 2001, BSA released a discussion paper on
payment reforms. The paper proposed the adoption of
legislation based on the New South Wales model that also
incorporated the best aspects of the Western Australian
model. The proposal is centred on delivering improved
payment outcomes for everyone in the construction chain
through a system of rapid adjudication and strong
contractor default provisions.
To date, the discussion paper has been positively received
and substantial progress has been made on developing a
policy position for the State Government’s consideration.
If supported the new legislation proposed in the discussion
paper is expected to be implemented in the 2003 financial
year.
Unlike our counterparts in other states, building contractors
and consumers in Queensland have been protected from
problems that plague private interstate home warranty
insurance schemes. The problems interstate surfaced soon
after Christmas when private home warranty insurance
schemes announced premium increases of up to 150%.
Shortly after, a major underwriter withdrew temporarily
from the market. Interstate contractors were unable to start
building projects until insurance was in place. This situation
created an artificial choke on building activity with many
contractors unable to commence work until they could find
an insurer.
Thankfully these pressures have had no affect on the
operations of the Queensland statutory home insurance
warranty scheme operated by BSA. BSA has the most
effective home warranty insurance scheme in Australia. It
offers Queensland consumers:
• No fault subsidence cover;
• No excess payable on claims;
• Superior benefits for claims arising through non-
completion of a contract.
The Scheme has served Queensland since 1977 under the
Builders Registration and Home-Owners’ Protection Act
and since 1992 under the Queensland Building Services
Authority Act. Over the past 12 months some 62,500
policies with a premium value of $27.792M were written.
Queensland’s scheme has performed very effectively with
99% of claimants in 2001/02 having their losses fully
covered. Insurance cover is given instantaneously to
contractors through Insurance Phone Pay, with policies
forwarded to consumers the same day. In recognition of
the outstanding improvements afforded to industry through
the Insurance Phone Pay introduced 1 July 2000, BSA was
awarded the 2001 Premier’s Award for Excellence in
Public Sector Management.
Uncertainty in the southern home warranty insurance
market, led the Federal Government, to announce in
December 2001, the appointment of consultant Professor
Percy Allan to conduct a National Review of Home
Warranty Insurance and Consumer Protection. Professor
Allan announced his preliminary findings in June 2002
citing the majority of the elements that are already part of
Queensland’s system as the model for success.
I thank my fellow Directors for their support and
commitment throughout the year. The Board
acknowledges the commitment of the experienced
Executive team and all BSA’s staff in making another
outstanding contribution this year.
Many challenges lie ahead. I am confident BSA’s capable
staff are competent to meet them and will continue to
improve BSA’s performance for the benefit of industry and
consumers.
G RossowChairman
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 7
8
At the beginning of the 2001/02 year, the Board and BSA,in conjunction with industry, developed our strategicdirection for the next four years. The direction beingpursued is to improve standards, equity and confidencein the industry and focuses on achieving the followingoutcomes:
• A licensing system, aligned with full tradequalifications, that builds on continuous improvement;
• A compliance program that builds integrity into theregulatory framework;
• More readily accessible advice and education forconsumers and licensees;
• Access to affordable, equitable and effective disputeresolution;
• Adequate protection to consumers against problemsnot of their own making; and
• Practical and responsible involvement of the industryin monitoring, assessing and improving the industry’sperformance.
Our operational aims for the last 12 months were built onthis strategic direction and were designed to consolidateand add value to the industry and more effectively protectconsumers. We set the following goals for the year:
• Ensuring our customers know, understand and supportus and know what we have achieved;• Continuing to improve our position, image and
presence in the industry through the establishmentof a customer value framework:
• Working with contractors to develop a betterstandard of workmanship and focusing onsolutions relating to major recurring defects in theindustry.
• Ensuring the long-term viability of the StatutoryInsurance Fund and the General Fund:• Creating a five year financial management plan for
the General Fund;• Working with the reinsurers to maintain a viable
Insurance Fund.• Fostering a culture of adaptive leadership so that we
are highly regarded, trusted and visible within theindustry and community:• Assisting the industry on a national front through
substantial input into the National Review of HomeWarranty Insurance and Consumer Protection;
• Working with Building Licensing Australia to ensuregreater consistency in licensing by Australianbuilding regulators.
• Foster relationships where stakeholders have directinvolvement and influence on strategy development:• Developing a new licence class framework;• Creating legislative reforms relating to the
Subcontractors’ Charges Act 1974;• Researching and developing a payment model
which ensures subcontracting participants withinthe industry have an appropriate tool to remedynon payment and slow payment issues within thecontractual chain.
• Establishing a people oriented culture in which staffare recognised and have available the resources toenable them to achieve organisational and personalgoals:• Learning, fostering and motivating staff through the
development and delivery of an integratedapproach to human resource managementconsisting of a performance management anddevelopment scheme, a leadership developmentprogram and a training and career developmentplan.
The targets set for these goals were in the main eitherachieved or exceeded and the results are highlighted inthe operational section.
Over the past 12 months we have begun developingstrategies to enhance our marketplace reputation anddeliver value to stakeholders that goes well beyond thatwhich we currently provide. Central to achieving thesestrategies is the customer value framework.
The customer value framework we have developedenables customers to define value and staff to developsolutions and initiatives to improve our business. Theframework is based on customer research data collectedby BSA staff through focus groups (qualitative) andtelephone surveys (quantitative). The data is plotted ona value continuum and used to create innovative solutions.
In gathering the research data, 33 focus groups wereconducted throughout the State. The focus groups enabledBSA to engage builders, trade contractors and consumersand develop a clear insight on what issues were importantto them particularly in terms of the drivers of customerloyalty and commitment. The research also highlightedimportant opportunities for BSA to review its processes anddevelop new products and services in the future.
To complement the focus group research BSA carried outa state-wide telephone survey of builders, trade contractorsand consumers to test the findings of the focus groups.
Building Services Authority 2001/2002 Annual Report
General Manager’sReview
-->
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 8
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Stakeholder feedback identified areas where BSA shouldconcentrate its efforts over the next 12–18 months:
• Provision of timely, accurate information, accessible toall stakeholders;
• Responsible customer focus and services;• Balancing the relationship between all stakeholders;• Positioning BSA as leader in the industry;• Early intervention and extended scope for involvement
in disputes; and• Relationship building.
The research has also provided an insight intostakeholder’s views on BSA’s position and reputation inthe industry. On a 7 point scale where 1 representsindifferent, unknown or don’t care about their relationshipwith BSA and 7 represents being in partnership withBSA, BSA recorded a rating of 3.98 and 4.52 respectivelyfor home owners and licensees.
The statutory home warranty insurance scheme continuedto protect consumers and building contractors.Significantly, the scheme was not exposed to the upheavalimpacting in late 2001 on the home warranty insurancemarkets in other States.
The success of the scheme and its ongoing ability toprovide protection can be attributed to BSA ‘s structure forservice delivery:
• Licensing – responsible for technical and financialregulation of contractors;
• Dispute Management – responsible for disputeresolution between contractors and consumers;
• Statutory Insurance Scheme – providinginsurance of ‘first resort’ in the event of non-completion, defective construction and subsidence; and
• Information and advice – providing consumersand contractors with information, data and contractprotection.
This service model is unique in its application and providesa balance between effective regulation of the buildingindustry and unparalleled consumer protection.
The success of this model has enabled BSA to maintainreinsurance with three highly respected reinsurers, GerlingGobal Re, Munich Re and Employers Re, and has ensuredQueensland consumers and contractors have:
• The most comprehensive home warranty insurancecover in Australia;
• Transparent, cost effective premiums; and• Ease of access to the statutory home warranty
insurance scheme for consumers and contractors.
In 2000/01 the statutory home warranty insurance schemefaced financial pressures settling an unprecedented $18.7Min claims. These claims were largely a result of theintroduction of GST which led to a higher number ofcontractor failures and also the need to pay GST onrectification work.
This financial year has been more pleasing with claimapprovals of $15.781M and premium income of $27.792M.
This result contributed to the stronger net asset positionof BSA, with total assets standing at $5.364M comparedwith $4.658M the previous year.
After a disappointing 2000/01 financial year where anoperating deficit of $6.952M was recorded, it is pleasingto report a surplus of $728,000. The principle reasons forthis result were a buoyant industry, low interest rates, thefirst home owners grant and tighter controls onadministrative expenditure.
Total revenue increased by $1.226M to $24.969M, a 5.25%increase from $23.723M in 2000/01. The major influenceon the operating revenue was the buoyant industry leadingto increased premium income. This in turn has led to anincrease in insurance business of around 20%.
Investment earnings reduced the revenue result throughlower than expected investment returns totalling $13,000only. Total expenditure decreased by $6.434M to $24.241M,a 20.17% decrease from $30.675M in 2000/01. In a buoyantindustry environment with resultant increasing demand forservices it is pleasing to be able to contain any rise inexpenditure to a minimum.
There were 50,100 licensees at the end of the year, 17,600builders and 32,500 trade contractors. This year 2.1% oflicensees exited the Queensland Industry compared with3% in 2000/01. The downturn in the exit rate is attributableto staff working cooperatively with licensees.
Demand for advice and services remained steady. Some11,400 counter enquiries were handled, 5.6M visitorsaccessed the website carrying out in excess of 190,000licence searches, 4,831 dispute notifications were receivedand 1,680 insurance claims were made.
In cooperation with industry stakeholders, BSA focusedon problems associated with paint, plasterboard, wetareas, tiling, flashing, footing and foundation movement.Several working parties were formed during the last 12months and have developed initiatives to reduce theincidence of these defects. These working parties havedeveloped a range of strategies including fact sheets andproposed amendments to the Australian Standards toimprove the technical practices of contractors.
Looking towards 2002/03 it is intended to continue todevelop the business within the customer valueframework, implement payment reforms and a newlicensing framework. Importance will also be placed oncracking down on those who are not complying withlegislation, while continuing to build a licensing regimewith integrity, as well as better informing the public andcontractors to ensure a trouble free building environment.Emphasis will also be on preserving the critical role weplay for the industry and consumers through the operationof the statutory home warranty insurance scheme.
Ian JenningsGeneral Manager
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 9
--> Annual licence fees for contractors remain competitive compared tothose in other States. This is despite the fact that BSA provides awider range of services.
10
OPERATIONAL COST EFFECTIVENESS
Insurance
Estimated average administrative cost per insurance
claimant assisted was $3,393 in 2001/02. This represents
a decrease compared with 2000/01 when the average
cost was $3,545. The decrease can be attributed to reduced
demand on the scheme which enabled BSA to reduce the
claims backlog.
From 1 July, 2000 BSA introduced a phone based,
paperless payment system for contractors to take out
statutory insurance.
The cost of issuing a policy in 2001/02 was $26.76
compared to $47.30 per policy in 2000/01.
Disputes
The cost of resolving a dispute has risen from $680 per
dispute in 2000/01 to $923 in 2001/02. The increase in cost
reflects the complexity of disputes being lodged and an
adjustment to the costing model to better reflect true
costs. Generally owner’s expectations are increasing and
disputes are taking longer to resolve. In some cases BSA
engages the services of experts to compile reports on
certain elements of buildings.
Licensing
The average cost per licensee of maintaining the licensing
system has risen marginally from $63 in 2000/01 to $63.30
in 2001/02.
LICENCE FEES
Annual licence fees for contractors remain competitive
compared to those in other States. This is despite the fact
that BSA provides a wider range of services. Queensland
is the only State to charge a user-pays licence fee. Licensees
in Qld with greater annual turnovers pay greater licence
fees than licensees with lower turnovers.
HOME WARRANTY INSURANCE
BSA’s statutory home warranty insurance scheme provides
Queensland consumers with the most comprehensive
Home Warranty Insurance product available anywhere in
Australia. The Queensland scheme provides protection
against non-completion of contract works, rectification of
defects and is the only scheme that provides consumers
with protection against subsidence and settlement.
The scheme is now unique as it is the only non-profit,
statutory scheme of its type in Australia, and provides
benefits which are far superior to other interstate private
schemes. Consumers also benefit as the policies do not
require claimants to pay an excess.
Building Services Authority 2001/2002 Annual Report
Value for Money
Qld NSW Vic
Annual Licence Fee $200 $251 $180**
*SC2 – self certification – builders and trade contractors with annualallowable turnover of $250,000
**Victoria charges a fee per licence held.
Comparison of licence fees in financial category SC2*
State Premium2
Qld $431
NSW $770
Vic $580
Tas $660
SA $195*
WA $315*
ACT $545*
1 source National Review of Home Builders Warranty Insurance andConsumer Protection, June 2002.
2 Average Premiums post February 2002
* These schemes provide a lower level of insurance protection.
Comparison of interstate insurance premiums1
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 10
Building Services Authority 2001/2002 Annual Report
The Future
--> Our strategic outputs will continue to be strongly linked to the Whole-of-Government priorities of Community Engagement and a BetterQuality of Life for Queenslanders ...
11
QUEENSLAND’S GOVERNMENT POLICYPRIORITIES
BSA plays a critical role in the building and construction
industry through regulation that provides remedies for
defective building work, and support, education and
advice for both consumers and contractors.
Our strategic outputs will continue to be strongly linked
to the Whole-of-Government priorities of Community
Engagement and a Better Quality of Life for Queenslanders
by focussing on the following objectives:
• Financially viable and better performing contractors;
• Improved industry work standards;
• Improved consumer awareness of and access to
information and advice;
• Protecting consumers against loss through the statutory
home warranty insurance scheme;
• Equitable and effective dispute resolution; and
• Corporate governance that recognises the need to
observe high standards of corporate conduct and
practice.
The industry is a vital element of the Australian and
Queensland economy and has a significant impact on the
efficiency and productivity of other industries. It is an
enabler of investment activity, both relying on and
generating investment and making one of the most
significant contributions to the national economy in terms
of Gross Domestic Product and employment. In 2001 the
industry produced a turnover of $58.4 billion across
Australia and $11.9 billion in Queensland.
We will closely monitor national reforms and changes in
global fiscal policy to enable us to proactively minimise
potential impacts on the industry and our operations. We
will ensure our outputs continue to be strongly linked to
Whole-of-Government priorities.
FEDERAL AND STATE GOVERNMENTPROPOSALS
The First Home Owners Grant has been a catalyst for the
housing industry and the economy since the introduction
of the GST. The amended grant requirements for new
homes continue to be the stimulus in this sector. BSA
anticipates that the gradual phasing out of the grant will
affect the industry and the activities of BSA.
BSA is currently monitoring the progress of the Federal
Government’s National Review of Home Builders Warranty
Insurance and Consumer Protection. Generally, home
warranty insurance provides protection to consumers
constructing new homes or renovating against their
builder’s failure to finish the work or rectify defects.
The unique feature of Queensland’s home warranty
insurance is that it is administered by BSA, whereas all
other states and territories are privately administered.
The review is expected to provide valuable information
on alternative regimes which will give BSA the opportunity
to compare its home warranty insurance scheme’s
performance with the private sector.
Security of Payment has been a contentious issue within
the industry for several years. BSA intends to develop a
government policy position by late 2002 that will ensure
that anyone who carries out ‘construction work’ or
provides related goods or services is entitled to receive and
is able to recover progress payments.
The State Government is conducting a National
Competition Policy Review of the Queensland Building
Services Authority Act 1991. The outcomes of the review,
may have implications for the future conduct of BSA’s
business.
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 11
--> The unique feature of Queensland’s home warranty insurance is thatit is administered by BSA, whereas all other states and territories areprivately administered.
12
Building Services Authority 2001/2002 Annual Report
The Future (continued) ...
POPULATION AND DEMOGRAPHICTRENDS
Queensland’s population growth rate continues to exceed
that of the rest of Australia, due mainly to high interstate
immigration levels.
It is forecast that Queensland’s net interstate migration will
on average constitute nearly half the total population
growth in Queensland for the next 10–15 years, with an
annual increase of 1.74% over the next 5 years to 2007.
The majority of these migrants are of working age, and
directly strengthen Queensland’s labour force.
Queensland is expected to experience considerable change
in the age structure of its population, in line with national
projections, with the most significant impacts emerging
from the older age groups.
In support of continued positive demographic trends,
BSA will concentrate on ensuring its customers understand
and support BSA’s role.
DEMAND FOR CONSTRUCTION INDUSTRY
The Queensland building and construction industry is
extremely diverse in terms of size of firms, type of activity
undertaken, range of skills and technology employed.
In 2001/02 Queensland rebounded from a lull in dwelling
commencements, benefiting from the First Home Owners
Grant and low interest rates. A further upturn is forecast
over the next 3 years to 2004/05, with commencements
expected to reach in the order of 43,400 annually.
The impacts of this upturn on BSA are likely to be
demonstrated by sustained high levels of premiums paid
as well as a fluctuation in dispute management activity.
CUSTOMERS
BSA’s customers are builders, trade contractors and other
members of the building industry including consumers,
community organisations, industry associations,
government entities and staff.
BSA research indicates that industry participants describe
the environment as complex, intensely competitive,
unpredictable and uncoordinated. Though these are
generalisations they are accompanied by intense feelings
of frustration and anxiety in carrying out day-to-day
activities.
Customer understanding, awareness, satisfaction and
involvement with BSA business is critical. BSA is committed
to working in partnership with customers and better
managing the relationships it has with stakeholders.
Carolyn Laurensen, one ofour team of CustomerServices Officers
<--
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 12
--> Customer understanding, awareness, satisfaction and involvementwith BSA business is critical. BSA is committed to working inpartnership with customers and better managing the relationships ithas with stakeholders.
13
INNOVATION AND INDUSTRY TRENDS
Innovation and industry trends in Australia over the next
5–10 years will have a stronger emphasis on developing,
adopting and promoting ‘green’ alternatives for
construction.
Green housing developments are already being
constructed and trialed in Queensland.
The Australian Building Codes Board, is currently
developing a new building code for standardised energy
solutions for housing throughout Australia.
Other initiatives include:
• the development of the National Australian Building
Environmental Rating System, which will rate the total
impact of a building on the natural environment;
• the establishment of a new Co-operative Research
Centre for Construction Innovation, administering
Federal funding and in-kind commitments to the value
of $64M over seven years.
Consumers are major drivers of the green push, demanding
environmental outcomes in residential building and major
subdivisions.
BSA will monitor these developments and implement
strategies to enhance industry understanding in the future.
LEGISLATION
BSA’s focus will be on continuing to manage and review
the effectiveness of the legislation administered, specifically
the Queensland Building Services Authority Act 1991, the
Domestic Building Contracts Act 2000 and the
Subcontractors’ Charges Act 1974.
Positive outcomes on a legislative front will be achieved
through consultation and interaction with industry
stakeholders and professional practitioners who are
affected by the legislation and BSA policy.
A consistent issue confronting BSA has been the lack of
compliance by industry with legislation and policy. BSA
will continue to implement a comprehensive industry
compliance strategy and educational initiatives to ensure
industry participants and consumers understand and meet
their statutory obligations.
Anna Metzdorf and Gina Do discussing acompliance initiative
<--
Jeff Pratt analysesrecurring defects in timber
frame construction
-->
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 13
Building Services Authority 2001/2002 Annual Report
Critical Areas and Values
14
4. Performance
Continually innovate and improve in a costeffective manner.
1. Customers
Provide superior customer service.
2. People
Respond to staff needs and acknowledgetheir achievements.
3. Partnership
Working with our customers towards sharedoutcomes.
BSA, as an organisation, has five operational divisions –
Dispute Management, Licensing, Insurance, Building
Information and Corporate Services. This divisional
structure assists in delivery of specific services; however
it is critical to our success that these areas work
cooperatively to achieve corporate goals. Our corporate
plan is structured to assist in this cooperative approach and
--> our reporting processes have been designed to
demonstrate BSA’s performance as a whole, rather than
in parts. The Critical Areas which form the framework of
our Corporate Plan and against which we report are (as
depicted) closely tied to our Values. These are the
corporate drivers which enable us to measure our progress
towards achieving our Vision and Mission.
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 14
15
-1
0
1
2
-1
0
1
2
-1
0
1
2
-1
0
1
2
-1
0
1
2
-1
0
1
2
Custom
ers
Leadership
People
Corporate
GovernanceLe
gisl
atio
nan
dPo
licy
Financial Managem
ent
Corporategovernance
issues
Audit
report
Compliancewith statutoryrequirements
Net assets
Proft/(loss)
from ordinary
activitiesCu
rrent ratio
Staff
turn
over
Wo
rkfo
rce
atti
tud
ein
dexPage 28
Page 54
Page 38
Page16
Page
42
Page 50
% o
f app
roved
claiman
t fully
com
pen
sated
% of disputes
satisfactorily
resolvedCustomer
continuum
Customer
continuum
% of customers
surveyed who
rate service
above average
% ofunlicensedcontractorsdetected
Numberof disputesreceived
Numberof directions
issued
Percentage of
directions
satisfactorily
complied with
Legislative
amendments
implemented
Sound
progre
ssion to
national
consis
tency
on
key is
sues
within
the
industr
y and
governm
ent
Wor
kpla
ceA
ttit
ude
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xFa
ctor
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ith c
orpo
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Partnership
Performance
-1
REDUCED PERFORMANCE
0
INCREASED PERFORMANCE
1
INCREASED PERFORMANCEMET TARGET
2
INCREASED PERFORMANCEMET/EXCEEDED TARGET
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 15
Value
--> Performance:Continually innovateand improve in a costeffective manner
Goals
--> To maintain andenhance a risk aversecorporate governancemodel including afocus on knowledgemanagement
Strategies
--> Develop strategies by which the Board andExecutive management can monitor the health ofthe organisation
Building Services Authority 2001/2002 Annual Report
Corporate Governance
--> To provide us all with the surety and confidence in ouroperations, we aim to be open, transparent, highlyaccountable and responsible for our actions.
16
Ian Jennings
Comments
<-- BSA continued to movetowards a moreproactive approach indealing with corporategovernance issues.Increased attention wasdirected to riskmanagement with theFinance and AuditCommittee revising itscharter to oversee thisissue.
REDUCEDPERFORMANCE
INCREASEDPERFORMANCE
INCREASED PERFORMANCEMET TARGET
INCREASED PERFORMANCEMET/EXCEEDED TARGET
-1
0
1
2
<-- Corporategovernanceissues
TARGETUnqualifiedAudit Report2002 ACTUAL
Unqualified auditreport rceived
<-- Audit report
<-- Compliancewith statuory
requirements
TARGETFull compliance
2002 ACTUALFully complied
TARGETNo major issues
2002 ACTUALNo major issues
--> Achievement
against KPMs 2001/02
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 16
The foundation to build on
Key Performance Measures 2001/02
--> Unqualified audit report
--> No major corporate governance issues
--> Full compliance with statutory requirements
Achievements 2001/02
--> Unqualified report
--> No major issues
--> Fully complied
17
CORPORATE GOVERNANCE FRAMEWORK
BSA has researched and is adopting Best Practice
Corporate Governance Standards which build on the
Australian National Audit Office’s five principles of
Leadership, Management environment, Risk management,
Monitoring and Accountability with reference to
information.
BSA’s corporate governance framework aims to deliver a
high standard of corporate practice and conduct to ensure
the organisation is highly accountable and responsible for
its actions, complies with statutory requirements,
incorporates an appropriate level of risk into its operations
and is ethical and transparent in its decision making and
treatment of its stakeholders, customers and staff.
Key elements of the corporate governance framework are:
• Legislation
• Board composition
• Strategic planning
• Business planning and budgeting
• Finance, audit and risk committee
• Policy committee
• Performance management framework assessment
• Evaluation and review
The corporate governance framework is facilitated through
the Board and the General Manager.
LEGISLATION
The Queensland Building Services Authority is a Statutory
Authority established under the Queensland Building
Services Authority Act 1991. The Authority is a body
corporate and consists of;
• the Queensland Building Services Board; and
• the General Manager, and the organisational unit
under the control of the General Manager.
Without limiting the above, the General Manager’s
functions and responsibilities include the following:
• administration of the licensing system;
• administration of a system of inspection;
• issuing directions for rectification of building work;
• taking disciplinary and other proceedings;
• assessing and approving payment of insurance claims;
• issuing warnings to the public or any section of the
public;
• providing and promoting consumer education;
• reporting regularly to the Queensland Building Services
Board on the administration of the Act;
• undertaking strategic planning to ensure that BSA’s
resources enable it to maintain the services it is
required to provide;
• providing an advisory service to consumers in relation
to:
• their statutory rights and obligations;
• their contractual rights and obligations under
building contractors;
• insurance claims that may arise about building
work;
• the Authorities role, functions and operating
procedures; and
• any incidental matters;
• providing courses of instruction for:
• persons seeking to obtain licences;
• licensees;
• persons proposing to carry out building work as
owner-builders;
• other persons seeking to acquire knowledge or
expertise in subjects relating to the building industry.
The foundation to build on
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 17
18
Building Services Authority 2001/2002 Annual Report
Corporate Governance (continued) ...
THE COMPOSITION OF THE BOARD
The Board is appointed by the Governor-in-Council on the
recommendation of the Minister for Public Works and
Minister for Housing.
The Queensland Building Services Board consists of 8
members – 7 voting members who represent builders and
trade contractors (3) consumers (2) the accounting
profession or the insurance industry (1) the building and
constructions unions (1) and a non-voting member who
is a public service officer. The Chairperson is appointed
from among the 7 voting members rather than in addition
to them.
The current Queensland Building Services Board was
appointed effective from 1 October 1999 for a term not
exceeding three years. For the reporting period until 18
October 2001 one consumer representative position and
the public service office position were vacant. Replacement
representatives were approved by Governor-in-Council
from 18 October 2001 for a term that expires in line with
the other members.
Garry Rossow – Chairman
Garry has over thirty-seven years’ experience in the
building construction, property development and
subcontracting industries in Queensland and the USA. He
is a Director of the Building Unions Superannuation
Scheme Queensland (BUSSQ) and several private
companies as well as serving as a State Councillor of the
Queensland Master Builders’ Association (QMBA). He
has served as Queensland Vice President of the Australian
Institute of Building and is a Past President of the QMBA.
Garry is a Fellow of the Australian Institute of Building,
an Associate of the Australian Institute of Arbitrators and
Mediators and a Justice of the Peace.
Jill Lee – Representative of licensed builders
Jill is General Manager (Queensland) of Westminster
Homes Pty Ltd and has over eleven years’ practical
experience in building, administration and site
coordination. She is the immediate Past President of the
Housing Industry Association in Queensland.
Ray Gilmour – Representative of licensed
contractors other than builders
Ray has over twenty years’ experience in business and the
building industry, particularly in the landscape sector. He
has owned and operated companies both in Australia and
overseas. He is President of the Queensland Association
of Landscape Industries and a member of the National
Subcontractors Association, the Building Industry
Subcontractors Association, the Landscape Association of
Australia and the Queensland Nursery Association. Ray is
also a fellow of the Australian Institute of Management and
a member of the Institute of Company Directors.
Jim Russell – Consumer representative
Jim was a member of the Builders Registration Board of
Queensland in 1991 before joining the Queensland
Building Services Board. He is currently one of two
consumer representatives on the Board. He has extensive
experience in the insurance industry and as a Board
Director. He was State Manager of Mercantile Mutual
from 1978 to 1996 and is a Past Chairman of the then Life
Insurance Federation of Australia Queensland Branch.
Jim is Chairman of the Sisters of Charity and Holy Spirit
Health Service Queensland Limited.
Pauline Pender – Representative of the
accounting profession
Pauline is a Fellow of the Institute of Chartered
Accountants in Australia, with considerable commercial
experience in providing internal financial management
strategies and reporting. She is the General Manager,
Finance and Business Development in the Department of
Primary Industries.
Wally Trohear – Representative of building
and construction unions
Wally has been involved with the building industry for over
thirty years. He is State Secretary of the Construction,
Forestry, Mining and Energy Union – Construction Workers
Divisional Branch and Secretary of the Building Trades
Group of Unions. He is Junior Vice Chair of the Australian
Council of Trade Unions Queensland and Chair of the
Workplace Health and Safety Construction Sector Standing
Committee. Wally is also a Director of BUSSQ and a
Director of Q-Leave.
The Board: (left to right) Pauline Pender, Gary May,Tracey Wilson, Ray Gilmour,Garry Rossow, Jim Russell, Jill Lee and Wally Trohear
<--
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 18
--> Board members ... are non-executive and their independent andobjective consideration of issues is invaluable in ensuring BSA’sstrategic direction, and organisational performances are aligned tostatutory, government, industry and community objectives.
19
Tracey Wilson – Consumer representative
Tracey has over 22 years’ regional business experience
throughout NT, NSW and Queensland. She owns and
operates her own consultancy, Working Visions Queensland
based in Gladstone, providing community-based research,
training and human resource management services. Tracey
brings to the Board a broad range of skills and expertise
in these areas. Tracey is Education Representative on the
Gladstone JobSkills Bursary Committee, and a member of
the Australian Human Resource Institute, Recruitment and
Consulting Services Association, Gladstone Working
Women’s Network, and the Institute of Sustainable and
Regional Development Committee.
Gary May – Public Service member (non-voting)
Gary is the Deputy Director-General, Department of
Public Works. He has extensive experience in the design
and construction of major capital works and has developed
innovative approaches to the procurement of these
facilities. As the Deputy Director-General, Gary is
responsible for the management of major government
capital works projects and the development and
implementation of whole-of-government policy
frameworks in the area of procurement and asset
management. He is a member of the Australian
Procurement Construction Council and has been closely
involved with major change processes in government
agencies and the building industry within Australia.
REMUNERATION
The Governor-in-Council determines remuneration of
Board members. Allowances paid to the Board members
totalled $19,870 this year up from $17,750 last year. These
figures exclude travel and associated expenses incurred
in the course of their duties.
LEADERSHIP
The Role of the Board
Board members including the Chairperson are non-
executive and their independent and objective
consideration of issues is invaluable in ensuring BSA’s
strategic direction, and organisational performances are
aligned to statutory, government, industry and community
objectives. The composition of the Board ensures an
appropriate mix of experience and skill in industry,
business and consumer issues.
The Board and General Manager establish BSA’s strategic
direction in consultation with stakeholders. Operational
planning for the achievement of corporate goals consistent
with the strategic direction is undertaken with staff input.
BSA’s performance and achievement of target outcomes
is monitored by its Executive management team and by
the Board at its regular meetings. Two committees have
been established to assist the Board in its role – the
Finance, Audit and Risk Committee and the Policy
Committee.
The Role of the General Manager
The General Manager is responsible for the overall
management of the organisation providing leadership
and ensuring conformity with statutory and accountability
requirements and advising the Minister on key issues and
performance. While the General Manager is independent
of the Board, the position reports regularly to the Board
on administration of legislation and must give effect to the
Board’s policies. In conjunction with the Executive
management team, the General Manager communicates
governance principles throughout BSA ensuring the
effective operation of internal checks and balances.
Full Board FA&R Policy
Number of Meetings 12 6 6
Garry Rossow 12 6
Jill Lee 10
Ray Gilmour 9 4 2
Jim Russell 12 6
Pauline Pender 7 6
Wally Trohear 5 1
Tracey Wilson 5*
Gary May 6*
* Ms Wilson and Mr May were appointed from 18 October 2001 andonly had the opportunity to attend seven Board Meetings.
Meetings attended
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 19
Ian Jennings
General ManagerCol Wright
Acting DeputyGeneral Manager
Ian White
ExecutiveManager, DisputeManagement
Jason Smith
ExecutiveManager,Licensing
Mandy
McCosker
Acting ExecutiveManager,Insurance
Brad Perry
Executive ManagerBuildingInformation
Lewis Hayes
ExecutiveManager,Corporate Services
20
Building Services Authority 2001/2002 Annual Report
Corporate Governance (continued) ...
EXECUTIVE MANAGEMENT TEAM
Ian Jennings is BSA’s General Manager and has over
9 years’ experience in the building industry. Ian previously
held the positions of Deputy General Manager, Q-Leave
for four years and General Manager, Q-Leave for two years
Col Wright who was originally an insurance industry
professional has had 22 years’ experience with BSA and
its predecessor the Builders’ Registration Board of
Queensland specialising in the administration and
development of BSA’s home warranty insurance scheme.
Col is the Acting Deputy General Manager.
Ian White has over 42 years’ experience in the building
industry as a builder and building surveyor. Ian has held
the position of Executive Manager, Dispute Management
for the past 8 years.
Jason Smith has 6 years’ experience as a solicitor
specialising in Building and Construction Law and
Insolvency Law. Jason was appointed Executive Manager,
Licensing in September 2001.
Mandy McCosker has in excess of 20 years’ experience
in the general insurance industry. Mandy has been Acting
Executive Manager, Insurance since August 2001.
Brad Perry has 26 years’ experience in the public
sector specialising in information and educational resource
development, telephone advisory centres, marketing,
media and community consultation. Brad has held the
position of Executive Manager Building Information for
the past 8 years.
Lewis Hayes has over 13 years’ experience managing
corporate service functions in government organisations.
Lewis has held the position of Executive Manager,
Corporate services since October 2001.
Manager,Compliance
ExecutiveManager,DisputeManagement
ExecutiveManager,Licensing
ExecutiveManager,Insurance
Manager,PolicyandLegislation
ExecutiveManager,BuildingInformation
ExecutiveManager,CorporateServices
Organisational Chart
Manager, LegalServices
Manager, Infor-mation Services
FOI Coordinator
Manager,Finance
Manager,Administration
Education Officer
Media and Comm-unications Officer
Manager, HumanResources
Manager, CustomerService Centre
Dispute ServiceManagers (4)
Manager, Researchand Review
Manager, LicensingDevelopment
Manager, LicensingProduction
New BusinessTeam Leader
Manager, Claims Manager, DebtRecovery
GeneralManager
Minister
Deputy GeneralManager
Queensland Building Services Board
BSA Regional Offices:
CairnsTownsvilleMackayRockhamptonSunshine CoastGold CoastToowoomba
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 20
--> In conjunction with the Executive management team, the GeneralManager communicates governance principles throughout BSAensuring the effective operation of internal checks and balances.
21
STRATEGIC, BUSINESS PLANNING ANDBUDGETING
Critical issues identified by stakeholders at the annual
Strategic Planning Conference help to determine BSA’s
direction for the coming year. Taking industry feedback
into account, the Board and Executive management team
review the corporate plan and settle on strategic priorities.
An environmental scan, including forecasts for the building
industry, is also taken into consideration when developing
strategic priorities. Executive managers and staff are
charged with planning how these priorities will be
actioned. The budget and operational plans are developed
based on priorities and agreed targets.
BSA enhanced its business planning and resource
management cycle in 2001/02 by ensuring budget and
operations functions had a shared focus and that there was
a greater emphasis on more regular reporting and review.
Budgets and operational plans are developed by the
Executive management team to create a shared
understanding of BSA’s budget and operational priorities.
Monthly reviews on budgets and quarterly reviews on
operational plans are then undertaken throughout the
year. Budgets and plans are adjusted through these regular
performance reviews.
Energy Management
Following the relocation of several staff from temporary to
permanent accommodation, a review of energy purchasing
was commenced. A review was undertaken with other
tenants in the building occupied at the rear of Edmondstone
Street. A tender was published and a new energy supplier
chosen. This will provide savings of around 34%. The
next step will be a review of energy practices and needs
with the aim of minimising consumption.
Information Technology
BSA’s Information Steering Committee (ISC) was
reconvened to ensure that the significant capital investment
associated with information technology generates a high
return through improved customer services and more
efficient work practices. The ISC comprises the Executive
management team, Manager, Information Services and
an external representative. The ISC’s role is to discuss and
decide on information technology and telecommunications
strategies, plans, priorities and major projects.
Major initiatives in 2001/02 included the continued
development and enhancement of BSA’s main business
application, the Contractor Management System (CMS),
redevelopment of the Intranet, development of
management information systems and the implementation
of a new financial management information system,
Finance 1 with a go-live date of 1 July 2002.
Service Delivery Model
Finance, Audit& RiskCommittee
MinisterGeneralManager
QueenslandBuildingServices Board
Compliance
Licensing
DisputeManagement
Insurance
BuildingInformation
CorporateServices
PolicyCommittee
Core businessprogramsplanning andcoordinatingservices
Builders, tradecontractors,industryassociations,consumers,communityorganisationsandGovernment
Customersrequiringquaility services
GeneralManager/Boardprovidingleadership
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 21
--> The code (of conduct) provides an ethical framework for behaviour,actions and decisions and plays an integral role in supporting BSAvalues of respect, trust and accountability.
22
Building Services Authority 2001/2002 Annual Report
Corporate Governance (continued) ...
The CMS initiative led to the claims, legal and compliance
systems redevelopment and significant work was also
carried out on a debtors sub ledger interfaced to Finance
1. The introduction of these systems streamlined
information flows across BSA and improved the level of
support provided to business processes.
BSA’s Intranet was upgraded to a more efficient technical
environment to enhance the distribution of information
across the organisation. Features of the new Intranet
include text and keyword search facilities for BSA
documents and improved presentation of data and
information.
Management reporting requirements for the Licensing,
Insurance and Dispute Management Program areas were
developed, based on key performance indicators (KPI’s).
The reports, published on the Intranet, allow progress
against the appropriate KPI’s to be monitored on a daily
basis.
BSA’s financial reporting framework will be aligned in
2002/03 to the business requirements of BSA through a
new financial software package, Finance 1. It is expected
that Finance 1 will enable more efficient reporting and
assist with the effective financial management of the
Authority.
Ongoing initiatives include the establishment of remote
computing capability for BSA building inspectors,
upgrading of all desktops to MS Word Office 2000,
implementation of a consistent anti-virus strategy,
upgrading of security in BSA systems, website and Internet
access.
The small number of staff currently able to access BSA’s
network from remote locations will be considerably
extended during 2002/03.
BSA’s standard operating environment was upgraded
during the year to include the latest version of Microsoft
Office 2000. This supports the management goal of
providing staff with the most effective tools for day-to-day
service delivery.
Code of Conduct
The Code of Conduct applies to all Board members and
BSA employees. The code provides an ethical framework
for behaviour, actions and decisions and plays an integral
role in supporting BSA values of respect, trust and
accountability. It ensures that consistent standards and
approaches are adopted in all our dealings. Code of
Conduct awareness sessions were conducted for all staff.
The sessions covered the current Code of Conduct and the
review and redevelopment of the new Code. Following
endorsement by the Executive management team, similar
sessions on the new Code will be run for staff.
FREEDOM OF INFORMATION
The Freedom of Information Act 1992 provides the public
with an enforceable right of access to documents held by
Queensland Government agencies, including BSA. Certain
documents such as material that is commercially sensitive,
subject to legal privilege or relating to the personal affairs
of parties other than the applicant, may be exempt from
access. If applicants do not agree with a decision to
refuse or limit access, they may request an internal review
by another officer and then ultimately by the Information
Commissioner.
Information Services staffdiscussing Finance 1implementation
<--
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 22
--> In September 2001, the State Government approved the introductionof an administrative system for all government departments andagencies relating to the collection, storage use and disclosure ofpersonal information.
23
BSA received 199 Freedom of Information applications of
which 154 (77%) were deemed administrative access i.e.
the applicant had a direct interest in the material subject
to the application. There were 42 (21%) applications that
were deemed non-personal and 3 (2%) deemed personal.
Twenty applications were subsequently withdrawn. BSA
considered 36, 505 documents and full access was granted
to 29, 874 (82%) documents and partial access to 3, 744
(10%) documents. Access was refused to 2,886 (8%)
documents. There were 11 applications for internal review
with the original decision upheld in nine cases. There were
five applications for external review with the Information
Commissioner. Two applications were withdrawn and in
a further two cases, the original decision was varied in part.
One application awaits a decision.
To ensure BSA met its statutory obligations under the
Freedom of Information Act 1992, a separate Freedom of
Information unit was formed. Staff were trained in
amendments to the Act and on other Freedom of
Information matters to maintain a high level of quality
control.
Information Privacy
In September 2001, the State Government approved the
introduction of an administrative system for all government
departments and agencies relating to the collection, storage
use and disclosure of personal information. The
requirements are set out in Information Standard 42.
The Information Standard applies to ‘personal information’
which is defined as:
“information or an opinion, whether true or not,
and whether recorded in a material form or not,
about an individual whose identity is apparent or
can be reasonably ascertained from the
information or opinion.”
BSA collects personal information as part of its role in
licensing contractors, managing disputes, providing home
warranty insurance and corporate services.
BSA implemented Information Standard 42 by:
• Reviewing all types of personal information collected
and stored by BSA;
• Reviewing all current agreements with external parties
and developing a standard clause for insertion in all
future contracts to ensure compliance with Information
Standard 42;
• Preparing a Privacy Plan that sets out BSA’s actions for
complying with Information Standard 42. It also gives
guidance to members of the public to assist them on
how BSA manages personal information and how
they can exercise their privacy rights and to BSA staff
who deal with personal information. The Privacy Plan
is published on BSA’s website;
• Preparing a Privacy and Security Statement that is
published on BSA’s website; and
• Preparing a notice that has been added to its
Application and Dispute Notification forms.
Because the Information Standard is linked to the
requirements of the Freedom of Information Act 1992, it
has been included in the Freedom of Information Unit’s
charter. Staff training will be completed in 2002/03. No
applications were received during the year.
Whistleblowers Protection Act 1994
BSA is a ‘public service entity’ as defined by the
Whistleblowers Protection Act 1994. BSA received no
disclosures during the reporting period under this
legislation.
Dian Davidson overseesthe Phonepay database to
ensure information privacy
-->
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 23
--> Through regular review process BSA aims to be proactive rather thanreactive.
24
Building Services Authority 2001/2002 Annual Report
Corporate Governance (continued) ...
MONITORING, ACCOUNTABILITY ANDRISK MANAGEMENT
There are 2 committees of the Board that complement the
monitoring process built into normal daily operations.
Through regular review process BSA aims to be proactive
rather than reactive.
Finance, Audit and Risk Committee
The Finance, Audit and Risk Committee oversee the
internal audit function, including strategic and annual
audit plans and also considers BSA’s budgets, financial
statements and financial position assessments.
With regard to risk management it assesses the adequacy
of the risk management framework and risk policies and
ensures issues relating to risks and threats to BSA are
incorporated into audit planning. The role of overseeing
risk management allows for greater co-ordination and
control of risk issues which are often linked to the internal
audit agenda. The Committee consists of three Board
members and is chaired by Ms Pauline Pender with other
members being Messrs Jim Russell and Ray Gilmour.
The main areas of focus for the Committee were
oversighting of the annual audit program, consideration
of management responses to recommendations and
progress in implementing recommendations. This ensured
that the full audit review and action cycle was achieved.
The Committee also focused on reviewing the Authority’s
quarterly financial performance and position, provided
feedback to management and reported to the Board. This
achieved an appropriate level of monitoring of BSA’s
financial position on behalf of the Board.
The Committee was assisted by BSA’s General Manager,
Ian Jennings, Acting Deputy General Manager, Col Wright,
Executive Manager, Corporate Services Lewis Hayes and
Manager, Finance Keith Chester.
Policy Committee
The Policy Committee was established to advise the Board
on matters relating to the need for new policies and the
need to review existing policies governing the
administration of the Queensland Building Services
Authority Act 1991. The Committee also advises on the
need for amendments to the legislation administered by
BSA. The Committee provides a valuable conduit between
BSA and its industry and consumer stakeholders.
The Policy Committee is chaired by Mr Garry Rossow and
includes Messrs Wally Trohear and Ray Gilmour. Non-
Board members of the committee included Messrs Greg
McLean (Executive Director, Queensland Master Builders’
Association), Warwick Temby (Regional Director, Housing
Industry Association, Queensland Division), Doug Foggo
(Building Industry Specialist Contractors Organisation of
Queensland Inc. – as representative of trade contractor
licensees who subcontract to builders and other
contractors), Paul Daly (State Manager, Master Painters
Australia – as representative of trade contractor licensees
who contract directly with consumers) and Ms Cherie
Dalley (President, Queensland Consumers’ Association
Inc.). BSA’s General Manager, Ian Jennings and Clive
Griffin, Acting Manager Policy and Legislation are also
members of the Committee with relevant Executive
managers coopted as required.
The main areas of focus for the Committee during the year
were overseeing the progression of the Licence Class
Review, amendments to the Subcontractors’ Charges Act
1974, consideration of existing security of payment
measures with a view to developing a new payments
model through consultation with the industry, and
monitoring the progress of working parties dedicated to
investigating Top 10 Defects and recommending measures
for improvements in those areas.
Ray Gayton performing areconciliation of BSA’saccounts
<--
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 24
--> Internal audit is an independent function responsible for thesystematic review and appraisal of the efficiency, economy andeffectiveness of BSA operations.
25
Internal Audit
Internal audit is an independent function responsible for
the systematic review and appraisal of the efficiency,
economy and effectiveness of BSA operations. It is
instrumental in promoting and improving internal contexts,
accountability and operational efficiency. BSA views
internal audit as a constructive value-adding element in
the administration of the organisation.
BSA’s strategic audit plan which covers a 3 year period and
its annual audit plan are developed according to the
identified risks and issues likely to confront the
organisation. The Executive management team contribute
to the development of the plans which are approved by
the Finance, Audit and Risk Committee.
BSA’s internal audit function is provided by Ernst and
Young. The function is administratively responsible to the
General Manager and reports to the Board through the
Finance, Audit and Risk Committee.
Audits and Investigations
During the year audit reports were received on:
• Freedom of Information processes and controls;
• Processes and controls for the issue of owner builder
permits;
• Processes for calculation of BSA’s FBT liability;
• Administrative practices in place over BSA’s major
committees ie. Board, Finance, Audit and Risk
Committee and Policy Committee;
• Mechanisms by which financial and performance
reports are generated, reviewed and submitted for
the Board;
• Controls in place for Fixed Assets;
• Planning processes and documentation for BSA’s
Business Continuity Plan;
• Debt recovery processes;
• Prosecutions for unlicensed contracting and failure to
rectify through the State Penalties Enforcement Register
Scheme;
• Payroll processes;
• Recovery of claims costs from re-insurers;
• Follow up on previous years audits; and
• Information Technology projects including Claims
System Development, New Financial System,
Compliance / Legal System Development and Records
System Development.
Audit recommendations together with management
responses were reviewed by the Finance, Audit and Risk
Committee. The recurring issue was the need to improve
the documentation of policies and procedures. A number
of other issues and recommendations were also identified
from the internal audit program. The Executive
management team has accepted and agreed to implement
the audit findings.
In addition, to address this issue as raised in particular audit
reviews, all program areas have been required to include
operational policy and procedural issues in their plans for
2002/03.
A bi-annual review is conducted by internal audit to
report to the Finance, Audit & Risk Committee on progress
in implementing audit recommendations.
Priority areas for internal audit in 2002/03 include:
• Information Technology developments including CMS;
• Information Technology security;
• Financial processes including purchasing, accounts
payable, cash management;
• Fixed assets;
• Contract management;
• Human Resource establishment management;
• Licensing renewal; and
• Contractor PIN security and Insurance claims integrity.
BSA will ensure the integrity of the new financial system,
Finance 1, and implementation of associated procedures
including those associated with the administration and
management of assets and information technology
development will be further enhanced.
Building Services Authority 2001/2002 Annual report
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 25
--> BSA is now positioned to pro-actively manage debt. Additionalresources will be provided next financial year to allow for better co-ordination of debt recovery.
26
Building Services Authority 2001/2002 Annual Report
Corporate Governance (continued) ...
Risk Management
The Finance and Audit Committee’s charter was amended
to reflect greater co-ordination and control of risk issues
which are often linked to the internal audit agenda. The
Committee’s name was changed to the Finance, Audit and
Risk Committee to better reflect its new role. BSA’s risk
profile is reviewed annually in order to determine future
audit programs. The risk review for 2001/02 conducted as
part of the audit programme showed the need to continue
monitoring development of information technology
systems and further assess security. It is also intended to
review new financial procedures developed during the
implementation of the new financial management
information system, Finance 1. Human resource
management processes will also be reviewed together with
the implementation of the Phone Pay facility for licence
renewals.
Freedom of Information was identified as a moderately
high residual risk with regard to non-compliance with
legislation, policies and procedures and inadequate
resources. In response, a separate Freedom of Information
unit was formed, policies and procedures were reviewed
to meet legislative amendments and staff training was
undertaken.
Business continuity and disaster recovery plans were
reviewed and the risks identified in relation to BSA’s
ability to respond. An information technology disaster
recovery site is being established to cope with total
systems failure and services have been identified that are
critical to business recovery in the event of total
disablement of head office.
Policies and procedures for debt management were
reviewed and management and performance reporting
introduced. BSA is now positioned to pro-actively manage
debt. Additional resources will be provided next financial
year to allow for better co-ordination of debt recovery. An
in-house legal officer will be appointed to manage large
recovery issues.
The impact of builder failure and defective work on BSA’s
statutory home warranty insurance scheme is considered
a risk. BSA minimises this risk by reinsuring 75% of the
business.
Alison O’Neil and Alana Ingram reviewingthe Human ResourceStrategic Plan
<--
Gwen Hawkins and Chris Larsen discuss theBusiness Continuity Plan
-->
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 26
Planning and Reporting Framework
Corporate Plan Marketing Plan
Operational Plans
Resource AllocationBudget
Monthy Reports Annual Reports
Information,Communicationand TechnologyStrategic Plan
Workforce StrategicPlan
Asset StrategicPlan
EEO ManagementPlan
EnvironmentalScan
What we arefunding next12 monthsand fowardestimates
How we areperformingagainst our plansand targets.
Publiccommunicationof performance
What ourdirections andpriorities arefor the next four(4) years.What are the
critical factorsidentified by ourshareholders?
What issuesshould we beconcernedabout?
Staff Training andDevelopment Plans
--> We intend to build on our corporate governance framework, ensuringaccountability and limited risk exposure to our business. We will workwith the industry in a true partnership to ensure that there are strongstrategic links.
27
INVESTMENTS
The Finance, Audit and Risk Committee assist in
developing investment policies and strategies. It also
monitors the performance of the two fund managers,
Queensland Investment Corporation and Queensland
Treasury Corporation. Funds invested at 30 June 2002 were
$38.579M and returns on investments provided $0.013M
in revenue. The financial year was a difficult one for
investment markets. Equity market returns in particular
were adversely affected by the slowdown in the global
economy, the events of September 11 and the subsequent
continued threat of terrorist activity, falling company
earnings, corporate failure and corporate accounting
scandals (particularly in the United States). Cash
investments performed to market expectations and off-set
the managed fund losses thereby achieving a small positive
return.
The Committee is advised by its actuary and funds
managers in relation to the need to adjust the investment
policy and strategies.
THE FUTURE
We intend to build on our corporate governance
framework, ensuring accountability and limited risk
exposure to our business. We will work with the industry
in a true partnership to ensure that there are strong
strategic links.
KPMs 2002/03
--> No major corporate governance issues
--> Full compliance with statutory requirements
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:13 AM Page 27
Building Services Authority 2001/2002 Annual Report
Customers
Brad Perry
Comments
<-- Consumers continue tobe afforded effectiveprotection againstlosses associated withresidential construction.BSA’s customercontinuum project hasidentified areas forimprovement which willform the focus forinitiatives in the nextfinancial year.
28
Values
--> Customers: Providesuperior customerservice
--> Partnership: Workingwith our customerstowards sharedoutcomes
Goals
--> To ensure ourcustomers know,understand andsupport us and knowwhat we haveachieved
Strategies
--> Working with our customers towards sharedoutcomes in a climate of integrity, mutual respectand support
--> Continue to improve our position, image andpresence in the industry through community,industry and government infrastructures
REDUCEDPERFORMANCE
INCREASEDPERFORMANCE
INCREASED PERFORMANCEMET TARGET
INCREASED PERFORMANCEMET/EXCEEDED TARGET
-1
0
1
2
TARGETEstablish baselineposition - customer
commitment2002 ACTUALCommitment
continuum estblished
<-- % of approved
claimant fully
compensated
TARGET>70%
2002ACTUAL
71%
TARGET>70%
2002ACTUAL
95%
<-- % of disputes
satisfactorily
resolved
<-- Customercontinuum
<-- Customercontinuum
<-- % of customers
surveyed who
rate serviceabove average
TARGET>98%
2002ACTUAL98.7%
TARGETEstablish baselineposition - customer
satisfaction2002 ACTUAL
Satisfaction continuumestblished
--> Achievement
against KPMs 2001/02
--> Community education is an essential ingredient to oursuccess. We will place greater emphasis on strengthening our image and presence in the community.
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 28
29
CUSTOMER CONTINUUM
During the year BSA recognised the need to improve the
level of understanding and awareness across Queensland
of BSA’s role and mission and refocus its efforts to deliver
value to customers.
Central to improving customer understanding and support
was the development of a Customer Continuum. The
intention of this project was to make customer value an
interactive paradigm throughout the entire organisation.
BSA used a customer value framework that contained three
elements, being customer research, innovative solution
building and operating excellence. Innovative solutions are
developed, implemented and lead to operating excellence.
Through a series of focus groups and telephone surveys,
customers were given the opportunity to state what they
desired in service delivery while BSA staff were the driving
force behind the solutions and initiatives to improve its
business.
33 focus groups were held throughout Queensland, which
enabled BSA to engage builders, trade contractors and
consumers and work towards a better understanding of
local needs and issues. The data was analysed and
responses to issues and service delivery options developed.
A report back to focus group participants will occur in
September 2002.
To complement the qualitative research, BSA conducted
a state-wide telephone survey of builders, trade contractors
and consumers to test the findings from the focus group
sessions. In excess of 900 telephone surveys were carried
out.
The Customer Continuum project will be ongoing and its
findings will be a key input to BSA’s business planning
cycle and inform key processes such as the Strategic
Planning Conference and Corporate Plan.
The foundation to build on
Key Performance Measures 2001/02
--> Over 98% of approved claimants fully compensated
--> Over 70% of disputes satisfactorily resolved
--> Positive movement in the Customer Continuum
--> Customer satisfaction survey (70% rate serviceabove average)
Achievements 2001/02
--> 98.7% of approved claimantswere fully compensated
--> 71% of disputes weresatisfactorily resolved
--> Customer ContinuumBenchmark positions forcommitment and satisfactionestablished
--> 95% of customers surveyedrated service above average
7.00
0
1.00
01 Commitment continuum
Partner
Values
2.00
3.00
4.00
5.00
6.00
Verystrong
Relativelystrong
NeitherRelativelyweak
Veryweak
Indifferent/unknown
Licenseesdispute notmentioned
4.01
Licenseesdispute
mentioned4.07
Home ownerdispute notmentioned
3.98
Home ownerdispute
mentioned4.52
7.00
0
1.00
02 Satisfaction continuum
Partner
Values
2.00
3.00
4.00
5.00
6.00
Verystrong
Relativelystrong
NeitherRelativelyweak
Veryweak
Indifferent/unknown
Licenseesdispute
mentioned4.21
Licenseesdispute notmentioned
4.52
Home ownerdispute
mentioned4.93
Home ownerdispute notmentioned
4.60
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 29
--> More than 5.6 million visitors accessed BSA’s website during the year,a 22% increase on the previous year. The online licence search facilitywas well patronised with in excess of 191,000 searches undertakencompared to 140,000 in 2000/01.
30
Building Services Authority 2001/2002 Annual Report
Customers (continued) ...
ADVICE AND INFORMATION
Demand for telephone advice and information decreased
by 17%, from 190,909 calls received in 2000/01 to 156,331.
The decrease was greater in BSA regional offices where
there was a 25% drop in the number of telephone
enquiries.
The decrease was attributed to minimal legislative reform
compared to the previous year when the Domestic
Building Contracts Act 2000, was introduced. There was
a peak in demand for service in August/September 2001,
possibly the result of mailing complications that resulted
in licence renewal notices being sent after the licence
expiry date.
A factor contributing to the decline in calls was
improvements made to the licence renewal form and
renewal process which resulted in a considerable decrease
in the number of renewal inquiries.
Customer Service Centre performance levels were
marginally improved with average telephone wait times
reduced from 80 seconds to 76 seconds.
Over-the-counter enquiries remained consistent with
11,462 customers served at BSA’s Brisbane Customer
Service Centre compared with 11,472 in 2000/01.
Customer service standards were monitored internally
with 93.9% of phone customers and 96.6% of face-to-face
customers rating BSA’s service above average.
More than 5.6 million visitors accessed BSA’s website
during the year, a 22% increase on the previous year. The
online licence search facility was well patronised with in
excess of 191,000 searches undertaken compared to
140,000 in 2000/01. BSA continued to promote its email
subscription news services to builders, trade contractors,
consumers, building certifiers and accountants. The utility
of BSA’s website was tested as part of the customer
continuum project.
Respondents Rating %
--> BSA’s website
‘useful as most’ 27.9
‘more useful than most’ 21.3
‘extremely useful’ 10.6
--> BSA’s email newsletter
‘useful as most’ 26.3
‘more useful than most’ 19.0
‘extremely useful’ 18.1
Customers’ Rating of BSA’s Website and Email Newsletter
BSA’s websitehas provided
5.6 millionvisitors with
easy access toinformation
and services
-->
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 30
--> The media enthusiastically supported both unlicensed contractingblitzes. Most regional daily newspapers and radio stations as well asthe Courier Mail covered the blitzes. Publicity generated prior to thecampaigns helped to substantially lift licence applications state-wide.
31
BUILDING LINKS
Two editions of BSA’s newsletter Building Links were
published (December/June).
The December edition, the largest in the history of the
publication, contained detailed information on the progress
of the 25 recommendations developed at the 2000 Strategic
Planning Conference, the Licence Class Review (including
a tear-out survey form as part of the consultation process)
and proposed amendments to the Subcontractors’ Charges
Act. Two new sections were introduced; Team Talk –
addressing issues and providing advice relating to BSA’s
program areas and Your Say – answering feedback from
licensees.
The June 2002 edition covered the upcoming compliance
strategy, the progress of the Licence Class Review and the
Security of Payment proposals. Another new section,
Apprentice News, was added.
Media releases focused on BSA’s major compliance
activities such as the unlicensed contracting blitzes and the
Security of Payment campaign as well as BSA resources
such as the CD ROM and revamped contracts. BSA issued
various warnings to consumers on unlicensed contractors
and itinerant traders and to contractors on legislative
requirements. The Statutory Home Warranty Insurance
Scheme and Insurance Phone Pay were regularly promoted
to contractors and consumers.
MEDIA
BSA initiated a media campaign to publicise the release
of the Security of Payment discussion paper. The proposals
received substantial media coverage with more than 72
articles appearing in both broadcast and print media
throughout the State during the month-long campaign. The
proposals were also the subject of comprehensive write-
ups in The Courier-Mail’s general news and property
sections as well as various industry publications.
The media enthusiastically supported two unlicensed
contracting blitzes conducted during the year. Most
regional daily newspapers and radio stations as well as The
Courier-Mail covered the blitzes. Publicity generated prior
to the campaigns helped to substantially lift licence
applications statewide. The launch of the CD ROM in
August also received excellent coverage with Brisbane
Extra devoting a whole segment to the product. The
launch also generated articles in Brisbane suburban papers
as well as a number of regional publications.
The new Minor Works Contract also received good
coverage throughout Queensland in January and February.
BSA introduced several publicity and awareness initiatives.
These included the publication of important information
for licence holders forwarded as part of the renewal
process. The introduction of a Member of Parliament
email service enabled parliamentarians to keep abreast of
BSA activities and initiatives.
BSA keeps the industryinformed on current issuesthrough its newsletter,Building Links
<--
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 31
Builders make up 37.1% of the licensee database. 21.7% are housebuilders and 15.4% are general builders. BSA believes licenceclasses by profession provides a valuable insight into the size ofthe respective industries in Queensland. The largest tradecontractor profession is carpentry with 14.6% followed byplumbing 7% and painting 5.5%.
32
Building Services Authority 2001/2002 Annual Report
Customers (continued) ...
EDUCATING CONSUMERS
Changes in legislation, together with the need for a better
understanding of the Domestic Building Contracts Act
2000 in particular, also necessitated periodic review and
updating of the complete range of resource material
produced by BSA and the development of new Fact
Sheets on Subsidence and Swimming Pools.
The statewide distribution of information and advice
designed to better inform and protect older home owners
continued to be a major commitment for BSA. This group
remains a prime target for unscrupulous, and frequently
unlicensed, door-to-door contractors. The main activities
focused around the Seniors Week period, and included
advertising and group presentations, participation in
Seniors Week activities around the State, the widespread
distribution of relevant educational material including the
Fact Sheet ‘The Older Persons Guide To The Building
Process’, and assistance to the Home Assist/Secure Unit
of the Department of Housing with the update of their
Home Checklist Book for older home owners undertaking
renovation or maintenance work. As in previous years, the
impact of these BSA initiatives was greatly enhanced by
working in collaboration with ‘partners’ including key
older persons groups such as the National Seniors
Association and the Australian Pensioners and
Superannuants League and the State Government’s Seniors
Card Unit.
There was a need to ensure that prospective owner
builders were adequately informed and equipped for
their project management role. The development of a
revised Owner Builder Course Study Guide was nearing
completion at the end of the financial year. A
comprehensive review of other owner builder
documentation, policy and procedures was carried out.
Changes to legislation and Board policy are expected to
be completed in the coming year.
LICENSEE BASE
The number of licensees increased from 47,718 to 50,190.
The reasons for the increase are:
• From 1 July, 2001 it became compulsory for fire
protection operators in Queensland to hold a BSA
licence. BSA introduced eight new trade contractor
licences for the fire protection industry
• BSA introduced a strategy to reduce the number of
licensees whose licence was about to lapse by
contacting them before cancellation to discuss why
they were leaving the industry. Based on this strategy,
the licensee drop out rate reduced from 9.2% in
2000/01 to 5.7% this financial year.
BSA expects the number of licensed contractors to drop
to 47,500 at 30 June 2003 due to the introduction of new
legislation that will limit the requirement for sub-trade
contractors to hold a BSA licence.
There are 17,667 builders and, 32,523 trade contractors
licensed in Queensland. The number of licensed builders
increased from 17,384 in 2000/01 to 17,667 in 2001/02. The
increase in licensed building contractors is the first since
1998/99 when licensed builder numbers peaked at 18,308.
The number of trade contractors increased from 30,334 in
2000/01 to 32,523 in 2001/02.
03 Licence class by profession
Carpentry14.6%
Builder37.1%
Swimming Pool0.9%
Other 11.2%Plumbing 7%Painting 5.5%Building Restricted 4.6%Concreting 3.6%Plastering 3.4%Bricklaying 3.1%Tiling 2.4%Metal Fabrication 2.3%Fire Protection 2.3%Gas Fitting 2.0%
04 Licensee base by region
Cairns7.3%
Brisbane44.3%
Gold Coast 14.7%Mackay 3.6%Rockhampton 4.0%Sunshine Coast 14.9%Toowoomba 5.8%Townsville 5.4%
-->
74% of licensees are based in South east Queensland with 44.3%based in Brisbane. The number of licensees operating in thecentral coast Regions of Mackay and Rockhampton is expected toincrease over the next financial year based on forecasts ofextensive construction activity in those areas. Distribution oflicensees throughout Queensland remained consistent withprevious years.
-->
Sue Crawford discusses alicence application withJacquii Reeves
<--
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 32
60
0
30
45
06 Number of licensed builders and tradecontractors
01/0200/0199/0098/9997/98
15
Builders
Trade contractors
’000
33
LICENCE APPLICATIONS
BSA received 6,709 licence applications (1,202 builder and
5,298 trade contractor the remaining 209 did not proceed
with their application) compared to 6,993 licence
applications in 2000/01. 7,532 licence applications were
finalised compared to 6,087 in 2000/01.
The increase of 1,445 in finalised applications can be
attributed to the separation of the production and
development functions of the Licensing Program and the
introduction of a separate licensing team to handle fire
protection licence applications. Consistently, throughout
the year, BSA finalised more applications per month than
2000/01.
Of the 7,532 licence applications finalised, 6,500 (86.3%)
were approved, 771 (10.2%) were rejected and 261 (3.5%)
withdrawn.
LICENCE CLASSES
BSA has 110 licence classes,104 of which are available to
new applicants. By 30 June 2002, 50,190 licensees held
79,375 active licences with 44% of licensees holding more
than one licence. There are 17,201 active house builder
licences and 12,210 general building licences. At 30 June
2002, there were 49,964 trade contractor licences. Of the
50,190 licensees, 43,212 are individuals and 6,978 are
companies.
FIRE PROTECTION LICENSING
BSA approved 1,810 fire protection licences to 973 entities.
This represented the largest percentage of new applicants
of any licence class. To handle the specialised nature of the
new licence classes, a licensing team was created to process
the applications and handle the large number of enquiries.
A ‘grandfather clause’ allowing fire protection applicants
to become licensed simply by demonstrating between two
and five years relevant experience expired on 30 June
2002. BSA received 490 licence applications in the last
week of June, 280 of these were fire protection
applications.
LICENCE RENEWALS
This year, BSA continued development of its Contractor
Maintenance System (CMS) to improve automation of
licence renewals. Automatic renewals are approved after
the annual licence fee is receipted and the financial
information entered in CMS. For automatic renewal, the
correct fee must have been paid and the renewal form
correctly completed. If either of these are incorrect
licensing staff are required to review the renewal manually
which slows the processing time. The changes have been
successful. In March 2002 automatic renewals increased
from 30% to 62%. By June, automatic renewals were
at 68%.
6,814 licensees were suspended at renewal, 614 for non-
payment of fees, 1,396 for non-provision of financials and
4,804 were suspended for both reasons.
1,982 licensees were cancelled at renewal, 296 for non-
payment of fees, 101 for non-provision of financials and
1,585 were cancelled for both reasons.
800
0
400
600
05 Licensee age vs AATO*
60>51-6041-5031-4021-30
200
Number AATO
20<
16 000
0
8 000
12 000
4 000
Number $’000
The largest demographic is the 41-50 age group in which there are14,110 licensees. BSA has 23 licensees aged 20 years or youngerand 3,090 over the age of 60. The average Allowable AnnualTurnover for licensees 20 years and younger is $105,434.Licensees 60 years and older have an average Allowable AnnualTurnover of $738,479.
Since 1997/98 the number of Licensed Builders and TradeContractors has gradually increased.
-->
-->
Diane Clift and SueCrawford review the new
licence class framework
-->
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 33
34
Building Services Authority 2001/2002 Annual Report
Customers (continued) ...
DROP OUT RATES
The Licensee drop out rate measures the number of
licensees that have their licence cancelled throughout
the year. In 2001/02, 2,839 licensees (5.7%) had their
licences cancelled. This is a significant decrease in the drop
out rate compared with 2000/01 when there was a 9.2%
dropout rate.
Cancellations comprised 823 builders (4.7%) and 2,016
trade contractors (6.4%). The drop out rate for 2002/03 is
projected to rise to around 15% due to the impending
introduction of new legislation specifying that sub-trade
contractors do not have to be licensed.
EQUITY IN DECISION-MAKING
In its compliance and licensing decision-making processes,
BSA has continued to reach sound decisions based on the
legislation and information provided. In 2001/02, 80% of
decisions were affirmed by the Queensland Building
Tribunal compared to 74% in 2000/01.
PROTECTING CONSUMERS
Resolving Disputes
4,830 new dispute notifications were received, a decrease
of 801 or 14% on the previous year. BSA was able to
reduce backlog and finalise 4,916 disputes which is 982
or 16% less than the 2000/01 year. The decrease in the
number of disputes finalised was attributed to staff
focussing more on the quality of the outcome and
minimising the need to issue directions to rectify.
Whilst BSA continues to succeed in resolving in excess of
90% of the disputes finalised without recourse to the
Queensland Building Tribunal, a lack of documentation,
particularly regarding variations, continues to impede the
speedy resolution of disputes. It is essential that consumers
and contractors properly record their agreements,
obligations and responsibilities to avoid confusion and the
likelihood of protracted litigation.
07 Regional distribution of dispute notificationsreceived in 2001/02
Brisbane53%
Cairns 3%Townsville 6%Mackay 4%Rockhampton 4%Toowoomba 3%Sunshine Coast 15%Gold Coast 12%
60
0
20
40
08 Dispute notifications received/finalisedcompared with building activity
01/0200/0199/0098/9997/98
Received
Finalised
6
0
2
4
’000
Insurance policiesby construction
year
’000
The percentage breakdown of disputes reported to BSA hasremained constant over the past year with the exception of Cairnswhich has experienced a minimal decrease in dispute notificationsreceived.
Dispute notifications received and finalised compared withbuilding activity has reduced over the past 12 months reflectingthe industry downturn in 2000/01 due to the introduction of GST.Dispute notifications are received with an average lag of between1 and 2 years from when the building work was carried out.
Wendy Moulton and Grant Cotterill review a
building dispute
-->
Leighann Hooperanswering a consumerinquiry
<--
-->
-->
Year %
2001/02 80
2000/01 74
1999/00 73
1998/99 67
1997/98 74
--> Reviews of BSA’s licensing and compliance decisions produced apositive result for BSA of 80%.
% of Tribunal reviews of licensing and compliancedecisions resulting in favourable outcome for BSA
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 34
35
Dispute Research and Review:
In co-operation with industry stakeholders, BSA formed
working parties to address the major defect areas of
waterproofing, subsidence, tiling, plasterboard and
paintwork and develop initiatives to reduce their incidence.
Except for the subsidence working party, all working
parties have completed their deliberations and developed
a range of strategies including Fact Sheets to address the
problems. The waterproofing working party has also
submitted a detailed paper to Standards Australia on
recommended improvements to AS340 ‘Waterproofing of
Wet Areas’. Fact Sheets and booklets will be produced on
each of the topics to distribute the findings and promote
best practice in the identified areas. BSA’s website will
contain a defects technical section which is expected to
be online in November 2002.
The subsidence working party is not expected to finalise
its recommendations until December 2002.
Recurrent defects are a major problem within the industry.
Data collected over the past five years has identified that
a number of defect types continue to come to the attention
of BSA. Research indicates that it is most often due to poor
industry practice and lack of supervision.
EQUITY IN DECISION-MAKING
BSA’s dispute resolution process continued to display
fairness in resolving disputes between consumers and
contractors with 74% of Tribunal reviews affirming BSA’s
decision.
Year %
2001/02 74
2000/01 81
1999/00 85
1998/99 86
1997/98 86
--> Reviews of BSA’s dispute management decisions produced apositive result for BSA of 74%.
% of Tribunal reviews of dispute managementdecisions resulting in favourable outcome for BSA
Defect Number
1. Wall and ceiling internal plasterboard 403
2. Shower recess (waterproofing) 374
3. Footings Slab (foundations) 367
4. Painting – External/internal (application) 305
5. Concrete driveways 269
6. Floor tiling 229
7. Roof flashings 214
8. Termites (chemical barrier) 201
9. Timber windows and doors (installation) 146
10. Aluminium windows and doors (installation) 127
Top 10 defects 2001/02
80
0
40
60
09 % disputes satisfactorily resolved
01/0200/0199/0098/9997/98
20
%
An increase from 64% to 71% was experienced over the past yearand reflects the increased focus on achieving a quality outcome.
60
0
30
45
10 Accrued policies by construction year
01/0200/0199/0098/9997/98
15
’000
Martin Helisma discusses atechnical problem
<--
-->
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 35
36
Building Services Authority 2001/2002 Annual Report
Customers (continued) ...
INSURING CONSUMERS
The Queensland home warranty insurance scheme
provides consumers with the most comprehensive home
warranty insurance protection available.
The failure of HIH Insurance and the threatened
withdrawal of another two insurers from the interstate
home warranty insurance market showed privatised
markets to be less than effective.
BSA’s non-profit statutory home warranty insurance
scheme served Queensland contractors and consumers
well, isolating them from the near failure of the interstate
home warranty insurance market which followed the
collapse of HIH Insurance.
Queensland licensees effect insurance through the award
winning Insurance Phone Pay system which provides
them with cost effective insurance within minutes of their
telephone call.
BSA processed 62,506 policies this year with record gross
premium receipts of $27.792M. This represents an increase
of 75% over 2000/01. The higher than expected premium
income was the result of a building industry boom with
a major driver being the First Home Owners Grant.
MANAGING CONSUMER CLAIMS
The focus this year has been on clearing the backlog of
claims resulting from the post-GST building slump and
reviewing operational procedures to improve the efficiency
of the claims process. In March, BSA introduced new
claims processing software with minimal disruption to
processing. By May, the new system had resulted in a
reduction in claims processing periods from a median
46 days to 28 days.
As a result of greater efficiencies in claims processing and
a further reduction in the backlog of prior years, claims
processed exceeded the number received in the year.
The 1,680 claims received this year were below the
expected target of 2,016. This reflects the buoyancy of the
building industry throughout the year and the consequent
lack of insolvencies. In all, 1,636 claims were approved
to the value of $15.781M.
The principal reduction in claims occurred in non-
completion claims, which numbered only 189. This is a
vast improvement from the 384 received in 2000/01. The
value of these claims was $2.87M compared with $6M in
2000/01.
Subsidence continues to be a concern with an increase in
the number of subsidence claim approvals rising from 550
($6.595M) in 2000/01 to 682 ($7.2M) this year. The cost
also reflects the impact of the increase in maximum policy
cover from $50,000 to $100,000 in January 1997 and
$100,000 to $200,000 in October 1999. Subsidence
insurance protection is unique to Queensland and provides
a benefit even when the problem has not arisen from a
construction defect.
BSA is continuing to investigate and improve its risk
management strategy in relation to subsidence claims
and minimise their future impact on the scheme.
The volume of business and premium receipts increased from2000/01. This increase is predominantly attributed to a buildingindustry boom with a major driver being the First Home OwnersGrant.
The buoyant building industry caused a reduction in insolvencynon-completion claims. The defects and subsidence claims wereconsistent with forecast.
30
0
10
20
11 Gross premium receipts
01/0200/0199/0098/9997/98
$M 20
0
10
15
12 Claim payments by type
01/0200/0199/0098/9997/98
5
Non-completion
Defects
$M
Subsidence
Brendan O’Halloranassessing an insurance
claim
-->
-->
-->
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 36
37
Approvals for rectification of defective work were
consistent with previous years. There were 1,238 claims
valued at $5.7M in 2001/02 compared with 1,298 claims
valued at $6M in 2000/01 and 1,279 claims worth $4.2M
in 1999/00.
The 65 claims associated with these five contractors
accounted for $1.75M. They represent 3.9% of the number
of claims received and 11% of the total claims expenditure
for the year.
This year, 94% of the 2,141 claims finalised were accepted
with 98.7% of claimants fully compensated for their
insured loss.
EQUITY IN DECISION-MAKING
BSA’s has continued to demonstrate fairness in determining
insurance claims. This is reflected in an increase in the
number of reviews lodged in the Queensland Building
Tribunal that are resolved in favour of BSA from 73% in
the 2000/01 to 79% in 2001/02.
THE FUTURE
Customer understanding, awareness, satisfaction and
involvement with our business are critical to our success.
There is a lack of understanding and awareness amongst
the community about our role. We need to strengthen our
image and heighten our presence to ensure that the
community is well aware of our home warranty insurance
scheme, dispute resolution processes and licensing regime.
Community education is an essential ingredient to our
success and we will place greater emphasis over the next
few years on ensuring that home owners are aware of their
rights and obligations. BSA will continue to work closely
with stakeholders and interstate regulators to ensure its
position as market leader in the provision of home
warranty insurance.
Licensee No. of Claims Amount ($)
Hinton, P.D. 13 489,120
King, S.G. 13 445,148
Oceania Building Group Pty Ltd 28 315,288
McKenzie, K. 8 309,275
Wallcol Constructions Pty Ltd 3 193,452
Failed Contractors causing the most significantclaim approvals during the year
Year %
2001/02 79
2000/01 73
1999/00 89
1998/99 82
1997/98 88
--> Reviews of BSA’s insurance decisions produced a positive resultfor BSA of 79%.
% of Tribunal reviews of insurance decisions thatreaffirmed BSA’s decision
Gary Stick inspects anincomplete home
<--
--> Customer understanding, awareness, satisfaction and involvementwith our business are critical to our success.
KPMs 2002/03
--> 5% reduction in termite barrier problems
--> 5% reduction in waterproofing defects
--> 5% reduction in plasterboard defects
--> Customer continuums (positive movement in regionalcustomer continuums for all key stakeholders)
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 37
Building Services Authority 2001/2002 Annual Report
People
--> We are creating an environment at BSA where staff areinformed and involved and our development willenable us to achieve organisational and personal goals.
Mandy McCosker
Comments
<-- A significantimprovement (9.5%)was achieved in the staffsatisfaction index whichreflects the considerableeffort by managementand staff in seeking tocontinually improve theorganisation.
38
Values
--> People: Respond tostaff needs andacknowledge theirachievements
--> Partnership: Workingwith our customerstowards sharedoutcomes
Goals
--> To establish a peopleorientated culturewhere staff arerecognised and able toachieve organisationaland personal goals
Strategies
--> Create a positive, stable and professional teamwithin a supportive, safe and discrimination-freeenvironment
--> Increase the opportunity for staff to learn anddemonstrate acquired competencies
REDUCEDPERFORMANCE
INCREASEDPERFORMANCE
INCREASED PERFORMANCEMET TARGET
INCREASED PERFORMANCEMET/EXCEEDED TARGET
-1
0
1
2
TARGET8502002
ACTUAL949
TARGET<15%
2002ACTUAL14.9%
<-- Workforce
attitude index
<-- Staff turnover
--> Achievement
against KPMs 2001/02
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 38
39
KEY WORKFORCE STATISTICS ANDINDICATORS
The number of full time equivalent staff (FTE) increased
from 200.2 to 208.75 by 30 June 2002. The increase was
due to a number of temporary positions being made
permanent, building of internal capabilities in customer
service, compliance, dispute management, legal, policy and
corporate services.
The staff separation rate was relatively high in comparison
to other public sector benchmarks. Systems including
exit surveys have been introduced to analyse the reasons
for departures. Workforce planning has begun to address
the underlying issues identified and specific career
management strategies will address staff turnover and
the long-term employer of choice objectives.
A framework for effective leadership, relationships and
performance will be the focus for the development of
individual, team and organisational capability next financial
year. Human resource management infrastructure will be
improved through policies covering reward and
recognition and general conditions. Furthering and
maintaining a committed workforce with values of
continuous improvement, learning, respect and trust will
be priorities in 2002/03.
LEARNING AND DEVELOPMENT
BSA continued to foster learning with the aim of
maintaining a motivated, committed and high-performing
workforce. The Human Resource Management function
was reviewed and aligned with best practice approaches
in training and development. A range of learning and
development opportunities were provided with customer
service and performance management training the priority.
390 staff training days were delivered through over 30
training courses in 2001/02. Staff continued to access the
Study and Research Assistance Scheme which provides
generous support for undergraduate and postgraduate
tertiary studies. Financial and other assistance was
extended to 21 staff pursuing relevant tertiary qualifications.
In line with competency-based training frameworks,
specific development opportunities for individual staff
members were enhanced through access to the Certificates
in Government.
A Performance Management and Development Scheme
was introduced. The Scheme focusses on individual
development complemented by manager and supervisor
coaching to support learning. The competency framework
developed as part of the Scheme assists in linking
individuals to organisational performance objectives.
The foundation to build on
Key Performance Measures 2001/02
--> Workforce Attitude Survey Index of 850
Achievements 2001/02
--> Workforce Attitude Survey Index of 949
HumanResourcePolicies andPractices
LeadershipDevelopmentProgram
TraningCertificatePrograms(GovernmentandTraineeships)
CareerManagement
Reward andRecognition
ExecutiveLeadershipDevelopmentProgram
PerformanceManagementand Develop-ment Scheme
Training andDevelopmentPlan
LeadershipFramework
Learning and Development Schematic
WorkforceStrategicPlan
Corporate Plan
Learning andDevelopmentStrategy
Study andResearchAssistanceScheme
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 39
40
Building Services Authority 2001/2002 Annual Report
People (continued) ...
EQUAL EMPLOYMENT OPPORTUNITY
A three-year equal employment opportunity management
plan was initiated to support BSA’s continued commitment
to workforce diversity. The number of female employees
as a percentage of the total workforce declined from
55.3% in 2000/01 to 54% in 2001/02. Particular efforts have
been made to increase trainee representation from target
groups such as people with a disability or those from non-
English speaking backgrounds. BSA continued to support
increases in Aboriginal and Torres Strait Islander
representation in the workforce. In particular, BSA built
relationships with communities in the Cairns region by
sponsoring training awards.
WORKPLACE HEALTH AND SAFETY
Nurturing a safe and harassment-free workplace was a
workplace health and safety priority. No major incidents
were reported in 2001/02. The number of working days
lost through compensable accident or injury reduced from
172 days in 2000/01 to 62.2 days in 2001/02. This represents
0.24% of total workdays. One work-related stress incident
was notified and one case involving repetitive strain injury.
WORKFORCE ATTITUDE SURVEY
The previous years trend was continued with a significant
improvement in the staff satisfaction index as assessed
through the workforce attitude survey.
The overall index increased from 866 to 949 and increased
in all 12 factors assessed by survey questions. 10 of the
12 factors rated above 75% (well managed) with the other
2 factors between 68% and 74% (sound management).
The organisational strengths included committed employees,
supportive and approachable managers and team work.
Areas for further development include knowledge sharing,
people development, performance management, reward
and recognition and managing change.
Initiatives to support these organisational issues have
been included in the Workforce Strategic Plan and will be
reported quarterly to staff.
Issues at a divisional or branch level will be managed and
actioned by local managers and staff with support from
the Human Resources Branch if required.
ENTERPRISE DEVELOPMENT AGREEMENT
There were no days lost through industrial disputation. The
Enterprise Development Agreement (EDA) continues to
provide a framework for effective workplace consultation.
A range of agreements on working conditions were
reached by the EDA Committee. Progress was made on
closing the gap between BSA pay rates and conditions and
those enjoyed by core public servants. Full parity is
anticipated by July 1, 2003. The Change Management
Tool Kit was developed to promote effective
communication and workplace consultation remains a
key part of our operations and empowers staff and
managers to understand and participate in organisational
2001/02 2000/01
Women 54.9% (117) 55.3% (115)
Aboriginal and Torres Strait Islander 3 staff 5 staff
People With a Disability 7 staff 6 staff
Non English Speaking Background 16 staff 14 staff
--> BSA is continuing its commitment to diversity in the workforce soit is representative of the community it serves.
Workforce diversity
EEO TargetMale Female Total Groups
Staff as at 30 June 2002
Administration AO1–AO3 17.4 79.85 97.25 15
Officers AO4–AO5 49.7 29.8 79.5 8
Middle Management AO6–AO8 22 4 26 3
Executive Management SO2–SES 6 0 6 0
Total 95.1 113.65 208.75 26
--> Females are well represented as a portion (54%) of BSA’s overall workforce with future efforts focusing on increasing their representation atmanagement level.
Ravi Iyer handling acustomer inquiry
-->
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 40
41
change processes. It promotes an acceptance of the need
for service efficiency while fostering an ongoing
commitment to quality outcomes.
ORGANISATIONAL CAPABILITY
BSA has introduced a range of organisational development
strategies to build capability in the context of systems,
organisational culture, people, processes and the needs of
government. These have included a range of reviews, job
redesign and evaluation along with general system
improvements such as the Licensing Phone Pay project.
A Business Improvement Council was initiated, in line with
the Business Excellence Framework, to encourage
innovation and drive improvement in key business
processes and service models.
ACCOMMODATION
The Gold Coast regional office was relocated this year. The
new location at the Robina Convenience Centre is more
accessible to customers and has improved parking facilities.
The Brisbane head office was significantly reorganised. The
existing offices were expanded and administration, records
and receipting staff were relocated from temporary off-site
accommodation to a new area adjoining the existing
office. Legal services, human resources and the disaster
recovery site for the information services area were
relocated to the new section allowing for the expansion
of the licensing, compliance, information services and debt
recovery areas.
THE FUTURE
We intend to move towards a truly people-oriented
organisation that creates trust, opportunity and enables our
people to develop and succeed.
We will take a broad view of our culture and establish an
ethos where people management is one of our main
priorities for success. We will progressively implement an
organisational climate that is accountable and accepts
responsibility for decision making.
2001/02 2000/01 1999/00
Staffing – VER’s, retrenchments and redeployments
VER package taken 0 1 1
Total value of VER’s taken ($) 0 17,621 50,510
Involuntary Retrenchments 0 0 0
Total value of retrenchments ($) 0 0 0
Staff redeployed internally 0 0 0
--> The result for 2001/02 is a continuing trend reflecting BSA’s internal stability.
As at 30 June 2002 2001/02 2000/01 1999/00
Staffing – Separations
Permanent employees 186.7 178.8 168.46
Separations 28 19 20
Resignations 19 12 16
Transfers to other Queensland Public Service (QPS) agencies 7 4 3
Retirements due to ill health 0 0 0
Retirements due to age 2 1 0
Voluntary early retirements 0 1 1
Redundancy 0 0 0
Dismissals 0 1 0
Separation rate (%) 14.9 10.6 11.8
Average tenure of permanent employees resigning or transferring to other QPS agencies 3.8 4.4 5.0
Temporary employees 22.05 21.4 27.34
Separations 28 30 31
BSA is aiming to reduce its separation rate to below 14%.
KPMs 2002/03
--> Workforce Attitude Survey (Index 835)
--> Staff turnover <15%
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 41
REDUCEDPERFORMANCE
INCREASEDPERFORMANCE
INCREASED PERFORMANCEMET TARGET
INCREASED PERFORMANCEMET/EXCEEDED TARGET
-1
0
1
2
<-- % of unlicenced
contractors
detected during
site checks
TARGET≤10%
2002ACTUAL8.5%
Amendmentsimplemented
within timeline
<-- Number of
disputes received
as a percentage of
construction.
Notification lodged
2 years previously
<-- Number ofdirections issuedas a percentageof disputesreceived
<-- Percentage ofdirectionssatisfactorilycomplied with
<-- Legislativeamendments
implemented
TARGET≤4%2002
ACTUAL6%
TARGET>60%
2002ACTUAL32.2%
TARGET≤20%
2002ACTUAL20.8%
Building Services Authority 2001/2002 Annual Report
Legislation and Policy
Col Wright
Comments
<-- BSA’s complianceagenda has beenenhanced by increasinghuman resources. Thishas improved BSA’sresponsiveness toindustry and it’s abilityto meet the needs ofcustomers.
Values
--> Performance:Continually innovatein a cost effectivemanner
Goals
--> To ensure thatcustomers understandand comply withlegislative and policyrequirements andhave the ability toinfluence change
Strategies
--> Involve customers in consultative processes
--> Promote understanding of legislation and policy
--> Develop a comprehensive industry compliancestrategy to identify and deal with breaches of thelegislation and policy
--> Monitor and review legislative and policyrequirements
42
--> Achievement
against KPMs 2001/02
--> The strong alignment between BSA and industry hasassured legislative amendments and Board Policy aredeveloped for the mutual benefit of industry andcustomers.
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 42
The foundation to build on
Key Performance Measures 2001/02
--> Unlicensed contractors ≥4% of all licenseeschecked via site inspections
--> Number of disputes received to be ≥10% ofconstruction notifications lodged 2 yearsprevious
--> Number of directions to rectify ≥20% ofdisputes received in same year
--> 60% of directions complied with satisfactorily
--> Legislative amendments implemented
Achievements 2001/02
--> 6% of licensees checked wereunlicensed
--> DNF’s received were 8.5% of CN’slodged 2 years previous
--> DTR’s were 20.8% of DNF’s received
--> 32.2% of DTR’s were complied withsatisfactorily
--> Legislative amendmentsimplemented in accordance withtimetable
43
FINANCIAL REQUIREMENTS FORLICENSING
The financial requirements, in place since October 1,
1999, require licensees to demonstrate, at licence renewal
stage, that they have a minimum level of Net Tangible
Assets and Liquidity.
The Financial Requirements for Licensing ensure a minium
level of Net Tangible Assets (NTA). Licensees unable to
meet the minimum NTA in their own right are able to rely
on an assurance of net assets from a related entity by
executing a Deed of Covenant and Assurance. The related
entity must be a partner, director, beneficiary or associated
company. As at 30 June 2002 the amount assured to
licensees by related entities was $577.5M. This is an
increase of $449.8M in two years.
The Deed of Covenant and Assurance assisted creditors
in a number of instances this year by providing a greater
pool of funds to increase their final return. An example
of the assistance BSA’s Financial Requirements for
Licensing has given creditors was the liquidation of
Antrend Pty Ltd. Based on a Deed of Covenant and
Assurance, the liquidator was successful in recovering
$129,994 from a director. This recovery led to a 100%
return to creditors.
LICENCE CLASS REVIEW
The Licence Class Review began in July 2001 after calls
from industry to rationalise the licensing system and make
it more relevant.
The Review, due for completion by December 2002 and
implementation by early 2003, focused on the following
issues:
• Licensing only those entities that will ultimately be held
responsible for defective work eg. builders and trade
contractors. An unlicensed person who solely operates
as a sub-trade contractor to a trade contractor will not
be prosecuted for unlicensed contracting. The Review
concluded that these sub-trade contractors are more
employees than business operators.
• Rationalising the licensing system to limit it to licences
requiring full trade qualifications at the certificate 3
level under the Australian Qualification Training
Framework.
• Introducing a compulsory Continuing Professional
Development (CPD) model for all licensees to ensure
they keep up-to-date with emerging building trends.
• Making legislative amendments. This will be in two
parts. In early 2003, changes to licensing requirements
for sub-trade contractors will be introduced. The
second stage, expected to begin in mid 2003, will
involve amendments to regulations to include the
scopes of work for new licence classes.
BSA has consulted extensively with industry on the Review
and will continue to do so during and after implementation
of the recommendations.
CHANGE OF RENEWAL DATE
From 1 January, 2002 all licensees with a turnover greater
than $250,000 were allowed to alter their renewal date at
renewal. This enabled licensees to align their renewal date
to coincide with their 30 June financial information.
Previously, licensees with renewal dates in the first half
of the year were required to see their accountant twice a
year.
The new system allows licensees in financial category 3
to move their renewal date between 1 September and
31October and licensees in financial category 2 to between
1 November and 31 January. In the 6 months to 30 June,
2002, 632 licensees took advantage of this facility and
altered their renewal date.
Financial Category Number
1 39
2 296
3 297
--> BSA expects that, from 1 July to 31 December 2002, a further 500licensees will alter their renewal date.
Number of licensees who altered their renewal dateby financial category
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 43
--> ... a strict contractor licensing system plays a critical role in deliveringimproved security of payment outcomes because of its capacity tofilter out those who are not fit to operate in the industry.
44
Building Services Authority 2001/2002 Annual Report
Legislation and Policy (continued) ...
SUBCONTRACTORS’ CHARGES ACT 1974
From 1 July 2002 amendments were enacted to the
Subcontractors’ Charges Act 1974. The amendments
brought together proposed enhancements which had
been mooted for a number of years. The amendments
were the result of industry stakeholders representing
contractors, subcontractors, legal specialists and
Government working together to further improve security
of payment within the building and construction industry.
The amendments were enacted to aid interpretation of the
Act, which because of its loopholes and complexity had
been the subject of strident criticism by the judiciary,
legal profession and industry. There were also a number
of significant policy initiatives contained within the
amendments, they include:
• Expansion of the categories of persons entitled to
claim a charge under the Act to include manufacturers
of project specific material and suppliers of labour;
• Partial withdrawal of a claim by a subcontractor and
partial acceptance of liability by a contractor; and
• Expansion of the monies available to subcontractors
to include securities held by an employer or superior.
PAYMENT INITIATIVES
A significant problem within the industry is security of
payment. A discussion paper on security of payment was
released in December, 2001. BSA was well placed to
make a contribution to the discussion because of its
appreciation, through the financial audits, of matters
giving rise to payment disputes.
The discussion paper contained extensive research into the
extent of, reasons for, and effect of, partial payment,
non-payment or slow payment to building contractors and
subcontractors. Current legislative measures were
reviewed, including BSA’s licensing regime, and new
legislative initiatives for dealing with security of payment
were recommended.
The discussion paper concluded that the existence of a
strict contractor licensing system plays a critical role in
delivering improved security of payment outcomes
because of its capacity to filter out those who are not fit
to operate in the industry.
While BSA is committed to maintaining a robust licensing
system as a fundamental element in improving security of
payment outcomes, it also acknowledges that licensing
does not ensure payment.
BSA’s licensing system cannot force alleged solvent head
contractors to pay subcontractors. The discussion paper
highlights this issue;
“While the Authority has in place the strongest
licensing regime in Australia, which is achieving its
objective in eliminating from the industry those
contractors who clearly fail to meet the relevant
licensing criteria, it nevertheless should be
recognised that licensing in itself is not an
appropriate vehicle to deliver further improved
security of payment outcomes for subcontractors.
The licensing financial criteria is a ‘snapshot’back
in time that all contractors have to satisfy on
licence application, renewal, or on request by the
Authority under a compliance audit.This process
can never reflect an absolute current position.In the
building and construction industry a lot can change
in one week, let alone 3 months, which is the most
‘current’financial position contractors with a high
turnover have to satisfy. From the Authority’s
perspective, the licensing regime must be coupled
with other initiatives designed to provide improved
payment outcomes for subcontractors.”
In its investigations into payment issues, BSA identified an
emerging trend in Australia and New Zealand toward
law reform relating to construction contracts. In particular
the reforms were designed to facilitate timely payments
between the parties, provide for the rapid resolution of
payment disputes and provide mechanisms for the rapid
recovery of payments.
BSA concluded that payment legislation, similar to the
Construction Industry Payments Bill 2002 soon to be
introduced in Western Australia, should be considered for
implementation in Queensland to support the licensing
regime. During an extensive initial statewide consultation
phase, completed in April 2002, the proposal received
widespread support from stakeholder groups and
contractors.
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 44
--> Unlicensed contracting remains a significant industry issue that notonly increases the potential for substandard work but also increasesthe likelihood of payment problems.
45
BSA is well placed to drive security of payment initiatives
because of its ability to provide improved compliance
outcomes by identifying financially distressed contractors.
BSA recognises the benefits industry participants will
derive through access to an affordable and speedy dispute
resolution process for payments.
FIRE PROTECTION LICENSING
From 1 July 2001 it became compulsory for fire protection
operators in Queensland to hold a BSA licence. BSA
introduced eight new trade contractor licences for the fire
protection industry:
• Fire Detection Systems
• Fire Fighting Appliances
• Fire Hydrants and Fire Hose Reels
• Fire Sprinkler Systems (Commercial and Industrial)
• Fire Sprinkler Systems (Domestic and Residential)
• Fire Suppression Systems (Special Hazards)
• Fixed Fire Pump Sets
• Passive Fire Equipment
ANTI-PHOENIX PROVISIONS
In 2001/02 the anti-phoenix provisions of the Queensland
Building Services Authority Act 1991 resulted in 224
builders and trade contractors being categorised as
‘excluded persons’ and barred from the industry for five
years. This represents a 49% percent increase since 2000/01
when 150 licensees were excluded. Of 826 compliance-
related licence cancellations, 176 were directors of failed
companies whose licences were cancelled under the anti-
phoenix provisions.
UNLICENSED CONTRACTING
Unlicensed contracting remains a significant industry issue
that not only increases the potential for substandard work
but also increases the likelihood of payment problems. This
is because unlicensed contractors have limited entitlement
to payment and do not normally meet the financial criteria
required to hold a licence.
BSA continued to pursue unlicensed contracting by issuing
infringement notices under the State Penalties Enforcement
Registry (SPER), conducting site visits, monitoring
advertising, particularly Yellow Pages and conducting
two statewide building sites compliance blitzes to check
the licensing credentials of contractors.
The aim of the compliance blitzes was to cover as many
areas of Queensland as possible. The blitzes were
conducted in August 2001 and March-April 2002. In
August, 3,071 individual interviews were conducted. Of
those 196 instances of suspected unlicensed contracting
were identified. In March 2002, 3,416 individual interviews
were conducted. Of those, 49 instances of suspected
unlicensed contracting were identified. In both blitzes
the majority of suspected unlicensed contractors were
carpenters. Inspections were carried out from Cairns to the
Gold Coast and as far west as Emerald.
An additional 442 unlicensed contracting investigations
were also started in response to complaints received.
Unlicensed contracting will continue to be given high
priority in 2002/03, with increased human resources
devoted to detection.
ACCOUNTABILITY INTERVENTIONS
BSA aims to secure accountability from those associated
with failed businesses where there is evidence of
impropriety. To achieve this, BSA liaises with other
regulatory bodies, particularly, the Office of Fair Trading,
and the Australian Taxation Office (ATO). This year, BSA
provided information and $55,564 in financial support to
liquidators, administrators or bankruptcy trustees when
directors or other relevant persons were thought to have
acted improperly or illegally. This represents an increase
in expenditure of $19,064 over 2000/01. Funding was
provided to improve the prospect of returns to creditors
and to ensure that the appropriate accountability measures
are brought to bear on failed companies and their directors.
Significant actions in this regard included:
• Riaps Pty Ltd. Under a construction management
contract, Riaps Pty Ltd, acting as a principal in the
construction of a unit development at Port Douglas
known as ‘La Pacifique’, went into administration in
June 1999. Initially, under a Deed of Company
Arrangement, the director of the company, proposed
to pay all non-related creditors in full. This arrangement
failed, resulting in the company proceeding to
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 45
--> A new case management system was developed and implementedallowing staff to more accurately monitor incoming data for use inunlicensed contracting investigation or financial investigation.
46
Building Services Authority 2001/2002 Annual Report
Legislation and Policy (continued) ...
liquidation. BSA provided funding to the liquidator
during the 2000/01 year to enable him to conduct a
public examination into the affairs of the company and
to obtain legal advice. During the year BSA agreed to
contribute a further $15,000 to enable proceedings to
be initiated against the director of the company and
her husband for insolvent trading and against her
husband for managing the company while a bankrupt.
• Imagemaster Constructions Pty Ltd. The Sunshine
Coast-based company collapsed leaving dozens of
creditors out-of-pocket with debts of more than $3M.
Before the collapse in October 2001, BSA had begun
an investigation into the company’s ability to meet its
liabilities. This resulted in a stop work condition being
imposed on the company’s licence. BSA worked
closely with the administrator to assist in securing a
Deed of Company Arrangement which will return
creditors 39 cents in the dollar. BSA has provided the
administrator with up to $15,000 to assist with a public
examination of relevant persons. The public
examination will help the administrator to determine
whether any specific actions should be initiated under
the Corporations Act.
BSA’s accountability focus also included the pursuit of
professionals such as accountants when their performance
compromised the integrity of the licensing system. During
the year BSA also started proceedings against an
accountant for allegedly providing false and misleading
financial information.
OTHER INITIATIVES
A new case management system was developed and
implemented allowing staff to more accurately monitor
incoming data for use in unlicensed contracting
investigation or financial investigation. The case
management system allows centralised monitoring of
investigations through an electronic log. This will improve
efficiency as tasks can be allocated to relevant staff
electronically rather than by hard copy memorandums. The
progress of an investigation can also be monitored via the
case management system, improving the timeliness of
responses to customer enquiries.
BSA’s compliance activities have been significantly
expanded. Additional staff allowed investigations to be
launched into the alleged failure of contractors to comply
with advertising and signage requirements contained
under Part 3, Division 10 of the Queensland Building
Services Authority Act,1991. There were 150 investigations
relating to advertising and signage requirements. Additional
staff also enabled continuous monitoring of breaches of
allowable annual turnover stipulated as part of the
Financial Requirements for Licensing. Previously, such
monitoring could only be done at the point of licence
renewal when fresh financial data was provided. A building
inspector allocated to Compliance has enabled unlicensed
contracting allegations to be more promptly investigated.
Previously, requests for site inspections were referred to
the Dispute Management Program.
Jason Smith and Anna Metzdorf discuss
the compliance casemanagement system
-->
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 46
47
GOVERNMENT CONTRACTOR FINANCIALAUDITS
BSA acted as an agent for the Government in assessing
the financial capacity of licensed contractors tendering for
capital works projects. There were 309 financial
assessments conducted in 2001/02 resulting in 12.6% of
contractors assessed as unsatisfactory. In 2000/01 559
assessments were conducted with 9.5% of contractors
found to be unsatisfactory. Though fewer assessments
were conducted during the year with a higher proportion
assessed as unsatisfactory this can be attributed to a
tightening in the application of financial assessments for
government tendering. The financial assessment criteria,
although similar in many respects to the Financial
Requirements for Licensing, contain a number of unique
features developed specifically for government tendering.
FINANCIAL INVESTIGATIONS
In attempting to establish whether a contractor was
meeting the financial requirements for licensing priority
was given to financial performance audits on contractors
displaying signs of financial distress.
During a financial performance audit a licensee is afforded
the opportunity to prove that they meet BSA’s rigorous
financial requirements by producing specified financial
records (within a 28 day period). BSA often directly
contacts a licensee’s creditors to verify the information
provided. Failure to provide the requested information may
result in suspension or cancellation of the licence and/or
the imposition of a stop work condition on the licence.
As a result 537 audits were conducted. 396 contractors had
their licences cancelled or suspended. In 141 instances BSA
was given evidence that the licensee did meet the Financial
Requirements for Licensing and no action was taken
against the licence. Often a licensee in financial distress
may initially be suspended and then subsequently
cancelled if the licensee does not prove that they meet
BSA’s Financial Requirements for Licensing.
In deciding whether or not a licensed individual, director
or other person who is in a position to control or
substantially influence the conduct of the company’s
affairs is a fit and proper person to hold a contractor’s
licence or to exercise control or influence over a licensed
company the Authority considers:
• the commercial and other dealings in which that
person has been involved and the standard of honesty
and integrity demonstrated in those dealings;
• any failure by that person to carry out commercial or
statutory obligations and the reasons for that failure;
and
• any other relevant factor.
BSA conducted 3 fitness and propriety audits during the
year, none of which resulted in licence suspension or
cancellation.
Jacquii Reeves reviews acontractor’s financialstatements
<--
Type 2001/02 2000/01 1999/00 1998/99 1997/98 1996/97
Performance audits finalised by type
Financial 537 311 243 308 521 604
Technical 0 0 0 2 15 22
Fitness and propriety 3 0 1 35 85 22
Other 0 0 0 0 8 1
Total 540 311 244 345 629 649
Licence cancellations 396 287 137 182 205 319
% 73 92 56 53 33 49
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 47
--> BSA has audited approximately 90% of certifiers on the easternseaboard of Queensland since private certification began in May 1998.
48
Building Services Authority 2001/2002 Annual Report
Legislation and Policy (continued) ...
PRIVATE CERTIFICATION
BSA continued to provide and deliver services for building
certifier accreditation, complaint investigation and auditing
in line with its legislative responsibility. The Local
Government Association of Queensland’s review into
building certification in Queensland was completed and
provided to the Government in November 2002. As a
member of the review panel responsible for the report,
BSA provided input into the proposed legislative
amendments. It did so as a member of the Building
Reference Group chaired by Building Codes Queensland.
As the primary stakeholder in the Building Reference
Group, BSA allocated significant resources to ensure
quality input was provided. The information provided to
the group was based on the findings of complaint
investigations, audits and general administration of BSA’s
functions as the accrediting body for certifiers.
BSA was a member of a committee charged with reviewing
the Public Benefit Test for the Queensland Building Act
1975 and Regulations. The committee report was tabled
in June 2002. BSA continued to participate in the
formulation of legislative amendments following committee
recommendations.
ACCREDITATION AND AUDITS
At the end of the financial year, there were 371 accredited
building certifiers of which 286 held private certifier
endorsement and 85 held standard building certifier
endorsement only. In 2000/01, there were 378 licensed
building certifiers of which 288 held private certifier
endorsement and 90 held standard building certifier
endorsement only.
Random audits of building certifier’s practices in 2001/02
were conducted in the Mackay region and the South East
corner of Queensland including the North and South
coasts. It was decided to leave audits in the remote areas
of Western Queensland until the 2002/03 financial year so
that resources could be concentrated on the more
populated South East corner. The majority of private
certifiers audited were found to have adequate
administration processes in respect to their certifying
functions. There were a small number of minor departures
from the requirements, however, these were not cause for
concern. BSA provided advice and recommendations in
these instances.
BSA has audited approximately 90% of certifiers on the
eastern seaboard of Queensland since private certification
began in May 1998. Audits focus on the procedural and
administrative functions of a certifier’s practice. Audits have
not uncovered any examples of professional misconduct
but have been able to provide certifiers with a basis to
improve their procedural administrative functions.
In 2002/03 BSA will continue to drive legislative change
to improve standards and education in the area of building
Type 1998/01 2001/02
Finalised Complaints by BSA 220 29
Current Complaints <30 days old 2 0
Current Complaints >30 days old 39 3
Total 261 32
--> The number of complaints received in 01/02 decreased by 50%.
Complaint status
Type 1998/01 2001/02
Town Planning 150 29
Technical (BCA) 20 5
Standard Building Regulation 89 11
Conflict of Interest 9 0
Code of Conduct 6 0
Administration 6 6
Total 280 51
--> Town planning remains the largest source of certifier complaintshowever an increase in SBR complaints has recently occurred.
Complaints received
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 48
--> We need to be a superior administrator and ensure that our activities,legislation and policy are consistent with the needs of the industry.
49
certification. This will be achieved through further random
audits, information seminars and publication of material
on BSA’s website. BSA will continue to work closely with
Building Codes Queensland in the development of
legislation as well as education and information strategies.
EDUCATING CONTRACTORS ANDCONSUMERS
Assisting contractors and consumers to better understand
their rights and obligations under the Domestic Building
Contracts Act 2000 was a key exercise throughout the year.
Initiatives included:
• development and installation on BSA’s website of a
Contractor Checklist and a summary of the warranties
provided to home owners under the legislation;
• review and approval of Contract Information
Statements submitted to BSA by industry associations
and private contractors;
• contractor articles published in Building Links
magazine to heighten contractor awareness of their
contractual requirements under the Domestic Building
Contracts Act 2000; and
• development of a Contract Checklist to assist relevant
BSA staff to check compliance of contracts with the
Domestic Building Contracts Act 2000 requirements.
BSA also served as a resource centre for a wide range of
industry associations and provided ongoing information
and advice regarding the requirements and practical
implications of the Domestic Building Contracts Act 2000.
After more than a year of ‘road testing’ BSA introduced a
number of improvements to its contract documentation
designed to better serve its customers. All documents in
BSA ‘One Pack’ Contract Kit were revised and updated
with improvements including changes to terminology
and the payment schedule to make the document more
user-friendly for trade contractors performing renovations
and extensions. An entirely new contract, BSA Contract
for Small Building Projects, was developed specifically to
meet the need for a simplified format documenting
domestic building projects valued at less than the $3,300
threshold of the Domestic Building Contracts Act 2000.
This one-page, plain-English contract will assist both
contractors and homeowners by helping to reduce the
incidence of disputes associated with small renovation
projects that are often caused by inadequate or poor
documentation.
THE FUTURE
We need to be a superior administrator and ensure that
our activities, legislation and policy are consistent with the
needs of the industry. Compliance will continue to be a
major focus with our aim being to improve the licensing
system integrity for the benefit of consumers and
contractors.
Type 1998/01 2001/02
Not Decided 33 19
Decisions Reversed 17 0
Decisions Upheld 11 0
Total 61 19
--> No decisions have come from the Chief Executive to question thecorrectness of BSA certification determinations
BSA Decisions appealed to Chief Executive
Type 1998/01 2001/02
Random 209 50
Total 209 50
--> BSA is on target to complete an audit of all certifiers within threeyears
Audit Information
KPMs 2002/03
--> Compliance continuum. Positive movement in allinitiatives under the compliance continuum
--> Legislative amendments implemented in accordance withtimetable
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 49
Building Services Authority 2001/2002 Annual Report
Financial Management
Lewis Hayes
Comments
<-- A strong recovery bythe Insurance Fund fromthe 2000/01 positiontogether with a smallerthan forecast deficitfrom the General Fundproduced a soundconsolidated result forthe year.
Values
--> Performance:Continually innovateand improve in a costeffective manner
Goals
--> To ensure the long-term viability of theStatutory InsuranceFund and the General Fund
Strategies
--> Regularly review the actuarial performance of theInsurance Fund flexibility to respond quickly to theneed for adjustment of premiums and policycoverage
--> Develop and implement a 5 year financialmanagement plan for the General Fund (incomeand expenditure)
50
REDUCEDPERFORMANCE
INCREASEDPERFORMANCE
INCREASED PERFORMANCEMET TARGET
INCREASED PERFORMANCEMET/EXCEEDED TARGET
-1
0
1
2
<-- Profit/(loss) fromordinary activities2001/02 $0.728M2000/01 ($6.952M)
TARGETPositive trendin net assets2002 ACTUAL
Increasedperformance
<-- Net assets
2001/02 $5.364M
2000/01 $4.658M
<-- Current ratio2001/02 1.48
2000/01 1.51
NO TARGET
TARGETOperating
Surplus2002 ACTUAL
Target Met
--> We will continue to build on the improvements madeduring the year to our financial management frameworkto enhance our financial management capability.
--> Achievement
against KPMs 2001/02
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 50
The foundation to build on
Key Performance Measures 2001/02
--> Produce an operating surplus
--> Loss ratio for 2000/01 <100%
--> Improvement in the net asset position
Achievements 2001/02
--> Operating surplus of $728K
--> Loss ratio 99.1%
--> Net assets increased by$690K
--> Net asset position assets/liability ratio reduced by .03 to 1.48
51
The consolidated fund recorded a profit from ordinary
activities of $0.728M compared with the originally forecast
profit of $0.138M and the revised forecast of $0.084M
estimated at the mid-year review. This result is attributable
to the Insurance Fund which recorded a $1.489M surplus
reflecting a buoyant Queensland building industry.
The General Fund recorded a loss from ordinary activities
of $0.761M attributable to an insufficient funding base
resulting from increasing demands for service from
industry, consumers and government, together with
reduced investment returns. However this was still a
better than anticipated result compared to both the original
budget (forecast deficit of $1.028M) and mid-year revised
forecast deficit of $1.225M. Major factors contributing to
the improved position were tighter controls on legal costs,
staff costs and engineering fees and an improvement on
revised revenue forecasts.
GENERAL FUND
Revenue
The General Fund derived approximately 87% of its
revenue from fees for licence renewals and applications.
The original revenue estimates for these fees were revised
down by approximately $1M in the mid-year review when
it became apparent that various indicators used in the
forecasts were optimistic.
The revised revenue targets were achieved with an actual
of $13.148M compared to a revised budget of $13.040M.
Investment returns were marginally downgraded during
the year by $0.060M. Investments for the General Fund
were stable throughout the year as they were in cash funds
which generally performed to market expectations. Other
revenue targets were generally achieved.
Expenses
Legal expenses significantly exceeded budget, however the
mid-year review resulted in a greater emphasis being
placed on the internal delivery of legal services and this
helped to contain the over expenditure. Other expense
control measures introduced as a result of the mid-year
review included tighter control of the staff costs by
introducing new procedures for the creation of positions,
the filling of vacancies and employment of
temporary/casual staff to ensure greater control against
budget, more timely reconciliation of engineering fees
claimable, and a number of corporate overhead reduction
initiatives eg. sourcing of a new power provider for BSA’s
Brisbane office at a rate 34% cheaper than the incumbent
provider.
A number of options will be explored in 2002/03 to
identify a more appropriate funding base for General
Fund operations while continuing to minimise corporate
overheads and other costs.
Actual expenditure decreased significantly by $2.551M
(15%) from 6.460M to $13.909M. This was attributable to
the fact that the Authority was not required to fund the
operations of the Queensland Building Tribunal in 2001/02
($2.345M in 2000/01). Exclusive of this amount expenditure
decreased by $0.206M. Several measures were
implemented during the year to contain expenditure.
DEBT MANAGEMENT
BSA’s debt management team recovered $1.213M in 2001/02
compared to $1.034M the previous year. This represents a
17% improvement and included $1.052M in insurance
claims recovered and $0.101M in Queensland Building
Tribunal (QBT) penalties/Magistrates Court fines recovered.
The balance included legal costs and interest recovered.
Recovery rates for insurance claims are generally around
8% because of the high rate of insolvency for building
contractors involved in large insurance claims payout.
Penalties and fines recovered through QBT and the courts
decreased by $0.199M in 2002, reflecting the successful
introduction during the latter half of the year of the State
Penalties Enforcement Regulatory System (SPERS). The
issuing of SPERS tickets by BSA has resulted in fewer
actions being pursued through the Tribunal and courts and
it also means BSA can action many more apparent
breaches through this resource efficient mechanism. This
trend will continue into 2002/03. To enhance BSA’s
capability in actioning breaches of legislation, staff will be
further trained throughout 2002/03 in issuing SPERS
notices for a number of offences.
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 51
--> The buoyancy of the building industry over the past year has seen arecord level of building activity. This has meant a major premiuminjection to the Insurance Fund and its reinsurers.
52
Building Services Authority 2001/2002 Annual Report
Financial Management (continued) ...
INSURANCE SCHEME VIABILITY
This year has been a time of consolidation, with focus on
securing the long-term viability of the scheme. This has
been necessary following the record breaking 2000/01 year
during which the scheme paid $18.73M in consumer
claims and recorded a loss of $6.862M.
The 2000/01 results impacted on loss ratios for
underwriting years from 1 July1997 to 30 June 2001 with
an average projected loss ratio of 130%. To provide long-
term stability and ensure reinsurer support, BSA, in
conjunction with its actuary and reinsurers, determined it
necessary to increase the amount of premium allocated to
underwriting the scheme. This was achieved by removing
the ‘surcharge’ cross-subsidisation between the Insurance
Fund and General Fund and applying the entire premium
to underwriting and administering the insurance scheme.
The premium was also increased from $5.50/$1,000 of
construction value to $6.00/$1,000.
Back-testing the new premium rate against established loss
ratios from previous years confirmed that had the new rate
been applied to previous years the average loss ratio
would have been no greater than 80%. An 80% loss ratio
is an acceptable industry benchmark.
The buoyancy of the building industry over the past year
has seen a record level of building activity. This has meant
a major premium injection to the Fund and its reinsurers.
In addition to the new premium rates, BSA also introduced
new Policy Conditions Edition 5. This removed liability for
the scheme in relation to non-completion claims from
developers and reduced the maximum policy benefit for
refund of deposit claims to the deposit limits prescribed
in the Domestic Building Contracts Act 2000.
Bob Johnson reconcilinginsurance premiums andclaim payments for BSA’s
reinsurers
-->
Kate Bijerk issuing aninsurance policy to acontractor using Phonepay
<--
125
0
75
100
13 10-year loss ratios
01/0200/0199/0098/9997/98
50
%
25
Loss ratios have been heavily impacted by GST. BSA’s target is an80% average loss ratio.
<--
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 52
--> BSA has also enhanced its financial reporting and monitoringcapability which will ensure the integrity and timeliness of financial reports.
53
MANAGING THE SCHEME
As reported last year, the GST legislation and its application
to the General Insurance Industry does not fit the unique
features of BSA’s home warranty insurance scheme with
the result that BSA is unable to claim a decreasing
adjustment that lessens the impact of GST on the statutory
home warranty insurance scheme. This is clearly an
anomaly in the GST legislation and one for which BSA has
unsuccessfully sought a favourable tax ruling from the
Australian Taxation Office (ATO).
This tax liability has increased BSA’s claim expense by the
GST cost, however, BSA has elected to bear this additional
expense whilst seeking a review of the tax ruling rather
than pass the expense on to its reinsurers with consequent
escalation in reinsurance cost.
At the time of reporting, BSA has formally applied for a
peer review of the ATO ruling and if unsuccessful, will
lodge a formal appeal through the Federal Court.
As at 30 June 2002, BSA had funded this GST liability at
a cost of $0.735M and provided $0.453M for its potential
future liability. If the outcome of BSA’s appeal is negative,
consideration will have to be given to revising the
Queensland Building Services Authority Act 1991.
REINSURANCE
With the new premium structure established, a 3-year
reinsurance agreement was negotiated with 75% of the risk
assumed by 3 major international reinsurance companies,
and the remaining 25% by BSA. This long-term reinsurance
agreement was a major coup and avoided BSA from
becoming embroiled in the extreme instability in the
insurance and reinsurance markets that started with the
HIH failure and deteriorated further after the events of
September 11.
THE FUTURE
We will maintain and strengthen our systems to improve
the short and long-term financial viability of the General
and Insurance Funds. Monitoring our operations, and
implementing cost-effective processes, will be a key to our
future success.
BSA will continue with current strategies in maintaining
the viability of the insurance scheme. These include
regularly reviewing the actuarial performance of the
scheme, working with industry to improve building
standards for the most common defects and assessing
annually the financial viability of building contractors as
part of the licensing process. BSA will also maintain the
ongoing review of premiums and policies to identify the
need to adjust premium levels and policy coverage.
As part of developing a five year financial management
plan for the General Fund, options for a more appropriate
fund base will be explored. BSA will also undertake a
review of its significant business processes in order to
achieve greater efficiencies. This will be overseen by a
Business Improvement Council comprising representatives
of all BSA Divisions, all levels of staff, management and
unions.
BSA has also enhanced its financial reporting and
monitoring capability which will ensure the integrity and
timeliness of financial reports. The new system, Finance
1, has a go-live date of 1 July 2002. This will enable
tighter financial control as part of a more rigorous reporting
and monitoring regime for 2002/03.
The basis and process for revenue forecasting has been
reviewed and it is anticipated forecasts for 2002/03 will
be more accurate.
KPMs 2002/03
--> Loss ratio for 2002/03 <110%
--> Improvement in net asset position of General Fund of $1M
--> Net asset position of Insurance fund of >$2M
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 53
Values
--> Performance:Continually innovateand improve in a costeffective manner
Goals
--> To foster a culture ofadaptive leadership sothat we are highlyregarded, trusted andvisible within theindustry andcommunity
Strategies
--> Implement a leadership culture which drives thevalues of the organisation
--> Develop, drive and achieve government andindustry policy initiatives
--> Continually improve in line with AQC businessexcellence framework
REDUCEDPERFORMANCE
INCREASEDPERFORMANCE
INCREASED PERFORMANCEMET TARGET
INCREASED PERFORMANCEMET/EXCEEDED TARGET
-1
0
1
2
TARGETProgression
achieved2002 ACTUALProgression
achieved
TARGET80%2002
ACTUAL85%
<-- Sound
progression to
national
consistency on
key issues within
the industry and
government
<-- WorkplaceAttitude IndexFactor B staffagreement with
corporatedirection
54
Building Services Authority 2001/2002 Annual Report
Leadership
--> BSA and Industry have developed the first licensingregime that aligns training with licensing competencies.
Jason Smith
Comments
<-- BSA continued toprovide input to variousbuilding industryforums throughoutAustralia and keepabreast of emergingissues.
--> Achievement
against KPMs 2001/02
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 54
The foundation to build on
Key Performance Measure 2001/02
--> Workforce Attitude Index Factor B >80% agreement
--> Sound progression to national consistency on keyissues within the industry and government
Achievements 2001/02
--> Workforce Attitude SurveyFactor B result 85%
--> Progression toward nationalconsistency
The foundation to build on
55
NATIONAL AGENDA
BSA represents Queensland stakeholder interests at the
national level as a founding member of Builders Licensing
Australia (BLA), a body comprising industry regulators from
each State and Territory. BLA was formed to achieve
building regulation uniformity nationwide. At the last
meeting of BLA, held in Hobart in March, the key topic
for discussion was the impact of the HIH Insurance
collapse on building regulators. While the collapse of
HIH Insurance had significant impacts on the home
warranty insurance market in other States, it had no
impact on Queensland, as Queensland remains the only
State with a statutory home warranty insurance scheme.
Of particular interest to BSA was progression of a model
for Continuing Professional Development to ensure that
industry practitioners improve and develop their skills in
accordance with industry trends and emerging technology.
Other topics discussed at the meeting included aligning
licensing qualifications to the Australian Qualification
Training Framework (AQTF). As BSA had already begun
the Licence Class Review Project, rationalising licence
classes and linking them to full qualification under the
AQTF, BSA led this discussion. The meeting also revised
the Building Regulation framework, a matrix that compares
each State’s building legislation.
FEDERAL HOME WARRANTY REVIEW
The upheaval in the home warranty insurance markets
interstate following the collapse of HIH Insurance and the
threatened exit from the market of the remaining home
warranty insurance providers prompted the Federal
Government to appoint an independent consultant to
investigate and report on the cause of this market failure.
As Queensland was the only state not affected by this crisis
BSA took a lead role in advising the consultant, Professor
Percy Allan, on the details of the Queensland system. The
terms of reference required the consultant to make
recommendations to ensure home warranty insurance
provision by the private sector was sustainable, and
adequately serviced the needs of both consumers and
industry. BSA emphasised why its interrelated licensing,
dispute resolution, building information and insurance
systems formed a model for success.
Professor Allan researched both Australian and overseas
jurisdictions before releasing his report in June 2002. The
report was extremely supportive of BSA’s model. Other
states are now considering replicating BSA’s systems and
services in the hope that improved preventative
mechanisms will increase the attractiveness of the provision
of home warranty insurance to insurers in their jurisdictions.
BSA will continue to participate in discussions with
interstate regulators in order to achieve national uniformity
in the future.
REPRESENTATION TO NSW PARLIAMENTJOINT SELECT COMMITTEE ON THEQUALITY OF BUILDING
In 2002, Ian Jennings, (BSA’s General Manager) provided
evidence to the Parliament of New South Wales Joint
Select Committee on the Quality of Building. The
Committee broadly examined the home building industry
in New South Wales, identifying its current strengths and
weaknesses, and capacity to deliver a quality product.
BSA’s evidence focused on the Queensland model and the
success it has achieved in consumer protection and
improving contractor standards within the industry.
THE FUTURE
We will foster an environment of shared and adaptive
leadership so that we are trusted, visible and strategically
focussed within the industry.
Our leadership philosophy will be one of empowering our
people and ensuring they are informed, proactive,
innovative and satisfied.
KPMs 2002/03
--> Implement the leadership framework from 1 January 2003
--> Maintain the current level of % satisfaction in factor B
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 55
Building Services Authority 2001/2002 Annual Report
Financial PerformanceReview
56
Page
--> Purpose and Scope 57
--> Guide to BSA’s Financial Performance Review 57
--> Financial Overview 58Consolidated 2001/02 Outcomes 58Operating Revenue 58Operating Expenditure 58Transfers from Reserves 59Statement of Financial Position 59Capital Expenditure 59Consultancy Expenditure 60General Fund 2001/02 Outcomes and Performance Review 60
--> Insurance Fund 2001/02 Outcomes and Performance Review 61
--> Financial Statements for the year ended June 2002Statement of Financial Performance 62Statement of Financial Position 63Statement of Cash Flows 64Notes to and forming part of the Financial Statements 65Note 1 Summary of Significant Accounting Policies 65Note 2 Licence Renewal and Application Fees 70Note 3 Underwriting 70Note 4 Investment Revenue 71Note 5 Other Revenue 71Note 6 Gain on Disposal of Non-current Assets 71Note 7 Administrative Expenses 71Note 8 Other Expenses 72Note 9 Queensland Building Tribunal Funding 72Note 10 Reserves 72Note 11 Retained Profits 72Note 12 Other Financial Assets 73Note 13 Receivables 73Note 14 Reinsurance and Other Recoveries Receivable 73Note 15 Other Assets 73Note 16 Plant and Equipment 73Note 17 Intangibles 74Note 18 Payables 74Note 19 Provisions 74Note 20 Unearned Premiums 74Note 21 Future Claims and Associated Costs 75Note 22 Commitments 76Note 23 Segment Information 76Note 24 Net Claims Incurred 78Note 25 Contingent Liability 79Note 26 Financial Instruments 79Note 27 Reconciliation of Net Cash Provided by Operating Activities to Operating Profit/(Loss) from Ordinary Activities 81Note 28 Reconciliation of Cash 82Note 29 Provision for GST Payable 82Note 30 HIH Insurance 82
--> Certificate of the Queensland Building Services Authority 83
--> Independent Audit Report 84
Contents
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 56
57
PURPOSE AND SCOPE
The Queensland Building Services Authority (BSA) is
constituted under the provisions of the Queensland
Building Services Authority Act 1991 (the Act) and is a
statutory body within the meaning given in the Financial
Administration and Audit Act 1977.
The Financial Statements have been prepared:-
• to satisfy the provisions and prescribed requirements
of the Financial Administration and Audit Act 1977;
and
• to convey information on BSA’s financial performance
for the year and its financial position at the close of
the year to the Minister for Housing, the Queensland
Parliament, contractors, consumer and the broader
community.
The statements are general purpose in nature and provide
a full presentation of all the financial activities of BSA.
Disclaimer
The graphs, tables and captions that appear in the body
of the Annual Report do not form part of the Financial
Statements as certified by the Auditor-General.
GUIDE TO BSA’S FINANCIALPERFORMANCE REVIEW
BSA is self-funded and under its legislation is required to
maintain two funds - the General Fund and the Insurance
Fund. The General Fund meets all operational costs
except those relating to insurance claims and the
administration of the insurance scheme. The General
Fund was no longer required to fund the operations of the
Queensland Building Tribunal (the Tribunal). Section 26
of the Act allows for the transfer of funds from the
Insurance Fund to the General Fund for use in
administering the Act. The maximum amount able to be
transferred is set by regulation at $5.5M.
BSA’s Financial Performance Review comprises:
• Financial Overview; and
• Financial Statements for the year ended 30 June 2002.
The Financial Overview provides a strategic review of
BSA’s financial position at 30 June 2002 and analyses
performance for the financial year 2001/02 in the context
of current issues and historical trends.
The Financial Statements present BSA’s consolidated
financial position and the financial results for 2001/02. At
Note 23 “Segment Information”, the results and financial
position of each Fund are presented.
The Financial Statements comprise:
• the Statement of Financial Performance which details
BSA’s income and expenditure for the year ended 30
June 2002;
• the Statement of Financial Position which reflects the
financial position of BSA at 30 June 2002;
• the Statement of Cash Flows which shows BSA’s cash
receipts and payments for the year ended 30 June 2002;
and
• Notes to and forming part of the Financial Statements.
Items in the Statement of Financial Performance, Statement
of Financial Position and Statement of Cash Flows are
referenced to the Notes, where more detail of balances is
provided. The accounting policies used in the preparation
of the Financial Statements are summarised in Note 1 of
the Notes to and forming part of the Financial Statements.
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 57
01 Program cost comparison
Insurance 41.2%
Dispute management 15.7%
Licensing 31.5%
Building information 11.6%
OPERATING EXPENDITURE
The decrease in overall expenditure is attributable to the
following factors:
Administrative expenses decreased by $0.628M (6.8%)
from $9.216M to $8.588M with fluctuations in expenditure
levels across several areas compared to the previous year.
The main movement was a decrease in Engineering and
other commissions fees of $1.131M (87%) from $1.296M
to $0.165M. Two major reconciliations were undertaken
during the year and it was identified were a substantial
proportion of engineering costs were reclaimable from
reinsurers this year. Office rentals and outgoings increased
by $0.418 (41%) from $1.018M to $1.436M. New office
accommodation was required for the Gold Coast regional
office and additional accommodation for the Brisbane head
office where some staff had been housed in temporary
demountable offices.
Underwriting claims expenses decreased by $3.893M
(46.5%). In the previous year there was a record number
of claims, with a high proportion being for contractor
failure. This also resulted in an higher than normal increase
in the amount required to be provided for in 2001/02 for
the provision for future claims liabilities.
With the recovery of the building industry this year there
has been a consequent lack of insolvencies which has
dramatically decreased the number of claims for non-
completion, down to 189 from 384.
BSA was not required to fund the Queensland Building
Tribunal this year. It is now funded by Queensland
Treasury following a Cabinet Budget Review Committee
decision that it be funded from consolidated revenue.
Other Expenses expenditure increased during the year by
$0.993M (59.8%) from $1.662M to 2.655M. The increase
is largely attributable to a change in accounting for the
annual leave provision. This was previously included
with “Salaries and Contract Personnel”. Amortisation
expenses increased by $0.268M from $0.363M to $0.631M
reflecting the continuing investment in business
applications development and the purchase of a new
financial management information system.
58
FINANCIAL OVERVIEW
A strong recovery by the Insurance Fund
from the 2000/01 position together with a
smaller than forecast deficit for the General
Fund produced a sound consolidated result
for the year.
CONSOLIDATED 2001/02 OUTCOMES
BSA’s consolidated financial outcome for 2001/02 was a
profit from ordinary activities of $0.728M compared to a
loss of $6.952M the previous year. This was a significantly
improved result on the originally budgeted profit of
$0.138M and the mid-year forecast of $0.084M profit. This
resulted from an increase in total revenue of $1.246M
(5.3%) and decrease in expenditure of $6.434M (20.9%).
A fall in insurance claims expenses of $3.893M (46.5%)
significantly contributed to the decrease in expenditure
together with the BSA no longer required to fund the
Queensland Building Tribunal ($2.345M in 2000/01).
OPERATING REVENUE
Strong revenue results were recorded for:
Licensing income increased by $2.029M (21.8%) due to
increases in the number of licensees from 47,718 to
50,190, reduced drop out rate of 5.66% compared to 9.2%
in 2000/01 and finalising 7,532 applications compared to
6,087 in the previous year.
Insurance Premiums and Administration Fees increased by
$1.102M (43.9%) and $3.827M (92.4%) respectively. BSA
processed 62,506 policies for the year reflecting a buoyant
Queensland building industry with major drivers being the
First Home Owners Grant and low interest rates.
These increased revenue streams were partially offset by
the decrease in investment revenue which fell by $2.217M
(99.4%) from $2.230M to $0.013M. This resulted from the
poor performance by the BSA’s managed fund investments
which returned approximately -4% or -$0.797M and is
attributable to the poor market in Australian and
international equities. BSA’s cash investments returned
approximately 4.6% or $0.805M for the year.
Other revenue streams generally achieved budget.
The surcharge was phased out from 1 July 2002. Previously
the surcharge formed part of the insurance premium to
provide funding for other BSA activities and the
Queensland Building Tribunal. The surcharge was
removed to allow the full premium to be allocated to
running the insurance scheme. The surcharge shown for
the year is the amount accrued to the year from the
previous financial year.
Building Services Authority 2001/2002 Annual Report
Financial Performance Review (continued) ...
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 58
59
TRANSFERS FROM RESERVES
A contractor and consumer education reserve was
established in 1994/95 for the purpose of encouraging and
assisting education and research related to the building
industry. This is provided for under s25(5) of the
Queensland Building Services Authority Act 1991. In
2001/02 the balance of the reserve reduced by a further
$0.047M following expenditure on publications and
education material including owner builder study guides
and fact sheets.
STATEMENT OF FINANCIAL POSITION
The $0.706M increase in total equity from $4.658M to
$5.364M reflects the sound operating result for the year,
mainly attributable to the performance of the Insurance
Fund. This is a significant reversal on the 2000/01 position
where there was a $6.946M reduction in total equity. The
significant factors were a 46.5% reduction in underwriting
claims expenses together with a 74% increase in insurance
premium and administration fee revenue. BSA was also
no longer required to fund the Queensland Building
Tribunal ($2.345M in 2000/01).
The $7.311M (9.0%) increase in total assets is attributable
to:
• Receivables – an overall increase in recovery debtors
which reflects the flow-on effects from the previous
year when there was a record level of insurance
claims paid.
• Other financial assets – an increase in cash from
insurance premiums and administration fees resulting
from the strong year from the insurance scheme.
• Other – prepayments – increase in the reinsurers
share of unearned income again due to the strong
performance of the Insurance Fund.
• Intangibles – the increase reflects the continuing
investment in business applications development and
the purchase of a new financial management
information system.
The total liabilities increased by $6.605M due to:
• Payables rose due to increased roll fees bought about
by increased licensing income.
16
0
8
12
02 Inflation adjusted comparison of program
01/0200/0199/0098/9997/98
4
Insurance
Dispute management
$M
Licensing
costs
Building information
• Unearned premiums increased by $5.015M due to a
buoyant building industry resulting in 62,506 policies
being produced for the year.
• Future claims (current and non-current) decreased
by $0.421M based on actuarial assessment. The post
GST effects have passed and it reflects the improved
performance by the industry, eg. non-completion
claims have decreased by 195 or 50.8%.
BSA’s ability to discharge short term commitments is
measured by the current ratio (current assets/current
liabilities). The result for the year has caused the ratio to
decline marginally by 0.03 from 1.51 to 1.48 and this
remains a healthy position.
CAPITAL EXPENDITURE
Capital expenditure for the year, net of proceeds from
disposals, amounted to $1.599M compared to $1.054M in
2000/01 and comprised:
• Leasehold improvements $0.302M
• Motor vehicles $0.178M
• Computer software $1.023M
• Furniture and equipment $0.096M
The redevelopment of BSA’s main business application
CMS continued during the year with the major focus
being on new claims, legal and compliance systems and
the creation of a debtors sub-ledger. A new financial
management information system Finance 1 was also
purchased in readiness for 2002/03.
Spending on leasehold improvements increased by
$0.241M from $0.061M to $0.302M with new office
accommodation required for the Gold Coast office and
additional accommodation for Head Office where several
branches had been housed in temporary demountable
offices. This also increased furniture and equipment
expenditure by $0.043M from $0.053M to $0.096M.
BSA has a fleet of 38 vehicles, 58% of which are utilised
by Building Inspectors in the delivery of the dispute
management service.
18
-6
6
12
03 Inflation adjusted comparison of
01/0200/0199/0098/9997/98
0
Operating revenue
Operating expenses
$M
Profit/(loss)
General Fund results
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 59
30
-10
10
20
05 Inflation adjusted comparison of
01/0200/0199/0098/9997/98
0
Total revenue
Total expenditure
$M
Operating profit/(loss) before abnormals
Insurance Fund performance
8
0
4
6
04 Inflation adjusted comparison of
01/0200/0199/0098/9997/98
2
Net assets
Cash and investments
$M
General Fund net assets versus cash and investments
60
Building Services Authority 2001/2002 Annual Report
Financial Performance Review (continued) ...
CONSULTANCY EXPENDITURE
Expenditure on consultants fees increased by $0.074M from
$0.198M to $0.272M. This was largely attributable to
higher use of actuaries brought about by the National
Competition Policy Review and the National Review of
Home Warranty Insurance and Consumer Protection.
Other significant expenditure included consultancies
related to human resource management issues, the
performance of the annual workforce attitude survey and
development of the Authority’s customer continuum
program.
GENERAL FUND 2001/02 OUTCOMESAND PERFORMANCE REVIEW
The General Fund recorded a deficit from ordinary
activities of $0.761M, a net loss of $0.714M after the
transfer from reserves of $0.047M and a total change in
equity of $0.783M after a decrease in reserves of $0.069M.
As a result, net assets reduced by $0.783M from $2.636M
to $1.853M.
Revenue increased in real terms by $1.716M (15%) from
$11.432M to $13.148M exclusive of the transfer from the
insurance fund ($5.000M in 2000/01). This transfer did not
occur in 2001/02 and the increased fees for licences did
not fully meet this shortfall.
Expenditure decreased substantially by $2.551M (15.5%)
with the major reason being BSA was no longer required
to fund the Queensland Building Tribunal ($2.345M in
2000/01). Excluding this funding, expenditure decreased
slightly by $0.206M (1.5%) from $14.115M to $13.909M.
Tighter controls on expenditure and a drive to reduce
corporate overheads helped contribute to the reduction.
The budget performed well relative to the originally
forecast loss of $1.028M and the mid-year forecast loss of
$1.225M.
Revenue of $13.148M was $0.939M under the original
forecast of $14.087M however exceeded the mid-year
forecast of $13.040M by $0.108M.
Investments returned a sound $0.175M against an original
forecast of $0.207M and mid-year forecast of $0.147M.
General fund investments are in cash funds which returned
4.6% for the year and generally performed to market
expectations.
Licensing income ($11.353M) was $0.915M under the
original budget and exceeded the mid-year forecast by
$0.115M. The original forecasts were significantly reviewed
mid-year in relation to drop-out rates for renewals and
number of applications in the various categories.
By the mid-year review in January it was clear that drop-
out rates for licence renewals were significantly higher than
originally forecast. It was also apparent that the number
of applicants in higher fee categories was significantly
down on original forecasts with a greater number of
applicants in the lower fee categories. This resulted in the
mid-year forecasts for licence renewal and application fees
being downgraded by $1.030M from $12.268M to
$11.238M.
Generally, other revenue forecasts were not significantly
altered and budget was achieved.
Expenditure ($13.909M) was $1.206M under original
forecasts and $0.355M under the mid-year forecasts.
Significant savings against forecasts were achieved in
salaries, contract services and commissions and fees and
engineering fees. Savings in salaries and related costs
were achieved through vacancy management. Legal fees
significantly exceeded both the original budget and mid-
year forecast. Control measures such as who could
approve legal work going to an external firm and a
greater emphasis on internal delivery of legal services did
slow expenditure late in the year and will be used in
2002/03 to significantly reduce legal expenditure.
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 60
4
0
2
3
09 Inflation adjusted comparison of
01/0200/0199/0098/9997/98
1
$M
administrative costs per claimant assisted
24
0
12
18
08 Inflation adjusted Insurance Fund
01/0200/0199/0098/9997/98
6
Operating expenses
Claims expenditure
$M
Surcharge transferred
expenditure by type
61
INSURANCE FUND 2001/02 OUTCOMESAND PERFORMANCE REVIEW
The Fund recorded a net profit of $1.489M compared to
a loss of $6.924M for 2000/01. As a result, the net asset
position improved by $1.489M. The turnaround reflects a
buoyant Queensland building industry that has recovered
from the post GST effects which influenced the previous
years results. The First Home Owners Grant, continuing
low interest rates, increasing consumer confidence and the
reallocation of collected surcharge to insurance
underwriting significantly contributed to the recovery.
Total revenue fell by $0.470M from $12.291M to $11.821M.
Premium income increased by $1.102M from $2.510M to
$3.612M and administration fee income increased by
$3.827M from $4.142M to $7.969M. 62,506 policies were
processed for the year compared to 43,412 for 2000/01
with an increased average premium value of $444.63
compared to $365.75 in 2000/01.
Investment income fell by $2.119M (108%) from $1.957M
to -$0.167M. This resulted from the poor return on BSA’s
managed fund investments which returned -$0.797M (-4%).
This is attributable to the poor performance of Australian
and international equities. Cash investments returned
$0.630M (4.6%).
40
0
20
30
06 Inflation adjusted comparison of
01/0200/0199/0098/9997/98
10
Net assets
Cash and investments
$M
Insurance Fund net assets versus cash and investments
Total income of $11.821M exceeded the original and
mid-year forecasts by $1.350M and $0.153M
respectively. By the mid-year review, it was apparent
that the building industry had made a better than
expected recovery and revenue forecasts were
substantially increased .
Total expenditure fell by $8.883M from $19.215M to
$10.332M. There was no longer the requirement for the
transfer to the General Fund ($5.0M in 2000/01). The
full premium collected is now directed to the Insurance
Fund.
Underwriting Claims expenses decreased by $3.893M
from $8.377M to $4.484M through a reduction in claims
approved during the year and the amount required to
be provided for in 2001/02 for the provision for future
claims liabilities.
20
0
10
15
07 Inflation adjusted Insurance Fund income
01/0200/0199/0098/9997/98
5
Underwriting plus admin fees
Investment and other income
$M
Surcharge collected
by type
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 61
62
Building Services Authority 2001/2002 Annual Report
2002 2001Note $000 $000
Operating revenues from ordinary activities
Licence renewal and application fees 2 11 353 9 324
Underwriting premiums 3 3 612 2 510
Investment revenue 4 13 2 230
Administration fees 3 7 969 4 142
Surcharge collected 3 127 3 719
Other revenue 5 1 895 1 798
Total operating revenues from ordinary activities 24 969 23 723
Operating expenses from ordinary activities
Administrative expenses 7 8 588 9 216
Underwriting claims 3 4 484 8 377
Salaries and contract personnel 8 708 9 075
Other expenses 8 2 655 1 662
Queensland Building Tribunal funding 9 (194) 2 345
Total operating expenses from ordinary activities 24 241 30 675
Profit/(loss) from ordinary activities 11 728 (6 952)
Transfer from reserves 10 47 90
Net profit/(loss) 775 (6 862)
Increase/(Decrease) in Reserves:
Asset revaluation reserve 10 (22) 6
Contractor and consumer education reserve 10 (47) (90)
(69) (84)
Total changes in equity other than those resulting
from transactions with owners as owners 706 (6 946)
The above Statement of Financial Performance is to be read in conjunction with the Notes to and forming part of the Financial Statements.
for the year ended 30 June 2002
Statement of Financial Performance
BSA 4484 A/R 2002 Fins SR-FA2 28/10/02 11:18 AM Page 62
63
2002 2001Note $000 $000
Current assets
Cash 1(p) 644 (501)
Receivables 13 2 562 1 533
Reinsurance and other recoveries receivable 14 10 708 10 476
Other financial assets 12 38 578 36 698
Other – prepayments 15 7 721 4 082
Total current assets 60 213 52 288
Non-current assets
Reinsurance and other recoveries receivable 14 24 217 25 095
Plant and equipment 16 1 708 1 836
Intangibles 17 1 919 1 527
Total non-current assets 27 844 28 458
Total assets 88 057 80 746
Current liabilities
Payables 18 14 174 12 167
Provisions 19 1 662 1 636
Future claims and associated costs 21 14 799 15 710
Unearned premiums 20 10 140 5 125
Total current liabilities 40 775 34 638
Non-current liabilities
Provisions 19 840 862
Future claims and associated costs 21 41 078 40 588
Total non-current liabilities 41 918 41 450
Total liabilities 82 693 76 088
Net assets 5 364 4 658
Equity
Reserves 10 606 675
Retained profits 11 4 758 3 983
Total equity 5 364 4 658
The above Statement of Financial Position is to be read in conjunction with the Notes to and forming part of the Financial Statements.
Statement of Financial Positionas at 30 June 2002
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2002 2001Note $000 $000
Cash flows from operating activities
Received from roll fees 13 070 8 687
Surcharge collected 127 2 987
Received from administration fees 6 842 3 118
Received from interest 336 555
Received from other revenue 1 295 1 542
GST receipts 2 915 4 396
24 585 21 285
Payments to creditors (7 041) (8 111)
GST payments (2 850) (4 244)
Payments to employees (9 589) (9 097)
(19 480) (21 452)
5 105 (167)
Received from premiums 17 509 5 871
Payments to reinsurers (15 245) (7 291)
Claims paid (15 458) (17 516)
Received from reinsurers 13 036 13 389
(158) (5 547)
Net cash provided by operating activities 27 4 947 (5 714)
Cash flows from investing activities
Payments for plant and equipment and intangibles (1 964) (1 247)
Proceeds from sale of investments 64 -
Proceeds from sale of plant and equipment 365 130
Net cash used in investing activities (1 535) (1 117)
Net increase/(decrease) in cash held 3 412 (6 831)
Cash at the beginning of the financial year 5 952 12 783
Cash at the end of the financial year 28 9 364 5 952
The above Statement of Cash Flows is to be read in conjunction with the Notes to and forming part of the Financial Statements.
for the year ended 30 June 2002
Statement of Cash Flows
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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation
The financial statements are general purpose financial reports that have been prepared in accordancewith applicable Australian Accounting Standards and other mandatory professional reportingrequirements (Urgent Issues Group Abstracts) and the requirements prescribed by:
– the Queensland Building Services Authority Act 1991;
– section 46F of the Financial Administration and Audit Act 1977; and
– the Financial Management Standard 1997
The financial statements are prepared in accordance with the historical cost convention and do not take into account changing money values. The accounting policies adopted are consistent with those ofprevious years unless otherwise stated. Comparative information is reclassified where appropriate toenhance comparability.
The Queensland Building Services Authority (BSA) is comprised of a General Statutory Fund and anInsurance Fund as stipulated by Sections 25 and 26 of the Queensland Building Services Authority Act1991. The financial statements of the Authority have been prepared as a consolidation of both Funds.The balances and effects of transactions between the Funds included in the consolidated financialstatements have been eliminated. Note 23, shows the results and financial position of each Fund as at 30 June 2002.
Having regard to the nature of the general insurance business conducted by the Authority, certaindisclosures have been made in the Statement of Financial Performance and Statement of FinancialPosition, which are additional to those required by the Financial Management Standard 1997.
(b) Ministerial portfolio
The BSA is a statutory body within the portfolio of the Minister for Public Works and Minister forHousing. The principal place of business for the BSA is 11 Edmondstone Street, South Brisbane,Queensland.
(c) Premium revenue
Insurance premiums comprise amounts charged to policyholders. The earned portion of premiumsreceived is recognised as revenue. Premium is treated as earned from the date of attachment of risk.
The pattern of recognition of income over the policy of indemnity period is based on time, where thisclosely approximates the pattern of risk underwritten. Unearned premiums are determined byapportioning the premiums written in the year, using the one twenty-fourth method for reinsurancebusiness, over the period of indemnity from the attachment of the risk.
(d) Outward reinsurance
Premiums ceded to reinsurers are recognised as an expense in accordance with the pattern ofreinsurance services received. Accordingly, a portion of outward reinsurance premiums is treated at thebalance date as a prepayment.
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) Claims
Claims expenses and a liability for outstanding claims are recognised in respect of direct insurancebusiness. The liability covers claims reported but not yet paid, incurred but not reported (IBNR) and theanticipated direct and indirect costs of settling those claims. Claims outstanding are assessed by reviewof individual claim files and estimating changes in the ultimate cost of settling claims, IBNR’s andsettlement costs using statistics based on past experience and trends. Outstanding claims relating to“long-tail” classes are subject to independent actuarial assessment. “Long-tail” classes refer to claims notsettled within one year of the incidence of risk.
The liability for outstanding claims for “long-tail” classes is measured as the present value of theexpected future payments. These payments are estimated on the basis of the ultimate cost of settlingclaims, which is affected by factors arising during the period to settlement such as inflation. Suchestimates are subject to uncertainty due to variations of both a random and non-random nature, whichmay affect components of the estimates. The expected future payments are discounted to present valueat the balance date using market determined, risk adjusted discount rates. The details of rates appliedare included in Note 21.
The liability for outstanding claims is calculated using a “best estimate” methodology, which is a centralestimate of likely future claim payments. This central estimate is intended to be neither optimistic norpessimistic about the development of claims in the future.
Goods and services tax (GST) on claims expenditure
The Authority incurs GST for which it is currently unable to claim an input tax credit on all claimsettlements made from and including 1 July 2000.
For claims settled after 30 June 2000 for events which occurred before 1 July 2000 the Authority is ableto claim a percentage of the GST paid (in accordance with the participation rates as detailed in Note 3)from its reinsurers.
A percentage of the GST paid cannot be passed to the reinsurers for claims for which the eventoccurred after 30 June 2000.
(f) Reinsurance and other recoveries receivable
Reinsurance and other recoveries receivable on paid claims, reported claims not yet paid and IBNR’s arerecognised as revenue. Recoveries receivable are assessed in a manner similar to the assessment ofoutstanding claims. Recoveries receivable in relation to “long-tail” classes are measured as the presentvalue of the expected future receipts, which are calculated on the same basis as the liability foroutstanding claims.
The details of discount and inflation rates applied are included in Note 21.
(g) Receivable and revenue recognition
Insurance claims recoverable from licensed builders are recognised when a claim paid to a consumer isfinalised. Tribunal fines receivables are recognised when an order from the Tribunal is issued in favourof the Authority. Magistrates Court fines receivables are recognised when a conviction from theMagistrates Court is issued in favour of the Authority. Appraisals of government contracts receivable arerecognised when the services provided by the Authority are invoiced at the end of each month.
Debtors are reviewed on an ongoing basis. Debts, which are known to be uncollectable, are written off.A provision for doubtful debts is raised where some doubt exists and in any event where the debt ismore than 180 days overdue.
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) Non-current assets
The carrying amount of non-current assets is reviewed to determine whether they are in excess of theirrecoverable amount at balance date. The recoverable amount of an asset is the amount expected to berecovered through the net cash inflows arising from its continued use. If the carrying amount of non-current assets exceeds the recoverable amount, the asset is written down to the lower amount. To theextent that a revaluation decrement reverses a revaluation increment previously credited to, and stillincluded in the balance of, the asset revaluation reserve, the decrement is debited directly to thatreserve. Otherwise, the decrement is recognised as an expense in the Statement of FinancialPerformance. In assessing recoverable amount the relevant cash flows have not been discounted to thepresent value. The threshold for recognising non-current physical assets in the financial statements onacquisition is $1,000.
Plant and equipment is valued at cost.
Change in Accounting Policy
In accordance with the transitional provisions provided for in AAS 38 Revaluation of Non-Current Assetsthe brought forward carrying value of plant and equipment as at 1 July 2001 is taken to be the deemedcost of these assets. The change in accounting policy has no financial effect in the current or priorfinancial years.
(i) Operating leases
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor,are charged as expenses in the periods in which they are incurred.
(j) Depreciation and amortisation
Depreciation and amortisation are provided as appropriate on all non-current assets, other than land,using a straight line method of calculation at rates determined by the estimated useful life of the assetsto the economic entity commencing from the time the asset is held ready for use. Estimates of remaininguseful lives are made on a regular basis for all assets, with annual reassessment for major items.
Depreciation commences from the date an asset is controlled, serviceable and ready for use. The rates of each class of asset are:
Office Furniture and Equipment 15%–33.33%Motor Vehicles 15%Computer Equipment 33.33%
Leasehold Improvements depreciated over the life of the applicable leaseagreement or the estimated useful life of theimprovement to the economic entity, whichever is theshorter. The rates are varied between 16% -50%.
Gains or losses arising from the sale or disposal of non-current assets are brought to account in thedetermination of the operating result for the year in which the sale or disposal took place.
(k) Investments
General Statutory Fund investments, excluding government and semi-government stock, are recorded atcost.
Government and semi-government stock and Insurance Fund investments are measured at their netmarket value at each balance date.
Changes in the net market values of investments (or cost of acquisition, if acquired during the financialyear) are recognised as revenue or expenses in the Statement of Financial Performance.
Investment revenue is brought to account on an accrual basis.
Income derived from investments is brought to account when earned.
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Employee leave and retirement benefits
Wages, salaries, annual leave and sick leave
The provisions for employee entitlements to wages, salaries, annual leave and sick leave represent theamount which the Authority has a present obligation to pay resulting from employees’ services providedup to the balance date. The provision has been calculated at nominal amounts based on current wageand salary rates and includes related on-costs.
Long service leave
The liability for employee entitlements to long service leave represents the present value of theestimated future cash outflows to be made by the Authority resulting from employees’ services providedup to the balance date.
Liabilities for employee entitlements which are not expected to be settled within twelve months arediscounted using the rates attaching to national government securities at balance date, which mostclosely match the terms of maturity of the related liabilities.
In determining the liability for employee entitlements, consideration has been given to future increasesin wage and salary rates, and the Authority’s experience with staff departures. Related on-costs have alsobeen included in the liability.
The long service leave provision also takes into account recognition of employees’ prior services inother state, local or federal government entities. Recognition of prior services has been agreed as part ofthe Enterprise Development Agreement for the Authority.
Superannuation fund
Superannuation contributions made by the Authority are contributed to an employee superannuationscheme and to other funds on behalf of its Board Members as required under applicable awardlegislation. These contributions are charged as expenses when incurred. The Authority has no obligationto cover any shortfall in any of the funds’ obligations to provide benefits to employees on retirement.
(m)Payables
These amounts represent liabilities for goods and services provided to the economic entity prior to theend of the financial year and which are unpaid. The amounts are unsecured and are usually paid within30 days of recognition.
(n) Intangible assets and expenditure carried forward
Costs associated with the computer systems redevelopment project are deferred and amortised on astraight-line basis over the period of their expected benefit, which is five years. The CD Romdevelopment costs are amortised over three years.
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o) Reserves
A contractor and consumer education reserve has been established for the purpose of encouraging andassisting education and research related to the building industry as allowed under the QueenslandBuilding Services Authority Act 1991, subsection 25(5). Transfers to this reserve are determined by theGeneral Statutory Fund’s profits.
(p) Cash
Cash balances in BSA’s General and Insurance bank accounts are cleared to QTC Cash Fund overnightto maximise investment returns. Consequently, period end Cash at Bank may reflect a negative balancedue to the timing of unpresented cheques. BSA does not have an overdraft facility and is precludedfrom doing so by legislation.
For purposes of the statement of cash flows, cash includes deposits at call which are readily convertibleto cash on hand and are subject to insignificant risk of changes in value.
(q) Goods and Services Tax (GST)
Revenues (including earned premiums), expenses and assets are recognised net of the amount of GSTunless (in relation to expenses and assets) the amount of GST incurred is not recoverable from theAustralian Tax Office (ATO). In these instances the GST is recognised as part of the amount of theexpense or is recognised as part of the cost of acquisition of the asset.
Receivables and payables are recognised inclusive of the amount of GST that is receivable or payable.An allowance for GST payable on future claims has been included in the provision for future claims.
Cash flows are included in the Statement of Cash Flows on a gross basis with the GST components ofthe cash flows shown as separate line items. The GST components of cash flows arising from investingand financing activities which are recoverable from, or payable to, the ATO are classified as operatingcash flows.
(r) Income taxation
The Authority is exempt from income taxation pursuant to Division 1AB, Subdivision A Sections 24AK to24AV of the Income Tax Assessment Act 1936.
(s) Rounding
Amounts have been rounded to the nearest thousand dollars, except where otherwise indicated.
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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Building Services Authority 2001/2002 Annual Report
2002 2001Note $000 $000
NOTE 2 LICENCE RENEWAL AND APPLICATION FEES
Renewal fees 9 939 8 430
Application fees 1 414 894
11 353 9 324
NOTE 3 UNDERWRITING
3.1 Underwriting premiums
Premiums received 19 464 8 037
Less: Outward reinsurance premium expense 14 594 6 025
Loss year distribution paid to reinsurers - 203
Authority’s share of premiums 4 870 1 809
Less: Unearned premiums at end of year 20 2 539 1 281
Total premiums received and earned during the year 2 331 528
Add: Unearned premiums at beginning of year 1 281 1 982
Underwriting premiums 3 612 2 510
Underwriting claims
Claims approved and charged 15 391 25 920
Less: Reinsurance and other recoveries revenue 10 907 17 543
Underwriting claims 24 4 484 8 377
Loss on underwriting (872) (5 867)
Participation in the Insurance Scheme
Date Authority Brokers/Reinsurers
Pre – 01/07/91 10% 90%
01/07/91 – 30/06/98 25% 75%
01/07/98 – 30/09/99 30% 70%
01/10/99 – 30/06/02 25% 75%
3.2 Administration fees
Administration fees received 7 938 3 826
Movement in the provision for future claims processing 31 316
Administration fees after provision for future claims processing 7 969 4 142
3.3 Surcharge collected 127 3 719
Previously a surcharge was collected and transferred to the General Fund. This is now retained by the
Insurance Fund and is reflected in Administration Fees which are collected for the administration of the
Insurance Scheme.
General Fund operations were supplemented by the restructuring of licence fees and the cessation of the
requirement to fund the Queensland Building Tribunal (refer Note 9).
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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2002 2001Note $000 $000
NOTE 4 INVESTMENT REVENUE
Interest 336 498
Changes in net market value of investments
– realised (323) -
– unrealised - 1 732
13 2 230
NOTE 5 OTHER REVENUE
Court fines awarded 645 502
Search fees 281 245
Owner builder fees 453 342
Gain on sale of non-current assets 6 16 7
Appraisal of Government Contracts 213 398
Other 287 304
1 895 1 798
NOTE 6 GAIN ON DISPOSAL OF NON-CURRENT ASSETS
Proceeds from sale of non-current assets 365 130
Carrying value of non-current assets sold or disposed (349) (123)
Gain on disposal 5 16 7
NOTE 7 ADMINISTRATIVE EXPENSES
Equipment maintenance 253 325
Information Systems Maintenance 404 695
Computer lease rentals 515 511
Miscellaneous office equipment 111 106
Office rentals and outgoings 1 436 1 018
Legal fees 1 459 1 382
Engineering and other commission fees 165 1 296
Consultants fees 272 198
Printing and stationery 689 752
Travelling expenses 168 130
Motor vehicle expenses 142 181
Postage and telephones 822 846
Superannuation 819 704
Payroll tax 509 461
Fringe benefits tax 80 75
Advertising 94 83
Other 650 453
8 588 9 216
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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2002 2001Note $000 $000
NOTE 8 OTHER EXPENSES
Auditors remuneration – audit of financial statements (i) 4 42
Board members’ fees and functions 43 31
Premium acquisition costs and sighting fees 70 295
Doubtful debts and bad debts 323 208
Depreciation 698 576
Amortisation 631 363
Long service leave 26 157
Annual leave 860 (10)
2 655 1 662
(i) Audit fees of $31 900 for 2002 were not accrued as at 30 June 2002
NOTE 9 QUEENSLAND BUILDING TRIBUNAL FUNDING
(194) 2 345
The Authority is no longer required to provide funding for the
running of the Tribunal.
The negative expense of $194 000 reflects the reversal of an
over-accrual made as at 30 June 2001.
NOTE 10 RESERVES
Consumer and contractor education reserve 1(o) 82 129
Asset revaluation reserve 524 546
606 675
Contractor and consumer education reserve
Balance at beginning of year 129 219
Add: funds transferred from retained profits - 15
Less: funds transferred to retained profits (47) (105)
Balance at end of year 82 129
Asset revaluation reserve
Balance at beginning of year 546 540
Add: Revaluation of assets - 52
Less: decrement on write down of assets (22) (46)
Balance at end of the year 524 546
NOTE 11 RETAINED PROFITS
Balance at beginning of year 3 983 10 845
Profit/(Loss) from ordinary activities 728 (6 952)
Transfer from reserves 47 90
Balance at end of the year 4 758 3 983
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
Building Services Authority 2001/2002 Annual Report
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Leasehold Plant &Improvements Equipment Total
2002 2001Note $000 $000
NOTE 12 OTHER FINANCIAL ASSETS
On call and overnight deposits and cash trust investments 8 720 6 453
Government and semi-government stock – at market value 29 858 30 245
38 578 36 698
NOTE 13 RECEIVABLES
Current
Sundry debtors 23 506 15 843
Less: Provision for doubtful debts 20 944 14 310
2 562 1 533
NOTE 14 REINSURANCE AND OTHER RECOVERIES RECEIVABLE
Current
Reinsurance and other recoveries receivable 10 708 10 476
Non-current
Reinsurance and other recoveries receivable 24 217 25 095
NOTE 15 OTHER ASSETS
Current
Prepayments 120 238
Prepayments – outward reinsurance on unearned premiums 20 7 601 3 844
7 721 4 082
NOTE 16 PLANT AND EQUIPMENT
At independent valuation 30 June 1998 - 1 659
At cost 3 791 1 691
3 791 3 350
Less: Provision for depreciation 2 083 1 514
1 708 1 836
Movement in carrying amount of plant and equipment
Carrying amount at beginning of year 577 1 259 1 836
Acquisitions 302 639 941
Disposals - (349) (349)
Write downs - (22) (22)
Depreciation (294) (404) (698)
Carrying amount at end of year 585 1 123 1 708
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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2002 2001Note $000 $000
NOTE 17 INTANGIBLES
Non-current
Computer systems redevelopment costs 1(n) 3 227 2 206
Less: Amortisation 1 330 710
1 897 1 496
CD Rom development costs 1(n) 33 31
Less: Amortisation 11 -
22 31
1 919 1 527
NOTE 18 PAYABLES
Current
Sundry creditors 8 022 6 806
Accruals 698 1 306
Roll fees 5 175 3 806
GST collected on premiums 279 249
14 174 12 167
NOTE 19 PROVISIONS
Current
Long service leave 689 726
Annual leave 973 910
1 662 1 636
Non-current
Long service leave 387 409
Provision for GST payable 29 453 453
840 862
NOTE 20 UNEARNED PREMIUMS
Authority’s share 3 2 539 1 281
Outward reinsurance 15 7 601 3 844
10 140 5 125
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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2002 2001$000 $000
NOTE 21 FUTURE CLAIMS AND ASSOCIATED COSTS
Expected future claims payments 65 696 66 023
Discount to present value (9 819) (9 725)
Liability for outstanding claims 55 877 56 298
Current 14 799 15 710
Non-current 41 078 40 588
55 877 56 298
Represented by:
Future claims provision 49 622 50 012
Future claims processing provision 6 255 6 286
55 877 56 298
The following average inflation rates and discounts rates
were used in the measurement of outstanding claims:
For the succeeding year
Inflation rate 3.5% 3.5%
Discount rate 6.0% 6.0%
For subsequent years
Inflation rate 3.5% 3.5%
Discount rates 6.0% 6.0%
The weighted average expected term of settlement of the
outstanding claims from the balance date is estimated to be: 3.0 years 2.9 years
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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Building Services Authority 2001/2002 Annual Report
2002 2001$000 $000
NOTE 22 COMMITMENTS
Operating lease commitments
Total operating lease expenditure contracted for at balance
date but not provided for in the accounts, payable:
– not later than one year 1 697 1 569
– later than one year and not later than five years 4 651 3 813
– later than five years - 83
6 348 5 465
The Authority leases property, plant and equipment under operating leases expiring from 1 to 5 years.
Property leases generally provide the Authority with a right of renewal at which time all terms are
renegotiated.
NOTE 23 SEGMENT INFORMATION
As stated in Note 1(a), the Authority is comprised of a General Statutory Fund and an Insurance Fund. The
General Statutory Fund derives the majority of its revenue from fees received from building industry
contractors to obtain and renew licences required under the Queensland Building Services Authority Act
1991. The Insurance Fund derives its revenue from underwriting premiums and administration fees from
operating the insurance scheme.
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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General Insurance ConsolidatedStatutory Fund Fund Entity
2002 2001 2002 2001 2002 2001Primary Reporting Segements $000 $000 $000 $000 $000 $000
General Insurance Elimin- ConsolidatedStatutory Fund Fund ations Entity
2002 2001 2002 2001 2002 2001Primary Reporting Segements $000 $000 $000 $000 $000 $000
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
Revenue
Revenue from external sources 13 148 11 432 11 821 12 291 24 969 23 723
Internal transfers of funds - 5 000 - - (5 000) - -
Total segment revenue 13 148 16 432 11 821 12 291 24 969 23 723
Expenditure
Expenditure from external sources 13 909 16 460 10 332 14 215 24 241 30 675
Internal transfers of funds - - - 5 000 (5 000) - -
Total segment expenditure 13 909 16 460 10 332 19 215 24 241 30 675
Segment results from
ordinary activities (761) (28) 1 489 (6 924) 728 (6 952)
Transfer from reserves 47 90 - - 47 90
Net profit/(loss) (714) 62 1 489 (6 924) 775 (6 862)
Increase/(decrease) in reserves (69) (84) - - (69) (84)
Total changes in equity other
than those resulting from
transactions with owners
as owners (783) (22) 1 489 (6 924) 706 (6 946)
Assets
Segment assets 10 070 8 995 77 987 71 751 88 057 80 746
Liabilities
Segment liabilities 8 217 6 359 74 476 69 729 82 693 76 088
Net Assets
Segment net assets 1 853 2 636 3 511 2 022 5 364 4 658
Other
Acquisition of non-current
segment assets 1 798 1560 166 45 1 964 1605
Depreciation and amortisation of
Non-current segment assets 1 287 939 42 - 1 329 939
Other non-cash segment expenses 114 (20) 6 520 (1 921) 6 634 (1 941)
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2002 2001Current Prior Current Prior
Year Years Total Year Years Total$000 $000 $000 $000 $000 $000
2002 2001Note $000 $000
NOTES 24 NET CLAIMS INCURRED
Current period claims relate to risks borne in the current reporting period. Prior period claims relate to a
reassessment of the risks borne in the previous reporting period.
Gross claims incurred and related
expenses – undiscounted 9 041 6 465 15 506 7 447 20 142 27 589
Reinsurance and other recoveries
– undiscounted (6 017) (4 456) (10 473) (4 965) (13 666) (18 631)
Net claims incurred – undiscounted 3 024 2 009 5 033 2 482 6 476 8 958
Discount and discount movement
– gross claims incurred (1 784) 1 669 (115) (1 294) (376) (1 670)
Discount and discount movement
– reinsurance and other recoveries 1 186 (1 316) (130) 861 91 952
Net discount movement (598) 353 (245) (433) (285) (718)
Total discounted net incurred claims 2 426 2 362 4 788 2 049 6 191 8 240
Other recoveries undiscounted
Claims recoverable from Licensees 15 425 16 260
Provision for doubtful debts (14 243) (16 117)
1 182 143
Reinsurer’s portion (878) (280)
Total undiscounted recoveries 304 (137)
Total discounted net incurred claims 4 788 8 240
Less: other recoveries undiscounted 304 (137)
Underwriting claims 3 4 484 8 377
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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NOTE 25 CONTINGENT LIABILITY – CONSOLIDATED REVENUE GRANT
During the 1998/99 financial year the Authority received a $1.45M grant from the State GovernmentConsolidated Revenue. The grant was made to provide short-term funding support for BSA pendingresolution of BSA’s long-term funding strategy through the Government’s Better Building Industry reforms.The grant was treated as income in the Authority’s accounts and as a general expense in the Government’saccounts for 1998/99. As a result of a subsequent Cabinet Decision, the Government requires the grant tobe repaid on a future date. Treasury advice is that the funds are to be repaid as a dividend, with the timingof this repayment dependent upon BSA’s capacity to do so and to be examined in subsequent annualbudget development processes.
As at 30 June 2002, the value of the contingent liability remained at $1.45M. Provision for payment of thecontingent liability, in full or part, was not made in the 2002/03 BSA budget.
NOTE 26 FINANCIAL INSTRUMENTS
The Authority invests in Queensland Investment Corporation (QIC) Cash Trust, QIC Investment Trust andQueensland Treasury Corporation (QTC) Cash Fund.
The investment managers of the pooled investment vehicles have invested in a variety of financialinstruments, including derivatives, which expose the Authority’s investment to a variety of investment risks,including interest rate risk, credit risk, market risk and currency risk.
The Authority obtains regular reports from each investment manager on the nature of the investment madeand the associated risks and returns. The Authority seeks information from the investment managers of eachproposed collective investment, and may also seek independent advice from other qualified persons, so asto determine the nature and extent of risk, and expected returns associated with each investment prior todetermining its suitability as an investment for the Authority. This includes the receipt of a formal RiskManagement Statement from each manager.
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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2002 2001Floating Non- Floating Non-interest interest interest interest
rate bearing Total rate bearing Total$000 $000 $000 $000 $000 $000
NOTE 26 FINANCIAL INSTRUMENTS (CONTINUED)
a) Interest rate risk exposures
The Authority’s exposure to interest rate risk and the effective weighted average interest rate for each
class of financial assets and financial liabilities is set out below.
Financial assets
Cash - 644 644 - (501) (501)
Receivables - 2 562 2 562 - 1 533 1 533
Investments
– At call deposits 8 720 - 8 720 6 453 - 6 453
– QIC stock 29 858 - 29 858 30 245 - 30 245
38 578 3 206 41 784 36 698 1 032 37 730
Weighted average interest rate 0.3% 5.85%
Financial liabilities
Payables - 14 174 14 174 - 12 167 12 167
Net financial assets (liabilities) 38 578 (10 968) 27 610 36 698 (11 135) 25 563
b) Credit risk exposures
The credit risk on financial assets of the Authority that have been recognised on the Statement ofFinancial Position is generally the carrying amount, net of any provisions for loss.
The Authority does not have any material credit risk exposure to any single debtor, or group of debtors,under financial instruments entered into by the Authority. The credit risk exposure does not take intoaccount the value of any security held in the event other parties fail to perform their obligations under afinancial instrument.
c) Net fair value of financial assets and liabilities
The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets andfinancial liabilities approximates their carrying value.
The net fair value of other monetary financial assets, being Queensland Investment Corporation Stock isbased on the quoted market price provided by QIC.
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
BSA 4484 A/R 2002 Fins SR-FA2 28/10/02 11:18 AM Page 80
81
2002 2001$000 $000
NOTE 27 RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO OPERATING PROFIT/(LOSS) FROM ORDINARY ACTIVITIES
Net cash provided by operating activities 4 947 (5 714)
Non-cash items in operating surplus:
Provisions for doubtful debts (6 634) 1 941
Provision for employee entitlement (4) (147)
Depreciation and amortisation (1 329) (939)
Net gain on sale of plant and equipment 16 7
Changes in net market value of investments (323) 1 675
Net change in operating assets and liabilities:
Increase/(decrease) in receivables 6 377 2 147
Increase/(decrease) in other current assets 522 (2 082)
(Increase)/decrease in sundry creditors and accruals (638) 1 478
(Increase)/decrease in roll fees (1 369) 637
(Increase)/decrease in accrued claims 421 (6 709)
(Increase)/decrease in unearned premiums (5 016) 2 485
Increase/(decrease) in deferred acquisition costs - (240)
Increase/(decrease) in prepayments – outward reinsurance 3 758 (1 783)
Payment from provision for GST - 292
Profit/(loss) from ordinary activities 728 (6 952)
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
BSA 4484 A/R 2002 Fins SR-FA2 28/10/02 11:18 AM Page 81
2002 2001Note $000 $000
NOTE 28 RECONCILIATION OF CASH
For the purposes of the Statement of Cash Flows, cash includes cash
on hand and on deposit with financial institutions for operating
activities. Cash at the end of the financial year as shown in the
Statement of Cash Flows is reconciled to the Statement of Financial
Position as follows:
Cash 1(p) 644 (501)
Deposits at call 8 720 6 453
Total cash and cash equivalents 9 364 5 952
As stated in Note 1(a), the Act requires the cash and cash equivalents
to the General Statutory Fund and Insurance Fund to remain separate.
The cash and cash equivalent balance of the two funds as at
30 June 2002 is:
General Statutory Fund
Cash 194 (232)
Deposits at call 1 272 2 241
Insurance Fund
Cash 450 (269)
Deposits at call 7 448 4 212
NOTE 29 PROVISION FOR GST PAYABLE
Building contractors pay the insurance premiums on behalf of consumers. However, the Australian TaxationOffice (ATO) has ruled that contractors are able to claim an input tax credit in respect of GST paid on thepremium. However, as consumers, not contractors, are the beneficiaries of claim settlements, there is abreak in the “chain of supply” which prevents BSA from being able to claim a decreasing adjustment inrespect of its claims expenditure. BSA is seeking an amendment to the GST legislation to address thisanomaly. In the event that it succeeds, BSA will incur a GST liability in regard to new insurance businesswritten during the period 2 December 1998 to 8 July 1999. A provision of $0.453M was made at 30 June 2002 for this potential liability. (Refer Note 19).
NOTE 30 HIH INSURANCE
The Authority has notified HIH Insurance of 5 circumstances which could give rise to professionalindemnity claims.
As at 30 June 2002 only one of the circumstances had an amount (of $25,000 actual) attached.
The Authority is unable to assess the amount of the potential liability attaching to the other four claims.
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
Building Services Authority 2001/2002 Annual Report
82
BSA 4484 A/R 2002 Fins SR-FA2 28/10/02 11:18 AM Page 82
83
We have prepared the following consolidated financial statements pursuant to the provisions of the FinancialAdministration and Audit Act 1977, Financial Management Standard 1997 and other prescribed requirementsand certify that in our opinion:
(a) the prescribed requirements in respect of the establishment and the keeping of accounts have beencomplied with in all material respects;
(b) the Statement of Financial Performance has been drawn up so as to present a true and fair view of theresults of the Authority for the year ended 30 June 2002;
(c) the Statement of Financial Position has been drawn up so as to present a true and fair view of theAuthority’s financial position as at 30 June 2002; and
(d) the Statement of Cash Flows has been drawn up so as to present a true and fair view of the cash flowsof the Authority for the year ended 30 June 2002.
Garry Rossow Ian Jennings
Chairman General Manager
Brisbane
19th September 2002
Certificate of the Queensland Building Services Authority
BSA 4484 A/R 2002 Fins SR-FA2 28/10/02 11:18 AM Page 83
84
Building Services Authority 2001/2002 Annual Report
Scope
I have audited the general purpose financial statements of the Queensland Building Services Authorityprepared by the Authority for the year ended 30 June 2002 in terms of section 46F of the FinancialAdministration and Audit Act 1977. The financial statements comprise the Statement of FinancialPerformance, Statement of Financial Position, Statement of Cash Flows, Notes to and forming part of thefinancial statements and certificates given by the Chairperson and the General Manager.
The Queensland Building Services Authority is responsible for the preparation and the form of presentationof the financial statements and the information they contain. I have audited the financial statements inorder to express an opinion on them.
The audit has been conducted in accordance with QAO Auditing Standards, which incorporate theAustralian Auditing Standards, to provide reasonable assurance as to whether the financial statements arefree of material misstatement. Audit procedures included the examination, on a test basis, of evidencesupporting the amounts and other disclosures in the financial statements and the evaluation of accountingpolicies and significant accounting estimates. These procedures have been undertaken to form an opinionwhether, in all material respects, the financial statements are presented fairly in accordance with prescribedrequirements in Australia which include Australian Accounting Standards so as to present a view which isconsistent with my understanding of the Queensland Building Services Authority's financial position, and theperformance as represented by the results of its operations and its cash flows.
The audit opinion expressed in this report has been formed on the above basis.
Audit Opinion
In accordance with section 46G of the Financial Administration and Audit Act 1977 I certify that I havereceived all the information and explanations I have required and, in my opinion –
– the prescribed requirements in respect of the establishment and keeping of accounts have beencomplied with in all material respects; and
– the statements have been drawn up so as to present a true and fair view, in accordance with prescribedaccounting standards and other mandatory professional reporting requirements in Australia, of thetransactions of the Queensland Building Services Authority for the financial year 1 July 2001 to 30 June 2002 and of the financial position as at the end of that year.
J P BEH, CPA
Director of Audit Queensland Audit Office
(Delegate of the Auditor-General) Brisbane
Independent Audit ReportQueensland Building Services Authority
BSA 4484 A/R 2002 Fins SR-FA2 28/10/02 11:18 AM Page 84
PageIndex Page
--> People 2, 4, 14, 38Accommodation 41Enterprise Development Agreement 40Equal Employment Opportunity 40Key Workforce Statistics and Indicators 39Learning and Development 39Workforce Attitude Survey 40Workplace Health and Safety 40
--> Policy (Legislation and) 2, 4, 14, 42--> Population and Demographic Trends 12--> Private Certifiers
Accreditation and Audits 48Certification 48
--> Queensland Government Policy Priorities 11--> Reinsurance 53--> Representation to NSW Parliament Joint Select
Committee on the Quality of Building 55--> Risk
Management 26Monitoring Accountability and Risk Management 24
--> Staff (See People)--> Strategic Business Planning and Budgeting 21--> Subcontractors’ Charges Act 1974 44--> Value for Money 10--> Values IFC, 14--> Vision IFC--> Whistleblowers Protection Act 1994 23--> Workplace Health and Safety 40
Diagrams
--> Corporate Performance - Bird’s Eye 14--> Learning and Development Schematic 39--> Map of BSA Office Locations IFC--> Organisational Chart 20--> Planning and Reporting Framework 27--> Service Delivery Model 21
Graphs
01 Customer Continuum – Commitment Continuum 2902 Customer Continuum – Satisfaction Continuum 2903 Licence Class by Profession 3204 Licensee Base by Region 3205 Licensee Age vs AATO 3306 Number of Licensed Builders and Trade Contractors 3307 Regional Distribution of Dispute Notifications
Received in 2001/02 3408 Dispute Notifications Received/Finalised
Compared with Building Activity 3409 Disputes Satisfactorily Resolved 3510 Accrued Policies by Construction Year 3511 Gross Premium Receipts 3612 Claim Payments by Type 3613 10-year loss ratios 52
Financial Performance Review Graphs
01 Program Cost Comparison 5802 Inflation Adjusted Comparison of Program Costs 5903 Inflation Adjusted Comparison of General
Fund Results 5904 Inflation Adjusted Comparison of General
Fund Net Assets Versus Cash and Investments 6005 Inflation Adjusted Comparison of Insurance Fund
Performance 6006 Inflation Adjusted Comparison of Insurance
Fund Net Assets Versus Cash and Investments 6107 Inflation Adjusted Insurance Fund Income by Type 6108 Inflation Adjusted Insurance Fund Expenditure by Type 6109 Inflation Adjusted Comparison of Administrative
Costs Per Claimant Assisted 61
Tables
--> % of Tribunal Reviews of Dispute Management Decisions Resulting in Favourable Outcome for BSA 35
--> % of Tribunal Reviews of Insurance Decisions that Reaffirmed BSA’s Decision 37
--> % of Tribunal Reviews of Licensing and Compliance Decisions Resulting in Favourable Outcome for BSA 34
--> Comparison of Interstate Insurance Premiums 10--> Comparison of Licence Fees in Financial Category SC2 10--> Consolidated Outcomes 3--> Customers’ Rating of BSA’s Website and
Email Newsletter 30--> Failed Contractors Causing the Most Significant
Claim Approvals During the Year 37--> General Fund 3--> Insurance Fund 3--> Meetings Attended by Board Members 19--> Number of Licensees Who Altered Their Renewal
Date by Financial Category 43--> Performance Audits Finalised by Type 47--> Private Certification – Audit Information 49--> Private Certification – BSA Decisions Appealed to
Chief Executive 49--> Private Certification – Complaint Status 48--> Private Certification – Complaints Received 48--> Staff as at 30 June 2002 40--> Staffing – Separations 41--> Staffing – VER’s, Retrenchments and Redeployments 41--> Top 10 Defects 2001/02 35--> Workforce Diversity 40
--> Anti-phoenix Provisions 45--> Audits and Investigations 25--> Board
Composition of the Board 18Finance, Audit and Risk Committee 24Policy Committee 24Remuneration 19Role of 19
--> Budgeting (Strategic Business Planning and) 21--> Building Links 31--> Chairman’s Review 6--> Claims
Equity in Decision Making 37Managing Consumer Claims 36
--> Code of Conduct 22--> Construction Industry - Demand for 12--> Consultancy Expenditure 60--> Consumers
Educating 32, 49Insuring 36Payment Initiatives 44Protecting 34Unlicensed Contracting 45
--> Contractors – Educating 49--> Corporate Governance 2, 4, 14, 16
Framework 17--> Corporate Performance 4--> Critical Areas and Values 14--> Customers 2, 4, 12,
14, 28Advice and Information 30Continuum 29Educating 32,49
--> Debt Management 51--> Defects – Top 10 35--> Disputes
Equity in Decision Making 35Research and Review 35Resolving 34
--> Energy Management 21--> Executive Management Team 20--> Federal and State Government Proposals 11--> Financial
Guide to BSA’s Financial Performance Review 57Investigations 47Management 2, 4, 14, 50Performance 3Performance Review 56Ratios 3
--> Freedom of Information 22--> Future 11, 27, 37,
41,49, 53, 55
--> General Fund 51Expenses 51Revenues 51
--> General ManagerReview 8Role of 19
--> Government Contractor Financial Audits 47--> Highlights 2--> Industry Trends (Innovation and) 13--> Information Privacy 23--> Information Technology 21--> Innovation and Industry Trends 13--> Insurance
Home Warranty Insurance 10Managing Claims 36Managing the Scheme 53Scheme Viability 52
--> Internal Audit 25--> Investments 27--> Leadership 2, 4, 14,
19, 54--> Legislation 13, 17
Legislation and Policy 2, 4, 14, 42--> Licence
Applications 33Class Review 43Classes 33Fees 10Renewals 33
--> Licensee Base 32--> Licensing
Accountability Interventions 45Change of Renewal Date 43Drop out Rates 34Equity in Decision Making 34Financial Requirements 43Fire Protection 33, 45Other Initiatives 46
--> Media 31--> Mission IFC--> National Agenda 55--> National Review of Home Warranty Insurance and
Consumer Protection 55--> Operational Cost Effectiveness 10--> Organisational Capability 41--> Payment Initiatives 44
BSA 4484 A/R 2002 Cover SR-FA 28/10/02 11:40 AM Page c
B R I S B A N E11 Edmondstone StreetSouth Brisbane QLD 4101Telephone (07) 3225 2800
Facsimile (07) 3225 2999PMB 84 Coorparoo DC 4151
C A I R N S181 Aumuller StreetWestcourt QLD 4870Telephone (07) 4031 6828
Facsimile (07) 4031 6831PO Box 211B Bungalow QLD 4870
G O L D C O A S TSuite 7 Robina Convenience Centre86 Robina Town Centre Drive Robina QLD 4230Telephone (07) 5575 7999
Facsimile (07) 5575 7666PO Box 3816Robina Town Centre QLD 4230
M A C K AY25 River StreetMackay QLD 4740Telephone (07) 4957 4477
Facsimile (07) 4953 4151PO Box 1254 Mackay QLD 4740
R O C K H A M P T O N164 Berserker Street (Cnr Elphinstone Street)North Rockhampton QLD 4701Telephone (07) 4926 1922
Facsimile (07) 4926 1377PO Box 6337 Central Qld Mail Centre QLD 4702
S U N S H I N E C O A S TUnit 7 WIN Television CentreCnr Baden Powell Street and Maroochydore RoadMaroochydore QLD 4558Telephone (07) 5479 8500
Facsimile (07) 5479 8555PO Box 218 Maroochydore QLD 4558
T O O W O O M B AClestrain Mall 131A Herries StreetToowoomba QLD 4350Telephone (07) 4632 9455
Facsimile (07) 4638 1917PO Box 107 Toowoomba QLD 4350
T O W N S V I L L EAAMI Building 287 Ross River RoadAitkenvale QLD 4814Telephone (07) 4725 2588
Facsimile (07) 4725 3401PO Box 140 Aitkenvale QLD 4814
W E B S I T Ewww.bsa.qld.gov.au
BU
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BSA 4484 A/R 2002 Cover SR-FA 28/10/02 11:40 AM Page d
Building Services Authority 2001/2002 Annual Report
Financial PerformanceReview
56
Page
--> Purpose and Scope 57
--> Guide to BSA’s Financial Performance Review 57
--> Financial Overview 58Consolidated 2001/02 Outcomes 58Operating Revenue 58Operating Expenditure 58Transfers from Reserves 59Statement of Financial Position 59Capital Expenditure 59Consultancy Expenditure 60General Fund 2001/02 Outcomes and Performance Review 60
--> Insurance Fund 2001/02 Outcomes and Performance Review 61
--> Financial Statements for the year ended June 2002Statement of Financial Performance 62Statement of Financial Position 63Statement of Cash Flows 64Notes to and forming part of the Financial Statements 65Note 1 Summary of Significant Accounting Policies 65Note 2 Licence Renewal and Application Fees 70Note 3 Underwriting 70Note 4 Investment Revenue 71Note 5 Other Revenue 71Note 6 Gain on Disposal of Non-current Assets 71Note 7 Administrative Expenses 71Note 8 Other Expenses 72Note 9 Queensland Building Tribunal Funding 72Note 10 Reserves 72Note 11 Retained Profits 72Note 12 Other Financial Assets 73Note 13 Receivables 73Note 14 Reinsurance and Other Recoveries Receivable 73Note 15 Other Assets 73Note 16 Plant and Equipment 73Note 17 Intangibles 74Note 18 Payables 74Note 19 Provisions 74Note 20 Unearned Premiums 74Note 21 Future Claims and Associated Costs 75Note 22 Commitments 76Note 23 Segment Information 76Note 24 Net Claims Incurred 78Note 25 Contingent Liability 79Note 26 Financial Instruments 79Note 27 Reconciliation of Net Cash Provided by Operating Activities to Operating Profit/(Loss) from Ordinary Activities 81Note 28 Reconciliation of Cash 82Note 29 Provision for GST Payable 82Note 30 HIH Insurance 82
--> Certificate of the Queensland Building Services Authority 83
--> Independent Audit Report 84
Contents
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 56
57
PURPOSE AND SCOPE
The Queensland Building Services Authority (BSA) is
constituted under the provisions of the Queensland
Building Services Authority Act 1991 (the Act) and is a
statutory body within the meaning given in the Financial
Administration and Audit Act 1977.
The Financial Statements have been prepared:-
• to satisfy the provisions and prescribed requirements
of the Financial Administration and Audit Act 1977;
and
• to convey information on BSA’s financial performance
for the year and its financial position at the close of
the year to the Minister for Housing, the Queensland
Parliament, contractors, consumer and the broader
community.
The statements are general purpose in nature and provide
a full presentation of all the financial activities of BSA.
Disclaimer
The graphs, tables and captions that appear in the body
of the Annual Report do not form part of the Financial
Statements as certified by the Auditor-General.
GUIDE TO BSA’S FINANCIALPERFORMANCE REVIEW
BSA is self-funded and under its legislation is required to
maintain two funds - the General Fund and the Insurance
Fund. The General Fund meets all operational costs
except those relating to insurance claims and the
administration of the insurance scheme. The General
Fund was no longer required to fund the operations of the
Queensland Building Tribunal (the Tribunal). Section 26
of the Act allows for the transfer of funds from the
Insurance Fund to the General Fund for use in
administering the Act. The maximum amount able to be
transferred is set by regulation at $5.5M.
BSA’s Financial Performance Review comprises:
• Financial Overview; and
• Financial Statements for the year ended 30 June 2002.
The Financial Overview provides a strategic review of
BSA’s financial position at 30 June 2002 and analyses
performance for the financial year 2001/02 in the context
of current issues and historical trends.
The Financial Statements present BSA’s consolidated
financial position and the financial results for 2001/02. At
Note 23 “Segment Information”, the results and financial
position of each Fund are presented.
The Financial Statements comprise:
• the Statement of Financial Performance which details
BSA’s income and expenditure for the year ended 30
June 2002;
• the Statement of Financial Position which reflects the
financial position of BSA at 30 June 2002;
• the Statement of Cash Flows which shows BSA’s cash
receipts and payments for the year ended 30 June 2002;
and
• Notes to and forming part of the Financial Statements.
Items in the Statement of Financial Performance, Statement
of Financial Position and Statement of Cash Flows are
referenced to the Notes, where more detail of balances is
provided. The accounting policies used in the preparation
of the Financial Statements are summarised in Note 1 of
the Notes to and forming part of the Financial Statements.
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 57
01 Program cost comparison
Insurance 41.2%
Dispute management 15.7%
Licensing 31.5%
Building information 11.6%
OPERATING EXPENDITURE
The decrease in overall expenditure is attributable to the
following factors:
Administrative expenses decreased by $0.628M (6.8%)
from $9.216M to $8.588M with fluctuations in expenditure
levels across several areas compared to the previous year.
The main movement was a decrease in Engineering and
other commissions fees of $1.131M (87%) from $1.296M
to $0.165M. Two major reconciliations were undertaken
during the year and it was identified were a substantial
proportion of engineering costs were reclaimable from
reinsurers this year. Office rentals and outgoings increased
by $0.418 (41%) from $1.018M to $1.436M. New office
accommodation was required for the Gold Coast regional
office and additional accommodation for the Brisbane head
office where some staff had been housed in temporary
demountable offices.
Underwriting claims expenses decreased by $3.893M
(46.5%). In the previous year there was a record number
of claims, with a high proportion being for contractor
failure. This also resulted in an higher than normal increase
in the amount required to be provided for in 2001/02 for
the provision for future claims liabilities.
With the recovery of the building industry this year there
has been a consequent lack of insolvencies which has
dramatically decreased the number of claims for non-
completion, down to 189 from 384.
BSA was not required to fund the Queensland Building
Tribunal this year. It is now funded by Queensland
Treasury following a Cabinet Budget Review Committee
decision that it be funded from consolidated revenue.
Other Expenses expenditure increased during the year by
$0.993M (59.8%) from $1.662M to 2.655M. The increase
is largely attributable to a change in accounting for the
annual leave provision. This was previously included
with “Salaries and Contract Personnel”. Amortisation
expenses increased by $0.268M from $0.363M to $0.631M
reflecting the continuing investment in business
applications development and the purchase of a new
financial management information system.
58
FINANCIAL OVERVIEW
A strong recovery by the Insurance Fund
from the 2000/01 position together with a
smaller than forecast deficit for the General
Fund produced a sound consolidated result
for the year.
CONSOLIDATED 2001/02 OUTCOMES
BSA’s consolidated financial outcome for 2001/02 was a
profit from ordinary activities of $0.728M compared to a
loss of $6.952M the previous year. This was a significantly
improved result on the originally budgeted profit of
$0.138M and the mid-year forecast of $0.084M profit. This
resulted from an increase in total revenue of $1.246M
(5.3%) and decrease in expenditure of $6.434M (20.9%).
A fall in insurance claims expenses of $3.893M (46.5%)
significantly contributed to the decrease in expenditure
together with the BSA no longer required to fund the
Queensland Building Tribunal ($2.345M in 2000/01).
OPERATING REVENUE
Strong revenue results were recorded for:
Licensing income increased by $2.029M (21.8%) due to
increases in the number of licensees from 47,718 to
50,190, reduced drop out rate of 5.66% compared to 9.2%
in 2000/01 and finalising 7,532 applications compared to
6,087 in the previous year.
Insurance Premiums and Administration Fees increased by
$1.102M (43.9%) and $3.827M (92.4%) respectively. BSA
processed 62,506 policies for the year reflecting a buoyant
Queensland building industry with major drivers being the
First Home Owners Grant and low interest rates.
These increased revenue streams were partially offset by
the decrease in investment revenue which fell by $2.217M
(99.4%) from $2.230M to $0.013M. This resulted from the
poor performance by the BSA’s managed fund investments
which returned approximately -4% or -$0.797M and is
attributable to the poor market in Australian and
international equities. BSA’s cash investments returned
approximately 4.6% or $0.805M for the year.
Other revenue streams generally achieved budget.
The surcharge was phased out from 1 July 2002. Previously
the surcharge formed part of the insurance premium to
provide funding for other BSA activities and the
Queensland Building Tribunal. The surcharge was
removed to allow the full premium to be allocated to
running the insurance scheme. The surcharge shown for
the year is the amount accrued to the year from the
previous financial year.
Building Services Authority 2001/2002 Annual Report
Financial Performance Review (continued) ...
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 58
59
TRANSFERS FROM RESERVES
A contractor and consumer education reserve was
established in 1994/95 for the purpose of encouraging and
assisting education and research related to the building
industry. This is provided for under s25(5) of the
Queensland Building Services Authority Act 1991. In
2001/02 the balance of the reserve reduced by a further
$0.047M following expenditure on publications and
education material including owner builder study guides
and fact sheets.
STATEMENT OF FINANCIAL POSITION
The $0.706M increase in total equity from $4.658M to
$5.364M reflects the sound operating result for the year,
mainly attributable to the performance of the Insurance
Fund. This is a significant reversal on the 2000/01 position
where there was a $6.946M reduction in total equity. The
significant factors were a 46.5% reduction in underwriting
claims expenses together with a 74% increase in insurance
premium and administration fee revenue. BSA was also
no longer required to fund the Queensland Building
Tribunal ($2.345M in 2000/01).
The $7.311M (9.0%) increase in total assets is attributable
to:
• Receivables – an overall increase in recovery debtors
which reflects the flow-on effects from the previous
year when there was a record level of insurance
claims paid.
• Other financial assets – an increase in cash from
insurance premiums and administration fees resulting
from the strong year from the insurance scheme.
• Other – prepayments – increase in the reinsurers
share of unearned income again due to the strong
performance of the Insurance Fund.
• Intangibles – the increase reflects the continuing
investment in business applications development and
the purchase of a new financial management
information system.
The total liabilities increased by $6.605M due to:
• Payables rose due to increased roll fees bought about
by increased licensing income.
16
0
8
12
02 Inflation adjusted comparison of program
01/0200/0199/0098/9997/98
4
Insurance
Dispute management
$M
Licensing
costs
Building information
• Unearned premiums increased by $5.015M due to a
buoyant building industry resulting in 62,506 policies
being produced for the year.
• Future claims (current and non-current) decreased
by $0.421M based on actuarial assessment. The post
GST effects have passed and it reflects the improved
performance by the industry, eg. non-completion
claims have decreased by 195 or 50.8%.
BSA’s ability to discharge short term commitments is
measured by the current ratio (current assets/current
liabilities). The result for the year has caused the ratio to
decline marginally by 0.03 from 1.51 to 1.48 and this
remains a healthy position.
CAPITAL EXPENDITURE
Capital expenditure for the year, net of proceeds from
disposals, amounted to $1.599M compared to $1.054M in
2000/01 and comprised:
• Leasehold improvements $0.302M
• Motor vehicles $0.178M
• Computer software $1.023M
• Furniture and equipment $0.096M
The redevelopment of BSA’s main business application
CMS continued during the year with the major focus
being on new claims, legal and compliance systems and
the creation of a debtors sub-ledger. A new financial
management information system Finance 1 was also
purchased in readiness for 2002/03.
Spending on leasehold improvements increased by
$0.241M from $0.061M to $0.302M with new office
accommodation required for the Gold Coast office and
additional accommodation for Head Office where several
branches had been housed in temporary demountable
offices. This also increased furniture and equipment
expenditure by $0.043M from $0.053M to $0.096M.
BSA has a fleet of 38 vehicles, 58% of which are utilised
by Building Inspectors in the delivery of the dispute
management service.
18
-6
6
12
03 Inflation adjusted comparison of
01/0200/0199/0098/9997/98
0
Operating revenue
Operating expenses
$M
Profit/(loss)
General Fund results
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 59
30
-10
10
20
05 Inflation adjusted comparison of
01/0200/0199/0098/9997/98
0
Total revenue
Total expenditure
$M
Operating profit/(loss) before abnormals
Insurance Fund performance
8
0
4
6
04 Inflation adjusted comparison of
01/0200/0199/0098/9997/98
2
Net assets
Cash and investments
$M
General Fund net assets versus cash and investments
60
Building Services Authority 2001/2002 Annual Report
Financial Performance Review (continued) ...
CONSULTANCY EXPENDITURE
Expenditure on consultants fees increased by $0.074M from
$0.198M to $0.272M. This was largely attributable to
higher use of actuaries brought about by the National
Competition Policy Review and the National Review of
Home Warranty Insurance and Consumer Protection.
Other significant expenditure included consultancies
related to human resource management issues, the
performance of the annual workforce attitude survey and
development of the Authority’s customer continuum
program.
GENERAL FUND 2001/02 OUTCOMESAND PERFORMANCE REVIEW
The General Fund recorded a deficit from ordinary
activities of $0.761M, a net loss of $0.714M after the
transfer from reserves of $0.047M and a total change in
equity of $0.783M after a decrease in reserves of $0.069M.
As a result, net assets reduced by $0.783M from $2.636M
to $1.853M.
Revenue increased in real terms by $1.716M (15%) from
$11.432M to $13.148M exclusive of the transfer from the
insurance fund ($5.000M in 2000/01). This transfer did not
occur in 2001/02 and the increased fees for licences did
not fully meet this shortfall.
Expenditure decreased substantially by $2.551M (15.5%)
with the major reason being BSA was no longer required
to fund the Queensland Building Tribunal ($2.345M in
2000/01). Excluding this funding, expenditure decreased
slightly by $0.206M (1.5%) from $14.115M to $13.909M.
Tighter controls on expenditure and a drive to reduce
corporate overheads helped contribute to the reduction.
The budget performed well relative to the originally
forecast loss of $1.028M and the mid-year forecast loss of
$1.225M.
Revenue of $13.148M was $0.939M under the original
forecast of $14.087M however exceeded the mid-year
forecast of $13.040M by $0.108M.
Investments returned a sound $0.175M against an original
forecast of $0.207M and mid-year forecast of $0.147M.
General fund investments are in cash funds which returned
4.6% for the year and generally performed to market
expectations.
Licensing income ($11.353M) was $0.915M under the
original budget and exceeded the mid-year forecast by
$0.115M. The original forecasts were significantly reviewed
mid-year in relation to drop-out rates for renewals and
number of applications in the various categories.
By the mid-year review in January it was clear that drop-
out rates for licence renewals were significantly higher than
originally forecast. It was also apparent that the number
of applicants in higher fee categories was significantly
down on original forecasts with a greater number of
applicants in the lower fee categories. This resulted in the
mid-year forecasts for licence renewal and application fees
being downgraded by $1.030M from $12.268M to
$11.238M.
Generally, other revenue forecasts were not significantly
altered and budget was achieved.
Expenditure ($13.909M) was $1.206M under original
forecasts and $0.355M under the mid-year forecasts.
Significant savings against forecasts were achieved in
salaries, contract services and commissions and fees and
engineering fees. Savings in salaries and related costs
were achieved through vacancy management. Legal fees
significantly exceeded both the original budget and mid-
year forecast. Control measures such as who could
approve legal work going to an external firm and a
greater emphasis on internal delivery of legal services did
slow expenditure late in the year and will be used in
2002/03 to significantly reduce legal expenditure.
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 60
4
0
2
3
09 Inflation adjusted comparison of
01/0200/0199/0098/9997/98
1
$M
administrative costs per claimant assisted
24
0
12
18
08 Inflation adjusted Insurance Fund
01/0200/0199/0098/9997/98
6
Operating expenses
Claims expenditure
$M
Surcharge transferred
expenditure by type
61
INSURANCE FUND 2001/02 OUTCOMESAND PERFORMANCE REVIEW
The Fund recorded a net profit of $1.489M compared to
a loss of $6.924M for 2000/01. As a result, the net asset
position improved by $1.489M. The turnaround reflects a
buoyant Queensland building industry that has recovered
from the post GST effects which influenced the previous
years results. The First Home Owners Grant, continuing
low interest rates, increasing consumer confidence and the
reallocation of collected surcharge to insurance
underwriting significantly contributed to the recovery.
Total revenue fell by $0.470M from $12.291M to $11.821M.
Premium income increased by $1.102M from $2.510M to
$3.612M and administration fee income increased by
$3.827M from $4.142M to $7.969M. 62,506 policies were
processed for the year compared to 43,412 for 2000/01
with an increased average premium value of $444.63
compared to $365.75 in 2000/01.
Investment income fell by $2.119M (108%) from $1.957M
to -$0.167M. This resulted from the poor return on BSA’s
managed fund investments which returned -$0.797M (-4%).
This is attributable to the poor performance of Australian
and international equities. Cash investments returned
$0.630M (4.6%).
40
0
20
30
06 Inflation adjusted comparison of
01/0200/0199/0098/9997/98
10
Net assets
Cash and investments
$M
Insurance Fund net assets versus cash and investments
Total income of $11.821M exceeded the original and
mid-year forecasts by $1.350M and $0.153M
respectively. By the mid-year review, it was apparent
that the building industry had made a better than
expected recovery and revenue forecasts were
substantially increased .
Total expenditure fell by $8.883M from $19.215M to
$10.332M. There was no longer the requirement for the
transfer to the General Fund ($5.0M in 2000/01). The
full premium collected is now directed to the Insurance
Fund.
Underwriting Claims expenses decreased by $3.893M
from $8.377M to $4.484M through a reduction in claims
approved during the year and the amount required to
be provided for in 2001/02 for the provision for future
claims liabilities.
20
0
10
15
07 Inflation adjusted Insurance Fund income
01/0200/0199/0098/9997/98
5
Underwriting plus admin fees
Investment and other income
$M
Surcharge collected
by type
BSA 4484 A/R 2002 Text SR-FA2 28/10/02 11:14 AM Page 61
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Building Services Authority 2001/2002 Annual Report
2002 2001Note $000 $000
Operating revenues from ordinary activities
Licence renewal and application fees 2 11 353 9 324
Underwriting premiums 3 3 612 2 510
Investment revenue 4 13 2 230
Administration fees 3 7 969 4 142
Surcharge collected 3 127 3 719
Other revenue 5 1 895 1 798
Total operating revenues from ordinary activities 24 969 23 723
Operating expenses from ordinary activities
Administrative expenses 7 8 588 9 216
Underwriting claims 3 4 484 8 377
Salaries and contract personnel 8 708 9 075
Other expenses 8 2 655 1 662
Queensland Building Tribunal funding 9 (194) 2 345
Total operating expenses from ordinary activities 24 241 30 675
Profit/(loss) from ordinary activities 11 728 (6 952)
Transfer from reserves 10 47 90
Net profit/(loss) 775 (6 862)
Increase/(Decrease) in Reserves:
Asset revaluation reserve 10 (22) 6
Contractor and consumer education reserve 10 (47) (90)
(69) (84)
Total changes in equity other than those resulting
from transactions with owners as owners 706 (6 946)
The above Statement of Financial Performance is to be read in conjunction with the Notes to and forming part of the Financial Statements.
for the year ended 30 June 2002
Statement of Financial Performance
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63
2002 2001Note $000 $000
Current assets
Cash 1(p) 644 (501)
Receivables 13 2 562 1 533
Reinsurance and other recoveries receivable 14 10 708 10 476
Other financial assets 12 38 578 36 698
Other – prepayments 15 7 721 4 082
Total current assets 60 213 52 288
Non-current assets
Reinsurance and other recoveries receivable 14 24 217 25 095
Plant and equipment 16 1 708 1 836
Intangibles 17 1 919 1 527
Total non-current assets 27 844 28 458
Total assets 88 057 80 746
Current liabilities
Payables 18 14 174 12 167
Provisions 19 1 662 1 636
Future claims and associated costs 21 14 799 15 710
Unearned premiums 20 10 140 5 125
Total current liabilities 40 775 34 638
Non-current liabilities
Provisions 19 840 862
Future claims and associated costs 21 41 078 40 588
Total non-current liabilities 41 918 41 450
Total liabilities 82 693 76 088
Net assets 5 364 4 658
Equity
Reserves 10 606 675
Retained profits 11 4 758 3 983
Total equity 5 364 4 658
The above Statement of Financial Position is to be read in conjunction with the Notes to and forming part of the Financial Statements.
Statement of Financial Positionas at 30 June 2002
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Building Services Authority 2001/2002 Annual Report
2002 2001Note $000 $000
Cash flows from operating activities
Received from roll fees 13 070 8 687
Surcharge collected 127 2 987
Received from administration fees 6 842 3 118
Received from interest 336 555
Received from other revenue 1 295 1 542
GST receipts 2 915 4 396
24 585 21 285
Payments to creditors (7 041) (8 111)
GST payments (2 850) (4 244)
Payments to employees (9 589) (9 097)
(19 480) (21 452)
5 105 (167)
Received from premiums 17 509 5 871
Payments to reinsurers (15 245) (7 291)
Claims paid (15 458) (17 516)
Received from reinsurers 13 036 13 389
(158) (5 547)
Net cash provided by operating activities 27 4 947 (5 714)
Cash flows from investing activities
Payments for plant and equipment and intangibles (1 964) (1 247)
Proceeds from sale of investments 64 -
Proceeds from sale of plant and equipment 365 130
Net cash used in investing activities (1 535) (1 117)
Net increase/(decrease) in cash held 3 412 (6 831)
Cash at the beginning of the financial year 5 952 12 783
Cash at the end of the financial year 28 9 364 5 952
The above Statement of Cash Flows is to be read in conjunction with the Notes to and forming part of the Financial Statements.
for the year ended 30 June 2002
Statement of Cash Flows
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65
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation
The financial statements are general purpose financial reports that have been prepared in accordancewith applicable Australian Accounting Standards and other mandatory professional reportingrequirements (Urgent Issues Group Abstracts) and the requirements prescribed by:
– the Queensland Building Services Authority Act 1991;
– section 46F of the Financial Administration and Audit Act 1977; and
– the Financial Management Standard 1997
The financial statements are prepared in accordance with the historical cost convention and do not take into account changing money values. The accounting policies adopted are consistent with those ofprevious years unless otherwise stated. Comparative information is reclassified where appropriate toenhance comparability.
The Queensland Building Services Authority (BSA) is comprised of a General Statutory Fund and anInsurance Fund as stipulated by Sections 25 and 26 of the Queensland Building Services Authority Act1991. The financial statements of the Authority have been prepared as a consolidation of both Funds.The balances and effects of transactions between the Funds included in the consolidated financialstatements have been eliminated. Note 23, shows the results and financial position of each Fund as at 30 June 2002.
Having regard to the nature of the general insurance business conducted by the Authority, certaindisclosures have been made in the Statement of Financial Performance and Statement of FinancialPosition, which are additional to those required by the Financial Management Standard 1997.
(b) Ministerial portfolio
The BSA is a statutory body within the portfolio of the Minister for Public Works and Minister forHousing. The principal place of business for the BSA is 11 Edmondstone Street, South Brisbane,Queensland.
(c) Premium revenue
Insurance premiums comprise amounts charged to policyholders. The earned portion of premiumsreceived is recognised as revenue. Premium is treated as earned from the date of attachment of risk.
The pattern of recognition of income over the policy of indemnity period is based on time, where thisclosely approximates the pattern of risk underwritten. Unearned premiums are determined byapportioning the premiums written in the year, using the one twenty-fourth method for reinsurancebusiness, over the period of indemnity from the attachment of the risk.
(d) Outward reinsurance
Premiums ceded to reinsurers are recognised as an expense in accordance with the pattern ofreinsurance services received. Accordingly, a portion of outward reinsurance premiums is treated at thebalance date as a prepayment.
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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Building Services Authority 2001/2002 Annual Report
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) Claims
Claims expenses and a liability for outstanding claims are recognised in respect of direct insurancebusiness. The liability covers claims reported but not yet paid, incurred but not reported (IBNR) and theanticipated direct and indirect costs of settling those claims. Claims outstanding are assessed by reviewof individual claim files and estimating changes in the ultimate cost of settling claims, IBNR’s andsettlement costs using statistics based on past experience and trends. Outstanding claims relating to“long-tail” classes are subject to independent actuarial assessment. “Long-tail” classes refer to claims notsettled within one year of the incidence of risk.
The liability for outstanding claims for “long-tail” classes is measured as the present value of theexpected future payments. These payments are estimated on the basis of the ultimate cost of settlingclaims, which is affected by factors arising during the period to settlement such as inflation. Suchestimates are subject to uncertainty due to variations of both a random and non-random nature, whichmay affect components of the estimates. The expected future payments are discounted to present valueat the balance date using market determined, risk adjusted discount rates. The details of rates appliedare included in Note 21.
The liability for outstanding claims is calculated using a “best estimate” methodology, which is a centralestimate of likely future claim payments. This central estimate is intended to be neither optimistic norpessimistic about the development of claims in the future.
Goods and services tax (GST) on claims expenditure
The Authority incurs GST for which it is currently unable to claim an input tax credit on all claimsettlements made from and including 1 July 2000.
For claims settled after 30 June 2000 for events which occurred before 1 July 2000 the Authority is ableto claim a percentage of the GST paid (in accordance with the participation rates as detailed in Note 3)from its reinsurers.
A percentage of the GST paid cannot be passed to the reinsurers for claims for which the eventoccurred after 30 June 2000.
(f) Reinsurance and other recoveries receivable
Reinsurance and other recoveries receivable on paid claims, reported claims not yet paid and IBNR’s arerecognised as revenue. Recoveries receivable are assessed in a manner similar to the assessment ofoutstanding claims. Recoveries receivable in relation to “long-tail” classes are measured as the presentvalue of the expected future receipts, which are calculated on the same basis as the liability foroutstanding claims.
The details of discount and inflation rates applied are included in Note 21.
(g) Receivable and revenue recognition
Insurance claims recoverable from licensed builders are recognised when a claim paid to a consumer isfinalised. Tribunal fines receivables are recognised when an order from the Tribunal is issued in favourof the Authority. Magistrates Court fines receivables are recognised when a conviction from theMagistrates Court is issued in favour of the Authority. Appraisals of government contracts receivable arerecognised when the services provided by the Authority are invoiced at the end of each month.
Debtors are reviewed on an ongoing basis. Debts, which are known to be uncollectable, are written off.A provision for doubtful debts is raised where some doubt exists and in any event where the debt ismore than 180 days overdue.
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) Non-current assets
The carrying amount of non-current assets is reviewed to determine whether they are in excess of theirrecoverable amount at balance date. The recoverable amount of an asset is the amount expected to berecovered through the net cash inflows arising from its continued use. If the carrying amount of non-current assets exceeds the recoverable amount, the asset is written down to the lower amount. To theextent that a revaluation decrement reverses a revaluation increment previously credited to, and stillincluded in the balance of, the asset revaluation reserve, the decrement is debited directly to thatreserve. Otherwise, the decrement is recognised as an expense in the Statement of FinancialPerformance. In assessing recoverable amount the relevant cash flows have not been discounted to thepresent value. The threshold for recognising non-current physical assets in the financial statements onacquisition is $1,000.
Plant and equipment is valued at cost.
Change in Accounting Policy
In accordance with the transitional provisions provided for in AAS 38 Revaluation of Non-Current Assetsthe brought forward carrying value of plant and equipment as at 1 July 2001 is taken to be the deemedcost of these assets. The change in accounting policy has no financial effect in the current or priorfinancial years.
(i) Operating leases
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor,are charged as expenses in the periods in which they are incurred.
(j) Depreciation and amortisation
Depreciation and amortisation are provided as appropriate on all non-current assets, other than land,using a straight line method of calculation at rates determined by the estimated useful life of the assetsto the economic entity commencing from the time the asset is held ready for use. Estimates of remaininguseful lives are made on a regular basis for all assets, with annual reassessment for major items.
Depreciation commences from the date an asset is controlled, serviceable and ready for use. The rates of each class of asset are:
Office Furniture and Equipment 15%–33.33%Motor Vehicles 15%Computer Equipment 33.33%
Leasehold Improvements depreciated over the life of the applicable leaseagreement or the estimated useful life of theimprovement to the economic entity, whichever is theshorter. The rates are varied between 16% -50%.
Gains or losses arising from the sale or disposal of non-current assets are brought to account in thedetermination of the operating result for the year in which the sale or disposal took place.
(k) Investments
General Statutory Fund investments, excluding government and semi-government stock, are recorded atcost.
Government and semi-government stock and Insurance Fund investments are measured at their netmarket value at each balance date.
Changes in the net market values of investments (or cost of acquisition, if acquired during the financialyear) are recognised as revenue or expenses in the Statement of Financial Performance.
Investment revenue is brought to account on an accrual basis.
Income derived from investments is brought to account when earned.
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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Building Services Authority 2001/2002 Annual Report
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Employee leave and retirement benefits
Wages, salaries, annual leave and sick leave
The provisions for employee entitlements to wages, salaries, annual leave and sick leave represent theamount which the Authority has a present obligation to pay resulting from employees’ services providedup to the balance date. The provision has been calculated at nominal amounts based on current wageand salary rates and includes related on-costs.
Long service leave
The liability for employee entitlements to long service leave represents the present value of theestimated future cash outflows to be made by the Authority resulting from employees’ services providedup to the balance date.
Liabilities for employee entitlements which are not expected to be settled within twelve months arediscounted using the rates attaching to national government securities at balance date, which mostclosely match the terms of maturity of the related liabilities.
In determining the liability for employee entitlements, consideration has been given to future increasesin wage and salary rates, and the Authority’s experience with staff departures. Related on-costs have alsobeen included in the liability.
The long service leave provision also takes into account recognition of employees’ prior services inother state, local or federal government entities. Recognition of prior services has been agreed as part ofthe Enterprise Development Agreement for the Authority.
Superannuation fund
Superannuation contributions made by the Authority are contributed to an employee superannuationscheme and to other funds on behalf of its Board Members as required under applicable awardlegislation. These contributions are charged as expenses when incurred. The Authority has no obligationto cover any shortfall in any of the funds’ obligations to provide benefits to employees on retirement.
(m)Payables
These amounts represent liabilities for goods and services provided to the economic entity prior to theend of the financial year and which are unpaid. The amounts are unsecured and are usually paid within30 days of recognition.
(n) Intangible assets and expenditure carried forward
Costs associated with the computer systems redevelopment project are deferred and amortised on astraight-line basis over the period of their expected benefit, which is five years. The CD Romdevelopment costs are amortised over three years.
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o) Reserves
A contractor and consumer education reserve has been established for the purpose of encouraging andassisting education and research related to the building industry as allowed under the QueenslandBuilding Services Authority Act 1991, subsection 25(5). Transfers to this reserve are determined by theGeneral Statutory Fund’s profits.
(p) Cash
Cash balances in BSA’s General and Insurance bank accounts are cleared to QTC Cash Fund overnightto maximise investment returns. Consequently, period end Cash at Bank may reflect a negative balancedue to the timing of unpresented cheques. BSA does not have an overdraft facility and is precludedfrom doing so by legislation.
For purposes of the statement of cash flows, cash includes deposits at call which are readily convertibleto cash on hand and are subject to insignificant risk of changes in value.
(q) Goods and Services Tax (GST)
Revenues (including earned premiums), expenses and assets are recognised net of the amount of GSTunless (in relation to expenses and assets) the amount of GST incurred is not recoverable from theAustralian Tax Office (ATO). In these instances the GST is recognised as part of the amount of theexpense or is recognised as part of the cost of acquisition of the asset.
Receivables and payables are recognised inclusive of the amount of GST that is receivable or payable.An allowance for GST payable on future claims has been included in the provision for future claims.
Cash flows are included in the Statement of Cash Flows on a gross basis with the GST components ofthe cash flows shown as separate line items. The GST components of cash flows arising from investingand financing activities which are recoverable from, or payable to, the ATO are classified as operatingcash flows.
(r) Income taxation
The Authority is exempt from income taxation pursuant to Division 1AB, Subdivision A Sections 24AK to24AV of the Income Tax Assessment Act 1936.
(s) Rounding
Amounts have been rounded to the nearest thousand dollars, except where otherwise indicated.
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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Building Services Authority 2001/2002 Annual Report
2002 2001Note $000 $000
NOTE 2 LICENCE RENEWAL AND APPLICATION FEES
Renewal fees 9 939 8 430
Application fees 1 414 894
11 353 9 324
NOTE 3 UNDERWRITING
3.1 Underwriting premiums
Premiums received 19 464 8 037
Less: Outward reinsurance premium expense 14 594 6 025
Loss year distribution paid to reinsurers - 203
Authority’s share of premiums 4 870 1 809
Less: Unearned premiums at end of year 20 2 539 1 281
Total premiums received and earned during the year 2 331 528
Add: Unearned premiums at beginning of year 1 281 1 982
Underwriting premiums 3 612 2 510
Underwriting claims
Claims approved and charged 15 391 25 920
Less: Reinsurance and other recoveries revenue 10 907 17 543
Underwriting claims 24 4 484 8 377
Loss on underwriting (872) (5 867)
Participation in the Insurance Scheme
Date Authority Brokers/Reinsurers
Pre – 01/07/91 10% 90%
01/07/91 – 30/06/98 25% 75%
01/07/98 – 30/09/99 30% 70%
01/10/99 – 30/06/02 25% 75%
3.2 Administration fees
Administration fees received 7 938 3 826
Movement in the provision for future claims processing 31 316
Administration fees after provision for future claims processing 7 969 4 142
3.3 Surcharge collected 127 3 719
Previously a surcharge was collected and transferred to the General Fund. This is now retained by the
Insurance Fund and is reflected in Administration Fees which are collected for the administration of the
Insurance Scheme.
General Fund operations were supplemented by the restructuring of licence fees and the cessation of the
requirement to fund the Queensland Building Tribunal (refer Note 9).
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
BSA 4484 A/R 2002 Fins SR-FA2 28/10/02 11:18 AM Page 70
2002 2001Note $000 $000
NOTE 4 INVESTMENT REVENUE
Interest 336 498
Changes in net market value of investments
– realised (323) -
– unrealised - 1 732
13 2 230
NOTE 5 OTHER REVENUE
Court fines awarded 645 502
Search fees 281 245
Owner builder fees 453 342
Gain on sale of non-current assets 6 16 7
Appraisal of Government Contracts 213 398
Other 287 304
1 895 1 798
NOTE 6 GAIN ON DISPOSAL OF NON-CURRENT ASSETS
Proceeds from sale of non-current assets 365 130
Carrying value of non-current assets sold or disposed (349) (123)
Gain on disposal 5 16 7
NOTE 7 ADMINISTRATIVE EXPENSES
Equipment maintenance 253 325
Information Systems Maintenance 404 695
Computer lease rentals 515 511
Miscellaneous office equipment 111 106
Office rentals and outgoings 1 436 1 018
Legal fees 1 459 1 382
Engineering and other commission fees 165 1 296
Consultants fees 272 198
Printing and stationery 689 752
Travelling expenses 168 130
Motor vehicle expenses 142 181
Postage and telephones 822 846
Superannuation 819 704
Payroll tax 509 461
Fringe benefits tax 80 75
Advertising 94 83
Other 650 453
8 588 9 216
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
71
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2002 2001Note $000 $000
NOTE 8 OTHER EXPENSES
Auditors remuneration – audit of financial statements (i) 4 42
Board members’ fees and functions 43 31
Premium acquisition costs and sighting fees 70 295
Doubtful debts and bad debts 323 208
Depreciation 698 576
Amortisation 631 363
Long service leave 26 157
Annual leave 860 (10)
2 655 1 662
(i) Audit fees of $31 900 for 2002 were not accrued as at 30 June 2002
NOTE 9 QUEENSLAND BUILDING TRIBUNAL FUNDING
(194) 2 345
The Authority is no longer required to provide funding for the
running of the Tribunal.
The negative expense of $194 000 reflects the reversal of an
over-accrual made as at 30 June 2001.
NOTE 10 RESERVES
Consumer and contractor education reserve 1(o) 82 129
Asset revaluation reserve 524 546
606 675
Contractor and consumer education reserve
Balance at beginning of year 129 219
Add: funds transferred from retained profits - 15
Less: funds transferred to retained profits (47) (105)
Balance at end of year 82 129
Asset revaluation reserve
Balance at beginning of year 546 540
Add: Revaluation of assets - 52
Less: decrement on write down of assets (22) (46)
Balance at end of the year 524 546
NOTE 11 RETAINED PROFITS
Balance at beginning of year 3 983 10 845
Profit/(Loss) from ordinary activities 728 (6 952)
Transfer from reserves 47 90
Balance at end of the year 4 758 3 983
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
Building Services Authority 2001/2002 Annual Report
72
BSA 4484 A/R 2002 Fins SR-FA2 28/10/02 11:18 AM Page 72
Leasehold Plant &Improvements Equipment Total
2002 2001Note $000 $000
NOTE 12 OTHER FINANCIAL ASSETS
On call and overnight deposits and cash trust investments 8 720 6 453
Government and semi-government stock – at market value 29 858 30 245
38 578 36 698
NOTE 13 RECEIVABLES
Current
Sundry debtors 23 506 15 843
Less: Provision for doubtful debts 20 944 14 310
2 562 1 533
NOTE 14 REINSURANCE AND OTHER RECOVERIES RECEIVABLE
Current
Reinsurance and other recoveries receivable 10 708 10 476
Non-current
Reinsurance and other recoveries receivable 24 217 25 095
NOTE 15 OTHER ASSETS
Current
Prepayments 120 238
Prepayments – outward reinsurance on unearned premiums 20 7 601 3 844
7 721 4 082
NOTE 16 PLANT AND EQUIPMENT
At independent valuation 30 June 1998 - 1 659
At cost 3 791 1 691
3 791 3 350
Less: Provision for depreciation 2 083 1 514
1 708 1 836
Movement in carrying amount of plant and equipment
Carrying amount at beginning of year 577 1 259 1 836
Acquisitions 302 639 941
Disposals - (349) (349)
Write downs - (22) (22)
Depreciation (294) (404) (698)
Carrying amount at end of year 585 1 123 1 708
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
73
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2002 2001Note $000 $000
NOTE 17 INTANGIBLES
Non-current
Computer systems redevelopment costs 1(n) 3 227 2 206
Less: Amortisation 1 330 710
1 897 1 496
CD Rom development costs 1(n) 33 31
Less: Amortisation 11 -
22 31
1 919 1 527
NOTE 18 PAYABLES
Current
Sundry creditors 8 022 6 806
Accruals 698 1 306
Roll fees 5 175 3 806
GST collected on premiums 279 249
14 174 12 167
NOTE 19 PROVISIONS
Current
Long service leave 689 726
Annual leave 973 910
1 662 1 636
Non-current
Long service leave 387 409
Provision for GST payable 29 453 453
840 862
NOTE 20 UNEARNED PREMIUMS
Authority’s share 3 2 539 1 281
Outward reinsurance 15 7 601 3 844
10 140 5 125
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
Building Services Authority 2001/2002 Annual Report
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2002 2001$000 $000
NOTE 21 FUTURE CLAIMS AND ASSOCIATED COSTS
Expected future claims payments 65 696 66 023
Discount to present value (9 819) (9 725)
Liability for outstanding claims 55 877 56 298
Current 14 799 15 710
Non-current 41 078 40 588
55 877 56 298
Represented by:
Future claims provision 49 622 50 012
Future claims processing provision 6 255 6 286
55 877 56 298
The following average inflation rates and discounts rates
were used in the measurement of outstanding claims:
For the succeeding year
Inflation rate 3.5% 3.5%
Discount rate 6.0% 6.0%
For subsequent years
Inflation rate 3.5% 3.5%
Discount rates 6.0% 6.0%
The weighted average expected term of settlement of the
outstanding claims from the balance date is estimated to be: 3.0 years 2.9 years
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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Building Services Authority 2001/2002 Annual Report
2002 2001$000 $000
NOTE 22 COMMITMENTS
Operating lease commitments
Total operating lease expenditure contracted for at balance
date but not provided for in the accounts, payable:
– not later than one year 1 697 1 569
– later than one year and not later than five years 4 651 3 813
– later than five years - 83
6 348 5 465
The Authority leases property, plant and equipment under operating leases expiring from 1 to 5 years.
Property leases generally provide the Authority with a right of renewal at which time all terms are
renegotiated.
NOTE 23 SEGMENT INFORMATION
As stated in Note 1(a), the Authority is comprised of a General Statutory Fund and an Insurance Fund. The
General Statutory Fund derives the majority of its revenue from fees received from building industry
contractors to obtain and renew licences required under the Queensland Building Services Authority Act
1991. The Insurance Fund derives its revenue from underwriting premiums and administration fees from
operating the insurance scheme.
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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General Insurance ConsolidatedStatutory Fund Fund Entity
2002 2001 2002 2001 2002 2001Primary Reporting Segements $000 $000 $000 $000 $000 $000
General Insurance Elimin- ConsolidatedStatutory Fund Fund ations Entity
2002 2001 2002 2001 2002 2001Primary Reporting Segements $000 $000 $000 $000 $000 $000
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
Revenue
Revenue from external sources 13 148 11 432 11 821 12 291 24 969 23 723
Internal transfers of funds - 5 000 - - (5 000) - -
Total segment revenue 13 148 16 432 11 821 12 291 24 969 23 723
Expenditure
Expenditure from external sources 13 909 16 460 10 332 14 215 24 241 30 675
Internal transfers of funds - - - 5 000 (5 000) - -
Total segment expenditure 13 909 16 460 10 332 19 215 24 241 30 675
Segment results from
ordinary activities (761) (28) 1 489 (6 924) 728 (6 952)
Transfer from reserves 47 90 - - 47 90
Net profit/(loss) (714) 62 1 489 (6 924) 775 (6 862)
Increase/(decrease) in reserves (69) (84) - - (69) (84)
Total changes in equity other
than those resulting from
transactions with owners
as owners (783) (22) 1 489 (6 924) 706 (6 946)
Assets
Segment assets 10 070 8 995 77 987 71 751 88 057 80 746
Liabilities
Segment liabilities 8 217 6 359 74 476 69 729 82 693 76 088
Net Assets
Segment net assets 1 853 2 636 3 511 2 022 5 364 4 658
Other
Acquisition of non-current
segment assets 1 798 1560 166 45 1 964 1605
Depreciation and amortisation of
Non-current segment assets 1 287 939 42 - 1 329 939
Other non-cash segment expenses 114 (20) 6 520 (1 921) 6 634 (1 941)
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2002 2001Current Prior Current Prior
Year Years Total Year Years Total$000 $000 $000 $000 $000 $000
2002 2001Note $000 $000
NOTES 24 NET CLAIMS INCURRED
Current period claims relate to risks borne in the current reporting period. Prior period claims relate to a
reassessment of the risks borne in the previous reporting period.
Gross claims incurred and related
expenses – undiscounted 9 041 6 465 15 506 7 447 20 142 27 589
Reinsurance and other recoveries
– undiscounted (6 017) (4 456) (10 473) (4 965) (13 666) (18 631)
Net claims incurred – undiscounted 3 024 2 009 5 033 2 482 6 476 8 958
Discount and discount movement
– gross claims incurred (1 784) 1 669 (115) (1 294) (376) (1 670)
Discount and discount movement
– reinsurance and other recoveries 1 186 (1 316) (130) 861 91 952
Net discount movement (598) 353 (245) (433) (285) (718)
Total discounted net incurred claims 2 426 2 362 4 788 2 049 6 191 8 240
Other recoveries undiscounted
Claims recoverable from Licensees 15 425 16 260
Provision for doubtful debts (14 243) (16 117)
1 182 143
Reinsurer’s portion (878) (280)
Total undiscounted recoveries 304 (137)
Total discounted net incurred claims 4 788 8 240
Less: other recoveries undiscounted 304 (137)
Underwriting claims 3 4 484 8 377
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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NOTE 25 CONTINGENT LIABILITY – CONSOLIDATED REVENUE GRANT
During the 1998/99 financial year the Authority received a $1.45M grant from the State GovernmentConsolidated Revenue. The grant was made to provide short-term funding support for BSA pendingresolution of BSA’s long-term funding strategy through the Government’s Better Building Industry reforms.The grant was treated as income in the Authority’s accounts and as a general expense in the Government’saccounts for 1998/99. As a result of a subsequent Cabinet Decision, the Government requires the grant tobe repaid on a future date. Treasury advice is that the funds are to be repaid as a dividend, with the timingof this repayment dependent upon BSA’s capacity to do so and to be examined in subsequent annualbudget development processes.
As at 30 June 2002, the value of the contingent liability remained at $1.45M. Provision for payment of thecontingent liability, in full or part, was not made in the 2002/03 BSA budget.
NOTE 26 FINANCIAL INSTRUMENTS
The Authority invests in Queensland Investment Corporation (QIC) Cash Trust, QIC Investment Trust andQueensland Treasury Corporation (QTC) Cash Fund.
The investment managers of the pooled investment vehicles have invested in a variety of financialinstruments, including derivatives, which expose the Authority’s investment to a variety of investment risks,including interest rate risk, credit risk, market risk and currency risk.
The Authority obtains regular reports from each investment manager on the nature of the investment madeand the associated risks and returns. The Authority seeks information from the investment managers of eachproposed collective investment, and may also seek independent advice from other qualified persons, so asto determine the nature and extent of risk, and expected returns associated with each investment prior todetermining its suitability as an investment for the Authority. This includes the receipt of a formal RiskManagement Statement from each manager.
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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2002 2001Floating Non- Floating Non-interest interest interest interest
rate bearing Total rate bearing Total$000 $000 $000 $000 $000 $000
NOTE 26 FINANCIAL INSTRUMENTS (CONTINUED)
a) Interest rate risk exposures
The Authority’s exposure to interest rate risk and the effective weighted average interest rate for each
class of financial assets and financial liabilities is set out below.
Financial assets
Cash - 644 644 - (501) (501)
Receivables - 2 562 2 562 - 1 533 1 533
Investments
– At call deposits 8 720 - 8 720 6 453 - 6 453
– QIC stock 29 858 - 29 858 30 245 - 30 245
38 578 3 206 41 784 36 698 1 032 37 730
Weighted average interest rate 0.3% 5.85%
Financial liabilities
Payables - 14 174 14 174 - 12 167 12 167
Net financial assets (liabilities) 38 578 (10 968) 27 610 36 698 (11 135) 25 563
b) Credit risk exposures
The credit risk on financial assets of the Authority that have been recognised on the Statement ofFinancial Position is generally the carrying amount, net of any provisions for loss.
The Authority does not have any material credit risk exposure to any single debtor, or group of debtors,under financial instruments entered into by the Authority. The credit risk exposure does not take intoaccount the value of any security held in the event other parties fail to perform their obligations under afinancial instrument.
c) Net fair value of financial assets and liabilities
The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets andfinancial liabilities approximates their carrying value.
The net fair value of other monetary financial assets, being Queensland Investment Corporation Stock isbased on the quoted market price provided by QIC.
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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2002 2001$000 $000
NOTE 27 RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO OPERATING PROFIT/(LOSS) FROM ORDINARY ACTIVITIES
Net cash provided by operating activities 4 947 (5 714)
Non-cash items in operating surplus:
Provisions for doubtful debts (6 634) 1 941
Provision for employee entitlement (4) (147)
Depreciation and amortisation (1 329) (939)
Net gain on sale of plant and equipment 16 7
Changes in net market value of investments (323) 1 675
Net change in operating assets and liabilities:
Increase/(decrease) in receivables 6 377 2 147
Increase/(decrease) in other current assets 522 (2 082)
(Increase)/decrease in sundry creditors and accruals (638) 1 478
(Increase)/decrease in roll fees (1 369) 637
(Increase)/decrease in accrued claims 421 (6 709)
(Increase)/decrease in unearned premiums (5 016) 2 485
Increase/(decrease) in deferred acquisition costs - (240)
Increase/(decrease) in prepayments – outward reinsurance 3 758 (1 783)
Payment from provision for GST - 292
Profit/(loss) from ordinary activities 728 (6 952)
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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2002 2001Note $000 $000
NOTE 28 RECONCILIATION OF CASH
For the purposes of the Statement of Cash Flows, cash includes cash
on hand and on deposit with financial institutions for operating
activities. Cash at the end of the financial year as shown in the
Statement of Cash Flows is reconciled to the Statement of Financial
Position as follows:
Cash 1(p) 644 (501)
Deposits at call 8 720 6 453
Total cash and cash equivalents 9 364 5 952
As stated in Note 1(a), the Act requires the cash and cash equivalents
to the General Statutory Fund and Insurance Fund to remain separate.
The cash and cash equivalent balance of the two funds as at
30 June 2002 is:
General Statutory Fund
Cash 194 (232)
Deposits at call 1 272 2 241
Insurance Fund
Cash 450 (269)
Deposits at call 7 448 4 212
NOTE 29 PROVISION FOR GST PAYABLE
Building contractors pay the insurance premiums on behalf of consumers. However, the Australian TaxationOffice (ATO) has ruled that contractors are able to claim an input tax credit in respect of GST paid on thepremium. However, as consumers, not contractors, are the beneficiaries of claim settlements, there is abreak in the “chain of supply” which prevents BSA from being able to claim a decreasing adjustment inrespect of its claims expenditure. BSA is seeking an amendment to the GST legislation to address thisanomaly. In the event that it succeeds, BSA will incur a GST liability in regard to new insurance businesswritten during the period 2 December 1998 to 8 July 1999. A provision of $0.453M was made at 30 June 2002 for this potential liability. (Refer Note 19).
NOTE 30 HIH INSURANCE
The Authority has notified HIH Insurance of 5 circumstances which could give rise to professionalindemnity claims.
As at 30 June 2002 only one of the circumstances had an amount (of $25,000 actual) attached.
The Authority is unable to assess the amount of the potential liability attaching to the other four claims.
Notes to and forming part of the Financial Statementsfor the year ended 30 June 2002
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We have prepared the following consolidated financial statements pursuant to the provisions of the FinancialAdministration and Audit Act 1977, Financial Management Standard 1997 and other prescribed requirementsand certify that in our opinion:
(a) the prescribed requirements in respect of the establishment and the keeping of accounts have beencomplied with in all material respects;
(b) the Statement of Financial Performance has been drawn up so as to present a true and fair view of theresults of the Authority for the year ended 30 June 2002;
(c) the Statement of Financial Position has been drawn up so as to present a true and fair view of theAuthority’s financial position as at 30 June 2002; and
(d) the Statement of Cash Flows has been drawn up so as to present a true and fair view of the cash flowsof the Authority for the year ended 30 June 2002.
Garry Rossow Ian Jennings
Chairman General Manager
Brisbane
19th September 2002
Certificate of the Queensland Building Services Authority
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Scope
I have audited the general purpose financial statements of the Queensland Building Services Authorityprepared by the Authority for the year ended 30 June 2002 in terms of section 46F of the FinancialAdministration and Audit Act 1977. The financial statements comprise the Statement of FinancialPerformance, Statement of Financial Position, Statement of Cash Flows, Notes to and forming part of thefinancial statements and certificates given by the Chairperson and the General Manager.
The Queensland Building Services Authority is responsible for the preparation and the form of presentationof the financial statements and the information they contain. I have audited the financial statements inorder to express an opinion on them.
The audit has been conducted in accordance with QAO Auditing Standards, which incorporate theAustralian Auditing Standards, to provide reasonable assurance as to whether the financial statements arefree of material misstatement. Audit procedures included the examination, on a test basis, of evidencesupporting the amounts and other disclosures in the financial statements and the evaluation of accountingpolicies and significant accounting estimates. These procedures have been undertaken to form an opinionwhether, in all material respects, the financial statements are presented fairly in accordance with prescribedrequirements in Australia which include Australian Accounting Standards so as to present a view which isconsistent with my understanding of the Queensland Building Services Authority's financial position, and theperformance as represented by the results of its operations and its cash flows.
The audit opinion expressed in this report has been formed on the above basis.
Audit Opinion
In accordance with section 46G of the Financial Administration and Audit Act 1977 I certify that I havereceived all the information and explanations I have required and, in my opinion –
– the prescribed requirements in respect of the establishment and keeping of accounts have beencomplied with in all material respects; and
– the statements have been drawn up so as to present a true and fair view, in accordance with prescribedaccounting standards and other mandatory professional reporting requirements in Australia, of thetransactions of the Queensland Building Services Authority for the financial year 1 July 2001 to 30 June 2002 and of the financial position as at the end of that year.
J P BEH, CPA
Director of Audit Queensland Audit Office
(Delegate of the Auditor-General) Brisbane
Independent Audit ReportQueensland Building Services Authority
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