Lotteries Commission of WA - Statement of Corporate Intent - 2016-17 1

Statement of Corporate Intent2016-17

This Statement of Corporate Intent 2016-17 represents the financial plan between the Minister and the Lotteries Commission of WA (trading as Lotterywest) for the financial year 2016-17. This Statement has been prepared pursuant to section 8B of the Lotteries Commission Act 1990

and the Lotteries Commission (Policy Instruments) Regulations 2010.

Heather ZampattiCHAIR LOTTERYWEST

The Hon Colin Barnett, MLA PREMIER

Lotteries Commission of WA - Statement of Corporate Intent - 2016-17 2

ContentsAbout Lotterywest 3Our Objectives 4Our Functions 4Our Challenges and Strategies 4Our Performance Targets 5Our Financial Agreement 6Our Main Undertakings 9Assumptions and Policies 9

Document control

Document owner General Manager Corporate Services

Document version Version 4.2 (Final draft)

Document file name

Document review Annually

Document security level Public document – not restricted

Document approval date – Board 28 April 2016

Document approval date – Premier 23 May 2016

Document concurrence date – Treasurer 9 September 2016

Lotteries Commission of WA - Statement of Corporate Intent - 2016-17 3

About LotterywestOur VisionBuilding a better Western Australia together.

Our PurposeWe aim to enhance the quality of life and well-being of all Western Australians through the funding, leadership and support we provide to our beneficiaries and by operating our lottery business with excellence and integrity.

Our ValuesLotterywest is an organisation committed to serving the community of Western Australia with excellence and integrity. In enacting these values, we recognise the diversity of our stakeholders and strive for an approach which balances their different needs and expectations.

Four core values underpin all that we do:

Rewarding We seek to ensure that the experience of all those with whom we come in contact – players, grant seekers, business partners and the community as a whole, will be a valued and rewarding one and that all will be treated with courtesy and respect.

Trusted We are honest, reliable and trustworthy. We conduct ourselves professionally with the highest standards of integrity and excellence in all our business operations and in our relationships with all our stakeholders.

Inspiring We motivate, encourage and inspire ourselves and others to achieve greater things for the benefit of the community of Western Australia.

Engaging We actively seek relationships with all our stakeholders based on principles of mutual respect and strive to enhance the achievement of their goals and ours.

Our ActThe Lotteries Commission of WA is a body corporate constituted under the Lotteries (Control) Act 1954. The Lotteries Commission now operates under the Lotteries Commission Act 1990. The Commission is an agent of the Crown in right of the State and enjoys the status, immunities and privileges of the Crown. Statutory provisions provide for the allocation of net lottery subscriptions to the Health Department [40%], Department of Sport and Recreation [5%], Department of Arts and Culture [5%] with the balance available to be allocated to eligible organisations.

Our OwnerWe are owned by the State Government and accountable to the Premier of Western Australia.

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Our ObjectivesOur strategic objectives, which align to the State Government’s goals, are to:

• support the community of Western Australia through our grants program;

• provide and efficiently administer a responsible lottery service in Western Australia;

• ensure that our products and services are accessible to all people living in our State; and

• maintain a strong state-wide retail network.

Our FunctionsOur functions, under the Lotteries Commission Act 1990, are to conduct lotteries and to perform any other function vested by the Act

The distribution of grants to eligible Western Australian beneficiaries is also a key function under our Act.

Our Challenges and StrategiesIn developing this Statement, environmental impacts such as: the economy; population growth and demographics; technology trends; lottery and gaming developments; retail trends; and funding opportunities for the not-for-profit sector have been considered.

Challenges to Lotterywest achieving its objectives are:

• Trends in retail distribution channels, technology and marketing;

• The emergence of new, aggressive competitors in the gaming market place;

• Increased support needs in the community sector driven by: growth of the sector; changes in the way community demand is funded by governments; declining levels of corporate and philanthropic support and the need to build sector capacity;

• The need to maintain a high level of confidence in the integrity of the lottery games and strength of Lotterywest;

• Access to and awareness of our grants and community development services; and

• The ability of Lotterywest to be nimble and responsive.

In response to these challenges, Lotterywest is pursuing the following strategies and initiatives:

Products and Services Develop an enhanced portfolio of products that appeal to existing and new players.

Deliver an effective and creative direct grants program

Distribution Determine “best” retail opportunity for an area.

Actively manage retail network for optimum performance.

Grow digital channel and presence to meet our customers’ expectations.

Ensure the effective distribution of our grants.

Communications & Branding Target communications, balancing existing and new communications channels.

Continue to build upon our heritage as a provider of lottery products and an integral part of the WA community.

Capacity Build our resilience and ability to respond quickly to change.

Ensure we use our resources and systems to achieve our identified business strategies.

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Our Performance TargetsEffectiveness Indicators 2015-16

Budget Estimate 2016-17

Budget Estimate Comment

Sales per adult $401.19 $433.47Growth is based on WA adult population decreasing 3% in 2016-17. Sales growth is expected to increase by 4.8%.

Total Allocations to beneficiaries Per Capita $100.50 $107.26The increase is the result of a total increase in allocations to beneficiaries and reduction in predicted population figures.

Total Allocations to beneficiaries as a % of sales 31.5% 31.1%The slight decrease is a result of the direct grants program remaining steady despite growth in sales. Statutory grants will however increase.

Efficiency Indicators 2015-16 Budget Estimate

2016-17 Budget Estimate Comment

Lottery expenses as a % of sales 6.1% 6.2%

Relative to sales, expenses remain constant with modest increases supporting organisational capability, accommodation relocation and retail transformation initiatives.

Grant operations expenses as a % of Direct Grants 15.6% 16.2%Increases in grant operational expenditure whilst the direct grants program remains relatively stable.

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Our Financial AgreementStatement of Comprehensive Income

Statement of Comprehensive Income2015-16

Updated Estimate $’000

2016-17 Budget Estimate

$’000Comment

Income Sale of lottery products to grow 4.8% from technology developments and player engagement, including new game opportunities.

Sales 880,000 922,000

Other income 59,343 60,285

Total Income 939,343 982,285

Expenses Prize payouts to players, commissions paid to retailers and GST paid on the gambling margin. Cost of sales to include reclassification of ticket printing costs.

Services 1 and 2 operational costs increase due to new accommodation, support for the RTP project and increased salary and wages arising from the functional review. Other operational expenditure restricted to CPI or less.

Statutory distributions estimated to increase by $7.7m. Direct grant program to increase by $2.0m.

Cost of sales (incl. GST) 599,983 632,015

Service 1 - Lotteries Operations 52,604 56,893

Service 2 - Grants and Community Development Operations 17,534 18,964

Returns to beneficiaries 276,920 286,648

Total Expenses 947,041 994,520Total Comprehensive Income (Loss) for the period (7,698) (12,235)

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Statement of Financial Position

Statement of Financial Position2015-16

Updated Estimate $’000

2016-17 Budget Estimate

$’000Comment

Current Assets 83,921 70,409

Non-Current Assets 204,531 206,829

Total Assets 288,452 277,238

Current liabilities 204,268 205,289

Non-Current Liabilities 1,556 1,556

Total Liabilities 205,824 206,845Net Assets 82,628 70,393

Reserves 9,162 9,162 For the 2016-17 year, Lotterywest will consciously consume accumulated reserves in order to maintain consistency in the direct grants program. Despite consuming some reserves, Lotterywest is expected to remain financially strong with all known and likely liabilities and appropriate buffers covered by liquid assets.

Accumulated Surplus 73,466 61,231

Equity 82,628 70,393

Services

Services

Total Cost of Services

Comment2014-15 Actual $’000

2015-16 Updated Estimate

$’000

2016-17 Forward Estimate

$’000Service One - Sale of lottery products to the public of Western Australia

48,665 52,604 56,893The 8% increase in the two service costs reflects increased operating costs as outlined in page 6.

Service Two - The provision of grants and other distributions to the community of Western Australia

16,221 17,534 18,964

Total cost of services 64,886 70,138 75,857

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Cash Flow Statement

Cash Flow Statement 2015-16

Updated Estimate $’000

2016-17 Budget Estimate

$’000Cash Flows from Operating Activities

Receipts 902,908 945,410

Payments (779,262) (815,877)

Net Cash Provided by (used in) Operating Activities 123,646 129,533

Cash Flows from Investing Activities

Receipts 37,134 10,172

Payments (29,483) (25,817)

Net Cash Provided by (used in) Investing Activities 7,651 (15,645)

Cash Flows (to) / from State Government

Receipts 36,950 38,000

Payments (161,920) (169,648)

Net Cash Provided to State Government (124,970) (131,648)

Net Increase/(Decrease) in cash and cash equivalents 6,327 (17,760)Cash at the beginning of the period 14,845 21,172

Cash at the end of the period (*) 21,172 3,412

* Note: Cash and cash equivalents represent cash on hand and cash at bank. Financial assets held to maturity are categorised as investments.

Lotteries Commission of WA - Statement of Corporate Intent - 2016-17 9

Our Main UndertakingsAsset Investment Plan

2015-16 Updated Estimate

$’000

2016-17 Budget Estimate

$’000Comment

Retail Transformation Project 9,403 4,119Replacement aging technology with modern gaming equipment, new player services and updating retail presentation.

Land and Building 200 2,368 Replacement of plant and equipment and new office fit out.

Software Development 683 500 Enhancements to gaming system.

Business Systems Initiatives 681 510System improvements for business intelligence and corporate system back- up and recovery solution.

IT Infrastructure Plan 2,350 3,200Maintain and upgrade infrastructure supporting gaming and corporate systems and new back up data centre.

Digital Strategy Plan 400 100 New digital products and services.

Total Approved Asset Investment Plan 13,717 10,797

Assumptions and Policies • The State’s economy to grow by 2.0% in 2016-17.1

• The State’s adult population to reduce by 3.0% from 2.193 million to 2.127 million.

• The State’s unemployment rate to remain at 6.5% in 2016-17.

• Sales to grow by 4.8% in 2016-17.

• CPI for 2016-17 of 2.5%.

• Lotterywest is required to comply with the provisions of the Financial Management Act. Lotterywest is a Statutory Authority and a not-for-profit reporting entity that prepares general purpose financial statements in accordance with all applicable Australian Accounting Standards and Treasurer’s Instructions.

Source http://www.treasury.wa.gov.au/Treasury/Economic_Data/Economic_Forecasts/ (Gross State Product and Unemployment Rate).