Western AustralianRegional Development Trust

ANNUAL REPORT 2010-2011

ii

PILBARA

GASCOYNE

MIDWEST

WHEATBELT

PEEL

PERTH

SOUTH WESTGREAT SOUTHERN

GOLDFIELDS-ESPERANCE

1

Table of contents

Statement of Compliance 2

Chair’s Introduction 3

The Western Australian Regional Development Trust 4 ResponsibleMinister 4

EnablingLegislation 4

ObjectoftheRoyaltiesforRegionsAct2009 4

Functions 4

Role 5

TheFund 5

ProvisionofservicesandfacilitiestotheTrust 5

Membership 6

Trust Meetings 9 Ordinarymeetings 9

SpecialMeeting 9

Attendance 9

Regional Observations 10

Trust work program 2010-2011 10

Advice and recommendations 11AdvicetoamendtheAct 12

The25%Issue 12

The$1billioncap 13

Technicalamendment 15

Advicetocreateastrategicregionaldevelopmentfund 15

Astrategicregionaldevelopmentfund 16

Apotentialsurplus 18

Advicetodevelopahumancapacitybuildingprogram 18

OECDinsightsintotheimportanceofbuildinghumancapacity 19

Buildinghumancapacity 20

Adviceonawaterprogram 21

AdviceonRoyaltiesforRegionsbudgetproposals 22

Advicerequired 22

Improvements 23

Adviceongovernance 25Governancereview 25

RDL’sresponsetothekeygovernanceconclusions 25

AdviceontheFundbeingusedtoretireStatedebt 30

AdvicetoreviewtheCountryLocalGovernmentFund 31

Othermatters 32Planning 32

Targetedinvestment 34

Trust Internal Governance 36 TrustOperatingBudget 36

TrustMember’sRemuneration 36

TravelExpenditure 36

TrustGovernanceFramework 36

Charter 36

CodeofConduct 36

ConflictofInterestPolicy 37

TrustAdministrativeFunctions 37

2

Statement of Compliance

HonBrendonGryllsMLAMinisterforRegionalDevelopment

DearMinister

Inaccordancewithsection28oftheRoyalties for Regions Act 2009,IherebysubmitforyourinformationandsubmissiontoParliamentthefirstannualreportfortheWesternAustralianRegionalDevelopmentTrust,forthefinancialyear2010-2011.

Section28(1)(b)oftheActrequiresthereporttocontainanyotherinformationrequiredbytheMinister.On28June2011theMinisteradvisedtheTrustthattherewasnofurtherinformationrequiredbytheMinisterinadditiontothatrequiredbysection28(1)(a).

AndrewMurrayChair

15September2011

3

Chair’s Introduction

Section28(1)(a)oftheRoyalties for Regions Act 2009(Act)requirestheWesternAustralianRegionalDevelopmentTrust(Trust)tosubmitareporttotheMinisterforRegionalDevelopment(Minister)thatcontainsinformationabouttheactivitiesoftheTrustduringthefinancialyear.

InsummarytheTrustspentitsfirstyearofexistenceinestablishingitsmethodofoperation,andgettingtogripswithWesternAustralia’sregions,regionaldevelopment,theAct,RoyaltiesforRegions,andtheDepartmentofRegionalDevelopmentandLands’(RDL)roleandfunction.

TheActisspecificastotheworktheTrustmustdo.ThemeasureoftheTrust’sworkwillbeoutcomes;namely,therange,natureandcontentofadviceithasprovidedtheMinister,theresponsetothatadvice,andtheconsequenceofthatadvicebeingaccepted.

TheTrustisestablishedbystatuteasanindependentadvisorybodytotheMinister.TheTrusthasbeentaskedtoperformabroadoversightroleontheRoyaltiesforRegionsprogramandtoprovidehighlevelindependentandimpartialadviceandrecommendationsonthepolicy,allocationandmanagementofexpenditurefromtheRoyaltiesforRegionsFund(Fund).

TheTrustdoesnotinvolveitselfintheselectionofspecificprojectsandprogramsforfunding,oradviseinthatregard,becauseitconsidersthatwouldconflictwithitsdutiesundertheAct.NeitherdoesitattempttoregulateoraudittheFund,asthisisoutsideitsremit.

Earlyon,theTrustdeterminedthatitwouldavoidadesk-topapproachtoitsdutiesandensurethatitvisitedtheregionsandconsultedwidelywithindividualsagenciesandentitiesconcernedwithregionaldevelopmentandRoyaltiesforRegionsprojects.TheTrustisgratefultothemanyindividualsandorganisationsthathavesharedtheirwisdomandviewswithit.

TheworkoftheTrustaffectsthewayinwhichRDLandtheMinisterdevelopandadministerRoyaltiesforRegionspolicyandprojects.TheTrusthasbeenimpressedbythepositiveandcooperativeattitudeofboththeMinisterandRDLtoitsviewsandfindings,andbyaprofessionaldesireforcontinuousimprovement.

TheTrustisdependentonthequalityexperience,backgroundandindependenceofitsmembers,anditsstaffmember.InthatrespecttheTrustiswellserved,andithasthereforebeenapleasuretoChairtheTrustin2010-11.

TheTrustlooksforwardtothechallengesandopportunitiesof2011-12.

AndrewMurrayChair

4

The Western Australian Regional Development Trust

Responsible MinisterHonBrendonGryllsMLAMinisterforRegionalDevelopment.

Enabling LegislationRoyaltiesforRegionsAct2009.

ExceptingforParts3and5,theActwasproclaimedon27March2010toprovidefortheoperationoftheRoyaltiesforRegionsFund.PriortotheproclamationoftheAct,theRoyaltiesforRegionsprogramoperatedpursuanttosection10(a)oftheFinancialManagementAct2006.

Parts3and5oftheActwereproclaimedonthe13July2010,andconcerntheTrust.Followingproclamation,thenewlyconstitutedTrusthelditsfirstmeetingon16July2010.

Object of the Royalties for Regions Act 2009 TheobjectoftheActistopromoteandfacilitateeconomic,businessandsocialdevelopmentinregionalWesternAustraliathroughtheoperationoftheRoyaltiesforRegionsFund.

FunctionsPursuanttosection12oftheActthefunctionsoftheTrustare–

(a) toprovideadviceandmakerecommendationstotheMinisterforthepurposesofsections5(2)and9(1);and

(b) toprovideadviceandmakerecommendationstotheMinisteronanyothermatterrelatingtotheoperationoftheFundthatisreferredtoitbytheMinister.

Section5(2)oftheAct–theTreasurer,ontherecommendationoftheMinister,istodeterminefromtimetotimethewayinwhichmoneystandingtothecreditoftheFundistobeallocatedbetweenthesubsidiaryaccounts.

Section9(1)oftheAct–theMinister,withtheTreasurer’sconcurrence,mayauthorisetheexpenditureofmoneystandingtothecreditoftheFundforthefollowingpurposes–

(c) toprovideinfrastructureandservicesinregionalWesternAustralia;

(d) todevelopandbroadentheeconomicbaseofregionalWesternAustralia;

(e) tomaximisejobcreationandimprovecareeropportunitiesinregionalWesternAustralia.

Section9(2)oftheAct–TherearetobechargedtotheFund–

(a) expenditureauthorisedundersubsection(1);and

(b) expenditureincurredintheadministrationoftheFund;and

(c) expenditureincurredintheadministrationoftheTrust,includinganyremunerationorallowancespayabletoitsmembers;and

anyotherexpenditureincurredintheadministrationofthisAct.

5

RoleTheTrustisanindependentstatutoryadvisorybodytotheMinisterontheFund.TheTrustperformsanoversightroleandprovidesindependentandimpartialadviceandrecommendationsontheallocationoffundsfromtheFund.

The FundSection5(1)oftheActstatesthattheRoyaltiesforRegionsFundistoconsistofthefollowingsubsidiaryaccounts:

(a) theCountryLocalGovernmentFund;

(b) theRegionalCommunityServicesFund;

(c) theRegionalInfrastructureandHeadworksFund;

(d) anyotheraccountdeterminedbytheTreasurer,ontherecommendationoftheMinister,tobeasubsidiaryaccount.

In2010-11,thebudgetofthefundwas$760.4million,allocatedasfollows:

theCountryLocalGovernmentFund

$68.204million

theRegionalCommunityServicesFund

$210.410million

theRegionalInfrastructureandHeadworksFund

$468.997million

anyotheraccountdeterminedbyTreasurer/Minister

$2.374million

administrationoftheFundandTrust–RDL

$10.458million

Table1RoyaltiesforRegionsFund2010-11AllocatedBudget

Provision of services and facilities to the TrustPursuanttosection27oftheActRDLprovidestheTrustwithservicesandfacilitiesnecessaryfortheTrusttoperformitsfunction.

Inthe2010-11financialyearRDLprovidedtheTrustwiththeservicesofafull-timeExecutiveOfficerandpolicyandadviceservicesasrequired.

Aspersections9(2)(c)andsection27oftheAct,RDLprovidestheTrustwiththefundsfortheexpenditureincurredintheadministrationoftheTrust;includingremunerationandallowancestoTrustMembers.Pursuanttosection10oftheActinformationabouttheoperationoftheFundisincludedinRDL’sAnnualReport.However,furtherdetailregardingTrustMembers’remunerationandsomeadministrativecostsfortheTrustisprovidedinthesectiononTrustInternalGovernanceinthisreport.

0%1%

9%

28%

62%

Country Local Government Fund - $68.204 (9%)

Regional Community Services Fund - $210.410 (28%)

Regional Infrastructure and Headworks Fund - $468.997 (62%)

New Regional and Statewide Initiatives - $2.374 ($0%)

Administering the Royalties for Regions Fund - $10.458 (1%)

Royalties for Regions Fund 2010-11 Allocated Budget in Millions

6

MembershipTrustmemberswereappointedbytheMinisterinJune2010andaninitialinductionmeetingwasheldon16June2010.TheinauguralformalmeetingoftheTrustwason16July2010.TheTrustheldfiveformalmeetingsandonespecialmeetingin2010-2011.

InFebruary2011subsequenttoMrTimShanahan’sresignationasChairpersonofthePilbaraDevelopmentCommission,MrPeterRundle–ChairpersonoftheGreatSouthernDevelopmentCommission,wasappointedastherepresentativeontheTrustfromaregionaldevelopmentcommissionaspersection13(1)(a).MrShanahanwasre-appointedtotheTrustasamemberundersection13(1)(b)oftheAct.

Asat30June2011themembershipoftheTrustisasfollows:

Andrew MurrayChair–3yearappointment,expires7June2013(appointed

aspersection13(1)(b)oftheRoyalties for Regions Act 2009)

AndrewMurrayisaRhodesScholarandformerbusinessmanwhowasaSenatorforWesternAustraliafrom1996to2008.

Andrew’ssenatecareerfocussedonfinance,banking,accounting,audit,economic,business,industrialrelationsandtaxissues;onaccountability,governanceandelectoralreform;andoninstitutionalisedchildren.Andrewisanexperiencedlegislatorandpolicymakerwithastrongfocusonaccountability.

Andrewhasastrongandvariedbusinessbackgroundasanexecutiveanddirectorinpublicandprivatecorporationsaswellasowningandmanaginghisownbusinesses.Hehasalsochairedandbeenamemberofcommunitybusinessandpoliticalboards,committeesandassociations,includingparliamentarycommitteeswithstatutoryobligations.

7

Sue MiddletonDeputyChair–3yearappointment,expires7June2013

(appointedaspersection13(1)(b)oftheRoyalties for Regions

Act 2009)

SueMiddletonwastheRuralIndustriesResearchandDevelopmentCorporation(RIRDC)RuralWomanoftheYear2010.In2003SuewasawardedtheCentenaryMedalforservicesto

regionalandruralAustralia.Sueandherhusband’sfamilymanageadiverserangeoffarmingoperationsincludingacitrusorchard,grainandporkenterpriseintheCentralWheatbelt.

SuealsocontributessignificantlytocommunityprojectsandhasbeeninvolvedinkeyleadershipgroupsincludingtheNationalRegionalWomen’sAdvisoryCouncil,theNationalRuralAdvisoryCouncilandtheRegionalSolutionsBoard.Suespecialisesincommunitydevelopment,strategicplanning,projectdevelopmentandisaprofessionalfacilitator.

Paul RosairTrustMember(appointedaspersection13(1)(b)and13(3)of

theRoyalties for Regions Act 2009)

PaulRosairistheDirectorGeneraloftheDepartmentofRegionalDevelopmentandLandsandamemberoftheTrust.PaulpreviouslyheldthepositionofDirectorofMajorRegionalProjectswithintheDepartmentof

LocalGovernmentandRegionalDevelopment,whereheestablishedandrolledouttheRoyaltiesforRegionsprogram.Priortothat,PaulheldthepositionofDirectorofRegionalOperationswithintheDepartmentofWaterandpreviouslytheDepartmentofEnvironment.

Paulhasworkedformorethan35yearsinnumerousseniorgovernmentrolesacrosstheregionaldevelopment,environment,water,landmanagement,indigenouscapacitybuilding,infrastructure,planningandnaturalresourcesmanagementportfolios.HealsohasextensiveexperienceworkingacrossthestateandabroadperspectiveonissuesofparticularimportancetoregionalWesternAustralia.

8

Peter RundleTrustMember–1yearappointment,expires27February2012

(aspersection13(1)(a)oftheRoyalties for Regions Act 2009)

PeterownsandrunsamixedenterprisefarminKatanning(sheep,canola,barleyandcrossbredlambs).PeterisChairmanoftheBoardoftheGreatSouthernDevelopmentCommission,anditisbyvirtueofthispositionthathehasbeen

appointedtotheTrustforthestatutoryperiodof1year.

PeterhaspreviouslybeenaBoardMemberofAQ2Smartaflow,aKatanningcompanywhichhaspioneeredlow-flowwaterchlorinationequipmentanddistributesAustralia-wide.HehasalsobeenamemberoftheWaterCorporation’sCustomerAdvisoryCouncil.

PreviouslyPeterworkedinthesharemarket,andmanagedWesfarmersShareDepartmentwhileworkingforErnst&YoungShareRegistryandlaterComputershare.

Tim ShanahanTrustMember–3yearappointmentexpires7June2013

(originallyappointedundersection13(1)(a),re-appointedas

persection13(1)(b)oftheRoyalties for Regions Act 2009)

TimShanahanhasastrongprofessionalandmanagerialbackground.TimwasinitiallyappointedforoneyeartotheTrustbyvirtueofhispositionastheChairofthePilbara

DevelopmentCommission.SincehisresignationfromthatpositionhehasbeenreappointedasamembertotheTrust.TimhasawealthofexperiencefromhisworkinregionalandlocalgovernmentpolicyandadvocacyaswellaswithindustryincludingastheformerChiefExecutiveoftheChamberofMineralsandEnergyofWesternAustraliaandhiscurrentpositionastheinauguralDirectoroftheEnergyandMineralsInitiativewiththeUniversityofWesternAustralia.

TimwasawardedthePublicServiceMedalin2001andtheCentenarymedalin2003bothforservicetoLocalGovernment.TimisaDirectoroftheLocalGovernmentSuperannuationPlanandthePresident,RoyalAutomobileClubofWA.

TheTrustformallymeetsapproximatelyeverytwomonthsandonotheroccasionsasrequired.Inthe2010-2011periodtheTrustformallymetonthefollowingoccasions:

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Ordinary MeetingsDate Location

MeetingOne 16July2010 WestPerth

MeetingTwo 9September2010 WestPerth

MeetingThree 12November2010 WestPerth

MeetingFour 9February2011 WestPerth

MeetingFive 7April2011 Geraldton

Special MeetingBudgetDiscussionwithMinister–21March2011,WestPerth

AttendanceFollowingistherecordofattendanceofTrustMembersfortheformalTrustMeetingsin2010-11.TrustMembersarerequiredtoattendformalTrustmeetingsandarerequiredtohaveanyleaveofabsenceapprovedbytheChair.

Andrew MurrayAttendanceatallsixTrustmeetings.

Sue MiddletonAttendanceatallsixTrustmeetings.

Paul RosairAttendanceatallsixTrustmeetings.

Peter RundleAttendanceatthetwoformalTrustmeetingsheldsincehisappointmenton28February2011.

Tim ShanahanAttendanceatfiveTrustmeetings.

Trust Meetings

10

Regional Observations Trust Work Program 2010-2011

TheTrustconsidersitimportantthatTrustmemberspersonallyappraisethemselvesofconditionsandprospectsandRoyaltiesforRegionsprojectsinregionalWesternAustralia.BetweentheTrustmembers,allnineregionsofWesternAustraliawerevisitedduringtheyear,somemorethanonce.

Forthe2010-11year,theTrustorganiseditsworkunderthebroadheadingsof:

• Governance

• RoyaltiesforRegionsproject/programselection

• RoyaltiesforRegionsproject/programexecution

• Regionaldevelopment

• Finance

11

Advice and Recommendations

Section12(a)oftheActrequirestheTrusttoprovideadviceandmakerecommendationstotheMinisterforthepurposesofsections5(2)and9(1).Insummary,thosesectionsrefertotheallocationofFundmoniestothevarioussubsidiaryaccounts;and,towhereFundexpenditureshouldbedirected.

Section12(b)requirestheTrusttoprovideadviceandmakerecommendationstotheMinisteronanymatterrelatingtotheoperationoftheFundthatisreferredtoitbytheMinister.

Inthefinancialyear2010-2011,onitsownmotionunderSection12(a),theTrustprovidedadviceandmaderecommendationstotheMinisteronthefollowingmatters:

• 1October2010:toamendtheAct

• 25October2010:tocreateastrategicregionaldevelopmentfund

• 16February2011:todevelopahumancapacityprogram

• 20March2011:onRoyaltiesforRegionsbudgetproposals

• 21March2011:onawaterprogram

• 27April2011:toreviewtheCountryLocalGovernmentFund

TheTrustalsoadvisedRDLon:

• 9February2011:governance

Inthefinancialyear2010-2011,underSection12(b)theTrusthadthefollowingmattersreferredtoit:

• 28June2011:ontheFundbeingusedtoretireStatedebt

• 28June2011:toreviewtheCountryLocalGovernmentFund

12

Advice to amend the ActAsaresultofitsroleinoversightingtheRoyaltiesforRegionspolicyandtheActtheTrustidentifiedanumberofissuesthatitsoughttoclarifyrelatingtothefinancearrangementsfortheFund.

The 25% issueTheTrustunderstandsthattheRoyaltiesforRegionspolicyformallyagreedtoattheformationofthecurrentGovernmentwasthat25percentoftheactualminingandonshorepetroleumroyaltiesduetotheStateGovernmentinafinancialyear(FY)wastobecreditedtotheFundeachFY.

RDLhadadvisedtheTrustthattheintentofthatinter-partyagreementwasreflectedintheRDLCabinetsubmissionofthe29September2008andtheCabinetdecisiondated13October2008.

AnyRoyaltiesforRegionsbudgetestablishedatFYcommencementbasedonapercentageofroyaltieswhoseactualquantumcanonlybeknownaftertheFYendsisofnecessitybasedonaforwardestimate.

FortheRoyaltiesforRegionspolicyintentthentoberealised,ayear-endreconciliationbetweenestimatedandactualroyaltieswouldbenecessary.

Theeffectoftheomissionof‘actualroyaltyincome’intheActistochangethepolicyintent.TheTrusthasrecommendedthattheActbeamendedtoinclude‘actualroyaltyincome’.

AsTable2belowshows,theeffectofnottakingactualroyaltiesintoconsiderationcanbeconsiderable.Basedonbudgetaryexperience,overthetermofagovernmentFundincomederivedfromroyaltyforecastsorestimateswilldiffermateriallyfromFundincomederivedfromactualroyaltyrevenue,tosumsofconsiderablemagnitude.

Total Royalty Income - Operating Statement

Year Budget Actual Variance

$m $m $m %

2000-01 535.4 700.6 165.2 30.9

2001-02 643.9 651.1 7.2 1.1

2002-03 669.7 706.8 37.1 5.5

2003-04 669.5 675.8 6.3 0.9

2004-05 750.8 863.9 113.1 15.1

2005-06 1,153.2 1204.5 51.4 4.5

2006-07 1,527.5 1,484.2 -43.3 -2.8

2007-08 1,829.8 1,679.6 -150.2 -8.2

2008-09 2,645.9 2,348.2 -297.7 -11.3

2009-10 2,576.9 2,323.6 -253.3 -9.8

13,002.6 12,638.4 -364.2 -2.8

Note:AllyearsandroundsofestimatesareonanAASB1049basis.

Pleasenotethatcompletedfiguresforthe2010-11periodwerenotavailablewhenthisreportwenttoprint.

Table2TotalRoyaltyIncome-OperatingStatement

13

InFY09-10theroyaltyestimateatyear-startexceededtheactualroyaltiesreceivedbytheStateatyear-end.

TheoriginalRoyaltiesforRegionspolicyintentwouldhavemeantthisexcessshouldhavebeen‘paidback’totheState’sConsolidatedAccount.TheAct’somissionof‘actualroyaltyincome’meansthattheamountbywhichtheforecastroyaltyincomeexceedstheactualroyaltyincomeinanyFYcannotbe‘paidback’totheState’sConsolidatedAccountfromtheFund.

NeithertheActnoranyotherActauthorisesanyexcessamountassessedbecause‘forecastroyaltyincome’exceedactualroyaltiestobechargedtotheFundandreturnedasacredittotheConsolidatedAccount.Conversely,thereisalsonoprovisiontoautomaticallyauthoriseanyshortfallamountassessedbecause‘forecastroyaltyincome’waslessthanactualroyaltyincome,tobecreditedtotheFund.

TheTrustconsidersboththeseoverandunder-estimateoutcomestobecontrarytothepolicyintent.

The $1 Billion CapSection8oftheActimposesa$1billioncapontheFund.1TheTrustconsidersthecapunnecessary,andhasrecommendedthatitberemoved.

Thepurposeofthe$1billioncapwasoutlinedbytheHonWendyDuncanMLCintheParliamentarydebateontheBill.2Thisquoteindicatesthatthe$1billioncapwasdesignedtohastenexpenditureofalltheroyaltiesduetotheFund,nottoacttopreventtheFundreceivingtheroyaltiesatall.

TheTrustisawarethatvariousoptionshavebeenmootedtoaddsubsidiaryaccountstotheFund,ortoconsiderpotentialsourcesofadditionalfundingtotheFund.Section7(1)(b)oftheActonlyrequiresthatmoneybe‘lawfullymadeavailabletotheFund’,whichmeanstheFundcanbeenlarged.Sowhether,forinstance,CommonwealthgrantscanbemadeavailabletotheFundwilldependonthetermsandconditionsoftheGrant.

TheeffectofthecapistorestrainthepotentialdevelopmentoftheFund,asanycontemplationofabreachwillhaveachillingeffectastheFundshouldnotexpandiftheeffectislikelytocauseabreachofthecap.

1Section8LimitonamountinFundThe Treasurer is to ensure that the amount of money standing to the credit of the Fund at any time does not exceed $1 billion.

2TheHonWendyDuncanMLCintheParliamentarydebateontheBill: “The $1 billion cap guarantees that the funds allocated are spent according to set timelines, and negates delaying tactics for projects or stockpiling for elections.”

14

TheexperienceoftheFundtodateisthat:

• Firstly,fundsaccumulatefasterthanexpenditure,principallybecauseroyaltiesareregularlycreditedtothefund,butapplication,selectioncommencementandcompletionofprojectsnaturallylags;and

• Secondly,royaltiesarenowamuchlargersourceofstaterevenueandsothe25percentshareismuchgreaterthanwhenthe$1billioncapwasintroduced.

If,attheendofaFY,lessthan25percentoftheforecastroyaltyincomehasbeencreditedtotheFundbutcannotbecreditedtotheFundbecausethecaphasbeenreached,thenthereisnostatutoryrequirementforthedifferencetobecreditedtotheFund.

ParliamentcouldappropriatetheshortfallamountforthepurposeoftheFundinafutureyearoryears,ifthebalanceoftheFundfellsufficientlybelowthecap.However,thereisnoobligationonParliamenttodoso.

TheTrustconsidersthissituationtobecontrarytothepolicyintentandtheActshouldthereforebeamended.

The$1billioncapincludesallocatedbutunspentmoneyintheFund.ItisonlywhenauthorisedexpenditureischargedtotheFundthatitceasestobeincludedinthecalculationofthecap.

WhiletheActallowstheMinister,withtheTreasurer’sconcurrence,toauthorisetheexpenditureofmoneyoutoftheFundevenifthemoneywillnotbeexpendeduntilfuturefinancialyears,subjecttofurtheradvice,theTrustisoftheopinionthatRDLmightbeobligatednottocontemplateexpenditureonprojectsagainstanticipatedFundincomeifthecapislikelytobebreachedbeforethefullamountofcommittedfundingisrequired.

IftheTrustisrightinthisopinionthenexpenditurethatisrecurrentordirectedtolargeprojectsthatextendedoveranumberofyears,mightbeatrisk.

TheTrustdoesnotacceptthatthecapshouldpotentiallyoperatetoimposeabarriertothefullroyaltiesduetotheFundbeingeffectivelybudgetedintheout-years.AvoidingthisriskrequirestheActtobeamended.

15

Technical amendmentMembersoftheTrustareappointedundersection13oftheAct.Section13(1)(a)requirestheTrusttoincludethechairpersonofaregionaldevelopmentcommission(RDC),whosetermis12months,undersection15(2).ThatappointmentbytheMinisterissubjecttoCabinetratification.

Section15(1)statesthatallothermemberstermofofficeisto“benotlongerthan3years”.WhytheRDCChairhastohaveaspecifiedshortertermisunclear,assection15(1)wouldallowtheMinistertoappointanymemberforashortertermthanthreeyears.

Moreimportantly,section15(4),readwithsection16(1),meansthatifanRDCChairresignsorisremovedfromofficebeforehis/herreplacementisappointedbytheMinisterandratifiedbyCabinet,thentheTrustwouldnotbeproperlyconstitutedundersection13.

TheActneedstobeamendedtoresolvethisissue.

Advice to create a strategic regional development fundTheTrustexaminedthepotentialestablishmentofanon-metropolitanregional‘futurefund’undertheAct.TheTrustdidadesk-topreviewofthevarioustypesofinternationalanddomesticfundsofthistypeandofthepoliciesthatdrivethem.

Incommonparlance,anyWesternAustralianGovernmentfundcouldbetermedafuturefundifitsintentionistotargetexpenditureoutsideofthebudgetfour-yearcycle,butinpolicytermsafuturefundusuallyhasaspecificmeaning.

Futurefunds,andtheir‘policycousins’sovereignwealthfunds,aregenerallynationalgovernmentpolicyinstruments.Adesk-topreviewoftheliteratureindicatesthatfuturefundstypically:

• areverylongterm(30yearsplus);

• comprisetensofbillionsincapital;

• haveindependentgovernanceoversightandmanagement;

• havegovernmentmandatedinvestmentpolicies3;

• areaccumulationfundsthataresavingsratherthanspendingmechanisms;and

• expenditureisgenerallydrawnfromnetinvestmentreturns;ifcapitalisexpended,itisgenerallydelayeduntilthefundsreachacertainsize,andeventhen,isspreadoverthelongerterm.

OnpresentinformationtheTrustisoftheviewthatadditionalorsurplusincometotheexistingRoyaltiesforRegionsfunds,evenifsupplementedbyotherpublicorprivatesources,isunlikelytobeoftraditionalfuturefundsize.

3-TheAustralianFutureFundhasalong-termbenchmarkforreal(afterinflation)returnsof4.5-5.5%.

16

TheremitofRDLandtheActisfordevelopment.TheWesternAustralianGovernmenthasdeterminedthatthestateneedstocatch-uponabacklogofneededregionalsocialandeconomicinfrastructureandservicesexpenditure.Thismeansanemphasisoncapitalexpenditure,againnotafeatureoffuturefunds.

TheTrustconcludedthattherewasnocasefortheestablishmentofafuturefundundertheAct.

TheTrustdidrecommendthatastrategicregionaldevelopmentfund(SRDF)beestablishedundertheAct.

A strategic regional development fundSection5(1)oftheActstatesthattheFund4istoconsistofthefollowingsubsidiaryaccounts:

• TheCountryLocalGovernmentFund(CLGF);

• TheRegionalCommunityServicesFund(RCSF);

• TheRegionalInfrastructureandHeadworksFund(RIHF);and

• AnyotheraccountdeterminedbytheMinisterandtheTreasurer.

TheCLGFismodestinsize(presentlyaround$100millionpa)andistoassistnon-metrolocalgovernmenttobuildandrenewlocalcommunityinfrastructure.

TheRCSFisalsomodestinsize(presentlylessthan$100millionpa)andistoimproveaccesstoservicesintheregions.

TheRIHFistosupportlarge-scaleregionalinfrastructureprojectsthatareofstrategicimportancetoWesternAustralia(presentlyaround$470millionpa).

ThekeydifferencebetweentheRIHFandtheproposednewSRDFisthattheRIHFisanon-cumulativefundforlarge-scaleconstruction-readyprojectsthatneedfundswithinthebudgetcycle,andtheproposednewfundwillbeacumulativefundforverylargeasyetunidentifiedfutureregionalprojectsthatwillneedfundsbeyondthebudgetout-years.

WhiletheTrustconsidersanewfundundertheActisdesirable,thisrecommendationiscomplicatedbypresentRoyaltiesforRegionspolicy.

4-TheFundisaspecialpurposeaccountestablishedunders10(a)oftheFinancial Management Act 2006andconstitutessubsidiaryaccountsasitemisedins5oftheRoyalties for Regions Act 2009.

17

Presentpolicyisthatallthefundsestablishedundersection5(1)oftheActarefundsrequiredtobespentbysetdeadlinesintheshorttomediumterm,withinthebudgetfour-yearcycle.Ifanewaccumulatingfundforfutureprojectsisrequiredforexpenditureinthemediumtolongerterm,extendingbeyondthebudgetout-years,RoyaltiesforRegionspolicywillneedtochangetoaccommodatethenewfund.

AcceleratingWesternAustralianroyaltiesandthepossibilitythatsignificantnon-royaltyincomecouldbepartneredintotheRoyaltiesforRegionsfundsbothraisetheprospectofsubstantialadditionalmoniesbeingavailableforRoyaltiesforRegions.WhileintheorysuchadditionalmoniesshouldbecapableofbeingaccommodatedintheexistingthreeRoyaltiesforRegionsfundsratherthananewfund,thedesignofthesefundsandthesection8$1billionlimittoFundsizemakesthisdifficult.

Asoutlinedabove,thenewfundisintendedforadifferentpurpose.Theexistingfundsarenon-cumulativeandtheirspecificprogramsandprojectsaretobespenttosettimelinesovertheshorttomediumterm.

TheTrustisoftheopinionthatneithertheCLGFnortheRCSFissuitableindesign,intentionorprospectsfortheadditionoflargeincreasesinincome.WhiletheRIHFisnotionallysuitable,itisdesignedforconstruction-readyprojectsthatmust5bespentintheshorttomediumterm.

TheTrusthasrecommendedthattheproposedSRDFbeinitiallyfundedbytheallocationofmoniesfromtheexistingsubsidiaryaccountsandfromnewroyaltiesincome,asdeterminedbytheMinisterontheadviceofRDLandwiththeconcurrenceoftheTreasurer.Suchfundscouldbesupplementedbyadditionalcentralbudgetallocations,RoyaltiesforRegionspartnershipcontributionsfromotherprivatesources;andRoyaltiesforRegionspartnershipcontributionsfromtheCommonwealth.

5-Seefootnote2.

ThisproposednewfundissimilarinconcepttothefundsestablishedundertheNation-buildingFundsAct2008toprovidefinancingresourcestomeettheCommonwealth’scommitmenttoAustralia’sfuturebyinvestmentincriticalareasofinfrastructuresuchastransport,communications,energy,water,education,researchandhealth.

Theshortfallordeficitininfrastructureisoftenthesubjectofpolicyanalysisandpubliccomment.Thereisaneedforlargeandcostlylong-termstrategicregionaldevelopmentprojectstobeabletobeconsideredbytheFund.Suchprojectsmayincludeprimaryinfrastructureorsupportiveinfrastructure.

OfparticularrelevancetotheobjectoftheActisthepotentialforafuturedevelopmentfundtosupportthedeliveryofsocialinfrastructurethatdeliverenhancedbenefitstotargetedlocalcommunitiesassociatedwithprioritystate-significantprojects.

Concept-readybutnotconstruction-readylargerregionaldevelopmentprojectsarecharacterisedbylongleadtimesandconstructionoverseveralyears,makingsuchprojectsmediumtolongertermincharacter,andpossiblyextendingbeyondthefouryearsofabudgetarycycle.

Fromaresponsiblebudgetperspectivesuchlonger-termstate-significantprojectsareoftenbestfacilitatediftheyaresignificantlyorfullypaidfromreserves.Thisprudentcostingapproachrequirestheaccumulationofconsiderablefundspriortoprojectconsiderationandcommencement.

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A potential surplusRoyaltiesforRegionsincomebeingreceivedaheadofexpenditurecreatesanunallocated‘surplus’whichonpresentroyaltyrevenueindicationsislikelytoincreaseatafasterrate.AnyFundbalanceofthisnatureisreportedatFYend.

BynatureoftheActanyunallocatedRoyaltiesforRegionsmoniesmustbespentinatimelyandresponsiblemanner.Prudencedictatesthatanytemptationshouldbeavoidedtohastentheexpenditureofa‘surplus’inwaysthatmaybeconsideredelection-orientedornottobeapriorityornottofulfilastrategicneed.

InternationalandAustralianexperiencehasindicatedthatitisbetterbudgetpracticetosecure‘surplus’fundsformeasuredandstrategicconsideration.ThepotentialRoyaltiesforRegions‘surplus’doesrepresentanopportunitytoaccumulatefunds.Withrespecttotheneedforlonger-termlargeregionaldevelopmentprojectstobeconsideredunderRoyaltiesforRegionsthatarenotpresentlycontemplatedbytheFund,any‘surplus’intheFundprovidesanopportunitytoconsiderlargefutureprojectsthatwouldnotnormallybepossible,andtosatisfyanunmetneed.

Advice to develop a human capacity building programTheTrusthasrecommendedthatRoyaltiesforRegionsengagemoreinthedevelopmentofhumancapacityintheregions.

Section4oftheActstatesthattheRoyaltiesforRegionsFundistobeusedtopromoteandfacilitateeconomic,businessandsocialdevelopmentinregionalWesternAustralia.Section9(1)oftheActisspecificastothedirectionofexpenditurerequired:

(a) to provide infrastructure and services in regional Western Australia;

(b) to develop and broaden the economic base of regional Western Australia;

(c) to maximise job creation and improve career opportunities in regional Western Australia.

TheActrequiresregionaldevelopmenttobedeliveredthroughRoyaltiesforRegionsexpenditureinbuildingphysicalcapacityandinbuildinghumancapacityinthenineregionsofWesternAustralia.Tobuildacanal,toburypowerlines,tobuildaswimmingpool,takesmonthsorafewyearsandisvisible.Buildinghumancapacityislessvisible;insomecasesitmaytakeafewyearsbutfrompre-schooltoanexperiencedengineercantaketwoandahalfdecades.

IthasnotbeensurprisingthatFundexpendituretodatehasbeenstrongeronbuildingphysicalcapacitythanonbuildinghumancapacity.Giventhepressuresforinfrastructure‘catch-up’,thishasbeentherightpriority.

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OECD6 insights into the importance of building human capacityTheTrustdoesyethavesufficientevidenceorexperienceinregionaldevelopmentinWesternAustraliatodrawfirmconclusionsastowhatparticularcombinationofexpenditurepolicyandprogramswillbeofgreatestlong-termbenefitinregionaldevelopment,butsomeindicatorsfromtheOECDareuseful.

Ina2009policybriefonhowregionsgrow,theOECDoutlinedsomebroadprinciplesforsuccessfulregionaldevelopmentpolicies.Theseareasfollows(italicsaddedtoemphasisetheimportanceofdevelopinghumancapacity):

• Provide infrastructure as part of an integrated regional approach.Theanalysissuggeststhatinfrastructurealonehasnoimpactonregionalgrowthunlessregionsareendowedwithadequatelevelsofhumancapitalandinnovation.Inotherwords,infrastructureisanecessary,butinsufficient,conditionforgrowth.Theanalysisalsorevealsthatittakesaboutthreeyearsforinfrastructuretopositivelyinfluencegrowth.

• Invest in human capital. Regions with well-educated populations will grow.Investmentsintertiaryeducationtakeaboutthreeyearstohaveapositiveimpactonregionalgrowth.

• Emphasise innovation and research and development.InvestmentsinR&D[researchanddevelopment]haveapositiveeffectonpatentactivityinallcategories,asdoR&Dexpendituresbybusinesses,thepublicsector,higher-educationinstitutionsandtheprivatenon-profitsector.However,innovationisalonger-termprocessandappearstohaveapositiveinfluenceonregionalgrowthonlyafterfiveyears.Theanalysissuggeststhatascapitalandtalentagglomerate,theytendtopositivelyinfluencegrowthinneighbouringregions.However,innovationremainsahighlylocalisedelement.

6-34leadingcountriesconstitutetheOrganisationforEconomicCo-operationandDevelopment.

• Focus on integrated regional policies.Agglomerationeconomiesarepartlyresponsibleforregionalgrowth.Sourcesofgrowthfromwithinregions,suchashumancapitalandinnovation,aremoreimportantthanaregion’sphysicaldistancefrommarkets.Althougharegionwithgoodaccessibilitytomarketshasanaddedadvantage,itsgrowthdependsonthepresenceofhumancapital,innovation,infrastructureandeconomiesofagglomeration.Regionsperformwellwhenlocalactorsinaregionalinnovationsystemcancommunicateeasilywitheachother.Indeed,oneregion’sperformancestronglyinfluencesneighbouringregions,suggestingthatinter-regionaltradeandinter-regionallinkagesplayanimportantroleinregionalgrowth.7

Internationalevidenceindicatesthattobeeffective,regionaldevelopmentisalong-termendeavour,sometimesstretchingoverdecadesforfullrealisation.Thisisparticularlythecasewithbuildinghumancapacity.

7-OrganisationforEconomicCo-operationandDevelopmentMarch2009PolicyBriefHowRegionsGrowp6.

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Building human capacityItwouldbehelpfulforadditionalanalysistobeundertakenbeforeamorecomprehensivepolicyonbuildinghumancapacityisadopted.TheTrustaskedthattheMinisterorRDLestablishaprocessofformalreviewtodetermineprinciplesprojectsproposalsandprioritiestoadvancehumancapacitybuildinginregionaldevelopment.TheTrustisawarethatanumberofotherfederalandstateMinistriesandentitieshavedoneworkintheseareas,whichshouldallowforeasieranalysis.

AtthispreliminarystagetheTrusthasidentifiedfivesubjectheadsunderwhichregionalandruralhumancapacitybuildingcouldbeconsidered:

• Leadershipdevelopment

• Skillsdevelopmentandretention

• Entrepreneurial/innovationdevelopment

• Addressingunemployment-andunder-employmentandexcesscapacity

• Theneedsofnewregionalpopulationsresultingfromregionaldevelopment

TheTrustconsideredthatRoyaltiesforRegionshumancapacitybuildingshouldstartwithleadershipdevelopment.TheTrustconsideredtherewasmeritincommunityleadershipandcapacitybuildingprogramsbecomingregionaldevelopmentprojects.Buildingsocialandhumancapitalintheregionsisvitalforregionaldevelopment.8ItisalsoapriorityfortheRegionalDevelopmentCouncil.9

8-InadditiontoreportssuchastheEconomicAuditCommittee’sFinalReportPutting the Public First: Partnering with the Community and Business to Deliver Outcomes December 2009,DepartmentofTrainingandWorkforceDevelopment’sSkilling WA: A Workforce Development Plan for Western Australia December 2010;Structuring Regional Development for the Future – A Review of the Functions and Responsibilities of Regional Development Commissions November 2010hasasectionRealisingHumanCapital(Section8.6)

9-Priority6:LeadershipandDecisionmaking.Regional Development Council : Regional Development Policy Framework : An Action Agenda for Regional DevelopmentJanuary2011.

Existingorganisationsinandservicingtheregionsexhibitorexpressaneedforqualityleadership.Thiswillnotoccuroptimallywithoutassistance.Thereisacorrespondingneedforhighqualityleadershipdevelopmentprocesses.

Theprincipleofsubsidiarity10issupportedbyWesternAustralia’sGovernment,andisdiscussedinrecentreportssuchasthoseoftheEconomicAuditandtheReviewoftheRegionalDevelopmentCommissions.Forsubsidiaritytobeaneffectivepolicy,itrequirescompetence,abilityandskillinthosewhoaretomakelocalorregionaldecisions.

TheMinisterrespondedpositivelytotheTrust’sadvice.The2011-12RoyaltiesforRegionsbudgetincludedkeyinitiativestoimprovesocialinfrastructure,whichincludedkeythemeareasofinvestmentineducation,skillstraining,AboriginalinitiativesandtheRegionalCentresDevelopmentPlan(SuperTowns).

10-Subsidiarityistheprinciplethatdecisionsshouldbetakenascloseaspossibletothecitizen.InWesternAustraliathatmeansthatacentralauthorityshouldonlyperformthosetaskstowhichitcanaddvalueorwhichcannotbeperformedeffectivelyattheregionalorlocallevel.

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Advice on a water programGettingWesternAustralia’swaterpolicyintegratedintoastate-wideregionaldevelopmentstrategyremainsachallenge.TheTrusthasrecommendedthatwaterpolicyandprojectsbegivengreateremphasisinRoyaltiesforRegions.

Section4oftheActstatesthattheFundistobeusedtopromote and facilitate economic, business and social development in regional Western Australia through the operation of the Fund,andsection9oftheActisspecificastothedirectionofexpenditurerequired.Self-evidently,regionaldevelopment,broadeningtheeconomicbase,andcreatingjobscannotoccursustainablyunlessthebasicdevelopmentunderpinningsareavailableofwater,power,transportation,communications,andhousingandsocialresources.

Ofthese,waterisoftenthebiggestchallengetoregionaldevelopment.

InWesternAustralia,tworegionalstrategiesarepresentlyapparentwithrespecttowater.Thefirstisadefensiveorreactivestrategytodealwiththeeffectsofdroughtanddryingregions,orconversely,theeffectsoffloodsandextremeweatherevents,onestablishedregionalpopulationsandindustries.Thesecondisanoffensiveorproactivestrategytocaterforgrowingandornewregionalpopulations,suchasinresourcesdevelopment,intheOrd,andinPilbaraCities.Botharenecessarystrategicapproaches.

Newtechnologyandinnovationinmoreefficientandsustainableuseofgroundandsurfacewater,desalination,recyclingandwastewaterhavealsobeenveryusefulinregionaldevelopment.RDLhasbeenactivelyengagedinsuchissues,andtheRoyaltiesforRegionsFundhasmadesomesignificantinvestmentsinwaterprojects.

WiththeexperiencegainedbyRDLandRoyaltiesforRegionstodate,theTrustisoftheviewthatRDLshouldmovetoamorefocussedplannedandstrategicapproachforwaterintheregionaldevelopmentcontext.

TheTrustrecognisesthattheDepartmentofWater(DoW)andWaterCorporation(WC)aretheprimeagenciesinWesternAustraliaforwater,andthatRDLalreadyworkscloselywiththem.Nevertheless,thoseagenciesnecessarilyhaveresourcelimitationsandtheirownpriorities.ThesecanaffectthetimingandoutcomesofRDL’sandRoyaltiesforRegion’sregionaldevelopmentprogramsandpossibilities.

Fromthematerialithasreviewed,theTrusthasconcludedthatovermanyyearstheGovernmenthasunderinvestedinprocuringandconsolidatingcomprehensivedetailedwaterresourcedata.GiventhesizeofWesternAustraliaitisnotsurprisingthatwatermappingisnotcompleteformuchofWesternAustralia,butalackofadequatedatacananddoesaffectsignificantdevelopmentproposals.

Further,newpolicyandprogramsinitiatedundertheActandbyRDLmaynotalwaysbeadequatelycoveredoffinpresentplanningandinvestmentbyDoWandWC.

RoyaltiesforRegionshastoinvestoncurrentwaterinformation,butforbetteroutcomesmustelicitbetterwaterresourcedataandexplorewateropportunitieswhereitcan,onaselectandstrategicbasis,sothatRoyaltiesforRegionsFundexpenditurecanbefocussedonthoseareaswhereWesternAustraliacangetthemostproductiveregionaldevelopment.

RDLneedstodeterminetheareaswhereanadequatesustainablewatersourcedoesormightexist,tobeutilisedforsignificantregionaldevelopmentopportunities.InRDL’ssearchforsignificantregionaldevelopmentopportunities,theTrustappreciatesthatdecidingonappropriateandsustainablewaterallocationandusewillbeaffectedbyvaluesotherthanthoseofregionaldevelopment.

Thereisalsothequestionofwhatdevelopmentstrategiestoadopttohelpfacilitatebetteroutcomesforalready-developedwater-stressedregionalareasinWesternAustralia.

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TheTrustrecommendedthattheMinisterconsidergivingRDLadirectiontodevelopanappropriatewaterstrategyforRoyaltiesforRegions,withtwoprimarygoals.ThefirstistosupplementexistingorplannedwaterinvestmentbyDoW,WCandotheragencies,ortheprivatesector,inordertomaximiseproductiveoutcomesinRoyaltiesforRegionsprojects.Thesecondistoidentifyprioritygeographicareaswherebetterwaterdataandwaterinvestmentcouldprovidefororacceleratemajorregionaldevelopment.

TheMinisterrespondedpositively,withthe2011-12RoyaltiesforRegionsbudgetincludingexpenditureonwaterandNaturalResourceManagementinitiatives.Thefourkeythemesofthebudgetfundingallocationare:

• Regionalwateravailabilityplanningandinvestigation;

• Regionaleconomicdevelopment–wateropportunities;

• Gascoynefoodbowl,includingfloodmitigationmeasures;and

• Regionalnaturalresourcemanagement.

Advice on Royalties for Regions budget proposalsAdvice requiredS12(a)oftheActrequirestheTrusttoprovideadviceandmakerecommendationstotheMinisterforthepurposesofsections5(2)and9(1).Insummary,thosesectionsrefertotheallocationofFundmoniestothevarioussubsidiaryaccounts;and,towhereFundexpenditureshouldbedirected.

TheseprovisionsrequiretheTrusttoconsultwiththeMinisterconcerninghisRoyaltiesforRegionsbudgetproposals.TheTrustdidthat.

TheTrustwasconstitutedinJuly2010.SincethenandpriortotheformulationoftheMinister’sRoyaltiesforRegions2011-12budgetproposals,theTrusthasexpressedviews,andformallyprovidedadviceandrecommendationstotheMinister,onarangeofissues,thataffectormayaffectRoyaltiesforRegionsbudgetprocessesanddecisions.

TheTrustrecognisesthattheMinisterandRDLhaveonlyhadashortperiodinwhichtoreacttoorimplementtheTrust’sadvice,someofwhichisquiterecent.

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Suchviewsandadvicehaveincluded;

• TheneedforRDLtodevelopamoreadvancedevidenceandexperience-basedregionaldevelopment,philosophy,policyanddestinationtoassistinitsdecision-making.

• TheneedforRDLtodevelopregionaldevelopmentprioritiesagainstspecificcriteria.

• TheneedforcoordinatedandholisticregionalplanningtoinformRoyaltiesforRegionsprojectandprogramselection.

• TheneedforRoyaltiesforRegionsprogramsandprojectstobeoutcomes-based,andtoincludetimelinesanddeadlines,whereverfeasible.

• TheneedforRoyaltiesforRegionsprogramsandprojectstohavebusinesscases,andcost/benefitanalyseswheresensible.

• RoyaltiesforRegionsbudgetsshouldinclude‘themes’designedtoaddressspecificareasofneed,transformation,orpolicy.

• Theneedforgreaterattentiontobuildinghumancapacityintheregions.

TheTrustconductedahigh-levelreviewofthe2011-12RoyaltiesforRegionsbudgetproposalsandconcludedthatthosebudgetproposalsmettherequirementsoftheActandRoyaltiesforRegionspolicy.

TheTrustdidnottakeaviewwithrespecttoindividualline-items.TheTrustdidnotconductadetailedreviewofthematerialandprocesssurroundingbudgetlineitems.TheTrustbudgetviewsneedtobeplacedinthatcontext.

ImprovementsTheTrustconsidersthatimprovementstoRoyaltiesforRegionsbudgetdecision-makingandprocesscanbemade.TheTrustindicatedanumberofareasitwillreviewandareasthatitwouldliketoseeaddressedinthepreparationofthe2012-13budget.Theseinclude:

Planning:TheTrustviewsregionalstrategicplansandawhole-of-governmentWesternAustraliaregionaldevelopmentpolicyasessentialaidstosoundregionaldevelopment,andwouldrecommendtheybeconcludedforuseinthe2012-13budgetprocess.TheTrustisconcernedbytheabsenceoflocallydeveloped,holistic,co-ordinatedregionalstrategicandinvestmentplansandframeworksforeveryregion,thathavebeenadoptedbyGovernment.SuchplanswouldhavethebenefitofaffectinginformedandstrategicRDLRoyaltiesforRegionsdecision-making.TheTrusturgedtheMinisterandRDLtocontinueitseffortstorectifythisplanningdeficiency.TheTrustnotesthatthisdirectionisstronglyadvocatedbytheReviewoftheFunctionsandResponsibilitiesofRegionalDevelopmentCommissions.

Process:Withrespecttoinvitingsubmissionsfromstateagencies,whiletheTrustconsidersRDL’sbudgetapproachausefulone,thetimelineforthisprocessforthe2011-12budgetwastooshort.TheTrustsuggeststhatthebudgetprocesscouldbeinitiatedearlier.TheTrustisoftheviewthattheinteragencyprocessforconsiderationofbudgetbidsshouldbereviewedandmoretimeprovidedforreviewofthevariousproposalsagainstRoyaltiesforRegionspolicy.Thisshouldalsoassistinensuringlessvarianceinthequalityofbusinesscases.

Productivity:TheTrustnotesthattheEconomicAuditreportcommissionedbytheGovernmentputproductivityasahighpriority.TheTrustconsidersthatproductivityshouldbeformallyincludedinthecriteriaforconsiderationforRoyaltiesforRegionsbudgetproposalsfor2012-13.

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Asastillrelativelynewagency,RDLhasmadegreatstridesinunderstandingregionaldevelopmentandindevelopingandexecutingRoyaltiesforRegionsregionaldevelopmentprojects.TheTrustconsidersthatthe2011-12RoyaltiesforRegionsbudgethasbenefitedfromexperienceandprocessimprovements,andbettersystemsofgovernance.

MinisterialjudgementandRoyaltiesforRegionsbudgetdecision-makingisassistedbyextensivecommunityinput,bysoundRDLprocesses,byCabinetapprovalsforallproposalsandbyparliamentaryandpublicscrutiny.Nevertheless,theonusontheMinisterremainshigh.

Hisdecision-makingisnotassistedwhentherearedeficienciesininformation,11alackofstrategicregionalplansandtheabsenceofawhole-of-governmentregionaldevelopmentpolicy.

Experiencedoesallowforcontinuousimprovementinregionaldevelopmentpolicy.Priortothenextbudgetround,RDLneedstodevelopanimprovedrevisedregionaldevelopmentpolicytoassistinstrategicdecision-making.

TheTrustadvisedtheMinisterofthreeissuesitwishestoreviewfurther.

Firstisamatterofaccounting.TheParliamentandtheGovernmentdeterminethefinancialframeworkunderwhichRoyaltiesforRegionssits.RoyaltiesforRegionsincomeandexpenditurewillaffecttheGovernment’sfinancialstatements,andaffectdebtandsurpluslevels.TheTrustrecognisesthattheTreasurerandtheDepartmentofTreasury(DoT)areentitledtooversightRoyaltiesforRegionseffectsonstatefinances.

11-Waterresourcedataisacaseinpoint.

TheTrustisconcernedthatmechanismsforRoyaltiesforRegionsprojectbudgetingandaccountingmaybedictatedbytheGovernment’soverallfinancepolicyratherthanbythemeritsandnatureofRoyaltiesforRegionsprojects.TheTrustconsidersthatthe70/30recurrent/capitalsplitdeterminedbytheGovernmentappearstobeartificialinconstruct,andwishestodetermineitseffect.

Secondisamatteroffinancialprudence.WhileintheoryallRoyaltiesforRegionsprojectsandprogramsareonlycommittedtoandfundedintothebudgetout-years,thereisahighprobabilitythatongoingprogramssuchasthePensionerFuelCard,PatientAssistanceTravelSchemeandtheRegionalWorkersIncentivewillcontinueforyearsbeyondtheout-years.

Royaltyrevenueisvariable,butsmoothedlongtermtrendlinesareavailablefromDoT.TheTrustisoftheviewthat,asadiscipline,RDLshouldensurethatprojectslikelytocontinuebeyondthebudgetout-yearsremain,inaggregate,considerablywithinthelong-term[25percentof ]royaltytrendline.Thisprudentmeasurewillenablegovernmenttocontinuetofundsuchprojectswithinlong-termanticipatedroyaltyrevenue.

Thirdly,thereistheissueofcontractualcommitments.ItwasnotcleartotheTrustwhatquantumofthebudgetproposalswasalreadycontractuallycommitted.Contractualcommitmentsusuallymeanthatbudgetproposalsarenotcapableofrejectionoradjustment.TheTrustconsidersthatinanyfuturebudgetprocessthesplitbetweencontractuallycommittedandnon-contractuallycommittedpartsoftheprogramshouldbeidentified.

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Advice on governanceGovernance reviewTheTrustconsideredthattheoperationalexperiencegainedbyRDLofRoyaltiesforRegionsfrom2008onwardsmadeitpracticaltoreviewtheirgovernancemechanisms.TheTrustadvisedRDLofitsgovernanceconclusions,whichRDLdiscussedwiththeMinister,whoadvisedhisacceptanceofthoseconclusionsonthe27June2011.

RDL’s response to the key governance conclusions TheTrust’sgovernanceconclusionswere:

• RDLmustbeclearinexpressionandunderstandingofwhatitmeansbyitsgovernancearrangements.

• Thegovernancearrangementsmustberelevanttoandsupportiveofsection4oftheActtopromoteandfacilitateeconomic,businessandsocialdevelopmentinregionalWesternAustralia,asexpandeduponbysection9.

• RDLmustbeclearinexpressionandunderstandingofwhatitmeansbydevelopment,andenunciateitsregionaldevelopmentphilosophy,policyanddestination.

• Strategicholisticregion-basedplanningisessentialtoeffectiveregionaldevelopment.

• Allregionaldevelopmentprojectsandprogramsmustbeoutcomesbased.

RDL’sresponsetoeachisoutlinedbelow(inbluetext)

RDL must be clear in expression and understanding of what it means by its governance arrangements.

RDLhasthenecessarygovernancesystemsinplacebutwillcontinuetoimproveitsarrangementstomeetthefollowingintent:

RDLRoyaltiesforRegionsgovernancewillprovideoversightandaccountabilityofRoyaltiesforRegionspoliciesprogramsandprojects.ItwillprovidesystemstomonitorrecordandauditRoyaltiesforRegionsactivity,toidentifycomplaintsandshortcomings,takestepstoensurecompliancewithagreedpoliciesandprocesses,provideforcorrectiveaction,evaluateoutcomes,andmanagerisk.Projectswillbeassessedastowhethertheybuildcapacitywithinaregionaldevelopmentcontext,accordwithRoyaltiesforRegionspolicyandbudgets,areoutcomes-basedand,wheneverfeasible,includetimelinesanddeadlines,andproductivitymeasures.Businesscaseswillberequiredforallprojectsandcost/benefitanalyseswillberequiredwhererelevantandfeasible.Governancewillbetailoredtoensurethatcompliancecostandtimeisnotexcessiveandisrelevanttocost,risk,andtheprojectandentityconcerned.

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The governance arrangements must be relevant to and supportive of section 4 of the Act: to promote and facilitate economic, business and social development in regional Western Australia, as expanded upon by section 9.

RDLagrees.

RDL must be clear in expression and understanding of what it means by development, and enunciate its regional development philosophy, policy and destination.

RDLrecognisesthataclearerWesternAustralian-relevantregionaldevelopmentphilosophypolicyanddestinationisneeded.AtpresentpolicyprioritiesandstrategiesaredeterminedbysixGovernmentrequirements:Buildingcapacityinregionalcommunities;Retainingbenefitsinregionalcommunities;Improvingservicestoregionalcommunities;Attainingsustainability;Expandingopportunity;and,Growingprosperity.

RDLnotesOECDevidencethateffectiveregionalpoliciesshould:provideinfrastructureaspartofanintegratedregionalapproach;investinhumancapital;emphasiseinnovation,researchanddevelopment;and,focusonintegratedregionalpolicies.

Strategic holistic region-based planning is essential to effective regional development.

RDLagrees,andisworkingwithinRDLandwithinstateandfederalgovernmenttoprogressthisaim.

All regional development projects and programmes must be outcomes based.

RDLagrees,andwillimplementthisapproachasnewRoyaltiesforRegionsprojectsappear.

Changing the six governing objectives:

AtpresentRoyaltiesforRegionspolicyprioritiesandstrategiesaredeterminedbysixgoverningobjectives:

• Buildingcapacityinregionalcommunities

• Retainingbenefitsinregionalcommunities

• Improvingservicestoregionalcommunities

• Attainingsustainability

• Expandingopportunity

• Growingprosperity

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TheseRoyaltiesforRegionsobjectivesaresimplebroadandclear.TheyhavenotactedasarestraintonRoyaltiesforRegions,butneitherhavetheyindicatedwhichobjective/smightbeapriorityatthistime,orwhichdeservegreateremphasis.TheTrusthasnotfoundthatindividualRoyaltiesforRegionsprogramsorprojectsareassessedagainstwhichobjectivetheymeetandhow.RDLwillneedtoconsiderwhetherthisisnecessarywhenitintroducesoutcomes-basedprocesses.

OfgreaterimportandstatusistheAct.ThereisanobligationonRDLtoensureRoyaltiesforRegionsoutcomesconformwithsections412and913.

TheTrusthasindicatedthatinplanning,RDLwillneedtodeterminewithinthesesixobjectives,andwithinsections4and9oftheAct,whatthebalanceemphasisorpriorityshouldbeinfuture.Certainlytheseobjectivescouldbereviewedandrefreshednolaterthanthenextelection.

RDL proposals for making further progress

Asaresultofthediscussionabove,RDLformallyadvisedtheTrustofitsproposalsformakingfurtherprogress.

12-Section4–Object

TheobjectofthisActistopromoteandfacilitateeconomic,businessandsocialdevelopmentinregionalWesternAustraliathroughtheoperationoftheFund.

13-Section9–ApplicationofFund

TheMinister,withtheTreasurer’sconcurrence,mayauthorisetheexpenditureofmoneystandingtothecreditoftheFundforthefollowingpurposes-

toprovideinfrastructureandservicesinregionalWesternAustralia;

todevelopandbroadentheeconomicbaseofregionalWesternAustralia;

tomaximisejobcreationandimprovecareeropportunitiesinregionalWesternAustralia.

Redefining principles, policy objectives and outcomes

TheRoyaltiesforRegionsprogramhasasignificantleverageopportunity,oftenpartneringwithfederalandstateagencies,toworkcollaborativelywithregionalandremotecommunitiestogrowanddevelop.Thebroadvisionistocreategrowthopportunities,addressmarketfailure,buildregionalcapacity,andremovebarrierstogrowthinwaysthatreflecttheneedsandgoalsoftheregionsandregionalcommunitiesthemselves.

Keytosuccessfulsustainableandeffectiveregionaldevelopmentisregionalcapacitybuildingandregionaldecisionmakingwhichfindsexpressioninanintegratedcomprehensivestrategicplanforeachregion.Intheabsenceofsuchregionally-derivedplans,RDLhastorelyonitsowndepartmentalplanningprocesseswithrespecttoregionaldevelopment,informedbyexternalplansandreports.

Takingintoaccounttheabove,arevisedsetofoutcomesandprinciplesforRoyaltiesforRegionsinregionalWesternAustraliaisproposed;

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ProposedOutcomes

Tobeconductedwithin2011-12,integratedregionalplanningagainstprioritysettingwilldirectRoyaltiesforRegionsandotherinvestmenttolargeandsmalltransformationalsocialandeconomicdevelopmentprojectswiththefollowingoutcomes:

• Newandrevitalisedregionalinfrastructuresupportsincreasedgrowth,reducedcostsandincreasedproductivity

• Productivityandeffectivenessofregionaleconomiesareincreased.

• Communitiesgrowandprosperthroughemploymentandbusinessdevelopment.

• Housing,landandessentialservicesareaccessibleandaffordable.

• Humanservicesaredeliveredatastandardequivalenttoorbetterthanthoseinmetropolitanareas.

• Communitiesenjoygoodqualityamenityandlifestyles.

• Capacitybuilding(particularlyforleadership)isenhanced.

ProposedPrinciples

• StrategicandtransformationalprojectsinregionalWesternAustraliaareapriority.

• Localplanninganddecision-makinginregionalareasisfundamental

• StateGovernmentagenciesshouldsupportintegratedregionalplanning,prioritysettingandinvestmentdecision-makingforregionalareas

• RoyaltiesforRegionsfundsmaybedirectedtobringingforwardStateGovernmentinitiativesthatareplannedforbutwherenobudgetallocationcurrentlyexists

• RoyaltiesforRegionsfundssupplementbutdonotsupplantexistingStateGovernmentfunds.

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Issues for further consideration

Assessingbusinesscasesandmanagingrisk

TheTrustnotesthatinassessingfundingapplications,RDLneedstodefinetheirpositiononriskmanagement.Apreferredapproachisonewhichavoidsbeingriskaversewhilesensiblyandresponsiblymanagingandminimisingtheeffectofidentifiedrisk.

Submissionsshouldindicatewhetherbusinesscasesareavailabletoassistwithstrategicfundingdecisions.Itisimportanttonotehoweverthatsomeprojectsaredifficulttoarticulateincost/benefittermsbecausetheyarearesponsetoagenuinebutperceivedneed,orarevaluebased.Theeconomiceffectonregionalcommunitiesinthissituationisnearlyimpossibletoassessandotherdecision-makingtoolsneedtobeconsidered.

TheoperationalexperienceofRoyaltiesforRegionsforthepasttwoyearshasshownthatmanybusinesscasesreceivedhavebeenstatementsofintentratherthanfundingrationalesinresponsetounmetneed.

Businesscasesthatlendsupporttofundingarethosethat:

• MakeaclearcasefortheprojectwithinthecontextoftheRoyaltiesforRegionspolicyobjectivesincludingtheoutcomestheprojectistoachieve.

• IdentifythefundingrequirementsfortheprojectincludingtheextentofRoyaltiesforRegionsfunding.

• Identifytherisksinvolvedinrelationtotheprojectandwhatriskmanagementstrategieswillbeemployedie.public/privateleverage

• Identifythemeasuresthatwillbeusedtoassesstheextenttowhichtheprojectoutcomesareachieved.

Consistentwiththeprincipleoffosteringlocaldecision-makingandcommunityempowerment,RDL,throughthepassingonofknowledge,hasaroletoassistapplicantsdevelopsoundbusinesscases.

Incaseswherestrategicprojectfundsarebeingprovidedeitherthroughgovernmentagenciesordirectlytonotforprofitcommunitybasedorganisations,risksassociatedwithpotentialcostshiftingandalackofcongruencybetweencorebusiness,governmentagencyprioritiesandregionalprioritiescanoccur.Inaddition,questionsinrelationtoprojectsustainabilitycanariseiffundshavebeenallocatedtoaserviceforwhichanotherdepartmenthascorefundingresponsibility.

Developmentofacommunityownedintegratedregionalplanningframework

TheprinciplesunderlyingtheRoyaltiesforRegionsprogramprovideanopportunitytotakeaplacebased,locallevelapproachtofosterpublic/privatepartnershipsandintegratenewstakeholdersandresourcesintothedevelopmentprocess.

TheOECD14suggeststhatthislocallydrivenapproachassistsindevelopingacultureofcross-sectoralco-operationwithincentralandlocalgovernmentsandthusmorecoherentpolicyinitiatives.Theyalsosuggestthatthereisarecognitionthataplace-basedapproachrequiresmorebottom-upasopposedtotop-downinitiatives.Thisproducesnewwaysofco-ordinatingverticallyacrosslevelsofgovernmentandabetteruseoflocalknowledge.

AnemergingchallengeforRDListoworkwithitskeystakeholderstoformulateanintegratedlocal,regionalandstateregionaldevelopment-planningframework,whichwillstrategicallyinformfundingdecisionsintothefuture.

14-OECDPolicyBriefOctober2006,ReinventingRuralPolicy

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Advice on the Fund being used to retire State debtTheMinisterreferredthematteroftheeffectoftheincreaseinironoreroyaltiestotheTrust.

WesternAustralia’sGovernmenthasdeterminedthattherewillbeaphasedendtotheroyaltyconcessionon‘fines’producedfromironore,sothatitequatestotheroyaltyratefor‘lump’ironore.Ithasestimatedthatthisroyaltyadjustmentwillproduceanestimatedadditional$1.923billioninStaterevenuefrom2012-13to2014-15.

Governmentpolicyistoquarantinetheadditionalroyaltyrevenuetobereceivedforthisfour-yearperiod,forStatedebtreductionpurposes.AsamemberofStateCabinettheTrustrecognisesthattheMinisterisobligedtosupportGovernmentpolicy,buttheActpreventscertainoutcomesinthisregard.

Undersection6oftheAct,eachfinancialyeartheRoyaltiesforRegionsFundistobecredited25percentoftheforecastroyaltyincomeforthatyear.TheincomeoftheFundisderivedfromrevenue,andnopartofitconstitutesdebt.25percentoftheestimatedroyaltyincreaseof$1.9billionis$475million.

TheincomeduetotheFundiscalculatedeachfinancialyear,andlegallycannotbelessthan25percentoftheforecastroyaltyincome.Thatmeansaportionofthat25percentcannotbewithheldfromtheFundforanyotherpurpose,includingdebtreduction.

TheActisclear.TheFundisdueitsshareofroyaltiesasspecifiedbytheAct,andforthepurposesdeterminedbytheAct.TheportionoftheroyaltiesduetotheFundcannotbequarantinedfordebtreduction;itmustbepaidtotheFund.

ExpenditureundertheActmustmeettherequirementsofsections4,5(1)and9(1).AlthoughtheActdoesnotspecificallyrefertouseoftheFundfordebtreductionpurposes,neitherdoesitprohibitit.Thequestionistherefore:couldthis$475millionduetotheFundforexpenditurethatmeetstherequirementsofsections4,5(1)and9(1)belawfullyexpensedbytheFundforStatedebtretirement?

IntheopinionoftheTrust,theanswerisyes,iftheStatedebtwasincurredforpurposesthatmirrortheprovisionsofsections4,5(1)and9(1).

AnimportantfeatureofRoyaltiesforRegionsisthatithasbeenestablishedtosupplement,notsupplant,normalstateexpenditure.TheTrustisstronglyoftheviewthatanyapplicationtodebtretirementofthisRoyaltiesforRegionsFundincomethathasbeenenhancedbytheseroyaltyincreasesshouldpassthetestofbeingacontributiontoandadditionaltonormaldebtretirement,andnotrepresentacost-shifttotheFund.

ItisimportantthatdebtforavalidRoyaltiesforRegionsregionaldevelopmentprojectinthesecircumstancesisgenuinelyincurred,andthatitspaymentbytheFunddoesnothavetheperceptionofbeingmanufacturedtosatisfythedebtreductionpolicy.

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Advice to review the Country Local Government FundOn15December2008,theMinisterlaunchedtheCLGFwith$400millionoverfouryearstoassistcountrylocalgovernmentstobuildandmaintaintheircommunityinfrastructure.

TheFund’sstatedaimsareto:

• addressinfrastructurebacklogsandsupportcapacitybuilding

• improvethefinancialsustainabilityofcountrylocalgovernmentsinWesternAustraliathroughimprovedassetmanagement

• providefinancialassistancetocountrylocalgovernmentswhichchoosetoamalgamatevoluntarily

• assistgroupsofcountrylocalgovernmentstofundlargerscaleinfrastructureprojects.

TheTrustunderstandstheprovenanceoftheCLGFwasinpartaresponsetoasustainabilityandinfrastructurestudysponsoredbytheWesternAustralianLocalGovernmentAssociation,andthattheCLGForiginallyenvisagedafour-yearbudgetprogramtoaddressdeficienciesandabackloginlocalandregionalinfrastructure.

Section5(1)(a)oftheActwentbeyondthistimeframe,asitgavetheCLGFpermanencebyentrenchingtheCLGFasasubsidiaryaccountoftheFund.

PublicdebateandcommentaryonCLGFpolicyandperformancetodatehasincludedmattersofquantumdesignprocessgovernanceallocationtimelinesandexecution.

TheTrust’sownconsultationtodatehasledittobelievethatoveralltheCLGFexpenditurehasbeenwelcomedandvaluedbyregionallocalgovernmentandregionalcommunities,andthattherehasbeenaneedforanindividuallocalgovernmentcomponenttotheFund,forsmallcommunitygrants,andforsubregionalpooledgrants.

Onthe28June2011theMinisterreferredareviewoftheCLGFtotheTrusttobeconcludedbytheendofJanuary2012.

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Other MattersTheTrusthasmadeitsownobservationsandhashadanumberofmattersraisedwithitinitsconsultation.TheTrustconsidersthattwoofthosemattersbelowareimportantandneedtoberaisedinthisreport.AspectsofthesemattershavebeenincludedinformaladviceprovidedtotheMinister,andreportedabove,buttheTrustconsidersitrelevanttoreportfurther.

PlanningSinceitsformationinJuly2010theTrusthasexpressedconsiderableinterestinthecontributionbetterstrategicregionalplanningcanmaketooptimalRoyaltiesforRegionsoutcomes.TheTrustconsidersthatstrategicholisticregion-basedplanningisessentialtoeffectiveregionaldevelopment.

TheTrustacceptsthenowlong-standinggovernmentdeterminationofninecountryregionsinWesternAustraliaassensibleinnumberanddemarcation,incorporatingastheydoanaggregationofshireswithinregionalboundaries.TheTrustsupportstheallocationandreportingofRoyaltiesforRegionsinvestmentpartlyonthatnine-regionbasis.

Theninecountryregionsarenothoweverastandardorganisationalmatrix,andstateagenciesoftenorganisethemselvesintodifferentregionalconfigurations(theDepartmentofEducationforinstancehassevenregions).

Withinthenineregionsaresub-regions,whichmayconstituteoneormoreshires,industries,andcities,towns,andsettlements,includingminingsettlements.Therearealsogeographiclinkagesanddevelopmentcorridorsacrossregions.

Strategicandoperationalplansareneededateachlevel,informedbyastateplanningframework,aggregatingtoastate-wideregionaldevelopmentplanpolicyandstrategyguidinginvestment.

FromtheRoyaltiesforRegionsperspective,iftheDepartmentofPlanning(DoP)andtheWesternAustralianPlanningCommission(WAPC)weretoplanonadifferentgeographicbasisfornon-metroWesternAustraliathantheninecountryregions,andotherstateagenciesstructuretheirregionalplansandanalysisdifferentlyaswell,itcanmakestrategicdecision-makingandco-ordinatingregionaldevelopmentmoredifficult.

TheTrusthasmadethepointtotheMinisterinadviceconcerninghis2011-12budgetproposals,thatMinisterialbudgetdecision-makingonRoyaltiesforRegionsismademoredifficultindeterminationselectionandprioritisationbyanabsenceofco-ordinatedintegratedholisticandconcludedstrategicplansbyregionandsub-region.

Thematterofregionalplanningisofvitalimportancetoregionaldevelopmentdecision-making,butitisoutsideRDL’sdirectcontrol.

TherecentGovernmentRegionalDevelopmentCommissionReviewraisedthisfundamentalquestion:‘HowshouldGovernmentbeorganisedtoimproveservicesandsupportforregionaldevelopment?’Asaguidelinetoaddressingthisquestion,theRDCreviewcommitteesaidthat‘itisimportantthatregionaldevelopmentisapproachedinawaythatbestpromotescoordinationandintegration,aswellasachievingatriplebottomlineofeconomic,socialandenvironmentalsustainability.’15

Itishardtoseehowthiscanbeeffectivelyachievedwithoutthedevelopmentofrequiredregionaloutcomesandregionalfuture-basedplans.Decision-makingofahighorderismademoredifficultandlessefficientwithoutgoodplanningsystems.

15-TheJune2010ReviewCommittee’sIssuesPaperpage3.

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Thereisnoquestionthatregionaldevelopmenthassuccessfullyoccurredwithoutanoverallplan,butthatdoesnotinvalidatetheneedforplanning.Goodplanningsavestimeandmoney,integratescollaborationandcoordination,andcrystallisesdesiredsocialandeconomicoutcomes.

IntheRoyaltiesforRegionsregionaldevelopmentcontexttheTrusthassuggestedthatgoodplanningshouldbecontinuousnotstatic,client-basednotsupplier-based,regionally-basednotcentrallyimposed,future-basednotpast-embedded.

TheTrust’sregionalconsultationhasindicatedthattherearestakeholderswhoconsiderthat:

• Regionalplanningtodatehasgenerallynotbeenintegratedcoordinatedorholistic

• Thereareplansofdifferenttypesbutnoregionalplansyet,apartfromthedraftPilbaraPlanningandInfrastructureFramework

• Planningisby‘silo’-business,community,sector,localgovernment,agency,departmentandauthoritybutisnotwellcoordinated

• Localgovernmentplanningqualityispatchy,andstrategicplanningisessential

• Planningisneedandpastbasedandnotprospectsandfuturebased

• ABScensusandotherdataisnotalwayssoundenough

TheTrusthasnotsightedthevarietyofplansavailablefromthevarietyoforganisationsoperatingintheregions.Nodoubtthereareplansthatarecomprehensiveveryuseableandofahighstandard;butonlysome(likeportauthoritiesandlocalgovernment)wouldbepublicsectorand/orpubliclyavailable.

Strategicandoperationalplanningshouldbecentraltoeverysignificantorganisation’sfunctioning,butrealistically,organisationslikelocalgovernmentoftenrequireexpertassistanceinplanningmatters,sorequiringoutsideinputsandaclient-supplierrelationship.

Startingwithtworegionaldevelopmentprinciples,thatplanningshouldberegionally-drivenandplanningshouldbefuture-based-whatcouldthismean?

Experiencemakesforcaution,andpast-basedplanningexhibitsthatcautionintryingtoberealisticandprudent.Ontheotherhand,underestimatingdevelopmentprospectsdemandorneedcanresultinunderinvestmentinsocialandeconomicinfrastructure,lessthanoptimaloutcomes,andmorecostly‘catch-up’beingrequiredlateron.

Future-basedplanningiseasiestwhenitreflectsGovernmentpolicy.Forexample,thereisadeterminationtocreatelarge,settledsustainablepopulationsinthePilbaraCitiespolicy,andtomakethePilbaraamorediversifiedeconomybyaddingservices,tourism,agricultureandsoontotheminingandexportsectors.

TheTrustacceptsthatsoundpolicydevelopmentmeansthatplanningguidelinesandprinciplesneedtobeagreedanddeterminedbyGovernment,andbudgetaryconsequencesrequireGovernmentapprovalorsupportforanysub-regionalorregionalplan.

TheCabinethasestablishedanagreedapproachtoregionalplanningthroughtheappointmentofregionalstatutoryplanningcommitteesundertheWAPC.

TheTrustnotesthattheWAPCisreportinggoodprogressunderitsStatePlanningStrategyandregionalplanningprocessestoaddressdeficiencieshighlightedhere.

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Targeted investmentWork

TheemphasisoftheActisonregionaldevelopment.TheActrecognisesthateconomicandbusinessdevelopmentisinsufficientunlessaccompaniedbysocialdevelopment.WhilethereareRoyaltiesforRegionsprogramsthataredirectedatindividuals,andarethereforewelfareinnature,suchasthePensionerFuelCard,PatientAssistanceTravelSchemeandtheRegionalWorkersIncentive,extensiveRoyaltiesforRegionssocialinvestmentinhealth,education,housingandurbanamenitieshasbeenmade.16

WhilemostRoyaltiesforRegionsexpenditureisnotdirectedtoaparticulardemographic,17thereisacasefortargetedinvestmentaimedatspecificareasofdisadvantageoropportunityinWesternAustralia’sregionalindigenouscommunity.Inparticular,furtherinvestmenttargetedatAboriginalworkforceparticipationiswarranted.

TheremitoftheActiswide.Section4oftheActstatesthattheRoyaltiesforRegionsFundistobeusedtopromoteandfacilitateeconomic,businessandsocialdevelopmentinregionalWesternAustralia.However,section9(1)(c)specificallytargetsjobs,andrequiresRoyaltiesforRegionstomaximisejobcreationandimprovecareeropportunitiesinregionalWesternAustralia.18

16-ThedistinctionbetweensocialandwelfareneedsisbroadlythatthereareRoyaltiesforRegionsprogramsandprojectsthatcontributetosocialdevelopmentintheregions,andthereareRoyaltiesforRegionsprogramsandprojectsthatprovideaidtoindividualsorgroupsinawelfarecontext.

17-Therearenotableexceptions,suchasforolderWesternAustralianswiththeCountryAgePensionFuelCardScheme.

18-Section9(1)oftheActisspecificastothedirectionofexpenditurerequired:

(a) to provide infrastructure and services in regional Western Australia;

(b) to develop and broaden the economic base of regional Western Australia;

(c) to maximise job creation and improve career opportunities in regional Western Australia.

Todate,RoyaltiesforRegionseffortsintheOrd19andintheculturalartsspaceseemtobeaneconomicandemploymentsuccess.

TherearemanyindigenousWesternAustralianslivingintheregionsthataredoingwell,holddowngoodjobs,andhavestablefamilies,buttherearemanywhoarenotdoingwell,whoareonwelfare,andwhosefamilyandsociallifeissub-optimal.

TherehasbeennoshortageofjobsinmuchofregionalWesternAustraliain2010-11,yetthereisunemploymentandunder-employment,particularlyinAboriginalcommunities.Inpartthatisbecausemanyliveinremoteareaswheretherearefewjobs,butinmanycountrytownstherearepeopleonwelfarewhileforeignbackpackersaregainfullyemployedinretail,tourist,agriculturalandotherpursuits.Theminingsectorisflyinginworkers,evenforunskilledandsemi-skilledjobs.

Jobavailabilityisnotenough.Experiencehasshownthatitisnoteasytoendanentrenchedwelfarecultureinsomesectors,ortoovercomeissuesofgeography,culture,communityandrelativedisadvantage.

Thereisconcernateconomicandemploymentissuesinregionalindigenoussociety,butincontrasttothosetargetingsocialoutcomes,therearenotthatmanyagenciesorganisationsandindividualsaddressingeconomicandemploymentissues.

TheexperienceofArgyleMinesandtheOrdExpansionprojectisthattomakesolidgainsinAboriginalemployment,anactiveprogramofrecruitmentandsupport,involvingaconsiderableoverhead,isrequiredtoaddresssocialandeconomicissues.

19-TheOrdFinalAgreementprovidesfortheAboriginalDevelopmentPackagewhichenablestheMiriuwung-Gajerrongpeopletoparticipateintheprojectasemployeesandinbusinesses.

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ManyindigenousWesternAustraliansintheregionsfaceparticularsocialandeconomicchallenges.Thesearewelldocumentedandarethefocusofmultiplestate,federalandprivatesectorprograms.RDLsitsontheWesternAustralianAboriginalAffairsCoordinatingCommittee,whichisleadingthedevelopmentofarationalisedandfocussedAboriginalpolicyframework.

TheTrusttakestheviewthatwhileRDLcanbeavaluablepartnerinthatcommittee’swork,itshouldusetheopportunitiesprovidedbytheActanditsdepartmentalresponsibilitiestotargetspecificaction.

MostfederalandstateexpenditureonAboriginalpeoplehasbeeninhealth,education,housing,publicorderandsafety,welfareandsoon.Expenditureoneconomicparticipationhasbeencomparativelylow.JobcreationisacorerequirementoftheAct.Thatshouldmeanthecreationofpermanentandsustainablework.TheTrustiswellawareofhowdifficultataskthathasprovedtobe,buthasbeenencouragedbythecommitmentandresultsofAboriginalworkparticipationintheOrdproject.

TheregionalAboriginalpopulationhashighnumbersofunder35’s,with40%oftheAboriginalpopulationundertheageof15.TheTrustisoftheviewthatatargetedandsustainedlong-termefforttoassistthislargecohortofyoungerAboriginalpeopletomovefromschooltoworkandfromwelfareintoeconomicparticipation,offersthegreatestdevelopmentpotential.

Land

LandsisadivisionofRDL,andthatdivisionhasaparttoplayinregionaldevelopment.State-widethereareissuesofsub-optimallandmanagement,misseddevelopmentopportunities,skillsdeficiencies,andsocialdisadvantage.Theseissuesarecross-cultural,buttheyarepronouncedintheAboriginalcommunitiesofthenorthandeast.ThereareopportunitiesnotonlytodevelopprogramsaimedatallWesternAustraliansinpastoral/rangeland/crownlandcountryareas,butalsoonesthatarespecificallyindigenousbecauseitisanareaofhighneed.

Further,homeandbusinessownershipareimportantcomponentsofregionaldevelopment.Workneedstobedonetoensurethatlargercountrytownshavethesamerangeoftenureavailabletothemwhetherthosetownshaveapredominantlyindigenouspopulationornot.

Somelandissuesneedspecialattention.InHedlandandKununurra(totaketwoexamples),inthemidstofverysignificantRoyaltiesforRegionsandotherexpenditurethatistransformingthosetowns,areAboriginalLandsTrust(ALT)20ownedsettlements.IntheorythesetwoALTcommunitiesarejustsuburbsofthesecountrytownsunderdifferenttenure,butinpracticethesearedegradedareaswithoutaccesstomunicipalservices,andinabadstatewithrespecttohousing,roads,footpaths,lighting,rubbish-collection,postalservicesandamenitiesmaintenance.Thereisexcessivelitter,andpoorcommunitystandardsreflectthepoorurbanenvironment.

Suchconditionsareapparentlylong-standing,andtheircontinuationisunacceptable.Politicalwillisneededtoaddressthepolicy,fundingandregulatoryissuesinvolved.Adeadlineshouldbesetforchangetobeeffected.Thosesuburbsshouldbenormalisedandbeprovidedwiththesamemunicipalservicesandfundingasanyothersuburb.

20-TheAboriginalLandsTrustwasestablishedbytheAboriginalAffairsPlanningAuthorityAct1972,whichistheresponsibilityofthe(WesternAustralian)DepartmentofIndigenousAffairs.

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Trust Internal Governance

Trust Operating BudgetPursuanttosection9(2)(c)andsection27oftheAct,RDLprovidestheTrustwithanoperatingbudgettocovertheexpenditureincurredintheadministrationoftheTrust.ThesefundsaremanagedbyRDLandarereportedonintheFinancialStatementssectionofRDL’s2010-11AnnualReport.

TheoperatingbudgetfortheTrustforthe2010-11periodwas$380,000.00.Asummaryofsomeoftheexpenditureisprovidedbelow.

Trust Members’ RemunerationAspersection20oftheActandthePublicSectorCommissioner’sdeterminationTrustmembersareentitledtoremunerationandtravelallowances,exceptingthememberoftheTrustwhoistheChiefExecutiveOfficerofRDL.TheremunerationforTrustmembersisasfollows:

Chair $111,377perannum

DeputyChair $40,160perannum

Members $660perdayformeetingsof4hoursormore

$430perdayformeetingslessthan4hours

ThetotalremunerationpaidtoTrustMembersforthe2010/11periodwas$158,674(exclusiveofsuperannuation).

Travel ExpenditureTheTrustheldonemeetinginGeraldton,countrymembersoftheTrustincurredtravelcoststoattendtoTrustbusiness,andtheChairoftheTrusttravelledextensivelytotheregionsofWesternAustralia.

Thetotaltravelexpenditurefor2010-11periodwas$14,108.

Trust Governance FrameworkTheTrust’sinternalGovernanceFrameworkwasdevelopedusingpublicsectorbestpracticeandcomprisesaCharter,CodeofConductandConflictofInterestPolicy.TheCodeofConductandConflictofInterestPolicywerereviewedbythethenOfficeofthePublicSectorStandardsCommissionerandtheirfeedbackwasincorporatedintothepolicies.

Thegovernancepolicieswereendorsedatthe16July2010meetingsubjecttoareviewforsuitabilityinoneyear’stime,whichiscurrentlyunderway.

CharterTheCharterwasdevelopedusingrecommendationsonbestpracticeforboardsandcommitteesfromthePublicSectorCommission’sGood Governance for Western Australian Public Sector Boards and Committeesguide.TheCharteroutlinestherolesandrelationships,keyactivities,Trustoperationandadministration.

Code of ConductTheCodeofConductwasdevelopedusingthethenOfficeofthePublicSectorStandardsCommissioner(OPSSC)Conduct Guide for Boards and Committees.InitsreviewoftheCodeofConductOPSSCfeedbackwasthattheCodewasconsistentwiththePublic Sector Code of Ethics,relevantlegislationandthesixkeyelementsintheConduct Guide for Boards and Committees.

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Conflict of Interest PolicyTheConflictofInterestPolicywasdevelopedtoassistTrustMemberstoidentify,declareandmanageconflictsofinterest.Thepolicygoesfurtherthantherequirementsundersection24oftheActtodisclose“directorindirectpecuniaryinterests”.TrustMembersagreedthatamoreexpansivedeclarationisappropriateandthattheActistheminimumrequired.

TheOPSSCnotedinitsreviewoftheConflictofInterestPolicythatthecodereflectedtheuniquebusinessoftheTrustandthestandardsexpectedofitsMembers.

TheConflictofInterestPolicycontainsthefollowingforms:

• RegistrationofPrivateInterests

• AdviceofPrivateAssociations

• DisclosingConflictsofInterest

• NotificationofAlterationtoStatementofInterests

• ResolutionandManagementofInterests

TrustMemberscompletedalloftheappropriateformsatthebeginningoftheirtermsandfurtherdisclosuresaremadeastheyoccur.TheagendaforformalTrustmeetingsincludesasectionatthebeginningfordisclosuresofinterestrelevanttoagendaitems.

Trust Administrative FunctionsPursuanttosection27oftheActRDLprovidestheTrustwiththeservicesandfacilitiesnecessaryfortheTrusttoperformitsfunction.Thisincludestheprovisionofafull-timeExecutiveOfficerwhoprovidessupporttotheTrust.TheExecutiveOfficerisresponsibleforadministrativeandproceduralarrangementsfortheTrust.

PartoftheservicesandfacilitiesprovidedtotheTrustbyRDLincludesthefollowingandisreportedoninRDL’s2010-11AnnualReport:

• RecordKeepingPlan

• DisabilityAccessandInclusionPlanOutcomes

• SubstantiveEquality

• Occupationalsafety,healthandinjurymanagement

Western Australian Regional Development TrustPOBox1143WestPerthWA6872

Tel: (08)65524498Fax:(08)65524417Web:www.rdl.wa.gov.au

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