INDEX. Directors' Report Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity...

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2 INDEX Directors' Report... 1 Page Statement of Comprehensive Income... 5 Statement of Financial Position... 6 Statement of Changes in Equity... 7 Statement of Cash Flows... 8 Notes to the Financial Statements... 9 Directors Declaration Lead Auditor s Independence Declaration Audit Report... 19

3 DIRECTORS' REPORT The directors present their report together with the financial report of Earthwatch Institute for the year ended 30 September 2012 and the auditors report thereon. DIRECTORS The directors of the company at any time during or since the financial year and their attendance at the four Board meetings during the 2012 financial year are: 2012 Financial Year Name Particulars Board Meetings Attended / Held Whilst Director Anthea Page Hancocks BSc (Monash University) 4/4 (Chair) MA (University of Washington) MBA (University of Queensland) Chief Marketing Officer, Herbert Geer Lawyers Member, Australian Institute of Company Directors Deputy Chair, Trust For Nature Director, YMCA Victoria Appointed: 20 January 2005 Philip Leonard Weickhardt BSc Hons. (University of Melb) 1/1 (Former Chair) MSc (University of Melb) Commissioner, Productivity Commission Appointed: 1 August 2002 Resigned: 2 February 2012 Professor Mark Burgman Bachelor of Science (Honours) UNSW 4/4 Master of Science (Macquarie) PhD (State University of New York, Stony Brook) Adrienne Clarke Chair of Botany, School of Botany, University of Melbourne Managing Director, Australian Centre of Excellence for Risk Analysis Member, Royal Botanical Gardens Board Appointed: 28 March 2006 Dr Ronald Neil Byron BSc(Forestry) Hons (ANU) 4/4 M.A. (University of British Columbia) Ph.D. (University of British Columbia) Graduate, Australian Institute of Company Directors Adjunct Professor, ANU s Crawford School of Economics & Government Visiting Fellow, University of Melbourne Member, Independent Science Panel for Great Barrier Reef Part-time Associate Commissioner, Productivity Commission Leader of Synthesis Team, Australia China Environment & Development Partnership Appointed 4 May 2010 Heather Joy Campbell BEng Agr (Hons) (Melbourne University) 3/4 MEngSc (Melbourne University) GradDipOccHyg (Deakin University) TGMP (Harvard Business School) CEO, Landcare Australia Limited Graduate Australian Institute of Company Directors Member, Northern Melbourne Institute of TAFE Board Member, Australian Biological Resources Study Advisory Committee Appointed: 15 January 2007 Page 1

4 DIRECTORS' REPORT (continued) Richard James Gilmore Executive Director, Earthwatch Institute 2/2 Appointed: 18 December 2007 Resigned: 14 May 2012 Colin David Gomm B.Eng Hons (Monash), MBA (Monash) 4/4 Vice President Assurance HSEC and GLD Priorities BHP Billiton Appointed 17 November 2008 Andrew William Thorold Grant Bachelor of Science (Hons), Monash University 3/4 Associate Diploma in Park Management, Charles Sturt University Graduate Diploma in Management, Monash University Williamson Community Leadership Program Director, Banksia Environmental Foundation CEO, CO2 Group Appointed 29 October 2009 Charles Macek BEcon and MAdmin (Monash University) 2/4 Director of Wesfarmers Ltd Chairman, Sustainable Investment Research Institute Pty Ltd Chairman, Racing Information Services Australia Pty Ltd Vice-Chairman, IFRS Advisory Council Director, Thoroughbred Trainers Service Centre Ltd Member, Investment Committee of UniSuper Ltd Member, AICD Corporate Governance Committee Member, MMC Advisory Board Member, ASIC External Advisory Panel Appointed:1 March 2011 Chris Schulz BComm/LLB (University of Melbourne) 4/4 Partner, Allens Linklaters Appointed 21 January 2011 Victoria Sedwick BSc (UTS), MEngSc (UNSW) 0/1 Principal, ENVIRON Australia Pty Ltd Appointed: 1 September 2005 Resigned: 2 February 2012 Professor Nigel Edwin Stork BSc (Hons), PhD (University of Manchester) 0/1 Director, Board of the Association for Tropical Biology and Conservation President of Association for Tropical Biology & Conservation Deputy Head, Griffith School of Environment (Griffith University) Appointed: 7 August 2007 Resigned: 17 February 2012 Matthew Edward Amcotts Wilson BA (Honours) Geography (Kings College, London) 0/4 Standard Graduate Course, Sovereign's Company, The Royal Military Academy, Sandhurst, UK President and CEO, Earthwatch Institute (USA) Appointed: 24 November 2005 Page 2

5 DIRECTORS' REPORT (continued) Dr Neil Thomas Montgomerie Chief Executive Officer, Earthwatch Institute (Australia) 2/2 Hamilton M.A. (Australian National University) PhD (University of Sydney) MAppSc (Curtin University of Technology) BSc (Honours) Macquarie University Director, La Cercle Polaire Appointed: 13 June 2012 DIRECTORS AND KEY MANAGEMENT PERSONNEL REMUNERATION The aggregate of income paid or payable, or otherwise made available, in respect of the financial year, to all directors and key management personnel of the company, directly or indirectly, by the company or by any related party was 157,729 (2011: 138,975). Remuneration of directors is included as part of Note 10 Employee Expenses. Non-executive directors receive no remuneration. DOMICILE, LEGAL FORM AND REGISTERED ADDRESS The company is limited by guarantee and is domiciled in Australia. The address of the registered office of the company is: 126 Bank Street South Melbourne VIC 3205 PRINCIPAL ACTIVITY The company s principal activity during the course of the financial year was to support scientific field research and education, and the promotion of understanding and action needed for sustainable development. During the financial year there was no significant change in the nature of those activities. REVIEW AND RESULTS OF OPERATIONS The company s Statement of Comprehensive Income shows a net loss attributable to members of 48,378 compared with a net surplus of 90,459 in The Board has undertaken an in depth review of operations and has taken immediate action such as closing the Sydney office. This does not impact on Earthwatch s ability to deliver on current and future programs and builds a solid base for the future. The company relies on the continued support of donors and volunteers for funding. The directors acknowledge the significant level of support from the corporate sector. Page 3

7 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2012 Note Revenue from ordinary activities 2 5,075,582 4,209,256 Interest income 97,400 82,136 5,172,982 4,291,392 Field research support (467,839) (461,719) Program expenses (4,170,163) (3,041,252) Fellowship and corporate engagement expenses (14,381) (252,289) Executive and international coordination (142,472) (115,305) Other expenses from ordinary activities (426,505) (330,368) Total expenses (5,221,360) (4,200,933) Net Surplus/(Deficit) (48,378) 90,459 The Statement of Comprehensive Income is to be read in conjunction with the notes to the financial statements set out on pages 9 to 16. Page 5

8 STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2012 Note ASSETS Cash and Cash Equivalents 5 1,869,313 1,195,206 Trade and Other Receivables 6 145, ,746 Other Current Assets 7 29,916 26,496 TOTAL CURRENT ASSETS 2,044,229 2,069,448 Property, Plant and Equipment 8 108,338 97,519 TOTAL NON-CURRENT ASSETS 108,338 97,519 TOTAL ASSETS 2,152,567 2,166,967 LIABILITIES Trade and Other Payables 9 990, ,329 Provisions 10 49,054 41,560 Deferred Income , ,274 TOTAL CURRENT LIABILITIES 1,780,546 1,741,163 Provisions 10 8,379 13,784 TOTAL NON-CURRENT LIABILITIES 8,379 13,784 TOTAL LIABILITIES 1,788,925 1,754,947 NET ASSETS 363, ,020 MEMBERS FUNDS Funds in Reserve , ,020 TOTAL MEMBERS FUNDS 363, ,020 The Statement of Financial Position is to be read in conjunction with the notes to the financial statements set out on pages 9 to 16. Page 6

9 STATEMENT OF CHANGES IN EQUITY AS AT 30 SEPTEMBER 2012 Note Funds in Reserve Total Balance at 30 September , ,561 Net surplus/(deficit) for the period 18 90,459 90,459 Other comprehensive income - - Total comprehensive income for the period 90,459 90,459 Balance at 30 September , ,020 Net surplus/(deficit) for the period 18 (48,378) (48,378) Other comprehensive income - - Total comprehensive income for the period (48,378) (48,378) Balance at 30 September , ,642 The Statement of Changes in Equity is to be read in conjunction with the notes to the financial statements set out on pages 9 to 16. Page 7

10 STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2012 Note Cash flows from operating activities Cash receipts in the course of operations 5,656,134 5,120,324 Cash payments in the course of operations (5,026,921) (4,338,827) Interest received 97,400 82,136 Net cash provided by operating activities 16(b) 726, ,633 Cash flows from investing activities Payments for property, plant & equipment (52,506) (69,115) Net cash used in investing activities (52,506) (69,115) Net increase in cash held 674, ,518 Cash at beginning of financial year 1,195, ,688 Cash at end of the financial year 16(a) 1,869,313 1,195,206 The Statement of Cash Flows is to be read in conjunction with the notes to the financial statements set out on pages 9 to 16. Page 8

11 1 SIGNIFICANT ACCOUNTING POLICIES Earthwatch Institute is a company domiciled in Australia. The address of the company s registered office is 126 Bank Street, South Melbourne, VIC The company is a not-for-profit organisation and is primarily involved in scientific field research and education. The significant accounting policies which have been adopted in the preparation of this financial report are: (a) Basis of Preparation The financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act The financial statements comply with International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board (IASB). The financial statements were authorised for issue by the Board of Directors on 13 December The financial statements have been prepared on the historical cost basis except for revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. These financial statements are presented in Australian dollars, which is the Company s functional currency. The preparation of financial statements in conformity with AASBs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included, where applicable, in the relevant notes to the financial statements. Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported. The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 September 2012 and the comparative information presented in these financial statements. (b) Recognition of Income Revenues are recognised at fair value of the consideration received net of the amount of goods and services tax (GST) payable to the taxation authority. Fielded Volunteer Contributions The company derives income by undertaking and supporting scientific research expeditions and field projects relevant to conservation and sustainable environments. Page 9

12 1 SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Recognition of Income (continued) Income from these activities is recognised at the time of departure of the expedition. Interest Interest revenue is recognised as it accrues. Program Support/Grant Income Program Support/Grant income is recognised at the commencement of the relevant project or when the service is performed. In kind Income Revenue recognised on an in-kind basis (i.e. receipt of non-cash goods or services) is recognised in accordance with the above policies, and a corresponding expense for the goods or services provided is recognised in the statement of comprehensive income. (c) (d) Income Tax For taxation purposes the company is classified as an approved research institute, therefore it is exempt from paying income tax pursuant to section 23(e) of the Income Tax Assessment Act. Goods and Services Tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST) except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances the GST is recognised as part of the cost of acquisition of an asset or as part of an item of the expenses. The net amount of GST recoverable from, or payable to, the taxation authority is included as a current asset or liability in the Statement of Financial Position. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows. (e) Plant & Equipment Acquisition Items of plant and equipment are recorded at cost and depreciated as outlined below. Depreciation Depreciation is provided on property, plant and equipment. Depreciation is calculated on a reducing balance basis as considered appropriate so as to write off the net cost of each asset over its expected useful life. The depreciation rates and methods used for each class of asset, for previous years are as follows: Depreciation Rate Depreciation Method Plant and equipment 7.5% % Reducing Balance Page 10

13 1 SIGNIFICANT ACCOUNTING POLICIES (continued) (f) Employee Entitlements Annual Leave The liability for annual leave represents the present obligation resulting from employees services provided to reporting date, calculated at undiscounted amounts on remuneration wage and salary rates which are expected to be paid as at reporting date, including related on-costs, such as workers compensation insurance and superannuation. Long Service Leave The provision for long service leave represents the present value of estimated future cash outflows resulting from employees services provided to reporting date. The provision is calculated using expected increases in wage and salary rates including related on-costs and expected settlement dates based on turnover history and is discounted using the rates attached to national government bonds at reporting date which most closely match the terms of maturity of the related liabilities. The unwinding of the discount is treated as long service leave expense. Superannuation Contributions to employee superannuation funds are expensed when incurred. (g) Receivables Trade receivables and other receivables are recorded at amounts due less any provision for doubtful debts. (h) Accounts Payable Trade payables and other accounts payable are recognised when the company becomes obliged to make future payments resulting from the purchase of goods and services. (i) Critical Accounting Estimates Grant income is recognised at the commencement of the relevant project at the directors best estimate of the revenue required to complete the project. The assumption is based on the fact that the project is reliably agreed upon when it commences. Page 11

14 2 REVENUE FROM ORDINARY ACTIVITIES Fielded volunteer contributions 955, ,451 Supporter donations and subscriptions 186, ,520 Program support/*grant Income 3,411,859 2,968,575 In-kind income 516, ,739 Other income 5,144 10,971 5,075,582 4,209,256 *Includes 5,000 grant from Australian Government Grants to Voluntary Environment and Heritage Organisations (GVEHO) 3 EXPENSES BY NATURE Depreciation expenses 36,203 20,406 Loss on disposal of assets 5,484 8,208 Operating lease expense 54,812 40,290 4 AUDITORS REMUNERATION Auditors of the company KPMG Australia - Audit and review of the financial report 8,800 8,400 - Other advisory service received in- kind 137,500 73, ,300 82,380 5 CASH AND CASH EQUIVALENTS Cash at bank and on hand 1,216, ,479 Research Fund Cash at Bank Volunteer Funds in Trust Bank Term Deposits Other Term Deposit 1,006 51,434 73, ,567 24,576 41,151 70, ,000 Earthwatch Institute must maintain a separate bank account for the Research Fund. The term deposits as at 30 September 2012 were earning interest rates of between 4.75% and 5% per annum (2011: 5.47% and 6% per annum). While term deposits are invested for defined periods, all deposits can be immediately accessed. At 30 September 2012, the average time to maturity was 39 days. (2011: 82 days). 1,869,313 1,195,206 Page 12

15 6 TRADE AND OTHER RECEIVABLES EARTHWATCH INSTITUTE Other Debtors 145, ,746 7 OTHER CURRENT ASSETS Prepayments Bond 24,159 5,757 23,924 2,572 29,916 26,496 8 PROPERTY, PLANT AND EQUIPMENT Plant and Equipment - at cost 224, ,938 Accumulated depreciation (115,675) (86,419) 108,338 97,519 Carrying amount at beginning of year 97,519 56,658 Additions 52,506 69,115 Disposals (5,484) (8,208) Depreciation (36,203) (20,046) 108,338 97,519 9 TRADE AND OTHER PAYABLES Creditors 938, ,964 Other creditors and accruals 51,637 66, , , EMPLOYEE BENEFITS Current Annual leave 31,630 28,194 Long service leave 17,424 13,366 49,054 41,560 Non current Long service leave 8,379 13,784 Page 13

16 11 EMPLOYEE EXPENSES The remuneration of employees is made up of the following: Salary 1,072, ,981 Superannuation 95,161 77,878 Annual leave 3,436 (1,674) Long service leave (1,348) 14,311 1,169, , DEFERRED INCOME 51,210 38,712 Expedition deposits received in advance 690, ,562 Grants received under obligation 741, , SEGMENT INFORMATION Earthwatch Institute operated wholly within Australia to support research and education expeditions in the arts, sciences and the humanities. 14 MEMBERS GUARANTEE The company is limited by guarantee. If the company is wound up, the articles of association state that each member is required to contribute a maximum of 50 each towards meeting any outstanding obligations of the company. Each member holds one voting right. At 30 September 2012 the number of members was 52 (2011: 48). 15 COMMITMENTS FOR EXPENDITURE Non-cancellable operating lease expense commitments not provided for in the financial statements and payable: Not later than one year 51,252 13,571 Later than one year but not later than five years 150, ,000 13,571 Non-cancellable operating lease expense commitments relate to the rental of the business premises and the total expense for the year was 54,812 (2011: 40,290). Page 14

17 16 NOTES TO THE CASH FLOW STATEMENT Note (a) Reconciliation of cash For the purposes of the Statement of Cash Flows, cash includes cash on hand and in banks and short term deposits at call, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the Statement of Cash Flows is reconciled to the related items in the Balance Sheet as follows: Cash and cash equivalents 5 1,869,313 1,195,206 (b) Reconciliation of net cash provided by operating activities to operating surplus Operating surplus/(deficit) (48,378) 90,459 Add non-cash items: Depreciation 36,203 20,046 Disposal of Non Current Assets 5,484 8,208 Changes in net assets and liabilities: (Increase)/decrease in current receivables 702, ,068 (Increase)/ decrease in net other current assets and (95,399) 435,964 other liabilities Increase/(decrease) in trade and other payables 123,868 (614,749) Increase/(decrease) in provisions 2,089 12,637 Net cash used in operating activities 726, ,633 Page 15

18 17 FINANCIAL INSTRUMENTS EARTHWATCH INSTITUTE (a) Interest Rate Risk 2012 Financial assets The following details the company s exposure to interest rate risk as at 30 September 2012: Fixed interest maturing in: Effective interest Floating interest rate 1 year or 1 to 5 More than 5 Noninterest Note rate less years years bearing Total % Cash and cash equivalents % 1,217, , ,714 1,869,313 Receivables , ,000-1,217, , ,714 2,014,313 Financial liabilities Trade Payables , , , , Financial assets Cash and cash equivalents % 584, , ,151 1,195,206 Receivables , , , , ,897 2,042,952 Financial liabilities Trade Payables , , , ,329 (b) (c) Net Fair Value The net fair value as at the reporting date of each class of financial asset and financial liability is represented by the accounts recorded in the statement of financial position determined in accordance with the accounting policies disclosed in Note 1 of the financial statements. Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract. The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets. 18 FUNDS IN RESERVE Retained surplus at the beginning of the year 412, ,561 Net Surplus/(Deficit) (48,378) 90,459 Retained Surplus at the end of the year 363, ,020 Page 16

Index. Page. Directors' Report Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity...

Index. Page. Directors' Report Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity... Index Directors' Report... 1 Page Statement of Comprehensive Income... 5 Statement of Financial Position... 6 Statement of Changes in Equity... 7 Statement of Cash Flows... 8 Notes to the Financial Statements...