AUDITOR GENERAL'S REPORT FINDS ROTTNEST UNDER THREAT

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26 November 2003

AUDITOR GENERAL'S REPORT FINDS ROTTNEST UNDER THREAT

Faced with a sea of troubles, the future of Rottnest Island is at the crossroads.

A comprehensive analysis by WA Auditor General Des Pearson of the numerous problems besetting Rottnest and what it is going to take to fix those problems and put the island on a financially sound and sustainable path, was tabled in State Parliament today.

And what it will take initially is estimated to be at least $50 million over the next five years just to refurbish, repair or replace the island's dilapidated accommodation and power, water and sewerage infrastructure.

Without urgent attention, states Mr Pearson, the Rottnest Island Authority (RIA) "will be left with little choice but to reconsider public access and use of the island".

This sombre message stems from his audit's finding that the RIA's financial performance is not sustainable and this in turn is adversely affecting economic, social and environmental performance.

The RIA's financial position has deteriorated from a small surplus five years ago to a deficit of $1.4 million (or $3.1 million if government grants are excluded), and in the absence of an operating surplus, the RIA has:

Used some government capital works grants for operating expenses rather than investing in core assets.
Allowed a backlog of urgent capital works to both accommodation and infrastructure to build up.
Relied on payments in advance for accommodation to support operating cash flow, leading to a significant unfunded liability.

The future of the island is in jeopardy because of this deteriorating financial position coupled to a legacy of under-investment - with the poor condition of the facilities and core infrastructure inflicting significant additional cost burdens and posing potential risks to visitors and business continuity.

The overall picture painted by Mr Pearson is a disturbing one - the turnaround needed to secure a sustainable future for Rottnest Island being "significant and challenging" and requiring the collective engagement of Parliament, the RIA and the community.

Of concern is that whilst the RIA's Management Plan for 2003-08 does provide a vision and priorities for achieving a more sustainable approach to managing the island, the RIA does not have a costed business plan to drive its implementation.

However, in the absence of such a business plan, the Auditor General, in conjunction with the RIA, has sketched a two-phase framework to assist the RIA to progress towards sustainability and also identified some funding options for the RIA to consider when developing a business plan.

Commenting on the audit today, Mr Pearson said: "Put simply, the problem facing the Rottnest Island Authority is that it has insufficient capital to adequately fulfil its obligations.

"Unless there is an injection of substantial funds that position will continue to decline to a point where there is a real risk for breakdowns in core infrastructure that could well lead to the shutdown of some facilities and a subsequent reconsideration of public access and use of the island.

"Of even more concern is that the lack of adequate capital expenditure exposes the RIA to significant risks through any failure to meet basic health, safety and welfare requirements for island visitors and employees - in terms of risk management such a position is unsound and potentially exposes the Authority, and hence Government, to substantial liability."

Ends/.

Media Contact: Peter Villiers, Manager Reporting and Communications
Tel: (08) 9222 7558. Mobile: 0417 936 171 Fax: (08) 9322 5664
4th Floor Dumas House 2 Havelock Street West Perth