COMPANY DIRECTORS COURSE ASSIGNMENT

Company Directors Course
Assignment Question 14
04667-1_14
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Vitium Incorporated
Assignment question
The question is in three parts
PART 1 (1800 words)
As a management committee member of Vitium Incorporated, you are asked
to review each of the following six agenda items, 4.1, 6.2A, 6.2B, 6.3, 7.1,
7.2, for the committee meeting to be held on Tuesday 15 August 2017. Then:
• For each item, explain the issues you believe are significant, providing
your analysis and rationale.
• State the questions you would ask at the meeting in relation to each item.
• Propose recommendations to address the issues for the management
committee’s consideration.
• Describe the anticipated outcomes assuming your recommendations
are adopted.
PART 2 (750 words)
As the proposed chair of the risk subcommittee, you are asked to prepare a
briefing note to be tabled and discussed by the management committee.
Your briefing note should include the following:
• key points to be included in the terms of reference for such a
subcommittee;
• documentation that would be required to institute risk management at
Vitium;
• decisions the management committee is likely to need to make setting
up a risk management system;
• a timetable for the implementation of the risk management process; and
• a list of the top six risks facing Vitium.
PART 3 (450 words)
1. Identify five (5) additional governance issues that should raise
concerns for this management committee.
2. Outline why you identified those issues and what you recommend.
3. For each of the additional governance issues, state how you would
personally seek to influence the management committee members to
accept your recommendations.
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Introduction
You have always admired Sandra McAlexander and her husband Bob for the
way they care for their son Rod. Sandra and Bob have been your neighbour
for the past dozen years. Rod was diagnosed with open Spina Bifida
(Myelomeningocele) at birth resulting in paralysis and neurological
problems. Rod is now 33 and the McAlexander’s have modified their home
to allow them to care for Rod and ensure he has the best life possible. You
are aware that they are very grateful for all the assistance and respite
provided to them by Vitium Incorporated (Vitium). Indeed, Sandra is on the
management committee of Vitium.1
Nevertheless, you were a little surprised when Sandra approached you three
months ago to join the management committee of Vitium. Sandra explained
that Vitium was undergoing significant change to prepare it for the
introduction of the National Disability Insurance Scheme (NDIS) in June
2018. She confided that this change program was not going smoothly. She
was aware that you had recently completed the Australian Institute of
Company Directors’ Company Directors Course and believed that the skills
and knowledge you had developed from the course could be of great
assistance to Vitium.
You met with the founders of Vitium, Dave and Emily Coram, and were
most impressed by their vision and zeal for the organisation. You also met
with Derek Sissman, the organisation’s Chief Executive Officer (CEO) and
reviewed the financials. You asked to attend a meeting of the management
committee as a guest and were impressed by the dedication of all the people
involved in seeking to improve the life outcomes for people with disabilities
and their families. As a result, you agreed to join the management
committee, filling a casual vacancy, and attended your first meeting in July
2017. You are now preparing for your second meeting in August.
1 Vitium Inc is an incorporated association under the Queensland Associations Incorporation
Act 1981. The Act specifies that the control of an incorporated association is under a
management committee. In many ways, the management committee is similar to the board of
directors of a Corporations Act 2001 (Cth) company.
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The organisation
Dave and Emily Coram, parents of a then teenage child who had a moderate
physical and intellectual disability from birth, founded Vitium Inc in 1985.
The organisation grew over a 32-year period as new State and
Commonwealth government programs became available. It broadened its
services from focusing on people with a disability in the 13 to 24 year age
range to a focus on those aged from 13 to 65 years.
The organisation undertook two mergers with similar organisations in 1993
and 2007.
Vitium provides a range of programs to people with disabilities and their
families on the north side of Brisbane. Specifically, it provides:
• assistance with daily life in a group or shared living arrangement;
• assistance to access and maintain employment;
• assistance with daily personal activities;
• assistance with travel and transport arrangements;
• day respite services; and
• residential respite services.
Currently, these services are funded through a range of programs
administered by the Queensland and Commonwealth Governments.
However, as of 1 July 2018, Vitium’s geographic area of the northern
suburbs of Brisbane will come under the National Disability Insurance
Scheme (NDIS).
As at August 2017 Vitium has:
• 516 clients;
• 143 equivalent full-time staff; and
• 418 volunteers.
The organisation owns six properties: two day respite centres, three
residential respite centres, and one long-term residential care facility. Respite
involves a range of services designed to give carers a break from their caring
role.
Vitium is an incorporated association registered in Queensland. Membership
is open to any family or individual who has a disability for which the
association provides assistance. There are currently 127 members of the
association. Vitium is registered as a charity with the Australian Charities
and Not-for-profits Commission (ACNC) and has deductible gift recipient
(DGR) status with the Australian Taxation Office (ATO).
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In 2015, the management committee developed a strategic plan for the first
time. The plan, Vitium’s Vision — 2015–2020, contains five ‘strategic
drivers’ as follows.
Vitium’s Vision — 2015–2020
Strategic drivers
NDIS ready by July 20182
The NDIS presents great opportunities and great risks. We must be ready for
the NDIS on 1 July 2018 — ‘N-Day’. In the three years from 1 July 2015,
we shall undergo a transformational change program. We shall reinvent
ourselves as a client-focused, nimble organisation, marketing a range of
supports to people aged 18 to 65 with a physical and/or intellectual
disability.
One-stop shop
The ‘plans’ provided to NDIS participants offer a wide range of potential
supports to people with a disability. Commencing with our current clients,
we shall investigate what new supports we might offer, so that to the extent
possible, we can provide a ‘one-stop shop’ to our clients.
Drive efficiency
Given the low prices paid by the NDIS for supports in participants’ plans we
must ensure we can offer supports at a cost below the NDIS price. This will
require greater efficiencies in our systems, how we deliver services, utilise
our people and how we market our services. At the same time, we must
ensure that our service and quality levels delight our clients. This will
require an overall improvement in our service delivery.
Financial sustainability
We are proud to be a not-for-profit charity. However, we must ensure that
we are financially sustainable into the future. Preparing for the NDIS will
require a substantial investment. We are fortunate in having the reserves to
make this investment. However, in making this investment we must ensure
that we maintain our minimum financial reserves goal. This goal is that our
cash and short-term financial assets are sufficient to cover six months’
payments to suppliers and employees.
2 See Appendix for information on the National Disability Insurance Scheme (NDIS).
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A human organisation
Above all else, we shall ensure we remain a human organisation. We deal
with some of the most vulnerable people in society. We will always put
people before profit. We will treat all people in the Vitium family — our
clients, their families, our employees and our volunteers — with respect,
courtesy and compassion. We shall involve our clients in all aspects of
decision making where we impact their lives. We will observe the highest
standards of ethical behaviour.
The Vitium management committee
The Vitium management committee comprises 13 people. Committee
members are elected for three-year terms, with one third of the longest
serving committee members standing for election each year. There is no
limit on the number of terms a person can serve. There are no subcommittees
although a risk subcommittee is proposed.
The current members of the management committee are:
President: Dave Coram AM BEng FAICD, age 74
Dave was the joint founder of Vitium and has been on the management
committee since the organisation’s inception. A civil engineer by profession,
he led his own construction company, specialising in medium density
residential, light industrial and suburban office buildings. Dave sold his
company to a national civil engineering group 15 years ago. Since then he
has dedicated himself to Vitium.
Vice-president: Arthur Hart FAICD, age 76
Arthur (Art) is a long-time friend of Dave and joined him on the initial
management committee. Art retired 12 years ago from being a senior
executive with the local newspaper, coming to that position from his original
career as a reporter.
Vice-president: Claudia Pryor AO, age 71
Claudia has been on the management committee for 27 years. Claudia has
had a distinguished record of community work. In addition to her work with
Vitium, she has been a tireless worker for abused women. She is well-known
in the media for her work in this area.
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Secretary: Dan Evans, age 66
Dan has been on the management committee for 24 years and for the past 16
years he has been the secretary of the association. The parent of a client of
Vitium, Dan was a secondary school teacher of English, retiring at age 60.
Treasurer: Melissa Broman BEc FCA GAICD, age 63
Melissa has been on the management committee for 21 years and treasurer
for 18 years. A chartered accountant by profession, she retired from her
chartered accounting firm 14 years ago. She initially joined the organisation
when her son, Michael, who has a physical disability, commenced as a client
of Vitium.
Committee members
Emily Coram AM, age 71
Emily Coram is Dave Coram’s wife and has been on the management
committee since the two of them founded the organisation. Emily has been a
tireless worker and advocate for people with a disability.
Eugene Lisowski BA, age 43
Eugene (Gene) has been a member of the management committee for the
past 16 years. He was originally a client of Vitium, having a moderate
physical disability for which he requires assistance in daily living activities
and transport. He works as a manager in the Queensland Department of
Transport and Main Roads.
Eileen Good BSocWk MSocWk, age 48
Eileen is the General Manager — Queensland for a large national disability
provider that specialises in providing short and long-term housing for people
with disabilities. Eileen’s involvement with Vitium commenced 13 years ago
and predated her current full-time role.
Shirley Glantz BPharm, age 54
Shirley is a current client of Vitium. She has Amyotrophic Lateral Sclerosis
(ALS), also known as Motor Neurone Disease (MND), due to a genetic
condition. While she has increasing difficulty communicating, the disease
has not yet reached a severe stage. However, Shirley had to give up her
position as a hospital pharmacist three years ago due to the onset of the
disease. She has been on the management committee for three years.
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Sandra McAlexander, age 59
Sandra’s involvement with Vitium commenced when her son, Rod, who has
Spina Bifida, became a client. That was 19 years ago and Sandra has been on
the management committee for the past 15 years. Sandra gave up full-time
work after Rod’s birth 33 years ago. She has dedicated herself to him as a
full-time carer.
Wayne Sumrall Beng, age 49
Wayne is a technical engineer in the mobile tower division of the large
national telephone company Telofone Ltd. He has a daughter who is a
Vitium client and has been on the management committee for 11 years.
Richard Robinson BA LLB MBA FAICD, age 61
Richard joined the management committee two years ago. His daughter,
Frances, was severely injured in a road accident, which resulted in an
Acquired Brain Injury (ABI). She now experiences difficulties with
communicating, physical functioning and is prone to emotional outbursts.
She became a client of Vitium three years ago and Richard was delighted
with the care that she received. Richard is a partner in a mid-tier law firm.
CDC Participant
You joined the committee on 1 July 2017.
Chief Executive Officer: Derek Sissman BSocWk, age 62
The CEO, Derek Sissman, who is not a member of the management
committee, has been in the role for 18 years. Prior to this role he was a
senior manager with the Queensland Department of Communities, Child
Safety and Disability Services. He has a wealth of knowledge in the
disability sector and, together with Dave and Emily Coram, is acknowledged
as being the driving force behind much of the growth experienced by Vitium
in the period 2000 to 2014.
The management committee meets monthly. Meetings commence at 6:00pm
and often continue until between 10:30pm and midnight. There is neither a
meeting calendar nor a management committee charter.
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Prior to the August management
committee meeting
An invitation around risk management
Dave Coram, the President of Vitium, pulled you aside at the completion of
the July management committee meeting. Dave said that to date Vitium had
done nothing formal concerning risk management. Derek Sissman, the CEO,
had been quite dismissive of the subject, describing it as “yet more
bureaucratic nonsense” when Dave had raised it with him following a recent
fatal car accident involving a Vitium employee. Further, Derek said the
organisation was far too busy getting itself ready for the NDIS to have the
time or resources to devote to risk management. Given you recently
completed the Australian Institute of Company Directors (AICD) Company
Directors Course, Dave wondered whether the way to approach the area of
risk might be through a subcommittee, which you might chair.
Dave asked you whether you could prepare a short briefing note to be tabled
at the August meeting of the committee setting out:
• the key points to be included in a terms of reference for such a
subcommittee;
• what documentation would be required to institute risk management at
Vitium;
• what key decisions the management committee is likely to need to
make setting up a risk management system;
• a timetable for the implementation of the risk management process;
and
• a list of the top six risks facing Vitium, from your perspective.
A coffee meeting with the president
A week after the July management committee meeting, Dave Coram
contacted you and asked if you would share a coffee with him at a local cafe
close to the Vitium office.
After some pleasantries and a short discussion on the risk project, Dave said
that he had been very impressed with your input at the July committee
meeting and he would like to take the opportunity to bounce off you some
issues which were troubling him.
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He introduced the first issue by stating:
I am now 74 and have been involved with Vitium since it began. My
daughter, Jenny, who was the reason that Emily and I started Vitium,
passed away three years ago. I feel we should start some succession
planning for the management committee. One of the vice-presidents,
Art, is 76, while the other vice-president, Claudia, is 71. I realise I am
not as young as I used to be. Emily believes we should retire from the
organisation and let others have a go.
However, I am concerned that there is nobody who has been on the
committee for more than a year or so who is well positioned to take
over. Also, to be perfectly candid, Vitium is the reason I get up every
morning. I sold my business some years ago and really have no
interests outside of the organisation.
Dave then moved to the second point he wished to make.
Also, I am concerned about our CEO, Derek. I think he is running out
of energy and I wonder whether he is capable of successfully
positioning us for the introduction of the NDIS. He has not been a
strong supporter of the NDIS and appears to lack the know-how of
what it will take for the organisation to be client-centric and clientfunded as distinct from a traditional program funded disability
organisation.
Dave continued:
I had a conversation with Derek the other day. He reminded me that
he is now 62 years of age. In our conversation he said, “I am really
looking forward to retiring, but I need to work to 65 years of age to
have financial security.”
You asked Dave about Derek’s contract. He advised that Derek’s current
contract was a fixed term contract, which ended on Derek’s 65th birthday.
You then asked whether any formal CEO performance assessment had been
conducted on Derek. Dave looked sheepish and said that he had known
Derek for so many years that he did not feel able to discuss Derek’s
performance as CEO with him. You asked whether the contract has provision
for regular performance reviews. Dave replied that he did not think so.
You discussed some possible courses of action before Dave then moved to
the third issue he wished to discuss. He started by noting that as an
incorporated association under the Associations Incorporation Act 1981
(Qld), Vitium must have a president and treasurer (s 61(3c)). The secretary is
also a required position (ss 65 and 66) with s 69A outlining the functions of
the secretary.
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Dave observed that the same people have held both these roles for many
years. Originally, the treasurer undertook the bookkeeping role, preparing
the accounts of the association and preparing cheques for signature by
herself and Dave as president. In the early 2000s, the organisation appointed
an accountant. Twelve months ago, when the original appointee to the
accounting role resigned, the position was upgraded to a Chief Financial
Officer (CFO) and a very experienced person was appointed to that role.
However, friction has occurred between the treasurer, Melissa Broman, and
the new CFO. Evidently Melissa insists on a weekly meeting with the CFO
where she vets every invoice for payment and signs off on these. She also
insists on receiving the monthly management accounts prior to their
circulation to any other person, including the CEO and the President. She
requires a two to three hour meeting each month with the CFO to “go
through the accounts”. Finally, she also insists that all meetings with the
external auditor occur in her presence.
Turning to the role of secretary, Dave noted that Dan Evans had also served
in that role for many years. In reality, Dave observed all the functions
required of the secretary have been performed for many years by the CEO’s
personal assistant (PA), who acts in the name of the secretary. However, she
has stated that this role has become onerous. Derek has suggested appointing
a professionally trained company secretary on a part-time basis to take over
this role. However, Dan has reservations concerning this course of action,
although he admitted to Dave that he is getting “a bit past it”.
You both continued to discuss these issues for a little time and the meeting
broke up with your agreeing to think about the points Dave raised and get
back to him with some suggestions.
A phone call from the president
Two days ago, prior to the meeting agenda and papers being circulated, you
received a phone call from an agitated Dave Coram. Dave explained that he
had just got off the phone from calling management committee member
Wayne Sumrall. CEO Derek Sissman had alerted Dave to the fact that the
meeting papers included details on the tender for the new
telecommunications system required by the organisation as part of its
transition to the NDIS. As Wayne works for Telofone Ltd, one of the
telecommunications companies selected to receive the tender documents,
Derek believed that Wayne has a conflict of interest. He asked Dave, as
president, to call Wayne to confirm the conflict of interest and state that the
paper containing details of the proposed tender would be redacted from
Wayne’s copy of the meeting papers. Further, Dave had said to Wayne that
he expected him to absent himself from the meeting while this agenda item
was being discussed.
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Dave was very surprised when Wayne had strongly denied he had a conflict
of interest, stating that he had nothing to do with the section of Telofone Ltd
which dealt with contracts of this kind and that he expected to receive the
papers and take part in the discussion. He was adamant that he did not have a
conflict of interest.
The president asked for your advice as to how he should proceed.
Vitium Incorporated
Management committee meeting agenda
6pm, Tuesday 15 August 2017
Vitium House, 100 Webster Rd, Stafford

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Board papers
Agenda item 4.1 Report on cybersecurity
Memorandum to: The management committee
From: Derek Sissman, CEO and Cassandra Ford, Manager — IT
Date: 4 August 2017
Topic: Cybersecurity
At the July committee meeting, our newest committee member asked about
our approach to cybersecurity. In the meeting, I indicated that I would take
this question on notice and prepare a report for the August 2017 committee
meeting. I have prepared this report in conjunction with Cassandra Ford,
who is the Manager — Information Technology.
In our preparations for the NDIS, we have made and continue to make a
large number of changes to our information technology systems.
Specifically, we have:
• purchased a new server, which is housed at our head office, and a
duplicate back-up server, which is housed at McWilliam House;
• commenced the introduction of a new integrated accounting system;
• introduced a Microsoft SharePoint document management system;
• standardised on Microsoft Office 2016 as our basic productivity
platform; and
• commenced trials for our field staff to enter details of a service
delivery immediately after completing the service in real-time using
iPads connected over the 4G network. This is integrated with the new
accounting system and allows the automatic raising of an invoice and
sending the invoice to the NDIA for payment.
We recognise that cybersecurity is a threat, but do not believe that it poses a
major threat to the organisation. We acknowledge that once our new systems
are fully operational we will have on record:
• personal details on clients, including medical information, email
addresses, personal details and credit card information;
• personal details on staff, including basic information (birthdate,
nationality, gender, tax file number, superannuation account, bank
details, etc); and
• details on people who have supported philanthropic appeals including
names, addresses, emails, giving history, etc).
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In the following table we have set out some of the major types of
cybersecurity threats and our actions.
Table 1: Cybersecurity threats and responses

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We believe that our current activities to guard against cybercrime are
appropriate for the risks involved. However, there are additional processes
and protections that could be introduced. These include:
1. Cyber insurance
It is possible to insure against cybercrime. Policies are available which
cover:
• liability for security or privacy breaches including loss of
confidential information by allowing, or failing to prevent,
unauthorised access to computer systems;
• the costs associated with a privacy breach, such as client and staff
member notification, client and staff support and costs of providing
credit-monitoring services to affected clients and staff;
• the costs associated with restoring, updating or replacing business
assets stored electronically;
• business interruption and extra expense related to a security or
privacy breach;
• liability associated with libel, slander, copyright infringement,
product disparagement or reputational damage to others when the
allegations involve a business website, social media or print media;
• expenses related to cyber-extortion or cyber-terrorism; and
• coverage for expenses related to regulatory compliance for billing
errors.
At present we do not have cybersecurity cover as part of our general
insurance policy. We have made enquiries with our insurance broker,
who advises that such a policy would be likely to cost between
$30,000 per annum and $50,000 per annum depending upon the
amount insured and an assessment of our current cybersecurity
protections.
2. Cybersecurity consultancy
Should members of the management committee continue to be
concerned, we could request a cybersecurity consultant review our
system, identify any risks and implement additional cybersecurity
solutions. Cybersecurity consultants offer services including risk
assessment, penetration testing, audit, incident response and training.
We have made some initial enquiries and believe that a consultancy
with the terms of reference to provide a risk assessment of our existing
systems would cost in the vicinity of $20,000. A report would be
available within two months of commissioning the consultancy.
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3. ISO 27001
A further option to review and potentially improve our cybersecurity
would be to pursue accreditation under ISO/IEC 27001:2013 —
Information technology — Security techniques — Information security
management systems — Requirements. ISO/IEC 27001:2013 is the
information security standard published by the International
Organization for Standardization (ISO) and the International
Electrotechnical Commission (IEC). It is a specification for an
information security management system (ISMS). Organisations that
meet the standard may be certified compliant by an independent and
accredited certification body on successful completion of a formal
compliance audit.
ISO/IEC 27001 allows the organisation to select those risk areas
which have the highest risk level and ensure controls are in place to
meet them. A decision to implement ISO/IEC 27001 would require
approval by the management committee and a significant input of
resources for the organisation. It is likely that we would need to
appoint an information security manager as well as one or two support
staff. We estimate that, in addition to these staff costs, we may incur
expenses of the order of $100,000 to $200,000 to bring our systems
and policies up to the ISO/IEC 27001 standard. Finally, the cost of an
audit is between $30,000 and $50,000.
We do not recommend that Vitium pursue ISO/IEC 27001
accreditation at this point in time. Given the other expenses being
incurred in transitioning to the NDIS, we do not believe that
expenditure of around $500,000 is warranted or affordable given what
we believe is a reasonably low level of risk which is being
appropriately managed.
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Agenda item 6.2: Report by the treasurer
Memorandum to: The management committee
From: Melissa Broman
Date: 10 August 2017
Topic: Treasurer’s report for committee meeting 15 August 2017
I have two matters to share with the committee at this meeting — our draft
annual 2016/17 financial results and the forward cash flow forecast.
6.2A. Draft annual financial report3
We have finalised the draft financial statements for 2016/17. The external
audit team is scheduled to review these in the week commencing Monday
4 September. The results for the last financial year are shown, together with
the previous four years. I hope that we shall have the final audited annual
results for the committee’s approval and inclusion in the annual report for
our September meeting. I welcome committee members’ comments.
3 Please note that these simplified financial accounts do not contain all of the disclosures that
a full set of annual reports would contain, including the impact and disclosures associated
with GST. No reconciliation is required, take figures as provided.
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6.2B. Cash flow forecast
Below is our 12-month rolling cash flow forecast. Committee members will
see that our cash position appears robust until June 2018. However, as the
last of our Commonwealth and State program funding is provided in April
2018, our cash at hand position deteriorates in June and July of that year. In
July, our funding moves from program funding to the fee-for-service funding
through the NDIS. At this stage we can only make estimates of how quickly
we can invoice for the services provided and receive payment from the
NDIA. There is also the uncertainty as to the level of uptake of our services.
While the cash position appears difficult in June and July 2018, we do have
some courses of action. We currently have financial assets of $3.9 million.
These are largely held as term deposits with our bank and AAA bonds. I
anticipate that we shall need to convert some of these assets to cash to cover
our cash flow in the first half of 2018 to ensure that we have an appropriate
cash reserve buffer. I anticipate that we may need to draw down
approximately $800,000 by July 2018. We could, of course, increase our
borrowings under our loan agreement with the bank. By July 2018, our loan
account should have reduced to approximately $660,000 from the $900,000
at the end of June 2017. However, the cost of borrowing is greater than the
return we receive on our financial assets.
I welcome the committee’s advice.
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Agenda item 6.3: Report by the CEO
Memorandum to: The management committee
From: Derek Sissman
Date: 10 August 2017
Topic: CEO’s report for committee meeting 15 August 2017
A. Key activities for July
Our level of activity remained high during July. Key operational KPIs are:

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B. Progress on project NDIS launch
We are now 11 months from the NDIS Launch date. In terms of our threeyear strategy around preparing for the NDIS, progress is slower than I would
wish. Following is a top-level summary.

1 Percentage of budget spent versus the project plan for this stage in the project
2 CEO Rating

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Overall, by the end of July 2017 we had budgeted to spend $1.648 million
on Project NDIS Launch. Our actual spend is $1.919 million, an overspend
of $271,000. Our current forecast spend on the project by 1 July 2018 is
$2.645 million, which is $589,000 over budget. While we are taking all
possible steps to avoid this budget blowout, the reality is that all these
initiatives must be in place by N-Day, 1 July 2018.
C. Approach by ConstantCare Ltd
The president and I have been approached by ConstantCare Ltd, a provider
of similar disability services successfully operating largely on the Gold
Coast and with a small operation in Northern NSW. ConstantCare Ltd is
about the same size as Vitium Inc. ConstantCare Ltd is a company limited
by guarantee with a strong balance sheet.
ConstantCare’s CEO, Ann Holder, is of the view that there are substantial
synergies to be had if the two organisations merge. Specifically, she believes
that we would make savings in:
• senior management;
• IT equipment and systems;
• governance costs;
• more efficient utilisation of a combined workforce; and
• quality and operational systems.
On the Gold Coast, they are also scheduled for the NDIS rollout to be 1 July
2018. However, the Northern Rivers area of New South Wales commenced
the NDIS on 1 July 2017. Hence, ConstantCare is now operating under the
new NDIS arrangements in northern New South Wales. Ann maintains that
ConstantCare has launched well in New South Wales and is fully prepared
for the NDIS on the Gold Coast.
My own view is that with the NDIS commencing in Brisbane in 11 months,
it would be counter-productive to attempt a merger of the two organisations
at this time. While there is the possibility that we could use many of the
systems developed by ConstantCare and benefit from their experience in
New South Wales, undertaking the due diligence required for a merger at
this time would put at risk our own implementation plans.
Further, we currently operate in the northern suburbs of Brisbane, while
ConstantCare operates as far north as Helensvale on the Gold Coast. There
would be a distinct geographic gap of combined operations covering the
southern suburbs of Brisbane and the Beenleigh and Coomera areas between
Brisbane and the Gold Coast. This is a distance of approximately 60 km.
Consequently, many of the efficiencies that Ann believes possible may be
diminished by this geographic gap.
Finally, at this critical point in our development, we would need to consider
the issues of the governance structure and the senior management structure
of any merged operation.
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Agenda item 7.1: Work health and safety
Vitium Inc
Work Health and Safety Report
July 2017
1. New incidents
During July there were three new incidents:

2. Graphs
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3. Update on major incidents
3.1 Carrie Overcash
We are still waiting to hear from Workplace Health and Safety Queensland
concerning their review of the fatal accident involving our employee Carrie
Overcash in March 2017. The Queensland Police have finished their
investigation and found the driver of the other car fully responsible for the
accident. We understand that the driver of the other car has been charged
with dangerous operation of a motor vehicle causing death.
Since the accident we have reviewed our Work Health and Safety Policy and
instituted a policy concerning Motor Vehicle Travel on Business. We have
also contracted Safe Travelling Australia Ltd to conduct a one-day safe
driver-training program for all staff members who are required to drive on
behalf of the organisation.
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3.2 David Bixby
David Bixby was severely injured in a sole vehicle accident while driving
one of our client transport vehicles. Luckily, there were no clients in the
vehicle when the incident occurred in January 2017. The Queensland Police
have concluded that David swerved to avoid a young child who had
wandered on to the road. They do not believe he was speeding at the time,
have determined that he was not under the influence of alcohol or drugs and
have closed the case with no charges being brought against David.
David is still on workers’ compensation through WorkCover Queensland.
We anticipate that he shall return to work in September this year. However,
he will need to go on to different duties, as it is not expected that he will be
able to drive again until sometime in 2018.
4. Queensland WorkCover premium
We have received advice that our WorkCover Queensland premium will be
38 per cent greater for 2017/18 than the previous year. The new premium is
$133,000.
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Agenda item 7.2: New office premises
Memorandum to: The management committee
From: Derek Sissman, CEO
Date: 8 August 2017
Topic: New head office
Our current lease on our head office at 100 Webster Rd Stafford expires on
30 June 2018. We have two five-year extensions available to us. I have had
discussions with our landlord, Integrated Properties Ltd, concerning the
terms of the five-year extension. As there is an oversupply of office space in
the northern suburbs of Brisbane, Integrated Properties have responded with
conditions set out in Table 1. Integrated Properties have proposed a new
10-year lease at a reduced rent rather than a five-year extension.
Table 1: Offer from Integrated Properties for lease renewal

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The new lease cost is $185.00 m2. This is compared to our current lease cost
of $202.12 m2. This represents a saving of $17.12 m2 or in the first year a
total saving of $26,000. A particularly pleasing aspect of their offer is that
they are prepared to commence the new rent on 1 September 2017 provided
that we commit by the end of this month, which represents a saving of
$19,500 this year.
Given that not all our employees are located at head office, I believe that we
are at approximately 80 per cent capacity at 100 Webster Rd. I estimate that
on current growth projections we should hit 100 per cent capacity in around
six to seven years. Of course, this estimate is very subjective, as we do not
have a firm idea as to the organisation’s performance under the NDIS.
Given the very good deal offered to us by our current landlord, I thought it
would be worthwhile to see what other offers are in the market. I used a firm
of commercial real estate agents to assist in this regard. They came up with
two proposals, the best of which I have listed below.
Table 2: Offer from East Asia Properties for new lease

This building has not yet been built. The developer has lodged plans with
Council and the development approval (DA) has been granted. A builder has
been appointed to the project by East Asia Properties Ltd and has
commenced site works. East Asia Properties are confident that the building
will be ready for occupation by 1 July 2018.
I have conducted a net present value (NPV) analysis on both proposals and
have summarised the assumptions and the NPV in Table 3.
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Table 3: Net present value analysis

As Table 3 shows, the cheapest option over the 11-year period (this year plus
the 10 years of the lease) is to remain at 100 Webster Rd, Stafford. The net
present value of moving to 180 Samford Road, Keperra is close to an
additional $546,000 over the 11-year period. However, when viewed as the
net present value per square metre, 960 Samford Rd represents a lower cost
per square metre than our existing premises at 100 Webster Rd. Hence, the
major benefit of the potential new premises is that they are approximately 25
per cent larger than our existing premises and should allow for growth over
the 10-year period.
The Keperra site is 7 km to the west of our existing Stafford site. This site is
considerably closer to the rail line than is the Stafford site, with the closest
station being Keperra station.
I recommend to the committee that we accept the offer of East Asia
Properties Ltd on the Keperra site. My reasons for this recommendation are:
• The Keperra site allows us sufficient room to grow over the 10-year
lease period. It is likely that we might run out of space at Stafford
around 2022.
• While the Keperra site has a higher overall net present value, the net
present value per square metre is lower.
• The current Stafford building is 18 years old and shows some signs of
its age. The Keperra building will be brand-new and is of a
contemporary architectural style. It will enhance the image of Vitium.
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Appendix
The National Disability Insurance Scheme
(NDIS)
The NDIS is a fundamental change to the way in which people with a
disability are supported by society. Prior to the NDIS, the vast majority of
assistance to people with physical and/ or intellectual disability was through
a range of programs administered by State and Territory governments and
the Commonwealth government. The common feature of these programs
was that funding was provided to a wide range of community organisations,
which in turn provided specific services to the person with a disability and
their family and carers.
The NDIS completely changes this model of assisting people with a
disability. Instead of funding organisations, the individual with the disability
is funded through a plan, which is individualised for that person. The
program provides a variety of ‘supports’ for the individual that are necessary
for them to lead a normal life. The NDIS aims to help people with a
disability to achieve their goals, including greater independence, community
involvement, employment and overall improved wellbeing.
The nature of this new model and how it compares with the previous model
is shown in Figure 1. Under the NDIS, disability not-for-profit organisations
are expected to move from organisations funded by government to provide a
range of programs to a market-based framework where a disability
organisation will market its services to the disability community and be paid
through a participant’s plan once they have delivered the support approved
for the participant.
Figure 1: The NDIS — Before and after
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The way in which the NDIS works is summarised in Figure 2. For a person
to be eligible for the NDIS, they must:
• have a permanent disability that significantly affects their ability to
take part in everyday activities;
• be aged less than 65 when they first enter the NDIS;
• be an Australian citizen or permanent resident; and
• live in Australia.
It was initially estimated that approximately 460,000 people would be
eligible to receive support from the NDIS, which is being progressively
rolled out throughout Australia. Experience to date suggests that more than
this number of people expected might require NDIS services, which is
resulting in increased pressure being placed on the scheme.
Figure 2: The NDIS process
The NDIS process commences with a person being assessed for their
eligibility to enter the scheme. Once they are accepted, the National
Disability Insurance Agency (NDIA), the government body established to
administer the NDIS, works with the participant, and where necessary their
carers or a nominee, to develop a custom plan based upon that individual’s
specific needs. The participant and, where applicable carers, then source
these supports from registered service providers. They may be assisted in
doing this by Plan Management Providers, who may act as an intermediary
assisting the participant to access service providers and also assisting with
the facilitation of payments.
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For traditional disability service organisations, the NDIS represents a
significant challenge. For the vast majority of organisations, major changes
in their business model and operating systems are required. Some of these
changes include:
• developing an accounting system capable of handling large numbers
of daily transactions from a potentially large customer base;
• understanding the cost base of providing specific services, as the
support provided through the NDIA is based upon a price list which
the organisation cannot exceed and which, to date, have been set at a
low level;
• developing customer relationship management (CRM) systems to
enable the organisation to manage and analyse customer interactions;
• developing new organisational skills, particularly in accounting,
finance and marketing;
• training existing and new personnel in customer-centric approaches to
dealing with clients;
• ensuring awards and enterprise agreements are compatible with the
new service provision environment; and
• managing the cash flow implications of moving from an environment
in which the organisation was paid quarterly in advance to provide
services to one in which payment may not be received from 3 to 30
days after the provision of the service.

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