Late Reports Agenda of Council Briefing

Council Briefing Agenda 22 May 2018

7 CORPORATE SERVICES

7.4 LATE REPORT: Financial Statements as at 30 April 2018

TRIM Ref: D18/69358

Author: Sheryl Teoh, Accounting Officer

Authoriser: Kerryn Batten, Director Corporate Services

Attachments: 1. Financial Statements as at 30 April 2018 ⇩

Recommendation:

That Council RECEIVES the Financial Statements for the month ended 30 April 2018 as shown in Attachment 1.

Purpose of Report:

To present the Financial Statements for the period ended 30 April 2018.

Background:

Regulation 34 (1) of the Local Government (Financial Management) Regulations 1996 requires a local government to prepare each month a statement of financial activity reporting on the sources and applications of funds, as set out in the budget.

A statement of financial activity report is to be in a form that sets out:

· the annual budget estimates;

· budget estimates for the end of the month to which the statement relates;

· actual amounts of expenditure, revenue and income for the end of the month to which the statement relates;

· material variances between the year-to-date income and expenditure; and

· other supporting notes and other information that the local government considers will assist in the interpretation of the report.

In addition to the above, under Regulation 34 (5) of the Local Government (Financial Management) Regulations 1996, each financial year a local government is to adopt a percentage of value, calculated in accordance with AAS 5, to be used in statements of financial activity for reporting material variances.

Details:

The following documents, included as Attachment 1 represent the Statement of Financial Activity for the period ending 30 April 2018:

Note	Description	Page

1.	Statement of Financial Activity by Program Report and Graph	1-3
2.	Statement of Comprehensive Income by Nature and Type Report	4
3.	Net Current Funding Position	5
4.	Summary of Income and Expenditure by Service Areas	6-62
5.	Capital Expenditure and Funding and Capital Works Schedule	63-77
6.	Cash Backed Reserves	78
7.	Rating Information and Graph	79-80
8.	Debtor Report	81
9.	Beatty Park Leisure Centre Financial Position	82

The following table provides a summary view of the year to date actual, compared to the Revised and Year to date Budget.

Summary of Financial Activity by Program as at 30 April 2018

		Revised Budget	YTD Budget	YTD Actual	Variance	Variance
		2017/18	2017/18	2017/18	2017/18	2017/18
		$	$	$	$	%
REVENUE		22,352,642	18,745,316	18,318,707	(426,609)	-2%

EXPENDITURE		(58,084,120)	(46,064,814)	(46,233,565)	(168,751)	0%

NET OPERATING EXCLUDING RATES		(35,731,478)	(27,319,498)	(27,914,859)	(595,361)	2%

OPERATING ACTIVITIES EXCLUDED FROM BUDGET
NON-CASH EXPENDITURE AND REVENUE
	Add Deferred Rates Adjustment	0	0	9,237	9,237	0%
	Add Back Depreciation	10,246,060	8,529,092	8,553,588	24,496	0%
	(Profit)/Loss on Asset Disposals	(415,015)	(415,015)	(139,766)	275,249	-66%
	"Percent for Art" and "Cash in Lieu" Funds Adjustment	0	0	0	0	0%

AMOUNT ATTRIBUTABLE TO OPERATING ACTIVITIES		9,831,045	8,114,077	8,423,059	308,982	4%

INVESTING ACTIVITIES
	Non-Operating Grants, Subsidies and Contributions	2,733,778	1,686,000	1,046,186	(639,814)	-38%
	Capital Expenditure	(12,736,797)	(7,090,371)	(5,105,200)	1,985,171	-28%
	Proceeds from Joint Venture Operations	333,333	333,333	166,667	(166,666)	-50%
	Proceeds from Disposal of assets	202,321	202,321	326,173	123,852	61%
		(9,467,365)	(4,868,717)	(3,566,175)	1,302,542	-27%

FINANCING ACTIVITIES
	Repayments Loan Capital	(881,398)	(730,198)	(729,740)	458	0%
	Transfers from Reserves	1,194,291	355,690	222,989	(132,701)	-37%
	Transfers to Reserves	(2,401,835)	(1,403,185)	(471,378)	931,807	-66%
		(2,088,942)	(1,777,693)	(978,129)	799,564	-45%

	Plus: Surplus/(Deficiency) Brought Fwd 1 July 2017	4,475,026	4,475,026	4,475,026	1	0%
	Surplus/(Deficiency) Before General Rates	(32,981,714)	(21,376,805)	(19,561,077)	1,815,728	-8%
	Total amount raised from General Rates	32,976,983	32,976,983	33,010,722	33,739	0%

NET CURRENT ASSETS at JUNE 30 C/FWD - SURPLUS/(DEFICIT)		(4,731)	11,600,178	13,449,645	1,849,467	16%

Comments on Summary of Financial Activity by Program:

Operating Revenue

There is a difference in classification of revenue reported by Program and by Nature and Type. Operating revenue by Program reporting includes ‘Profit on Sale of Assets’, but this is excluded in the Nature and Type report, however ‘Rates’ revenue is added.

Revenue by Program is showing a negative variance of 2% ($427k). This is due to lower revenue in Other Recreation and Culture of $314k ($214k Beatty Park Leisure Centre, $113k Park Services), Other Property and Services $287k (asset disposals), and Community Amenities of $96k.

Operating Revenue as presented on the ‘Nature and Type’ report (Page 4 of Attachment 1) is showing 0.2% variance.

Operating Expenditure

Expenditure by Program is showing negative variance of 0.4% ($169k). This is due to:

· Other Property and Services – overspend by $352k;

· Recreation and Culture – overspend by $155k;

· Governance – overspend by $83k;

· Community Amenities – underspend by $171k;

· Transport – underspend by $167k, and

· Education and Welfare – underspend by $50k.

Similarly, the operating expenditure listed under the Nature and Type report reflects a corresponding unfavourable variance of 0.3%, with the largest variances in:

· Employee Costs ($845k unfavourable), in which $653k on salaries and $179k on labour, and

· Materials and Contracts ($418k favourable), where the variance is due to timing on waste collection and tipping costs $349k and consultants $163k.

Transfer from Reserves

Transfer from Reserves is aligned with the timing of Capital Works projects that are reserve funded. Most of these projects have not yet started, with a large number likely to do so before the end of the financial year.

Capital Expenditure

The variance is attributed to timing on commencement of projects. Administration has confirmed to Finance that a carry forward of capital projects into 2018-19 will be $2,839,747 (as at 18 May 2018). For further detail, refer to Note 5 on Attachment 1.

Transfer to Reserves

Monthly transfer to reserves commenced in July 2017 except for the Tamala Park Land Sale Reserve which is transferred when actual funds are received.

Opening Funding Surplus / (Deficit)

The surplus opening balance brought forward from 2016/17 was $4,035,268, compared to the revised budget opening surplus balance of $3,946,211, after end of year carry forward adjustments. The actual surplus for 2016/17 was $4,475,026, which reflects an improvement of $529k over the anticipated end of year result for 2016/17.

Closing Surplus / (Deficit)

There is currently a surplus of $13,449,645 compared to the year to date budget surplus of $11,600,178. This variance substantially attributed to anticipated operating and capital expenditure for the remainder of 2017/18 (i.e., timing differences to budget), and the increase in the opening balance.

Comments on financial performance as set out in the Statement of Financial Activity (Attachment 1) and an explanation of each report is detailed below:

1. Statement of Financial Activity by Program Report (Note 1 Page 1)

This statement of financial activity shows operating revenue and expenditure classified by Program.

2. Statement of Comprehensive Income by Nature and Type Report (Note 2 Page 4)

This statement of financial activity shows operating revenue and expenditure classified by nature and type.

3. Net Current Funding Position (Note 3 Page 5)

Net current assets is the difference between the current assets and current liabilities, less committed assets and restricted assets. This amount indicates how much capital is available for day to day activities. The net current funding position as at 30 April 2018 is $13,449,645.

4. Summary of Income and Expenditure by Service Areas (Note 4 Page 6 – 62)

This statement shows a summary of operating revenue and expenditure by Service Unit.

5. Capital Expenditure and Funding Summary (Note 5 Page 63 - 77)

The following table is a summary of the ‘2017/2018 Capital Expenditure Budget by Program’, which compares year to date budget with actual expenditure to date. The full Capital Works Program is listed in detail in Note 5 of Attachment 1.

CAPITAL EXPENDITURE	Revised Budget	YTD Budget	YTD Actual	Remaining Budget
	$	$	$	%
Land and Buildings	2,018,358	1,097,958	664,009	67%
Infrastructure Assets	8,194,846	4,498,420	3,411,739	58%
Plant and Equipment	1,441,911	735,711	542,421	62%
Furniture and Equipment	1,081,682	758,282	487,032	55%
Total	12,736,797	7,090,371	5,105,200	60%


FUNDING	Revised Budget	YTD Budget	YTD Actual	Remaining Budget
	$	$	$	%
Own Source Funding - Municipal	8,606,407	4,846,360	3,509,853	59%
Cash Backed Reserves	1,194,291	355,690	222,989	81%
Capital Grant and Contribution	2,733,778	1,686,000	1,046,186	62%
Other (Disposals/Trade In)	202,321	202,321	326,173	-61%
Total	12,736,797	7,090,371	5,105,200	60%

Note: Detailed analysis is included on page 64 - 77 of Attachment 1.

6. Cash Backed Reserves (Note 6 Page 78)

The Cash Backed Reserves schedule details movements in the reserves, including transfers and funds used, comparing actual results with the annual budget. The balance as at 30 April 2018 is $9,156,508.

7. Rating Information (Note 7 Page 79 – 80)

The notices for rates and charges levied for 2017/18 were issued on 07 August 2017.

The Local Government Act 1995 provides for ratepayers to pay rates by four instalments. The due dates for each instalment were:

First Instalment	12 September 2017
Second Instalment	06 November 2017
Third Instalment	08 January 2018
Fourth Instalment	06 March 2018

To cover the costs involved in providing the instalment program the following charge and interest rates apply:

Instalment Administration Charge

(to apply to second, third, and fourth instalment)

$13.00 per instalment

Instalment Interest Rate

5.5% per annum

Late Payment Penalty Interest

11% per annum

Pensioners registered with the City for rate concessions do not incur the above interest or charge.

The Rates debtors balance to be collected as at 30 April 2018 is $860,377 (this includes deferred rates of $100,192). This represents 2.44% of collectable income compared to 2.48% at the same time last year.

8. Receivables (Note 8 Page 81)

Receivables of $3,659,796 are outstanding as at 30 April 2018, of which $2,880,904 has been outstanding over 90 days. This is comprised of:

· $2,462,933 (85.5%) relates to unpaid infringements (plus costs) over 90 days. Infringements that remain unpaid for more than two months are sent to Fines Enforcement Registry (FER), which then collects the outstanding balance and returns the funds to the City for a fee. Administration is currently reconciling FER debtors and liaising with FER to determine whether the receivables are likely to be collected given the age, and the amount of any required write off if not;

· $343,016 (11.9%) relates to Cash in Lieu Parking. Some Cash in Lieu Parking debtors have special payment arrangements over more than one year; and

· $46,545 (2.6%) relates to Other Receivables, (refer page 81

Administration has been following up outstanding items which relate to Other Receivables by issuing reminders when they are overdue and initiating formal debt collection when payments remain outstanding over longer periods of time.

9. Beatty Park Leisure Centre – Financial Position Report (Note 9 Page 82)

As at 30 April 2018 the operating deficit for the centre was $1,104,697 in comparison to the year to date budgeted deficit of $708,968.

Once the depreciation component has been deducted, the cash position showed a current cash deficit of $137,060 in comparison to the year to date budget estimate of a cash surplus of $258,658.

10. Explanation of Material Variances

All material variances as at 30 April 2018 have been detailed in the variance comments report in Attachment 1.

The materiality thresholds used for reporting variances are 10% and $10,000. This means that variances will be analysed and separately reported when they are more than 10% (+/-) of the year to date budget, where that variance exceeds $10,000 (+/-). This threshold was adopted by Council as part of the budget adoption for 2017/18 and is used in the preparation of the statements of financial activity when highlighting material variance in accordance with Financial Management Regulation 34(1) (d).

Consultation/Advertising:

Not applicable.

Legal/Policy:

Section 6.4 of the Local Government Act 1995 requires a local government to prepare an annual financial report for the preceding year and such other financial reports as are prescribed.

Regulation 34 (1) of the Local Government (Financial Management) Regulations 1996 requires the local government to prepare each month, a statement of financial activity reporting on the source and application of funds as set out in the adopted Annual Budget.

A statement of financial activity and any accompanying documents are to be presented at an Ordinary Meeting of the Council within two months after the end of the month to which the statement relates.

Section 6.8 of the Local Government Act 1995, specifies that a local government is not to incur expenditure from its Municipal Fund for an additional purpose except where the expenditure is authorised in advance by an absolute majority decision of Council.

Risk Management Implications:

Low: Provision of monthly financial reports fulfils a statutory requirement.

Strategic Implications:

Strategic Plan 2013-2023:

“4.1 Provide good strategic decision-making, governance, leadership and professional management:

4.1.2 Manage the organisation in a responsible, efficient and accountable manner;

(a) Continue to adopt best practice to ensure the financial resources and assets of the City are responsibly managed and the quality of services, performance procedures and processes is improved and enhanced.”

SUSTAINABILITY IMPLICATIONS:

Not applicable.

Financial/Budget Implications:

Not applicable.

Comments:

All expenditure included in the Financial Statements is incurred in accordance with Council’s revised budget.