Late Reports Agenda of Ordinary Council Meeting

19 May 2020

15.2 Quarterly Budget Review Statement for the period ended 31 March 2020 – Updated Report

File Number: 10619-2#251

Executive Summary

The purpose of this report is to present the Quarterly Budget Review Statement (QBRS) for the period ended 31 March 2020. The document reports detailed information on Council’s financial progress for the third quarter of the 2019/20 financial year.

For the 2019/20 financial year, Council originally adopted a balanced working funds position.

Council has had an extended period of unplanned disruptions – bushfires, floods and the COVID-19 pandemic, during the course of the year which have each impacted on the 2019/20 Budget. This includes both a reduction in income largely due to the impacts of Covid-19 and an increase in Expenditure due to the impacts of Bushfire and Flood response and recovery.

In total, this is forecast to have a negative $3.57M impact, leading to a forecast deficit Net Operating Result Before Capital Items for 2019/20 of $1.81M.

In addition, effects of the unanticipated disasters and the COVID-19 pandemic are expected to result in an increase in Council’s Rate and Charges Outstanding Ratio at year end as Council provides more property owners relief under Council’s hardship policy.

Whilst the variations are significant in size, Council has prudently maintained a sound financial position and as such is able to fund the variations from unrestricted cash balances without drawing upon reserves held for specific purposes.

It is anticipated that the variations recommended will have a flow on effect in the coming 20/21 financial year which will be incorporated into the draft operational plan and future forecasts.

A current list of projects comprising the Capital Works Program will also be tabled for information purposes.

Recommendation

That

1. The Quarterly Budget Review Statement for the period ended 31 March 2020 and proposed adjustments to the 2019/20 budget estimates be adopted.

2. The list of current projects comprising the Capital Works Program be noted.

Report

This Quarterly Budget Review reports on the financial progress towards achieving Council’s 2019/20 Operational Plan objectives as at 31 March 2020.

The Quarterly Review also reports on Council’s progress towards delivering the Capital Project program 2019/20. A list of the current projects comprising the 2019/20 Capital Works Program will be tabled.

The Quarterly Budget Review Statement (QBRS) measures Council’s financial health as we progress through the year. It needs to adequately disclose Council’s overall financial position and provide sufficient information to enable Councillors to make informed and transparent decisions. It is also a means by which Councillors can ensure that Council remains on track to meet its objectives, targets and outcomes as set out in the Delivery Program and Operational Plan.

The Office of Local Government has prescribed that the Quarterly Budget Review Statement includes (as a minimum) the following components:

· Statement by the Responsible Accounting Officer on Council’s financial position at the end of the year based on the information in the review documents;

· Income and Expenses Statement showing the original and revised budgets, along with any changes proposed in the current Quarterly review. Actual income and expenditure to date is also required to be shown;

· Explanation for material variations between the revised budget and projected year end result and likely impacts of the variation;

· Capital Budget, also showing the original and revised budgets, along with any changes proposed in the current Quarterly Review. Actual income and expenditure to date is also required to be shown;

· Explanation for variations between the revised capital budget and projected year end result and likely impacts of the variation;

· Cash and investments position;

· Key Performance Indicators;

· Contracts entered into during the quarter (>$50,000); and

· Expenditure to date for Consultancies and external Legal Fees.

Collectively, these documents form the QBRS. Clause 203 (1) of the Local Government (General) Regulation 2005 requires a QBRS to be submitted to Council within two months after the end of each quarter (except the June quarter).

Summary of Variations

Income:

Rates and Annual Charges

The effects of the unanticipated disasters and the COVID-19 pandemic are expected to result in an increase in Council’s Rate and Charges Outstanding Ratio at year end as Council provides more property owners apply for relief under Council’s hardship policy. A small increase ($25K) in income from rates and annual charges is forecast for the 2019/20 financial year as a result of additional supplementary income that has been levied in relation to recent subdivisions. Revisions to the 2020/21 Operational Plan income forecasts will take the resulting impact on cash flow into account.

User Charges and Fees

Income from user fees and charges is anticipated to be reduced by $1.3 million with decreased in income from the following sources:

· Hire of community halls, sportsgrounds, parks and reserves ($66K)

· Statutory advertising fees ($38K)

· Plan checking fees ($79K)

· Development application income ($224K)

· Rezoning application fees ($161K)

· Commercial tipping fees ($281K)

· Royalty income ($72K)

Interest and investment revenue

Council continues to invest available funds in accordance with policy however the market has seen significant reductions in interest rates resulting in a reduction of $858K to the forecast income for the year.

Grants and Contributions

Grant and contribution income is forecast to increase as a result of:

· realisation of operating Grant income tied to the current Local Environment Plan (LEP) project ($1.25M)

· disaster relief income being claimed for the s44 bushfire event ($1.1M)

· additional Capital grant income ($9.1M)

Expenditure:

Employee costs

Employee costs are expected to increase by $90K as a result of increase salary charges in relation to increased capital projects that have been partially offset by salary savings from vacancies in other areas of councils operations.

Materials and contracts (including legal and consultancy costs)

Expenditure is forecast to increase by $4.527M as a result of the following:

· bushfire emergency costs ($1.6M)

· consultancy and contractor costs on the LEP project ($1.25M)

· consultancy costs associated with Silverdale road investigative works ($590K)

· increased contractor costs for waste collection and roadside clean up ($330K)

· increased tree works resulting from the recent weather events ($80K)

The increases have been partially offset by savings in event costs, recruitment and training as a result of the COVID-19 restrictions.

Other Expenses

Other expenses are forecast to be $828K lower than previous estimates due to the reduced running costs associated with Council meetings and council buildings and public halls that are no longer in use due to the COVID-19 restrictions.

Capital Works Program

Variations to the Capital Works Program have been made to accommodate necessary capital works to assets damaged by the bushfire and flood events. The program has also been updated to include additional works being undertaken on open space assets which are grant funded.

Consultation

All members of the Executive and Senior Management have had input into the production of this budget review and a Councillor briefing session covering the key movements and causes was held on 28 March 2020.

Financial Implications

The QBRS provides Council and the Community with information in relation to Council’s projected financial position. Having regard to the projected budget estimates and the original budget, Council’s financial position is considered to be satisfactory.

For the 2019/20 financial year, Council originally adopted a balanced working funds position. Budgetary adjustments identified during the first two quarters have enabled Council to maintain its available working funds at a balanced position.

Details of the proposed budget variations for the third quarter of the 2019/20 financial year are provided in the attached Quarterly Budget Review Statement for the period ended 31 March 2020.

The variations proposed recognise that Council has had an extended period of unplanned disruptions – bushfires, floods and the COVID-19 pandemic, during the course of the year which have each impacted in some way on forecasts. Whilst the some of the variations are significant in size Council is able to fund the variations from unrestricted cash balances without drawing upon reserves held for specific purposes.

It is anticipated that the variations recommended will have a flow on effect in the coming 20/21 financial year which will need to be incorporated into the draft operational plan and future forecasts.

Attachments

1. Quarterly Budget Review Statement for the period ended 31 March 2020 ⇩

Date:	Tuesday, 19 May 2020
Time:	6.30pm
Location:	Council meeting to be held remotely using audio visual link and is open to members of the community via webcast.