Agenda of Finance Advisory Committee Meeting

BYRON SHIRE COUNCIL

Staff Reports - Corporate and Community Services 4.1

Staff Reports - Corporate and Community Services

Report No. 4.1 Quarterly Update - Implementation of Special Rate Variation

Directorate: Corporate and Community Services

Report Author: James Brickley, Manager Finance

File No: I2019/119

Summary:

At its Ordinary Meeting held on 2 February 2017 Council resolved to apply for a Special Rate Variation (SRV) of 7.50% per annum for four years commencing from the 2017/2018 financial year (Resolution 17-020 part 5).

Following approval of Council’s SRV by the Independent Pricing and Regulatory Tribunal (IPART) received on 9 May 2017, Council resolved to implement the SRV at its Ordinary Meeting held 22 June 2017 (Resolution 17-268 part 1).

At the same Ordinary Meeting Council resolved (Resolution 17-222 part 2) to incorporate reporting on the Special Rate Variation into the development of the 2017/2018 Financial Sustainability Plan and quarterly updates to Council through the Finance Advisory Committee on the implementation of the adopted Financial Sustainability Plan. Whilst Council is no longer developing an annual Financial Sustainability Plan from 2018/2019 onwards, it is important to still provide progressive reporting as to the implementation of the SRV.

The purpose of this report is to provide the Finance Advisory Committee with a quarterly update on implementation of the SRV and expenditure up to 31 December 2018.

RECOMMENDATION:

That the Finance Advisory Committee notes the quarterly update on the Special Rate Variation Implementation as at 31 December 2018.

Attachments:

1 2017-18 Special Rate Management Report as at 31 December 2018 reported to Finance Advisory Committee 14/2/2019, E2019/7516 , page 8⇩

REPORT

At its Ordinary Meeting held on 2 February 2017 Council resolved to apply for a Special Rate Variation (SRV) as follows:

Resolution 17-020 part 5:

Lodge a Section 508A permanent Special Rate Variation application to the Independent Pricing and Regulatory Tribunal, for increases to the ordinary rate income (general revenue) of 7.5% (including rate peg) in 2017/18, 7.5% (including rate peg) in 2018/19, 7.5% (including rate peg) in 2019/20 and 7.5% (including rate peg) in 2020/21.

After lodging the Special Rate Variation application with the Independent Pricing and Regulatory Tribunal (IPART), Council received approval to increase its ordinary rate income as per resolution 17-020. This approval was granted on 9 May 2017. Council resolved to implement the SRV through adoption of the 2017/2018 Operational Plan and Revenue Policy at its Ordinary Meeting held on 22 June 2017 (Resolution 17-268 part 1).

At its Ordinary Meeting held on 22 June 2017 Council received Report 13.13 confirming the outcome of the SRV application and its subsequent approval. Council resolved resolution 17-222 as follows:

1. That Council note the determination from IPART in relation to its 2017/2018 Special Rate Application including the following conditions imposed by IPART on Council for the:-

a) use of the additional income derived from the special variation for the purposes of reducing its infrastructure backlog and improving financial sustainability; and

b) reporting on this use against the forecasts included in the Council’s application as part the Council’s annual report for each year from 2017-18 to 2026-27.

2. That Council adopt as a Policy Framework the use and reporting conditions imposed by IPART in the SRV determination and further incorporate reporting on the Special Rate Variation into the development of the 2017/2018 Financial Sustainability Plan and the quarterly updates to Council through the Finance Advisory Committee on the implementation of the adopted Financial Sustainability Plan.

3. That Council establish as a policy framework that funding for infrastructure renewal and maintenance from general revenue sources is not ever lower then the general revenue baseline indicator established in the 2016/2017 Budget.

4.That Council establish as a policy framework that any funds generated by the SRV that remain unexpended at the end of each financial year are to be restricted and held in a internal reserve, to be carried forward to subsequent financial year, for expenditure in accordance with the uses imposed in the SRV approval.

5. That Council incorporate the research of potential non resident revenue sources (if any) as part of the Revenue Review chapter in the development of the 2017/2018 Financial Sustainability Plan, and provide quarterly updates to Council through the Finance Advisory Committee.

6. That Council not proceed with the implementation of part 9 and part 11 of resolution 17-020.

This report is provided to the Finance Advisory Committee to advise on the implementation of the SRV and the current status of expenditure from 1 July 2017 to 31 December 2018 which is

detailed in Attachment 1 being the second year of the SRV.

The levy of Council’s annual rates and charges was completed in accordance with Resolution 18-429 prior to 31 July 2018 and this included applying the second tranche of the 7.5% ordinary rate increase for 2018/2019 continuing the revised ordinary rating structure adopted by Council for 2017/2018.

The yield from the SRV for 2017/2018 being the first year of the increase is $1,185,000 with the yield from the SRV for 2018/2019 as the second year of the increase estimated at $2,276,400.

Upon adoption of the 2018/2019 Budget Estimates, Council resolved to undertake the following program of capital and maintenance works including the additional SRV revenue and other funding as outlined in Attachment 1. During the course of the 2018/2019 financial year, there may be adjustments required to the expenditure budgets identified in the schedule of capital and maintenance works currently funded by the SRV revenue which will be presented to Council for approval via the Quarterly Budget Review process.

The expenditure program adopted for 2018/2019 financial year is consistent with Council’s SRV application and approval from IPART to use the funding to improve financial sustainability and reduce infrastructure backlog.

STRATEGIC CONSIDERATIONS

Community Strategic Plan and Operational Plan

CSP Objective

CSP Strategy

DP Action

OP Activity

Community Objective 5: We have community led decision making which is open and inclusive

5.2

Create a culture of trust with the community by being open, genuine and transparent

5.2.1

Provide timely, accessible and accurate information to the community

5.2.1.3

Report on progress of Delivery Program actions

Legal/Statutory/Policy Considerations

Approval and conditions received from the Independent Pricing and Regulatory Tribunal (IPART) regarding the Byron Shire Council Special Rate Application 2017-2018 received 9 May 2017.

Council Resolution 17-268, 18-429 and 17-222.

Financial Considerations

There are no direct financial implications associated with this report. The table included at Attachment 1 provides information to the Finance Advisory Committee as to the expenditure of the Special Rate Variation Funds up to the end of the second quarter of the 2018/2019 financial year.

The total 2017/2018 SRV Allocation for 2018/2019 as indicated in Attachment 1 is $2,530,800. Whilst the 2018/2019 SRV levy is $2,276,400, the difference of $254,400 is unexpended funds from 2017/2018 that has been carried forward to the current financial year.

Consultation and Engagement

Prior to the approval of the SRV, Council undertook extensive community consultation. This report also provides the opportunity on a quarterly basis for the community to receive an update as to the implementation of the SRV for the current financial year. Final outcomes for the 2018/2019 financial year will also be published in Council’s Annual Report in accordance with the approval conditions set by IPART.

BYRON SHIRE COUNCIL

Staff Reports - Corporate and Community Services 4.2

Report No. 4.2 Long Term FInancial Plan 2018-2028 Update

Directorate: Corporate and Community Services

Report Author: James Brickley, Manager Finance

File No: I2019/157

Summary:

The Finance Advisory Committee received a progress update report on the working draft of the 2018-2028 Long Term Financial Plan at its Meeting held on 15 November 2018 following presentation of the original draft to the Finance Advisory Committee Meeting held on 16 August 2018.

This report provides a further progress update on the 2018-2028 Long Term Financial Plan.

RECOMMENDATION:

That the Finance Advisory Committee notes the further update provided in respect of the 2018-2028 Long Term Financial Plan.

REPORT

Background

At its Meeting held on 16 August 2018 the Finance Advisory Committee received a report on the

working draft of the 2018-2028 Long Term Financial Plan (LTFP). The Finance Advisory Committee noted the working draft and that a further revision would be provided to the Finance Advisory Committee Meeting to be held on 15 November 2018.

Council endorsed this approach at its Meeting held on 20 September 2018 via resolution 18-600.

The working draft of the 2018-2028 Long Term Financial Plan (#E2018/66626) provided to the 16 August 2018 Finance Advisory Committee is somewhat different to previous LTFPs developed by Council for the following reasons:

· Aside from the LTFP itself and its modelling, this document provides the context of what the LTFP is about and its relationship as part of the resourcing strategy that underpins Council’s Integrated Planning documents.

· It contains a new section outlining the Budget Framework guiding the development of Council budgets, which is the first attempt to document the process.

· It outlines existing Council resolutions that have created specific ‘parameters’ for budget development.

· It identifies principles which underpin the budget process.

· It suggests a timeframe for the annual budget process.

The latest draft 2018-2028 LTFP contains a base case and a scenario. These are as follows:

· Base case – is currently the 2018/2019 Budget adopted by Council on 28 June 2018 as the starting point with projections based on applying assumptions and a ten year capital works program across all Funds.

· Scenario – is based on Council acquiring the former Mullumbimby War Memorial Hospital and remediating that site for future redevelopment. The scenario attempts to model the financial impact of the project on the base case.

The draft LTFP in its current form is presenting some challenges in terms of the budget position for the General Fund, most specifically for the years 2019/2020 to 2022/2023 where there are indicative budget deficits each year before the budget returns to surplus in 2023/2024.

Further work needs to be undertaken to review these projections and address the following items (not in any specific order):

· The Plant Fund runs out of cash in the 2021/2022 financial year, requiring the plant replacement program to be reduced by at least 50% compared to the desired replacement program.

· Restoration of the Legal Services Reserve to at least $500,000.

· Review of Waste Operations to incorporate the significant capital expenditure in 2019/2020 that is not affordable irrespective of anticipated part grant funding.

· Complete the integration of the Section 94 Plan into the Long Term Financial Plan.

· Review expenditures from the Infrastructure Renewal Reserves x 3. Council appears to be banking funds so there is scope for additional asset renewal.

· Whilst fully allocated, review the application of the 2017/2018 Special Rate Variation Funds.

· The need to remove maintenance funding from Infrastructure Renewal Reserves funded by pay parking and divert to projects.

· Review the infrastructure backlog and required asset maintenance benchmarks.

· Look at structural changes to the budget for the 2019/2020 year onwards, especially in operational areas, by identification of new revenue or review of costs to reverse budget deficits projected from 2019/2020 to 2022/2023.

Aside from the General Fund, there is also an issue with the Sewerage Fund, given the scale of future capital works and their affordability in the absence of new loan borrowings, in that there needs to be a complete consideration of the Water and Sewerage Business Plans to ensure they are completely integrated into the LTFP. This work is currently being undertaken by Hydrosphere.

Council is about to commence the 2019/2020 Budget process and with the finalisation of the 2017/2018 Financial Statements, it was not possible to devote the necessary time to consider revision of the projections contained in the LTFP and address the dot points above.

Next steps

The intent was to provide an updated version of the 2018-2028 Long Term Financial Plan to this Meeting of the Finance Advisory Committee Meeting. Unfortunately this has not been able to be achieved for the following reasons:

· The 2019/2020 Budget Estimates process is underway and whilst budget information is still being compiled at the time of preparing this report, it appears that the 2019-2020 will require some decisions which are difficult to project into future years.

· The potential loss of income being anticipated from reduced development activity.

· Council has not yet had the opportunity to consider the financial issues raised in the Draft 2018-2028 Long Term Financial Plan and how they can be resolved in the 2019-2020 Budget process and future projections. As part of this discussion Council will be asked to consider how best to balance its aspirations against current and future available resources

· Only the draft review of the Sewerage Fund Business Plan has been received from Hydrosphere at this point.

The 2019-2020 Budget may potentially need to consider changes to the way in which activities are financed which may significantly change future projections compared to those in the current Draft 2018-2028 Long Term Financial Plan.

Given that Council is now engaged in the 2019-2020 Budget estimates and Integrated Planning process, it is proposed that efforts be concentrated on the development of the 2019-2029 Long Term Financial Plan and that this be done in concert with the 2019-2020 Budget.

If this can be achieved, it will enable Council to also consider future projection beyond 2019-2020 as an indicative financial path with the proposed 2019-2020 budget estimates forming the base of the Plan.

STRATEGIC CONSIDERATIONS

Community Strategic Plan and Operational Plan

CSP Objective

CSP Strategy

DP Action

OP Activity

Community Objective 5: We have community led decision making which is open and inclusive

5.4

Manage Council’s assets and allocate resources in a fair and holistic manner

5.4.5

Progress implementation of inclusive and integrated resourcing strategy

5.4.5.4

Monitor, review and update Long Term Financial Plan

Legal/Statutory/Policy Considerations

Section 403(2) of the Local Government Act 1993

Financial Considerations

As outlined in the report.

Consultation and Engagement

The Long Term Financial Plan forms part of the Council’s Resourcing Strategy. The intent of the next Long Term Financial Plan 2019-2029 is to have it developed in time for public exhibition alongside the next round of Integrated Planning documents during May 2019.

BYRON SHIRE COUNCIL

Staff Reports - Corporate and Community Services 4.3

Report No. 4.3 Budget Review - 1 October 2018 to 31 December 2018

Directorate: Corporate and Community Services

Report Author: James Brickley, Manager Finance

File No: I2019/162

Summary:

This report is prepared to comply with Regulation 203 of the Local Government (General) Regulation 2005 and to inform Council and the community of Council’s estimated financial position for the 2018/2019 financial year, reviewed as at 31 December 2018.

This report contains an overview of the proposed budget variations for the General Fund, Water Fund and Sewerage Fund. The specific details of these proposed variations are included in Attachment 1 and 2 for Council’s consideration and authorisation.

Attachment 3 contains the Integrated Planning and Reporting Framework (IP&R) Quarterly Budget Review Statement (QBRS) as outlined by the Office of Local Government in circular 10-32.

RECOMMENDATION:

That the Finance Advisory Committee recommends to Council:

1. That Council authorises the itemised budget variations as shown in Attachment 2 (#E2019/9717) which include the following results in the 31 December 2018 Quarterly Review of the 2018/2019 Budget:

a) General Fund – $20,000 increase to the Estimated Unrestricted Cash Result

b) General Fund - $835,300 increase in reserves

c) Water Fund - $515,600 increase in reserves

d) Sewerage Fund - $2,149,000 increase in reserves

2. That Council adopts the revised General Fund Estimated Unrestricted Cash Result of $1,145,200 for the 2018/2019 financial year as at 31 December 2018.

Attachments:

1 Budget Variations for General, Water and Sewerage Funds, E2019/9752 , page 23 ⇩

2 Itemised Listing of Budget Variations for General, Water and Sewerage Funds, E2019/9717 , page 95⇩

3 Integrated Planning and Reporting Framework (IP&R) required Quarterly Review Statement, E2019/9716 , page 102⇩

REPORT

Council adopted the 2018/2019 budget on 28 June 2018 via Resolution 18-429. It also considered and adopted the budget carryovers from the 2017/2018 financial year, to be incorporated into the 2018/2019 budget at its Ordinary Meeting held on 23 August 2018 via Resolution 18-522. Since that date, Council has reviewed the budget taking into consideration the 2017/2018 Financial Statement results and progress through the first half of the 2018/2019 financial year. This report considers the December 2018 Quarter Budget Review.

The details of the budget review for the Consolidated, General, Water and Sewer Funds are included in Attachment 1, with an itemised listing in Attachment 2. This aims to show the consolidated budget position of Council, as well as a breakdown by Fund and Principal Activity. The document in Attachment 1 is also effectively a publication outlining a review of the budget and is intended to provide Councillors with more detailed information to assist with decision making regarding Council’s finances.

Attachment 1 has the following reporting hierarchy:

Consolidated Budget Cash Result

General Fund Cash Result Water Fund Cash Result Sewer Cash Result

Principal Activity Principal Activity Principal Activity

Operating Income Operating Expenditure Capital income Capital Expenditure

The pages within Attachment 1 are presented (from left to right) showing the original budget as adopted by Council on 28 June 2018 plus the adopted carryover budgets from 2017/2018 followed by the resolutions between July and September, the September budget review, resolutions between October and December, the re-vote (or adjustment for this review) and then the revised position projected for 30 June 2019 as at 31 December 2018.

On the far right of the Principal Activity, there is a column titled “Note”. If this is populated by a number, it means that there has been an adjustment in the quarterly review. This number then corresponds to the notes at the end of the Attachment 1 which explain the variation.

There is also information detailing restricted assets (reserves) to show Council estimated balances as at 30 June 2019 for all Council’s reserves.

A summary of Capital Works is also included by Fund and Principal Activity.

Office of Local Government Budget Review Guidelines:-

The Office of Local Government on 10 December 2010 issued the new Quarterly Budget Review Guidelines via Circular 10-32, with the reporting requirements to apply from 1 July 2011. This report includes a Quarterly Budget Review Statement (refer Attachment 3) prepared by Council in accordance with the guidelines.

The Quarterly Budget Review Guidelines set a minimum standard of disclosure, with these standards being included in the Local Government Code of Accounting Practice and Financial Reporting as mandatory requirements for Council’s to address.

Since the introduction of the new planning and reporting framework for NSW Local Government, it is now a requirement for Councils to provide the following components when submitting a Quarterly Budget Review Statement (QBRS):-

· A signed statement by the Responsible Accounting Officer on Councils financial position at the end of the year based on the information in the QBRS

· Budget review income and expenses statement in one of the following formats:

o Consolidated

o By fund (e.g General, Water, Sewer)

o By function, activity, program etc to align with the management plan/operational plan

· Budget Review Capital Budget

· Budget Review Cash and Investments Position

· Budget Review Key performance indicators

· Budget Review Contracts and Other Expenses

The above components are included in Attachment 3:-

Income and Expenditure Budget Review Statement by Type – This shows Council’s income and Expenditure by type. This has been split by Fund. Adjustments are shown, looking from left to right. These adjustments are commented on through the last 12 pages of Attachment 1.

Capital Budget Review Statement – This statement identifies in summary Council’s capital works program on a consolidated basis and then split by Fund. It also identifies how the capital works program is funded. As this is the first quarterly review for the reporting period, the Statement may not necessarily indicate the total progress achieved on the delivery of the capital works program.

Cash and Investments Budget Review Statement – This statement reconciles Council’s restricted funds (reserves) against available cash and investments. Council has attempted to indicate an actual position as at 31 December 2018 of each reserve to show a total cash position of reserves with any difference between that position and total cash and investments held as available cash and investments. It should be recognised that the figure is at a point in time and may vary greatly in future quarterly reviews pending on cash flow movements.

Key Performance Indicators (KPI’s) – At this stage, the KPI’s within this report are:-

o Debt Service Ratio - This assesses the impact of loan principal and interest repayments on the discretionary revenue of Council.

o Rates and Annual Charges Outstanding Ratio – This assesses the impact of uncollected rates and annual charges on Councils liquidity and the adequacy of recovery efforts

o Asset Renewals Ratio – This assesses the rate at which assets are being renewed relative to the rate at which they are depreciating.

These may be expanded in future to accommodate any additional KPIs that Council may adopt to use in the Long Term Financial Plan (LTFP.)

Contracts and Other Expenses - This report highlights any contracts Council entered into during the October to December quarter that are greater then $50,000.

CONSOLIDATED RESULT

The following table provides a summary of the overall Council budget on a consolidated basis inclusive of all Funds’ budget movements for the 2018/2019 financial year projected to 30 June 2019 and revised as at 31 December 2018.

2018/2019 Budget Review Statement as at 31 December 2018	Original Estimate (Including Carryovers) 1/7/2018	Adjustments to 31 Dec 2018 including Resolutions*	Proposed 31 Dec 2018 Review Revotes	Revised Estimate 30/6/2019 at 31/12/2018
Operating Revenue	81,580,000	142,700	1,276,000	82,998,700
Operating Expenditure	86,541,800	4,618,000	678,200	91,838,000
Operating Result – Surplus/Deficit	(4,961,800)	(4,475,300)	597,800	(8,839,300)
Add: Capital Revenue	25,396,200	67,800	(9,807,900)	15,656,100
Change in Net Assets	20,434,400	(4,407,500)	(9,210,100)	6,816,800
Add: Non Cash Expenses	13,678,900	925,700	0	14,604,600
Add: Non-Operating Funds Employed	3,899,000	4,634,000	(1,000,000)	7,533,000
Subtract: Funds Deployed for Non-Operating Purposes	(63,028,000)	(4,421,400)	13,730,000	(53,719,400)
Cash Surplus/(Deficit)	(25,015,700)	(3,269,200)	3,519,900	(24,765,000)
Restricted Funds – Increase / (Decrease)	(25,031,500)	(3,233,400)	3,499,900	(24,765,000)
Forecast Result for the Year – Surplus/(Deficit) – Unrestricted Cash Result	15,800	(35,800)	20,000	0

GENERAL FUND

In terms of the General Fund projected Unrestricted Cash Result the following table provides a reconciliation of the estimated position as at 31 December 2018:

Opening Balance – 1 July 2018	$1,145,200
Plus original budget movement and carryovers	15,800
Council Resolutions July – September Quarter	(53,000)
Recommendations September Budget Review – increase/(decrease)	37,200
Council Resolutions October – December Quarter	($20,000)
Recommendations within this Review – increase/(decrease)	20,000
Forecast Unrestricted Cash Result – Surplus/(Deficit) – 30 June 2019	0
Estimated Unrestricted Cash Result Closing Balance – 30 June 2019	$1,145,200

The General Fund financial position overall has increased by $20,000 as a result of this budget review, bringing the forecast cash result back to zero. The cash result after the September budget review but before the December budget review was showing a $20,000 deficit due to the two Council resolutions below:

Council Resolutions

Council has passed the following resolutions in the October to December quarter that have had an effect on the cash result:

· Resolution 18-710 part 2 Matter of Urgency - Support for Drought Relief:

“Allocate a budget of $10,000 in the 2018/2019 financial year, with approval for the trips to be delegated to the General Manager, and funded from unallocated revenue in 2018/19”.

· Resolution 18-836 part 1 Funding for Tyagarah Beach Cameras:

“That the $10,000 funding required for the Tyagarah Reserve cameras and related signage be immediately allocated from Council’s unrestricted reserve funds”.

The proposed budget changes are detailed in Attachment 1 and summarised further in this report below.

Budget Adjustments

The budget adjustments identified in Attachments 1 and 2 for the General Fund have been summarised by Budget Directorate in the following table:

Budget Directorate	Revenue Increase/ (Decrease) $	Expenditure Increase/ (Decrease) $	Accumulated Surplus (Working Funds) Increase/ (Decrease) $
General Manager	212,800	212,800	0
Corporate & Community Services	2,000	(53,300)	55,300
Infrastructure Services	(10,538,100)	(10,472,000)	(66,100)
Sustainable Environment & Economy	48,500	17,700	30,800
Total Budget Movements	10,274,800	10,294,800	20,000

Budget Adjustment Comments

Within each of the Budget Directorates of the General Fund, are a series of budget adjustments (identified in detail at Attachments 1 and 2). More detailed notes on these are provided in Attachment 1 but in summary the major additional items included are summarised below by Directorate and are included in the overall budget adjustments table above:

General Manager

· In the General Manager’s program it is proposed to increase the Legal Services budget by $104,000 to allow for the anticipated increase in legal costs prior to the end of the financial year. This can be funded from the Legal Services’ reserve and legal fees recovered. It is also proposed to add an income budget of $10,400 for documentation preparation and legal fees. This is not a new budget but has been moved from the Corporate Services program.

· In the People & Culture program, it is proposed to increase revenue by $98,400 for the annual WHS incentive payment ($27,700) and a Hindsight Performance payment ($70,700) and restrict the funds in the WHS Incentive reserve and People & Culture reserve respectively.

Corporate and Community Services

· In the Information Services program it is proposed to increase revenue and expenditure by $39,400 due to the second instalment of the grant for the Smart Cities & Suburbs 3D Modelling Solutions project. It is proposed to increase revenue by a further $3,000 due to an increase in actual revenue received for document enquiries. It is also proposed to decrease operating expenditure for Authority maintenance ($20,000), Document Management maintenance ($8,000), data systems maintenance ($7,900) and lease payments for hardware, as actual expenditure will be under the current allocated budgets. These adjustments against revenue and expenditure are offset through support services costs allocated to other budget programs.

· In the Corporate Services Program the document preparation and legal fee budget has been moved to the General Manager’s program ($10,400). It is proposed to decrease the budget for the Business Continuity program ($30,000) as the project will not be finalised this financial year and decrease insurance premiums for the Carrier’s Liability ($700) and Environmental Impairment Liability ($23,100) as the insurance premiums have been allocated to the Sewerage Fund.

· In the Community Development program, it is proposed to decrease operating expenditure by $37,400 for the Tyagarah Recreation Club Lease. This has an offsetting revenue budget in the Open Space & Recreation program that has also decreased.

Infrastructure Services

· In the Projects & Commercial Development program, it is proposed to decrease capital expenditure due to various works unlikely to be completed in the 2018/2019 financial year.

· In the Local Roads and Drainage program, there are a number of adjustments outlined under Note 16 in the Budget Variations explanations section of Attachment 1. Further disclosure is included in the fourth page of Attachment 2 under the budget program heading Local Roads and Drainage.

· In the Roads and Maritime Services program (RMS) it is proposed to transfer $872,600 from capital revenue to operating revenue for the correct revenue recognition recording of Natural Disaster funding.

· In the Open Space and Recreation program, a number of adjustments are outlined under Note 18 in the Budget Variations explanations section of Attachment 1. Further disclosure is included in the fifth page of Attachment 2, under the budget program heading Open Space & Recreation.

· In the Waste & Recycling program it is proposed to increase the budget for the expansion of the Resource Recovery Centre ($317,000), increase the budget for the purchase of a loader ($100,000) and create a budget for the Solar Farm Project Initiation ($120,000). These adjustments are funded through the Other Waste Management reserve.

· In the Cavanbah Centre program, it is proposed to decrease capital expenditure by $85,000 for Trophy Cabinets ($15,000), Additional Building Storage ($20,000) and Grandstands ($50,000) as grant funding is not available for these projects.

Sustainable Environment and Economy

· In the Planning Policy & Natural Environment program, it is proposed to increase revenue by $37,400 due to a grant amendment for $5,000 for Beach Scraping, grant revenue for Byron Habitat Corridors ($18,200) and a grant instalment for the Flying Foxes program.

WATER FUND

After completion of the 2017/2018 Financial Statements, the Water Fund as at 30 June 2018 has a capital works reserve of $6,923,500 and held $3,857,800 in section 64 developer contributions.

The estimated Water Fund reserve balances as at 30 June 2019, and forecast in this Quarter Budget Review, are derived as follows:

Capital Works Reserve

Opening Reserve Balance at 1 July 2018	$6,923,500
Plus original budget reserve movement	(2,627,400)
Less reserve funded carryovers from 2017/2018	(375,700)
Resolutions July - September Quarter – increase / (decrease)	0
September Quarterly Review Adjustments – increase / (decrease)	89,900
Resolutions October - December Quarter – increase / (decrease)	0
December Quarterly Review Adjustments – increase / (decrease)	515,600
Forecast Reserve Movement for 2018/2019 – Increase / (Decrease)	(2,397,600)
Estimated Reserve Balance at 30 June 2019	$4,525,900

Section 64 Developer Contributions

Opening Reserve Balance at 1 July 2018	$3,857,800
Plus original budget reserve movement	(746,400)
Less reserve funded carryovers from 2017/2018	(503,800)
Resolutions July - September Quarter – increase / (decrease)	(430,000)
September Quarterly Review Adjustments – increase / (decrease)	74,000
Resolutions October - December Quarter – increase / (decrease)	0
December Quarterly Review Adjustments – increase / (decrease)	0
Forecast Reserve Movement for 2018/2019 – Increase / (Decrease)	(1,606,200)
Estimated Reserve Balance at 30 June 2019	$2,251,600

Movements for Water Fund can be seen in Attachment 1 with a proposed estimated increase to reserves (including S64 Contributions) overall of $515,600 from the 31 December 2018 Quarter Budget Review.

SEWERAGE FUND

After completion of the 2017/2018 Financial Statements the Sewer Fund as at 30 June 2018 has a capital works reserve of $8,706,800 and plant reserve of $704,400. It also held $9,051,600 in section 64 developer contributions.

Capital Works Reserve

Opening Reserve Balance at 1 July 2018	$8,706,800
Plus original budget reserve movement	(3,480,800)
Less reserve funded carryovers from 2017/2018	(1,454,800)
Resolutions July - September Quarter – increase / (decrease)	(1,330,000)
September Quarterly Review Adjustments – increase / (decrease)	258,600
Resolutions October - December Quarter – increase / (decrease)	0
December Quarterly Review Adjustments – increase / (decrease)	2,099,000
Forecast Reserve Movement for 2018/2019 – Increase / (Decrease)	(3,908,000)
Estimated Reserve Balance at 30 June 2019	$4,798,800

Plant Reserve

Opening Reserve Balance at 1 July 2018	$704,400
Plus original budget reserve movement	0
Less reserve funded carryovers from 2017/2018	0
Resolutions July - September Quarter – increase / (decrease)	0
September Quarterly Review Adjustments – increase / (decrease)	0
Resolutions October - December Quarter – increase / (decrease)	0
December Quarterly Review Adjustments – increase / (decrease)	0
Forecast Reserve Movement for 2018/2019 – Increase / (Decrease)	0
Estimated Reserve Balance at 30 June 2019	$704,400

Section 64 Developer Contributions

Opening Reserve Balance at 1 July 2018	$9,051,600
Plus original budget reserve movement	(27,900)
Less reserve funded carryovers from 2017/2018	(1,018,700)
Resolutions July - September Quarter – increase / (decrease)	(1,020,000)
September Quarterly Review Adjustments – increase / (decrease)	(50,400)
Resolutions October - December Quarter – increase / (decrease)	(856,000)
December Quarterly Review Adjustments – increase / (decrease)	50,000
Forecast Reserve Movement for 2018/2019 – Increase / (Decrease)	(2,923,000)
Estimated Reserve Balance at 30 June 2019	$6,128,600

Movements for the Sewerage Fund can be seen in Attachment 1 with a proposed estimated overall increase to reserves (including S64 Contributions) of $2,149,000 from the 31 December 2018 Quarter Budget Review.

Legal Expenses

One of the major financial concerns for Council over previous years has been legal expenses. Not only does this item represent a large expenditure item funded by general revenue, but can also be susceptible to large fluctuations.

The table that follows indicates the allocated budget and actual legal expenditure within Council on

a fund basis as at 31 December 2018.

Total Legal Income & Expenditure as at 31 December 2018

Program	2018/2019 Budget ($)	Actual ($)	Percentage To Revised Budget
Income
Legal Expenses Recovered	0	4,000	0%
Total Income	0	4,000	0%

Expenditure
General Legal Expenses	202,600	185,290	91.46%
Total Expenditure General Fund	202,600	185,290	91.46%

Note: The above table does not include costs incurred by Council in proceedings after 31 December 2018 or billed after this date. At the time of writing this report, Council has incurred an additional $7,135 of expenditure in January 2018 with a further commitment of $7,836. It is proposed to transfer an additional $100,000 from the Legal Services Reserve within this review to cover additional legal expenses expected this financial year. This will leave an estimated balance of $126,600 in the Legal Services reserve at 30 June 2019.

STRATEGIC CONSIDERATIONS

Community Strategic Plan and Operational Plan

CSP Objective

CSP Strategy

DP Action

OP Activity

Community Objective 5: We have community led decision making which is open and inclusive

5.5

Manage Council’s finances sustainably

5.5.1

Enhance the financial capability and acumen of Council

5.5.1.1

Financial reporting as required provided to Council and Management

Legal/Statutory/Policy Considerations

In accordance with Regulation 203 of the Local Government (General) Regulation 2005 the Responsible Accounting Officer of a Council must:-

(1) Not later than 2 months after the end of each quarter (except the June quarter), the responsible accounting officer of a council must prepare and submit to the council a budget review statement that shows, by reference to the estimate of income and expenditure set out in the statement of the council’s revenue policy included in the operational plan for the relevant year, a revised estimate of the income and expenditure for that year.

(2) A budget review statement must include or be accompanied by:

(a) a report as to whether or not the responsible accounting officer believes that the statement indicates that the financial position of the council is satisfactory, having regard to the original estimate of income and expenditure, and

(b) if that position is unsatisfactory, recommendations for remedial action.

(3) A budget review statement must also include any information required by the Code to be included in such a statement.

Financial Considerations

This report indicates that the short term financial position of the Council is still satisfactory for the 2018/2019 financial year, having consideration of the original estimate of income and expenditure at the 31 December 2018 Quarter Budget Review.

This opinion is based on the estimated General Fund Unrestricted Cash Result position and that the current indicative budget position for 2018/2019 outlined in this Budget Review remains for the remainder of the 2018/2019 financial year. It is also noted that Council will need to address the current level of the Legal Services Reserve.

Venue	Conference Room, Station Street, Mullumbimby
Date	Thursday, 14 February 2019
Time	2.00pm