Agenda of Finance Advisory Committee Meeting

BYRON SHIRE COUNCIL

Staff Reports - Corporate and Community Services 4.2

Report No. 4.2 Unrestricted Cash and Reserves at 30 June 2016

Directorate: Corporate and Community Services

Report Author: James Brickley, Manager Finance

File No: I2016/1118

Theme: Corporate Management

Financial Services

Summary:

This report has been prepared to allow the Finance Advisory Committee to note the Reserve balances as at 30 June 2016, and to consider the recommendation that Council replace the Accumulated Surplus (Working Funds) as an indicator of Council’s liquidity position.

It is recommended that the Accumulated Surplus (Working Funds) indicator be replaced with the alternate indicator of the Unrestricted Cash Balance for the quarterly budget reporting during the 2016/17 Financial Year.

Council at its Ordinary Meeting held on 27 October 2016 adopted the 2015/2016 Financial Statements that incorporate the results indicated in this report.

RECOMMENDATION:

1. That the Reserve balances as outlined in Attachment 1 (#E2016/94067) at 30 June 2016 be noted by the Finance Advisory Committee.

2. That the Unrestricted Cash Balance of $1,145,200 as at 30 June 2016 be noted by the Finance Advisory Committee.

3. That the Finance Advisory Committee recommend to Council that for the 2016/17 Financial Year that the Accumulated Surplus (Working Funds) not be used as an indicator of Council’s liquidity position for the General, Water and Sewerage Funds and that for the General Fund that the Accumulated Surplus (Working Funds) be replaced with the Unrestricted Cash Balance indicator.

Attachments:

1 2015/2016 Reserves Schedule, E2016/94067 , page 33

Report

Council at its Ordinary Meeting held on 27 October 2016 adopted the 2015/2016 Financial Statements that incorporate the results indicated in this report.

Liquidity in terms of Council being able to fulfil its short term financial commitments is critical and an indicator in the short term of Council’s financial health. There is no set indicator that is absolutely used to identify the liquidity position of a Council, however there are the following indicators:

· Unrestricted Cash – this represents the total available cash and investments Council has, that is not restricted for any reason either by legislation, condition or Council resolution. This amount is determined at 30 June each year and disclosed at note 6(c) of Council’s annual Financial Statements. It is calculated by deducting from total cash and investments held the total amount of internal and external restrictions or reserves.

· Unrestricted Current Ratio – this ratio assesses the short term adequacy of working capital. It compares unrestricted current assets to unrestricted current liabilities. Any ratio that has at least $1.50 of unrestricted current assets to each $1 of unrestricted current liabilities is generally considered satisfactory. This indicator is determined at 30 June each year and disclosed at note 13(a) of Council’s annual Financial Statements. This indicator is usually provided on a consolidated basis ie amalgamating all of Council’s General, Water and Sewerage Funds. However since the 2009/2010 financial year, Councils are now required to calculate this ratio and other ratios by Fund for additional disclosure as outlined in note 13(b) of Council’s annual Financial Statements. On a consolidated basis at 30 June 2016, Council had $2.96 of unrestricted current assets to each $1 of unrestricted current liabilities.

· Accumulated Surplus (Working Funds) – this indicator is a traditional measure of Councils working capital adequacy and is something Byron Shire Council has used for some time and established targets for adequacy in each of the Funds operated being General, Water and Sewerage. Accumulated Surplus (Working Funds) are not disclosed anywhere in Council’s annual Financial Statements.

· Cash Expense Cover Ratio – this indicator commenced disclosure from the 2013/2014 financial year that is disclosed at note 13(a) of Council’s annual Financial Statements. It measures the number of months Council would be able to pay its immediate expenses without additional cash inflow. The benchmark for this ratio is 3 months and at 30 June 2016, Council was at 14.55 months.

Accumulated Surplus (Working Funds)

This measure of working capital has been utilised by Council historically as an indicator of its short term liquidity position. To this end, Council has adopted the following targets by Fund:

· General Fund - $1,000,000

· Water Fund - $600,000

· Sewerage Fund - $600,000

This indicator attempts to identify the working capital position of Council by comparing the following items:

· Current Assets (cash at bank, investments, current receivables, inventories and other current assets (generally prepayments)) less restricted assets or reserves (unexpended grants, contributions, bonds and deposits, unexpended loans, crown reserves and internal reserves)

less

· Current Liabilities (creditors, loan repayments due the next year, and provisions) less any restricted current liabilities, provisions and loan repayments. Provisions and loan repayments are generally excluded from the calculation as they form part of Council’s committed budget for the following financial year ie they are provided for there plus the immediate settlement of these items is generally not required.

One of the issues associated with the use of Accumulated Surplus (Working Funds) as a financial indicator relates to what items are included, and what items are not. An example of this is that the value of Council’s stores and materials is included as a current asset but these are not easily converted to cash. Firstly to utilise stores and materials as cash requires the stores and materials to be sold so whilst considered a current asset, if needed to in an emergency, the process to convert stores and materials to cash would take time, and therefore in terms of timing there is a question as to whether stores and materials are an appropriate component of Accumulated Surplus (Working Funds) balance. The theme follows that not all of Council’s current assets can be converted to cash immediately.

The notion of Accumulated Surplus (Working Funds), whilst an indicator of working capital cannot be construed as available cash, as its composure is simply not cash alone. This is something that an alternative measure such as the Unrestricted Cash Balance which is disclosed at Note 6(c) to Council’s annual Financial Statements, is considered as a stronger indicator, as it is based solely on available cash not restricted for any other purpose.

Unrestricted Cash Balance

The Unrestricted Cash Balance disclosed in the Financial Statements indicates that as at 30 June 2016 an amount of $1,145,211 was available whereas in 2014/2015 it was $1,143,412. This means that all cash held by Council as at 30 June 2016 was restricted for a purpose by legislation, funding condition or Council resolution except for $1,145,211.

Whilst Council has considered Accumulated Surplus (Working Funds) as its traditional guide to working capital or short term liquidity, it is also important to consider the amount of unrestricted cash as an alternate indicator. This is argued as it is clearly a more valid measure of the available cash position of Council. Council has considered this proposition at its Ordinary Meeting held on 8 August 2013 where it also adopted an Unrestricted Cash Balance target of $1,000,000 for the General Fund as a measure of its short term unrestricted liquidity from 1 July 2013 (Resolution: 13-378). Council’s other funds being Water and Sewerage will always have a $0 (Nil) Unrestricted Cash Balance given the legislative requirements of water and sewerage revenues which requires and unexpended funds to be reserved as an external restriction. Any reported Unrestricted Cash Balance will always relate to the General Fund.

1. It is subjective in calculation (interpreting what is included) and incorporates non-cash items even though it is purported to be a liquidity measure.

2. It is an indicator that is not recognised in Council’s Annual Financial Statements.

3. There is no reporting of this indicator to the Office of Local Government annually as part of the Council’s Financial Data Return.

4. It has not been used by any recent external financial assessments of Council such as the financial sustainability assessments conducted by NSW Treasury Corporation and the Independent Pricing and Regulatory Tribunal (IPART).

5. Current performance benchmarking in Local Government such as that conducted by Price Waterhouse Coopers (PWC) does not consider this indicator.

Reserves

Detailed at Attachment 1 is a listing of Council’s cash funded reserves. Contained in this listing is the detail of and value as at 30 June 2016 of the various reserve types. Reserve types are broken down into the following components:

· External Restrictions – these reserves relate to unexpended grants, developer contributions, bonds and deposits, unexpended loans (non-General Fund), Crown reserves, domestic waste management, water, sewerage and Roads and Maritime Services (RMS) contributions unexpended.

· Internal restrictions – these are reserves set by Council for specific purposes that are not required to be restricted for external reasons ie legislation, condition etc. These reserves though are generally created to isolate self-financing activities and their accumulated funds or if Council by resolution wants funds specifically set aside. Examples of internal restrictions are also listed in Attachment 1 and also in note 6(c) to Council’s annual Financial Statements.

In summary, as at 30 June 2016 detailed in Note 6(c) to the annual Financial Statements are the following values relating to reserves restricted against available cash and investments:

· Total available cash and investments $79,489,126

· Total external restrictions (reserves) $57,838,047

· Total internal restrictions (reserves) $20,505,868

· Total unrestricted cash and investments $1,145,211.

It is appropriate that Council consider its reserves which are restricted against available cash and investments and resolve by resolution to adopt their description and value. By default this occurred when Council adopted the 2015/2016 Financial Statements at its Ordinary Meeting held on 27 October 2016. Council further reviews the position of held reserves through setting the annual budget and subsequent reviews of the budget at each quarterly budget review.

Financial Implications

There are no direct financial implications associated with this report. the report is identifying to the Finance Advisory Committee the overall liquidity and reserves position of Council at 30 June 2016 for information.

Statutory and Policy Compliance Implications

The requirement of Council to restrict aspects of its available cash and investments follows from the requirement to maintain appropriate accounting records to verify the expenditure of funds and recognition of funds required to be detailed as unexpended. This is a canvassed by the Local Government Code of Accounting Practice and Financial Reporting (as amended) upon which Council must adhere to as outlined Section 413(3) of the Local Government Act 1993 and Regulation 214 of the Local Government (General) Regulation 2005.

Section 409 of the Local Government Act 1993 and Regulation 205 of the Local Government (General) Regulation also outline conditions on the use of funds received by Council.

BYRON SHIRE COUNCIL

Staff Reports - Corporate and Community Services 4.3

Report No. 4.3 Council Budget Review - 1 July 2016 to 30 September 2016

Directorate: Corporate and Community Services

Report Author: James Brickley, Manager Finance

File No: I2016/1120

Theme: Corporate Management

Financial Services

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 2016/2017 financial year, reviewed as at 30 September 2016.

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 Division of Local Government in circular 10-32.

RECOMMENDATION:

That the Finance Advisory Committee recommend to Council:

1. That Council authorise the itemised budget variations as shown in Attachment 2 (#E2016/94992) which includes the following results in the 30 September 2016 Quarterly Review of the 2016/2017 Budget:

a) General Fund – No change in the Estimated Unrestricted Cash Result

b) General Fund - $1,831,800 decrease in reserves

c) Water Fund - $1,216,300 increase in reserves

d) Sewerage Fund - $2,152,300 increase in reserves

2. That Council adopt the revised General Fund Estimated Unrestricted Cash Result of $1,182,800 for the 2016/2017 financial year as at 30 September 2016.

Attachments:

1 Budget Variations for General, Water and Sewerage Funds, E2016/95846 , page 47

2 Itemised Listing of Budget Variations for General, Water and Sewerage Funds, E2016/94992 , page 111

3 Integrated Planning and Reporting Framework (IP&R) Quarterly Review Statement, E2016/95847 , page 115

Report

Council adopted the 2016/2017 budget on 29 June 2016 via Resolution 16-348. It also considered and adopted the budget carryovers from the 2015/2016 financial year, to be incorporated into the 2016/2017 budget at its Ordinary Meeting held on 25 August 2016 via Resolution 16-446. Since that date, Council has reviewed the budget taking into consideration the 2015/2016 Financial Statement results and progress through the first quarter of the 2016/2017 financial year. This report considers the September 2016 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.

Contained in the document at Attachment 1 is 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) by showing the original budget as adopted by Council on 29 June 2016 plus the adopted carryover budgets from 2015/2016 followed by the resolutions between July and September and the revote (or adjustment for this review) and then the revised position projected for 30 June 2017 as at 30 September 2016.

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 provides an explanation of the variation.

There is also information detailing restricted assets (reserves) to show Council estimated balances as at 30 June 2017 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 Councils 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 pages 51 to 62 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 30 September 2017 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 July to September 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 2016/2017 financial year projected to 30 June 2017 but revised as at 30 September 2016.

2016/2017 Budget Review Statement as at 30 September 2016	Original Estimate (Including Carryovers) 1/7/2016	Adjustments to Sept 2016 including Resolutions*	Proposed Sept 2016 Review Revotes	Revised Estimate 30/6/2017 at 30/9/2016
Operating Revenue	75,503,200	0	39,200	75,542,400
Operating Expenditure	76,715,900	115,000	(181,800)	76,649,100
Operating Result – Surplus/Deficit	(1,212,700)	(115,000)	221,000	(1,106,700)
Add: Capital Revenue	19,784,900	0	2,308,100	22,093,000
Change in Net Assets	18,574,200	(115,000)	2,529,100	20,986,300
Add: Non Cash Expenses	12,515,100	0	0	12,515,100
Add: Non-Operating Funds Employed	1,673,000	0	0	1,673,000
Subtract: Funds Deployed for Non-Operating Purposes	(60,072,800)	0	(992,300)	(61,065,100)
Cash Surplus/(Deficit)	(27,312,500)	(115,000)	1,536,800	(25,890,700)
Restricted Funds – Increase / (Decrease)	(27,350,100)	(115,000)	1,536,800	(25,928,300)
Forecast Result for the Year – Surplus/(Deficit) – Unrestricted Cash Result	37,600	0	0	37,600

As part of this budget review, there has been a reassessment of the distribution support costs following implementation of the organisational restructure. Support costs are distributed across the primary activities of Council to reflect actual costs of those services. Budget programs such as People and Culture, Finance, Information Technology and Governance are examples of Council activities that provide support and where costs

are distributed to the primary activities of Council or output service areas. In this review, the costs of the General Manager Directorate which contains Organisation Development, Media/Communications, Customer Service and Organisation Development were revised to be allocated based on budgeted expenditure as opposed to the previous method of full time staff to reflect a more appropriate allocation of these costs. This has had an effect across most programs with a comment against the relevant budget program impacted in attachment 1.

GENERAL FUND

In terms of the General Fund projected Unrestricted Cash Result the following table provides a reconciliation of the estimated position as at 30 September 2016:

Opening Balance – 1 July 2016	$1,145,200
Plus original budget movement and carryovers	$37,600
Council Resolutions July – September Quarter	0
Recommendations within this Review – increase/(decrease)	$0
Forecast Unrestricted Cash Result – Surplus/(Deficit) – 30 June 2017	$37,600
Estimated Unrestricted Cash Result Closing Balance – 30 June 2017	$1,182,800

The General Fund financial position overall has not changed as a result of this budget review. However there are proposed changes to the budget as a result of this review. The proposed budget changes are detailed in Attachment 1 and summarised further in this report below.

Council Resolutions

There were no Council resolutions during the July to September 2016 quarter that impacted the overall 2016/2017 budget result.

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	0	0	0
Corporate & Community Services	215,000	150,200	64,800
Infrastructure Services	3,927,600	4,105,900	(178,300)
Sustainable Environment & Economy	81,200	(32,300)	113,500
Total Budget Movements	4,223,800	4,223,800	0

Budget Adjustment Comments

Within each of the Budget Directorates of the General Fund, are a series of budget adjustments identified in detail at Attachment 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:

Corporate and Community Services

· In the General Purpose Revenues Program an additional $95,800 in revenue has been recognised as the allocation for Council’s 2016/2017 Financial Assistance Grant is $95,800 more then budgeted. The original budget for this grant replicated the 2015/16 amount as Councils were advised that the Financial Assistance Grant would be frozen for four years from the 2014 Federal Budget. Council though has received an increased allocation following determination from the NSW Local Government Grants Commission as to the distribution of the Financial Assistance Grant allocated to NSW.

· In the Financial Services Program there is a proposed budget adjustment for additional income and expenditure of $36,700 due to a grant that was received from the NSW Treasury for the implementation of the Emergency Services Property Levy (ESPL). The ESPL will replace the Emergency Services Levy (ESL) that is currently collected as part of all property-based insurance policies and will be paid by all property owners alongside Council rates. This grant will assist with the implementation of this new charge.

· In the Governance Services Program it is proposed to increase expenditure by $26,100 to increase the number of days per week from 3 to 5 for the position of Legal Services Support Officer to provide additional resource to Legal Services to assist with work volumes. Funding for this is to be provided by the Legal Services Reserve.

· In the Community Development Program, expenditure has increased due to the Indigenous Language Arts project ($43,200 – funded from an unexpended grant) and a new 5 year licence agreement with the Mullumbimby District Cultural Centre for the Mullumbimby Drill hall ($29,800). This is funded from a rent subsidy by Council of $29,300 (The corresponding income adjustment is in the Facilities management program) and Licensee rent of $500.

· In the Sandhills program, it is proposed to reduce the support service costs by $53,800 as mentioned previously in this report and to increase the budget for required WHS works on the building and its grounds ($9,300). These movements have no net effect on the result as all movements are taken up through the Childrens’ Service reserve.

Infrastructure Services

· In the Emergency Services program, it is proposed to increase the expenditure budget to allow for the increase in contributions to the Rural Fire Service, NSW Fire Brigade and the SES. This is to reflect the actual cost to be incurred by Council as advised by the NSW Government.

· In the Local Roads and Drainage program, there are a number of adjustments outlined under Note 14 in the Budget Variations explanations section of Attachment 1. Further disclosure is included in the second 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 decrease operating income and expenditure by $11,500 from the block grant to match RMS approvals. It is also proposed to decrease capital expenditure by $54,400 due to the completion of the Broken Head road works being under budget ($80,400) and additional works for the creation and installation of the Jingi Wallah sign ($26,000).

· In the Open Space and Recreation program, operating expenditure increased by $300 due to a request for a budget for a Recreational needs Assessment of $50,000 and a support service cost adjustment ($49,700). An assessment of the active recreational land use for Byron Shire is required for Council to effectively plan to meet present and future recreational land needs of the community through the provision of appropriate grounds and associated facilities and services. There are a number of capital expenditure adjustments outlined under Note 16 in the Budget Variations explanations section of Attachment 1. Further disclosure is included in the third page of Attachment 2 under the budget program heading Open Space & Recreation.

· In the Quarry program it is proposed to reduce income and expenditure due to the inactivity of the Quarry.

· In the Waste & Recycling program It is proposed to increase operating income by $107,200 due to the receipt of the Better Waste and Recycling grant. It is proposed to increase operating expenditure by $43,000 for Promotion and Education Resource Recovery and an Anti littering program at Byron Bay Foreshore in association with the rollout of the new bin enclosure network. It is also proposed to make a support service adjustment of $48,300. It is proposed to increase capital expenditure by $364,000 for the replacement of all Byron Bay and Brunswick Heads bin enclosures including the roll-out of 71 new public place recycling enclosures and a trial of 1 public place organics recycling enclosure. This is to be funded through Developer Contributions ($250,000) and unexpended grant money from the NSW Environmental protection Agency (EPA) ($114,000).

· In the Cavanbah Centre program, it is proposed to increase expenditure to allow for the cost of installing a new booking system ($20,000)

· In the Suffolk Beachfront Holiday Park program, it is proposed to decrease the budget by $300,000 for the replacement of the Amenities block. It is anticipated that the majority of these works will now be carried out in the 2017/18 financial year.

· In the Facilities Management program it is proposed to increase operating expenditure by $39,100 due to a support service cost adjustment and increase capital expenditure to fund the administration centre foyer renovation ($15,000).

Sustainable Environment and Economy

· In the Planning Policy and Natural Environment Program, It is proposed to adjust the budget to cater for three new grants received (Graminoid Clay Heath Restoration $18,500, Land for Wildlife $15,600 and NCCARF Partnership program $5,000), income received from sponsorship at the sustainable house day ($3,600) and an applicant funded LEP contribution ($8,900). It is proposed to increase expenditure by the same grant monies and an additional $10,000 for the Byron Shire Housing Summit, as outlined in Council resolution 16-528.

WATER FUND

After completion of the 2015/2016 Financial Statements the Water Fund as at 30 June 2016 has a capital works reserve of $2,723,000 and held $10,549,100 in section 64 developer contributions.

The estimated Water Fund reserve balances as at 30 June 2017, and forecast in this Quarter Budget Review, are derived as follows:

Capital Works Reserve

Opening Reserve Balance at 1 July 2016	$2,723,000
Plus original budget reserve movement	1,553,000
Less reserve funded carryovers from 2015/2016	(346,800)
Resolutions July - September Quarter – increase / (decrease)	0
September Quarterly Review Adjustments – increase / (decrease)	(53,700)
Forecast Reserve Movement for 2016/2017 – Increase / (Decrease)	1,152,500
Estimated Reserve Balance at 30 June 2017	$3,875,500

Section 64 Developer Contributions

Opening Reserve Balance at 1 July 2016	$10,549,100
Plus original budget reserve movement	(7,794,000)
Less reserve funded carryovers from 2015/2016	(383,100)
Resolutions July - September Quarter – increase / (decrease)	0
September Quarterly Review Adjustments – increase / (decrease)	1,270,000
Forecast Reserve Movement for 2016/2017 – Increase / (Decrease)	(6,907,100)
Estimated Reserve Balance at 30 June 2017	$3,642,000

Movements for Water Fund can be seen in Attachment 1 with a proposed estimated increase to reserves (including S64 Contributions) overall of $1,216,300 from the 30 September 2016 Quarter Budget Review.

SEWERAGE FUND

After completion of the 2015/2016 Financial Statements the Sewerage Fund held a capital works reserve of $5,153,600 and a plant reserve of $827,800. It also held $8,760,300 in section 64 developer contributions.

Capital Works Reserve

Opening Reserve Balance at 1 July 2017	$5,153,600
Plus original budget reserve movement	814,200
Less reserve funded carryovers from 2015/2016	(96,900)
Resolutions July - September Quarter – increase / (decrease)	0
September Quarterly Review Adjustments – increase / (decrease)	1,071,600
Forecast Reserve Movement for 2016/2017 – Increase / (Decrease)	1,788,900
Estimated Reserve Balance at 30 June 2017	$6,942,500

Plant Reserve

Opening Reserve Balance at 1 July 2016	$827,800
Plus original budget reserve movement	0
Less reserve funded carryovers from 2015/2016	0
Resolutions July - September Quarter – increase / (decrease)	0
September Quarterly Review Adjustments – increase / (decrease)	0
Forecast Reserve Movement for 2016/2017 – Increase / (Decrease)	0
Estimated Reserve Balance at 30 June 2017	$827,800

Section 64 Developer Contributions

Opening Reserve Balance at 1 July 2016	$8,760,300
Plus original budget reserve movement	(2,785,400)
Less reserve funded carryovers from 2015/2016	(503,200)
Resolutions July - September Quarter – increase / (decrease)	0
September Quarterly Review Adjustments – increase / (decrease)	1,074,700
Forecast Reserve Movement for 2016/2017 – Increase / (Decrease)	(2,213,900)
Estimated Reserve Balance at 30 June 2017	$6,546,400

Movements for the Sewerage Fund can be seen in Attachment 1 with a proposed estimated overall increase to reserves (including S64 Contributions) of $2,146,300 from the 30 September 2016 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 30 September 2016.

Total Legal Income & Expenditure as at 30 September 2016

Program	2016/2017 Budget ($)	Actual ($)	Percentage To Revised Budget
Income
Legal Expenses Recovered	0	0	0%
Total Income	0	0	0%

Expenditure
General Legal Expenses	200,000	7,681	3.8%
Total Expenditure General Fund	200,000	7,681	3.8%

Note: The above table does not include costs incurred by Council in proceedings after 30 September 2016 or billed after this date.

Financial Implications

The 30 September 2016 Quarter Budget Review of the 2016/2017 Budget has not changed the overall budget result. As a result there is no expected change to the estimated unrestricted cash balance attributable to the General Fund, with this remaining an estimated $1,182,800 at 30 June 2017.

Statutory and Policy Compliance Implications

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.

Statement by Responsible Accounting Officer

This report indicates that the short term financial position of the Council is satisfactory for the 2016/2017 financial year, having consideration of the original estimate of income and expenditure at the 30 September 2016 Quarter Budget Review.

This opinion is based on the estimated General Fund Unrestricted Cash Result position and that the current indicative budget position for 2016/2017 is maintained in this Budget Review. Notwithstanding this, Council will need to continue to carefully monitor the 2016/2017 budget over the remainder of the financial year.

BYRON SHIRE COUNCIL

Staff Reports - Corporate and Community Services 4.4

Report No. 4.4 Financial Sustainability Plan 2016/2017

Directorate: Corporate and Community Services

Report Author: Mark Arnold, Director Corporate and Community Services

File No: I2016/1121

Theme: Corporate Management

Financial Services

Summary:

Council at its Ordinary meeting held on 9 May 2013 adopted a Financial Sustainability Plan (“FSP”) for the 2013/2014 financial period (refer Resolution 13-238).

This was the initial FSP developed and adopted by Council, and was prepared in accordance with part 3 of Council Resolution 13-148, to provide a strategic approach to the management of the Financial Sustainability of Council.

Resolution 13-148, adopted by the Strategic Planning Committee Resolution at its meeting held on 28 March 2013, provided the framework for the development the FSP.

The FSP provides a means for Council to communicate with the community on proposed reforms and actions to manage the financial sustainability of the organisation in the short, medium and long term.

This report has been prepared to allow the Finance Advisory Committee to consider the fourth version of the Financial Sustainability Plan for the 2016/2017 financial period.

A copy of the draft Financial Sustainability Plan 2016/17 will be distributed to Committee Members prior to the meeting.

RECOMMENDATION:

That the Finance Advisory Committee recommend to Council:

That Council adopt the Draft Financial Sustainability Plan 2016/2017 (#E2016/26998).

Report

This report has been prepared to allow the Finance Advisory Committee to consider the draft “Financial Sustainability Plan 2016/2017” (“FSP 2016/2017”).

The FSP 2016/2017 is the fourth version of the FSP prepared for consideration by Council.

The first version of the FSP, FSP 2013/2014 was adopted by Council on 9 May 2013 via Resolution 13-238.

The second version of the FSP, FSP 2014/2015 was adopted by Council on 7 August 2014 via Resolution 14-326.

The third version of the FSP, FSP 2015/2016 was adopted by Council on 15 December 2015 via Resolution 15-606.

During the course of the 2015/2016 financial year, work on the implementation of the actions detailed in the individual chapters of the 2015/2016 FSP was undertaken, with the outcomes progressively reported to the Finance Advisory Committee on a quarterly basis on 18 February 2016 and 12 May 2016, with the final report for the 2015/2016 financial year submitted to the FAC meeting held 18 August 2016.

The FSP 2016/2017 has been developed using a similar format to that of FSP 2015/2016 but has been amended to reflect the actions undertaken and the impact of the outcomes from these actions on the future strategic management of Council’s financial sustainability.

The relevant chapters in the FSP 2016/2017 have been prepared to capture the outcomes from the 2015/2016 financial year as well detail what is proposed for the 2016/2017 financial year.

The Action Plan is a summary of the actions detailed in the FSPP for the following chapter areas:

· Expenditure Review

· Revenue Review

· Land Review and Property Development

· Strategic Procurement

· Policy and Decision Making

· Potential Commercial Opportunities

· Volunteerism

· Collaborations and Partnerships

· Asset Management

· Long Term Financial Planning

· Performance Indicators

· Environmental Projects

The Action Plan will be completed and included in the 2016/2017 FSP when adopted by Council and will be developed from the Actions included in each Chapter. The Action Plan will then be reported to the FAC each quarter starting with the December quarter.

A copy of the draft “Financial Sustainability Plan 2016/2017” will be distributed to Committee Members prior to the meeting.

Financial Implications

The draft “Financial Sustainability Plan 2016/2017” forms part of the strategic approach adopted by Council in managing the short, medium long term sustainability of Council. The Plan needs to be considered in context with the adopted annual Operational Plan, the Quarterly Budget Reviews and the Long Term Financial Plan when Council is considering the financial impacts of specific activities, projects and Services.

Part 2 of Resolution 13-148 requires the General Manager to prepare reports on specific elements of sustainability reform package detailed in the FSP, including any rationalisation of Council's property portfolio and the associated establishment of an Infrastructure Renewal Fund. The Infrastructure Renewal Fund was established by Council by Resolution 13-170 and the terms of operation for this Reserve were adopted by Council on 9 May 2013 via Resolution 13-239.

In accordance with Part 4 of Resolution 13-148 the General Manager will continue to prepare and submit progress reports on the implementation of the draft “Financial Sustainability Plan 2016/2017” to the Council's Finance Committee on a quarterly basis.

Statutory and Policy Compliance Implications

The FSP has been developed as a tool to assist Council in its ongoing obligations as defined in Chapter 3 (Principles for local government) of the Local Government Act 1993.

Section 8A of the Local Government 1993 provides that Council as part of its Guiding Principles consider the following:

(1) Exercise of functions generally

The following general principles apply to the exercise of functions by councils:

(a) Councils should provide strong and effective representation, leadership, planning and decision-making.

(b) Councils should carry out functions in a way that provides the best possible value for residents and ratepayers.

(c) Councils should plan strategically, using the integrated planning and reporting framework, for the provision of effective and efficient services and regulation to meet the diverse needs of the local community.

(d) Councils should apply the integrated planning and reporting framework in carrying out their functions so as to achieve desired outcomes and continuous improvements.

(e) Councils should work co-operatively with other councils and the State government to achieve desired outcomes for the local community.

(f) Councils should manage lands and other assets so that current and future local community needs can be met in an affordable way.

(g) Councils should work with others to secure appropriate services for local community needs.

(h) Councils should act fairly, ethically and without bias in the interests of the local community.

(i) Councils should be responsible employers and provide a consultative and supportive working environment for staff.

(2) Decision-making

The following principles apply to decision-making by councils (subject to any other applicable law):

(a) Councils should recognise diverse local community needs and interests.

(b) Councils should consider social justice principles.

(d) Councils should consider the principles of ecologically sustainable development.

(e) Council decision-making should be transparent and decision-makers are to be accountable for decisions and omissions.

(3) Community participation

Councils should actively engage with their local communities, through the use of the integrated planning and reporting framework and other measures.

Venue	Conference Room, Station Street, Mullumbimby
Date	Thursday, 10 November 2016
Time	2.00pm