FINANCIAL PERFORMANCE REPORT – MAY 2023

Executive summary

Year-to-date (YTD) performance against current budget as at 31 May 2023 is positive with operating revenues outperforming forecast. Operating expenditure is under forecast YTD, with an underspend in Employee Costs and Materials and Services. Capital revenues are above forecast while capital expenditure is below forecast due to timing of project delivery. YTD Financial Performance Summary Budget Actual Variance Variance Status $m $m $m % Operating Revenue $117.2 $119.1 $1.9 1.6% Above Budget Operating Expense $106.3 $105.6 $0.8 0.7% On Track Operating Position $10.9 $13.6 $2.7 24.7% Capital Revenue $22.7 $34.8 $12.1 53.4% Above Budget Capital Expenditure* $48.0 $44.3 $3.8 7.8% Below Budget

• Reflects constructed assets and intangibles only (excludes contributed) The $2.7 million YTD operating surplus comprises $2.6 million general operating surplus from activities that are funded through Council’s general rate, regulatory fees and sales of goods and services; as well an additional $0.1 million from waste operations, unspent levy and separate charge funds are constrained in reserve for future use. The general operating surplus position is also augmented by a number of incomplete grant-funded programs. Budget Actual Variance Item

YTD

YTD

YTD

$m $m $m $9.5 General business operating position (unconstrained funds) $12.1 $2.6 ($2.5) Unspent levies (constrained funds) ($2.5) $0.0 $3.9 Waste operations $4.0 $0.1 $10.9 Total Council Operating Position $13.6 $2.7 Financial statements including Statement of Income & Expenditure, Statement of Financial Position (balance sheet), and Statement of Cash Flows are included as attachments for information for Council. Figure 1: Actual Performance Compared to Budget Council’s performance against key measures of financial sustainability has been calculated as at May 2023. These statutory indicators enable the reader to assess Council’s success in managing its budget, cash and debt as well as undertaking sustainable asset management. The table below contains a snapshot of a number of key measures, with full detail included in the report. YTD Measures of Financial Sustainability Current Target Actual YTD Status Budget Operating Surplus Ratio On Track 0-10% 0.1% 11.4% Net Financial Liabilities On Track Ratio t;60% -12.8% -34.3% Cash Cover Ratio On Track 3 months 10.3 months 13.6 months Asset Sustainability Ratio On Track > 90% 176.7% 156.7%

Recommendation

That Council note the report by the Manager Financial Services (Acting) to the General Committee Meeting dated 12 June 2023 outlining May 2023 year to date financial performance against budget, including changes to the financial performance report with the inclusion of key financial sustainability indicators.

Report

Operating Revenue (YTD Benchmark 91.7%) Council has received 97.1% ($119.1 million) of its operating revenue budget ($122.7 million). Commentary on each revenue category is provided below.

Category

Summary

Comments •

Rates and Levies $83.2 million (100.0%) General rate (net of discounts and pensioner of the annual budget of remissions) $23.0k above

YTD

budget $83.2 million has been (100.0% or $62.9 million of $62.9 million earned annual budget earned) • Waste utility charges $25.1k under YTD budget (99.9% or $14.6 million of $14.6 million annual budget earned)

Summary •

Fees and Charges $7.4 million (86.0%) of Property and Facility fees $111.4k above YTD the annual budget of budget (102.8% or $589.4k of $573.4k annual $8.7 million has been budget earned) • earned Waste Management fees $26.3k above YTD budget (75.1% or $193.7k of $258.0k annual budget earned) • Cemetery fees $15.4k above YTD budget (96.7% or $296.3k of $306.4k annual budget earned) • Development Assessment $489.6k below YTD budget (74.8% or $1.8 million of $2.4 million annual budget earned) • Plumbing fees $108.1k below YTD budget (87.9% or $1.2 million of $1.3 million annual budget earned) • Building fees $67.2k below YTD budget (75.8% or $668.3k of $882.2k annual budget earned) •

Sale of Goods and $12.7 million (95.9%) Holiday Park revenue $376.3k above YTD

Services of the annual budget of budget (100.4% or $4.0 million of $4.0 million $13.2 million has been annual budget earned). Any revenue upside earned will be generally offset by a corresponding increase in associated operating costs • Community Facility fees $212.3k above YTD budget (99.5% or $3.1 million of $3.1 million annual budget earned) • Sales of Recyclables $49.3k below YTD budget (88.2% or $1.2 million of $1.4 million annual budget earned) •

Interest Received $4.0 million (125.0%) Interest revenues continue to track above of the $3.2 million budget YTD with Council investing surplus annual budget has cash in high yielding term deposits to maximise been earned the return on its cash holdings and interest rate on QTC and CBA facilities also increasing inline with market pressures. •

Other Revenue $3.1 million (115.9%) Waste Management sundry revenue $110.4k of the $2.7 million above YTD budget (146.8% or $334.5k of annual budget has $227.8k annual budget earned) • been earned Community Facility revenue $63.8k above YTD budget (108.0% or $466.7k of $431.9k annual budget earned) • Digital Hub revenue $19.5k below YTD budget (67.2% or $53.2k of $79.2k annual budget earned) • Properties and Facilities revenue is $127.7k above budget due to the receipt of an insurance reimbursement for damage to Council properties from the February 2022 flood event. •

Operating Grants, $4.6 million (79.5%) of Operating Grants and subsidies are above

Subsidies the $5.7 million annual YTD budget expectations due to the receipt of budget has been a QRA Local Economic Recovery Grant, QRA received Emergent Works and Disaster Funding, Queensland Arts Showcase Program Grant, Illegal Dumping Grant, Eco-Certified Tourism Destination Program and Public Health Network Grant.

Summary • 75% ($1.9 million) of the financial assistance grant was prepaid in June 2022 and may impact on Council’s 2022/23 final operating position if the prepayment approach is discontinued by the Australian government. Council has also been advised that its allocation of future year financial assistance grants is likely to decrease, which has the potential to further impact Council’s operating result. •

Unitywater On track Unitywater distributions are fixed each year so

Distributions there is limited budget variance risk

Figure 2: Operating Revenue Position by Type (Excluding Rates)

Operating Expenditure (YTD Benchmark 91.7%) Actual operating expenditure is currently 86.2% ($105.6 million) of full year budget ($122.5 million). Detailed commentary for each expenditure category is provided below.

Category

Summary

Comments •

Employee Costs $37.6 million (88.6%) of the YTD under expenditure for permanent annual budget of $42.4 staff salaries and wages ($1.4 million) due million has been expended to position vacancies, partially offset by additional spend on casual staff and external labour hire ($1.3 million). • Training costs $4.5k under YTD budget (81.0% or $302.9k of $374.0k annual budget spent) •

Materials and $48.5 million (82.4%) of the Civil Operations $554.9k above YTD

Services $58.9 million annual budget budget (97.4% or $8.5 million of $8.7 has been expended. million annual budget spent) • Holiday Parks $273.9k above YTD budget (104.9% or $2.4 million of $2.3 million annual budget spent) – offset by additional revenue. • Community Facilities $62.6k above YTD budget (93.9% or $2.3 million of $2.5 million annual budget spent)

Summary • Fleet $38.2k above YTD budget (86.9% or $1.2 million of $1.4 million annual budget spent) • Environment & Sustainable Development Management $20.2k above YTD budget (108.1% or $194.1k of $179.5k annual budget spent) • Waste Management $251.6k below YTD budget (89.8% or $11.9 million of $13.2 million annual budget spent) • Development Assessment $196.2k below YTD budget (76.0% or $1.1 million of $1.4 million annual budget spent) • Strategic Planning $159.7k below YTD budget (26.4% or $194.1k of $734.8k annual budget spent) • Infrastructure Planning, Design & Delivery $150.1k below YTD budget (12.7% or $54.8k of $429.9k annual budget spent) • Asset Management $132.5k below YTD budget (53.5% or $696.8k of $1.3 million annual budget spent) • Information Communication & Technology $117.7k below YTD budget (85.3% or $3.6 million of $4.1 million annual budget spent) • Procurement $107.9k below YTD budget (78.3% or $1.0 million of $1.4 million annual budget spent) • Environmental Services $87.5k below YTD budget (53.5% or $2.7 million of $5.0 million annual budget spent) •

Finance Costs Currently on track Whilst existing loan borrowings are set with fixed interest rates, any further RBA rate rises will impact finance costs on new loan borrowings. •

Depreciation Currently on track Current inflationary conditions for construction inputs will continue to impact the value of Council’s infrastructure assets and depreciation. The annual asset revaluation cycle will quantify the financial risk by end of financial year.

Other Expenses Currently on track Nil

Figure 3: Operating Expenditure Position by Type

Tourism and Economic Development Investment Summary Council resolved to report on a monthly basis, investment details for tourism and economic development. Expenditure at 30 April 2023 is outlined below:

Expenditure

Annual Budget

YTD Budget

YTD Actual

YTD Variance

$m $m

$m - Payment to Tourism Noosa $2.65 $2.65 $2.65 $0.01 Economic Development $1.20 $0.93 $0.92

$0.01

Total

$3.85

$3.58

$3.57 All instalments payable under the Tourism Noosa agreement for the 2022-23 financial year have been made. Economic Development expenditure is on track with the development of the Destination Management Plan underway. Tourism and economic development activity is funded through the general rate, with 5.8% of the annual general rate committed towards tourism and economic development. Should actual general rate revenue fall below budget, this does not impact Council’s contractual commitment to fully fund its contribution to Tourism Noosa and all associated tourism activity. Any general rate revenue shortfall is funded through other general revenue sources to ensure all planned activities are undertaken in full.

Capital Revenue YTD capital revenue of $34.8 million received comprises cash contributions from developers ($2.3 million) and capital grants ($32.0 million). Note that the timing of capital grant receipts are generally dependent on the timing of grant conditions and also capital delivery performance, and that the timing of the receipt of developer contributions (both cash and contributed) is unpredictable. Council has received funding approval from the Queensland Reconstruction Authority for reconstruction works relating to the Black Mountain landslip and several other flood impacted sites, which occurred during the February 2022 rain event. Following this approval, Council has received upfront payments of $21.5 million to fund these works.

Figure 4: Capital Revenue by Type

Capital Program Actual capital expenditure (excluding commitments) is $44.3 million (YTD budget $48.0 million). Detailed discussion of progress in the delivery of the capital works program is provided through a separate quarterly report by the infrastructure team.

Figure 5: Capital Program Delivery Performance

Cash Management and Investment Performance Total cash on hand at the end of May was $111.6 million. Included in this balance are funds held in trust and for restricted purposes (e.g. unexpended levy and grant funds), prepaid grants including the financial assistance grant, QRA disaster funding and other capital works grants, prepayment of Waste Levy subsidy (4 years), and unspent monies committed for funding capital projects which are underway and will continue during the financial year. The following pie charts present the mix of cash held at May 2023 by agency (graph on the left) and by credit risk rating (graph on the right). All funds have been invested in accordance with the Investment Policy and in consideration of the principles of ethical investment, preservation of capital, return on investment and counterparty thresholds.

Figure 6: Closing Cash Held by Agency and Credit Rating The following chart monitors the 12 month trend on total cash and the agencies invested. To maximise the return on in its cash holdings Council has invested $50 million in higher yielding term deposits. These investments were made in line with Council’s Investment of Surplus Funds policy.

Figure 7: 12 Month Trend of Cash Invested by Agency

Measures of Financial Sustainability The following table incorporates a set of financial sustainability indicators to further assist in managing Council financial performance. There are no current emerging risks regarding performance noting the early stage of the financial year. •

Operating Surplus Ratio

Intent: Identifies the extent to which revenues cover operational expenses, to ensure community equity is not degraded •

Target: 0 – 10% •

Result: 11.4% •

Comment: The ratio is at the second peak for the year following the issue of rates and levies in January. This ratio will slowly decline as expenditure on operations occurs through to the end of the financial year at 30 June 2023. •

Cash Expense Cover

Intent: Indicates how long council can continue paying its day-to-day expenses from cash at bank without needing additional cash flows •

Target: > 3 months •

Result: 13.6 months •

Comment: Council is forecast to remain above target for the financial year. Business as usual expenditure through to 30 June 2023 will continue to diminish Council’s cash holdings, albeit not below the target range of 3 – 6 months. Cash balances are also enhanced with Grant and Waste Levy subsidy prepayments (held as restricted cash) and QRA payments for disaster projects •

Asset Sustainability Ratio

Intent: Measures the extent to which assets are being replaced as their condition degrades to ensure service potential is maintained •

Target: 90% of depreciation budget spent on renewals annually •

Result: In line with budget •

Comment: The ratio will progressively increase each month as expenditure on renewals occurs as part of the capital works program. •

Net Financial Liabilities Ratio

Intent: Outlines the level that net Council debt can be serviced by operating revenues. A ratio below zero implies that liabilities are less than cash (and other current assets) and there is adequate borrowing capacity available if needed. •

Target: less than 60% •

Result: -34.3% •

Comment: Council has low debt levels and strong cash holdings. The January rates revenue also inflates the YTD actual outcome. •

Investment Return

Intent: Ensure appropriate return on investment yield for cash at bank. •

Target: 0.25% above current Bloomberg commonwealth 10-year bond rate yield (3.40%) •

Result: 4.47% •

Comment: With bond rates rising, Council has invested surplus cash in higher yielding term deposits to maximise returns. Council’s investment returns remain above target. •

Rates in Arrears

Intent: Ensuring that the amount of unpaid rates remains sustainable and does not negatively impact cash flows •

Target: 5% industry benchmark •

Result: 5.7% •

Comment: Rates arrears continue to decline from the high point in the cycle with payments coming due in February. Reminder notices will be issued and arrears will continue to stabilise through to June as they are collected, and payment arrangements implemented.

Report details

Index: ECM/ Subject / 22.09 – Monthly Financial Performance Report