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FINANCIAL PERFORMANCE REPORT – OCT 2024

Financial Services Manager , Pauline Coles · Financial Services | Corporate Services Department

Executive summary

Year-to-date (YTD) performance against current budget as at 31 October 2024 is positive with operating revenues outperforming forecast and operating expenditure under forecast YTD. Capital revenues are above forecast with capital expenditure behind forecast due to scheduled timing of project delivery. YTD Financial Performance Summary Budget Actual Variance Variance Status $m $m $m % Operating Revenue $64.0 $65.9 $1.9 2.9% On Track Operating Expense $45.7 $45.2 $0.5 1.0% On Track Operating Position $18.3 $20.7 $2.4 Capital Revenue $18.9 $21.4 $2.5 13.1% On Track Capital Expenditure* $52.7 $26.2 $26.5 50.3% Behind Budget

  • Reflects constructed assets and intangibles only (excludes contributed), also includes QRA disaster funded projects, resulting from the February 2022 flood event. The $2.4 million full year positive interim operating variance comprises $1.7 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 $0.6 million from waste operations and $0.1 million from holiday park operations. Any unspent levy and separate charge funds are constrained in reserve for future use where they are not fully utilised in a given year. Budget Actual Variance Item

YTD

YTD

YTD

$m $m $m $13.2 General business operating position (unconstrained funds) $14.9 $1.7 $3.9 Commercial operations (constrained funds) * $4.6 $0.7 $1.2 Unspent levies (constrained funds) $1.2 $0.0 $18.3 Total Council Operating Position $20.7 $2.4

  • Includes Waste and Holiday Park operations as shown in the table below Council has elected to apply National Competition Policy (NCP) reforms to its Waste Management and Holiday Parks which provides greater transparency and assists with removing anti-competitive conduct and ensure the best allocation of Council's limited resources. A summary of the YTD operational performance of these business activities is outlined below. Waste Operations Holiday Parks Budget Actual Variance Budget Actual Variance

YTD

YTD

YTD

YTD

YTD

YTD

$m $m $m $m $m $m Revenue 11.2 11.4 0.2 1.2 1.6 0.4 Expenditure 7.5 7.1 0.4 1.0 1.3 (0.3) Net Operating Position 3.7 4.3 0.6 0.2 0.3 0.1 Financial statements including Statement of Income & Expenditure, Statement of Financial Position (balance sheet), and Statement of Cash Flows are included as attachments as further information for Council. Figure 1: Actual Performance Compared to Budget Council’s performance against key measures of financial sustainability has been calculated as at October 2024. 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% 0.2% 31.4% Net Financial Liabilities Ratio On Track <60% -0.3% -75.1% Cash Cover Ratio On Track 3 months 9.4 months 11.9 months Behind Budget Asset Sustainability Ratio > 90% 132.7% 20.2%

Recommendation

That Council note the report by the Financial Services Manager to the General Committee Meeting dated 18 November 2024 outlining the October 2024 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 33.3%) Council has received 47.1% ($65.9 million) of its operating revenue budget ($139.9 million). Commentary on each revenue category is provided below.

Category

Summary

Comments • Waste utility charges $93.4k above YTD budget

Rates and $47.2 million (50.0%) (50.3% or $8.5 million of $16.9 million annual

Levies of the annual budget of budget earned) $94.4 million has been • earned General rate (net of discounts) $1.7k below YTD budget (49.98% or $35.7 million of $71.4 million annual budget earned) • Building & Plumbing Compliance $162.0k above

Fees and $4.5 million (41.0%) of budget (38.4% or $995.3k of $2.6 million annual

Charges the annual budget of budget earned) $10.9 million has been • earned Cemeteries $28.4k above budget (41.4% or $145.0k of $349.8k annual budget earned) • Local Laws $83.6k below budget (50.2% or $1.3 million of $2.5 million annual budget earned) • Development Assessment $162.0k below budget (40.5% or $1.4 million of $3.6 million annual budget earned) • Holiday Park revenue $386.6k above budget

Sale of Goods $5.4 million (34.6%) of (39.2% or $1.6 million of $4.0 million annual

and Services the annual budget of budget earned). Any revenue upside will be $15.6 million has been generally offset by a corresponding increase in earned associated operating costs. • Sports facility revenue $99.2k above budget (36.8% or $1.1 million of $2.9 million annual budget earned) • Interest revenues have continued to track above

Interest $2.3 million (71.8%) of budget with investment in higher yielding term

Received the $3.1 million annual deposits maximising the return on surplus cash budget has been holdings. Cash holdings are higher compared to earned previous years due to the advanced payment of QRA disaster capital works grants and delays in the delivery of the capital works program. • Recoupment of Waste Bin (SULO) purchases

Other Revenue $1.2 million (35.4%) of $21.2k above budget (38.3% or $66.5k of the $3.3 million $174.9k annual budget earned. annual budget has been earned

Category

Summary

Comments • Operating Grants and subsidies are in line with

Operating $3.0 million (45.0%) of budget expectations at this stage of the year.

Grants, the $6.6 million YTD variance relates to $65k Floating Land

Subsidies annual budget has grant, $75k for Disaster Recovery & Resilience been received Officer funding program and $98k final payment relating to Black Summer Bushfire Funding for the living tech fire lab. • $1.4 million of the FY 2025 financial assistance grant allocation was received in July 2024. This is a change from the previous approach of prepaying part or all of the grant in the preceding year. This prepayment approach had been consistent over the past 7 years. • Council has received notification of the approved FY 2024/25 financial assistance grant allocation which is less than budgeted. As such there is potential for this to impact the FY 24/25 operating position if payment of future years allocations are not paid in the preceding year. • Unitywater distributions are fixed each year so

Unitywater On track there is limited budget variance risk

Distributions

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

Operating Expenditure (YTD Benchmark 33.3%) Actual operating expenditure is currently 32.3% ($45.2 million) of the full year budget ($140.1 million). Detailed commentary for each expenditure category is provided below.

Category

Summary

Comments • Expenditure for permanent staff salaries

Employee Costs $17.7 million (33.7%) of the and wages underspent ($544.8k) due to annual budget of $52.6 position vacancies, partially offset by million has been expended additional spend on casual staff and external labour hire ($563.4k). • Training costs are below budget (37.3% or $143.9k of $386.1k annual budget spent) • Holiday Parks $255.1k above budget

Materials and $19.4 million (31.1%) of the (38.7% or $918.1k of $2.4 million annual

Services $62.4 million annual budget budget spent) has been expended.

Category

Summary

Comments • Civil Operations $36.0k above budget (31.7% or $3.0 million of $9.5 million annual budget spent) • Fleet $32.8k above budget (40.2% or $646.3k of $1.6 million annual budget spent) • Waste Management $331.2k below budget (28.8% or $4.2 million of $14.7 million annual budget spent) • Building and Facilities $110.1k below budget (22.7% or $292.1k of $1.3 million annual budget spent) • Arts & Culture $73.7k below budget (29.8% or $779.8k of $2.6 million annual budget spent) • ICT $66.8k below budget (31.1% or $1.6 million of a $5.3 million annual budget spent) • Whilst existing loan borrowings are set with

Finance Costs Currently on track fixed interest rates, any further RBA rate rises will impact finance costs on new loan borrowings.

Depreciation Currently on track Nil

Other Expenses Currently on track Nil

Figure 3: Operating Expenditure Position by Type

Tourism and Economic Development Investment Summary Tourism and economic development activity is funded through the general rates. The first instalment payable under the Tourism Noosa agreement for the FY 2024-25 was made in July 2024.

Expenditure

YTD Budget

YTD Actual

Variance

$’000 $’000

$’000 - Tourism Noosa Funding Agreement $1,260.0 $1,260.0 $2.6 Economic Development $360.4 $357.8

$2.6

Total

$1,620.4

$1,617.8 All instalments payable under the Tourism Noosa agreement for the 2024-25 financial year have been made. • Employee Costs are $3.8k below budget (33.7% or $217.4k of $644.4k annual budget spent) • Materials & Services are in line with budget at this stage of the year.

Capital Revenue Year to date Capital revenue of $21.4 million received comprises cash contributions from developers ($0.5m) and capital grants ($20.9 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. Grants and subsidies are higher than prior years due to the receipt of funding from the Queensland Reconstruction Authority for reconstruction works relating to the Black Mountain landslip and several other flood impacted sites, which are currently under construction.

Figure 6: Capital Revenue by Type

Capital Program Actual capital expenditure (excluding commitments and disaster projects) is $5.9 million (YTD budget $13.3 million). Expenditure on disaster projects (excluding commitments) is $18.8 million (YTD budget $35.5 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 7: Capital Program Delivery Performance

Cash Management and Investment Performance Total cash on hand at the end of October was $114.3 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 (3 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 October 2024 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 8: 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 $30.5 million in higher yielding term deposits. These investments were made in line with Council’s Investment of Surplus Funds policy.

Figure 9: 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's financial performance. There are no current emerging risks regarding performance noting the early stage of the financial year.

Category

Comments •

Intent: Identifies the extent to

Operating Surplus Ratio which revenues cover operational expenses, to ensure community equity is not degraded •

Target: Greater than 0% •

Result: 31.4% •

Comment: The slowly declining ratio reflects the levying of 50% of rates in July and gradual utilisation of these monies as expenditure occurs on operations through to the next rating cycle in January 2025. •

Intent: Indicates how long council

Cash Expense Cover can continue paying its day-to- day expenses from cash at bank without needing additional cash flows •

Target: > 3 months •

Result: 11.9 months •

Comment: Cash cover remains above target, while business as usual expenditure through to 30 June 2025 will degrade Council’s cash holdings, albeit not below the target range of 3 – 6 months.Cash balances include funding for capital programs, unspent grant monies paid in advance, Waste Levy subsidy prepayments and QRA advance payments for disaster projects which are restricted for specific purposes and inflate the ratio. •

Intent: Measures the extent to

Asset Sustainability Ratio which assets are being replaced as their condition degrades to ensure service potential is maintained •

Target: 80% of depreciation budget spent on renewals annually •

Result: 20.2% achieved, however below forecast result due to project delays and scheduling. •

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

QRA

disaster projects have been excluded from the ratio calculations.

Category

Comments •

Intent: Outlines the level that net

Net Financial Liabilities Ratio 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: -75.1% •

Comment: Council has low debt levels and strong cash holdings. The first bi-annual rates run in July also inflates the YTD actual outcome. •

Intent: Ensure appropriate return

Investment Return on investment yield for cash at bank. •

Target: 0.25% above current Bloomberg commonwealth 10- year bond rate yield (4.44%) •

Result: 5.58% •

Comment: With higher-than- normal cash balances due to the advance payment of grants and subsidies and a delayed capital program, combined with bond rates remaining steady, Council has invested surplus cash in higher yielding term deposits to maximise returns. Council’s investment returns remain above target. •

Intent: Ensuring that the amount

Rates in Arrears of unpaid rates remains sustainable and does not negatively impact cash flows •

Target: 5% industry benchmark •

Result: 7.1% •

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

Report details

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