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FINANCIAL PERFORMANCE REPORT – NOV 2024

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

Executive summary

Year-to-date (YTD) performance against current budget as at 30 November 2024 is positive with operating revenues outperforming forecast and operating expenditure under forecast YTD. Capital revenues are above forecast with capital expenditure behind of forecast due to delays and rescheduled timing of project delivery. YTD Financial Performance Summary Budget Actual Variance Variance Status $m $m $m % Operating Revenue $67.5 $69.8 $2.3 3.4% On Track Operating Expense $56.1 $55.8 $0.3 0.6% On Track Operating Position $11.4 $14.0 $2.6 Capital Revenue $20.0 $24.0 $4.0 20.0% On Track Capital Expenditure* $61.2 $35.5 $25.7 42.0% Behind Budget

  • Reflects constructed assets and intangibles only (excludes contributed assets). The $2.6 million full year operating surplus 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 $0.1 million from holiday park operations and $0.8 million from waste 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 $7.5 General business operating position (unconstrained funds) $9.3 $1.7 $2.9 Commercial operations (constrained funds) * $3.8 $0.9 $0.9 Unspent levies (constrained funds) $0.9 $0.0 $11.4 Total Council Operating Position $14.0 $2.6

  • Includes Waste and Holiday Park operations as shown in the table below Council elects 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 ensures the best allocation of Councils limited resources. A summary of the YTD operational performance of these business activities are 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 11.9 12.4 0.5 1.7 1.9 0.2 Expenditure 9.3 9.0 0.3 1.3 1.4 (0.1) Net Operating Position 2.6 3.4 0.8 0.4 0.5 0.1 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 November 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% -0.1% 20.1% Net Financial Liabilities Ratio On Track <60% -3.2% -41.7% Cash Cover Ratio On Track 3 months 9.4 months 10.6 months Asset Sustainability Ratio Behind Budget > 90% 136.7% 28.8%

Recommendation

That Council note the report by the Financial Services Manager to the General Committee Meeting dated 16 December 2024 outlining the November 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 41.7%) Council has received 49.9% ($69.8 million) of its operating revenue budget ($139.9 million). Commentary on each revenue category is provided below.

Category

Summary

Comments • Waste utility charges $90.0k 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) $27.3k above YTD budget (49.9% or $35.7 million of $71.4 million annual budget earned) • Building & Plumbing Compliance $160.7k above

Fees and $5.2 million (47.5%) of budget (45.5% or $1.2 million of $2.6 million

Charges the annual budget of annual budget earned) $10.9 million has been • earned Waste $49.8k above budget (112.1% or $63.8k of $56.9k annual budget earned) • Cemeteries $25.5k above budget (48.9% or $171.3k of $349.8k annual budget earned) • Development Assessment $189.1k below budget (46.6% or $1.7 million of $3.6 million annual budget earned) • Local Laws $147.6k below budget (52.9% or $1.7 million of $2.5 million annual budget earned) • Waste $221.4k above budget (42.9% or $3.3

Sale of Goods $7.0 million (45.1%) of million of $7.7 million annual budget earned)

and Services the annual budget of • $15.6 million has been Holiday Park revenue $200.1k above budget earned (48.2% or $1.9 million of $4.0 million annual budget earned). Any revenue upside will be generally offset by a corresponding increase in associated operating costs. • Sports facility revenue $126.0k above budget (48.1% or $1.4 million of $2.9 million annual budget earned) • Interest revenues have continued to track above

Interest $2.8 million (88.6%) 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. • Plant recharge revenue is $51.3k above budget

Other Revenue $1.5 million (47.0%) of due to internal plant being utilised for the deliver the $3.3 million of disaster funded capital projects. annual budget has • been earned Recoupment of Waste Bin (SULO) purchases $40.2k above budget (63.9% or $66.0k of $103.3k annual budget earned. • Royalty income from landfill gas $22.4k above budget (88.5% or $51.5k of $58.1k annual budget earned)

Category

Summary

Comments • Operating Grants and subsidies are in line with

Operating $3.5 million (53.1%) 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, $90k for Regional Enablers 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 41.7%) Actual operating expenditure is currently 39.8% ($55.8 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 $21.7 million (41.4%) of the and wages underspent ($717.0k) due to annual budget of $52.6 position vacancies and recoupment of YTD million has been expended vacancy dividend. This underspend is also partially offset by additional spend on casual staff and external labour hire ($687.6k). • Training costs are above budget (52.5% or $202.6k of $386.1k annual budget spent)

Category

Summary

Comments • Holiday Parks $255.1k above budget

Materials and $23.9 million (38.4%) of the (38.7% or $918.1k of $2.4 million annual

Services $62.4 million annual budget budget spent) has been expended. • 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 $380.6k below budget (36.5% or $5.4 million of $14.7 million annual budget spent) • Arts & Culture $67.7k below budget (36.9% or $967.4k of $2.6 million annual budget spent) • Development Assessment below budget (38.3% or $502.7k of a $1.3 million annual budget spent) • Canals & Waterways $41.8k below budget (34.5% or $119.3k of a $346.2k annual budget spent) • ICT $40.5k below budget (39.9% or $2.1 million of a $5.3 million annual budget spent) • Holiday Parks $153.5k above budget (47.5% or $1.1 million of $2.4 million annual budget spent) - offset by additional revenue • Civil Operations $134.9k above budget (41.0% or $3.9 million of $9.5 million annual budget spent) • Fleet $72.6k above budget (50.2% or $806.4k of $1.6 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. YTD underspend also relates to the timing of drawdown of forecast borrowings for FY 2025.

Depreciation Currently on track Nil

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 November 2024 is outlined below:

Expenditure

YTD Budget

YTD Actual

Variance

$’000 $’000

$’000 - Tourism Noosa Funding Agreement $1,260.0 $1,260.0 $3.5 Economic Development $427.6 $424.1

$3.5

Total

$1,687.6

$1,684.1 Tourism and economic development activity is funded through the general rates. The first instalment payable under the Tourism Noosa agreement for the 2024-25 financial year was made in July 2024, with the second instalment due in January 2025. The Tourism Noosa agreement is due for renewal in June 2025. • Employee Costs are $5.3k below budget (41.1% or $264.9k 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 $24.0 million received comprises cash contributions from developers ($0.6m) and capital grants ($23.4 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 $10.7 million (YTD budget $20.3 million). Expenditure on disaster projects (excluding commitments) is $24.7 million (YTD budget $40.9 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 November was $101.3 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 November 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

Quarterly Supplementary Information - Cash Components An update detailing the composition of Council’s cash reserves is provided quarterly. Council’s cash balance comprises a number of components – restricted cash (reserves), committed cash, financial sustainability requirements and unrestricted cash. These are outlined below.

Restricted Cash - In accordance with Council’s Management of Restricted Cash Policy, funds are set aside and restricted for a specific purpose. This can be either to meet regulatory requirements, allocate against specific future projects and activities, and to ensure sufficient working capital to meet current and long term financial obligations.

Committed Cash - A portion of cash reserves are committed to undertake current year capital works. At the start of the financial year, this commitment will be increased for any unfinished capital works from previous year which are carried over as part of the budget review process to ensure the projects can be completed.

Sustainability Requirement – Cash expense cover is a key statutory indicator to measure liquidity, ensure going concern and is a key measure considered in Council achieving its current credit rating (Sound with a Neutral Outlook) to ensure borrowing capacity. Cash expense cover calculates how long Council can continue to pay its day-to-day expenses without needing to seek borrowings or other external funding. A target minimum of three month’s cash cover is to be held in any given financial year to minimise financial risk.

Unrestricted Cash – These are funds where there is no regulatory, policy or budgetary commitment to retain funds for specific purposes. These funds can be separated into the following:

  • Working Capital – The cycle of revenue received twice yearly through rates that is held in the bank and spent over the following six months on operations and capital.
  • Long Term Surplus – Uncommitted cash set aside to fund the 10-year capital works program. Overall, Council’s $101.3 million total cash balance compromises:
  • $44.9 million (44.3%) in restricted cash. This includes unspent levy funds, advance grant & subsidy payments, developer contributions, natural disaster provision and future landfill rehabilitation provision
  • $11.3 million (11.2%) committed for the delivery of capital works projects
  • $28.8 million ($28.4%) to meet sustainability requirements, equivalent to 3 months cash cover.
  • $9.4 million (9.3%) in working capital to pay for operations through to the next rating cycle
  • $6.9 million (6.8%) in unrestricted free cash, which is the cash available to fund emergent or new capital works projects. There is no funding to replenish this unless Council generates a surplus operating position.

Figure 10: Allocation of Cash Balances

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 significant emerging risks regarding performance identified at this stage, however the delay in the delivery of the capital program may impact Council’s asset sustainability and renewal targets.

Category

Comments •

Intent: Identifies the extent

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

Target: Greater than 0% •

Result: 20.1% •

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

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

Target: > 3 months •

Result: 10.6 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

Asset Sustainability Ratio to 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: 28.8% 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

Category

Comments the capital works program. For transparency

QRA

disaster projects have been excluded from the ratio calculations. Should capital works continue to fall forecast for the remainder of the year this may impact the achievement of Council’s asset sustainability and renewal targets •

Intent: Outlines the level that

Net Financial Liabilities Ratio 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: -41.7% •

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

Investment Return return on investment yield for cash at bank. •

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

Result: 5.57% •

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.

Category

Comments •

Intent: Ensuring that the

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

Target: 5% industry benchmark •

Result: 6.6% •

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