FINANCIAL PERFORMANCE REPORT – SEPTEMBER 2023

Executive summary

Year-to-date (YTD) performance against current budget as at 30 September 2023 is positive with operating revenues outperforming forecast and operating expenditure slightly under forecast YTD. Capital revenues are above forecast with capital expenditure slightly ahead of forecast due to scheduled timing of project delivery. YTD Financial Performance Summary Budget Actual Variance Variance Status $m $m $m % Operating Revenue $55.7 $57.4 $1.7 3.0% Above Budget Operating Expense $31.5 $31.2 $0.3 1.0% On Track Operating Position $24.2 $26.2 $2.0 Above Capital Revenue $0.8 $4.4 $3.6 419.6% Budget Capital Expenditure* $11.4 $11.8 ($0.4) (3.9%) On Track

• Reflects constructed assets and intangibles only (excludes contributed) The $2.0 million full year operating surplus comprises $1.1 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 $0.3 million from holiday park operations and $0.4 million from waste operations, and a further $0.2 million in unspent levy and separate charge funds which are constrained in reserve for future use. Budget Actual Variance Item

YTD

YTD

YTD

$m $m $m $18.1 General business operating position (unconstrained funds) $19.2 $1.1 $4.7 Commercial operations (constrained funds) * $5.4 $0.7 $1.4 Unspent levies (constrained funds) $1.6 $0.2 $24.2 Total Council Operating Position $26.2 $2.0

• Includes Waste and Holiday Park operations as shown in the table below Council 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 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 9.5 9.9 0.4 0.9 1.2 0.3 Expenditure 4.9 4.9 0.0 0.8 0.8 0.0 Net Operating 4.6 5.0 0.4 0.1 0.4 0.3 Position 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 September 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% -0.6% 45.7% Net Financial Liabilities On Track Ratio <60% -9.0% -69.8% Cash Cover Ratio On Track 3 months 9.3 months 14.6 months Asset Sustainability Ratio On Track > 90% 150.5% 32.6%

Recommendation

That Council note the report by the Manager Financial Services (Acting) to the General Committee Meeting dated 23 October 2023 outlining September 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 25.0%) Council has received 43.3% ($57.4 million) of its operating revenue budget ($132.4 million). Commentary on each revenue category is provided below.

Category

Summary

Comments •

Rates and Levies $44.6 million (49.9%) Waste utility charges $81.7k above YTD of the annual budget of budget (50.3% or $7.9 million of $15.7 million $89.3 million has been annual budget earned) • earned General rate (net of discounts) $208.8k below YTD budget (49.7% or $33.6 million of $67.7 million annual budget earned) •

Fees and Charges $3.4 million (30.0%) of Property and Facilities $19.7k above budget the annual budget of (39.33% or $281.6 of $716.1k annual budget $11.4 million has been earned) • earned Local Laws $68.1k below budget (31.7% or $673.9k of $2.1 million annual budget earned) • Community Facilities $63.9k below budget (9.26% or $37.6k of $406.3k annual budget earned) • Development Assessment $43.9k below budget (31.2% or $1.2 million of $3.8 million annual budget earned) • Building & Plumbing $37.8k below budget (23.7% or $1.2 million of $3.8 million annual budget earned) •

Sale of Goods and $3.8 million (27.6%) of Waste Management fees $336.2k above

Services the annual budget of budget (25.8% or $1.7 million of $6.8 million $13.9 million has been annual budget earned) • earned Holiday Park revenue $268k above budget (32.1% or $1.2 million of $3.7 million annual budget earned). Any revenue upside will be generally offset by a corresponding increase in associated operating costs • Community Facility fees $106.0k above budget (26.4% or $827.4k of $3.1 million annual budget earned) •

Interest Received $1.8 million (63.5%) of Interest revenues are tracking above budget the $2.8 million annual with investment in higher yielding term budget has been deposits maximising the return on surplus earned cash holdings. •

Other Revenue $0.6 million (22.4%) of Other revenue is in line with budget the $2.9 million annual expectations at this stage budget has been earned •

Operating Grants, $1.7 million (27.3%) of Operating Grants and subsidies is in line with

Subsidies the $6.2 million annual budget expectations at this stage • budget has been 100% ($2.0 million) of the financial assistance received grant was again prepaid in June 2023 and may impact on Council’s 2023/24 final operating position if the prepayment approach is discontinued by the Australian government. •

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 25.0%) Actual operating expenditure is currently 23.4% ($31.2 million) of full year budget ($133.2 million). Detailed commentary for each expenditure category is provided below.

Category

Summary

Comments •

Employee Costs $10.4 million (21.0%) of the Expenditure for permanent staff salaries annual budget of $49.6 and wages underspent ($916.2k) due to million has been expended position vacancies, partially offset by additional spend on casual staff and external labour hire ($393.5k). • Training costs $16.2k over full year budget (13.1% or $48.6k of $372.6k annual budget spent) •

Materials and $14.9 million (24.7%) of the Digital Hub $105.8k above budget (94.3%

Services $60.6 million annual budget or $187.7k of $198.9k annual budget has been expended. spent) relates to grant funded project with offsetting revenue. • Information Technology Communications $105.5k above budget (26.1% or $1.1 million of $4.3 million annual budget spent) • Infrastructure Planning, Design & Delivery $24.1k above budget (25.9% or $44.7k of $266.6k annual budget spent) • Development Assessment $32.1k below budget (36.0% or $487.2k of $1.4 million annual budget spent) • Environmental Services $29.2k below budget (22.4% or $759.8k of $3.4 million annual budget spent) • Waste Management $26.2k below budget (21.9% or $3.3 million of $14.8 million annual budget spent) • Cemeteries $24.4k below budget (6.2% or $20.4k of $325.6k annual budget spent) • Property and Facility $24.9k below budget (21.8% or $1.0 million of $4.9 million annual budget spent)

Category

Summary

Comments •

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 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 September 2023 is outlined below:

Expenditure

YTD Budget

YTD Actual

Variance

$m $m

$m Payment to Tourism - $1.26 $1.26 Noosa $0.02 Economic Development $0.19 $0.17

$0.02

Total

$1.45

$1.43 The first instalment payable under the Tourism Noosa agreement for the 2023-24 financial year was made in July. 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.

Legal Cost Summary An update on legal costs and associated expenditure is provided on a quarterly basis. Expenditure as at 30 September 2023 is outlined below. Legal and associated costs are $256.9k below budget (37.7% or $563.7 million of $1.5 million of annual budget spent). Legal and associated expenditure is dependent on the type and specialist nature of appeals being undertaken and costs and timing may fluctuate as a result.

Capital Revenue Full Year Capital revenue of $4.4 million received comprises cash contributions from developers ($237.7k) and capital grants ($4.1 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 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. Council has received upfront payments of $24.4 million to fund these works.

Figure 4: Capital Revenue by Type

Capital Program Actual capital expenditure (excluding commitments) is $11.8 million (YTD budget $11.4 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 June was $135.0 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. With the first bi-annual rates run coming due in August, cash is at a higher level at this point in the year, and will decline as expenditure occurs through to 30 June 2024. The following pie charts present the mix of cash held at September 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

Quarterly Supplementary Information - Cash Components 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 $135.0 million total cash balance compromises: • $58 million (43%) in restricted cash. This has increased due to the inclusion an additional $8.8 million to provide for future landfill rehabilitation and a total of $2.0 million expended year to date. • $29 million (22%) committed for capital works projects. • $28 million to meet sustainability requirements, equivalent to 3 months cash cover. • $18 million in working capital to pay for operations until the next rates and levies issue in February. • $2 million (2%) in unrestricted free cash, which is the cash available to fund emergent or new capital works projects. Reduction due to emergent capital works project variations. There is no funding to replenish this unless Council generates a surplus operating position.

Figure 7: 12 Allocation of Cash Balance

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.

Category

Comments •

Operating Surplus Ratio

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

Target: 0 – 10% •

Result: 45.7% •

Comment: The high ratio reflects the levying of rates in July, which will degrade as expenditure occurs on operations through the financial year to 30 June 2024.

Category

Comments •

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. Note this is calculated based on total cash, and includes both restricted and unrestricted cash components. •

Target: > 3 months •

Result: 14.6 months •

Comment: Current cash cover remains on target, while business as usual expenditure through to 30 June 2024 will degrade Council’s cash holdings, albeit not below the target range of 3 – 6 months. The cash balance is inflated as it included 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. •

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: -69.8% •

Comment: Council has low debt levels and strong cash holdings. The July rates

Category

Comments 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 (4.2%) •

Result: 5.08% •

Comment: With bond at higher levels, 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: 8.9% •

Comment: Rates arrears are in line with performance for the previous 6 and 12 monthly cycles

Report details

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