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FINANCIAL PERFORMANCE REPORT – MAY 2024

Financial Services Manager (Acting), Pauline Coles · Financial Services | Corporate Services Department

Executive summary

Year-to-date (YTD) performance against current budget as at 31 May 2024 is positive with operating revenues outperforming forecast and operating expenditure under forecast YTD. Capital revenues are above forecast with total capital expenditure below forecast due to project delays and schedule timing of delivery. YTD Financial Performance Summary Budget Actual Variance Variance Status $m $m $m % Operating Revenue $126.5 $128.9 $2.4 1.9% On Track Operating Expense $116.7 $115.1 $1.6 1.3% On Track Operating Position $9.8 $13.8 $4.0 Capital Revenue $25.0 $32.7 $7.7 30.8% Above Budget Capital Expenditure* $83.1 $59.4 $23.7 28.6% Behind Budget

  • Reflects constructed assets and intangibles only (excludes contributed assets). The $4.0 million YTD positive operating variance comprises $2.2 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 $1.8 million from commercial operations. Unspent levy and separate charge funds are constrained in reserve for future use where they are not fully utilised in a given year. Budget Variance Actual YTD Item

YTD

YTD

$m $m $m $2.3 General business operating position (unconstrained funds) $4.5 $2.2 $4.9 Commercial operations (constrained funds) * $6.7 $1.8 $2.6 Unspent levies (constrained funds) $2.6 $0.0 $9.8 Total Council Operating Position $13.8 $4.0

  • 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 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 23.3 23.9 0.6 3.8 4.4 0.6 Expenditure 19.1 18.3 0.8 3.1 3.3 0.2 Net Operating Position 4.2 5.6 1.4 0.7 1.1 0.4 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 May 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% 10.7% Net Financial Liabilities Ratio On Track <60% -0.3% -15.5% Cash Cover Ratio On Track 3 months 9.4 months 12.0 months Asset Sustainability Ratio Behind > 90% 132.7% 80.3%

Recommendation

That Council note the report by the Manager Financial Services to the General Committee Meeting dated 17 June 2024 outlining May 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 91.7%) Council has received 94.7% ($128.9 million) of its operating revenue budget ($136.2 million). Commentary on each revenue category is provided below.

Category

Summary

Comments •

Rates and Levies $88.9 million (100.0%) General rate (net of discounts) $173.7k above of the annual budget of YTD budget (100.2% or $67.2 million of $67.0 $88.9 million has been million annual budget earned) • earned Waste utility charges $97.3k below YTD budget (99.4% or $15.8 million of $15.9 million annual budget earned) •

Fees and Charges $8.5 million (76.1%) of Development Assessment $755.3k below the annual budget of budget (65.7% or $2.5 million of $3.8 million $11.2 million has been annual budget earned) • earned Local Laws $247.5k below budget (77.8% or $1.6 million of $2.0 million annual budget earned) • Building & Plumbing Compliance $231.2k below budget (82.9% or $2.0 million of $2.4 million annual budget earned) • Community facility fees $129.1k below budget (59.9% or $243.3k of $406.3k annual budget earned) •

Sale of Goods and $15.1 million (101.9%) Holiday Park revenue $740.0k above budget

Services of the annual budget of (107.8% or $4.5 million of $4.1 million annual $14.8 million has been budget earned). Any revenue upside will be earned generally offset by a corresponding increase in associated operating costs. • Waste Management fees $413.4k above budget (96.9% or $6.9 million of $7.1 million annual budget earned) • Sports facility revenue $332.7k above budget (105.0% or $2.9 million of $2.7 million annual budget earned) • Cultural facility revenue $84.3k above budget (105.7% or $580.6k of $549.2k annual budget earned) •

Interest Received $6.5 million (132.6%) Interest revenues are tracking above budget of the $4.9 million with investment in higher yielding term annual budget has deposits maximising the return on surplus been earned cash holdings. Cash holdings are higher compared to previous years due to the advanced payment of QRA disaster capital

Summary works grants and delays in the delivery of the capital works program. •

Other Revenue $2.9 million (104.4%) Plant recharge revenue is $328.4k above of the $2.8 million budget due to internal plant being utilised for annual budget has the delivery of disaster funded capital projects. been earned •

Operating Grants, $3.4 million (46.0%) of Operating Grants and subsidies are in line with

Subsidies the $7.5 million annual budget expectations at this stage. YTD budget has been variance relates to $78k illegal dumping grant received received in February 2024. • 100% ($2.0 million) of the financial assistance grant allocated for FY 2023/24 was prepaid in June 2023. This prepayment approach has been consistent over the past 7 years however a change in this approach may impact Council’s 2023/24 final operating position. To date Council has not received notification from the Australian government whether it will continue this prepayment approach in respect to the FY 2024/25 funding allocation. •

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 84.7% ($115.1 million) of the full year budget ($135.9 million). Detailed commentary for each expenditure category is provided below.

Category

Summary

Comments •

Employee Costs $42.8 million (87.3%) of the Expenditure for permanent staff salaries annual budget of $48.9 and wages underspent ($3.0m) due to million has been expended position vacancies, partially offset by additional spend on casual staff and external labour hire ($1.6 million). • Training costs are behind forecast at this point in the year (67.2% or $205.4k of $372.6k annual budget spent)

Summary •

Materials and $51.4 million (80.5%) of the Civil Operations $900.6k above budget

Services $63.9 million annual budget (97.2% or $9.1 million of $9.4 million has been expended. annual budget spent) • Development Assessment $273.3k above budget (106.0% or $1.9 million of $1.8 million annual budget spent) • ICT $267.4k above budget (93.8% or $4.2 million of a $4.5 million annual budget spent) • Holiday Parks $164.5k above budget (92.4% or $2.3 million of a $2.5 million annual budget spent) – offset by additional revenue. • Waste Management $976.5k below budget (79.4% or $11.9 million of $15.0 million annual budget spent) – cost savings have been utilised to fund several emergent capital works projects. • Cemeteries $163.8k below budget (37.2% or $121.0k of $325.6k annual budget spent) • Transport and Traffic $142.7k below budget (33.7% of $80.7k of $239.7k annual budget spent) • Canals and Waterways $94.5k below budget (65.5% or $332.9k of $507.8k annual budget spent) • Environment Levy program $107.4k below budget (55.06% or $886.5k of $1.6 million annual budget spent) • Economic Development $70.3k below budget (53.0% or $233.2k of $439.7k annual budget spent) • Environmental Services (excluding levy funded programs) $69.5k below budget (65.5% or $955.0k of $1.5 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 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 31 May 2024 is outlined below:

Expenditure

YTD Budget

YTD Actual

Variance

$’000 $’000

$’000 - Tourism Noosa Funding Agreement $2,520 $2,520 ($69) Economic Development $1,039 $970

($69)

Total

$3,559

$3,490 All instalments payable under the Tourism Noosa agreement for the 2023-24 financial year have been made. • Employee Costs are $1k above budget (92.1% or $578.4k of $627.6k annual budget spent) • Materials & Services are $70.3k below budget (53.0% or $233.2k of $439.7k annual budget spent)

Capital Revenue Full Year Capital revenue of $32.7 million received comprises cash contributions from developers ($2.3m) and capital grants ($27.4 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 is 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.

gure 6: Capital Revenue by Type

Capital Program Actual capital expenditure (excluding commitments and disaster projects) is $26.8 million (YTD budget $41.7 million). Expenditure on disaster projects (excluding commitments) is $32.6 million (YTD budget $41.4 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 7: Capital Program Delivery Performance

Cash Management and Investment Performance Total cash on hand at the end of April was $113.2 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 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 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 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: 10.7% •

Comment: With the second rates cycle occurring in January, this ratio will slowly decline as expenditure on operations occurs through to the end of the financial year at 30 June 2024. •

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: 12.0 months •

Comment: Current cash cover remains above 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. A second advance payment of disaster funding ($17.6m) was received in February 2024, this combined with delays in the delivery capital works projects has resulted in higher than normal cash balances. 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. •

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: Renewals are currently running behind budget due to project delays and scheduling. •

Comment: The ratio will progressively increase 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. •

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: -15.5% •

Comment: Council has low debt levels and strong cash holdings. The advance payment of rates, grants and subsidies 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 (4.83%) •

Result: 5.60% •

Comment: With higher than normal cash balances and bond rates at their peak, 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: 6.5% •

Comment: Rates arrears continue to decline from the high point in the cycle with payments coming due in February. Reminder notices were issued in March 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