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FINANCIAL PERFORMANCE REPORT – AUGUST 2024

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

Executive summary

Year-to-date (YTD) performance against current budget as at 31 August 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. The current budget now includes Budget Review 1 (BR1) adjustments which was adopted at August 2024 Council meeting for any operational and capital commitments carried over from 2023/24. YTD Financial Performance Summary Budget Actual Variance Variance Status $m $m $m % Operating Revenue $56.0 $56.7 $0.7 1.3% On Track Operating Expense $22.5 $21.6 $0.8 3.7% On Track Operating Position $33.5 $35.1 $1.6 Capital Revenue $7.6 $8.1 $0.4 5.8% On Track Capital Expenditure* $21.1 $10.8 $10.4 49.1% Behind Budget

  • Reflects constructed assets and intangibles only (excludes contributed), also includes QRA disaster funded projects, resulting from the February 2022 flood event. The $1.6 million full year positive interim operating variance comprises $1.2 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 $0.3 million from commercial operations and $0.1 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 $24.7 General business operating position (unconstrained funds) $25.9 $1.2 $6.5 Commercial operations (constrained funds) * $6.8 $0.3 $2.3 Unspent levies (constrained funds) $2.4 $0.1 $33.5 Total Council Operating Position $35.1 $1.6

  • 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 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 10.0 10.1 0.1 0.5 0.7 0.2 Expenditure 3.5 3.4 0.1 0.5 0.6 (0.1) Net Operating Position 6.5 6.7 0.2 0.0 1.0 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 August 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% (0.1%) 61.9%% Net Financial Liabilities Ratio On Track <60% (3.2%) (57.6%) Cash Cover Ratio On Track 3 months 9.4 months 12.8 months Asset Sustainability Ratio On Track > 80% 136.7% 13.5%

Recommendation

That Council note the report by the Manager Financial Services (Acting) to the General Committee Meeting dated 16 September 2024 outlining August 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 16.7%) Council has received 40.5% ($56.7 million) of its operating revenue budget ($139.9 million). Commentary on each revenue category is provided below.

Category

Summary

Comments • Waste utility charges $47.2k above YTD budget

Rates and $47.2 million (50.0%) (50.2% 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) $16.1k below YTD budget (50.0% or $35.7 million of $71.4 million annual budget earned) • Building & Plumbing Compliance $106.6k above

Fees and $2.7 million (25.2%) of budget (22.6% or $586.9kmillion of $2.4 million

Charges the annual budget of annual budget earned) $10.9 million has been • earned Local Laws $64.8k above budget (30.2% or $761.2k of $2.5 million annual budget earned) • Development Assessment $148.5k below budget (27.1% or $971.3k of $3.6 million annual budget earned) • Holiday Park revenue $203.2k above budget

Sale of Goods $2.7 million (17.4%) of (18.1% or $728.0k of $4.0 million annual budget

and Services the annual budget of earned). Any revenue upside will be generally $15.6 million has been offset by a corresponding increase in associated earned operating costs. • Sports facility revenue $64.8k above budget (18.2% or $540.1k of $2.9 million annual budget earned) • Waste Management fees $32.4k below budget (16.2% or $1.2 million of $7.7 million annual budget earned) • Interest revenues have continued to track above

Interest $1.0 million (33.2%) 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 $153.2k above budget

Other Revenue $439.7k (13.4%) of due to internal plant being utilised for the delivery the $3.3 million of disaster funded capital projects. annual budget has • been earned Recoupment of Waste Bin (SULO) purchases $46.4k above budget (36.5% or $63.9k of $174.9k annual budget earned) • Operating Grants and subsidies are in line with

Operating $2.2 million (33.0%) of budget expectations at this stage of the year.

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

Subsidies annual budget has and $75k for Disaster Recovery & Resilience been received Officer funding program. • $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.

Category

Summary

Comments • Council has received notification of the approved FY 2024/25 financial assistance grant allocation which is less than the amount 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 16.7%) Actual operating expenditure is currently 15.4% ($21.6 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 $7.7 million (14.7%) of the and wages underspent ($455.3k) 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 ($212.9k). • Training costs are below budget (13.2% or $48.8k of $59.8k annual budget spent) • Holiday Parks $46.6k above budget (16.7%

Materials and $9.8 million (15.7%) of the or $396.5k of $2.4 million annual budget

Services $62.4 million annual budget spent) has been expended. • Civil Operations $112.0k below budget (13.6% or $1.3 million of $9.5 million annual budget spent) • ICT $108.8k below budget (13.7% or $2.1 million of a $5.3 million annual budget spent) • Waste Management $99.1k below budget (14.04% or $2.1 million of $14.7 million annual budget spent) • Environmental Services $67.9k below budget (9.04% or $299.9k of $3.3 million annual budget spent).

Category

Summary

Comments • Building and Facilities $55.2k below budget (10.8% or $138.4k of $1.3 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 Council resolved to report on a monthly basis, investment details for tourism and economic development. Expenditure at 31 August 2024 is outlined below:

Expenditure

YTD Budget

YTD Actual

Variance

$’000 $’000

$’000 - Tourism Noosa Funding Agreement $1,260.0 $1,260.0 $4.5 Economic Development $147.8 $143.4

$4.5

Total

$1,407.8

$1,403.4 All instalments payable under the Tourism Noosa agreement for the 2024-25 financial year have been made. • Employee Costs are $5.8k below budget (14.3% or $92.4k 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 $8.1 million received comprises cash contributions from developers ($0.4m) and capital grants ($7.7 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 $4.6 million (YTD budget $9.5 million). Expenditure on disaster projects (excluding commitments) is $6.1 million (YTD budget $11.6 million).

Figure 7: Capital Program Delivery Performance

Cash Management and Investment Performance Total cash on hand at the end of August was $123.1 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 August 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 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: Greater than 0% •

Result: 61.9% •

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 2025. •

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: 12.8 months •

Comment: Cash cover remains above target, while business as usual expenditure through to

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. •

Asset Sustainability Ratio

Intent: Measures the extent 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: In line with budget •

Comment: The FY 2025 capital program has only just commenced. 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. •

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: -57.6% •

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

Category

Comments •

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 (4.37%) •

Result: 4.83% •

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: 11.2% •

Comment: Rates arrears are at the first peak in the annual cycle with rates notices issued in July. Arrears rates are in line with the performance for the previous 6 and 12 monthly cycles.

Report details

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