FINANCIAL PERFORMANCE REPORT – SEP 2024

Executive summary

Year-to-date (YTD) performance against current budget as at 30 September 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 relative to scheduled timing of delivery. YTD Financial Performance Summary Budget Actual Variance Variance Status $m $m $m % Operating Revenue $60.4 $61.7 $1.3 2.1% On Track Operating Expense $34.9 $34.2 $0.7 2.0% On Track Operating Position $25.4 $27.4 $2.0 Capital Revenue $15.7 $16.9 $1.2 7.5% Above Budget Capital Expenditure* $31.2 $17.4 $13.8 44.3% Behind Budget

• Reflects constructed assets and intangibles only (excludes contributed), also includes QRA disaster funded projects, resulting from the February 2022 flood event. The $2.0 million full year operating surplus comprises $1.6 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 $0.4 million from waste operations, and holiday park operations and unspent levy and separate charge funds which are constrained in reserve for future use are showing a breakeven position. Budget Actual Variance Item

YTD

YTD

YTD

$m $m $m $18.6 General business operating position (unconstrained funds) $20.2 $1.6 $5.1 Commercial operations (constrained funds) * $5.5 $0.4 $1.7 Unspent levies (constrained funds) $1.7 $0.0 $25.4 Total Council Operating Position $27.4 $2.0

• 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 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 10.5 10.7 0.2 0.9 1.1 0.2 Expenditure 5.5 5.3 0.2 0.8 1.0 (0.2) Net Operating Position 5.0 5.4 0.4 0.1 0.1 0.0 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 September 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%) 44.5% Net Financial Liabilities Ratio On Track <60% (3.2%) (80.2%) Cash Cover Ratio On Track 3 months 9.4 months 13.1 months Behind Asset Sustainability Ratio > 80% 136.7% 16.9%

Recommendation

That Council note the report by the Financial Services Manager to the General Committee Meeting dated 14th October 2024 outlining September 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 25.0%) Council has received 44.1% ($61.7 million) of its operating revenue budget ($139.9 million). Commentary on each revenue category is provided below.

Category

Summary

Comments •

Rates and $47.2 million (50.0%) Waste utility charges $101.1k above YTD budget

Levies of the annual budget of (50.3% or $8.5 million of $16.9 million annual $94.4 million has been budget earned) • earned General rate (net of discounts) $26.2k below YTD budget (49.9% or $35.6 million of $71.4 million annual budget earned) •

Fees and $3.7 million (34.4%) of Building & Plumbing Compliance $95.9k above

Charges the annual budget of budget (28.7% or $743.2k of $2.6 million annual $10.9 million has been budget earned) • earned Local Laws $55.9k above budget (50.6% or $1.3 million of $2.5 million annual budget earned) • Development Assessment $226.5k below budget (31.8% or $1.1 million of $3.6 million annual budget earned) •

Sale of Goods $4.0 million (25.6%) of Holiday Park revenue $203.2k above budget

and Services the annual budget of (28.0% or $1.1 million of $4.0 million annual $15.6 million has been budget earned). Any revenue upside will be earned generally offset by a corresponding increase in associated operating costs. • Sports facility revenue $68.4k above budget (26.6% or $792.0k of $2.7 million annual budget earned) • Cultural facility revenue $38.3k above budget (31.6% or $188.2k of $596.1k annual budget earned) • Waste Management fees $14.1k above budget (23.6% or $1.8 million of $7.7 million annual budget earned) •

Interest $1.6 million (52.8%) of Interest revenues have continued to track above

Received the $3.1 million annual budget with investment in higher yielding term budget has been deposits maximising the return on surplus cash earned holdings. Cash holdings are higher compared to previous years due to the advanced payment of QRA disaster capital works grants and delays in the delivery of the capital works program.

Category

Summary

Comments •

Other Revenue $836.1k (25.5%) of Recoupment of Waste Bin (SULO) purchases the $3.3 million $23.2k above budget (38.0% or $66.5k of annual budget has $174.9k annual budget earned. been earned •

Operating

million (38.2%) of Operating Grants and subsidies are in line with

Grants, the $6.6 million budget expectations at this stage of the year.

Subsidies annual budget has YTD variance relates to $65k Floating Land grant been received and $75k for Disaster Recovery & Resilience 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. • 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 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 24.4% ($34.2 million) of full year budget ($140.1 million). Detailed commentary for each expenditure category is provided below.

Category

Summary

Comments •

Employee Costs $13.4 million (25.5%) of the Expenditure for permanent staff salaries annual budget of $52.6 and wages underspent ($763.4k) due to million has been expended position vacancies, partially offset by additional spend on casual staff and external labour hire ($425.1k). • Training costs are in slightly over forecast at this point in the year (30.4% or $117.5k of $386.1k annual budget spent)

Category

Summary

Comments •

Materials and $14.6 million (23.4%) of the Holiday Parks $154.7k above budget

Services $62.4 million annual budget (28.2% or $667.8k of a $2.4 million annual has been expended. budget spent) – offset by additional revenue. • Digital Hub $24.4k above budget (22.1% or $80.9k of $365.4k annual budget spent.) • Waste Management $144.2k below budget (21.7% or $3.2 million of $14.7 million annual budget spent) • ICT $113.8k below budget (21.8% or $1.1 million of $5.3 million annual budget spent) • Buildings & Facilities $96.9k below budget (16.7% or $214.5k of $1.3 million annual budget spent) • Infrastructure Planning Design and Delivery $45.8k below budget (4.8% or $19.9k of $409.6k annual budget spent) • Property and Facilities $42.9k below budget (23.3% or $664.0k of $2.8 million annual budget spent) • Sports facilities $37.5k below budget (21.9% or $349.5k of $1.6k annual budget spent) • Development Assessment $24.8k below budget (23.1% or $303.5k of $1.3 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 30 September 2024 is outlined below:

Expenditure

YTD Budget

YTD Actual

Variance

$’000 $’000

$’000 - Tourism Noosa Funding Agreement $1.260 $1.260 ($30) Economic Development $1,494 $1,464

($30)

Total

$2,754

$2,724 Tourism and economic development activity is funded through the general rates. The first instalment payable for the 2024-25 financial year is committed and has been paid in accordance with the Tourism Noosa contractual funding agreement which is due for renewal at 30 June 2025.

Legal Cost Summary An update on legal costs and associated expenditure is provided on a quarterly basis. Legal and associated costs are $61.9k under budget YTD (21.7% or $358 million of $1.6 million 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. YTD Expenditure as at 30 September 2024 is outlined below:

YTD 24 ACT

FY 2023/24

% of FY

Legal Expenditure by Type

Actuals

Budget Budget

$'000 $'000

spent

Specialised Legal Costs 262 1,110 23.6% Development Application Appeals 9 60 14.8% Planning Scheme Amendments 40 Overdue Rates 0 0.0% 8 40 18.7% Procurement and Tender Advice 29 95 30.3% Property & Leases 6 37 16.4% Infringement prosecutions 7 30 22.7% Industrial Relations Advice

,412

%

General Legal Advice 20 204 10.0% CEO & Governance 17 30 56.7% All Other Branches

234

%

Total

,646

% Figure 4: Legal Costs (including consultancy) over time.

Figure 5: Legal Expenditure by Department – 5-year trend

Capital Revenue Full Year Capital revenue of $16.9 million received comprises cash contributions from developers ($0.5m) and capital grants ($16.5 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 $6.6 million (YTD budget $12.9 million). Expenditure on disaster projects (excluding commitments) is $11.3 million (YTD budget $18.3 million).

Figure 7: Capital Program Delivery Performance

Cash Management and Investment Performance Total cash on hand at the end of September was $124.0 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 (3 years), and unspent monies committed for funding capital projects which are underway and will continue during the financial year. Cash is at the high point in the cycle with the first rates run occurring in August. The following pie charts present the mix of cash held at September 2024 by agency (graph on the left) and by credit risk rating (graph on the right). All funds have been invested in accordance with Council's 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: 0 – 10% •

Result: 44.5% •

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

Category

Comments •

Result: 13.1 months •

Comment: Current 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. •

Asset Sustainability Ratio

Intent: Measures the extent to which assets are being replaced as their condition degrades to ensure service potential is maintained •

Target:

% 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: -80.2% •

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.

Category

Comments •

Target: 0.25% above current Bloomberg commonwealth 10- year bond rate yield (4.39%) •

Result: 4.99% •

Comment: With higher 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: 8.8% •

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