6.2 FINANCIAL
ACTIVITY STATEMENTS - YEAR TO DATE AS AT 31 DECEMBER 2019
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STRATEGIC
GOAL
STRATEGIC OBJECTIVE
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6. LEADERSHIP Visionary, collaborative,
accountable
6.1 Governance systems, process and
practices are responsible, ethical and transparent.
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SUBJECT INDEX
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Budget Planning
and Reporting
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BUSINESS UNIT
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Financial Services
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REPORTING OFFICER
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Manager Financial Services - Paul
Sheridan
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AUTHORISING OFFICER
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Director Finance and Corporate
Services - Tony Nottle
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NATURE
OF DECISION
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Executive: substantial direction
setting, including adopting strategies, plans and policies (excluding local
planning policies), tenders, setting and amending budgets, funding, donations
and sponsorships, reviewing committee recommendations
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VOTING REQUIREMENT
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Simple Majority
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ATTACHMENTS
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Attachment a Investment Report
December 2019⇩ 
Attachment b Financial
Activity Statement December 2019⇩ 
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EXECUTIVE
SUMMARY
Pursuant to Section 6.4 of the
Local Government Act 1995 (the Act) and Regulation 34(4) of the Local
Government (Financial Management) Regulations 1996 (the Regulations), a
local government is to prepare, on a monthly basis, a statement of financial
activity that reports on the City’s financial performance in relation to
its adopted / amended budget.
This report
has been compiled to fulfil the statutory reporting requirements of the Act and
associated Regulations, whilst also providing the Council with an overview of
the City’s financial performance on a year to date basis for the period
ending 31 December 2019.
BACKGROUND
The Regulations detail the form and
manner in which financial activity statements are to be presented to the
Council on a monthly basis, and are to include the following:
· Annual budget
estimates
· Budget estimates
to the end of the month in which the statement relates
· Actual amounts of
revenue and expenditure to the end of the month in which the statement relates
· Material variances
between budget estimates and actual revenue/expenditure (including an
explanation of any material variances)
· The net current
assets at the end of the month to which the statement relates (including an
explanation of the composition of the net current position)
Additionally, and pursuant to
Regulation 34(5) of the Regulations, a local government is required to adopt a
material variance reporting threshold in each financial year. At its meeting on
31 July 2019, the Council adopted (C1907/131) the following material variance
reporting threshold for the 2019/20 financial year:
“That pursuant to Regulation
34(5) of the Local Government (Financial Management) Regulations, the
Council adopts a material variance reporting threshold with respect to
financial activity statement reporting for the 2019/20 financial year as
follows:
· Variances equal to
or greater than 10% of the year to date budget amount as detailed in the Income
Statement by Nature and Type/Statement of Financial Activity report, however
variances due to timing differences and/or seasonal adjustments are to be
reported on a quarterly basis; and
· Reporting
of variances only applies for amounts greater than $25,000.”
OFFICER COMMENT
In order to fulfil statutory
reporting requirements and to provide the Council with a synopsis of the
City’s overall financial performance on a year to date basis, the
following financial reports are attached hereto:
Statement of Financial Activity
This report provides details of the
City’s operating revenues and expenditures on a year to date basis, by
nature and type (i.e. description). The report has been further extrapolated to
include details of non-cash adjustments and capital revenues and expenditures,
to identify the City’s net current position; which reconciles with that
reflected in the associated Net Current Position report.
Net Current Position
This report provides details of the
composition of the net current asset position on a full year basis, and
reconciles with the net current position as per the Statement of Financial
Activity.
Capital Acquisition Report
This report provides full year
budget performance (by line item) in respect of the following capital
expenditure activities:
· Land and Buildings
· Plant and Equipment
· Furniture and Equipment
· Infrastructure
Reserve Movements Report
This report provides summary details
of transfers to and from reserve funds, and associated interest earnings’
on reserve funds, on a full year basis.
Additional reports and/or charts are
also provided as required to further supplement the information comprised
within the statutory financial reports.
Comments on Financial Activity to 31 December 2019
The Statement of Financial Activity for the year to
date as at 31 December 2019 shows an overall Net Current Position of $24.7M as
opposed to the amended budget of $9.3M. The following summarises the major
variances in accordance with Council’s adopted material variance
reporting threshold that collectively make up
the above difference:
|
Description
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2019/20
Actual YTD
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2019/20
Amended
Budget YTD
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2019/20
Amended
Budget
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2019/20
YTD Bud Variance
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2019/20
YTD Bud Variance
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|
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$
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$
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$
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%
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$
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Revenue
from Ordinary Activities
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|
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|
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1. Operating Grants, Subsidies and Contributions
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2,773,545
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2,195,978
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4,977,647
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26.30%
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577,567
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2. Non-Operating Grants, Subsidies and Contributions
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2,183,887
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4,106,042
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23,804,690
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(46.81%)
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(1,922,155)
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|
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Capital
Revenue & (Expenditure)
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|
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3. Land & Buildings
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(1,466,968)
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(5,350,853)
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(8,475,358)
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72.58%
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3,883,885
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Plant & Equipment
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(726,928)
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(2,290,500)
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(4,855,350)
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68.26%
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1,563,572
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Furniture & Equipment
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(125,824)
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(540,028)
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(1,113,069)
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76.70%
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414,204
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Infrastructure
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(7,137,403)
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(14,765,161)
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(36,813,923)
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51.66%
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7,627,758
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4. Proceeds from Sale of Assets
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255,155
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579,050
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3,409,080
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(55.94%)
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(323,895)
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5. Transfer to Restricted Assets
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(438,247)
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(30,054)
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(60,100)
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(1,358.20%)
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(408,193)
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6. Transfer from Restricted Assets
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557,751
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0
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0
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100%
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557,751
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7. Transfer from Reserves
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1,232,906
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1,657,906
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33,992,705
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(25.63%)
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(425,000)
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Revenue from
Ordinary Activities
Year to date (YTD) actual income
from ordinary activities is $1.16M more than expected when compared to the YTD
amended budget, with the following items meeting the material variance
reporting threshold:
1. Operating Grants, Subsidies and
Contributions are $578K (net) better than amended budget. This variance is
mainly due to the following:
· Legal
Fees Reimbursements (10500) ($40K) – budget item included for a fine that
was received in the 18/19 financial year. A budget amendment was
processed to move a portion of the fine from retained earnings to a legal
reserve, however a further budget amendment to remove this revenue item is
still being investigated;
· Human
Resources Reimbursements (10521) $37K - $18K due to conference & training
reimbursements not budgeted for sufficiently and $19K received in workers comp
reimbursements with all receipts budgeted in June;
· Contributions
to Airport Operations (11151) $49K – received December but budgeted in
June;
· Environmental
Management Administration (10830) $172K – grant received for the
Revitalizing Geographe Waterways Phase 2 project earlier than forecast;
· Preventative
Services CLAG (10925) $30K – part of the operating grant received from
Department of Health earlier than budgeted;
· Protective
burning and firebreaks reserve (10931) $166K. This variance relates to
receiving 50% grant awarded to the City under the mitigation activity fund
(Emergency Services Levy) and will be subject to a Council report requesting
that the 2019/20 budget be amended to reflect this additional income.
Details of the cost codes for this amendment are being finalised;
· Bushfire
risk management planning (10942) DFES $86K. This variance relates to the
payment of grant in full for the bushfire risk planning coordinator position within
the City of Busselton. This represents a timing difference between budget
allocations (over 12 months), and actual funds received;
· Fire
Prevention DFES (10940) $49K – this is due to a combination of receiving
the quarterly ESL grant a month earlier than forecast ($90K over), and not
receiving the prior period grant acquittal adjustment that was forecast in
October ($41K under);
· Pre-Primary
Building & Surrounds (B1503) $30K – grant was budgeted to be received
in June 2020, but was received in November 2019;
· Regional
Waste Management Administration (11301) ($32K) – annual budget of $63K
spread over 12 months, but no contributions have actually been invoiced or
received YTD;
· Reimbursements
Old Butter Factory (B1401 & B9610) $193K – timing difference due to
difficulties in predicting when LGIS would process the claims. Advice
received in January that claims have been processed.
Expenses from
Ordinary Activities
Expenditure from
ordinary activities is $2.04M or 4.94% less than expected when compared to the
amended YTD budget. No individual items exceed the variance reporting
thresholds.
Non-Operating
Grants, Subsidies and Contributions
2. Non-Operating Grants, Subsidies and
Contributions are less than budget by $1.9M with the main items impacting on
the above result being the timing of the receipt of funding which is also
offset with less than anticipated capital expenditure at this time.
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Cost Code
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Cost Code Description
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Variance
YTD
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Finance and Corporate Services
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10239
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Contributions - Community
Facilities
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(382,986)
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Community and Commercial Services
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C6099
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Airport Development - Project
Grant
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477,978
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Planning and Development Services
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B1015
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Hithergreen District Bushfire Brigade
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(465,200)
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B1024
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Wilyabrup
Bushfire Brigade
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(178,300)
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B9109
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Hithergreen Building Renovations
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(34,446)
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Engineering and Works Services
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C1512
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Port
Geographe Boat Ramp Renewal Works
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(82,500)
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C3113
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Busselton
Tennis Club - Infrastructure
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80,000
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C3168
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Busselton
Foreshore Jetty Precinct
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(154,110)
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C3186
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Lou Weston
Oval - Courts
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(325,000)
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F0019
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College
Avenue
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72,000
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S0035
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Strelly
Street / Barlee Street Roundabout
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36,448
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S0051
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Causeway
Road / Rosemary Drive Roundabout
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(200,002)
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S0064
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Peel
Terrace (Stanley Pl/Cammilleri St Intersection Upgrade)
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(100,002)
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S0069
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Peel
Terrace (Brown Street Intersection Upgrades)
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(49,998)
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S0071
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Ludlow-Hithergreen
Road Safety Improvements
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(50,002)
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S0072
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Kaloorup
Road - Reconstruct and Seal Shoulders
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461,200
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T0019
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Wonnerup
South Road - Reconstruct and Widening (narrow seal)
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(312,270)
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T0085
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Yoongarillup
Road - Reconstruct Intersection at Vasse H/Way
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(105,000)
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T0086
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Yoongarillup
Road - Reconstruct & Widen (Western Section)
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(739,050)
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Capital
Expenditure
3. As at 31 December 2019,
there is a variance of 58.8% or $13.5M in total capital expenditure with YTD
actual at $9.5M against the YTD amended budget of $22.3M.
The attachments to
this report include detailed listings of all capital expenditure (project)
items, however the main areas of variance are summarised as follows:
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Cost Code
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Cost Code Description
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Variance
YTD
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Land
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(71,308)
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10370
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Busselton Cemetery
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(71,308)
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Buildings
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3,883,885
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B9600
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Old Vasse Lighthouse (budget
amendment pending)
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70,245
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B9516
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Busselton Library Upgrade
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206,875
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B9109
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Hithergreen Building Renovations
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34,446
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B9407
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Busselton Senior Citizens
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501,462
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B9511
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ArtGeo Building (budget amendment
pending)
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(24,961)
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B9517
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GLC - Pool Relining (budget
amendment pending)
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25,002
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B9556
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NCC Upgrade
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33,268
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B9591
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Performing Arts Convention Centre
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36,553
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B9596
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GLC Building Improvements
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155,990
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B9604
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Womens Change Facility Bovell
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(48,330)
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B9605
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Energy Efficiency Initiatives
(Various Buildings
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66,972
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B9606
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King Street Toilets
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33,333
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B9610
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Old Butter Factory
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(46,529)
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B9716 & B9717
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Airport Terminals
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2,878,642
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B9808
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Busselton Jetty Tourist Park
Upgrade
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48,024
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Plant & Equipment
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1,563,572
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10000
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Members of Council
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40,000
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10250
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Information & Communication
Technology Services
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35,000
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10910
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Building Services
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35,000
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11101
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Engineering Services Administration
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40,000
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11156
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Airport Development Operations
(budget amendment pending)
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(142,088)
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11402
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Plant Purchases (P10) (budget
amendment pending)
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945,000
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11403
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Plant Purchases (P11) (budget
amendment pending)
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265,369
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|
11404
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Plant Purchases (P12) (budget
amendment pending)
|
320,000
|
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Furniture & Office Equipment
|
414,204
|
|
10250
|
Information & Communication
Technology Services
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308,370
|
|
10900
|
Cultural Planning
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(59,572)
|
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11156
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Airport Development Operations
|
137,084
|
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Infrastructure By Class
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7,628,787
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|
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Roads
|
1,506,866
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|
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Bridges
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124,000
|
|
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Car Parks
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586,539
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|
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Footpaths & Cycleways
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283,339
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|
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Parks, Gardens & Reserves
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4,265,774
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|
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Regional Airport & Industrial
Park Infrastructure
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31,664
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Many of these items
of under expenditure e.g. Main Roads construction works, also assists in
explaining the above current YTD shortfall in Non-Operating Grants. In the
main, many of these projects have yet to be completed and represent a timing
difference.
Proceeds from
Sale of Assets
4. There is a variance for the
proceeds from sale of assets of -$324K, due to timing in the changeover of
vehicles.
Transfer to
Restricted Assets
5. There is a variance in
transfers to restricted assets of $408K more than amended budget.
The reason for this is as follows:
· Transfer
to deposits and bonds of $44K as opposed to a budget of $0. These funds do not
have a budget allocation as they are not able to be reliably measured;
· Interest
earned on government grants of $25K transferred to restricted cash, for which
there was no budget allocated as it was expected that the grant would have been
utilized by this stage;
· Additional
bonds of $321K were received in relation to the next stage of the Dunsborough
Lakes development.
Transfer from
Restricted Assets
6. There is a variance in
transfers from restricted assets of $558K more than amended budget.
The main reason for this is as follows:
· Transfer
from Roadwork Bonds of $519K as opposed to a budget of $0. These funds do
not have a budget allocation as they are not able to be reliably measured.
Transfer from
Reserves
7. There is a variance for
transfer from reserves of $425K less than amended budget. The
reason for this is as follows:
· Transfer
from Jetty Maintenance Reserve of $425K did not occur due to works not being
undertaken on cost code C3497 (part of the Parks, Gardens & Reserves
variance shown above), for the following reasons:
i. The previous expenditure figure was based on the 50
year plan.
ii. The 5 year structural review undertaken in 2019/2020
discovered that the Jetty was in better condition than forecast in the 50
year plan. Capital works planned for 2020 have been deferred to 2030.
iii. Requests
for Tenders issued for maintenance works per the 5 year plan are to be awarded
at the Council meeting on 29 January 2020.
iv. As
a result budget figures have been revised for next the 5 financial years to
reflect the 5 year plan.
Investment
Report
Pursuant to the Council’s
Investment Policy, a report is to be provided to the Council on a monthly
basis, detailing the investment portfolio in terms of performance and
counterparty percentage exposure of total portfolio. The report is also to
provide details of investment income earned against budget, whilst confirming
compliance of the portfolio with legislative and policy limits.
As at 31 December 2019, the value of
the City’s invested funds totalled $81.48M, down from $84.48M as at 30
November. The reduction is due to funds being transferred to the cheque account
to meet ongoing normal operating costs.
During the month of November three
term deposits totalling the amount of $4.5M matured. These were renewed for a
further 162 days at 1.51% on average.
The balance of the 11am account (an
intermediary account which offers immediate access to the funds compared to the
term deposits and a higher rate of return compared to the cheque account)
reduced by $3.0m with the funds being transferred to the cheque account to meet
ongoing normal operating costs.
The balance of the Airport
Development ANZ and WATC cash accounts remained steady.
The RBA announced no rate changes in
December and January. Future movements are unknown at this time although
further drops are possible in coming months.
Chief Executive Officer –
Corporate Credit Card
Details of monthly (November to
December) transactions made on the Chief Executive Officer’s corporate
credit card are provided below to ensure there is appropriate oversight and
awareness of credit card transactions made.
|
Date
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$ Amount
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Payee
|
Description
|
|
16-Dec-19
|
94.00
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CHEEKY
MONKEY BREWERY
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+ CEO/MAYOR LUNCH WITH SHIRE OF
AUG/MR
|
|
23-Dec-19
|
131.00
|
THE GOOD EGG CAFÉ
|
+ HOSPITALITY - CITY OF BUNBURY
MEETING
|
|
23-Dec-19
|
3,585.18
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CAVES HOUSE HOTEL
|
COUNCIL END OF YEAR FUNCTION
|
|
24-Dec-19
|
436.78
|
QANTAS
|
FLIGHTS - RCA BOARD MEETING
(Mayor)
|
|
24-Dec-19
|
351.80
|
THE FIRESTATION
|
MAYORS LUNCHEON
|
|
27-Dec-19
|
426.99
|
VIRGIN AUSTRALIA
|
FLIGHTS - RCA BOARD MEETING
(Mayor)
|
|
27-Dec-19
|
4.33
|
VIRGIN AUSTRALIA
|
BOOKING FEE
|
*Funds debited against CEO Annual
Professional Development Allowance as per employment Contract Agreement
+ Allocated against CEO
Hospitality Expenses Allowance
Statutory Environment
Section 6.4 of the Act and
Regulation 34 of the Regulations detail the form and manner in which a local
government is to prepare financial activity statements.
Relevant Plans and Policies
There are no relevant plans or policies
to consider in relation to this matter.
Financial Implications
Any financial implications are detailed
within the context of this report.
Stakeholder Consultation
No external stakeholder consultation was
required or undertaken in relation to this matter.
Risk Assessment
An assessment of the potential
implications of implementing the officer recommendation has been undertaken
using the City’s risk management framework, with risks assessed taking
into account any controls already in place. No risks
of a medium or greater level have been identified.
Options
The Statements of Financial Activity
are presented in accordance with Section 6.4 of the Act and Regulation 34 of
the Regulations and are to be received. Council may wish to make additional
resolutions as a result of having received these reports.
CONCLUSION
As at 31 December 2019, the
City’s financial performance is considered satisfactory.
TIMELINE FOR
IMPLEMENTATION OF OFFICER RECOMMENDATION
Not applicable.
7. General
Discussion Items
7.1 NEW
ACCOUNTING STANDARDS
Impact of Changes in Accounting
Standards (AASB 15 and AASB 1058)
A change to the Australian
Accounting Standards occurred on 1 July 2019. The impact of these changes will
be implemented during the current financial year and apply to the presentation
of the 2019-20 annual financial report. The two new accounting standards are:
· AASB 15 Revenue
from Contracts with Customers; and
· AASB 1058 Income
of Not-for-Profit Entities
Both new Standards relate to the
timing and recognition of revenue and are applicable to local government.
Implementing these new Standards will have an influence on day to day
accounting processes and procedures as well as a significant impact on the
City’s Statement of Financial Position (Balance sheet) going forward in
the tens of millions of dollars.
The changes relate to when a local
government is required to classify money received from customers and
contributors as revenue in its accounts. In the context of AASB 15, customers
are anyone transacting with the City to receive a benefit in a period
subsequent to the transaction. As a general rule, prior to their
commencement money received from customers and contributors would be recognised
as revenue when it was received. This is no longer the case, as the Standards
require the City to assess the contractual performance obligations imbedded in
these types of transactions and then match the revenue recognition with the
timing of the satisfaction of these obligations.
There are a lot of circumstances
were the City receives a contribution or enters into a contract with a
customer, where the timing of the cash received is not aligned to the related
performance obligations.
As an example, in the past when a
contribution or a grant was received in advance for future works (such as a
developer contribution), it would be recognised as revenue when the cash was
received. Now, such a contribution will not appear in the budget/accounts as
revenue on receipt, but will be held as a liability in the balance sheet until
such time as the work is carried out. Only in the financial year when the work
is undertaken will the money funding the activity be classified as revenue. In
some circumstances, this may delay the timing of revenue recognition in the
accounts by many years.
As part of the transition to the new
rules, all qualifying past unspent grants, contributions and unperformed
contracts must be established as liabilities (regardless that the cash received
in the past is held in a cash reserve or as other restricted cash). For the
City of Busselton, the extent of these identified unperformed past obligations
is in the vicinity of $17m and this will require new liabilities to this amount
on the statement of financial performance at 30th June 2020.
It is important to note, the relevant cash received in the past has not been
spent but quarantined from past budgets in cash reserves or other restricted
cash and is available to offset these new liabilities. As a consequence, there
will be no adverse impact on the City’s financial position or
rates.
Implementation of processes and
procedures to support the new rules adds administration and complexity around
assessing, classifying, tracking and accounting for grant agreements, customer
contracts and developer contribution schemes. External grants and contributions
help the City provide community infrastructure and facilities but the cost of
administration in managing and accounting for these important funding sources
has now increased significantly with these changes.
The requirements imposed in these
two new standards will have a wide-ranging impact across many accounts and
various service areas, however one new requirement under AASB 1058 requires further
explanation. The Standards brings in a new concept of volunteer labour being
considered as non-cash revenue in certain circumstances.
The City has the option to consider
all contributions of volunteers labour as non-cash revenue by establishing a
new accounting policy or recognise individual volunteer contributions for
activities where the City would have paid employees for the activity in the
absence of volunteer assistance. In both cases, the revenue and mirrored
expenditure are non-cash items and have no impact on the City’s overall
rate setting process.
It should
be noted that the benefits of capturing and valuing all volunteer labour
include:
· Tracking all
volunteer movements for safety, operational expediency and administrative
compliance. There is some isolated tracking currently in place, but no
assessment of value to facilitate revenue and expense recognition and what
needs to be disclosed in the annual statutory financial statements (which is
extremely onerous);
· Monitoring
treatment of volunteers to ensure (and easily demonstrate), ethical and
efficient management;
· Accurate and
reliable year-on-year comparatives, across the City; and
· A transparent,
positive note in the Annual Report.
These new Standards follow others
relating to Leases (AASB 16) and Financial instruments (AASB 9) in changing the
accounting rules. All the new standards are accompanied by an increased level
and complexity of disclosure in the annual financial statements and will
require changes to some existing practices and procedures. The full
extent and exact nature and scope of the administrative changes that will be
required is currently being investigated.
7.2 LISTING
OF PAYMENTS BY REGION AND INDUSTRY
Members held a general discussion of the spreadsheet
‘Listing of Payments Made Under Delegated Authority’ containing the
list of payments broken down by region and industry provided to members prior
to the meeting by Mr Sheridan.
8. Next
Meeting Date
Wednesday, 11 March 2020
9. Closure
The meeting closed at 11.33am.
THESE MINUTES CONSISTING OF PAGES 1 TO 47 WERE
CONFIRMED AS A TRUE AND CORRECT RECORD ON Wednesday,
11 March 2020.
DATE:_______________________ PRESIDING
MEMBER:____________________________
