Late Items Agenda of Council - Wednesday, 27 January 2021

Council 264 27 January 2021

12.5 Finance Committee - 20/1/2021 - FINANCIAL ACTIVITY STATEMENTS - YEAR TO DATE AS AT 30 NOVEMBER 2020

STRATEGIC GOAL	6. LEADERSHIP Visionary, collaborative, accountable
STRATEGIC OBJECTIVE	6.1 Governance systems, process and practices are responsible, ethical and transparent.
SUBJECT INDEX	Financial Services
BUSINESS UNIT	Financial Services
REPORTING OFFICER	Manager Financial Services - Paul Sheridan
AUTHORISING OFFICER	Director Finance and Corporate Services - Tony Nottle
NATURE OF DECISION	Executive: substantial direction setting, including adopting budgets, strategies, plans and policies (excluding local planning policies); funding, donations and sponsorships; reviewing committee recommendations
VOTING REQUIREMENT	Simple Majority
ATTACHMENTS	Attachment a Investment Report November 2020 ⇩ Attachment b Financial Activity Statement November 2020 ⇩

This item was considered by the Finance Committee at its meeting on 20/1/2021, the recommendations from which have been included in this report.

COMMITTEE RECOMMENDATION AND OFFICER RECOMMENDATION

That the Council receives the statutory financial activity statement reports for the period ending 30 November 2020, pursuant to Regulation 34(4) of the Local Government (Financial Management) Regulations.

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 30 November 2020.

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 27 July 2020, the Council adopted (C2007/071) the following material variance reporting threshold for the 2020/21 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 2020/21 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 only if not to do so would present an incomplete picture of the financial performance for a particular period; 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 30 November 2020

The Statement of Financial Activity (FAS), for the year to date (YTD) as at 30 November 2020 shows an overall Net Current Position of $33.4M as opposed to the budget of $21.8M. This represents a positive variance of $11.7M YTD. This variance increased by $2M in November.

The following table summarises the major YTD variances that appear on the face of the FAS, which, in accordance with Council’s adopted material variance reporting threshold, collectively make up the above difference. Each numbered item in this lead table is explained further in the report.

Description	2020/21 Actual YTD $	2020/21 Amended Budget YTD $	2020/21 Amended Budget $	2020/21 YTD Bud Variance %	2020/21 YTD Bud Variance $	Change in Variance Current Month $
Revenue from Ordinary Activities				*0.37%*	*243,011*	*388,993*
1. Operating Grants, Subsidies and Contributions	2,068,471	1,841,090	4,819,786	12.35%	227,381	107,105

Expenses from Ordinary Activities				*10.04%*	*3,394,035*	*(24,349)*
2. Materials & Contracts	(5,722,049)	(7,572,326)	(18,710,746)	24.43%	1,850,276	108,688
3. Utilities	(1,013,511)	(1,160,855)	(2,770,956)	12.69%	147,344	33,640
4. Other Expenditure	(904,477)	(1,831,608)	(5,236,779)	50.62%	927,131	9,185

5. Non-Operating Grants, Subsidies and Contributions	3,682,520	4,503,591	29,904,462	(18.23%)	(821,071)	195,329

Capital Revenue & (Expenditure)				*24.53%*	*6,072,230*	*806,856*
6. Land & Buildings	(2,280,874)	(2,781,046)	(17,454,059)	17.99%	500,173	(227,618)
Plant & Equipment	(676,530)	(1,106,810)	(2,510,340)	38.88%	430,280	105,359
Infrastructure	(5,954,913)	(13,839,129)	(35,785,600)	56.97%	7,884,216	1,575,011
7. Proceeds from Sale of Assets	121,925	399,500	581,500	(69.48%)	(277,575)	(138,000)
8. Transfer to Restricted Assets	(2,598,783)	(22,920)	(62,750)	(11238.49%)	(2,575,863)	(693,958)
9. Transfer from Restricted Assets	131,980	0	2,807,074	100.00%	131,980	72,968

Revenue from Ordinary Activities

In total, revenue from Ordinary Activities is $243K, or 0.37%, ahead of budget YTD. The only material variance item contributing to this is:

1. Operating Grants, Subsidies and Contributions

Ahead of YTD budget by $227K, or 12.35%, mainly due to the items listed in the table below:

Revenue Code	Revenue Code Description	Actual YTD $	Amended Budget YTD $	Variance YTD $	Variance YTD %	Change in Variance Current Month $
Finance and Corporate Services		*870,668*	*921,274*	*(50,606)*	*(5.81%)*	*(26,350)*
10200	Financial Services – Reimbursements	64,043	103,625	(39,582)	(61.81%)	(21,274)
The second instalment of the LGIS Contributions Assistance Package was due to be received in November, but instead a credit note received from LGIS was offset against scheme policies that were due for payment in early December, at their instruction.
Community and Commercial Services		*185,592*	*149,179*	*36,413*	*19.62%*	*83,847*
10530	Community Services Administration – State Government Grants	50,000	20,835	29,165	58.33%	(4,167)
The Rio Tinto COVID Relief & Recovery Grant was invoiced in total in August, however the budget was spread evenly over 12 months.
Planning and Development Services		*886,521*	*818,257*	*31,852*	*3.59%*	*43,622*
10925	Preventative Services – CLAG – State Government Grants	26,418	-	26,418	100.00%	-
The Department of Health contribution to the mosquito program was received a month earlier than budgeted.
Engineering and Works Services		*1,197,803*	*919,816*	*241,575*	*20.17%*	*121,299*
W0267	Road Safety Signage Infrastructure – Federal government Grants	50,000	-	50,000	100.00%	-
The $98K budget for year 1 of the $194K grant from the Road Safety Innovation Fund was amended to be received in January. However, $50K relating to milestone 1 was received in November.
11301	Regional Waste Management Administration – Reimbursements	47,958	9,165	38,793	80.89%	46,125
The contributions to the 2020/21 Southwest Regional Waste Group Project were received from 10 participating local governments in November, totalling $48K. Only $22K was budgeted for the year, and this was spread over 12 months.
11501	Operations Services Works – Reimbursements	97,167	25,500	71,667	73.76%	10,803
Workers compensation claims totalling $97K have been received YTD. This is by nature very difficult to predict. $61K was budgeted for the year, spread evenly over 12 months.

Expenses from Ordinary Activities

Expenditure from ordinary activities is $3.4M, or 10%, less than expected when compared to the budget YTD as at November. The following individual expense line items on the face of the financial statement have YTD variances that meet the material reporting thresholds:

2. Materials and Contracts

Better than budget by $1.8M or 24.3%. The table below lists the main variance items that meet the reporting thresholds:

Cost Code	Cost Code Description	Actual YTD $	Amended Budget YTD $	Variance YTD $	Variance YTD %	Change in Variance Current Month $
Finance and Corporate Services		*829,630*	*941,496*	*111,866*	*11.9%*	*61,133*
10000	Members of Council	63,326	32,897	(30,429)	(92.5%)	41
The variance is timing related and is in relation to Subscriptions and Memberships. We have received and paid all of the membership fees due under this budget line item, where it was anticipated that we would receive a number of them later in the year (by the end of December). This variance will resolve after December.
10250	Information & Communication Technology Services	492,029	555,557	63,528	11.4%	45,305
Largely due to a lower than expected spend on consultants, caused by lingering delays in various projects due to COVID. Also, a planned longer term consulting arrangement with a Tech1 specialist has been facilitated via a fixed term employment contract, rather than via consultancy fees.
Community and Commercial Services		*513,540*	*899,488*	*385,948*	*42.9%*	*20,306*
10380	Busselton Library	15,956	45,247	29,291	64.7%	3,063
Spending in this area was put on hold for a few months whilst tenders were sought for a new “buy local” initiative to purchase a range of new release books from a local book shop. We have now commenced spending in this area and will soon catch up. The purchase of new furniture and office equipment (under the capitalisation threshold), has been held up due to the new renovations and the subsequent requirement for furniture and fitout of the new children’s area. Depending on the final budget of the renovations, the furniture fit out will be considered in the remaining funds. Have earmarked spending the 2020/21 furniture budget very soon.
10541	Recreation Planning	1,030	45,166	44,136	97.7%	12,500
Timing of expenditure is largely due in Q2 & Q3 awaiting the outcomes of external grant applications. As of late November, grant deeds have not been received. The expected expenditure is now Q3 and Q4.
10590	Naturaliste Community Centre	20,751	55,420	34,669	62.6%	7,518
The Naturaliste Community Centre was closed due to COVID and upon reopening, was subject to phased restrictions which limited the attendance numbers and therefore expenditure associated with our programs and services throughout the first two quarters. To date, we are still limited by Phase 4 restrictions and have limited numbers in some activities affecting a slow return to business as usual and therefore planned expenditure. Business is now picking up and we are likely to see increased expenditure over the next few months in line with budget.
10591	Geographe Leisure Centre	119,567	165,597	46,030	27.8%	(2,466)
This is the same as the factors listed above for the NCC.
10600	Busselton Jetty Tourist Park	171,667	242,090	70,423	29.1%	5,725
The majority of this variance cost is the monthly management contract fee ($41,125) for the caravan park which has resulted due to a timing issue with presentation and payment of the invoice. Other expenses falling within Materials & Contracts are related to maintenance, which will occur throughout the year.
10630	Property and Business Development	10,775	35,885	25,110	70.0%	1,060
The budget is made up of numerous line items that have been spread throughout the year. The actual timing for these things are inherently difficult to predict, as more often than not they depend on interactions with outside third parties for development opportunities and collaborations. For example, we budget for advertising and marketing, but need to wait for relevant opportunities to arise throughout the year that may not necessarily align with budget timing.
11151	Airport Operations	66,720	181,251	114,531	63.2%	(4,359)
The budget YTD monthly allocation for Airport Operations of $114K includes the key allocations of: · security screening allocations of $45K not spent; · contractors - $49K for water tank removal and tree clearing not completed/expended; and · smaller variances in other areas not yet expended.
Planning and Development Services		*425,319*	*812,541*	*387,222*	*47.7%*	*38,026*
10830	Environmental Management Administration	149,747	187,225	37,478	20.0%	(29,097)
Expenditure variance due to timing of Barnard Park East upgrade works contract due April 2021.
10931	Protective Burning & Firebreaks-Reserves	11,678	226,620	214,942	94.8%	41,317
Q2 mitigation well underway, with all spring burns now complete. Invoices for works completed are yet to be received.
11170	Meelup Regional Park	30,234	65,130	34,896	53.6%	11,098
Expenditure variance due to timing of awarding cultural heritage assessment contract as part of the Meelup Regional Park Management Plan review. This was budgeted to occur in November, but is now planned for mid-February 2021.
Engineering and Works Services		*3,952,135*	*4,914,776*	*962,641*	*19.6%*	*(9,787)*
12600	Street & Drain Cleaning	95,498	182,390	86,892	47.6%	16,376
Expenditure timing - Total expenditure as a percentage of annual budget has been lower to the end of November than it has been in previous years at 22% compared to an average of 35%. The rate of expenditure for street sweeping will begin to increase as we move into the summer months with servicing of the town centres and surrounds increasing with the extra visitors to town. The majority of drain abduction works will commence prior to the rainy season in the last quarter of the financial year to ensure drains are free of debris to mitigate against flooding. This budget will be fully expended come June 30.
12620 & 12621	Rural & Urban Tree Pruning	51,952	157,500	105,548	67.0%	19,128
Expenditure timing and reduced expenditure to potentially offset May 2020 storm damage subject to DRFAWA claims.
Various	Bridges	8,563	75,505	66,942	88.7%	15,067
Expenditure timing and reduced expenditure to potentially offset May 2020 storm damage subject to DRFAWA claims.
Various	Buildings	499,105	592,115	93,010	15.7%	(8,861)
The majority of scheduled maintenance activities to Buildings occur primarily in the second half of the financial year and costs associated with the busy tourist season also increase costs from December through to Easter; hence the year to date variance to budget (which is spread evenly).
Various	Other Infrastructure Maintenance	370,091	753,664	383,573	50.9%	19,438
This broad category encompasses the consolidation of 84 separate and unique services delivered across the City, this includes things like Event support; Boat Ramp maintenance; Cemetery maintenance; maintenance at the Libraries and GLC; Caravan Park maintenance, Street Lighting installation; the Foreshores; the CBD’s; Cycleway, Footpaths Maintenance etc. Expenditure variance for November is attributable to timing with the budget having been evenly spread across the financial year. Material & Contractor costs associated with the majority of these areas will gradually increase as we move into the busy summer months of the year.

Various	Waste services	876,562	1,103,420	226,858	20.6%	(33,144)
The pandemic resulted with more people remaining at home for extended periods, generating more household waste. This, coupled with the two major storm events, requiring more time to process the increased volumes and therefore delays in payment of invoices, has contributed to the larger variances. Another contributing factor is that the City has suspended the FOGO service (i.e. no collection and no processing costs) for the remainder of the financial year. Furthermore, there were also delays in receiving invoices from various aspects of the recycling contractor as well. Another contributing factor is the planned restoration works associated with the decontamination of the Busselton Transfer Station and its surrounds which have not as yet commenced.
Various	Roads Maintenance	814,707	361,170	(453,537)	(125.6%)	(38,552)
Higher than normal costs are largely associated with DRFCA WA storm damage claims from the May 2020 storm events. Three claims have been submitted to DFES with a fourth and final claim submitted in November. Claims totalling $789k have been submitted, with $150k of these associated with costs incurred in the previous financial year. The State Government is awaiting a determination by the Federal Government specific to disaster recovery in relation to debris removal from road verges and the evidence requirements in support of these types of claims.
Various	Reserve Maintenance	527,663	822,905	295,242	35.9%	(12,414)
Costs associated with Public Open Spaces are historically lower in the first half of the financial year with an increasing in costs beginning as we move into the busy summer period. In November costs associated with the City’s stock of Parks and Reserves started to rise accordingly.
5280	Transport - Fleet Management	678,144	852,567	174,423	20.5%	11,228
Fuel was underspent by $103,702 YTD due to lower fuel cost and lower plant and vehicle utilisation. Tyre purchase was underspent by $12,871 YTD, replacement parts/tooling/contractor costs were underspent by $57,850 YTD. Budget is spread evenly across the year, however spending is generally more cyclical in nature and peaks in the busier spring/summer/autumn months.

3. Utilities

Costs are $147K, or 12.7%, under budget as at November YTD. Contributing factors include:

· At year ended 30 June 2020, the June street lighting account was booked in June, rather than in the following month when received per normal practice. Accruals are not done on a monthly basis, so this has the effect of causing actuals to appear to be on average $75K behind budget in relation to street lighting (until the following June, when actuals will catch up to budget);

· There have been delays in receiving the accounts for parks and reserves from Synergy, due to system issues at their end (along with a number of other electricity accounts). With no accruals on a monthly basis, this also causes what appears to be an under-spend against the budget. As at November, system issues at Synergy are still ongoing. Pending resolution of this and a catch up in billing, this should largely rectify itself in coming months as the billing cycles re-align.

· Apart from the Synergy system issues, the invoices that were in fact emailed from Synergy were quarantined at the City end due to the new cyber security practices. The quarantined messages are not visible to Accounts staff, however processes are being developed to ensure they are made aware in a timely fashion to avoid supplier payment delays.

4. Other Expenditure

$927K, or 50.6%, under the budget YTD. The main contributing items are listed below:

Cost Code	Cost Code Description	Actual YTD $	Amended Budget YTD $	Variance YTD $	Variance YTD %	Change in Variance Current Month $
*Finance and Corporate Services*		*233,561*	*312,561*	*79,000*	*25.3%*	*(4,013)*
10000	Members of Council	183,074	224,058	40,984	18.3%	(11,781)
Timing variances exist in relation to the payment of elected member allowances and reimbursements. As per previous commentary, some of this is related to sitting fees being paid in arrears with a double payment in June. This makes up approximately $30K of the variance. Close to $4k is related to there being no expenditure against the Council holding account, and the balance relates to timing variances for expense reimbursements which are difficult to predict when budgeting.
*Community and Commercial Services*		*527,784*	*1,265,335*	*737,551*	*58.3%*	*24,095*
10536	School Chaplaincy Programs	41,400	-	(41,400)	(100.0%)	-
Historically, Youthcare invoices the City in the 2^nd half of the year, but this year invoiced earlier than budgeted.
10547	Iron Man	-	200,000	200,000	100.0%	-
Ironman has been cancelled for this year and hence the funds will not be expended. Council have resolved (C2012/159 – 9 December 2020) to utilise the remaining budget towards an electronic billboard, however this will not likely be completed until closer to the end of the financial year.
10567	CinefestOZ	-	120,000	120,000	100.0%	-
YTD variance is due to the CinefestOZ sponsorship amount being incorrectly paid out of 10530 (a request will be made to journal funds from 10530 to this account to correct the error). Further, the sponsorship contract was varied due to change in format as a result of COVID (C2009/110) - $80k paid in 2020/21 with the balance ($38k) carried over to be paid in addition to 2021/22 Market Yield Adjustment.
11151	Airport Operations	76	413,929	413,853	100.0%	52
Airport Operations marketing activities for RPT services which have not commenced due to COVID.
12631	Peel Tce Building & Surrounds	81,800	40,899	(40,901)	(100.0%)	(40,900)
The December quarter funding contribution to MRBTA was paid earlier than usually planned.
*Planning and Development Services*		*62,027*	*97,517*	*35,490*	*36.4%*	*(16,493)*
10805	Planning Administration	8,523	25,000	16,477	65.9%	(3,523)
The subsidy for the façade refurbishment at the old Hobson’s site was delayed. This will be paid in January.
10830	Environmental Management Administration	119	17,528	17,409	99.3%	17,400
YTD variance due to timing of Biodiversity Incentive Rebate Scheme payment due May 2021.
*Engineering and Works Services*		*35,720*	*102,460*	*66,740*	*65.1%*	*3,270*
B1223	Micro Brewery - Public Ablution	-	60,000	60,000	100.0%	-
The City’s fund contribution to the construction of these ablutions is due to be paid upon receipt of invoice from the company.

5. Non-Operating Grants, Subsidies & Contributions

The negative variance of $821K is mainly due to the items in the table below. It should be noted that any variance in this area will approximately correlate to an offsetting variance in a capital project tied to this funding source. This can be seen in the section below that outlines the capital expenditure variances.

Revenue Code	Revenue Code Description	Actual YTD $	Amended Budget YTD $	Variance YTD $	Variance YTD %	Change in Variance Current Month $
*Engineering and Works Services*		*3,671,927*	*4,499,591*	*(827,663)*	*(18.4%)*	*218,293*
B9407	Busselton Senior Citizens – Developer Cont. Utilised	595,306	162,479	432,827	266.4%	-
B9591	Performing Arts Convention Centre – Developer Cont. Utilised	-	1,000,000	(1,000,000)	(100.0%)	-
C0059	Dunsborough Yacht Club Carpark – Developer Cont.	60,000	-	60,000	100.0%	-
C3116	Dawson Park (McIntyre St POS) – Developer Cont.	-	77,467	(77,467)	(100.0%)	(77,467)
F1002	Dual Use Path - Dunsborough to Busselton – State Capital Grant	64,000	-	64,000	100.0%	-
F1022	Buayanyup Drain Shared Path – State Capital Grant	-	133,335	(133,335)	(100.0%)	(26,667)
S0070	Peel & Queen Street Roundabout Service Relocation - Developer Cont. Utilised	120,000	240,000	(120,000)	(50.0%)	-
S0074	Causeway Road Duplication – Developer Cont. Utilised	500,000	300,000	200,000	66.7%	200,000
S0075	Local Road and Community Infrastructure Program – Federal Capital Grant	480,935	240,468	240,467	100.0%	-
T0019	Wonnerup South Road - Reconstruct and Widening (narrow seal) – RTR Capital Grant	448,000	298,667	149,333	50.0%	298,667
T0020	Capel Tutunup Road – RTR Capital Grant	-	594,470	(594,470)	(100.0%)	(118,894)

6. Capital Expenditure

As at 30 November 2020, there is an underspend variance of 49.2%, or $8.8M, in total capital expenditure, with YTD actual at $9.1M against the YTD amended budget of $17.9M. A portion of this positive underspend variance is offset by the negative variance in Non-operating Grants, Contributions & Subsidies discussed above, with the remainder offset by the negative variances in Transfers From Reserves related to funds held aside for these projects. The attachments to this report include detailed listings of all capital expenditure (project) items, however the main areas of YTD variance are summarised as follows:

Cost Code	Cost Code Description	Actual YTD $	Amended Budget YTD $	Variance YTD $	Variance YTD %	Change in Variance Current Month $
*Buildings*		*2,268,774*	*2,756,046*	*487,273*	*17.7%*	*(227,618)*
B9300	Aged Housing Capital Improvements – Winderlup	-	33,000	33,000	100.0%	6,600
Works proposed are to separate power and drainage servicing Winderlup Court and Winderlup Villas. The power requirements will not be triggered until the new conditional land title lot is created. Upgrade and separation of drainage is planned to occur this financial year as the infrastructure is damaged.
B9302	Aged Housing Capital Improvements - Winderlup Court (City)	-	52,000	52,000	100.0%	-
Works proposed are to separate power and drainage servicing Winderlup Court and Winderlup Villas. The power requirements will not be triggered until the new conditional land title lot is created. Upgrade and separation of drainage is planned to occur this financial year as the infrastructure is damaged.
B9407	Busselton Senior Citizens	620,333	738,128	117,795	16.0%	(26,055)
Works were completed in September. The savings against budget are being reviewed for potential use on roof replacement and carpark works. Contractor delays in providing estimates have delayed commencement of these works.
B9591	Performing Arts Convention Centre	795,645	943,528	147,883	15.7%	31,104
Regional Growth Fund milestones are under review pending funding extension confirmation. Design contract program extension pending. Budgeted cash flow is under review on this basis.
B9596	GLC Building Improvements	2,564	204,855	202,291	98.7%	40,971
Carried over works from the prior year. Works have been rescheduled and have been forecast to be completed in February/March 2021 to minimise impact to GLC operations.
B9606	King Street Toilets	48,647	19,180	(29,467)	(153.6%)	3,836
Stage 1 works completed. Minor additional works undertaken in this period to improve accessibility to new viewing platform.
B9610	Old Butter Factory	128,553	-	(128,553)	(100.0%)	(135,146)
Conservation and fire damage works now completed. Insurance claim has now been approved, with the final position estimated to be in the order of ($30K), with savings being identified in other areas to account for this variance.
*Plant & Equipment*		*676,530*	*1,106,810*	*430,280*	*38.9%*	*105,359*
10810	Statutory Planning	-	35,000	35,000	100.0%	-
Vehicle ordered in December, delivery expected in January. A delay in the order was due to a delay in confirmation of government pricing and availability of different vehicle makes by the manufacturer.
10920	Environmental Health Services Administration	-	35,000	35,000	100.0%	-
Vehicle ordered in September, delivery expected in January. Delays in delivery are due to the high demand currently being experienced by dealers due to the government’s stimulus package in concurrence with supply chain restrictions due to COVID.
11156	Airport Development Operations	172,865	117,960	(54,905)	(46.5%)	17,092
Baggage handling system supply/install is now completed, however monthly budget allocation has been spread over a longer time period.
11402	Plant Purchases (P10)	321,201	360,000	38,799	10.8%	(1,201)
Generators at DWF pond and cell – not yet replaced. Site and operations under review.
11403	Plant Purchases (P11)	-	167,500	167,500	100.0%	87,500
1 x vehicle ordered, delivery expected in January – reasoning similar to above. 1 x vehicle to be ordered in January. 1 x light truck ordered in December, delivery expected in May.
11404	Plant Purchases (P12)	-	95,000	95,000	100.0%	85,000
1 x light truck to be ordered early February, delivery expected in May.
11407	P&E - P&G Smart Technologies	-	41,665	41,665	100.0%	8,333
The annual scope of the project is currently being finalised and delivery will follow in the last quarter of 20/21.
11500	Operations Services Administration	-	40,000	40,000	100.0%	-
Vehicle ordered in October, delivery expected in March. Delays in delivery are due to the high demand currently being experienced by dealers due to the government’s stimulus package in concurrence with supply chain restrictions due to COVID.
*Infrastructure By Class*		*5,954,913*	*13,839,129*	*7,884,216*	*57.0%*	*1,575,011*
Various	Roads	2,997,757	7,378,592	4,380,835	59.4%	452,617
Capital projects with civil works are commonly scheduled to be carried out later in the financial year, in the drier spring/summer construction season. The capital works budgets have been entered based on an even spread method and approach, not on a scheduled timing of works basis.
Various	Bridges	-	716,665	716,665	100.0%	143,367
Per the above Roads comment.
Various	Car Parks	616,213	862,815	246,602	28.6%	(4,763)
Generally similar to the above Roads comment, however good progress has been made with several projects now that inclement weather has abated.
Various	Footpaths & Cycleways	143,585	612,425	468,840	76.6%	106,576
Per the above Roads comment.
Various	Parks, Gardens & Reserves	2,133,780	4,057,388	1,923,608	47.4%	838,665
Per the above Roads comment.
Various	Drainage	-	48,669	48,669	100.0%	6,725
Projects of this nature are scheduled for the summer months.
Various	Regional Airport & Industrial Park Infrastructure	63,578	162,575	98,997	60.9%	31,824
Airport projects planned over the year, bird netting due to start in January, car park works completed not invoiced; other line items not started as yet.

7. Proceeds From Sale of Assets

YTD proceeds from sale of assets is $278K behind budget due to delays in delivery of acquisitions. Also, potential income from sales proceeds have been hampered by the pandemic. Aside from a significantly reduced capital replacement program in both light vehicles and heavy plant items, the existing ones that were due to be replaced have been retained in service to maintain operational requirements.

8. Transfer to Restricted Assets

There is a YTD variance in transfers to restricted assets of $2.6M more than amended budget. Grant funding received from Federal Government for “Drought Communities Program” of $500k (attributable to CC C3223 Dunsborough Non-Potable Water Network). The funding was received in September whereas budget projected allocation was in June. It was anticipated that the expenditure would be incurred in June, hence the funding timing projections followed.

Developer contributions, deposits and bonds are inherently hard to predict and budget for. An annual amount of $50K spread evenly over 12 months was budgeted, however, over $2.1M has been received in the YTD as at November, the bulk of which are for road works bonds ($1.7M).

9. Transfer from Restricted Assets

YTD there has been $132K transferred from restricted assets into the Municipal Account. This was mainly attributable to refunds of road work bonds of $94K, refund of hall deposits of $12K and other refunds of $26K.

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 30 November 2020, the value of the City’s invested funds totalled $89.29M, steady from $89.29M as at 31 October.

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) remained unchanged at $6.0M.

During the month of November, two term deposits totalling the amount of $4.0M matured. Existing deposits were renewed for a further 181 days at 0.33% on average.

The official cash rate has dropped to 0.10% on the 3^rd of November 2020. Consequently, both the 11am Account and Airport Redevelopment - ANZ Cash Account interest rates have dropped from 0.15% to 0.00%. The Airport Redevelopment – WATC Deposits has decreased from 0.20% to 0.05%. The interest rates being offered on term deposits have decreased significantly. This will have a strong impact on the City’s interest earnings for the foreseeable future.

Chief Executive Officer – Corporate Credit Card

Details of transactions made on the Chief Executive Officer’s corporate credit card during November 2020 are provided below to ensure there is appropriate oversight and awareness.

Date	$ Amount		Payee	Description
13/11/2020		240.00	HOWARD PARK WINES SUBIACO	REFRESHMENTS FOR CIVIC RECEPTION AREA FOR BUSSELTON HOSPICE FUNDRAISER.
		*240.00*

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 by Council. Council may wish to make additional resolutions as a result of having received these reports.

CONCLUSION

Budget timings remain affected by COVID impacts and are gradually being re-aligned. As at 30 November 2020, the City’s net current position stands at $33.4M. The City’s financial performance is considered satisfactory, and cash reserves remain strong.

TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION

Not applicable.

Council 295 27 January 2021

12.6 Finance Committee - 20/01/2021 - BUDGET AMENDMENT REQUEST / REVIEW - FINANCE & CORPORATE SERVICES - JANUARY 2021

STRATEGIC GOAL STRATEGIC OBJECTIVE	6. LEADERSHIP Visionary, collaborative, accountable 6.1 Governance systems, process and practices are responsible, ethical and transparent.
SUBJECT INDEX	Budget Planning and Reporting
BUSINESS UNIT	Financial Services
REPORTING OFFICER	Manager Financial Services - Paul Sheridan
AUTHORISING OFFICER	Director Finance and Corporate Services - Tony Nottle
NATURE OF DECISION	Executive: Substantial direction setting, including adopting budgets, strategies, plans and policies (excluding local planning policies); funding, donations and sponsorships; reviewing committee recommendations
VOTING REQUIREMENT	Absolute Majority
ATTACHMENTS	Attachment a FCS - Budget Amendment Table - January 2021 ⇩ Attachment b Consumables Stock Listing Nov 2020 ⇩

This item was considered by the Finance Committee at its meeting on 20/1/2021, the recommendations from which have been included in this report.

COMMITTEE RECOMMENDATION AND OFFICER RECOMMENDATION

That the Council endorse:

1. The requested budget amendments outlined in this report, recognising identified consumables stock to the value of $659,706.55.

2. The net budget amendment, as outlined within Attachment A and in accordance with section 6.8(1) of the Local Government Act 1995, results in a $643,163.67 net positive impact on the 2020/21 annual operating budget and a nil impact on the budgeted net current position.

EXECUTIVE SUMMARY

This report seeks Council approval of budget amendments as detailed in this report. Adoption of the officer recommendation will result in a $643,163.67 net positive impact to the City’s budgeted operating result and nil impact on the net current position.

BACKGROUND

In accordance with section 6.8(1) of the Local Government Act 1995, a local government is not to incur expenditure from its Municipal fund for an additional purpose except where the expenditure:

· is incurred in a financial year before the adoption of the annual budget by the local government; and

· is authorised in advance by Council resolution - absolute majority required; or

· is authorised in advance by the Mayor in an emergency.

Approval is therefore sought for the budget adjustments detailed in the attachment for the reasons specified.

OFFICER COMMENT

Council adopted its 2020/2021 Municipal Budget on Monday 27 July 2020 with a balanced budget position. Since then, officers have identified areas within the budget that require reconsideration or adjustment. It is good management practice to revise the adopted budget when it’s known that circumstances have changed. To ensure this is the case, budgets are reviewed on a monthly basis.

Amendments to the budget are categorised into the three key types as listed below:

1. Adjustments impacting the budget balance or net position of the City: relatively uncommon type.

2. Adjustments with no impact on the budget balance: most common amendment type.

3. Adjustments to transfer budget between capital and operating undertakings: relatively uncommon type.

Officers have reviewed the adopted budget as at YTD December 2020 and subsequently recommend alterations to the budget as tabled below.

1. Adjustments impacting the Municipal Budget balance.

Nil.

2. Adjustments with no impact on the budget balance.

Recognition of identified consumables stock on hand

Subsequent to the finalisation of the year end audit and in preparation for the tri-annual Financial Management System Review (FMSR), to be performed by an external independent auditor in February, an internal review of the items contained in balance sheet was undertaken.

After discussion with various operational staff at the depot and a review of manually maintained spreadsheets and documentation, it became apparent that the consumables stock on hand was no longer of an immaterial nature.

Approximately six years ago, the practice of maintaining an accurate system-based register of consumables stock was abandoned. This was due to the minor, immaterial value of the stock left on hand after various works, plus the fact that adopted operational practice was to only purchase whatever materials were necessary in order to complete certain works. As such, the additional administrative burden of tracking the stock was deemed unnecessary.

Successive clean FMSR’s attested to this treatment, as did successive end of financial year audits.

The subsequent discovery of significantly higher levels of consumables stock can be attributed to many successive years of high growth throughout the district, creating a sharp increase in operational requirements, coupled with an extensive, ongoing capital works program. Recently, over successive years, not all scheduled works were completed by year end, leaving a steadily increasing number of stockpiles of consumables.

The below list is an extract from the manually maintained stock spreadsheet at the City depot, obtained in November. A detailed stock listing showing quantities and unit costs supports each broad category and type. These stock listings are shown in Attachment B to this report.

Type	Value	Category
PPE	42,743.12	PPE
Chemical shed	34,101.47	Parks / Reserves
Yard	237,282.99	Roads
Waste Site - cement products	53,803.88	Roads
Soakway	10,498.80	Roads
Oil coolant grease	35,240.00	Plant
Workshop	18,881.18	Plant
Oil Filters	15,428.24	Plant
Air Filters	13,811.89	Plant
Store	33,710.93	50/50 Parks / Roads
Foreshore	49,552.65	50/50 Parks / Roads
Tyres	35,885.00	Plant
Keys padlocks	20,663.00	50/50 Parks / Roads
Plant Blades	9,232.49	Plant
Fire Tenders	7,763.38	Plant
Dunsborough Depot	41,107.53	50/50 Parks / Roads

	659,706.55

At the point when the system-based register of stock was discontinued, it held stock to the value of $16,542.88. This value has remained on the balance sheet and must be removed in order to be replaced with the above stocktake verified figure.

The resulting net impact on the operating result is therefore $643,163.67. However, as this amount adds back into stock, it has a nil impact on the net current position and has nil impact on cash.

The City will be reinstating the system-based register of consumables to provide a more rigorous and up-to-date position of the City’s stock control and net current position.

3. Transfers between capital and operating budget.

Nil.

Statutory Environment

Section 6.8 of the Local Government Act 1995 refers to expenditure from the Municipal fund that is not included in the annual budget. Any adjustments to a budget allocation must be made by an absolute majority decision of the Council. Additionally, where no budget allocation exists, expenditure is not to be incurred until such time as it is authorised in advance, by an absolute majority decision of the Council.

Relevant Plans and Policies

The proposed budget amendment is supported by the City’s asset management plan, capital works program and long term financial plan.

Financial Implications

A summary of the financial implications of these recommendations is shown in the table below. Corresponding details required in order to process the accounting changes in the budget are contained within the table attachment to this report.

Reference Item #

Description

Net Increase in Revenue

Net Consumables Stock Brought to Account

Net Additional Expenditure

Net Impact on Operational Budget

Net Impact on Cash

Net Impact on Reserves

Recognition of consumables stock on hand.

643,163.67

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. There are no risks identified of medium or greater level.

Options

The Council could decide not to go ahead with the proposed budget amendment request.

CONCLUSION

Council’s approval is sought to amend the budget as per the details contained in this report.

TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION

Should the officer recommendation be endorsed, the associated budget amendment will be processed within a month of being approved.