Towards a sustainable future MAV and VAGO assessments Differing assessments of financial risk 2010- 20 Councils facing risk One is extremely high risk, four very high.
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Towards a sustainable future 1 MAV and VAGO assessments Differing assessments of financial risk 2010- 20 Councils facing risk One is extremely high risk, four very high risk and fifteen are high risk MAV - E and H risk Councils require external funding assistance 2 Is information to assess Council’s financial sustainability credible? What strategies does Council have to maintain a financially sustainable position? What assistance does Council need from government? 3 To determine, in partnership with the Council: whether all management responses to its financial sustainability position have been exhausted and; ultimately and legitimately requires assistance from State /Federal Government 4 Central Goldfields Hepburn Horsham Ararat Gannawarra Corangamite Yarriambiack Towong Loddon West Wimmera 5 Baw Baw Colac Otway East Gippsland Glenelg Hindmarsh Hume City Indigo Kingston Macedon Ranges Maroondah Moira Shire Council Moorabool Moyne Southern Grampians Strathbogie Wellington Wodonga City 6 Self Assessment - 8 key success factors: Understanding Financial Sustainability Corporate Governance Service and Asset Management Plans Financial Reporting Annual Planning ,Budgeting and Rating Long Term Financial plans Service provision Skill Development 7 WOMBAT SHIRE COUNCIL GAP ANALYSIS CHART 8 0 0 0 0 0 0 Murrindindi Shire Council Northern Grampians Shire Council Pyrenees Shire Council Queenscliffe Borough Council 72 33 West Wimmera Shire Council Yarriambiack Shire Council 80 Towong Shire Council Understanding Financial Sustainability and its implications Strathbogie Shire Council 0 Mount Alexander Shire Council 0 Mansfield Shire Council 35 Loddon Shire Council 40 Indigo Shire Council 0 44 Hindmarsh Shire Council 33 Hepburn Shire Council 38 Golden Plains Shire Council 41 Gannawarra Shire Council 50 Central Goldfields Shire Council 0 Buloke Shire Council 0 Benalla Rural City Council 20 Bass Coast Shire Council 60 Ararat Rural City Council 10 Alpine Shire Council Score Comparison Chart - Key Challenge 1 - Understanding Financial Sustainability and its Implications Strathbogie Shire Small Rural Councils Average 100 90 70 71 42 46 30 30 0 9 Adjusted Operating Surplus/(Deficit) 2008/09 - Small Rural Councils Council Group Average $4,000,000 $2,000,000 $0 -$2,000,000 -$4,000,000 -$6,000,000 -$8,000,000 -$10,000,000 -$12,000,000 -$14,000,000 -$16,000,000 10 Proposed Renewal Exp. $ - All Asset Groups Predicted Renewal Expenditure Requirement - All Asset Groups 6,000,000 30.0 5,000,000 25.0 4,000,000 20.0 3,000,000 15.0 2,000,000 10.0 1,000,000 5.0 0 0.0 2010 2012 2014 2016 2018 2020 2022 2024 2026 Predicted % of Asset Base above Intervention Renewal Expenditure in $ % of Asset Base Above Intervention - Prop Renewal Exp. Model - All Asset Groups 2028 Year Ahead 11 Understanding financial sustainability SRP’s – Policies and financial strategies No substantial LTFP’s Disparate /incomplete Asset Registers Condition Data/Intervention levels Depreciation charges not related to condition Short term Capital Works program 12 Balance Sheet versus Moloney Whole of life costing –not practiced. Community consultation/LOS. Budget in service level terms/SAMP’s Performance reporting – Audit Committee Rating strategy – future funding 13 8 of the 10 Councils are rating below average 9 of the 10 Councils have underlying operating deficits 2 of the 10 Councils have lower than average depreciation charges 4 of the 10 Councils have overstated depreciation charges 2 of the 10 Councils are over funding renewal gap. Inconsistency in renewal valuation rates; All Brownfield valuations on Balance Sheet 14 Total Capital expenditure $62 million Renewal Demand $48 million Renewal investment $ 34 million Unexpended CAPEX $7.8 million 71 % of renewal demand funded 55 % of total CAPEX was renewal 45 % of CAPEX was new and upgrade 12.5 % of budgeted CAPEX was not delivered. 15 Total Capital exp Renewal Demand Renewal investment Unexpended CAPEX $222.76 million $160.40 million $109.44 million $56.96 million 68 % of renewal demand funded 49 % of total CAPEX was renewal 29 % of CAPEX was upgrade 22% of CAPEX was new 26 % of Budgeted CAPEX was not delivered. 16 Need robust Strategic Resource Plan Long Term Financial Plan Financial policies/ target ratios 10 year CAPEX programme – R,U,N Rating and revenue raising Council engaged/report performance – Audit Committee Review of Asset Management Strategy and practices Asset Registers/Condition Assessments/Intervention levels Renewal Valuations Document management strategies – LOS/Rationalisation Whole of organisation approach Training 17 Debt Strategy Capital Works projects and funding Revenue Raising (rating) strategy STRATEGIC RESOURCE PLAN Asset Management Strategies Notional Reserve Funds Operational Expenses (service levels) Grants and Fees 18 SRP – provided policy parameters for LTFP Councils have increased rates significantly 10 year Capital works program Escalation factors Financial Ratios Charts Financial Statements Renewal Demand versus renewal annuity 19 Long Term Financial Plan 10. Financial Statements Error check breaches: 0. Active error alerts: 0 FinancialStatements_O OK OK FinancialStatements_O Return to Financial Statements Contents 10.01 Flags Units Period start Period end 1 Jul 06 30 Jun 07 1 Jul 07 30 Jun 08 1 Jul 08 30 Jun 09 1 Jul 09 30 Jun 10 1 Jul 10 30 Jun 11 1 Jul 11 30 Jun 12 10.02 Profit & Loss Statement Revenue from Operating Activities Rate and Charge Revenue Special Charges Rate Assistance Package Operating (Recurrent) Grants Capital (Non-Recurrent) Grants Contributions (including Contributed Assets) Reimbursements and Subsidies User Charges Statutory Fees and Fines Gain on Sale of Land held for Resale $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 - 7,501.00 6,869.00 673.00 692.00 681.00 1,452.00 - 7,633.00 8,567.00 1,071.00 506.00 916.00 1,328.00 - 7,958.00 6,825.00 2,388.00 532.00 960.00 1,385.00 - 8,502.13 7,029.75 2,459.64 542.64 988.80 1,426.55 - 9,083.57 7,240.64 2,533.43 553.49 1,018.46 1,469.35 - Total Revenue from Operating Activities $'000 - 17,868.00 20,021.00 20,048.00 20,949.51 21,898.95 Revenue from Outside of Operating Activities Interest Revenue Other Revenue Outside of Operating Activities $'000 $'000 - 495.00 437.00 415.00 431.60 448.86 Total Revenue from Outside Operating Activities $'000 - 495.00 437.00 415.00 431.60 448.86 Total Revenue $'000 - 18,363.00 20,458.00 20,463.00 21,381.11 22,347.81 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 - (6,751.00) (5,632.00) (26.00) (4,512.00) (282.00) (245.00) (272.00) - (6,918.00) (6,312.00) (23.00) (5,031.00) (228.00) (244.00) (228.00) - (7,443.00) (6,884.00) (4,686.00) (1,131.00) (185.00) - (7,815.15) (46.70) (7,159.36) (15.96) (4,742.81) (1,136.66) (120.35) (26.89) (8,205.91) (47.63) (7,445.73) (17.33) (4,992.21) (1,142.34) (107.75) (27.14) Total Operating Expenses $'000 - (17,720.00) (18,984.00) (20,329.00) (21,063.88) (21,986.05) Net Surplus/(Deficit) from Operations $'000 - Operating Expenses from Ordinary Activities Employee Benefits Paid Employee Benefits Provisioned Materials & Consumables Utilities Bad and Doubtful Debts Depreciation Other Operating Expenses Other Expenses Contributions Interest on Borrowings (Finance Costs) Interest on Unwinding of Discount on Provisions Written down value & Infrastructure Replaced 643.00 1,474.00 134.00 317.23 361.77 20 CAPITAL WORKS STATEMENT 7,000,000 6,000,000 5,000,000 4,000,000 Renewal investment Upgrade investment 3,000,000 New investment 2,000,000 1,000,000 0 2007/08 2008/09 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 21 Focus on determining issues impacting on sustainability Self Assessment Framework Data Review Improvement Plan/cross functional team Tools and techniques Strategic Resource Plan Long Term Financial Plan Sustainable future 22