Coffs Harbour City Council

16 October 2019

 

Ordinary Council Meeting

 

The above meeting will be held in the Council Administration Building

Cnr Coff and Castle Streets, Coffs Harbour on:

 

Thursday, 24 October 2019

 

The meeting commences at 5.00pm and your attendance is requested.

 

 

AGENDA

 

1.         Opening of Ordinary Meeting

2.         Acknowledgment of Country

3.         Public Forum

4.         Disclosure of Interest

5.         Apologies

6.         Leaves of Absence

7.         Mayoral Minute

8.         Confirmation of Minutes

9.         Rescission Motion

10.      Notices of Motion – General

11.      General Manager’s Reports

12.      Notices of Motion – Business Services

13.      Directorate Reports – Business Services

14.      Notices of Motion – Sustainable Communities

15.      Directorate Reports – Sustainable Communities

16.      Notices of Motion – Sustainable Infrastructure

17.      Directorate Reports – Sustainable Infrastructure

18.      Questions On Notice

19.      Matters of an Urgent Nature

20.      Consideration of Confidential Items (if any)

21.      Close of Ordinary Meeting.

 

 

Steve  McGrath

General Manager

 

 


Order of Business

 

  

General Manager's Reports

GM19/26         2018/19 Audit and Risk Committee Report to Council............................ 3

Directorate Reports - Business Services

BS19/51          Bank and Investment Balances for September 2019........................... 11

BS19/52          Monthly Financial Performance Report for the Month Ended 31 August 2019............................................................................................................ 33

BS19/53          Audited 2018/2019 Annual Financial Statements.................................... 50   


GM19/26      2018/19 Audit and Risk Committee Report to Council

Author:                        Group Leader Governance

Authoriser:                  General Manager

MyCoffs:                      D.1 Our leaders give us confidence in the future

Attachments:              ATT1  GM19/26  2018/19 Audit and Risk Committee Report to Council   

 

Executive Summary

The purpose of this report is to inform Council on the activities of the Audit and Risk Committee for the financial year ending 30 June 2019 (refer Attachment 1).  This report also reviews the attendance fees for the external independent members of the Committee and forecasts proposed changes in the legislative framework for the establishment and operation of future Audit, Risk and Improvement Committees.

 

 

Recommendation:

That Council:

1.       Note the report of the Audit and Risk Committee for 2018/19.

2.       Endorse an increase in the attendance fees for each external independent member from $500 to $700 (excluding GST) per meeting, effective immediately.

 

Report

Description of Item:

The objective of the Audit and Risk Committee (Committee) is to provide independent assurance and assistance to Coffs Harbour City Council on risk management, controls, governance and external accountability responsibilities.

 

The Committee currently comprises three external independent members and two Councillor representatives.  The current independent members are Barry Ford, Chris Jones and Paul Tipper.  Barry Ford is the current chair of the Committee.  The Committee met four times in this reporting period with an allowance for extra meetings when required.

 

Attached is the Committee’s report for the financial year ending 30 June 2019 for Council’s consideration.

Issues:

The current remuneration to each of the independent Committee members is $500 (excluding GST) per meeting.  This amount is considered at the lower end of payments to Committee members at similar sized councils.  It is therefore recommended the remuneration be increased to $700 (excluding GST) for meeting attendance and this amount will include any meeting preparation and travel expenses.

 

The proposed mandatory reforms outlined in the discussion paper ‘A New Risk Management and Internal Audit Framework for local councils in NSW’ proposes nine core requirements councils will be required to comply with when establishing their Audit, Risk and Improvement Committees, risk management framework and internal audit function.  Council is currently meeting the majority of these core requirements as it has an Audit and Risk Committee which has been in place for many years in addition to a well-established risk management and legislative compliance framework and an externally provided internal audit function.

 

The main impacts from the proposed changes will be on the Committee structure with the requirement for pre-qualified, external and independent membership and an expanded role for the Committee and Chair.

 

Once section 428A of the Local Government Act 1993 is proclaimed and the mandatory risk management and internal audit framework for local councils comes into operation, Council will be required to remunerate the Committee in accordance with the fees currently paid under the NSW Government’s prequalification scheme.  These fees will be $16,123 (excluding GST) per annum for the Chair and $1,621 (excluding GST) per meeting day for each member.

Options:

Council has the following options to consider in relation to this report; being:

 

1.    Adopt the recommendation provided to Council; or

2.    Amend the recommendation provided.

Sustainability Assessment:

•     Environment

There are no environmental impacts in relation to this report.

•     Social

The advice provided by committees is useful as a consultative and information sharing mechanism.

•     Civic Leadership

The purpose of the Audit and Risk Committee is to ensure transparency and accountability in local government.  For this reason, the voting members on the committee are not employed by Council.

•     Economic – Broader Economic Implications

This report has no broader economic impacts.

•     Economic - Delivery Program/Operational Plan Implications

Sitting fees for the independent Committee members are incorporated in Council’s approved Operational Plan and therefore the recommended increase in remuneration for Committee members will have a negligible impact on this plan.

Risk Analysis:

The Audit and Risk Committee provides an important legislative and best practice mechanism to monitor and mitigate organisational risks.

Consultation:

This report has been prepared in consultation with the independent members of the Audit and Risk Committee.

Related Policy, Precedents and / or Statutory Requirements:

The Internal Audit Guidelines under which this Committee operates are Director General’s guidelines for the purposes of section 23A of the Local Government Act 1993.

Implementation Date / Priority:

The increase in remuneration will apply to the next meeting of the Audit and Risk Committee.

Conclusion:

Council acknowledges the input from the external independent members of the Audit and Risk Committee.  A future report will be provided to Council outlining the new proposed regulatory framework for Audit, Risk and Improvement Committees.

 


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BS19/51       Bank and Investment Balances for September 2019

Author:                        Section Leader Financial Planning

Authoriser:                  Director Business Services

MyCoffs:                      D.2 We have effective use of public resources.

Attachments:              ATT1  BS19/51   Investment Performance Report for the Month Ended 30 September 2019  

 

Executive Summary

Council’s Bank Balances and Investments as at 30 September 2019 totalled $222,108,293.50.  Council receives independent advice and invests surplus funds in accordance with Council’s Investment Policy to maximise investment income and preserve capital to assist with funding requirements for projects listed under the My Coffs Community Strategic Plan.

 

Also included in the monthly report is a summary of Council’s Socially Responsible Investment Performance (refer Attachment 1).

 

 

Recommendation:

That Council note the bank balances and investments totalling $222,108,293.50 (including from loans, Developer Contributions and other avenues that form the restricted accounts and are committed for future works) as at 30 September 2019.

 

Report

Description of Item:

A copy of the state of Bank Balances and Investments as at 30 September 2019 is attached.  Also included is a summary of Council’s Socially Responsible Investment Performance.  It should be noted that Council is required to account for investments in accordance with the Australian International Financial Reporting Standards.  Term deposits are shown at face value and all other investment balances at the end of each month reflect market value movements, which would be inclusive of accrued interest.

 

Interest when paid, say quarterly, would result in reductions in the market value of the investments.  The Investment Report reflects the above requirements and reflects the interest earned (or accrued) on each investment, based on the acquisition price.

 

Reports written by Laminar Group Pty Ltd (Council’s investment portfolio advisors), which examine economic and financial markets data for September 2019 are available in the Councillors’ Resource Centre.

Issues:

There are no issues associated with the report.

Options:

As the report is for noting only, an options analysis is not required.

Sustainability Assessment:

•     Environment

There are no perceived current or future environmental impacts from the information contained in this report.

•     Social

There are no perceived current or future social impacts from the information contained in this report.

•     Civic Leadership

Council invests surplus funds to maximise investment income and preserve capital to assist with funding requirements for projects listed under the My Coffs Community Strategic Plan.

•     Economic – Broader Economic Implications

Council’s investments are held according to the requirements stated within Council’s Investment Policy and the returns are acceptable in relation thereto.  In the long term, earnings from investments can vary due to economic conditions and financial markets.  Council constructs its investment portfolio with consideration of current conditions and to comply with the Office of Local Government Investment Policy Guidelines.

•     Economic - Delivery Program/Operational Plan Implications

As at 30 September 2019, it is noted that the total bank and investment balance was $222,108,293.50 comprising restricted and unrestricted General, Trust, Water and Sewerage Fund cash and investments.

Risk Analysis:

The likelihood of risks associated with New South Wales Local Government’s investing funds is now remote due to the conservative nature of investments permitted under statutory requirements.  The risk of capital not being returned in relation to each individual investment Council owns is indicated in the attachment.

 

The main risks for Council’s investment portfolio are liquidity and credit risk, both of which are being managed under the advice of Laminar Group Pty Ltd.  Liquidity risk is the risk that the Council is unable to redeem the investment at a fair price within a timely period and thereby incurs additional costs (or in the worst case is unable to execute its spending plans).  Credit risk is the risk of loss of principal stemming from a financial institutions failure to repay that principal when that principal is due.  Council is compensated for assuming credit risk by way of interest payments from the financial institutions issuing the investment security.

 

Credit risk is rated by various rating agencies.  Investment securities in Council’s current portfolio are rated by either Standard and Poors or Fitch, with the majority of the portfolio rated by Standard and Poors.  Standard and Poors credit ratings and an explanation of their ratings are as follows:

 

Rating

Ratings Explanation

AAA

Extremely strong capacity to meet financial commitments.  Highest Rating.

AA

Very strong capacity to meet financial commitments.

A

Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.

BBB

Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.

BBB-

Considered lowest investment grade by market participants.

BB+

Considered highest speculative grade by market participants.

BB

Less vulnerable in the near term but faces major ongoing uncertainties to adverse business, financial and economic conditions.

B

More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.

CCC

Currently vulnerable and dependent on favourable business, financial and economic conditions to meet financial commitments.

CC

Currently highly vulnerable.

C

Currently highly vulnerable obligations and other defined circumstances.

D

Payment default on financial commitments.

 

Ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

 

Types of investment securities by credit risk ranking from highest to lowest are as follows:

 

·    Deposits/Covered Bonds – these share first ranking

·    Senior debt – Floating Rate Notes/Fixed Coupon Bonds.

·    Subordinated debt

·    Hybrids

·    Preference shares

·    Equity shares (common shares).

 

Subordinated debt, hybrids, preference and equity shares are not a permitted investment under the current Ministerial Order.  Term deposits of $250,000 or less per financial institution are covered under the Commonwealth Government Deposit Guarantee Scheme and therefore by default have the same credit rating as the Commonwealth Government, i.e. AAA.

 

All credit unions, building societies and mutual banks are Authorised Deposit-taking Institutions (ADIs) and are regulated in the same way as all other Australian banks.  ADIs are regulated by the Australian Securities and Investment Commission under the Corporations Act 2001, and by the Australian Prudential Regulatory Authority under the Banking Act 1959.

Consultation:

Council’s investment advisors, Laminar Group Pty Ltd have been consulted in the preparation of this report.

Related Policy, Precedents and / or Statutory Requirements:

Council funds have been invested in accordance with Council’s Investment Policy (POL‑049), which was adopted on 24 August 2017.

Local Government Act 1993 – Section 625

Local Government Act 1993 – Investment Order (dated 12 January 2011)

Local Government General Regulation 2005

The Trustee Amendment (Discretionary Investments) Act 1997 – Sections 14A(2), 14C(1) and 14C(2)

Implementation Date / Priority:

Nil.

Conclusion:

Council should consider the information provided in the report and the Councillors’ Resource Centre and the recommendation provided.

 

 

 


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BS19/52       Monthly Financial Performance Report for the Month Ended 31 August 2019

Author:                        Senior Finance Business Partner

Authoriser:                  Director Business Services

MyCoffs:                      D.2 We have effective use of public resources.

Attachments:              ATT1  BS19/52   Monthly Financial Performance Report for the Month Ending 31 August 2019   

 

Executive Summary

This report presents the Monthly Financial Performance Report for 31 August 2019.  The report provides information on the actual to budget position at the financial statement level and capital expenditure reports for the current financial year.  The projected year to date surplus is $85.0 million with the actual year to date being $87.5 million.

 

The explanation of year to date variances is contained within the Income Statement commentary under Variance Comments for variances greater than 10%.  There are individual recurrent revenue sources with variances but overall recurrent revenue is on track, similarly for recurrent expenditure.

 

The capital expenditure target for the current financial year is $88.8 million with $8.3 million expended to the end of August.

 

 

Recommendation:

That Council note the Monthly Financial Performance Report for 31 August 2019.

 

Report

Description of Item:

The Monthly Financial Performance Report provides information on Council’s actual to budget performance.  The report provides accrual based information to Council on a monthly basis and designed to identify and explain any major variances between budgeted and actual results.

 

The report includes:

 

Financial Management Summary

·     The net operating surplus at the end of August is $3.8 million ahead of budget expectations with the majority of rates income budgeted and raised in the first month of the financial year.  The total surplus after capital grants is $87.5 million against a budget of $85 million.  Operating expenditure to the end of August $26.5 million against a budget of $26.4 million.

·     Capital expenses is ahead of budget expectations by $0.3 million with total capital expenditure to the end of August of $8.3 million versus a YTD budget of $8 million and annual targeted expenditure of $88.8 million.  Further details are provided in the Capital Expenditure Report comments.

 

Income Statement

·     This is a comprehensive income statement detailing the monthly performance for August 2019.  This statement compares actual to budget on a monthly and year to date basis at the financial statement level.  In terms of monthly percentages, although some percentages may be large in dollar terms, they have a minor impact on financial performance.  There are individual comments for any monthly and YTD variances greater than 10%.

 

Capital Expenditure Summary and Detailed

·     Capital expenditure by cost centre and then at a more detailed level is also provided in the attachment.  Explanations have been provided for any variances greater than $200,000.

Issues:

Income Statement commentary as at 31 August 2019 for Year to Date (YTD) variances:

 

Revenue

·     User Charges and Fees:  Variance arises from a number of revenue streams being budgeted on a different revenue type to that where the actual income is being receipted.  It is anticipated that the majority of these issues will be rectified as part of the September QBRS report to Council.  Englands Road Non-Domestic tip fees received to date are $180,000 above anticipated.  Airport security income also slightly higher than budgeted, which were based on last year’s actual cash flow.

·     Interest and Investment Revenue:  This timing difference is due to interest coupons on investments received in August.  They are received based on investment and maturity dates.  This variance is expected to decrease as higher rate term deposits are re-invested at current lower rates and should meet or slightly exceed budget by the end of the financial year.

·     Other Revenue:  The primary surplus item relates to timing of rental income invoicing for Council properties, issue will be rectified for September QBRS reporting.

·     Capital Grants, Subsidies, Contributions and Donations:  Developer Contribution income budgets across the General, Water and Sewer funds are split evenly to reduce fluctuations however actual receipt of income are more sporadic in nature.

 

Expenditure

·     Other Expenses:  The primary shortfall relates to Local Roads maintenance budgets allocated to other expenses whereas actuals are being charged to materials and contracts.

 

Income Statement commentary as at 31 August 2019 for Monthly variances:

 

Revenue

·     Rates and Annual Charges:  Variance arises from Pensioner Rebates for general, water and sewer funds being higher than expected this month.

·     Interest and Investment Revenue:  This timing difference is due to interest coupons on investments received in August.  They are received based on investment and maturity dates.  This variance is expected to decrease as higher rate term deposits are re-invested at current lower rates and should meet or slightly exceed budget by the end of the financial year.

·     Other Revenue:  The primary surplus item relates to timing of rental income invoicing for Council properties, issue will be rectified for September QBRS reporting.  There are other items that have minor impact upon this result including additional income from Construction Certificates for Subdivisions, Scrap Metal Sales and Stadium Canteen Sales.

·     Capital Grants, Subsidies, Contributions and Donations:  Developer Contribution income budgets across the General, Water and Sewer funds are split evenly to reduce fluctuations however actual receipt of income are more sporadic in nature.

 


 

Expenditure

·     Other Expenses:  The primary shortfall relates to Local Roads maintenance budgets allocated to other expenses whereas actuals are being charged to materials and contracts.

Options:

An options analysis is not provided as the report is for noting only.

Sustainability Assessment:

•      Environment

There are no perceived short or long term environmental impacts for the information contained within the report.

•      Social

There are no perceived short or long term social impacts for the information contained within the report.

•      Civic Leadership

Council supports the delivery of high quality, sustainable outcomes for Coffs Harbour by monitoring financial performance which assists the decision making process to allocate funding for projects listed under the MyCoffs Community Strategic Plan.

•      Economic – Broader Economic Implications

This report assesses the current year’s budget position only.  Any variations approved by Council are subsequently reflected in Council’s Delivery Plan and may affect future economic sustainability.

•      Economic - Delivery Program/Operational Plan Implications

The year to date surplus, after capital revenue, was budgeted to be $85 million as at 31 August 2019.

Risk Analysis:

There are no risks associated with this report.

Consultation:

Group Leaders and their relevant staff have been provided with budget reports for each cost centre on a monthly basis for review.  Any variations will be provided to Council for adoption through the Quarterly Budget Review process.

Related Policy, Precedents and / or Statutory Requirements:

Local government regulations require the Responsible Accounting Officer to submit a quarterly budget review to Council.  There is no obligation to provide monthly financial performance reports but as part of prudent financial management we have opted to do so.

Implementation Date / Priority:

This report is for noting only and therefore there are no implementation actions.

 

Conclusion:

 

This Monthly Financial Performance Report provides information on the actual to budget results at the financial statement level along with capital expenditure reports for the current financial year.

 

The Responsible Accounting Officer confirms the Monthly Financial Performance Report for the month ended 31 August 2019 indicates the financial position of the Council is satisfactory, having regard to the projected estimates of income and expenditure and the original budgeted income and expenditure.

 

 


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BS19/53       Audited 2018/2019 Annual Financial Statements

Author:                        Section Leader Financial Support

Authoriser:                  Director Business Services

MyCoffs:                      D.2 We have effective use of public resources.

Attachments:              ATT1  BS19/53   General Purpose Financial Statements 2018/19

ATT2  BS19/53   Special Purpose Financial Statements 2018/19

ATT3  BS19/53   Special Schedules 2018/19  

 

Executive Summary

The audited Annual Financial Statements for 2018/2019 are being presented to meet legislative requirements under Section 419 of the Local Government Act in relation to their completion, audit and presentation.

 

The General Purpose Financial Statements and Special Purpose Financial Statements are the statements required to be produced by the Australian International Financial Reporting Standards whilst the Special Schedules contain additional information required by the Office of Local Government.

 

The final audited Financial Statements require certification by the designated signatories for the audit opinion and Conduct of the Audit Report to be issued, and for the Financial Statements to be then lodged with the Office of Local Government.

 

 

Recommendation:

That Council:

1.       Approve the General Purpose Financial Statements – Statement by Councillors and Management and Special Purpose Financial Statements – Statement by Councillors and Management forms relating to the audited 2018/2019 Annual Financial Statements for completion by the designated signatories.

2.       Receive and adopt the audited 2018/2019 Annual Financial Statements.

 

Report

Description of Item:

The audited Annual Financial Statements for the year ended 30 June 2019 are attached.

 

The Audit Office of NSW, represented by Mr Jan-Michael Perez, will be in attendance to address Council during the meeting in relation to the audit of the 2018/19 Financial Statements through presenting the Conduct of the Audit Report.

 

The Financial Statements consist of three distinct sections:

 

1.    The General Purpose Financial Statements (Attachment 1)

2.    The Special Purpose Financial Statements (Attachment 2)

3.    The Special Schedules (Attachment 3)

 

 

The General Purpose Financial Statements and Special Purpose Financial Statements are the statements required to be produced by the Australian International Financial Reporting Standards whilst the Special Schedules contain additional information required by the Office of Local Government.

 

It should be recognised that the Income Statement, Statement of Comprehensive Income, Statement of Financial Position, and Statement of Cash Flows of the General Purpose Statements provide a consolidated picture of a Council’s operation and financial position and excludes transactions between General, Water and Sewer funds, e.g. water charges met by the Asset Construction and Maintenance section are reversed.

 

For a multi-purpose Council, such as Coffs Harbour City Council, the results achieved by each traditional fund (General, Water and Sewerage) are disclosed in Note 26(b) of the General Purpose Financial Statements.

 

The sections of the financial statements are set out below:

 

1.    General Purpose Financial Statements

 

In relation to the specific statements included in the General Purpose Financial Statements, the following comments are made:

 

a)   Statement by Councillors and Management.

 

The statement requires Councillors and Management to declare that the financial statements are neither false nor misleading in any way and present fairly Council’s operating result and financial position for the year.  The draft statements were approved by Council for signature on 12 September 2019.

 

The Audit Office of NSW, as representatives of the Auditor General, require for the audited Annual Financial Statements presented at this meeting to be approved for signature by the designated signatories prior to providing the audit report.  The audit report is required to be submitted with the Annual Financial Statements to the Office of Local Government by 31 October 2019.

 

b)   Income Statement

 

The Income Statement summarises the $215.223 million of Income and $174.759 million of Expenses from Continuing operations that result in Council’s Net Operating Surplus of $40.464 million.  The 2018/19 Net Operating Result before grants and contributions provided for capital purposes was a surplus of $5.980 million.

 

The Net Operating Surplus is impacted by the following events;

 

i.     Grant and Contributions for Capital Purposes

The revaluation process undertaken for Open Space and Recreational Assets resulted in $1.547 million of assets recognised for the first time as the last revaluation of this class was carried out in the 2010/2011 financial year.  Council’s asset identification practices and records have improved considerably since this time.

 

Council’s continued focus on improved asset identification, classification and measurement practices as a whole resulted in a further $3.582 million of Stormwater ($0.439 million), Water ($1.509 million) and Sewer ($1.633 million) assets being recognised for the first time in the 2018/19 financial year.

 

ii.     User Charges & Fees, Employee Benefits & Oncosts, and Materials & Contracts

Council was appointed the Crown Land Manager on 1 July 2018 under the Crown Lands Management Act 2016 and the Coffs Coast State Park Trust ceased.  Subsequently the cost recovery agreement previously held with Coffs Coast State Park Trust also ceased from this date and Holidays Parks operations and management of Crown Reserves were consolidated within Council’s general fund.

 

The financial effect for the year ended 30 June 2019 was an increase of $8.466 million in expenditure, consisting of Employee Benefits and Oncosts ($2.961 million), and Material and Contracts ($5.505 million) and an increase in revenue by $13.567 million, consisting of User Charges and Fees ($11.485 million), and Other Revenue ($2.172 million).

 

The Operating Surplus for the year before Grants and Contributions provided for Capital Purposes of $5.980 million compares favourably with the Original Budget Deficit of $0.064 million and the 2017/2018 Operating Deficit of $0.383 million.

 

After taking into consideration the above events, the normalised Net Operating Result before Grants and Contributions for Capital Purposes is $0.854 million.  The following table shows these adjustments aligning with the above notes in $’000s:

 

 

c)   Statement of Comprehensive Income

 

The Statement of Comprehensive Income reports on the movement in Equity resulting from the Income Statement operations surplus of $40.464 million (2017/2018 $38.688 million) and transactions that must by-pass the Income Statement because they have not been realised.  This includes a gain on Revaluation of Infrastructure, Property, Plant and Equipment $84.843 million (2017/2018 $22.127 million) which is largely attributable to the assets previously held by the Coffs Coast State Park Trust and transferred to Council upon cessation of the reserve trust from 1 July 2018.  Another movement was the decrease in the Financial Asset Reserve of $0.22 million due to the fair value adjustment of Council’s Southern Phones shareholding.  These unrealised gains or losses do not result from operations but increased net assets and equity of Council.

 

d)   Statement of Financial Position

 

The Statement of Financial Position reports on the assets $2,399.799 million (2017/2018 $2,284.425 million), liabilities $177.173 million (2017/2018 $187.056 million) and equity $2,222.626 million (2017/2018 $2,097.369 million) of Council.

 

i.     Assets

Assets have increased by $115.374 million (2017/2018 $55.163 million). Excluding Revaluation Increments of $84.821 million (2017/2018 $22.152 million), the increase was $30.553 million (2017/2018 $33.011 million).

 

The increases in Cash & Cash Equivalents and Investments was $10.528 million (2017/2018 $20.434 million), Receivables decreased by $0.405 million (2017/2018 increase of $1.799 million), Inventories and Other Assets decreased by $1.943 million (2017/2018 decrease $0.093 million) and the increase to Infrastructure, Property, Plant & Equipment was $108.239 million (2017/2018 $10.685 million).

 

The Cash & Cash Equivalents and Investments of $223.314 million (2017/2018 $212.786 million) had External and Internal Restrictions (summarised in Note 6(c) to the General Purpose Financial Statements) of $215.527 million (2017/2018 $208.258 million), resulting in unrestricted cash of $7.787 million (2017/2018 $4.528 million).

 

ii.     Liabilities

Liabilities have decreased by $9.883 million (2017/2018 decrease $5.652 million) resulting from decreases in Payables and Income Received in Advance of $1.080 million (2017/2018 increase $3.573 million), decreases in net Borrowings of $14.245 million (2017/2018 decrease $9.803 million) and an increase in Provisions by $3.282 million (2017/2018 increase $0.578 million).

 

iii.    Equity

Equity has increased by $125.257 million (2017/2018 $60.815 million) resulting from increases to Operating Surplus of $40.436 million (2017/2018 $38.688 million) and Asset Revaluations $84.843 million (2017/2018 $22.127 million), and a decrease in the Financial Asset Revaluation Reserve of $0.022 million (2017/2018 nil movement).

 

e)   Statement of Changes in Equity

 

The Statement of Changes in Equity reports the movement in the Equity as reflected in the Statement of Financial Position.  Equity has increased by $125.285 million (2017/2018 $60.815 million) resulting from an Operating Surplus of $40.464 million (2017/2018 $38.688 million), Asset Revaluations of $84.843 million (2017/2018 $22.127 million), and an $0.022 million decrease to the Financial Asset Revaluation Reserve (2017/2018 nil movement).

 

f)    Statement of Cash Flows

 

The Statement of Cash Flows reports the decrease in Council’s Cash and Cash Equivalent resources by $1.061 million (2017/2018 $4.944 million) resulting from operating, investing and financing activities.  Cash Resources are $21.434 million (2017/2018 $22.495 million).

 

Operating activities generated net cash inflows of $83.701 million (2017/2018 $70.554 million). Investing activities generated net cash outflows of $70.488 million (2017/2018 $55.760 million) and financing activities generated cash outflows of $14.274 million (2017/2018 $9.850 million).

 

The operating surplus for the year is adjusted for non-cash items and movements in operating assets and liabilities to determine the Cash Flows from operating activities (Note 15 to the General Purpose Financial Statements).  The effect of these adjustments is to remove non-cash items and movements in operating assets and liabilities subject to the accrual basis of accounting from the operating surplus to arrive at the cash inflows generated by operating activities.

 

Reconciliation of Operating Surplus to Cash Flows from Operating Activities

Operating Surplus
$ '000

Non-Cash Items and Movements in Operating Assets and Liabilities $ '000

Cash Flows From Operating Activities
$ '000

Revenue

Rates and Annual Charges

98,458

(312)

98,146

User Charges and Fees

45,088

5,503

50,591

Interest and Investment Revenue

6,915

(254)

6,661

Grants and Contributions

48,135

(13,680)

34,455

Bonds and Deposits Received

0

271

271

Other Revenues

16,627

8,374

25,001

Total Revenue/Cash Inflows

215,223

(98)

215,125

Expenses

Employee Benefits and On costs

46,714

239

46,953

Borrowing Costs

9,934

(14)

9,920

Materials and Contracts

55,502

9,708

65,210

Depreciation and Amortisation

45,820

(45,820)

0

Other Expenses

12,982

(3,641)

9,341

Losses from Disposal of Assets

3,807

(3,807)

0

Revaluation decrement

0

0

0

Total Expenses/Cash Outflows

174,759

(43,335)

131,424

Operating Surplus/Cash Flows from Operating Activities

40,464

43,237

83,701

 

 

g)   Financial Result and Financial Position by Fund

 

The operating surplus of $40.464 million (2017/2018 $38.688 million) is dissected by Water Fund $8.191 million (2017/2018 $5.445 million), Sewer Fund $8.276 million (2017/2018 $4.486 million) and General Fund $23.997 million (2017/2018 $28.757 million).

 

The operating surplus before grants and contributions provided for capital purposes of $5.980 million (2017/2018 deficit $0.383 million) is dissected by Water Fund surplus $1.409 million (2017/2018 deficit $0.396 million), Sewer Fund deficit $1.347 million (2017/2018 deficit $2.868 million), and General Fund Surplus $5.918 million (2017/2018 surplus $2.881 million).

 

The Net Assets of the Water Fund are $384.303 million (2017/2018 $371.321 million) and Sewer Fund $482.456 million (2017/2018 $467.389 million).

 

The detail of the Financial Performance and Financial Position of the Water, Sewer and General Fund is reported in Note 25 to the General Purpose Financial Statements and the Water and Sewer Funds are separately reported in the Special Purpose Financial Statements.

 

The Water, Sewer and General Fund operations include internal charges and recoveries made between the funds.

 

h)   Key Performance Indicators (Note 26 to the General Purpose Financial Statements)

 

i.     Operating Performance Ratio 5.37% (2017/2018 3.23%) Benchmark >0%

This ratio measures Council’s achievement of limiting operating expenditure within the available recurrent revenue.  Council’s operating expenses are 94.63% of its operating revenue.  Council performance is in excess of the benchmark.

 

ii.     Own Source Operating Revenue Ratio 76.98% (2017/2018 73.20%) Benchmark > 60%

This ratio measures the reliance on external funding sources such as operating grants and contributions.  Council’s level of reliance on external grants and contributions for the funding of operational projects reduced in 2018/19, resulting in a 3.78% increase to the own source operating revenue ratio that is in excess of the Benchmark.

 

iii.    Unrestricted Current Ratio 6.11X (2017/2018 9.64X) Benchmark >1.5X

This ratio measures the adequacy of working capital to satisfy short term obligations for the unrestricted activities of Council.  After excluding all external restriction, Council continues to comfortably meet its short term obligations as they fall due.  Council’s performance is in excess of the Benchmark.

 

iv.   Debt Service Ratio 2.70X (2017/2018 2.33X) Benchmark >2.0X

This ratio measures the relationship between Operating result before capital grants and contributions, excluding interest, depreciation, amortisation and impairment expenses and Loan Principal and Interest Payments to determine Council’s capacity to service debt.  The 2.70X result is in excess of the Benchmark 2.0X and reports that Council’s adjusted Operating Result would cover the loan principal and interest payments 2.70 times.

 

v.    Rates and Annual Charges, Interest and Extra Charges Outstanding Percentage 6.69% (2017/2018 6.58%) Benchmark <10%

This ratio assesses the rates and charges unpaid over the rates and charges levied and is a measure of liquidity and debt recovery effectiveness.  Council is below the Benchmark and has remained consistent with prior years indicating that the debt recovery activities undertaken have limited the growth in unpaid rates and charges.

 

vi.   Cash Expense Cover Ratio 9.88 months (2017/2018 10.20 months) Benchmark >3 months

This ratio is a measure of the amount of time Council could fund operational expenditure from its available cash, cash equivalents and investments without any cash inflows from operations.  Council is in excess of the Benchmark due to the restricted cash held for developer contributions, unexpended loans, unexpended grants, Water, Sewer and Waste operations.

 

2.    Special Purpose Financial Statements

 

The Special Purpose Financial Statements include the Income Statements and Statement of Financial Performance for Council’s Business Activities (Water, Sewerage, Coastal Works, CitySmart Solutions, Coffs Harbour Laboratory, Holiday Parks and Reserves and Coffs Harbour Airport) as required for National Competition Policy (NCP) reporting purposes.

 

The Income Statement includes internal transactions between business activities and Council’s General fund, and also shows notional transactions required under NCP (i.e. Imputation Payments, Corporate Taxation Equivalent and Notional Subsidies from Council).

 

The Statement of Financial Position sets out the assets, liabilities and equity of Council’s business activities.  The statement includes internal transactions between business activities and Council’s General fund.

 

Note 1 to the Special Purpose Financial Statements outlines the significant accounting policies complied with and other matters of note affecting the financial statements such as the National Competition Policy Imputation Payments utilised.

 

3.    Special Schedules

 

Council must prepare two Special Schedules as required by the Office of Local Government, the Permissible Income for General Rates and the Report on Infrastructure Assets.

 

The Permissible Income for General Rates reports the income for the current reporting period and for the following year.  The permissible income is calculated in accordance with the rate-peg limit and/or other adjustments in accordance with the Act and appropriate approvals by the Independent Pricing and Regulatory Tribunal (IPART) or the Minister for Local Government.  This Special Schedule is required to be audited in conjunction with the Annual Financial Statements and a copy of the audit report included.

 

The Report on Infrastructure Assets provides information on Council’s assets in addition to that contained in Note 10(a) Infrastructure, Property, Plant and Equipment of the audited General Purpose Financial Statements.  The nature of the information contained in the Special Schedule is related to the condition, maintenance and renewal of infrastructure assets.  This Report is a mandatory requirement of the Office of Local Government however is not subject to audit.

 

In accordance with Council Resolution 2019/148 (Business Services Report BS19/42 presented on 12 September 2019), a separate report will be presented to the first Council meeting in December 2019 outlining the number of assets listed at condition 4 and 5 and the estimated cost to bring them up to ‘satisfactory’ condition.

 

The adopted Annual Financial Statements and Conduct of the Audit Report, prepared by the Audit Office of NSW, will be presented with Council’s Annual Report as required under S 419(1) of the Local Government Act.

Issues:

Failure to approve the abovementioned statements will result in non-compliance with relevant legislation.

Options:

This report is to enable Council to adopt the audited Financial Statements for 2018/2019.  This is required by legislation and therefore is the only option provided to Council.

Sustainability Assessment:

•     Environment

There are no perceived current or future environmental impacts.

•     Social

There are no perceived current or future social impacts.

•     Civic Leadership

There are no perceived current or future civic leadership impacts.

•     Economic – Broader Economic Implications

There are no perceived current or future economic impacts.

•     Economic - Delivery Program/Operational Plan Implications

The operational plan process through budget reviews have reflected the financial results achieved in Council’s Annual Financial Statements.  Costs for preparation of the Annual Financial Statements are allocated with the Financial Services and Logistics budget cost centres.

Risk Analysis:

It is considered that the recommendation does not present a risk to Council.

Consultation:

The Annual Financial Statements were collated with the assistance of various Council staff members in conjunction with the Audit Office of NSW (Council’s external auditors).

Related Policy, Precedents and / or Statutory Requirements:

The Financial Statements are prepared and presented on an annual basis in accordance with statutory and regulatory requirements.

 

The financial statements have been prepared in accordance with:

 

1.    The Local Government Act 1993 and amendments

2.    Local Government Regulations

3.    Australian Accounting Standards (AASBs)

4.    The "Local Government Code of Accounting Practice and Financial Reporting” published by the Office of Local Government

5.    The “Asset Accounting Manual” published by the Office of Local Government

6.    Instructions issued in circulars released by the Office of Local Government

7.    NSW Government Policy Statement “Application of National Competition Policy to Local Government”

8.    Office of Local Government guidelines “Pricing & Costing for Council Businesses: A guide to Competitive Neutrality”

9.    Council’s policies and procedures

Implementation Date / Priority:

Under Section 416(1) of the Local Government Act 1993, Council’s financial statements for a year must be prepared and audited within the period of four months after the end of that year i.e. submitted to the Office of Local Government by 31 October.  The Financial Statements for 2018/2019 have been completed and audited, and will be lodged with the Office of Local Government by 31 October 2019 following adoption by Council.  The final audited Financial Statements require certification by the designated signatories for the audit opinion and Conduct of the Audit Report to be issued.

Conclusion:

This report presents the final audited Financial Statements for the 2018/2019 financial year to Council for certification and adoption, provides for Council’s external auditors to present their draft Conduct of the Audit Report and provides Council with an analysis of the results for the year.

 

 


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