Item 10.1 - Attachment 3 |
Previous Report to
Council on 17 October 2011 |
GOVERNANCE AND CORPORATE
ITEM NUMBER 6.1
SUBJECT 2010/11 Financial
Report
REFERENCE F2009/01832 - D02106997
PURPOSE: 1. To present Council’s 2010/11 Annual Financial Report for adoption
and to receive the Auditor’s Report from Council’s Auditors
PricewaterhouseCoopers. 2. Mr D. Banicevic, Director Local Government Services from
PricewaterhouseCoopers, will be present at the Council meeting to present the
Auditor’s Report. |
(a) That
Council adopt the Financial Report for the year ended 30 June 2011. (b) That
Council authorise the Lord Mayor, Deputy Lord Mayor, Chief Executive Officer
and Manager Finance (Responsible Accounting Officer) to sign the following: General Purpose Financial Report Special Purpose Financial Report (c) That
Council receive the Auditor’s Report on the 2010/11 Financial Report. (d) Further,
that Council present the 2010/11 audited Financial Report and Auditor’s
Report to the public at the Council Meeting of the 28 November 2011. |
BACKGROUND
1. The
Council’s Financial Report for the year ended 30 June 2011 has been completed
and is submitted to Council for adoption and formal referral to Council’s
Auditors, PricewaterhouseCoopers.
2. Council’s
Financial Report includes the following:
2.1 The
General Purpose Financial Report
2.2 The
Special Purpose Financial Report
2.3 The
Special Schedules.
3. The audited Financial Reports will be
presented to the Audit Committee on
October 13. An update of the Audit
Committee meeting will be provided at the Council meeting.
4. The
full Financial Report is attached but does not include the Auditor’s Report.
5. Mr D. Banicevic, Director, Local
Government Services of PricewaterhouseCoopers, will be in attendance at the
Council Meeting on 17 October 2011 to present the Auditor’s Report and answer
questions.
6. To
meet statutory requirements, it is proposed that Council present the 2010/11
Financial Report and Auditor’s Report to the public at its meeting of the 28
November 2011. This is after the public
exhibition period of 2 weeks which enables the public to make submissions.
7. Council
must ensure that copies of all submissions received are referred to the
Auditor, and may take such action as it considers appropriate with respect to
any such submission, including the giving of notice to the Director-General of
Local Government of any matter that appears to require amendment of the
Council’s Financial Report.
ISSUES/OPTIONS/CONSEQUENCES
Financial Performance
8. The
2010/11 Financial Report reports Council’s financial performance along similar
lines to financial reports in the commercial world, where the focus is on the bottom
line profit of the company.
9. Council’s
operating result has increased from a surplus of $9.3 million in the previous
year to a $14.1 million surplus this year. The increase is due to an increase
in Capital Grants and Contributions $2.2M, an increase in profit on Asset Sales
($1.221M) and a reduction in materials and contract costs ($2.7m).
10. Council
is maintaining its asset base with $31 million (2009/10 $31 million) spent on
capital works. This was funded from a mix of revenue, loans, special rates,
sale of assets and capital grants and contributions. For further information
see Note 9 in the Financial Reports.
11. Council’s
cash position remained constant at $86.7 million.
12. Council’s
loan liability decreased from $85.4 million to $84 million during the year. Of
this amount, $55 million is in respect of
13. The
2010/11 Financial Report contains a number of performance indicators (Note 13)
and they are detailed below with commentary:
PERFORMANCE
INDICATORS
2010/11 2009/10 2008/09 2007/08
Unrestricted
Current
Ratio 2.86:1 1.84:1 1.86:1 1.82:1
(To assess the adequacy of working capital and the
ability to satisfy obligations in the short term for the unrestricted
activities of Council)
Comment/Explanation
For every $1 of current liabilities, Council has
$2.86 of working capital to satisfy these obligations in the short term. (This is a useful indicator in that it
takes into account restrictions placed on working capital.)
This
ratio stands above the industry benchmark of 1:1.
2010/11 2009/10 2008/09 2007/08
% % %
%
Debt
Service Ratio 5.75
7.32 6.49 6.86
(To assess the degree to which revenues are
committed to the repayment of debt)
Comment/Explanation
5.75% of our total revenue was committed to loan
repayments for 2010/11. This is better than the industry benchmark of 10% for
developed councils. (NB: The
Rates & Annual Charges Coverage Percentage
2010/11 2009/10 2008/09 2007/08
% % % %
58.65 59.22 59.71 61.00
(To assess the degree of dependence upon revenues
from rates)
Comment/Explanation
A major
portion (59%) of our revenue is derived from Rates and Other Annual Charges
such as Domestic Waste, Commercial Waste and the Stormwater Levy.
Rates
Outstanding Percentage
2010/11 2009/10 2008/09 2007/08
% % % %
3.73 4.27 5.50 4.40
(To
assess the impact of uncollected rates and annual charges on liquidity and the
adequacy of recovery efforts)
Comment/Explanation
3.73% of
rates and annual charges remained uncollected at year end which compares
favourably with the industry benchmark of 5%. This is an outstanding result
given economic conditions.
General
Comments
14. Council’s
performance indicators are all better than the industry benchmark.
15. Some of
the major projects included are Ermington Bay Nature Pathway Parramatta
Cycleway, Parks Improvements, Playground Replacement, Civic Place Project Management
and the CITSR project.
16. Council
has revoted approximately $2.8 million of projects from the 2010/11 budget to
the 2011/12 budget. This represents 7% of the 2010/11 projects budget and 1.4%
of total operating and capital expenditure.
17. Restrictions
relating to grants and contributions provide information on unspent
amounts. There continues to be an increase in the balance of unspent grants
and contributions which is up from $18.8 million in 2009/10 to $24.5 million in
2010/2011. This increase is due to larger than usual developer contributions.
Special Purpose Financial
Report
18. Council identified its Commercial Property Portfolio as a
Category 1 business in accordance with the requirements of National Competition
Policy (NCP) guidelines.
19. Council
has imputed all normal taxation payments that would be faced by an equivalent
private sector organisation as well as a return on investment.
Special Schedule 7 –
Condition of Public Works
20. The
purpose of this schedule is to allow an assessment of the condition of
Council’s public works assets and how Council is performing in managing these
assets. The schedule reports on our public works assets in respect of:
21.1 The
assessed condition of the assets
21.2 The
assessed expenditure required to bring the asset up to a satisfactory standard
21.3 The
anticipated expenditure required to keep these assets at a satisfactory
standard
21.4 The
actual maintenance expenditure in 2010/11.
21. Council
has developed an asset management strategy and progressively implement Whole of
Life costing for all its classes of assets.
An excellent example is the work done by City Services for the road
pavements and footpath pavements and work on Council’s drainage assets.
22. Whilst
the condition of our assets is generally satisfactory, the consequence of not
finding the right balance will be that asset management costs will be deferred
for future generations to address and lead to deterioration in asset
performance.
CONSULTATION & TIMING
23. PricewaterhouseCoopers
has completed its Annual Audit and no major issues have arisen. It is
anticipated that Council will receive an unqualified Audit Report for 2010/11.
Acting Manager Finance
REFERENCE MATERIAL