HURSTVILLE CITY COUNCIL
CIVIC CENTRE, MACMAHON STREET, HURSTVILLE.
SUMMARY OF ITEMS CONTAINED IN THE
DIVISIONAL MANAGER - BUSINESS AND FINANCIAL SERVICES' REPORT TO THE COUNCIL MEETING TO BE HELD ON
23RD AUGUST, 1995-
02:01 1994/95 Statutory Accounts
|HURSTVILLE CITY COUNCIL|
REPORT ITEM NO: .
BUSINESS & FINANCIAL SERVICES
DIVISIONAL MANAGER - BUSINESS AND FINANCIAL SERVICES
REPORT NO 1 TO THE COUNCIL
TO BE HELD ON 23RD AUGUST, 1995
The General Manager
Hustville City Council
The Civic Centre
Hereunder is my report No.02 to be submitted to the COUNCIL Committee:-
02.01 1994/95 STATUTORY ACCOUNTS
Council's Statutory Accounts for the twelve month period 1 July 1994 to 30 June 1995 have been prepared in accordance with the new provisions of the Local Government Act, 1993.
As part of this the Accounts have adopted the Australian Accounting Standards ("AAS"), including AAS27 which specifically relates to Local Government. The adoption of these new standards has meant that the accounts from 1993 onwards will be presented in a completely different format from the previous approach. As a result of this change in approach there has been a significant effort required by Council staff to extract information and present it in a manner not previously provided for in the General Ledger. A review of the financial results has been provided below.
The Accounts (refer 'Annexure D' which has been forwarded separately) have now been completed and audited by our Auditors, Truman & Co. In order to officially adopt the accounts in accordance with the Local Government Act, the following steps must be undertaken:-
(a) Council must resolve to authorize the Mayor, one Councillor, the General Manager and the Responsible Accounting Officer to sign the accounts;
(b) The Auditors must sign the accounts after (a) above is undertaken;
(c) Council must place at least one advertisement in a local newspaper providing a summary of the results and giving at least two weeks' notice of a Council meeting date where the accounts will be formally adopted;
(d) At an open meeting of Council the accounts must be formally adopted; and
(e) The Accounts must be made available for inspection by the general public during the adveriting period.
Review of the 1994/95 Financial Results
In an overall sense the change in accounting approach to adopt AAS27 and the new Code of Accounting Practice issued by the Department of Local Government has meant that the focus is now on three separate areas:-
(i) the level of recurrent revenues and expenditures that were committed by Council ("Operating Statement");
(ii) the level of asset growth and asset/liability management undertaken by Council in each year ("Statement of Financial Position"); and
(iii) the cashflow available to meet the commitments of Council ("Cashflow Statement").
(i) Operating Statement
As outlined above the operating statement is designed to identify the total revenues received during the year and the expenses incurred. These are broken down into recurring revenues (eg rates income) and expenses (eg employee costs) and "one-off" items such as capital grants or contributions received from developers towards open space (ie S94 Contributions).
It should be noted that the major difference between the AAS27 approach and the previous "Fund" approach is that the new operating statement format:-
* does not include any expenditure of a capital nature (eg property acquisitions, new road construction, etc.)
* incorporates all developer contributions in the year they are received rather than the year they are spent.
A summary of the 1994/95 operating results are as follows:-
Capital Grants and Contributions
Net Operating Surplus
As can be seen from the above summary and the detailed accounts Council generated an accounting surplus of - $6.860 million from operations during the 1994/95 Year. Included in this figure is non-recurring income of $2.861 million which was received for expenditure on specific capital items (eg open space under S.94 contributions).
Overall this result demonstrates that Council is managing its financial position strongly. The accounting surplus demonstrates that Council has not committed all its resources to purely recurring or maintenance items. Rather, it is continuing to increase and improve community facilities by incurring expenditure on capital items which will have a long lasting benefit. In fact, note 18 to the accounts identifies the extent to which this approach has been adopted by Council, with it committing $8.560 million on capital expenditure during the 1994/95 Year. A significant portion of this expenditure was on the construction of the Hurstville Aquatic Leisure Centre ($2.810 million).
A more detailed analysis of the revenue base of Council also shows Hurstville to be in a relatively strong position with only 52.3% (53.7% in 1994) of income being derived from rates. This means that approximately 47.7% of the revenue base is obtained from other sources such as user charges and regular grants from Government to support community service activities.
The results are comparable with those achieved for the annualized 1994 six-month period with the exception of specific grants being approximately $800,000 above the previous year as a result of the Commonwealth Grants received on the Leisure Centre ($450,000) and income from User Charges being approximately $900,000 higher than the previous year due to generally higher activity throughout all services. A separate report reviewing the actual expenditure compared to budget for the 1995/96 year is being prepared and will also be submitted for Council consideration.
(ii) Statement of Financial Position
The Statement of Financial Position identifies Council's assets and liabilities. As a consequence of the adoption of AAS27 this statement also introduces a new concept for Local Government, being "net equity". Net equity represents the cumulative wealth of assets held by Council for the benefit of the community, after deducting any outstanding liabilities.
As part of calculating the net equity position of Council AAS27 requires values to be attributed to a range of assets not previously brought to account (eg parks and reserves, roads, drainage assets). These assets are required to be brought to account over a 3-year period between 1994/95 and 1996/97.
During 1994/95 values were attributed to all land and buildings owned by Council and under the control and maintenance of Council. Consequently, many parks and reserves which are actually Crown Land (eg Hurstville Oval, Penshurst Park, etc.) are now required to be valued and brought to account by Council. This is despite the fact that Council has no right to deal in the property nor even enter into leases without the Minister's approval.
All buildings on Council land or Crown land controlled and maintained by Council have been identified and then were valued by independent valuers Rushton Group. This valuation in total was $14.262 million which represented an increase of $3.459 million above that previously included in the accounts.
Land owned by Council and Crown land controlled and maintained by Council has been valued by the Office of the Valuer General as part of his normal valuation process. Consequently, total land owned and/or controlled by Council now included in the accounts is $45.052 million. This is an increase of $38.677 million over previous years.
Overall, this means that the net equity position of Council (ie its net wealth) has been increased as a result of these valuations by:-
Land $37.333 million
Buildings $ 3.459 million
Net Increase $40.792 million
During 1995/96 Council will be required to value all its transport and communication assets (eg roads, land under roads, etc.). Work has already been undertaken to measure and assess the quality of roads in the City to enable them to be valued prior to 30 June 1996.
As at 30 June 1995, Hurstville's net equity amounted to $42.26 million. This largely represents the cash held by Council and the fixed assets utilized by Council to conduct its operations (including parks and reserves owned or under its control). At this point in time as the fixed assets are now a combination of operating and community assets the true realizable equity of Council is very difficult to determine.
However, I believe that a realistic measure for benchmarking in the future for "realizable net equity" will be equal to net cash plus operating assets. As an example of the strength of Hurstville's current net equity position a comparison can be taken against a similar-sized local Council such as Rockdale as at 30 June 1994.
Comparison of Net Equity
As At 30 June 1994
This shows that although both Councils have a relatively similar asset base that Hurstville's net equity is approximately 2.21 times stronger.
(iii) Cashflow Statement
The cashflow statement demonstrates how Council actually funded its activities during the year - both ongoing operations and capital expenditure.
In summary the cashflow shows that during 1994/95 year Hurstville generated net cash of $10.360 million (1993 - $4.730 million) after meeting all its day-to-day costs of operations. These funds were basically then used to improve the facilities in the community with Council spending $8.560 million (1993 - $2.905 million) on capital improvements. Consequently, the net increase in cash holdings for the year was $2.469 million.
While this statement shows that Hurstville has a very strong cash position, holding $29.96 million as at 30 June 1995, it is important to note that a significant amount of this is restricted for specific uses.
Consequently, of the $29.96 million on hand:-
* $6.012 million is restricted by virtue of the Local Government Act as part of S.94 trust funds and Town Improvement levies (refer Note 13 in Annexure D).
* $13.331 million is restricted by previous Council resolutions to be spent on specific projects (refer Note 22 in Annexure D).
Thus, only $10.619 million is not committed for specific purposes. These funds form part of the working capital of Council and fund the daytoday creditors, salary payments and stores that are necessary for the smooth running of Council operations between periods when rate income is generated.
While Hurstville does have a healthy cash position it is clear that this level is not excessive given the restrictions on the use of the majority of the funds and the ongoing working fund requirements of Council.
Overall, the change required to introduce AAS27 has been a significant strain on the resources of the Division. This will continue to occur for a considerable period as AAS27 is phased in over the next three years and inevitable "fine-tuning" is made by the Accounting bodies. However, it is considered that in the longer term that the AAS27 approach will provide Council and senior management with a strong management tool. It will be able to identify specific areas in which to place emphasis from year to year such as:-
(i) targeting Council's ongoing level of expenditure or income through the Operating Statement;
(ii) re-orienting Council's asset management position through a detailed focus on the Statement of Financial Position; or
(iii) focusing on the strength of cashflows of Council to ensure appropriate minimum levels are maintained.
Under S.419(2) of the Local Government Act Council may require the Auditors to attend the meeting where the accounts are presented for adoption.
The Auditors, Truman & Co., made a presentation to Council on 3 August 1994 in respect of the 1993 Accounts. Given the fact that Council's financial position has continued to strengthen Council may decide that it is not necessary to request the Auditors to make a presentation at the meeting but rather make a presentation or short report to the Finance Committee, as determined appropriate by the Chairman of the Committee from time to time.
The 1994/95 Statutory Accounts show that Hurstville has maintained its previous strong financial position and further consolidated itself as one of the leading Councils in the State.
The retention of a debt-free position for the seventh year has enabled Council to re-direct money which would otherwise be committed to debt servicing into capital expenditure and the provision of improved services for the community.
|HURSTVILLE CITY COUNCIL|
RECOMMENDATION NO: .01
BUSINESS & FINANCIAL SERVICES
: Recommendation 1994/95 STATUTORY ACCOUNTS RECOMMENDATION
Yours faithfully, W D Bradey Divisional Manager - Business & Financial Services
(1) THAT Council authorize the Mayor, the Deputy Mayor, the General Manager and the Responsible Accounting Officer to sign the 1994/95 Year Statutory Accounts and subsequent submission of the Accounts to the Auditors for their signature.
(2) THAT Council resolve to consider formal adoption of the 1994/95 Accounts in public at the Council meeting to be held on Wednesday 20 September 1995.
(3) THAT Council delegate authority to the General Manager to place an advertisement in a local newspaper in accordance with S.418(3) of the Local Government Act, 1993, notifying the public of the proposal to adopt the 1994/95 Accounts on 20 September 1995.
(4) THAT Council congratulate the Manager - Financial Services and staff in the Division on the work involved in preparing the 1994/95 Year Accounts in the new format.
* * * * * *
|HURSTVILLE CITY COUNCIL|
REPORT ITEM NO: .
BUSINESS & FINANCIAL SERVICES
A D D E N D U M 02.02A QUARTERLY FINANCIAL STATEMENT AS AT 30TH JUNE, 1995 (Appendix "A" to Divisional Manager - Business & Financial Services, Mr W Bradey, Manager - Financial Services, Mr D Turnbull, and Manager - Management Accounting, Mrs C Long)
As part of the provision of regular financial information to Council to monitor the quarterly performance of the 1994/95 Financial Plan the following quarterly review as at 30 June 1995 is submitted for consideration and covers the following funds:-
Beverly Hills Town Improvement Local Fund
Hurstville Town Improvement Local Fund
Mortdale Town Improvement Local Fund
Penshurst Town Improvement Local Fund
Riverwood Town Improvement Local Fund
In June 1994 the Council adopted the budget for the 1994/95 year in respect of the General Fund which included the following key elements:-
Operating Expenditure 25,073,317
Capital Expenditure 9,432,884
Total Expenditure 34,506,201
Budgeted Income 32,730,720
Net Budgeted Deficiency
(including depreciation) 1,775,481
After deducting depreciation of $1,800,000, a non-cash item included to reflect the usage and deterioration of Council's capital assets the budgeted cash surplus was $24,519.
During the 12 months to 30 June, 1995, Council has further voted support for the following projects to be funded from Working Funds:-
|V94-5/76||11 The Avenue - Signage, Chairs & Costs|
|V94-5/119||17 Bonds Street - Demolish Building|
|V94-5/145||Georges River Community Services Extensions|
|V94-5/155||Library Oral History Project 1994/95|
|V94-5/168||Photocopiers - Penshurst Library|
- 96 Queens Road
|V94-5/186||Southern Sydney Therapy Centre|
|V94-5/204||Youth Games - trophies, etc|
|V94-5/237||Riverwood Community Police Centre|| 600|
|V94-5/253||Removal of PABX Room - Councillors Suite|
|V94-5/303||New Vehicles (2) Health|
|V94-5/307||Lamrock Committee - Bed Race|| 250|
|V94-5/308||Hurstville Skillshare - Financial Support|
When combined with the original budgeted cash surplus of $24,519 this would generate a revised planned cash deficit in Working Funds for 1994/95 of $86,140
However, as can be seen from the summary schedule in 'Appendix 'A' which has been forwarded separately to all Councillors, due to savings generated in several areas arising from the continuing adoption of more efficient practices and increasing expenditure in other areas, it is expected that the result will actually be a cash surplus of $1,461,000, an improvement on budget of $1,437,000. Of this amount $108,349 (before allocation of full overheads for pensioner rebates) is restricted for waste services, which leaves an estimated cash surplus for the year of $1,353,000.
The major variances within the key expenditure areas can be attributed to the following:-
(i) Management and Administration
It is expected that as a result of Council's continuing support for the Jobskills program which provides 6 months' training for people who have been unemployed for more than 18 months an unbudgeted expenditure of $151,196 has been incurred. This is fully offset by grants received from the government under this programme.
However, future jobskill programmes will have a net cost of up to $1,500 for each jobskill employee as funding arrangements provided by the government have changed.
General Insurance premiums paid by the Council during the year will show a saving of $44,250. This is as a result of a change by Council to a new more competitive insurance pool.
However, at the same time Workers Compensation premiums have increased by $46,926 as a direct result of a statutory increase in the Workers Compensation levy.
Advertising expenditure is $89,083 above budgeted levels due to increased requirements to advertise matters under the new Local Government Act and higher turnover of staff than anticipated.
Engineering Indirect Expenditure
An over expenditure of $139,359 has occurred due to a need to write off as a bad debt restoration work beyond that normally paid by the RTA and the Water Board..
Staff Dress Code
As a result of a change in policy to introduce a more effective staff dress code initial year costs will be higher, of which $27,000 is expected to occur in the current financial year.
Financial Assistance Grants S.356 - Donations
At present Council has approved an above budget expenditure in donations of $43,476. The main donations covered by this increase are:
. Hurstville City Drought Appeal - $25,000
. Sporting Grants - $ 5,000
. St George Hospital Cancer Fellowship - $ 8,000
A saving for the provision of pensioner rebates on rates and garbage charges of approximately $313,000 is expected to be achieved for the 1994/95 year.
This will arise as the budget was prepared based on higher eligible pensioners as advised by the Department of Social Security than have been made claims to date - together with an over-estimate of the rebate costs to be borne by Council and a requirement to reallocate part of the costs to the Domestic Waste Management Service.
Interest on Investments
As a result of a change in policy by Council to wider acceptable banks with whom Council can place investments an improvement in returns on investments has been achieved. This will be at least $186,000 above budget for the year.
A similar level of increase is being achieved on investments which are restricted in their use under the Accounting Code (eg S.94 Contributions).
Financial Assistance Grants
As a result of a review of the basis of the provision of these grants and the road element our proportion has been reduced by the Government compared to the original estimates by $73,889.
As a result of higher economic activity leading to an increased number of applications for building application approvals together with an increased concentration on health inspections income has risen to $311,000 which is $101,458 above budget.
(iii) Recreation and Culture
Construction on the Leisure Centre has commenced with the head contractor, Belmadar Constructions, taking possession of the site in July 1994. As a result of the continuing good weather experienced during this quarter progress is on time and within the programmed budget. Total expenditure incurred on the project at 30th June 1995 was $2,810,597.
Upon closer review of the timing of the budget it is expected that $1,475,403 originally planned for expenditure in the current year will now not be incurred until the first quarter of the 1995/96 year.
This does not affect the overall position of the 1994/95 budget as both income and expenditure sources of $1,475,403 will be deferred until 1995/96.
At the date of this report all claims have been lodged and received from the Federal Government for the first and second round of funding provided for the Centre. This means total Federal grants of $450,000 have been received to support the Centre. In January 1995 the State Government announced it would also provide a $25,000 grant which has been received.
The increased level of expenditure in Library Services is directly attributable to the payment of adjusted salaries arising from changes to bandings under the new award which was backdated to June 1992.
(iv) Community Service
Service for Youth & Children
During the year Council received an ILAP grant of $65,000 for development of a Youth Program.
Kenwyn Street Long Day Care Centre
Due to protracted negotiations with the Australian Taxation Office regarding its level of support for the Centre the commencement of construction has been delayed. It is now expected that construction will commence in the first quarter of the 1995/96 year and will be completed during 1995/96.
Consequently, income and grant receipt projections for the Centre will also not occur until the 1995/96 year. This has meant a net saving in expenses for the year of approximately $100,000.
(v) Housing and Community Amenities
Expenditure in the provision of waste services has been brought in approximately $108,000 below budget as a result of the non-occurrence of budgeted increases in government tipping charges at Lucas Heights for 1994/95.
Income for the provision of waste services also increased above budget by approximately $176,000 as a result of an increased level of services. An amount of $108,000 (before adjustment for pensioner rebates) which reflects net of cost figures and will be restricted under the requirements of the Accounting Manual and will only be available to use for future provision of Waste Services.
As a direct result of the increased economic activity in the City there has been a significant rise in the number of development applications which has led to an increase in income of $203,468 for the year, which has been partially offset ($63,000) by an increase in temporary salary costs to handle the workload.
Legal expenses are also significantly higher by $323,000 as a result of an accrual of $250,000 to cover the expected costs of testing of the new Residential Control Plan in the Land and Environment Court.
It should be noted that the budget does not include any allowance for income of S.94 contributions as these are restricted in their use. However, under the new Accounting rules, these contributions are reported as "income" of a capital nature. It is considered that the current budget approach provides a better means for Council and management to assess funding for each programme.
(vi) Transport and Communication
Due to a change in the approach adopted by the RTA in the maintenance of main roads whereby it now controls the work directly rather than contracting to Councils, construction expenditure has reduced $73,000 and an equivalent amount of income has not been received.
Roads - Maintenance and Repair
Work done in previous years to restore the laying of AGL pipes through the city has not had to be conducted this year. Consequently, expenditure budgeted of $125,000 has not been incurred nor the equivalent budgeted level of income received. In a net sense this means Council's net income will be reduced by approximately $20,000 as a result of this change.
Over expenditure of $90,000 in the resheet programme arose due to the upgrading of the Kempt Field cycle track to support the criterium which was conducted in November 1994.
Funding for this project came entirely from S.94 Reserves.
Expenditure in Revenue Works will be $139,000 above budget due to increased works for specific private sporting clubs and improved drainage. In all cases this work is funded by the clubs or the Drainage Rate and consequently has no net effect on the budget.
(vii) Economic Affairs
Income from Hurstville House is $66,438 higher than originally budgeted due to the collection of some arrears and an improvement in the level of letting in the building.
(viii) Works in Progress and/or Voted During Year
The net expected increase in expenditure due to extra items voted during the current year is $96,697.
Increases in the level of carryover costs for jobs or projects that were expected to be completed in the 1994 Transitional Period but which were not completed and therefore have been carried over to 1994/95 amount to $99,837. These carryover figures from the 1994 Transitional Period to 1994/95 are reflected and adjusted accordingly in the Working Funds Surplus as at 30th June 1994 and in the anticipated surplus at the end of 1994/95.
Review of S.94 Expenditure
The obligations of Council to provide services and facilities from Section 94 Contributions are shown below together with the amounts held as restricted assets to fund those services and facilities.
Post 1993 Contribution Plan
Pre 1993 Contribution Plan
|Held as Restricted Assets|
A summary of income and expenditure during the year for the post 1993 plan is shown below.
Interest Earned During Year
Expended During Year
Held as Restricted Asset
Income and expenditure for the pre 1993 contribution plan is as follows.
As At 30 June 1995
Interest Earned During Year
Expended During Year
Held as Restricted Asset
It should also be noted that some of these funds have already been committed to certain projects. Details of these will be added in future reports, where possible.
Overall Council remains in a strong financial position due to a continuing strong commitment by all levels of Council to rigorously monitor the budget as an on-going management tool.
In accordance with Clause 9(2) of the Local Government Act, 1993 - (Regulations) I hereby certify as the Duly appointed Responsible Accounting Officer that as at 31 December 1994, the Council's financial position is satisfactory, having regard to the original estimate of income and expenditure and the ability to fund additional projects approved during the year.
|HURSTVILLE CITY COUNCIL|
RECOMMENDATION NO: .02A
BUSINESS & FINANCIAL SERVICES
: Recommendation QUARTERLY FINANCIAL STATEMENT AS AT 30TH JUNE, 1995 (Appendix "A" to Divisional Manager - Business & Financial Services, Mr W Bradey, Manager - Financial Services, Mr D Turnbull, and Manager - Management Accounting, Mrs C Long) RECOMMENDATION
THAT the financial statement and quarterly review as at 30 June 1995 in relation to the funds listed and outlined be received and adopted
FURTHER THAT part of the surplus be allocated to the following projects:-
(a) Funding of additional lift in the Civic Centre - $275,000
(b) Creation of reserve for provision of additional
office accommodation - $300,000