QUARTER 3 BUDGET REVIEW STATEMENT - bmcc.nsw.gov.au · Hazelbrook Masterplan $198 Drainage Upgrade...

QUARTER 3 BUDGET REVIEW STATEMENT 2019-2020

Quarter 3 Budget Review Statement 2019-2020

Contents CONTENTS ............................................................................................................................................. 2

ABOUT THIS REPORT ......................................................................................................................... 2

QUARTERLY BUDGET REVIEW STATEMENT BY THE RESPONSIBLE ACCOUNTING OFFICER ................................................................................................................................................... 3


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About this report The provisions of Integrated Planning and Reporting under the Local Government Act 1993 require that reports are provided to the Council on the progress in implementing the Delivery Program and Operational Plan as follows:

• Budget review statement (Quarters 1, 2 and 3); • Delivery Program progress report (6-monthly); and • Annual report including audited financial reports (within 5 months of the end of each financial year).

This report provides the legislatively required budget review statement for Quarter 3 of 2019-2020 (as at 31 March 2020). The Purpose of Reports Reports have been designed:

• To meet legislative requirements (transparency and accountability); • To provide a practical assessment of how the Council is tracking overall – whether we are delivering

against our commitments on time and within budget; and • To demonstrate results/achievements and to formally document any issues that arise that impact on

service delivery commitments. How the Council will be assessing progress in 2019-2020 Budget Review Statement The budget review statement must include details on the general financial position of the Council, and if this position is regarded as unsatisfactory it must also include recommendations for remedial action. The budget review statement will be provided to the Council as follows:

• Quarter 1 (as at 30 September 2019) – reported in November 2019 • Quarter 2 (as at 31 December 2019) – reported in February 2020 • Quarter 3 (as at 31 March 2020) – reported in May 2020 • Quarter 4 (preliminary end-of-year position as at 30 June 2020) – reported in August 2020

Delivery Program and Operational Plan progress report The method for assessing progress in implementing the Council’s Delivery Program and Operational Plan includes:

• Action/project progress – tracking whether actions/projects are being delivered as planned, on time and within budget (reported every six months)

• Other service measures – used to measure whether specific outputs or standards are achieved by different services (reported at the end of the financial year)

• Quantitative Organisational Sustainability Performance (Quadruple Bottom Line) measures – used to measure Council’s environmental, social, financial and governance performance against the Key Direction of Civic Leadership (reported at the end of the financial year)

• Qualitative Community Survey – used to measure resident perceptions of service delivery (reported at the end of every second financial year)

• Quantitative asset-based measures – used to measure actual improvement in built asset condition e.g. roads, footpaths, pools (reported at the end of the council term)

Progress on the implementation of the 2017-2021 Delivery Program and 2019-2020 Operational Plan will be provided to the Council as follows:

• First six months (July to December 2019) – reported in February 2020 • Final six months (January to June 2020) – reported in August 2020


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Quarterly Budget Review Statement by the Responsible Accounting Officer In accordance with the Local Government Act, 1993 and the provisions of clause 9 of the Financial Management Regulation, a budget review statement and revision of estimates must be completed and submitted to the Council for formal adoption at the end of each financial quarter. This report must include details on the general financial position of the Council and if this position is regarded as unsatisfactory, also include recommendations for remedial action. The following information details the budget review statement to the end of March 2020 in accordance with the requirements of the legislation. The Office of Local Government has issued guidelines for the minimum requirements of Quarterly Budget Review Statements. The statements included in the budget review statement by the Responsible Accounting Officer comply with the minimum requirements of the Office of Local Government. Financial Highlights

• Cash and Investments as at 31 March 2020 are $35.6M; • Services are on track and within Budget other than those with closed facilities due to

Covid, and budget variations are included in this report to adjust these service budgets; • Some financial KPI’s are behind the 2019/2020 budget projections; • Significant budget variations relate to reduced income from closed facilities due to Covid,

and capital projects deferred to 20/21..

Working Capital Position The optimum level of working capital for the Council has previously been identified in the range of $1.7 million to $1.9 million, which represents the industry standard to allow for stores and the provision of core debtors. Subject to the Council adopting the recommended variations, the estimated working capital of $1.7 million is within the optimum level. The following reconciliation illustrates the projected Working Capital position as at the 31 March 2020 review. Working Capital Position

$‘000 Actual Working Capital Result – 1 July 2019 2,585 Original Budget 2019-2020 Forecast Improvement in Working Capital 0 Quarter 1 Movement -885 Quarter 2 Movement 0 Quarter 3 Movement 0 Estimated Working Capital Result – 30 June 2020 1,700


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Operational Budget – Significant Variations – March 2020

The significant budget variations that occurred in this review are summarised in the table below. Significant Variations

Operational Budget Favourable $’000

Unfavourable $’000

Reduced income & expenditure due to bushfire and Covid impacts for Echo Point VIC, caravan parks, commercial properties and Regulatory Fees

-$547 -$1,490

Safer roads grants income deferred to 20/21 $600 -$600 Grant & Contributions for Pitt Park building capital exp $225 -$225 Subsidy received for RFFF Hazard Reduction contract costs $131 -$131 Grants received for Natural Area Visitor Facilities projects contract costs $258 -$258 Savings in advertising, consultancies, repairs transferred to reserve to fund capital projects

$396 -$396

Savings from employment vacancies $955 Reduction in operational building renewal consultancies $274 Reduction in Crown Land Review $80 Reduction in borrowing expense $248 Reduction in materials $262 Additional consultancies -$120 Additional expenditure for Asbestos management -$156 Additional casual cleaning budget -$250 Transfer to reserve to fund technology purchases -$350 Gross Budget Variation as at Quarter 3 $3,976 -$3,976 NET TOTAL $0

Asset Works Program Summary

Total 2019-2020 Original Budget* $25,306,934

Total 2019-2020 Revised Budget* $8,220,815

Total Dollars spent as at 31 March 2020 32%

Percentage spent 75%

Percentage of projects on target or completed** $25,306,934

*Includes funding carried over from 2018-2019, recommended / adopted variations and capital funding for Major Projects.

**Projects that have been rescheduled or withdrawn have been excluded from this calculation.

Note: As this is a 12 month program, the majority of construction occurs in Quarter 4.


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Asset Works Program (AWP) – Significant Variations

The following variations relating to asset projects are recommended.

Asset Works Program Budget Variations Favourable

$’000 Unfavourable

$’000 Funding for capital works from operational savings $746 Additional expenditure for Knapsack Park and Carpark -$97 Glenbrook Hall roof repairs funded from reserves -$60 Additional expenditure for Aquatic asset renewal works -$102 Additional plant and equipment -$137 Additional Technology equipment -$350 Pitt Park Football Club building funded by grant & club contributions $225 -$225 Drainage upgrade deferred to 20/21 $49 -$49 Warrimoo oval carpark upgrade deferred to 20/21 $40 -$40 Safer roads grant projects deferred to 20/21 $600 -$600 Lapstone Sewer deferred to 20/21 funded by developer contributions $464 -$464 Hazelbrook Masterplan deferred to 20/21 $198 -$198 AWP completed projects savings returned to reserves $381 -$381 Reduction in Road Reseal Program $600 -$600 Civic Arcade funds returned to Property Investment Fund $40 -$40 Gross Budget Variation as at Quarter 3 $3,343 -$3,343 NET TOTAL -$0

Summary of AWP items rescheduled to 2019-2020

There are a number of projects that were included in the 2019-2020 AWP, that have been deferred to the 2020-2021 year due to unforeseen delays and ongoing reviews of implementation plans.

Summary of deferred Asset Works Project funds

Project name Budget Amount

$‘000

Hazelbrook Masterplan $198 Drainage Upgrade Wentworth Falls $49 Warrimoo Oval Carpark Upgrade $40 Lapstone Reserve Sewer system $464 Safer Roads-Fitzroy & Gladstone Sts Leura $50 Safer Roads-Glenbrook Rd Glenbrook $150 Safer Roads-Prince George Blackheath $175 Safer Roads-Wilson St Katoomba $225 Net Total $1,351


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Cash Flow

The Council’s cash and investments position has increased by $5.0 million from a balance of $30.6 million at 30 June 2019 to a balance of $35.6 million at 31 March 2020 as presented below. This increase is in line with the expected cash position for this part of the financial year. The graph below displays:

• The level of cash each quarter from September 2017 to March 2020. • The movement up or down for each quarter.

Loan Position

The Council has utilised borrowings to fund major infrastructure critical to the ongoing community health, environmental protection, cultural and economic vitality and overall sustainability of the City. Examples of such projects include the Waste and Resource Recovery facilities at Katoomba and Blaxland, Katoomba Library and Cultural Centre, Lawson Town Centre relocation, Blue Mountains Theatre and Community Hub in Springwood as well as funding the City’s road renewal program. Borrowing for major infrastructure projects is considered appropriate and prudent as it provides for intergenerational equity in sharing the cost of these projects. The Council is committed to reducing its debt position in the Long Term Financial Plan given:

• the Council determined that it had reached its capacity to incur and importantly repay debt in the short to medium term;

• the June 2013 special variation for renewal of infrastructure replaced the previous program of annually borrowing $2.3 million to fund asset maintenance and renewal works; and

• the reduction of debt would provide more capital funding in the medium term than would be available if the Council continued to borrow for renewals and then had to fund the significantly more costly debt service cost.


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From Council’s Six Strategies for Sustainability, Strategy 3: Manage Borrowings and Investments Responsibly, the Council is committed to:

• cease future loan borrowings subject to a business case; • reduce existing loan debt refinancing; • direct surplus cash funds to reduce borrowings where appropriate; • review borrowing capacity annually; • implement the Council’s Investment Policy and Strategy.

The loan position of the Council was $28.0 million at 1 July 2019. As shown in the bar chart below, the Council’s projected loan balance as at 30 June 2020 will be $24.3 million.

Implementing this Strategy is fiscally responsible and could see the Council’s Loan Balance Outstanding reduce to a projected $8.2 million by 2025-2026, if there were no further borrowings. The appropriateness of loan borrowings as a source of funding will continue to be reviewed annually and it may be appropriate in the medium to longer term when the Council’s debt levels have been reduced and the Council’s financial sustainability strengthened, to again increase borrowings - if required for supporting the City. Importantly, borrowing for major essential infrastructure projects is considered appropriate as it provides for intergenerational equity in sharing the cost of these projects where benefits will be realised in future years.

$- $5,000,000

$10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 $45,000,000

17/18Actual

Balance

18/19BudgetBalance

19/20LTFP

Projection

20/21LTFP

Projection

21/22LTFP

Projection

22/23LTFP

Projection

23/24LTFP

Projection

24/25LTFP

Projection

25/26LTFP

Projection

Projected Loan balance outstanding as per LTFP


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Special Rate Variation 2015 In the 2019-2020 budget, funds from the 2015 Stage 2 Special Rate Variation (SRV2) were allocated to designated programs and projects through a separate best value business case assessment process. The following table shows a summary of the allocation, the major variations and actual year to date figures. Special Rate Variation 2015 Budget review


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Budget Variations As some of the SRV2 projects were continued from 2018-2019, they received carryovers amounting to a total of $1.9 million. Due to unforeseen delays and ongoing reviews of implementation plans, a number of Asset Works Projects funded from SV2 allocation were deferred to this financial year. Outcomes Nearly all Asset Works Program projects funded from SRV2 have commenced as of the end of Quarter 3, however, in some cases no SRV2 funds have yet been utilised, as it is assumed that any grant funding received for these projects is to be spent prior to SRV2 budget. For the Environmental program Council continues to develop, implement and monitor the following programs which are on track:

• Bushland and Endangered Ecological Community Management • Noxious and Environmental Weed Control • Natural Area and Visitor Facilities • Environmental Education and Engagement • Aquatic Monitoring and Catchment Health

Report by Responsible Accounting Officer The following statement is made in accordance with Clause 203(2) of the Local Government (General) Regulations 2005. It is my opinion that the Quarterly Budget Review Statement for Blue Mountains City Council for the quarter ended 31 March 2020 indicates that Council’s projected financial position at 30 June 2020 will be satisfactory at year end, having regard to the projected estimates of income and expenditure and the original budgeted income and expenditure. Signed:

Hailie Ryzak, Responsible Accounting Officer Date: 30 April 2020 Note: The following pages form part of Blue Mountains City Council's Quarterly Budget Review Statement (QBRS) for the quarter ended 30/9/2020 and should be read in conjunction with the other sections in the Quarterly Budget Review Statement above.


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Income & Expenses Budget Review Statement Income and Expenses – General Fund


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Income & Expenses Budget Review Statement continued

Recommended changes to revised budget


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Capital Budget Review Statement Capital Budget – General Fund


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Capital Budget Review Statement continued Recommended changes to revised budget


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Cash & Investment Review Statement


15

Cash & Investment Review Statement continued


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Contracts Budget Review Statement

Consultancy & Legal Expenses Budget Review Statement


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Key Performance Indicators Budget Review Statement - Industry KPI's Office of Local Government


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Key Terms Used in this Report • Sustainability Performance Reporting (Quadruple Bottom Line) – Sustainability performance

measures are used to assess the Council's governance, environmental, social and financial performance or how sustainable and healthy we are as an organisation.

• Major Projects - Major projects are defined as those projects that have a significant capital component and / or require significant financial / staff resources / community consultation usually over more than one financial year.

• Asset Works Projects - Asset works are projects that broadly involve the planning and construction of new built assets or the improvement of existing built assets such as footpaths, signage, roads and community halls.

• Operational Plan Actions - Operational Plan actions are a comprehensive list of all activities and projects the Council is committed to delivering each year in alignment with the Council's 4-year plans.

• Service Performance Measures - Service performance measures are a quantitative assessment of outputs of Council service delivery to assess whether the Council has delivered service outputs as planned to required standards.

• Delivery Program Performance Measures - The Delivery Program performance measures focus on outcome based measures of service activity including qualitative measures on perceptions of key stakeholders on service performance results and asset based measures used to measure the condition of built assets.

How Progress is Reported For each milestone / project / action progress will be shown as either: • On Target - is applied to a milestone / project / action that is in progress as planned. • Complete - is applied to a milestone / project / action that has been completed as planned. • Behind Target - is applied to a milestone / project / action that is not being delivered as

planned which could be due to a number of reasons such as vacancies, weather or new issues that arose during the course of project implementation.

• Not Complete – is applied to milestone / project / action that was not completed as planned. • Rescheduled - this is assigned to a project by the General Manager where resources have

been redirected to other agreed priorities that have emerged or where delays / issues have arisen beyond the control of the Council. This status is removed from the calculations for "% of projects On Target / Complete".

• Withdrawn - this is assigned to a project where the lead community partner or lead agency no longer wishes to proceed with the project or where it has been superseded by other priorities. This status is removed from the calculations for "% of projects On Target / Complete".

For each performance measure progress will be shown as either: • Below Target: applied to a performance target that was not achieved. • On Target: applied to a performance target that was achieved or tracking in the right

direction to be achieved. • Within ±10% of Target: applied to a performance measure target that was within ±10% of

the target. • Not Yet Available: applied to performance targets where the result is not available. These

measures are removed from the calculation for "% of performance measures on target".

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QUARTER 3 BUDGET REVIEW STATEMENT - bmcc.nsw.gov.au · Hazelbrook Masterplan $198 Drainage Upgrade...

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