glen innes severn council meeting 27 march 2014 · 2015-06-27 · council’s level of...

Glen Innes Severn Council Meeting

27 MARCH 2014

B1

Glen Innes Severn Council Page 1

Glen Innes Severn Council

Financial Assessment and Benchmarking Report

21 March 2013

Prepared by NSW Treasury Corporation as part of the Local Infrastructure Renewal Scheme

B3


Disclaimer

This report has been prepared by New South Wales Treasury Corporation (TCorp) in accordance with

the appointment of TCorp by the Division of Local Government (DLG) as detailed in TCorp’s letters of

22 December 2011 and 28 May 2012. The report has been prepared as part of the Local Infrastructure

Renewal Scheme (LIRS) announced by the NSW Government.

The report has been prepared based on information provided to TCorp as set out in Section 2.2 of this

report. TCorp has relied on this information and has not verified or audited the accuracy, reliability or

currency of the information provided to it for the purpose of preparation of the report. TCorp and its

directors, officers and employees make no representation as to the accuracy, reliability or

completeness of the information contained in the report.

In addition, TCorp does not warrant or guarantee the outcomes or projections contained in this report.

The projections and outcomes contained in the report do not necessarily take into consideration the

commercial risks, various external factors or the possibility of poor performance by the Council all of

which may negatively impact the financial capability and sustainability of the Council. The TCorp report

focuses on whether the Council has reasonable capacity, based on the information provided to TCorp,

to take on additional borrowings within prudent risk parameters and the limits of its financial projections.

The report has been prepared for Glen Innes Severn Council the LIRS Assessment Panel and the

DLG. TCorp shall not be liable to Glen Innes Severn Council or have any liability to any third party

under the law of contract, tort and the principles of restitution or unjust enrichment or otherwise for any

loss, expense or damage which may arise from or be incurred or suffered as a result of reliance on

anything contained in this report.

B4


Index

Section 1 Executive Summary ...................................................................................................... 4

Section 2 Introduction ................................................................................................................... 6

2.1: Purpose of Report ........................................................................................................... 6

2.2: Scope and Methodology ................................................................................................. 6

2.3: Overview of the Local Government Area ........................................................................ 8

2.4: LIRS Application .............................................................................................................. 9

Section 3 Review of Financial Performance and Position ........................................................... 10

3.1: Revenue ........................................................................................................................ 10

3.2: Expenses ...................................................................................................................... 11

3.3: Operating Results ......................................................................................................... 12

3.4: Financial Management Indicators ................................................................................. 13

3.5: Statement of Cashflows ................................................................................................ 14

3.6: Capital Expenditure ....................................................................................................... 15

3.6(a): Infrastructure Backlog ................................................................................................... 15

3.6(b): Infrastructure Status ...................................................................................................... 16

3.6(c): Capital Program ............................................................................................................ 17

3.7: Specific Risks to Council ............................................................................................... 18

Section 4 Review of Financial Forecasts .................................................................................... 19

4.1: Operating Results ......................................................................................................... 19

4.2: Financial Management Indicators ................................................................................. 20

4.3: Capital Expenditure ....................................................................................................... 22

4.4: Financial Model Assumption Review ............................................................................. 23

4.5: Borrowing Capacity ....................................................................................................... 24

Section 5 Benchmarking and Comparisons with Other Councils ...................................................... 25

Section 6 Conclusion and Recommendations .................................................................................. 31

Appendix A Historical Financial Information Tables ................................................................... 32

Appendix B Glossary ................................................................................................................. 35

B5


Section 1 Executive Summary

This report provides an independent assessment of Glen Innes Severn Council’s (the Council) financial

capacity and its ability to undertake additional borrowings. The analysis is based on a review of the

historical performance, current financial position, and long term financial forecasts. It also benchmarks

the Council against its peers using key ratios.

The report is primarily focused on the financial capacity of the Council to undertake additional

borrowings as part of the Local Infrastructure Renewal Scheme (LIRS).

Council has made two LIRS applications. One application is for CBD revitalisation for $1.8m and the

other application is for a Transport Infrastructure Renewal Program for $1.0m. Both loans are to be

repaid over 10 years.

TCorp’s approach has been to:

Review the most recent three years of Council’s consolidated financial results

Conduct a detailed review of the Council’s 10 year financial forecasts. The review of the

financial forecasts focused on the particular Council fund that was undertaking the proposed

debt commitment. As the Council operates three funds we focused our review on the General

Fund as the loans will be attached to the General Fund

The Council has been effectively managed over the review period based on the following observations:

Council’s underlying cash result (measured using EBITDA) has been increasing over the

three year period

Council’s Unrestricted Current Ratio has been above benchmark each year indicating Council

had sufficient liquidity

Council’s Interest Cover Ratio and DSCR have been well above benchmark over the three

year period

Council’s reported Infrastructure Backlog of $37.7m in 2011 represents 16.5% of its infrastructure asset

value of $227.4m. Other observations include:

The Council’s Infrastructure Backlog is on an upward trend

Public road assets made up 54.0% of the Infrastructure Backlog and is being partly

addressed in both of the two LIRS projects

Council is not investing sufficient funds on asset renewals to keep the assets in their current

condition and it is likely that the backlog will grow

B6


The key observations from our review of Council’s 10 year forecasts for its General Fund are:

Cash Expense Ratios are above benchmark indicating Council will have sufficient liquidity

throughout the next 10 years to service short term liabilities and currently scheduled capital

expenditure

Council’s fiscal flexibility is low as their Own Sourced Operating Revenue Ratio is below

benchmark for the forecast period. We consider that rates and annual charges have been

forecast at conservative levels

In our view, the Council has the capacity to undertake the combined additional borrowings of $2.8m for

the LIRS projects. This is based on the following analysis:

The DSCR remains comfortably above the benchmark for the full 10 years of the model

The Interest Cover Ratio remains comfortably above the benchmark for the full 10 years of

the model

In addition, we consider that Council has sufficient capacity to manage additional borrowings

from 2012/2013 of up to $4.8m, based on our calculations and Council’s current financial

forecasts

In respect of the Benchmarking analysis TCorp has compared the Council’s key ratios, on a

consolidated basis, with other councils in DLG Group 10. The key observations are:

Council’s financial flexibility is moderate as indicated by the Operating Ratio which increases

above benchmark and its peer group in 2012 and is forecast to remain at this level in the

medium term. The Own Source Operating Revenue Ratio was below benchmark and the

group average over the review period. While it is forecast to improve in the medium term it

remains below benchmark

Council was in a sound liquidity position as indicated by the Cash Expense Ratio and

Unrestricted Current Ratio above benchmark and the group average for the past four years

and forecast to remain at this level in the medium term

Council’s DSCR and Interest Cover Ratio while below the group average tracked benchmark

level over the review period which indicates Council has the capacity to service their current

borrowings. They are forecast to remain at this level in the medium term

Council’s level of Infrastructure Backlog is well above benchmark The Asset Maintenance Ratio is below benchmark and underperformed against the group

average over the review period. Council’s Building and Infrastructure Asset Renewal Ratio was below benchmark over the past four years but has tracked the group average since 2011. The Capital Expenditure Ratio increased above benchmark and the group average in 2011 but is forecast to decrease below benchmark and its peer group in the medium term

B7


Section 2 Introduction

2.1: Purpose of Report

This report provides the Council with an independent assessment of their financial capacity and

performance measured against a peer group of councils which will complement their internal due

diligence, and the IP&R system of the Council and the DLG.

The report is to be provided to the LIRS Assessment Panel for its use in considering applications

received under the LIRS.

The key areas focused on are:

The financial capacity of the Council to undertake additional borrowings

The financial performance of the Council in comparison to a range of similar councils and

measured against prudent benchmarks

2.2: Scope and Methodology

TCorp’s approach was to:

Review the most recent three years of the Council’s consolidated audited accounts using

financial ratio analysis. In undertaking the ratio analysis TCorp has utilised ratio’s

substantially consistent with those used by Queensland Treasury Corporation (QTC) initially in

its review of Queensland Local Government (2008), and subsequently updated in 2011

Conduct a detailed review of the Council’s 10 year financial forecasts including a review of the

key assumptions that underpin the financial forecasts. The review of the financial forecasts

focused on the particular Council fund that was undertaking the proposed debt commitment.

For example where a project is being funded from the General fund we focussed our review

on the General fund

Identify significant changes to future financial forecasts from existing financial performance

and highlight risks associated with such forecasts

Conduct a benchmark review of a Council’s performance against its peer group

Prepare a report that provides an overview of the Council’s existing and forecast financial

position and its capacity to meet increased debt commitments

Conduct a high level review of the Council’s IP&R documents for factors which could impact

the Council’s financial capacity and performance

In undertaking its work, TCorp relied on:

Council’s audited financial statements (2008/09 to 2010/11)

Council’s financial forecast model

Council’s IP&R documents

Discussions with Council officers

Council’s submissions to the DLG as part of their LIRS application

Other publicly available information such as information published on the IPART website

B8


Benchmark Ratios

In conducting our review of the Councils’ financial performance and forecasts we have measured

performance against a set of benchmarks. These benchmarks are listed below. Benchmarks do not

necessarily represent a pass or fail in respect of any particular area. One-off projects or events can

impact a council’s performance against a benchmark for a short period. Other factors such as the

trends in results against the benchmarks are critical as well as the overall performance against all the

benchmarks. As councils can have significant differences in their size and population densities, it is

important to note that one benchmark does not fit all.

For example, the Cash Expense Ratio should be greater for smaller councils than larger councils as a

protection against variation in performance and financial shocks.

Therefore these benchmarks are intended as a guide to performance.

The Glossary attached to this report explains how each ratio is calculated.

Ratio Benchmark

Operating Ratio > (4.0%)

Cash Expense Ratio > 3.0 months

Unrestricted Current Ratio > 1.50x

Own Source Operating Revenue Ratio > 60.0%

Debt Service Cover Ratio (DSCR) > 2.00x

Interest Cover Ratio > 4.00x

Infrastructure Backlog Ratio < 0.02x

Asset Maintenance Ratio > 1.00x

Building and Infrastructure Asset Renewal Ratio > 1.00x

Capital Expenditure Ratio > 1.10x

B9


2.3: Overview of the Local Government Area

Glen Innes Severn LGA

Locality & Size

Locality New England Region

Area 5,487km²

DLG Group 10

Demographics

Population 8,656

% under 18 24%

% between 18 and 59 46%

% over 60 30%

Expected population 2021 10,000

Operations

Number of employees (FTE) 132

Annual revenue $21.5m

Infrastructure

Roads 758.3km

Bridges 141

Infrastructure backlog value $37.7m

Total infrastructure value $227.5m

Glen Innes Severn Council Local Government Area (LGA), known as the Celtic Country, is located in

the Northern Tablelands in the New England Region of New South Wales, near the crest of the Great

Dividing Range.

The LGA contains the township of Glen Innes, and the villages of Emmaville, Deepwater, Red Range

and Glencoe. Glen Innes is located at the intersection of the New England Highway and the Gwydir

Highway.

The current population of 8,656 is expected to grow by 15.3% to 10,000 by 2021.

Council had 132 full-time equivalent employees at the end of 2011.

B10


2.4: LIRS Application

Council has made two LIRS applications.

Project 1: CBD Revitalisation Program

Description: The renewal and upgrade of the Glen Innes CBD including pavements, footpaths, street

lighting, and stormwater drainage.

Amount of loan facility: $1.8m

Term of loan facility: 10 years

Project 2: Transport Infrastructure Renewal Program

Description: The renewal of urban and rural sealed roads, and footpaths, and a specific improvements

program targeted at reducing maintenance expenditure on unsealed rural roads.

Amount of loan facility: $1.0m

Term of loan facility: 10 years

B11


Section 3 Review of Financial Performance and Position

In reviewing the financial performance of the Council, TCorp has based its review on the annual

audited accounts of the Council unless otherwise stated.

3.1: Revenue

Key Observations

Rates and annual charges increased by 5.2% in 2011 with a similar increase of 5.9% in 2010.

Farmland rates increased in 2011 due to the revaluation of farmland in 2010 which increased

the value of farmland from $438.0m in 2010 to $717.0m in 2011. Due to an error Council

overcharged on farmland rates in 2011 and this has been rectified in the 2012 financial year

and is reflected in the LTFP. The 2010 increase was driven by an increased number of

assessments for that year.

User fees and charges have been decreasing year on year with a cumulative decrease of

$0.5m since 2009. In 2011 this is driven by decreases in income from water supply services,

private works and RMS fees, with reduced RMS fees also driving the 2010 decrease.

Operating grants and contributions rose for two consecutive years. Following an increase of

7.2% in 2010, 2011 saw an increase of 16.8% to $10.7m. The 2011 increase was due to

Council being allocated an additional $1.0m in operating grants for flood restoration and

$0.3m in bushfire services.

Other revenue remained static between 2010 and 2011. In 2010 a one off increase of 72.8%

in other revenue was driven by Section 355 Committee revenue of $0.4m.

6,914 6,574 6,207

2,281 2,678 2,808

611 485 460

10,6889,147 8,529

1,078

1,163673

0

5,000

10,000

15,000

20,000

25,000

2011 2010 2009

Figure 1 - Revenue Sources for 2008/09 to 2010/11 ($'000s)

Rates and annual charges User charges and fees

Interest and investment revenue Grants and contributions for operating purposes

Other revenues

B12


3.2: Expenses

Key Observations

Employee costs have increased by over 8.0% p.a. for the last two years, higher than NSW

wage indexation rates. The 2011 increases were driven by salary increases, and increases in

employee leave entitlements (ELE). In 2011 Council reviewed their ELE which highlighted

that they had under-provided in previous years hence the increase in 2011. 2010 saw

increases in superannuation costs.

In 2010 the Asset Revaluation process increased the value of Council’s infrastructure assets.

This resulted in the annual depreciation charge increasing 49.3% in 2011 to $6.4m.

Other expenses have increased year on year driven by rising utility costs and emergency

services levies.

9,170 8,455 7,812

516 536 556

5,148 5,3105,302

6,4334,310

3,871

2,909

2,5201,952

0

5,000

10,000

15,000

20,000

25,000

30,000

2011 2010 2009

Figure 2 - Expenses for 2008/09 to 2010/11 ($'000s)

Employees Borrowing costs Materials and contract expenses

Depreciation and amortisation Other expenses

B13


3.3: Operating Results

TCorp has made some standard adjustments to focus the analysis on core operating council results.

Grants and contributions for capital purposes, realised and unrealised gains on investments and other

assets are excluded, as well as one-off items which Council have no control over (e.g. impairments).

TCorp believes that the exclusion of these items will assist in normalising the measurement of key

performance indicators, and the measurement of Council’s performance against its peers.

All items excluded from the income statement and further historical financial information is detailed in

Appendix A.

Key Observations

Council has consistently posted net operating deficits excluding capital grants and

contributions for the last three years. The deficits are increasing year on year. The deficit

increased in 2011 due to increased depreciation charges.

Council expenses include a non-cash depreciation expense, ($6.4m in 2011), which has

increased substantially over the past three years following the Asset Revaluations process.

Whilst the non-cash nature of depreciation can favourably impact on ratios such as EBITDA

that focus on cash, depreciation is an important expense as it represents the allocation of the

value of an asset over its useful life.

(2,604)

(1,084)

(816)

(2,136)

(645)

147

(3,000)

(2,500)

(2,000)

(1,500)

(1,000)

(500)

0

500

2011 2010 2009

Figure 3 - Operating Results for 2008/09 to 2010/11 ($'000s)

Operating result (excluding capital grants and contributions)

Operating result (including capital grants and contributions)

B14


3.4: Financial Management Indicators

Performance Indicators Year ended 30 June

2011 2010 2009

EBITDA ($’000s) 4,345 3,762 3,611

Operating Ratio (12.1%) (5.4%) (4.4%)

Interest Cover Ratio 8.42x 7.02x 6.49x

Debt Service Cover Ratio 5.13x 4.44x 3.94x

Unrestricted Current Ratio 2.40x 2.83x 1.84x

Own Source Operating Revenue Ratio 31.5% 32.2% 31.7%

Cash Expense Ratio 6.8 months 7.0 months 7.4months

Net assets ($'000s) 269,414 252,880 165,678

Key Observations

Council’s underlying operating performance (measured using EBITDA) has increased year on

year.

The Operating Ratio for 2011 is well below the benchmark each year and is trending

downwards with the decrease in 2011 driven by increased depreciation charges.

Council’s Interest Cover Ratio and DSCR were above their respective benchmarks indicating

Council had flexibility in regard to carrying more debt.

The Unrestricted Current Ratio has been above benchmark each year indicating Council had

sufficient liquidity.

The Own Source Operating Revenue Ratio is below the 60% benchmark. This indicates that

Council did not have sufficient financial flexibility, and rely on revenue streams outside of their

control.

The Cash Expense Ratio was above benchmark in all three years indicating Council had

sound liquidity.

Council’s Net Assets have increased by $103.7m between 2009 and 2011 due to Asset

Revaluations which have increased the value of roads, bridges and drainage infrastructure.

When the Asset Revaluations are excluded, the underlying trend in all three years has been a

decrease in the infrastructure, property, plant and equipment (IPP&E) asset base with asset

purchases being less than the combined value of disposed assets and annual depreciation.

Over the three years this amounted to a $3.1m decrease in IPP&E assets.

Council has total borrowings of $7.3m representing 2.7% of Net Assets.

B15


3.5: Statement of Cashflows

Key Observations

Cash and cash equivalents have been marginally increasing year on year

The cash balances along with the Unrestricted Current Ratio indicate Council had sound

liquidity.

Of the $10.6m in cash and investments, $7.0m is externally restricted, $3.5m is internally

restricted and $0.1m is unrestricted.

In 2011, part of Council’s investment portfolio of $0.9m was invested in a CDO. Council is

expecting to receive full recovery of their CDO on 20 June 2012, being $1.0m.

9,794

9,474

9,343

9,100

9,200

9,300

9,400

9,500

9,600

9,700

9,800

9,900

2011 2010 2009

Figure 4 - Cash and Cash Equivalents for 2008/09 to 2010/11 ($'000s)

B16


3.6: Capital Expenditure

The following section predominantly relies on information obtained from Special Schedules 7 and 8 that

accompany the annual financial statements. These figures are unaudited and are therefore Council’s

estimated figures.

3.6(a): Infrastructure Backlog

Council reported a $37.7m Infrastructure Backlog in 2011, of which 54.0% ($20.3m) related to public

roads. Council is seeking to address part of their roads infrastructure backlog in both of their LIRS

projects.

0

5,000

10,000

15,000

20,000

25,000

Buildings and other

structures

Public roads (inc.

footpaths and car parks)

Water Sewerage Drainage works

Figure 5 - Infrastructure Backlog for 2008/09 to 2010/11 ($'000s)

2011 2010 2009

19%

54%

9%

17%

1%

Figure 6 - Infrastructure Backlog Composition for 2010/11

Buildings and other structures

Public roads (inc. footpaths and car

parks)

Water

Sewerage

Drainage works

B17


3.6(b): Infrastructure Status

Infrastructure Status Year ended 30 June

2011 2010 2009

Bring to satisfactory standard ($’000s) 37,745 34,987 23,134

Required annual maintenance ($’000s) 3,412 3,257 2,977

Actual annual maintenance ($’000s) 2,103 2,021 1,963

Total value of infrastructure assets ($’000s) 227,488 215,177 132,400

Total assets ($’000s) 280,817 263,674 177,298

Infrastructure Backlog Ratio 0.17x 0.16x 0.17x

Asset Maintenance Ratio 0.62x 0.62x 0.66x

Building and Infrastructure Renewals Ratio 0.57x 0.07x 0.39x

Capital Expenditure Ratio 1.10x 0.51x 0.63x

The Infrastructure Backlog Ratio has remained static over the three year period as the increase in the

value of the infrastructure has increased at a slightly higher rate than the increase in the value of the

Infrastructure Backlog.

The Asset Maintenance Ratio and Building and Infrastructure Asset Renewal Ratio indicate the Council

is spending at levels below the benchmark on asset renewal and asset maintenance.

The Capital Expenditure Ratio, which takes into account assets which improve performance or

capacity, was at benchmark level in 2011 but well below benchmark in 2009 and 2010

B18


3.6(c): Capital Program

The following figures are sourced from the Council’s Annual Financial Statements at Special Schedule

No. 8 and are not audited. New capital works are major non-recurrent projects.

Capital Program ($’000s) Year ended 30 June

2011 2010 2009

New capital works 0 239 590

Replacement/refurbishment of existing assets 4246 2090 2114

Total 4246 2329 2704

Along with the Capital Expenditure Ratio, the above table shows how Council had prioritised asset

renewal in the last three years rather than new capital works projects. Examples of major capital works

include

Capital Works Projects 2009/2010

Replacement of Glen Elgin Road, Timbarra River bridge, $0.6m

Road Rehabilitation $1.6m

Replace waterway crossing Homestead Road, Grahams Valley Creek, $0.1m

Deepwater Water treatment Plant $0.3m

Emmaville Upgrade of the Emmaville Memorial Hall $ 0.6m

Capital Works Programs 2010/2011

Replacement of Glen Elgin Bridge $0.6m

Sewer Extensions and Renewals $0.2m

Replacement of Pinkett Road, Sara River bridge, $0.5m

Rehabilitation/renewal of Tent Hill Road, Beardy River bridge, $0.5m

Future Capital Works Programs 2012/2020

Roads to recovery expenditure $3.0m

CBD Road and Pavement Renewal $1.9m

Bridge R ehabilitation $2.3m

B19


3.7: Specific Risks to Council

Reliance on grants. Grants and contributions for operating purposes remains Council’s largest

source of revenue at 49.5% of total revenue excluding capital grants in 2011. Operating

grants revenue is greater than rates and annual charges combined with user fees and

charges, and are forecast to remain at this level. The primary source of Councils operating

grants are financial assistance grants, aged care grants, flood restoration grants and roads to

recovery grants. Council have forecast continued assistance in these areas in their LTFP

however any decrease in operating grants will have a significant negative impact on the

overall operating result.

Own source revenue. Rates and annual charges contribute only 32.0% of overall revenue,

and user fees and charges have been decreasing. The forecast for both is relatively

conservative and Council needs to consider its options to improve its performance in this

areas. In their LTFP Council have forecast in increase in user fees and charges from 2012

onwards.

Population growth. The LGA’s population is forecast to increase by 15.3% over the next 10

years. This will place additional pressure on existing assets and services. With Council

forecasting a decrease in capital expenditure, the Infrastructure Backlog will likely continue to

increase and services could be affected. Council has an Asset Management Strategy in place

to assess their existing assets, and will prioritise the most urgently needed works that provide

the greatest benefit to the community. However this is dependent on funding available.

B20


Section 4 Review of Financial Forecasts

The financial forecast model shows the projected financial statements and assumptions for the next 10

years. The model includes the $2.8m loan without any LIRS subsidy.

The LIRS loan relates to the General Fund, therefore we have focused our financial analysis solely

upon this Fund. Council’s consolidated position includes both a Water and Sewer Fund however these

are operated as independent entities, which unlike the General Fund are more able to adjust the

appropriate fees and charges to meet all future operating expense and investment spending.

4.1: Operating Results

The Council’s operating ratio forecasts a deficit position until 2014 when capital grants and

contributions are excluded. From 2014 the Ratio increases above benchmark with a total increase of

15.0% over the entire forecast period. A decrease in depreciation in 2013 of $1.7m and increase in

operating grants of $1.0m in 2015 are causing the ratio to increase.

In 2012 due to the large increase in depreciation in 2011 Council reassessed their unit rate for

construction and found that they had been over estimating their true depreciation expense. In order to

correct this they have forecast a decrease in depreciation for 2013.

Operating grants have been forecast to increase by $1.0m in 2015. The LGA is currently campaigning

for increased local grant funding. Operating grants is and will continue to be a considerable proportion

of Council’s income and Council do not consider it unreasonable to forecast an increase in their

operating grants.

(16.0%)

(14.0%)

(12.0%)

(10.0%)

(8.0%)

(6.0%)

(4.0%)

(2.0%)

0.0%

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Figure 7- Operating Ratio for General Fund

Operating Ratio Benchmark

B21


4.2: Financial Management Indicators

The financial management indicators are linked to the utilisation of debt in early years and improve

over time as the amortising debt reduces and operating deficits also improve.

Liquidity Ratios

The Cash Expense Ratio is above benchmark for the lifetime of the forecast and indicates that Council

will have sufficient liquidity.

The Unrestricted Current Ratio indicates that Council will have sound liquidity. Council should be able

to service all short and long term liabilities and currently scheduled capital expenditure.

0.0 months

2.0 months

4.0 months

6.0 months

8.0 months

10.0 months

12.0 months

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Figure 8 - Cash Expense Ratio for General Fund

Cash Expense Ratio Benchmark

2.40x

1.88x2.01x

2.19x

2.49x2.74x

2.87x 2.90x 3.01x 3.11x 3.16x

3.55x

0.00x

0.50x

1.00x

1.50x

2.00x

2.50x

3.00x

3.50x

4.00x

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Figure 9 - Unrestricted Current Ratio for General Fund

Benchmark

B22


Fiscal Flexibility Ratios

The Own Source Operating Revenue Ratio remains below benchmark for the entire forecast period. In

2011 Council purchased a quarry and the $1.5m increase in user fees and charges in 2012 is the

increase in revenue expected from the quarry.

The DSCR is above the benchmark of 2.00x for the 10 years of the forecast. This indicates that

Council has the capacity to manage the additional debt cost that the LIRS applications relate to. It dips

to 3.48x in 2014 which corresponds to the LIRS loan repayment. Outstanding borrowings will peak in

2013 at $8.3m reducing to a low of $5.7m in 2022.

30%

35%

40%

45%

50%

55%

60%

65%

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Figure 10 - Own Source Operating Revenue Ratio for General Fund

Own Source Operating Revenue Ratio Benchmark

5.80x5.29x

5.01x

3.48x

4.19x

3.50x 3.52x3.23x 3.26x

3.03x 3.00x 2.96x

0.00x

1.00x

2.00x

3.00x

4.00x

5.00x

6.00x

7.00x

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Figure 11 - DSCR for General Fund

Benchmark

B23


11.12x

8.49x7.94x

6.17x

7.78x

6.43x6.99x 6.81x

7.47x 7.29x8.07x

9.15x

0.00x

2.00x

4.00x

6.00x

8.00x

10.00x

12.00x

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Figure 12 - Interest Cover Ratio for General Fund

Benchmark

The Interest Cover Ratio, similar to the DSCR, shows the Council has sufficient capacity to service

scheduled debt commitments, including the LIRS loans. There is capacity to service further debt

interest costs before the Council’s ratio decreases to the 4.00x benchmark.

4.3: Capital Expenditure

The Capital Expenditure Ratio is below benchmark for the entire forecast period with the exception of

2015. The forecast levels of capital expenditure will increase pressure on existing assets. While

depreciation is forecast to increase between 2012 and 2022, capital expenditure is decreasing resulting

in a cumulative deficit for depreciation versus capital expenditure of $12.7m.

B24


The Capital Expenditure spikes in 2015 due to $2.9m being spent on roads renewal and $1.1m on

renewal of other structures that year.

4.4: Financial Model Assumption Review

Councils have used their own assumptions in developing their forecasts.

In order to evaluate the validity of the Council’s forecast model, TCorp has compared the model

assumptions versus TCorp’s benchmarks for annual increases in the various revenue and expenditure

items. Any material differences from these benchmarks should be explained through the LTFP.

TCorp’s benchmarks:

Rates and annual charges: TCorp notes that rates increased by 3.4% in the year to

September 2011, and in December 2011, IPART announced that the rate peg to apply in the

2012/13 financial year will be 3.6%. Beyond 2013 TCorp has assessed a general benchmark

for rates and annual charges to increase by mid-range LGCI annual increases of 3.0%

Interest and investment revenue: annual return of 5%

All other revenue items: the estimated annual CPI increase of 2.5%

Employee costs: 3.5% (estimated CPI+1%)

All other expenses: the estimated annual CPI increase of 2.5%

Key Observations and Risks

Rates and annual charges are forecast to increase by 3.0% for the forecast period. Given the

rate peg of 3.6% announced this is considered reasonable. User fees and charges are

forecast to increase over 90.0% in 2012 due to increased revenue from new quarry

operations. The 10.0% increase forecast for 2013 is due to forecast increases in water

access charges. A 2.8% p.a. increase is forecast for the remainder of the forecast period and

this is considered reasonable.

Employee costs have been forecast to increase by 3.5% p.a. which is in line with the historic

results for the General Fund.

Materials and contracts expenses are forecast to decrease in 2012 and 2013 in line with

historic results. From 2013 they are forecast to increase up to 4.6% p.a. which we consider

reasonable.

Operating grants have been forecast to increase by $1.0m in 2015. With the LGA

campaigning for more local grant funding this increase is not considered unreasonable.

Due to the reassessment of Council’s construction rate they have forecast a decrease in

depreciation for 2013

B25


4.5: Borrowing Capacity

When analysing the financial capacity of the Council we believe Council will be able to incorporate

additional loan funding in addition to the LIRS loan facilities. Some comments and observations are:

Based on a benchmark of DSCR>2x, $4.8m could be borrowed in addition to the $2.8m

borrowings proposed under LIRS in 2013

This scenario has been calculated by basing borrowing capacity on a 10 year amortising loan at

a rate of 7.81%

5.80x

2.54x 2.54x2.10x

2.52x2.26x 2.26x 2.15x 2.17x 2.07x 2.05x 2.02x

0.00x

1.00x

2.00x

3.00x

4.00x

5.00x

6.00x

7.00x

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Figure 14 - DSCR for General Fund

Benchmark

B26


Section 5 Benchmarking and Comparisons with Other Councils

As discussed in section 2 of this report, each council’s performance has been assessed against ten key

benchmark ratios. The benchmarking assessment has been conducted on a consolidated basis (that is,

for councils that operate more than one fund, the results of all funds are included). This section of the

report compares the Council’s performance with its peers in the same DLG Group. The Council is in

DLG Group 10. There are 25 councils in this group and at the time of preparing this report, we have data

for all of these councils.

In Figure 15 to Figure 23, the graphs compare the historical performance of Council with the benchmark

for that ratio, with the average for the Group, with the highest performance (or lowest performance in the

case of the Infrastructure Backlog Ratio where a low ratio is an indicator of strong performance), and with

the forecast position of the Council as at 2016 (as per Council’s LTFP). Figures 21 to 23 do not include

the 2016 forecast position as those numbers are not available.

Where no highest line is shown on the graph, this means that Council is the best performer in its group

for that ratio. For the Interest Cover Ratio and Debt Service Cover Ratio, we have excluded from the

calculations, councils with very high ratios which are a result of low debt levels that skews the ratios.

Financial Flexibility

Council’s Operating Ratio, while below benchmark generally tracks the group average over the review

period. Following a decrease in 2011 as a result of increased depreciation expense the ratio improves

above benchmark and the group average in 2012 following a subsequent reduction in depreciation and

increase in operating grants. Council is forecast to remain at this level in the medium term.

(15.0%)

(10.0%)

(5.0%)

0.0%

5.0%

10.0%

15.0%

20.0%

2009 2010 2011 2012 2016

Figure 15 - Operating Ratio Comparison

Benchmark Highest Average Glen Innes Shire Council

B27


Council’s Own Source Operating Revenue Ratio was below benchmark and the group average over the

review period. The proportion of own sourced revenue is forecast to increase over the medium term

consistent with other councils in the group.

Overall Council’s financial flexibility is moderate.

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

2009 2010 2011 2012 2016

Figure 16- Own Source Operating Revenue Ratio Comparison


B28


Liquidity

Council’s Cash Expense Ratio has been above benchmark and tracked the group average over the since

2010. The ratio is forecast to improve slightly in the medium term and outperform the group average.

The Unrestricted Current Ratio was below the group average but above benchmark level for the past four

years , indicating Council’s ability to meet its debt payments is sufficient. The ratio is forecast to

decrease slightly in the medium term but remains above benchmark and the group average.

Overall, Council’s liquidity position is sound.

0.0 months

5.0 months

10.0 months

15.0 months

20.0 months

25.0 months

2009 2010 2011 2012 2016

Figure 17 - Cash Expense Ratio Comparison


1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

2009 2010 2011 2012 2016

Figure 18 - Unrestricted Current Ratio Comparison


B29


Debt Servicing

Council’s debt servicing capacity was sound over the review period, as indicated by DSCR and Interest

Cover Ratios tracking benchmark level. Overall, Council’s debt servicing ratios are forecast to remain

acceptable over the medium term.

-

20.00

40.00

60.00

80.00

100.00

120.00

140.00

2009 2010 2011 2012 2016

Figure 19- Debt Service Cover Ratio Comparison


-

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

450.00

2009 2010 2011 2012 2016

Figure 20 - Interest Cover Ratio Comparison


B30


-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

2009 2010 2011 2012 2016

Figure 21 - Capital Expenditure Ratio Comparison


-

0.50

1.00

1.50

2.00

2.50

2009 2010 2011 2012

Figure 22 - Asset Maintenance Ratio Comparison


B31


Council’s Infrastructure Backlog Ratio was well above benchmark but tracked the group average over the

review period.

Council’s Asset Maintenance Ratio was below benchmark and the group average over the review period.

The Building and Infrastructure Asset Renewal Ratio has been below benchmark for the review period

but increased to track the group average in 2011 and remains at this level.

Council’s Capital Expenditure Ratio increases above benchmark and the group average in 2011 and this

performance is maintained in 2012. The ratio is forecast to decrease below benchmark and the group

average in the medium term.

-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

2009 2010 2011 2012

Figure 24 - Building and Infrastructure Asset Renewal Ratio


-

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

0.18

0.20

2009 2010 2011 2012

Figure 22 - Infrastructure Backlog Ratio Comparison

Benchmark Lowest Average Glen Innes Shire Council

B32


Section 6 Conclusion and Recommendations

Based on our review of both the historic financial information and the 10 year financial forecast within

Council’s long term financial plan we consider Council to be in a satisfactory financial position. Both past

performance and the financial forecasts support our findings that Council has sufficient financial capacity

to service the additional borrowings proposed under its LIRS application.

We base our recommendation on the following key points:

Council has sufficient financial capacity to manage the additional $2.8m debt highlighted by a

DSCR and Interest Cover Ratio above the benchmarks in all 10 years of its financial forecast

Based on our analysis Council could also incorporate an additional $4.8m before it reaches

benchmark of 2.00x

However we would also recommend that the following points be considered:

Council’s rates and annual charges and user fees and charges make up only 42.0% of their

overall revenue. We recommend Council considers its options for improving its performance in

this area, either by securing new or additional revenue

Council is reliant on Operating Grants as a key source of revenue. While this is not unusual for

rural LGA’s it is an area that requires monitoring

While Council has forecast increases in operating grants Council should continue to source

additional revenue streams should this not eventuate

B33


Appendix A Historical Financial Information Tables

Table 1- Income Statement

Income Statement ($'000s) Year ended 30 June % annual change

2011 2010 2009 2011 2010

Revenue

Rates and annual charges 6,914 6,574 6,207 5.2% 5.9%

User charges and fees 2,281 2,678 2,808 (14.8%) (4.6%)

Interest and investment revenue 611 485 460 26.0% 5.4%

Grants and contributions for operating purposes 10,688 9,147 8,529 16.8% 7.2%

Other revenues 1,078 1,163 673 (7.3%) 72.8%

Total revenue 21,572 20,047 18,677 7.6% 7.3%

Employees 9,170 8,455 7,812 8.5% 8.2%

Borrowing costs 516 536 556 (3.7%) (3.6%)

Materials and contract expenses 5,148 5,310 5,302 (3.1%) 0.2%

Depreciation and amortisation 6,433 4,310 3,871 49.3% 11.3%

Other expenses 2,909 2,520 1,952 15.4% 29.1%

Total expenses 24,176 21,131 19,493 14.4% 8.4%

Operating result (2,604) (1,084) (816) (140.2%) (32.8%)

Table 2 - Items excluded from Income Statement

Excluded items ($’000s)

2011 2010 2009

Grants and contributions for capital purposes 468 439 963

FV adjustments on Investments 81 203 (141)

Net gain/(Loss) on disposal of assets (17) 22 36

B34


Table 3 - Balance Sheet

Balance Sheet ($’000s) Year Ended 30 June % annual change

2011 2010 2009 2011 2010

Current assets

Cash and equivalents 9,794 9,474 9,343 3.4% 1.4%

Investments 905 832 629 8.8% 32.3%

Receivables 2,001 1,592 1,002 25.7% 58.9%

Inventories 304 334 299 (9.0%) 11.7%

Other 24 16 30 50.0% (46.7%)

Total current assets 13,028 12,248 11,303 6.4% 8.4%

Non-current assets

Investments 0 0 0 0 0

Receivables 156 108 152 44.4% (28.9%)

Inventories 0 0 0 0 0

Infrastructure, property, plant & equipment 267,443 251,128 165,653 6.5% 51.6%

Investment property 190 190 190 0.0% 0.0%

Intangible Assets 28 62 96 (54.8%) (35.4%)

Non-current assets clarified as ‘held for sale’ 82 82 82 0.0% 0.0%

Other 58 0 0 0 0

Total non-current assets 267,789 251,426 165,995 6.5% 51.5%

Total assets 280,817 263,674 177,298 6.5% 48.7%

Current liabilities

Payables 1,590 941 1,521 69.0% (38.1%)

Borrowings 313 331 313 (5.4%) 5.8%

Provisions 2,144 1,921 1,880 11.6% 2.2%

Total current liabilities 4,047 3,193 3,714 26.7% (14.0%)

Non-current liabilities

Borrowings 6,994 7,307 7,637 (4.3%) (4.3%)

Provisions 362 294 269 23.1% 9.3%

Total non-current liabilities 7,356 7,601 7,906 (3.2%) (3.9%)

Total liabilities 11,403 10,794 11,620 5.6% (701%)

Net assets 269,414 252,880 165,678 6.5% 52.6%

B35


Table 4-Cashflow

Cashflow Statement ($'000s) Year ended 30 June

2011 2010 2009

Cashflows from operating activities 4,805 2,541 5,175

Cashflows from investing activities (4,154) (2,098) (2,229)

Proceeds from borrowings and advances 0 0 0

Repayment of borrowings and advances (331) (312) (360)

Cashflows from financing activities (331) (312) (360)

Net increase/(decrease) in cash and equivalents 320 131 2,586

Cash and equivalents 9,794 9,474 9,343

B36


Appendix B Glossary

Asset Revaluations

In assessing the financial sustainability of NSW councils, IPART found that not all councils reported

assets at fair value.1 In a circular to all councils in March 20092, DLG required all NSW councils to

revalue their infrastructure assets to recognise the fair value of these assets by the end of the 2009/10

financial year.

Collateralised Debt Obligation (CDO)

CDOs are structured financial securities that banks use to repackage individual loans into a product that

can be sold to investors on the secondary market.

In 2007 concerns were heightened in relation to the decline in the “sub-prime” mortgage market in the

USA and possible exposure of some NSW councils, holding CDOs and other structured investment

products, to losses.

In order to clarify the exposure of NSW councils to any losses, a review was conducted by the DLG with

representatives from the Department of Premier and Cabinet and NSW Treasury.

A revised Ministerial investment Order was released by the DLG on 18 August 2008 in response to the

review, suspending investments in CDOs, with transitional provisions to provide for existing investments.

Division of Local Government (DLG)

DLG is a division of the NSW Department of Premier and Cabinet and is responsible for local

government across NSW. DLG’s organisational purpose is “to strengthen the local government sector”

and its organisational outcome is “successful councils engaging and supporting their communities”.

Operating within several strategic objectives DLG has a policy, legislative, investigative and program

focus in matters ranging from local government finance, infrastructure, governance, performance,

collaboration and community engagement. DLG strives to work collaboratively with the local government

sector and is the key adviser to the NSW Government on local government matters.

1IPART “Revenue Framework for Local Government” December 2009 p.83

2 DLG “Recognition of certain assets at fair value” March 2009

B37

http://useconomy.about.com/od/glossary/g/Banking.htm


Depreciation of Infrastructure Assets

Linked to the asset revaluations process stated above, IPART’s analysis of case study councils found

that this revaluation process resulted in sharp increases in the value of some council’s assets. In some

cases this has led to significantly higher depreciation charges, and will contribute to higher reported

operating deficits.

EBITDA

EBITDA is an acronym for “earnings before interest, taxes, depreciation, and amortisation”. It is often

used to measure the cash earnings that can be used to pay interest and repay principal.

Grants and Contributions for Capital Purposes

Councils receive various capital grants and contributions that are nearly always 100% specific in nature.

Due to the fact that they are specifically allocated in respect of capital expenditure they are excluded from

the operational result for a council in TCorp’s analysis of a council’s financial position.

Grants and Contributions for Operating Purposes

General purpose grants are distributed through the NSW Local Government Grants Commission. When

distributing the general component each council receives a minimum amount, which would be the

amount if 30% of all funds were allocated on a per capita basis. When distributing the other 70%, the

Grants Commission attempts to assess the extent of relative disadvantage between councils. The

approach taken considers cost disadvantage in the provision of services on the one hand and an

assessment of revenue raising capacity on the other.

Councils also receive specific operating grants for one-off specific projects that are distributed to be spent

directly on the project that the funding was allocated to.

Independent Commission Against Corruption (ICAC)

ICAC was established by the NSW Government in 1989 in response to growing community concern

about the integrity of public administration in NSW.

The jurisdiction of the ICAC extends to all NSW public sector agencies (except the NSW Police Force)

and employees, including government departments, local councils, members of Parliament, ministers,

the judiciary and the governor. The ICAC's jurisdiction also extends to those performing public official

functions.

Independent Pricing and Regulatory Tribunal (IPART)

IPART has four main functions relating to the 152 local councils in NSW. Each year, IPART determines

the rate peg, or the allowable annual increase in general income for councils. They also review and

determine council applications for increases in general income above the rate peg, known as “Special

Rate Variations”. They approve increases in council minimum rates. They also review council

development contributions plans that propose contribution levels that exceed caps set by the

Government.

B38

http://en.wikipedia.org/wiki/Acronym

http://en.wikipedia.org/wiki/Profit_(accounting)

http://en.wikipedia.org/wiki/Interest

http://en.wikipedia.org/wiki/Taxes

http://en.wikipedia.org/wiki/Depreciation

http://en.wikipedia.org/wiki/Amortization_(tax_law)


Infrastructure Backlog

Infrastructure backlog is defined as the estimated cost to bring infrastructure, building, other structures

and depreciable land improvements to a satisfactory standard, measured at a particular point in time. It is

unaudited and stated within Special Schedule 7 that accompanies the council’s audited annual financial

statements.

Integrated Planning and Reporting (IP&R) Framework

As part of the NSW Government’s commitment to a strong and sustainable local government system, the

Local Government Amendment (Planning and Reporting) Act 2009 was assented on 1 October 2009.

From this legislative reform the IP&R framework was devised to replace the former Management Plan

and Social Plan with an integrated framework. It also includes a new requirement to prepare a long-term

Community Strategic Plan and Resourcing Strategy. The other essential elements of the new framework

are a Long-Term Financial Plan (LTFP), Operational Plan and Delivery Program and an Asset

Management Plan.

Local Government Cost Index (LGCI)

The LGCI is a measure of movements in the unit costs incurred by NSW councils for ordinary council

activities funded from general rate revenue. The LGCI is designed to measure how much the price of a

fixed “basket” of inputs acquired by councils in a given period compares with the price of the same set of

inputs in the base period. The LGCI is measured by IPART.

Net Assets

Net Assets is measured as total assets less total liabilities. The Asset Revaluations over the past years

have resulted in a high level of volatility in many councils’ Net Assets figure. Consequently, in the short

term the value of Net Assets is not necessarily an informative indicator of performance. In the medium to

long term however, this is a key indicator of a council’s capacity to add value to its operations. Over time,

Net Assets should increase at least in line with inflation plus an allowance for increased population and/or

improved or increased services. Declining Net Assets is a key indicator of the council’s assets not being

able to sustain ongoing operations.

Roads and Maritime Services (RMS)

The NSW State Government agency with responsibility for roads and maritime services, formerly the

Roads and Traffic Authority (RTA).

Section 64 Contribution

Development Servicing Plans (DSPs) are made under the provisions of Section 64 of the Local

Government Act 1993 and Sections 305 to 307 of the Water Management Act 2000.

DSPs outline the developer charges applicable to developments for Water, Sewer and Stormwater within

each Local Government Area.

B39


Section 94 Contribution

Section 94 of the Environmental Planning and Assessment Act 1979 allows councils to collect

contributions from the development of land in order to help meet the additional demand for community

and open space facilities generated by that development.

It is a monetary contribution levied on developers at the development application stage to help pay for

additional community facilities and/or infrastructure such as provision of libraries; community facilities;

open space; roads; drainage; and the provision of car parking in commercial areas.

The contribution is determined based on a formula which should be contained in each council's Section

94 Contribution Plan, which also identifies the basis for levying the contributions and the works to be

undertaken with the funds raised.

Special Rate Variation (SRV)

A SRV allows councils to increase general income above the rate peg, under the provisions of the Local

Government Act 1993. There are two types of special rate variations that a council may apply for:

a single year variation (section 508(2)) or

a multi-year variation for between two to seven years (section 508A).

The applications are reviewed and approved by IPART.

Ratio Explanations

Asset Maintenance Ratio

Benchmark = Greater than 1.0x

Ratio = actual asset maintenance / required asset maintenance

This ratio compares actual versus required annual asset maintenance, as detailed in Special Schedule 7.

A ratio of above 1.0x indicates that the council is investing enough funds within the year to stop the

infrastructure backlog from growing.

Building and Infrastructure Renewals Ratio


Ratio = Asset renewals / depreciation of building and infrastructure assets

This ratio compares the proportion spent on infrastructure asset renewals and the asset’s deterioration

measured by its accounting depreciation. Asset renewal represents the replacement or refurbishment of

existing assets to an equivalent capacity or performance as opposed to the acquisition of new assets or

the refurbishment of old assets that increase capacity or performance.

B40

http://www.lanecove.nsw.gov.au/Council%20Services/Development%20Control/Development%20Controls/Contributions%20Plans/documents/SECTION94PLANinclamendmentsof160204.pdf

http://www.lanecove.nsw.gov.au/Council%20Services/Development%20Control/Development%20Controls/Contributions%20Plans/documents/SECTION94PLANinclamendmentsof160204.pdf


Cash Expense Cover Ratio

Benchmark = Greater than 3.0 months

Ratio = current year’s cash and cash equivalents / (total expenses – depreciation – interest costs)*12

This liquidity ratio indicates the number of months a council can continue paying for its immediate

expenses without additional cash inflow.

Capital Expenditure Ratio


Ratio = annual capital expenditure / annual depreciation

This indicates the extent to which a council is forecasting to expand its asset base with capital

expenditure spent on both new assets, and replacement and renewal of existing assets.

Debt Service Cover Ratio (DSCR)


Ratio = operating results before interest and depreciation (EBITDA) / principal repayments (from the

statement of cash flows) + borrowing interest costs (from the income statement)

This ratio measures the availability of cash to service debt including interest, principal and lease

payments

Infrastructure Backlog Ratio

Benchmark = Less than 0.02x

Ratio = estimated cost to bring assets to a satisfactory condition (from Special Schedule 7) / total

infrastructure, building, other structures and depreciable land improvement assets (from note 9a)

This ratio shows what proportion the backlog is against total value of a council’s infrastructure.

Interest Cover Ratio


Ratio = EBITDA / interest expense (from the income statement)

This ratio indicates the extent to which a council can service its interest bearing debt and take on

additional borrowings. It measures the burden of the current interest expense upon a council’s operating

cash.

B41


Operating Ratio

Benchmark = Better than negative 4%

Ratio = (operating revenue excluding capital grants and contributions – operating expenses) / operating

revenue excluding capital grants and contributions

This ratio measures a council’s ability to contain operating expenditure within operating revenue.

Own Source Operating Revenue Ratio

Benchmark = Greater than 60%

Ratio = rates, utilities and charges / total operating revenue (inclusive of capital grants and contributions)

This ratio measures the level of a council’s fiscal flexibility. It is the degree of reliance on external funding

sources such as operating grants and contributions. A council’s financial flexibility improves the higher the

level of its own source revenue.

Unrestricted Current Ratio

Benchmark = 1.5x (taken from the IPART December 2009 Revenue Framework for Local Government

report)

Ratio = Current assets less all external restrictions / current liabilities less specific purpose liabilities

Restrictions placed on various funding sources (e.g. Section 94 developer contributions, RMS

contributions) complicate the traditional current ratio because cash allocated to specific projects are

restricted and cannot be used to meet a council’s other operating and borrowing costs. The Unrestricted

Current Ratio is specific to local government and is designed to represent a council’s ability to meet debt

payments as they fall due.

B42

glen innes severn council meeting 27 march 2014 · 2015-06-27 · council’s level of...

Documents