· Web viewIn planning its activities for 2007-08, the Council has split its activities into two categories – “core” and “discretionary”. Core activities of the Council

LG System Inc – Model Budget Template, 2007-08

Model Budget Template

2007 - 2008

This project has been assisted by the Local Government Research& Development Scheme


TABLE OF CONTENTS

1. BUDGET OVERVIEW........................................................................................................1

2. KEY FINANCIAL INDICATORS........................................................................................3

3. SERVICES PROVIDED TO THE COMMUNITY............................................................6

4. ANALYSIS OF OPERATING BUDGET...........................................................................8

Operating Revenue............................................................................................................8

Operating Expenses.........................................................................................................10

Operating Result...............................................................................................................11

5. ANALYSIS OF CAPITAL EXPENDITURE....................................................................12

Net Outlays on Existing assets.......................................................................................12

Net Outlays on New and Upgraded Assets..................................................................12

Capital Works Program....................................................................................................13

Infrastructure and Asset Management Plan.................................................................13

6. ANALYSIS OF BUDGETED BALANCE SHEET..........................................................14

Net Financial Liabilities....................................................................................................15

7. RATING STRATEGY........................................................................................................16

8. FINANCING THE BUDGET............................................................................................18

APPENDICES........................................................................................................................20

BUDGETED INCOME STATEMENT............................................................................21

BUDGETED BALANCE SHEET.....................................................................................22

BUDGETED CASH FLOW STATEMENT.....................................................................23

UNIFORM PRESENTATION OF FINANCES..............................................................24

SUMMARY OF LONG-TERM FINANCIAL PLAN.......................................................25

CAPITAL WORKS PROGRAM......................................................................................26

DETAILS OF COST OF PROVIDING SERVICES......................................................27

GLOSSARY............................................................................................................................28


1. BUDGET OVERVIEWThe Council considers that its budget is a fundamental instrument of accountability and an essential pre-requisite to deciding the annual rate impost on the community.

The Council has budgeted for an operating surplus/deficit of $[Click here and type details] in 2007-08 after including general and other rates of $[Click here and type details]. Capital spending on infrastructure and other assets of $[Click here and type details] is proposed.

Note: In future years, it is proposed that this Budget Overview section will also include a high level summary of the Council’s:-(1) Key Budget assumptions and influences; (2) Annual Business Plan consultation outcomes; (3) Rating Regime; (4) Any increased service levels.

Planning framework

The 2007-08 Budget has been developed within the Council’s overall planning framework. The Council’s suite of strategic management plans includes a 10-year long-term financial plan supported by an infrastructure and asset management plan, the latter currently under development. A summary of the long-term financial plan is shown in Appendix E. Its purpose is to express, in financial terms, the activities that the Council proposes to undertake over the medium to longer-term to achieve its stated goals and objectives.

Note: It is expected that the data covering the long-term financial plan will be available as an output of the Financial Planning software product provided to Councils free of charge by the LGA/LG Financial Management Group. That product, which was developed by Jigsaw Services Ltd and funded by the Local Government Research and Development Scheme, currently is being updated and improved (again with funding from the Research and Development Fund).

To guide the preparation of its 2007-08 Budget, the Council prepared and undertook community consultation on a draft annual business plan. The draft annual business plan for 2007-08 includes the Council’s planned objectives, activities and performance measures for the financial year as well as its proposed rating structure and policies.

The annual business plan as adopted provides a linkage between the Council’s suite of strategic management plans and its annual Budget.

Highlights of the Budget

Highlights of the 2007-08 Budget include:

[Click here and type details] [Click here and type details]

Section 1: Budget Overview - 1 -


Note: We could give examples of the sorts of things to put in highlights in a User Manual. Indeed, throughout this draft document, there are a number of areas where examples and further guidance could be provided in a User Manual. Highlights should be expressed in terms of outcomes wherever possible.


2. KEY FINANCIAL INDICATORSThis section of the 2007-08 Budget provides information about five key indicators of the Council’s financial performance and financial position. Analysis on each of the indicators is included in the following sections of the document. Further explanatory notes on the indicators are provided in the Glossary.

Operating Surplus / (Deficit)

An operating surplus / deficit of $[Click here and type details] is targeted in 2007-08. This represents an improvement / deterioration of $[Click here and type details] on the estimated operating result for 2006-07.

Note: The Operating Result has, as an integral part, the level of rates to be raised for the Budget period. This document does not culminate in a Rates Determination Statement as may have occurred traditionally. Instead, the level of rates is part of a range of expenditure and revenue decisions made in the context of ensuring the long-term sustainability of the Council’s financial performance and financial position. All financial information is assembled on an accrual accounting basis.

Note: The LGA has issued an information paper on financial indicators (including to explain the reason for indicators) which promotes seven standard indicators for use by the Local Government sector (five of which are used in this document). Subsequently, the LGA General Meeting in April 2007 decided to adopt all seven indicators. It is proposed that the additional two indicators (Interest Cover Ratio and Asset Consumption Ratio) will be added to future additions of this document. Indicators are measures of outcomes. Individually and without associated analysis, they only tell part of the story. The usefulness of indicators is not in the numbers themselves but the analysis of what is driving the indicator.

Section 2: Key Financial Indicators - 3 -


Operating Surplus Ratio

The estimated operating surplus / deficit in 2007-08 expressed as a percentage of general and other rates (the operating surplus ratio) is estimated at [Click here and type details]% / negative [Click here and type details]%.

Net Financial Liabilities

The Council’s level of net financial liabilities is expected to be $[Click here and type details] / negative $[Click here and type details] at 30 June 2008. This represents an increase / a decrease of $[Click here and type details] on the estimated level of net financial liabilities at 30 June 2007.



Net Financial Liabilities Ratio

The Council’s net financial liabilities at 30 June 2008 expressed as a percentage of estimated operating revenue in 2007-08 (the net financial liabilities ratio) is expected to be [Click here and type details]% / negative [Click here and type details]%.

Asset Sustainability Ratio

The Council’s asset sustainability ratio in 2007-08 is expected to be [Click here and type details]% calculated by comparing planned capital expenditure on renewal and replacement of assets against depreciation expenses in 2007-08 / calculated by comparing planned capital expenditure on renewal and replacement of assets against the optimal level for such expenditure in 2007-08 as shown in the Council’s Infrastructure and Asset Management Plan.



3. SERVICES PROVIDED TO THE COMMUNITYNote: The aim here is to link the budget to achieving the Council’s strategic objectives. More generally, this document attempts to present information which is useable and understandable by the community and which can be reconciled with audited financial statements This section would be supported by core information in an Appendix which essentially would be the underlying basis for assembling the Budget. To the maximum extent possible, it is planned that the process of “feeding” that core information into the other higher level tables and charts scattered throughout this document would be automated using software developed within or integrated into the LGS System. Meantime, some general wording for this section is provided below. To a large extent, this section of the document is a summary of what will have earlier been included in the Council’s draft Annual Business Plan.

This section provides a summary of the activities to be funded in the Budget for the 2007-08 year and how these will contribute to achieving the Council’s strategic objectives.

In planning its activities for 2007-08, the Council has split its activities into two categories – “core” and “discretionary”. Core activities of the Council are those which more or less continue to be provided each year. Discretionary activities are those which will be undertaken only if sufficient revenue is available. Often, discretionary activities support the current strategic focus of the Council and may involve short-term or one-off initiatives.

Note: We could show here a list of functions /or programs /or objectives /or service categories, a description of what the service delivery associated with that function/program/objective/service category involves, and the gross cost of providing the service. The sum of the gross cost figures should equal the operating expenses budget included in Section 4 of this document. As a suggested starting point, the following table summarises the Council’s budgeted operating expenses under Organisational Units and lists the main activities under each Unit. Such an approach may be attractive to some Councils as actual performance reports against the budget during the year ahead could then be prepared on a consistent basis. This structure may also help facilitate the assessment of each Managers performance in meeting targets?

The following table summarises activities under the Council’s organisational units. The table is followed by a brief summary of the key outputs of each one of the organisational units for 2007-08:-

Section 5: Community Services - 6 -


Organisational Unit/ActivityCore

Operating Expenses

$’000

Discretionary Operating Expenses

$’000

Total Operating Expenses

$’000Works and Technical ServicesRoadsFootpathsTreesStreet Lighting Parks and ReservesWaste Management Community Wastewater ManagementTotal Works and Technical Services

Community and Economic ServicesLibrary ServicesCommunity TransportxxxxTotal Community and Economic Services

Environmental and Inspectorial ServicesxxxxxxxxTotal Environ and Inspectorial Services

Governance and AdministrationxxxxxxxxTotal Governance and Administration

Total Operating Expenses

Key outputs of each one of the Organisational Units for 2007-08 are as follows:-

[Click here and type details]

Note: Elected Members need appropriate information and advice to enable decisions on expenditure and rating effort. The range of community expectations can never be completely fulfilled without increasing rates and/or reducing expenditure on other services. This section of the document could be used to highlight that Elected Members therefore need to make choices about which expectations deserve priority and that they are accountable to their communities for these choices. Separately, we probably need to highlight in this section where planned expenditure is conditional upon grants being received.

Section 6: Operating Budget Analysis - 7 -


4. ANALYSIS OF OPERATING BUDGETThis section of the document analyses the expected revenues and expenses of the Council for the 2007-08 financial year. It also provides commentary on the budgeted operating result for 2007-08.

Operating Revenue

2005-06 2006-07 2007-08Revenue Types Ref Actual Estimate Budget $’000 $’000 $’000Rates – General 4.1Rates – Other 4.2Statutory Charges 4.3User Charges 4.4Grants, Subsidies and Contributions 4.5Investment Income 4.6Reimbursements 4.7Other Revenue 4.8 Total Operating Revenue

Source: Appendix A

4.1 General Rates

General rate revenue of $[Click here and type details] is planned for 2007-08, an increase of $[Click here and type details] compared with 2006-07. This represents an increase of [Click here and type details]% (excluding general rate revenue associated with new development). Section 7 of this document includes further discussion and analysis of rates to be levied in 2007-08 together with summary information about the Council’s rating structure. The Council’s Annual Business Plan for 2007-08 [Click here and incude a reference on how to access the Annual Business Plan]provides detailed information on the Council’s rating structure and policies.

4.2 Other Rates

Other rate revenue in 2007-08 includes the State Government’s Natural Resources Management (NRM) levy collected on behalf of the [Click here and type details] NRM Board ($[Click here and type details]), a separate rate covering [Click here and type details] ($[Click here and type details]) and [Click here and type details] ($[Click here and type details]).

4.3 Statutory Charges

Statutory charges are fees for regulatory services. They are associated with the granting of a permit/licence or the regulation of an activity. They include Section 6: Operating Budget Analysis - 8 -


Development Act fees and parking fines. Increases in statutory charges are made in accordance with legislative requirements.

Statutory charges in 2007-08 are forecast to increase by $[Click here and type details] compared with 2006-07.

4.4 User Charges

User charges relate mainly to the recovery of service delivery costs through the charging of fees to users of Council’s services. They include hire of community facilities and cemetery fees. User charges also include income from commercial activities (such as operating a caravan park) which traditionally have been shown as a separate income item.

User charges in 2007-08 are projected to increase by $[Click here and type details] compared with 2006-07. This represents an increase of [Click here and type details]% and aims to ensure that the Council recovers the costs of service delivery.

4.5 Grants, Subsidies and Contributions

This item covers grants, subsidies and contributions from all sources but excludes amounts specifically received for new/upgraded assets (i.e. the acquisition or enhancement of assets). The following table summarises the main grants involved:-

2005-06 2006-07 2007-08Grant Funding Types Actual Estimate Budget $’000 $’000 $’000LG Grants Commission – General Purpose GrantLG Grants Commission – Identified Local Road GrantLG Grants Commission – Special Local Roads GrantRoads to RecoveryHome and Community CareXXXXXXXXOtherTotal Grants, Subsidies and Contributions

Overall, Local Government Grants Commission grants (representing funding provided by the Australian Government) are estimated to be $[Click here and type details] in 2007-08. This represents [Click here and type details]% of the Council’s estimated total operating revenue in 2007-08.

4.6 Investment Income

Interest earnings on the investment of funds not immediately required and interest received on loans to community groups are estimated at $[Click here and type details] in 2007-08.



4.7 Reimbursements

Reimbursements are amounts received as payment for work done by the Council acting as an agent for others (e.g. reimbursement for road works by the State Government). Revenue of $[Click here and type details] is estimated in 2007-08.

4.8 Other Revenues

Other revenue is revenue not separately classified above. Of the estimated revenue of $[Click here and type details] in 2007-08, $[Click here and type details] is attributable to [Click here and type details].

Operating Expenses

2005-06 2006-07 2007-08Expense Types Ref Actual Estimate Budget $’000 $’000 $’000Employee Costs 4.9Materials, Contracts & Other Expenses 4.10Finance Costs 4.11Depreciation 4.12Total Operating Expenses

Source: Appendix A

4.9 Employee Costs

Employee costs include all labor related expenses such as wages and salaries, and on-costs such as allowances, leave entitlements and employer superannuation.

Employee costs are forecast to increase by $[Click here and type details] (or [Click here and type details]%) in 2007-08 compared with 2006-07. This increase relates to:


Average staff numbers during 2007-08 have been budgeted as follows:

4.10 Materials, Contracts & Other Expenses

Materials cover payments for physical goods. This includes purchase of consumables, water and energy. Contract Services involve payments for the external provision of services. This may include indirectly provided labour and materials or sub-contractors which are part of a contract. Overall, the increase / decrease of $[Click here and type details] in materials, contract and other expenses in 2007-08 mainly reflects[Click here and type details].



4.11 Finance Costs

Finance costs cover the costs of financing the Council’s activities through borrowings or other types of financial accommodation. The increase / decrease in 2007-08 mainly reflects [Click here and type details].

4.12 Depreciation

Depreciation is an accounting measure which records the consumption of the Council’s infrastructure, property, plant and equipment. The increase of $[Click here and type details] in depreciation expenses in 2007-08 reflects the combined effect of a full year’s impact of depreciable assets created by capital expenditure on new/upgraded assets in 2006-07, the part year impact of capital expenditure on new/upgraded assets in 2007-08 and the ongoing impact of regularly revaluing infrastructure assets on a ‘fair value’ basis.

Operating Result

2005-06 2006-07 2007-08Operating Surplus/(Deficit) Actual Estimate Budget $’000 $’000 $’000Operating Revenueless: Operating ExpensesEquals: Operating Surplus/(Deficit)

Source: Appendix A

As shown in the above table, the Council has budgeted for an operating surplus / deficit of $[Click here and type details] in 2007-08. A key financial target of the Council is to continue to achieve a modest operating surplus each year / is to strive to achieve a modest operating surplus by [Click here and type year]/[Click here and type year] so as to ensure ongoing financial sustainability and therefore avoid future potential cuts to services and/or significant increases in rates.

Any operating surplus generated is applied to meet capital expenditure and thus reduces the amount of borrowings otherwise needed for that purpose. Where such capital expenditure is not required in a particular year, the amount of the operating surplus is held for capital expenditure needs in future years by either increasing financial assets or, where possible, reducing outstanding debt in the meantime. Put another way, the amount of the operating surplus not needed for capital expenditure in a particular year automatically leads to a reduction in the level of the Council’s net financial liabilities.

Note: Some additional commentary may be desirable here given the fundamental importance of the operating result measure to the long-term financial sustainability of the Council. This could include reference to planned future operating results showing in the Long-term Financial Plan at Appendix E.



5. ANALYSIS OF CAPITAL EXPENDITURENet Outlays on Existing assets

The following table summarises capital outlays on existing assets:

2005-06 2006-07 2007-08Net Outlays on Existing Assets Actual Estimate Budget $’000 $’000 $’000Capital Expend on Renewal/Replacement of Assetsless: Proceeds from Sale of Replaced Assetsless: DepreciationEquals: Net Outlays on Existing Assets

Source: Appendix D

The Asset Sustainability Ratio in 2007-08 is expected to be [Click here and type details]% and has been calculated by comparing the capital expenditure on renewal and replacement of existing assets (net of the sale proceeds of replaced assets) with depreciation expenses / and has been calculated by comparing planned capital expenditure on renewal and replacement of assets against the optimal level for such expenditure in 2007-08 as shown in the Council’s Infrastructure and Asset Management Plan.

An analysis of this ratio shows [Click here and type details].

Net Outlays on New and Upgraded Assets

The following table summarises capital outlays on new/upgraded assets:

2005-06 2006-07 2007-08Net Outlays on New and Upgraded Assets Actual Estimate Budget $’000 $’000 $’000Capital Expenditure on New/Upgraded Assetsless: Proceeds from Sale of Surplus Assets less: Amounts received specifically for New/Upgraded AssetsEquals: Net Outlays on New and Upgraded Assets

Source: Appendix D

The ongoing maintenance and depreciation expenses associated with the capital expenditure on new/upgraded assets has been factored into the Council’s Long-term Financial Plan.

Section 7: Capital Expenditure Analysis - 12 -


Capital Works Program

The following table summarises the Council’s planned Capital Works Program in 2007-08. A listing of individual projects comprising the Program for 2007-08 is shown in Appendix F.

2005-06 2006-07 2007-08Capital Works Area Actual Estimate Budget $’000 $’000 $’000Roads DrainsFootpathsBuildingsCommunity Wastewater Management Waste ManagementInformation TechnologyPlant, Equipment and OtherTotal Capital Works

Capital Works represented by:Asset renewal/replacementNew/upgraded assetsTotal Capital Works

Source: Appendix F

Highlights of the 2007-08 Capital Works Program are as follows:-


Infrastructure and Asset Management Plan

The Council is developing an Infrastructure and Asset Management Plan which sets out the capital expenditure requirements of the Council for the next 10 years by class of asset and project and is a key input to the Long-term Financial Plan. When completed, it will predict infrastructure consumption and renewal needs and will consider new infrastructure needs to meet future community service expectations. The Plan will be subject to a rigorous process of consultation and evaluation. Key elements of the process are as follows:

Long term capital planning which integrates with the Council’s Strategic Management Plans;

Listing of all known capital projects, prioritised within classes of assets on the basis of evaluation criteria;

Transparent process for evaluating and prioritising capital projects.

A key objective of the Infrastructure and Asset Management Plan is to maintain or preserve Council’s existing assets at desired condition levels, and thus minimise whole of life cycle costs of assets.

Section 7: Capital Expenditure Analysis - 13 -


6. ANALYSIS OF BUDGETED BALANCE SHEETThis section analyses the estimated balance sheet movements between 30 June 2007 and 30 June 2008 and discusses the level of the Council’s net financial liabilities (being the key measure of the Council’s financial position).

2005-06 2006-07 2007-08 Ref Actual Estimate Budget $’000 $’000 $’000Current assets 6.1 Non-current Assets 6.2 Total Assets

Current Liabilities 6.3 Non-current Liabilities 6.4 Total Liabilities

Equity 6.5

Source: Appendix B

6.1 Current assets

The increase / decrease in current assets in 2007-08 primarily is due to [Click here and type details]. Outstanding rates and other debtor balances are not expected to change significantly and are at acceptable levels.

6.2 Non-current assets

The increase in non-current assets in 2007-08 essentially reflects the combined effect of all capital expenditure, the depreciation of existing assets, the book value of assets sold and the ongoing revaluation of infrastructure assets on a ‘fair value’ basis.

6.3 Current liabilities

The increase / decrease in current liabilities in 2007-08 (that is, obligations the Council must pay within the next 12 months) primarily is due to [Click here and type details].

Section 8: Budgeted Balance Sheet Analysis - 14 -


6.4 Non-current liabilities

The increase / decrease in non-current liabilities in 2007-08 (i.e. obligations that the Council must pay beyond 30 June 2008) primarily is due to[Click here and type details].

6.5 Equity

The net increase / decrease in equity of $[Click here and type details] in 2007-08 results directly from the net surplus / deficit showing in the Budgeted Income Statement (see Appendix A).


2005-06 2006-07 2007-08Net Financial Liabilities Actual Estimate Budget $’000 $’000 $’000Net Financial Liabilities at 1 Julyless: Net Lending / (Borrowing) for financial yearless: Other miscellaneous transactionsEquals: Net Financial Liabilities at 30 June

Source: Appendix D and E

A secondary financial target for the Council is to ensure that the accumulated level of net financial liabilities does not exceed [Click here and type details]% of total operating revenue in any year. The estimated level of net financial liabilities at 30 June 2008 is $[Click here and type details] which represents [Click here and type details]% of the Council’s expected operating revenue in 2007-08.

Section 8: Budgeted Balance Sheet Analysis - 15 -


7. RATING STRATEGYThis section summarises the Council’s rating arrangements and describes the proposed rate increases in 2007-08.

7.1 Background

Excluding the NRM levy collected on behalf of the State Government’s [Click here and type details] Natural Resource Management Board, general and other rates are expected to account for [Click here and type details]% of the Council’s operating revenue in 2007-08.

The Council’s rating structure and policies are set out in the 2007-08 Annual Business Plan. The rating structure is comprised of two key elements. These are:

Property values, which generally reflect capacity to pay; and User pays component to reflect usage of some services provided by Council.

Striking a proper balance between these elements provides equity in the distribution of the rate burden across ratepayers.

7.2 Rate increases in 2007-08

The Valuer-General has provided capital values for all ratable properties totalling $[Click here and type details]. This represents an increase of [Click here and type details]% over the values adopted in 2006-07 and is made up of the following components:

Natural Valuation Increase [Click here and type details]%New Development (i.e. Growth) [Click here and type details]%Total Valuation Increase [Click here and type details]%

The adopted Budget contains an average general rate increase of x.x% (including / excluding? new development). Overall, general rate revenue in the adopted Budget for 2007-08 (including from new development) will be $[Click here and type details]. This is $[Click here and type details] greater than general rate revenue in 2006-07. The total increase is comprised as follows:

Increase in Valuations $[Click here and type details]Additional Income from Growth $[Click here and type details]Total General Rate Revenue Increase $[Click here and type details]

Section 7: Rating Strategy - 16 -


7.3 Minimum Rate / Fixed Charge

The minimum rate / fixed charge has increased from $[Click here and type details] to $[Click here and type details] for the 2007-08 financial year. This increase is broadly in line with the average general rate revenue increase of [Click here and type details]%.

7.4 Natural Resources Management (NRM) Levy

The Council is required to collect the NRM levy on behalf of the State Government.

The State Government’s [Click here and type details] NRM Board has indicated that the contribution payable by the Council for the 2007-08 year is $[Click here and type details], which is a [Click here and type details]% increase on the amount in 2006-07. This levy will be collected by way of a separate rate charged to each rateable property within the council area and forwarded to the $[Click here and type details] NRM Board. The levy is required to be raised as a fixed charge per assessment / at a particular rate in the dollar of property values per assessment.

7.5 Rating structure

The differential rating structure of the Council $[Click here and type details]

The following table summarises the general rates proposed to be adopted for the 2007-08 financial year.

Rate type 2006-07 2007-08

Residential Cents in $ of CVCommercial Cents in $ of CVIndustry Cents in $ of CVPrimary Production Cents in $ of CVVacant Land Cents in $ of CVMinimum Rate/Fixed Charge $ per property

Note: This draft Budget document deliberately attempts to have less focus on Rates than traditional Budget documents prepared by LGS Councils. This approach recognises that the Annual Business Plan would have explained the proposed rating arrangements in detail. Traditional Budget documents of some Councils do not appear to have focused sufficiently on other revenue items as well as the expenses side of the Budget. A focus is required on the cost of services being provided to communities and the necessity for elected members to continually review expenditure policies and priorities. Some Budget documents appear to provide a mass of detailed financial data on inputs with little or no data or explanations on outputs/outcomes. However, the views and judgement of individual Councils on these matters is what is important. Thus, it is appreciated that additional information about Rates (over and above that shown above) may be necessary in this document.

Section 7: Rating Strategy - 17 -


8. FINANCING THE BUDGETThe following table shows the Council’s estimated net lending / (borrowing) result for 2007-08. The data is drawn from the Council’s uniform summary of operating and capital investment activities which has been prepared on a consistent basis with other Councils (see Appendix D). The Council’s Budget for 2007-08 is expected to result in a net lending of $[Click here and type details]. / The Council’s Budget for 2007-08 is expected to result in a net borrowing of $[Click here and type details]. The expected net lending result in 2007-08 will lead to a reduction in the level of net financial liabilities during 2007-08 by approximately the amount of the net lending / The expected net borrowing result will lead to an increase in the level of net financial liabilities in 2007-08 by approximately the amount of the net borrowing:

2005-06 2006-07 2007-08Net Lending/(Borrowing) Actual Estimate Budget $’000 $’000 $’000Operating Surplus/(Deficit)less: Net Outlays on Existing Assetsless: Net Outlays on New and Upgraded AssetsEquals: Net Lending/(Borrowing)

Source: Appendix D

Financing transactions associated with applying the surplus funds stemming from the expected net lending result in 2007-08 / associated with accommodating the expected net borrowing result in 2007-08 are set out in the following table:

2005-06 2006-07 2007-08Financing Transactions Actual Estimate Budget $’000 $’000 $’000New Borrowingsless: Repayment of Principal on Borrowingsless: Increase/(Decrease) in Cash and Cash EquivalentsLess: Increase/(Decrease) in Trade and Other Receivablesless: Decrease/(Increase) in Trade and Other Payablesless: Decrease/(Increase) in Provisionsless: Other (including movement in Inventories)Equals: Financing Transactions

Source: Appendix B and C

The Council plans to apply the surplus funds expected to be available as a result of a net lending result in 2007-08 by, first, repaying the principal instalments due on earlier borrowings and, second, by increasing the level of its deposits with the Local Government Finance Authority. / The Council plans to apply the surplus funds expected to be available as a result of a net lending result in 2007-08 by, first, repaying the principal instalments due on earlier borrowings undertaken by the Council and, second, by repaying a portion of the Council’s borrowings outstanding

Section 10: Financing the Budget - 18 -


under its Cash Advance Debenture facility with the Local Government Finance Authority, a facility where voluntary principal repayments can be made at any time.

The Council plans to finance the expected net borrowing result in 2007-08 by liquidating cash and investments otherwise being held on deposit at the Local Government Finance Authority. / The Council plans to finance the net borrowing result in 2007-08 by borrowing that amount from the Local Government Finance Authority under its Cash Advance Debenture facility, where the interest rate on the borrowing (currently 7.25% p.a.) is reset only when official interest rates (as determined by the Reserve Bank of Australia) change. In this way, the Council will ensure that a portion of its portfolio of borrowings will be exposed to short-term interest rates and thus spread the Council’s interest rate risks.

Note: It is planned that the User Manual explain the deliberate proposal here to keep the funding of activities of the Council separate and distinct from how the net impact of those activities will be financed (i.e. being the financing transactions as set out in the table above). Funding refers to how the Council’s costs are paid for using Council revenue (e.g. rates, user charges, Commonwealth financial assistance grants). Financing essentially is about arranging borrowings or running down the level of cash and cash equivalents to meet any shortfall between Council expenditure (both operating and capital) and the current year’s revenue.

Section 10: Financing the Budget - 19 -


APPENDICESA. Budgeted Income StatementB. Budgeted Balance SheetC. Budgeted Cash Flow StatementD. Uniform Presentation of FinancesE. Summary of Long-term Financial PlanF. Capital Works ProgramG. Details of Cost of Providing Services

Appendices - 20 -


APPENDIX ABUDGETED INCOME STATEMENTfor the year ended 30 June 2008

2005-06Actual$’000

2006-07Estimate

$’000

2007-08Budget$’000

REVENUERates – generalRates – otherStatutory chargesUser chargesGrants, Subsidies and ContributionsInvestment IncomeReimbursementsOther RevenuesTotal Operating Revenue

EXPENSESEmployee CostsMaterials, Contracts and Other ExpensesFinance CostsDepreciationTotal Operating Expenses

OPERATING SURPLUS / (DEFICIT) BEFORE CAPITAL AMOUNTS

Amounts received specifically for new/upgraded assetsNet Gain / (Loss) on disposal or revaluation of assetsPhysical resources received free of chargeNET SURPLUS / (DEFICIT)

Appendices - 21 -


APPENDIX BBUDGETED BALANCE SHEETAs at 30 June 2008

2005-06Actual$’000

2006-07Estimate

$’000

2007-08Budget$’000

ASSETSCurrent AssetsCash and cash equivalentsTrade & other receivablesOther financial assetsInventoriesNon-current Assets held for Sale

Total Current Assets

Non-current AssetsFinancial AssetsInvestment PropertyInfrastructure, Property, Plant & EquipmentOther Non-current Assets

Total Non-current AssetsTotal Assets

LIABILITIESCurrent LiabilitiesTrade & Other PayablesBorrowingsShort-term ProvisionsOther Current LiabilitiesLiabilities relating to Non-current Assets held for Sale

Total Current Liabilities

Non-current LiabilitiesTrade & Other PayablesLong-term BorrowingsLong-term ProvisionsOther Non-current Liabilities

Total Non-current LiabilitiesTotal LiabilitiesNET ASSETS

EQUITYAccumulated SurplusAsset Revaluation ReserveOther ReservesTOTAL EQUITY

Appendices - 22 -


APPENDIX CBUDGETED CASH FLOW STATEMENTFor the year ended 30 June 2008

2005-06Actual$’000

2006-07Estimate

$’000

2007-08Budget$’000

CASH FLOWS FROM OPERATING ACTIVITIESReceiptsOperating Receipts Investment ReceiptsPaymentsOperating Payments to Suppliers and EmployeesFinance PaymentsNet Cash provided by (or used in) Operating Activities

CASH FLOWS FROM INVESTING ACTIVITIESReceiptsAmounts specifically for new/upgraded assetsSale of replaced assetsSale of surplus assetsSale of Investment PropertySale of Real Estate DevelopmentsRepayments of loans by community groupsPaymentsExpenditure on renewal/replacement of assetsExpenditure on new/upgraded assetsLoans made to community groupsNet Cash provided by (or used in) Investing Activities

CASH FLOWS FROM FINANCING ACTIVITIESReceiptsProceeds from BorrowingsProceeds from Aged Care Facility DepositsPaymentsRepayments of BorrowingsRepayment of Finance Lease LiabilitiesRepayment of Aged Care Facility DepositsNet Cash provided by (or used in) Financing Activities

Net Increase (Decrease) in cash heldCash and cash equivalents at beginning of periodCash and cash equivalents at end of period

Appendices - 23 -


APPENDIX DUNIFORM PRESENTATION OF FINANCES

2005-06Actual$’000

2006-07Estimate

$’000

2007-08Budget$’000

Operating Revenueless: Operating ExpensesOperating Surplus/(Deficit) before Capital Amounts

Less: Net Outlays on Existing AssetsCapital Expenditure on renewal and replacement of Existing Assetsless: Depreciationless: Proceeds from Sale of Replaced Assets

Less: Net Outlays on New and Upgraded AssetsCapital Expenditure on New and Upgraded Assetsless: Amounts received specifically for New and Upgraded Assetsless: Proceeds from Sale of Surplus Assets

Equals: Net Lending / (Borrowing) for Financial Year

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APPENDIX ESUMMARY OF LONG-TERM FINANCIAL PLAN

2006-07 Estimate

$’000

2007-08 Budget $’000

2008-09 Plan $’000

2009-10 Plan $’000

2010-11 Plan $’000

2011-12 Plan $’000

2012-13 Plan $’000

2013-14 Plan $’000

2014-15 Plan $’000

2015-16 Plan $’000

2016-17 Plan $’000

Operating Revenueless: Operating Expenses

Operating Surplus / (Deficit) before Capital Amounts

Less: Net Outlays on Existing AssetsCapital Expenditure on Renewal/Replacement of Assetsless: Proceeds from Sale of Replaced Assetsless: Depreciation

Net Outlays on Existing Assets

Less: Net Outlays on New and Upgraded AssetsCapital Expenditure on New/Upgraded Assetsless: Proceeds from Sale of Surplus Assetsless: Amounts received specifically for New/Upgraded Assets

Net Outlays on New and Upgraded Assets

Equals: Net Lending / (Borrowing) for Financial Year

Key Financial Indicators 2006-07 Estimate

2007-08 Budget

2008-09 Plan

2009-10 Plan

2010-11 Plan

2011-12 Plan

2012-13 Plan

2013-14 Plan

2014-15 Plan

2015-16 Plan

2016-17 Plan

Operating Surplus - $’000Operating Surplus Ratio - %Net Financial Liabilities - $’000Net Financial Liabilities Ratio - %Asset Sustainability Ratio - %

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APPENDIX FCAPITAL WORKS PROGRAM

Note: Suggestion would be for a table here showing details of the planned Capital Works Program, but not too much detail! Need to be sure to distinguish capital expenditure between that on renewal/replacement of assets on one hand, and new/upgraded assets on the other. Again, the views and judgement of individual Councils is what is important here as to the level of detail. As a starting point, an example of a ‘‘minimalist” approach is shown below:

Asset Renewal &

Replacement

New & Upgraded

AssetsTotalCapital Projects for 2007-08

$’000 $’000 $’000Playground Upgrade - LGS ParkReplacing roof of Senior Citizens Hall – LGS GroveSealing LGS Street – between Moore St and Carey DriveResurfacing of bitumen footpath – LGS AvenueReplace grader with new LGS model 057

Total Capital Works

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APPENDIX GDETAILS OF COST OF PROVIDING SERVICES

Note: Essentially, it is proposed that this Appendix provides the detail of material shown in Section 3 of this document. To a large extent, this is likely to include the sort of information (albeit not so detailed) that currently makes up the main budget documents of some Councils. The information could show, for example, under each Organisational Unit, the various inputs (eg employee costs, materials etc) broken down to whatever detail is considered appropriate. This information then could be “rearranged” (hopefully automatically by way of future enhancements to the LGS System) to help complete many of the tables in the rest of this document.

Instead of preparing separate documents covering an Annual Business Plan (ABP) on one hand and a Budget on the other, some councils will decide to prepare one consolidated document with two distinct components (i.e. ABP and Budget). In these circumstances, Appendix G of this template (and some other Appendices) will relate to both components.

Appendices - 27 -


GLOSSARYAsset Sustainability Ratio

Asset Sustainability Ratio indicates whether the Council is renewing or replacing existing non-financial assets at the same rate as its overall stock of assets is wearing out. The ratio is calculated by measuring capital expenditure on renewal and replacement of assets relative to the level of depreciation. Where a Council has a soundly based Infrastructure and Asset Management Plan, a more meaningful asset sustainability ratio would be calculated by measuring the actual level of capital expenditure on renewal and replacement of assets (or proposed in the Budget) with the optimal level identified in the Plan.

Financial Assets

Financial Assets include cash, cash equivalents, trade and other receivables, and other financial assets, but excludes equity held in Council businesses. Also, inventories and land held for resale are not regarded as financial assets.

Financial Sustainability

Financial Sustainability is where planned long-term service and infrastructure levels and standards are met without unplanned and disruptive increases in rates or cuts to services.


Net Financial Liabilities equals total liabilities less financial assets, where financial assets for this purpose includes cash, cash equivalents, trade and other receivables, and other financial assets, but excludes equity held in Council businesses, inventories and land held for resale.

Net Financial Liabilities Ratio

Net Financial Liabilities Ratio expresses Net Financial Liabilities as a percentage of total operating revenue. The ratio allows interested parties to readily equate the outstanding level of the Council’s accumulated financial obligations against the level of one-year’s operating revenue. Where the ratio is falling over time, it generally indicates that the Council’s capacity to meet its financial obligations is strengthening.

Net Lending/ (Borrowing)

Net Lending/ (Borrowing) equals Operating Surplus / (Deficit), less net outlays on non-financial assets. The Net Lending / (Borrowing) result is a measure of the Council’s overall (i.e. operating and capital) budget on an accrual basis. Achieving a zero result on the Net Lending / (Borrowing) measure in any one year essentially means that the Council has met all of its expenditure (both operating and capital) from the current year’s revenues.

Non-financial or Physical Assets

Appendices - 28 -


Non-financial or Physical Assets means infrastructure, land, buildings, plant, equipment, furniture and fittings, library books and inventories.

Operating Deficit

Operating Deficit is where operating revenues less operating expenses is negative and operating income is therefore not sufficient to cover all operating expenses.

Operating Expenses

Operating Expenses are operating expenses including depreciation but excluding losses on disposal or revaluation of non-financial assets.

Operating Revenues

Operating Revenues are operating revenues shown in the Income Statement but exclude profit on disposal of non–financial assets and amounts received specifically for new/upgraded assets, e.g. from a developer. For ratios calculated where the denominator specified is total operating revenue or rate revenue, Natural Resource Management (NRM) levy revenue is excluded.

Operating Surplus

Operating Surplus is where operating revenues less operating expenses is positive and operating revenue is therefore sufficient to cover all operating expenses.

Operating Surplus Ratio

Operating Surplus Ratio expresses the operating surplus (deficit) as a percentage of general and other rates.

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Appendices - 29 -

Documents

· Web viewIn planning its activities for 2007-08, the Council has split its activities into two categories – “core” and “discretionary”. Core activities of the Council