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Finance and Council
Controlled Organisations Committee
13 March 2018
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Part
A Reports
Financial Result - Period Ended 31 January
2018
Department: Finance
EXECUTIVE SUMMARY
1 This
report provides the financial results for the period ended 31 January 2018 and
the financial position as at that date.
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RECOMMENDATIONS
That the Committee:
a) Notes the Financial
Performance for the period ended 31 January 2018 and the Financial Position
as at 31 January 2018.
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BACKGROUND
2 This
report provides a commentary of:
· the forecast operating result of
Council for the whole of the 2017/18 financial year (Part 3), and
· The performance of Council for the period ended 31 January 2018 and the
financial position as at that date (Parts 4 to 8).
DISCUSSION
3 Commentary
on expected Full Year Budget Overspend
Section 1 to this Report shows that Council
has a budgeted Net Deficit (excluding Waipori) for 2017/18 of $3.587m.
Various events occur throughout each financial year that cause variances
between the actual operating surplus/deficit and the budgeted operating
surplus/deficit. The following events will impact on Council’s Net
Deficit (excluding Waipori) budget of $3.587m for 2017/18 (approximate
figures):
Operating Expenditure – the following
unbudgeted operating expenditure items are expected to be incurred:
· $8.5m
related to work carried out in response to the July 2017 flood event
(additional $4m capital expenditure will also be incurred)
· $5.5m
related to the Property Division focussing on its deferred maintenance program
and a general increase in its service levels
Revenue – the following budgeted
approximate revenue streams will not be received in 2017/18 (largely just a
timing difference as these have been deferred to 2018/19):
· $5m due
to the deferral of capital works, mainly related to LED and cycle ways
· $3m
related to the deferral of NZTA funding in association with the Peninsula
project
These ‘negatives’ are expected
to be partially offset by the following unbudgeted revenue streams that are
expected to arise:
· $9m,
being NZTA funding for work carried out in response to the July 2017 flood
event
· $2m as
the level of waste received to landfill exceeds the budgeted figure as a
privately owned facility is no longer operating
· $1m in
additional Development Contributions, mainly associated with development in
Mosgiel
The nett effect of these matters on the
Operating Result (excluding Waipori) is that:
· Operating
Expenditure will exceed budget by around $14m
· Income
is expected to exceed budget by around $4.2m and
· Operating Result will be around $10m worse than budget
4 Commentary
on Year to Date Result (Table in Section 1)
The unfavourable YTD variance against
budget was due to the following:
· $3.110
million higher than expected asset operations and maintenance expenditure
primarily due to emergency repair work associated with the July 2017 flood
event.
· $2.332
million higher fees & levies costs. This included consultancy costs in
Property covering for vacant positions and a high volume of building survey and
inspection work undertaken to inform maintenance and renewal programmes.
In addition Building Services expenditure is higher than expected to ensure
consenting activity meets the required statutory deadlines. A number of
other departments had higher than expected expenditure associated with the
development of asset renewal plans (eg: Logan Park Precinct, Dunedin Ice
Stadium) and coverage for position vacancies.
· $1.830
million lower than expected grants revenue in Transport due to the delays being
experienced in the capital programme (including cycleways and Peninsula
projects), partially offset by the higher revenue associated with the emergency
repair work discussed above.
· $832k
higher materials, supplies & services expenditure. This included
costs associated with the 2GP, flood relief expenditure and contracted services
to assist in the management of the property portfolio.
5 These
unfavourable YTD variances were partially offset by:
· $3.173
million – higher than expected other operating revenue. This
favourable variance was mainly due to: Waste and Environmental Solutions
revenue was greater than expected with additional tonnage through the Green
Island landfill being the overflow from the closure of the Fairfield Landfill;
and higher than expected building consent activity in Regulatory
Services. Parking operations revenue was also higher than expected with
increased metered activity.
· $2.627
million Waipori Fund resulting from unbudgeted fair value gains across a number
of investment portfolios – in particular international equities driven by
the weaker NZD. This result is prior to the recent deterioration in world
equity markets.
· $795k
– Grants expenditure was lower than budgeted due to the delayed timing of
grant payments including the grant associated with the development on the new
hockey turf in South Dunedin ($510k).
· $797k
– favourable interest expenditure driven by the lower debt level and
favourable floating interest rate.
6 YTD
Capital expenditure was less than budget by $16.046 million. Project delays
have arisen across a number of portfolios while project scoping and design is
finalised.
7 Total
Council debt as at 31 January 2018 was $212.433 million or $5.969 million lower
than budget. This variance reflected delayed expenditure on capital
projects. Note that the $9.500 million short term debt was repaid early
February.
OPTIONS
8 Not
applicable.
NEXT STEPS
9 Not
applicable.
Signatories
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Author:
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Lawrie Warwood - Financial Analyst
Gavin Logie - Financial Controller
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Authoriser:
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Dave Tombs - General Manager Finance and Commercial
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Attachments
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Title
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Page
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a
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Summary Financial
Information
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20
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b
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Statement of Financial
Performance
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21
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c
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Statement of Financial
Position
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22
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d
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Statement of Cashflows
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23
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e
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Capital Expenditure
Summary
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24
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f
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Borrowing and
Investment Policy
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25
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g
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Statement of Public
Debt
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26
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h
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Summary of Operating
Variances
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27
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i
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Financial Review
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28
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SUMMARY OF CONSIDERATIONS
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Fit with purpose
of Local Government
The financial expenditure reported in this report relates
to providing local infrastructure, public services and regulatory functions
for the community.
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Fit with strategic
framework
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Contributes
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Detracts
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Not applicable
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Social Wellbeing Strategy
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☐
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☐
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☒
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Economic Development Strategy
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☐
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☐
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☒
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Environment Strategy
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☐
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☐
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☒
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Arts and Culture Strategy
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☐
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☐
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☒
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3 Waters Strategy
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☐
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☐
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☒
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Spatial Plan
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☐
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☐
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☒
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Integrated Transport Strategy
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☐
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☐
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☒
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Parks and Recreation Strategy
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☐
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☐
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☒
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Other strategic projects/policies/plans
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☐
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☐
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☒
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This report has no direct contribution to the Strategic
Framework, although the financial expenditure reported in this report has
contributed to all of the strategies.
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Māori Impact
Statement
There are no known impacts for tangata whenua.
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Sustainability
There are no known implications for sustainability.
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LTP/Annual Plan /
Financial Strategy /Infrastructure Strategy
This report fulfils the internal financial reporting
requirements for Council.
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Financial
considerations
Not applicable – reporting only.
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Significance
Not applicable – reporting only.
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Engagement –
external
There has been no external engagement.
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Engagement -
internal
The report is prepared as a summary for the individual department
financial reports.
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Risks: Legal /
Health and Safety etc.
There are no known risks.
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Conflict of
Interest
There are no known conflicts of interest.
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Community Boards
There are no known implications for Community Boards.
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Finance and Council Controlled Organisations
Committee
13 March 2018
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Financial Review
For The
Period ended 31 January 2018
This report provides a detailed commentary
on the Council’s financial results for the period ended 31 January 2018
and the financial position at that date.
net
surplus/(Deficit) (including waipori)
The net
deficit (including Waipori) for the period ended 31 January 2018 was
$11.585 million or $960k worse than budget.
REVENUE
The total revenue for the period was
$155.320 million or $2.326 million greater than budget.
The major variances were as follows:
Other Operating Revenue
Actual $41.259 million, Budget $38.086
million, Favourable variance $3.173 million
Waste and Environmental Solutions revenue
was favourable $2.112 million due mainly to the level of waste received to
landfill being greater than expected.
Parking Operations revenue was favourable
$282k reflecting increased usage for on-street and off-street car parks and car
park buildings.
Enterprise Dunedin revenue was favourable
$270k due to timing of Regional Business Partnership revenue and Work Ready
Coordinator funding.
Regulatory Services revenue was favourable
$191k due to greater than expected number of building consent applications.
Alcohol licencing and dog registration revenue was also ahead of target.
Civic and Administration revenue was
favourable $96k due to unbudgeted revenue relating to an Otago Regional Council
by-election in their Dunstan constituency. This was partly offset by unbudgeted
expenditure.
These favourable variances were partially
offset by:
Property revenue was unfavourable $341k due
to some vacancies in the investment portfolio and reduced rent in some
miscellaneous property while building improvement work was carried out.
Aquatic Services revenue was unfavourable
$91k. Unfavourable winter weather conditions impacted on revenue for
Moana. In addition gym revenue was less than budget, partly due to promotions
being run by other gyms.
Grants
Actual $12.344 million, Budget $14.174
million, Unfavourable variance $1.830 million
Transport grants and subsidy revenue was
unfavourable by $1.835 million. The timing of capital projects resulted
in an unfavourable variance in capital subsidy revenue
($3.692 million), partly offset by greater than budgeted operating subsidies
due to expenditure in response to the July 2017 flooding event.
Contributions
Actual $1.065 million, Budget $248k,
Favourable variance $817k
This variance related to higher than
expected development contributions invoiced in the current year.
Expenditure
The total expenditure for the period was
$171.441 million or $5.913 million greater than budget.
The major variances were as follows:
Personnel Costs
Actual $33.018 million, Budget $32.376
million, Unfavourable variance $642k
Personnel costs were unfavourable year to
date due to higher than budgeted recruitment costs to secure resourcing in a
number of departments, along with higher than expected training costs in
particular leadership development.
Asset Operations and Maintenance Costs
Actual $32.460 million, Budget $29.350
million, Unfavourable variance $3.110 million
Transportation costs were unfavourable $3.502 million primarily due
to July's rain event resulting in unbudgeted emergency work.
Property costs were unfavourable $609k
mainly due to unbudgeted reactive maintenance cost in the Housing portfolio.
Waste and Environmental Solutions costs were unfavourable
$192k. ETS costs were higher than budget reflecting the additional income
activity discussed above.
These unfavourable variances were partially
offset by:
Parks and Recreation expenditure was
favourable ($858k) due to delays in programmed maintenance (buildings &
trees), lower than expected reactive maintenance and improved oversight
associated with the Green Space and Ecological contracts.
Materials Supplies and Services
Actual $5.816 million, Budget $4.984
million, Unfavourable variance $832k
Property costs were unfavourable $647k due
to unbudgeted contracted services expenditure to support the operation of the
department pending appointment of permanent staff.
Civic and Administration Services costs
were unfavourable $292k due to costs associated with the 2GP and flood relief
expenditure.
Fees and Levies
Actual $8.091 million, Budget $5.759
million, Unfavourable variance $2.332 million
Recreation
Planning costs were unfavourable $429k due to consultant costs relating to the
Logan Park Precinct Plan and recreation planner secondment costs.
Property
costs were unfavourable $851k due to the high number of consultants
currently working in the Property Services department. This variance will
increase through the financial year as a result of both consultants covering
vacant positions and a high volume of survey and inspection work being
undertaken to inform maintenance and renewal programmes.
Regulatory
Services costs were unfavourable $251k due mainly to higher consultancy costs
for building consents work being processed by third parties.
Resource
Consents costs were unfavourable $158k due to unbudgeted litigation costs and
planning costs associated with processing resource consent applications.
Transportation
costs were unfavourable $566k due to consultant’s costs for health and
safety and other audits, and professional services scoping costs for City
Cluster Schools safety work.
Three
Waters costs were unfavourable $147k due to consultant support for procurement
activity and system reviews.
Grants and Subsidies
Actual $7.024 million, Budget $7.819
million, Favourable variance $795k
Recreation Planning costs were favourable
$649k primarily due to the budgeted $520k grant for the Kings hockey turf not
yet being required due to project delays.
City Development costs were favourable
$165k due to the timing of Heritage Support grants.
Interest
Actual $7.440 million, Budget $8.237
million, Favourable variance $797k
Interest expenditure was less than budget
due to the lower level of borrowing and a favourable floating interest rate
applied to the non-fixed interest borrowing.
WAIPORI FUND NET
OPERATING RESULT
Actual
$4.536 million, Budget $1.909 million, Favourable variance $2.627 million
The Waipori Fund net operating
result was favourable for the year due to unrealised gains across a number of
investment portfolios. In particular international equities have been
favourably impacted by the weaker NZD.
Statement of
Financial Position
A Statement of Financial Position is
provided as Attachment C.
Short term investments of $7.125 million
relate to the Waipori Fund.
The value of fixed assets was greater than
budget as at 31 January 2018, mainly due to a higher than expected revaluation
increase applied to infrastructure assets (in particular Three Waters assets).
Statement of
Cashflows
A Statement of Cashflows is provided as
Attachment D.
Cashflow from operations was less than
budgeted year due to higher than expected operating costs (maintenance and
professional fees).
Cash outflows from investing were less than
budgeted due to capital expenditure being less than budgeted.
Capital
Expenditure
A summary of the capital expenditure
programme by Activity is provided as Attachment E.
Total capital expenditure for the period to
31 January 2018 was $17.967 million or 27.4% of the full year budget of
$65.681 million.
Community
and Planning Group capital expenditure was $928k
underspent
This variance was due to delayed progress
with the Citywide Amenities upgrade work. The project will continue
through the 2017/18 financial year.
Corporate Services capital expenditure was $2.351 million underspent
This variance was due to delayed timing of
the Electronic Document and Records Management system replacement
project. The RFP process is complete with a preferred vendor appointed.
Property capital
expenditure was $988k underspent
Project prioritisation and final scoping
continues to be a focus within the Property group prior to the commencement of
any significant works.
Investment property upgrades were underspent
$212k. Work to date includes 37 Treffers Road roof and yard
reconstruction as well as for 9 Heriot Drive’s sprinkler upgrade.
Completion is expected first quarter 2018.
Parks and Recreation capital expenditure was $1.318 million underspent
A number of projects have been delayed
while assets assessments are completed to allow appropriate programming of
work.
Tenders for Playground improvements work
have closed and are currently being evaluated.
Other projects for changing room
refurbishment at Mosgiel and the Caledonian Gym as well as the Botanic Garden
glasshouse renewal have been approved and will be tendered soon.
The Mosgiel East (Highland Park) reserve
development project is nearing completion.
There has been no expenditure to date on
the Logan Park Artificial Turf project ($1 million favourable). This
budget is unlikely to be spent this financial year with construction not
expected to commence until October 2018.
Customer and Regulatory capital expenditure was $381k underspent
The budget for parking meter upgrades (FY
$300k) will not be required for 2017/18 due to all meters being upgraded in the
2016/17 financial year in order to comply with new credit card protocols.
Transport capital
expenditure was $6.354 million underspent
The Peninsula road widening project was
under budget by $3.168 million. There has been a delay in commencing the
physical works with full year expenditure likely to be in the order of $2.000
million (full year budget $10.800 million).
Renewals capital was under budget by $3.424
million due to timing. Contracts have been recently awarded for
carriageway resurfacing, kerb and channelling and footpath resurfacing.
These under spends were partially offset
by:
Minor safety improvements were over budget
$1.274 million and included the Highcliff Road and South Dunedin safety works.
The year to date expenditure also included
unbudgeted slip repairs resulting from the July 2017 rain event totalling
$565k.
Water and Waste Services capital expenditure was $3.152 million underspent
General
network renewals were tracking behind budget, partially offset by on-going
expenditure on the Ross Creek Dam project and the treatment site switchboard
replacement programme.
Debt
Refer to
Attachments F and G.
Attachment F
provides a summary of the debt servicing ratios for the year to date.
All three
targets were within policy.
No new loans
were required year to date.
Debtors and rates
outstanding
Sundry debtors outstanding as at 31 January
2018 totalled $23.501 million. This included long term debt of $435k, and debt
associated with Warm Dunedin of $3.244
million.
Debtors outstanding for more than four
months (excluding long term debt and Warm Dunedin) totalled $641k, compared
with last year’s total of $616k as at 31 January 2017.
Rates arrears relating to prior year rates
totalled $976k. This was higher than the $648k total as at January
2017. Of this total $92k was being recovered under formal arrangements
with Council, while the balance is being actively pursued.
Comments from
group activities
Attachment H, the Summary of Operating
Variances, shows by Group Activity the overall net surplus or deficit variance
for the seven months ended 31 January 2018. It also shows the variances
by revenue and expenditure type.
Enterprise Dunedin Group - $581k Favourable
External revenue was favourable $270k due to
the timing of budgeted revenue from Regional Business Partners and Education
New Zealand. There was also some unbudgeted revenue relating to the Business
Events activity.
Operating expenditure was favourable $304k
due largely to the delayed timing of various marketing and project activities.
Property - $3.327 million Unfavourable
Staff costs were unfavourable $351k due to
unbudgeted recruitment fees, and new positions being filled.
Property operating costs were unfavourable
$2.443 million. Fees and levies expenditure was unfavourable $851k
due to the high number of consultants currently working in the Property
Services department. This variance will increase through the financial year as
a result of both consultants covering positions yet to be filled and a high
volume of survey and inspection work being undertaken to inform maintenance and
renewal programmes.
Repairs & maintenance expenses were
unfavourable $1.256 million mainly due to unbudgeted reactive works and
contractor costs across the Property portfolios.
Premises costs were greater than budget
$295k largely due to the costs associated with Building WOF compliance
monitoring.
Investment Account – $1.337 million
Favourable
Interest costs were favourable $797k due to
the lower level of borrowing and a favourable floating interest rate applied to
the non-fixed interest borrowing.
Parks & Recreation Group - $439k
Favourable
Parks and Recreation operating expenditure
was favourable ($850k) due to delays in programmed maintenance (buildings &
trees), lower than expected reactive maintenance and improved oversight
associated with the Green Space and Ecological contracts. In addition
grants expenditure was lower than budget primarily due to the Kings Hockey Turf
ground still to be paid out.
This favourable variance was partially
offset by Aquatics revenue falling behind budget due to the impact of poor
weather, and increased competition effecting gym revenue. In addition
Aquatics personnel costs exceeded budget due to increased overtime and
rostering required to resource for unplanned illness and leave.
Transport Group - $5.627 million
Unfavourable
External revenue was unfavourable $1.462
million. Capital subsidies were $1.879 million less than budget due to delays
in capital projects (Peninsula widening, LED lighting upgrade and the central
city cycling projects). Operating subsidies were higher than expected due
to increased operating expenditure, including costs incurred in response to the
July 2017 flood event.
Transport operating expenditure was
unfavourable $3.856 million to due to greater than budgeted costs of subsidised
emergency work and road maintenance as a result of the
July 2017 rainfall event.
Waste and Environmental Solutions –
$2.057 million Favourable
Total revenue was favourable $2.112 million
due to due to an increase in waste to landfill.
WWS Three Waters – $404k Favourable
External revenue was favourable $669k due
mainly to an unbudgeted external recovery and higher than expected development
contribution revenue.
Operating expenditure was $266k
unfavourable in part reflecting costs associated with the July 2017 flood event
and the boil water notification which included system flushing and supply of
bulk tanker water for residents and affected businesses.
