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Finance and Council
Controlled Organisations Committee
31 August 2020
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Financial Result - Year Ended 30 June 2020
Department: Finance
EXECUTIVE SUMMARY
1 This
report provides the financial results for the year ended 30 June 2020 and the
financial position as at that date.
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RECOMMENDATIONS
That the Council:
a) Notes the
Financial Performance for the year ended 30 June 2020 and the Financial
Position as at that date.
b) Notes that
the year end result is subject to final adjustments and external audit by
Audit New Zealand.
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BACKGROUND
2 This
report provides the financial statements for the year ended 30 June 2020.
It includes reports on: financial performance, financial position, cashflows
and capital expenditure. The operating result is also shown by group,
including analysis by revenue and expenditure type.
DISCUSSION
3 The
full year unfavourable revenue variance included the impact of the nationwide
lockdown with a number of operating units recording little or no income in the
month of April, flowing into May. The variance also included the
previously reported reduced activity at the Green Island Landfill and lower
parking revenue.
Grants revenue was also less than budget due to the lower
than expected capital expenditure on roading projects.
These unfavourable variances were partially offset by an
unbudgeted dividend from Civic Assurance and unbudgeted revenue from the
Provincial Growth Fund for economic development initiatives.
Contributions revenue was also greater than budget primarily
due to a higher than budgeted level of vested assets.
4 Overall
expenditure was an unfavourable spend of $1.025 million.
The unfavourable variances included:
· higher
depreciation following the revaluation of Transport and Three Waters assets,
· higher
personnel costs due to additional staffing required to support the delivery of
2GP. Personnel costs were also impacted by an increase in the liability
for annual leave due to the current restrictions on travel and staff electing
to defer their holiday plans,
· higher
grants & subsidies due to the payment of $500k in relation to the planned
hockey turf at Kings High School originally budgeted in the 2017/2018 financial
year,
· an
increase in the aftercare provision related to the Green Island Landfill.
The unfavourable variances were partially offset by:
· lower
than expected costs associated with Parks maintenance contracts (reserves,
buildings and other facilities) resulting from the nationwide lockdown and
improved management of scheduled and unscheduled spending,
· lower
variable costs resulting from the reduced landfill activity,
· favourable
interest costs due to a lower level of borrowing and favourable floating
interest rate.
5 The
full year Waipori result was close to budget with a significant degree of
recovery in April/May following the initial market decline that occurred in
March.
6 Capital
expenditure ended the year below budget with delays for a number of projects
including limited expenditure during the nationwide lockdown.
OPTIONS
7 Not
applicable.
NEXT STEPS
8 Not
applicable.
Signatories
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Author:
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Lawrie Warwood - Financial Analyst
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Authoriser:
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Gavin Logie - Acting General Manager Finance
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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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29
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⇩b
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Statement of Financial
Performance
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30
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⇩c
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Statement of Financial
Position
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31
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⇩d
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Statement of Cashflows
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32
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⇩e
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Capital Expenditure
Summary
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33
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⇩f
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Summary of Operating
Variances
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34
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⇩g
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Financial Review
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35
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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
which contribute to the well-being of 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
31 August 2020
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Financial Review
For the year ended 30 June 2020
This report provides a detailed commentary
on the Council’s financial result for the year ended
30 June 2020 and the financial position at that date.
net surplus/(Deficit) (including
waipori)
The net surplus (including Waipori) for the
year ended 30 June 2020 was $405k or
$9.442 million lower than budget.
REVENUE
The total revenue for the year was
$308.696 million or $8.323 million less than budget.
The major variances were as follows:
Other Operating Revenue
Actual $69.446 million, Budget $77.452
million, Unfavourable variance $8.006 million
Waste and Environmental revenue was
unfavourable $3.402 million primarily due to lower than expected activity at
the Green Island landfill.
Parking Operations revenue was unfavourable
$2.750 million, resulting from delays in implementing the new pricing structure
at the start of the financial year, and the budget being over-optimistic with
regards to the additional income arising from this pricing structure. The
variance also included the impact of providing free parking during/after the
period of the nationwide lockdown.
A number of other operating units were
impacted by the lockdown and subsequent alert level changes. The main
areas included:
· Parking Services with lower level of infringement activity ($432k).
· Aquatic Services with reduced user fees ($915k).
· Ara Toi group with reduced visitor activity ($398k).
These unfavourable variances were partially
offset by:
Investment account revenue included an
unbudgeted dividend received from Civic Assurance ($355k).
Enterprise Dunedin revenue was favourable
$285k mainly due to revenue from the Provincial Growth Fund for several
initiatives, namely Otago Regional Economic Development, Construction Labour
Forecast and the Code of Digital Excellence.
Grants and Subsidies Revenue
Actual $40.052 million, Budget $43.359
million, Unfavourable variance $3.307 million
Transportation revenue was unfavourable
$3.527 million due to the lower than expected capital expenditure for the year
including the impact of limited activity in April.
Contributions Revenue
Actual $6.116 million, Budget $3.332
million, Favourable variance $2.784 million
The full year actual included $4.900
million of vested infrastructure assets versus a budget of
$2.500 million.
Expenditure
The total expenditure for the year was
$313.239 million or $1.025 million greater than budget.
The major variances were as follows:
Personnel Costs
Actual $67.488 million, Budget $64.973
million, Unfavourable variance $2.515 million
The full year variance reflected additional
staffing and staffing cost required to support the delivery of the 2GP and
process a higher than expected volume of building consents. The variance
also reflected ongoing recruitment of staff into the higher salary grades and a
reduction in annual leave taken across the organisation due to the nationwide
lockdown resulting in a higher than expected accrued leave as at 30 June 2020.
Operations and Maintenance Costs
Actual $67.782 million, Budget $71.154
million, Favourable variance $3.372 million
Parks costs were favourable $1.693 million partly due to tighter management of scheduled and
unscheduled work under the North and South Greenspace contracts. Some living
asset, building and paving maintenance costs were also deferred. Contract
costs savings attributed to the nationwide lockdown in April and May were
estimated to be approx. $520k across the Greenspace, Ecological and tree
maintenance contracts.
Three Waters costs were favourable $1.078 million partly due to the
impact of the nationwide lockdown in April and May. A larger than
expected amount of work under the City Care contract was capital in nature,
resulting in savings in operational maintenance and contract overhead costs of
$630k. There were also significant treatment savings in testing and
chemicals.
Grants and Subsidies Costs
Actual $10.095 million, Budget $9.482
million, Unfavourable variance $613k
Parks costs were unfavourable $508k due to
a grant relating to the Kings hockey turf budgeted in 2017/18 being paid in the
2019/20 year.
Depreciation
Actual $73.052 million, Budget $68.984
million, Unfavourable variance $4.068 million
Depreciation was unfavourable mainly due to
revaluation of Transportation and Three Waters assets effective from 1 July
2019.
Interest
Actual $10.014 million, Budget $12.833
million, Favourable variance $2.819 million
Interest expenditure was less than budget
primarily due to a favourable floating interest rate applied to the non-fixed
interest borrowing, along with a lower loan balance.
WAIPORI FUND NET OPERATING RESULT
Actual
$4.948 million, Budget $5.042 million, Unfavourable variance $94k
The Waipori Fund ended the year relatively
close to budget following the earlier market decline in March.
Statement of Financial Position
A Statement of Financial Position is
provided as Attachment C.
Short term investments of $7.163 million
relate to the Waipori Fund.
Total Debt ended the year below budget
following the lower level of capital expenditure, partially offset by the
revenue shortfalls discussed above.
Capital Expenditure
A summary of the capital expenditure
programme by Activity is provided as Attachment E.
Total capital expenditure for the year was
$92.319 million or 73.9% of the full year budget of
$124.958 million.
Community
Planning capital expenditure was $1.406 million
underspent
There was limited expenditure for the year
on the Central City Plan and Citywide Amenity Upgrades.
Corporate
Services capital expenditure was $2.551 million
underspent
The underspend was primarily driven by
lower than expected expenditure on a number of key IT projects including the
Payroll System Replacement, Online Services, and Mobility Solutions,
Infrastructure Program and Performance Management System.
Property capital
expenditure was $7.999 million underspent
The underspend was due the delayed timing
of projects including the South Dunedin Community Complex, School St and
Palmyra Housing Upgrades, Tarpit Renewal, Ice Stadium Roof, Civic Centre Roof
Renewal, and the Central Library Refurbishment project.
Parks and Recreation capital expenditure was $6.919 million underspent
This variance primarily reflected delays in
key Aquatics projects (Moana upgrade and the Mosgiel Aquatic centre
development) pending finalising of project scope and design.
Transport capital
expenditure was $8.178 million underspent
A number of key projects were underspent
for the year, partially driven by the impact of the nationwide lockdown and
managed project recommencement in May and June.
Dunedin Urban Cycleways expenditure was
underspent $1.969 million, with expenditure being deferred until 2021 to allow
negotiations with Kiwirail to be concluded.
Three Waters
capital expenditure was $3.548 million underspent
The underspend was primarily driven by
delays in Mosgiel stormwater renewals while further investigative work on flood
risks in Mosgiel is undertaken.
Comments from group activities
Attachment F, the Summary of Operating
Variances, shows by Group Activity the overall net surplus or deficit variance
for the year. It also shows the variances by revenue and expenditure
type.
Corporate Services - $784k Favourable
BIS operating costs were favourable
primarily due to project management costs being capitalised to the relevant
software projects (including payroll).
Group depreciation was also favourable due
to the delayed completion of some key IT projects.
Property - $962k Unfavourable
External revenue was impacted by reduced
rental income during the nationwide lockdown period, partially offset by an
unbudgeted net increase in the value of the investment property portfolio.
Operating costs were unfavourable due
largely to unbudgeted fire compliance costs for several properties, including
the Regent Theatre and Art Gallery, maintenance costs in the Civic Centre, Town
Hall air condition systems maintenance and asbestos assessment costs at Toitu
Settlers Museum.
Parks and Recreation - $718k Favourable
Parks costs were favourable due to tighter
management of scheduled and unscheduled work under the North and South
Greenspace contracts. Some living asset, building and paving maintenance costs
were also deferred. Contract costs savings attributed to the nationwide
lockdown in April and May were estimated to be approx. $520k across the
Greenspace, Ecological and tree maintenance contracts.
Group
revenue was unfavourable primarily due to the impact of the lockdown and subsequent alert level changes in Aquatic Services.
Customer and Regulatory Services - $2.856 million Unfavourable
Parking Operations and Parking Enforcement
revenue was unfavourable due to less than budgeted parking meter revenue
partially as a result of delays in implementing the new pricing structure, and
the budget being over-optimistic with regards the additional income arising
from this pricing structure. The variance also included the impact of
providing free parking during/after the period of the nationwide
lockdown.
Transport - $2.876 million Unfavourable
Depreciation was unfavourable as a result
of latest revaluation of Transportation assets.
NZTA grants revenue was unfavourable due to
lower operational expenditure on both maintenance and subsidised consultants
during the nationwide lockdown as well as the underspend on major capital
projects and subsidised renewals.
These unfavourable variances were partially
offset by unbudgeted vested asset income of
$3.200 million.
Waste and Environmental - $3.602 million Unfavourable
This variance reflected the net impact of a
reduction in commercial tonnage at Green Island Landfill, along with an
increase in the aftercare provision related to the landfill.
