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Finance and Council
Controlled Organisations Committee
10 August 2021
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Financial Result - Year Ended
30 June 2021
Department: Finance
EXECUTIVE SUMMARY
1 This
report provides the financial results for the twelve months ended 30 June 2021
and the financial position as at that date.
2 As this is
an administrative report only, there are no options or Summary of
Considerations.
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RECOMMENDATIONS
That the Committee:
a) Notes the Financial Performance for the twelve months ended
30 June 2021 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
3 This
report provides the financial statements for the twelve months ended 30 June
2021. 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
4 The
full year operating result was positive given the economic uncertainty over the
last 12 months. Anticipated revenue shortfalls did not materialise with
positive variances across most areas of the organisation. The net return
from the Waipori Fund also contributed to the favourable net surplus.
5 The
favourable revenue variance ($9.230 million) included increased activity: Green
Island Landfill, Aquatic Facilities, and Building Services. It also
included unbudgeted government project funding for Economic Development, Three
Waters, Property and Parks.
6 These
favourable variances were partially offset by lower grants funding in Transport
due to a lower level of subsidised capital expenditure and a shortfall in
renewals funding from Waka Kotahi. Parking revenue was also impacted due
to the temporary closure of the St Andrew Street and Dowling Street carparks
while on-site works were completed.
7 Overall
expenditure for the year was higher than budget. Variances included:
· higher
ETS and variable contract costs at the Green Island Landfill as a result of
increased activity,
· development/scoping
costs in Transport related to the major projects programme. Roading
maintenance was also ahead of budget due in part to increased expenditure for
road marking and street cleaning activities,
· unbudgeted
expenditure related to the government project funding discussed above, and
· unbudgeted
costs associated with the second-generation district plan.
8 These
unfavourable variances were partially offset by:
· favourable
interest expenditure due to the lower level of borrowing and a favourable
floating interest rate, and
· favourable
personnel costs reflecting vacancies during the year across the organisation.
9 Capital
expenditure was $110.825 million for the full year or 88% of budget. Activity
in the final quarter has seen this spend exceed initial forecasts with the
predominant activity in renewals for Three Waters and Transport.
NEXT STEPS
10 Financial
Result Reports continue be presented to future meetings of either the Finance
and Council Controlled Organisation Committee or Council.
Signatories
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Authoriser:
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Gavin Logie - Chief Financial Officer
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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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38
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⇩b
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Statement of Financial
Performance
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39
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⇩c
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Statement of Financial
Position
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40
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⇩d
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Statement of Cashflows
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41
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⇩e
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Capital Expenditure by
Activity
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42
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⇩f
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Summary of Operating
Variances
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43
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⇩g
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Financial Review
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44
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Finance and Council
Controlled Organisations Committee
10 August 2021
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Financial Review
For the twelve months ended 30 June
2021
This report provides a detailed commentary
on the Council’s draft financial result for the twelve months ended 30
June 2021 and the financial position at that date.
net surplus/(Deficit) (including
waipori)
The net surplus (including Waipori) for the
twelve months ended 30 June 2021 was $5.510 million or
$8.480 million greater than budget.
REVENUE
The total revenue for the period was
$318.584 million or $9.230 million greater than budget.
The major variances were as follows:
Other Operating Revenue
Actual $71.628 million, Budget $66.172
million, Favourable variance $5.456 million
Aquatic Services revenue was favourable
$551k due to greater than budgeted revenue for the gym and the swim school. The
various Covid 19 alert levels have had an impact on the timing of the provision
of some services at Moana Pool. This included the renewal of gym memberships
delayed from the lockdown period last financial year.
Economic Development revenue was favourable
$1.868 million due to unbudgeted funding received for the Centre of Digital
Excellence, Otago Regional Economic Development projects and from the Regional
Events Fund.
Regulatory Services revenue was favourable
$828k primarily due to increased building services activity.
Waste and Environmental revenue was
favourable $2.372 million due to higher than expected tonnage entering the
Green Island landfill. This was partially offset by an increase in
landfill variable costs – see comments below.
These favourable variances were partially
offset by lower than expected off-street parking revenue due to the temporary
closure of the St Andrew Street and Dowling Street carparks while upgrade works
were completed and the impact of the Covid 19 level changes and more people
working from home.
Grants and Subsidies Revenue
Actual $41.461 million, Budget $40.701
million, Favourable variance $760k
Transportation revenue was unfavourable
$5.700 million due to the lower level of subsidised capital expenditure and a
shortfall in Waka Kotahi funding for the programme of renewals.
This unfavourable variance was partially
offset by unbudgeted government funding: $426k allocated to the maintenance of
community halls, $5.475 million for Water Reform work, $396k for the Urban Link
predator control project, $58k War Memorial Restoration grant, and $140k
Responsible Camping grant.
Expenditure
The total expenditure for the period was
$322.402 million or $4.963 million greater than budget.
The major variances were as follows:
Personnel Costs
Actual $65.970 million, Budget $67.972
million, Favourable variance $2.002 million
This variance reflected vacancies across
the organisation during the financial year.
Operations and Maintenance Costs
Actual $75.649 million, Budget $68.293
million, Unfavourable variance $7.356 million
Waste and Environmental Services costs were
$2.192 million higher than budgeted mainly due to additional ETS costs and
landfill variable costs associated with the higher tonnage entering the Green
Island Landfill.
Property costs were $373k higher than
budget due to reactive maintenance costs on a number of properties including
community halls funded from the government grant discussed above.
Economic
Development costs were $1.344 million higher than budget due to expenditure on
the Centre of Digital Excellence and Otago Regional Economic Development
projects. This expenditure was funded by unbudgeted revenue – see
comments above.
Three Waters
expenditure was unfavourable $1.428 million partly due to higher than budgeted
sludge removal costs due to the incinerator at Tahuna undergoing maintenance
and sludge from the treatment plant being transported to the Green Island
landfill for disposal. Maintenance costs were greater than budget due to
these incinerator repairs as well as repair work on the landfill gas to
electricity system at the Green Island treatment plant. Network
maintenance costs were high due to the level of reactive maintenance of the
water network, including additional costs relating to water testing, monitoring
and tankered water supply to the Northern water area.
Transportation expenditure was unfavourable
$1.587 million partly due to increased road marking and street cleaning costs
to maintain required levels of service.
Consumable and General Costs
Actual $26.420 million, Budget $23.629
million, Unfavourable variance $2.791 million
Transport costs were unfavourable $1.196
million due to planning and project management costs for Shaping Future Dunedin
and the Major Projects program.
Waste and Environmental costs were
unfavourable $693k due to consultancy costs associated with the Waste Futures
project including initial work on consenting applications for the Green Island
landfill and Resource Recovery Park.
Three Waters expenditure was unfavourable
$772k due to consultant costs associated with water reform and design work for
stimulus projects, as well as coastal monitoring activities.
City Development expenditure was
unfavourable $473k due to unbudgeted legal and planning consultancy costs
associated with the 2GP.
Expenditure in the month was higher than
budget due in part to the reclassification of project costs for planning and
initial design from capital to operating expenditure. This included
initial works on the Mosgiel Aquatic Facility and South Dunedin Library and
Community Complex.
Interest
Actual $8.103 million, Budget $12.051
million, Favourable variance $3.948 million
Interest expenditure was less than budget
due to a favourable floating interest rate applied to the non-fixed interest
borrowing, along with a lower loan balance.
Note that as at 30 June, $10.0 million of the
term loan balance was subject to historical fixed rates of interest, with the
balance being charged at the floating rate as set by Dunedin City Treasury
Limited.
WAIPORI FUND NET OPERATING RESULT
Actual
$9.328 million, Budget $5.115 million, Favourable variance $4.213 million
The operating result for the Waipori Fund
was favourable to budget with positive movements across all equity
markets. The full year return from the fund was 9.9% versus the benchmark
of 9.0% with NZ Equities being the main contributor. The market value of
the investment portfolio at 30 June was $100.0 million.
Statement of Financial Position
A Statement of Financial Position is
provided as Attachment C.
Short term investments of $6.975 million
relate to the Waipori Fund.
Total Debt was below budget as at 30 June
primarily reflecting the lower level of capital expenditure, plus the
unbudgeted receipt of Three Waters reform funding yet to be spent.
The 30 June 2021 value of fixed assets will
be adjusted in the annual report to reflect the impact of valuations currently
being finalised – these valuations will include land, buildings
infrastructure assets and the investment property portfolio.
Capital Expenditure
A summary of the capital expenditure
programme by Activity is provided as Attachment E.
Total capital expenditure for the period
was $110.825 million or 88% of the full year budget. The full year
spend reflected an uplift in the final quarter of the year with the predominant
activity in renewals for Three Waters and Transport.
Corporate
Services capital expenditure was $2.638 million
underspent
The underspend was primarily driven by
lower than expected expenditure on a number of key IT projects including the
Payroll System Replacement, Infrastructure Program, Smart Water Meter project
and Records Management System.
Property capital
expenditure was $6.108 million underspent
A number of projects were impacted by
delayed delivery including roof renewals for the Civic Centre and Art Gallery,
the School St housing development, and the South Dunedin Library and Community
Complex.
Refurbishment of block three at the Palmyra
housing site has been completed, with the final block scheduled for completion
by December 2021.
Parks and Recreation capital expenditure was $4.735 million underspent
The underspend was primarily due to delays
in delivery of the renewals programme (including Aquatics) pending completion
of scoping and design work. This included the planned replacement of the
hydroslide at Moana Pool.
Customer and Regulatory Services capital expenditure was $999k underspent.
The underspend was primarily driven by the
delayed purchase of the replacement mobile library. This procurement is
currently being finalised for delivery in 2021/22. The underspend also
reflected a delay in parking meter upgrades pending the supply of equipment.
Transport capital
expenditure was $3.927 million underspent
Renewals spend for
the year was ahead of budget including carriageway and structure component
projects (bridges and retaining walls).
New capital projects were underspent
primarily related to timing associated with a number of
projects pending completion of design and procurement activities. This
includes urban cycleways, central city upgrade and intersection
improvements. The LED street light installation project is generally
complete, with post implementation surveying and control system commissioning
underway.
Three Waters capital expenditure was $4.870 million overspent
Renewals capital was overspent ($10.324m),
and included the replacement of pipework in Edinburgh Street, Karitane water
main renewals and water and wastewater costs associated with the Peninsula
project. Some of the additional renewals spend was funded from the reform
stimulus monies – see grant revenue discussion above.
Three Waters new capital was underspent
($5.452m) due to delays in the planning and design phases of projects.
Comments from group activities
Attachment F, the Summary of Operating
Variances, shows by Group Activity the overall net surplus or deficit variance
for the period. It also shows the variances by revenue and expenditure
type.
Arts and Culture - $895k Favourable
Revenue was favourable due to better than
expected visitor fees for Lan Yuan and Olveston along with strong merchandise
sales for the Dunedin Public Art Gallery and Toitū.
Staff costs were favourable due to the
current level of vacancies.
Enterprise Dunedin - $412k Favourable
Economic Development revenue was favourable
due to unbudgeted funding received for the Centre of Digital Excellence, Otago
Regional Economic Development projects and from the Regional Events Fund.
This variance was partially offset by associated expenditure in these areas.
Parks and Recreation - $1.241 million Favourable
Overall
revenue was favourable and included better than expected activity within
Aquatic Services along with unbudgeted government
funding for the Urban Link predator control project, war memorial restoration,
University Oval restoration and responsible camping.
Customer and Regulatory Services - $679k Favourable
Revenue was favourable primarily due to
increased building services activity.
This favourable variance was partially
offset by lower than expected off-street parking revenue due to the temporary
closure of the St Andrew Street and Dowling Street carparks while upgrade works
were completed and the impact of the Covid 19 level changes and more people
working from home.
Group expenditure was favourable due
project initiatives being deferred.
Transportation - $8.081 million Unfavourable
Revenue was unfavourable due to the lower
level of subsidised capital expenditure and a shortfall in Waka Kotahi funding
for the programme of renewals.
Operating costs were unfavourable $2.665
million due to planning and project management costs for Shaping Future Dunedin
and the Major Projects program.
Three Waters - $3.423 million Favourable
Three Waters revenue was favourable $6.622
million due to unbudgeted grants revenue for Water Reform work and higher than
expected development contributions.
Three waters expenditure was unfavourable
partly due to higher than budgeted sludge removal costs due to the incinerator
at Tahuna undergoing maintenance and sludge from the treatment plant being
transported to the Green Island landfill for disposal.
Maintenance costs were greater than budget
due to these incinerator repairs as well as repair work on the landfill gas to
electricity system at the Green Island treatment plant.
Network maintenance costs were also higher
due to the level of reactive maintenance of the water network, including
additional costs relating to water testing, monitoring and tankered water
supply to the Northern water area.
