CITY OF BUSSELTON MINUTES FOR THE FINANCE COMMITTEE … · 56/1415 Demi Liddle Special Circumstances – State Selection for the Under 18 Australian Junior Basketball Championships.

Please note: These minutes are yet to be confirmed as a true record of proceedings

CITY OF BUSSELTON

MINUTES FOR THE FINANCE COMMITTEE MEETING HELD ON 7 MAY 2015

TABLE OF CONTENTS ITEM NO. SUBJECT PAGE NO.

1. DECLARATION OF OPENING AND ANNOUNCEMENT OF VISITORS................................................... 2

2. ATTENDANCE ............................................................................................................................... 2

3. PUBLIC QUESTION TIME ................................................................................................................ 2

4. DISCLOSURE OF INTERESTS ........................................................................................................... 2

5. CONFIRMATION OF MINUTES ....................................................................................................... 3

5.1 Minutes of the Finance Committee held on 2 April 2015 .................................................... 3

6. REPORTS ...................................................................................................................................... 4

6.1 FINANCE COMMITTEE INFORMATION BULLETIN - MARCH 2015 ......................................... 4

6.2 FINANCIAL ACTIVITY STATEMENTS – PERIOD ENDING 31 MARCH 2015............................ 11

6.3 LIST OF PAYMENTS MADE – MARCH 2015 ......................................................................... 18

6.4 ANNUAL BUDGET REVIEW - PERIOD ENDING 31 MARCH 2015 ......................................... 20

6.5 REVIEW OF THE CITY OF BUSSELTON'S DEBT STRUCTURE ................................................... 8 6.6 VASSE TASKFORCE BUDGET AMENDMENT………………………………………………………………………45

6.7 GEOGRAPHE LEISURE CENTRE - BUDGET AMENDMENT REQUEST - GRANT FUNDING ............................................................................................................................. 49

7. GENERAL DISCUSSION ITEMS ...................................................................................................... 52

8. NEXT MEETING DATE .................................................................................................................. 52

9. CLOSURE .................................................................................................................................... 52

Finance Committee 2 7 May 2015

MINUTES

MINUTES OF THE FINANCE COMMITTEE HELD IN THE COMMITTEE ROOM, ADMINISTRATION BUILDING, SOUTHERN DRIVE, BUSSELTON, ON 7 MAY 2015 AT 9.30AM.

1. DECLARATION OF OPENING AND ANNOUNCEMENT OF VISITORS

The Presiding Member opened the meeting at 9.30am

2. ATTENDANCE

Presiding Member:

Members:

Cr Ian Stubbs Mayor Cr Grant Henley Cr John McCallum Cr Tom Tuffin - Deputy

Officers: Mr Mike Archer, Chief Executive Officer (from 9.45am until 9.47am, from 9.49am until 10.51am, from 10.53am until end of the meeting) Mr Paul Needham, Director, Planning and Development Services (until 9.55am, from 10.51am until 10.55am) Mr Matthew Smith, Director, Finance and Corporate Services Mr Greg Simpson, Manager Environmental Services (until 9.49am, from 10.51am until 10.55am, from 11.12am until 11.15am) Mr Ehab Gowegati, Financial Accountant (until 9.48am and returned at 9.49am) Mr Daniel Hall, Asset Coordinator (until 10.05am) Mrs Corinne Carrington, Administration Officer, Governance (until 10.02am and returned at 10.05am) Visitors: Mr Ron Back, Local Government Consultant, RJ Back and Associates (from 9.49am) Apologies Cr Jenny Green Approved Leave of Absence Cr Gordon Bleechmore

3. PUBLIC QUESTION TIME

Nil

4. DISCLOSURE OF INTERESTS

Nil


5. CONFIRMATION OF MINUTES

5.1 Minutes of the Finance Committee held on 2 April 2015

COMMITTEE DECISION F1505/022 Moved Councillor G Henley, seconded Councillor J McCallum

That the Minutes of the Finance Committee Meeting held 2 April 2015 be confirmed as a true and correct record.

CARRIED 4/0

9.45am At this time the Chief Executive Officer entered the meeting.


6. REPORTS

6.1 FINANCE COMMITTEE INFORMATION BULLETIN - MARCH 2015

SUBJECT INDEX: Councillor's Information STRATEGIC OBJECTIVE: Governance systems that deliver responsible, ethical and accountable

decision-making. BUSINESS UNIT: Finance and Information Technology ACTIVITY UNIT: Executive Services REPORTING OFFICER: Manager, Finance and Information Technology - Darren Whitby

Asset Coordinator - Dan Hall Administration Officer, Governance - Corinne Carrington

AUTHORISING OFFICER: Chief Executive Officer - Mike Archer VOTING REQUIREMENT: Simple Majority ATTACHMENTS: Attachment A Investment Performance Report - Period Ending 31

March 2015 Attachment B Letter from Australian Local Government Association -

Financial Assistance Grants Attachment C Letter to Federal Member for Forrest (August 2014) -

Indexation Pause: Financial Assistance Grants

PRÉCIS This report provides an overview of information that is considered of relevance to members of the Finance Committee, and also the Council.

INFORMATION BULLETIN 1. Investment Performance Report Pursuant to the Council’s Investment Policy, a report is to be provided to the Council on a monthly basis, detailing the investment portfolio in terms of performance and counterparty percentage exposure of total portfolio. The report is also to provide details of investment income earned against budget, whilst confirming compliance of the portfolio with legislative and policy limits. As at 31 March 2015, the value of the City’s invested funds totalled $69.3M (including $18M associated with the Civic and Administration Centre project). This represents a nominal reduction of $0.45M on the prior month’s closing balance. During the month, $17M in term deposit funds were renegotiated, for an average of 148 days, and at an average rate of 3.04% (marginally less than the previous month’s average interest rate). As at the end of March, credit interest earnings are collectively tracking below year to date budget estimates by approximately $110K. Whilst interest on reserve funds reflects a favourable variance of $65K, interest on municipal funds is falling short of YTD budget estimates by $175K. Current projections are that by financial year end, a collective adverse variance of up to $210K will be evident. Whilst interest on reserve funds is expected to exceed annual budget estimates by up to $70K, municipal interest earnings is expected to fall short of annual budget estimates by up to $280K, which will directly impact on the financial year closing surplus/ deficit position. Whilst the Reserve Bank continues to maintain the cash rate at 2.25%, market speculation continues that further cuts will occur by mid 2015. This will further impact on interest earnings performance over coming months, and also into 2015/16.

9.47am At this time the Chief Executive Officer left the meeting.


9.48am At this time the Financial Account left the meeting. 9.49am At this time the Chief Executive Officer and the Financial Account re-entered the meeting. 9.49am At this time Mr Ron Back entered the meeting. 9.49am At this time the Manager Environmental Services left the meeting.

2. Chief Executive Officer – Corporate Credit Card Details of monthly transactions made on the Chief Executive Officer’s corporate credit card are provided below to ensure there is appropriate oversight and awareness of credit card transactions made.

Date Amount Payee Description

27/02/2015 $227.30 Createsend.com Electronic Issue of Bay to Bay Newsletter

13/03/2015 $650.00 Local Government Managers Australia

South West Professional Development Conference held in Busselton – Corporate Sponsorship

3. Voluntary Contributions/ Donations (Income) At its meeting of 22 September 2010, the Council adopted (C1009/329) its Voluntary Contributions/ Donations Policy. This Policy requires that the Finance Committee be informed (via an information only bulletin) of any instances whereby voluntary contributions/ donations are approved by the Chief Executive Officer or jointly by the Mayor and Chief Executive Officer.

The voluntary cash contribution towards the beach shower at Dawson Drive, Yallingup was reported as part of the September 2014 Finance Committee Information Bulletin. No subsequent voluntary contributions have been received. 4. Donations/ Contributions and Subsidies Fund (Sponsorship Fund – Payment of Funds) Council resolved in April 2010 (C1004/132) a move towards a tiered system of funding and following the 6 October 2011 Finance Committee meeting, it was recommended to Council that the delegation to determine the allocations of sponsorship and donations from the sponsorship fund be revoked and be returned to the Chief Executive Officer to enable a more timely turnaround of sponsorship applications. Current expenditure from the Donations, Contributions and Subsidies Fund (Sponsorship Fund) reveals:

60 applications for sponsorship have been received during this financial year.

The average donation approved for the financial year is $324.91.

There were 8 applications for sponsorship received or assessed during March 2015.

Expenditure from the Donations, Contributions and Subsidies Fund (Sponsorship Fund) for the financial year totals $18,195.00.

Total budget for the Donations, Contributions and Subsidies Fund (Sponsorship Fund) is $26,050.00.

App. No. Recipient Purpose Amount

53/1415 Novacare Residents Association

Funding to assist with the purchasing of a defibrillator. Application did not meeting the City’s guidelines

$0.00


App. No. Recipient Purpose Amount

54/1415 Voices of the Vasse Donation for performance at the combined Australian Citizenship Ceremony and Civic Reception 26/03/2015.

$200.00

55/1415 Caelin Winchcombe Special Circumstances – State Selection for the Laser 4.7 Youth World Championships in the Netherlands. Funding to assist with boat charter/hire.

$400.00

56/1415 Demi Liddle Special Circumstances – State Selection for the Under 18 Australian Junior Basketball Championships. Funding to assist with travel, accommodation and uniform expenses.

$200.00

57/1415 Geographe Bay Over 50 Cycle Club

30th Anniversary over 55 Cycle Club Event 6/05/15 and 7/05/15 – Funding to assist with the dinner and presentation evening.

$500.00

58/1415 Busselton Horse and Pony Club Inc.

Busselton Winter Jumping Carnival 30/05/15 and 31/05/15 – Funding to assist with hiring of equipment, payment of judges and other costs associated with set up of the event.

$500.00

59/1415 Busselton RSL The Poppy Project - Funding to assist with the purchasing of felt, buttons and floristry wire to make poppies for Remembrance Day 2015.

$500.00

60/1415 Jasmine Hopkins Special Circumstances – State Selection for the Georgina Hope Australian Age Swimming Championships. Funding to assist with accommodation expenses.

$200.00

5. Asset Management Report Fair Value Staff are continuing to work through the fair value of infrastructure assets for finance. This is proving to be a rather time consuming process, however asset officers are working hard to ensure we meet the required timeframes. Public Open Space Strategy Asset staff have been with Community Development staff in formulating a draft public open space (POS) strategy. This document is still in the early stages, however once it’s completed it will provide a framework for the management of existing POS as well as implementation of new areas. It will also provide a framework for level of service modelling, which is an important part of the ongoing management of POS areas. This will no doubt be workshopped with senior management and the Council as the document progresses. 6. Letter from Australian Local Government Association – Financial Assistance Grants As part of its 2014/15 budget, the Commonwealth determined to freeze indexation of local government Financial Assistance Grant (FAG) funding until 2017/18. The Australian Local Government Authority (ALGA) has written to the City seeking its support and assistance in ALGA’s ongoing campaign to restore the indexation of FAG funding. A copy of ALGA’s letter is attached to this report.


9.55am At this time the Director Planning and Development Services left the meeting.

In demonstration of support, ALGA has requested that all local government Councils pass a resolution which: Acknowledges the importance of FAG funding for the continued delivery of services and

infrastructure; Acknowledges the value of FAG funding paid in the current financial year; and, Ensures that FAG funding, and other Federal funding received, will be appropriately identified in

Council publications, including the Annual Report. This matter has previously been raised by ALGA, and in August 2014, the Mayor and CEO wrote to the Federal Member for Forrest (Ms Nola Marino) outlining the financial impact for the City as a result of the budget decision. A copy of that letter is also attached for reference. This matter has been included on the Finance Committee Information Bulletin for deliberation by Finance Committee Members and recommendation as to any action to be taken by the Council in respect of ALGA’s request. OFFICER RECOMMENDATION That the Finance Committee notes the Finance Committee Information Bulletin for the month of March 2015.

Note: As per recent correspondence received from the Australian Local Government Association and Western Australian Local Government Association (attachment B in this report), the Committee agreed to include acknowledgement of the receipt of Financial Assistance Grants from the Commonwealth in the recommendation.

COMMITTEE DECISION F1505/023 Moved Councillor J McCallum, seconded Councillor G Henley

That the Finance Committee:

1. Notes the Finance Committee Information Bulletin for the month of March 2015; 2. Acknowledges the importance of federal funding through the Financial Assistance Grants

program for the continued delivery of Councils services and infrastructure and seeks to advocate for increases in Federal Government Grants to Local Government;

3. Acknowledges that the Council will receive $2.1 million in 2014 – 15; and 4. Will ensure that this federal funding, and other funding provided by the Federal

Government under relevant grant programs, is appropriately identified as Commonwealth grant funding in Council publications, including annual reports.

CARRIED 4/0

10.05am At this time the Asset Coordinator left the meeting and did not return.


6.2 FINANCIAL ACTIVITY STATEMENTS – PERIOD ENDING 31 MARCH 2015

Note: The Presiding Member allowed for item 6.5 – Review of the City of Busselton’s Debt Structure to be considered by the Committee prior to item 6.2.

6.5 REVIEW OF THE CITY OF BUSSELTON'S DEBT STRUCTURE

SUBJECT INDEX: Financial Plans and Strategies STRATEGIC OBJECTIVE: An organisation that is managed effectively and achieves positive

outcomes for the community. BUSINESS UNIT: Finance and Information Technology ACTIVITY UNIT: Finance REPORTING OFFICER: Manager, Finance and Information Technology - Darren Whitby AUTHORISING OFFICER: Director, Finance and Corporate Services - Matthew Smith VOTING REQUIREMENT: Simple Majority ATTACHMENTS: Attachment A Consultant's Report: City of Busselton - Review of the

City's Debt Structure

PRÉCIS An external review of the City of Busselton’s debt structure has recently been commissioned. Local Government consultant Mr Ron Back from R J Back and Associates (the ‘consultant’) was appointed to undertake the review. The consultant’s report is presented for review, deliberation and noting by the Finance Committee.

BACKGROUND The matter of debt financing has regularly been raised as part of the Council’s Long Term Financial Plan deliberations. With this in mind, a review of the City’s prevailing, and importantly future, debt structuring would be invaluable in guiding the Council in respect of future borrowing decisions; whilst also informing an updated and overarching ‘Borrowings’ policy. To ensure an unbiased report, an external consultant was selected to undertake the review. To guide the context of the review however, the following matters were identified by staff for review and comment by the consultant: Any applicable industry best practice strategies in relation to borrowings Any benchmarks that the Council could aspire to achieve in relation to borrowings Whether the value of borrowings, and more particularly principal and interest repayments,

should be tied to any specific indicators (e.g. debt service coverage ratio, percentage of projected annual rates revenue etc.)

The additional borrowing capacity available via additional rate increases in selected years The accumulation of reserve funds and whether these funds, or existing reserve funds, could

potentially be utilised to fund capital projects (e.g. long service leave reserve etc.) Clearly any other matters of relevance as raised by the consultant would also be welcomed as part of the report. In compiling the review document, the consultant was able to reference the Council’s recently endorsed Long Term Financial Plan (2015/16 – 2024/25), ensuring that his report was based on current data.

10.02am At this time the Administration Officer, Governance left the meeting. 10.05am At this time the Administration Officer, Governance re-entered the meeting.


STATUTORY ENVIRONMENT Sections 6.20 and 6.21 of the Local Government Act refer to a local government’s power to borrow. Section 5.56 of the Local Government Act refers to the requirement for a local government to plan for the future of its district, in accordance with any associated regulations. RELEVANT PLANS AND POLICIES Council Policy 048 – Loans, provides guidelines for the Council and staff in respect of the utilisation of borrowings to fund the acquisition, construction or renewal of assets. As part of the Integrated Planning and Reporting Framework, the Council’s Long Term Financial Plan is also of direct relevance to this matter. FINANCIAL IMPLICATIONS There are no direct financial implications associated with the recommendation as included in this report. Long Term Financial Plan Implications The consultant’s report deals with the Council’s future debt financing strategies, and any determinations made by the Council in respect of the report may directly impact on the Council’s future Long Term Financial Plan development. STRATEGIC COMMUNITY OBJECTIVES This matter principally aligns with Key Goal Area 6 – ‘Open and Collaborative Leadership’ and more specifically Community Objective 6.3 - ‘An organisation that is managed effectively and achieves positive outcomes for the community’. The achievement of the above is underpinned by the Council strategy to ‘ensure the long term financial sustainability of Council through effective financial management’. RISK ASSESSMENT As part of his report, the consultant has identified the requirement to maintain basic standards (at least) in debt related financial ratio performance, and also the impact of borrowing rates. Both of these matters are entirely relevant from a risk perspective and should form an integral component of any strategic borrowing policy. CONSULTATION In order to provide the Finance Committee with an unbiased report, an expert external consultant was commissioned to undertake the review on the City’s behalf. Whilst provided with an initial scope of works document, the findings and associated recommendations are entirely those of the consultant. OFFICER COMMENT The purpose of the consultant’s report is primarily to provide the Council with, amongst others, an (expert) external viewpoint of the City’s current (informal) debt financing principles, and its capacity to continue to raise debt in the future. Based on the consultants’ findings, the Council could then determine to develop an overarching strategic debt policy.


In his report, the consultant has discussed a range of relevant matters, including the relevance of the Council’s current Loans Policy, its relative (industry) financial performance in respect of debt and its capacity to continue to raise debt. These matters will assist the council in framing its strategic debt policy. Perhaps most relevant however is the consultant’s summary, commencing on page 13 of the report. This provides a synopsis of the Council’s current borrowing status, and the important matters that require consideration when considering future borrowing decisions. The consultant will be attending the 07 May 2015 Finance Committee to provide an overview of his findings, and to respond to any questions that Committee members may have in relation to the report. CONCLUSION The consultant’s report has provided an invaluable external viewpoint as to the Council’s prevailing debt position, whilst also highlighting a range of matters that the Council will need to consider when deliberating future borrowing proposals. OPTIONS Not applicable. TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION Not applicable. OFFICER RECOMMENDATION That the Finance Committee receives the report “City of Busselton – Review of the City’s Debt Structure”, as prepared by R J Back and Associates, and notes the report’s findings.

Note: The Committee were in support of the Officer Recommendation, however, felt able to endorce for Council consideration changes to the loan policy in accordance with the recommendations contained in the report.

COMMITTEE RECOMMENDATION F1505/024 Moved Councillor T Tuffin, seconded Councillor J McCallum

1. That the Council receives the report “City of Busselton – Review of the City’s Debt

Structure”, as prepared by R J Back and Associates, and notes the report’s findings.

2. That the loan policy (policy number 48) be amended in accordance with the recommendations contained in the report from RJ Back and Associates.

CARRIED 4/0


6.2 FINANCIAL ACTIVITY STATEMENTS – PERIOD ENDING 31 MARCH 2015

SUBJECT INDEX: Budget Planning and Reporting STRATEGIC OBJECTIVE: An organisation that is managed effectively and achieves positive

outcomes for the community. BUSINESS UNIT: Finance and Information Technology ACTIVITY UNIT: Finance REPORTING OFFICER: Manager, Finance and Information Technology - Darren Whitby AUTHORISING OFFICER: Director, Finance and Corporate Services - Matthew Smith VOTING REQUIREMENT: Simple Majority ATTACHMENTS: Attachment A Financial Activity Statements - Period Ending 31

March 2015

PRÉCIS Pursuant to Section 6.4 of the Local Government Act (‘the Act’) and Regulation 34(4) of the Local Government (Financial Management) Regulations (‘the Regulations’), a local government is to prepare, on a monthly basis, a statement of financial activity that reports on the City’s financial performance in relation to its adopted/ amended budget. This report has been compiled to fulfil the statutory reporting requirements of the Act and associated Regulations, whilst also providing the Council with an overview of the City’s financial performance on a year to date basis for the period ending 31 March 2015.

BACKGROUND The Regulations detail the form and manner in which financial activity statements are to be presented to the Council on a monthly basis; and are to include the following: Annual budget estimates Budget estimates to the end of the month in which the statement relates Actual amounts of revenue and expenditure to the end of the month in which the statement

relates Material variances between budget estimates and actual revenue/ expenditure/ (including

an explanation of any material variances) The net current assets at the end of the month to which the statement relates (including an

explanation of the composition of the net current position) Additionally, and pursuant to Regulation 34(5) of the Regulations, a local government is required to adopt a material variance reporting threshold in each financial year. At its meeting of 30 July 2014, the Council adopted (C1407/190) the following material variance reporting threshold for the 2014/15 financial year: That pursuant to Regulation 34(5) of the Local Government (Financial Management) Regulations, the Council adopts a material variance reporting threshold with respect to financial activity statement reporting for the 2014/15 financial year to comprise variances equal to or greater than 10% of the year to date budget amount as detailed in the Income Statement by Nature and Type/ Statement of Financial Activity report, however variances due to timing differences and/ or seasonal adjustments are to be reported on a quarterly basis.


STATUTORY ENVIRONMENT Section 6.4 of the Local Government Act and Regulation 34 of the Local Government (Financial Management) Regulations detail the form and manner in which a local government is to prepare financial activity statements. RELEVANT PLANS AND POLICIES Not applicable. FINANCIAL IMPLICATIONS Any financial implications are detailed within the context of this report. Long Term Financial Plan Implications Not applicable. STRATEGIC COMMUNITY OBJECTIVES This matter principally aligns with Key Goal Area 6 – ‘Open and Collaborative Leadership’ and more specifically Community Objective 6.3 - ‘An organisation that is managed effectively and achieves positive outcomes for the community’. The achievement of the above is underpinned by the Council strategy to ‘ensure the long term financial sustainability of Council through effective financial management’. RISK ASSESSMENT Risk assessments have been previously completed in relation to a number of ‘higher level’ financial matters, including timely and accurate financial reporting to enable the Council to make fully informed financial decisions. The completion of the monthly Financial Activity Statement report is a treatment/ control that assists in addressing this risk. CONSULTATION Not applicable. OFFICER COMMENT In order to fulfil statutory reporting requirements, and to provide the Council with a synopsis of the City’s overall financial performance on a year to date basis, the following financial reports are attached hereto: Statement of Financial Activity This report provides details of the City’s operating revenues and expenditures on a year to date basis, by nature and type (i.e. description). The report has been further extrapolated to include details of non-cash adjustments and capital revenues and expenditures, to identify the City’s net current position; which reconciles with that reflected in the associated Net Current Position report. Net Current Position This report provides details of the composition of the net current asset position on a year to date basis, and reconciles with the net current position as per the Statement of Financial Activity.


Capital Acquisition Report This report provides year to date budget performance (by line item) in respect of the following capital expenditure activities: o Land and Buildings o Plant and Equipment o Furniture and Equipment o Infrastructure Reserve Movements Report This report provides summary details of transfers to and from reserve funds, and also associated interest earnings on reserve funds, on a year to date basis. Reserve Transfers to Municipal Fund This report provides specific detail in respect of expenditures being funded from reserves. Additional reports and/ or charts are also provided as required to further supplement the information comprised within the statutory financial reports. COMMENTS ON FINANCIAL ACTIVITY TO 31 MARCH 2015 In terms of the Council’s adopted material reporting threshold for 2014/15, ‘quarterly’ financial activity statement reports are required to provide a summary of variances equal to or greater than 10% of the year to date budget amount as detailed in the Income Statement by Nature and Type/ Statement of Financial Activity report, irrespective of whether they are only due to timing differences. However, as the Annual Budget Review for 2014/15 has been compiled based on the City’s financial performance to the end of March, it is not considered necessary to replicate this same level of reporting in the March Financial Activity Statement report. Operating Activity Operating Revenue As at 31 March 2015, there is a variance of +0.8% in total operating revenue, with the following categories exceeding the 10% material variance threshold:

Description Variance %

Variance $000’s

Non-Operating Grants, Subsidies and Contributions -15% -$639

Profit on Asset Disposals +238% +$22

A summary of the above variances is provided as follows: Non-Operating Grants, Subsidies and Contributions (-$639K) The current variance is primarily attributable to: The receipt of additional developer contributions over year to date budget estimates (+$470K) The accounting recognition of a donated assets (+$123K) Timing differences associated with the receipt of capital grant funding including, but not limited

to: o Road construction related grant funding (-$528K) o Beach restoration related works (-$398K) o Busselton Regional Airport – Terminal upgrade and Airport related infrastructure works (-

$197K) o Bridge construction funding (+$112K) o Barnard Park East (+$84K)


The developer contributions funding has no direct impact on the Net Current Position, as these funds are transferred to Equity upon receipt, via the ‘Transfers to Restricted Assets’ capital expenditure activity. Additionally, donated assets are accounted for in the City’s Balance Sheet, and also do not impact on the Net Current Position. Finally, the performance in grant funding receipts is essentially offset by the associated capital expenditure performance, or equity transfers as required. Profit on Asset Disposals (+$22K) This nominal variance is primarily attributable to book profits on the sale, through auction, of obsolete computer equipment and sundry plant items. In most cases, the items had a zero written down value, with any funds received representing a book profit on disposal. It should be noted however that as this is an accounting entry only, performance in this category has no direct impact on the Net Current Position. Reflecting a favourable variance of approximately $460K as at 31 March 2015, overall operating revenue performance has been boosted by additional rates revenue and net favourable performance in fees and charges revenue. Coupled with additional developer contributions and the recognition of donated assets, this has notionally offset underlying adverse performance in the overall non-operating grants, subsidies and contributions category. Operating Expenditure As at 31 March 2015, there is a variance of -2.6% in total operating expenditure, with the following categories exceeding the 10% material variance threshold:


Variance $000’s

Materials and Contracts -20% -$2,304

Depreciation on Non-current Assets +20% +$1,503

Insurance Expenses -11% -$88

Loss on Asset Disposals +172% +$73

A summary of the above variances is provided as follows: Materials and Contracts (-$2,304K) Due to the nature of this expenditure category, variances are evident across a broad range of activities. However, major variances to 31 March 2015, include: Collective contractor expenditure is presently -$1,106K below year to date budget estimates and

includes, amongst others, recycling contractors (-$319K), Busselton Jetty contractors (-$177K), coastal protection related contractors (-$195K), Vasse and Provence specified area rate maintenance works (-$308K), and also numerous building contractor related works (e.g. Nautical Lady lighthouse demolition of $150K)

Collective consultancy expenditure is presently -$420K below year to date budget estimates Building maintenance services (including contract cleaning and general maintenance) are

presently -$200K below year to date budget estimates Plant and equipment maintenance services are presently -$112K below year to date budget

estimates Collective legal expenses are presently -$120K below year to date budget estimates The remainder of the variance is attributable to a variety of budget variances (primarily favourable) across a range of activities. Notwithstanding the magnitude of the current variance, projections are that end of financial year (net) savings will be evident in building maintenance, plant and equipment maintenance and legal expenses, to the value of approximately $390K.


Depreciation on Non-current Assets (+$1,503K) This variance is primarily attributable to the Buildings fair value valuation (as at 30 June 2014), coupled with the significant value of donated assets brought to account as at financial year end. The depreciation budget is developed reasonably early in the annual budget process, based on financial year end projections. Whilst generally accurate, this approach has this year been impacted by the aforementioned activities, the outcomes of which were not known until very late in the 2013/14 financial year. It should be noted however that depreciation expense is reversed as a non cash adjustment, and as such has no net effect on the Net Current Position. Insurance Expenses (-$88K) This variance is primarily attributable to property and plant insurance premiums, which presently reflect variances of -$46K and -$48K respectively. Whilst an end of financial year saving of approximately $85K is projected in this category, additional expenses will continue to be incurred during the financial year as additions/ amendments are made to the City’s insurance schedule; albeit these are not expected to be material. Loss on Asset Disposals (+$73K) This variance is due to book losses on the write-off, or disposal through auction or trade-in, of obsolete computer equipment, sundry plant items, and also light and heavy plant items. It should be noted however that as this is an accounting entry only, performance in this activity has no direct impact on the Net Current Position. Whilst collective operating expenditure presently reflects a variance of -$1.1M, this includes the additional depreciation expense of $1.5M. Discounting the depreciation variance results in a revised variance of -$2.6M (or -6.2%) against year to date budget estimates, which is predominantly due to shortfalls in Materials and Contracts expenditure. Capital Activity Capital Revenue As at 31 March 2015, there is a variance of -21.8% in total capital revenue, with the following categories exceeding the 10% material variance threshold:


Variance $000’s

Proceeds from the Sale of Assets -26% -$189

Proceeds from New Loans -28% -$6,830

Transfers from Restricted Assets +38% +$920

A summary of the above variances is provided as follows: Proceeds from the Sale of Assets (-$189K) This variance is primarily attributable to budget timing differences in relation to the changeover of light and heavy plant items, and corresponds with the current variance in the ‘Plant and Equipment’ capital expenditure activity. Proceeds from New Loans (-$6,830K) This variance is attributable to delays in the drawdown of the Busselton Foreshore borrowing facility of $6.8M, and the self supporting loan in favour of the Busselton Football and Sportsman’s Club Inc. of $30K. Whilst the self supporting loan is to be drawn in April 2015, the Executive Services Directorate advises that the Busselton Foreshore Loan will not be drawn until June.


Transfers from Restricted Assets (+$920K) This variance is primarily due to the earlier than projected transfer of unspent loans funds totalling $1.56M in respect of the Barnard Park and Geographe Leisure Centre extensions projects. The unspent component of the associated borrowings was quarantined as at 30 June 2014, to fund the projects’ completion in the current financial year. In addition, $1.69M in bond and deposit refunds has also been processed to 31 March 2015. It should be noted that performance in this category does not have any direct impact on the Net Current Position. The transfer of unspent loan funds is fully offset by the equivalent project expenditure, whilst bond and deposit transactions do not form part of the Net Current Position calculation. Capital Expenditure As at 31 March 2015, there is a variance of -24.8% in total capital expenditure, with the following categories exceeding the 10% material variance threshold:


Variance $000’s

Land and Buildings -39% -$2,319

Plant and Equipment -33% -$973

Furniture and Office Equipment -33% -$131

Infrastructure -56% -$10,163

Advances to Community Groups -100% -$30

Transfers to Restricted Assets +80% +$625

The attachments to this report include detailed listings of the following capital expenditure (project) items, to assist in reviewing specific variances: Land and Buildings Plant and Equipment Furniture and Office Equipment Infrastructure A summary of the remaining variances is provided as follows: Advances to Community Groups (-$30K) This matter relates to the drawdown of the budgeted self-supporting loan of $30K in favour of the Busselton Football and Sportsman’s Club; to carry out repairs to the Bovell Park football clubrooms. The loan has been scheduled for drawdown during April 2015. Transfers to Restricted Assets (+$625K) The favourable variance is primarily due to the receipt of developer contributions totalling approximately $0.9M, and bond and deposit payments totalling approximately $0.3M. It should be noted however that performance in this activity has no direct impact on the City’s Net Current Position. The developer contribution funds are initially recognised via the Non-operating Grants, Subsidies and Contributions operating revenue category; resulting in a full off-set. Additionally, and due tho their nature, bond and deposit transactions do not form part of the Net Current Position calculation. BUDGET VARIATIONS AND OTHER ‘KNOWNS’ In considering the October 2014 Financial Activity Statements, the Council determined (C1412/338) to quarantine a number of windfall revenues and identified savings to the Infrastructure Development Reserve; summarised as follows:


Description Amount $

September 2013 Storm Damage Claim Reimbursement 99,092

Insurance Scheme Surplus Distribution 50,336

Loan Repayments – Civic and Administration Centre 83,919

TOTAL 233,347

CONCLUSION As previously mentioned, the Annual Budget Review for 2014/15 has been compiled based on the City’s financial performance to 31 March 2015. The Budget Review reports that as at the reporting date, the City’s performance is considered satisfactory, with a closing surplus in the order of $900K projected as at 30 June 2015. OPTIONS The Council may determine not to receive the statutory financial activity statement reports. TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION NA.

COMMITTEE RECOMMENDATION AND OFFICER RECOMMENDATION F1505/025 Moved Councillor G Henley, seconded Councillor J McCallum

That the Council receives the statutory financial activity statement reports for the period ending 31 March 2015, pursuant to Regulation 34(4) of the Local Government (Financial Management) Regulations.

CARRIED 4/0


6.3 LIST OF PAYMENTS MADE – MARCH 2015

SUBJECT INDEX: Financial Operations STRATEGIC OBJECTIVE: An organisation that is managed effectively and achieves positive

outcomes for the community. BUSINESS UNIT: Finance and Information Technology ACTIVITY UNIT: Finance REPORTING OFFICER: Manager, Finance and Information Technology - Darren Whitby AUTHORISING OFFICER: Director, Finance and Corporate Services - Matthew Smith VOTING REQUIREMENT: Simple Majority ATTACHMENTS: Attachment A List of Payments Made - March 2015

PRÉCIS This report provides details of payments made from the City’s bank accounts for the month of March 2015, for noting by the Council and recording in the Council Minutes.

BACKGROUND The Local Government (Financial Management) Regulations require that when the Council has delegated authority to the Chief Executive Officer to make payments from the City’s bank accounts, that a list of payments made is prepared each month for presentation to, and noting by, the Council. STATUTORY ENVIRONMENT Section 6.10 of the Local Government Act and more specifically, Regulation 13 of the Local Government (Financial Management) Regulations; refer to the requirement for a listing of payments made each month to be presented to the Council. RELEVANT PLANS AND POLICIES NA. FINANCIAL IMPLICATIONS NA. STRATEGIC COMMUNITY OBJECTIVES This matter principally aligns with Key Goal Area 6 – ‘Open and Collaborative Leadership’ and more specifically Community Objective 6.3 - ‘An organisation that is managed effectively and achieves positive outcomes for the community’. RISK ASSESSMENT NA. CONSULTATION NA.


OFFICER COMMENT NA. CONCLUSION NA. OPTIONS NA. TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION NA.

COMMITTEE RECOMMENDATION AND OFFICER RECOMMENDATION F1505/026 Moved Councillor I Stubbs, seconded Councillor J McCallum

That the Council notes the payment of voucher numbers M110852 - M111046, EF039200 – EF039688, T007129 - T007134, and DD002410 - DD002436, together totalling $6,804,333.34.

CARRIED 4/0


6.4 ANNUAL BUDGET REVIEW - PERIOD ENDING 31 MARCH 2015

SUBJECT INDEX: Budget Planning and Reporting STRATEGIC OBJECTIVE: An organisation that is managed effectively and achieves positive

outcomes for the community. BUSINESS UNIT: Finance and Information Technology ACTIVITY UNIT: Finance REPORTING OFFICER: Manager, Finance and Information Technology - Darren Whitby AUTHORISING OFFICER: Director, Finance and Corporate Services - Matthew Smith VOTING REQUIREMENT: Absolute Majority ATTACHMENTS: Nil

PRÉCIS Between January and March in each financial year, a local government is to carry out a review of its annual budget for that year. The Council is required to consider the review submitted to it and determine (by absolute majority) whether or not to adopt the review, any parts of the review or any recommendations made in the review. This report, based on the City’s financial performance for the period ending 31 March 2015, has been compiled to fulfil the statutory reporting requirements of the Local Government Act and associated Regulations in respect of the annual budget review process.

BACKGROUND The requirement for a local government to carry out an annual budget review is prescribed via Regulation 33A of the Local Government (Financial Management) Regulations (the ‘Regulations’). A copy of the review, including the Council's determination in respect of the review, is to be provided to the Department of Local Government and Communities within 30 days of the date of the applicable Council Resolution. The Regulations require that the budget review must: (a) consider the local government's financial performance in the period beginning on 01 July and

ending no earlier than 31 December in that financial year; and (b) consider the local government's financial position as at the date of the review; and (c) review the outcomes for the end of the financial year that are forecast in the budget Essentially, the purpose of an annual budget review is to ensure that a local government conducts a review of its financial performance at an appropriate time in the financial year such that any significant budget variances can be identified and remedial action instigated as necessary; prior to financial year end. STATUTORY ENVIRONMENT Regulation 33A of the Local Government (Financial Management) Regulations details the requirement for a formal budget review to be completed annually. RELEVANT PLANS AND POLICIES Not applicable.

10.51am At this time the Chief Executive Officer left the meeting.


10.51am At this time the Director, Planning and Development Services and the Manager Environmental Services returned to the meeting.

10.53am At this time the Chief Executive Officer returned to the meeting.

FINANCIAL IMPLICATIONS Any immediate financial implications attributable to this review are addressed within the context of this report. Long Term Financial Plan Implications The primary purpose of this report is to review the City’s current and projected financial performance for the financial year ending 30 June 2015. Whilst there is limited direct consideration of long term financial plan implications within the report, the City’s current year financial performance will nonetheless assist in informing the development of next year’s long term financial plan. STRATEGIC COMMUNITY OBJECTIVES This matter principally aligns with Key Goal Area 6 – ‘Open and Collaborative Leadership’ and more specifically Community Objective 6.3 - ‘An organisation that is managed effectively and achieves positive outcomes for the community’. The achievement of the above is underpinned by the Council strategy to ‘ensure the long term financial sustainability of Council through effective financial management’. RISK ASSESSMENT Risk assessments have been previously completed in relation to a number of ‘higher level’ financial matters, including timely and accurate financial reporting to enable the Council to make fully informed financial decisions. The completion of an annual budget review is a treatment/control that assists in addressing this risk. CONSULTATION Not applicable. OFFICER COMMENT As in previous years, the Annual Budget Review has been compiled based on the ‘Nature and Type’ reporting structure, to maintain consistency with monthly Financial Activity Statement reporting. The review has concluded that the City’s financial performance to 31 March 2015 is satisfactory. Furthermore, as no (net) overall material adverse variance has been projected as part of the review, specific remedial actions are not required to be implemented. Notwithstanding this, the report has identified a number of areas in which individual favourable and adverse variances will be evident as at 30 June 2015. In numerous instances, the variances relate to items that are fully off-set and, as such, will not directly impact on the overall budget performance as at financial year end. Whilst these matters are discussed within the body of this report, the following Executive Summary provides a synopsis of those areas in which it is projected that the City’s overall (net) budget performance at financial year end will be impacted. Executive Summary Operating Revenue Rates revenue is projected to exceed annual budget estimates by up to $100K An unbudgeted ‘good driver’ insurance rebate of $15K has been received


Development application and advertising fees are projected to exceed annual budget estimates by up to $60K

Dog and cat registration fees are projected to exceed annual budget estimates by up to $70K Cemetery fees are projected to exceed annual budget estimates by up to $65K Building application fees are projected to exceed annual budget estimates by up to $30K Subdivision supervision and clearance fees are projected to fall short of annual budget estimates

by up to $40K Bushfire related fines and penalties are projected to fall short of annual budget estimates by up

to $45K Parking related fines and penalties are projected to fall short of annual budget estimates by up to

$55K Municipal fund interest earnings are projected to fall short of annual budget estimates by up to

$280K Rates instalment plan interest earnings are projected to exceed annual budget estimates by up

to $10K In summary, net operating revenue is projected to fall short of annual budget estimates by up to $70K. Operating Expenditure Building maintenance services expenditure is projected to fall short of annual budget estimates

by up to $80K Contract cleaning services expenditure is projected to fall short of annual budget estimates by up

to $80K Fuel and oil expenditure is projected to fall short of annual budget estimates by up to $120K Organisational related legal expenses are projected to fall short of annual budget estimates by up

to $110K Electricity expenditure is projected to fall short of annual budget estimates by up to $120K Other utilities expenditure (telephones) is projected to fall short of annual budget estimates by

up to $10K Property and plant insurance expenditure is projected to fall short of annual budget estimates by

up to $85K Fair value valuation expenditure is projected to fall short of annual budget estimates by $50K Interest expenses relating to the budgeted Busselton Foreshore borrowing facility are projected

to fall short of annual budget estimates by $165K In summary, net operating expenditure is projected to fall short of annual budget estimates by up to $820K. Capital Revenue Nil. Capital Expenditure Principal repayments on the budgeted Busselton Foreshore borrowing facility are projected to

fall short of annual budget estimates by approximately $150K In summary, net capital expenditure is projected to fall short of annual budget estimates by up to $150K. Based on the above, current projections are that the City will achieve a surplus closing position in the order of $900K as at 30 June 2015.


10.55am At this time the Director, Planning and Development Services and the Manager Environmental Services left the meeting.

The aforementioned estimation is predicated on numerous assumptions that have been required to be made in arriving at the projected closing position, which is exclusive of any potential/ identified carry-over items (which would otherwise artificially inflate the estimated closing figure). Clearly, the projected closing surplus position may also be impacted by any ‘extraordinary’ financial activity that may arise during the remainder of the financial year. The above Executive Summary only highlights variances that are projected to have a material net impact on the City’s financial performance as at financial year end. However, as previously mentioned, numerous other variances are estimated as at 30 June 2015, with several of these being material in value. In most instances however, there will be off-setting variances to negate any net budget impact. This includes expenditures (both operating and capital) funded from reserves, grants, contributions, or borrowings. It is nonetheless considered appropriate that the Council is provided with an overview of the projected annual budget performance in all relevant income and expenditure activities. Accordingly, the following sections of this report provide a summary of financial performance against each of the operating revenue and expenditure categories (by nature and type), and also the capital revenue and expenditure categories (by classification/ description). OPERATING REVENUE As at 31 March 2015, there is a variance of approximately +$0.5M (or +0.8%) in respect of total operating revenue activities. This variance is detailed as follows:

Description Actual YTD

$

Amended Budget YTD

$

Amended Budget

$

Variance YTD

$

Variance YTD

%

Rates 36,319,246 35,908,117 35,957,473 +411,069

+1.1%

Operating Grants, Subsidies and Contributions

3,088,055 2,887,861 4,279,718 +200,194 +6.9%

Fees and Charges

12,277,277 11,694,348 13,627,230 +582,929 +5.0%

Other Revenue

424,084 443,222 605,222 -19,138 -4.3%

Interest Earnings

1,855,780 1,952,404 2,552,190 -96,624 -5.0%

Non-operating Grants, Subsidies and Contributions

3,716,294 4,355,706 14,428,446 -639,412 -14.7%

Profit on Asset Disposals

31,513 9,324 11,324 +22,189 +238.0%

TOTAL 57,712,249 57,251,042 71,461,603 +461,207 +0.8%

An overview of the financial performance in each category is provided as follows: Rates (YTD variance: +$411K) The current favourable variance in this category is primarily attributable to interim rating, predominantly in the improved residential rating zone. It is worthy of noting that the annual budget allocation has also been exceeded by approximately $50K as at the end of March. Historically, net rates revenue tends to level off towards the end of the financial year, as overpayments and other refunds are processed. However, it is estimated that further valuation


schedules will be received prior to financial year end, resulting in a net increase in the current financial year’s interim rates revenue. Whilst the financial impact of the new valuations is unable to be accurately determined at this stage, it is conservatively estimated that this will be in the vicinity of $50K. For the purpose of this review, it is therefore estimated that Rates revenue will conservatively exceed annual budget estimates by up to $100K as at financial year end. Operating Grants, Subsidies and Contributions (YTD variance: +$200K) The current variance in this category is primarily attributable to timing differences in the receipt of operating grants, subsidies and contributions (+$93K), coupled with the receipt of additional and/ or unbudgeted reimbursements (+$93K). With respect to operating grants, adverse variances are currently evident in the Cultural Planning and Artgeo activities, with the higher valued favourable variances relating to Meelup Regional Park and Management Plan Implementation. Due to the nature of this activity, performance is generally in line with the associated expenditure incurred by financial year end and as such, it is not expected that there will be any material variances (favourable or adverse) which will impact on the closing surplus/ deficit position as at financial year end. With regards to reimbursements, current favourable variances include the reimbursement of parenting leave payments, workers compensation payments and insurance related matters. Whilst primarily reimbursing expenditures already incurred, the insurance reimbursements does include an unbudgeted good driver rebate of approximately $15K, which will contribute to the closing surplus/ deficit position. Current adverse variances in reimbursements include a timing difference in the Emergency Services Levy (ESL) payment, and also the reimbursement of legal fees (which have obviously not been incurred). For the purposes of this budget review, the good driver insurance rebate of $15K represents revenue that will assist in the determination of the closing surplus/ deficit position as at 30 June 2015. Fees and Charges (YTD variance: +$583K) The current variance in the ‘Fees and Charges’ operating revenue category is attributable to a range of individual variances, both favourable and adverse. However, the major contributors to the variance, by dollar value, are as follows:

Description YTD Variance $000’s

YTD Variance %

Waste Disposal Sites +$222 +32%

Statutory Planning (development application fees) +$119 +38%

Kookaburra Caravan Park +$83 +10%

Animal Control (dog and cat registration fees) +$81 +87%

Waste Collection and Waste Disposal Rate charges +$78 +1%

Cemetery Services +$61 +91%

Building Services +$52 +10%

Geographe Leisure Centre -$35 -3%

Engineering Services (supervision and clearance fees) -$49 -29%

Airport Operations -$54 -7%

Environmental Health Fees (primarily holiday home renewals) -$76 -32%

Responsible Directorates have provided the following commentaries in relation to the aforementioned variances:


Waste Disposal Sites The favourable year to date variance of $222K is primarily attributable to additional tipping fees (+$215K). When the annual budget was developed, tipping fees were reduced in anticipation of a large commercial waste collection company diverting a significant proportion of waste from the City’s landfill, thus reducing tipping fees collected. This company was in discussions with the City to lease City land to sort and recycle construction and demolition waste. The associated leasing agreement was finalised in April 2015, whereas the annual budget was predicated on reduced waste tonnage from the first quarter of the financial year. Current projections are that tipping fees will exceed budget estimates by up to $285K at financial year end, albeit this figure could potentially be higher depending on several other external matters. Notwithstanding this, pursuant to Council Policy 007 (Waste Management Facility and Plant Reserve – Management of year end position), waste disposal site revenue forms part of the end of financial year reconciliation and subsequent transfer to/ from the Waste Management Facility and Plant Reserve. Consequently, performance in this activity will not have any net impact of the closing surplus/ deficit position. Statutory Planning The current favourable variance is primarily due to additional development application and advertising fees. Based on current activity, the Planning and Development Services Directorate projects that the annual budget allocations for these fees will exceed annual budget estimates by up to $60K at financial year end. Whilst variances are also expected in relation to other Planning related fees and charges as at 30 June 2015, the net effect of these is considered to be immaterial. Kookaburra Caravan Park The actual revenue received as at 31 March 2015 is favorable as compared to the year to date budget projection. This indicates a positive summer tourist season with occupancy rates recorded slightly above average. The monthly occupancy rates and hence revenue for the last quarter are expected to decrease due to winter weather conditions, however the end of financial year revenue is still projected to meet the annual budget figures. Animal Control (dog and cat registration fees) The favourable year to date variance of $74K in dog registration fees is attributable to a significant increase in statutory fees and a higher number of dog registrations than were originally projected for the 2014/15 financial year. Additionally, the favourable year to date variance of $8K in cat registration fees is primarily due to the introduction of mandatory registration for cats under the new Cat Act 2013, albeit current year registrations are also higher than originally estimated. The Planning and Development Services Directorate projects that the annual budget allocations for dog and cat registrations will be exceeded by up to $64K and $6K respectively as at 30 June 2015. Waste Collection and Waste Disposal Rate charges The favourable year to date variance is primarily due to additional residential collection and recycling charges, and also additional Waste Disposal Rate charges. These increases can be directly associated with property growth and development within the City (e.g. new residential dwellings). Pursuant to Council Policy 007 (Waste Management Facility and Plant Reserve – Management of year end position), collection and recycling charges form part of the end of financial year reconciliation and subsequent transfer to/ from the Waste Management Facility and Plant Reserve, whilst all funds levied under the Waste Disposal Charge are automatically transferred to the reserve. Consequently, performance in this activity will not have any net impact of the closing surplus/ deficit position. Cemetery Services The 2014/15 Cemetery revenue figures, on a year to date basis, show a significant variation for two reasons.


Firstly the tax (GST) requirements for various cemetery fees changed just prior to July 1, 2014. There was a significant shift from items that were tax inclusive to tax exclusive. The new tax alignment moved the Grants of Right of Burial revenue from tax inclusive to tax exclusive. This accounts for the majority of tax exclusive revenue variance. Secondly, while every effort is made to project the community’s cemetery requirements, ultimately it is impossible to do this with a high degree of accuracy due to the nature of the service being provided. An example is a recent pre-need sale of seven ashes placements in Dunsborough to a family from the Perth metropolitan area. Their only local tie is memorable holidays in the region and a desire to return as a family to a region they love. The end of the financial year coincides with a historically busy time for cemeteries, the onset of winter. Should the winter be mild, there may be considerably fewer service requirements. If the historical trend holds true for 2015, then it is likely revenue will exceed the budget by up to $65K (or 73%) as at 30 June 2015. It should be noted that over the last twelve months Officers have conducted a future needs assessment which involved the assessment of historical trend data and the review of industry standards and resulted in the establishment of some projected need data. This data is being utilised for projection of the 2015/16 Cemetery revenue. Building Services The current favourable variance is primarily due to additional building application fees. Based on current activity, the Planning and Development Services Directorate project that the annual budget allocation for building application fees will exceed annual budget estimates by up to $30K as at financial year end. Geographe Leisure Centre (GLC) The majority of the adverse year to date variance can be attributed to the vacant café and health suites, which were forecast to be leased from January 2015. As at 31 March 2015 this equated to $23.6K. In addition, GLC operations were impacted (more than anticipated) by the expansion and upgrade works to the Centre, which occurred in the first half of the year. Revenue was down by $21.5K compared to the same time in the previous year. The two areas most affected were Membership Sales and Aerobics (group fitness). A number of actions were implemented to return revenues in affected areas to budget forecast and it is expected that by the end of the financial year that the total GLC revenue will achieve, and possibly exceed, annual budget forecasts. Engineering Services (supervision and clearance fees) The adverse year to date variance of -$49K is primarily attributable to subdivision supervision fees and early clearance fees, which reflect variances of -$40K and -$9K respectively. The reduced revenue from supervision fees can be attributed to a reduced number of sub-division approvals the City has received this financial year to date, which directly impacts on early clearance requests. The Engineering and Works Services Directorate projects that revenue from subdivision supervision fees and early clearance fees will fall short of annual budget estimates by up to -$27K and -$13K respectively as at 30 June 2015. Airport Operations The revenue figures recorded for the Airport as at 31 March 2015 are under the projected year to date budget. This is due to a number of factors including revenue owed to the City for landing fees to a value of $78K, and passenger facilitation and security fees to a value of $67.5K. Officers are liaising with operators to ensure that all revenue is receipted by the end of the financial year. Revenues projected for Airport Fuel Agency Fees ($30K) and Fuel Facility Leasing fees ($7K) will not be realised due to the delays of the Jet Fuel project. However it is projected that the collective fees and charges budget allocation for the Airport Operations will be achieved by 30 June 2015.


Environmental Health Fees (inc. holiday home renewals) The current adverse year to date variance of -$76K is primarily attributable to holiday home renewal fees, and to a lesser extent water sampling fees. The Planning and Development Services Directorate advises that the current variance is primarily due to timing differences, with invoices for holiday home renewals to be issued in May 2015. The collective Environmental Health fees budget is expected to be achieved as at 30 June 2015. As detailed above, current projections are that the ‘Fees and Charges’ operating revenue category will reflect a collective favourable variance in excess of $470K as at 30 June 2015. However, approximately $285K of the variance relates of waste disposal site fees, which form part of the end of financial year reconciliation and subsequent transfer to/ from the Waste Management Facility and Plant Reserve. Consequently, for the purpose of this review, the remaining estimated favourable variances totalling $185K will favourably impact of the closing surplus/ deficit position. Other Revenue (YTD variance: -$19K) This category includes a range of revenue types including fines and penalties, the sale of miscellaneous items and other sundry revenue. The current variance is overstated by approximately $100K in accounting entries, which will clear during April 2015. With this in mind, the performance in respective activities is summarised as follows: Fines and Penalties Revenue As at 31 March 2015, there is an adverse variance of approximately -$71K in this area, with the main contributors being Bushfire related fines (-$33K) and Parking fines (-$36K). The Planning and Development Services Directorate projects that an adverse variance of up to $100K will be evident as at 30 June 2015, with Bushfire related fines and parking fines falling short of annual budget estimates by up to $45K and $55K respectively. The main reasons for the revenue shortfalls are due to the continued education of landowners in respect of fire related matters, and also the ongoing presence of the City’s parking inspectors. Sale of Miscellaneous Items As at 31 March 2015, there is an adverse variance of approximately -$58K in this area, primarily due to scrap metal sales. Against an annual budget of $162K, the Engineering and Works Services Directorate projects revenue to be in the order of $80K, representing a shortfall of $82K. The fall in demand for scrap metal is largely due to the continued fall in the iron ore price. It should be noted however that this revenue forms part of the overall waste activities, and associated end of financial year transfer to/ from the Waste Management Facility and Plant Reserve. Consequently the revenue shortfall has no direct impact on the closing surplus/ deficit position. Other Revenue As at 31 March 2015, there is a favourable variance of approximately $110K in this area. As previously mentioned this includes accounting entries to the value of $100K, and also unbudgeted revenue of approximately $11K pertaining to the Mayoral Prayer Breakfast. The accounting entries represent the trade in value on two plant items being replaced, and will be reversed during April. Additionally, the Mayoral Prayer Breakfast funds are fully offset as any residual funds held (after covering event expenses) were donated. In summary of the above, current projections are that an overall shortfall of approximately -$170K will be evident in this category as at 30 June 2015. However, the only activity directly impacting on the City’s closing surplus/ deficit position relates to Fines and Penalties revenue (-$100K), with this included in the closing position calculation.


Interest Earnings (YTD variance: -$97K) The ‘Interest Earnings’ operating revenue category not only includes credit interest earnings on municipal and reserve funds, but also rates related interest revenue. The year to date, and projected end of financial year, performance in each of these areas is summarised as follows: Municipal & Reserve Interest There is a current adverse variance of approximately $110K in collective municipal and reserve interest earnings, with individual variances of approximately -$175K and +$65K respectively. Based on current projections, it is anticipated that by financial year end, municipal interest earnings will fall short of annual budget estimates by up to $280K, albeit reserve interest earnings are estimated to exceed annual budget estimates by up to $70K. This represents a combined shortfall of approximately $210K. The overall shortfall is primarily attributable to the prolonged duration of the depressed interest rate market, wherein rates have continued to fall over the past twelve months. Reserve interest earnings do not directly impact on the City’s closing surplus/ deficit position, as this revenue is reallocated to the ‘Transfers to Reserves’ capital expenditure category. Notwithstanding this, the additional interest earnings do represent a further injection of funds to the City’s Reserve accounts. Conversely, municipal interest earnings form part of the City’s general revenue and consequently, the estimated shortfall of up to $280K will directly impact on the closing surplus/ deficit position. Rates Related Interest (Instalment Plan and Late Payment) There is a current favourable variance of approximately $14K in relation to rates related interest charges. Whilst late payment interest charges are tracking marginally below year to date budget estimates, it is projected that the annual budget allocation will be achieved by financial year end. Instalment plan interest charges are currently tracking approximately $16K above year to date budget projections, and $10K above the annual budget allocation. This interest is predominantly raised early in the financial year (subsequent to the initial instalment payment date), and as such, the current annual budget variance is not expected to materially increase above $10K. For the purpose of this review, it is projected that rates related interest earnings may exceed annual budget estimates by up to $10K by financial year end. In summary of the above, it is anticipated that the overall ‘Interest Earnings’ activity will fall short of annual budget estimates by up to $200K as at 30 June 2015. However, for the purposes of estimating a closing surplus/ deficit position, a net shortfall of some $270K is projected, comprising -$280K in municipal interest and +$10K in rates related interest. Non-operating Grants, Subsidies and Contributions (YTD variance: -$639K) The year to date variance in this category includes a range of individual (favourable and adverse) variances, which collectively contribute to the net adverse variance. Whilst total grant funding reflects an adverse variance of -$1.23M, this is offset in part by the recognition of additional developer contributions of +$470K and donated assets of +$123K. With regards to the grant funding variance, this is primarily due to timing differences. However it must be noted that a number of significant projects are not proposed to be commenced in 2014/15, and as such, the associated grant funding will not be raised. Grant funding yet to be received includes approximately -$528K in roadwork related funding, -$398K in beach restoration projects (e.g. Locke Estate, Abbey groyne refurbishment) and -$297K in Busselton Regional Airport related Infrastructure works. Conversely, grant funding received in advance of budget projections includes bridge funding of +$112K, the Busselton Regional Airport Terminal building of +$100K and the Barnard Park East project of $84K. The above variances will not have any direct impact on the closing surplus/ deficit position however, so long as grants for works completed are raised on or before 30 June 2015. Conversely, where


grants are received in advance of works being completed (by 30 June 2015), any unspent component of the associated grant funding will be required to be quarantined (to restricted assets). With regards to the favourable variances in contributions and donated assets, these will also not have any direct impact on the closing surplus/ deficit position. An adjusting entry is made to exclude Donated Assets from the net current position, whilst an equity transfer is processed to move contribution funds to restricted assets (via the ‘Transfers to Restricted Assets’ capital expenditure category). Profit on Asset Disposals (YTD variance: +$22K) The current variance remains primarily attributable to book profits on the sale, through auction, of obsolete computer equipment and sundry plant items. In most cases, the items had a zero written down value, with any funds received representing a book profit on disposal. It should be noted that this is an accounting entry only, and has no direct impact on the surplus/ deficit position. OPERATING EXPENDITURE As at 31 March 2015, there is a variance of approximately -$1.1M (or -2.6%) in respect of total operating expenditure activities. This variance is detailed as follows:


$

Amended Budget YTD

$

Amended Budget

$

Variance YTD

$

Variance YTD

%

Employee Costs

19,101,699 19,070,629 24,930,623 +31,070 +0.2%

Materials and Contracts

9,153,349 11,457,216 15,189,738 -2,303,867 -20.1%

Utilities (Gas, Electricity, Water etc.)

1,530,280 1,676,160 2,234,664 -145,880 -8.7%

Depreciation on Non-current Assets

9,030,456 7,527,760 10,002,780 +1,502,696 +20.0%

Insurance Expenses

695,850 783,947 785,076 -88,097 -11.2%

Other Expenditure

2,208,944 2,212,577 3,282,609 -3,633 -0.2%

Allocations

-1,503,896 -1,427,361 -1,875,168 +76,535 +5.4%

Interest Expenses

777,315 862,984 1,221,098 -85,669 -9.9%

Loss on Asset Disposals

115,357 42,392 65,915 +72,965 +172.1%

TOTAL 41,109,354 42,206,304 55,837,335 -1,096,950 -2.6%

An overview of the financial performance in each category is provided as follows: Employee Costs (YTD variance: +$31K) Whilst reflecting an overall nominal adverse variance as at 31 March 2015, this category presently includes numerous individual variances (both favourable and adverse), which essentially net each other off. For example, whilst wages expenditure presently exceeds year to date budget estimates, this is offset by under-expenditures in recruitment costs, conference and training costs and other employee costs.


In order to project an end of financial year variance, the current expenditure in each activity has been extrapolated, either by the number of fortnightly pays remaining, or months left in the financial year. On this basis, and noting other impacting factors (such as current vacant positions and historical expenditure patterns), it is projected that a nominal favourable variance will be evident in the ‘Employee Costs’ operating expenditure category as at 30 June 2015. There are a range of matters however that can directly impact on the ‘Employee Costs’ financial performance, and as such it must be reiterated that this projection is based on available information at the time of compiling this report. Materials and Contracts (YTD variance: -$2,304K) The ‘Materials and Contracts’ operating expenditure category comprises a wide range of expenditure types, and presently incorporates in the order of 140 separate accounts. The current variance is attributable to both favourable and adverse variances (of varying magnitudes) across a range of diverse activities. Consequently, this report will only highlight those material variances which are expected to have a direct impact on the City’s closing surplus/ deficit position as at 30 June 2015. Maintenance of Buildings There is a favourable variance of approximately $200K in this activity on a year to date basis, with the major contributors being building maintenance services (-$98K) and contract cleaning costs (-$73K). The Engineering and Works Services Directorate projects that the building maintenance services expenditure will fall short of annual budget estimates by up to $80K as at 30 June 2015. An equivalent saving is also projected from the contract cleaning budget, primarily due to an overall decrease in tender rates achieved this financial year. Maintenance of Plant and Equipment There is a favourable variance of approximately $112K in this activity on a year to date basis, with the major contributors being fuel (-$91K) and replacement parts (-$21K). The Engineering and Works Services Directorate projects that, based on current usage patterns, the costs associated with fuel and oil will be approximately (-$120K) under annual budget estimates as at financial year end. This variance is due to the significant reduction in the cost per barrel of oil that is not likely to be sustainable over the longer term. With regards to replacement parts, it is anticipated that all of the available budget will be spent, with the year to date variance attributable to timing differences only. Contractors There is a favourable year to date variance of approximately $1.1M in collective contractors’ expenditure. This expenditure type is comprised within a significant range of individual projects, and individual variances (favourable and adverse) are evident throughout. However, for the purposes of this review, the following contractor expenditure variances have been highlighted for comment. Busselton Jetty contractor costs are under year to date budget estimates by approximately -$177K. It is anticipated that approximately $95K of the Jetty Contingency budget ($110K) will not be required this financial year. This budget is assigned annually and is only accessed in certain circumstances, in the event of damage, unforeseeable events or urgent repair requirements. Conversely, the full budget assigned for timber pile wrapping will be fully appropriated by year end. As jetty maintenance works are funded from the Jetty Maintenance Reserve, the projected contingency underspend will not have any net impact on the closing surplus/ deficit position. A further favourable variance of -$195K is associated with numerous Coastal Studies that are currently under-way. There is $116K in commitments that represent orders raised to suppliers for these works yet to be receipted. These studies are jointly funded by Grants and City contributions from the Beach Protection Reserve, thus any end of financial year variance will not have any net impact on closing surplus/ deficit position.


There is a favourable variance of $150K associated with the Nautical Lady project. It is envisaged that this budget will be fully expended on the demolition of the structure prior to the end of June. Contractor costs associated with urban street lighting installation are falling short of the year to date budget by approximately -$127K. The variance represents a timing difference only, with these funds to be allocated to the installation of new street lights along Queen Street. There is a favourable variance totalling $169K attributable to Provence Estate Maintenance. This estate has not been handed over to the City even though the five year landscape maintenance agreement has ceased, with this area effectively being maintained by the developer. Whilst these works were partly reserve funded, unfortunately there will be no overall budget saving arising from this activity, as the funds have been required to be expended elsewhere within the overall parks and gardens expenditure program. Finally, there is a favourable year to date variance of approximately $319K in recycling refuse activities. The associated budget allocation is primarily attributable to concrete crushing, with the current variance being as a result of timing differences only. The project is underway, with completion, and payment, expected imminently. Legal Expenses As at 31 March 2015, collective legal expenses are falling short of year to date budget estimates by approximately -$120K. This includes a variance of approximately -$96K (excluding commitments) in the ‘organisational’ legal budget. Current projections are that the subsidiary legal budgets, including Rates and Ranger Services will be expended by 30 June 2015. However, it is estimated that a saving may be achieved in the organisational legal budget as at financial year end. The Finance and Corporate Services Directorate advises that the 2014/15 organisational legal budget was predicated on, amongst others: An allocation for various major development projects anticipated to substantially progress during

the 2014/15 financial year including Railway House, the Civic and Administration Centre, the Busselton Foreshore project and the Busselton Regional Airport redevelopment. While it was expected that the City’s legal team would provide legal assistance in relation to the majority of these projects, it was also considered that certain specialised work would have been required to be outsourced. The delay in the progress/ implementation of some of these projects has however impacted on the timing of required legal assistance.

An allocation of funds for legal advice and support in relation to a potential compensation claim

against the City. The favourable year to date variance is largely due to the delay in the aforementioned projects, coupled with the City not having to engage the service of external lawyers in respect of the potential compensation claim. Based on current commitments and other matters requiring attention prior to financial year end, a saving of up to $110K in the ‘organisational’ legal expenses budget may be achieved as at 30 June 2015. Consultancies As at 31 March 2015, the collective consultancies budget reflects a favourable year to date variance of approximately -$420K, with the variance attributable to a range of individual consultancy allocations. Based on projections to 30 June 2015, it is estimated that the annual budget allocation of approximately $1.0M will be underspent by up to $500K. The major contributors to the projected variance include Rubbish Site Development (-$330K) and Cultural Planning related consultancies (-$60K).With regards to the Rubbish Site Development, the


Engineering and Works Services Directorate advises that while the City has been progressing new site investigations, the adopted waste strategy includes development and operation of Vidler Road for the next 20+ years. This strategy was adopted by Council late last year, after the budget had been established. The $350K budget was for progressing environmental impact assessments and additional due diligence at the Ridge Road site, which was the target site at the time and has since been abandoned on the basis that the public drinking catchment area was not down-graded and the site geotechnical assessment indicates it is not a very good site from a long term perspective (site development overly expensive for the potential airspace yield). Other sites are currently progressing and due to be funded by the Caperoc budget. The current year’s City budget will only complement the assigned Caperoc budget as required. As the $350K consultancy allocation is fully funded from the Waste Management Facility and Plant Reserve, the projected expenditure shortfall will not have any net impact on the closing surplus/ deficit position. With regards to the Cultural Planning related consultancy budget of $60K, the total expenditure budget was predicated on being fully funded by operating grants. In several instances, grant funding has not been successful. However in other instances, the associated projects have been taken on by other parties. Whilst it is not expected that any of the Cultural Planning budget allocation will be expended in 2014/15, due to the allocations being fully grant funded, there will be not net impact on the closing surplus/ deficit position as a result. With regards to the remaining consultancy budget, a number of allocations are subject to grant funding, or will be requested to be relisted as part of the 2015/16 annual budget. With this in mind, for the purposes of this report, it is projected that whilst a significant variance will be evident in the overall consultancies budget as at 30 June 2015, this will not have any material impact on the closing surplus/ deficit position as at financial year end. In summary of the above, current projections are that there will be a material favourable variance in ‘Materials and Contracts’ expenditure as at 30 June 2015. Whilst expectations are that a range of individual favourable and adverse variances will be evident in this category, for the most part these will notionally cancel each out. However, excluding these, and also those variances that are fully offset, savings of up to $390K in building maintenance, plant and equipment maintenance and legal expenses will be achieved by financial year end; which will favourably impact on the closing surplus/ deficit position. Utilities - Gas, Electricity, Water etc. (YTD variance: -$146K) The current variance is attributable to favourable variances in electricity charges (-$88K), telephone charges (-$32K) and water charges (-$25K). Whilst due in part to timing differences in the receipt and payment of utility invoices, end of financial year savings are nonetheless projected in several of the utility categories. Electricity Charges Whilst the overall electricity charges variance is due to a range of individual variances, the more significant savings are reflected in the major electricity users, including the Geographe Leisure Centre (-$25K), the Administration Building (-$23K) and the Busselton Regional Airport (-$19K). Resulting from the repealing of the carbon tax, it is estimated is that the City’s electricity charges will reduce by up to $70K during 2014/15, subject to overall performance against budget. The year to date carbon tax savings are reflected in the above figures. The Busselton Regional Airport budget has been impacted by its transfer to contestable energy charges through Perth Energy, which will result in further savings. Additionally, the Geographe Leisure Centre budget was overstated this current financial year, until such time as the energy initiatives introduced at the Centre could be validated. Based on current projections, it is estimated that, inclusive of the carbon tax repeal saving, that a favourable variance of up to $120K will be evident in electricity charges as at financial year end.


Telephone Charges The telephone charges variance is primarily due to the application of invoice credits received throughout the financial year, and also the reduction in mobile phone costs emanating from the introduction of a new process for administering mobile phones provided to eligible staff. Whilst a financial year saving of up to $40K may be evident as at 30 June 2015, the majority of this will be offset by an increase in the ‘Employee Costs’ operating expenditure activity, due to the payment of staff mobile phone allowances. Water Charges The current variance in water charges is primarily attributable to timing differences in the issue and subsequent payment of water related invoices. With the exception of several areas (including the beachfront), there are presently no areas whereby water charges are significantly exceeding year to date budget estimates. It is therefore considered that the water budget will be achieved as at financial year end. In summary of the above, it is projected that the ‘Utilities’ activity will reflect a favourable variance of up to $160K as at 30 June 2015. However, this figure includes mobile phone savings of approximately $30K which will be expensed in the ‘Employee Costs’ operating expenditure activity. Consequently, for the purposes of the Annual Budget Review, it is projected that a collective saving of $130K in this activity will be achieved as at 30 June 2015. Depreciation on Non-current Assets (YTD variance: +$1,503K) This variance, which will further increase by 30 June 2015, is primarily attributable to the Buildings fair value valuation (as at 30 June 2014), coupled with the significant value of donated assets also brought to account as at 30 June 2014. The depreciation budget is required to be calculated reasonably early in the annual budget development process, and has historically been predicated on financial year end projections, along with other known (material) asset movements. Whilst generally accurate, this approach has this year been impacted by the aforementioned activities, the outcomes of which were not known until very late in the 2013/14 financial year. Whilst depreciation is an expense that the City needs to be fully mindful of, due to its accounting nature, this operating expense is reversed as a non cash adjustment in the Statement of Financial Activity, and as such has no net effect on the surplus/ deficit position. Insurance Expenses (YTD variance: -$88K) The current variance in this activity is primarily attributable to property and plant insurance premiums, which reflect favourable year to date variances of -$46K and -$48K respectively. As with depreciation expenses, the insurance budget is required to be developed early in the budget process, to enable other necessary budget activities to progress. Whilst the City’s insurer provides preliminary premium ratios, these are subject to subsequent amendment. Whilst additional insurances expenses are expected to be incurred prior to 30 June 2015, primarily via insurance schedule additions and amendments, along with excess payments, these are not expected to be material in value. Consequently, a favourable variance of approximately $85K is projected in this activity by financial year end. Other Expenditure (YTD variance: -$4K) Whilst reflecting a nominal favourable variance as at 31 March 2015, the year to date expenditure includes the (unbudgeted) return of a portion of the Women’s Refuge grant payment, to the value of approximately $225K. This expenditure is offset by a range of current under-expenditures, with the major contributors being Contributions and Donations (-$152K) and Members Expenses (-$55K).


With regards to the Contributions and Donations activity, it is presently projected that the annual budget allocation will be fully expended by financial year end. Similarly, the Members Expenses variance is due in most part to timing differences (e.g. allowances and sitting fees alone currently reflect a favourable variance of -$32K). Excepting the above activities, a range of other individual year to date variances (both favourable and adverse) is evident throughout this category. Whilst expectations are that these will largely cancel each other out by financial year end, a saving of $50K has potentially been identified in relation to the fair value valuation expenses. Whilst initial views were that external valuations would be required in respect of specialised Infrastructure assets, these may not be required this financial year. For the purpose of this review it is projected that the ‘Other Expenditure’ operating expenditure category will reflect a net saving of $50K as at 30 June 2015. Allocations (YTD variance: +$77K) This category incorporates numerous internal accounting allocations. Whilst the majority of individual allocations are administration based (and clear each month), the activity also includes plant and overhead related allocations. Due to the nature of these line items, the activity reflects as a net offset against operating expenditure, in recognition of those expenses that are of a capital nature (and need to be recognised accordingly). Due to its ‘accounting transaction’ nature, performance in this activity has no net impact on the surplus/ deficit position. Interest Expenses (YTD variance: -$86K) The current variance is attributable to timing delays in the drawdown of two budgeted loan facilities, namely the self-supporting loan of $30K in favour of the Busselton Football and Sportsman’s Club Inc. (-$1K), and also the Busselton Foreshore loan of $6.8M (-$85K). The nominal variance pertaining to the self-supporting loan is fully offset by an equivalent reduction in the ‘Operating Grants, Subsidies and Contributions’ operating revenue activity, as the Football Club has not been required to reimburse the City for (budgeted) interest repayments whilst the loan facility remains undrawn. The delay in drawdown of the Busselton Foreshore loan facility will however result in a favourable variance in this category as at 30 June 2015. This facility includes budgeted loan repayments in March and June, with the total interest component for the financial year equating to approximately $169K. Whilst approximately $3.4M in loan funding will be required to meet financial current year expenditure, the full $6.8M borrowing is to proceed in 2014/15, with the remaining $3.4M to quarantined as at 30 June 2015. As drawdown of the loan is not expected to occur until June 2015, any current financial year interest repayment will be minimal only. Consequently, for the purposes of this review, a notional saving of approximately $165K is projected as at 30 June 2015. This is in addition to a saving in principal repayments of approximately $150K, as is further discussed in the ‘Total Loan Repayments – Principal’ capital expenditure category. Distinct from the above, it is also worthy of noting that the ‘Interest Expense’s budget has previously been amended this financial year. Due to lower interest rates secured for the Civic and Administration Centre borrowing of $18M, approximately $84K in (budgeted) principal and interest repayments were able to be transferred to the Infrastructure Development Reserve as savings. Loss on Asset Disposals (YTD variance: +$73K) This variance is due to book losses on the sale, through auction, of obsolete computer equipment, sundry plant items and a range of light vehicles. It should be noted that this is an accounting entry only, and has no direct impact on the surplus/ deficit position.


CAPITAL REVENUE As at 31 March 2015, there is an adverse variance of approximately -$6.1M (or -21.8%) in respect of total capital revenue activities. This variance is detailed as follows:


$

Amended Budget YTD

$

Amended Budget

$

Variance YTD

$

Variance YTD

%

Proceeds from Sale of Assets

533,818 722,850 867,850 -189,032

-26.2%

Proceeds from New Loans

18,000,000 24,830,000 24,830,000 -6,830,000 -27.5%

Self-Supporting Loans –Repayment of Principal

50,338 51,541 69,456 -1,023 -2.3%

Transfers from Restricted Assets

3,337,352 2,416,993 3,999,589 +920,359 +38.1%

Transfers from Reserves

0 0 14,180,022 0 0.0%

TOTAL 21,921,508 28,021,384 43,346,917 -6,099,876 -21.8%

An overview of the financial performance in each category is provided as follows: Proceeds from Sale of Assets (YTD variance: -$189K) The ‘Proceeds from Sale of Assets’ category is directly aligned with the ‘heavy and light plant’ component of the ‘Plant and Equipment’ capital expenditure budget, insofar as it recognises the estimated sale/ trade-in value of plant items budgeted to be replaced during the financial year. Consequently, the current adverse variance in this category is largely reflective of the lower than projected level of expenditure in the ‘Plant and Equipment’ budget on a year to date basis. Furthermore, and due to the aforementioned alignment, any shortfall in this revenue budget will predominantly be offset by an under-expenditure in the associated capital expenditure budget line items. As discussed in the ‘Plant and Equipment’ capital expenditure category, the Engineering and Works Services Directorate advises that the ‘Plant and Equipment’ budget will be fully expended as at 30 June 2015, and as such, the current variance in this category should clear by financial year end. Notwithstanding this, and due to the nature of this category, any resulting end of financial year variance should not have any material direct impact on the closing surplus/ deficit position, as the initial expenditure would not have been incurred. Proceeds from New Loans (YTD variance: -$6,830K) The 2014/15 amended budget includes $24.83M in newly proposed borrowings, detailed as follows:


$

Amended Budget YTD

$

Amended Budget

$

Variance YTD

$

Civic and Administration Centre

18,000,000 18,000,000 18,000,000 0

Busselton Foreshore Project

0 6,800,000 6,800,000 -6,800,000



$

Amended Budget YTD

$

Amended Budget

$

Variance YTD

$

Busselton Football & Sportsman’s Club – Self Supporting Loan

0 30,000 30,000 -30,000

TOTAL 18,000,000 24,830,000 24,830,000 -6,830,000

With regards to the Busselton Foreshore loan facility, the $6.8M has been allocated to the following individual projects:

Description Amount $

Foreshore East - Coastal Defences (Jetty to Brown St)

3,000,000

Foreshore East - Foreshore Promenade (Jetty to Brown St)

2,000,000

Foreshore East - Brown Street Extension

800,000

Foreshore East - Spine Road and Ancillary Council Works

1,000,000

TOTAL 6,800,000

Whilst the $30K self supporting loan will be drawn during April 2015, current projections are that the $6.8M Busselton Foreshore loan will not be drawn until June 2015. Consideration could be given to reducing the amount of the loan that is drawn and utilising amounts allocated for loan repayments to fund these works. Whilst only $3.4M in Busselton Foreshore loan funds are expected to be utilised to fund current financial year activities, the remaining $3.4M will be quarantined to fund expenditure in the following financial year. Self-Supporting Loans –Repayment of Principal (YTD variance: -$1K) This nominal variance is attributable to the delay in the drawdown of a self-supporting loan facility of $30K in favour of the Busselton Football and Sportsman’s Club Inc. As the loan is yet to be drawn, there is no requirement for the Club to reimburse the City for associated (principal) loan repayments. It should be noted that this variance is fully offset by an equivalent variance in the ‘Total Loan Repayments – Principal’ capital expenditure activity. Transfers from Restricted Assets (YTD variance: +$920K) The ‘Transfers from Restricted Assets’ capital revenue category represents the equity transfer of previously quarantined monies (e.g. grants, contributions and unspent loans) to assist in funding specified works within the current financial year, along with the refund of bond and deposit payments. Due to the nature of this category, the annual budget allocation is generally spread evenly across the financial year, excepting June, where a higher allocation is made to reflect specific end of financial year transactions. Consequently, budget variances will be evident throughout the financial year. The transfers from Restricted Assets made to 31 March 2015 primarily comprise $1.69M in bond and deposit refunds, and also the transfer of $1.56M in unspent loan funds for the Barnard Park and Geographe Leisure Centre Gymnasium Extensions projects. These transactions do not have any net impact on the closing surplus/ deficit position. Firstly, bond and deposit transactions (both payments and refunds) are excluded from cash position calculations. Secondly, the transfer of unspent loan


funds represents unspent borrowings quarantined as at the end of the previous financial year, due to the associated works not being completed. As the works are finalised, the loan funds can be utilised to offset the current financial year expenditure. This is also the case for grants and contributions. In reiteration, the performance in this category has no net impact on the closing surplus/ deficit position. Transfers from Reserves (YTD variance: $0K) Similar to ‘Transfers from Restricted Assets’, this capital revenue category represents equity transfers utilised to fund identified capital and operating expenditures. The annual budget reflects the total value of transfers from reserves occurring in June, to minimise budget variances arising as a result of timing differences. As with the ‘Transfers from Restricted Assets’ category, performance in this category has no direct impact on the closing surplus/ deficit position. Where a transfer is not made, it will be due to the associated works not having incurred any expenditure within the financial year. It should be noted however that the timing of transfers does have an impact on associated interest earnings. That is, where transfers can be deferred, this provides the capacity for additional earnings on the respective reserve accounts (albeit this does not impact on the closing surplus/ deficit position). CAPITAL EXPENDITURE As at 31 March 2015, there is a variance of approximately -$13.0M (or -24.8%) in respect of total capital expenditure activities. This variance is detailed as follows:


$

Amended Budget YTD

$

Amended Budget

$

Variance YTD

$

Variance YTD

%

Land & Buildings

3,602,359 5,920,957 9,080,220 -2,318,598 -39.2%

Plant & Equipment

1,938,768 2,911,805 3,510,130 -973,037 -33.4%

Furniture & Office Equipment

271,878 403,254 610,535 -131,376 -32.6%

Infrastructure

8,007,520 18,170,093 26,660,303 -10,162,573 -55.9%

Total Loan Repayments- Principal

1,067,604 1,145,577 1,565,146 -77,973 -6.8%

Advances to Community Groups

0 30,000 30,000 -30,000 -100.0%

Transfers to Restricted Assets

1,402,623 777,514 1,036,685 +625,109 +80.4%

Transfers to Reserves

23,135,154 23,043,735 26,675,617 +91,419 +0.4%

TOTAL 39,425,905 52,402,935 69,168,636 -12,977,030 -24.8%

An overview of the financial performance in each category is provided as follows: Land & Buildings (YTD variance: -$2,319K) The ‘Land and Buildings’ capital expenditure budget of approximately $9.1M comprises a number of


major projects areas, including: Busselton Foreshore Works - $5.2M Civic and Administration Centre - $0.9M Geographe Leisure Centre extensions - $0.9M Busselton Regional Airport Terminal extensions - $1.0M Remainder of Buildings Program - $0.9M With the exception of the Busselton Foreshore works, the majority of other projects are expected to be completed by financial year end. The Engineering and Works Services Directorate does advise however that minor anomalies will include the Busselton Beachfront ablutions upgrade of $22K, which has been deferred pending the outcome of a development application, and the Busselton Waste Transfer Station Shed of $60K which will be relisted as part of the 2015/16 budget due to a delay in gaining environmental approvals. With regards to the Busselton Foreshore projects, the Executive Services Directorate advises: Foreshore East - Youth Precinct - Community Youth Building (budget $2.9M) This project comprises of Lotterywest Grant (421006734) and a further Lotterywest grant which is pending approval. Presently there is an ‘in-principle agreement’ between the City and Lotterywest for grant 421006734 as it is dependent upon the successful completion of grant number 421006640; relating to the Youth Precinct Skate Park. Construction of this project is expected to commence in April 2016, and as such will be relisted as part of the 2015/16 draft budget. Railway House (budget $2.0M) This project has been delayed due to further negotiations between BJECA and GBTA regarding the concept design. Construction of this project is expected to begin in August 2015 and therefore it is anticipated that the significant majority of funding will be relisted as part of the 2015/16 draft budget. Jetty Depot – Maintenance Compound ($325K) The Jetty Depot is now operational, will full completion expected by 30 June 2015. Based on the above, it is projected that the ‘Land and Buildings’ capital expenditure category will fall short of annual budget estimates by up to $5M. However, excepting the Busselton Beachfront ablutions upgrade ($22K), the remaining projects are fully funded from grants, contributions and/ or reserve transfers. Coupled with the fact these all of the projects are to be relisted as part of the 2015/16 draft budget, the projected under-expenditure will not have any net impact on the closing surplus/ deficit position. Plant & Equipment (YTD variance: -$973K) The ‘Plant and Equipment’ capital expenditure budget of approximately $3.5M comprises $3.3M in heavy and light plant replacements and acquisitions, with the balance of the budget including the Kookaburra Caravan Park onsite cabin project, along with other sundry plant and equipment procurements. At 31 March 2015, the majority of the current variance is primarily attributable to timing differences in the delivery of the heavy plant replacement program (-$0.9M); including the following:

An Isuzu 9 tonne truck, budgeted at $150K, will be delivered in April and not January as originally anticipated

The purchase of a Toro Groundmaster mower budgeted at $110K for acquisition in January has been delayed owing to stock availability and import issues. Delivery is expected for May.

A replacement Caterpillar Grader valued at $300K scheduled for delivery in March is now expected for delivery in April.


The Engineering and Works Service Directorate advises that the Plant and Equipment budget will be fully achieved as at 30 June 2015. Furniture & Office Equipment (YTD variance: -$131K) The current variance in this category is primarily due to Information Technology expenditure (-$200K), and also a range of unbudgeted expenditures incurred (+$60K). With regards to the Information Technology expenditure, the variance is currently attributable to timing differences in relation to specific projects, including the fibre optic joint venture with Busselton Water. Whilst this, and the majority of scheduled projects, will be finalised by financial year end, it is nonetheless projected that up to $110K of the current year’s Information Technology budget will be required to be carried over to 2015/16. Projects requiring relisting include the first stage of the Technology One Works and Assets implementation, and also works associated with the Civic and Administration Centre project of $58K, due to the project being deferred into the 2015/16 financial year. With regards to the unbudgeted expenditure component, this is predominantly due to the accounting need to reallocate budgeted expenditures to the correct asset classification. For example, $36K has been allocated to Busselton Regional Airport Furniture and Equipment for items that were budgeted for as part of the overall Terminal expansion (e.g. chairs, counters, baggage handling equipment etc.). Clearly, savings in the primary projects should effectively offset any unbudgeted expenditures elsewhere. Other unbudgeted expenditures include the replacement of stolen/ damaged equipment under insurance claims, and necessary air conditioning replacements/ upgrades, which have been notionally funded from savings in respective (operating) maintenance budgets. As mentioned, it is anticipated that approximately $110K of the Information Technology budget will need to be carried over to the 2015/16 financial year. A component of the Cultural Planning budget (Settlement Art Project) may also require relisting. Whilst this may artificially inflate the closing surplus/ deficit position for 2014/15, this will be offset by the need to relist the unspent funds in the following year’s budget. At this stage, all other expenditures are anticipated to be fully expended by 30 June 2015. Therefore, for the purposes of this review, performance in the Furniture and Office Equipment budget is not projected to have any net impact on the closing surplus/ deficit position. Infrastructure (YTD variance: -$10,163K) For the purposes of this review, the ‘Infrastructure’ capital expenditure category will be broken down to three specific areas. The year to date performance in each area is summarised as follows:


$

Amended Budget YTD

$

Amended Budget

$

Variance YTD

$

Variance YTD

%

Busselton Foreshore

2,997,280 7,119,452 11,253,158 -4,122,172 -57.90%

Busselton Regional Airport

330,021 1,142,116 1,624,159 -812,095 -71.10%

Infrastructure - Other 4,680,219 9,908,525 13,782,986 -5,228,306 -52.77%

TOTAL 8,007,520 18,170,093 26,660,303 -10,162,573 -55.93%

Comments relating to the performance in each of the above areas are provided as follows: Busselton Foreshore The Executive Services Directorate advises that the majority of infrastructure cannot be installed until the Coastal Defence works have been undertaken, which have been put on hold to follow the


event season. These coastal defences have been tendered and construction (Jetty abutment through to Brown St) commenced in February 2015; taking breaks for major events. Construction completed or underway includes the Geographe Bay Road / Brown St Extension, the relocation of the City (Jetty) Depot, both Barnard Park Oval East and West and smaller scale capital works. The year to date variance has mainly arisen through planning and preparation of detailed design of service infrastructure including (not limited to) Western Power, Water Corporation and Telstra, whose design application and approvals process are ongoing. These negotiations with service providers should be finalised very shortly before the capital works including the Foreshore promenade and Youth Precinct area commences. All materials, street furniture and ancillary equipment have been ordered and contractor works have been tendered, and in some cases awarded, in accordance with the construction schedule. Busselton Regional Airport As at 31 March 2015, $330K had been expended, against a year to date budget estimate of $1.1M. The Community and Commercial Services Directorate advises that the variance is primarily attributable to three projects, as follows: The jet fuel installation project reflects a variance of -$525K as at 31 March 2015. Officers are

attempting to finalise negotiations on the commercial arrangements with the preferred supplier. Officers will commence with quotations and engage contractors once the contracts have been signed.

The new apron project reflects a variance of -$266K as at 31 March 2015. The Tender was

awarded to BMD construction as per Council resolution (C1411/294) to the value of $695,167. The project has now completed at a final project cost of $712,355. Officers are requesting from the Department of Transport that unspent funds from the RADS projects (GA Taxiway and Hangar extension and Noise modelling and integration into land use planning) totalling $53,809, in addition to the City's unspent allocation ($53,809) be transferred towards the Apron Extension project to cover the overspend of $17,188 and reduce the draw from the Airport Infrastructure Reserve.

The Taxiway/Hanger extension reflects a variance of -$28K as at 31 March 2015. This project is

now complete with the final project expenditure at $145,744, leaving an amount of $71,718 outstanding (50% being RADS contribution). Officers are requesting the Department of Transport approve the transfer of unspent from this project to the aforementioned Apron expansion project.

Infrastructure - Other Against an annual budget of approximately $13.8M and a year to date budget of approximately $9.9M, $4.7M has been expended to 31 March 2015. This component of the ‘Infrastructure’ capital expenditure budget is largely managed by the Engineering and Works Services Directorate and covers a range of different activities. The Engineering and Works Services Directorate provides the following commentary on financial performance: The majority of Infrastructure projects administered by the Engineering and Works Services Directorate are progressing well, which is contradictory to the fact that only 44% of the (total) annual Infrastructure budget has been outlaid at this time. It is prudent to note that there is a further $2M in committed costs raised against projects that represent orders made to suppliers anticipated to be receipted and paid in the short to medium term.


Although total expenditure to date is less than originally estimated for this time of the y e a r , the following major items are contributing to the variance; As at the end of March there remains $2.2M in road capital works yet to be completed. This

represents 24% of the year to date budgeted unexpended variance. The Puzey Road Reconstruction Project valued at $831K commenced in March and is scheduled for completion by 30 June 2015. An asphalt-overlay and intersection improvement project on Commonage Road valued at $193K is scheduled to commence in April after being deferred whilst the construction crew worked on the Brown Street extension earlier in the year. The $300K State Government funded project for the construction of Bus Bays has been delayed due to clearing permit approval matters and will represent a carry-over/relist into the 2015/16 financial year.

$1.6M, representing 31% of the unexpended annual budget variance, is attributable to Sanitation

(waste) Infrastructure. The majority of these works consist of;

1. Phase one of the New Cell Development is scheduled to begin upon awarding of the successful tendered supplier in May.

2. The Busselton Transfer Station Development whereby DER approvals have taken longer than anticipated. This said, the construction of access roads is scheduled to begin in late April.

$510K, representing 10% of the year to date budget unexpended variance, is attributable to

Jetty Capital works. The installation of a permanent Marine Berthing Facility was postponed pending a temporary trial of Cruise Ship passenger landings on the West Swim Jetty. A Grant application for a more permanent facility is currently awaiting confirmation.

$503K, representing 10% of the year to date budget unexpended variance is attributable to Car Park and Townscape construction projects. The resealing of the Coles Car Park in Busselton was scheduled for completion earlier in the year; however this will now be completed prior to June. Delays have also been encountered with the Meelup Car Park project with this now scheduled to be carried over into the following financial year. The Kent Street townscape project has presented some challenges and will now be finalised after the April school holidays.

$663K, representing 13% of the year to date budget unexpended variance, is attributable to Coastal Protection and Boat Ramp Capital works. All of these projects are now under way and scheduled to be completed by financial year end.

$933K in budgeted Capital Bridge works will not go-ahead this financial year. These works are

carried out and invoiced by Main Roads WA. The Main Roads bridge construction team is marginally behind schedule, causing this variance.

In summary of the above, the Engineering and Works Services Directorate estimate that only a small number of projects may be required to be carried over or relisted into the 2015/16 financial year. Whilst this may artificially inflate the final closing surplus/ deficit position for 2014/15, this will be offset by the need to re-list these projects in the ensuing draft budget. Additionally, other projects being deferred (and particularly in respect of sanitation related expenditure) are reserve funded and as such, will have no net impact on the closing surplus/ deficit position. Due to the nature of the ‘Infrastructure’ projects, unless savings can be achieved in municipal funded projects, the extent to which the annual budget is expended has a limited direct impact on the surplus/ deficit position. Shortfalls in capital expenditure are generally accompanied by equivalent reductions in revenue categories such as ‘Non-operating Grants, Subsidies and Contributions’, ‘Proceeds from New Loans’ and ‘Transfers from Reserves and Restricted Assets’. Furthermore, and as mentioned above, unspent funds will generally be carried over to the following year’s budget,


thereby negating any saving. Total Loan Repayments- Principal (YTD variance: -$78K) The current variance is attributable to timing delays in the drawdown of two budgeted loan facilities, namely the self-supporting loan of $30K in favour of the Busselton Football and Sportsman’s Club Inc. (-$1K), and also the Busselton Foreshore loan of $6.8M (-$77K). The nominal variance pertaining to the self-supporting loan is fully offset by an equivalent reduction in the ‘Self-Supporting Loans – Repayment of Principal’ capital revenue activity, as the Football Club has not been required to reimburse the City for (budgeted) principal repayments whilst the loan facility remains undrawn. The delay in drawdown of the Busselton Foreshore loan facility will however result in a favourable variance in this category as at 30 June 2015. This facility includes budgeted loan repayments in March and June, with the total principal component for the financial year equating to approximately $155K. Whilst approximately $3.4M in loan funding will be required to meet financial current year expenditure, the full $6.8M borrowing is to proceed in 2014/15, with the remaining $3.4M to quarantined as at 30 June 2015. As drawdown of the loan is not expected to occur until June 2015, any current financial year principal repayment will be minimal only. Consequently, for the purposes of this review, a notional saving of approximately $150K is projected as at 30 June 2015. This is in addition to a saving in interest repayments of approximately $165K, as is further discussed in the ‘Interest Expenses’ operating expenditure category. Distinct from the above, it is also worthy of noting that the ‘Total Loan Repayments - Principal’ budget has previously been amended this financial year. Due to lower interest rates secured for the Civic and Administration Centre borrowing of $18M, approximately $84K in (budgeted) principal and interest repayments were able to be transferred to the Infrastructure Development Reserve as savings. Advances to Community Groups (YTD variance: -$30K) This allocation relates to a self-supporting loan facility of $30K in favour of the Busselton Football and Sportsman’s Club Inc., to carry out essential roof repairs to the Bovell Park football clubrooms. The Club has recently lodged a building application for the proposed works, and as such, the loan facility is expected to be drawn imminently. The delay in drawdown has resulted in immaterial variances in several other expenditure/ revenue activities; however these are fully offsetting. Transfers to Restricted Assets (YTD variance: +$625K) The ‘Transfers to Restricted Assets’ budget comprises an estimation of funds that could potentially be received during the financial year, primarily from developer contributions. Included are cash in lieu of parking, community and recreation facilities contributions and contributions to works. Due to the nature of the category, the annual budget allocation is spread evenly throughout the financial year. The performance in this category does not have any direct impact on the surplus/ deficit position, as whilst recognised as operating revenue upon receipt (via ‘Non-operating Grants, Subsidies and Contributions’), these funds are subsequently quarantined to Restricted Assets; essentially offsetting the initial transaction. In addition to the above, the ‘Transfers to Restricted Assets’ category also includes the payment of bonds and deposits, albeit no specific budget allocation is made for these funds. The favourable financial year to date variance of approximately $0.6M is primarily attributable to the receipt of developer contribution payments totalling $0.9M, and bond and deposit payments totalling approximately $0.3M. Whilst performance in this category does not directly impact on the closing surplus/ deficit position, interest earnings on a range of restricted asset funds do contribute to the City’s municipal interest earnings.


Transfers to Reserves (YTD variance: +$91K) The ‘Transfers to Reserves’ budget includes both a base transfer and a projected interest component, which collectively equate to the respective annual budget allocations. Whilst the base transfers are made in terms of the adopted/ amended budget, the overall financial performance in any year is impacted by the associated interest earnings performance. The current favourable variance is attributable to interest earnings on Reserve funds. Whilst the budget variance in this category (+$91K) is higher than the budget variance in the ‘Interest Earnings’ operating revenue category (+$65K), this is simply due to the year to date budget figures in each instance. Current projections are that reserve interest earnings will exceed annual budget estimates by approximately $70K as at 30 June 2015, which will be reflected in the end of financial year ‘Transfers to Reserves’ performance. Whilst this will not directly impact on the closing surplus/ deficit position, the additional revenue will supplement the projected balance of the City’s reserve funds at financial year end. CONCLUSION As detailed within this report, it is considered that the City’s overall financial performance to 31 March 2015 is satisfactory, with current projections indicating a surplus closing position in the order of $900K as at 30 June 2015. Additionally, the Annual Budget Review has not identified any specific adverse financial trends; for which remedial action is required to be instigated prior to financial year end. The projected surplus closing position is primarily due to operating expenditure savings, coupled with (current financial year) savings of over $315K pertaining to the delayed drawdown of the Busselton Foreshore loan facility of $6.8M. As this report also identifies, it is projected that overall capital expenditure will fall well short of annual budget estimates, with this primarily attributable to the Busselton Foreshore project. However, as the individual Foreshore projects are essentially fully funded in one form or another, a corresponding shortfall in capital revenue will be evident as at 30 June 2015. Whilst components of the unspent capital and operating expenditure budgets may need to be considered for re-listing in the Council’s 2015/16 draft budget, the projected surplus closing position of $900K represents (net) underspends or additional revenues directly associated with the current financial year’s financial performance. Whilst acknowledging the potential surplus closing position at financial year end, it is considered that the utilisation, or quarantining of these funds, be fully considered as part of the Council’s 2015/16 draft budget deliberations. OPTIONS The Finance Committee/ Council may determine that additional recommendations are required to be made, or alternatively that the Annual Budget Review not be adopted by the Council at this time, pending clarification of any further matters. TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION Consequent to endorsement by the Council, with or without amendment, a copy of this report (and the associated Council Resolution) will be forwarded to the Department of Local Government and Communities within 30 days of the date of the Council Resolution.


OFFICER RECOMMENDATION ABSOLUTE MAJORITY DECISION OF COUNCIL REQUIRED

That, pursuant to Regulation 33A of the Local Government (Financial Management) Regulations, the Council adopts the 2014/15 Annual Budget Review, compiled as at 31 March 2015.

Note: The Chief Executive Officer discussed with the Committee, the potential of reducing the principle loan amount the City is borrowing for the Busselton Foreshore from $6.8M to $6.5M and reducing the term of the loan to take advantage of current low interest rates. The Committee were supportive of this and gave the Chief Executive Officer verbal approval to lock the reduced loan in as soon as possible due to the risk of interest rates increasing.

COMMITTEE RECOMMENDATION

ABSOLUTE MAJORITY DECISION OF COUNCIL REQUIRED F1505/027 Moved Councillor J McCallum, seconded Councillor G Henley

1. That, pursuant to Regulation 33A of the Local Government (Financial Management)

Regulations, the Council adopts the 2014/15 Annual Budget Review, compiled as at 31 March 2015.

2. That the Finance Committee endorse the CEO’s actions to draw a new loan from State Treasury for Busselton Foreshore capital works for $6.5m at a reduced term subject to negotiations with State Treasury concerning prevailing interest rates.

CARRIED 4/0

11.12am At this time the Manager Environmental Services returned to the meeting.


6.6 VASSE TASKFORCE BUDGET AMENDMENT SUBJECT INDEX: Environmental Projects and Programmes STRATEGIC OBJECTIVE: Our natural environment is cared for and enhanced for the enjoyment

of the community and visitors. BUSINESS UNIT: Environmental Services ACTIVITY UNIT: Environmental planning REPORTING OFFICER: Manager, Environmental Services - Greg Simpson AUTHORISING OFFICER: Director, Planning and Development Services - Paul Needham VOTING REQUIREMENT: Absolute Majority ATTACHMENTS: Nil

PRÉCIS This report recommends an amendment to Councils 2014/15 Budget such that $15,000 originally allocated for the purpose of conducting water quality trials in the Lower Vasse River be reallocated to the Environmental Planning salaries budget, for the purpose of engaging appropriate skill and expertise to progress the development of management plans for the Lower Vasse River and Toby Inlet. This is a matter on which Councillors were informally briefed several months ago. BACKGROUND In August 2013, the then Minister for Water, the Honourable Terry Redman MLA, announced the decision to undertake an independent review of waterways management efforts in the Vasse Wonnerup and Geographe catchment. This resulted in Professor Barry Hart being engaged by the Department of Water (DoW) in October 2013 to undertake an independent review of the management of water assets in the Geographe catchment. In October 2014, the then (and current) Water Minister Mia Davies announced, in response to Professor Hart’s independent review, the establishment of a Vasse Taskforce led by the Minister for Water to provide overall leadership and a cross government approach to improve the health of the Vasse Wonnerup and management of water assets in the Geographe catchment. The purpose of the Vasse Taskforce is to drive implementation of a Vasse Geographe Strategy which is structured around four themes comprising the development of long term governance framework, improved water quality management, improved waterway management and communication with community involvement in the process. This approach has involved establishment of designated managers for the different parts of the system to work collectively so that all partners have common objectives and the technical understanding to best manage the water asset. The Vasse Taskforce will provide direction and support to the lead agencies responsible for managing designated water assets and reporting to the community on outcomes of activities undertaken across the catchment to improve waterway and wetland health. The Vasse Taskforce will be chaired by the Hon Minister for Water Mia Davies during its first year, after which it is intended it be chaired by the DoW. The improved waterways management theme in the Vasse Geographe Strategy focuses on projects aimed at understanding specific water assets and the development of strategies and plans to outline how each water assets will be managed and by whom. This work will be undertaken in consultation with the community and key stakeholders towards a shared vision and approach to water way management. Amongst the many other activities, the Vasse Geographe Strategy improved waterway management theme will result in the following projects being undertaken:

a. Vasse Wonnerup Wetlands Management


The Vasse Estuary Technical Working Group (comprising stakeholder government agencies

and chaired by DoW) has taken on the role of developing management objectives and plans

for the wetlands as well as refining operational procedures for the flood (storm surge) gates

and sand bar openings.

b. Lower Vasse River and Toby Inlet Management

The City of Busselton has been designated as the key stakeholder responsible for

coordination and development of management objectives and plans for the Lower Vasse and

Toby Inlet catchments. Management plans will be developed for these water assets with the

DoW providing technical assistance.

The City of Busselton will lead a group focussed on managing the Lower Vasse River and Toby Inlet

and the development of water management plans outlining an agreed approach across agencies and

key stakeholders on how the Lower Vasse River and Toby Inlet will be managed in the future.

The time line set by the Vasse Taskforce requires a number of projects to be completed by 30 June

2015, including the development of a reporting and evaluation framework, communication/

community consultation plan and development of draft management objectives for the Lower

Vasse River and Toby Inlet.

STATUTORY ENVIRONMENT Section 6.8 of the Local Government Act refers to expenditure from the municipal fund for an additional purpose that is not included in the annual budget. In the context of this report, where no budget allocation exists, expenditure is not to be incurred until such time as it is authorised in advance, by an absolute majority decision of the Council. RELEVANT PLANS AND POLICIES The City has no specific policy relating to the management of water quality and for the treatment of waterways throughout the district. In November 2010, the Department of Water in partnership with the Geographe Catchment Council, finalized the Vasse Wonnerup Wetlands and Geographe Bay Water Quality Improvement Plan (WQIP). The WQIP, the accumulation of four years data collection and modelling, is a guiding document for managing water quality to protect the internationally recognized Vasse Wonnerup Wetlands and Geographe Bay. Implementation of the WQIP, and protection of these iconic areas will depend on a collaborative effort from government agencies, NRM groups and the community. FINANCIAL IMPLICATIONS Long-term Financial Plan Implications - Nil The City’s 2014/15 Budget includes within the Environmental Planning Administration Contractors account 421-11830-3280-0000, an allocation of $22,500 to enable Council’s Waterways Improvement Reference Group to implement a communication strategy and for conducting water quality improvement trials in the Lower Vasse River. Following the October 2014 announcement by the Hon. Minister Mia Davies to establish the Ministerial Taskforce, expenditure on the proposed water quality improvement trials in the Lower Vasse River were suspended. This report recommends the realignment of $15,000 from Environmental Planning Administration Contractors account 421-11830-3280-0000 for the purpose of engaging a person with appropriate environmental and water management skills for a fixed term expiring before 30 June 2015, to


undertake the initial research and investigations to expedite the initial phases for the development of the Lower Vasse River and Toby Inlet Management Plans. In order to maintain the integrity of Council’s financial reporting, this report recommends an amendment to Council’s 2014/2015 budget to include the operating and capital grant funding as revenue and corresponding expenditure as follows:

Description Account String 2014/2015 Adopted Budget

2014/2015 Amended Budget (Proposed)

2014/2015 Variance

Expenditure

Contract (Inc contract staff)

421-10830-3280-0000

55,000 40,000 (15,000)

Salaries - Normal 421-10830-3001- 0000

135,619 149,380 13,761

Salaries Superannuation (SGC)

421-10830-3025-0000

14,698 15,937 1,239

Net Exp/Rev 0

STRATEGIC COMMUNITY OBJECTIVES The works to be funded by this budget amendment are considered as relating to Key Goal Area 5 – Cared for and Enhanced Environment and Community Objective 5.1 - Our natural environment is cared for and enhanced for the enjoyment of the community and visitors. RISK ASSESSMENT An assessment of the potential implication of not implementing the officer recommendation has been undertaken using the City’s risk assessment framework. The assessment sought to identify ‘downside’ risks only rather than ‘upside’ risks and where the risk following implementation of controls has been identified is moderate or greater. No such risks were identified. CONSULTATION The City represented on the Vasse Taskforce by Councillor Tarbotton and the Director Planning and

Development Services and City staff are also involved with the key stakeholder groups involved in

the development of management plans for the Vasse Wonnerup Wetlands , Vasse Geographe

catchment and also the governance review component of the Vasse Geographe Strategy.

OFFICER COMMENT Following the initial meeting of the Vasse Taskforce in November 2014, the lead agencies responsible for managing designated water assets have focused on implementation of the activities and projects outlined in the Vasse Geographe Strategy. These designated managers are currently in the process of identifying issues and management initiatives towards the development of management plans for their respective area of responsibility. Critical to the development of the management plans is determining the management objectives and community expectations and this process will require extensive consultation with stakeholders and the broader community. The Vasse Geographe Strategy requires considerable resource in the initial phase to coordinate the development of management plans for the Lower Vasse River and Toby Inlet for the purpose of


improving water quality and visual amenity of these water assets. As part of the City’s role in this process the City is required to work closely with agency and community stakeholders to develop a project plan and a series of issues papers to help inform the community and to assist discussions throughout the community consultation phase and to develop the management objectives for Lower Vasse River and Toby Inlet. This process will require the allocation of additional resource to complete the research and a number of activities prior to 30 June 2015. CONCLUSION Interim governance arrangements have designated lead agencies to coordinate the asset management arrangements for waterways management in the Vasse Geographe catchments. These arrangements are to facilitate the development of water asset management plans and improved governance arrangements to improve the management of drainage and water quality. Additional resource is required to complete the research and numerous activities in preparation for an extensive stakeholder and community consultation process and this report seeks to realign funding currently allocated with Councils 2014/15 Budget for the purpose of engaging appropriate skill and expertise to progress the development of management plans for the Lower Vasse River and Toby Inlet. OPTIONS The Council may determine to not endorse the proposed amendment to the 2014/2015 budget. TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION The Officer Recommendation subject to Council endorsement, will be implemented prior to 30 May 2015.

COMMITTEE RECOMMENDATION AND OFFICER RECOMMENDATION ABSOLUTE MAJORITY DECISION OF COUNCIL REQUIRED

F1505/028 Moved Councillor G Henley, seconded Councillor T Tuffin

1. That the Council endorses an amendment to the 2014/2015 adopted budget on the following basis:

Description Account String 2014/2015

Adopted Budget 2014/2015 Amended Budget (Proposed)

2014/2015 Variance

Expenditure Contract (Inc contract staff)

421-10830-3280-0000

55,000 40,000 (15,000)

Salaries - Normal 421-10830-3001- 0000

135,619 149,380 13,761

Salaries Superannuation (SGC)

421-10830-3025-0000

14,698 15,937 1,239

Net Exp/Rev 0

CARRIED 4/0

11.15am At this time the Manager Environmental Services left the meeting and did not return.


6.7 GEOGRAPHE LEISURE CENTRE - BUDGET AMENDMENT REQUEST - GRANT FUNDING

SUBJECT INDEX: Geographe Leisure Centre STRATEGIC OBJECTIVE: A City where the community has access to quality cultural, recreation,

leisure facilities and services. BUSINESS UNIT: Community Services ACTIVITY UNIT: Community Services REPORTING OFFICER: Manager, Community Services - Maxine Palmer AUTHORISING OFFICER: Director, Community and Commercial Services - Naomi Searle VOTING REQUIREMENT: Absolute Majority ATTACHMENTS: Nil

PRÉCIS The purpose of this report is to seek approval to amend the 2014/15 Geographe Leisure Centre (GLC) budget to include an additional $4,740 (ex GST) received in grant funding and associated expenditure. The funding was applied for under the Royalties for Regions, South West Community Chest Fund to enable a fauna study to be conducted on the land surrounding the GLC. This is one of the first steps in planning for the future expansion of the centre to establish if and how the site can accommodate additional indoor courts, a 50m pool, change and toilet facilities, storage and parking.

BACKGROUND The Royalties for Regions Community Chest Fund was established to improve economic and community infrastructure and services in the South West Region through funding projects that will assist in attracting investment and increasing jobs or help to improve the quality of life in the region. The City was successful in securing a grant of $4,740 (ex GST) to enable a fauna study which will:

1. Determine the scope of the surrounding land that can be developed 2. Establish the timeframes to consider for likely Federal and State government clearing permits

and rehabilitation and relocation requirements 3. Determine how much of the surrounding land can be developed 4. Dictate the scale of developments on the site 5. Provide cost estimates for associated processes

The above will enable the City to progress the Master Plan for the expansion of the GLC facility to potentially in the future add three indoor courts, a 50m pool, more change and toilet facilities, storage and parking. STATUTORY ENVIRONMENT Section 6.8 of the Local Government Act refers to expenditure from the municipal fund that is not included in the annual budget. In the context of this report, where no budget allocation exists, expenditure is not to be incurred until such time as it is authorized in advance, by an absolute majority decision of the Council. RELEVANT PLANS AND POLICIES The Geographe Leisure Centre expansion is listed as a Corporate Plan action and priority of Council. Master Planning for the GLC’s future expansion is also an identified project in the Council endorsed GLC Business Plan 2014/15-2018/19.


FINANCIAL IMPLICATIONS The following budget amendments would be required to receive the $4,740 funding plus GST in the 2014/15 budget, noting this results in a net neutral outcome to Council and no implications for the Long term Financial Plan.

Long Term Financial Plan Implications Nil. STRATEGIC COMMUNITY OBJECTIVES This proposal aligns to the City’s Strategic Community Plan of 2013: Key Goal Area 2: Well planned, Vibrant and Active Places Objective: 2.1 A City where the community has access to quality cultural, recreation, leisure facilities and services. 2.3 Infrastructure assets are well maintained and responsibly managed to provide for future generations. RISK ASSESSMENT An assessment of the potential implications of implementing the officer recommendations has been undertaken using the City’s risk assessment framework. The assessment identifies ‘downside’ risks only, rather than ‘upside’ risks as well. There were no risks identified. CONSULTATION Consultation took place with Environmental Planning staff and contractors to establish the required scope of works, in addition to discussions with the South West Development Commission prior to the submission of the grant application. OFFICER COMMENT This funding supports the next steps towards planning the future expansion of the GLC. As the City’s population has grown the GLC has also experienced significant growth in all areas of team sports, aquatics, gym use, exercise classes, vacation care and crèche. Basketball, in particular, has outstripped growth expectation. In 2014/15 the Busselton Basketball Association has 161 teams in the local competition, 134 more than the previous season. Team sports and any other growth are now restricted by the capacity of the indoor facilities with courts at the GLC and schools being used. Due to a shortage of indoor courts the Basketball Association is unable to continue running Aussie Hoops, a successful national entry level winter program. The association believes that if the facilities were available they would attract a five percent increase in membership in 2015/16, and similar growth in the following seasons. Extra stadium space would also support growth in netball,

Description Account String 2014/15 Adopted Budget $

2014/15 Amended Budget (PROPOSED) $

Variance $

GLC Operating Grants – Dept of Sport & Rec.

336-10591-1233-0000

$0 -$4,740

-$4,740

GLC Contractors (Incl Contract staff) 336-10591-3280-0000

$3,230 $7,970

$4,740

Net Variance $0 $0 $0


volleyball, indoor soccer, hockey and gymnastics in the future. All of these sports are growing in participation rates and are popular with youth and working age adults. The pools are also becoming increasingly congested and are used by all ages for many purposes such as swimming lessons, aquatic programs, swim clubs, school carnivals, children’s parties, competitions, training, rehabilitation and general swimming. The GLC indoor pool has reached capacity. The geothermal investment has enabled the outdoor pool to be heated and open all year which has addressed the immediate need but not the longer term need which would be an expansion of the existing outdoor to a 50m pool. The fauna study will be entirely funded by the grant. The grant requires no matching funding contribution from Council but must be paid to the recipient by 30 June 2015. CONCLUSION Officer’s recommend the 2014/15 budget is amended to enable the grant funded fauna study to be conducted on the land surrounding the GLC. OPTIONS Council may determine not to support the Officer’s recommendation to amend the budget and accept the funds awarded for the fauna study for the land surrounding the GLC, in which case the South West Development Commission would need to be informed of this decision and the reasons for it. This could affect the City’s success in future funding opportunities. TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION Should the officer recommendation be endorsed, the study will commence in May/June 2015 and the project and acquittal will be completed by August 2015.

COMMITTEE RECOMMENDATION AND OFFICER RECOMMENDATION ABSOLUTE MAJORITY DECISION OF COUNCIL REQUIRED

F1505/029 Moved Councillor G Henley, seconded Councillor J McCallum That the Council approves an amendment to the 2014/15 budget on the following base:

CARRIED 4/0

Description Account String 2014/15 Adopted Budget $

2014/15 Amended Budget (PROPOSED) $

Variance $

GLC Operating Grants – Dept of Sport & Rec.

336-10591-1233-0000 $0 -$4,740

-$4,740

GLC Contractors (Incl Contract staff)

336-10591-3280-0000 $3,230 $7,970

$4,740

Net Variance $0 $0 $0


7. GENERAL DISCUSSION ITEMS

Nil

8. NEXT MEETING DATE

Thursday, 4 June 2015

9. CLOSURE

The meeting closed at 11.19am.

THESE MINUTES CONSISTING OF PAGES 1 TO 52 WERE CONFIRMED AS A TRUE AND

CORRECT RECORD ON THURSDAY, 4 JUNE 2015.

DATE:_________________ PRESIDING MEMBER: _________________________

CITY OF BUSSELTON MINUTES FOR THE FINANCE COMMITTEE … · 56/1415 Demi Liddle Special Circumstances – State Selection for the Under 18 Australian Junior Basketball Championships.

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