Section 4 – The Budget Process
Introduction ....................................................................................... 3
4.1.1
Benefits of Budgeting ................................................................ 5
4.1.2
The Principles of Budgeting ........................................................ 6
4.1.3
Budget Calculation Techniques.................................................... 7
4.1.4
Forward Planning – Long Term Sustainability Planning ....................... 9
4.1.5
The Budget Process ............................................................... 10
Key Budget Financial Statements........................................................ 14
4.2.1
Statement of Comprehensive Income .......................................... 14
4.2.2
Statement of Cash Flows ......................................................... 15
4.2.3
Rate Setting Statement ........................................................... 17
4.2.4
Statement of Financial Position & Statement of Change in Equity ........ 18
Notes to the Annual Budget............................................................... 18
Supplementary Information............................................................... 18
Common Pitfalls .............................................................................. 19
4.5.1
Brought Forward Figures – Opening and Closing Funds .................... 19
4.5.2
Rating – Valuations up to date ................................................... 19
4.5.3
Early Adoption ...................................................................... 19
Checklist ......................................................................................... 20
eporting Timeline ............................................................................ 21
Statutory Requirements for Amendments ............................................. 22
Budget Adoption ............................................................................... 24
4.9.1
Adoption of the 201Y/201Z Budget ............................................. 24
Model Annual Budget.................................................................... 31
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Section 4 - Budget Process – Page 2
The Budget Process
Introduction
All local governments are required to adopt an annual budget in accordance with Part 6,
Division 2 of the Local Government Act 1995, Part 3 of the Local Government (Financial
Management) Regulations 1996, Australian Accounting Standards (AASB) and the
Australian Accounting Standards Board Interpretations (AASBI) which replaces the
Urgent Issues Group Interpretations (UIG). Details are included in the Compliance and
Reporting Summary below.
With the introduction of the Integrated Planning and Reporting (IPR) framework, the
annual budget starting from 2013/14 will result from that process and be in accordance
with the adopted Corporate Business Plan.
Definitions and Abbreviations
The abbreviations used in this chapter refer to the following:
FMR
Local Government (Financial Management) Regulations 1996
LGA
Local Government Act 1995
AASB
Australian Accounting Standards followed by the number of
the applicable standard
IPR
Integrated Planning and Reporting Framework
DLGC
Department of Local Government and Communities
CEO
Chief Executive Officer
Interpretation
AASBI Interpretation followed by the number of the
interpretation
AASBI
Australian Accounting Standards Board Interpretations
replaces the Urgent Issues Group and identifies and classifies
interpretations into two groups (refer AASB 1048)
Compliance and Reporting Summary
LGA s. 6.2(1)
Council is to adopt the budget during the period 1 June to 31
August or seek an extension of time from the Minister (refer note
12, page 12).
LGA s. 6.2(4)
Additional information required to be included in the Budget
documentation.
FMR r. 27
FMR r. 4
The FMR are in addition to and not in derogation of Australian
Accounting Standards (AAS). If a provision of the FMR is
inconsistent with the provision of an AASB, the FMR applies to
the extent of the inconsistency.
Section 4 - Budget Process – Page 3
Compliance and Reporting Summary continued.
FMR r. 5A
Subject to regulation 4, the annual budget, annual financial
report and other financial reports of a local government must
comply with the AAS.
FMR r. 33
A copy of the annual budget of a local government is to be
submitted* to the Departmental CEO within 30 days of its
adoption by the local government.
FMR r. 33A
Between 1 January and 31 March in each financial year a local
government is to carry out a review of its annual budget for that
year.
FMR r. 33A(4)
Within 30 days after council has made a determination on the
review, a copy of the review is to be provided* to the Department
of Local Government.
AASB 101.51
Each financial statement and the notes must be clearly identified
with name of the entity or group of entities, the date of the end of
the reporting period, presentation currency and the level of
rounding used in the financial statements.
AASB 101.38
Except when Australian Accounting Standards permit or require
otherwise, comparative information shall be disclosed in respect
of the previous period for all amounts reported in the current
period’s financial statements.
*Annual Budget lodged electronically to annal.budget@dlgc.wa.gov.au and Budget
Review to budget.review@dlgc.wa.gov.au
In relation to budgeting, Section 6.2(1) of the LGA states:
“During the period from 1 June in a financial year to 31 August in the next financial
year, or such extended time as the Minister allows, each local government is to
prepare and adopt (absolute majority required), in the form and manner prescribed,
a budget for its municipal fund for the financial year ending on the 30 June next
following that 31 August”.
Section 6.2(2) of the LGA requires council in formulating the budget, to have regard to
the contents of the plan for the future of the district and prepare detailed estimates for
the current year.
Section 6.2(4) of the LGA sets out certain details that the annual budget is to
incorporate and such other matters as prescribed.
Part 3 of the FMR establish the form and content of the budget document and require
a copy of the annual budget to be submitted to the Department within 30 days of
adoption by council.
Section 4 - Budget Process – Page 4
Effective planning and control of a local government’s operations begins with the
development of operational plans for achieving its organisational and financial
objectives.
The budget is a detailed financial plan for the coming year covering all aspects of a
council’s operations, and should reflect the resources generated by way of revenue and
the resources consumed by way of expenditure.
The key objectives of budgeting in local government are:
 to provide a fiscal management tool for the carrying out of council’s programs in the
ensuing year;
 to provide the means by which the council is accountable to the community for the
rates to be levied; and
 to provide the basis for the setting of rates.
The annual budget is a short term reflection of the local government’s plan for the future
as outlined in the corporate business plans for that year. It represents, financially, the
actions expected to be taken by the council in achieving its objectives.
In addition to its planning aspects, the budget can and should be used by management
as a benchmark against which actual performance can be measured. This can be
achieved by reporting actual results against budgeted figures to provide management
and the council with information on progress against its plan, usage of resources and
accountability for performance.
As a short term operational plan the annual budget is directed to the ultimate objectives
of the council and serves as a guide to maintaining a definite course of activity. It is
imperative that all budget estimates such as capital works and new proposals are
developed in accordance with the local government’s plan for the future. Managers must
be motivated to achieve their individual operational objectives in line with the local
government’s objectives.
Above all, the budget must be realistic and achievable at all levels within the local
government if it is to be used as a benchmark against actual performance.
4.1.1 Benefits of Budgeting
Providing a common and disciplined approach to the solution of problems, a
coordinated and systematic approach to budgeting enjoys the following benefits:
 obliging the organisation to commit to an early recognition of its difficult decisions
and instilling into the organisation the habit of careful study before making
decisions;
 developing throughout the local government an attitude of cost awareness and
maximum resource utilisation;
Section 4 - Budget Process – Page 5
 coordinating the operating plans for the diverse units within the local government
so that final decisions and plans represent the total organisation in the form of an
integrated and comprehensive plan;
 providing the opportunity of systematically evaluating every operation of the local
government;
 assisting in directing effort and capital into the most efficient channels;
 encouraging a high standard of performance and serving as an incentive to
perform more effectively; and
 providing standards or benchmarks for measuring performance of the local
government, its departments, operations and individuals.
Whilst the advantages of budgeting are comprehensive and persuasive, there are
other issues which need to be considered:
 budgeting involves elements of judgement and prediction of future events and
circumstances based on the best information available at the time;
 a revision or modification of estimates should be made when variations from
original budgets justify a change of plans;
 budgeting requires the cooperation, coordination and participation of all members
of management and the council;
 the budget should facilitate the achievement of the local government’s goals and
objectives;
 the budget should reflect the local government’s corporate business plans for that
year developed as part of the plan for the future;
 the people responsible for the budget must be educated and guided in its purpose
and use; and
 the local government remains financially healthy and is able to cope with financial
shocks and/or contingencies that may arise.
In preparing the budget, each of these issues should be recognised and steps put in
place to ensure the budget process and outputs critically address these areas.
4.1.2 The Principles of Budgeting
In broad terms, budgeting is a three step process which takes place within the
framework of:
 Top-down objective
setting
-
this is based on objectives derived and
developed from the local government’s plan for
the future. The setting of these objectives
should form part of the local government’s
overall business planning process;
 Bottom-up preparation
-
functional budgets are prepared by
responsibility centre and aggregated into
summary and consolidated budgets; and
Section 4 - Budget Process – Page 6
 Review
-
budgets should be reviewed at each level of
management (on a line by line basis) and, if
necessary, revised before being submitted to
the next level of management and ultimately to
council.
The review stage should involve comparisons of budgets to the local government’s
financial objectives and any variation explained and reviewed by senior management.
The local government’s organisational chart and its chart of accounts form the basic
framework on which to build a coordinated and efficient system of managerial planning
and budget control. The organisation chart defines functional responsibilities of
managers and establishes the basis on which their budgets will be developed.
Although final responsibility for the budget rests with the council all managers should
be responsible for the preparation and execution of their departmental budgets.
For a budgetary control system to be successful managers must fully cooperate and
understand their role in making the budget system successful.
The procedures used in developing a budget may be as important as its content and
should include these fundamental principles:
 the budget should quantify financial and non-financial inputs to and outputs of the
local government’s operations and programs;
 there should be adequate guidance so that all management levels are working on
the same assumptions, targeted objectives and agenda;
 participants in the budgeting process should understand how their activities fit into
the entire organisation and what constraints will be placed upon them and their
activities;
 participation in the budgeting process should be encouraged at each level within
the local government;
 development of the budget should be structured to involve the people who will be
responsible for implementing the budget;
 individuals and departments should be given the freedom and authority to influence
and accept their own performance levels, and should assume the responsibility for
achievement; and
 the budget preparation should be structured so that there is a high probability of
attainment of goals and objectives. If objectives are not achieved the reasons
should be clear.
Following these principles during budget preparation will assist in minimising
implementation difficulties.
4.1.3 Budget Calculation Techniques
Budgets for the next financial year should be planned well in advance. Section 6.2 (1)
of the Local Government Act 1995 allows an early adoption of the annual budget.
Section 4 - Budget Process – Page 7
The information contained in the local government’s plan for the future, corporate
business plan and 10 year financial plans, covering both operational and capital
income and expenditure requirements, should be the basis on which the annual
budget is developed.
The annualised portion of the longer term plan should be supported by sources of
funds from grants, loan borrowings and utilisation of reserve investments and should
be underpinned by proper asset management plans, borrowing and rating strategies
etc.
Budget calculation processes will include:
 identification of recurring operating income and expenditure;
 preparation of detailed salary and wages schedules including proposed new staff
positions, staff increment changes and enterprise agreement increases;
 preparation of detailed water, power and sewer utilities costs and increase
assumptions;
 capital expenditure based on long-term asset management plans;
 confirmation of grants for both operating and capital requirements;
 determination of the opening current position from the previous financial year;
 identifying any carry over projects into the new financial year;
 flagging committed funds and excluding these from the brought forward balance in
the determination of the current position;
 establishing if there is a budget deficit or surplus to be carried forward restricted to
the prescribed amount;
 obtain quotations for non-current assets to be sold or traded on new assets;
 prepare business plans for any significant project of undertaking;
 obtain quotations for insurance including workers’ compensation;
 update the scale of fees and charges for the next 12 months;
 prepare alternative rate model options on suggested rate increases;
 consider phasing in of valuations if revaluation has occurred;
 compile projected cash flows over the next 12 months to ensure there is sufficient
liquidity to meet current commitments throughout the year;
 budgets should be prepared consistently with comparative financial results for the
previous year;
 ensure that surplus funds invested conforms with the short-term requirements for
drawdowns as and when the funds are required;
 complete all the required statutory schedules for adoption by council.
Budgets should be prepared and calculated on realistic and conservative estimates. If
budgets are unrealistic then comparison with actual results becomes meaningless.
Section 4 - Budget Process – Page 8
4.1.4 Forward Planning – Plan for the Future
The local government’s corporate business plan developed as part of the plan for the
future outlines the aims, objectives and strategies for the next four years and the
development of this into shorter-term action plans. Through the development of the
forward planning process the local government can:
 align the current year’s operations with the strategic directions;
 project revenues over a 4 to 10 year period as a base to fund and develop
operations and developments;
 identify the costs over the long-term of maintaining current operations;
 review operations to ensure they are in line with corporate objectives;
 develop action plans to achieve strategic and operational change;
 examine timescales, priorities and funding needs to ensure developments can be
achieved over the desired timeframe;
 identify funding requirements and constraints early to develop affordable and
realistic plans over the long-term timeframe.
Care should be taken in setting budget estimates both on monthly and on an
annualised basis as it will affect the local government’s budgeted cash flow.
The Integrated Planning and Reporting (IPR) framework includes preparation of
annual budgets that are developed from the corporate business plan and informed by
asset management, workforce planning and other informing strategies through the 10year long term financial plan. The annual budget outlines the financial estimates to
deliver the corporate business plan and the 10-year long term financial plan.
Section 4 - Budget Process – Page 9
4.1.5 The Budget Process
In practice, council’s budgetary procedures revolve around the annual rate-setting
process.
Overview of the Budgetary Process
In accordance with the Local Government Act 1995 a local government must adopt its
budget by 31 August each year.
An important part of the budgeting process is early and thorough preparation and
planning. The objective of early preparation is to:
 inform staff, management and councillors of the process and their respective roles;
and
 ensure there is sufficient emphasis on program objectives and outputs rather than
the previous year’s activities and inputs.
The budget process must be linked to the local government’s plan for the future and
align directly with the corporate business plan for that year.
The steps included in the budget process are designed to progress the budget from its
earliest planning stages when the capital works program for the following year is being
put together through to the adoption of the approved budget and the subsequent,
ongoing monitoring of the budget and actual results. Timing of the process should be
given adequate consideration depending on the size of the organisation.
1.
Finalise Budget Timetable
The initial task should be to develop a budget timetable for endorsement by council
and distribution to senior management within the local government.
2.
Corporate Review
Council and management determine corporate planning requirements for the following
financial year, setting out strategic objectives and goals in accordance with the local
government’s plan for the future. This planning process is not only limited to financial
issues but covers all aspects of the local government operations.
3.
Update Long-Term/Strategic Capital Works Listing
Council and management review and update the current capital program to reflect
known changes and requirements to the capital projects listed for both the current and
subsequent financial years as per local government’s plan for the future.
Section 4 - Budget Process – Page 10
4.
Budget Planning Sessions
Management hold budget planning sessions in order to determine budget targets and
parameters to be used by the council in establishing the budgets for the following
year. These parameters will include staff levels, labour overhead rates, inflation
factors (where required), interest and depreciation rates, private works fees, transfers
to cash-backed reserves, borrowings, etc.
5.
Draft Capital Program Prepared and Distributed
The draft capital works program is prepared by management and distributed to each
department for review and comment. Further submissions from departments are also
considered at this time.
6.
Circulate Budget Documents, Forms etc.
Working papers, budget forms and budget instructions/guidelines are distributed to all
management and staff responsible for preparing budgets for their area. It is also
appropriate at this time to hold briefing sessions with all staff responsible for putting
together budgets to ensure clear understanding of both the guidelines for preparing
budgets and requirements of the local government in terms of its corporate business
plan.
7.
Finalise Capital Works Program
The draft capital works program, including sources of funding, is finalised for
presentation to council. Once it has been considered by council it is then used to
provide subsequent input to development of the Rate Setting Statement.
8.
Return Budget Documents
Management and staff responsible for preparing budgets return all necessary budget
documents to the finance department whose responsibility it is to ensure that all
departments within the local government have responded accordingly to the request
for budget submissions.
9.
Prioritise Items, Prepare Draft Budget
The finance department reviews all budget submissions to ensure completeness and
accuracy of data. The data is then entered into the budget program in order to
prepare the draft budget for the following financial year.
Section 4 - Budget Process – Page 11
10. Draft
A draft budget or working papers should be initially prepared by staff with as much
detail as possible to present to council for consideration. Budget workshop(s) with
councillors prior to adoption will consider these working papers.
Supplementary information could include detailed information on –










the capital works program (infrastructure);
the purchase of capital items;
grant funding;
proposed reserve transfers;
debenture loan borrowings;
land and trading undertakings;
‘abnormal’ operating expense or revenue;
rates modelling options;
specific community/agency requests;
fees and charges.
11. Final Assessment and Review
Management reviews the final draft of the budget to ensure that it meets the financial
objectives and parameters set by the council for the following financial year, and that
all programs and activities have received due consideration. The CEO and senior
managers give the budget its final ratification before presentation to council for
consideration and approval.
12. Adopt Final Budget/Declare Rate(s)
Having considered all submissions and/or comments the council gives final approval
for the budget to be adopted and sets the rate(s) accordingly for the budget year. The
budget must be adopted in the required format and cannot be adopted and
subsequently formatted into the statutory format. Once adopted, a copy is then
forwarded to the Department of Local Government.
Note: Adoption after 31 August
Section 6.2(1) of the Local Government Act 1995 requires a local government to
prepare and adopt a budget for its municipal fund between 1 June in a financial year
to 31 August in the next financial year, or such extended time as the Minister
allows.
The Director General has delegated authority from the Minister to deal with
applications for an extension of time to adopt the municipal fund budget. If a local
government is unable to meet the 31 August timeframe the following process must be
followed:
Section 4 - Budget Process – Page 12
1. A formal written application must be forwarded to the Director General, at the
Department prior to 31 August. An extension cannot be given if the statutory
period has already passed.
2. A detailed reason for the delay and why the extension is sought must be given.
3. The formal application should nominate a date to which the extension is sought
being a date that is within a reasonable period after 31 August and not too
remote into the future.
13. Copy of Budget
A copy of the Annual Budget and the date it was adopted by council is to be forwarded
to the Department of Local Government within the required timeframe and the
prescribed format. Hard copies are no longer required by the Department and the
budget should be forwarded by email to annual.budget@dlgc.wa.gov.au
14. Implement and Monitor Budget
Once the budget is adopted by council, management and staff then have the
responsibility for implementing the budget and will duly monitor the local government’s
actual progress against budget during the financial year.
15. Budget Review
Between 1 January and 31 March in each financial year a local government is to carry
out a review of its annual budget for that year. Details of what is required are included
in FMR r.33A. Refer to 4.11 of this section.
Section 4 - Budget Process – Page 13
Key Budget Financial Statements
4.2.1 Statement of Comprehensive Income
Compliance and Reporting Summary
LGA s. 6.2
FMR r 4(1)
FMR r 4(2)
Each local government is to prepare and adopt in the form and
manner prescribed, a budget for the financial year ending on 30
June. Where there is an inconsistency between a provision of an
AASB and the FMR, the provision of the FMR prevails.
FMR r. 22(1)
The annual budget of a local government is to be in a form that
includes the following –
(a) an income statement
(Note: AASB 101 describes this as a statement of comprehensive
income and this title is used in this manual)
FMR r. 22(2)
The financial information disclosed in the annual budget, other
than the cash flow statement, is to be compiled on an accrual
accounting basis.
FMR r. 30
Previous financial year results to be included for comparison.
(1) In the annual budget (a) the statement of comprehensive income for the previous
financial year
is to be prepared in a manner that clearly compares the estimates
in the annual budget in respect of each statement or piece of
information, as the case requires, with the equivalent financial
results at 30 June of the previous financial year (comparative
figures).
(2) If at the time of preparation of the annual budget a financial
result referred to in sub-regulation (1) is not known, an estimate of
that result may, if it is disclosed as an estimate, be included in the
annual budget.
The Statement of Comprehensive Income of a local government is to be prepared by
program and by nature and type. The purpose of the Statement of Comprehensive
Income by Program is to enable users to identify the cost of goods and services
provided, and the extent to which that cost was recovered from revenues, during the
reporting period. The nature of local government is that its major revenue item of
general rates is tied, by legislation, to a balance of cash requirements for the
municipality for the year. Accordingly, a local government’s Statement of
Comprehensive Income does not attempt to show a profit or loss on operations.
Section 4 - Budget Process – Page 14
It is important that all readers of this manual refer to the Accounting Standard
AASB 101 Presentation of Financial Statements (available from the Australian
Accounting Standards Board – www.aasb.gov.au ) for a more detailed explanation of
the characteristics of assets, liabilities, equity, expenses and revenues.
The Statement of Comprehensive Income is prepared on an accrual basis. It is
therefore fundamentally different to a “receipts and payments account” (often prepared
by clubs and social groups) which records cash receipts and payments in that it
makes adjustments for unearned income, credit sales, repayments, accrued expenses
and non-cash provisions (e.g. depreciation and leave provisions). Depreciation, which
is an expense charged in the Statement of Comprehensive Income to reflect the value
of capital assets consumed during the accounting period, is explained in more detail in
Section 9 of this manual.
This process of recognising income as it is earned, and expenses as they are
incurred, is known as “accrual accounting”. This method provides a more accurate
reflection of the transactions which actually occurred during the accounting period and
is a better reflection of the actual business activities undertaken by the local
government.
Accounting Standard AASB 1004 Contributions requires contributions to be
recognised as revenue (i.e. in the Statement of Comprehensive Income) when the
local government obtains control over the assets comprising the contributions
notwithstanding that those contributions may be a grant for a capital item.
Given this requirement, grants for capital works have the potential to significantly
affect the operating result in a particular year.
4.2.2 Statement of Cash Flows
Compliance and Reporting Summary
LGA s. 6.2(1)
Each local government is to prepare and adopt in the form and
manner prescribed, a budget.
FMR r. 22(1)
The annual budget of a local government is to be in a form that
includes the following –
(b) a cash flow statement
(Note: AASB 101 and 107 describe this as a statement of cash
flows and this title is used in this manual)
FMR r. 22(2)
The financial information disclosed in the annual budget, other
than the statement of cash flows, is to be compiled on an accrual
accounting basis.
Cash flow information provides users of financial reports with a basis to assess the
ability of an entity to generate cash and cash equivalents and the needs of the entity
to utilize those cash flows. AASB 107 sets out the requirements for the presentation
of the statement of cash flows and related disclosures.
Section 4 - Budget Process – Page 15
The Statement of Cash Flows shall report cash flows during the period classified by
operating, investing and financing activities.
When estimating inflows the relevant balance sheet items are:
 cash (or overdraft);
 debtors;
 inventories; and
 investments.
These assets form the starting point for a cash flow budget which is built using the
following process:
 profiling the period over which the local government expects to receive funds from
debtors;
 budgeting revenues from rates, charges and other sources for each period;
 profiling the expected timing of receipts from each revenue source (i.e. due date for
rates payments, instalments dates etc.);
 determining the period in which any loans/grants will be received; and
 identifying the points at which investments will mature.
This process attempts to predict or profile the local government’s cash inflows, by
period, for the coming year. The same process is used for cash outflows with the
starting point being the following balance sheet items:
 creditors; and
 loans.
From this point an attempt is made to predict cash outflows for the local government
by:
 profiling the periods in which creditors will be paid;
 identifying due dates for loan repayments;
 profiling wages and salaries commitments:
 profiling the local government’s capital works program; and
 budgeting all expenditure on the basis of expected payment date as opposed to
the period in which the expenditure is expected to be incurred.
All cash inflows and outflows should be incorporated into the cash flow forecast
including:
 draw downs on loan facilities/loan redemption; and
 capital purchases/asset sales.
The key objective of a cash flow forecast is to predict the period in which cash inflows
and outflows will occur.
Section 4 - Budget Process – Page 16
The peaks in available cash can be identified and arrangements made to invest
surplus cash and overdraft arrangements organised in advance with bankers to cover
shortfalls.
The management of cash is extremely important and a local government’s cash
position must be distinguished from its equity position. Equity is represented by all of
the local government’s assets less its liabilities. Most local governments could survive
an operating deficit for a year but would reach crisis point if insufficient cash was
available to pay wages and salaries.
The cash flow forecast thus provides the local government with the means by which:
 cash surpluses can be predicted and surplus funds invested for an appropriate
period; and
 cash shortages can be predicted and appropriate arrangements made for a bank
overdraft or redemption of invested funds.
Whilst a cash flow forecast is not mandatory, other than in assisting with setting the
annual rates and charges, it is considered a vital financial management technique for
all organizations to ensure there is sufficient liquidity throughout the financial year.
4.2.3 Rate Setting Statement
Compliance and Reporting Summary
LGA s. 6.2(1)
Each local government is to prepare and adopt in the form and
manner prescribed, a budget.
FMR r. 22(1)(d)
The annual budget of a local government is to be in a form that
includes a rate setting statement.
FMR r. 22(2)
The financial information disclosed in the annual budget, other
than the cash flow statement, is to be compiled on an accrual
accounting basis.
FMR r. 30(1)(c)
Previous financial year figures to be shown for comparison
It is essential that local governments have meaningful and accurate financial
information on which to base decisions. The starting point for sound financial
management is the preparation of a Rate Setting Statement. This statement is a
crucial component of the budget process and establishes the amount to be made up
from rates.
The Rate Setting Statement is a summary of all operating and capital sources of funds
and the application of those funds. All the information is compiled from the Statement
of Comprehensive Income prepared on an accrual basis. Depreciation, Profit/Loss
and non-current movements are written back to arrive at the amount to be made up
from rates. It should be noted that the non-current to current movements should not
be adjusted in the opening balance brought forward from the previous year audited
financial statements but should rather be separate line items in the Rate Setting
Statement.
Section 4 - Budget Process – Page 17
4.2.4 Statement of Financial Position & Statement of Changes in Equity
A Statement of Financial Position and Statement of Changes in Equity are not
required under current legislation to be included in the local government’s annual
budget document. However local governments are encouraged to include these
statements in the budget as best practice.
Examples of a Statement of Financial Position and a Statement of Changes in Equity
can be found at Appendix I of this section.
Notes to the Annual Budget
Certain information must be included in the budget document in accordance with
s.6.2(4) of the LGA and as prescribed by the FMR. FMR r. 22 to 31 details the notes
to be included in the annual budget.
The Model Annual Budget includes examples of the notes required under these
regulations.
Supplementary Information
FMR r. 22(1)(i) requires that the budget includes notes containing the information set
forth in FMR r. 27 and such other supporting notes, tables and other information as
the local government considers will assist in the interpretation of the annual budget.
This regulation encompasses information that is not covered by a specific provision
and could include, but is not limited to, the following:
 Budget overview that highlights areas of expenditure, increases and decreases for
various functions and activities;
 Revenue and expenditure on a line by line basis over various programs and subprograms detailed in Schedule 1 of the FMR;
 Schedule of fees and charges which is required under Section 6.2 (4)(c) of the
Local Government Act 1995 to be included in the budget document;
 A list of individual assets to be acquired which includes all capital purchases and
works and has reference to the Acquisition of Assets Note in the budget document.
Details of development grants and contributions, their source and their application
can be incorporated into the detailed information on acquisition of assets. An
example of reports can be found at Appendix II – Capital Templates.
Examples of rate modelling can be found at Appendix III.
Section 4 - Budget Process – Page 18
Common Pitfalls
4.5.1 Brought Forward Figures – Opening and Closing Funds
The Rate Setting Statement is a statutory requirement and is unique to local
government in Western Australia in that it contains values of the opening funds and
closing funds.
Opening funds refer to 'net current assets less restricted funds and committed cash
and amounts already reflected in the current year budget'. The opening fund forms
part of the calculation of the amount of the deficiency to be raised from rates as
referred to in Section 6.2(2)(c) of the Local Government Act 1995.
The calculations of opening funds brought forward at 1 July from the previous financial
year, and closing funds carried forward at 30 June into the next financial year in the rate
setting statement of the budget, have a direct impact in the determination of the amount
of rates to be raised, and whether it is a balanced, surplus or deficit budget. Some local
governments have found themselves in difficulties over miscalculation of these funds.
Errors have led to situations where the funds available during the year have been less
than that required to deliver the services and facilities provided for in the budget. In other
cases councils have imposed higher rate increases than were necessary.
For more on calculation of Opening and Closing funds please refer to ‘Local
Government Operational Guidelines – Number 8: Net Current Assets (Opening and
Closing Funds) used in the Annual Budget’.
4.5.2 Rating – Valuations up to date
Changes in valuation are regularly forwarded to a local government from the Valuer
General and include interim valuations, GRV general valuations approximately every
three years and UV general valuations yearly. It is essential that the valuations are
updated prior to 30 June each year and that the local government valuation register
balances with the total of valuations provided by the Valuer General.
4.5.3 Early Adoption
Calculation of projected estimates to 30 June for the early adoption of the budget
should be based on relatively accurate data. Early adoption of a budget can use an
incorrect closing estimated balance for the end of the previous financial year.
Estimated actuals need to be very carefully scrutinised to ensure accurate figures are
carried forward and should include:
 Analysis of outstanding purchase orders;
 Contract payments;
 Leave accruals entered or estimated;
 Analysis of restricted cash;
 Accurate calculation of year end reserve transfers;
 All debtor’s invoices raised or estimated;
 Inventory calculations;
 Interest and staff accruals;
Section 4 - Budget Process – Page 19
 Current provisions.
Checklist
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












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
The form of the budget (in accordance with legislation)
Adopted between 1 June and 31 August (or later with Ministerial Approval)
Budget notes
Surplus or deficit budgets (within statutory limit)
Current position balance brought forward (exclude deferred rates)
Comparative figures
Rates information
Service charges
Differential rates advertising period (Ministerial approval if required)
Specified area rates
Other fees and charges
Discounts, waivers and write-offs
Disposition of assets
Interest on late payments
Instalment options
Investments
Borrowings
Reserves
Change of purpose of reserves
Trading and major trading undertakings
Major land transactions
Councillor remuneration
Programs and activities, Nature or Type
Depreciation
No legislative requirement to advertise the budget
Absolute majority resolutions (Note: a resolution adopting a ‘budget as attached’
is not acceptable).
Section 4 - Budget Process – Page 20
Reporting Timeline
REF
ACTION
TIMELINE
DETAILS
LGA s. 6.2(1)
Local government to
adopt Annual
Budget
Between
1 June and
31 August
Or such extended time as
the Minister allows
(delegated to Director
General)
FMR r. 33
Local government to
submit copy of
Annual Budget to
Departmental CEO
30 days
Following adoption of the
Annual Budget
Last day to submit
Annual Budget to
Departmental CEO
30 September
Unless Minister has
extended time to adopt
Local government
(officers) to carry out
a Review of its
Annual Budget
Between
1 January and
31 March
Covering the period 1 July
and ending no earlier than
31 December
Budget Review to be
submitted to Council
Within 30 days
(30 April at
latest)
After Review completed
by officers the council to
consider whether to adopt
all, part or not to adopt
A copy of the Budget
Review and the
council’s
determinations
(Minutes) is to be
provided to the
Department
Within 30 days
(30 May at
latest)
After council has made a
determination on the
Review
FMR r.
33A(1)
and (2A)
FMR r.
33A(2)
and (3)
FMR r.
33A(4)
Section 4 - Budget Process – Page 21
Statutory Requirements for Amendments
Changes or additions to Fees and Charges Schedule
LGA s. 6.16(3)
Fees and charges are to be imposed when adopting the annual
budget but may be –
(a)
imposed during a financial year; and
(b)
amended from time to time during a financial year
* absolute majority required.
LGA s. 6.19
Local public notice of fees
Local public notice to be given of fees and charges imposed or
changed after the budget is adopted –
(a)
of a local governments intention to do so; and
(b)
the date from which the proposed fees and charges will be
imposed.
Changes or additions to Borrowings
LGA s. 6.20(2)
Where, in any financial year, a local government proposes to
exercise a power under subsection (1) (power to borrow) and
details of that proposal have not been included in the annual
budget for that financial year —
(a)
unless the proposal is of a prescribed kind, the local
government must give one month’s local public notice of
the proposal; and
(b)
the resolution to exercise that power is to be by absolute
majority.
LGA s. 6.20(3)
Where a local government has exercised a power to borrow
and —
(a)
it does not wish to proceed with the performance of the
function or the exercise of the power for which the power to
borrow was exercised; or
(b)
after having completed the performance of the function or
the exercise of the power for which the power to borrow
was exercised, any part of the money borrowed, credit
obtained or financial accommodation arranged has not
been expended or utilized,
the local government may resolve* to expend the money or utilize
the credit or financial accommodation for another purpose if one
month’s local public notice is given of the proposed change of
purpose.
* Absolute majority required.
Section 4 - Budget Process – Page 22
Changes or additions to Reserves
LGA s. 6.11(2)
Subject to subsection (3), before a local government —
(a)
changes* the purpose of a reserve account; or
(b)
uses* the money in a reserve account for another purpose,
it must give one month’s local public notice of the proposed
change of purpose or proposed use.
* Absolute majority required.
LGA s. 6.11(3)
A local government is not required to give local public notice under
subsection (2) —
(a)
where the change of purpose or of proposed use of money
has been disclosed in the annual budget of the local
government for that financial year; or
(b)
in such other circumstances as are prescribed.
LGA s. 6.11(4)
A change of purpose of, or use of money in, a reserve account is
to be disclosed in the annual financial report for the year in which
the change occurs.
LGA s. 6.11(5)
Regulations may prescribe the circumstances and the manner in
which a local government may set aside money for use for a
purpose in a future financial year without the requirement to
establish and maintain a reserve account.
LGA s. 6.8(1)
Expenditure from municipal fund not included in annual budget
A local government is not to incur expenditure from its municipal fund
for an additional purpose except where the expenditure —
(a)
is incurred in a financial year before the adoption of the
annual budget by the local government;
(b)
is authorised in advance by resolution*; or
(c)
is authorised in advance by the mayor or president in an
emergency.
* Absolute majority required.
Adjusting the rate in the dollar
LGA s. 6.32(3)
A local government —
(a)
may, at any time after the imposition of rates in a financial
year, in an emergency, impose* a supplementary general
rate or specified area rate for the unexpired portion of the
current financial year; and
(b)
is to, after a court or the State Administrative Tribunal has
quashed a general valuation, rate or service charge,
impose* a new general rate, specified area rate or service
charge.
* Absolute majority required.
Section 4 - Budget Process – Page 23
Budget Adoption
The following is an example of a Budget Adoption Agenda Item
4.9.1 Adoption of the 201Y/201Z Budget
REPORT DATE:
21 July 201Y
LOCATION ADDRESS:
Town of Eagle Bay
APPLICANT
N/A
FILE REFERENCE:
4.20.1
AUTHOR
Tim Jones - Executive Manager Corporate Services
SENIOR OFFICER
James Farnham – Chief Executive Officer
DISCLOSURE OF
INTEREST
1. Financial Interest as salary and conditions of officers
incorporated within the municipal budget
APPENDICES
Nil
DOCUMENTS TABLED
Attachment 4.9.1 – 201Y/201Z Draft Budget
PURPOSE
To consider and adopt the Municipal Fund Budget for the 201Y/201Z financial year
together with supporting schedules, including imposition of rates and minimum
payments, adoption of fees and charges, establishment of new reserve funds, setting
of elected members fees for the year and other consequential matters arising from the
budget papers.
BACKGROUND
The draft 201Y/201Z budget has been compiled based on the principles contained in
the Strategic Community Plan and Plan for the Future. The 201Y/201Z draft budget
has been prepared in accordance with the presentations made to councillors at the 6
budget workshops held between April and June 201Y.
The proposed differential general rates were approved by the council on 1 June 201Y
and advertised for public comment. No submissions were received by 28 June 201Y
when the public comment period closed.
DETAILS
The budget has been prepared to include information required by the Local
Government Act 1995, Local Government (Financial Management) Regulations 1996
and Australian Accounting Standards. The main features of the draft budget include:

The budget has been prepared with a 3.0% rate increase in line with the forward
financial plans contained in the Plan for the Future. This increase applies to all
differential general rate categories.
Section 4 - Budget Process – Page 24

Fees and charges have also been increased by 3% and are itemised in the draft
budget.

Household and commercial waste charges and charges for depositing refuse at the
Eagle Waste Transfer Station are proposed to increase by 4% and are itemised
separately in the draft budget.

The recurrent operating budget includes an overall increase in estimated
expenditure of 3% (although individual line items may vary from this based on
specific factors affecting each of these) and continues the focus on improved
service delivery to the community. There is no increase in staff numbers planned.

A capital works programme totalling $14m for investment in infrastructure, land and
buildings, plant and equipment and furniture and equipment is planned.
Expenditure on road infrastructure is the major component of this ($6.8m) in line
with Council’s strategy to increase the investment in road and associated assets.
An amount of $4.25m is provided for land and buildings of which $3.42m is for the
Eagles Nest land purchase which will be developed for sale.

Loan borrowings of $320,000 to fund a new loader for the works division are
proposed.

A new Reserve Account - Workers Compensation Premium Reserve is included
and was previously endorsed by Council at its 4 May 201Y meeting (Minute No
1Y/286).

An estimated surplus of $1.16m is anticipated to be brought forward from 30 June
201Y. However this is unaudited and may change. Any change will be addressed
as part of a future budget review.

Principal additional grant funding for the year is estimated from:
 Royalties for Regions Funding - $2,327,000.
 Black Spot Funding - $1,270,000.
 Roads to Recovery - $1,184,000.
CONSULTATION
While no specific consultation has occurred on the draft 201Y/201Z budget,
community consultation and engagement has previously occurred during development
of the Community Strategic Plan from which the Corporate Business Plan was
developed. In addition, the proposed differential rates were advertised in the Eagle
Bay Flyer on 4 June 201Y. No comments were received.
Extensive internal consultation has occurred between all Divisions and through
briefings and workshops with elected members.
STATUTORY ENVIRONMENT
Section 6.2 of the Local Government Act 1995 requires that not later than 31 August in
each financial year, or such extended time as the Minister allows, each local
government is to prepare and adopt, (Absolute Majority required) in the form and
manner prescribed, a budget for its municipal fund for the financial year ending on the
next following 30 June.
Section 4 - Budget Process – Page 25
Divisions 5 and 6 of Part 6 of the Local Government Act 1995 refer to the setting of
budgets and raising of rates and charges. The Local Government (Financial
Management) Regulations 1996 details the form and content of the budget. The draft
201Y/201Z budget as presented is considered to meet statutory requirements.
POLICY IMPLICATIONS
The budget is based on the principles contained in the Plan for the Future and the
Corporate Business Plan.
FINANCIAL IMPLICATIONS
Specific financial implications are as outlined in the Detail section of this report and as
itemised in the draft 201Y/201Z budget attached for adoption.
STRATEGIC IMPLICATIONS
The draft 201Y/201Z budget has been developed based on the existing Plan for the
Future and strategic planning documents adopted by council.
VOTING REQUIREMENT
Absolute Majority required: Yes for some of the parts of the recommendations.
TRIPLE BOTTOM LINE ASSESSMENT
Economic Implications
The draft 201Y/201Z budget has been developed based on sound financial
management and accountability principles and is considered to deliver a sustainable
economic outcome for council and the community.
Social Implications
The draft 201Y/201Z budget delivers social outcomes identified in various planning
and community supporting strategies that have previously been adopted by the
council.
Environmental Implications
The draft 201Y/201Z budget supports key environmental strategies and initiatives
adopted by the council.
COMMENT
The draft 201Y/201Z budget continues to deliver on other strategies adopted by the
council and maintains a high level of service across all programs while ensuring an
increased focus on road and associated infrastructure as well as on renewing all
assets at sustainable levels.
Section 4 - Budget Process – Page 26
OFFICER RECOMMENDATION TO BE DEBATED AND RESOLVED BY COUNCIL
That:
PART A – MUNICIPAL FUND BUDGET FOR 201Y/201Z
Pursuant to the provisions of section 6.2 of the Local Government Act 1995 and
Part 3 of the Local Government (Financial Management) Regulations 1996, the
council adopt the Municipal Fund Budget as contained in Attachment 4.9.1 of this
agenda and the minutes, for the Town of Eagle Bay for the 201Y/201Z financial
year which includes the following:
 Statement of Comprehensive Income by Nature and Type on page (#)
showing a net result for that year of $5,983,657
 Statement of Comprehensive Income by Program on page (#) showing a
net result for that year of $5,983,657
 Statement of Cash Flows on page (#)
 Rate Setting Statement on page (#) showing an amount required to be
raised from rates of $8,683,439
 Notes to and Forming Part of the Budget on pages (# to #)
 Budget Program Schedules as detailed in pages (# to #)
 Transfers to / from Reserve Accounts as detailed in page (#)
Moved:
Seconded:
ABSOLUTE MAJORITY REQUIRED
PART B – GENERAL AND MINIMUM RATES, INSTALMENT PAYMENT
ARRANGEMENTS
1. For the purpose of yielding the deficiency disclosed by the Municipal Fund
Budget adopted at Part A above, council pursuant to sections 6.32, 6.33, 6.34
and 6.35 of the Local Government Act 1995 impose the following differential
general rates and minimum payments on Gross Rental and Unimproved
Values.
1.1 General Rates*
 Residential (GRV)
 Commercial / Industrial (GRV)
 Truck/Bus Depot (GRV)
 Rural (UV)
 Commercial/Industrial (UV)
 Mining (UV)
8.3900 cents in the dollar
8.3900 cents in the dollar
9.0450 cents in the dollar
1.2403 cents in the dollar
1.2403 cents in the dollar
1.2403 cents in the dollar
1.2 Minimum Payments
 Residential (GRV)
 Commercial / Industrial (GRV)
 Truck/Bus Depot (GRV)
 Rural (UV)
 Mining (UV)
 Commercial / Industrial (UV)
$521
$521
$521
$260
$260
$260
Section 4 - Budget Process – Page 27
2. Pursuant to section 6.45 of the Local Government Act 1995 and regulation
64(2) of the Local Government (Financial Management) Regulations 1996,
council nominates the following due dates for the payment in full by instalments:
 Full payment and 1st instalment due date
24 September 201Y
 2nd half instalment due date
28 January 201Z
nd
 2 quarterly instalment due date
26 November 201Y
rd
 3 quarterly instalment due date
28 January 201Z
 4th quarterly instalment due date
28 April 201Z
3. Pursuant to Section 6.46 of the Local Government Act 1995, council offers a
discount of 5% to ratepayers who have paid their rates in full, including arrears,
waste and service charges, on or before 26 September 201Y or 35 days after
the date of service appearing on the rate notice, whichever is the later.
4. Pursuant to section 6.45 of the Local Government Act 1995 and regulation 67
of the Local Government (Financial Management) Regulations 1996, council
adopts an instalment administration charge where the owner has elected to pay
rates (and service charges) through an instalment option of $10 for each
instalment after the initial instalment is paid.
5. Pursuant to section 6.45 of the Local Government Act 1995 and regulation 68
of the Local Government (Financial Management) Regulations 1996, council
adopts an interest rate of 5.5% where the owner has elected to pay rates and
service charges through an instalment option.
6. Pursuant to section 6.51(1) and subject to section 6.51(4) of the Local
Government Act 1995 and regulation 70 of the Local Government (Financial
Management) Regulations 1996, council adopts an interest rate of 11% for
rates (and service charges) and costs of proceedings to recover such charges
that remains unpaid after becoming due and payable.
Moved:
Seconded:
ABSOLUTE MAJORITY REQUIRED
PART C – RESERVE FUNDS – NEW RESERVE ESTABLISHED
Pursuant to section 6.11 of the Local Government Act 1995 a Workers’
Compensation Premium Reserve be established
The purpose of this Reserve is to hold any workers’ compensation insurance
premium savings that may be made each year and to fund any additional premium
demand made by council’s insurers from time to time.
Moved:
Seconded:
ABSOLUTE MAJORITY REQUIRED
PART D – GENERAL FEES AND CHARGES FOR 201Y/201Z
Pursuant to section 6.16 of the Local Government Act 1995, council adopts the
Section 4 - Budget Process – Page 28
Fees and Charges included at pages # to # inclusive of the draft 201Y/201Z budget
included as Attachment 4.9.1 of this agenda and minutes.
Moved:
Seconded:
ABSOLUTE MAJORITY REQUIRED
PART E – OTHER STATUTORY FEES FOR 201Y/201Z
1.
2.
3.
Pursuant to section 53 of the Cemeteries Act 1986 the council adopts the Fees
and Charges for the Eagles Rest Cemetery included at page # of the draft
201Y/201Z budget included as Attachment 4.9.1 of this agenda and minutes.
Pursuant to Regulation 53(2) of the Building Regulation 2012 the council
adopts a swimming pool inspection fee of $33 inclusive of GST.
Pursuant to section 67 of the Waste Avoidance and Resources Recovery Act
2007, council adopt the following charges for the removal and deposit of
domestic and commercial waste:
3.1




Residential Premises (including recycling)
240ltr bin per weekly collection
240ltr bin per weekly collection – eligible pensioner
140ltr bin per weekly collection
140ltr bin per weekly collection – eligible pensioner
$300pa
$200pa
$180pa
$120pa



Commercial Premises
Council Owned Bulk Bin per weekly collection
Privately Owned Bulk Bin per collection
Additional weekly collection
$1,850pa
$1,430pa
$1,430pa
3.2
Moved:
Seconded:
SIMPLE MAJORITY
4.
Pursuant to section 67 of the Waste Avoidance and Resources Recovery Act
2007, and section 6.16 of the Local Government Act 1995 council adopt the
following charges for the deposit of domestic and commercial waste:
4.1







Eagles Waste Transfer Station
Load or volume:
Car or station wagon
Van or utility
Trailer (6 x 4)
Trailer (6 x 4) high sided
Commercial waste (per cubic metre)
Domestic volumes (<2m3) of green waste
Commercial volumes (>2m3) of green waste (per m3)
Moved:
$17.00
$25.00
$30.00
$35.00
$30.00
$Free
$5.00
Seconded:
ABSOLUTE MAJORITY REQUIRED
PART F – ELECTED MEMBERS’ FEES AND ALLOWANCES FOR 201Y/201Z
Section 4 - Budget Process – Page 29
1.
Pursuant to section 5.99 of the Local Government Act 1995 and regulation 34
of the Local Government (Administration) Regulations 1996, council adopts the
following annual fees for payment of elected members in lieu of individual
meeting attendance fees:
Mayor
Councillors
2.
$14,000
$7,000
Pursuant to section 5.99A of the Local Government Act 1995 and regulations
34A and 34AA of the Local Government (Administration) Regulations 1996,
council adopts the following annual allowances for elected members:
Telecommunications Allowance
Information Technology Allowance
3.
Pursuant to section 5.98(5) of the Local Government Act 1995 and regulation
33 of the Local Government (Administration) Regulations 1996, council adopts
the following annual local government allowance to be paid in addition to the
annual meeting allowance:
Mayor
4.
$2,000
$1,000
$14,000
Pursuant to section 5.98A of the Local Government Act 1995 and regulations
33A of the Local Government (Administration) Regulations 1996, council
adopts the following annual local government allowance to be paid in addition
of the annual meeting allowance:
Deputy Mayor
Moved:
$3,500
Seconded:
ABSOLUTE MAJORITY REQUIRED
PART G – MATERIAL VARIANCE REPORTING FOR 201Y/201Z
In accordance with regulation 34(5) of the Local Government (Financial
Management) Regulations 1996, and AASB 1031 Materiality, the level to be used in
statements of financial activity in 201Y/201Z for reporting material variances shall
be 5% or $5,000, whichever is the greater.
Moved:
SIMPLE MAJORITY
Section 4 - Budget Process – Page 30
Seconded:
NOTES TO BUDGET ADOPTION
Not all decisions associated with budget adoption require an ABSOLUTE
Majority.
The adoption of a budget should not be by a single resolution; rather the budget
adoption should be broken-down into various like components as shown above
and be adopted by several separate motions.
Council may consider adopting some of the above items as a separate report and
prior to the formal adoption of the budget.
Such items may be:
1.
Adoption of the Fees and Charges (Part D and E)
2.
Adoption of Councillor Fees (Part F)
3.
Adoption of material variance for reporting (Part G)
Model Annual Budget
This model 201Y/201Z Annual Budget is based on the hypothetical Town of Eagle Bay
for which a complete set of model financial statements is provided.
The reporting formats used for the Town of Eagle Bay are examples of good practice
used for illustrative purposes only and comply with AASB 101 and legislation.
They should NOT be interpreted as mandatory reporting formats. The report structure
as indicated is simply a guide. The model statements include disclosures that apply to a
wide range of users but it is unlikely that any one user will find all of the disclosures
appropriate to its circumstances. Similarly, it is likely that most users will need to make
one or more disclosures not shown in the model statement.
The key financial statements and notes as far as practicable have been cross referenced
to the Australian Accounting Standards and Western Australian legislation. The
commentary to the financial statements and notes are on the left page to each document
with a brief explanation of the standard and legislation. To obtain a clearer
understanding of the Australian Accounting Standards may require further reference to
the narratives provided by each of the Australian Accounting Standards, the Australian
Accounting Standards Interpretations which replaces the UIG interpretation or the Local
Government Act 1995 and the Local Government (Financial Management) Regulations
1996.
Reference to the AASB’s
Reference is made to various Australian Accounting Standards (AASB’s) throughout this
section of the manual. Compliance with the AASB’s is mandatory by virtue of the Local
Government (Financial Management) Regulations 1996, FMR r.4(1). Individual AASB’s
are identified by their number and include a paragraph reference number after the full
stop for greater reference. On occasions a reference is made to an ‘Aus’ paragraph,
which is a reference to specific, not for profit exemptions and guidance.
Section 4 - Budget Process – Page 31
Section 4 - Budget Process – Page 32
TOWN OF EAGLE BAY
ANNUAL BUDGET
FOR THE YEAR ENDING 30 JUNE 201Z
TABLE OF CONTENTS
Statement of Comprehensive Income - By Nature or Type
38
Statement of Comprehensive Income - By Program
40
Statement of Cash Flows
42
Rate Setting Statement
44
Notes to and Forming Part of the Budget
49
Section 4 - Budget Process – Page 33
Commentary – Statement of Comprehensive Income by Nature or Type
Accounting standard for financial report presentation and disclosure
AASB 101.Aus1.1
AASB 101 “Presentation of Financial Statements” applies to each entity which is
required to prepare general purpose financial reports, including local
governments.
AASB 101.51
The local government must clearly identify each financial statement and the
notes with the name of the local government, the reporting period, the currency
and the level of rounding used.
AASB 101.38
FMR r. 30 (1)(a)
The local government must disclose comparative information in respect of the
previous period for all amounts reported in the current period’s financial
statements. This should include comparative information for narrative and
description when it is relevant to an understanding of the current period’s
financial statements.
AASB 101.5
This Standard uses terminology that is suitable for profit-oriented entities. Some
line items are renamed to reflect the activities of the local government.
FMR r. 22 (1)(a)
This Regulation requires the annual budget to include a Statement of
Comprehensive Income.
FMR r. 3
AASB 101.10 (b)
The definition of “Income Statement” at Financial Management Regulation 3 is:
“income statement (or equivalent) that meets the requirements of Australian
Accounting Standards for income statements.”
Due to the changes to terminology in AASB 101, the “income statement” is now
referred to as “statement of comprehensive income”.
FMR r. 15 (3)
Where a local government rounds off any figures, the basis of the rounding off is
to be shown in column headings and explained fully in the accompanying notes.
AASB 101.82
AASB 101.85
This Standard prescribes the minimum disclosure requirement on the face of the
Statement of Comprehensive Income. AASB 101.85 allows for additional line
items, headings and subtotals when such presentation is relevant to an
understanding of the local government’s financial performance.
DLGC
FMR Schedule 1
Part 2
The Statement of Comprehensive Income illustrates revenue and expenditure
items by nature or type. For guidance on type classification of financial
transactions into appropriate categories refer to Section 5.4 of the Manual
“Classification of Financial Transactions”.
Please note the legislation only prescribes the minimum disclosures and greater
details should be provided if such presentation is relevant to the understanding
of the council’s financial performance.
Financial Management Regulation Amendment
FMR r. 14
AASB 1052.11(b)
Financial Management Regulation 14 was amended following the withdrawal of
AAS27 and no longer requires a Statement of Comprehensive Income by
program as this is dealt with by AASB 1052.11(b) which only requires this
statement by note. However, local governments may choose to continue to
provide this information by statement.
The requirement to produce a statement by nature or type classifications still
remains.
AASB 101.104
Notes to the budget shall be presented in a systematic order. Each item in the
financial statements shall be cross-referenced to the related notes.
Section 4 - Budget Process – Page 34
FMR r. 22(1)(a)
FMR r. 3
AASB 101.5, 10(b)
AASB 101.10A, 51
AASB 101.85
AASB 101.99
AASB 101.38, 113
FMR r. 15(3)
FMR r. 30(1)(a)
AASB 101.82(a)
AASB 101.5
FMR r. 14
FMR Schedule 1
Part 2
AASB 101.82(b)
TOWN OF EAGLE BAY
STATEMENT OF COMPREHENSIVE INCOME
BY NATURE OR TYPE
FOR THE YEAR ENDING 30 JUNE 201Z
NOTE
Revenue
Rates
Operating Grants,
Subsidies and Contributions
Fees and Charges
Service Charges
Interest Earnings
Reimbursements/Recoveries
Other Revenue
Expenses
Employee Costs
Materials and Contracts
Utility Charges
Depreciation
Interest Expenses
Insurance Expenses
Other Expenditure
8
13
10
2(a)(ii)/12
2(a)(i),15(b)
2(a)(i),5(a)
AASB 101.85
201Z
Budget
$
201Y
Actual
$
201Y
Budget
$
8,914,617
8,753,005
8,638,728
5,424,320
5,099,750
0
500,000
0
815,366
20,754,053
6,987,595
4,999,717
0
498,964
30,000
738,038
22,007,319
5,548,348
4,253,486
0
385,100
0
27,304
18,852,966
(7,821,052)
(3,995,534)
(457,291)
(7,200,000)
(107,196)
(346,481)
(592,991)
(20,520,545)
233,508
(8,896,802)
(4,120,422)
(443,972)
(6,907,407)
(96,257)
(336,390)
(564,333)
(21,365,583)
641,736
(8,772,958)
(3,926,230)
(435,600)
(7,100,000)
(399,441)
(333,163)
(828,951)
(21,796,343)
(2,943,377)
Non-Operating Grants,
Subsidies and Contributions
Adjustments to financial assets
at fair value through profit and loss
Profit on Asset Disposals
Loss on Asset Disposals
15(b)
5,658,334
2,994,037
5,856,328
2(a)(i)
4
4
0
109,795
(18,000)
5,750,129
(60,000)
44,048
(98,325)
2,879,760
0
2,333,736
(49,155)
8,140,909
AASB 101.81A(a)
NET RESULT
15(b)
5,983,637
3,521,496
5,197,532
AASB 101.81A(b)
Other Comprehensive Income
Changes on Revaluation of non-current
assets
Total Other Comprehensive Income
0
0
830,611
830,611
0
0
AASB 101.81A(c)
TOTAL COMPREHENSIVE INCOME
5,983,637
4,352,107
5,197,532
Other Comprehensive Income (if any) is impacted upon by external forces and is
unable to be reliably estimated.
It is anticipated in all instances, any other comprehensive income will relate to noncash transactions and as such, have no impact on this budget
document.
This statement is to be read in conjunction with the accompanying notes.
Section 4 - Budget Process – Page 35
Commentary – Statement of Comprehensive Income By Nature or Type (continued)
Other Presentation Issues
Goods and Services Tax (GST)
UIG 1031(6), (7)
UIG 1031 Accounting for the GST provides that revenues and expenses must be
recognised net of the amount of GST, except where GST relating to expense
items that is not recoverable from the tax authority it must be recognised as part of
the item of expense.
Offsetting
AASB 101.32
Assets and liabilities and income and expenses, must not be offset unless
required or permitted by the Australian Accounting Standards. Examples of
income and expenses that are required or permitted to be offset are as follows:
(a) Gains and losses on the disposal of non-current assets, including investments
and operating assets, are reported by deducting from the proceeds on
disposal the carrying amount of the asset and related selling expenses.
(b) Expenditure related to provision that is recognised in accordance with AASB
137 Provisions, Contingent Liabilities and Contingent Assets and reimbursed
under a contractual arrangement with a third party (for example, a supplier’s
warranty agreement) may be netted against the related reimbursement.
(c) Gains and losses arising from a group of similar transactions are reported on a
net basis, for example, gains and losses arising on financial instruments held
for trading. Such gains and losses need to be reported separately if they are
material.
Commentary – Statement of Comprehensive Income By Program
FMR r. 14
Western Australian local governments are required by Regulation 14 of the Local
Government (Financial Management) Regulations 1996 (FMR) to disclose
operating income and expenses by nature or type in the Income Statement and
provide program disclosure by note or statement.
FMR r. 3
Schedule 1 Part 1
The program classifications for the classification of financial transactions for local
government in Western Australia are detailed in Schedule 1, Part 1 of the Local
Government (Financial Management) Regulations 1996.
AASB 1052.11,
12, 13
The standard requires for each broad function or activity, disclosure by note is
required of the nature, objectives and carrying amount of assets attributable to
each function or activity (see note 2(a)).
DLGC
AASB 101.99
The model statements have taken the approach of including both the Statement of
Comprehensive Income by Nature or Type and a Statement of Comprehensive
Income by Program as part of key financial statements. AASB 101.99 requires an
entity to present the Statement of Comprehensive Income using a classification
based on either their nature or their function (program) within the entity, whichever
provides information that is reliable and more relevant.
Section 5.4 of the manual “Classification of Financial Transactions” provides
further clarity on classification of local government financial transactions.
FMR r. 15(3)
Requires the basis of the rounding off figures to be shown in the reports and
notes.
FMR r. 36(2)
Requires disclosure adjacent to the end of year figures in the Statement of
Comprehensive Income, the original budget estimates for the financial year.
AASB 101.5
This Standard uses terminology that is suitable for profit-oriented entities. Some
line items are renamed to reflect the activities of the local government.
Section 4 - Budget Process – Page 36
FMR r. 22(1)(a)
FMR r. 3
AASB 101.5, 10(b)
AASB 101.10A, 51
AASB 101.85
AASB 101.99
FMR r. 15(3)
FMR r. 14
AASB 101.38
FMR r. 30(1)(a)
AASB 101.82(a)
AASB 101.5
FMR Schedule 1
Part 1
TOWN OF EAGLE BAY
STATEMENT OF COMPREHENSIVE INCOME
BY PROGRAM
FOR THE YEAR ENDING 30 JUNE 201Z
NOTE
201Z
Budget
$
Revenue
Governance
General Purpose Funding
Law, Order, Public Safety
Health
Education and Welfare
Housing
Community Amenities
Recreation and Culture
Transport
Economic Services
Other Property and Services
Expenses
Governance
General Purpose Funding
Law, Order, Public Safety
Health
Education and Welfare
Housing
Community Amenities
Recreation & Culture
Transport
Economic Services
Other Property and Services
AASB 101.85
Adjustments to financial assets
at fair value through profit and loss
Non-Operating Grants, Subsidies, Contributions
Law Order & Public Safety
15(b)
Recreation & Culture
Transport
Other Property & Services
201Y
Actual
$
201Y
Budget
$
219,117
12,587,898
549,433
270,249
1,710,763
600
1,738,813
1,246,770
895,033
517,813
1,017,564
20,754,053
108,566
12,221,261
574,829
262,378
1,660,935
520
1,688,168
1,081,801
2,104,548
503,702
1,800,611
22,007,319
93,221
12,560,244
444,802
176,240
1,416,806
600
1,332,502
931,562
879,065
387,060
630,864
18,852,966
(826,134)
(176,970)
(1,371,758)
(369,302)
(1,792,712)
(1,500)
(3,295,015)
(4,384,021)
(6,936,311)
(674,667)
(692,155)
(20,520,545)
(802,072)
(171,816)
(1,137,630)
(356,604)
(1,743,528)
(1,657)
(2,859,238)
(4,259,938)
(8,517,398)
(616,182)
(899,520)
(21,365,583)
(898,185)
(158,077)
(1,349,794)
(331,717)
(1,713,980)
(1,500)
(3,057,906)
(4,235,364)
(8,308,559)
(598,183)
(1,143,078)
(21,796,343)
233,508
641,736
(21,796,343)
0
(60,000)
0
158,000
122,000
5,365,334
13,000
5,658,334
112,000
247,102
2,634,935
0
2,994,037
112,000
240,000
3,004,328
2,500,000
5,856,328
1,500
(7,000)
103,295
(6,000)
91,795
(24,097)
0
(30,180)
0
(54,277)
(10,000)
138,196
37,819
2,118,566
2,284,581
AASB 101.82(a)
AASB 101.5
FMR r. 14
FMR Schedule 1
Part 2
Profit/(Loss) on Disposal of Assets
Governance
Recreation & Culture
Transport
Other Property & Services
AASB 101.81A(a)
NET RESULT
15(b)
Other Comprehensive Income
Changes on Revaluation of Non-Current Assets
Total Other Comprehensive Income
5,983,637
3,521,496
5,197,532
0
0
830,611
830,611
0
0
TOTAL COMPREHENSIVE INCOME
5,983,637
4,352,107
5,197,532
AASB 101.81A(b)
AASB 101.81A(c)
4
Other Comprehensive Income (if any) is impacted upon by external forces and is not able to
be reliably estimated. It is anticipated in all instances, an other comprehensive income will
relate to non-cash transactions and as such, have no impact on this budget document.
Section 4 - Budget Process – Page 37
Commentary – Statement of Cash Flows
Accounting standard for financial report presentation and disclosure
AASB 101.10
AASB 107
This standard prescribes the composition of a complete set of financial
statements. This needs to include a Statement of Cash Flows for the reporting
period.
Accounting Standard for the Statement of Cash Flows
This Standard applies to each entity that is required to prepare general purpose
financial statements and a Statement of Cash Flows shall be prepared by the local
government and be presented as an integral part of its financial statements for
each period for which financial statements are presented.
AASB 107.10
AASB 107.18(a)
The Statement of Cash Flows shall report cash flows during the period classified
by operating, investing and financing activities.
Reporting cash flows - operating activities
An entity shall report cash flows from operating activities using the direct method,
whereby major classes of gross cash receipts and gross cash payments are
disclosed.
FMR
Schedule 1 Part 2
Classifications According to Nature and Type
AASB 107.31

Interest and dividends
Cash flows from interest and dividends received and paid shall each be disclosed
separately. Each shall be classified in a consistent manner from period to period
as operating, investing or financing activities.
UIG

Interpretation 31
AASB 107.21
Goods and Services Tax
Cash flows shall be included in the cash flow statement on a gross basis. The
GST component of cash flows arising from investing and financing activities which
is recoverable from, or payable to, the taxation authority shall be classified as
operating cash flows.

From investing and financing activities
An entity shall report separately major classes of gross cash receipts and gross
cash payments arising from investing and financing activities, except to the extent
that cash flows described in paragraphs 22 and 24 of AASB 107 are reported on a
net basis (refer to description below).
AASB 107.22, 23

On a net basis
Cash flows arising from the following operating, investing or financing activities
may be reported on a net basis:
(a) cash receipts and payments on behalf of customers when the cash flows
reflect the activities of the customer rather than those of the entity (e.g. rents
collected on behalf of, and paid over to, the owners of properties); and
(b) cash receipts and payments for items in which the turnover is quick, the
amounts are large, and the maturities are short (e.g.) advances made for, and
repayment of, principal amounts relating to credit card customers).
AASB 107.45
An entity shall disclose the components of cash and cash equivalents and shall
present a reconciliation of the amounts in its cash flow statement with the
equivalent items reported in the Statement of Financial Position.
AASB 101.111
Cash flow information provides users of financial statements with a basis to
assess the ability to generate cash and cash equivalents and the needs to utilise
those cash flows.
Section 4 - Budget Process – Page 38
FMR r. 22(1)(b)
AASB 101.10(d)
AASB 101.51,111
AASB 107.1
AASB 101.38, 113
FMR r. 15(3)
AASB 107.10
AASB 107.18
AASB 107.18(a)
FMR Schedule 1
Part 2
Interpretation 1031
AASB 107.18(a)
FMR Schedule 1
Part 2
AASB107.32
Interpretation 1031
TOWN OF EAGLE BAY
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDING 30 JUNE 201Z
NOTE
AASB 107.10
AASB 107.21
AASB 107.45
201Y
Actual
$
201Y
Budget
$
8,855,414
4,999,443
5,195,930
0
500,000
1,539,891
1,005,367
22,096,045
8,813,260
6,975,823
4,993,691
0
498,964
1,539,891
178,633
23,000,262
8,639,448
5,452,682
4,253,640
0
385,100
1,539,891
27,304
20,298,065
(8,233,403)
(3,359,657)
(457,291)
(346,481)
(67,149)
(1,539,891)
(634,044)
(14,637,916)
(9,186,356)
(3,977,285)
(443,972)
(336,390)
(77,531)
(1,539,891)
(516,058)
(16,077,483)
(9,474,863)
(3,252,196)
(435,600)
(333,163)
(372,735)
(1,539,891)
(824,283)
(16,232,731)
15(b)
7,458,129
6,922,779
4,065,334
3
(3,851,373)
(2,056,759)
(4,076,189)
3
(2,347,500)
(2,738,440)
(4,474,382)
3
(8,222,895)
0
(6,186,340)
(500,000)
(10,704,824)
(500,000)
15(b)
4
5,658,334
602,000
2,994,037
759,429
5,856,328
5,904,714
(8,161,434)
(7,728,073)
(7,994,353)
(108,612)
50,399
320,000
(70,597)
24,393
1,227,644
(70,597)
24,393
2,188,452
261,787
1,181,440
2,142,248
376,146
6,005,704
(1,786,771)
6,005,704
6,381,850
4,218,933
Cash Flows From Operating Activities
Receipts
Rates
Operating Grants, Subsidies, Contributions
Fees and Charges
Service Charges
Interest Earnings
Goods and Services Tax
Other Revenue
Payments
Employee Costs
Materials and Contracts
Utility Charges
Insurance Expenses
Interest Expenses
Goods and Services Tax
Other Expenditure
Net Cash Provided By
Operating Activities
AASB 107.10
AASB 107.21
201Z
Budget
$
Cash Flows from Investing Activities
Payments for Development of
Land Held for Resale
Payments for Purchase of
Property, Plant & Equipment
Payments for Construction of
Infrastructure
Advances to Community Groups
Non-Operating Grants,
Subsidies and Contributions
Proceeds from Sale of Assets
Net Cash Used in
Investing Activities
Cash Flows from Financing Activities
Repayment of Debentures
Proceeds from Self Supporting Loans
Proceeds from New Debentures
Net Cash Provided By (Used In)
Financing Activities
5(a)
5(a)
5(a)
Net Increase (Decrease) in Cash Held
(441,518)
Cash at Beginning of Year
6,381,850
Cash and Cash Equivalents
at the End of the Year
15(a)
5,940,332
This statement is to be read in conjunction with the accompanying notes.
Section 4 - Budget Process – Page 39
Commentary – Rate Setting Statement
Rate setting statement
FMR r. 22(1)(d)
The annual budget of a local government is to include a rate setting statement
showing details of:
(i) all sources and applications of funds that have been taken into account to
determine the budget deficiency;
(ii) the total amount of the general rate to be imposed; and
(iii) any deficit or surplus remaining after the imposition of the general rate.
10% rule to be in accordance with s 6.34 of the Act.
FMR r. 30(1)(c)
FMR r. 30(2)
Previous financial year’s figures need to be included for comparison. These
include the previous financial year result at 30 June.
If estimate of actual of previous year is unknown then estimate may be, if noted,
included in the annual budget.
FMR r. 31
(1) The annual budget is to include the net current assets carried forward from the
previous financial year.
(2) If at the time of preparation of the annual budget the net current assets is not
known, an estimate of that figures may, if disclosed as an estimate, be
included in the annual budget.
Rounding off figures
FMR r. 15(3)
All figures shown in the annual budget and a financial report (other than a rate in
the dollar) may be:
(a) rounded off to the nearest dollar;
(b) if the total assets shown in the last audited annual financial report of the local
government exceed $10,000,000, rounded off to the nearest $1,000.
Note:
This Model Budget presents a balanced budget figure of zero (0) as the expected
surplus at 30 June of the budget period. Many councils estimate a small surplus
to ensure that funds are available prior to rates being raised or to allow for any
variation required following the audit of the annual financial statements.
Section 4 - Budget Process – Page 40
AASB 101.51
FMR r. 22(1)(d)
TOWN OF EAGLE BAY
RATE SETTING STATEMENT
FOR THE YEAR ENDING 30 JUNE 201Z
AASB101.38
FMR r. 15(3)
FMR r. 30(1)(c)
NOTE
201Y
Est. Actual
$
201Y
Budget
$
220,617
3,688,511
707,433
270,249
1,710,763
600
1,738,813
1,368,770
6,363,662
517,813
1,030,564
17,617,795
108,566
3,518,112
686,829
262,378
1,660,935
520
1,688,168
1,328,903
4,783,531
503,702
1,800,611
16,342,255
93,221
3,970,416
556,802
176,240
1,416,806
600
1,803,650
2,171,562
3,960,367
387,060
3,916,478
18,453,202
(826,134)
(176,970)
(1,371,758)
(369,302)
(1,792,712)
(1,500)
(3,295,015)
(4,391,021)
(6,936,311)
(674,667)
(698,155)
(20,533,545)
(826,169)
(171,816)
(1,137,630)
(356,604)
(1,743,528)
(1,657)
(2,859,238)
(4,259,938)
(8,641,626)
(616,182)
(909,520)
(21,523,908)
(908,185)
(158,077)
(1,349,794)
(331,717)
(1,682,025)
(1,500)
(3,057,906)
(4,243,523)
(8,380,666)
(598,183)
(1,133,922)
(21,845,498)
(2,915,750)
(5,181,653)
(3,392,296)
Adjustments for Cash Budget Requirements:
Non-Cash Expenditure
and Revenue
(Profit)/Loss on Asset Disposals
4
Movement in Deferred Pensioner Rates
Movement in Employee Benefit Provisions
Depreciation on Assets
2(a)(i),15(b)
(91,795)
0
0
7,200,000
54,277
2,400
39,677
6,907,407
(2,284,581)
0
0
7,100,000
Net Non-Cash Expenditure
and Revenue
7,108,205
7,003,761
4,815,419
Revenue
Governance
General Purpose Funding
Law, Order, Public Safety
Health
Education and Welfare
Housing
Community Amenities
Recreation and Culture
Transport
Economic Services
Other Property and Services
Expenses
Governance
General Purpose Funding
Law, Order, Public Safety
Health
Education and Welfare
Housing
Community Amenities
Recreation & Culture
Transport
Economic Services
Other Property and Services
Net Operating
Excluding Rates
Section 4 - Budget Process – Page 41
201Z
Budget
$
This page has been intentionally left blank.
Section 4 - Budget Process – Page 42
TOWN OF EAGLE BAY
RATE SETTING STATEMENT
FOR THE YEAR ENDING 30 JUNE 201Z
AASB 101.51
FMR r. 22(1)(d)
AASB101.38
NOTE
FMR r. 15(3)
FMR r. 30(1)(c)
(continued)
Capital Expenditure
Purchase of Land Held for Resale
Purchase Land
Purchase Buildings
Purchase Plant and Equipment
Purchase Furniture and Equipment
Infrastructure Assets - Roads
Infrastructure Assets - Other
Advances to Community Groups
Repayment of Debentures
201Z
Budget
$
201Y
Est. Actual
$
201Y
Budget
$
(3,851,373)
(500,000)
(328,500)
(1,499,000)
(20,000)
(6,865,895)
(1,357,000)
0
(108,612)
(2,056,759)
(272,805)
(387,380)
(2,031,457)
(46,798)
(6,586,340)
0
(500,000)
(70,597)
(4,076,189)
(700,479)
(1,087,000)
(2,686,903)
0
(10,704,824)
0
(500,000)
(70,597)
(14,530,380)
(11,952,136)
(19,825,992)
4
5(b)
602,000
320,000
759,429
1,227,644
5,340,453
2,188,452
5(a)
50,399
24,393
24,393
972,399
2,011,466
7,553,298
(3,867,220)
2,739,845
(3,376,061)
2,543,939
(1,478,584)
2,447,854
(1,127,375)
(832,122)
969,270
1,2
3
3
3
3
3
3
3
5(a)
Net Capital Expenditure
Capital Revenue
Proceeds Disposal of Assets
Proceeds from New Debentures
Self-Supporting Loan Principal
Income
Net Capital Revenue
Transfers
Transfers to Reserves
Transfers from Reserves
6
6
Net Transfers
ADD
LESS
Est. Surplus/(Deficit) July 1 B/Fwd
Est. Surplus/(Deficit) June 30 C/Fwd
7
7
1,593,514
0
1,841,049
1,593,514
1,290,473
0
Amount Required to be
Raised from Rates
8
(8,899,387)
(8,703,149)
(8,589,828)
This statement is to be read in conjunction with the accompanying notes.
Section 4 - Budget Process – Page 43
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Section 4 - Budget Process – Page 44