LG System Inc – Model Budget Template, 2007-08
Model Budget
Template
2007 - 2008
This project has been assisted by the Local Government Research
& Development Scheme
LG System Inc – Model Budget Template, 2007-08
TABLE OF CONTENTS
1. BUDGET OVERVIEW ........................................................................................................ 1
2. KEY FINANCIAL INDICATORS ....................................................................................... 3
3. SERVICES PROVIDED TO THE COMMUNITY ........................................................... 6
4. ANALYSIS OF OPERATING BUDGET .......................................................................... 8
Operating Revenue ............................................................................................................ 8
Operating Expenses......................................................................................................... 10
Operating Result ............................................................................................................... 11
5. ANALYSIS OF CAPITAL EXPENDITURE.................................................................... 12
Net Outlays on Existing assets....................................................................................... 12
Net Outlays on New and Upgraded Assets .................................................................. 12
Capital Works Program ................................................................................................... 13
Infrastructure and Asset Management Plan ................................................................. 13
6. ANALYSIS OF BUDGETED BALANCE SHEET ......................................................... 14
Net Financial Liabilities .................................................................................................... 15
7. RATING STRATEGY ....................................................................................................... 16
8. FINANCING THE BUDGET ............................................................................................ 18
APPENDICES ........................................................................................................................ 20
BUDGETED INCOME STATEMENT ............................................................................ 21
BUDGETED BALANCE SHEET .................................................................................... 22
BUDGETED CASH FLOW STATEMENT .................................................................... 23
UNIFORM PRESENTATION OF FINANCES .............................................................. 24
SUMMARY OF LONG-TERM FINANCIAL PLAN ....................................................... 25
CAPITAL WORKS PROGRAM ...................................................................................... 26
DETAILS OF COST OF PROVIDING SERVICES ...................................................... 27
GLOSSARY............................................................................................................................ 28
LG System Inc – Model Budget Template, 2007-08
1. BUDGET OVERVIEW
The Council considers that its budget is a fundamental instrument of accountability
and an essential pre-requisite to deciding the annual rate impost on the community.
The Council has budgeted for an operating surplus/deficit of
$[Click here and type details] in 2007-08 after including general and other rates of
$[Click here and type details]. Capital spending on infrastructure and other assets of
$[Click here and type details] is proposed.
Note: In future years, it is proposed that this Budget Overview section will also
include a high level summary of the Council’s:(1) Key Budget assumptions and influences; (2) Annual Business Plan consultation
outcomes; (3) Rating Regime; (4) Any increased service levels.
Planning framework
The 2007-08 Budget has been developed within the Council’s overall planning
framework. The Council’s suite of strategic management plans includes a 10-year
long-term financial plan supported by an infrastructure and asset management plan,
the latter currently under development. A summary of the long-term financial plan is
shown in Appendix E. Its purpose is to express, in financial terms, the activities that
the Council proposes to undertake over the medium to longer-term to achieve its
stated goals and objectives.
Note: It is expected that the data covering the long-term financial plan will be
available as an output of the Financial Planning software product provided to
Councils free of charge by the LGA/LG Financial Management Group. That product,
which was developed by Jigsaw Services Ltd and funded by the Local Government
Research and Development Scheme, currently is being updated and improved
(again with funding from the Research and Development Fund).
To guide the preparation of its 2007-08 Budget, the Council prepared and undertook
community consultation on a draft annual business plan. The draft annual business
plan for 2007-08 includes the Council’s planned objectives, activities and
performance measures for the financial year as well as its proposed rating structure
and policies.
The annual business plan as adopted provides a linkage between the Council’s suite
of strategic management plans and its annual Budget.
Highlights of the Budget
Highlights of the 2007-08 Budget include:


[Click here and type details]
[Click here and type details]
Section 1: Budget Overview
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LG System Inc – Model Budget Template, 2007-08
Note: We could give examples of the sorts of things to put in highlights in a User
Manual. Indeed, throughout this draft document, there are a number of areas where
examples and further guidance could be provided in a User Manual. Highlights
should be expressed in terms of outcomes wherever possible.
LG System Inc – Model Budget Template, 2007-08
2. KEY FINANCIAL INDICATORS
This section of the 2007-08 Budget provides information about five key indicators of
the Council’s financial performance and financial position. Analysis on each of the
indicators is included in the following sections of the document. Further explanatory
notes on the indicators are provided in the Glossary.
Operating Surplus / (Deficit)
Operating Surplus/(Deficit) $Mill
2.0
1.0
0.0
-1.0
-2.0
-3.0
-4.0
2004-05 Actual
2005-06 Actual
2006-07 Estimate
2007-08 Budget
An operating surplus / deficit of $[Click here and type details] is targeted in 2007-08.
This represents an improvement / deterioration of $[Click here and type details] on
the estimated operating result for 2006-07.
Note: The Operating Result has, as an integral part, the level of rates to be raised for
the Budget period. This document does not culminate in a Rates Determination
Statement as may have occurred traditionally. Instead, the level of rates is part of a
range of expenditure and revenue decisions made in the context of ensuring the
long-term sustainability of the Council’s financial performance and financial position.
All financial information is assembled on an accrual accounting basis.
Note: The LGA has issued an information paper on financial indicators (including to
explain the reason for indicators) which promotes seven standard indicators for use
by the Local Government sector (five of which are used in this document).
Subsequently, the LGA General Meeting in April 2007 decided to adopt all seven
indicators. It is proposed that the additional two indicators (Interest Cover Ratio and
Asset Consumption Ratio) will be added to future additions of this document.
Indicators are measures of outcomes. Individually and without associated analysis,
they only tell part of the story. The usefulness of indicators is not in the numbers
themselves but the analysis of what is driving the indicator.
Section 2: Key Financial Indicators
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LG System Inc – Model Budget Template, 2007-08
Operating Surplus Ratio
60%
40%
Ratio %
20%
0%
-20%
-40%
-60%
-80%
2004-05 Actual
2005-06 Actual
2006-07 Estimate
2007-08 Budget
The estimated operating surplus / deficit in 2007-08 expressed as a percentage of
general and other rates (the operating surplus ratio) is estimated at
[Click here and type details]% / negative [Click here and type details]%.
Net Financial Liabilities
Net Financial Liabilities $Mill
10
8
6
4
2
0
-2
2004-05 Actual
2005-06 Actual
2006-07 Estimate
2007-08 Budget
The Council’s level of net financial liabilities is expected to be
$[Click here and type details] / negative $[Click here and type details] at 30 June
2008. This represents an increase / a decrease of $[Click here and type details] on
the estimated level of net financial liabilities at 30 June 2007.
Section 2: Key Financial Indicators
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LG System Inc – Model Budget Template, 2007-08
Net Financial Liabilities Ratio
100
75
Ratio %
50
25
0
-25
-50
-75
2004-05 Actual
2005-06 Actual
2006-07 Estimate
2007-08 Budget
The Council’s net financial liabilities at 30 June 2008 expressed as a percentage of
estimated operating revenue in 2007-08 (the net financial liabilities ratio) is expected
to be [Click here and type details]% / negative [Click here and type details]%.
Asset Sustainability Ratio
175
150
Ratio %
125
100
75
50
25
0
2004-05 Actual
2005-06 Actual
2006-07 Estimate
2007-08 Budget
The Council’s asset sustainability ratio in 2007-08 is expected to be
[Click here and type details]% calculated by comparing planned capital expenditure
on renewal and replacement of assets against depreciation expenses in 2007-08 /
calculated by comparing planned capital expenditure on renewal and replacement of
assets against the optimal level for such expenditure in 2007-08 as shown in the
Council’s Infrastructure and Asset Management Plan.
Section 2: Key Financial Indicators
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LG System Inc – Model Budget Template, 2007-08
3. SERVICES PROVIDED TO THE
COMMUNITY
Note: The aim here is to link the budget to achieving the Council’s strategic
objectives. More generally, this document attempts to present information which is
useable and understandable by the community and which can be reconciled with
audited financial statements This section would be supported by core information in
an Appendix which essentially would be the underlying basis for assembling the
Budget. To the maximum extent possible, it is planned that the process of “feeding”
that core information into the other higher level tables and charts scattered
throughout this document would be automated using software developed within or
integrated into the LGS System. Meantime, some general wording for this section is
provided below. To a large extent, this section of the document is a summary of what
will have earlier been included in the Council’s draft Annual Business Plan.
This section provides a summary of the activities to be funded in the Budget for the
2007-08 year and how these will contribute to achieving the Council’s strategic
objectives.
In planning its activities for 2007-08, the Council has split its activities into two
categories – “core” and “discretionary”. Core activities of the Council are those which
more or less continue to be provided each year. Discretionary activities are those
which will be undertaken only if sufficient revenue is available. Often, discretionary
activities support the current strategic focus of the Council and may involve shortterm or one-off initiatives.
Note: We could show here a list of functions /or programs /or objectives /or service
categories, a description of what the service delivery associated with that
function/program/objective/service category involves, and the gross cost of providing
the service. The sum of the gross cost figures should equal the operating expenses
budget included in Section 4 of this document. As a suggested starting point, the
following table summarises the Council’s budgeted operating expenses under
Organisational Units and lists the main activities under each Unit. Such an approach
may be attractive to some Councils as actual performance reports against the
budget during the year ahead could then be prepared on a consistent basis. This
structure may also help facilitate the assessment of each Managers performance in
meeting targets?
The following table summarises activities under the Council’s organisational units.
The table is followed by a brief summary of the key outputs of each one of the
organisational units for 2007-08:-
Section 5: Community Services
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LG System Inc – Model Budget Template, 2007-08
Organisational Unit/Activity
Core
Operating
Expenses
$’000
Discretionary
Operating
Expenses
$’000
Total
Operating
Expenses
$’000
Works and Technical Services
Roads
Footpaths
Trees
Street Lighting
Parks and Reserves
Waste Management
Community Wastewater Management
Total Works and Technical Services
Community and Economic Services
Library Services
Community Transport
xxxx
Total Community and Economic Services
Environmental and Inspectorial Services
xxxx
xxxx
Total Environ and Inspectorial Services
Governance and Administration
xxxx
xxxx
Total Governance and Administration
Total Operating Expenses
Key outputs of each one of the Organisational Units for 2007-08 are as follows:[Click here and type details]
Note: Elected Members need appropriate information and advice to enable decisions
on expenditure and rating effort. The range of community expectations can never be
completely fulfilled without increasing rates and/or reducing expenditure on other
services. This section of the document could be used to highlight that Elected
Members therefore need to make choices about which expectations deserve priority
and that they are accountable to their communities for these choices. Separately, we
probably need to highlight in this section where planned expenditure is conditional
upon grants being received.
Section 6: Operating Budget Analysis
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LG System Inc – Model Budget Template, 2007-08
4. ANALYSIS OF OPERATING BUDGET
This section of the document analyses the expected revenues and expenses of the
Council for the 2007-08 financial year. It also provides commentary on the budgeted
operating result for 2007-08.
Operating Revenue
Revenue Types
Ref
Rates – General
Rates – Other
Statutory Charges
User Charges
Grants, Subsidies and Contributions
Investment Income
Reimbursements
Other Revenue
Total Operating Revenue
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
2005-06
Actual
$’000
2006-07
Estimate
$’000
2007-08
Budget
$’000
Source: Appendix A
4.1
General Rates
General rate revenue of $[Click here and type details] is planned for 2007-08, an
increase of $[Click here and type details] compared with 2006-07. This represents
an increase of [Click here and type details]% (excluding general rate revenue
associated with new development). Section 7 of this document includes further
discussion and analysis of rates to be levied in 2007-08 together with summary
information about the Council’s rating structure. The Council’s Annual Business Plan
for 2007-08
[Click here and incude a reference on how to access the Annual Business Plan]
provides detailed information on the Council’s rating structure and policies.
4.2
Other Rates
Other rate revenue in 2007-08 includes the State Government’s Natural Resources
Management (NRM) levy collected on behalf of the [Click here and type details]
NRM Board ($[Click here and type details]), a separate rate covering
[Click here and type details] ($[Click here and type details]) and
[Click here and type details] ($[Click here and type details]).
4.3
Statutory Charges
Statutory charges are fees for regulatory services. They are associated with the
granting of a permit/licence or the regulation of an activity. They include
Section 6: Operating Budget Analysis
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LG System Inc – Model Budget Template, 2007-08
Development Act fees and parking fines. Increases in statutory charges are made in
accordance with legislative requirements.
Statutory charges in 2007-08 are forecast to increase by
$[Click here and type details] compared with 2006-07.
4.4
User Charges
User charges relate mainly to the recovery of service delivery costs through the
charging of fees to users of Council’s services. They include hire of community
facilities and cemetery fees. User charges also include income from commercial
activities (such as operating a caravan park) which traditionally have been shown as
a separate income item.
User charges in 2007-08 are projected to increase by $[Click here and type details]
compared with 2006-07. This represents an increase of [Click here and type details]
% and aims to ensure that the Council recovers the costs of service delivery.
4.5
Grants, Subsidies and Contributions
This item covers grants, subsidies and contributions from all sources but excludes
amounts specifically received for new/upgraded assets (i.e. the acquisition or
enhancement of assets). The following table summarises the main grants involved:Grant Funding Types
2005-06
Actual
$’000
2006-07
Estimate
$’000
2007-08
Budget
$’000
LG Grants Commission – General Purpose Grant
LG Grants Commission – Identified Local Road Grant
LG Grants Commission – Special Local Roads Grant
Roads to Recovery
Home and Community Care
XXXXXXXX
Other
Total Grants, Subsidies and Contributions
Overall, Local Government Grants Commission grants (representing funding
provided by the Australian Government) are estimated to be
$[Click here and type details] in 2007-08. This represents
[Click here and type details]% of the Council’s estimated total operating revenue in
2007-08.
4.6
Investment Income
Interest earnings on the investment of funds not immediately required and interest
received on loans to community groups are estimated at
$[Click here and type details] in 2007-08.
Section 6: Operating Budget Analysis
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LG System Inc – Model Budget Template, 2007-08
4.7
Reimbursements
Reimbursements are amounts received as payment for work done by the Council
acting as an agent for others (e.g. reimbursement for road works by the State
Government). Revenue of $[Click here and type details] is estimated in 2007-08.
4.8
Other Revenues
Other revenue is revenue not separately classified above. Of the estimated revenue
of $[Click here and type details] in 2007-08, $[Click here and type details] is
attributable to [Click here and type details].
Operating Expenses
Expense Types
Ref
Employee Costs
Materials, Contracts & Other Expenses
Finance Costs
Depreciation
Total Operating Expenses
4.9
4.10
4.11
4.12
2005-06
Actual
$’000
2006-07
Estimate
$’000
2007-08
Budget
$’000
Source: Appendix A
4.9
Employee Costs
Employee costs include all labor related expenses such as wages and salaries, and
on-costs such as allowances, leave entitlements and employer superannuation.
Employee costs are forecast to increase by $[Click here and type details] (or
[Click here and type details]%) in 2007-08 compared with 2006-07. This increase
relates to:


[Click here and type details]
[Click here and type details]
Average staff numbers during 2007-08 have been budgeted as follows:
4.10 Materials, Contracts & Other Expenses
Materials cover payments for physical goods. This includes purchase of
consumables, water and energy. Contract Services involve payments for the external
provision of services. This may include indirectly provided labour and materials or
sub-contractors which are part of a contract. Overall, the increase / decrease of
$[Click here and type details] in materials, contract and other expenses in 2007-08
mainly reflects[Click here and type details].
Section 6: Operating Budget Analysis
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LG System Inc – Model Budget Template, 2007-08
4.11 Finance Costs
Finance costs cover the costs of financing the Council’s activities through borrowings
or other types of financial accommodation. The increase / decrease in 2007-08
mainly reflects [Click here and type details].
4.12 Depreciation
Depreciation is an accounting measure which records the consumption of the
Council’s infrastructure, property, plant and equipment. The increase of
$[Click here and type details] in depreciation expenses in 2007-08 reflects the
combined effect of a full year’s impact of depreciable assets created by capital
expenditure on new/upgraded assets in 2006-07, the part year impact of capital
expenditure on new/upgraded assets in 2007-08 and the ongoing impact of regularly
revaluing infrastructure assets on a ‘fair value’ basis.
Operating Result
Operating Surplus/(Deficit)
2005-06
Actual
$’000
2006-07
Estimate
$’000
2007-08
Budget
$’000
Operating Revenue
less: Operating Expenses
Equals: Operating Surplus/(Deficit)
Source: Appendix A
As shown in the above table, the Council has budgeted for an operating surplus /
deficit of $[Click here and type details] in 2007-08. A key financial target of the
Council is to continue to achieve a modest operating surplus each year / is to strive
to achieve a modest operating surplus by [Click here and type year]
/[Click here and type year] so as to ensure ongoing financial sustainability and
therefore avoid future potential cuts to services and/or significant increases in rates.
Any operating surplus generated is applied to meet capital expenditure and thus
reduces the amount of borrowings otherwise needed for that purpose. Where such
capital expenditure is not required in a particular year, the amount of the operating
surplus is held for capital expenditure needs in future years by either increasing
financial assets or, where possible, reducing outstanding debt in the meantime. Put
another way, the amount of the operating surplus not needed for capital expenditure
in a particular year automatically leads to a reduction in the level of the Council’s net
financial liabilities.
Note: Some additional commentary may be desirable here given the fundamental
importance of the operating result measure to the long-term financial sustainability of
the Council. This could include reference to planned future operating results showing
in the Long-term Financial Plan at Appendix E.
Section 6: Operating Budget Analysis
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LG System Inc – Model Budget Template, 2007-08
5. ANALYSIS OF CAPITAL EXPENDITURE
Net Outlays on Existing assets
The following table summarises capital outlays on existing assets:
Net Outlays on Existing Assets
2005-06
Actual
$’000
2006-07
Estimate
$’000
2007-08
Budget
$’000
Capital Expend on Renewal/Replacement of Assets
less: Proceeds from Sale of Replaced Assets
less: Depreciation
Equals: Net Outlays on Existing Assets
Source: Appendix D
The Asset Sustainability Ratio in 2007-08 is expected to be
[Click here and type details]% and has been calculated by comparing the capital
expenditure on renewal and replacement of existing assets (net of the sale proceeds
of replaced assets) with depreciation expenses / and has been calculated by
comparing planned capital expenditure on renewal and replacement of assets
against the optimal level for such expenditure in 2007-08 as shown in the Council’s
Infrastructure and Asset Management Plan.
An analysis of this ratio shows [Click here and type details].
Net Outlays on New and Upgraded Assets
The following table summarises capital outlays on new/upgraded assets:
Net Outlays on New and Upgraded Assets
2005-06
Actual
$’000
2006-07
Estimate
$’000
2007-08
Budget
$’000
Capital Expenditure on New/Upgraded Assets
less: Proceeds from Sale of Surplus Assets
less: Amounts received specifically for New/Upgraded
Assets
Equals: Net Outlays on New and Upgraded Assets
Source: Appendix D
The ongoing maintenance and depreciation expenses associated with the capital
expenditure on new/upgraded assets has been factored into the Council’s Long-term
Financial Plan.
Section 7: Capital Expenditure Analysis
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LG System Inc – Model Budget Template, 2007-08
Capital Works Program
The following table summarises the Council’s planned Capital Works Program in
2007-08. A listing of individual projects comprising the Program for 2007-08 is shown
in Appendix F.
Capital Works Area
2005-06
2006-07
2007-08
Actual
Estimate
Budget
$’000
$’000
$’000
Roads
Drains
Footpaths
Buildings
Community Wastewater Management
Waste Management
Information Technology
Plant, Equipment and Other
Total Capital Works
Capital Works represented by:
Asset renewal/replacement
New/upgraded assets
Total Capital Works
Source: Appendix F
Highlights of the 2007-08 Capital Works Program are as follows:

[Click here and type details]
[Click here and type details]
Infrastructure and Asset Management Plan
The Council is developing an Infrastructure and Asset Management Plan which sets
out the capital expenditure requirements of the Council for the next 10 years by class
of asset and project and is a key input to the Long-term Financial Plan. When
completed, it will predict infrastructure consumption and renewal needs and will
consider new infrastructure needs to meet future community service expectations.
The Plan will be subject to a rigorous process of consultation and evaluation. Key
elements of the process are as follows:



Long term capital planning which integrates with the Council’s Strategic
Management Plans;
Listing of all known capital projects, prioritised within classes of assets on the
basis of evaluation criteria;
Transparent process for evaluating and prioritising capital projects.
A key objective of the Infrastructure and Asset Management Plan is to maintain or
preserve Council’s existing assets at desired condition levels, and thus minimise
whole of life cycle costs of assets.
Section 7: Capital Expenditure Analysis
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LG System Inc – Model Budget Template, 2007-08
6. ANALYSIS OF BUDGETED BALANCE
SHEET
This section analyses the estimated balance sheet movements between 30 June
2007 and 30 June 2008 and discusses the level of the Council’s net financial
liabilities (being the key measure of the Council’s financial position).
Ref
Current assets
Non-current Assets
Total Assets
6.1
6.2
Current Liabilities
Non-current Liabilities
Total Liabilities
6.3
6.4
Equity
6.5
2005-06
2006-07
2007-08
Actual
Estimate
Budget
$’000
$’000
$’000
Source: Appendix B
6.1
Current assets
The increase / decrease in current assets in 2007-08 primarily is due to
[Click here and type details]. Outstanding rates and other debtor balances are not
expected to change significantly and are at acceptable levels.
6.2
Non-current assets
The increase in non-current assets in 2007-08 essentially reflects the combined
effect of all capital expenditure, the depreciation of existing assets, the book value of
assets sold and the ongoing revaluation of infrastructure assets on a ‘fair value’
basis.
6.3
Current liabilities
The increase / decrease in current liabilities in 2007-08 (that is, obligations the
Council must pay within the next 12 months) primarily is due to
[Click here and type details].
Section 8: Budgeted Balance Sheet Analysis
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LG System Inc – Model Budget Template, 2007-08
6.4
Non-current liabilities
The increase / decrease in non-current liabilities in 2007-08 (i.e. obligations that the
Council must pay beyond 30 June 2008) primarily is due
to[Click here and type details].
6.5
Equity
The net increase / decrease in equity of $[Click here and type details] in 2007-08
results directly from the net surplus / deficit showing in the Budgeted Income
Statement (see Appendix A).
Net Financial Liabilities
Net Financial Liabilities
2005-06
Actual
$’000
2006-07
Estimate
$’000
2007-08
Budget
$’000
Net Financial Liabilities at 1 July
less: Net Lending / (Borrowing) for financial year
less: Other miscellaneous transactions
Equals: Net Financial Liabilities at 30 June
Source: Appendix D and E
A secondary financial target for the Council is to ensure that the accumulated level of
net financial liabilities does not exceed [Click here and type details]% of total
operating revenue in any year. The estimated level of net financial liabilities at 30
June 2008 is $[Click here and type details] which represents
[Click here and type details]% of the Council’s expected operating revenue in 200708.
Section 8: Budgeted Balance Sheet Analysis
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LG System Inc – Model Budget Template, 2007-08
7. RATING STRATEGY
This section summarises the Council’s rating arrangements and describes the
proposed rate increases in 2007-08.
7.1
Background
Excluding the NRM levy collected on behalf of the State Government’s
[Click here and type details] Natural Resource Management Board, general and
other rates are expected to account for [Click here and type details]% of the
Council’s operating revenue in 2007-08.
The Council’s rating structure and policies are set out in the 2007-08 Annual
Business Plan. The rating structure is comprised of two key elements. These are:


Property values, which generally reflect capacity to pay; and
User pays component to reflect usage of some services provided by Council.
Striking a proper balance between these elements provides equity in the distribution
of the rate burden across ratepayers.
7.2
Rate increases in 2007-08
The Valuer-General has provided capital values for all ratable properties totalling
$[Click here and type details]. This represents an increase of
[Click here and type details]% over the values adopted in 2006-07 and is made up of
the following components:
Natural Valuation Increase
New Development (i.e. Growth)
Total Valuation Increase
[Click here and type details]%
[Click here and type details]%
[Click here and type details]%
The adopted Budget contains an average general rate increase of x.x% (including /
excluding? new development). Overall, general rate revenue in the adopted Budget
for 2007-08 (including from new development) will be $[Click here and type details].
This is $[Click here and type details] greater than general rate revenue in 2006-07.
The total increase is comprised as follows:
Increase in Valuations
Additional Income from Growth
Total General Rate Revenue Increase
Section 7: Rating Strategy
$[Click here and type details]
$[Click here and type details]
$[Click here and type details]
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LG System Inc – Model Budget Template, 2007-08
7.3
Minimum Rate / Fixed Charge
The minimum rate / fixed charge has increased from $[Click here and type details] to
$[Click here and type details] for the 2007-08 financial year. This increase is broadly
in line with the average general rate revenue increase of [Click here and type details]
%.
7.4
Natural Resources Management (NRM) Levy
The Council is required to collect the NRM levy on behalf of the State Government.
The State Government’s [Click here and type details] NRM Board has indicated that
the contribution payable by the Council for the 2007-08 year is
$[Click here and type details], which is a [Click here and type details]% increase on
the amount in 2006-07. This levy will be collected by way of a separate rate charged
to each rateable property within the council area and forwarded to the
$[Click here and type details] NRM Board. The levy is required to be raised as a
fixed charge per assessment / at a particular rate in the dollar of property values per
assessment.
7.5
Rating structure
The differential rating structure of the Council $[Click here and type details]
The following table summarises the general rates proposed to be adopted for the
2007-08 financial year.
Rate type
Residential
Commercial
Industry
Primary Production
Vacant Land
Minimum Rate/Fixed Charge
2006-07
2007-08
Cents in $ of CV
Cents in $ of CV
Cents in $ of CV
Cents in $ of CV
Cents in $ of CV
$ per property
Note: This draft Budget document deliberately attempts to have less focus on Rates
than traditional Budget documents prepared by LGS Councils. This approach
recognises that the Annual Business Plan would have explained the proposed rating
arrangements in detail. Traditional Budget documents of some Councils do not
appear to have focused sufficiently on other revenue items as well as the expenses
side of the Budget. A focus is required on the cost of services being provided to
communities and the necessity for elected members to continually review
expenditure policies and priorities. Some Budget documents appear to provide a
mass of detailed financial data on inputs with little or no data or explanations on
outputs/outcomes. However, the views and judgement of individual Councils on
these matters is what is important. Thus, it is appreciated that additional information
about Rates (over and above that shown above) may be necessary in this document.
Section 7: Rating Strategy
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LG System Inc – Model Budget Template, 2007-08
8. FINANCING THE BUDGET
The following table shows the Council’s estimated net lending / (borrowing) result for
2007-08. The data is drawn from the Council’s uniform summary of operating and
capital investment activities which has been prepared on a consistent basis with
other Councils (see Appendix D). The Council’s Budget for 2007-08 is expected to
result in a net lending of $[Click here and type details]. / The Council’s Budget for
2007-08 is expected to result in a net borrowing of $[Click here and type details].
The expected net lending result in 2007-08 will lead to a reduction in the level of net
financial liabilities during 2007-08 by approximately the amount of the net lending /
The expected net borrowing result will lead to an increase in the level of net financial
liabilities in 2007-08 by approximately the amount of the net borrowing:
Net Lending/(Borrowing)
2005-06
Actual
$’000
2006-07
Estimate
$’000
2007-08
Budget
$’000
Operating Surplus/(Deficit)
less: Net Outlays on Existing Assets
less: Net Outlays on New and Upgraded Assets
Equals: Net Lending/(Borrowing)
Source: Appendix D
Financing transactions associated with applying the surplus funds stemming from the
expected net lending result in 2007-08 / associated with accommodating the
expected net borrowing result in 2007-08 are set out in the following table:
Financing Transactions
2005-06
Actual
$’000
2006-07
Estimate
$’000
2007-08
Budget
$’000
New Borrowings
less: Repayment of Principal on Borrowings
less: Increase/(Decrease) in Cash and Cash
Equivalents
Less: Increase/(Decrease) in Trade and Other
Receivables
less: Decrease/(Increase) in Trade and Other
Payables
less: Decrease/(Increase) in Provisions
less: Other (including movement in Inventories)
Equals: Financing Transactions
Source: Appendix B and C
The Council plans to apply the surplus funds expected to be available as a result of a
net lending result in 2007-08 by, first, repaying the principal instalments due on
earlier borrowings and, second, by increasing the level of its deposits with the Local
Government Finance Authority. / The Council plans to apply the surplus funds
expected to be available as a result of a net lending result in 2007-08 by, first,
repaying the principal instalments due on earlier borrowings undertaken by the
Council and, second, by repaying a portion of the Council’s borrowings outstanding
Section 10: Financing the Budget
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LG System Inc – Model Budget Template, 2007-08
under its Cash Advance Debenture facility with the Local Government Finance
Authority, a facility where voluntary principal repayments can be made at any time.
The Council plans to finance the expected net borrowing result in 2007-08 by
liquidating cash and investments otherwise being held on deposit at the Local
Government Finance Authority. / The Council plans to finance the net borrowing
result in 2007-08 by borrowing that amount from the Local Government Finance
Authority under its Cash Advance Debenture facility, where the interest rate on the
borrowing (currently 7.25% p.a.) is reset only when official interest rates (as
determined by the Reserve Bank of Australia) change. In this way, the Council will
ensure that a portion of its portfolio of borrowings will be exposed to short-term
interest rates and thus spread the Council’s interest rate risks.
Note: It is planned that the User Manual explain the deliberate proposal here to keep
the funding of activities of the Council separate and distinct from how the net impact
of those activities will be financed (i.e. being the financing transactions as set out in
the table above). Funding refers to how the Council’s costs are paid for using
Council revenue (e.g. rates, user charges, Commonwealth financial assistance
grants). Financing essentially is about arranging borrowings or running down the
level of cash and cash equivalents to meet any shortfall between Council
expenditure (both operating and capital) and the current year’s revenue.
Section 10: Financing the Budget
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LG System Inc – Model Budget Template, 2007-08
APPENDICES
A.
B.
C.
D.
E.
F.
G.
Budgeted Income Statement
Budgeted Balance Sheet
Budgeted Cash Flow Statement
Uniform Presentation of Finances
Summary of Long-term Financial Plan
Capital Works Program
Details of Cost of Providing Services
Appendices
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LG System Inc – Model Budget Template, 2007-08
APPENDIX A
BUDGETED INCOME STATEMENT
for the year ended 30 June 2008
2005-06
Actual
$’000
2006-07
Estimate
$’000
2007-08
Budget
$’000
REVENUE
Rates – general
Rates – other
Statutory charges
User charges
Grants, Subsidies and Contributions
Investment Income
Reimbursements
Other Revenues
Total Operating Revenue
EXPENSES
Employee Costs
Materials, Contracts and Other Expenses
Finance Costs
Depreciation
Total Operating Expenses
OPERATING SURPLUS / (DEFICIT)
BEFORE CAPITAL AMOUNTS
Amounts received specifically for
new/upgraded assets
Net Gain / (Loss) on disposal or revaluation of
assets
Physical resources received free of charge
NET SURPLUS / (DEFICIT)
Appendices
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LG System Inc – Model Budget Template, 2007-08
APPENDIX B
BUDGETED BALANCE SHEET
As at 30 June 2008
2005-06
Actual
$’000
2006-07
Estimate
$’000
2007-08
Budget
$’000
ASSETS
Current Assets
Cash and cash equivalents
Trade & other receivables
Other financial assets
Inventories
Non-current Assets held for Sale
Total Current Assets
Non-current Assets
Financial Assets
Investment Property
Infrastructure, Property, Plant & Equipment
Other Non-current Assets
Total Non-current Assets
Total Assets
LIABILITIES
Current Liabilities
Trade & Other Payables
Borrowings
Short-term Provisions
Other Current Liabilities
Liabilities relating to Non-current Assets held for
Sale
Total Current Liabilities
Non-current Liabilities
Trade & Other Payables
Long-term Borrowings
Long-term Provisions
Other Non-current Liabilities
Total Non-current Liabilities
Total Liabilities
NET ASSETS
EQUITY
Accumulated Surplus
Asset Revaluation Reserve
Other Reserves
TOTAL EQUITY
Appendices
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LG System Inc – Model Budget Template, 2007-08
APPENDIX C
BUDGETED CASH FLOW STATEMENT
For the year ended 30 June 2008
2005-06
Actual
$’000
2006-07
Estimate
$’000
2007-08
Budget
$’000
CASH FLOWS FROM OPERATING
ACTIVITIES
Receipts
Operating Receipts
Investment Receipts
Payments
Operating Payments to Suppliers and
Employees
Finance Payments
Net Cash provided by (or used in)
Operating Activities
CASH FLOWS FROM INVESTING
ACTIVITIES
Receipts
Amounts specifically for new/upgraded assets
Sale of replaced assets
Sale of surplus assets
Sale of Investment Property
Sale of Real Estate Developments
Repayments of loans by community groups
Payments
Expenditure on renewal/replacement of
assets
Expenditure on new/upgraded assets
Loans made to community groups
Net Cash provided by (or used in)
Investing Activities
CASH FLOWS FROM FINANCING
ACTIVITIES
Receipts
Proceeds from Borrowings
Proceeds from Aged Care Facility Deposits
Payments
Repayments of Borrowings
Repayment of Finance Lease Liabilities
Repayment of Aged Care Facility Deposits
Net Cash provided by (or used in)
Financing Activities
Net Increase (Decrease) in cash held
Cash and cash equivalents at beginning of
period
Cash and cash equivalents at end of
period
Appendices
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LG System Inc – Model Budget Template, 2007-08
APPENDIX D
UNIFORM PRESENTATION OF FINANCES
2005-06
Actual
$’000
2006-07
Estimate
$’000
2007-08
Budget
$’000
Operating Revenue
less: Operating Expenses
Operating Surplus/(Deficit) before Capital
Amounts
Less: Net Outlays on Existing Assets
Capital Expenditure on renewal and
replacement of Existing Assets
less: Depreciation
less: Proceeds from Sale of Replaced Assets
Less: Net Outlays on New and Upgraded
Assets
Capital Expenditure on New and Upgraded
Assets
less: Amounts received specifically for New
and Upgraded Assets
less: Proceeds from Sale of Surplus Assets
Equals: Net Lending / (Borrowing) for
Financial Year
Appendices
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LG System Inc – Model Budget Template, 2007-08
APPENDIX E
SUMMARY OF LONG-TERM FINANCIAL PLAN
2006-07
Estimate
$’000
2007-08
Budget
$’000
2008-09
Plan
$’000
2009-10
Plan
$’000
2010-11
Plan
$’000
2011-12
Plan
$’000
2012-13
Plan
$’000
2013-14
Plan
$’000
2014-15
Plan
$’000
2015-16
Plan
$’000
2016-17
Plan
$’000
2006-07
Estimate
2007-08
Budget
2008-09
Plan
2009-10
Plan
2010-11
Plan
2011-12
Plan
2012-13
Plan
2013-14
Plan
2014-15
Plan
2015-16
Plan
2016-17
Plan
Operating Revenue
less: Operating Expenses
Operating Surplus / (Deficit) before Capital Amounts
Less: Net Outlays on Existing Assets
Capital Expenditure on Renewal/Replacement of Assets
less: Proceeds from Sale of Replaced Assets
less: Depreciation
Net Outlays on Existing Assets
Less: Net Outlays on New and Upgraded Assets
Capital Expenditure on New/Upgraded Assets
less: Proceeds from Sale of Surplus Assets
less: Amounts received specifically for New/Upgraded Assets
Net Outlays on New and Upgraded Assets
Equals: Net Lending / (Borrowing) for Financial Year
Key Financial Indicators
Operating Surplus - $’000
Operating Surplus Ratio - %
Net Financial Liabilities - $’000
Net Financial Liabilities Ratio - %
Asset Sustainability Ratio - %
Appendices
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LG System Inc – Model Budget Template, 2007-08
APPENDIX F
CAPITAL WORKS PROGRAM
Note: Suggestion would be for a table here showing details of the planned Capital Works
Program, but not too much detail! Need to be sure to distinguish capital expenditure
between that on renewal/replacement of assets on one hand, and new/upgraded assets
on the other. Again, the views and judgement of individual Councils is what is important
here as to the level of detail. As a starting point, an example of a ‘‘minimalist” approach is
shown below:
Capital Projects for 2007-08
Asset
Renewal &
Replacement
$’000
New &
Upgraded
Assets
$’000
Total
$’000
Playground Upgrade - LGS Park
Replacing roof of Senior Citizens Hall – LGS
Grove
Sealing LGS Street – between Moore St and
Carey Drive
Resurfacing of bitumen footpath – LGS Avenue
Replace grader with new LGS model 057
Total Capital Works
Appendices
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LG System Inc – Model Budget Template, 2007-08
APPENDIX G
DETAILS OF COST OF PROVIDING SERVICES
Note: Essentially, it is proposed that this Appendix provides the detail of material shown in
Section 3 of this document. To a large extent, this is likely to include the sort of information
(albeit not so detailed) that currently makes up the main budget documents of some
Councils. The information could show, for example, under each Organisational Unit, the
various inputs (eg employee costs, materials etc) broken down to whatever detail is
considered appropriate. This information then could be “rearranged” (hopefully
automatically by way of future enhancements to the LGS System) to help complete many
of the tables in the rest of this document.
Instead of preparing separate documents covering an Annual Business Plan (ABP) on one
hand and a Budget on the other, some councils will decide to prepare one consolidated
document with two distinct components (i.e. ABP and Budget). In these circumstances,
Appendix G of this template (and some other Appendices) will relate to both components.
Appendices
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LG System Inc – Model Budget Template, 2007-08
GLOSSARY
Asset Sustainability Ratio
Asset Sustainability Ratio indicates whether the Council is renewing or replacing existing
non-financial assets at the same rate as its overall stock of assets is wearing out. The ratio
is calculated by measuring capital expenditure on renewal and replacement of assets
relative to the level of depreciation. Where a Council has a soundly based Infrastructure
and Asset Management Plan, a more meaningful asset sustainability ratio would be
calculated by measuring the actual level of capital expenditure on renewal and
replacement of assets (or proposed in the Budget) with the optimal level identified in the
Plan.
Financial Assets
Financial Assets include cash, cash equivalents, trade and other receivables, and other
financial assets, but excludes equity held in Council businesses. Also, inventories and land
held for resale are not regarded as financial assets.
Financial Sustainability
Financial Sustainability is where planned long-term service and infrastructure levels and
standards are met without unplanned and disruptive increases in rates or cuts to services.
Net Financial Liabilities
Net Financial Liabilities equals total liabilities less financial assets, where financial assets
for this purpose includes cash, cash equivalents, trade and other receivables, and other
financial assets, but excludes equity held in Council businesses, inventories and land held
for resale.
Net Financial Liabilities Ratio
Net Financial Liabilities Ratio expresses Net Financial Liabilities as a percentage of total
operating revenue. The ratio allows interested parties to readily equate the outstanding
level of the Council’s accumulated financial obligations against the level of one-year’s
operating revenue. Where the ratio is falling over time, it generally indicates that the
Council’s capacity to meet its financial obligations is strengthening.
Net Lending/ (Borrowing)
Net Lending/ (Borrowing) equals Operating Surplus / (Deficit), less net outlays on nonfinancial assets. The Net Lending / (Borrowing) result is a measure of the Council’s overall
(i.e. operating and capital) budget on an accrual basis. Achieving a zero result on the Net
Lending / (Borrowing) measure in any one year essentially means that the Council has met
all of its expenditure (both operating and capital) from the current year’s revenues.
Non-financial or Physical Assets
Appendices
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LG System Inc – Model Budget Template, 2007-08
Non-financial or Physical Assets means infrastructure, land, buildings, plant, equipment,
furniture and fittings, library books and inventories.
Operating Deficit
Operating Deficit is where operating revenues less operating expenses is negative and
operating income is therefore not sufficient to cover all operating expenses.
Operating Expenses
Operating Expenses are operating expenses including depreciation but excluding losses
on disposal or revaluation of non-financial assets.
Operating Revenues
Operating Revenues are operating revenues shown in the Income Statement but exclude
profit on disposal of non–financial assets and amounts received specifically for
new/upgraded assets, e.g. from a developer. For ratios calculated where the denominator
specified is total operating revenue or rate revenue, Natural Resource Management
(NRM) levy revenue is excluded.
Operating Surplus
Operating Surplus is where operating revenues less operating expenses is positive and
operating revenue is therefore sufficient to cover all operating expenses.
Operating Surplus Ratio
Operating Surplus Ratio expresses the operating surplus (deficit) as a percentage of
general and other rates.
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Councils_0708 (4).doc
Appendices
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