Local Government
Forecasting Model v3
LGFP CFO and Finance Managers Forum
24 July 2015
Local Government Forecasting Model
Agenda
 LGFM Features and benefits
 Using the LGFM to tell your Council’s financial story
2
Local Government
Forecasting Model v3.0
Features and benefits
3
LGFM v3 New Features
 Business units
 Ability to ‘normalise’
 “Bottom-up” revenue & expense
forecasting
 Different loan types are catered
for
 Improved treatment of grants
 Improved cash flow timings
 More accurate interest expense
 Better reporting
 More accurate depreciation
 User comments
 Run sensitivities and scenarios
 Improved notifications
4
LGFM v3 Features
Business Units
 Develop financial forecasts for up to six internal business units
 Calculate financial sustainability metrics for each business unit
 Assess the profitability of your commercialised business units
 Model internal transactions, including internal operating revenues
and expenses, borrowings, dividends and tax equivalents.
5
LGFM v3 Features
Business units
Whole
Council
Whole
ofofCouncil
Revenue & Expenses
Assets
QTC Debt
Cash
Miscellaneous
6
LGFM v3 Features
Business units
Whole of Council
Assets
Revenue & Expenses
QTC Debt
Cash
Miscellaneous
Allocation to business units
General
Business unit 1
Business unit 2
Business unit 3
Business unit 4
Business unit 5
7
LGFM v3 Features
Business units – operating internals
Whole of Council
Assets
Revenue & Expenses
General
Business unit 1
Operating internals
QTC Debt
Business unit 2
Business unit 3
Cash
Business unit 4
Miscellaneous
Business unit 5
Operating internals
8
LGFM v3 Features
Business units – internal loans
General
Internal Loan
Loan repayments
+ internal margin
Business unit 1
Business unit 2
Business unit 3
Business unit 4
Business unit 5
9
LGFM v3 Features
Business units – dividends
General
Tax equivalents and
dividends
Business unit 1
Business unit 2
Business unit 3
Business unit 4
Business unit 5
10
LGFM v3 Features
Built-in Scenario Manager
 Efficiently develop scenarios to
– Sensitise specific aspects of
your business
> Applying different growth factors
to revenue and expense line
items
– Quantify how a particular course
of action may impact your
financial sustainability
11
LGFM v3 Features
Built-in Scenario Manager
 Model scenarios with a high
degree of flexibility, including
– Adding or removing a particular
capex project
– Adding or excluding additional
debt repayments
12
LGFM v3 Features
Normalise results
 Easily eliminate the impact of
the revenues and expenses
associated with a specific
subsidy program (eg, NDRRA)
13
LGFM v3 Features
Reporting capability
 Generate dashboard-style,
visual reporting for decision
makers
 Generate user-specific reports,
including ‘favourite’ ratios and
metrics
 Create custom reports from
blank templates
 View reports for whole-ofcouncil and individual business
units
14
LGFM v3 Features
Asset flexibility
 Add capital expenditure events
on any date to produce more
accurate depreciation estimates
and cash balance forecasting
 Assign residual values to new
capital expenditure with the
depreciation forecast adjusted
automatically
 Base revaluations, for new
assets, on user-defined rates
according to asset class, with
depreciation calculations
adjusted automatically
 Assign work-in-progress to
individual assets or projects
15
LGFM v3 Features
Improved debt forecasting
 Model debt with a greater range
of loan types which closely
approximate QTC debt products
 Add loans at any date in the
forecast period (no longer fixed
at 30 June)
16
LGFM v3 Features
Cash forecasting
 Forecast with more flexibility
around the timing of cash flows
for revenues, expenses, capital
expenditure, borrowings and
debt repayments
 More accurately estimate
interest with bi-monthly cash
forecasts that:
– reflect council’s cash cycle
– identify minimum cash
requirements and surplus cash
17
Dashboard
Detailed cash forecasts
18
Local Government
Forecasting Model v3.0
Telling your financial story
19
LGFM v3.0
Using LGFM to tell your financial story
 Completeness check (Checklist)
 Accuracy check (Notifications)
 Interpret / analyse (Dashboard – sustainability indicators)
 Normalise - elimination of abnormal items (eg, NDRRA)
 Review standard or customised reports
 Run sensitivities and scenarios
20
Model completeness and accuracy
Checklist page
Step 1
General information



Model setup
Information about the council and business units
Completed on 21 Oct 14 by Mark Baseley
Grant programs
Define grant, subsidy, contribution and donation programs to be forecast
Completed on 21 Oct 14 by Mark Baseley
Days receivable and payable
Set the default number of days receivable and payable
Incomplete
Financial growth rates
Consumer Price and Council Cost Indices
Incomplete
Staff
Full-time equivalents and enterprise bargaining agreement growth
Incomplete
Regional data
Population and rateable properties
Incomplete
Custom growth indices & drivers
User defined indices by actual numbers or growth rates
Incomplete
Revenue
All operating revenue including operating grants
Incomplete
Revenue discounts
Discounts and pensioner remissions
Incomplete
Expenses
All operating expenses including internal operating transactions
Incomplete
Current asset base with forecasted depreciation
New expenditure on assets in the forecast period
Incomplete
Non-financial data
Step 2
Revenues & expenses
Step 3
Assets
Existing assets
Capital expenditure
Incomplete
21
Model completeness and accuracy
Notifications page
22
Interpret and analyse
Dashboard
23
Interpret and analyse
Dashboard - key sustainability metrics
24
Generate standard and custom reports
Operating performance report – extract
Operating Performance
Page 1 of 2
Operating result ($'000)
400,000
Operating efficiency ratio (%)
120%
350,000
300,000
250,000
100%
100%
80%
80%
60%
60%
40%
40%
20%
20%
200,000
150,000
100,000
50,000
(50,000)
-%
Jun-13AJun-14AJun-15BJun-16F Jun-17F Jun-18F Jun-19F Jun-20F Jun-21F Jun-22F Jun-23F Jun-24F
Operating result
Operating revenue
Operating expenses
-%
Jun-13AJun-14AJun-15BJun-16FJun-17FJun-18FJun-19FJun-20FJun-21FJun-22FJun-23FJun-24F
Operating efficiency ratio (%)
Operating surplus ratio (%)
3%
Sales, contracts and recoverable works margin (%)
Debtor and creditor days
90
80
2%
70
2%
60
1%
50
8%
1%
40
6%
-%
30
-1%
20
-1%
10
-2%
-
Jun-13AJun-14AJun-15BJun-16F Jun-17F Jun-18F Jun-19FJun-20F Jun-21F Jun-22F Jun-23F Jun-24F
12%
10%
4%
2%
-%
Jun-13AJun-14AJun-15BJun-16FJun-17FJun-18FJun-19FJun-20FJun-21FJun-22FJun-23FJun-24F
Operating surplus ratio (%)
Creditor days
Actual
Jun-13A
Jun-15B
Jun-13AJun-14AJun-15BJun-16F Jun-17F Jun-18F Jun-19F Jun-20F Jun-21F Jun-22F Jun-23F Jun-24F
Gross interest expense as a portion of average term debt (%)
Interest revenue as a portion of average cash (%)
Debtor days
Budget
Jun-14A
Interest to debt and interest to cash balance ratios (%)
14%
3%
Operating performance indicators
Sales, contracts and recoverable works margin (%)
120%
Forecast
Jun-16F
Jun-17F
Jun-18F
Jun-19F
Jun-20F
Jun-21F
Jun-22F
Jun-23F
Jun-24F
Actual
(FY10-14)
Annual average
Forecast
(FY15-19)
Forecast
(FY15-24)
Operating performance metrics
Operating surplus ratio (% )
Operating efficiency ratio (% )
Sales, contracts and recoverable works margin (% )
Creditor days
Debtor days
Gross interest expense as a portion of average term debt (% )
Interest revenue as a portion of average cash (% )
-1.2%
98.8%
100.0%
77.5
54.3
6.6%
7.6%
2.5%
102.6%
100.0%
62.0
36.8
6.7%
7.1%
0.0%
100.0%
100.0%
59.4
37.0
6.7%
7.3%
0.2%
100.2%
100.0%
59.4
37.0
6.8%
8.7%
0.2%
100.2%
100.0%
59.8
37.0
6.7%
9.9%
0.4%
100.4%
100.0%
59.8
37.0
8.0%
11.7%
0.2%
100.2%
100.0%
59.9
37.0
6.8%
10.9%
0.9%
100.9%
100.0%
59.9
37.0
6.1%
10.5%
0.7%
100.7%
100.0%
60.1
37.0
6.1%
10.2%
0.7%
100.7%
100.0%
60.1
37.0
6.1%
10.7%
0.7%
100.7%
100.0%
60.2
37.0
6.1%
10.7%
0.7%
100.7%
100.0%
60.2
37.0
6.1%
10.6%
-1.0%
99.1%
100.0%
76.0
50.0
6.6%
7.6%
0.2%
100.2%
100.0%
59.7
37.0
7.0%
9.7%
0.5%
100.5%
100.0%
59.9
37.0
6.5%
10.1%
Operating result ($'000)
Operating revenue
Operating expenses
Operating result
292,831
296,332
(3,501)
290,683
283,321
7,362
277,013
276,981
31
285,339
284,797
542
295,470
294,794
676
307,385
306,102
1,284
319,724
319,187
536
329,326
326,457
2,870
339,299
337,074
2,225
348,440
346,166
2,273
359,096
356,424
2,672
370,010
367,300
2,710
1.2%
0.6%
79.4%
1.9%
2.4%
-40.8%
2.4%
2.6%
-9.5%
25
Generate standard and custom reports
Liquidity position report – extract
Liquidity Position
Page 1 of 2
4 years
Time period for the chart from the start of the forecast
6.0
Cash cycle by cash segments ($'000)
200,000
Cash expense cover (months)
7.0
5.0
4.0
3.0
150,000
2.0
1.0
Jun-13A Jun-14A Jun-15B Jun-16F Jun-17F Jun-18F Jun-19F Jun-20F Jun-21F Jun-22F Jun-23F Jun-24F
100,000
Cash expense cover (months)
QTC—upper bound
Working capital ratio (times)
3.5x
50,000
QTC—lower bound
3.0x
2.5x
2.0x
-
1.5x
1.0x
0.5x
(50,000)
Jun-13AJun-14AJun-15BJun-16F Jun-17F Jun-18F Jun-19F Jun-20F Jun-21F Jun-22F Jun-23F Jun-24F
120,000
Cash cover
Cash cover (unfunded)
Externally restricted
Externally restricted (unfunded)
Internally restricted
Internally restricted (unfunded)
Long-term surplus
Short-term surplus
Overdraft
Cash balance
Approved working capital facility limit
Closing balance of cash and cash equivalents ($'000)
180,000
Working capital ratio (times)
Annual unrestricted cash balance range (high, median, low)
120,000
QTC—lower bound
QTC—upper bound
Closing cash balance and median annual cash balance
160,000
100,000
100,000
140,000
80,000
120,000
80,000
100,000
60,000
60,000
80,000
40,000
60,000
40,000
40,000
20,000
20,000
20,000
Jun-13AJun-14AJun-15BJun-16F Jun-17F Jun-18F Jun-19F Jun-20F Jun-21F Jun-22F Jun-23F Jun-24F
Externally restricted
Internally restricted
Unrestricted
-
Jun-15B Jun-16F Jun-17F Jun-18F Jun-19F Jun-20F Jun-21F Jun-22F Jun-23F Jun-24F
Jun-13AJun-14AJun-15BJun-16F Jun-17F Jun-18FJun-19F Jun-20F Jun-21F Jun-22F Jun-23FJun-24F
Cash and cash equivalents—closing balance
Cash and cash equivalents—median balance
26
Sensitivities and scenarios
Control Panel allows users to sensitise, normalise and
control outputs
Control Panel
1.
Select Scenario
2.
Whole of Council or Business Units?
Whole of Council
Selected Business Units
3.
4.
Select Business Units
Whole of Council
[Inactive BU] 4
[Inactive BU] 2
[Inactive BU] 5
[Inactive BU] 3
[Inactive BU] 6
Normalise Results
5.
Print
Use median cash balance for ratios
Print All
Use alt. min. liquidity for cash chart
Operating Performance
Normalise for selected grant program
Fiscal Flexibility
Asset Sustainability
Liquidity
Select the Base Case
or Alternate Case
Look at either the
whole-of-council
or individual BUs
Select which BUs Normalise results
to view
On the dashboard,
we can print
specific sections
27
Summary
LGFM v3
Features
What to look for
 Business units
 Completeness (checklist)
 Scenario manager
 Accuracy (notifications)
 Normalise results
 Interpret and analyse
(dashboard)
 Reporting capability
 Asset & debt improvements
 Run standard and custom
reports
 Enhanced cash forecasting
 Sensitivities and scenarios
28
Resources available to LGs
LGFM v3
 On QTC Connect:
– Model
– User guide
– Quick Reference guide
– FAQs guide
– Video Tutorials
 One-on-one training and support
29
Questions
Ross Kline, Senior Advisor
T: 07 3842 4898
E: rkline@qtc.com.au
30
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© Queensland Treasury Corporation 2015
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