2026/27 FINANCIAL POLICIES · Attachment 1 - Financial Sustainability Policy

Attachment 1 – Financial Sustainability Policy

 Liquidity Management

 The unrestricted cash expense cover ratio is a key indicator utilised to measure Council liquidity
 (i.e. current financial health) and to assess ongoing financial sustainability risk. This ratio calculates
 how long Council can continue paying its day-to-day expenses from cash at bank without needing
 additional cash flow injections. Council will target achieving a minimum unrestricted cash expense
 cover of three months operating expenditure throughout and in any given financial year.

 Expenditure Management

 Council will ensure that expenditure on goods and services to meet established service levels will
 be undertaken efficiently and effectively. This will be achieved via the development of the annual
 operating expenditure budget from a zero base, ensuring staff compliance with Council’s policies
 and procedures as well as partnering with key stakeholders such as Local Buy to ensure efficient
 cost procurement options are implemented.

 Expenditure management outcomes will be measured by how Council performs annually against its
 operating and capital expenditure budget allocations.

 Physical and Natural Asset Management

 Council will ensure that it maintains its physical and natural assets on an ongoing basis at defined
 levels to ensure that services are able to be provided effectively to the community.

 The asset sustainability, asset consumption and asset renewal ratios are the three (3) key
 measures of financial sustainability relating to the management of Council’s assets required under
 legislation.

 The asset sustainability ratio is calculated by measuring the expenditure on the renewal and
 rehabilitation of Council’s existing infrastructure assets against the annual depreciation charge
 relating to infrastructure assets. It is a measure of whether Council is reinvesting appropriately in
 existing infrastructure assets as they reach the end of their useful lives.

 Council will target over the life of the ten (10) year financial plan to achieve a minimum asset
 sustainability ratio of 80% measured as a single year result and as a five-year average result
 (excluding plant, fleet and office equipment renewals) consistent with the benchmark unless
 condition based renewal forecasts demonstrate a percentage lower than 80% in any given year.

 The asset consumption ratio measures the extent to which Council’s infrastructure assets have
 been consumed compared to the cost of building a new asset with the same benefit to the
 community. It is calculated by measuring the written down replacement cost of infrastructure assets
 compared to the current replacement cost of those assets. A target of greater than 60% measured
 a single year result and a five-year average result has been set to ensure that Council’s infrastructure
 assets are being consumed in line with their estimated useful lives.

 The asset renewal funding ratio measures the ability of Council to fund its projected infrastructure
 asset replacement in the future. It is calculated by measuring planned capital expenditure on
 infrastructure assets as a percentage of required capital expenditure on infrastructure asset as
 outlined in Council’s asset management plans and forecasts. The ratio should be as close to 100%
 as possible as this indicates that Council is appropriately funding and delivering the entirety of its
 required capital program as set out in its asset management plans.

 Investment in natural assets will be prioritised according to biodiversity value and ecosystem service
 benefits realised for the community.




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