Meeting papers

A Financial Sustainability (Sustainability) Guideline has also been developed by the state
government, with this document requiring Council to calculate and publish relevant measures of
financial sustainability which show whether Council is achieving its financial sustainability objectives
over the short and medium term.

The key measurement criteria for whether Council is achieving its financial sustainability objectives
are the nine financial sustainability ratios required to be published under legislation, namely the:
1.    Operating surplus ratio;
2.    Operating cash surplus ratio;
3.    Unrestricted cash expense cover ratio;
4.    Asset sustainability ratio;
5.    Asset consumption ratio;
6.    Leverage ratio;
7.    Council controlled revenue ratio*;
8.    Population growth ratio*; and
9.    Asset renewal funding ratio*;
*These ratios are for contextual purposes only meaning there is no set target for these measures, nor will they be subject to audit. They are
included only to provide further information about Council’s financial capacity and asset management.


Council’s current and expected financial sustainability performance will be measured and reported
against the benchmarks set by the state government in its Financial Sustainability (Sustainability)
Guideline, as well as by ongoing periodic sustainability assessments undertaken by the Queensland
Treasury Corporation (QTC).

COUNCIL POLICY

Operating Performance

Council will ensure that it maintains an operating surplus each year over the life of the ten (10) year
financial plan. An operating surplus is achieved when operating revenues are greater than operating
expenses (including depreciation and interest on debt).

The operating surplus ratio is a key measure of financial sustainability required under legislation.
It calculates the operating surplus (or deficit) as a percentage of operating revenue. An operating
surplus ratio above 0% indicates that Council is managing its finances within its existing funding
envelope and generating surplus funds for capital funding or other purposes. The target band for
Council is greater than 0% measured as a single year result and a five-year average result.

The operating cash ratio measures Council’s ability to cover its core operational expenses and to
generate a cash surplus (excluding depreciation, amortisation and finance costs). A positive cash
ratio indicates that Council is generating surplus cash from its operations and has the ability to self-
fund its capital expenditure requirements. The target set by the state government for this ratio is also
greater than 0% measured as a single year result and a five-year average result.

Council will target to achieve an operating surplus commensurate with mitigating known risks with
respect to appropriately funding future trunk infrastructure and capital expenditure requirements,
whilst also ensuring that the operating surplus ratio and operating cash ratios are contained within
the required benchmarks.

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.
                                                                                                                                Page 2
                                                                                                                                Page 11 of 392