2015-06-12 Special Meeting

COUNCIL POLICY – FINANCIAL SUSTAINABILITY


COUNCIL POLICY

Operating surplus

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
one of the three (3) key measures of financial sustainability required under legislation. It calculates
the operating surplus (or deficit) as a percentage of Council operating revenue. The target
operating surplus ratio set by the state government is between 0% and 10%.

Council will target to achieve an operating surplus consistent with the value of tax equivalent
payments received from its investment in Unitywater and Council business activities (to mitigate
the risk of losing these revenue streams), whilst also ensuring that the operating surplus ratio is
contained within the required benchmarks.

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.

Asset management

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

The asset sustainability ratio is one of the three (3) key measures of financial sustainability
required under legislation. This ratio is calculated by measuring the annual expenditure on the
renewal and rehabilitation of Council’s assets against the annual depreciation charge. It is a
measure of whether Council is reinvesting appropriately in existing infrastructure assets. The target
asset sustainability ratio set by the state government is greater than 90%.

Council will target over the life of the ten (10) year financial plan to achieve a minimum asset
sustainability of 90% consistent with the benchmark.

Established management plans for Council’s asset and infrastructure classes will incorporate
annual maintenance financial estimates as well as ten (10) year renewal / replacement forecasts
developed from regular asset condition assessments. Asset management plan financial forecasts
will be incorporated into Council’s ten (10) year financial plan and annual budget to ensure
financial sustainability implications are appropriately considered.

Annual depreciation forecasts will be developed on an asset by asset basis utilising methodology
endorsed by the Queensland Audit Office, with assets regularly revalued in accordance with
legislative requirements

The QTC project decision making framework will be utilised for business case analysis for all new
and replacement capital projects over the agreed value thresholds established. The outcomes from
the analysis will be used to inform Council of whole of life costing implications associated with each
project.



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