2019-07-09 Services & Organisation Committee Agenda

SERVICES & ORGANISATION COMMITTEE MEETING AGENDA                                           9 JULY 2019


REPORTS FOR NOTING BY THE COMMITTEE
8                        OUTCOME OF QUEENSLAND TREASURY CORPORATION CREDIT REVIEW
DOCUMENT INFORM AT ION




Author                           Director Corporate Services, Michael Shave
                                 Corporate Services Department

Index                            ECM/ Subject / Financial Management / Accounting | Loans - Queensland
                                 Treasury Corporation

Attachments                      1.   QTC Rating Scale and Definitions


EXECUTIVE SUMMARY
Not applicable.

RECOMMENDATION
That Council note the report by the Director Corporate Services to the Services & Organisation
Committee Meeting dated 9 July 2019 detailing the outcomes of the Queensland Treasury
Corporation (QTC) Noosa Council credit review.

REPORT
Queensland Treasury Corporation (QTC) was established to act as a financial institution to
statutory bodies and the State as well as providing financial resources and services. Local
governments are considered a statutory body under the Statutory Bodies Financial Arrangements
Act 1982. This essentially means that QTC is the only institution local governments can borrow
funds from on an ongoing basis.

The Department of Local Government, Racing and Multicultural Affairs (DLGRMA) must approve
local government borrowing requests before QTC can provide any loan funds. As part of this
process, QTC has a formal engagement with DLGRMA to undertake credit assessments, in
conjunction with the annual Local Government State Borrowing Program (SBP), to assist the
department in making the borrowing approval decisions. Credit reviews are performed
periodically by QTC depending on their internal tiering of local governments based on
outstanding debt exposure.

The credit review process is an assessment of creditworthiness, particularly focusing on a
council’s leverage and capacity to service existing and future debt obligations. Local
governments must provide their current long term financial plan to QTC to allow analysis of
recent and future financial performance. Given the recent Queensland Auditor General report to
parliament, where it was identified that 22 out of 77 local governments are at high risk of
becoming unsustainable, this process is obviously an important risk management tool for the
department and QTC to manage potential loan repayment defaults which would have significant
ramifications for both Queensland state and local governments.

When QTC undertakes credit reviews they use a number of approaches to assess the financial
capacity of local governments, namely:
 Consideration of qualitative factors (i.e. Council strategy, demographics, economic outlook,
   governance and management etc.) and quantitative factors (i.e. historical financial results,
   budget vs actuals, financial forecasts including financial ratios etc.);
 Identification and assessment of key risks and mitigation strategies; and
 Consideration of the results of previous credit reviews undertaken.

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