Financial benchmarks not met due to mitigating circumstances

A performance snapshot shows that Council failed two financial indicators but passed four other State Government mandated benchmarks in its 2018-2019 financial reports.

Outstanding rates and annual charges did not meet the benchmark.
Council’s ratio of 6.53 per cent was higher than the benchmark of less than 5 per cent.
This ratio assesses the impact of uncollected rates and annual charges on council’s liquidity and the adequacy of its debt recovery efforts.
Council said it included the annual charges for water, sewerage and stormwater drainage services, which the majority of other NSW Councils did not have.
“Most other Councils will only have rates and domestic waste management annual charges to issue and collect,” the report said.
Council’s annual rates notices are issued in July, in accordance with the Local Government Act 1993, with the option to pay quarterly in August, November, February and May.
“This means that the ratio calculation reflects the amounts overdue, as the rates should be paid in full by the end of May,” the report said.
“Council’s water notices contain a portion of the annual charges for water and sewerage as the annual charge for water and sewerage is split over the quarterly billing cycle, as well as usage charges for water and sewer where applicable.
“Council’s water meters are read on a rolling schedule as part of our water meter reading program and issues water notices after the water meter has been read.
“Payment terms for water notices are 30 days.”
Council said the rolling schedule of water notices and due dates affected this ratio.
For example, the water notices issued in June were not due for payment until the next reporting period, but would be included in the ratio as if they were overdue.
“Water meter reading and billing schedules have been brought forward marginally to ensure all water notices are issued and are due payable prior to 30 June,” the report stated.
It had a positive impact on reducing the ratio from 7.82 per cent in 2018 to 6.53 per cent at June 30, 2019.
“Council staff will work with our ratepayers on financially affordable payment plans in accordance with the Policy for Debt Recovery and Hardship, to move towards achieving industry benchmark for this measure,” the report said.
Council also failed to reach the benchmark of better than 0 per cent in its operating performance ratio, which was minus 0.37 (- 0.37) per cent.
This measures how well the council contained operating expenditure within operating revenue.
Council said it would continue to review its operations to look for innovative ways to deliver services and take advantage of efficiencies to achieve the benchmark.
It passed the industry indicators for own source operating revenue ratio, with 82.11 per cent beating the benchmark of more than 60 per cent.
Own Source Operating Revenue Ratio measures Councils’ fiscal flexibility and the degree of reliance on external funding sources, such as operating grants and contributions.
It passed the unrestricted current ratio, where the benchmark was more than 1.5 and Council was 1.68.
Unrestricted Current Ratio measures the adequacy of working capital and council’s ability to satisfy obligations in the short term for the unrestricted activities of council.
It also passed the debt service cover ratio, which measures the availability of operating cash to service debt, including interest, principal and lease payments.
Council was 3.21 times above, which was above the benchmark of more than two times.
It passed the cash expense cover ratio with 9.8 month’s liquidity, and the benchmark being more than three months.
Cash Expense Cover Ratio indicates the number of months a council can continue paying for its immediate expenses without additional cash inflow.

Agenda Item 2.9
Central Coast Council meeting, Feb 24
Reporter: Merilyn Vale