134 01 March 2017
Finance and Performance Committee
14 February 2017
File: (17/228)
Report no: FPC2017/1/79
Finance Update
Purpose of Report
1. The purpose of the report is to present the Committee with Council’s financial performance to 31 December 2016 and the forecast year-end financial position.
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Recommendations That the Committee notes the year to date financial performance and the forecast year-end position. |
Background
2. The report provides information comparing year to date actual and year-end forecasts against budgets set by Council in its 2016/2017 Annual Plan.
Discussion
3. Operating Position
There is a year to date operating deficit of $4.2m compared to a budgeted deficit of $4.8m giving a favourable variance of $0.6m. The variance is due to reduced operating costs mainly because of timing difference with the CFT Stokes Valley Hub project and reduced interest and depreciation expenses. This is offset mainly by operating and capital subsidies being less than budget at this stage due to programmed work being behind schedule, and additional repair costs due to the November earthquake and storms.
At year end there is expected to be a forecast deficit of $12.0m compared to the budgeted deficit of $14.6m, giving a favourable variance of $2.6m. This is mainly due to a forecast underspend in the budgeted operating grant payments to CFT for Fraser Park Sportsville and savings in Interest costs of about $1.4m due to underspend on Capital projects.
This is expected to be offset by reduced revenue due to capital subsidies being less than budget because of the deferral of some roading projects including the cycleway projects. There is also a forecast unfavourable variance in Parks & Reserves due to unbudgeted costs for remediation work to address soil contamination at the former Summit Road Depot and costs arising from the November earthquake and storm events which are expected to be about $1.2m.
Capital subsidies of $2.4m and CFT grants of $4.2m will need to be carried over to 2017/18.
YTD interest rate swaps have increased in value by $6.0m due to high market floating interest rates relative to interest rates fixed by Council.
4. Capital Position
There is a favourable year to date variance of $13.5m against a year to date budget of $33.7m. Of this variance $1.9m relates to the Huia Programme Pool, $1.2m relates to the Civic Events Centre project, and $6.1m relates to Roading & Traffic projects which have been delayed.
At year end there is a forecast favourable variance of $21.8m mainly due to delays in some major projects. Of this amount; $6.2m relates to the Roading cycleway and shared path projects which will require carryovers; $0.7m relates to Avalon Park; and $1.2m relates to Riddiford Gardens which will also require carryovers. A further $13.7m of this forecast variance relates to the Civic Events Centre project which will also require a carryover to next year. At this stage a total of $22.8m will need to be carried over to 2017/18.
Most other projects at this stage are expected to be completed on time and within budget by year end.
5. Asset Sales
Asset sales at this stage are forecast to be $1.3m for the year which is $0.2m above budget due to the inclusion of two sales not completed in 2015/16.
6. Net Debt
Debt as at 31 December 2016 is $19.3m below budget which reflects the YTD favourable variances in operating and capital expenditure offset by an unfavourable variance in asset sales. Forecast year end debt is expected to be under budget by $24.5m mainly as a result of the forecast underspend in capital and the favourable variance in operating costs.
7. Annual Leave Liability
There has been a decrease in the annual leave liability over the past few months which is expected at this time of year as staff take leave over the festive and school holiday period. The leave liability for both December and January is lower than for the same months last year.
Consultation
8. There is no requirement to consult.
Legal Considerations
9. There are no legal considerations.
Financial Considerations
10. The financial considerations are covered in the report.
Other Considerations
11. In making this recommendation, officers have given careful consideration to the purpose of local government in section 10 of the Local Government Act 2002. Officers believe that this recommendation falls within the purpose of the local government in that it provides it provides Councillors with the necessary information to effectively undertake their governance role.
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Financial Tables |
142 |
Author: Philip Benseman
Budgeting and Reporting Manager
Reviewed By: Brent Kibblewhite
Chief Financial Officer
Approved By: Tony Stallinger
Chief Executive