End of year results show a strong short term financial position

Published on 13 September 2018

Budget infographic

End of year results show Council in a strong short term financial position

An operating surplus of $3.7 million combined with low levels of debt, a healthy working capital ratio, a strong cash position and reduced infrastructure renewal gap underpin a strong short term financial position for Colac Otway Shire Council, according to chief executive Peter Brown.

The Council last night approved its 2017/18 financial and performance statements at a Special Council Meeting.

Mr Brown said the Council was well placed financially and was currently working on delivery of a sustainable long term financial plan. He said last night’s Council decision was a statutory requirement that helped assess the organisation’s 2017/18 financial performance, but the real challenges were longer term.

“It isn’t always useful to compare years, because in our case 2016/17 was heavily influenced by non-recurrent government grants and capital works associated with disaster recovery,” he said.

“We have undertaken a thorough review of the way we are treating Port of Apollo Bay transactions as well to ensure that Council’s financial reporting is robust and meaningful for decision making.”

Mr Brown said he had some concerns about the Council’s underlying long term financial position, but the organisation was improving the quality of its financial reporting.

“In total, we budgeted for $21.6 million of capital expenditure, spent $16.1 million and carried $3.9 million forward to this financial year, including $1.4 million tied to external grants,” he said.

Mr Brown said the Council was holding $27.2 million in current assets, including $23.5 million in cash and investments and had $10.7 million in current liabilities which calculated to a very healthy working capital ratio.

“Despite an increase of $1 million in our Landfill Restoration Provision, our working capital ratio of 255 per cent remains very strong. Ratios greater than 150 per cent are considered low risk,” he said.

“There’s no doubt that the Council is in a strong short term financial position, but I have concerns that we don’t fully understand our asset position yet.

“The work that is currently being done to develop a robust long term financial plan and associated asset management plans will give us a much better understanding of the technical condition of our roads and buildings.”

Mr Brown said that until the asset management plans were completed and fed into the long term financial plan being developed by officers it was difficult to discuss Colac Otway Shire Council’s long term sustainability.

“Similar to most other rural shires in Victoria though, there are serious issues impacting our long term sustainability,” he said.

“We need to address those issues and we’ll be taking that very seriously. I’m confident we’ll have a much better understanding of our true position next year and the year after that.”

The signed 2017/18 Financial and Performance Statement will be sent to Auditor General in the next few days.