Report to FINANCE & AUDIT COMMITTEE for noting

Transcription

1 Title: Section: Prepared by: Surplus Reserves and Internal Loans Finance Pauline Foreman (Senior Projects Accountant) Meeting Date: 9 February 2017 Legal Financial Significance = low Report to FINANCE & AUDIT COMMITTEE for noting SUMMARY The purpose of this report is intended to give a high level overview of Council s reserves and internal loans balances for the period ending 31 December There is also a brief description of their purpose and origin. The purpose of this report is to provide up to date financial tables for: 1. Internal loans 2. Special Funds Reserves 3. Depreciation Reserves The decisions or matters in this report are considered to be of low significance in accordance with the Council s Significance and Engagement Policy. RECOMMENDATIONS That the Finance & Audit Committee: 1. Notes the contents of this report. Authorised by: Herman Koenders Acting Group Manager Operations Keywords: loans, depreciation, reserves, performance, trend Page 1 of 5

2 BACKGROUND 1. The Finance team currently provide high level financial information on income, expenditure, capital projects and debt at each Finance and Audit Committee. The focus of this report is to provide updated financial tables for: Internal loans Special Funds Reserves Depreciation Reserves. DISCUSSION AND OPTIONS 2. Internal Loans, Special Funds Reserves and Depreciation Reserves Internal Loans 3. The current level of internal loans is $70m. This represents those activities that have capital projects that are funded by internal loans. The practice of using internal loans to fund capital projects and use an internal central treasury function began in The basis of the decision was to reduce interest costs to Council, by minimising external debt levels. Prior to this practice Council had a very rigid approach to cash flow management with specific pots of cash on deposit to reflect actual special fund reserves and Council borrowing funds for capital projects. 5. Council refers mainly to the level of external loans or public debt. The external loans reflect the amount of money Council currently owes externally i.e. to banks, or other funding agencies. INTERNAL LOANS Holding Company Loan 14,098 14,098 0 Finance and Information Services 3,465 3,797 (332) Wastewater 20,407 19, Stormwater 5,348 5,493 (145) Tairawhiti Roads 4,596 4, Rivers and Land Drainage 4,215 4, Commercial Property Management (1) Strategic Investment Parks 3,885 3, Community Property 4,536 4,552 (15) Pool Operations (11) Churchill Park Solid Waste 5,747 6,014 (266) Water Supply 1,386 1,409 (22) Arts and Public Places (31) Cemeteries Conveniences (10) Facilities and Plant Management (7) Theatres Consents Emergency Management (2) Library (3) Airport - Commercial Property (9) 69,628 69, Page 2 of 5

3 Special Funds Reserves 6. Special funds reserves are a component of public equity and represent a particular use to which that part of equity has been assigned. Special fund reserves may be legally restricted or only used for the purpose created by Council. 7. Reserves do not represent cash that is available to Council. The decision to use the funds in a reserve account results in additional external borrowing. Correspondingly cash received and transferred to a reserve account results in a reduction in external borrowing. 8. The special reserves relate mainly to specific projects, for example the Library Extension Fund was the result of specific bequests of Mr J Green ($1,200k), Hannah Dunlop ($140k) and Jessie Iris Jefferies ($12k). Development Contribution Reserves and Quarry Rehabilitation can only be used for their stated purposes. 9. Interest on reserve balances is set quarterly at the 90 day Bank Bill rate. No adjustment is included for treasury related operational costs. 10. The interest rate charged on deficit balances is set at the weighted average cost of external borrowing (including credit margin and other related costs). 11. The interest rate paid on surplus balances is the 90 day Bank Bill rate. 12. Council may determine not to pay interest on specific reserve balances or to pay interest at a reduced rate. 13. Interest may be notionally received and allocated to the specific reserve account providing the funds or through the related activity income/expenditure accounts. SPECIAL FUND RESERVES Capital Development Fund 2,350 2,350 0 Library Building Extension 1,967 1,989 (22) Quarry Rehabilition 1,109 1,109 0 Waipaoa Flood Control Scheme Civil Defence Disaster Relief Reserves GHL Forestry Reserve (1,130) (875) (255) Stormwater Development (755) (756) 1 Land Subdivision Wastewater Development Reserves Development Olympic Pool Development Municipal Theatre Project HMNZS Blackpool Fund Rates Postponment Fidelity Roading Flood Damage 0 Land Transport Development (264) (282) 19 Water Supply Development (684) (705) 21 4,751 4,953 (202) Page 3 of 5

4 Depreciation Reserves 14. There are a number of depreciation reserves. Each category has been established to reflect the asset category, depreciation and capital funding. 15. The Asset Management System Implementation Project being undertaken at Council aims to improve Council s asset management information. This may impact on Council s depreciation expense and subsequently our depreciation reserves. DEPRECIATION AND REVALUATION RESERVES Asset Revaluation Reserve 1,488,599 1,488,599 0 Support Services 3,221 3,653 (432) Stormwater Water Supply 20,310 19, Wastewater (1,086) (1,247) 161 Solid Waste 1,786 1, Tairawhiti Roads 3,905 1,299 2,606 Flood Control Community Housing 3,129 3,176 (48) Property Pool Operations 1,110 1, Library (32) Museum ,234 32,030 3,204 ASSESSMENT OF SIGNIFICANCE Criteria This Report The Process Overall The effects on all or a large part of the Gisborne district Low Low The effects on individuals or specific communities Low Low The level or history of public interest in the matter or issue Low Low Inconsistency with Council s current strategy and policy Low Low Impacts on Council s delivery of its Financial Strategy and Long Term Plan. Low Low 16. The decisions or matters in this report are considered to be of low significance in accordance with Council s Significance and Engagement Policy. COMMUNITY ENGAGEMENT 17. There are no community engagement implications associated with this noting paper. CONSIDERATIONS Financial/Budget 18. Council uses its reserves and external borrowing to internally fund both capital expenditure and working capital. Overall borrowing and funding of capital projects are approved within boundaries set during the LTP and/or Annual Plan process. Page 4 of 5

5 Legal 19. There are no legal implications associated with this noting paper. POLICY AND PLANNING IMPLICATIONS 20. All internal borrowing and use of reserves are in line with guidelines set within the Treasury Management Policy and the Revenue & Finance Policy. RISKS 21. There are no significant risks associated with this noting paper. Page 5 of 5