Financial overview

On 16 March 2020, a State of Emergency was declared in Victoria due to the COVID-19 pandemic. A State of Disaster was subsequently declared on 2 August 2020.

Council’s 2020–21 operating result and capital works budgets have been significantly impacted by COVID-19. Some business areas were severely restrained such as our Libraries and Learning Centres and Glen Eira Leisure due to forced closures directed by Chief Health Officer directives.

To support the Glen Eira community, Council endorsed a COVID-19 Response and Recovery Package totalling $8.9 million. This Package provided immediate financial relief to those most at risk and aimed to mitigate the impact of COVID-19 on the health and wellbeing of residents, particularly those more vulnerable and those already experiencing disadvantage. The Package also provided immediate and ongoing support to local businesses local community groups and sporting clubs and contribute to their ongoing viability post COVID-19.

The pandemic continues to provide an uncertain environment. Council has noted the following significant impacts on its financial operations:

  • New revenue from government grants that enabled us to provide new services to the community and local employment in response to the pandemic. This revenue was offset by expenditure.
  • Reductions in income, including user fee income from Glen Eira Leisure Centres ($6.4 million) and interest revenue from investments ($1.08 million).
  • Our COVID-19 Response and Recovery Package, $5.7 million in 2020–21.
  • Costs for pandemic prevention, including cleaning and personal protective equipment to protect our staff and community ($1.4 million).

Our financial position remains sound. We’ve included detailed information about our financial performance in the Financial Statements and Performance Statement sections of the Financial Report.

The Financial Report can be downloaded here.

OPERATING POSITION

Our 2020–21 operating position was a $516,000 surplus, which is $4.85 million less than our 2020–21 budget. Factors that contributed to this include:

INCOME

Our total revenue for the 2020–21 financial year was $178.96 million, $3.22 million unfavourable to budget (two per cent).

Rates and charges revenue was in-line with the 2020–21 Annual Budget. Our rates and charges are still much lower than the average of all inner metropolitan councils (we are the second lowest).

Statutory fees and fines were unfavourable to budget by $1.84 million, mainly due to lower than anticipated revenue from parking infringements of $1.8 million.

User fees were lower than anticipated due to COVID-19 restrictions, mainly related to the closure of Glen Eira Leisure facilities ($3.72 million), reduced fees received for Family and Children’s services ($1.19 million) and reduced occupancy within our Residential Aged Care facilities ($1.06 million).

Grants — operating was favourable to budget by $8.33 million due to:

  • Working for Victoria initiative — Council was successful in applying for a grant of $6.6 million with the Department of Jobs, Precincts and Regions to carry out a project through the Working for Victoria Fund. The aim of the Fund was to match displaced workers with casual and short-term employment opportunities. Employees in these positions supported delivery of critical community services to support the Government’s COVID-19 response;
  • early receipt of the 2021–22 payment from the Victorian Grants Commission. The amount of $2.01 million (50 per cent of the 2021–22 grants) was received for financial assistance and local roads funding during the 2020–21 financial year;
  • increased subsidy funding of family day care and early learning centres mainly due to government initiatives due to the pandemic ($822,000); and
  • the above favourable variances were offset by reduced residential aged care income due to vacant beds ($1.53 million).

Grants — capital was unfavourable to budget by $661,000 due to the timing of grants now expected to be received during 2021–22.

Other income — was unfavourable to budget by $1.98 million and relates to decreased interest revenue due to reduced investment as a result of the pandemic and lower than anticipated interest rates ($1.31 million).

Refer to Figure 1.

EXPENSES

Our total expenditure for 2020–21 was $178.44 million (one per cent unfavourable to budget). Significant variances to budget include:

Employee costs — unfavourable variance of $4.91 mainly due to new expenditure for the Working for Victoria initiative (fully grant funded) and increased costs to meet Chief Health Officer directions as a result of the pandemic for residential aged care facilities.

Materials and services — favourable variance of $4.55 million due to savings across utilities, materials, contractors, training and building maintenance, mainly due to closures of services and buildings as a result of the pandemic.

For more information see note 1 starting on page 11 of the Financial Report.

Refer to Figure 2.

FIGURE 1. 2020–21 SOURCES OF INCOME (%)

Figure 2. 2020–21 Categories of Expenditure (%)

CAPITAL INVESTMENT

During 2020–21, we expended $32.48 million on capital works. Variance to budget for total capital works was $8.2 million across the following activities:

Land — we purchased three parcels of land for future open space ($3.27 million).

Buildings — we underspent by $7 million in 2020–21 due to works that are ongoing at Murrumbeena Community Hub, Bentleigh Library redevelopment, Lord Reserve pavilion and Carnegie Memorial Swimming Pool. These will be carried forward into 2021–22.

Plant, machinery and equipment — was under budget due to delays in delivery of ordered fleet and plant and equipment as a result of COVID-19 ($1.17 million).

Drainage — was underspent by $1.35 million due to works across the municipality unable to be completed and will be carried forward to the 2021–22 financial year.

Streetscape works — relates to development and beautification of Council’s streets and shopping precincts. These projects were underspent by $3.04 million mainly due to the Bentleigh Eat Street Plaza project, which was delayed due to COVID-19 ($2.65 million). Funding will be carried forward to the 2021–22 year.

Carried forward expenditure from 2019–20 — relates to projects that were either incomplete or not commenced due to planning issues, weather delays, extended consultation etc. Council approved carried forward projects of $5.68 million in July 2020 of which $5.23 million was spent as at 30 June 2021.

Refer to Figure 3.

ASSET EXPENDITURE CATEGORIES

The major asset expenditure categories of capital works were:

  • land $3.27 million;
  • buildings $7.9 million;
  • plant and equipment $3.62 million;
  • roads $5.08 million;
  • footpaths $2.26 million;
  • drainage $2.55 million;
  • open space and recreation $1.97 million;
  • car parks $61,000;
  • streetscape works $540,000; and
  • projects carried forward from 2019–20 $5.23 million.

For more information see note 1.2 starting on page 15 of the Financial Report.

The $32.48 million comprised:

  • renewal 42.52 per cent ($13.81 million);
  • upgrade 23.65 per cent ($7.68 million);
  • expansion 7.78 per cent ($2.53 million); and
  • new expenditure 26.05 per cent ($8.46 million).

Refer to Figure 4.

FIGURE 3. CAPITAL WORKS EXPENDITURE 2011–12 TO 2020–21 ($M)

Figure 4. 2020–21 Capital Works expenditure — by type (%)

ASSET RENEWAL

To bridge the infrastructure gap, we invested $24.02 million in renewing, upgrading and expanding assets in 2020–21.

Our asset renewal ratio, measured by comparing asset renewal and upgrade expenditure to depreciation was 89 per cent.

Refer to Figure 5.

ASSETS

Our net asset base increased from $2,263 million to $2,509 million. This was mostly due to a decrease in the value of our fixed assets from $2,251 million to $2,503 million.

The movement in our property, infrastructure, plant and equipment value is due to:

  • the impact of our assets revaluation;
  • the net result of the Capital Works Program;
  • asset depreciation; and
  • the sale of property, plant and equipment.

Refer to Figure 6.

LIQUIDITY

Working capital is the excess of current assets above current liabilities. This calculation recognises that although we have current assets, some are already committed to settling liabilities in the following 12 months. Therefore, they’re not available for discretionary spending.

Cash and cash equivalents (including financial assets) was $64.24 million as at 30 June 2021. This is enough to cover our short-term restricted liabilities, which include $30.2 million in trust funds and aged care deposits, and $26.26 million in Public Open Space Reserve funds.

We must ensure we maintain working capital and have enough cash reserves to meet normal cash flow requirements. We’ll continue to have a large investment in capital works projects. The liquidity ratio expresses our level of current assets for meeting current liabilities.

We should hold enough cash to cover restricted assets, such as residential aged care deposits, Public Open Space Reserve, contract deposits and the Fire Services Property Levy.

Refer to Figure 7.

FIGURE 5. ASSET RENEWAL RATIO (INCLUDING UPGRADE) 2016–17 TO 2020–21 (%)

FIGURE 6. PROPERTY, INFRASTRUCTURE, PLANT AND EQUIPMENT AND INTANGIBLES 2016–17 TO 2020–21 ($M)

FIGURE 7. LIQUIDITY RATIO (WORKING CAPITAL) 2016–17 TO 2020–21 (%)

PUBLIC OPEN SPACE STRATEGY

Contributions to the Public Open Space Reserve during the financial year relate to public open space levies that were received under Section 18 of the Subdivision Act 1988.

We received contribution income of $5.80 million during the 2020–21 year. This can be used to fund projects that meet the conditions of the Open Space Strategy, which is mainly focused on increasing open space in identified gap areas. We spent $3.74 million on projects that met the conditions and the remainder will be held in the reserve for future years.

SERVICE DELIVERY

Services that we deliver for every $100 of rates and charges revenue (2020–2021):

  • Capital Works Program $31.04
  • Planning for growth and the future $5.06
  • Urban maintenance $11.62
  • Recycling and waste $18.87
  • Services for families and the community $6.38
  • Services for the aged $7.05
  • Parks and recreation $13.66
  • Glen Eira Libraries $3.73
  • Community safety $1.36
  • Cultural services $1.23

Please note: this represents the services that are funded by rates and charges, including the waste charge.

LOOKING AHEAD

We’ve prepared a 2021–22 Budget to respond to the draft themes emerging as part of our consultation process to inform the development of our Council Plan 2021–2025. The Budget also details the resources required to fund the large range of services we provide to the community. It includes details of capital expenditure allocations to improve and renew our City’s physical infrastructure, buildings and operational assets, and how we intend to invest in technology and other improvements that will enable us to continue to deliver high-quality, responsive and accessible services at a reasonable cost.

The 2021–22 Budget is based on a rate increase of 1.5 per cent. This is in-line with the Fair Go Rates System (FGRS), which caps Victorian council rate increases to forecast movements in the Consumer Price Index.

Our focus for the next year is to support and lead our community’s recovery from the pandemic, continue to deliver quality projects and services that make our City a great place to live, work and do business, and to demonstrate our commitment to deep community engagement through our actions. Our challenges for 2021–22 include:

  • Continuing to redirect resources into recovery associated with COVID-19.
  • Continuing to operate and enhance our Residential Aged Care service in a way that responds to the recommendations of the Royal Commission for the aged care sector, despite declining income and increased cost of operation.
  • Reducing our reliance on self-sourced income through parking revenue due to a shift in philosophy to one that prioritises community education over infringements to achieve behaviour change.
  • Responding to the general slow-down in economic activity that will impact income streams.
  • Managing our finances within the constraints set by the State Government’s rate capping regime.
  • Continuing to provide top-up funding for services that we provide on behalf of the State and Federal Governments to the local community (such as School Crossing Supervision and Home and Community Care). Over time the funds received by Local Governments have not increased in-line with real cost increases — leaving a gap. At this time, we do not know what increases if any will be applied.
  • Maintaining investment in our ageing community and infrastructure assets.
  • Responding to growth and increasing diversity in the population within the municipality.

We projected an investment of $72.65 million in new capital expenditure for asset renewals, upgrades and expansions.

Highlights of the 2021–22 Capital Works Program include:

  • Community facilities — comprises buildings and building improvements, upgrade and renewal of community facilities; municipal offices; sports facilities; and pavilions. Projects include Bentleigh Library, Murrumbeena Pavilion, Lord Reserve Pavilion and the redevelopment of the Carnegie Swim Centre ($32.07 million).
  • Renewal projects — this includes the renewal and upgrade of Council’s major infrastructure assets, such as: road reconstruction; drainage improvement; footpaths; local road resurfacing and car parks. Other renewals include building improvements and upgrade of community facilities, replacement of plant and machinery; furniture and equipment; information technology and telecommunications; and library collections ($18.64 million).
  • Recreation and open space — this includes Open Space Strategy initiatives (including acquisition of new open spaces); parks; playing surfaces; and playground equipment ($15.15 million).
  • Sustainability — Council continues to allocate five per cent of capital budgets for sustainability measures. Direct sustainability initiatives include the installation of photovoltaic systems to generate renewable energy, double glazing and insulation on Council assets and other building sustainability improvements ($6.2 million includes total sustainability measures across all projects).
  • Community safety — this includes safety projects: cross intersection, pedestrian crossings and safer speed limits; school safety; shopping centres; sustainable transport and disabled parking upgrades ($505,000).
  • Strategic projects — Activity Centre streetscape works, Cycling Action Plan implementation, multi-deck car parks, Integrated Transport Strategy implementation and Structure Plan designs (Elsternwick, Bentleigh, Carnegie) ($4.27 million).
  • Transformation and technology — includes technological solutions to enable customers to better transact with Council. Customer-focused projects include single customer view and increased online presence to make it easier to do business with us without needing to come to the Town Hall ($1.33 million).

Reading our Financial Report

2020–21 Financial Report