Council a low financial risk

Posted on 10 Jan 2013

Please note: this is an old article

It was published in January 2013, so the information may be out-of-date.

Greater Shepparton City Council’s financial management has once again been independently assessed as being robust, with Council in a healthy financial position heading into the future.

Following a recent audit, the Victorian Auditor-General’s Office (VAGO) identified Council as being unlikely to have any financial sustainability concerns. Greater Shepparton City Council is one of 73 Victorian councils assessed as posing a low financial risk, while five councils were assessed as medium risk and one high risk.

Financial sustainability is assessed by the VAGO from both the short term and long term perspective. Short term indicators relate to the ability of councils to fund operations and meet short term commitments, while long term indicators focus on strategic issues such as the ability to renew assets and repay debt.

“VAGO has given Greater Shepparton City Council a clean bill of health”, explains CEO, Gavin Cator. “What this means is that the areas of liquidity, self-financing, indebtedness capital replacement and renewal gap are being well managed, ensuring a sound financial position now and into the future. However, while we are satisfied with the audit outcome, we are continuing to work hard to improve our financial position”.

Achieving this standard of result is impressive given that during the 2011/12 financial year all Victorian councils were required to address a shortfall in the defined benefit superannuation fund totalling $453 million.

“Issues such as defined benefits will be a challenge”, suggests Mr Cator. “We didn’t anticipate inheriting this cost; however we are confident that we are able to manage this”.

Part of Council’s strategy to address the defined benefit superannuation shortfall is to pay a lump sum in order to gain a discount.

“Council’s share of this shortfall of $5,334,220 was paid in September 2012 taking advantage of a discount in the amount of $297,600”, explains Justin Finlayson, Greater Shepparton City Council Director of Business.

“As part of the mid-year budget review, savings from the Council’s $97 million operating budget and $32 million capital works budget will be investigated to replenish cash reserves”, suggests Mr Finlayson. 

Council will consider the mid-year budget review at its next Ordinary Meeting on Tuesday 19 February 2013.

Council envisages that in addition to the savings identified, a reduction in services, a reduction in capital projects or borrowing at a lower interest rate may be necessary to replenish cash reserves. These options will be considered during the preparation of the Council’s Strategic Resource Plan and 2013/14 Budget.

The key objective of the Strategic Resource Plan is financial sustainability, whilst still achieving Council’s strategic objectives as specified in the Council Plan. 

Mr Cator contends that, “The ability to provide the required services to our community in a cost effective and efficient way will continue to challenge us. We are working to provide more transparency in our Budget and Strategic Resource Plan processes so that the community is fully engaged and informed”.

The next Ordinary meeting is being held on Tuesday 19 February 2013, 5.30pm in the Council Boardroom, at the Welsford Street Offices. All members of the community are invited to attend to find out more about the mid-year budget.