CITYOFPORTLINCOLN Notes to the Financial Statements for the year ended 30 June 1. Significant Accounting Policies (a) Basis of accounting These Financial Statements are prepared according to Australian Accounting Standards. Except for certain assets shown at a written down current cost valuation, the report uses the historical cost convention. The accounting policies adopted are consistent with those of the previous year. (b) The local government reporting entity All material Funds through which the Council controls resources to carry on its functions are in the Financial Statements. In the process of reporting on the Council as a single unit all transactions and balances between those material Funds (for example, loans and transfers between Funds) have been eliminated. (c) Acquisitions of Assets The cost method of accounting is used for the initial recording of all assets. Cost is determined as the fair value of the assets given as consideration plus costs incurred in preparing them for use. Fair value means the amount for which an asset could be exchanged between a knowledgeable buyer and seller in an arm's length transaction. (d) Revaluations of Non-current Assets Land and buildings were revalued to their current cost less accumulated depreciation as at 30 June 1994. The net revaluation increments were added directly to the accumulated surplus. All non-current assets, with the exception of receivables, land held for resale and investments, were revalued to their current cost less accumulated depreciation at the date of each general revaluation of property within the Council area. The last such revaluation was at 30 June Revaluation increments were added directly to the asset revaluation reserve. Current cost with an asset, means the lowest cost at which the gross service potential of that asset could be obtained in the normal course of operations. Revaluations do not result in the value of non-current assets exceeding the net amount expected to be recovered through the net cash inflows arising from their continued use and subsequent disposal ("recoverable amount"). Where the value of a non-current asset is greater than its recoverable amount, the asset is devalued. The revaluation decrement is recognised as an expense in the operating statement except where it reverses a previous increment. In this situation the revaluation decrement is taken from the asset revaluation reserve. The expected net cash flows included in determining recoverable amounts of non-current assets are discounted to their present values using a market determined, risk adjusted discount rate. (e) Depreciation of Non-current Assets 1
All non-current assets having a limited useful life are depreciated over their lives in a manner that reflects the consumption of the service potential. Land is not a depreciable asset. Depreciation is recognised on a straight-line basis, using rates that are reviewed each reporting period. (f) Non-current Assets constructed by the Council The cost of non-current assets constructed by the council includes the cost of all materials used in construction, direct labour on the project and a proportion of variable and fixed overhead. (g) Maintenance and Repairs Maintenance, repair costs and minor renewals are expensed when incurred. (h) Employee Entitlements Employee entitlements are accrued on a pro rata basis for annual leave and long service leave up to the reporting date. Such accruals are assessed having regard to the estimated future cash outflows discounted by an appropriate interest rate and other factors including experience of employee departures and their periods of service. No accrual for sick leave has been made because it is non-vesting. The best estimate of the sick leave expense for the reporting period is the actual amount paid for the year. The superannuation expense for the reporting period is the amount of the statutory contribution the council makes to the employees superannuation plan. Details of these arrangements are outlined in Note 24. (i) Inventory Inventories are valued at the lower of cost and net realisable value. (j) Investments Investments are valued at cost. Interest revenues are recognised as they accrue. (k) Land held for resale Land bought for development valued at the lower of cost and net realisable value. Cost includes the cost of acquisition, development and finance charges Interest and other holding costs incurred after completion are recognised as expenses. Revenue arising from the sale of property is recognised in the operating statement as at the time of signing a binding contract of sale (l) Leases A distinction is made between finance leases where the Council effectively owns the leased noncurrent assets, and operating leases under which the lessor retains ownership. Where a non-current asset is acquired by means of a finance lease the asset is recorded at its fair value. A liability is recorded for the same amount. Lease payments are allocated between the principal component and the interest expense. Operating lease payments are charged to the operating statement in the periods in which they are incurred. (m) Rates, grants, donations and other contributions Rates, grants, donations and other contributions are recognised as revenues when Council obtains control over the assets comprising the contributions. Control over assets acquired from rates is obtained at the commencement of the rating period or, where earlier, upon receipt of the rates. Control over assets received by way of grant(s) is normally obtained upon their receipt or upon prior 2
notification that a grant has been secured. The timing of control commencement depends upon the arrangement between the grantor and Council. Unreceived contributions over which Council has control are recognised as receivables. Where contributions recognised as revenues during the reporting period were obtained on the condition that they be expended in a particular manner or used over a particular period, and those conditions were undischarged as at the reporting date, the nature of and amounts pertaining to those undischarged conditions are disclosed in Note 6. That note also discloses the amount of contributions recognised as revenues in a previous reporting period that were obtained for Council's operations in the current period. (n) Joint Venture The Council's interest in a joint venture has been recognised in the Financial Statements by including its share of any assets, liabilities, revenues and expenses within the relevant items reported in the statement of financial position and operating statement. (o) Cash For the purposes of the statement of cash flows, cash includes all monetary deposits that are readily convertible to cash on hand and which are used, or are available for use, in the cash management function on a day to-day basis, net of outstanding bank overdraft. (p) Full Cost Attribution Accounts have been prepared on a Full Cost Attribution basis as per the Local Government (Financial Management) Regulations 1999 Part 3 8 (2) 3
2.(a) Functions/Activities of the Council FUNCTIONS ACTIVITIES Administration (Unalloc.) Public Order & Safety Health Social security & Welfare Housing & Community Amenities Protection Of the Environ Recreation & Culture TOTAL GRANTS 824,391 775,291 77,630 106,210 1,500 136,401 47,094 TOTAL OTHER 5,278,221 5,620,050 42,589 52,681 5,198 14,949 94,740 44,831 563,348 584,268 918,141 131,615 207,780 287,377 REVENUE TOTAL 6,102,612 6,395,341 42,589 52,681 5,198 14,949 172,370 151,041 563,348 585,768 918,141 131,615 344,181 334,471 % EXPENSES TOTAL 68.3 73.5.5.6.1.1 1.9 1.7 6.3 6.7 10.3 1.5 3.9 3.8 1,040,484 115,889 66,553 140,715 56,665 102,176 258,659 212,910 1,516,874 1,693,616 182,512 100,946 1,641,007 1,152,585 % OPERATIONS SURPLUS (DEFICIT) 10.4 1.7.7 2.0.6 1.5 2.6 3.0 15.2 24.0 1.8 1.5 16.4 16.4 5,062,128 6,279,452 (23,964) (88,034) (51,467) (87,227) (86,289) (61,869) (953,526) (1,107,848) 735,629 30,669 (1,296,826) (818,114) Mining & Construction Transport & Communications Economic Affairs Other Purposes NEC Governance 137,823 270,665 61,942 45,734 388,581 257,904 61,157 65,681 132,574 405,352 61,942 45,734 526,404 528,569 61,157 65,681 132,574 405,352.7.6 5.9 6.1.7.8 1.5 4.6 80,857 199,685, 1,592,419 1,478,743 312,604 438,914 3,255,551 1,060,736.8 2.9 15.9 21.0 3.1 6.0 26.2 15.0 (18,915) (153,951) (1,066,015) (950,174) (251,447) (373,233) (3,122,977) (655,384) 349,427 5.0 (349,427) TOTAL 1,176,245 1,200,760 7,754,271 7,510,442 8,930,516 8,711,202 100 100 10,004,185 7,046,342 100.0 100.0 (1,073,689) 1,664,860 Note: Comparatives may be distorted due to the change in accounting policy incorporating Full Cost Attribution to the accounts 4
3. Depreciation and Amortisation Expense Amortisation of plant and equipment under finance leases was $32,387 Depreciation and amortisation expenses for the year was charged in respect of: Plant & Machinery 145,368 162,515 Office Equipment, Furn & Fittings 53,521 61,454 Library 30,864 35,612 Infrastructure 850,040 1,000,045 Buildings 451,308 397,963 Library Books 57,975 111,537 1,589,076 1,769,126 4. Interest Expense Interest paid/payable on debentures 0 146,342 Bank Interest - No GST 3 Bank Interest - Including GST 0 5. Other Expenses Other expenses reported in the Operating Statement include: Finance charges relating to finance leases 32,387 32,387 Rental expense relating to operating leases 6. Conditions on Grants Grants which were recognised as revenues in a previous reporting period and were expended during the current reporting period in the manner specified by the grantor were - Coast & Clean Seas Project 7. Current Assets-Cash Cash at bank and on hand 257,244 513,114 Investments (Note 10) 1,978,043 1,081,802 2,235,287 1,594,916 The above amounts are reconciled to cash at the end of the financial year as disclosed in the statement of cash flows as follows: Balances as above 2,235,287 1,594,916 Less: Bank Overdraft (Note 12) 110,659 Balances per statement of cash flows 2,235,287 1,484,257 8. Current Assets-Receivables Rates Receivable 105,207 78,707 Less: Provision for doubtful debts (15,000) (15,000) 90,207 63,707 Loans and advances Other debtors 162,762 165,329 Less: Provision for doubtful debts (5,600) (5,600) 157,162 159,729 247,369 223,436 5
9. Current Assets-Inventory Stores and materials 104,880 12,480 Stores Loose Tools 20,000 20,000 124,880 32,480 10. Current Assets-Investments Government and semi-government bonds-at cost Term Deposits Long Service Leave 316,204 158,913 Community Pier Fund 16,661 15,932 Pre-paid Burial Scheme 3,036 2,903 Kirton Court Maintenance 10,527 10,066 Parnkalla Trail 152 145 Local Works of Art 67 5836 Carried F/W WIP 1,050,130 0 Home Assist 715 684 Plant Replacement 567,434 168,692 Library 4,878 4,664 Clean Seas 0 691,408 Cultural Centre 1,230 1,176 Short Term Deposit Skate Park 2,321 1,999 Youth Council JJJ 4,688 4,483 Crime Prevention 14,900 TOTAL 1,978,043 1,081,801 11. Current Assets-Other Accrued Interest Accrued Revenues 168,646 188,360 12. Current Liabilities-Bank Overdraft Bank Overdraft 0 110,659 13. Current Liabilities-Creditors and Provisions Sundry Creditors & Accruals 668,975 403,132 Provision for Annual Leave 148,552 179,657 Provision for Long Service Leave 26,340 31,981 843,867 614,770 14. Current Liabilities-Loans Bank Loans Other Loan Lease liabilities 32,387 32,387 32,387 32,387 15. Non-current Assets-Land and Buildings Land and Buildings - at cost 31,050,850 31,336,500 Less: Accumulated Depreciation 7,591,675 7,263,250 23,459,175 24,073,250 6
16. Storm Water Drainage Storm water at cost 1,206,438 1,194,087 Less accumulated depn 161,323 145,596 1,045,115 1,048,491 17. Other Infrastructure Infrastructure at cost 51,873,538 48,827,341 Less accumulated depn 12,403,357 11,616,433 39,470,181 37,210,908 40,515,296 38,259,399 18. Non-current Assets-Plant and Equipment Plant and equipment - at cost 1,565,147 2,112,198 Less: Accumulated depreciation 710,468 743,357 854,679 1,368,841 Plant and equipment under finance lease at cost 338,000 338,000 Less: Accumulated depreciation 150,332 117,944 187,668 220,056 1,042,347 1,588,897 19.Non-current Assets-Office Equipment and Furniture and Fittings Office equipment and furniture and fittings - cost 969,536 890,802 Less: Accumulated depreciation 354,367 270,038 615,169 620,764 Library books at 844,142 832,649 Less: Accumulated depreciation 504,122 446,146 340,020 386,503 Valuations were determined by John Morgan Consulting as at June 30 7
20. Local Government Asset Movement Schedule Balance at Beginning of Year Land Buildings Infrastructur e Plant and Equipment Furniture and Equipment Other Total 13,149,500 10,923,750 38,259,399 1,588,897 620,764 474,003 65,016,313 Additions 139,350 3,105,937 20,491 78,790 11,492 3,356,060 Disposals 223,000 79,117 346,673 648,790 Revaluation Increments / Decrements Depreciatio n Expense Balance at the End of the Year -75,000-75,000 451,308 850,040 145,368 84,385 57,975 1,589,076 12,926,500 10,532,675 40,515,296 1,042,347 615,169 427,520 66,059,507 21. Non-current Liabilities-Creditors and Provisions Provision for Annual Leave 49,517 56,734 Provision for Long Service Leave 119,993 145,690 169,510 202,424 22. Non-current Liabilities Loans Bank Loans Other Loan- Debentures LGFA Lease liabilities 168,470 187,669 Deferred Housing 390,825 266,824 559,295 454,493 23. Reserves Unexpended specific purpose grants HACC 0 0 Crime Prevention 0 0 Clean Seas 0 691,408 691,408 24. Commitments for Expenditure Capital Commitments Coast & Clean Seas Project will continue during /2004 with a budgeted expenditure for the financial year of $27,000 Financial Lease Commitments At the reporting date, the council had the following obligations under finance leases (the sum of which is recognised as a liability after deduction of future finance charges included in the obligation): Lease Plan Australia - Garbage Compactor 8
Payable within one year 51,437 51,437 Later than 1 year but less than 5 163,107 214,544 214,544 265,981 Less future finance charges 26,875 45,925 187,669 220,056 25. Superannuation The Council contributes for its employees to a defined benefit superannuation Plan established for all local governments in the state. The Council contributes to the Local Super Scheme amounts as determined by the Plan. Assets accumulate in the Plan to fund members' benefits as they accrue. If the assets of the Plan were insufficient to satisfy benefits payable to its beneficiaries, the Council would be required to meet its share of the deficiency. No liability of the Council has been recognised as at the reporting date in respect of superannuation benefits for its employees. The amount of superannuation contributions paid by the Council during the reporting period was $179,851 ( $173,044) 26. Reconciliation of Increase in Net Assets Resulting from Operations to Net Cash Inflow from Operating Activities Increase in net assets resulting from operations 1,664,860 (1,073,670) Items not involving operating cash: Depreciation 1,589,075 1,769,126 Loss (Gain) on Disposal (159,693) 2,359,931 3,094,242 3,054,387 Provision for doubtful debts Revenues provided by government Government Grants Investing activity Change in operating assets and liabilities Receivables 93,441 Other Current Assets (96,619) 31,652 Creditors 265,843 51,370 Provision for employee entitlements (69,660) (138,349) Net cash inflow from operating activities 3,193,806 3,093,501 27. Regional Subsidiaries The City of Port Lincoln is a member of the Eyre Peninsula Local Government Association which has as its objectives the provision of a forum for common action and information on a variety of local government issues. All Councils situated on Eyre Peninsula are members of the EPLGA. The total subscription amount paid to EPLGA in / was $16,200 (net of GST) In addition, the City of Port Lincoln is a member of the Spencer Gulf Cities Association which also has a common objective of providing a forum for discussion and action on issues affecting the regional cities of Port Pirie, Port Augusta, Whyalla and Port Lincoln. In the / financial year, $233 was paid as membership to the association with $15,932 paid as a share of consultancies commissioned by the association. The Eyre Regional Development Board is a regional economic development authority charged with the responsibility of facilitating economic growth and activity in the Eyre region. The contribution of this Council to that Board for the / financial year was $24,643 (net of GST) 9
28. Financial Instruments The interest rate risk for all interest bearing financial instruments of the Council at 30th June are detailed in the following table. Exposures arise predominantly from assets and liabilities at variable interest rates as the Council intends to hold fixed rate assets and liabilities to maturity. Financial Assets: Cash & Deposits Investments Average Interest Rate Variable Interest Rate Less than 1 Year Fixed Interest Rate 1 to 5 Years More than 5 Years Non Interest Bearing Total % $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 4.25% 2,235,287 2,235,287 Receivables 4.0% 247,369 247,369 Financial Liabilities: Overdraft and Borrowings Creditors and Accruals Lease Liabilities 4.0% 668,975 668,975 5.0% 32 32 The Council s financial assets and liabilities are recorded at amounts reflective of their respective net fair values within the financial statements. The net fair value of other monetary financial assets and financial liabilities is based on market price, where a market exists, or by discounting expected future cashflows by the current interest rates for assets and liabilities with similar risk properties. 10
CHIEF EXECUTIVE OFFICER'S STATEMENT I,.the person for the time being occupying the position of chief executive officer of the Corporation of the City of Port Lincoln, do hereby state that the financial statements for the council for the / financial year are to the best of my knowledge presented fairly and in accordance with accounting procedures which have been maintained in accordance with the Local Government Act 1999 and the Local Government (Financial Management) Regulations 1999 made under that Act... (Signed). (Dated) ADOPTION STATEMENT. Laid before the Corporation of the City of Port Lincoln Council and adopted on.. (Principal member of the council) 11