Financial snapshot

Overall, Council’s financial position remains sound, although underlying income was impacted again by the closure of some services due to COVID-19 throughout the year.

Council also undertook considerable storm recovery works from a storm that impacted the shire in June 2021. The processing and sale of the recycled material generated an income source that contributed to the underlying result. The increased income was offset by increased expenses relating to the storm recovery works and material processing. Capital works expenditure for the year was $24.81 million. However, the program of works was disrupted by the impacts of COVID-19, rising prices of materials and a shortage of contractors to undertake the work. Several projects originally planned for 2021/22 were in progress at the end of the financial year and will now be completed in 2022/23. Borrowings have decreased and remain at affordable levels and no new loans were drawn down during 2021/22. The following table outlines some of the key financial numbers and indicators (refer to the financial statements at the end of this report for more detail).

Item and related financial statement

Total income (Income statement) Total expenditure (Income statement) Surplus (Income statement) Assets (Balance sheet) Liabilities (Balance sheet) Capital expenditure (Statement of capital works) Loans and borrowing ratio (Performance Statement) Working capital ratio (Performance Statement) Asset renewal & Upgrade Ratio (Performance Statement) Adjusted Underlying Result (Performance Statement)

Economic impacts

In 2021/22, interest rates remained comparatively low for much of the year however rates began to increase in the later part of the year. In turn, the increased rates linked directly to the increase in inflation towards the end of the twelve month period. Inflation for the twelve month period ending 30 June 2022 was 6.1%. A large component of Council’s expenditure is on salaries, inflation did not impact salaries. However, it did impact the costs relating to materials and supplies and construction costs (Capital works). Price rises continue to be driven by high levels of building construction activity combined with ongoing shortages of materials and labour. Low interest rates meant that returns on Council investments were also low. Interest income was impacted dramatically during the year. However, an increase in interest rates was evident towards the end of the year. The impact of COVID-19 was apparent in 2021/22, it wasn’t as significant as in 2020/21, with many recreational, leisure and cultural venues requiring several temporary closures during the year.

2021/22 $126.877m $110.052m $16.825m $1,342,067b $43.836m $24.810m 6.26%

167.81%

136.30%

-0.26% 2020/21

$92.517m $84.562m $7.955m $1,200,021b $35.678m $18.389m 7.56% 194.07% 87.06% -2.74%

Revenue (income)

In 2021/22 income totalled $126.8 million, this was an increase of $34.3 million from 2020/21. Rates and charges increased by $2.99 million, this was within the limit placed on Council with the rate cap. Operating grants increased by $10.1 million, due largely to grants received for emergency management and the early payment of a large percentage of the 2022/23 financial assistance grant. Capital grants increased by $1.3 million, due largely to the timing of the payment of grants relating to projects. Non-monetary contributions (gifted infrastructure) decreased by $7.4 million. This is linked directly to the timing on subdivisions being completed and Council recognising infrastructure assets. Other income increased by $11.1 million, this is due to the income generated from the processing and sale of recycled storm timber. The following graph provides a breakdown on the key income categories.

Revenue by key sources

Rates and charges 44.3% Statutory fees and fines 2.7% User fees 4.1% Grants – operating 21.8% Grants – capital 7% Contributions – monetary 2% Contributions – non monetary 8.1% Other income 10%

Expenditure (operating expenses)

The following graph provides a breakdown of the key expenditure categories. As can be seen, our operating expenditure is mainly made up of the cost of employees and contractors who deliver our services. Operating expenses increased by $25.5 million in 2021/22. As this increase was lower than income growth, our underlying surplus increased. Employee costs decreased in 2021/22, despite pay rises associated with the Enterprise Agreement, and new staff commencing that were included in the budget. The large number of staff vacancies throughout the year provided savings that offset the increases to employee costs from 2020/21. The vacant positions were filled with temporary staff, reported under materials and services. Materials and services costs increased by $25.39 million. The increase was due largely to the costs incurred by Council undertaking storm recovery works and costs relating to the processing of recycled materials to sell.

Revenue by key sources

Employee costs 32.3% Materials and services 49% Borrowing costs 0.2% Other expenses 4.4% Depreciation and amortisation 14.1%

Capital works

Capital works expenditure relates to renewing and upgrading our existing assets and constructing new assets. During 2021/22, we spent a total of $24.8 million on capital works across the shire. Capital expenditure included the commencement of works on two significant multiyear projects: a construction contract was awarded for Stage 1 of the Macedon Ranges Regional Sports Precinct project and a design and construction contract awarded for the Macedon Ranges Shared Trails project. Completed projects across the shire included: • Kyneton Town Hall exterior façade works • Purpose-built, state-of-the-art Kyneton Kindergarten • Lancefield Park Lighting • Installation of Electric Vehicle Charging stations • Kyneton Livestock Exchange upgrade.

Breakdown of capital expenditure by key categories

Property 19.29% Plant and equipment 9.08% Roads 29.73% Bridges 4.09% Footpaths and cycleways 10.55% Drainage 1.57% Recreation, leisure and community facilities 6.32% Parks, open space and streetscapes 7.90% Other 11.48%

Assets and liabilities (balance sheet)

The balance sheet shows what we own (assets) and what we owe (liabilities). Assets minus liabilities gives total equity, which is an accumulation over time of the net worth of Council. During 2021/22, our assets increased by $142 million. Reasons for this included: • Council holding higher levels of cash and cash equivalents of $44.39 million at 30 June 2022, partly due to the capital works program being delayed and projects carried forward to 2022/23. Grants totalling $14.7 million received in advance (unearned income), late in the financial year also contributed to higher cash holdings. These were both offset by unbudgeted expenditure relating to storm recovery works and material processing costs. • Increases in fixed asset values of $117 million resulting from the revaluation of land and buildings ($96.3 million) and road assets ($20.7 million). • $10,301,000 of assets transferred to Council following the completion of new subdivisions. Our debt ratios improved with no new borrowings taken out during the year. Increasing liabilities for 2021/22 was the recognition of the unearned income of $14.7 million.