NRS Financial Viability Guide for Local Governmentsqshelter.asn.au/elements/2015/03/NRS-Financial... · NRS Financial Viability Guide for Local Governments Page 8 of 21 Front sheet

NRS Financial Viability Guide for

Local Governments

Published by the Office of the Registrar

Publication date: September 2014

Supported by the Queensland State Government

NRS Financial Viability Guide for Local Governments Page 2 of 21

Useful Contact Information Q Shelter has been contracted by the State Government to support community housing providers

through the registration process by building their capacity to meet the National Regulatory Scheme

for Community Housing performance outcome areas.

Q Shelter can supply tools and resources where necessary to applicants. Q Shelter can also

source consultants or undertake specialist project work for Local Government providers to build

necessary evidence and resources, if required.

Contact:

Jane West: [email protected]

Or phone Q Shelter: (07) 3831 5900

In addition there are a number of resources available to Local Governments on Q Shelter’s website

including:

Navigating the NRS bulletins at http://www.qshelter.asn.au/navigating-nrs-lg

Watching the webinars at http://www.qshelter.asn.au/local-government-registration-0

mailto:[email protected]

http://www.qshelter.asn.au/navigating-nrs-lg

http://www.qshelter.asn.au/local-government-registration-0


Table of contents

NRS Financial Viability Guide for Local Governments ............................................................... 1

Useful Contact Information .......................................................................................................... 2

Table of contents .......................................................................................................................... 3

Checklist – FPR Required Inputs ................................................................................................. 4

Overview ........................................................................................................................................ 5

Icons to highlight key information ............................................................................................... 5

Populating the FPR ....................................................................................................................... 6

General navigation .......................................................................................................................... 6

General rules for FPR inputs ........................................................................................................... 7

Input colour coding .......................................................................................................................... 7

Front sheet worksheet .................................................................................................................. 8

Front sheet inputs ........................................................................................................................... 8

Front sheet data checks .................................................................................................................. 9

Segmented business analysis worksheet ................................................................................. 10

Segmented business analysis details............................................................................................ 11

Segmented business analysis sheet data checks ......................................................................... 12

Consolidated business analysis worksheet ............................................................................. 13

Consolidated business analysis details ......................................................................................... 13

Consolidated business analysis sheet data checks ....................................................................... 14

Ratios worksheet ........................................................................................................................ 15

Graphs worksheet ....................................................................................................................... 16

Development and financing worksheet ..................................................................................... 17

Sign-off worksheet ...................................................................................................................... 18


Checklist – FPR Required Inputs

Helpful hint

To ensure all significant inputs are entered in the FPR input worksheets, it could be

useful to print this checklist out to use while going through the FPR.

Worksheet To do

Front sheet Filled in Council name and Reporting year

Segmented Business Analysis Corporate overheads – Segment 1

Community Housing – Segment 2

Community housing breakdown

Comments on variations

Other housing business – Segment 3

Other business activities – Segment 4

Consolidated Business Analysis Income Statement

Balance Sheet

Cash Flow Statement

Check ‘ERROR!’ free

Ratios All ratios appear for all four years

Graphs Graphs are displaying correctly

Comments on significant trends made

Development and financing Assumptions filled out

Check ‘ERROR!’ free

Sign-off sheet All input are completed and filled out

‘CHECKLIST’ is completed

Providers workings Any additional assumptions or calculations are included here


Overview

This document provides guidance to Local Governments (Council) applying for registration to the

National Regulatory System (NRS) Community Housing, in relation to satisfying Performance

Outcome 7: Financial Viability (PO7).

Financial viability is the ability to generate sufficient income to meet operating payments, debt

commitments and, where applicable, to allow for growth, while maintaining service levels. The

assessment of financial viability is a processing involving a review of the financial performance

report (FPR), audited financial statements and other information.

In assessing the financial viability of Council applicants, the NRS will assess performance in the

following areas:

ensuring a viable capital structure,

maintaining appropriate financial performance, and

managing financial risk exposure.

This document specifically provides guidance in relation to:

populating the FPR,

FPR supporting documentation for submission, and

useful information sources.

Following the guidance will ensure that Council populates the FPR in an effective way and

understands PO7 submission requirements.

Icons to highlight key information

The following icons will be used throughout the FPR guide to highlight key information.

Helpful hint

Outlines useful ideas that can make populating the model easier and faster.

Important note

Highlights key messages and assumptions that should be noted.

Errors and warnings

Highlights inputs (or lack of inputs) that can create an error or warning.

Calculations

Summarises key calculations explaining the underlying methodology.


Input Output

Populating the FPR

General navigation

To use the FPR, basic knowledge of and skills in Microsoft Excel is required.

The FPR has been modified for Council registration and references to the FPR in this document refer Version 1.

The five input tabs are coloured blue and the output tabs are grey (see table below)

The two main input sheets are ‘Segmented Business Analysis’ (segmented business) and ‘Consolidated Business Analysis’ (consolidated business).

The ‘Definitions’ worksheet provides detailed explanations of terms in the ‘Segmented Business Analysis’, ‘Consolidated Business Analysis’ and’ Development and Financing’ worksheets if required.

Front sheet Documents basic information on Council and reporting period, performs checks on input

data and links to the other tabs in the FPR.

Segmented Business

Analysis

Shows the breakdown of Council’s business segments and how full-time equivalent staff

(FTE) numbers of Council is allocated between four business segments.

Consolidated

Business Analysis

Reflects the consolidated (audited) financial statements of Council’s business activities ie,

income statement, balance sheet and cash flow statement.

Ratios An output sheet that produces ratios measured against Tier 3 thresholds.

Graphs An output sheet that displays graphs used to highlight significant trends.

Development and

financing

Records Council’s assumptions relating to any community housing development and

associated financing.

Sign-off sheet Documents Council’s assurance of compliance with the NRS requirements.

Providers workings Worksheet to use to show the Office of Registrar the calculations and workings behind

relevant inputs.

Worksheet tab colour

coding

Helpful hint

Some cells contain red arrows in the top right hand corner; hovering over these arrows

will display additional useful information for populating the cell.


General rules for FPR inputs

Several general rules for inputting data into the FPR will assist Council in ensuring the FPR is

successfully completed to meet NRS requirements.

Helpful hint

Actuals data covers FY2013 and FY2014 and forecast data covers FY2015 and

FY2016.

Important note

The total values in the segmented business and the consolidated business must equal

the Council’s audited income statements for the ‘Actual FY 2013’ and ‘Actual FY 2014’

data.

Monetary inputs are assumed to be in nominal dollars. That is, it is assumed that the

amounts entered are adjusted for inflation and any other price growth.

In order for the FPR to calculate correct results, income, expenses and gains should be

recorded as positive numbers and losses as negative numbers.

Errors and warnings

Use consistent whole dollar values throughout the FPR to avoid errors due to rounding.

Calculations

Where partial year calculations are required, a 365-day year is to be used in

determining the allocation of an amount to the partial year.

Input colour coding

Purple cell requires input of historical actual data

Green cell requires input of forecast data

White cell does not require input


Front sheet worksheet

The Front Sheet documents high-level information on the Council and reporting period. The front

sheet also validates input data and outlines the contents of the FPR with links to other tabs.

Front sheet inputs

The basic inputs required to begin using the FPR are located in the ‘Front Sheet’ and are outlined

below.

Input Explanation

Provider name Name of the Council.

Tier level Tier of the applicant; Council will be Tier 3.

ABN/ACN The Australian Business Number or Australian Company Number.

Primary jurisdiction Queensland.

Reporting year The date of the latest available audited financial statements for the Council (should be

FY2014, if for some reason FY2014 is unavailable use FY2013).

Important note

The entered reporting year will automatically update all financial years (FY) in the actual

and forecast columns in all worksheets, so it is critical to ensure the reporting year is

correct.


Front sheet data checks

The data validation section performs a high level check of user inputs. The possible data check

outcomes are detailed below.

The result is satisfactory

The result is not satisfactory - possibly due to rounding, a formula or

incorrect input

Insufficient data to perform the check

No data is entered to check

Errors and warnings

Do not submit the FPR to the Registrar unless data checks show no ’ERROR!’

messages. If issues persist, please contact your lead analyst at the Office of the

Registrar.


Segmented business analysis worksheet

The FPR includes a ‘Segmented Business Analysis’ (segmented business) worksheet, which

separates Council’s business activities and FTE numbers into:

1. ‘Corporate overheads’

2. ‘Community Housing’

3. ‘Other housing business’ and,

4. ‘Other business activities’

Two years’ historical actuals data and two years’ forecast data is required for each of the business

segments.

Helpful hint

Historical actuals data will be readily available from Council’s audited financial

statements or from the Queensland Treasury Corporation (QTC) Local Government

Forecasting Model (LGFM) version 2.5 or 3.0 (if applicable). Council will also be able to

obtain two years’ forecast data from their LGFM.

The segmented business worksheet captures how the Council’s audited income statements,

forecasts and FTE numbers of the Council are distributed between the four business segments.

Important note

Adopt a consistent, replicable methodology for allocation between segments. The

‘Providers Workings’ sheet is available to show assumptions and calculations behind

allocations.


Segmented business analysis details

Corporate

overheads

Segment 1

Any cost which is not directly

operational.

Salary and wages of Council employees who do not directly

work in ‘Other Business’ segments (eg, administration and

corporate staff) if applicable

Calculations

It is recommended to use FTE for a segment (eg, ‘Community Housing’ FTEs) to

Council’s Total FTE (FTE/Total FTE) to apportion corporate overheads—if another

method is used to allocate overheads, ensure working is provided.

Community

housing

Segment 2

Includes income and expenses

related to Council’s community

housing business.

Include any other properties used by

Council as community housing.

Properties included can be either owned or managed by

Council, eg, properties funded by the Department of Housing

such as long term community housing, National Rental

Affordability Scheme (NRAS), Community Managed Studio

Units, Community Rent Scheme (CRS) or Same House

Different Landlord (SHDL).

Helpful hint

Column B (‘Notes’) is for describing Council’s other housing business (if applicable) and

for providing direction to the ‘Providers Workings’ sheet is additional calculations or

assumptions are used. See example below.

For ‘Community Housing’ (Segment 2) only – explain variances from FY2013 to FY2014

which are greater than $10,000 and with a variance greater than 20 per cent (see above

screenshot). Explanation can be in the ‘Notes’ column.

Important note

The Community Housing Assets Definitions and Guidelines document (see Useful

information sources section, page 15) will help Councils identify what is a community

housing asset and to allocate programs, properties and business activities to the correct

segment.


Other housing

business

Segment 3

Housing that does not meet the

definition of community housing (if

applicable).

Includes employee expenses that

are directly involved with identified

other housing.

For example - crisis accommodation, employee housing,

caravan parks, aged care facilities, retirement villages,

disability and respite centres.

This will include, for example, salary, wages, leave,

superannuation and associate FTEs.

Other business

activities

Segment 4

The remainder and core of Council’s

business. It will be the largest

segment of the segmented

business.

For example, rates, water, sewerage, roads and parks will be

in other business.

Includes employee expenses that

are directly involved with Council’s

other business.

Will include, for example, salary, wages, leave,

superannuation and associate FTEs.

Segmented business analysis sheet data checks

The segmented business worksheet does not have a data validation section to perform a check of

user inputs.

The segmented business data flows to populate the ‘Income Statement’ component of the

‘Consolidated Business Analysis’ worksheet.

The allocation of income and expenses should be exhaustive in the segmented business data, ie,

the total of the segmented business data should equal the income statement section of the

consolidated business which will equal the Council’s audited income statement.

Errors and warnings

Despite the segmented business worksheet not having a ‘Checks’ section, the

consolidated business worksheet does and will ask ‘Does the contribution from business

segments align?’ (Row 189). This check is useful to look at to highlight any errors before

continuing on to the ‘Consolidated Business Analysis’ worksheet.


Consolidated business analysis worksheet

The consolidated business worksheet displays the Council’s income statements, balance sheets

and cash flow statements.

Consolidated business analysis details

Helpful hint

Rows 36 to 183 are made up of input cells and calculation cells that typically calculate

totals, eg, the calculation of net surplus or EBITDA. Following the colour coding on pg.

4 of this document will assist with any clarification required.

Income Statement The income statement and FTE numbers are automatically populated for Council from

the business segment worksheet.

Input cells do exist for any other income that is not specific to any business segment,

eg, row 36. These cells are colour coded.

Balance Sheet Requires inputs two historical years and two forecast years’ data.

Unspent capital grants and restricted cash (row 59) includes capital grants received in

advance of use and any sinking fund (if applicable).

Cash Flow Statement Requires the input of two historical years and two forecast years’ data.


Calculations

The accumulated depreciation formula in the Balance Sheet for the forecast period can

be over-written in case there are any adjustments.

The formula for government capital grants or other capital grants (row 150) in the

Balance Sheet for the forecast period can be over-written if there are any adjustments.

Important note

Forecasts should reflect any strategic business plan forecasts and asset maintenance

plans.

Property-related expense forecasts should reconcile to an asset maintenance plan or

clearly identify how it is different in the ‘Notes’ column (if applicable).

Consolidated business analysis sheet data checks

The consolidated business worksheet has data validation checks from row 186 to row 192.

Helpful hint

It is useful to check the ‘Variance %’ column to see if there are any large or unexpected

variances. An explanation is not required but it may help Council to identify any

potential errors in data entered.


Ratios worksheet

The ratios sheet is an output only sheet. The ‘Tier-3’ Thresholds will be what the Office of the

Registrar looks at as part of assessing Council’s financial viability.

These financial performance thresholds are indicative in assessing a Council’s financial viability.

The thresholds do not determine viability or compliance.

The thresholds provide an indication of performance and a useful starting point against which

results can be assessed.

Helpful hints

If anything stands out when observing Council’s ratios (eg, ratios significantly or

drastically below or above Tier 3 thresholds) it is useful to provide comments and

background to the Registrar relating to the cause. This can help avoid the Office of the

Registrar having to go back to Council and enquire further.

The NRS Performance Outcome 7: Financial Viability Guidance Note document

explains in detail the calculation behind the ratios and the data definitions. Refer to page

15, ‘Useful Information Sources’ below.


Graphs worksheet

The graphs sheet is an output-only sheet and is useful for Council and the Office of the Registrar to

identify any significant trends.

A comment section is available under each graph for Council to comment on anything significant or

relevant in explaining data (if applicable).


Development and financing worksheet

If applicable, the development and financing worksheet requires inputs to highlight financing and

development activities in community housing relevant to Council.

It requires one year of actuals data and two years of forecast. A ‘Checks’ section is below the input

cells (row 90 to 95) to allow Council to ensure the data entered is valid before continuing to the

next worksheet.

Helpful hints

This worksheet in particular has notes (red top-right-hand corners of cell) attached to

explain in more detail what inputs are required. These notes are highly beneficial to

read before entering data.


Sign-off worksheet

Errors and warnings

Ensure the sign-off sheet is completed correctly before submission. The Office of the

Registrar will not begin to look at Councils application until it is.

Use an electronic signature or type in the name of Council’s CEO / CFO/ or an

Authorised Officer verifying the FPR data

Ensure Council has answered Yes or No from the drop down box asking "Have

forecasts included in this report been approved by the Board?"

Make sure Council has answered Yes or No from the drop down box asking “I

give permission to The Office of the Registrar to make contact with the

Queensland Treasury Corporation (QTC) to gain additional financial information

pertaining to the Evidence Guidelines?"

Confirm you have met the ‘Checklist’ requirements


FPR supporting documents

To help assess PO7, the NRS also relies on existing documentation and data that Council has.

The table below lists documentation Council should (if applicable) submit, alongside the FPR. The

evidence sources can demonstrate Council’s capacity to meet the NRS Code at the point of

registration and/or its ongoing ability to comply with performance indicators.

Possible information to support PO7 requirements

Business plan Audit management letter for the most recent financial year

(where issued)

Annual report (including audited financial reports)

Council budget

Financial sustainable statement and long term

sustainability statement for two years and beyond (if

available)

Financial viability measures, financial management policies

and procedures from QTC Credit Review and Financial

Sustainability Review*

Evidence used for community housing provider

accreditation or an accreditation report issued by the

accrediting authority

Audit committee reports/minutes

*QTC is able to provide these upon Council consent.

Helpful hints

The ‘Evidence guidelines for local governments and prescribed state providers of

community housing’ document explains the assessment process, performance

requirements, indicators and thresholds applicants are assessed against.

Important note

Evidence sources should be attached to a folder labelled ‘Financial Viability Evidence’

to ensure that the Registrar considers all evidence sources.


Useful information sources

Source name Description of relevant content Document link (URL)

Evidence guidelines for local

governments and prescribed state

providers of community housing

Sets out the performance outcomes and

indicators, and evidence sources to be

used in assessing applicants.

http://www.hpw.qld.gov.au/SiteCollecti

onDocuments/EvidenceGuidelinesFor

LocalGovernments.pdf

Performance Outcome 7:

Financial Viability

Guidance Note

Explains PO7 in detail eg, describes

financial performance ratios, the meaning

of financial viability and other data

definitions.

http://www.nrsch.gov.au/__data/assets

/file/0009/288225/D_Financial_Viability

.pdf

QLD Housing Regulation 2003 Outlines the provisions for housing-

related activities carried on by the State

and the system for supporting and

regulating Community Housing Providers.

https://www.legislation.qld.gov.au/LEG

ISLTN/CURRENT/H/HousingR03.pdf

Housing Reforms - Regulatory

and funding changes commencing

1 January 2014

Explains the implications of the

amendments effective 1 January 2014,

for Community Housing Providers.


onDocuments/HousingReforms.pdf

Amendments to the Housing

Regulation 2003

Explains the implications of the

amendments effective 1 January 2014,

for Community Housing Providers.


onDocuments/HousingReforms.pdf

The NRSCH Law (also known as

the National Law)

State and Territory legislation that

established the NRSCH.

http://www.nrsch.gov.au/publications/t

he_national_law

Enforcement Guidelines Explains the enforcement principles and

approach of Registrars where the

Community Housing Provider does not

comply, and provides guidance on

enforcement action.


/file/0020/284033/I_Enforcement_Guid

elines.pdf

National Regulatory Code Sets out the performance requirements

that registered Community Housing

Providers are required to comply with,

under the National Law.


/file/0007/284650/National_Regulatory

_Code.pdf

Queensland Housing Act 2003 Contains definitions related to community

housing and Community Housing assets

classes and their respective reporting

requirements.

https://www.legislation.qld.gov.au/LEG

ISLTN/CURRENT/H/HousingA03.pdf

http://www.hpw.qld.gov.au/SiteCollectionDocuments/EvidenceGuidelinesForLocalGovernments.pdf



http://www.nrsch.gov.au/__data/assets/file/0009/288225/D_Financial_Viability.pdf



https://www.legislation.qld.gov.au/LEGISLTN/CURRENT/H/HousingR03.pdf

https://www.legislation.qld.gov.au/LEGISLTN/CURRENT/H/HousingR03.pdf

http://www.hpw.qld.gov.au/SiteCollectionDocuments/HousingReforms.pdf




http://www.nrsch.gov.au/publications/the_national_law

http://www.nrsch.gov.au/publications/the_national_law

http://www.nrsch.gov.au/__data/assets/file/0020/284033/I_Enforcement_Guidelines.pdf



http://www.nrsch.gov.au/__data/assets/file/0007/284650/National_Regulatory_Code.pdf



https://www.legislation.qld.gov.au/LEGISLTN/CURRENT/H/HousingA03.pdf

https://www.legislation.qld.gov.au/LEGISLTN/CURRENT/H/HousingA03.pdf


Disclaimer

The information presented does not take into account particular situations, objectives or needs,

and does not constitute advice. Before acting upon this information it is recommended you obtain

individual advice specific to your needs.

This Guide and any figures, tables and charts were prepared in part by data obtained from third

party information sources. There has been no independent verification of that information.

Accordingly, no representation is provided that the information contained is accurate or complete

and it should not be relied upon as such.

Following the Guide does not guarantee success in applying for the National Regulatory System

(NRS) Community Housing Providers, whether in relation to satisfying Performance Outcome 7:

Financial Viability (PO7) or otherwise. QTC is under no obligation or duty to notify anyone if there

is a change in any information or there is new information or if it forms a different opinion at any

time after the date of the information.

Recipients of this document should not rely on any matter set out in this document which is not

covered by an express warranty. To the extent permitted by law, neither the authors nor their

employees, contractors, servants or agents accept any liability or responsibility whatsoever for any

expense, damage, loss, claim, cause of action or costs incurred by a person arising out of or in

connection with any use of, or reliance on, the information provided, regardless of whether such

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omission or negligence of the authors, their employees, contractors, servants or agents.

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