THE HILLS SHIRE COUNCIL FINANCIAL STATEMENTS · The Hills Shire Council FINANCIAL STATEMENTS 2015-16 3 NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 30 June 2016

The Hills Shire Council FINANCIAL STATEMENTS 2015-16 1

THE HILLS SHIRE COUNCIL

FINANCIAL STATEMENTS 2015-2016

2 The Hills Shire Council FINANCIAL STATEMENTS 2015-16

GENERAL PURPOSE FINANCIAL STATEMENTS

for the financial year ended 30 June 2016

Boundary Adjustment 3

Chief Financial Officer’s Report 4

Understanding Council’s Financial Statements 6

Statement by Councillors & Management 7

Primary Financial Statements:

• Income statement 8

• Statement of Comprehensive Income 9

• Statement of Financial Position 10

• Statement of Changes in Equity 11

• Statement of Cash Flows 12

Notes to the Financial Statements 13

Independent Auditor’s Report

• On the Financial Statements (Sect 417 [2]) 86

• On the Conduct of the Audit (Sect 417 [3]) 88

OVERVIEW

(i) These financial statements are General Purpose Financial Statements and cover the operations for The Hills Shire

Council.

(ii) The Hills Shire Council is a body politic of NSW, Australia – being constituted as a local government area by

proclamation and is duly empowered by the Local Government Act 1993 (LGA).

• Council’s Statutory Charter is detailed in Paragraph 8 of the LGA and includes giving Council;

• the ability to provide goods, services and facilities, and to carry out activities appropriate to the current and

future needs of the local community and of the wider public,

• the responsibility for administering regulatory requirements under the LGA and

• a role in the management, improvement and development of the resources in the area.

A description of the nature of Council’s operations and its principal activities are provided in Note 2(b).

(iii) All figures presented in these financial statements are presented in Australian currency.

(iv) These financial statements were authorised for issue by the Council on 23 August 2016. Council has the power to

amend and reissue these financial statements.

THE HILLS SHIRE COUNCIL FINANCIAL STATEMENTS 2015-2016

Email: [email protected]

Phone: (02) 9843 0555

The Hills Shire Council

www.thehills.nsw.gov.au

CONTENTS


NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 30 June 2016

BOUNDARY ADJUSTMENT

NSW Premier Mike Baird and the Minister for Local Government Paul Toole announced 19 new Councils in NSW commencing on 12 May 2016. Although The Hills Shire Council did not merge with another Council, its boundaries were adjusted.

Those suburbs south of the M2 (SM2) that are currently part of The Hills Shire Council will now form part of the City of Parramatta Council. These include: Carlingford, the majority of North Rocks, Oatlands, Northmead, North Parramatta, Winston Hills and parts of Baulkham Hills.

The former Hills Shire Council covered an area of 396 square kms, a population in excess of 180,000 people and 65,383 rate assessments. After the boundary adjustment, it will cover an area of 382 square kms, a population in excess of 159,000 and 55,763 number of rate assessments. However it is still estimated Hills Shire will increase to more than 260,000 people by 2031.

This matter directly affects the Financial Position of The Hills Shire Council. Loss reported in FY 15/16 Financial Statements of $478M relates mainly to transfer of Assets. This also resulted in a $1.1M impact on FY 15/16 Budget and an $8.8M impact on recurrent Budgets from FY 16/17 onwards. Although Council’s financial position has changed, it still remains positive.

The City of Parramatta has requested that The Hills Shire Council continue to provide the services to the suburbs SM2 on a cost recovery basis, so that the services are not disrupted to the residents until such time the City of Parramatta is ready to take over.

As per the Transitional Agreement between City Of Parramatta (CoP) and the Hills Shire Council the following amounts are due to CoP as at 30 June 2016. These amounts have been provided in the FY 15/16 Financial Statements and are detailed below.

Due To CoP $

Rates, Stormwater & Financial Assistance Grant* 1,557,973

North Rocks Child Care Centre * 34,871

Trust – Bonds 387,100

Section 94 – CP 7 & CP 14 10,479,496

Restorations Income received in advance 88,208

Waste Management Reserve 15.28% 461,595

Total Due to CoP 13,009,243

Due From CoP

Transitional Services provided* 497,626

Outstanding Rates & Annual Charges Debtors 349,171

North Rocks Preschool Expenditure incurred 260,053

Capital Expenditure incurred between 13 May & 30 June 2016 on SM2 Assets 1,035,463

Total due from CoP 2,142,314

Net Due To CoP 10,866,929

*Operating Loss FY15/16 $1,095,218

Table below details the Written Down Value of the assets transferred to City Of Parramatta as at 30 June 2016.

Category $'000 Balance prior to SM2 transfer of assets

Amounts transferred to CoP

Balance after transfer of assets

Plant & Office Equipment 6,304 - 6,304

Operational Land 119,906 (4,510) 115,396

Community Land 289,543 (40,825) 248,717

Land Under Roads 2,637,658 (244,670) 2,392,989

Buildings 248,360 (12,521) 235,841

Roads/Traffic/Footpath/Bridges 1,061,613 (118,855) 942,756

Bulk Earthworks 123,785 (14,703) 109,082

Stormwater Drainage 258,266 (25,715) 232,551

Parks Infrastructure 55,873 (6,236) 49,637

TOTAL 4,801,308 (468,035) 4,333,273


CHIEF FINANCIAL OFFICER’S REPORT

“Council is in the strongest financial position it has been in throughout its history. The Hills Shire Council is prepared for the future.”

The Hills Shire Council is ‘Fit for the Future’, debt free and has a strong financial outlook as rated by NSW Treasury Corp. It was also reported by Council’s external Auditors PricewaterhouseCoopers, that this Council is if not the best, one of the best Council’s in NSW.

In FY 15/16 The Hills Shire Council expended $201M to provide recurrent operations and capital works. This expenditure covers a broad range of services including civil and parks asset maintenance, town planning, regulatory functions, waste and recycling, aged care, leisure and culture, children, family and youth, libraries, major festivals and community events, economic development and building infrastructure. Included in the above were 319 infrastructure projects totalling $57.6M.

Council manages $4.3B worth of assets infrastructure including roads, bridges, buildings, recreation and leisure facilities, drains, libraries and parks.

This financial sustainability rating further emphasises our status as one of the well-managed Local Government Areas in Australia. This has been made possible by strict budgetary control measures at all levels of operations, prudent investing in the maintenance of our infrastructure and adopting a cost-conscious approach to spending ratepayer’s money.

Total Cash and Investments held as at 30 June 2016 increased from $311M to $363M. This is mainly due to increased Developer Contributions received during the year and income from property development activities. As a result our unrestricted current ratio which measures the adequacy of working capital and the ability to satisfy obligations in the short term, was well above the benchmark.

The Infrastructure backlog of $52M reported in June 2011 has reduced to zero.

LOCAL GOVERNMENT REFORM - BOUNDARY ADJUSTMENTNSW Premier Mike Baird and the Minister for Local Government Paul Toole announced 19 new Councils in NSW commencing on 13 May 2016. Although The Hills Shire Council did not merge with another Council, its boundaries were adjusted.

Those suburbs south of the M2 (SM2) that are currently part of The Hills Shire Council will now form part of the City of Parramatta Council. These include: Carlingford, the majority of North Rocks, Oatlands, Northmead, North Parramatta, Winston Hills and parts of Baulkham Hills.

The former Hills Shire Council covered an area of 396 square kms, a population in excess of 180,000 people and 65,383 rate assessments. After the boundary adjustment, it will cover an area of 382 square kms, a population in excess of 159,000 and 55,763 number of rate assessments. However it is still estimated The Hills Shire will increase to more than 260,000 people by 2031.

This matter directly affects the financial position of The Hills Shire Council. Loss reported in FY 15/16

Operating loss due to boundary adjustments of $479M (10%) relates mainly to transfer of Assets. Although The Hills Shire Council did not merge with another Council, its boundaries were adjusted and all assets South of M2 (SM2) had to be transferred to City of Parramatta at book value with no compensation.

This also resulted in a $1.1M impact on FY 15/16 Operating loss for the period 13 May 2016 to 30 June 2016. It is also estimated that $8.8M will be lost from FY 16/17 onwards. Although Council’s financial position has changed, it still remains positive.

The City of Parramatta has requested that The Hills Shire Council continue to provide the services to the suburbs SM2 on a cost recovery basis, so that the services are not disrupted to the residents until such time the City of Parramatta is ready to take over.

LOOKING AHEADLooking forward, the 2016-2017 $257M budget was formulated on a general rates increase of 1.8% as per the guidelines issued by the Independent Pricing and Regulatory Tribunal (IPART).

This budget ensures that The Hills Shire Council remains in a strong position to not only deliver our current goals, but also to provide for future growth and make the Hills Shire an even greater place to live and do business. With the arrival of Sydney Metro Northwest in the near future, The Hills Shire Council is poised for a historic era of growth and development.

CHALLENGESThe biggest challenge this Council faces is managing land acquisition liabilities that are created by the Contribution Plans in the new release areas. Under the current legislation, Councils are required to acquire land listed under the Contribution Plans even though no contributions have been received from the developers.

Chandi Saba


Samantha Riley Drive, Kellyville.


INTRODUCTION

Each year, individual local governments across New South Wales are required to present a set of audited financial statements to their council and community.

WHAT YOU WILL FIND IN THE STATEMENTS

The financial statements set out the financial performance, financial position and cash flows of Council for the financial year ended 30 June 2016.

The format of the financial statements is standard across all NSW Councils and complies with both the accounting and reporting requirements of Australian Accounting Standards and requirements as set down by the Office of Local Government.

ABOUT THE COUNCILLOR/MANAGEMENT STATEMENT

The financial statements must be certified by senior staff as ‘presenting fairly’ the Council’s financial results for the year, and are required to be adopted by Council – ensuring both responsibility for and ownership of the financial statements.

ABOUT THE PRIMARY FINANCIAL STATEMENTS

The financial statements incorporate five ‘primary’ financial statements:

1. The Income Statement

This statement summarises Council’s financial Performance for the year, listing all income and expenses.

This statement also displays Council’s original adopted budget to provide a comparison between what was projected and what actually occurred.

2. The Statement of Comprehensive Income

This statement primarily records changes in the fair values of Council’s infrastructure, property, plant and equipment.

3. The Statement of Financial Position

An end of year snapshot of Council’s financial position indicating its assets, liabilities and equity (‘net wealth’).

4. The Statement of Changes in Equity

The overall change for the year (in dollars) of Council’s ‘net wealth’.

5. The Statement of Cash Flows

This statement indicates where Council’s cash came from and where it was spent. This statement also displays Council’s original adopted budget to provide a comparison between what was projected and what actually occurred.

ABOUT THE NOTES TO THE FINANCIAL STATEMENTS

The Notes to the Financial Statements provide greater detail and additional information on the five primary financial statements.

ABOUT THE AUDITOR’S REPORTS

Council’s financial statements are required to be audited by external accountants (that generally specialise in local government). In NSW, the auditor provides two audit reports:

1. An opinion on whether the financial statements present fairly the Council’s financial performance and position, and

2. Their observations on the conduct of the audit including commentary on the Council’s financial performance and financial position.

WHO USES THE FINANCIAL STATEMENTS?

The financial statements are publicly available documents and must be presented at a Council meeting between seven days and five weeks after the date of the Audit Report.

The public can make submissions to Council up to seven days subsequent to the public presentation of the financial statements.

Council is required to forward an audited set of financial statements to the Office of Local Government.


UNDERSTANDING COUNCIL’S FINANCIAL STATEMENTS


The attached General Purpose Financial Statements have been prepared in accordance with:

• the Local Government Act 1993 (NSW) (as amended) and the regulations made thereunder,

• the Australian Accounting Standards and professional pronouncements, and

• the Local Government Code of Accounting Practice and Financial Reporting.

To the best of our knowledge and belief, these financial statements:

• present fairly the Council’s operating result and financial position for the year, and

• accord with Council’s accounting and other records.

We are not aware of any matter that would render these statements false or misleading in any way.

Signed in accordance with a resolution of Council made on 23 August 2016.

THE HILLS SHIRE COUNCIL GENERAL PURPOSE FINANCIAL STATEMENTS for the year ended 30 June 2016

STATEMENT BY COUNCILLORS & MANAGEMENT made pursuant to Section 413(2)(c) of the Local Government Act 1993 (NSW) (as amended)

Financial Statements 2016


General Purpose Financial Statements for the year ended 30 June 2016

Statement by Councillors and Managementmade pursuant to Section 413(2)(c) of the Local Government Act 1993 (NSW) (as amended)

The attached General Purpose Financial Statements have been prepared in accordance with:

the Local Government Act 1993 (NSW) (as amended) and the regulations made thereunder,

the Australian Accounting Standards and professional pronouncements, and

the Local Government Code of Accounting Practice and Financial Reporting.


present fairly the Council’s operating result and financial position for the year, and

accord with Council’s accounting and other records.



Dr Michelle Byrne Councillor Yvonne KeaneMayor Councillor

Dave Walker Chandi SabaGeneral manager Responsible accounting officer

page 4



This statement should be read in conjunction with the accompanying notes. page 5


Income Statement for the year ended 30 June 2016

$ ’000

Income from continuing operationsRevenue:Rates and annual chargesUser charges and feesInterest and investment revenueOther revenuesGrants and contributions provided for operating purposesGrants and contributions provided for capital purposesOther income:Net gains from the disposal of assets

Total income from continuing operations

Expenses from continuing operationsEmployee benefits and on-costsMaterials and contractsDepreciation and amortisationOther expensesNet losses from the disposal of assetsNet share of interests in joint ventures andassociates using the equity method

Total expenses from continuing operations

Operating result from continuing operations

Boundary Adjustments

Net profit/(loss) from boundary adjustments

Net operating result for the year

Net operating result attributable to Council

Net operating result for the year before grants and contributionsprovided for capital purposes & boundary adjustments

Original budget as approved by Council – refer Note 161

18,668

3,292

3b 20,308 10,187 8,094

20,077 3e,f

–

48,168

40,441

16,993 42,348

Budget 1

3e,f

4d

5

20,290

95,577 97,855

Notes

3a

3d3c

2016

4,929

2016

–

(478,853)

(328,131)

–

95,686

95,686

22–

136,568

95,686

21,713

5

4a 52,025

– 21,869

132,743

150,722

19

20,924

49,584

–

12,856 42,981

4e3,012

4c

283,465

39,865 20,233

–

(328,131)

379,276 232,253

53,217

20,005 22,905

53,337

Actual 2015

Actual

94,327

9,873 130,014

248,670

130,606

17,710

129,009 102,962

4,313

–

248,670

248,670

145,708

INCOME STATEMENT for the financial year ended 30 June 2016

This statement should be read in conjunction with the accompanying notes.




Statement of Comprehensive Income for the year ended 30 June 2016

$ ’000

Operating result for the year prior to boundary adjustments

Net profit/(loss) from boundary adjustments

Net operating result for the year (as per Income Statement)

Other comprehensive income:

Amounts which will not be reclassified subsequently to the operating result

Gain (loss) on revaluation of I,PP&EAdjustment to correct prior period errorsTotal items which will not be reclassified subsequentlyto the operating result

Amounts which will be reclassified subsequently to the operating resultwhen specific conditions are metNil

Total other comprehensive income for the year

Total comprehensive income for the year

Total comprehensive income attributable to CouncilTotal comprehensive income attributable to non-controlling interests

150,722 248,670

(478,853) –

410,513

410,513

Actual 2015

493,802 160,539

248,670

45,619 654,341

20b (ii) 30,673 14,945

NotesActual

(328,131)

– (282,512)

161,843

–

45,619

(282,512)

2016


STATEMENT OF COMPREHENSIVE INCOMEfor the financial year ended 30 June 2016





Statement of Financial Positionas at 30 June 2016

$ ’000

ASSETSCurrent assetsCash and cash equivalentsInvestmentsReceivablesInventoriesOtherNon-current assets classified as ‘held for sale’Total current assets

Non-current assetsInvestmentsReceivablesInventoriesInfrastructure, property, plant and equipmentInvestments accounted for using the equity methodInvestment propertyOtherTotal non-current assets

TOTAL ASSETS

LIABILITIESCurrent liabilitiesPayablesBorrowingsProvisionsTotal current liabilities

Non-current liabilitiesPayablesBorrowingsProvisionsTotal non-current liabilities

TOTAL LIABILITIES

Net assets

EQUITYRetained earningsRevaluation reservesCouncil equity interestNon-controlling equity interests

Total equity

140,000

4,664,825

8

5,783

–

4,823,400

10

10

17,004

5,105,912

5,105,912

1,281,955

– –

21

56,837

140,000

–

–

– –

4,678,838

–

–

10

– 20,863

9

1039,162

4,359,919

9,905

4,333,273

467,520

–

– 23,634 10

233

16,709

– 16,579

483

4,108

3,497,973

671 233

40,446

40,213

209

3,823,957

8,507

338,343 7,408

56,166

462

201,325,426 4,823,400

4,823,400 –

5,105,912 –

20

6a6b

10

7

6b

8

8

Notes

7

1419

8

520,318

2016

7,711 255

294,413 8,901

25,108

5,146,358

2015ActualActual

4,880,237


STATEMENT OF FINANCIAL POSITIONas at 30 June 2016





Statement of Changes in Equity for the year ended 30 June 2016

$ ’000

Opening balance (as per last year’s audited accounts)

a. Correction of prior period errorsb. Changes in accounting policies (prior year effects)

Revised opening balance (as at 1/7/15)

c. Net operating result for the year

d. Other comprehensive income – Revaluations: IPP&E asset revaluation rsve – Prior period errorsOther comprehensive income

Total comprehensive income (c&d)

e. Distributions to/(contributions from) non-controlling Interests

f. Transfers between equity

Equity – balance at end of the reporting period

$ ’000

Opening balance (as per last year’s audited accounts)

a. Correction of prior period errorsb. Changes in accounting policies (prior year effects)

Revised opening balance (as at 1/7/14)

c. Net operating result for the year

d. Other comprehensive income – Revaluations: IPP&E asset revaluation rsve – Prior period errorsOther comprehensive income

Total comprehensive income (c&d)

e. Distributions to/(contributions from) non-controlling Interests

f. Transfers between equity

Equity – balance at end of the reporting period

494,278

– –

654,817

–

– 160,539

– 160,539 160,539

TotalInterest

–

– –

654,817 494,278

4,823,400

– –

(282,512)

–

– – –

– –

(328,131)

5,105,912

5,105,912

–

Non-

(282,512)

– – –

1,281,955

14,945 – 45,619

– 30,673

(328,131)

controlling

5,105,912

5,105,912

–

Non-

– –

Councilinterest

–

equity

30,673

3,823,957

–

RetainedearningsNotes

– –

20b (ii) –

3,823,957

30,673

20 (c)

20 (d)

– (328,131)

12,798 43,471

14,945

–

20b (ii) 2,147 2,147

(Refer 20b)

Reserves

Reserves

43,471

1,325,426

–

1,281,955

(Refer 20b)

2016

–

– – –

5,105,912

–

1,281,955

20b (ii)

2015

– 248,670

3,081,009

– 1,121,416

1,121,416 –

20 (d)

3,823,957

494,278

– –

742,948

–

160,539 903,487

4,202,425–

20b (ii) 160,539

494,278

– –

– –

5,105,912

903,487

–

Council

4,823,400

3,081,009

–

–

Earnings

248,670

–

– 4,202,425

4,202,425

248,670

–

RetainedNotes

(325,984)

3,497,973

–

TotalInterest

controlling

–

EquityInterest

45,619

20 (c) – – –

4,202,425 –


STATEMENT OF CHANGES IN EQUITYfor the year ended 30 June 2016





Statement of Cash Flows for the year ended 30 June 2016

$ ’000

Cash flows from operating activitiesReceipts:Rates and annual chargesUser charges and feesInvestment and interest revenue receivedGrants and contributionsBonds, deposits and retention amounts receivedOtherPayments:Employee benefits and on-costsMaterials and contractsOtherNet cash provided (or used in) operating activities

Cash flows from investing activitiesReceipts:Sale of investment securitiesSale of real estate assetsSale of infrastructure, property, plant and equipmentPayments:Purchase of investment securitiesPurchase of investment propertyPurchase of infrastructure, property, plant and equipmentPurchase of real estate assetsNet cash provided (or used in) investing activities

Cash flows from financing activitiesNil

Net increase/(decrease) in cash and cash equivalents

Plus: cash and cash equivalents – beginning of year

Cash and cash equivalents – end of the year

Additional Information:

plus: Investments on hand – end of year

Total cash, cash equivalents and investments

Please refer to Note 11 for information on the following:– Non-cash financing and investing activities– Financing arrangements– Net cash flow disclosures relating to any discontinued operations

6b

Notes

9,382

(49,269)

39,113

88,045 4,209 2,588

20,308

15,853

20152016

73,864

57,155

16,709

(9,575)

11a

58,800

–

(50) (69,457)

1,133

–

–

66,730 (34,304)

4,085 –

59,341 4,929

97,422

Budget

(53,296) (29,224)

2016

17,778

(161,409)

363,451

338,343

25,108

311,122

16,709

294,413

–

11a

135,447

(196,652) (20,863)

(115) (63,437)

9,895

95,860

114,561

17,710

Actual

94,342

127,505

(43,670) (51,624)

(29,945) (28,137)

68,684 152,722 –

(123,083) (127,048)

(43,737)

12,287

4,422

16,709

8,399

Actual

(416)

(46,269) 11b

1,297 10,521 3,274


STATEMENT OF CASH FLOWSfor the year ended 30 June 2016




CONTENTS OF THE NOTES ACCOMPANYING THE FINANCIAL STATEMENTS


page 10


Notes to the Financial Statements for the year ended 30 June 2016

Contents of the notes accompanying the financial statements

Details

Summary of significant accounting policiesCouncil functions/activities – financial informationCouncil functions/activities – component descriptionsIncome from continuing operationsExpenses from continuing operationsGains or losses from the disposal of assetsCash and cash equivalent assetsInvestmentsRestricted cash, cash equivalents and investments – detailsReceivablesInventories and other assetsInfrastructure, property, plant and equipmentExternally restricted infrastructure, property, plant and equipmentInfrastructure, property, plant and equipment – current year impairmentsPayables, borrowings and provisionsDescription of (and movements in) provisionsStatement of cash flows – additional informationCommitments for expenditureStatement of performance measures:13a (i) Local government industry indicators (consolidated)13a (ii) Local government industry graphs (consolidated)Investment propertiesFinancial risk managementMaterial budget variationsStatement of developer contributionsContingencies and other liabilities/assets not recognisedInterests in other entities

‘Held for sale’ non-current assets and disposal groupsImpact on Boundary AdjustmentsFair value measurement

Additional council disclosures

Council information and contact detailsStatement of developer contributions without internal borrowings

n/a – not applicable

43

42 n/a

42

39

5

38

35

3637

Note

21

14

10(a)10(b)

17

6(a)

4

6(c)

9(c)

11

2(a)

32(b)

6(b)

Page

1

19

1516

20

46

45

41

42 n/a

18

1213

11272829

78

9(a)9(b)

24

33

36

44

63

50

4749

64 n/a

5456

65

6822 69

25 75

Retained earnings, revaluation reserves, changes in accounting policies, changes in accounting estimates and errors

23 70

74

1430

3132

36

38

39

3940

41

424445

45

45

46

4748

4950

52

53

57

59

66

67

68

71

72

73

77

78


NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2016

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial Statements 2016_

The Hills Shire Council Notes to the Financial Statements for the year ended 30 June 2016 Note 1. Summary of significant accounting policies

page 11

The principal accounting policies adopted by Council in the preparation of these consolidated financial statements are set out below in order to assist in its general understanding. Under Australian Accounting Standards (AASBs), accounting policies are defined as those specific principles, bases, conventions, rules and practices applied by a reporting entity (in this case Council) in preparing and presenting its financial statements. (a) Basis of preparation (i) Background These financial statements are general purpose financial statements, which have been prepared in accordance with: Australian Accounting Standards and Australian

Accounting Interpretations issued by the Australian Accounting Standards Board,

the Local Government Act (1993) and Regulation,

and the Local Government Code of Accounting

Practice and Financial Reporting. For the purpose of preparing these financial statements, Council has been deemed to be a not-for-profit entity. (ii) Compliance with International Financial

Reporting Standards (IFRSs) Because AASBs are sector neutral, some standards either:

(a) have local Australian content and prescription that is specific to the not-for-profit sector (including local government) which are not in compliance with IFRSs, or

(b) specifically exclude application by not-for-profit entities.

Accordingly, in preparing these financial statements and accompanying notes, Council has been unable to comply fully with International Accounting Standards, but has complied fully with Australian Accounting Standards.

Under the Local Government Act (LGA), Regulation and Local Government Code of Accounting Practice and Financial Reporting, it should be noted that Councils in NSW only have a requirement to comply with AASBs. (iii) New and amended standards adopted by

Council There have been no new accounting standards adopted in this year’s financial statements which have had any material impact on reported financial position, performance or cash flows.

(iv) Early adoption of accounting standards Council has not elected to apply any pronouncements before their operative date in the annual reporting period beginning 1 July 2015, except for AASB2015-7 Amendments to Australian Accounting Standards – Fair Value Disclosures of Not-for-Profit Public Sector Entities, which has reduced the fair value disclosures for Level 3 assets. For summary information relating to the effects of standards with future operative dates refer further to paragraph (ab).

(v) Basis of accounting These financial statements have been prepared under the historical cost convention except for: (i) certain financial assets and liabilities at fair

value through profit or loss and available-for-sale financial assets, which are all valued at fair value,

(ii) the write down of any asset on the basis of impairment (if warranted), and

(iii) certain classes of non-current assets (eg.

infrastructure, property, plant and equipment and investment property) that are accounted for at fair valuation.

The accrual basis of accounting has also been applied in their preparation. (vi) Changes in accounting policies Council’s accounting policies have been consistently applied to all the years presented, unless otherwise stated.



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


The Hills Shire Council Notes to the Financial Statements for the year ended 30 June 2016 Note 1. Summary of significant accounting policies (continued)

page 12

There have also been no changes in accounting policies when compared with previous financial statements unless otherwise stated [refer Note 20 (d)].

(vii) Critical accounting estimates The preparation of financial statements requires the use of certain critical accounting estimates (in conformity with AASBs). Accordingly this requires management to exercise its judgement in the process of applying the Council's accounting policies. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on Council and that are believed to be reasonable under the circumstances. Critical accounting estimates and assumptions Council makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are set out below: (i) Estimated fair values of investment properties

(ii) Estimated fair values of infrastructure, property,

plant and equipment,

(iii) Estimated remediation provisions.

(b) Revenue recognition Council recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to it, and specific criteria have been met for each of the Council’s activities as described below. Council bases any estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue is measured at the fair value of the consideration received or receivable. Revenue is measured on major income categories as follows: Rates, Annual Charges, Grants and Contributions Rates, annual charges, grants and contributions (including developer contributions) are recognised as revenues when the Council obtains control over the assets comprising these receipts. Control over assets acquired from rates and annual charges is obtained at the commencement of the rating year as it is an enforceable debt linked to the rateable property or, where earlier, upon receipt of the rates. A provision for the impairment on rates receivables has not been established as unpaid rates represent a charge against the rateable property that will be recovered when the property is next sold. Control over granted assets is normally obtained upon their receipt (or acquittal) or upon earlier notification that a grant has been secured, and is valued at their fair value at the date of transfer. Revenue from contributions is recognised when the Council either obtains control of the contribution or the right to receive it, (i) it is probable that the economic benefits comprising the contribution will flow to the Council and (ii) the amount of the contribution can be measured reliably. Where grants or contributions recognised as revenues during the financial year were obtained on condition that they be expended in a particular manner or used over a particular period and those conditions were undischarged at balance date, the unused grant or contribution is disclosed in Note 3 (g). Note 3 (g) also discloses the amount of unused grant or contribution from prior years that was expended on Council’s operations during the current year. The Council has obligations to provide facilities from contribution revenues levied on developers under the provisions of s94 of the EPA Act 1979. Whilst Council generally incorporates these amounts as part of a Development Consents Order, such






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developer contributions are only recognised as income upon their physical receipt by Council, due to the possibility that individual development consents may not be acted upon by the applicant and accordingly would not be payable to Council. Developer contributions may only be expended for the purposes for which the contributions were required but the Council may apply contributions according to the priorities established in work schedules. A detailed note relating to developer contributions can be found at Note 17. User charges, fees and other Income User charges, fees and other income (including parking fees and fines) are recognised as revenue when the service has been provided, the payment is received, or when the penalty has been applied, whichever first occurs. A provision for the impairment of these receivables is recognised when collection in full is no longer probable. A liability is recognised in respect of revenue that is reciprocal in nature to the extent that the requisite service has not been provided as at balance date.

Sale of infrastructure, property, plant and equipment The profit or loss on sale of an asset is determined when control of the asset has irrevocably passed to the buyer.

Interest and rents Rental income is accounted for on a straight-line basis over the lease term. Interest income from cash and investments is accounted for using the effective interest rate at the date that interest is earned. Dividend income Revenue is recognised when the Council’s right to receive the payment is established, which is generally when shareholders approve the dividend.

Other Income Other income is recorded when the payment is due, the value of the payment is notified or the payment is received, whichever occurs first. (c) Principles of consolidation These consolidated financial statements include the financial position and performance of controlled entities from the date on which control is obtained until the date that control is lost. (i) The Consolidated Fund

In accordance with the provisions of section 409(1) of the LGA 1993, all money and property received by Council is held in the Council’s consolidated fund unless it is required to be held in the Council’s trust fund. The consolidated fund and other entities through which the Council controls resources to carry on its functions have been included in the financial statements forming part of this report. The following entities have been included as part of the consolidated fund: General purpose operations Hills community care Child care centres (ii) The trust fund In accordance with the provisions of section 411 of the Local Government Act 1993 (as amended), a separate and distinct trust fund is maintained to account for all money and property received by the Council in trust that must be applied only for the purposes of or in accordance with the trusts relating to those monies. Trust monies and property subject to Council’s control have been included in these statements. Trust monies and property held by Council but not subject to the control of Council have been excluded from these statements. A separate statement of monies held in the trust fund is available for inspection at the Council office by any person free of charge.






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(iii) Interests in other entities

Subsidiaries Council has no interest in any subsidiaries. Joint arrangements Council has no interest in any joint arrangements. Joint ventures

Council has no interest in any joint ventures.

Associates Council has no interest in any associates. County councils

Council is a member of the following county councils (which are bodies incorporated under the Local Government Act): Hawkesbury River County Council

Description of County Councils Functions Number of Constituent Councils

The governing body of each county council is responsible for managing its own affairs. Council is of the opinion that it neither controls nor significantly influences the above county council/s and accordingly these entities have not been consolidated or otherwise included within these financial statements. Unconsolidated structured entities Council has no interest in any unconsolidated structured entities. (d) Leases All leases entered into by Council are reviewed and classified on inception date as either a finance lease or an operating lease.

Finance leases Leases of property, plant and equipment where the Council has substantially all the risks and rewards of ownership are classified as finance leases.

Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in borrowings. Each lease payment is allocated between the liability outstanding and the recognition of a finance charge. The interest element of the finance charge is costed to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Property, plant and equipment acquired under finance leases is depreciated over the shorter of each leased asset’s useful life and the lease term.

Operating Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. Lease income from operating leases is recognised in income on a straight-line basis over the lease term.

(e) Cash and Cash Equivalents For Statement of Cash Flows (and Statement of Financial Position) presentation purposes, cash and cash equivalents includes; cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with

original maturities of three months or less that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value, and

bank overdrafts.






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Bank overdrafts are shown within borrowings in current liabilities on the balance sheet but are incorporated into cash and cash equivalents for presentation of the Cash Flow Statement. (f) Investments and other financial assets Council (in accordance with AASB 139) classifies each of its investments into one of the following categories for measurement purposes: financial assets at fair value through profit or

loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. Each classification depends on the purpose or intention for which the investment was acquired and at the time it was acquired. Management determines each investment classification at the time of initial recognition and re-evaluates this designation at each reporting date. (i) Financial assets at fair value through profit

or loss Financial assets at fair value through profit or loss include financial assets that are ‘held for trading’. A financial asset is classified in the ‘held for trading’ category if it is acquired principally for the purpose of selling in the short term. Assets in this category are primarily classified as current assets as they are primarily held for trading and/or are expected to be realised within 12 months of the balance sheet date.

(ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Council provides money, goods or services directly to a debtor with no intention (or in some cases ability) of selling the resulting receivable.

They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date, which are classified as non-current assets. (iii) Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Council’s management has the positive intention and ability to hold to maturity. In contrast to the ‘loans and receivables’ classification, these investments are generally quoted in an active market. Held-to-maturity financial assets are included in non-current assets, except for those with maturities less than 12 months from the reporting date, which are classified as current assets. (iv) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. Investments must be designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long term. Accordingly, this classification principally comprises marketable equity securities, but can include all types of financial assets that could otherwise be classified in one of the other investment categories. They are generally included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date or the term to maturity from the reporting date is less than 12 months.

Financial assets – reclassification Council may choose to reclassify a non-derivative trading financial asset out of the held-for-trading category if the financial asset is no longer held for the purpose of selling it in the near term. Financial assets other than loans and receivables are permitted to be reclassified out of the held-for-trading category only in rare circumstances arising from a






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single event that is unusual and highly unlikely to recur in the near term. Council may also choose to reclassify financial assets that would meet the definition of loans and receivables out of the held-for-trading or available-for-sale categories if it has the intention and ability to hold these financial assets for the foreseeable future or until maturity at the date of reclassification. Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassification date are subsequently made. Effective interest rates for financial assets reclassified to loans and receivables and held-to-maturity categories are determined at the reclassification date. Further increases in estimates of cash flows adjust effective interest rates prospectively.

General accounting and measurement offinancial instruments: (i) Initial recognition Investments are initially recognised (and measured) at fair value, plus in the case of investments not at ‘fair value through profit or loss’, directly attributable transactions costs. Purchases and sales of investments are recognised on trade-date – the date on which the Council commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Council has transferred substantially all the risks and rewards of ownership. (ii) Subsequent measurement Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method.

Realised and unrealised gains and losses arising from changes in the fair value of the financial assets classified as ‘fair value through profit or loss’ category are included in the income statement in the period in which they arise. Unrealised gains and losses arising from changes in the fair value of non-monetary securities classified as ‘available-for-sale’ are recognised in equity in the available-for-sale investments revaluation reserve. When securities classified as ‘available-for-sale’ are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains and losses from investment securities.

Impairment Council assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. If there is evidence of impairment for any of Council’s financial assets carried at amortised cost (eg. loans and receivables), the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the group may measure impairment on the basis of an instrument’s fair value using an observable market price.






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(iii) Types of investments Council has an approved Investment Policy in order to invest in accordance with (and to comply with) section 625 of the Local Government Act and s212 of the LG (General) Regulation 2005. Investments are placed and managed in accordance with the policy and having particular regard to authorised investments prescribed under the Ministerial Local Government Investment Order. Council maintains its Investment Policy in compliance with the Act and ensures that it or its representatives exercise care, diligence and skill that a prudent person would exercise in investing Council funds. Council amended its policy following revisions to the Ministerial Local Government Investment Order arising from the Cole Inquiry recommendations. Certain investments that Council holds are no longer prescribed (eg. managed funds, CDOs, and equity linked notes), however they have been retained under grandfathering provisions of the Order. These will be disposed of when most financially advantageous to Council. (g) Fair value estimation – financial instruments The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. Council uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held.

If the market for a financial asset is not active (and for unlisted securities), the Council establishes fair value by using valuation techniques. These include reference to the fair values of recent arm’s length transactions, involving the same instruments or other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer’s specific circumstances. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Council for similar financial instruments.

(h) Receivables Receivables are initially recognised at fair value and subsequently measured at amortised cost, less any provision for impairment. Receivables (excluding rates and annual charges) are generally due for settlement no more than 30 days from the date of recognition. The collectibility of receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off in accordance with Council’s policy. A provision for impairment (i.e. an allowance account) relating to receivables is established when objective evidence shows that Council will not be able to collect all amounts due according to the original terms of each receivable. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. Impairment losses are recognised in the Income Statement within other expenses. When a receivable for which an impairment allowance had been recognised becomes






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uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the Income Statement. (i) Inventories (i) Raw materials and stores, work in progress

and finished goods Raw materials and stores, work in progress and finished goods in respect of business undertakings are all stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Inventories held in respect of non-business undertakings have been valued at cost subject to adjustment for loss of service potential. (ii) Inventory held for distribution Inventory held for distribution is held at cost, adjusted where applicable for any loss of service potential. (iii) Land held for resale/capitalisation of

borrowing costs Land held for resale is stated at the lower of cost and net realisable value. Cost is assigned by specific identification and includes the cost of acquisition, and development and borrowing costs during development. When development is completed borrowing costs and other holding charges are expensed as incurred.

Borrowing costs included in the cost of land held for resale are those costs that would have been avoided if the expenditure on the acquisition and development of the land had not been made. Borrowing costs incurred while active development is interrupted for extended periods are recognised as expenses.

(j) Infrastructure, property, plant and equipment (I,PP&E) Acquisition of assets Council’s non-current assets are continually revalued (over a 5-year period) in accordance with the fair valuation policy as mandated by the Office of Local Government. At balance date, the following classes of I,PP&E were stated at their fair value: - Plant and equipment

(as approximated by depreciated historical cost) - Operational land (external valuation) - Community land (external and internal valuation) - Land improvements

(as approximated by depreciated historical cost) - Buildings – specialised/non-specialised

(external valuation) - Other structures

(as approximated by depreciated historical cost) - Roads assets including roads, bridges and

footpaths (external valuation)

- Bulk earthworks (internal valuation) - Stormwater drainage (internal valuation) - Swimming pools

(internal valuation) - Other open space/recreational assets

(internal valuation) - Other infrastructure

(internal valuation)






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- Other assets (as approximated by depreciated historical cost)

- Investment properties – refer Note 1(p),

Initial recognition On initial recognition, an asset’s cost is measured at its fair value, plus all expenditure that is directly attributable to the acquisition. Where settlement of any part of an asset’s cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of recognition (i.e. date of exchange) of the asset to arrive at fair value. The discount rate used is the Council’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Where infrastructure, property, plant and equipment assets are acquired for no cost or for an amount other than cost, the assets are recognised in the financial statements at their fair value at acquisition date – being the amount that the asset could have been exchanged between knowledgeable willing parties in an arm’s length transaction. Subsequent costs Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to Council and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Asset revaluations (including indexation) In accounting for asset revaluations relating to infrastructure, property, plant and equipment: increases in the combined carrying amounts of

asset classes arising on revaluation are credited to the asset revaluation reserve,

to the extent that a net asset class increase

reverses a decrease previously recognised via

the profit or loss, then increase is first recognised in profit or loss,

net decreases that reverse previous increases of

the same asset class are first charged against revaluation reserves directly in equity to the extent of the remaining reserve attributable to the asset, with all other decreases charged to the Income Statement.

Water and sewerage network assets are indexed annually between full revaluations in accordance with the latest indices provided in the NSW Office of Water – Rates Reference Manual. For all other assets, Council assesses at each reporting date whether there is any indication that a revalued asset’s carrying amount may differ materially from that which would be determined if the asset were revalued at the reporting date. If any such indication exists, Council determines the asset’s fair value and revalues the asset to that amount. Full revaluations are undertaken for all assets on a 5-year cycle. Capitalisation thresholds Items of infrastructure, property, plant and equipment are not capitalised unless their cost of acquisition exceeds the following;

Land- Council land 100% capitalised - Open space 100% capitalised - Land under roads (purchases after 30/6/08) 100% capitalised

Plant and equipmentOffice furniture > $5,000 Office equipment > $5,000 Other plant and equipment > $5,000

Buildings and land improvementsPark furniture and equipment 100% capitalised Building - Construction/extensions 100% capitalised - Renovations 100% capitalised Other structures 100% capitalised






Notes to the Financial Statementsfor the year ended 30 June 2016

Note 1. Summary of significant accounting policies (continued)

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Stormwater assets Drains and culverts 100% capitalised Other 100% capitalised

Transport assets Road construction and reconstruction 100% capitalised Reseal/re-sheet and major repairs 100% capitalised

Bridge construction and reconstruction 100% capitalised

Other infrastructure assets Swimming pools 100% capitalised Other open space/recreational assets 100% capitalised Other infrastructure 100% capitalised

Depreciation

Depreciation on Council's infrastructure and property is calculated on condition basis with the exception of plant and equipment assets which is on straight line.

Land is not depreciated.

Estimated useful lives for Council's I,PP&E include:

Plant and equipment - Office equipment expensed - Office furniture expensed - Computer equipment expensed - Vehicles 4 years - Heavy plant/road making equipment 4 years - Other plant and equipment 5 years

Other equipment - Playground equipment 5 years - Benches, seats etc. 5 years

Buildings - Buildings: masonry 100 years - Buildings: other 15 -100 years

Stormwater assets - Drains 100 years - Culverts 100 years

Transportation assets - Sealed roads: surface 15-50 years - Sealed roads: structure 50-100 years - Unsealed roads 50 years

- Bridge: concrete 100 years - Bridge: other 100 years

- Road pavements 50-100 years - Kerb, gutter and footpaths 35-100 years

Other infrastructure assets- Bulk earthworks Infinite

- Other open space/ recreational assets 15-80 years

All asset residual values and useful lives are reviewed and adjusted (if appropriate) at each reporting date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount – refer Note 1 (s) on asset impairment.

Disposal and de-recognition

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in Council’s Income Statement in the year the asset is derecognised.

(k) Land

Land (other than land under roads) is in accordance with Part 2 of Chapter 6 of the Local Government Act (1993) classified as either operational or community.

This classification of land is disclosed in Note 9 (a).






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(l) Land under roads

Land under roads is land under roadways and road reserves, including land under footpaths, nature strips and median strips. Council has elected to recognise land under roads acquired before 1 July 2008 in accordance with AASB 1051. Land under roads acquired after 1 July 2008 is recognised in accordance with AASB 116 – Property, Plant and Equipment.

(m) Intangible assets Council has not classified any assets as intangible. (n) Crown reserves Crown reserves under Council’s care and control are recognised as assets of the Council. While ownership of the reserves remains with the Crown, Council retains operational control of the reserves and is responsible for their maintenance and use in accordance with the specific purposes to which the reserves are dedicated. Improvements on Crown reserves are also recorded as assets, while maintenance costs incurred by Council and revenues relating to the reserves are recognised within Council’s Income Statement. Representations are currently being sought across state and local government to develop a consistent accounting treatment for Crown Reserves across both tiers of government. (o) Rural fire service assets

Under section 119 of the Rural Fires Act 1997, ‘all fire fighting equipment purchased or constructedwholly or from money to the credit of the Fund is to be vested in the council of the area for or on behalf of which the fire fighting equipment has been purchased or constructed’.

At present, the accounting for such fire fighting equipment is not treated in a consistent manner across all Councils. Until such time as discussions on this matter have concluded and the legislation changed, Council will continue to account for these assets as it has been doing in previous years, which is exclude the assets, their values and depreciation charges from these financial statements. (p) Investment property Investment property comprises land and/or buildings that are principally held for long-term rental yields, capital gains or both, that is not occupied by Council. Investment property is carried at fair value, representing an open-market value determined annually by external valuers. Annual changes in the fair value of investment properties are recorded in the Income Statement as part of ‘other income’. Full revaluations are carried out every year The last full revaluation for Council’s investment properties was dated 30/6/2016. (q) Provisions for close down, restoration and for environmental clean-up costs –

including tips and quarries Close down, restoration and remediation costs include the dismantling and demolition of infrastructure, the removal of residual materials and the remediation of disturbed areas. Estimated close down and restoration costs are provided for in the accounting period when the obligation arising from the related disturbance occurs, whether this occurs during the development or during the operation phase, based on the net present value of estimated future costs. Provisions for close down and restoration costs do not include any additional obligations that are expected to arise from future disturbance. Costs are estimated on the basis of a closure plan.






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The cost estimates are calculated annually during the life of the operation to reflect known developments, e.g. updated cost estimates and revisions to the estimated lives of operations, and are subject to formal review at regular intervals. Close down, restoration and remediation costs are a normal consequence of tip and quarry operations, and the majority of close down and restoration expenditure is incurred at the end of the life of the operations. Although the ultimate cost to be incurred is uncertain, Council estimates the respective costs based on feasibility and engineering studies using current restoration standards and techniques. The amortisation or ‘unwinding’ of the discount applied in establishing the net present value of provisions is charged to the Income Statement in each accounting period. This amortisation of the discount is disclosed as a borrowing cost in Note 4 (b). Other movements in the provisions for close down, restoration and remediation costs including those resulting from new disturbance, updated cost estimates, changes to the estimated lives of operations and revisions to discount rates are capitalised within property, plant and equipment. These costs are then depreciated over the lives of the assets to which they relate. Where rehabilitation is conducted systematically over the life of the operation, rather than at the time of closure, provision is made for the estimated outstanding continuous rehabilitation work at each balance sheet date and the cost is charged to the Income Statement. Provision is made for the estimated present value of the costs of environmental clean-up obligations outstanding at the balance sheet date. These costs are charged to the Income Statement. Movements in the environmental clean-up provisions are presented as an operating cost, except for the unwind of the discount, which is shown as a borrowing cost.

Remediation procedures generally commence soon after the time the damage, remediation process and estimated remediation costs become known, but may continue for many years depending on the nature of the disturbance and the remediation techniques. As noted above, the ultimate cost of environmental remediation is uncertain and cost estimates can vary in response to many factors, including changes to the relevant legal requirements, the emergence of new restoration techniques or experience at other locations. The expected timing of expenditure can also change, for example, in response to changes in quarry reserves or production rates. As a result there could be significant adjustments to the provision for close down and restoration and environmental clean-up, which would affect future financial results. Specific information about Council's provisions relating to close down, restoration and remediation costs can be found at Note 26. (r) Non-current assets (or disposal groups) ‘held for sale’ and discontinued operations Non-current assets (or disposal groups) are classified as held for sale and stated at the lower of either (i) their carrying amount and (ii) fair value less costs to sell, if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. The exception to this is plant and motor vehicles, which are turned over on a regular basis. Plant and motor vehicles are retained in non-current assets under the classification of infrastructure, property, plant and equipment – unless the assets are to be traded in after 30 June and the replacement assets were already purchased and accounted for as at 30 June. For any assets or disposal groups classified as non-current assets ‘held for sale’, an impairment loss is recognised at any time when the assets carrying value is greater than its fair value less costs to sell.




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Non-current assets ‘held for sale’ are not depreciated or amortised while they are classified as ‘held for sale’. Non-current assets classified as ‘held for sale’ are presented separately from the other assets in the balance sheet. A discontinued operation is a component of Council that has been disposed of or is classified as ‘held for sale’ and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the Income Statement. (s) Impairment of assets All Council's I,PP&E is subject to an annual assessment of impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Where an asset is not held principally for cash- generating purposes (for example infrastructure assets) and would be replaced if the Council was deprived of it, then depreciated replacement cost is used as value in use, otherwise value in use is estimated by using a discounted cash flow model. Non-financial assets (other than goodwill) that suffered a prior period impairment are reviewed for possible reversal of the impairment at each reporting date. Goodwill and other intangible assets that have an indefinite useful life and are not subject to amortisation are tested annually for impairment.

(t) Payables These amounts represent liabilities and include goods and services provided to the Council prior to the end of financial year that are unpaid. The amounts for goods and services are unsecured and are usually paid within 30 days of recognition. (u) Borrowings Council does not have any borrowings. (v) Borrowing costs Council does not have any borrowings. (w) Provisions Provisions for legal claims, service warranties and other like liabilities are recognised when: Council has a present legal or constructive

obligation as a result of past events, it is more likely than not that an outflow of

resources will be required to settle the obligation, and

the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the






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time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense. (x) Employee benefits (i) Short-term obligations Short-term employee benefit obligations include liabilities for wages and salaries (including non-monetary benefits), annual leave and vesting sick leave expected to be wholly settled within the 12 months after the reporting period. Leave liabilities are recognised in the provision for employee benefits in respect of employees’ services up to the reporting date with other short term employee benefit obligations disclosed under payables. These provisions are measured at the amounts expected to be paid when the liabilities are settled. All other short-term employee benefit obligations are presented as payables. Liabilities for non-vesting sick leave are recognised at the time when the leave is taken and measured at the rates paid or payable, and accordingly no Liability has been recognised in these reports. Wages and salaries, annual leave and vesting sick leave are all classified as current liabilities. (ii) Other long-term obligations The liability for all long service and annual leave in respect of services provided by employees up to the reporting date (which is not expected to be wholly settled within the 12 months after the reporting period) are recognised in the provision for employee benefits. These liabilities are measured at the present value of the expected future payments to be made using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.

Expected future payments are then discounted using market yields at the reporting date based on national government bonds with terms to maturity and currency that match as closely as possible the estimated future cash outflows. Due to the nature of when and how long service leave can be taken, all long service leave for employees with 4 or more years of service has been classified as current, as it has been deemed that Council does not have the unconditional right to defer settlement beyond 12 months – even though it is not anticipated that all employees with more than 4 years service (as at reporting date) will apply for and take their leave entitlements in the next 12 months. (iii) Retirement benefit obligations All employees of the Council are entitled to benefits on retirement, disability or death. Council contributes to various defined benefit plans and defined contribution plans on behalf of its employees. Defined benefit plans A liability or asset in respect of defined benefit superannuation plans would ordinarily be recognised in the balance sheet, and measured as the present value of the defined benefit obligation at the reporting date plus unrecognised actuarial gains (less unrecognised actuarial losses) less the fair value of the superannuation fund’s assets at that date and any unrecognised past service cost. The present value of the defined benefit obligation is based on expected future payments which arise from membership of the fund to the reporting date, calculated annually by independent actuaries using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. However, when this information is not reliably available, Council can account for its obligations to defined benefit plans on the same basis as its obligations to defined contribution plans – i.e. as an expense when they become payable. Council is party to an Industry Defined Benefit Plan under the Local Government Superannuation






page 25

Scheme, named the ‘Local Government Superannuation Scheme – Pool B’. This scheme has been deemed to be a ‘multi-employer fund’ for the purposes of AASB 119. Sufficient information is not available to account for the Scheme as a defined benefit plan (in accordance with AASB 119) because the assets to the scheme are pooled together for all Councils. The last valuation of the scheme was performed by Mr Richard Boyfield , FIAA on 24th February 2016 and covers the period ended 30/6/2016. However the position is monitored annually and the actuary has estimated that as at 30 June 2016 the prior period deficit still exists. Effective from 1 July 2009, employers are required to contribute additional contributions to assist in extinguishing this deficit. The amount of employer contributions to the defined benefit section of the Local Government Superannuation Scheme and recognised as an expense and disclosed as part of superannuation expenses at Note 4 (a) for the year ending 30 June 2016 was $720,686.90. The amount of additional contributions included in the total employer contribution advised above is $ 570,399.28. The share of this deficit that can be broadly attributed to Council is estimated to be in the order of $ 1,216,000 as at 30 June 2016. Council’s share of that deficiency cannot be accurately calculated as the scheme is a mutual arrangement where assets and liabilities are pooled together for all member councils. For this reason, no liability for the deficiency has been recognised in these financial statements. Council has, however, disclosed a contingent liability in Note 18 to reflect the possible obligation that may arise should the scheme require immediate payment to correct the deficiency.

Defined contribution plans Contributions to defined contribution plans are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(iv) Employee benefit on-costs Council has recognised at year end the aggregate on-cost liabilities arising from employee benefits, and in particular those on-cost liabilities that will arise when payment of current employee benefits is made in future periods. These amounts include superannuation and workers compensation expenses which will be payable upon the future payment of certain leave liabilities accrued as at 30/06/16.

(y) Self-insurance Council does not self-insure. Council also maintains cash and investments to meet expected future claims and these are detailed in Note 6 (c).

(z) Allocation between current and non-current assets and liabilities In the determination of whether an asset or liability is classified as current or non-current, consideration is given to the time when each asset or liability is expected to be settled. The asset or liability is classified as current if it is expected to be settled within the next 12 months, being the Council’s operational cycle. Exceptions In the case of liabilities where Council does not have the unconditional right to defer settlement beyond 12 months (such as vested long service leave), the liability is classified as current even if it is not expected to be settled within the next 12 months. In the case of inventories that are ‘held for trading’, these are also classified as current even if not expected to be realised in the next 12 months.






page 26

(aa) Taxes

The Council is exempt from both Commonwealth Income Tax and Capital Gains Tax. Council does, however, have to comply with both Fringe Benefits Tax and Goods and Services Tax (GST).

Goods and Services Tax (GST)

Income, expenses and assets are all recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the revenue / expense.

Receivables and payables within the Balance Sheet are stated inclusive of any applicable GST. The net amount of GST recoverable from or payable to the ATO is included as a current asset or current liability in the Balance Sheet. Operating cash flows within the Cash Flow Statement are on a gross basis, i.e. they are inclusive of GST where applicable. Investing and financing cash flows are treated on a net basis (where recoverable from the ATO), i.e. they are exclusive of GST. Instead, the GST component of investing and financing activity cash flows that are recoverable from or payable to the ATO are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from (or payable to) the ATO. (ab) New accounting standards and Interpretations issued (not yet effective) Certain new (or amended) accounting standards and interpretations have been published that are not mandatory for reporting periods ending 30 June 2016. Council has not adopted any of these standards early.

These include the following standards that are anticipated will impact on local government: AASB 9 – Financial Instruments

AASB 15 – Revenue from Contracts with Customers and associated amending standards AASB ED 260 – Income of Not-for-Profit Entities AASB16 – Leases

AASB2015-6 – Amendments to Australian Accounting Standards – Extending Related Party Disclosures to Not-for-Profit Public Sector Entities

AASB 2014 – 10 Sale or Contribution of Assets Between an Investor and its Associate or Joint Venture

AASB 2014 – 3 Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint Operations [AASB 1 and AASB 11] The full impact of the above standards has yet to be ascertained or quantified but will range from additional and/or revised disclosures to changes in how certain transactions and balances are accounted for.

(ac) Rounding of amounts Unless otherwise indicated, amounts in the financial statements have been rounded off to the nearest thousand dollars. (ad) Comparative figures To ensure comparability with the current reporting period’s figures, some comparative period line items and amounts may have been reclassified or individually reported for the first time within these financial statements and/or the notes. (ae) Disclaimer Nothing contained within these statements may be taken to be an admission of any liability to any person under any circumstance.




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–

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547,

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–

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–

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–

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81,8

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358

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–

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–

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–

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–

–

–

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297,

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27

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Details relating to the Council’s functions/activities as reported in Note 2(a) are as follows:

BALANCED URBAN GROWTH

Forward Planning, Infrastructure & Transport Planning, Community Planning & Special Infrastructure Projects, Place Management, Development Assessment Services and Subdivision & Development Certification.

MODERN LOCAL ECONOMY

Economic Development and Civic Events.

PROTECTED ENVIRONMENT

Waterways, Sustainability and Resource Recovery.

PROACTIVE LEADERSHIP

Costs relating to the Council’s role as a component of democratic government, including elections, members fees and expenses, subscriptions to local authority associations, meetings of council and policy making committees, area representation and public disclosure and compliance, together with related administration.

VIBRANT COMMUNITIES

Asset Planning, Community Buildings, Library Services, Children’s Services, Community Services, Community Facilities Hire, Fire Control & State Emergency Services, Aged & Disabled Services. Environmental Health Services, Development Monitoring and Compliance.


NOTE 2(B). COUNCIL FUNCTIONS/ACTIVITIES - COMPONENT DESCRIPTIONS



page 29



Note 3. Income from continuing operations

$ ’000

(a) Rates and annual charges

Ordinary ratesResidentialFarmlandBusinessTotal ordinary rates

Special ratesNil

Annual charges (pursuant to s.496, s.496A, s.496B, s.501 & s.611)Domestic waste management servicesStormwater management servicesTotal annual charges

TOTAL RATES AND ANNUAL CHARGESCouncil has used 2015 year valuations provided by the NSW Valuer General in calculating its rates.

(b) User charges and fees

Specific user charges (per s.502 – specific ‘actual use’ charges)Nil

Other user charges and fees(i) Fees and charges – statutory and regulatory functions (per s.608)General administrationPlanning and building regulationRegistration feesSection 603 certificatesTotal fees and charges – statutory/regulatory

(ii) Fees and charges – other (incl. general user charges (per s.608))Aged careCemeteriesChild careEngineering worksLibraryOther support servicesParks and gardensPublic hallsCorporate servicesTotal fees and charges – other

TOTAL USER CHARGES AND FEES

10,879 9,918

9,429

341 5,077

7,792

Notes 2016 2015

1,571

94,327

Actual

62,051

7,360 564

Actual

68,739

629 60,858

7,252 69,975

8,683

24,017

6,961

25,5881,562

95,577

17,710

315 512

4

6 7

368 457 557

2,544 2,269

292 448

20,308

6

25,602

1

105

24,040

635 5,523

1,248

360

1

1,183

115


NOTE 3. INCOME FROM CONTINUING OPERATIONS



page 30



Note 3. Income from continuing operations (continued)

$ ’000

(c) Interest and investment revenue (including losses)

Interest – Interest on overdue rates and annual charges (incl. special purpose rates) – Interest earned on investments (interest and coupon payment income)OtherTOTAL INTEREST AND INVESTMENT REVENUE

Interest revenue is attributable to:Unrestricted investments/financial assets:Overdue rates and annual charges (general fund)General Council cash and investmentsRestricted investments/funds – external:Development contributions – Section 94Total interest and investment revenue recognised

(d) Other revenues

Fair value increments – investment propertiesRental income – investment propertiesFinesLegal fees recovery – rates and charges (extra charges)Building controlCommunity services and educationCorporate supportEngineering worksEnvironmental protectionInsurance claim recoveriesPublic librariesTown planningSales - Biobanking CreditsOtherTOTAL OTHER REVENUE

2016

9,752 9,351

Actual

245

2015Actual

451

130,014 97

125,875 1,862

191

245

– 1,434

132 187 226 156

48

266

898

1,339 904

57

199

230 205

959

90

587

8,094

698 493 425

14

Notes

222

213

9,873

6,529

10,187

222 5,724

277

10,1873,099 4,241

9,873

– 14

99


NOTE 3. INCOME FROM CONTINUING OPERATIONS (continued)



page 31




$ ’000

(e) Grants

General purpose (untied)Financial assistance – general componentFinancial assistance – local roads componentPensioners’ rates subsidies – general componentTotal general purpose

Specific purposeAged careBushfire and emergency servicesChild careCommunity careEnvironmental protectionLibraryParks, heritage and cultural servicesStreet lightingTransport (roads to recovery)Transport (other roads and bridges funding)Total specific purposeTotal grants

Grant revenue is attributable to:– Commonwealth funding– State funding– Other funding

–

– –

2016Capital

4,977

2,602

586

586

–

911

–

2,370

–

–

911

2,329

4,977

2,602

–

16,888

6,496 10,332

1,497

1,497

4,977

737

–

46 –

422

–

5,993

752

1,011

458

–

–

525

–

Capital

337

2015

– –

–

1,930 3,794

Operating 2015

Operating 2016

6,755

–

1,497

3,806

10,222

1,024

456 317

1,010

79 416

1,925

10,154

6,701

443

16,977

–

16,977

–

1,060

6,734

16,888

–

10,276

60

727 848 5 – –

78

–

–

5,717 –

–





page 32




$ ’000

(f) Contributions

Developer contributions:(s93 & s94 – EP&A Act, s64 of the LGA):S 94 – contributions towards amenities/servicesTotal developer contributions

Other contributions:Bio bankingCommunity servicesDedications (other than by S94)

Fire protectionParks and gardensRoads and bridgesTown planningOther (Contribution from City of Parramatta)OtherTotal other contributionsTotal contributions

TOTAL GRANTS AND CONTRIBUTIONS

$ ’000

(g) Restrictions relating to grants and contributions

Certain grants and contributions are obtained by Council on conditionthat they be spent in a specified manner:

Unexpended at the close of the previous reporting period

Add: grants and contributions recognised in the current period but not yet spent:

Less: grants and contributions recognised in a previous reporting period now spent:

Net increase (decrease) in restricted assets during the period

Unexpended and held as restricted assets

Comprising: – Specific purpose unexpended grants – Developer contributions

53,744

3,621

121,072

121,072

121,072

95,798

(16,984)

2015

–

–

129,009

66,248

101,465

–

– –

2016

67,328

70,728

35,023

185,363

–

– –

64,291

– 194

117,451

–

(31,507)

4

17

311

– –

–

42 34,794

89,147

368

–

–

1,170 824

Actual

35,217

102,962

–

256 – –

501 149

3,189 34,88591

–

1,503 –

2016

23 47

3,189 3,313

Actual

3,313124,032

20,077

– 1,037

20,290

267

185,363

4,143

89,147

Operating 2016

Capital Capital 20152015

Operating

66,248

181,220

–





page 33



Note 4. Expenses from continuing operations

$ ’000

(a) Employee benefits and on-costs

Salaries and wagesEmployee leave entitlements (ELE)Superannuation – defined contribution plansSuperannuation – defined benefit plansWorkers’ compensation insuranceFringe benefit tax (FBT)Training costs (other than salaries and wages)OtherTotal employee costsLess: capitalised costsTOTAL EMPLOYEE COSTS EXPENSEDNumber of ‘full-time equivalent’ employees (FTE) at year endNumber of ‘full-time equivalent’ employees (FTE) at year end (incl. vacancies)

(b) Borrowing costsNil

(c) Materials and contracts

Raw materials and consumablesContractor and consultancy costs – Waste Collection, Disposal & Recycling – Roads, Parks and Buildings – Aged & Disabled – Information Technology – Other Contractor and consultancy costsAuditors remuneration (1)

Legal expenses: – Legal expenses: planning and development – Legal expenses: otherOperating leases: – Operating lease rentals: minimum lease payments (2)

TOTAL MATERIALS AND CONTRACTS

1. Auditor remuneration During the year, the following fees were incurred for services provided by

the Council’s Auditor:

(i) Audit and other assurance services – Audit and review of financial statements: Council’s AuditorRemuneration for audit and other assurance servicesTotal Auditor remuneration

2. Operating lease payments are attributable to:Buildings

53

20,768

49,584

229

319

3,237 4,445

347

53

6,705

50

559

82

1,646

5,209

216

485

50,755

53

41,295

Actual Actual

79

575 591

(1,171)

–

532

262

39,865

2015

(917) 52,942

52,025

2,109

1,063

8,362

1,728

213

8282 79

50

7979

7,999

1,261

22,473

82

42,981

Notes 2016

931

42,891

356

3,366 453

240 518

4,443

240

–

1,911

50

540


NOTE 4. EXPENSES FROM CONTINUING OPERATIONS



page 34



Note 4. Expenses from continuing operations (continued)

$ ’000

(d) Depreciation, amortisation and impairment

Plant and equipmentOffice equipmentInfrastructure: – Buildings – non-specialised – Roads – Stormwater drainageOther assets – OtherTOTAL DEPRECIATION ANDIMPAIRMENT COSTS EXPENSED

$ ’000

(e) Other expenses

Other expenses for the year include the following:

AdvertisingBank chargesContributions/levies to other levels of government – Department of planning levy – Emergency services levy (includes FRNSW, SES, and RFS levies)

– NSW fire brigade levy – NSW rural fire service levy – Other (incl. ferries, registrations, valuer general and other)Councillor expenses – mayoral feeCouncillor expenses – councillors’ feesCouncillors’ expenses (incl. mayor) – other (excluding fees above)Electricity and heatingInsuranceOffice expenses (including computer expenses)

Professional chargesProject costs (amounts that are not materially individual)Street lightingTelephone and communicationsVoluntary chargesOtherTOTAL OTHER EXPENSES

2,453

3,069

721 6,045

Actual 2016

20,233

2,527 2,576

5,386 10,032

2015

2016Actual

2015

–

263

365

626

122

693

2,501

12,856

274

1

240

280

1,148

309

1,301

573

1,163

20,924

372

Depreciation/amortisation

995

710

118

61

163

114

3,199

704

21,869

2,415

1,196

Actual

1,992

68

1,727

Notes

287

2,682

787

1,821

250

756 6,572

–

–

–

–

–

–

1,362

–

–

– –

– –

NotesActual

Impairment costs

2015

–

Actual Actual

–

–

2016

736

1,168 2,714

62

183


NOTE 4. EXPENSES FROM CONTINUING OPERATIONS (continued)



page 35



Note 5. Gains or losses from the disposal of assets

$ ’000

Property (excl. investment property)Proceeds from disposal – propertyLess: carrying amount of property assets sold/written offNet gain/(loss) on disposal

Plant and equipmentProceeds from disposal – plant and equipmentLess: carrying amount of plant and equipment assets sold/written offNet gain/(loss) on disposal

InfrastructureProceeds from disposal – infrastructureLess: carrying amount of infrastructure assets sold/written offNet gain/(loss) on disposal

Real estate assets held for saleProceeds from disposal – real estate assetsLess: carrying amount of real estate assets sold/written offNet gain/(loss) on disposal

Financial assets*Proceeds from disposal/redemptions/maturities – financial assetsLess: carrying amount of financial assets sold/redeemed/maturedNet gain/(loss) on disposal

NET GAIN/(LOSS) ON DISPOSAL OF ASSETS

617

(3,012)

–

–

(7,293)

(876)

(753)

68,684

497

1,177

Actual

(3,835)

823

2015

4,313

(560)

–

3,228

(152,722)

724

2016

–

–

10,521

(256)

(68,684)

1,600

–

–

–

(474)

NotesActual

–

(3,835)

1,297

152,722


NOTE 5. GAINS OR LOSSES FROM THE DISPOSAL OF ASSETS



page 36



Note 6a. – Cash assets and Note 6b. – investments

$ ’000

Cash and cash equivalents (Note 6a)Cash on hand and at bankCash-equivalent assets 1

– Deposits at callTotal cash and cash equivalents

Investments (Note 6b) – Long term depositsTotal investmentsTOTAL CASH ASSETS, CASHEQUIVALENTS AND INVESTMENTS

1 Those investments where time to maturity (from date of purchase) is < 3 mths.

Cash, cash equivalents and investments wereclassified at year end in accordance withAASB 139 as follows:

Cash and cash equivalentsa. ‘At fair value through the profit and loss’

Investmentsa. ‘Held to maturity’Investments

Note 6(b-i)Reconciliation of investmentsclassified as ‘held to maturity’Balance at the beginning of the yearAdditionsDisposals (sales and redemptions)Balance at end of year

Comprising:– Long term deposits

Total

Refer to Note 23. Fair value measurement for information regarding the fair value of investments held.

Current

–

–

2015

–

2015Actual

5,319

294,413

294,413 –

(68,684) 161,409

– –

–

– 201,688

–

–

294,413

–

Non-current

294,413 294,413

–

–

–

–

–

–

–

11,390

Actual

25,108

338,343

338,343

338,343 338,343

6(b-i)

196,652

–

311,122

–

–

– –

338,343

(152,722)

294,413

338,343

363,451

294,413

Non-current

294,413

16,70925,1083,944

–

2016

–

16,709

21,164

338,343

–

–

–

Notes

2016Actual

Current

–

–

Actual


NOTE 6A. CASH ASSETS & NOTES 6B. - INVESTMENTS





Note 6c. Restricted cash, cash equivalents and investments – details

$ ’000

Total cash, cash equivalentsand investments

attributable to:External restrictions (refer below)

Internal restrictions (refer below)

Unrestricted

$ ’000

Details of restrictions

External restrictions – included in liabilitiesNil

External restrictions – otherDeveloper contributions – general (D)Developer contributions – City of Parramatta (D)Specific purpose unexpended grants (F)Domestic waste management (G)Domestic waste management - City of Parramatta(G)External restrictions – otherTotal external restrictions

Internal restrictionsCarry over recurrent operationsChild careFuture fundHills community careInfrastructureInsurance / workers compensationLand developmentPlantRecurrent operationsTotal internal restrictions

TOTAL RESTRICTIONS

D Development contributions which are not yet expended for the provision of services and amenities in accordancewith contributions plans (refer Note 17).

F Grants which are not yet expended for the purposes for which the grants were obtained. (refer Note 1 (b)) G Water, sewerage, domestic waste management (DWM) and other special rates/levies/charges are externally

restricted assets and must be applied for the purposes for which they were raised.

10,479

14,026

2,993

Transfers to

170,741

(71,800) 16,244

Non-current

–

–

2015Actual

153,110

–

(29,619)

balance

4,143 –

–

2016

–

23,149

93,910 462

(913)

(50)

4,059

93,910 (30,532)

16,561

(27,086) 88

–

(268)

(558)

(1,410) 3,382

(102,331)

46,597

988

1,754

1,115

2,993

7,473

16,561

5,255

73,897

127,908

317,792

126,506

256

38,230

2,485

–

522 – 10,479

3,621

8,445

189,884

153,110

279,616

311,122

1,634 (2,606)

(6,177) 1,417

670 (33,645) 3,038

950

6,177

106,972 93,388

77,834

4,972

140,507

462

balance restrictions

–

126,506

45,659 363,451

Actual Non-current

–

189,884 –

restrictions

126,506

Current

–

189,884 (30,532)

Current Actual

2016 Closing Transfers from

– 127,908

311,122

–

31,506

Opening

2016

363,451

Actual 2015

–

page 37


NOTE 6C. RESTRICTED CASH, CASH EQUIVALENTS & INVESTMENT - DETAILS



page 38



Note 7. Receivables

$ ’000

PurposeRates and annual chargesInterest and extra chargesAccrued revenues – Interest on investmentsGovernment grants and subsidiesNet GST receivableDebtors – applicationsOther debtors – Bio bankingDebtor - City of Parramatta (see note v)

Other debtorsTotal

Less: provision for impairmentOther debtorsTotal provision for impairment – receivables

TOTAL NET RECEIVABLES

Externally restricted receivablesDomestic waste managementTotal external restrictionsInternally restricted receivablesNilUnrestricted receivablesTOTAL NET RECEIVABLES

Notes on debtors above:(i) Rates and annual charges outstanding are secured against the property.

(ii) Doubtful rates debtors are provided for where the value of the property is less than the debt outstanding. An allowance for other doubtful debts is made when there is objective evidence that a receivable is impaired.

(iii) Interest was charged on overdue rates and charges at 8.50% (2015 8.50%).Generally all other receivables are non-interest bearing.

(iv) Please refer to Note 15 for issues concerning credit risk and fair value disclosures.

(v) These balances are as at 30 June 2016 and will be finalised at conclusion of transitional agreements.

1,645

Notes Non-current

209

935

1,341

5,783

Current

157

2016

7,408

(356)

415

4,1087,408

836

5,7835,783 4,108

6,473

– –

–

2,501

935

8,901

9,10249 –

1,122 – –

(201) –

438 (434)

2,142 –

2,691

–

(201)

8,065

4,108

–

5,110

–

5,783

836

8,901

1,177

– –

567

2015

2,379

386 1,776

–

(667)

Non-current

25 – –

7,764

–

– –

3,516

–

212

(356)

4,108

–

–

Current


NOTE 7. RECEIVABLES



page 39



Note 8. Inventories and other assets

$ ’000

(a) Inventories

(i) Inventories at costReal estate for resale (refer below)Stores and materialsOtherTotal inventories at cost

(ii) Inventories at net realisable value (NRV)Nil

TOTAL INVENTORIES

(b) Other assets

PrepaymentsTOTAL OTHER ASSETS

Externally restricted assetsThere are no restrictions applicable to the above assets.

Additional Note 8 disclosures can be found on the next page.

Notes

–

2015Non-current

483

–

Current

––

8,507

8,507

– 483 –

5,469 21

2,221

– 21

Current 2016

–

– 255 – 255

7,711 –– 2,882 –

7,711

Non-current

– 5,604


NOTE 8. INVENTORIES & OTHER ASSETS



page 40



Note 8. Inventories and other assets (continued)

$ ’000

(i) Other disclosures

(a) Details for real estate developmentResidentialTotal real estate for resale(Valued at the lower of cost and net realisable value)

Represented by:Acquisition costsDevelopment costsTotal costsTotal real estate for resale

Movements:Real estate assets at beginning of the year – Purchases and other costs – Transfers in from (out to) Note 9 – Transfer from Investment Properties – Prior Period CorrectionTotal real estate for resale

(b) Current assets not anticipated to be settled within the next 12 monthsThe following inventories and other assets, even though classifiedas current are not expected to be recovered in the next 12 months;

Real estate for resale

(c) Inventory write downsThere were no amounts recognised as an expense relating to the write down of inventory balances held during the year.

Refer to Note 23. Fair value measurement for information regarding the fair value of other assets held.

–

––

–

416

2016

– 5,188

2,000

–

–

5,354

–

– 5,604

5,469

5,604

5,469

–5,604

–

Non-current

5,604

–

4,050

–

–

2016

4,050

2015

–

–– –

5,604

115

–

115 – 2,416 –

5,469– –

10,481

5,604

–

–

5,469

– –

Current

5,469

Non-current Current 2015

–

–

(2,208)

(42)


NOTE 8. INVENTORIES & OTHER ASSETS (continued)


Fina

ncia

l Sta

tem

ents

201

6

The

Hills

Shi

re C

ounc

il20

135

Not

es to

the

Fina

ncia

l Sta

tem

ents

for t

he y

ear e

nded

30

June

201

6

Not

e 9a

. Inf

rast

ruct

ure,

pro

perty

, pla

nt a

nd e

quip

men

t

AtAt

Car

ryin

gAt

AtC

arry

ing

$ ’0

00co

stfa

ir va

lue

depr

ecia

tion

impa

irmen

tva

lue

cost

fair

valu

ede

prec

iatio

nim

pairm

ent

valu

e

Pla

nt a

nd e

quip

men

t–

28

,953

17,5

59

–

11

,394

–

3,00

7

(4

74)

(2

,576

)

–

(5,6

29)

0

–

–

–

–

–

23

,824

18,1

02

–

5,

722

O

ffice

equ

ipm

ent

–

1,22

1

656

–

565

–

131

–

(1

14)

–

–

(0)

–

–

–

–

–

1,35

2

770

–

582

Lan

d:

– O

pera

tiona

l lan

d13

3,50

2

–

–

13

3,50

2

–

–

–

–

(1

2,70

4)

(8,8

40)

(4,5

10)

42

7,90

5

–

–

–

11

5,39

6

–

–

11

5,39

6

– C

omm

unity

land

–

208,

802

–

–

208,

802

–

22,6

55

–

–

12

,201

15,2

11

(4

0,82

5)

–

–

–

30,6

73

–

24

8,71

7

–

–

24

8,71

7

– L

and

unde

r roa

ds (p

re 1

/7/0

8)–

2,

442,

522

–

–

2,

442,

522

–

–

–

–

–

–

(2

44,6

70)

–

–

–

–

–

2,19

7,85

2

–

–

2,19

7,85

2

–

Lan

d un

der r

oads

(pos

t 30/

6/08

)–

19

4,63

3

–

–

19

4,63

3

–

–

–

–

50

3

–

–

–

–

–

–

–

19

5,13

7

–

–

19

5,13

7

In

fras

truc

ture

:

– B

uild

ings

–

–

–

–

–

–

–

–

–

235,

839

–

–

–

–

–

–

–

270,

434

34,5

93

–

23

5,84

1

– B

uild

ings

– n

on-s

peci

alis

ed–

24

1,09

8

32

,329

–

208,

769

2,94

3

1,

592

(3,8

07)

(2,6

82)

(1

97,3

86)

(8

95)

(1

2,52

1)

–

–

3,98

7

–

–

–

–

–

–

– B

uild

ings

– s

peci

alis

ed–

45

,839

6,14

6

–

39,6

93

–

–

–

–

(3

8,45

3)

–

–

–

–

(1

,240

)

–

–

–

–

–

–

– R

oads

–

1,05

2,19

4

40,0

43

–

1,

012,

151

19

,291

29,9

46

–

(5

,386

)

(2,4

41)

134

(1

18,8

55)

–

–

7,91

7

–

–

97

5,71

1

32

,955

–

942,

756

–

Bul

k ea

rthw

orks

(non

-dep

reci

able

)–

11

8,53

2

–

–

11

8,53

2

–

2,

845

–

–

2,44

1

(3

3)

(1

4,70

3)

–

–

–

–

–

109,

082

–

–

109,

082

–

Sto

rmw

ater

dra

inag

e–

25

4,50

1

9,

638

–

24

4,86

3

1,

192

7,95

8

–

(7

36)

–

4,23

4

(2

5,71

5)

–

–

755

–

–

24

0,94

6

8,

395

–

23

2,55

1

O

ther

ass

ets:

–

Oth

er–

64

,421

15,0

22

–

49

,399

3,31

7

3,

349

(28)

(1,3

62)

–

(1

82)

(6

,236

)

–

–

1,38

0

–

–

63

,043

13,4

06

–

49

,637

TOTA

L IN

FRAS

TRU

CTU

RE,

PRO

PER

TY, P

LAN

T AN

D E

QU

IP.

Ren

ewal

s ar

e de

fined

as

the

repl

acem

ent o

f exi

stin

g as

sets

(as

oppo

sed

to th

e ac

quis

ition

of n

ew a

sset

s).

Ref

er to

Not

e 23

. Fai

r val

ue m

easu

rem

ent f

or in

form

atio

n re

gard

ing

the

fair

valu

e of

oth

er in

frast

ruct

ure,

pro

perty

, pla

nt a

nd e

quip

men

t.

as a

t 30/

6/20

16

Accu

mul

ated

Tfrs

fro

m/(t

o)

inve

stm

ent

prop

ertie

s

Am

alga

mat

ions

trans

fers

in/(o

ut)

–

4,00

0

(468

,035

)

4,33

3,27

3

42

7,90

5

12,7

98

30

,673

–

4,

441,

494

10

8,22

1

–

26,7

43

(4

,309

)

(12,

856)

71

,484

as a

t 30/

6/20

15As

set m

ovem

ents

dur

ing

the

repo

rtin

g pe

riod

Accu

mul

ated

Tfrs

fro

m/(t

o)

real

est

ate

asse

ts(N

ote

8)

Adj

ustm

ents

and

trans

fers

Oth

erm

ovem

ents

Prio

r Per

iod

Cor

rect

ions

Add

ition

sne

w a

sset

sA

dditi

ons

rene

wal

s

Car

ryin

g va

lue

of d

ispo

sals

Dep

reci

atio

n ex

pens

e

Prio

r Per

iod

Cor

rect

ions

to

equ

ity

(AR

R)

Rev

alua

tion

incr

emen

tsto

equ

ity

(AR

R)

–

4,

786,

218

12

1,39

3

–

4,66

4,82

5

page

41

NO

TES

TO

TH

E F

INA

NC

IAL

STA

TE

ME

NT

S fo

r th

e ye

ar e

nd

ed 3

0 J

un

e 2

016

NO

TE

9A

. IN

FAS

TR

UC

TU

RE

, PR

OP

ER

TY

, PL

AN

T &

EQ

UIP

ME

NT





Note 9b. Externally restricted infrastructure, property, plant and equipment

$ ’000

Council has no externally restricted infrastructure, property, plant and equipment.

Note 9c. Infrastructure, property, plant and equipment – current year impairments

Council has recognised no impairment losses during the reporting period nor reversed any prior period losses.

Note 10a. Payables, borrowings and provisions

$ ’000

PayablesGoods and services – operating expenditurSecurity bonds, deposits and retentionsOther (City of Parramatta)Total payables

BorrowingsNil

ProvisionsEmployee benefits:Annual leaveSick leaveLong service leaveGratuitiesTotal provisions

(i) Liabilities relating to restricted assets

$10.9m payable to City of Parramatta relates to external restrictions relating to developer contributions anddomestic waste management.

16,579 209

56,166 233

233

–

–

– 4,153

451

671 40,213

377 209 233 –

39,162

430 12,026

4,220

– 11,619

TOTAL PAYABLES, BORROWINGS AND PROVISIONS

Notes

462 23,634

13,665 12,548

–

Actual

17,004 –

307

–

Non-current Current Non-current

– 17,874 –

–

Actual

2016Current

8,740 9,969

–

2015

–

462

page 42


NOTE 9B. EXTERNALLY RESTRICTED INFRASTRUCTURE, PROPERTY, PLANT & EQUIPMENT

NOTE 9C. INFRASTRUCTURE, PROPERTY, PLANT & EQUIPMENT - CURRENT YEAR IMPAIRMENTS

NOTE 10A. PAYABLES, BORROWINGS & PROVISIONS





Note 10a. Payables, borrowings and provisions (continued)

$ ’000

(ii) Current liabilities not anticipated to be settled within the next twelve months

The following liabilities, even though classified as current, are not expectedto be settled in the next 12 months.

Provisions – employees benefitsPayables – security bonds, deposits and retentions

Note 10b. Description of and movements in provisions

a. Employees leave entitlements and on-costs represents those benefits accrued and payable and an estimate of those that will become payable in the future as a result of past service.

13,851

Unused amounts reversed

Remeasurement effects due to

discounting

–

2015

Decrease due to payments

12,783

2016

16,812 5,049

Sick leave

Openingbalance

as at 1/7/15

Long service leave

4,153

TOTAL69

–

2016

451 (48)

Class of provision

–

Additional provisions

Gratuities

(78)

– – (1,221)

Annual leave –

430

(3,301)

1,628 – 610

3,368

11,619

Closingbalance

as at 30/6/16

–

11,917

Actual

23,417

516 4,220

2015

(16)

9,566

–

24,700

(4,648)

Actual

17,213

12,026

–

page 43


NOTE 10A. PAYABLES, BORROWINGS & PROVISIONS (continued)

NOTE 10B. DESCRIPTION OF MOVEMENTS IN PROVISIONS





Note 11. Statement of cash flows – additional information

$ ’000

(a) Reconciliation of cash assets

Total cash and cash equivalent assetsLess bank overdraftBalance as per the Statement of Cash Flows

(b) Reconciliation of net operating result to cash provided from operating activities

Net operating result from Income StatementAdjust for non-cash items:Depreciation and amortisationNet losses/(gains) on disposal of assetsNon-cash capital grants and contributionsLosses/(gains) recognised on fair value re-measurements through the P&L: – Investment propertiesNet Loss from disposal of assests due to Boundary adjustments

+/- Movement in operating assets and liabilities and other cash items:Decrease/(increase) in receivablesIncrease/(decrease) in provision for doubtful debtsDecrease/(increase) in inventoriesDecrease/(increase) in other assetsIncrease/(decrease) in payablesIncrease/(decrease) in employee leave entitlementsNet cash provided from/(used in)operating activities from the Statement of Cash Flows

2016

3,012

2015Notes

(155)

(328,131)

(3,013)

401

127

(35,023) (34,793)

19,678

(125,875)

16,709

12,856

248,670

–

(4,313)

135,447

661

127,506

5,036

(1,363)

15,990 228

468,391

315

21

Actual

10

6a 16,709 25,108 – –

Actual

20,233

25,108

–

page 44


NOTE 11. STATEMENT OF CASH FLOWS - ADDITIONAL INFORMATION





Note 11. Statement of cash flows – additional information (continued)

$ ’000

(c) Non-cash investing and financing activities

Other dedications - developer contributions in kindTotal non-cash investing and financing activities

(d) Financing arrangements

(i) Unrestricted access was available at balance date to the following lines of credit:

Bank overdraft facilities (1)

Credit cards/purchase cardsTotal financing arrangements

1. The bank overdraft facility may be drawn at any time and may be terminated by the bank without notice. Interest rates on overdrafts are interest rates on loans and other payables are disclosed in Note 15.

(ii) Secured loan liabilitiesLoans are secured by a mortgage over future years rate revenue only.

(e) Bank guarantees

Workcover in the amount of $2,656,155 for the retro paid loss scheme.

Note 12. Commitments for expenditure

Capital commitments (exclusive of GST)

Capital expenditure committed for at the reporting date but notrecognised in the financial statements as liabilities:

Property, plant and equipmentBuildingsInfrastructureParksWaterwaysLandTotal commitments

These expenditures are payable as follows:Within the next yearTotal payable

Sources for funding of capital commitments:Unrestricted general fundsTotal sources of funding

38,841

5,064

–

34,793

198 9,665

6,070

2016

38,841 6,0706,070

4,414

6,070

761

Notes

5,000

35,023

5,000

34,793

Actual Actual

64

35,023

Actual

26,351 2,627

38,841

283

38,841 6,070

Actual

585 27

38,841

2015

107 5,107

page 45


NOTE 11. STATEMENT OF CASH FLOWS - ADDITIONAL INFORMATION (continued)

NOTE 12. COMMITMENTS FOR EXPENDITURE





Note 13a(i). Statement of performance measurement – indicators (consolidated)

$ ’000

Local government industry indicators – consolidated

1. Operating performance ratioTotal continuing operating revenue (1) excluding capitalgrants and contributions less operating expensesTotal continuing operating revenue (1) excluding capitalgrants and contributions

2. Own source operating revenue ratioTotal continuing operating revenue (1)

excluding all grants and contributionsTotal continuing operating revenue (1)

3. Unrestricted current ratioCurrent assets less all external restrictions (2)

Current liabilities less specific purpose liabilities (3, 4)

4. Debt service cover ratioOperating result (1) before capital excluding interestand depreciation/impairment/amortisationPrincipal repayments (Statement of Cash Flows)plus borrowing costs (Income Statement)

5. Rates, annual charges, interest and extra charges outstanding percentageRates, annual and extra charges outstandingRates, annual and extra charges collectible

6. Cash expense cover ratioCurrent year’s cash and cash equivalentsplus all term depositsPayments from cash flow of operating andfinancing activities

Notes

(1) Excludes fair value adjustments and reversal of revaluation decrements, net gain/(loss) on sale of assets and the net share of interests in joint ventures and associates.(2) Refer Notes 6-8 inclusive. Also excludes any real estate and land for resale not expected to be sold in the next 12 months.(3) Refer to Note 10(a).(4) Refer to Note 10(a)(ii) – excludes all payables and provisions not expected to be paid in the next 12 months (incl. ELE).

47.33%

2.95%

Prior periods

0.00x

21.23 mths10,437

363,451

2,426

2016

2.46%

20.01x

–

2.80%

x12 30.19 mths

20152016

20,987 329,598 15.71x

2014

283,465

24,725

0.00x

16.01%

37,581

14.66%10.62%

98,727

134,166

Indicator

12.56x

154,456

34.82 mths

0.00x

62.67%50.60%

Amounts

page 46


NOTE 13A(I). STATEMENT OF PERFORMANCE MEASUREMENT - INDICATORS (consolidated)



NOTE 13A(ii). LOCAL GOVERNMENT INDUSTRY INDICATORS - GRAPHS (consolidated)




Note 13a(ii). Local government industry indicators – graphs (consolidated)

Benchmark: ――― Minimum >=0.00% Ratio achieves benchmarkSource for benchmark: Code of Accounting Practice and Financial Reporting #24 Ratio is outside benchmark


Benchmark: ――― Minimum >=1.50 Ratio achieves benchmarkSource for benchmark: Code of Accounting Practice and Financial Reporting #24 Ratio is outside benchmark

This ratio continues to exceed the benchmark and demonstrates Council's ability to contain operating expenditure

within operating revenue.

2015/16 ratio 47.33%

Purpose of unrestricted current

ratio

This ratio measures Council’s

achievement of containing operating expenditure within operating revenue.

This ratio measures fiscal flexibility. It is

the degree of reliance on external funding

sources such as operating grants and

contributions.

To assess the adequacy of working capital and its ability to satisfy obligations in the short term for

the unrestricted activities of Council.

2015/16 ratio 16.01%

This ratio fell below the benchmark due to increases in developer contibutions and

subdivider dedications received compared to previous years.

This ratio continues to be well above industry benchmark of 1 indicating sound

liquidity.

Purpose of operating

performance ratio

Commentary on 2015/16 result

2015/16 ratio 15.71x


Purpose of own source operating

revenue ratio


3%

15%

11%

16%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2013 2014 2015 2016

Rat

io %

1. Operating performance ratio

61% 63%

51% 47%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 2015 2016

Rat

io %

2. Own source operating revenue ratio

11.112.6

20.0

15.7

0.0

5.0

10.0

15.0

20.0

25.0

2013 2014 2015 2016

Rat

io (

x)

3. Unrestricted current ratio

page 47



page 48



Note 13a(ii). Local government industry indicators – graphs (consolidated)


Benchmark: ――― Maximum <5.00% Ratio is within BenchmarkSource for Benchmark: Code of Accounting Practice and Financial Reporting #24 Ratio is outside Benchmark




2015/16 ratio 2.46%

Council's cash expense ratio has been well above benchmark indicating Council's

ability to pay immediate expenses without additional cash flow.

Purpose of cash expense cover ratio


2015/16 ratio 34.82 mths

This liquidity ratio indicates the number of months a Council can continue paying

for its immediate expenses without

additional cash inflow.

To assess the impact of uncollected rates and annual charges on Council’s liquidity and the adequacy of

recovery efforts.

This ratio continues to improve and remains well above benchmark.

Purpose of rates and annual charges

outstanding ratio

Purpose of debt service cover ratio

This ratio measures the availability of operating cash to

service debt including interest, principal and

lease payments

Council remains debt free since 2002.

2015/16 ratio 0.00x

0.0 0.0 0.0 0.00.0

0.5

1.0

1.5

2.0

2.5

2013 2014 2015 2016

Rat

io (

x)

4. Debt service cover ratio

3% 3% 3%2%

0%

1%

2%

3%

4%

5%

6%

2013 2014 2015 2016

Rat

io %

5. Rates, annual charges, interest andextra charges outstanding percentage

17.621.2

30.2

34.8

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

2013 2014 2015 2016

Rat

io (

mth

s)

6. Cash expense cover ratio


NOTE 13A(ii). LOCAL GOVERNMENT INDUSTRY INDICATORS - GRAPHS (consolidated)



page 49



Note 14. Investment properties

$ ’000

(a) Investment properties at fair value

Investment properties on hand

Reconciliation of annual movement:Opening balance– Acquisitions– Net gain/(loss) from fair value adjustments– Transfers from/(to) inventories (Note 8)– Transfers from/(to) owner occupied (Note 9)– Transfer to non-current assets held for resaleCLOSING BALANCE – INVESTMENT PROPERTIES

(b) Valuation basis

The basis of valuation of investment properties is fair value, being the amounts for which the properties couldbe exchanged between willing parties in arms length transaction, based on current prices in an active marketfor similar properties in the same location and condition and subject to similar leases.

The 2016 revaluations were based on independent assessments made by:Independent Property Valuations Pty Ltd

(c) Contractual obligations at reporting date

Refer to Note 12 for disclosures relating to any capital and service obligations that have been contracted.

(d) Investment property income and expenditure – summary

Rental income from investment properties:– Minimum lease paymentsNet revenue contribution from investment propertiesplus:

Fair value movement for yearTotal income attributable to investment properties

Refer to Note 23. Fair value measurement for information regarding the fair value of investment properties held.

20,863

9,905

2016

– 125,875

9,905

451

126,326

–

20,863

–

2015

24,030

1,862

125,875

(7,905)

20,863

1,862 451

– 1,862

– (140,000) 9,905

Notes

(2,000) –

Actual Actual


NOTE 14. INVESTMENT PROPERTIES



page 50



Note 15. Financial risk management

$ ’000

Risk management

Council’s activities expose it to a variety of financial risks including (1) price risk, (2) credit risk, (3) liquidity riskand (4) interest rate risk.

The Council’s overall risk management program focuses on the unpredictability of financial markets and seeksto minimise potential adverse effects on the financial performance of the Council.

Council does not engage in transactions expressed in foreign currencies and is therefore not subject to foreigncurrency risk.

Financial risk management is carried out by Council’s finance section under policies approved by the Council.

A comparison by category of the carrying amounts and fair values of Council’s financial assets and financialliabilities recognised in the financial statements is presented below.

Financial assetsCash and cash equivalentsInvestments – ‘Held to maturity’ReceivablesTotal financial assets

Financial liabilitiesPayablesTotal financial liabilities

Fair value is determined as follows:

– Cash and cash equivalents, receivables, payables – are estimated to be the carrying value that approximates market value.

– Borrowings and held-to-maturity investments – are based upon estimated future cash flows discounted by the current mkt interest rates applicable to assets and liabilities with similar risk profiles, unless quoted market prices are available.

– Financial assets classified (i) ‘at fair value through profit and loss’ or (ii) ‘available-for-sale’ – are based upon quoted market prices (in active markets for identical investments) at the reporting date or independent valuation.

Refer to Note 23. Fair value measurement for information regarding the fair value of financial assets and liabilities.

2016

16,709

Fair value

23,63439,62439,624

378,135 378,135

23,634

294,413

25,108

39,624

322,63811,516

338,343

25,108

14,684 322,638

16,709

11,516 294,413 338,343

2015Carrying value

14,684

2016

23,634 39,624

2015

23,634


NOTE 15. FINANCIAL RISK MANAGEMENT



page 51



Note 15. Financial risk management (continued)

$ ’000

Council’s objective is to maximise its return on cash and investments whilst maintaining an adequate level ofliquidity and preserving capital.

Council’s finance area manages the cash and Investments portfolio with the assistance of independent advisors.

Council has an investment policy which complies with the Local Government Act 1993 and Minister’sinvestment order. This policy is regularly reviewed by Council and it’s staff and an investment report is tabledbefore Council on a monthly basis setting out the portfolio breakup and its performance.

The risks associated with the investments held are:

– Price risk – the risk that the capital value of Investments may fluctuate due to changes in market prices, whether there changes are caused by factors specific to individual financial instruments or their issuers or are caused by factors affecting similar instruments traded in a market.

– Interest rate risk – the risk that movements in interest rates could affect returns and income.

– Credit risk – the risk that the investment counterparty will not complete their obligations particular to a financial instrument, resulting in a financial loss to Council – be it of a capital or income nature.

Council manages these risks (amongst other measures) by diversifying its portfolio and only purchasinginvestments with high credit ratings or capital guarantees.

(a) Market risk – price risk and interest rate risk

The following represents a summary of the sensitivity of Council’s Income Statement and accumulated surplus(for the reporting period) due to a change in either the price of a financial asset or the interest rates applicable.

It is assumed that the change in interest rates would have been constant throughout the reporting period.

2016Possible impact of a 1% movement in interest rates

2015Possible impact of a 1% movement in interest rates (3,113)

3,634

3,113

Increase of values/rates Decrease of values/rates

(3,634) 3,634 Profit Equity

3,113 (3,113)

Profit Equity (3,634)


NOTE 15. FINANCIAL RISK MANAGEMENT (continued)






$ ’000

(b) Credit risk

Council’s major receivables comprise (i) rates and annual charges and (ii) user charges and fees.

The major risk associated with these receivables is credit risk – the risk that debts due and payable to Councilmay not be repaid in full.

Council manages this risk by monitoring outstanding debt and employing stringent debt recovery procedures.It also encourages ratepayers to pay their rates by the due date through incentives.

Credit risk on rates and annual charges is minimised by the ability of Council to secure a charge over the landrelating to the debts – that is, the land can be sold to recover the debt. Council is also able to charge intereston overdue rates and annual charges at higher than market rates which further encourages the payment of debt.

There are no significant concentrations of credit risk, whether through exposure to individual customers,specific industry sectors and/or regions.

The level of outstanding receivables is reported to Council monthly and benchmarks are set and monitored foracceptable collection performance.

Council makes suitable provision for doubtful receivables as required and carries out credit checks on mostnon-rate debtors.

There are no material receivables that have been subjected to a re-negotiation of repayment terms.

A profile of Council’s receivables credit risk at balance date follows:

(i) Ageing of receivables – %Current (not yet overdue)Overdue

(ii) Ageing of receivables – valueRates and annual charges Other receivablesCurrent Current< 1 year overdue 0 – 30 days overdue1 – 2 years overdue 30 – 60 days overdue2 – 5 years overdue 60 – 90 days overdue> 5 years overdue > 90 days overdue

(iii) Movement in provision for impairment of receivablesBalance at the beginning of the year+ new provisions recognised during the year– amounts already provided for and written off this year– amounts provided for but recovered during the yearBalance at the end of the year

100%

0%

(17)

receivables charges Other

92%

184

–

100%

20152016

240 1,881

11,425

Rates and

receivables charges

annual

19%

124

2016

2,162

annual Other Rates and

annual

0% 81%

9,143

receivables Other

charges

100%

7,370

100%

annual Other

2015Rates and

charges receivables

418

74

–

2015

137

259 168 34

265

2,729

–

335

(244)

100%

43

1,238 616

356

100%

175 209

–

Rates and

201 356

8%

(138)

2,426 12,459

2016

page 52





page 53




$ ’000

(c) Liquidity risk

Payables and borrowings are both subject to liquidity risk – the risk that insufficient funds may be on hand tomeet payment obligations as and when they fall due.

Council manages this risk by monitoring its cash flow requirements and liquidity levels and maintaining anadequate cash buffer.

Payment terms can (in extenuating circumstances) also be extended and overdraft facilities utilised as required.

The contractual undiscounted cash outflows (ie. principal and interest) of Council’s payables and borrowings areset out in the maturity table below:

$ ’000

Trade/other payablesTotal financial liabilities

Trade/other payablesTotal financial liabilities

Borrowings are also subject to interest rate risk – the risk that movements in interest rates could adverselyaffect funding costs and debt servicing requirements. Council manages this risk through the diversification ofborrowing types, maturities and interest rate structures.

The following interest rates were applicableto Council’s borrowings at balance date:

Trade/other payables

– 23,634

Average

39,624

cash

–

value

2015

39,624

–

outflows values

–

payable in: carrying

–

23,634 2015

2016–

to no3-4 Yrs1-2 Yrsmaturity 4-5 Yrs

Carrying

23,634

39,624 –

13,665

39,624 21,750

17,874

17,874

39,624 0.00%

–

–

9,969

23,634

–

–

interest rateCarrying

–

– 21,750

–

Averagevalue

2016

–

0.00%

interest rate

–

23,634

–

23,634 39,624

– 9,969

–

–

Subject

13,665

≤ 1 Year > 5 Yrs2-3 Yrs

ActualTotal





page 54



Note 16. Material budget variations

$ ’000

Council’s original financial budget for 15/16 was adopted by the Council on 28 June 2016.

While the Income Statement included in this General Purpose Financial Report must disclose the originalbudget adopted by Council, the Local Government Act 1993 requires Council to review its financial budget on aquarterly basis, so that it is able to manage the various variations between actuals versus budget thatinvariably occur throughout the year.

This note sets out the details of material variations between Council’s original budget and its actualresults for the year as per the Income Statement – even though such variations may have been adjusted forduring each quarterly budget review.

Note that for variations* of budget to actual :Material variations represent those variances that amount to 10% or more of the original budgeted figure.F = Favourable budget variation, U = Unfavourable budget variation

$ ’000

REVENUESRates and annual chargesLoss of Rates, Waste and Stormwater Levies as a result of the Proclamation dated 12 May 2016.

User charges and feesIncreased activity in the Building Industry resulting in greater than anticipated income.

Interest and investment revenueDue to greater than anticipated Section 94 and more cash available for investing resulting in additional income

Other revenuesGreater than anticipated income from Parking Fines, and Legal Recoveries. New lease income, sale of minor property and easements; and sale of biobanking credits not budgeted orginally.

Operating grants and contributionsGreater than anticipated income from : Streetlighting Subsidy (due to recent audit); Restorations; and operating grants received in advance for FY 16/17.

Capital grants and contributionsGreater than anticipated capital grants and contributions received from Section 94 income and subdivider dedications.

Net gains from disposal of assetsBudget was based on a sale of a large parcel of investment properties. This sale has been negotiated withdelayed settlement and it will be reflected in FY 16/17.

U

F

(48,168) (100%)

3,297

86,661

4,802

1,640

19%

F42,348

48,168

16,993

–

205%129,009

20,290

146%3,292

F4,929

2016Budget

8,094

(2%)

F

(2,278)

2016

U

F

2016

5,258 107%

97,855

18,668 20,308

Actual

9%

---------- Variance* ----------

10,187

95,577


NOTE 16. MATERIAL BUDGET VARIATIONS



page 55



Note 16. Material budget variations (continued)

$ ’000

EXPENSESEmployee benefits and on-costs

Materials and contracts

Depreciation and amortisationBudgeted depreciation based on percentage of book value. Council has implemented a new asset managementsystem which calculates depreciation based on asset condition based depreciation.

Other expenses

Net losses from disposal of assetsDue to demolition of buildings required for open space embellishment.

Budget variations relating to Council’s Cash Flow Statement include:

Cash flows from operating activitiesDue to greater than anticipated Section 94 Income and more cash available for investing resulting in additional income.

Cash flows from investing activitiesDue to delay in settlement of sale of assets and purchase of investment properties not originally budgeted.

(6%)

F103.0%

1226.9%(9,575) (117,473)

1,036

66,730 135,447

U(127,048)

–

68,717

2016

5%

U3,012

42,981

0%(3,012)

20,005 F12,856

U

22,905 F21,869

2016

F

36%7,149

---------- Variance* ----------

2%

2016

(2,540)

1,19252,025

Actual

40,441

Budget

53,217


NOTE 16. MATERIAL BUDGET VARIATIONS (continued)


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SUM

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page

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page 63



Note 18. Contingencies and other assets/liabilities not recognised

$ ’000

The following assets and liabilities do not qualify for 2. Other liabilitiesrecognition in the Statement of Financial Position, buttheir knowledge and disclosure is considered relevant (i) Insuranceto the users of Council’s financial report.

As at the 30/6/2016 there are three oustanding publicliability claims with Council or Council's insurer.

LIABILITIES NOT RECOGNISED: These are shown as contingent liabilities.

1. Guarantees (ii) Property

(i) Defined benefit superannuation A number of matters are currently listed to be heard contribution plans in the Land & Environment Court.

Council participates in an employer-sponsored (iii) Third party claimsdefined benefit superannuation scheme, and makescontributions as determined by the superannuation The Council is involved from time to time in variousscheme’s trustees. claims incidental to the ordinary course of business

including claims for damages relating to its services.Member councils bear responsibility of ensuring thereare sufficient funds available to pay out the required Council believes that it is appropriately coveredbenefits as they fall due. for all claims through its Insurance Coverage and

does not expect any material liabilities to eventuate.The schemes most recent full actuarial reviewindicated that the net assets of the scheme were (iv) S94 plansnot sufficient to meet the accrued benefits of theschemes defined benefit member category with Council levies Section 94/94A Contributions uponmember councils required to make significantly various development across the Council area throughhigher contributions in future years. the required Contributions Plans.

The Local Government Superannuation Scheme As part of these Plans, Council has received fundshowever is unable to provide Council with an accurate for which it will be required to expend the monies inestimate of its share of the net deficit and accordingly accordance with those Plans.Council has not recorded any net liability from it’sdefined benefit scheme obligations in accordance As well, these Plans indicate proposed futurewith AASB 119. expenditure to be undertaken by Council, which will

be funded by making levies and receipting funds inFuture contributions made to the defined benefit future years or where a shortfall exists by the use ofscheme to rectify the net deficit position will be Council's General Funds.recognised as an expense when they becomepayable – similar to the accounting for defined These future expenses do not yet qualify as liabilitiescontributions plans. as of the Reporting Date, but represent Councils

intention to spend funds in the manner and timingset out in those Plans.


NOTE 18. CONTINGENCIES AND OTHER ASSETS/LIABILITIES NOT RECOGNISED



page 64



Note 18. Contingencies and other assets/liabilities not recognised (continued)

$ ’000

LIABILITIES NOT RECOGNISED (continued): ASSETS NOT RECOGNISED:

2. Other liabilities (continued) (i) Infringement notices/fines

(v) HIH Insurance Fines and penalty income, the result of Council issuing infringement notices is followed up and

Upon investigation, Council has determined that collected by the Infringement Processing Bureau.through Metropool, its public risk & professionalindemnity insurance cover for the period 1992 - 1996 Council’s revenue recognition policy for suchwas insured with the HIH group of companies. income is to account for it as revenue on receipt.

At this point in time, there are no outstanding claims. Accordingly, at year end, there is a potential assetdue to Council representing issued but unpaid

The statutory period has lapsed (3 yrs) with the only infringement notices. exception being that any minors that may have beeninjured in the 4 year period may lodge a claim up to Due to the limited information available on the status,the age of 21, although the likelihood of any claims is value and duration of outstanding notices, Council isthought to be minimal. unable to determine the value of outstanding income.

(vi) Potential land acquisitions due to planning restrictions imposed by Council

Council has classified a number of privately ownedland parcels as Local Open Space or Bushland.

As a result, where notified in writing by the variousowners, Council will be required to purchase theseland parcels.

At reporting date, reliable estimates as to the valueof any potential liability (& subsequent land asset)from such potential acquisitions has not beenpossible.

Note 19. Interests in other entities

Council has no interest in any controlled entities, joint arrangements or associates.


NOTE 18. CONTINGENCIES AND OTHER ASSETS/LIABILITIES NOT RECOGNISED (continued)

NOTE 19. INTERESTS IN OTHER ENTITIES





Note 20. Retained earnings, revaluation reserves, changes in accountingpolicies, changes in accounting estimates and errors

$ ’000

(a) Retained earnings

Movements in retained earnings were as follows:Balance at beginning of year (from previous years audited accounts)

a. Prior Period Correctionsb. Net operating result for the yearBalance at end of the reporting period

(b) Revaluation reserves

(i) Reserves are represented by:

– Infrastructure, property, plant and equipment revaluation reserveTotal

(ii) Reconciliation of movements in reserves:

Infrastructure, property, plant and equipment revaluation reserve– Opening balance– Revaluations for the year– Correction of prior period errors– Balance at end of year

(iii) Nature and purpose of reserves

Infrastructure, property, plant and equipment revaluation reserve– The infrastructure, property, plant and equipment revaluation reserve is used to record increments/decrements of non-current asset values due to their revaluation.

20 (c)

3,823,9572,147

1,281,955

1,325,426

3,497,973

1,121,41630,673

1,281,955

160,539

Actual

3,081,009

2015

1,325,426

248,670494,278

1,281,955

9(a) 12,798

(328,131)

Notes 2016

1,325,4261,281,955

3,823,957

Actual

– 9(a)

page 65


NOTE 20. RETAINED EARNINGS, REVALUATION RESERVES, CHANGES IN ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES & ERRORS





Note 20. Retained earnings, revaluation reserves, changes in accountingpolicies, changes in accounting estimates and errors (continued)

$ ’000

(c) Correction of error/s relating to a previous reporting period

Correction of errors disclosed in this year’s financial statements:

Reinstatement of Land & Infrastructure Disposed from Previous PeriodsCommunity LandBuildingsRoadsStormwater DrainageOther Infrastructure - Parks

Disposal of Land & Infrastructure from Previous PeriodsReal EstateOperational LandCommunity LandBuildingsRoadsBulk EarthworksOther Infrastructure – Parks

Plant & Equipment incorrectly capitalised as Parks erroneously in 07/08

Profit on sale of Biobanking Credits previously written off againstInventory

As at 30 June 2015, Council started applying the Strategic Asset Management module to calculate depreciation based on assetcondition. Due to an error in the reports run at 30 June 15,accumulated depreciation reflected balances as at 30 June 16.Therefore in FY 14/15, accumulated depreciation was overstated.

As a result, Council has adjusted the accumulated depreciation forthe following asset classes as at 30/6/15 to reflect the correct valueof accumulated depreciation;

Adjustment to Accumulated Depreciation to reflect correct valueRoads Depreciation OverstatedBuildings Depreciation OverstatedDrainage Depreciation OverstatedParks Infrastructure Overstated

Council does not have sufficient and reliable information that willallow the restatement of information prior to 30/6/15 (the closing datefor the comparative figures in this report).

This adjustment resulted in net increase/(decrease) in Council’saccumulated surplus as at 30/6/15.

ActualActual2015

–

(3,132)

–

Notes

–

18,344

–

–

–

– –

(2,208)–

355

225 1,2354,234

314

(8,840)

(1,120)(1,101)

2016

(496)(33)

(5,629)

7,860 2,747

755 1,380

page 66


NOTE 20. RETAINED EARNINGS, REVALUATION RESERVES, CHANGES IN ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES & ERRORS (continued)





Note 20. Retained earnings, revaluation reserves, changes in accounting policies, changes in accounting estimates and errors (continued)

$ ’000

(c) Correction of error/s relating to a previous reporting period (continued)

Correction of errors as disclosed in last year’s financial statements:Reinstatement of land disposed from previous periods – Real estate– LandDisposal of land and buildings from previous periods – Land– BuildingsAs part of Council's transition to measuring all it's I,PP&E at fairvalues, Council this year reviewed and brought to account fair valuesfor the following asset classes:– Roads– Buildings– Drainage– Parks infrastructureAs part of that evaluation & measurement process, the remaininguseful life of each asset has been reassessed to actual.This reassessment has resulted in a material difference as to wheresome assets actually sit in relation to their asset life cycle relative towhat the value of accumulated depreciation in Council's financialreports had previously indicated.Council does not have sufficient and reliable information that willallow the restatement of information prior to 30/6/14 (the closing datefor the comparative figures in this report).As a result, Council has adjusted the accumulated depreciation forthe following asset classes as at 30/6/14 to reflect the correct valueof accumulated depreciation;Road Depreciation overstatedBuildings Depreciation overstatedDrainage Depreciation overstatedParks Infrastructure Depreciation overstatedThis adjustment resulted in a net increase/(decrease) in Council’saccumulated surplus as at 30/6/14.In accordance with AASB 108 – Accounting Policies, Changes inAccounting Estimates and Errors, the above prior period errorshave been recognised retrospectively.These amounted to the following equity adjustments:– Adjustments to opening equity – 1/7/14 (relating to adjustments for the 30/6/14 reporting year end and prior periods)– Adjustments to closing equity – 30/6/15 (relating to adjustments for the 30/6/15 year end)

Total prior period adjustments – prior period errors

(d) Voluntary changes in accounting policies Council made no voluntary changes in any accounting policies during the year.

Actual Actual Notes 2016 2015

494,279

(183)

2,000 2,103

(2,615)

62,213

2,147

389,459

2,147

32,743

–

494,279

8,559

–

page 67


NOTE 20. RETAINED EARNINGS, REVALUATION RESERVES, CHANGES IN ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES & ERRORS (continued)



page 68



Note 21. ‘Held for sale’ non-current assets and disposal groups

$ ’000

(i) Non-current assets and disposal group assets

Non-current assets ‘held for sale’LandTotal non-current assets ‘held for sale’

TOTAL NON-CURRENT ASSETSCLASSIFIED AS ‘HELD FOR SALE’

$ ’000

(ii) Reconciliation of non-current assets ‘held for sale’ and disposal groups – i.e. discontinued operations

Opening balanceBalance still unsold after 12 months:Plus new transfers in:– Investment property

Closing balance of ‘held for sale’non-current assets and operations – 140,000 – 140,000

Assets ‘held for sale’2015

– –

140,000

2016

–

2015

–

140,000

– – 140,000

140,000 –

2016

Non-current2015

– 140,000 –

–

Non-current2016 2016 2015

–140,000

– 140,000140,000140,000 –

Current

–

Disposal groups

Current


NOTE 21. ‘HELD FOR SALE’ NON-CURRENT ASSETS & DISPOSAL GROUPS



page 69



Note 22. Boundary Adjustments

$ ’000

Boundary adjustmentGross profit/(loss) relating to boundary adjustment

NET PROFIT/(LOSS) FROM BOUNDARY ADJUSTMENT

Details of the boundary adjustment

Carrying amount of net assets transferredCarrying amount of developer contributions transferredCarrying amount of waste management external reserves transferred *Carrying amount of liability due to Hills ShireProfit/(loss) on boundary adjustment

* Note : These balances are as at 30 June 2016 and will be finalised at conclusion of transitional agreements.

–

(478,853)

–

–

Actual Actual

(478,853)

(468,035)

(478,853)

–

2016 2015

(10,479) (462) 123

NSW Premier Mike Baird and the Minister for Local Government Paul Toole announced 19 new Councils in NSW commencing on 13 May 2016. Although The Hills Shire Council did not merge with another Council, its boundaries were adjusted and all assets South of M2 (SM2) had to be transferred to City of Parramatta at book value with no compensation.

– – –


NOTE 22. BOUNDARY ADJUSTMENTS





Note 23. Fair value measurement

$ ’000

The Council measures the following asset and liability classes at fair value on a recurring basis:

– Infrastructure, property, plant and equipment– Investment property

The fair value of assets and liabilities must be estimated in accordance with various accounting standards foreither recognition and measurement requirements or for disclosure purposes.

AASB 13 Fair Value Measurement requires all assets and liabilities measured at fair value to be assigned to a‘level’ in the fair value hierarchy as follows:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date.

Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

(1) The following table presents all assets and liabilities that have been measured and recognised at fair values:

2016

Recurring fair value measurements

Investment propertiesInvestment propertiesTotal investment properties

Infrastructure, property, plant and equipmentOperational landCommunity landLand under roadsBuildings (specialised and non-specialised)Roads, bridges, footpathsStormwater drainagePlant and equipmentOffice equipmentOtherBulk earthworksTotal infrastructure, property, plant and equipment

30/06/15 – –

– –

30/06/15 – – 49,637 49,637 30/06/15 – – 109,082 109,082

30/06/13 – – 235,841 235,841 30/06/15 – – 942,756 942,756 30/06/15 – – 232,551 232,551 30/06/15 – – 5,722 5,722

30/06/15 – – 2,392,989 2,392,989

– – 20,863 20,863

582

– 248,717

582

4,333,273 4,333,273

inputsinputsprices in observable

Fair value measurement hierarchyLevel 1 Level 2

SignificantLevel 3 Total

Date Quoted Significant

valuation active mktsof latest unobservable

dd/mm/yy – – 20,863 20,863

30/06/13 – – 115,396 115,396 30/06/16 – 248,717

page 70


NOTE 23. FAIR VALUE MEASUREMENT





Note 23. Fair value measurement (continued)

$ ’000

(1) The following table presents all assets and liabilities that have been measured and recognised at fair values (continued):

2015

Recurring fair value measurements

Investment propertiesInvestment propertiesTotal investment properties

Infrastructure, property, plant and equipmentOperational landCommunity landLand under roadsBuildings (specialised and non-specialised)Roads, bridges, footpathsStormwater drainagePlant and equipmentOffice equipmentOtherBulk earthworksTotal infrastructure, property, plant and equipment

(2) Transfers between level 1 and level 2 fair value hierarchies

During the year, there were no transfers between level 1 and level 2 fair value hierarchies for recurring fairvalue measurements.

(3) Valuation techniques used to derive level 2 and level 3 fair values

Where Council is unable to derive fair valuations using quoted market prices of identical assets(ie. level 1 inputs) Council instead utilises a spread of both observable inputs (level 2 inputs) andunobservable inputs (level 3 inputs).

The fair valuation techniques Council has employed while utilising level 2 and level 3 inputs are as follows:

Investment properties

Investment properties were purchased in the current year and held at their purchase cost.

Infrastructure, property, plant and equipment (IPP&E)

Condition based assessments have been carried out on these assets to determine fair value, the rate of consumption of service potential and the residual life for valuation purposes

valuation active mkts

Level 1 Level 2Significant Significant

of latest prices in observableDate Quoted

–

30/06/15– –

30/06/13 – – 208,802 208,802 30/06/11 – – 133,502 133,502 30/06/15 – – 2,637,155 2,637,155

Fair value measurement hierarchy

– – 9,905 9,905 9,905 9,905

Level 3 Total

4,664,825

inputsunobservable

inputs

30/06/13 – – 248,462 248,462 30/06/15 – – 1,012,151 1,012,151 30/06/15 – – 244,863 244,863 30/06/15 – – 11,394 11,394 30/06/15 – – 565 565 30/06/15 – – 49,399 49,399 30/06/15 – – 118,532 118,532

– 4,664,825

page 71


NOTE 23. FAIR VALUE MEASUREMENT (continued)


Fina

ncia

l Sta

tem

ents

201

6

page

72

The

Hill

s S

hire

Cou

ncil

Not

es to

the

Fina

ncia

l Sta

tem

ents

for t

he y

ear e

nded

30

June

201

6

Not

e 23

. Fai

r val

ue m

easu

rem

ent (

cont

inue

d)

$ ’0

00

(4).

Fair

valu

e m

easu

rem

ents

usi

ng s

igni

fican

t uno

bser

vabl

e in

puts

(lev

el 3

)

a. T

he fo

llow

ing

tabl

es p

rese

nt th

e ch

ange

s in

leve

l 3 fa

ir va

lue

asse

t cla

sses

.

Ope

ning

bal

ance

– 1

/7/1

4

Purc

hase

s (G

BV)

Dis

posa

ls (W

DV)

Dep

reci

atio

n an

d im

pairm

ent

Oth

er m

ovem

ent

Oth

er m

ovem

ent

Oth

er m

ovem

ent

Clo

sing

bal

ance

– 3

0/6/

15

Tran

sfer

s fro

m/(t

o) a

noth

er a

sset

cla

ssPu

rcha

ses

(GBV

)D

ispo

sals

(WD

V)D

epre

ciat

ion

and

impa

irmen

tFV

gai

ns –

oth

er c

ompr

ehen

sive

inco

me

FV g

ains

– In

com

e St

atem

ent

Oth

er m

ovem

ent (

Prio

r Per

iod

Cor

rect

ions

)O

ther

mov

emen

t (fro

m R

eal E

stat

e)O

ther

mov

emen

t (fro

m In

vest

men

t Pro

peer

ties

Oth

er m

ovem

ent (

Loss

of S

outh

M2)

Clo

sing

bal

ance

– 3

0/6/

16

2,44

1

2,44

1

–

(14,

703)

–

(12,

704)

12,2

00

50

3

–

(56,

493)

2,10

3

(2,6

15)

–

(1

84)

(57,

189)

–

–

–

–

103,

627

103,

627

118,

532

(87,

658)

87,7

28

–

36

11

8,63

8

–

–

–

–

(1,9

92)

(1

,992

)

(540

)

(1

,629

)

2,91

0

6,34

7

–

17,6

99

6,

661

2,63

7,15

5

2,84

5

–

Bul

kC

omm

unity

Ope

ratio

nal

Land

unde

rla

nd

212,

710

2,61

9,66

9

Bui

ldin

gs

140,

854

road

s

––

118,

532

3,34

6,45

313

3,50

2–

208,

802

eart

hwor

ksTo

tal

53,5

83

3,

151,

381

land

124,

565

–

(876

)

(2

13)

33,6

17

–

248,

462

30,0

35

–

(3

,807

)

–

–

22

,655

–

–

–

–

(2

,682

)

–

30,6

73

–

30

,673

–

–

42

42

(33)

–

–

(1

2,52

1)

235,

841–

4,

535

(3,8

07)

(2,6

82)

–

–

(244

,670

)

–

–

–

–

8,22

4

(8,8

40)

1,

853

–

–

15

,211

–

–

–

7,90

5

–

7,90

5

–

–

(40,

825)

24

8,71

7

(317

,229

) 3,

102,

024

115,

396

109,

082

(4,5

10)

2,39

2,98

9

(33)

NO

TES

TO

TH

E F

INA

NC

IAL

STA

TE

ME

NT

S fo

r th

e ye

ar e

nd

ed 3

0 J

un

e 2

016

NO

TE

23

. FA

IR V

ALU

E M

EA

SU

RE

ME

NT

(co

nti

nu

ed)


Fina

ncia

l Sta

tem

ents

201

6

The

Hill

s S

hire

Cou

ncil

Not

es to

the

Fina

ncia

l Sta

tem

ents

for t

he y

ear e

nded

30

June

201

6

Not

e 23

. Fai

r val

ue m

easu

rem

ent (

cont

inue

d)

$ ’0

00

(4).

Fair

valu

e m

easu

rem

ents

usi

ng s

igni

fican

t uno

bser

vabl

e in

puts

(lev

el 3

) con

tinue

d

a. T

he fo

llow

ing

tabl

es p

rese

nt th

e ch

ange

s in

leve

l 3 fa

ir va

lue

asse

t cla

sses

. (co

ntin

ued)

Ope

ning

bal

ance

– 1

/7/1

4

Purc

hase

s (G

BV)

Dis

posa

ls (W

DV)

Dep

reci

atio

n an

d im

pairm

ent

Oth

er m

ovem

ent

Oth

er m

ovem

ent

Oth

er m

ovem

ent

Clo

sing

bal

ance

– 3

0/6/

15

Tran

sfer

s fro

m/(t

o) a

noth

er a

sset

cla

ssPu

rcha

ses

(GBV

)D

ispo

sals

(WD

V)D

epre

ciat

ion

and

impa

irmen

tO

ther

mov

emen

t (P

rior P

erio

d C

orre

ctio

ns)

Oth

er m

ovem

ent (

Loss

Sou

th o

f M2)

Clo

sing

bal

ance

– 3

0/6/

16

(5).

Hig

hest

and

bes

t use

All o

f Cou

ncil’s

non

-fina

ncia

l ass

ets

are

cons

ider

ed to

bei

ng u

tilis

ed fo

r the

ir hi

ghes

t and

bes

t use

.

–

–

942,

756

232,

551

6,30

4

49,6

37

1,

231,

248

–

(6,2

36)

(1

50,8

06)

–

–

–

(1

18,8

55)

(2

5,71

5)

–

–

–

–

–

8,

051

4,

989

(5

,629

)

1,19

8

8,60

9

–

–

49,2

37

9,

150

3,

138

6,

666

68

,191

(474

)

(2

8)

(5

02)

–

–

–

–

(5,3

86)

(7

36)

(2,6

90)

–

–

–

–

–

–

(1

,362

)

(10,

174)

49,3

99

1,

318,

372

(560

)

–

–

–

–

(5

60)

–

–

–

–

32,6

77

5,

141

3,

022

4,

305

45

,145

–

clas

scl

ass

clas

scl

ass

brid

ges

Stor

mw

ater

and

offic

eAs

set

Asse

tAs

set

Asse

tR

oads

Oth

er

–

–

–

–

Plan

t,equ

ip

here

here

here

here

foot

path

sdr

aina

geeq

uipm

ent

asse

tsTo

tal

578,

777

172,

004

6,46

3

47,0

44

80

4,28

8

–

–

–

1,01

2,15

1

244,

863

11,9

59

–

–

–

–

–

–

–

–

(10,

032)

(2,4

15)

(2

,595

)

(3,1

99)

(1

8,24

1)

–

–

–

–

55

,062

–

5,62

9

(4,0

00)

56

,691

–

–

–

–

355,

667

70,1

33

–

5,

555

43

1,35

5

–

–

–

–

–

–

–

(3

06)

(306

)

–

–

–

–

(2,4

41)

–

–

–

(2

,441

)

–

–

–

page

73

NO

TES

TO

TH

E F

INA

NC

IAL

STA

TE

ME

NT

S fo

r th

e ye

ar e

nd

ed 3

0 J

un

e 2

016

NO

TE

23

. FA

IR V

ALU

E M

EA

SU

RE

ME

NT

(co

nti

nu

ed)



NOTE 24. COUNCIL INFORMATION & CONTACT DETAILS

PRINCIPAL PLACE OF BUSINESS:

3 Columbia CourtBaulkham Hills. 2153

CONTACT DETAILS

Mailing address: Opening hours:

PO Box 7064 8.30am-4.30am | Monday - FridayBaulkham Hills BC. 2153

Telephone: 02 9843 0555 Internet: www.thehills.nsw.gov.au

Facsimile: 02 9843 0409 Email: [email protected]

OFFICERS ELECTED MEMBERS

GENERAL MANAGER MAYOR

Dave Walker Dr Michelle Byrne

RESPONSIBLE ACCOUNTING OFFICER COUNCILLORS

Chandi Saba Dr Michelle Byrne

PUBLIC OFFICER Yvonne Keane (Deputy Mayor)

Peter Doyle Andrew Jefferies *

Dr Jeff Lowe JP

AUDITORS Tony Hay OAM

PricewaterhouseCoopers Ryan Tracey

201 Sussex Street Alan Haselden

Sydney. 2000 Robyn Preston

Dr Peter Gangemi

Mark Taylor, MP

Raymond Harty OAM

Mike Thomas

OTHER INFORMATION * Councillor until 31 July 2016

ABN: 25 034 494 656


Fina

ncia

l Sta

tem

ents

201

6

The

Hill

s S

hire

Cou

ncil

Not

es to

the

Fina

ncia

l Sta

tem

ents

for t

he y

ear e

nded

30

June

201

6

Not

e 25

. Sta

tem

ent o

f dev

elop

er c

ontri

butio

ns w

ithou

t int

erna

l bor

row

ings

$ ’0

00

Cou

ncil

curr

ently

has

13

S94

deve

lope

r con

tribu

tion

plan

s.

The

tabl

e (o

n th

e ne

xt p

age)

refle

cts

the

posi

tion

of e

ach

Con

tribu

tion

Pla

n ex

clud

ing

Inte

rnal

Bor

row

ings

.

Of t

he D

evel

oper

Con

tribu

tion

cash

hel

d as

rest

ricte

d as

set a

s at

30

June

201

6 of

$18

1.2m

, $10

.5m

is p

ayab

le to

City

of P

arra

mat

ta a

s it

rela

tes

to d

evel

opm

ents

loca

ted

Sout

h of

M2.

The

am

ount

com

pris

es o

f $6.

3m re

latin

g to

Con

tribu

tion

Plan

No.

7 a

nd $

4.2m

rela

ting

to C

ontri

butio

n Pl

an N

o. 1

4. T

he p

ayab

le is

exp

ecte

d to

be

settl

ed in

FY 1

6/17

.

The

NS

W G

over

nmen

t has

est

ablis

hed

a P

riorit

y In

frast

ruct

ure

Fund

( P

IF )

for t

he F

Y 10

/11

, Hou

sing

Acc

eler

atio

n Fu

nd (H

AF)

for t

he F

Y 12

/13

and

Loca

l Inf

rast

ruct

ure

Gro

wth

Sch

eme

from

the

FY 1

3/14

to b

ridge

the

gap

betw

een

the

IPA

RT

App

rove

d E

ssen

tial I

nfra

stru

ctur

e C

ontri

butio

n ra

te a

nd th

e C

ap.

Cou

ncil

has

rece

ived

$70

.7m

from

Dep

artm

ent o

f Pla

nnin

g fo

r PIF

, HAF

& L

IGS

as a

t 30

June

201

6 fo

r dev

elop

men

t app

licat

ions

app

rove

d be

twee

n 4

June

201

0 an

d31

Jan

uary

201

6.

page

75

NO

TES

TO

TH

E F

INA

NC

IAL

STA

TE

ME

NT

S fo

r th

e ye

ar e

nd

ed 3

0 J

un

e 2

016

NO

TE

25

. STA

TE

ME

NT

OF D

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ELO

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NT

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ION

S W

ITH

OU

T I

NT

ER

NA

L B

OR

RO

WIN

GS


Fina

ncia

l Sta

tem

ents

201

6

page

76

The

Hill

s S

hire

Cou

ncil

Not

es to

the

Fina

ncia

l Sta

tem

ents

for t

he y

ear e

nded

30

June

201

6

Not

e 25

. Sta

tem

ent o

f dev

elop

er c

ontri

butio

ns w

ithou

t int

erna

l bor

row

ings

(con

tinue

d)

$ ’0

00

Cou

ncil

reco

vers

con

tribu

tions

, rai

ses

levi

es a

nd e

nter

s in

to p

lann

ing

agre

emen

ts o

n de

velo

pmen

t wor

ks th

at a

re s

ubje

ct to

a d

evel

opm

ent c

onse

nt is

sued

by

Cou

ncil.

All

cont

ribut

ions

mus

t be

spen

t/util

ised

for t

he s

peci

fic p

urpo

se th

ey w

ere

levi

ed a

nd a

ny in

tere

st a

pplic

able

to u

nspe

nt fu

nds

mus

t be

attri

bute

d to

rem

aini

ng fu

nds.

The

follo

win

g ta

bles

det

ail t

he re

ceip

t, in

tere

st a

nd u

se o

f the

abo

ve c

ontri

butio

ns a

nd le

vies

and

the

valu

e of

all

rem

aini

ng fu

nds

whi

ch a

re ‘r

estri

cted

’ in

thei

r fut

ure

use.

SUM

MA

RY

OF

CO

NTR

IBU

TIO

NS

AN

D L

EVIE

S

Dra

inag

eR

oads

Traf

fic fa

cilit

ies

Ope

n sp

ace

Com

mun

ity fa

cilit

ies

Pla

nnin

g ag

reem

ent

Oth

er

PUR

POSE

Con

trib

utio

nsIn

tere

stE

xpen

ditu

reIn

tern

al

Non

-cas

hin

yea

rye

ar(to

)/fro

mas

set

9,01

6

6,

396

–

302

(5

,148

)

–

10

,566

Hel

d as

Cum

ulat

ive

inte

rnal

bo

rrow

ings

du

e/(p

ayab

le)

Ope

ning

rece

ived

dur

ing

the

year

earn

eddu

ring

borr

owin

gre

stri

cted

bala

nce

Cas

h

30,7

73–

9,

920

20,3

44

–

50

9

–

–

–

13,2

34

3,

151

–

411

(4

,768

)

–

12

,028

–

4,14

7–

4,

147

–

–

–

–

–

59,8

86–

28

,773

4,00

6

–

92

2

–

–

33,7

01–

25

,395

48,9

61

–

1,

164

(15,

634)

–

–15

9,96

5–

S94

A le

vies

– u

nder

a p

lan

17,3

642,

740

–47

1(4

,054

)–

S94

con

trib

utio

ns –

und

er a

pla

n95

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f dev

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tinue

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page

78

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201

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81

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tinue

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ear

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Fina

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201

6

page

82

The

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ncil

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ncia

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ents

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he y

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nded

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June

201

6

Not

e 25

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tem

ent o

f dev

elop

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ontri

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erna

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row

ings

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tinue

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IES

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PLA

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CO

NTR

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Page 83 Page 84


Page 84


PricewaterhouseCoopers, ABN 52 780 433 757Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

The MayorDr Michelle Byrne Adjunct ProfessorThe Hills Shire CouncilDX 8455CASTLE HILL

Dear Councillor Byrne

Report on the conduct of the audit for year ended 30 June 2016 – Section 417(3)

We have completed our audit of the financial reports of The Hills Shire Council for the year ended30 June 2016, in accordance with Section 415 of the Local Government Act, 1993.

Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonableassurance as to whether the financial reports are free of material misstatement. Our proceduresincluded examination, on a test basis, of evidence supporting the amounts and other disclosures in thefinancial reports, and the evaluation of accounting policies and significant accounting estimates.These procedures have been undertaken to form an opinion as to whether, in all material respects, thefinancial reports are presented fairly in accordance with Australian Accounting Standards as well asstatutory requirements so as to present a view which is consistent with our understanding of theCouncil’s financial position, the results of its operations and its cash flows.

This report should be read in conjunction with our audit opinion on the general purpose financialstatements provided under Section 417(2) of the Local Government Act 1993.

Flowing from our audit, there are a number of comments we wish to raise concerning the trends inCouncil's finances. These are set out below.

Operating Result

Council’s operating result declined from a $249 million surplus to a $328 million deficit during theperiod under review.

The main reasons for the decline were:

Loss on Boundary Adjustment $479m

Revaluation of investment property (Gay St) in2014 not repeated

$126m

The result before boundary adjustments and capital grants and contributions was, however, a surplusof $22m down from $146m in the prior year because of the Gay Street revaluation.

Cash Position

Council’s overall cash position increased from $311 million to $363 million during the period underreview. The following table highlights the composition of cash.

Page 85


2015$m

2016$m

Externally restricted 126 190Internally restricted 153 128Unrestricted 32 45Total 311 363

Higher developer contributions mainly contributed to this increase.

Working Capital

Council’s net current assets also increased from $427 million to $463 million during the period underreview.

2015$m

2016$m

Net current assets 427 463Less:

External restrictions (127) (190)Internal restrictions (153) (128)

147 145Add:

Current Liabilities to be funded from othersources 23 25

Available Working Capital 170 170

The effective unrestricted or available working capital upon which Council could build its 2016/17budget upon was $170 million.

Performance Indicators

The financial reports disclose a number of useful indicators in Note 13 and these are detailed below.

June 2015%

June 2016%

Operating Performance Ratio 11 16Own Source Operating Revenue Ratio 51 47Unrestricted Current Ratio 2001 1571Debt Service Cover Ratio - -Rates Outstanding Ratio 2.8 2.5Cash Expense Cover Ratio 30 35

The operating performance ratio improved to 16% and remains well above the industry benchmark of‘above 0%’.

The own source operating revenue ratio declined to 47% and stands below the industry benchmark of60%. This ratio was impacted by significantly higher capital grants and contributions (up $26m)which, although bringing the ratio down, actually benefits Council financially.

Page 86


The unrestricted current ratio declined but remained significantly above the accepted benchmark forthe industry of 150%.

The debt service cover ratio reflects the fact that Council continues to be debt free.

The rates outstanding ratio improved to 2.5% of collectibles and remains better than the industrybenchmark of 5%.

The cash expense cover ratio indicates that Council could continue to cover its operating costs for 35months should cash inflows cease. This compares very favourably with the industry benchmark of 3months.

The above indicators show that Council remains in a strong and stable financial position despite thenegative impact of the Boundary Change.

General

The books of accounts and records inspected by us have been kept in an accurate and conscientiousmanner. We thank the General Manager and his staff for the co-operation and courtesy extended touse during the course of our audit.

Yours faithfully

PricewaterhouseCoopers

Marc Upcroft SydneyPartner 24 August 2016

Page 87



SPECIAL PURPOSEFINANCIAL STATEMENTS

2015-2016


SPECIAL GENERAL PURPOSE FINANCIAL STATEMENTS

for the financial year ended 30 June 2016

Statement by Councillors & Management 93

Special Purpose Financial Statements:

• Income Statement – Other Business Activities 94

• Statement of Financial Position – Other Business Activities 95

Notes to the Special Purpose Financial Statements 97

Auditor’s Report 100

BACKGROUND

i. These Special Purpose Financial Statements have been prepared for the use by both Council and the Office of Local

Government in fulfilling their requirements under National Competition Policy.

ii. The principle of competitive neutrality is based on the concept of a ‘level playing field’ between persons/entities

competing in a market place, particularly between private and public sector competitors.

Essentially, the principle is that government businesses, whether Commonwealth, state or local, should operate

without net competitive advantages over other businesses as a result of their public ownership.

iii. For Council, the principle of competitive neutrality and public reporting applies only to declared business activities.

These include (a) those activities classified by the Australian Bureau of Statistics as business activities being water

supply, sewerage services, abattoirs, gas production and reticulation, and (b) those activities with a turnover of more

than $2 million that Council has formally declared as a business activity (defined as Category 1 activities).

iv. In preparing these financial statements for Council’s self-classified Category 1 businesses and ABS-defined activities,

councils must (a) adopt a corporatisation model and (b) apply full cost attribution including tax-equivalent regime

payments and debt guarantee fees (where the business benefits from Council’s borrowing position by comparison

with commercial rates).

THE HILLS SHIRE COUNCIL SPECIAL PURPOSE FINANCIAL STATEMENTS 2015-2016


Phone: (02) 9843 0555



CONTENTS


SPFS 2016


Special Purpose Financial Statements for the year ended 30 June 2016

Statement by Councillors and Management made pursuant to the Local Government Code of Accounting Practice and Financial Reporting

The attached Special Purpose Financial Statements have been prepared in accordance with:

the NSW Government Policy Statement ‘Application of National Competition Policy toLocal Government’,

the Division of Local Government Guidelines ‘Pricing and Costing for Council Businesses – A Guide to Competitive Neutrality’,

the Local Government Code of Accounting Practice and Financial Reporting,

the NSW Office of Water Best-Practice Management of Water and Sewerage Guidelines.


present fairly the operating result and financial position for each of Council’s declared businessactivities for the year, and

accord with Council’s accounting and other records.



Dr Michelle Byrne Councillor Yvonne KeaneMayor Councillor

Dave Walker Chandi SabaGeneral manager Responsible accounting officer

page 2

SPECIAL GENERAL PURPOSE FINANCIAL STATEMENTS for the financial year ended 30 June 2016

STATEMENT BY COUNCILLORS & MANAGEMENT made pursuant to the Local Government Code of Accounting Practice & Financial Reporting


SPFS 2016

page 3


Income Statement of Council's Other Business Activities for the year ended 30 June 2016

$ ’000

Income from continuing operationsAccess chargesUser chargesFeesInterestGrants and contributions provided for non-capital purposesProfit from the sale of assetsOther incomeTotal income from continuing operations

Expenses from continuing operationsEmployee benefits and on-costsBorrowing costsMaterials and contractsDepreciation and impairmentLoss on disposal of assets (due to Proclamation)Calculated taxation equivalentsDebt guarantee fee (if applicable)Other expensesTotal expenses from continuing operationsSurplus (deficit) from continuing operations before capital amounts

Grants and contributions provided for capital purposesSurplus (deficit) from continuing operations after capital amounts

Surplus (deficit) from boundary adjustmentSurplus (deficit) from all operations before taxLess: corporate taxation equivalent (30%) [based on result before capital]

SURPLUS (DEFICIT) AFTER TAX

Plus opening retained profitsPlus/less: prior period adjustmentsPlus/less: other adjustmentsPlus adjustments for amounts unpaid:– Taxation equivalent payments– Debt guarantee fees– Corporate taxation equivalentAdd:– Subsidy paid/contribution to operationsLess:– TER dividend paid– Dividend paidClosing retained profits

Return on capital %Subsidy from Council

Category 1 Category 1

17.4%

1,836

136.1%–

1,335

–

501(5)(150)

–

–

–

150–––

–

11

–

–

––

–5

–

88

–

––

–

1,3191,3352,435

351

91

304

(1,035)(731)

–

304–

2,728

––

5,903

(822)

(91)

5,599374

–

–

205

–293

293(88)

2,532

16

2,865

–

–

121

22

–

66

293

– ––

–––

55–

–

936 2,266148

5,173329

5,466

2016Actual

2015Actual Actual

20152016

–

56

–

5,717–

5,993

5106,961

–

–

–

–

5,523–

27337

–16

4,135

1,035

7,304

317–

3,842

5.6%

Child Care Hills Community Care

1,997

–

–

–

2,728

–

–

––

5.0%

1,248

50

–

501 16

– –––

3,086

5,077–

53–

Actual

1,183

–

6,9451,4271,303

16

6,803

–

501–

– – –

INCOME STATEMENT OF COUNCIL’S OTHER BUSINESS ACTIVITIES for the year ended 30 June 2016


SPFS 2016

page 4


Statement of Financial Position – Council's Other Business Activities as at 30 June 2016

$ ’000

ASSETSCurrent assetsCash and cash equivalentsInvestmentsReceivablesInventoriesOtherTotal Current Assets

Non-current assetsInvestmentsReceivablesInventoriesInfrastructure, property, plant and equipmentInvestments accounted for using equity methodInvestment propertyIntangible assetsOtherTotal non-current assetsTOTAL ASSETS

LIABILITIESCurrent liabilitiesBank overdraftPayablesBorrowingsProvisionsTotal current liabilities

Non-current liabilitiesPayablesBorrowingsProvisionsOther LiabilitiesTotal non-current liabilitiesTOTAL LIABILITIESNET ASSETS

EQUITYRetained earningsRevaluation reservesCouncil equity interestNon-controlling equity interestTOTAL EQUITY

822

–

–

1,3351,836

–

222

–

734

––

1,3356,404

2,570

1,997

5,673–

3,676

–

5,673 6,404–

–

1,836–

–

–

–

822

–

1,044

–

1,836

5

1,836

–

Child Care

–

–

1,039

–

–

Category 1

–

Actual

1,313–

Hills Community Care

Category 1

–

2016

–

2015

–

Actual 2015

1,335

5–

734

2,728

–

6,4045,673

–

–

92

––

–

–

1,682

368

–

–

–

–

–

5,809

7,226

– – –

–

368––

3,676

–

4391,335

–

439

––––

439

1,774

–

Actual

512–

–

–

1,682

92

–

–

–185

5,8095,4046,717

–

822

1,417

–

–

–

–5,404

–

–

–

1,313

–

––

Actual 2016

– –

2,202

2,202

–1,417

854

–

–

– – – –

STATEMENT OF FINANCIAL POSITION - COUNCIL’S OTHER BUSINESS ACTIVITIES as at 30 June 2016


SPFS 2016

page 5


Special Purpose Financial Statements for the year ended 30 June 2016

Contents of the notes accompanying the financial statements

Details

Summary of significant accounting policies

Water Supply Business Best-Practice Management disclosure requirements

Sewerage Business Best-Practice Management disclosure requirements n/a3

Note Page

1

2

6

n/a

SPECIAL PURPOSE FINANCIAL STATEMENTS for the financial year ended 30 June 2016

97


SPFS 2016_


Notes to the Special Purpose Financial Statementsfor the year ended 30 June 2016

Note 1. Significant accounting policies

page 6

These financial statements are a Special Purpose Financial Statements (SPFS) prepared for use by Council and the Office of Local Government.

For the purposes of these statements, the Council is not a reporting not-for-profit entity.

The figures presented in the SPFS, unless otherwise stated, have been prepared in accordance with:

the recognition and measurement criteria of relevant Australian Accounting Standards,

other authoritative pronouncements of the Australian Accounting Standards Board (AASB), and

Australian Accounting Interpretations.

The disclosures in the SPFS have been prepared in accordance with:

the Local Government Act (1993) NSW,

the Local Government (General) Regulation, and

the Local Government Code of Accounting Practice and Financial Reporting.

The statements are also prepared on an accruals basis, based on historic costs and do not take into account changing money values nor current values of non-current assets (except where specifically stated).

Certain taxes and other costs (appropriately described) have been imputed for the purposes of the National Competition Policy.

National Competition Policy

Council has adopted the principle of ‘competitive neutrality’ to its business activities as part of the national competition policy which is being applied throughout Australia at all levels of government.

The framework for its application is set out in the June 1996 government policy statement, Application of National Competition Policy to Local Government.

The Pricing and Costing for Council Businesses, AGuide to Competitive Neutrality, issued by the Officeof Local Government in July 1997, has also been adopted.

The pricing and costing guidelines outline the process for identifying and allocating costs to activities and provide standards for disclosure. These disclosures are reflected in Council’s pricing and/orfinancial reporting systems and include taxation equivalents, Council subsidies, return on investments(rate of return), and dividends paid.

Declared business activities

In accordance with Pricing and Costing for Council Businesses – A Guide to Competitive Neutrality,Council has declared that the following are to be considered as business activities:

Category 1

(where gross operating turnover is over $2 million)

a. Child careProvision of child care service

b. HCCProvision of aged care service

Category 2

(where gross operating turnover is less than $2 million)

None

Monetary amounts

Amounts shown in the financial statements are in Australian currency and rounded to the nearest thousand dollars.

(i) Taxation-equivalent charges

Council is liable to pay various taxes and financial duties in undertaking its business activities. Where this is the case, they are disclosed in these statements as a cost of operations just like all other costs.

However, where Council is exempt from paying taxes which are generally paid by private sector businesses (such as income tax), equivalent tax payments have been applied to all Council-nominated business activities and are reflected inthese financial statements.

For the purposes of disclosing comparative information relevant to the private sector equivalent,

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS for the year ended 30 June 2016

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES


SPFS 2016_



Note 1. Significant accounting policies (continued)

page 7

the following taxation equivalents have been applied to all Council-nominated business activities (this does not include Council’s non-business activities):

Notional rate applied (%)

Corporate income tax rate – 30%

Land tax – the first $482,000 of combined land values attracts 0%. For that valued from $482,001 to $2,947,000 the rate is 1.6% + $100. For the remaining combined land value that exceeds $2,947,000, a premium marginal rate of 2.0%applies.

Payroll tax – 5.45% on the value of taxable salaries and wages in excess of $750,000.

Income tax

An income tax equivalent has been applied on the profits of each reported business activity.

While income tax is not a specific cost for the purpose of pricing a good or service, it needs to be taken into account in terms of assessing the rate of return required on capital invested.

Accordingly, the return on capital invested is set at a pre-tax level (gain or loss from ordinary activities before capital amounts) as would be applied by a private sector competitor – that is, it should include a provision equivalent to the corporate income tax rate, currently 30%.

Income tax is only applied where a positive gain/(loss) from ordinary activities before capital amounts has been achieved.

Since this taxation equivalent is notional – that is, it ispayable to Council as the ‘owner’ of business operations, it represents an internal payment andhas no effect on the operations of the Council.Accordingly, there is no need for disclosure ofinternal charges in Council’s General Purpose Financial Statements.

The 30% rate applied is the equivalent company tax rate prevalent as at balance date. No adjustments have been made for variations that have occurred during the year.

Local government rates and charges

A calculation of the equivalent rates and charges payable on all category 1 businesses has been applied to all land assets owned or exclusively used by the business activity.

Loan and debt guarantee fees

The debt guarantee fee is designed to ensure that council business activities face ‘true’ commercialborrowing costs in line with private sector competitors.

In order to calculate a debt guarantee fee, Council has determined what the differential borrowing rate would have been between the commercial rate and Council’s borrowing rate for its business activities.

(ii) Subsidies

Government policy requires that subsidies provided to customers, and the funding of those subsidies,must be explicitly disclosed.

Subsidies occur when Council provides services on a less-than-cost-recovery basis. This option is exercised on a range of services in order for Council to meet its community service obligations.

Accordingly, ‘subsidies disclosed’ (in relation to National Competition Policy) represents the difference between revenue generated from ‘rate of return’ pricing and revenue generated from prices set by Council in any given financial year.

The overall effect of subsidies is contained within the Income Statement of each reported business activity.

(iii) Return on investments (rate of return)

The policy statement requires that councils with category 1 businesses ‘would be expected togenerate a return on capital funds employed that is comparable to rates of return for private businessesoperating in a similar field’.

Such funds are subsequently available for meeting commitments or financing future investment strategies.


NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (continued)


SPFS 2016_



Note 1. Significant accounting policies (continued)

page 8

The rate of return on capital is calculated as follows:

Operating result before capital income + interest expense

Written down value of I,PP&E as at 30 June

As a minimum, business activities should generate a return equal to the Commonwealth 10 year bond rate which is 2.17% at 30/6/16.

The actual rate of return achieved by each business activity is disclosed at the foot of each respective Income Statement.

(iv) Dividends

Council is not required to pay dividends to either itself (as owner of a range of businesses) or to anyexternal entities.


NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (continued)


Page 9Page 10


Page 10



SPECIAL SCHEDULESfor the year ended 30 June 2016


SPECIAL SCHEDULES

for the year ended 30 June 2016

Special Schedules1:

Special Schedule 1 Net Cost of Services 104

Special Schedule 7 Report on Infrastructure Assets 106

Special Schedule 8 Permissible Income Calculation 110

1 Special Schedules are not audited (with the exception of Special Schedule 8).

BACKGROUND

i. These Special Schedules have been designed to meet the requirements of special purpose users such as;

• the NSW Grants Commission

• the Australian Bureau of Statistics (ABS),

• the NSW Office of Water (NOW), and

• the Office of Local Government (OLG).

ii The financial data is collected for various uses including;

• the allocation of Financial Assistance Grants,

• the incorporation of Local Government financial figures in national statistics,

• the monitoring of loan approvals,

• the allocation of borrowing rights, and

• the monitoring of the financial activities of specific services.

THE HILLS SHIRE COUNCIL SPECIAL SCHEDULES

2015-2016


Phone: (02) 9843 0555



CONTENTS


Special Schedules 2016

page 2


Special Schedule 1 – Net Cost of Services for the year ended 30 June 2016

$’000

Governance

Administration

Public order and safety

Beach controlEnforcement of local government regulationsAnimal controlOtherTotal public order and safety

Health

EnvironmentNoxious plants and insect/vermin controlOther environmental protectionSolid waste managementStreet cleaningDrainageStormwater managementTotal environment

Community services and educationAdministration and educationSocial protection (welfare)Aged persons and disabledChildren’s servicesTotal community services and education

Housing and community amenitiesPublic cemeteriesPublic conveniencesStreet lightingTown planningOther community amenitiesTotal housing and community amenities

–

(1,586)–

–

–(2,114)

–

–

(2,760)–

–

500

914

414

(1,900)

–3,674

–

–736

27,100

31,9351,032

6,290

6,803

16,021

–

7,303–

6,290–

16,154

–

Net cost.of services.

(230)–

(3,210)

13,115

9,957542

7,507 4,624 – (2,883)

–––

–

–

–

–

Function or activity

–

Fire service levy, fire protection, emergency services

–

5,544

2,71413,440

–

3,717

–

– –(3,440)

– –

–

–

––

5,000–

–

507

–

–

10,278

–

–

––

2,376(1,962)

360–

–

–

–

–

––

–

9,526

14,1215,904

752

13,851

13,851–

Expenses from.continuing.operations. Non-capital.

1,283

–

1,574–

Capital.

Income fromcontinuing operations

1,053

–

953–

25,514

1,560

28,041

3,067

SPECIAL SCHEDULE 1 - NET COST OF SERVICES





Special Schedule 1 – Net Cost of Services (continued) for the year ended 30 June 2016

$’000

Recreation and culturePublic librariesMuseumsArt galleriesCommunity centres and hallsPerforming arts venuesOther performing artsOther cultural servicesSporting grounds and venuesSwimming poolsParks and gardens (lakes)Other sport and recreationTotal recreation and culture

Fuel and energy

Agriculture

Mining, manufacturing and constructionBuilding controlOther mining, manufacturing and constructioTotal mining, manufacturing and const.

Transport and communicationUrban roads (UR) – localUrban roads – regionalSealed rural roads (SRR) – localSealed rural roads (SRR) – regionalUnsealed rural roads (URR) – localUnsealed rural roads (URR) – regionalBridges on UR – localBridges on SRR – localBridges on URR – localBridges on regional roadsParking areasFootpathsAerodromesOther transport and communicationTotal transport and communication

Economic affairsCamping areas and caravan parksOther economic affairsTotal economic affairs

Totals – functionsGeneral purpose revenues (1)

NET OPERATING RESULT (2)

(1) Includes: rates and annual charges (including ex gratia, excluding water and sewer), non-capital general purpose (2) As reported in the Income Statement

grants, interest on investments (excluding externally restricted assets) and interest on overdue rates and annual charges

Income fromcontinuing operations

– – –

–

721

–

132,743

–

26,946 9,147

3,480 3,480

154,456

332

– –

82,382 132,743

332

–

72,074

– –

129,009

–

–

–

– –

–

– 860

–

2,154 – – –

–

–

– –

55,897

Function or activity

–

–

–

55,897

–

– –

–

–

–

–

–

–

–

–

–

–

–

– –

–

52,971 25,700 – –

3,971

– –

–

–

–

– – – –

–

–

Non-capital.

–

Expenses from.continuing.operations.

13,459

– –

–

2,227

– –

– –

– –

24,792 8,287

–

–

–

–

–

–

– –

–

31,242

48,966 1,023

–

Capital.

–

4,005

–

–

– – –

129,009

– – – –

150,722

–

68,340 (3,148)

–

38,098 (1,294)

(3,148)

–

–

–

–

–

82,382

6,621 –

–

(5,900) –

5,620

–

–

–

–

612

–

Net cost.of services.

–

–

–

–

39,392

–

–

– 36,530

Share of interests – joint ventures and associates using the equity method

page 3

SPECIAL SCHEDULE 1 - NET COST OF SERVICES (continued)



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ated

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–

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SPEC

IAL S

CH

ED

ULE 7

- R

EP

OR

T O

N I

NF

RA

ST

RU

CT

UR

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S

as a

t 3

0 J

un

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Spe

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The

Hill

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Spe

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– R

epor

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at 3

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43216 10987

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page

5

SPEC

IAL S

CH

ED

ULE 7

- R

EP

OR

T O

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NF

RA

ST

RU

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Special Schedule 7 – Report on Infrastructure Assets (continued) for the year ended 30 June 2016

$ ’000

Infrastructure asset performance indicators * consolidated

1. Infrastructure renewals ratioAsset renewals (1)

Depreciation, amortisation and impairment

2. Infrastructure backlog ratioEstimated cost to bring assets to a satisfactory standardCarrying value of infrastructure assets

3. Asset maintenance ratioActual asset maintenanceRequired asset maintenance

Notes

* All asset performance indicators are calculated using the asset classes identified in the previous table.

(1) Asset renewals represent the replacement and/or refurbishment of existing assets to an equivalent capacity/performance as opposed to the acquisition of new assets (or the refurbishment of old assets) that increases capacity/performance.

13,906

Indicator Prior periods

– 0.00% 1.03% 2.67%1,460,785

2016 2016 2015 2014

26,743 263.09% 231.52% 194.20%10,165

Amounts

1.37 2.31 1.9410,165

page 6

SPECIAL SCHEDULE 7 - REPORT ON INFRASTRUCTURE ASSETS (continued) as at 30 June 2016




Special Schedule 7 – Report on Infrastructure Assets (continued) for the year ended 30 June 2016


Benchmark: ――― Maximum <2.00% Ratio achieves benchmarkSource for benchmark: Code of Accounting Practice and Financial Reporting #24 Ratio is outside benchmark

Benchmark: ――― Minimum >1.00 Ratio achieves benchmarkSource for benchmark: Code of Accounting Practice and Financial Reporting #24 Ratio is outside benchmark

Council is continuing to renew its assets greater than the rate it is depreciating. It is

well above the benchmark of 100% and Council has now reduced its infrastructure

backlog to ZERO.


2015/16 Ratio 0.00%

Council's infrastructure backlog has now reduced to zero from $52m reported in June

2011.


2015/16 Ratio 1.37 x

Compares actual vs. required annual asset maintenance. A ratio above 1.0 indicates Council is investing

enough funds to stop the infrastructure backlog growing.

Purpose of asset renewals ratio

This ratio showswhat proportion the backlog is against

the total valueof a Council’s infrastructure.

To assess the rate at which these assets are being renewed

relative to the rate at which they are depreciating.

Purpose of infrastructurebacklog ratio

Purpose of asset maintenance ratio


2015/16 Ratio 263.09%

Council continues to spend greater than what is required in order to maintain assets in a satisfactory condition and to stop the

infrastructure backlog from growing.

135%

194%232%

263%

0%

50%

100%

150%

200%

250%

300%

2013 2014 2015 2016

Rat

io %

1. Infrastructure renewals ratio

1.0%

0.0%

3.7%

2.7%

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%

2013 2014 2015 2016

Rat

io %

2. Infrastructure backlog ratio

1.53

1.94 2.32

1.37

0.00

0.50

1.00

1.50

2.00

2.50

2013 2014 2015 2016

Rat

io (

x)

3. Asset maintenance ratio

page 7

SPECIAL SCHEDULE 7 - REPORT ON INFRASTRUCTURE ASSETS (continued) as at 30 June 2016



page 8


Special Schedule 8 – Permissible Income Calculation for the year ended 30 June 2017

$’000

Notional general income calculation (1)

Last year notional general income yieldPlus or minus adjustments (2)

Notional general income

Permissible income calculation

Special variation percentage (3)

Or rate peg percentageOr crown land adjustment (incl. rate peg percentage)

Less expiring special variation amountPlus special variation amount

Or plus rate peg amountOr plus Crown land adjustment and rate peg amount

Sub-total

Plus (or minus) last year’s carry forward totalLess valuation objections claimed in the previous yearSub-total

Total permissible income

Less notional general income yieldCatch-up or (excess) result

Plus income lost due to valuation objections claimed (4)

Less unused catch-up (5)

Carry forward to next year

Notes

(1) The notional general income will not reconcile with rate income in the financial statements in the correspondingyear. The statements are reported on an accrual accounting basis which include amounts that relate to prior years’rates income.

(2) Adjustments account for changes in the number of assessments and any increase or decrease in land value occurringduring the year. The adjustments are called ‘supplementary valuations’ as defined in the Valuation of Land Act 1916 .

(3) The ‘special variation percentage’ is inclusive of the rate peg percentage and where applicable Crown land adjustment.

(4) Valuation objections are unexpected changes in land values as a result of land owners successfully objecting to theland value issued by the Valuer-General. Councils can claim the value of the income lost due to valuation objections inany single year.

(5) Unused catch-up amounts will be deducted if they are not caught up within 2 years. Usually councils will have anominal carry forward figure. These amounts can be adjusted for in setting the rates in a future year.

(6) Carry forward amounts which are in excess (an amount that exceeds the permissible income) require ministerial approval by order published in the NSW Government Gazette in accordance with section 512 of the Local Government Act 1993 . The OLG will extract these amounts from Council’s Special Schedule 8 in the financial data return (FDR) to administer this process.

978 1,14569,140 71,943

68,162 70,798

0.00% 0.00%2.40% 1.80%0.00% 0.00%

– –– –

– 14

1,659 1,295– –

70,799 73,238

– (13)– 1

73,239

70,798 73,234

a

14 81

Calculation Calculation2015/16 2016/17

– –

1 5

13 76

70,799

l

m

n = (l + m)

o = k + n

g

k = (c + g + h + i + j)

b

d

e

f

j = c x f

i = c x e

h = d x (c – g)

c = (a + b)

p

q = o – p

r

st = q + r – s

SPECIAL SCHEDULE 8 - PERMISSABLE INCOME CALCULATION


Page 9

The Hills Shire Council FINANCIAL STATEMENTS 2015-16 111Page 9

112 The Hills Shire Council FINANCIAL STATEMENTS 2015-16 Page 10



FINANCIAL STATEMENTS

2015 - 2016


Phone: (02) 9843 0555



Documents

THE HILLS SHIRE COUNCIL FINANCIAL STATEMENTS · The Hills Shire Council FINANCIAL STATEMENTS 2015-16 3 NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 30 June 2016