AGENDA


Finance and Governance Committee

 

Monday, 08 July 2019

6.00pm

 

Waratah Room

Ground Floor, Georges River Civic Centre

Hurstville

 

 

 

 

 

 

 

 

 

 

 


Georges River Council – Finance and Governance Committee -  Monday, 8 July 2019                                                Page 2

 

          Finance and Governance Committee

ORDER OF BUSINESS

 

1.      Opening

2.      Acknowledgement of Country

3.      Apologies / Leave of Absence

4.      Notice of Webcasting

5.      Disclosures of Interest

6.      Public Forum

7.      Confirmation of Minutes of Previous Meeting  

MINUTES: Finance and Governance Committee - 11 June 2019

8.      Committee Reports

FIN048-19         Audit, Risk and Improvement Committee Minutes from 18 February 2019

(Report by Internal Auditor).......................................................................................... 3

FIN049-19         Investment Report as at 31 May 2019

(Report by Senior Financial Accountant - Reporting)........................................... 14

FIN050-19         Local Government NSW (LGNSW) 2019 Annual Conference - Voting Delegates and Submission of Motions

(Report by Manager, Office of the General Manager)........................................... 33  

 

 


Georges River Council – Finance and Governance Committee -  Monday, 8 July 2019                                                Page 3

Committee Reports

Item:                   FIN048-19          Audit, Risk and Improvement Committee Minutes from 18 February 2019 

Author:              Internal Auditor

Directorate:      Office of the General Manager

Matter Type:     Committee Reports

 

Recommendation:

That the Minutes of the Audit, Risk and Improvement Committee Meeting held on the 18 February 2019 be noted.

 

Executive Summary

1.      Council’s Audit, Risk and Improvement Committee Charter provides in Clause 5.1 for the reporting of Audit, Risk and Improvement Committee (ARIC) Minutes to the Council.         

 

2.      The Minutes of the ARIC meeting held 18 February 2019 were confirmed by the ARIC at their meeting of 20 May 2019 and are now presented for Council’s information.

Background

3.       Council’s Audit, Risk and Improvement Committee Charter adopted by Council’s Finance and Governance Committee on 13 November 2017, provides in Clause 5.1 for the periodic reporting of Audit, Risk and Improvement Committee Minutes to the Council, as follows:

“The Committee shall report back to Council within a six (6) months period following each meeting. Summary reports may be presented to the Council. The report shall provide Council with the following as appropriate and applicable:

 

- Minutes of each meeting

- All significant issues which can be reported without prejudice to the audit function.

 

This provision is to permit the implementation of Committee recommendations in a reasonable window of confidentiality, to optimise the effectiveness of Committee actions.”

 

4.      The Audit, Risk and Improvement Committee meet four times per year to review, note and recommend on items identified in their Charter.

 

5.      These Minutes relate to the ARIC meeting held on 18 February 2019 and were confirmed at the ARIC meeting held on 20 May 2019.

 

Financial Implications

6.      There are no budget impacts for this report.

 File Reference

D19/79228

 

ATTACHMENTS

Attachment 1

ARIC Minutes - February 2019


Georges River Council -         Finance and Governance Committee - Monday, 8 July 2019

FIN048-19              Audit, Risk and Improvement Committee Minutes from 18 February 2019

[Appendix 1]          ARIC Minutes - February 2019

 

 

Page 13

 


 


 


 


 


 


 


 


 


 


Georges River Council – Finance and Governance Committee -  Monday, 8 July 2019                                                Page 20

Item:                   FIN049-19                    Investment Report as at 31 May 2019 

Author:              Senior Financial Accountant - Reporting

Directorate:      Business and Corporate Services

Matter Type:     Committee Reports

 

Recommendation:

That Council receive and note the contents of the Investment Report as at 31 May 2019.

 

 

Executive Summary

1.      This report details Council’s performance of its investment portfolio as at 31 May 2019, and compares it against key benchmarks.

2.      This report also includes the estimated market valuation of Council’s investment portfolio, loan liabilities and any required update on Council’s legal action against various parties.

3.      Council’s annualised rate of return is 2.77%, which is 0.78% above benchmark. Income from interest on investments totals $4.9m, which is $120k less than the 2018/19 year-to-date adopted budget.

Background

4.      Council’s Responsible Accounting Officer is required to report monthly on Council’s Investment Portfolio and certify that the Investments are held in accordance with Council’s Investment Policy and Section 625 of the Local Government Act (1993).

Investment Performance Commentary

5.      Council’s performance against the benchmark for returns of its investment portfolio for May 2019, are as follows:

 

1 Month

3 Month

12 Month

Portfolio Performance

0.21%

0.68%

2.77%

Performance Index

0.15%

0.51%

1.99%

Excess

0.06%

0.17%

0.78%

Notes:                                                      

a)      Portfolio performance is the rate of return of the portfolio over the specified period.

b)      The Performance Index is the rate of return of the market (comparable securities) over the specified period.                                    

c)      Excess performance is the rate of return of the portfolio in excess of the Performance Index.


 

 

6.      Council’s investment portfolio as at the end of May was as follows:

Security Type

Market Value $000's

% Total Value

Cash at Bank

17,103

9.77%

11am Cash

7,099

4.05%

31 Day Notice Account

23

0.01%

Covered Floating Bond

1,014

0.58%

Flexi Deposit (Fix/Float)

6,000

3.43%

Floating Rate Deposit

5,000

2.86%

Floating Rate Note

46,329

26.46%

Floating Rate TCD

3,512

2.01%

Term Deposit

83,041

47.42%

Managed Funds Trust

5,989

3.42%

Total Cash and Investments

175,110

100.00%

 

7.      At the end of April 2019, Total Cash and Investments were $169.15m and have increased by $6m at the end of May 2019 largely due to rates instalments being paid in the month of May.

8.      Council continues to utilise the Federal Government’s current guarantee ($250k) investing in Term Deposits with a range of Authorised Deposit Taking Institutions (ADI’s) on short to medium term investments (generally 30 days to 180 days maturity) where more competitive rates are available.

Legal Issues

9.      Georges River Council is participating in a Group Class Action against Fitch Ratings Inc., in respect of losses suffered on the Corsair (Cayman Islands) No.4 Ltd Series 6 Kakadu Collateralised Debt Obligation (CDO) notes. Council suffered a capital loss of $214,812 on these investments dating back to December 2006, and will seek damages of the Capital Loss including lost interest as part of the action.

Loan Liability

10.    Council’s loan liability, as at 31 May 2019, was $1.75m which represents the balance of a $5m 10 year loan drawn down on 16 November 2012 for the Jubilee Park upgrade in Mortdale. The next repayment of $125k is due on 25 June 2019.

11.    The outstanding balance on this facility is at a variable interest rate of 194 basis points above the three month BBSW. At the current three month BBSW rate, the interest rate payable is 3.48% pa.

12.    Council receives a 4% p.a. subsidy under the NSW Government’s Local Infrastructure Renewal Scheme funding agreement for the Jubilee Park upgrade facility. It is intended to continue this financially-advantageous arrangement through to full term in 2022.

13.    It should be noted that Council has been advised by NSW Treasury Corporation (TCorp) that the Australian 10 year bond yield fell to 1.52%. It was only six months ago that the 10 year bond yield was trading over 2.80%. The subdued global economy at the beginning of the year, combined with renewed trade tensions (leading to safe haven buying in US treasuries) and the expectation of rate cuts below 1% by the middle of next year in Australia have culminated in a further collapse in bond yields.

14.    While lower interest rates will lead to reduced interest income from new term deposits for councils, the flip side is the potential for a lower cost of borrowing. Based on this, a council could look to fund a 10 year debt fixed with semi-annual payments at 2.6%.

 

Policy Limits

 

15.    The graph below shows the Investment Rating limits, as a percentage of total cash investments, which are allowed under Council’s Investment policy. It also compares them to the amounts actually invested, as a percentage of the total cash investments. It shows that the funds invested are within the limits set in the Investment Policy.

 

 

Investment Income

16.    Income from interest on investments to 31 May 2019 is estimated at $4.9m, which is $120k less than the 2018/19 year-to-date adopted budget.

 

17.    Investments have been made in accordance with the Local Government Act (1993), Minister’s Guidelines, Regulations and Council’s Investment Policy.

Analysis of Investments

Investment Duration

Investment Term

Market Value ‘000

% Total Value

Policy Limits

0 to < 1 Year

99,776

56.98%

100%

1 to < 3 Years

55,090

31.46%

70%

3 to < 5 Years

 20,244

11.56%

50%

Portfolio Total

175,110

100.00%

 

 


 

18.    Council’s portfolio is liquid, with 56.98% of assets maturing within 12 months. FRNs, At-Call Funds and Fixed Bonds also provide additional liquidity in an emergency.

 

 

19.    The following graphs show analysis of the total cash investment by institution:    

 

 

Type of Investments

 

20.    The majority of Council’s investment portfolio is made up of fixed term deposits, which account for approximately 51% of total investments.

 

21.    Bank Floating Rate Notes (FRN) offer liquidity and a higher rate of income accrual, which is highly recommended by our Investment Advisors (CPG Research & Advisory).

 

22.    The following are the types of investments held by Council:

a)      Cash and Call Accounts refer to funds held at a financial institution and can be recalled by Council either same day or on an overnight basis.

b)      An FRN is a debt security issued by a company with a variable interest rate. This can either be issued as Certificates of Deposit (CD) or as Medium Term Notes (MTN). The interest rate can be either fixed or floating, where the adjustments to the interest rate are usually made quarterly and are tied to a certain money market index such as the Bank Bill Swap Rate.

c)      A Fixed Term Deposit is a debt security issued by a company with a fixed interest rate over the term of the deposit.

d)      A managed fund is a professionally managed investment portfolio that individual investors can buy into, purchasing 'units' rather than shares. Each managed fund has a specific investment objective. This is usually based around the different asset classes (cash, fixed interest, property and shares). The money you invest is used to buy assets in line with this investment objective. When you invest in a managed fund, you are allocated a number of 'units'. The value of your units is calculated on a daily basis and changes as the market value of the assets in the fund rises and falls.

* These managed funds have been grandfathered since the NSW State Government changed the list of Approved Investments as a result of the Cole enquiry (which was reflected in the Ministerial Order dated 31/7/2008).

 

 

 

Credit Rating

23.    Credit ratings are generally a statement as to an institution’s credit quality. Ratings ranging from AA to BBB (Short Term) & AA to BBB (long term) are considered investment grade.

 

24.    A general guide as to the meaning of each credit rating that Council deals with is as follows:

Short-term

AA:            The best quality companies, reliable and stable. An obligor’s capacity to meet its financial commitments on the obligation is very strong.

A:               The obligor’s capacity to meet its financial commitments on the obligation is still strong but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions.

BBB:          Adequate capacity to meet financial commitments, but adverse economic conditions or changing circumstances are more likely to weaken the obligor’s capacity to meet its financial commitments.

Unrated:   This category includes unrated Authorised Deposit-Taking Institutions (ADI’s) such as some Credit Unions and Building Societies to the extent not Commonwealth-guaranteed. No rating has been requested, or there is insufficient information on which to base a rating.         

Long-term

AA:            Quality companies, a bit higher risk than AAA. An obligor has very strong capacity to meet its financial commitments. It differs from the highest-rated obligors only to a small degree.

A:               Economic situation can affect finance. An obligor has strong capacity to meet its financial commitments but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in higher-rated categories.

BBB:          Medium class companies, which are satisfactory at the moment. An obligor has adequate capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments.

Unrated:  This category includes unrated Authorised Deposit-Taking Institutions (ADI’s) such as some Credit Unions and Building Societies to the extent not Commonwealth-guaranteed. No rating has been requested, or there is insufficient information on which to base a rating.

 

25.    The credit quality of Council’s portfolio is relatively high with approximately 76% of assets rated ‘A’ or higher. The ‘AAA’ assets represent the deposit investments covered by the Federal Government’s Financial Claims Scheme (FCS).

 

26.    The remaining 24% rated ‘BBB’ or ‘unrated’ reflects the deposit and FRN investments with the regional and unrated ADIs.

 

 

 

 

Council’s Investment Powers

27.    Council’s investment powers are regulated by Section 625 of the NSW Local Government Act (1993), which states:

·        A council may invest money that is not, for the time being, required by the council for any other purpose.

·        Money may be invested only in a form of investment notified by order of the Minister published in the Gazette.

·        An order of the Minister notifying a form of investment for the purposes of this section must not be made without the approval of the Treasurer.

·        The acquisition, in accordance with section 358, of a controlling interest in a corporation or an entity within the meaning of that section is not an investment for the purposes of this section.

 

28.    Council’s investment policy and strategy requires that all investments are to be made in accordance with:

·        Local Government Act 1993 - Section 625

·        Local Government Act 1993 - Order (of the Minister) dated 12 January 2011

·        The Trustee Amendment (Discretionary Investments) Act 1997 – Sections 14A (2), 14C (1) & (2)

·        Local Government (Financial Management) Regulation 1993

·        Investment Guidelines issued by the Department of Local Government

 

Financial Implications

29.    Within budget allocation.

 

Risk Implications

30.    Enterprise risk/s identified and management process applied.

 

31.    Council’s enterprise risk identified was ‘poor financial management adversely impacts Council’s long term financial sustainability’. The risk has been managed by Council’s management of investments in accordance with the relevant act and regulations, along with Council adopted Investment Policy. To further minimise the risk, Council will progressively move towards the placement of investments only in investments rated A or above.

 

Community Engagement

32.    No community consultation is required as a result of this report. Members of the community are able to attend and address Council at the Council meeting in relation to this matter in accordance with Council’s Code of Meeting Practice.

 


 

File Reference

D19/141800

 

 

ATTACHMENTS

Attachment 1

Investment Report as at 31 May 2019

 


Georges River Council -         Finance and Governance Committee - Monday, 8 July 2019

FIN049-19              Investment Report as at 31 May 2019

[Appendix 1]          Investment Report as at 31 May 2019

 

 

Page 22

 


 


 


 


 


 



 


 


 



Georges River Council – Finance and Governance Committee -  Monday, 8 July 2019                                                Page 35

Item:                   FIN050-19          Local Government NSW (LGNSW) 2019 Annual Conference - Voting Delegates and Submission of Motions 

Author:              Manager, Office of the General Manager

Directorate:      Office of the General Manager

Matter Type:     Committee Reports

 

Recommendation:

(a)     That Council nominate nine (9) Councillors to attend the 2019 Local Government NSW Annual Conference as voting delegates and other Councillors to attend as observers.

 

(b)     That Council consider any motions it wishes to put forward to the Local Government NSW (LGNSW) Annual Conference.

 

(c)     That Council review and confirm motions, to be submitted for the LGNSW Conference, at the Council meeting of 26 August 2019.

 

(d)     That Council note that the General Manager will nominate staff to attend the Conference.

 

Executive Summary

 

1.      This report is presented to Council for its consideration of Councillor voting delegates and Councillor attendance at the 2019 Local Government NSW (LGNSW) Annual Conference, to be held at the William Inglis Hotel, Warwick Farm from Monday 14 October 2019 to Wednesday 16 October 2019.

2.      The report also calls for Councillors to consider any motions they may wish to put to the Conference with a view to confirming preferred motions at the Council meeting of 26 August 2019.

 

Background

 

Delegates

3.      The 2019 Local Government NSW Annual Conference will be held at the William Inglis Hotel, Warwick Farm from Monday 14 October 2019 to Wednesday 16 October 2019.

4.      Separate from conference registration, member councils must register the names of their delegates for voting on motions during formal business sessions.

5.      As 2019 is a Board election year, the Conference will involve two (2) types of voting and Local Government NSW is required to develop two (2) separate rolls of voters:

i. Voting on motions

ii.        Voting in the election for Office Bearers and the Board

6.      In accordance with the Local Government NSW rules, only members that were financial on 1 March 2019 (the ‘calculation date’) have been allocated voting entitlements.  To exercise voting rights, members also need to be financial on 19 August 2019 (the date on which the roll of voters closes).  The formula for calculating members’ voting entitlements is prescribed at Rule 23 of the LGNSW rules.

7.      In 2019, Georges River Council’s member voting entitlement is nine (9) voting members (see Attachment 1). 

8.      In 2018, Council was entitled to eight (8) voting members, and the following Councillors were nominated:  Councillor Hindi, Councillor Elmir, Councillor Landsberry, Councillor Katris, Councillor Wu, Councillor Kastanias, Councillor Symington and Councillor Konjarski. The following councillors attended: Councillor Elmir, Katris, Wu, Symington and Konjarski.

9.      The deadline to provide LGNSW with the names of nominated voting delegates, for both types of voting, is 12 midnight (AEST on Friday, 20 September 2019.  Nominations of voting delegates received after the closing date/time cannot be accepted.

 

Motions

10.    LGNSW member councils are invited to submit motions for possible debate at the conference.  Motions are to be strategic local government issues which affect members state-wide and introduce new or emerging policy issues and actions.

11.    Members are encouraged to submit motions online by 19 August 2019, however, in line with the LGNSW rules, the motions can be accepted for inclusion in the Conference Business Paper by midnight on Monday 16 September 2019 at the latestA sample Motion Submission Form is provided in Attachment 2.

 

12.    Motions will only be included in the Business Paper where they:

a.   are consistent with the objectives of Local Government NSW (the Association) - Rule 4 of the LGNSW rules;

b.   relate to Local Government in NSW and/or across Australia;

c.   concern or are likely to concern Local Government as a sector;

d.   seek to advance the Local Government policy agenda of the Association and/or improve governance of the Association;

e.   have a lawful purpose (a motion does not have a lawful purpose if its implementation would require or encourage non-compliance with prevailing laws);

f.    are clearly worded and unambiguous in nature; and

g.   do not express preference for one or several members over one or several other members.

13.    The format of motions, as much as possible should call on a specific body (e.g. LGNSW, state government, federal government, a specific Department or Minister) and have a specific outcome that the motion is aiming to achieve.  The motion should state whether it is seeking to change a LGNSW Fundamental Principle and the wording should be unambiguous. 

14.    In accordance with Clause 5 of the Annual Conference 2019 Motions Submission Guide, accompanying evidence must be provided in support of the motion.  Such evidence may include an attachment note or extract from the minutes of the Council meeting at which the member Council resolved to submit the motion for consideration by the Conference.  In the absence of a Council meeting, the evidence should be a letter signed by both the Mayor and General Manager.

15.    The complete Annual Conference 2019 Motions Submission Guide can be found on the Local Government NSW website.

 

Financial Implications

 

16.    Registration to attend the Conference opens Monday 15 July.  Members will be able to take advantage of special ‘early bird’ rates.  At time of writing this report, rates and other associated costs have not been published, however LGNSW has advised that the information will be made available on its website on Monday 15 July, at which time Council staff will advise Councillors.

 

Risk Implications

 

17.    No risks identified.

 

Community Engagement

 

18.    Community engagement is not required.

 

File Reference

D19/132965

 

 

 

ATTACHMENTS

Attachment 1

Members-voting-entitlement-2019-LGNSW-Annual-Conference

Attachment 2

LG NSW Annual Conference 2019 - Sample Motion Submission form

 


Georges River Council -         Finance and Governance Committee - Monday, 8 July 2019

FIN050-19              Local Government NSW (LGNSW) 2019 Annual Conference - Voting Delegates and Submission of Motions

[Appendix 1]          Members-voting-entitlement-2019-LGNSW-Annual-Conference

 

 

Page 37

 


 


 


 


Georges River Council -         Finance and Governance Committee - Monday, 8 July 2019

FIN050-19              Local Government NSW (LGNSW) 2019 Annual Conference - Voting Delegates and Submission of Motions

[Appendix 2]          LG NSW Annual Conference 2019 - Sample Motion Submission form

 

 

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