Plain English Guide to council’s financial report€¦ · Plain English Guide to council’s financial report (continued) Balance Sheet The Balance Sheet is a snap shot of the financial

Plain English Guide to council’s financial report The Hepburn Shire Council is committed to accountability. Council’s financial reports

are prepared in accordance with the Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, the Local Government Act 1989, and the Local Government (Finance and Reporting)

Regulations 2004, and as such, use terminology and conventions that may not be familiar to some readers.

This Plain English Guide has been developed to assist readers understand and analyse our financial reports.

What is contained in the Financial Report? The financial report contains four major disclosures, collectively known as the

Financial Statements.

• Comprehensive Income Statement

• Balance Sheet

• Statement of Changes in Equity

• Cash Flow Statement

These key documents provide an overview of the transactions that occurred during the year and a summary of the financial status of Council at the end of the year.

The remainder of the financial report is called the Notes. These provide explanations of the accounting policies and further details on the values contained in the four

Statements. Details about the information contained in each of the four Statements and the Notes are provided below. Comprehensive Income Statement

The Comprehensive Income Statement shows the sources of revenue earned and the operating (or day-to-day) expenses incurred during the financial year. Capital asset purchases are not included in the Statement of Financial Performance because

assets have a life greater than 12 months. Instead, there is an item for “Depreciation”. This value is the value of assets used up during the year. This arrangement ensures that the cost of an asset is matched to the period in which it is

used rather than just the period in which it was purchased.

Plain English Guide to council’s financial report (continued) Balance Sheet

The Balance Sheet is a snap shot of the financial situation at 30 June. It shows in total value what the Council owns as Assets and what it owes as Liabilities. The

bottom line of this Statement is Net Assets. This is the net worth of Council, built up over many years.

The assets and liabilities are separated into Current and Non-Current categories. Current means those assets or liabilities that will fall due in the next 12 months.

The items included in the Balance Sheet are: Current Assets

• Cash and cash equivalents - Cash held in a bank, on hand as petty cash or

cash register floats and bank bills or term deposits that mature within the next 12 months.

• Trade and other receivables - Monies owed to Council by ratepayers and

others who have been invoiced or bills sent.

• Accrued income – Income that has been earned but not received by the 30

June such as interest.

• Prepayments – This represents payments made during the reporting year for

services either in part or in full that will be delivered in a future reporting period.

• Inventories - Frequently used goods and materials purchased in advance to

minimise delays in undertaking works. Non-Current Assets

• Trade and other receivables - Monies owed to Council by ratepayers and others that are not due for payment within the next 12 months.

• Financial assets – Bank bills and term deposits that have been invested for periods longer than 12 months that also will not mature within the next 12 months.

• Investments in associates - The value of Council’s equity in the Central Highlands Regional Library Service.

• Property infrastructure, plant & equipment, land, buildings, roads, vehicles, equipment, etc. which have been built up by Council over many years.

Plain English Guide to council’s financial report (continued) Current and Non-Current Liabilities

• Trade and other payables - People and businesses to whom Council owes money.

• Trust funds and deposits – Money held on behalf of other people or business that will be refunded at some point in the future.

• Provisions - The accrued value of Long Service Leave and Annual Leave.

• Interest bearing loans and borrowings - The outstanding balance Council

owes on Bank loans. Current interest bearing loans and borrowings represent the amount to be repaid in 2012-13.

Net Assets and Total Equity

These terms describe the worth that the Council has built up over many years. Net Assets is the difference between all the assets and all the liabilities. Total Equity is the term used to describe the components of Net Assets. These components are:

• Accumulated surplus - The value of all net assets, other than those directly

below, which has been accumulated over time.

• Asset revaluation reserve - The difference between the previously recorded

value of assets and their current valuation.

• Statutory reserves - Funds that have restrictions placed on their use and are not readily available for use by Council.

• Discretionary reserves – Funds that Council has set aside for a specific purpose.

A reduction in total equity means that the overall value of the Shire has fallen. There can be many reasons for this. However, it usually means that the level of new capital

investment has not kept pace with depreciation. This is not unusual in the short term because of the cyclical nature of asset replacement. However, in the longer term and in the absence of a conscious decision to downsize, a reduction in total equity

can be of concern. Statement of Changes in Equity Over the course of the year the values which make up Total Equity can change. This

Statement shows the values of changes and how these changes arose. The most important value to consider is the movement in the Accumulated Surplus.

Movements arise from a reduction in the value of Council’s major asset groups or an increase in liabilities. Cash Flow Statement The Cash Flow Statement summarises cash payments and cash received for the

year. The values in this Statement may differ from those shown in the Income Statement because the Income Statement is prepared on an accrual accounting basis i.e. taking into account payments due but not made and money due but not

received.

Plain English Guide to council’s financial report (continued) Council’s cash arises from, and is used in, three main areas:

Cash Flows from Operating Activities:

Receipts

All cash received arising from the general operations of Council. It includes rates, general trading sales and debtors, grants and interest earnings. Cash from the sale of assets or loan funds is not included.

Payments

All cash paid by Council from its bank account to staff, creditors and other persons. It does not include the costs associated with the creation or purchase of assets. Cash Flows from Investing Activities: The accounting term Investing Activities relates to the purchase and sale of assets

such as land, buildings, plant and other long-term revenue producing assets. Cash Flows from Financing Activities:

This is where the receipt and repayment of borrowed funds is recorded.

The bottom line of the Statement of Cash Flows is the Cash at the End of Financial Year. This shows the cash position of Council to meet its debts and other liabilities. Notes to the Accounts The Notes are a very important and informative section of the report. They form a

part of the Financial Statements. The Australian Accounting Standards sometimes offer alternative ways to record and value transactions or assets. The method chosen by Council is shown in the Notes.

Apart from describing the main accounting policies (Note 1) details are also provided on many of the summary figures contained in the Statements. The Note numbers

are the key and refer to particular items shown in the four main Statements. The Notes also provide an opportunity for Council to disclose additional information

that can not be incorporated into the Statements. Other Notes disclose information on:

• The cost of the various functions of Council, • The break down of expenses, revenues, reserves and other assets,

• Contingent assets and liabilities, • Transactions with persons related to Council, and • Financial performance indicators.

The Notes should be read at the same time as, and together with, the other parts of the Financial Statements to get a clear picture of the accounts.

Plain English Guide to council’s financial report (continued) Statements by Principal Accounting Officer and Councillors The Principal Accounting Officer, the Chief Executive Officer and two Councillors are

required to sign the Financial Statements on behalf of Council. Auditor General’s Report This is the Auditor’s independent opinion on the Financial Statements. The opinion covers both statutory and professional requirements and also the fairness aspects of the Financial Statements.

Hepburn Shire CouncilANNUAL FINANCIAL REPORTFor the Year Ended 30 June 2012

Page

1

2

3

4

5

Note 1 Significant accounting policies 6

Note 2 Rates and charges 15

Note 3 Statutory fees and fines 15

Note 4 User fees 16

Note 5 Grants 16

Note 6 Contributions 19

Note 7 Reimbursements 19

Note 8 Other income 19

Note 9 Employee benefits 19

Note 10 Materials and services 20

Note 11 Bad debts and change in doubtful debts 20

Note 12 Depreciation and amortisation 20

Note 13 Finance costs 21

Standard Statements, Variances and Certification

Hepburn Shire CouncilFinancial ReportTable of Contents

Statement of Changes in Equity

FINANCIAL REPORT

Comprehensive Income Statement

Balance Sheet

Cash Flow Statement

Notes to Financial Statements

Introduction

Note 13 Finance costs 21

Note 14 Other expenses 21

Note 15 Proceeds from disposal of plant and equipment 21

Note 16 Investments in associates 21

Note 17 Cash and cash equivalents 22

Note 18 Trade and other receivables 22

Note 19 Financial assets 22

Note 20 Inventories 22

Note 21 Other assets 22

Note 22 Property, infrastructure, plant and equipment 23

Note 23 Intangible assets 30

Note 24 Trade and other payables 30

Note 25 Trust funds and deposits 30

Note 26 Provisions 31

Note 27 Interest bearing loans and borrowings 33

Note 28 Other Liabilities 34

Note 29 Reserves 35

Note 30 Reconciliation of cash flows from operating activities to surplus or deficit 36

Note 31 Reconciliation of cash and cash equivalents 38

Note 32 Restricted assets 38

Note 33 Superannuation 38

Page

Hepburn Shire CouncilFinancial ReportTable of Contents

FINANCIAL REPORT

Note 34 Commitments 39

Note 35 Operating leases 40

Note 36 Financial instruments 41

Note 37 Contingent liabilities and contingent assets 43

Note 38 Auditors' remuneration 50

Note 39 Related party transactions 50

Note 40 Revenue, expenses and assets by functions/activities 51

Note 41 Capital expenditure 53

Note 42 Special committees and other activities 55

Note 43 Financial ratios (Performance indicators) 56

Note 44 Events occurring after balance date 57

58

60Performance Statement and Certification

Certification of the Financial Report

Hepburn Shire CouncilSTANDARD STATEMENTS

For the Year Ended 30 June 2012

Note 1 Basis of Preparation of Standard Statements

Note to Standard Statements


Detailed information on the actual financial results are contained in the Annual Financial Report for the year ended 30 June 2012.

The detailed budget for 2011/2012 can be obtained by contacting Hepburn Shire Council or through the Council's web site. The

Standard Statements must be read with reference to these documents.

Hepburn Shire Council is required to prepare and include audited Standard Statements within its Annual Report.

These Statements and supporting notes form a special purpose financial report prepared to meet the requirements of the Local

Government Act 1989 and the Local Government (Finance and Reporting) Regulations 2004.

The Standard Statements have been prepared on accounting bases consistent with those used for the General Purpose Financial

Report and the Budget. The results reported in these Statements are consistent with those reported in the General Purpose

Financial Report.

The Standard Statements are not a substitute for the General Purpose Financial Report, which is included in the Annual Report.

They have not been prepared in accordance with all Australian Accounting Standards or other authoritative professional

pronouncements. The Standard Statements compare Hepburn Shire Council's Strategic Resource Plan, expressed through its

annual budget, with actual performance. The Local Government Act 1989 requires explanation of any material variances. Hepburn

Shire Council has adopted a materiality threshold of greater than 10% per cent or more than $10,000. Explanations have not been

provided for variations below the materiality threshold unless the variance is considered to be material because of its nature.

The budget figures included in the Standard Statements are those adopted by Hepburn Shire Council in June 2011. The budget was

based on assumptions that were relevant at the time of adoption of the budget. Hepburn Shire Council set guidelines and

parameters for revenue and expense targets in this budget in order to meet Hepburn Shire Council's business plan and financial

performance targets for both the short and long term. The budget did not reflect any changes to equity resulting from asset

revaluations, as their impacts were not considered predictable.

Budget Actual2011/2012 2011/2012

$'000 $'000 % Ref $'000

Revenues from ordinary activities

Rates and charges 14,562 83 1% 14,645

Statutory fees and fines 222 114 51% 1 336

User fees 907 27 3% 934

Contributions 235 675 287% 2 910

Grants - Recurrent 4,970 2,376 48% 3 7,346

Grants - Non recurrent 499 2,675 536% 4 3,174

Other revenue 5,554 4,352 78% 5 9,906

Total revenues 26,948 10,302 37,251 Expenses from ordinary activities

Employee benefits 9,359 2,103 22% 6 11,462

Materials and services 6,473 4,357 67% 7 10,830

Bad and change in doubtful debts 4 4 91% 8

Depreciation 5,038 (71) -1% 4,967

Finance costs 358 (77) -21% 8 281

Other expenses 1,231 195 16% 9 1,426

Total expenses 22,463 6,510 28,973

Net profit from operations 4,485 3,792 10 8,278

Ref. Item

1 Statutory fees and fines

2 Contributions - Non Monetary

2 Contributions - Monetary

Hepburn Shire Council

Standard Income Statement

Variances

Commentary

Budgeted statutory fees and fines are set at conservative levels and therefore actuals

have exceed Budget. Of note are planning fees which were $48,000 ahead of Budget.


Contributions included in the Budget for the Cameron Court Units ($70,000) and User

Benefit Schemes ($50,000) were not received during the year due to the associated

projects not being completed. However, this was offset due to community contributions

for four projects that were anticipated to be received in the prior financial year - Mullers

Lane Bridge ($58,000), Doug Lindsay Recreation Reserve ($50,000), Mt Prospect Tennis

($12,000) and the Creswick Magic Pudding Playground ($15,000). Due to additional

costs, further contributions were received from Leonards Hill and Bullarto Halls ($11,800),

Vic Roads ($4,000) and the Smeaton Bowling Club ($12,240) for their respective projects.

Non-monetary contributions are as a result of gifted or Council owned assets that were

"found" during the year, meaning assets that were not previously recorded in Council's

asset register. As a result of the land and buildings revaluation this year, $604,000 of

additional Council owned land and buildings were added to the asset register.




Ref. Item

3 Grants - recurrent

$ 2,046,611

$ 128,000

$ 193,000

$ 8,330

$ 2,375,941

4 Grants - non recurrent

$ 1,000,000

$ 553,000

$ 406,350

$ 226,000

$ 52,500

$ 46,000

$ 80,000

$ 46,000

$ 43,000

$ 50,000

$ 190,000

$ 49,000

$ 12,300

$ 94,223

$ 74,000

$ 12,950

Other $ 142,330

$ (250,000)

$ (95,000)

$ (57,500)

$ 2,675,153

Actual grants received are greater than budget as a result of additional grants received

that were not budgeted for:

Actual grants received are greater than budget as a result of additional grants received

that were not budgeted for:

DPCD Municipal Fire and Emergency Management Grant

Daylesford Streetscape Grant (funds expected to be received in

2012-13)

Swimming Pools Upgrade Grant (funds expected upon completion in

2012-13)

Total

Less grants budgeted for but not received

Wombat Hill Botanic Gardens sustainable water and power upgrade

grant (funds expected upon completion in 2012-13)

Total

Neighbourhood Safer Places Grant

HACC Bushfire Preparedness

Advancing Country Towns Grant (payment # 2)

Living Libraries Grant - Trentham Library

Localities Enhancing Arts Participation Grant (LEAP)

Clunes Community Interpretive Centre Grant (payment # 1)

Victorian Grant Commission General and Local Roads Grant for the

2012-13 year was prepaid in June 2012

Library Grant now directly received by Council

Transport Connections grant - program extended

Under estimates of grant income in the Budget

Commentary

Country Roads and Bridges Grant

Local Government Infrastructure Grant

V/line Crossing Project Grant

Wombat Hill Power Upgrade (Carryforward Project)

Glenlyon Hall Upgrade Grant - final payment (Carryforward Project)

Business & C'ty Develop. Officer funding (Carryforward Project)

Central Springs Mineral Reserve Grant

Halls Refurbishment Grant - final payment (Carryforward Project)

Carbon Initiatives Grant - final payment (Carryforward Project)




Ref. Item

5 Other revenue

$ 3,929,000

$ 232,300

$ 99,500

Other $ 91,200

$ 4,352,000

6 Employee benefits

$ 1,423,099

$ 178,000

$ 273,300

$ 369,750

$ (163,000)

$ 91,049

$ -

$ (69,500)

$ 2,102,698

$1.4 million has been included in superannuation expenses for 2011-

12, this is to cover Council's contribution to the defined benefit

superannuation fund, payable July 1, 2013.

Additional staff costs recognised as part of the mid year budget

review.

Total

Vacancy savings

Employment of Library Staff directly

Funded positions - Advancing Country Towns Manager; DPCD

Municipal Fire and Emergency Management Officer; Transport

Connections Officer; Flood Office Manager

Less transition from Central Highland Regional Library employee

costs treated as employee benefits in the Budget but classified as

payments to suppliers in the financial statements.

Net increase in Annual Leave and Long Service Leave Provision

Actuals are greater than budget as a result of the following items that were not budgeted

for:

Actual income is greater than budget as a result of income received that was not

budgeted for:

Commentary

Interest on investments as a result of Capital Works program not

being completed as budgeted and additional interest on overdue

rates

Total

Cameron Court Units, Glenlyon Recreation Reserve and Lyonville

Hall rent and other income not budgeted for (operated under section

86 committees)

Additional reimbursements received in relation to Flood Recovery

works

Additional hours worked by outdoor maintenance team on non

capital programs was offset by decreased hours and therefore

decreased costs in the respite care, personal care and

housekeeping areas.




Ref. Item

7 Materials and services

$ 1,970,000

$ 958,000

$ 250,000

$ 110,000

$ 265,000

$ 200,000

$ 125,000

$ 175,000

$ 50,000

$ 56,000

$ 40,000

$ 26,000

$ 25,000

$ 48,000

$ 59,000

$ 4,357,000

Actual material expenses are greater than budget as a result of the following items that

were not budgeted for:

V/line Crossing Project, funded by external sources.

Flood Recovery expenses, only capital costs were included in the

Budget, however flood office expenditure plus expenditure on non

Council assets was incurred.

Carryforward projects, i.e. costs associated with non capital projects

that were anticipated to be completed in the prior financial year and

hence not included in the 2011-12 Budget.

Other individual items

Additional recruitment and computer software costs.

Total

Commentary

Cameron Court Units, Glenlyon Recreation Reserve and Lyonville

Hall expenses not budgeted for (operated under section 86

committees)

By-election costs

Clunes Caravan Park Study - funded by external sources.

Environmental Projects (all Environmental Levy funds to be used on

projects rather than funding an officer)

Provision raised for future remedial works at Mount Beckworth, this

was funded from the capital budget and therefore not included in the

materials budget.

Yandoit Tennis works funded by the Local Government

Infrastructure Fund (non- Council owned asset)

Contractors used as a result of internal vacancies, backfill and

special projects.

Additional fleet and plant maintenance costs.

Additional swimming pool, garden and reserve material costs.

Building works included in capital program classified as maintenance

and included in materials in the financials.




Ref. Item

8 Finance costs

9 Other expenses

10 Net surplus from operations

The net surplus is higher than budget due to the $2 million Victorian Grants Commission

prepayment of 2012-13 funds. Further, the new $1 million State Government Country

Roads and Bridges and $553,000 State Government Local Government Infrastructure

funding that was received was spent on capital works and therefore not included in the

expenses above (refer to standard capital works statement).

Commentary

Other expenses are higher than budget due to increased insurance costs and the write

down of investments in associates ($111,000). This increase was somewhat offset by

decreased contributions to City of Ballarat for library services, as some the of contribution

was for library books which was treated as asset additions in the financials, not

expenses.

Actual interest on borrowings was less than Budget due to borrowings being taken out

later in the financial year than anticipated and in addition, a lower interest rate was

obtained than budgeted.

Budget Actual2011/2012 Variances 2011/2012$'000 $'000 % Ref $'000

Current assets

Cash assets 1,661 11,812 711.2% 11 13,473

Receivables 1,366 894 65.4% 12 2,260

Other assets 70 10 14.7% 80

Total current assets 3,097 12,717 15,814

Non-current assets

Financial assets 962 (441) -45.9% 13 521

Investments in associates 443 (323) -72.9% 14 120

Property, plant and equipment 191,731 (3,143) -1.6% 15 188,588

Total non-current assets 193,136 (3,907) 189,229

Total assets 196,233 8,809 205,042

Current liabilities

Payables 1,037 2,090 201.5% 16 3,127

Interest bearing liabilities 559 (15) -2.6% 544

Provisions 1,437 1,700 118.3% 17 3,137

Total current liabilities 3,033 3,775 6,808

Non-current liabilities

Interest bearing liabilities 3,624 17 0.5% 3,641

Provisions 1,054 1,154 109.5% 17 2,208

Total non-current liabilities 4,678 1,171 5,849

Total liabilities 7,711 4,946 12,657

Net assets 188,522 3,863 192,385

Equity

Accumulated surplus 115,289 2,012 1.7% 18 117,301

Asset revaluation reserve 72,075 2,016 2.8% 19 74,091

Other reserves 1,158 (165) -14.2% 20 993

Total equity 188,522 3,863 192,385

Variance Explanation Report


Standard Balance Sheet

As at 30 June 2012



As at 30 June 2012Ref. Item

11 Cash

$ 10,301,729

$ (603,700)

$ (6,510,002)

$ 1,423,099

$ (893,946)

$ 2,090,070

$ 2,293,000

$ 500,000

$ 3,212,115

$ 11,812,365

12 Receivables

13 Financial Assets

14 Investments in Associates

15 Property, plant and equipment

Additional revenue - see Standard Income Statement

Total

Less additional expenditure - see Standard Income Statement

Add back Defined Benefits Top up expense (non cash flow)

Capital Works program under budget - see Standard Statement of

Capital Works

Higher creditors - supplier invoices not paid until after 30 June 2012

Higher debtors - invoices not paid by our customers as expected

Reallocation of LSL provoision from financial assets to cash

Add back non monetary asset contributions

Timing differences and differences between the forecast 30 June

2011 position on which the budget was based and on the actual 30

June 2011 position.

Commentary

Actual cash at year end is greater than budget as a result of the following items:

Collectability of rate debtors was budgeted to improve again in 2011-12, however this is

not reflected in the 30 June balance. Due to a delay in follow-up, the balance didn't

decrease until July 2012. Further, $400,000 of government grant debtors remain at 30

June 2012 in relation to capital projects that were budgeted to be finished during the

year. The GST receivable balance at year end is also high due to the increased flood

recovery purchases.

Legislation changed during the year and now funds are not required to be held separately

for long service leave provision. $500,000 held previously in a bond expired during the

year and therefore funds have been reallocated in the balance sheet to cash above.

The variance to budget for Property, Plant and Equipment is a result of five factors:

The closing budgeted value of Council's property, plant and equipment is based on an

forecasted closing balance as at 30 June 2011. The budget is set in May and the closing

balance is not finalised until September. Therefore part of the budget variance is relating

to an incorrect forecasted opening balance. The forecast was $179.7 million, however the

actual closing balance was $169.8 million, a difference of $9.9 million. This difference

predominately relates to a write down of assets as a result of flood damage and the

capital works program not being completed as scheduled.

The Central Highlands Regional Library of which Hepburn Council was a part of is in the

process of winding up. The books held in Council's three libraries are now owned directly

by Council and have therefore been transferred from this asset class to property, plant

and equipment. Further, the asset has been decreased based on future expected cash

flows from the liquidators and the City of Ballarat.




15 Property, plant and equipment

(cont.)

16 Payables

17 Provisions

** Note this includes trust fund and other

deposits

As a result of the flood events, significant assets have been damaged (impaired) and this

has resulted in a devaluation of $5.773 million at year end.

Council's land and buildings were re-valued at 30 June 2012 and the $6.1 million

increase is reflected in an increased value of property, plant and equipment and an

increase in the asset revaluation reserve. Further, some infrastructure assets were re-

valued in July 2011 and this $8.2 million increase has been reflected at 30 June 2012,

again as an increase in the value of property, plant and equipment and an increase in the

asset revaluation reserve. Due to the unpredictability of revaluations, these were not

included in the Budget.

The capital works program was not completed in accordance with the Budget, refer to the

Standard Capital Works Statement. This has resulted in the value of these assets not

increasing as per the Budget.

$268,000 of library books transferred from the Central Highlands Library Corporation and

$604,000 of "found" buildings have been added to Council's assets that were not

budgeted for.

Commentary

Current provisions are higher than budget due to the following reasons:

The creditors are higher than Budget due to timing, with $1 million in invoices relating to

2011-12 not being received until July 2012. Further, flood recovery works were budgeted

to be completed by 30 June 2012, however expenditure was still being incurred in June

2012 and will continue into next financial year.

As a result of the latest Enterprise Bargaining Agreement negotiations in November 2010,

an employee may access their long service leave entitlement, on a pro-rata basis, after

an initial 7 years of continuous service. Previously this was 10 years. This has

consequently increased the current portion of long service leave and decreased the non

current portion. While Council was made aware of this dollar difference at 30 June last

year, the budget for 2011-12 had already been set.

Council has a number of employees with annual leave balances greater than the

recommended hours. This has been a focus of management for the last two year, and

while the Budget estimated a decrease in the annual leave provision, the actual balance

is consistent with the prior year.

Council's share of the unfunded defined benefit liability is $1.4 million. Council was made

aware of this amount in August 2012 and therefore this was not included in the Budget.




18 Accumulated surplus

19 Asset Revaluation Reserve

20 Other Reserves Council's use of funds in the Recreation/Open Space Reserve was greater than

budgeted.

Last year, after the Budget was set, Council decreased the value of infrastructure assets

by $5.9 million as a result of flood damage. Another assessment has been made at 30

June 2012 and a further reduction of $5.77 million (impairment) has been made.

Council's land and buildings were re-valued at 30 June 2012 and the $6.1 million

increase is reflected in an increased value of property, plant and equipment and an

increase in the asset revaluation reserve. Further, some infrastructure assets were re-

valued in July 2011 and this $8.2 million increase has been reflected at 30 June 2012,

again as an increase in the value of property, plant and equipment and an increase in the

asset revaluation reserve. Due to the unpredictability of impairment assessments and

revaluations, these were not included in the Budget.

Commentary

Refer to commentary in item 10 of the Standard Income Statement.

Budget Actual

2011/2012 2011/2012

Capital Works Areas $'000 $'000 % Ref $'000

Roads, Drainage, Footpath, Bridges 11,204 (447) -4.0% 21 10,757

Recreation 1,924 728 37.8% 22 2,652

Buildings 2,411 (1,712) -71.0% 23 699

Plant and equipment and other 1,906 (862) -45.2% 24 1,044

Total capital works 17,445 (2,293) 15,152

Represented by:

New assets 741 (231) -31.2% 25 510

Expansion/upgrade 1,533 (87) -5.7% 1,446

Renewal 15,171 (1,975) -13.0% 26 13,196

Total capital works 17,445 (2,293) 15,152

Add capitalised library books and "found buildings" ($872,000) 16,024

Ref. Item

21 Roads, Drainage, Footpath,

Bridges


$3.6 million in general works were completed. This included $430,000 of an

additional $1 million in funding under the Country Roads and Bridges Program.

$332,000 was spent on the stabilisation and shoulder sealing projects, this was

$850,000 behind budget. Further, the $100,000 of roads and footpaths in the

Budget under special charge schemes were not completed during the year.

$300,000 was spent in completing Mullers Lane Bridge, this was not included in

the Budget as it was expected to be completed in the prior year. However, the

2011-12 Bridge program was underspent as the replacement of the Creswick Dean

Culvert has been deferred until next year. This is estimated to cost $200,000, plus

$50,000 for two other projects.

An additional $553,000 was received in funding under the Local Government

Infrastructure Fund during this year, of which $55,000 was spent on bridge and

footpath projects.


Variances

Commentary

Standard Capital Works Statement


The budget comprised $4.2 million of general works plus $7 million in flood

recovery works. $7.15 million in flood recovery works were completed on

Council's roads, bridges, footpaths and drains.

During the mid year budget review, the general program was reduced by $200,000

to fund other unexpected costs to Council.




Ref. Item

22 Recreation

23 Buildings

24 Plant & equipment & other

Due to the site still being negotiated, the new Cameron Court units have not been

built (budgeted cost $571,000). Further $300,000 remains to be spent on the

Vincent Street streetscape project and the $150,000 in the Budget for building

renewal was used for building maintenance and hence the costs weren't included

in capital.

The Budget comprised $1.2 million of general works plus $1.2 million in flood

recovery works. $260,000 in flood recovery works were completed on this asset

class. $443,000 in general works were completed.

Doug Lindsay Recreation Reserve at Creswick $178,000

Funding was received for upgrades of the Clunes, Trentham and Daylesford

Swimming Pool, $107,000 remains to be spent in 2012-13. $136,000 was spent on

the Clunes Community Interpretive Centre during the year, against a budget of

$300,000.

Commentary

5 major recreation projects that were not included in the Budget in the current year

as they were scheduled for completion by 30 June 2011 have now commenced or

been completed:

$25,000 was spent during the year completing a transfer facility upgrade and some

works at the Municipal Recycle Facility. A further $108,000 was spent on carbon

negative initiatives, such as water tanks and solar hot water systems at Clunes and

Newlyn. These projects were not included in the Budget as they were anticipated to

be finished in 2010-11.

Creswick Magic Pudding Playground $68,500

Drummond Tennis Court renewal $38,000

Daylesford Community Park projects $229,000

Two modules of the new corporate system have been implemented with one

remaining. The remaining $240,000 from the 2011-12 Budget will be spent in 2012-

13.

$400,000 to fund plant items were not purchased by 30 June, however will be

purchased early 2012-13.

The Budget comprised $720,000 of general works plus $1.2 million in flood

recovery works. $1.15 million in flood recovery works were completed. An

additional $553,000 was received in funding under the Local Government

Infrastructure Fund during this year, of which $309,000 was spent on recreation

projects. $1.5 million in general works were completed.

Calambeen Park Walking Track $76,000.

Clunes & Newlyn solar/hot water projects $108,500.




Ref. Item

24 Plant & equipment & other

(cont.)

25 New assets

26 Renewal Renewal of assets comprises the most significant class, which is consistent with

the Council's focus on renewal of existing assets to close the significant

"infrastructure gap". Refer to comments above for an explanation of why renewal

assets are below budget, in particular roads and bridges, recreation assets and the

significant plant items. Note all flood works have been treated as renewal.

Commentary

New assets are below budget predominately as a result of the Cameron Court units

not being built, but offset by the new amenities block at Daylesford Community

Park and the solar/hot water projects being completed during the year. These

projects were not included in the Budget as they were anticipated to be completed

the year before.

Council has moved to leasing part of the annual computer equipment renewal.

Therefore rather than paying $50,000 in cash for new laptops and computers this

year, these have been leased over 3 years. This has reduced the capital spend this

year against budget by $50,000.

Works at the Hepburn Mineral Springs reserve, such as replace concrete channel

and upgrade pedestrian connections have not been completed in full ($140,000

behind budget). These are anticipated to be completed next year in conjunction

with flood works at the site.

Budget Actual

2011/2012 2011/2012

$'000 $'000 % Ref $'000

Cash flows from operating activities

Rates and charges 14,562 74 1% 14,636

Grants recurrent (inclusive of GST) 4,970 2,271 46% 27 7,241

Grants non recurrent and contributions (inclusive of GST) 734 3,609 492% 28 4,343

Interest 250 302 121% 29 552

User fees 907 9 1% 916

Statutory fees 222 114 51% 30 336

Other receipts (inclusive of GST) 5,304 4,414 83% 31 9,718

Payments to suppliers (inclusive of GST) (6,473) (4,463) 69% 32 (10,936)

Payments to employees (9,662) 33 0% 33 (9,629)

Interest paid (271) 14 -5% (257)

Other payments (1,231) (207) 17% (1,438)

Net cash inflow (outflow) from operating activities 9,311 6,169 15,481

Cash flows from investing activities

Proceeds from sale of property, plant and equipment 333 (179) -54% 34 154

Payments for property, plant and equipment (17,445) 2,238 -13% 35 (15,207)

Net cash inflow (outflow) from investing activities (17,111) 2,059 (15,053)

Cash flows from financing activities

Proceeds from sale of financial asset - 500 36 500

Proceeds from borrowings 1,200 - 0% 1,200

Repayment of borrowings (473) - 0% (473)

Net cash inflow (outflow) from financing activities 727 500 1,227

Net increase (decrease) in cash held (7,073) 8,728 1,655

Cash at the beginning of the year 8,734 3,084 11,818

Cash at the end of the year 1,661 11,812 13,473


Variances


Standard Statement of Cash Flows


Ref. Item Commentary

27 Grants - recurrent (inclusive of GST) Refer to commentary in the Standard Income Statement regarding grants.

28 Grants - non recurrent (inclusive of

GST) and contributions

Refer to commentary in the Standard Income Statement regarding grants and

contributions.

29 Interest received Interest income in the Budget is set at conservative levels. Additional interest

on investments was earned as a result of Capital Works program not being

completed as budgeted, as the associated cash remained in the bank. Further,

flood recovery funds were received in advance and held on investment.

30 Statutory fees (inclusive of GST) Refer to commentary in the Standard Income Statement regarding statutory

fees.

31 Other Receipts (inclusive of GST) Refer to the Standard Income Statement. Note a number of reimbursements

due from government agencies and entities are still outstanding at year end,

therefore they are not included in the receipts. These outstanding receipts

contribute to the increased debtors balance at year end, refer Standard

Balance Sheet.

32 Payments to suppliers (inclusive of

GST)

Refer to commentary in the Standard Income Statement regarding materials

expenses and payment to suppliers.

33 Payments to employees Refer to commentary in the Standard Income Statement regarding grants and

contributions. Note the $1.4 million defined benefits top up payment that has

been included in employee benefits expense has not been paid as yet and

therefore is not included in this payment to employees.

34 Proceeds from sale of property,

plant and equipment

While commitments have been made, delivery of some major plant items had

not occurred by year end, therefore the sale of the items being replaced has

not occurred either by 30 June 2012.

35 Payments for property plant and

equipment

Refer to the Standard Capital Works Statement , the capital works program was

not completed as per the Budget.

36 Proceeds from sale of financial

assets

Refer to the Standard Balance Sheet - financial assets.


Standard Statement of Cash Flows


Anthea Lyons CA

Principal Accounting Officer

Date 21 September 2012

We have been authorised by the Council on 18 September 2012 to certify the standard statements in their final form.


Statement by Councillors and Principal Accounting Officer


In my opinion the accompanying standard statements have been prepared on accounting bases consistent with the financial

statements and in accordance with the Local Government Act 1989 and the Local Government (Finance and Reporting) Regulations

2004.

As at the date of signing, we are not aware of any circumstances which would render any particulars in the financial statements to be

misleading or inaccurate.

In our opinion the accompanying standard statements have been prepared on accounting bases consistent with the financial


2004.

Cr Sebastian Klein

Councillor

Date: 21 September 2012

Cr Rod May

Councillor


Aaron Van Egmond

Chief Executive Officer

Date 21 September 2012

Hepburn Shire CouncilFINANCIAL STATEMENTS


Note 2012 2011

$ $

Income

Rates and charges 2 14,645,226 13,507,270

Statutory fees and fines 3 335,664 313,752

User fees 4 934,212 985,368

Contributions - cash 6 (a) 306,328 81,051

Contributions - non-monetary assets 6 (b) 603,700 218,000

Grants - recurrent 5 7,345,944 5,941,508

Grants - non-recurrent 5 3,174,150 3,305,440

Reimbursements 7 8,177,390 9,838,854

Other income 8 1,728,117 1,379,075

Total income 37,250,729 35,570,319

Expenses

Employee benefits 9 (11,461,551) (9,384,483)

Materials and services 10 (10,829,555) (12,054,822)

Bad debts and change in doubtful debts 11 (7,644) (24,425)

Depreciation and amortisation 12 (4,967,448) (4,741,669)

Finance costs 13 (281,034) (214,839)

Other expenses 14 (1,425,769) (1,115,395)

Total expenses (28,973,002) (27,535,634)

Profit/(loss) 8,277,727 8,034,684

Other comprehensive income

Net gain/(loss) on disposal of property,

infrastructure, plant and equipment 15 (214,938) 58,730

Share of net profits/(losses) of associates and

joint ventures accounted for by the equity

method

16 - 10,254

Impairment of property and infrastructure 22 (5,773,281) (5,932,281)

Gains on property revaluation22 14,252,395 -

Other comprehensive income 8,264,176 (5,863,297)

Comprehensive result 16,541,903 2,171,387

Comprehensive Income Statement


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

Page1

Assets Note 2012 2011

Current assets $ $

Cash and cash equivalents 17 13,473,365 11,818,269

Trade and other receivables 18 2,259,946 2,004,666

Inventories 20 22,319 17,530

Other assets 21 57,981 128,269

Total current assets 15,813,612 13,968,733

Non-current assets

Trade and other receivables 18 - 688

Financial assets 19 520,560 998,567

Investments in associates 16 120,188 453,154

Property, infrastructure, plant and equipment 22 188,461,616 169,763,259

Intangible assets 23 126,296 142,083

Total non-current assets 189,228,660 171,357,752

Total assets 205,042,272 185,326,484

Liabilities

Current liabilities

Trade and other payables 24 3,127,070 1,693,035

Trust funds and deposits 25 965,056 887,214

Provisions 26 2,084,285 2,166,858

Interest-bearing loans and borrowings 27 544,282 433,191

Other liabilities 28 87,572 124,181

Total current liabilities 6,808,265 5,304,478

Non-current liabilities

Provisions 26 2,002,714 637,411

Interest-bearing loans and borrowings 27 3,640,627 3,024,476

Other liabilities 28 205,357 223,214

Total non-current liabilities 5,848,698 3,885,101

Total liabilities 12,656,963 9,189,579

Net Assets 192,385,308 176,136,905

Equity

Accumulated surplus 117,301,453 109,020,474

Reserves 29 75,083,856 67,116,431

Total Equity 192,385,308 176,136,905

Balance SheetAs at 30 June 2012

The above balance sheet should be read in conjunction with the accompanying notes.

Page2

Asset

Accumulated Revaluation Other

Total Surplus Reserve Reserves

2012 2012 2012 2012

2012 $ $ $ $

Balance at beginning of the financial year 176,136,905 109,020,474 66,097,266 1,019,165

Comprehensive result for the year 16,541,903 2,289,508 14,252,395 -

Transfers to other reserves 29(b) 170,250 - - 170,250

Transfers from other reserves 29(b) - 218,190 - (218,190)

Adjustments made directly to the Asset

Revaluation Reserve during the year

29(a) (485,742) 5,773,281 (6,259,023) -

Adjustments directly to equity recognised during

the year

21,993 - - 21,993

Balance at end of the financial year 192,385,308 117,301,453 74,090,638 993,217

Asset

Accumulated Revaluation Other

Total Surplus Reserve Reserves

2011 2011 2011 2011

2011 $ $ $ $

Balance at beginning of the financial year 173,855,136 100,737,501 72,074,547 1,043,088

Surplus(deficit) for the year 2,171,387 2,171,387 - -

Transfers to other reserves 29(b) 119,308 - - 119,308

Transfers from other reserves 29(b) - 179,305 - (179,305)

Adjustments made directly to the Asset

Revaluation Reserve during the year

29(a)

(45,000) 5,932,281 (5,977,281)

Adjustments directly to equity recognised during

the year

36,074 - - 36,074

Balance at end of the financial year 176,136,905 109,020,474 66,097,266 1,019,165

Note

The above statement of changes in equity should be read with the accompanying notes.

Statement of Changes in EquityFor the Year Ended 30 June 2012

Page3

2012 2011

Inflows/ Inflows/

(Outflows) (Outflows)

Note $ $

Cash flows from operating activities

Rates and charges 14,635,920 13,951,827

Statutory fees and fines 335,663 305,307

User charges and other fines (inclusive of GST) 915,621 1,487,236

Grants (inclusive of GST) 11,583,561 8,706,029

Developer contributions (inclusive of GST) 476,578 186,051

Reimbursements (inclusive of GST) 7,702,429 9,830,237

Interest 552,136 437,372

Rents (inclusive of GST) 847,246 805,236

Other receipts (inclusive of GST) 396,354 109,466

Net GST refund/payment 295,099 123,564

Payments to suppliers (inclusive of GST) (10,935,739) (12,834,812)

Payments to employees (9,628,909) (8,937,556)

Other payments (1,438,418) (1,115,360)

Net cash provided by (used in) operating activities 30 15,737,541 13,054,597

Cash flows from investing activities

Payments for property, infrastructure, plant and equipment 22 (15,206,789) (8,451,348)

Proceeds from sale of property, infrastructure, plant and equipment 15 153,720 254,083

Net cash provided by (used in) investing activities (15,053,069) (8,197,265)

Cash flows from financing activities

Finance costs (256,617) (219,445)

Proceeds from sale of financial asset 500,000 -

Proceeds from interest bearing loans and borrowings 1,200,000 380,000

Repayment of interest bearing loans and borrowings (472,758) (399,290)

Net cash provided by (used in) financing activities 970,625 (238,735)

Net increase (decrease) in cash and cash equivalents 1,655,097 4,618,596

Cash and cash equivalents at the beginning of the financial year 11,818,269 7,199,672

Cash and cash equivalents at the end of the financial year 31 13,473,365 11,818,269

The above cash flow statement should be read with the accompanying notes.

Restrictions on cash assets 32

Cash Flow StatementFor the Year Ended 30 June 2012

Page4

Introduction

(a) The Hepburn Shire Council was established by an Order of the Governor in Council on 19 January

1995 and is a body corporate.

The Council's main office is located at 76 Vincent Street, Daylesford 3460.

(b) The purpose of the Council is to:

- provide for the peace, order and good government of its municipal district;

- to promote the social, economic and environmental viability and sustainability of the municipal

district;

- to ensure that resources are used efficiently and effectively and services are provided in

accordance with the Best Value Principles to best meet the needs of the local community;

- to improve the overall quality of life of people in the local community;

- to promote appropriate business and employment opportunities;

- to ensure that services and facilities provided by the Council are accessible and equitable;

- to ensure the equitable imposition of rates and charges; and

- to ensure transparency and accountability in Council decision making.

External Auditor - Auditor-General of Victoria

Internal Auditor - Pitcher Partners

Bankers - Commonwealth Bank

Website - www.hepburn.vic.gov.au

Notes to the Financial ReportFor the Year Ended 30 June 2012

Website - www.hepburn.vic.gov.au

This financial report is a general purpose financial report that consists of a comprehensive Income

Statement, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement, and notes

accompanying these financial statements. The general purpose financial report complies with

Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting

Standards Board, the Local Government Act 1989, and the Local Government (Finance and

Reporting) Regulations 2004.

Note 1 Significant accounting policies

(a) Basis of accounting

This financial report has been prepared on the accrual and going concern basis.

This financial report has been prepared under the historical cost convention, except where

specifically stated in notes 1(i), 1(k), 1(m), 1(r) and 1(t).

Page 5


Note 1 Significant accounting policies (cont.)

All accounting policies are consistent with those applied in the prior year. Where appropriate,

comparative figures have been amended to accord with current presentation, and disclosure has

been made of any material changes to comparatives.

All entities controlled by Council that have material assets or liabilities, such as Special Committees

of Management, have been included in this financial report. All transactions between these entities

and the Council have been eliminated in full. Details of entities not included in this financial report

based on their materiality are detailed in note 42.

(b) Revenue recognition

Rates, grants and contributions

Rates, 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 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 doubtful debts on rates has not been established as unpaid rates represents a

charge against the rateable property that will be recovered when the property is next sold.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 are valued at their fair value at the date of transfer.

Income is recognised when the Council obtains control of the contribution or the right to receive the

contribution, it is probable that the economic benefits comprising the contribution will flow to the

Council and 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

5. The note also discloses the amount of unused grant or contribution from prior years that was

expended on Council’s operations during the current year.

A liability is recognised in respect of revenue that is reciprocal in nature to the extent that the

requisite service has not been provided at balance date.

Page 6



User fees and fines

User fees and fines (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 doubtful debts is recognised when collection in full is no longer probable.

Sale of property, plant and equipment, infrastructure

The profit or loss on sale of an asset is determined when control of the asset has irrevocably

passed to the buyer.

Trade and other receivables

Receivables are carried at amortised cost using the effective interest rate method. A provision for

doubtful debts is recognised when there is objective evidence that an impairment loss has

occurred.

Interest and rents

Interest and rents are recognised as revenue on a proportional basis when the payment is due, theInterest and rents are recognised as revenue on a proportional basis when the payment is due, the

value of the payment is notified, or the payment is received, whichever first occurs.

(c) Inventories

Inventories held for distribution are measured at cost adjusted when applicable for any loss of

service potential.

Other inventories are measured at the lower of cost and net realisable value.

(d) Depreciation and amortisation of property, plant and equipment, infrastructure, intangibles

Buildings, land improvements, plant and equipment, infrastructure, heritage assets, and other

assets having limited useful lives are systematically depreciated over their useful lives to the

Council in a manner which reflects consumption of the service potential embodied in those assets.

Estimates of remaining useful lives and residual values are made on a regular basis with major

asset classes reassessed annually. Depreciation rates and methods are reviewed annually.

Page 7



Where assets have separate identifiable components that are subject to regular replacement,

these components are assigned distinct useful lives and residual values and a separate

depreciation rate is determined for each component.

Road earthworks and artworks are not depreciated.

Straight line depreciation is charged based on the residual useful life as determined each year.

Major depreciation periods used are listed below and are consistent with the prior year unless

otherwise stated:

Period

Property (Years)

Land improvements 20 - 100

Buildings and Leasehold improvements 25 - 150

Plant and Equipment

Plant

plant, machinery and equipment 3 - 10

Machinery

fixtures, fittings and furniture 3 - 20 fixtures, fittings and furniture 3 - 20

Library books 10

Infrastructure

Roads

road pavements, seals and road substructure 10 - 80

road formation and earthworks nil

road kerb, channel and minor culverts 10 - 65

Bridges 5 - 80

Footpaths & cycle ways 10 - 65

Drainage 5 - 80

Street Furniture 5 - 80

Playground Equipment 5 - 80

Monuments 5 - 80

Other structures 5 - 80

Intangible Assets 10

Page 8



(e) Repairs and maintenance

Routine maintenance, repair costs, and minor renewal costs are expensed as incurred. Where the

repair relates to the replacement of a component of an asset and the cost exceeds the

capitalisation threshold the cost is capitalised and depreciated. The carrying value of the replaced

asset is expensed.

(f) Borrowing costs

Borrowing costs are recognised as an expense in the period in which they are incurred.

(g) Recognition and measurement of assets

Acquisition

The purchase method of accounting is used for all acquisitions of assets, being the fair value of

assets provided as consideration at the date of acquisition plus any incidental costs attributable to

the acquisition. Fair value is the amount for which the asset could be exchanged between

knowledgeable willing parties in an arm's length transaction.

Where assets are constructed by Council, cost includes all materials used in construction and

direct labour.

In accordance with Council's policy, the threshold limits of $1,000 has applied when recognising

assets within an applicable asset class and are consistent with the prior year:

Revaluation

Subsequent to the initial recognition of assets, non-current physical assets, other than plant and

equipment (and other structures), are measured at their fair value, being the amount for which the

assets could be exchanged between knowledgeable willing parties in an arms length transaction.

At balance date, the Council reviewed the carrying value of the individual classes of assets

measured at fair value to ensure that each asset materially approximated its fair value. Where the

carrying value materially differed from the fair value at balance date the class of asset was

revalued.

In addition, Council undertakes a formal revaluation of land, buildings, and infrastructure assets on

a regular basis ranging from 2 to 5 years. The valuation is performed either by experienced council

officers or independent experts.

Page 9



Where the assets are revalued, the revaluation increments are credited directly to the asset

revaluation reserve except to the extent that an increment reverses a prior year decrement for that

class of asset that had been recognised as an expense in which case the increment is recognised

as revenue up to the amount of the expense. Revaluation decrements are recognised as an

expense except where prior increments are included in the asset revaluation reserve for that class

of asset in which case the decrement is taken to the reserve to the extent of the remaining

increments. Within the same class of assets, revaluation increments and decrements within the

year are offset.

Land under roads

Land under roads acquired after 30 June 2008 is brought to account using the fair value basis.

Council does not recognise land under roads that it controlled prior to that period in its financial

report.

(h) Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents include cash on hand,

deposits at call, and other highly liquid investments with original maturities of three months or less,

net of outstanding bank overdrafts.

(i) Other financial assets

Managed funds are valued at fair value, being market value, at balance date. Any unrealised gains

and losses on holdings at balance date are recognised as either a revenue or expense.

(j) Investments

Investments, other than investments in associates, are measured at cost.

(k) Accounting for investments in associates

As a result of the wind up of the Central Highlands Regional Library Corporation, Council's

investment in associates is accounted for using final expected distributions. Refer to note 16.

Council's investment in associates was formally accounted for by the equity method.

(l) Tender deposits

Amounts received as tender deposits and retention amounts controlled by Council are recognised

as Trust funds until they are returned or forfeited (refer to note 25).

Page 10



(m) Employee benefits

Wages and salaries

Liabilities for wages and salaries and rostered days off are recognised and measured as the

amount unpaid at balance date and include appropriate oncosts such as workers compensation

and payroll costs.

Annual leave

Annual leave entitlements are accrued on a pro rata basis in respect of services provided by

employees up to balance date.

Annual leave expected to be paid within 12 months is measured at nominal value based on the

amount, including appropriate oncosts, expected to be paid when settled.

Long service leave

Long service leave entitlements payable are assessed at balance date having regard to expected

employee remuneration rates on settlement, employment related oncosts and other factors

including accumulated years of employment, on settlement, and experience of employee departure

per year of service.

Long service leave expected to be paid within 12 months is measured at nominal value based on

the amount expected to be paid when settled.

Long service leave expected to be paid later than one year has been measured at the present

value of the estimated future cash outflows to be made for these accrued entitlements.

Commonwealth bond rates are used for discounting future cash flows.

An employee may access this entitlement, on a pro-rata basis, after an initial 7 years of continuous

service. Previously this was 10 years.

Classification of employee benefits

An employee benefit liability is classified as a current liability if the Council does not have an

unconditional right to defer settlement of the liability for at least 12 months after the end of the

period. Long service leave for employees with 7 or more years continuous service and all annual

leave and wages and salaries is classified as current. Long service leave for employees with less

than 6 years service is classified as non current.

Page 11



Superannuation

A liability is recognised in respect of Council's present obligation to meet the unfunded obligations

of defined benefit superannuation schemes to which its employees are members. The liability is

defined as the Council's share of the scheme's unfunded position, being the difference between the

present value of employees’ accrued benefits and the net market value of the scheme’s assets at

balance date. The liability also includes applicable contributions tax of 15%.

The superannuation expense for the reporting year is the amount of the statutory contribution the

Council makes to the superannuation plan which provides benefits to its employees together with

any movements (favourable/unfavourable) in the position of any defined benefits schemes. Details

of these arrangements are recorded in note 33.

(n) Leases

Operating leases

Lease payments for operating leases are required by the accounting standard to be recognised on

a straight line basis, rather than expensed in the years in which they are incurred.

(o) Allocation between current and non-current(o) Allocation between current and non-current

In the determination of whether an asset or liability is 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 twelve months, being the Council's

operational cycle, or if the Council does not have an unconditional right to defer settlement of a

liability for at least 12 months after the reporting date.

(p) Web site costs

Costs in relation to websites are charged as an expense in the period in which they are incurred.

(q) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the

amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances

the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the

expense. Receivables and payables in the balance sheet are shown inclusive of GST.

Cash flows are presented in the cash flow statement on a gross basis, except for the GST

component of investing and financing activities, which are disclosed as operating cash flows.

Page 12



(r) Impairment of assets

At each reporting date, the Council reviews the carrying value of its assets to determine whether

there is any indication that these assets have been impaired. If such an indication exists, the

recoverable amount of the asset, being the higher of the asset's fair value less costs to sell and

value in use, is compared to the assets carrying value. Any excess of the assets carrying value

over its recoverable amount is expensed to the comprehensive income statement, unless the asset

is carried at the revalued amount in which case, the impairment loss is recognised directly against

the revaluation surplus in respect of the same class of asset to the extent that the impairment loss

does not exceed the amount in the revaluation surplus for that same class of asset.

(s) Rounding

Unless otherwise stated, amounts in the financial report have been rounded to the nearest dollar.

Figures in the financial statement may not equate due to rounding.

(t) Financial guarantees

Financial guarantee contracts are recognised as a liability at the time the guarantee is issued. The

liability is initially measured at fair value, and if there is material increase in the likelihood that the

guarantee may have to be exercised, at the higher of the amount determined in accordance withguarantee may have to be exercised, at the higher of the amount determined in accordance with

AASB 137 Provisions, Contingent Liabilities and Contingent Assets and the amount initially

recognised less cumulative amortisation, where appropriate. In the determination of fair value,

consideration is given to factors including the probability of default by the guaranteed party and the

likely loss to Council in the event of default.

(u)

Contingent assets and contingent liabilities are not recognised in the Balance Sheet, but are

disclosed by way of a note and, if quantifiable, are measured at nominal value. Contingent assets

and liabilities are presented inclusive of GST receivable or payable respectively.

Commitments are not recognised in the Balance Sheet. Commitments are disclosed at their

nominal value and inclusive of the GST payable.

Contingent assets and contingent liabilities and commitments

Page 13


(v)

Standard / Interpretation Summary Applicable for

annual reporting

periods beginning

or ending on

Impact on Local

Government

financial

statements

AASB 9: Financial Instruments and

AASB 20010–11: Amendments to

Australian Accounting Standards

arising from AASB 9 [AASB 1, 3, 4,

5, 7, 101, 102, 108, 112, 118, 121,

127, 128, 131, 132, 136, 139, 1023

& 1038 and Interpretations 10 & 12]

These standards are applicable retrospectively

and amend the classification and measurement

of financial assets. Council has not yet

determined the potential impact on the financial

statements. Specific changes include:

Applicable for annual

reporting periods

commencing on or after

1 January 2013.

These changes are

expected to provide

some simplification in

the accounting for and

disclosure of financial

instruments

* simplifying the classifications of financial assets

into those carried at amortised cost and those

carried at fair value;

* removing the tainting rules associated with held-

to-maturity assets;

* simplifying the requirements for embedded

derivatives;

* removing the requirements to separate and fair

value embedded derivatives for financial assets

carried at amortised cost;

* allowing an irrevocable election on initial

recognition to present gains and losses on

investments in equity instruments that are not

held for trading in other comprehensive income.

Dividends in respect of these investments that

are a return on investment can be recognised in

profit or loss and there is no impairment or

recycling on disposal of the instrument; and

* reclassifying financial assets where there is a

change in an entity's business model as they are

initially classified based on:

a. the objective of the entity's business model for

managing the financial assets; and

b. the characteristics of the contractual cash

flows.


Pending Accounting Standards

The following Australian Accounting Standards have been issued or amended and are applicable to the Council

but are not yet effective.

They have not been adopted in preparation of the financial statements at reporting date.

The other Australian Accounting Standards issues or amendments have an effect on the Hepburn Shire Council.

Note 2 Rates and charges 2012 2011

$ $

Residential 7,804,379 6,969,550

Commercial 1,699,032 1,527,262

Mixed Use 268,465 247,687

Industrial 73,986 65,723

Farm 1,562,049 1,459,283

Vacant Land - township 458,990 479,946

Vacant Land - other 538,283 429,905

Recreational 11,729 10,763

Trust For Nature 14,316 13,398

Supplementary rates and rate adjustments 149,370 154,318

Municipal charge - 325,046

Garbage charge 512,704 485,478

1,110,510 1,009,905


Council uses capital improved value (CIV) as the basis of valuation of all

properties within the municipal district. The CIV of a property is its market

value.

The valuation base used to calculate general rates for 2011/2012 was $3,092

million (2010-2011 $3,044 million). The 2011/2012 rate in the CIV dollar was

0.4180 (2010-2011: 0.3835).

Waste Management Charge 1,110,510 1,009,905

Recycling Charge 441,412 329,006

Total rates and charges 14,645,226 13,507,270

Note 3 Statutory fees and fines

Infringements and costs 47,248 19,786

Town planning fees 200,630 193,629

Land information certificates 43,367 44,662

Permits 36,215 49,448

Other 8,204 6,227

Total statutory fees and fines 335,664 313,752

The date of the latest general revaluation of land for rating purposes within the municipal district

was 1 January 2010, and the valuation will be applied in the rating year commencing 1 July 2010.

A revaluation was undertaken again during 2012, these valuations will be effective for the 2012-13

and 2013-14 financial years.

Page 15


Note 4 User fees 2012 2011

$ $

Aged services fees 464,057 465,178

Registration fees 181,159 189,640

Building services fees 125,460 123,158

Waste services charges 97,151 129,929

Other fees and charges 66,385 77,463

Total user fees 934,212 985,368

Note 5 Grants

Grants were received in respect of the following :

Summary of grants

Federally funded grants 710,902 2,159,717

State funded grants 9,704,619 7,087,232

Total 10,415,521 9,246,949

Recurrent

Commonwealth Government - roads to recovery 692,250 696,767

Victoria Grants Commission - unallocated* 3,334,138 2,577,845

Victoria Grants Commission - local roads ** 1,659,498 1,295,657

Community health 51,481 56,128

School crossing supervisors 12,484 12,150

Maternal and child health 119,899 123,596 Maternal and child health 119,899 123,596

Food services 35,013 34,341

Home help/linkages 645,425 647,690

Senior citizen centres 55,914 29,505

Transport 175,414 67,741

Adult day care 203,593 210,077

Assessment/welfare support 179,804 140,573

Heritage and culture 14,000 13,200

Youth 39,112 24,300

Libraries 127,919 -

Other - 11,936

Total recurrent 7,345,944 5,941,508

* This amount includes $1,358,380 pre-payment of 2012/13 Victoria Grants Commission

unallocated grant.

**This amount includes $681.231 pre-payment of 2012/13 Victoria Grants commission - local roads

grant.

On 3 August 2012, Council was advised that the 2011-12 Grants Commission allocations to Victoria were overpaid by

a total of $13.601 million due to an overestimation of the inflation and population growth forecasts used to estimate the

allocations for that year. The overpayment applicable to Hepburn Shire was $104,573. Consequently, the 2012-13

allocation will be reduced by this overpayment amount.

Page 16


Note 5 Grants (cont.) 2012 2011

Non-recurrent $ $

Community health 3,722 55,142

Youth 2,500 16,664

Family and children - 11,500

Home help 12,950 107,913

Commerce and tourism 347,907 273,300

Roads 1,000,000 -

Recreation 58,426 1,929,000

Heritage and culture 594,900 217,625

Waste and environment 86,125 84,125

Emergency management and preparation 123,628 132,500

Bushfire recovery - 133,270

Flood recovery 80,000 330,902

Other infrastructure 553,000 -

Libraries 56,734 -

Other 254,258 13,500

Total non-recurrent 3,174,150 3,305,440

Conditions on grants

Grants recognised as revenue during the year that were obtained on condition that they be expended in a specified

manner that had not occurred at balance date were:

Accord Round 5 Project: Sustainable Building Management Plan 5,000 -

Country Roads & Bridges Initiative Grant 532,850 -

Local Government Infrastructure Program Grant 130,690 -

Clunes Community and Interpretive Centre Project 406,350 -

Living Libraries - Trentham 35,200

Bushfire Community Assistance Gift - 66,477

Transport Connections 175,400 -

VBRRA Community Recovery Support Grant - 66,972

VMWC Projects - 93,342

Flood Recovery - 290,902

Preschool Grant - 11,500

HACC Growth Funding 35,761 -

HACC Seeding Grant - 12,317

HACC Bushfire Preparedness Grant 12,500 12,150

HACC Rural Support and Flood Relief IT Resources Grant - 22,999

HACC Rural Need Project - 38,000


Page 17


Note 5 Grants (cont.) 2012 2011

$ $

Clunes Cluster Small Towns Adaptation Project 190,000 188,250

Flood Recovery Position Business & Community Development Officer 12,855 14,337

Victorian Mineral Water DVD Grant - 18,000

Bushfire Planning Provisions - 120,000

School Focused Youth Services - 16,664

Noxious Weeds Gorse Task Force - 22,085

Halls Refurbishment Grant - 22,025

Daylesford Avenue of Honour - 4,628

Calembeen Park Walking Track - 54,000

Daylesford Community Park Stage 2 (Skate Park) - 161,000

Total 1,536,606 1,235,648

HACC Bushfire Preparedness Grant 12,150 -

Clunes Cluster Small Towns Adaptation Project 169,000 -

Victorian Mineral Water DVD Grant 18,000 -

Bushfire Planning Provisions 19,190 -

Grants which were recognised as revenue in prior years and were expended during the current year in the manner

specified by the grantor were:

Grants recognised as revenue during the year that were obtained on condition that they be expended in a specified


Bushfire Planning Provisions 19,190 -

Noxious Weeds Gorse Task Force 22,085 -

Halls Refurbishment Grant 22,025 -

Daylesford Community Park Stage 2 (Skate Park) 161,000 -

Grant for Doug Lindsay recreation reserve - 2,525,341

Grant for transport connections Front SEEAT program (community services) - 95,552

Bushfire Community Assistance Gift - 49,590

Drummond Avenue of Honour - 4,000

Economic Development Buy Local Grant - 1,994

Glenlyon Hall Upgrade - 32,760

Hepburn L2P Program - 6,063

Trentham Sporting Facilities Refurbishment - 144,914

VBRRA Community Recovery Support Grant - 4,382

Youth Bushfire Response Gift - 45,321

423,450 2,909,917

Net increase (decrease) in restricted assets resulting from grant revenues for

the year: 1,113,156 (1,674,269)

Page 18


Note 6 Contributions 2012 2011

(a) Cash $ $

Roads 71,637 10,000

Recreational, leisure and community facilities 222,843 71,051

Other 11,848 -

Total 306,328 81,051

(b) Non-monetary assets

Land under roads - 7,000

Roads - 61,000

Land & Buildings 603,700 150,000

Total 603,700 218,000

Total contributions 910,028 299,051

Note 7 Reimbursements

Flood recovery 7,982,090 9,716,829

Other 195,300 122,025

Total 8,177,390 9,838,854

Note 8 Other income

Interest 585,236 337,663

Interest on rates 89,054 99,709

Rent 847,246 832,854 Rent 847,246 832,854

Sale of materials 53,864 34,821

Supervision and administration fees 22,546 27,069

Other 130,171 46,959

Total other income 1,728,117 1,379,075

Note 9 Employee benefits 2012 2011$ $

Wages and salaries 8,847,830 8,015,039

Superannuation 710,353 626,493

Superannuation - additional call* 1,423,099 315,260

Fringe benefits tax and work cover 480,270 427,691

Total employee benefits 11,461,551 9,384,483

* On July 1, 2013, Council will be required to make an another additional contribution to Vision Super to meet our

obligations in relation to members of the defined benefit plan. Refer Note 33 for further information.

* In 2011-12, Council was required to make an additional contribution to Vision Super to meet our obligations in

relation to members of the defined benefit plan. This includes a contribution to the Central Highlands Regional Library

corporation defined benefit plan shortfall.

Page 19


Note 10 Materials and services 2012 2011

$ $

Materials and services

Waste management 2,193,052 1,858,102

Road construction 2,250,790 1,906,786

Home & community care 309,009 387,654

Building maintenance 429,211 407,621

Flood recovery 1,969,760 5,031,183

Swimming pools 265,538 198,573

Materials 2,957,885 1,893,078

Utility payments 454,309 371,825

Total materials and services 10,829,555 12,054,822

Note 11 Bad debts and change in doubtful debts

Infringement debtors 7,644 24,425

Total bad debts and change in doubtful debts 7,644 24,425

Note 12 Depreciation and amortisation

Property

Land

Land improvements 155,167 155,167 Land improvements 155,167 155,167

Buildings

Buildings 608,997 453,948

Plant and Equipment

Plant, machinery and equipment 598,190 594,884

Fixtures, fittings and furniture 52,746 56,782

Computers and telecommunications 45,567 67,595

Library books 52,994 -

Infrastructure

Roads 2,821,864 2,787,994

Bridges 215,268 213,337

Footpaths and cycleways 59,715 59,369

Drainage 90,780 90,780

Kerb & Channel 134,992 134,992

Street furniture 33,866 33,866

Monuments 10,785 10,785

Playground equipment 26,483 25,483

Other infrastructure 44,248 40,900

Intangibles

Computer software 15,787 15,787

Total depreciation and amortisation 4,967,448 4,741,669

Page 20


2012 2011

Note 13 Finance costs $ $

Interest - Borrowings 281,034 214,839

Total finance costs 281,034 214,839

Note 14 Other expenses 2012 2011

$ $

Auditors' remuneration (see Note 38) 65,324 75,223

Councillors' allowances 108,955 145,285

Insurances 347,220 213,689

Community grants 138,887 138,948

Contribution to Central Highlands Regional Library Corporation 262,707 427,148

Contribution to City of Ballarat for Library Services 162,119 -

Write down of Investment in Associates 118,150 -

Other 222,407 115,102

Total other expenses 1,425,769 1,115,395

Note 15 Net gain/(loss) on disposal of property, infrastructure, plant and equipment

Proceeds from disposal of assets 153,720 254,083

Write off assets not under Council's control 484,320 -

Written down value of assets sold (852,979) (195,353) Written down value of assets sold (852,979) (195,353)

Profit/(loss) on disposal of assets (214,938) 58,730

Note 16 Investment in associates 2012 2011

Central highlands regional library corporation $ $

Movement in carrying value of specific investment

Carrying value of investment at start of year 453,154 442,900

Share of surplus(deficit) for year - 10,254

Reallocation to Book Assets (see Note 22) (214,816) -

Write down of investment * (118,150) -

Carrying value of investment at end of year 120,188 453,154

As of 1 July 2011, Hepburn Shire Council employed their library staff and commenced purchasing

some library services from the City of Ballarat.

Central Highlands Regional Library Corporation established in April 1997 provides library services

across 6 municipalities with Hepburn Shire Council having a 11.62% share in ownership (11.62%

2010-11).

Page 21


Note 16 Investment in associates (cont.)

2012 2011

Note 17 Cash and cash equivalents $ $

Cash on hand 6,167 5,000

Cash at bank 454,182 1,991,074

Money market call account 13,013,016 9,822,195

Total cash and cash equivalents 13,473,365 11,818,269

Note 18 Trade and other receivables

Current

Rates debtors 896,623 887,317

Infringement debtors 32,283 35,853

Provision for doubtful debts - infringements (16,751) (27,697)

Other debtors, including government grants 1,052,693 992,841

Net GST receivable 295,099 116,352

Users of the financial report should refer to Note 32 for details of restrictions on cash assets and

note 34 for details of existing Council commitments

The Board of the Central Highlands Regional Library Corporation resolved to wind up the Corporation

on 10 October 2011 and appointed Dennis M Foley and Associates as the liquidator. On 17 July

2012, Hepburn Shire Council authorised the signing and sealing of the Agreement for the Winding Up

of the Central Highlands Regional Library Corporation. * An estimate of future cash flows has been

used to value the investment at 30 June 2012.

Net GST receivable 295,099 116,352

Total 2,259,946 2,004,666

Non-current

Special charge scheme - 688

Total - 688

Total trade and other receivables2,259,946 2,005,353

Note 19 Financial assets 2012 20110 12,568

Non-current

Bank bills 520,560 998,567

Total financial assets 520,560 899,196

Note 20 Inventories

Inventories held for distribution 22,319 17,530

Total inventories 22,319 17,530

Note 21 Other assets

Current

Prepayments 24,881 113,061

Accrued income 33,100 15,208

Total 57,981 128,269

Page 22

Note 22 Property, plant and equipment, infrastructure

2012 2011

$ $

Summary

at cost 33,666,041 35,203,867

less accumulated depreciation (5,379,967) (5,401,677)

28,286,074 29,802,190

at fair value 310,036,047 274,325,465

less accumulated depreciation (138,154,913) (128,432,115)

less accumulated impairment losses (11,705,592) (5,932,281)

160,175,542 139,961,069

Total 188,461,616 169,763,259

Property

Land

at fair value as at 30 June 2012 24,545,700 22,456,700

24,545,700 22,456,700

Land under roads

at deemed cost 86,327 86,327

86,327 86,327

Land improvements

at cost 9,771,398 4,743,233

Less accumulated impairment losses (2,093,481) -

Less accumulated depreciation (1,272,352) (1,117,184)

6,405,565 3,626,048

Total Land 31,037,593 26,169,075

Buildings

at cost 532,183 3,245,715

Less accumulated depreciation - (70,466)

532,183 3,175,249



Less accumulated impairment losses (806,224) (356,224)

37,640,312 31,638,614

Total Buildings 38,172,495 34,813,862

Total Property 69,210,087 60,982,938


Page 23


Note 22 Property, plant and equipment, infrastructure (cont.)

Plant and Equipment 2012 2011

$ $

Plant, machinery and equipment

at cost 5,566,471 5,526,816


2,803,603 2,950,287

Fixtures, fittings and furniture

at cost 782,308 807,031

Less accumulated depreciation (525,655) (464,742)

256,653 342,290

Computers and telecommunications

at cost 335,015 712,957


59,912 95,003

Library books

at cost 529,940 -

Less accumulated depreciation (314,440) -

215,500 -

Art works

at cost 341,085 341,085

341,085 341,085

Total Plant and Equipment 3,676,752 3,728,665

Valuation of land (excluding land under roads) and buildings were undertaken by a qualified

independent valuer, Vincent John Bourke, Registered Valuer. The valuation of buildings is at fair

value based on current replacement cost less accumulated depreciation at the date of valuation. The

valuation of land is at fair value, being market value based on highest and best use permitted by

relevant land planning provisions. All freehold land reserved for public open space is valued at a

discount of 70 percent to market value based on legal precedents.

Land under roads is valued at deemed cost. Deemed cost is based on Council valuations at the date

acquired using site values adjusted for englobo (undeveloped and/or unserviced) characteristics,

access rights and private interests of other parties and entitlements of infrastructure assets and

services.

Assets can be valued at cost or at fair value. A revaluation of land and buildings has occurred at 30

June 2012 which has resulted in those buildings above valued at cost at 30 June 2011 now being

valued at fair value and are therefore included on a separate line above.

Page 24


Note 22 Property, plant and equipment, infrastructure (cont.)2012 2011

Infrastructure $ $

Roads

at cost 9,318,982 13,086,406


9,318,982 12,744,804



Less accumulated impairment losses (6,520,030) (4,771,000)

80,680,823 65,023,575

Bridges

at cost 1,624,930 361,850


1,612,386 356,544



Less accumulated impairment losses (840,000) (600,000)

9,070,485 9,518,516

Footpaths and cycleways

at cost 76,457 612,804


76,457 569,523



Less accumulated impairment losses (96,800) -

1,538,097 1,189,899

Drainage

at cost 1,020,397 207,728


1,001,513 192,009



Less accumulated impairment losses (1,349,057) (205,057)

2,818,613 4,050,197

Page 25



2012 2011

Kerb & Channel $ $

at cost - 12,511


- 11,260

at Fair value as at 30 June 2011 8,667,511 8,086,965


4,067,054 4,110,726

Street Furniture

at Fair value as at 30 June 2010 2,278,742 2,278,742


1,609,024 1,642,890

Monuments $ $

at Fair value as at 30 June 2010 539,263 539,263


266,020 276,805

Playground Equipment

at cost 275,641 124,622


252,531 107,743

at Fair value as at 30 June 2010 405,032 405,032


32,895 53,147

Other Structures

at cost 1,449,057 1,069,469


1,274,046 938,706

Total Infrastructure 113,618,926 100,786,343

Page 26



Works in progress

Land & Buildings at cost 536,927 91,566

Roads at cost 919,353 3,587,792

Other at cost 499,570 585,955

Total Works in progress 1,955,850 4,265,313

188,461,616 169,763,259 Total property, infrastructure, plant and equipment

Valuation of infrastructure assets has been determined in accordance with a valuation undertaken by

Council's Manager - Engineering Services, Richard Russell. The valuation is at fair value based on

replacement cost less accumulated depreciation as at the date of valuation. A revaluation was

undertaken in July 2011 on some infrastructure assets and has been reflected in the valuations as at

30 June 2012.

Assets can be valued at cost or at fair value. A revaluation of roads, footpaths kerb & channel

occurred at 30 June 2011 which has resulted in those assets above valued at cost at 30 June 2011

now being valued at fair value and are therefore included on a separate line above.

Page 27


2012

Balance at

beginning of

financial year

Acquisition of

assets **

Revaluation

increments

(decrements)

Depreciation

and

amortisation

Written down

value of

disposals Transfers

Balance at end

of financial

year

(note 27) (note 12)

$ $ $ $ $ $ $ $

Property

land 22,456,700 603,700 1,950,800 - 465,500 - - 24,545,700

land under roads 86,327 - - - - - - 86,327

land improvements 3,626,048 1,668,514 - (155,167) - (2,093,481) 3,359,652 6,405,565

Total land 26,169,075 2,272,214 1,950,800 (155,167) 465,500 (2,093,481) 3,359,652 31,037,593

buildings 34,813,862 503,570 4,106,689 (608,997) 221,242 (450,000) 28,613 38,172,495

Total buildings 34,813,862 503,570 4,106,689 (608,997) 221,242 (450,000) 28,613 38,172,495

Total property 60,982,938 2,775,784 6,057,489 (764,164) 686,742 (2,543,481) 3,388,264 69,210,088

Plant and Equipment

plant, machinery and equipment 2,950,287 558,582 - (598,190) 107,077 - - 2,803,603

fixtures, fittings and furniture 342,290 7,727 - (52,746) 40,618 - - 256,653

computers and telecommunications 95,003 29,018 - (45,567) 18,542 - - 59,912

library books - 268,494 (52,994) 215,500

art works 341,085 - - - - - - 341,085

Total plant and equipment 3,728,665 863,821 - (749,497) 166,237 - - 3,676,752

Infrastructure (188,461,616)

roads 77,768,379 8,605,811 8,196,476 (2,821,864) - (1,749,000) - 89,999,802

bridges 9,875,060 1,119,610 - (215,268) - (240,000) 143,471 10,682,872

footpaths and cycleways 1,759,422 79,631 (81,640) (59,715) - (96,800) 13,656 1,614,554

drainage 4,242,206 812,690 - (90,780) - (1,144,000) - 3,820,116

kerb & channel 4,121,986 - 80,070 (134,992) - - - 4,067,064

street furniture 1,642,890 - - (33,866) - - - 1,609,024

monuments 276,805 - - (10,785) - - - 266,020

playground equipment 160,890 82,455 - (26,483) - - 68,565 285,426

other Structures 938,706 136,094 - (44,248) - - 243,493 1,274,046

Total infrastructure 100,786,343 10,836,290 8,194,906 (3,438,000) - (3,229,800) 469,185 113,618,924

Works in progress

land & buildings 91,566 473,974 - - - - (28,613) 536,927

roads 23,315 61,891 - - - - (13,656) 71,550

bridges 148,471 18,475 - - - - (143,471) 23,475

infrastructure 3,416,007 767,972 (3,359,651) 824,328

other 585,955 225,673 (312,058) 499,570

Total works in progress 4,265,315 1,547,985 - - - - (3,857,449) 1,955,851

Total property, plant and

equipment, infrastructure169,763,259 16,023,880 14,252,395 (4,951,661) 852,979 (5,773,281) 0 188,461,616

**Payments for property, infrastructure, plant and equipment per the Cash Flow Statement does not equal total additions due to non cash items being the transfer of library books

and the land now under Council control.

Notes to the Financial Report


Impairment

losses

recognised in

asset

revaluation

reserve *

* In September 2010, January 2011 and February 2011, major flooding was experienced in several parts of the Shire resulting in the need for significant repairs to Buildings and

Infrastructure. The impairment loss as at 30 June 2011 amounted to $5.93 million. $8.56 million in flood recovery works have been undertaken on Council's assets during 2011-12.

These costs have been capitalised and are reflect in the "at cost" amounts above. These works have increased the total written down value of assets reflected above.

As the repair work has not been completed by 30 June 2012, Council's assets have been subject to further impairment testing. A further $5.77 million of impairment has been

recorded. The recoverable amount of the asset is its value-in-use.

Page28


2011

Balance at

beginning of

financial year

Acquisition

of assets

Revaluation

increments

(decrements)

Depreciation

and

amortisation

Written down

value of

disposals Transfers

Balance at end

of financial

year

(note 27) (note 12) (a)

$ $ $ $ $ $ $ $

Property

land 22,561,700 - (45,000) - 60,000 - - 22,456,700

land under roads 51,000 35,327 0 - - - - 86,327

land improvements 3,781,215 - 0 (155,167) - - - 3,626,048

Total land 26,393,915 35,327 (45,000) (155,167) 60,000 - - 26,169,075

buildings 34,883,721 687,016 0 (453,948) 0 (356,224) 53,298 34,813,862

Total buildings 34,883,721 687,016 0 (453,948) 0 (356,224) 53,298 34,813,862

Total property 61,277,636 722,343 (45,000) (609,115) 60,000 (356,224) 53,298 60,982,938

Plant and Equipment

plant, machinery and equipment 2,829,213 850,860 - (594,884) 134,901 - - 2,950,287

fixtures, fittings and furniture 286,942 112,129 - (56,782) - - - 342,290

computers and telecommunications 78,017 85,033 - (67,595) 452 - - 95,003

art works 341,085 - - - - - - 341,085

Total plant and equipment 3,535,257 1,048,022 0 (719,261) 135,353 0 0 3,728,664

Infrastructure

roads 82,320,674 2,961,145 - (2,787,994) - (4,771,000) 45,553 77,768,379

bridges 10,346,395 51,963 - (213,337) - (600,000) 290,039 9,875,060

footpaths and cycleways 1,801,508 7,293 - (59,369) - - 9,990 1,759,422

drainage 4,538,042 - - (90,780) - (205,057) - 4,242,206

kerb & channel 4,256,977 - - (134,992) - - - 4,121,986

street furniture 1,676,756 - - (33,866) - - - 1,642,890

monuments 287,590 - - (10,785) - - - 276,805

playground equipment 166,373 20,000 - (25,483) - - - 160,890

other Structures 770,563 188,508 - (40,900) - - 20,535 938,706

Total infrastructure 106,164,879 3,228,910 - (3,397,505) - (5,576,057) 366,117 100,786,343

Works in progress

buildings 103,016 62,042 - - - - (73,491) 91,566

roads 65,202 13,656 - - - - (55,543) 23,315

bridges 312,539 125,971 - - - - (290,039) 148,471

infrastructure 361,621 3,054,386 - 3,416,007

Other 192,471 414,019 (20,535) 585,955

Total works in progress 1,034,849 3,670,073 - - - - (439,608) 4,265,314

Total property, plant and

equipment, infrastructure172,012,622 8,669,347 (45,000) (4,725,882) 195,353 (5,932,281) (20,193) 169,763,259



Impairment

losses

recognised in

asset

revaluation

reserve *

Page29

Note 23 Intangible assets 2012 2011

$ $

Computer softwareat cost 157,870 157,870


126,296 142,083

Reconciliation of computer softwareBalance at beginning of year 142,083 157,870

Additions - -

Amortisation (15,787) (15,787)

Closing carrying value at the end of the

year 126,296 142,083

Note 24 Trade and other payables

Trade payables 2,141,677 1,501,139

Accrued expenses 985,393 191,895

Total trade and other payables 3,127,070 1,693,035

Note 25 Trust funds and deposits

79,508 92,508

2,500 2,500

12,619 10,100

86,842 71,356

151,413 114,345

Trust deposits 632,174 596,405

Total trust funds and deposits 965,056 887,214

$ $

Details of trust deposits:

91,400 91,819

Medlyn estate 21,600 21,698

Vicroads agency & signage account 768 521

Community playground appeal 1,083 1,083

The purposes for which trust funds are held and the nature of any restriction imposed on

the manner in which these can be applied:

Litherland bequest

(Preservation of art collection at creswick museum)

(Preservation of bottle collection at clunes)

Refundable building deposits

Refundable contract deposits

Refundable civic facilities deposits

Retention amounts

Other refundable deposits



(Money collected on behalf of vicroads)

Page 30



Note 25 Trust funds and deposits (cont.) 2012 2011

Details of trust deposits (cont.): $ $

F. Shaw bequest 10,000 10,000

Mineral water trust 492,182 456,130

6,345 6,345

Dress down day - charity donation 1,124 626

McGinty trust 3,785 3,785

Trust Tourism Hepburn Board -

Creswick development committee 3,780 4,311

Various small trust accounts 108 88

632,174 596,405

Note 26 Provisions

(a) Employee benefits

Current

Annual leave 872,457 839,229

Superannuation - Defined Benefits - 303,078

Long service leave 955,902 860,505

Other 60,205 143,826

1,888,565 2,146,638

Non-current

Superannuation - Defined Benefits 1,423,099 -

Long service leave 137,515 175,091

1,560,614 175,091

Current 1,888,565 2,146,638

Non-current 1,560,614 175,091

3,449,178 2,321,729

(General support for Daylesford day activity centre)

Aggregate carrying amount of employee benefits:

(Preservation of art collection at creswick museum)

James Jasper Strachan appeal - commemoration

Page 31



Note 26 Provisions (cont.)

(i) Current 2012 2011

$ $

750,000 650,000

1,138,565 1,496,638

137,515 175,091

(b) Provisions

Pit restoration reserve

Current 175,500 -

Non-current 27,000 27,000

Total 202,500 27,000

Creswick tip EPA monitoring reserve

Current 9,520 9,520

Non-current 190,400 199,920

Total 199,920 209,440

- Short-term employee benefits, that fall due within 12 months after the end of the

period measured at nominal value

- Other long-term employee benefits that do not fall due within 12 months after the end

of the period measured at present value

(ii) Non-current

Long service leave representing less than 10 years of continuous service measured at

present value

All annual leave and the long service leave entitlements representing 7 or more years

of continuous service

Page 32



Note 26 Provisions (cont.) 2012 2011$ $

Daylesford tip EPA monitoring reserve

Current 10,700 10,700

Non-current 224,700 235,400

Total 235,400 246,100

Total provisions

Current 2,084,285 2,166,858

Non-current 2,002,714 637,411

Total 4,086,998 2,804,269

Note 27

2012 2011

$ $

Current

Borrowings - secured 544,282 433,191

544,282 433,191

Non-current

Borrowings - secured 3,640,627 3,024,476

Total 4,184,909 3,457,667

Not later than one year 544,282 433,191

1,625,814 1,782,672

Later than five years 2,014,813 1,241,803

Total 4,184,909 3,457,666

Current 544,282 433,191

Non-current 3,640,627 3,024,476

Total interest-bearing loans and borrowings 4,184,909 3,457,667

The security for the borrowings is a Deed of Charge over Hepburn Shire Council rates.

Interest-bearing loans and borrowings

Later than one year and not later than five years

The maturity profile for Council's borrowings is:

Aggregate carrying amount of interest-bearing loans and borrowings:

Reserves for Creswick and Daylesford tips relate to a 20 year obligation to monitor landfill leachate. These reserves are

expected to be expended over that 20 year period.

Page 33



Note 28 2012 2011

$ $

Current

Prepaid income 87,572 124,181

87,572 124,181

Non-current

Prepaid income 205,357 223,214

Total Other Liabilities 292,930 347,395

Other Liabilities

Page 34

Note 29 ReservesBalance at

beginning

reporting period Adjustment

Increment

(decrement)

Balance at end

of reporting

period

$ $ $ $

(a) Asset revaluation surplus

2012

Property

Land 15,351,986 (485,742) 1,950,800 16,817,044

Land improvements 89,974 - (2,093,481) (2,003,507)

Buildings 17,466,905 3,656,689 21,123,594

32,908,865 (485,742) 3,514,008 35,937,131

Infrastructure

Roads 23,415,754 - 6,447,476 29,863,230

Other infrastructure 9,772,647 - (1,482,370) 8,290,277

33,188,401 - 4,965,106 38,153,507

Total asset revaluation surplus 66,097,266 (485,742) 8,479,114 74,090,638

2011

Property

Land 15,396,986 (45,000) - 15,351,986

Land improvements 89,974 - - 89,974

Buildings 17,823,129 - (356,224) 17,466,905

33,310,089 (45,000) (356,224) 32,908,865

Infrastructure

Roads 28,186,754 - (4,771,000) 23,415,754

Other infrastructure 10,577,704 - (805,057) 9,772,647

38,764,458 - (5,576,057) 33,188,401

Total asset revaluation surplus 72,074,547 (45,000) (5,932,281) 66,097,266


Page 35


Note 29 Reserves (cont.)Balance at

beginning

reporting period Transfers in

Transfer to

accumulated

surplus

Balance at end

of reporting

period

$ $ $ $

(b) Other reserves

2012

Heritage advisory fund 20,000 - - 20,000

Car parking reserve 21,250 - - 21,250

Drainage reserve 300 - (300) -

Smeaton Hill pit reserve 74,419 - - 74,419

Mt Beckworth pit reserve 27,772 - - 27,772

Clunes caravan park reserve 10,500 - (3,790) 6,710

Waste management reserve 7,600 - (7,600) -

Resort and recreation reserve 832,907 170,250 (206,500) 796,657

The purpose of this reserve is to provide future

recreation

Financial asset valuation reserve 24,417 21,993 - 46,410

Total Other reserves 1,019,165 192,243 (218,190) 993,217

Note 29 Reserves (cont.)Balance at

beginning

reporting period Transfers in

Transfer to

accumulated

surplus

Balance at end

of reporting

period

$ $ $ $

2011

Heritage advisory fund 20,000 - - 20,000

Car parking reserve 21,250 - - 21,250

Drainage reserve 300 - - 300

Smeaton Hill pit reserve 74,419 - - 74,419

Mt Beckworth pit reserve 27,772 - - 27,772

Plant replacement reserve 37,425 - (37,425) -

Clunes caravan park reserve 10,500 - - 10,500

Waste management reserve 92,600 - (85,000) 7,600

Resort and recreation reserve 770,479 119,308 (56,880) 832,907

Financial asset valuation reserve (11,657) 36,074 - 24,417

Total Other reserves 1,043,088 155,382 (179,305) 1,019,165

(b) Other reserves

Page 36

2012 2011

$ $

Note 30

Surplus 8,277,727 8,034,684

Depreciation/amortisation 4,967,448 4,741,669

Write off of investment in associate 118,116 -

Contributions - Non-monetary assets (603,700) (218,000)

Bad Debts 7,644 24,425

Finance costs 281,034 214,839

Change in assets and liabilities:

(Increase)/decrease in trade and other receivables (243,647) (56,109)

Increase/(decrease) in other assets 65,499 (86,798)

Increase/(decrease) in trade and other payables 1,213,881 (297,538)

(Decrease)/increase in other liabilities 77,842 264,225

Increase/(Decrease) in provisions 1,575,697 433,199

Net cash provided by/(used in) operating activities 15,737,542 13,054,596

Note 31 Reconciliation of cash and cash equivalents

Cash and cash equivalents (see note 17) 13,473,365 11,818,269

Total reconciliation of cash and cash equivalents 13,473,365 11,818,269

Note 32 Restricted assets

Long service leave* (note 19) - 974,150

Reserve funds (note 29) 817,906 854,456

Total restricted assets 817,906 1,828,606

* Due to changes in the Regulations, Council does not require long service leave funds to be restricted.

Reconciliation of cash flows from operating activities to surplus (deficit)


Council has cash and cash equivalents (note 16) that are subject to restrictions. As at the reporting date, Council had

legislative restrictions in relation to reserve funds (Car Parking, Drainage and Resort and Recreation Reserves).

Page 37

Note 33 Superannuation

Council made contributions to the following funds:

2012 2011

Fund $ $

Defined benefits fund

Employer contributions to Local Authorities

Superannuation Fund (Vision Super) 103,360 97,368

103,360 97,368

Accumulation funds

431,334 491,881

175,659 134,612

606,993 626,493

Employer contributions payable to Local Authorities

Superannuation Fund (Vision Super) at reporting date. 107,887 67,670

Employer contributions payable to other superannuation

funds. 37,327 79,267

145,214 146,937

The Local Authorities Superannuation Fund latest 31 December 2011 Actuarial investigation identified

an unfunded liability of $406 million net of contributions tax in the defined benefit fund of which

Hepburn Shire Council is a member. Council was made aware of the expected shortfall through the

year and was informed formally of their share on 3 August 2012 which amounted to $1.21 million, net

of contributions tax. The total amount is $1.42 million. A decision on funding options will be made as

part of Council setting the Budget 2013-14. Council has accounted for this shortfal in the

Comprehensive Income Statement in Employee Benefits (see Note 9) and in the Balance Sheet in

Provisions for Employee Benefits (see Note 26).

Employer contributions to Local Authorities Superannuation Fund

(Vision Super)

Employer contributions to 18 (19 in 2008-2009) other

Superannuation Funds


Page 38

Note 34 Commitments

2012

Not later than

1 year

Later than 1

year and not

later than 2

years

Later than 2

years and not

later than 5

years Total

$ $ $ $

Operating

Recycling 142,500 - - 142,500

Garbage collection 195,000 - - 195,000

Operation of Municipal Recycling Facility 142,500 - - 142,500

Transfer stations 158,400 - - 158,400

Cleaning Council Public Conveniences 120,700 - - 120,700

Meals for delivery 49,500 49,500 - 99,000

Home Care Maintenance Services 25,000 25,000 25,000 75,000

Swimming pools 126,600 - - 126,600

Photocopiers 36,600 36,600 73,200

Total 996,800 111,100 25,000 1,132,900

Capital

Buildings 246,000 246,000

Plant and equipment 488,000 488,000

Roads 756,012 756,012

Other structures 50,000 50,000

Flood recovery 956,986 - - 956,986

Total 2,496,998 - - 2,496,998

The Council has entered into the following commitments


Page 39


Note 34 Commitments (cont.)

Not later than

1 year

Later than 1

year and not

later than 2

years

Later than 2

years and not

later than 5

years Total

2011 $ $ $ $

Operating

Recycling 175,512 - - 175,512

Garbage collection 248,436 - - 248,436

Operation of Municipal Recycling Facility 170,568 - - 170,568

Maternal & child health services 271,032 - - 271,032

Transfer stations 158,500 - - 158,500

Public Litter & Public Place Recycling 176,130 - - 176,130

Meals for delivery 48,000 48,000 144,000 240,000

Swimming pools 161,233 165,263 - 326,496

Recreation facilities management 25,000 - - 25,000

Valuations 119,000 - - 119,000

Photocopiers 26,628 26,628 79,884 133,140

Total 1,580,039 239,891 223,884 2,043,814

Capital

Buildings 369,500 - - 369,500

Plant and equipment 470,000 - - 470,000

Roads 1,444,286 1,444,286 1,444,286 4,332,858

Bridges 200,195 - - 200,195

Recreation facilities 377,750 - - 377,750

Buildings - flood recovery 192,000 - - 192,000

Total 3,053,731 1,444,286 1,444,286 5,942,303

Note 35 Operating leases

(a) Operating lease commitments 2012 2011

$ $


Later than one year and not later than five years 148,247 124,608

188,424 155,760

At the reporting date, the Council had the following obligations under non-

cancellable operating leases for the lease of equipment for use within Council's

activities (these obligations are not recognised as liabilities):

Page 40


Note 35 Operating leases (cont.)

(b) Operating lease receivables


Later than one year and not later than five years 3,470,374 3,572,445

Later than five years 9,665,451 11,145,101

14,026,398 15,568,786

Future minimum rentals receivable under non-cancellable operating leases are

as follows:

The Council has entered into commercial property leases on some property partly owned and partly managed on

behalf of the government, consisting mainly of caravan parks and some buildings located on Crown Land for

which the Council is committee of management. These properties held under operating leases have remaining

non-cancellable lease terms of between 1 and 20 years. These leases include either a CPI based revision of the

rental charge annually or set rental increases included in the lease.

Page 41

Note 36

Recognised financial

instruments Note Accounting Policy Terms and Conditions

Financial assets

Cash and cash

equivalents

17 Cash on hand and at bank and money

market call account are valued at face

value.

On call deposits returned a floating interest

rate of 4.07% (3.14% in 2010/2011). The

interest rate at balance date was 4.07 %

(4.66% in 2010/11).

Interest is recognised as it accrues.

Investments and bills are valued at cost. Funds returned fixed interest rates of

between 4.60% (5.5% in 2010/11), and 6.4%

(6.16% in 2010/11).Investments are held to maximise interest

returns of surplus cash.

Financial assets 19 Floating rate notes are measured at market

value.

Floating rate notes provided a return of

3.50% (3.75% in 2010/11).

Trade and other

receivables

18 Receivables are carried at nominal

amounts due less any provision for doubtful

debts. A provision for doubtful debts is

recognised when collection in full is no

longer probable. Collectability of overdue

accounts is assessed on an ongoing basis.

General debtors are unsecured and rate

arrears attract an interest rate of 10% (10%

in 2010/11). Credit terms are based on 30

days.

Trade and other

payables

24 Liabilities are recognised for amounts to be

paid in the future for goods and services

provided to Council as at balance date

whether or not invoices have been

General Creditors are unsecured, not subject

to interest charges and are normally settled

within 14 - 30 days of invoice receipt.

Trust funds and

deposits

25 Trust funds and deposits are recognised at

cost.

Trust funds and deposits are held by Council

until returned or forfeited. They are not

subject to interest charges and are normally

settled within 1 year of receipt.

Interest-bearing loans

and borrowings

27 Loans are carried at their principal

amounts, which represent the present

value of future cash flows associated with

servicing the debt. Interest is accrued over

the period it becomes due and recognised

as part of payables.

Borrowings are secured by way of mortgages

over the general rates of the Council.

The weighted average interest rate on

borrowings is 7.35% (6.18% in 2010/11).

Financial Liabilities


(a) Accounting Policy, terms and conditions

Financial Instruments

Page 42

Note 36 Financial instruments (cont.)

(b) Interest Rate Risk

2012

Floating

interest

rate

1 year or

less

Over 1 to 5

years

More than 5

years

Non-interest

bearing Total

$ $ $ $ $ $

Financial assets

Cash and cash equivalents 3,385,036 10,082,162 - - 6,167 13,473,365

Financial assets 520,560 - - - - 520,560

Trade and other receivables - 896,623 - - 1,363,323 2,259,946

Total financial assets 3,905,596 10,978,785 - - 1,369,490 16,253,871

Weighted average interest rate 4.38% 5.63%

Financial liabilities

Trade and other payables - - - - 3,127,070 3,127,070

Trust funds and deposits - - - - 965,056 965,056

Interest-bearing loans and

borrowings

- 544,282 1,625,814 2,014,813 - 4,184,909

Total financial liabilities - 544,282 1,625,814 2,014,813 4,092,126 8,277,035

Weighted average interest rate 6.91% 7.07% 7.10%

Net financial assets (liabilities) 3,905,596 10,434,504 (1,625,814) (2,014,813) (2,722,637) 7,976,836

The exposure to interest rate risk and the effective interest rates of financial assets and financial liabilities, both recognised

and unrecognised, at balance date are as follows:

Fixed interest maturing in:


Page 43


Note 36 Financial instruments (cont.)

2011

Floating

Interest rate

1 year or

less

Over 1 to 5

years

More than 5

years

Non-interest

bearing Total

$ $ $ $ $ $

Financial assets

Cash and cash equivalents 5,783,269 6,030,000 - - 5,000 11,818,269

Financial assets 998,567 - - - - 998,567

Trade and other receivables - - - - 1,117,348 1,117,348

Total financial assets 6,781,836 6,030,000 - - 1,122,348 13,934,185

Weighted average interest rate 1.97% 5.22%


Trade and other payables - - - - 1,693,035 1,693,035

Trust funds and deposits - - - - 887,214 887,214

Interest-bearing loans and

borrowings - 433,191 1,782,672 1,241,803 - 3,457,666

Total financial liabilities - 433,191 1,782,672 1,241,803 2,580,249 6,037,915

Weighted average interest rate 6.82% 7.08% 7.30%

Net financial assets (liabilities) 6,781,836 5,596,809 (1,782,672) (1,241,803) (1,457,900) 7,896,270

Fixed interest maturing in:

Page 44

Note 36

(c) Net Fair Values

Financial Instruments

2012 2011 2012 2011

$ $ $ $

Financial assets

Cash and cash equivalents 13,473,365 11,818,269 13,473,365 11,818,269

Other financial assets 520,560 998,567 520,560 998,567

Trade and other receivables 2,259,946 2,004,665 2,259,946 2,004,665

Total financial assets 16,253,871 14,821,501 16,253,871 14,821,501


Trade and other payables 3,127,070 1,693,035 3,127,070 1,693,035

Trust funds and deposits 965,056 887,214 965,056 887,214

Interest-bearing loans and borrowings 4,184,909 3,457,667 4,184,909 3,457,667

Total financial liabilities 8,277,035 6,037,916 8,277,035 6,037,916

(d) Credit Risk

(e) Risks and mitigation

Market risk

The aggregate net fair values of financial assets and financial liabilities, both recognised and unrecognised, at balance

date are as follows:

The maximum exposure to credit risk at balance date in relation to each class of recognised financial asset is

represented by the carrying amount of those assets as indicated in the Balance Sheet.

Total carrying amount as

per Balance Sheet

Aggregate net fair value


Financial Instruments (cont.)


The risks associated with our main financial instruments and our policies for minimising these risks are detailed below.

Market risk is the risk that the fair value or future cash flows of our financial instruments will fluctuate because of changes

in market prices. The Council's exposures to market risk are primarily through interest rate risk with only insignificant

exposure to other price risks and no exposure to foreign currency risk. Components of market risk to which we are

exposed are discussed below.

Page 45


For the Year Ended 30 June 2012Note 36

Interest rate risk

- conformity with State and Federal regulations and standards,

- capital protection,

- appropriate liquidity,

- diversification by credit rating, financial institution and investment product,

- monitoring of return on investment,

- benchmarking of returns and comparison with budget.

Credit risk

- we have a policy for establishing credit limits for the entities we deal with;

- we may require collateral where appropriate; and

Interest rate risk refers to the risk that the value of a financial instrument or cash flows associated with the instrument will

fluctuate due to changes in market interest rates. Interest rate risk arises from interest bearing financial assets and

liabilities that we use. Non derivative interest bearing assets are predominantly short term liquid assets. Our interest rate

liability risk arises primarily from long term loans and borrowings at fixed rates which exposes us to fair value interest rate

risk.


Our loan borrowings are sourced from major Australian banks by a limited quotation process. Council does not currently

have an overdraft. We manage interest rate risk on our net debt portfolio by:

Investment of surplus funds is made with approved financial institutions under the Local Government Act 1989. We

manage interest rate risk by adopting an investment policy that ensures:

- ensuring access to diverse sources of funding;

- setting prudential limits on interest repayments as a percentage of rate revenue.

Credit risk is the risk that a contracting entity will not complete its obligations under a financial instrument and cause us to

make a financial loss. We have exposure to credit risk on some financial assets included in our balance sheet. To help

manage this risk:

We manage the interest rate exposure on our debt portfolio by appropriate budgeting strategies and obtaining approval

for borrowings from the Department of Planning and Community Development each year.

- we only invest surplus funds with financial institutions which have a recognised credit rating specified in our investment

policy.

Maturity will be staggered to provide for interest rate variations and to minimise interest rate risk.

Trade and other receivables consist of a large number of customers, spread across the consumer, business and

government sectors. Credit risk associated with the Council's financial assets is minimal because the main debtor is the

Federal and/or the Victorian Government. Apart from these, we do not have any significant credit risk exposure to a

single customer or groups of customers. Ongoing credit evaluation is performed on the financial condition of our

customers and, where appropriate, an allowance for doubtful debts is raised.

Page 46



Movement in Provisions for Doubtful Debts 2012 2011

$ $

Balance at the beginning of the year 27,697 23,717

(10,946) 3,980

Balance at end of year 16,751 27,697

Ageing of Trade and Other Receivables

Current (not yet due) 1,864,005 507,785

Past due by up to 30 days 107,501 1,056,632

Past due between 31 and 90 days 11,131 3,736

Past due between 91 and 120 days 14,357 71,736

Past due by more than 121 days 279,703 412,789

Total Trade & Other Receivables 2,276,697 2,052,678

Liquidity risk

Liquidity risk includes the risk that, as a result of our operational liquidity requirements:

- we will not have sufficient funds to settle a transaction on the date;

- we may be unable to settle or recover a financial asset at all.

At balance date, debtors representing financial assets with a nominal value of $16,751 (2011 $27,697) were impaired.

The amount of the provision raised against these debtors was$16,751 (2011 $27,697). The individually impaired debtors

relate to infringement, general and sundry debtors and have been impaired as a result of their doubtful collection.

Infringement debtors sit in the Infringements Court system and many of the long outstanding past due amounts have

been lodged with Council's debt collectors or are on payment arrangements.

- we will be forced to sell financial assets at a value which is less than what they are worth; or

At balance date other debtors representing financial assets were past due but not impaired.

These amounts relate to a number of independent customers for whom there is no recent

history of default. The ageing of the Council's Trade & Other Receivables was:

Provisions recognised during the year/(Amounts already provided for and written off as

uncollectible)


Page 47



To help reduce these risks we:

(f) Sensitivity disclosure analysis

Profit Equity Profit Equity

2012 $'000 $'000 $'000 $'000 $'000

Financial assets:

13,473 (118) (118) 118 118

2,260 (22) (22) 22 22

Financial liabilities:

4,185 41 41 (41) (41)

- have a liquidity portfolio structure that requires surplus funds to be invested within various bands of liquid instruments;

Taking into account past performance, future expectations, economic forecasts, and management's knowledge and

experience of the financial markets, the Council believes the following movements are 'reasonably possible' over the next

12 months :

- A parallel shift of + 1% and -1% in market interest rates (AUD) from year-end rates.

The table below discloses the impact on net operating result and equity for each category of financial instruments held by

the Council at year-end, if the above movements were to occur.

Interest rate risk

- have an investment policy which targets a minimum and average level of cash and cash equivalents to be maintained;

- set limits on borrowings relating to the percentage of loans to rate revenue and percentage of loan principal

repayments to rate revenue and to income streams from assets funded by specific borrowings.

The Councils exposure to liquidity risk is deemed insignificant based on prior periods' data and current assessment of

risk. Details of our contingent liabilities are disclosed in Note 37.

- monitor budget to actual performance on a regular basis; and

Interest-bearing loans and borrowings

-100 basis points +100 basis points


-1 % +1

Cash and cash equivalents

Trade and other receivables

Page 48

Note 37 Contingent liabilities and contingent assets

Note 38 Auditors' remuneration 2012 2011

$ $

Audit fee to conduct external audit - Victorian Auditor-General 37,100 34,430

Internal audit fees - Pitcher Partners 21,718 35,690

Fees for other services provided by other auditor 6,506 5,103

65,324 75,223

Department of Sustainability and Environment, Department of Planning and Community Development,

Regional Development Victoria and Sports and Recreation Victoria funding for the above works is

estimated at $2.9 million. Further applications of $8.9 million for Natural Disaster Relief funding will be

made to the Department of Treasury and Finance for flood recovery works and cost of flood recovery

office. Total future funding applications are estimated to be $11.68 million.

Council engineers estimate $12.37 million in flood recovery works remain, with an anticipated

completion date of September 2013. A significant portion of these works are the relocation of the

Creswick Bowling Club and the Glengower Road reconstruction.


The majority of damage to Council's buildings and recreation facilities and those of which Council are

Committee of Management, are covered under Council's insurance policy. Estimates of damage still

to be completed that will be claimed under this insurance policy is $550,000. $753,000 in insurance

reimbursements are estimated to be received as works are completed.

In September 2010, January 2011 and February 2011, major flooding was experienced in several

parts of the Shire resulting in the need for significant repairs to Buildings and Infrastructure.

Page 49

Note 39 Related party transactions

(i) Responsible Persons

Councillors Councillor Sebastian Klein (Mayor 07/12/11 to Current)

Councillor Janine Booth (Current)

Councillor Rod May (Mayor 21/12/2010 - 06/12/2011)

Councillor Donald Henderson (Current)

Councillor Bill McClenaghan (Current)

Councillor Jonathon Barrell (Current)

Councillor Neil Newitt (30/08/2011- Current)

Chief Executive Officer Aaron Van Egmond (14/05/12 to Current)

Peter Reeve (14/11/11 to (14/05/12)

Kaylene Conrick (11/08/08 to 11/11/11)

(ii) Remuneration of Responsible Persons

2012 2011

No. No.

6 4

2 3

1 -

- 1

1 -

10 8

$ $

551,938 360,971

(iii)

(iv)

(v) Other Transactions

No transactions other than remuneration payments or the reimbursement of approved

expenses were entered into by Council with Responsible Persons, or Related Parties of

such Responsible Persons during the reporting year (2010/11 Nil).

Names of persons holding the position of a Responsible Person at the Council at any time during the

year are:

No retirement benefits have been made by the Council to a Responsible Person during

the reporting year (2010/11 Nil).

No loans have been made, guaranteed or secured by the Council to a Responsible

Person during the reporting year (2010/11 Nil).

$20,000 - $29,999

$70,000 - $79,999

$210,000 - $219,999


Total Remuneration for the reporting year for Responsible Persons included above

amounted to:

The numbers of Responsible Officers, whose total remuneration from Council and any

related entities fall within the following bands:

$310,000 - $319,999

$10,000 - $19,999

Page 50


Note 39 Related party transactions (cont.)

(vi)

2012 2011

No. No.

3 6

$127,000 - $129,999 1

1 1

1 -

6 7

$ $

593,550 489,507 Total Remuneration for the reporting year for Senior Officers included above, amounted

to:

$130,000 - $139,999

$140,000 - $149,999

The number of Senior Officers other than the Responsible Persons, are shown below in

their relevant income bands:

Senior Officers Remuneration

A Senior Officer other than a Responsible Person, is an officer of Council who has

management responsibilities and reports directly to the Chief Executive Officer or whose

total annual remuneration exceeds $127,000.

<$127,000

Income Range:

Page 51

2012 2011 2012 2011 2012 2011 2012 2011 2012 2011

$ $ $ $ $ $ $ $ $ $

REVENUE

Grants - - 2,257,006 2,089,195 547,814 555,282 4,338,468 3,730,434 3,377,006 2,583,645

Other - - 775,044 628,764 713,699 694,380 2,989,316 2,648,516 13,531,591 12,610,587

TOTAL - - 3,032,050 2,717,959 1,261,513 1,249,662 7,327,784 6,378,950 16,908,597 15,194,232

EXPENSES 1,051,843 834,127 5,012,832 3,953,624 3,118,598 2,605,295 6,795,690 6,119,892 4,626,088 4,010,396

(1,051,843) (834,127) (1,980,782) (1,235,665) (1,857,085) (1,355,633) 532,094 259,058 12,282,509 11,183,836

- - 676,773 794,239 - - 179,052,900 168,003,843 706,768 1,235,654

2012 2011 2012 2011 2012 2011

$ $ $ $ $ $

REVENUE

Grants - - 10,520,294 8,958,556

Other 8,117,085 10,047,731 603,700 218,000 26,730,435 26,847,978

TOTAL 8,117,085 10,047,731 603,700 218,000 37,250,729 35,806,534

EXPENSES 1,969,760 5,031,183 6,398,191 5,217,332 28,973,002 27,771,849

6,147,325 5,016,548 (5,794,491) (4,999,332) 8,277,727 8,034,685

8,557,885 - 16,047,945 15,292,748 205,042,272 185,326,484

SURPLUS/

(DEFICIT) FOR

THE YEAR

ASSETS

ATTRIBUTED

TO

FUNCTIONS/

ACTIVITIES*


Corporate Services

Unclassified Total

CEO Unit Community Services Sustainable Development Infrastructure

ASSETS

ATTRIBUTED

TO

FUNCTIONS/

ACTIVITIES*

SURPLUS/

(DEFICIT) FOR

THE YEAR

Note 40 Income, expenses and assets by function/activities (cont.)

Flood Recovery

Page 52


Functions/activities of council

CEO Unit

Corporate Services

Community Services

Infrastructure

Sustainable Development

Income, expenses and assets by function/activities (cont.)Note 40

Assets and engineering services, waste management, infrastructure maintenance.

Planning, local laws compliance, environmental health, economic development and tourism, sustainability, building.

*Assets have been attributed to functions/activities based on the control and/or custodianship of specific assets.

Governance and communications

Aged and disability services, community strengthening, youth, arts and culture, recreation, meal delivery, community visitors

scheme

Finance, risk, human resources, information technology, customer service and records

Page 53

Note 41 Capital expenditure Note 2012 2011

$'000 $'000

Capital expenditure areas

Roads, Bridges and Drainage 10,757 3,161

Parks, open space and streetscapes 2,652 328

Land and Buildings 699 3,981

Plant and equipment & other 1,044 1,200

Total capital works 15,152 8,670

Represented by:

Renewal (a) 13,196 6,303

Upgrade/Expansion (b) 1,446 472

New 510 1,895


Property, plant and equipment, infrastructure movement


Asset revaluation movement 29(a) 8,479 (5,932)

Depreciation/amortisation 12 4,952 (4,726)

Found assets 22 604 -

Transfers in 22 268 -

Transfers out 22 - (20)

Written down value of assets sold 22 (853) (195)

Net movement in property, plant and equipment,

infrastructure 22 28,602 (2,203)

(a) Renewal


Expenditure on an existing asset which returns the service potential or the life of the asset up to that which it had

originally. It is periodically required expenditure, relatively large (material) in value compared with the value of the

components or sub-components of the asset being renewed. As it reinstates existing service potential, it has no impact

on revenue, but may reduce future operating and maintenance expenditure if completed at the optimum time.

The movement between the previous year and the current year in property, plant and equipment, infrastructure as

shown in the Balance Sheet links to the net of the following items:

Page 54


Note 41 Capital expenditure (cont.)

(b) Upgrade

(c) Expansion

Note 42 Special committees and other activities

Clunes community housing committee

Lyonville hall committee

Clunes museum committee

Creswick museum committee

Clunes town hall committee

Lindsay park recreation reserve committee

Section 86 committee of management not included in financial statements as they were not considered

material.

Expenditure which enhances an existing asset to provide a higher level of service or expenditure that will increase the

life of the asset beyond that which it had originally. Upgrade expenditure is discretional and often does not result in

additional revenue unless direct user charges apply. It will increase operating and maintenance expenditure in the

future because of the increase in the council’s asset base.

Expenditure which extends an existing asset, at the same standard as is currently enjoyed by residents, to a new group

of users. It is discretional expenditure which increases future operating and maintenance costs, because it increases

council’s asset base, but may be associated with additional revenue from the new user group.

Section 86 committee of management included in financial statements.

Glenlyon recreation reserve committee

Clunes historic medlyn complex

committee

Dean recreation reserve committee

Drummond hall committee

Clunes community centre committee

Campbelltown school ground committee

Page 55

Note

43 2012 2012 2011 2011 2010 2010

$'000 (%) $'000 (%) $'000 (%)

(a)

Debt servicing costs 281 215 221

Total revenue 37,251 35,570 22,811

(b)

Debt servicing & redemption costs 754 614 640

Rate revenue 14,645 13,507 12,342

(c)

Rate revenue 14,645 13,507 12,342

Total revenue 37,251 35,570 22,811

(d)

Total indebtedness 12,657 8,215 8,085

Total realisable assets 90,485 82,858 74,983

The following assets are excluded from total assets when calculating Council's realisable assets:

Restricted assets; heritage assets; total infrastructure assets; and Council's investment in associates.

The level of Council's reliance on rate revenue is determined by assessing rate revenue as a proportion of

the total revenue of Council.

= 10.8%= 10.0%

Debt exposure ratio (to identify Council's exposure to debt)

= 14.0%

For the purposes of the calculation of financial ratios, realisable assets are those assets which can be sold

and which are not subject to any restriction on realisation or use.

Any liability represented by a restricted asset (note 32) is excluded from total indebtedness.

38.0% =

5.1%=

Revenue ratio (to identify Council's dependence on non-rate

income)

=

= 39.3% =



Financial ratios (Performance

indicators)

= 0.8% = 0.6% = 1.0%

Debt servicing ratio (to identify the capacity of Council to service its outstanding debt)

Debt servicing costs refer to the payment of interest on loan borrowings.

The ratio expresses the amount of interest paid as a percentage of Council's total revenue.

The ratio expresses the percentage of rate revenue utilised to pay interest and redeem debt principal.

The strategy involves the payment of loan principal and interest.

Debt commitment ratio (to identify Council's debt redemption

strategy)

54.1%

4.5% = 5.2%

Page 56



Note

43 2012 2012 2011 2011 2010 2010

$'000 (%) $'000 (%) $'000 (%)

(d)

(e)

Current assets 15,814 13,969 9,222

Current liabilities 6,808 5,304 5,027

Note

44 Events occurring after balance date

1.83

Debt exposure ratio (to identify Council's exposure to debt) (cont.)

= 2.32 == 2.63

Matters that have occurred after balance date that require disclosure in the financial report have

been disclosed in Note 5 and Note 33.

Working capital ratio (to assess Council's ability to meet current commitments)

The ratio expresses the level of current assets the Council has available to meet its current liabilities.

Financial ratios (Performance

indicators) cont.

This ratio enables assessment of Council's solvency and exposure to debt. Total indebtedness refers to the

total liabilities of Council. Total liabilities are compared to total realisable assets which are all Council assets

not subject to any restriction and are able to be realised. The ratio expresses the percentage of total

liabilities for each dollar of realisable assets.

Page 57

Anthea Lyons CA



We have been authorised by the Council on 18 September 2012 to certify the performance statement in its final form.




In my opinion the accompanying performance statement has been prepared on accounting bases consistent with the financial


2004.

As at the date of signing, we are not aware of any circumstances which would render any particulars in the performance statement

to be misleading or inaccurate.

In our opinion the accompanying performance statement has been prepared on accounting bases consistent with the financial


2004.

Cr Sebastian Klein

Councillor


Cr Rod May

Councillor


Page 58

Aaron Van Egmond



Page 59


PERFORMANCE STATEMENT


Page 60

Strategic Objective 1: Good Governance

Performance Measure Performance Measure Target

Increase in community satisfaction with Councils consultative

processesAnnual customer contact increased to 70% Not Met

The Community Consultation was 46. Further work needs to be

undertaken to enhance Council's consultation.

Review supplier agreements, foster relationships with

Procurement Australia and the MAV and seek alternative ways

to tender, purchase and lease to find cost efficiencies.

Savings to the value of 1% of total expenses

identified.Met

$187,000 in savings has been achieved. This equates to 1% of

total expenses.

Percentage completed was 57%. This is partly due to projects of

significant value not proceeding pending further development and

some projects commencing later than expected as a result of

staffing turnover.

A process is being developed to ensure a much greater level of

completion is achieved in 2012/13.

Strategic Objective 2: A More Prosperous Economy


Council will complete a main street revitalisation plan for

Vincent St Daylesford

Report and detailed plans to be completed by

30 June 2012 for the Vincent Street

revitalisation Daylesford.

Not Met

The Strategy (comprising stages 1A & 1B) has been completed

and has been advertised for public comment. The plans are to be

tabled at the September 2012 Council meeting.

Council will conduct a review of the MSS for the Hepburn

Shire. The project is expected to take two years.

Finalised and awaiting Minister's approval by

30 June 2012.Not Met

Council is awaiting DPCD approval to place review on exhibition.

All the amendment documents have been prepared.

Increased proportion of planning applications

processed within 60 days.

Issue 80% of planning permits and 90% of

planning amendments within statutory

timeframes

Not Met

75% of planning applications issued were within the statutory

timeframe. Differentiation between planning applications and

planning amendments can not be achieved.

Hepburn Shire Council Performance StatementAs at 30 June 2012

Increase in the percentage of the capital works program

completed annually

Target of 80% completion for 2011-12 financial

yearNot Met

Performance Measure as at 30 June 2012


Page 61


Strategic Objective 3: Healthy, Safe and Vibrant Communities


Council will assist with the development of community plans2 new Community Plans developed by 30 June

2012.Met

A Community Plan for the Sailors Falls, Musk Vale and Leonards

Hill area was completed in April 2012 and a Daylesford

Community Plan was completed in May 2012.

Completion of a significant tree register through the Hepburn

Planning SchemeCompletion of register by 30 June 2012. Met

Register is complete and awaiting DPCD approval to place on

exhibition. All amendment documents have been prepared for

exhibition.

Continuing to provide maternal and child health services to

our residents.Minimum of 316 clients Met 1026 children enrolled in Maternal and Child Health service.

Council will provide during the 2011-12

financial year a minimum of:Not Met Hours are down due to demand. Council provided:

12,658 hours of housekeeping 10,830 hours of housekeeping

4,261hours of personal care 2,318 hours of personal care

2,756 hours of respite care 1, 720 hours of respite care

Continuing to provide high quality comprehensive aged and

disability services to the aged, disabled and their carers

across the Hepburn Shire.


Page 62


Strategic Objective 4: Environmental Sustainability


Proportion of landfill waste as a percentage of annual

residential waste50% of total waste Met 49% of waste went to landfill.

Proportion of recycling as a percentage of annual residential

waste50% of total waste Met 51% of waste was recycled.

Council will implement priorities indentified in the Energy

Descent Plan.Completion by 30 June 2012 Not Met

The sub committee working on the EDAP expect completion by

September 2012.

Increase amount of "green" purchasing across

the organisation.

Green purchasing to be 35% of total

purchases.Not Met

Data has not been captured for the whole organisation. This

outcome is under review and a process being developed to

ensure a much greater level of success is achieved in 2012/13.

14% of purchases from Corporate Express were "green".

Reduce the carbon output from Council’s

operations, verified through utility tracking.Carbon output reduced by 5%. Not Met

Emission in council buildings have reduced by 2%. The

Sustainable Building Management Plan will do energy audits of

main buildings and retrofit the most appropriate building in an

attempt to make reductions in the future.


Page 63

Anthea Lyons CA



We have been authorised by the Council on 18 September 2012 to certify the performance statement in its final form.




In my opinion the accompanying performance statement has been prepared on accounting bases consistent with the financial


2004.

As at the date of signing, we are not aware of any circumstances which would render any particulars in the performance statement

to be misleading or inaccurate.

In our opinion the accompanying performance statement has been prepared on accounting bases consistent with the financial


2004.

Cr Sebastian Klein

Councillor


Cr Rod May

Councillor


Page 64

Aaron Van Egmond



Page 65

Documents

Plain English Guide to council’s financial report€¦ · Plain English Guide to council’s financial report (continued) Balance Sheet The Balance Sheet is a snap shot of the financial