ACCOUNTING ADJUSTMENTS IMPACT COUNCIL'S BUDGET BOTTOM LINE

Two significant accounting adjustments have impacted Scenic Rim Regional Council's 2019-20 Budget.

Council considers the resulting deficit of $1 million, when balanced with other factors, presents the best outcome for the community at this time.

Mayor Greg Christensen said changes in asset valuations and a reversal of the accounting treatment for road re-sheeting had produced a negative nett effect of $3 million and an overall $1 million Budget deficit for 2019-20.

"Scenic Rim Regional Council's 2019-20 Budget was prepared in the context of challenging conditions currently being experienced in parts of the community due to drought declarations and residual effects from significant weather events," he said.

"We could have cut programs or had additional rates increases, however I believe our decision to accept the deficit achieves the right balance.

"These adjustments reflect accounting best practice and compliance with Australian accounting standards.

"In any case, we expect to return to surplus in the 2020-21 financial year, and savings achieved through the ongoing work of Council's Refresh and Refocus program will help to bridge that deficit as the 2019-20 year progresses."

Council's prior valuations, undertaken in 2013-14, were based on significant under-recognition of road assets, both in length and width.

There have been significant increases in unit rates for valuation calculations of most asset classes, including roads and bridges, since that time.

The change in unit rate, particularly for roads, has been driven by design changes to match the durability demands for modern high pressure tyre systems used in freight movements.

"As a result of improvements in asset management, which have given us an accurate profile of all of our roads, our latest asset revaluation has required a substantial increase to recognise road assets not previously recorded in our valuation," Cr Christensen said.

"The combined impact has resulted in an increase to our Fair Asset Valuation of roads, bridges and drainage of some $142.59 million and subsequently increased depreciation costs of $3 million in the 2019-20 Budget.

"Whilst in the short term this will cause some negative flow-on impacts through increased depreciation expense, we believe that adopting this approach satisfies our accounting and legislative responsibilities and properly recognises the challenges we face in managing our significant asset base."

To maintain accurate data, Council will revise its revaluation schedule to occur at least every three years.

The second budget impact resulted from the reversal of a decision made by Council in 2010 to treat road re-sheeting as a capital expense.

Following a review by the Queensland Audit Office and Council's Audit and Risk Committee, this will now appear as an operating expense, as a proper and accurate accounting practice consistent with other local governments within Queensland.

"This change in accounting methodology will not alter the substantial amount of work we do in road re-sheeting across our region. However, it does have a significant impact, increasing operating expenses in the 2019-20 Budget," Cr Christensen said.

"These changes are further evidence for our community that this Council is prepared, and remains committed, to improving the accuracy and integrity of all aspects of its operations.

"This Budget shows the benefits of robust planning and analysis, clarity of prioritisation through strategic focus and commitment to sustainable service delivery and good governance."