Budget reporting made clearer
Burwood Council in NSW has developed an integrated budget reporting system to overcome shortcomings in traditional Local Government end of financial year reporting processes.
Concerned that Council's real financial position was obscured by a system which concentrated on available working funds, Burwood set about designing a new system. The aim was to avoid confusion which occurred when the Fund budget showed a surplus and the Operating Statement showed a deficit.
This anomaly had, in the past, led to a misconception about the Council's financial credibility. Burwood has designed a system that overcomes this discrepancy by synchronising both internal and external reporting into a form which gives an overall financial position. It can be easily understood by people who have no accounting expertise, which may be the case for some elected representatives.
Council's Finance Department felt that the financial position could only be simplified when all financial reporting followed a single common form. This included using the same format, prepared on the same basis, and Council's financial position being assessed and monitored in the same fashion.
The new budget format comprises the following major components.
- Operating Budget
- Capital Budget
- Projected Operating Statement
- Projected Balance Sheet
- Projected Cash Flow
- Projected Performance Indicators
Central to its success is the use of indicators as a measure of financial health. Under this system no one indicator is used in isolation from other indicators and financial information.
These indicators include the Current Ratio, the Liquidity Ratio, Debt Service Ratio, Rate Coverage Ratio and Rate and Annual Charges Outstanding percentage. This data can also be presented in a graphic form which gives a clearer indication of trends for the lay person.
The new approach has many advantages including standardisation of financial information into the same format, streamlining work through the linking of budget documents, and cost savings achieved through no longer having to reconcile the fund budget format with end of year financial statements.
For further information contact Michael Tse, Executive Manager Finance, telephone (02) 9911 9911.