for the year ended 30 june 2012 - upper lachlan shire...^ jl g^&e liability limited by the...

2011/2012 FINANCIAL STATEMENTSfor the year ended 30 June 2012

UPPER LACHLAN SfflRE COUNCIL

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GROUPACCOUNTANTS & ADVISORS

INDEPENDENT AUDITOR'S REPORT TO THE COUNCILON THE GENERAL PURPOSE FINANCIAL STATEMENTS OF

UPPER LACHLAN SHIRE COUNCIL

Report on the Financial Statements

We have audited the accompanying general purpose financial statements of Upper Lachlan Shire Council forthe financial year ended 30 June 2012. The financial statements comprise the Statement by Councillors andManagement, Income Statement. Statement of Comprehensive Income, Balance Sheet, Statement of Changesin Equity, Statement of Cash Flows and accompanying Notes to the Financial Statements.

Council's Responsibility for the Financial Statements

The Council are responsible for the preparation and fair presentation of the financial statements in accordancewith the Local Government Act 1993. This responsibility includes establishing and maintaining internalcontrols relevant to the preparation and fair presentation of the financial statements that are free frommaterial misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies;and making accounting estimates that are reasonable in the circumstances.

Auditors Responsibility

Our responsibility is to express an opinion on the financial statements based on our audit. Our auditresponsibility does not extend to the original budget figures included in the Income Statement and Statementof Cash Flows, the original budget disclosures in Notes 2(a) and 16, nor the projected revenue and expenditureof developer contributions reported in Note 17 and accordingly, we express no opinion on them. We conductedour audit in accordance with Australian Auditing Standards. These Auditing Standards require that we complywith relevant ethical requirements relating to audit engagements and plan and perform the audit to obtainreasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor's judgement, including the assessmentof the risks of material misstatement of the financial statements, whether due to fraud or error. In makingthose risk assessments, the auditor considers internal control relevant to the entity's preparation and fairpresentation of the financial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internalcontrol. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by Council, as well as evaluating the overall presentation of thefinancial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion.

Independence

In conducting our audit, we followed applicable independence requirements of Australian professional ethicalpronouncements.

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Matters Relating to the Electronic Presentation of the Audited Financial Statements

This auditor's report relates to the general purpose financial statements of Upper Lachlan Shire Council(Council) for the year ended 30 June 2012 included on Council's web site. Council is responsible for theintegrity of Council's web site. We have not been engaged to report on the integrity of the web site. Theauditor's report refers only to the statements named above. It does not provide an opinion on any otherinformation which may have been hyperlinked to/from these statements. If users of this report areconcerned with the inherent risks arising from electronic data communications they are advised to refer tothe hard copy of the audited financial statements to confirm the information included in the auditedfinancial statements presented on this web site.

Audit Opinion

In our opinion:

(al the Council's accounting records have been kept in accordance with the requirements of the LocalGovernment Act 1993, Chapter 13, Part 3, Division 2;

(b) the Council's financial statements:

(i) has been prepared in accordance with the requirements of this Division;[iil is consistent with the Council's accounting records;liii] presents fairly the Council's financial position, the results of its operations and cashflows; and(ivl is In accordance with applicable Australian Accounting Standards (including the AustralianAccounting Interpretationsl.

(c) alt information relevant to the conduct of the audit has been obtained; and

(d) there are no material deficiencies in the accounting records or financial statements that have cometo light in the course of the audit.

H^M^ Q^s>^ ff^W^r^L, .^J'lA/t'TL^^0 'MORSE GROUP LR SMITHPARTNER

266 Howick StreetBathurstDated; 4 October 2012 .

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GROUPL

ACCOUNTANTS & ADVISORS

INDEPENDENT AUDITOR'S REPORTON THE SPECIAL PURPOSE FINANCIAL STATEMENTS OF


Report on the Financial Statements

We have audited the special purpose financial statements of Upper Lachlan Shire Council for the year ended 30June 2012, comprising the Statement by Council, Income Statement by Business Activities, Balance Sheet byBusiness Activities, and accompanying Notes to the Financial Statements. Our audit responsibility does notextend to the best practice management disclosures in Notes 2 and 3 and accordingly we express no opinion onthem.

Council's Responsibility for the Financial Statements

The Council are responsible for the preparation and fair presentation of the financial statements and havedetermined that the accounting policies described in Note 1 to the financial statements which form part of thefinancial statements are appropriate to meet the financial reporting requirements of the Council and theDivision of Local Government for the purpose of fulfilling the requirements of National Competition Policyreporting. The Council's responsibility also includes establishing and maintaining internal controls relevant tothe preparation and fair presentation of the financial statements that are free from material misstatement,whether due to fraud or error; selecting and applying appropriate accounting policies; and making accountingestimates that are reasonable in the circumstances.

Auditor's Responsibility

Our responsibility is to express an opinion on the financial statements based on our audit. No opinion isexpressed as to whether the accounting policies used, as described in Note 1, are appropriate to meet theneeds of the Council. We conducted our audit in accordance with Australian Auditing Standards. TheseAuditing Standards require that we comply with relevant ethical requirements relating to audit engagementsand plan and perform the audit to obtain reasonable assurance whether the financial statements are free frommaterial misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor's judgement, including the assessmentof the risks of material misstatement of the financial statements, whether due to fraud or error. In makingthose risk assessments, the auditor considers internal control relevant to the entity's preparation and fairpresentation of the financial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internalcontrol. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by the Council as well as evaluating the overall presentation ofthe financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion

Independence

In conducting our audit, we followed applicable independence requirements of Australian professional ethicalpronouncements.

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^ ^Liability limited by the Accountants Scheme, approved under the Professional Standards Act 1994 INSW]

Matters Relating to the Electronic Presentation of the Audited Financial Statements

This auditor s report relates to the special purpose financial statements of Upper Lachlan Shire Council[Council] for the year ended 30 June 2012 included on Council's web site. Council is responsible for theintegrity of Council's web site. We have not been engaged to report on the integrity of the web site. Theauditor's report refers only to the statements named above. It does not provide an opinion on any otherinformation which may have been hyperlinked to/from these statements. If users of this report areconcerned with the inherent risks arising from electronic data communications they are advised to refer tothe hard copy of. the audited financial statements to confirm the information included in the auditedfinancial statements presented on this web site.

Audit Opinion

In our opinion, the special purpose financial statements of Upper Lachlan Shire Council are presentedfairly in accordance with the requirements of those applicable accounting policies detailed in Note 1 , theaccounting requirements of the Local Government Act 1993 and the Local Government Code of AccountingPractice and Financial Reporting.

Basis of Accounting

Without modifying our opinion, we draw attention to Note 1 to the financial statements, which describes thebasis of accounting. The special purpose financial statements have been prepared for distribution to theCouncil and the Division of Local Government for the purpose of fulfilling the requirements of NationalCompetition Policy reporting. As a result, the financial statements may not be suitable for anotherpurpose. We disclaim any assumption of responsibility for any reliance on this report or on the financialstatements to which it relates to any person other than the Council or the Division of Local Government orfor any purpose other than for which the statements were prepared.

f^nf^ /A^'^Y./DOldA (^jQjL^fi(J 'MORSE GROUP LR SMITH

PARTNER266 Howick StreetBathurstDated: 4 October 2012

GROUPACCOUNTANTS & ADVISORS

4 October 2012

The MayorUpper Lachlan Shire CouncilPO Box 42GUNNING NSW 2581

Dear Mr Mayor

INDEPENDENT AUDITOR'S REPORT ON THE CONDUCT OF THE AUDIT - Section 417 (3]UPPER LACHLAN SHIRE COUNCIL

We advise having completed our audit of the financial statements of Upper Lachlan Shire Council for thefinancial year ended 30 June 2012. Our audit resulted in the issuing of an unmodified audit report on boththe general purpose and special purpose financial statements of Council.

In accordance with Section 417 of the Local Government Act 1993 we submit our report on the conduct ofthe audit of Upper Lachlan Shire Council for the year ended 30 June 2012. Our audit reports on the generalpurpose financial statements of Council and the special purpose financial statements on Council'sbusiness units outline the legislative framework of our audit and should be referred to in order to establishthe context in which our comments are made.

Council's Responsibility for the Financial Report

The Council is responsible for the preparation and fair presentation of the financial report in accordancewith the Local Government Act 1993. This responsibility includes establishing and maintaining internalcontrols relevant to the preparation and fair presentation of financial statements that are free~frommaterial misstatement. whether due to fraud or error; selecting and applying appropriate accountingpolicies; and making accounting estimates that are reasonable in the circumstances.

Auditor's Responsibility

Our responsibility is to express an opinion on the financial statements based on our audit. We conductedour audit in accordance with Australian Auditing Standards. These Auditing Standards require that wecomply with relevant ethical requirements relating to audit engagements and plan and perform the audit toobtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor's judgement, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal control relevant to the entity'spreparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe entity's internal control. An audit also includes evaluating the appropriateness of accounting policiesused and the reasonableness of accounting estimates made by Council, as well as evaluating the overallpresentation of the financial statements.

The following comments are provided in accordance with Section 415 [31 of the Local Government Act 1993and Regulation 227 of the Local Government (General) Regulation 2005 to assist in the understanding of thefinancial statements and our reports.

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Review of Financial Results

(a] Operating Result

As disclosed in Council's Income Statement the year's operations resulted in a surplus from ordinaryactivities after capital amounts of $5,193,000 [2011 - $3,79A,000). Some items of note in the operatingstatement include:

Revenue

The operating surplus from ordinary activities' before capital amounts was $2,448,000 (201 -.

$437,000).

Rates and annual charges increased by $341,000 [4.23%] to $8.408,000 [2011 - $8,067,000] which is.

consistent with the 2.8% increase in rate pegging, together with an increase in special rates forsewerage due to the completion of works on the TaraLga Sewerage Scheme.

User charges and fees increased from $3,843,000 for 2011 to $5,885,000 for 2012 (increase of.

$2,042,000].

Contributing to this was an increase of $816,000 in work conducted by Council for the RMS(formerly RTA] on State Roads.

In addition, private works income was $946,000 higher than 2011. The 2011-12 financial yearincluded $1.334,000 in work for Gunning Wind Energy to construct roads to access wind farms inthe Council area, whilst only $256,000 was received for works of this nature in 2010-11.

Operating grants and contributions rose from $8,196,000 in 2011 to $10,376,OOD in 2012 (increase of.

$2,180.0001.

The 2011 financial year included $1,331,000 in relation to Natural Disaster funding for worksrequired due to floods in the Council area in December 2010. The 2012 financial year included$2,739,000 of funding for this purpose as a result of floods early in the 2012 calendar year.

In addition, Council received two (21 advance payments of the Financial Assistance Grant for 2012-13 in the 2012 financial year, compared tojust one (1] advance payment received in 2011.

Capital grants and contributions decreased by $612,000 to $2,745.000 (201 1 - $3,357,000)..

The 2011 financial year included the receipt of $1 ,782,000 in funding for the TaraLga SewerageScheme, which was the balance of funding receivable by Council for this project.

This was offset by an increase in capital grants for water supplies of $1,A26,000. The 2011 yearincluded $400,000 in funding for the Taralga Water Augmentation, whilst 2012 incLuded $1,900,000for the Gunning Water Treatment Plant Upgrade.

Expenditure

Employment costs felt by $438,000 from $9,091,000 in 2011 to $8,653.000 for 2012..

Salaries and wages fell by $965,000 (13.72%) partly as a result of vacancies in a number of positionsthroughout the year.

However the major contributor to the reduction was due to a system error which was identified inthe 2011-12 financial year, and had previously resulted in some salaries and wages overheads beingconsolidated into salaries and wages costs, rather than to materials and contracts. The error didnot result in a misstatement of total expenses, only in their disclosure.

Materials and contracts expenditure for 2012 totaled $7,227,000 compared to $4,793,000 for 2011.

(increase of $2.434,000].

A key contributor to this was the works required as a result of flooding throughout the Council areain the 2011-12 year, which required significant levels of unscheduled works.

In addition, expenditure required to conduct the work undertaken for the RMS and Gunning WindEnergy has further contributed to the increase in this expense category.

The system error noted above in relation to employee costs also contributed to the increase in thisexpenditure category in comparison to the prior year.

Council's depreciation expense for 2012 was $370,000 higher than the 201 1 financial year. Of this.

increase, $175,000 related to Council's Sewerage assets and is primarily due to the extensivecapital works undertaken on the Taralga Sewerage Scheme over the last few years.

[b] Financial Position

The Balance Sheet discloses that for the year ended 30 June 2012 Council's net assets stood at$401,985,000 (2011 - $401.515,000) which represents an increase of $470.000..

This increase is the combined effect of the surplus for the year after capital amounts of $5,193,000, thedownwards revaluation of Council's water and sewerage assets by $2.093.000 and the correction of prioryear accumulated depreciation for these assets of $2,630,000.

To assess the health of Council's net current asset position it is necessary to review the level of restrictionsplaced against the use of Councils assets. The notes to the financial statements indicate clearly whererestrictions exist, and the effect of the restrictions is summarised as follows.

2012 2011$.000 $.000

Net current assets 13,764 8,556

Less: Amounts externally restricted forspecial purposes refer Notes 6; 7; & 8of financial statements (8.8721 ;6,7903

Less: Council internally imposed restrictions(refer Note 6 of financial statements) (6.2741 IA.438)

Add: Applicable current liabilities refer Note 10- Water 151 695- Sewerage 164 925- Domestic Waste Management 65 57

Add: Employee leave entitlements classifiedas current but not expected to besettled within 12 months 2,077 1,995

Unrestricted net current asset surplus/ldeficit] 1,075 1.000

Unrestricted net current assets comprise:-

AssetsCash 291 243Receivables 1,471 1,732Inventories 1.259 959Other assets 316 297

3.337 3,231Less:

Liabilities

Payables 11.3933 ;U29|Interest bearing liabilities (771 (701Provisions !2,86A) (2.527)

'4.339; !4,22AiAdd: Employee leave entitlements classified

as current but not expected to besettled within 12 months 2,077 1.995

Unrestricted net current asset surplus/ldeficit] 1,075 1,000

The positive unrestricted net current asset position of Upper Lachlan Shire Council has improved slightlysince the prior year but will require continued management to ensure it remains positive in subsequentfinancial years.

It is also important to note that this position is underpinned by high levels of receivables and inventories.The realisation of these assets during 2012-13 will impact Council's ability to provide services to thecommunity. Until these assets are realised, Council's flexibility to respond to community needs asrequired may be restricted.

Whilst the analysis of the net current asset position is a complete summary of Council's short-termposition, the strength of that position is determined by the liquidity of those assets, hence Council's abilityto operate effectively is largely governed by the amount of available cash.

Note 6 to the accounts discloses total cash and investments (current and non-current] of $15.161,000 (201-^$12.150.000]. Of this amount $8 596,000 12011 - $6,845,000) is subject to external restrictions requiringCouncil to commit those funds to the purposes for which they were provided and $6,27&,000 (2011 -$5,062,000) is subject to internal restrictions agreed upon by Council for designated purposes. Theseinternal restrictions may be altered at the discretion of Council, consistent with the Operational Plan ofCouncil

The unrestricted balance of $291 .000 (2011 - $243,000) represents funds available to cover non-budgeteddiscretionary expenditure and short-term cash flow requirements.

(c) Performance Indicators

Note 13 to the Financial Statements provides a measure of Council's performance using a number ofselected ratios as follows:

Unrestricted Current Ratio

The Unrestricted Current Ratio is a measure of Council's liquidity that demonstrates Council's ability tosatisfy obligations out of short-term asset balances.

Council's ratio of 4.25% (201 1 - 3.44%) demonstrates an acceptable level of funds available to meet itsshort term obligations.

However, as noted above. Council's current assets include high levels of receivables and inventories, whichwill need to be realised before Council is able to fully utilise the value of these assets in its day to dayoperations.

We stress the importance of considering this ratio in conjunction with other performance indicators and notin isolation. The fact that this ratio is based upon consolidated funds should also be kept in mind as theratios for individual funds [i.e. General, Water, Sewer, etc.] may vary significantly.

Debt Service Ratio

The cost of repaying debt is reflected in the debt service ratio, which expresses that cost as a percentage ofrecurrent revenue.

Council's ratio for 2012 was 4.7% [2011 - 3.6%]. Any future borrowings should be entered into only ifCouncil believes it can continue to meet its debt service requirements out of recurrent revenue.

Rates & Annual Charges Coverage Ratio

The ability of Council to meet community expectations for the delivery of services and provision of facilitiesis directly influenced by the discretion it can exercise in the allocation of resources.

In relation to rates, ahighteveL of dependency on rates income provides Council with a degree of flexibilityin the nature and timing of how funds are spent.

Upper Lachlan Shire Council's ratio of 29.3% (2011 - 32.5%) is lower than the prior year, and reflects theincreased revenue from grants and contributions and user charges and fees.

Rates & Annual Charges Outstanding Ratio

The rates and annual charges outstanding percentage is a measure of management efficiency. Whilstprevailing economic conditions may influence Council's ability to collect revenue, the efficiency andapplication of collection procedures are still the largest determinant of this ratio.

Upper Lachlan Shire Council's rates and annual charges outstanding percentage of 3.08% (2011 - 2.86%]reflects effective collection of debts and is the result of continued efforts by Councils staff to activelymanage outstanding rates.

Building and Infrastructure Renewals Ratio

The purpose of this ratio is to assess the rate at which infrastructure assets are being renewed against therate at which they are depreciating.

Because the distinction between replacements, renewals and repairs is not well defined, it is difficult tomake meaningful analysis from this ratio. Council's ratio at 30 June 2012 was 0.77 compared to 1.00 in2011 and 1.07 in 2010.

(d) Statement of Cash Flows

The Statement of Cash Flows reports a net decrease in cash assets held of $3,095,000 (2011 - net increaseof $344,000] as follows:

2012 2011$'000 $'000

Cash flow provided by / (used in]

Operating activities 9,634 8.497

Investing activities H2.C76] 37,871 J

Financing activities (6R3i 1282)

Net increase / (decrease) in cash held (3,095! 344

Cash flows from operating activities

Cash flows from operating activities were higher than the prior year, with a key contributor being thereceipt of the additional advance payment of the Financial Assistance Grant, which had no offsetting cashoutflow.

Cash flows from investing act'ivities

The net cash flows used in investing activities totalled $12,076,000 (2011 - $7,871,000]. The major outflowsincluded $2,518,00(1 of capital work on roads throughout the Council area. including $667,000 on TaralgaRoad Main_Roa(H248E]. An additional $1.280,000 was spent on bridges, including those on Bigga Road(Burwood Creek) and Collector Road (Collector Creek).

Councit spent $1,661,000 on additions to its heavy equipment and motor vehicle fleet. This was partiallyoffset by the disposal of older assets in these categories which contributed $506,000 to Council'scashflows.

A net amount of $6,100.000 was transferred out of cash and into longer terms investments which attracthigher interest rates.

Cash flows from financing activities

The net cash flows used in financing activities were $653,000 (201 1 - $282,000].

No borrowings were drawn in the current financial year. Repayments were in line with the requirements ofthe Loans.

Repayments during the year included $350,000 which was repaid on the Crookwell Sewerage Loan 168 aspart of the refinancing and renegotiation of loan terms

(e) Comparison of Actual and Budgeted Performance

Council's surplus from ordinary activities after capital amounts of $5,193,000 was $1,512,000 lower thanCouncil's original estimate of $6,705,000.

The nature of this report does not lend itself to detailed analysis of individual budget variation. Council hasprovided a commentary on these variations in Note 16.

Other Matters

(a) National Competition Policy

In accordance with the requirements of National Competition Policy guidelines, Upper Lachlan ShireCouncil has prepared a special purpose financial report on its business units for the year ended 30 June2012^ Council has determined that it has three business units within its operations being Water, Sewerageand Domestic Waste Management.

The Division of Local Government's July 1997 guidelines 'Pricing and Costing for Council Businesses: AGuide to Competitive Neutrality" outlines the process for identifying and allocating costs of activities andprovide a standard of disclosure requirements. These disclosures are reflected in Council's pricing and/orfinancial reporting systems and include taxation equ'ivaLents, Council subsidies, rate of return oninvestments in business units and dividends paid.

An unmodified audit report on the special purpose reports for the year ended 30 June 2012 has beenissued.

(bl Management Letters

An interim management letter was issued on 16 May 2012 whilst a final report will be prepared uponcompletion of our year end review. Matters raised via management letters have been satisfactorilyaddressed.

1c] Legislative compliance

As a result of our audit we advise that there are no material deficiencies in the accounting records orfinancial reports that have come to our attention during the conduct of the audit and that Upper LachlanShire Council's accounting records have been kept in accordance with the requirements of the LocalGovernment Act, 1993 and regulations.

Matters Relating to the Electronic Presentation of the Audited Financial Report

This auditor's rsport relates to the financial report of Upper LachLan Shire Council (Council] for the yearended 30 June 2012 included on Council's web site. Council is responsible for the integrity of Council's website. We have not been engaged to report on the integrity of the web site. The auditoi-'s report refers onlyto the statements named above. It does not provide an opinion on any other information which may havebeen hypertinked to/from these statements. If users of this report are concerned with the inherent risksarising from electronic data communications they are advised to refer to the hard copy of the auditedfinancial report to confirm the information included in the audited financial report presented on Council'sweb site.

Conclusion

a) The Council's accounting records have been kept in a manner and form that facilitated thepreparation of the general purpose financial report and allowed proper and effective audit of thisreport;

(b) The Council's accounting records have been kept in a manner and form that facilitated thepreparation of the special purpose financial reports and allowed proper and effective audit of thisreport; and

(c) all information relevant to the conduct of the audit has been obtained.

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.0 'MORSE GROU LR SMFTHPARTNER

266 Howick StreetBathurstDated: A October 2012

Upper Lachlan Shire Council

COUNCIL'S CERTIFICATEfor the year ended 30th June 2012

STATEMENT BY COUNCILLORS AND MANAGEMENTMADE PURSUANT TO SECTION 413(2)(c) OF THE LOCAL GOVERNMENT ACT 1993

(as amended )

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

(i) The Local Government Act 1993 (as amended) and the Regulations made thereunder.

(ii) The Australian Accounting Standards and professional pronouncements.

(iii) The Local Government Code of Accounting Practice and Financial Reporting.

To the best of our knowledge and belief, this report:-

(i) Present fairly the Council's operating result and financial position for the year and

(ii) Accords with Council's accounting and other records.

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

Signed in accordance with a Resolution of Council made on 20 September 2012.

/^^^-"-' ^^^yc\r. John Shaw Clr. James Wheelwright

MAYOR COUNCILLOR

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John Bell Bruce JohnstonG ERAL MANAGER RESPONSIBLE ACCOUNTING OFFICER

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GENERAL PURPOSE FINANCIAL REPORTSfor the year ended 30th June 2012

TABLE OF CONTENTS

Council's Certificate - s.413 (21 (c) ii

Auditor's Reoort - s.417 (2) and (3)

General Purpose Financial Reports:

* Income Statement & Statement of Comprehensive Income -2

* Balance Sheet 3

* Statement of Changes in Equity 4

* Cash Flow Statement 5

Notes to the Financial Statements:

Note No. 1 Summary of Significant Accounting Policies 6-26

Note No. 2 (a) Functions or Activities 27

Note No. 2 (b) Components of Functions or Activities 28

Note No. 3 Income from Continuing Operations 29-32Note No. 4 Expenses from Continuing Operations 33-35Note No. 5 Gain ( or Loss ) on Disposal of Assets 36

Note No. 6 (a) Cash and Cash Equivalents 37

Note No. 6 (b) Investments 38

Note No. 6 (c) Restricted Cash, Cash Equivalents and Investments 39-40Note No. 7 Receivables 41-42Note No. 8 Inventories and Other Assets 43-44

Note No. 9 (a) Infrastructure, Property, Plant and Equipment 45

Note No. 9 (b) Restricted Infrastructure, Property, Plant and Equipment 46

Note No. 9 (c) Infrastructure, Property, Plant and Equipment Notes 47-51

Note No. 10 (a) Payables, Borrowings and Provisions 52

Note No. 10 (b) Description of and Movements in Provisions 53Note No. 11 Reconciliation of Cash Flow Movements 54-55

Note No. 12 Commitments for Expenditure 56

Note No. 13 (a) Statement of Performance Measures - Consolidated Results 57

Note No. 13 (b) Statement of Performance Measures by Fund 58

Note No. 14 Investment Properties 59Note No. 15 Financial Risk Management 60-63Note No. 16 Material Budget Variations 64Note No. 17 Statement of Developer Contributions 65-66Note No. 18 Contingencies 67

Note No. 19 Interests in Joint Ventures 68Note No. 20 Revaluation Reserves and Retained Earnings 69-70

Note No. 21 Income Statement by Fund 71-72Note No. 22 Non-Current Assets Classified as Held For Sale 73Note No. 23 Events occurring after Balance Sheet date 74

Note No. 26 Reinstatement, Rehabilitation and Restoration Liabilities 75

Sustainable Finances Health Check 76

Comparatives to Previous Years 77


INCOME STATEMENTfor the year ended 30th June 2012

Original(DBudget Actual Actual

2012 2012 2011

( $-000) Notes ( $-000 ) ($'000)

INCOME FROM CONTINUING OPERATIONSRevenue:

8,389 Rates and Annual Charges 3 (a) 8,408 8,0675,042 User Charges and Fees 3(b) 5,885 3,843

550 Interest and Investment Revenue 3(c) 740 872419 Other Revenues 3 (d) 368 433

6,628 Non-Capital Purposes - Operating Grants and Contributions(2) 3(e,f) 10,376 8,1967,557 Capital Purposes - Grants and Contributions(2) 3(e,f) 2,745 3,357

Other Income:.

84 Gain from the Disposal of Assets 5 170 83

Net share of Interests in Joint Ventures and Associates using the equity method 19 21

28,669 TOTAL INCOME FROM CONTINUING OPERATIONS 28,713 24,852

EXPENSES FROM CONTINUING OPERATIONS:

8,716 Employee Benefits and On-Costs 4(a) 8,653 9,091333 Borrowing Costs 4(b) 309 334

5,781 Materials and Contracts 4(c) 7,227 4,7934,750 Depreciation and Amortisation 4(d) 5,043 4,673

Impairment 4(d)2,355 Other Expenses 4(e) 2,288 2,139

Interest and Investment Losses 3(c)29 Loss from Disposal of Assets 5 28

Net share of Interests in Joint Ventures and Associates using equity method 1921,964 TOTAL EXPENSES FROM CONTINUING OPERATIONS 23,520 21,058

6,705 OPERATING RESULT FROM CONTINUING OPERATIONS 193 3.794

OPERATING RESULT FROM DISCONTINUED OPERATIONS 24

6.705 NET OPERATING RESULT FOR THE YEAR 5,193 3,794

6,705 Surplus/(Deficit) attributable to Council 5,172 3,793Surplus/(Deficit) attributable to Minority Interests 21

NET OPERATING RESULT FOR THE YEAR BEFORE GRANTS(852) AND CONTRIBUTIONS PROVIDED FOR CAPITAL PURPOSES 2 437

The above Income Statement should be read in conjunction with the accompanying notes.

Note: (1) Original budget as approved by Council in the 2011/2012 Operational Plan - refer to Note 16.Note: (2) The Roads to Recovery and Roads and Maritime Services Regional Roads Block Grant income is classified as'Non-Capital Purposes - Operating Grants and Contributions'.

1

Uoper Lachlan Shire Council

STATEMENT OF COMPREHENSIVE INCOMEfor the year ended 30th June 2012

ActUul Actual

2012 2011

Notes ($-000) ($'000)

Net operating result for the year - from Income Statement 5,193 3,794

Other comprehensive income

Gain (loss) on revaluation of infrastructure, property, plant and equipment 20 (b) (2,093) 2,462Gain (loss) on revaluation of available-for-sale investments 20 (b)Realised available-for-sale investment gains recognised in revenue 20 (b)De-recognition of land under roads 20 (f)Adjustment to correct prior period depreciation errors 20 (d) (2,630 ) 21

Total other comprehensive income for the year (4,723) 2,483

Total comprehensive income for the year 470 6,277

Attributable to - Council 449 6,276- Minority interests 21

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

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BALANCE SHEETas at 30th June 2012

Actual ActualNotes 2012 2011

($-000) ($-000)

ASSETSCurrent Assets

Cash and Cash Equivalents 6 (a) 1,719 4,813Investments 6(b) 13,442 6,478Receivables 7 1,747 1,912Inventories 8 1,259 959Other 8 316 297Non-Current Assets Classified as Held for Sale 22

TOTAL CURRENT ASSETS 18,483 14,459

Non-Current AssetsInvestments 6(b) 859Receivables 7 452 59Inventories 8

Infrastructure, Property, Plant and Equipment 9 391,265 394,573Investments accounted for using equity method (81 19 201 180Investment Property 14Intangible Assets 25Other 8

TOTAL NON.CURRENT ASSETS 391,918 395,671

TOTAL ASSETS 410,401 410,130

LIABILITIESCurrent Liabilities

Payables 10 (a) 1,426 1,667Borrowings 10 (a) 188 1,499Provisions 10 (a) 3,105 2,737

TOTAL CURRENT LIABILITIES 4,719 5,903

Non-Current LiabilitiesPayables 10 (a)Borrowings 10 (a) 3,020 2,362Provisions 10 (a) 677 350

TOTAL r'ON-CURRENT LIABILITIES 3,697 2,712

TOTAL LIABILITIES 8,416 8,615

NET ASSETS 401,985 401,515

EQUITYRetained Earnings 20 253,888 248,716Revaluation Reserves 20 147,896 152,619Council Equity Interest 401,784 401,335

Council Equity Interest 401,784 401,335Minority Equity Interest 201 180

TOTAL EQUITY 401,985 401,515

The above Balance Sheet should be read in conjunction with the accompanying notes.

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STATEMENT OF CASH FLOWSfor the year ended 30th June 2012

Budget Actual Actual2012 Notes 2012 2011

($-000) ($'000 ) ($'000 )

CASH FLOWS FROM OPERATING ACTIVITIES:

Receipts:

8,389 Rates and Annual Charges 8,378 8,0415,042 User Charges and Fees 5,759 3,859

550 Investment Revenue and Interest 656 77714,184 Grants and Contribub'ons 13,121 11,553

Deposits and Retentions Received 27419 Other 375 422

28,584 28,316 24,652Payments:

(8,623 ) Employee Benefits and On-Costs (8,285 ) ( 8,969 )( 5,781 ) Materials and Contracts ( 7,348 ) (4,695 )

(333) Borrowing Costs (295) (321)Deposits and Retentions Refunded (147)

(2,355 ) Other (2,607) (2,170)(17,092) (18,682) (16,155)

11,492 Net Cash provided (or used in) Operating Activities 11 (b) 9,634 8,497

CASH FLOWS FROM INVESTING ACTIVITIES:

Receipts:Sale of Investments 500 500Sale of Investment PropertySale of Real Estate Assets

440 Sale of Infrastructure, Property, Plant and Equipment 506 268Sale of Interests in Joint Ventures / AssociatesProceeds from Boundary AdjustmentOther - Weeds Committee Funds 46

440 1,006 814Payments:

Purchase of Investments (6,600 ) (1,393)Purchase of Investment Property

( 12,444 ) Purchase of Infrastructure, Property, Plant and Equipment (6,482 ) ( 7,292 )Purchase of Real EstatePurchase of Interests in Joint Ventures / AssociatesOther

(12,444) (13,082) (8,685)

(12,004) Net Cash provided by ( or used in ) Investing Activities (12,076) 7,871 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Receipts:500 Borrowings and Advances

Payments by Deferred DebtorsOther

500

Payments:(616) Borrowings and Advances (653) (282)

Lease LiabilitiesOther

(616) (653) (282)

(116) Net Cash provided by ( or used in ) Financing Activities 653) (2S2)

(628) Net increase / (decrease ) in Cash and Cash Equivalents (3,095) 3444,814 Cash and Cash Equivalents at beginning of reporting perioc 11 (a) 4,814 4,469

4,186 Cash and Cash Equivalents at end of reporting period 11 (a) 1,719 4,814

The above Cash Flow Statement should be read in conjunction with the accompanying notes.

5


NOTES TO THE FINANCIAL STATEMENTS

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This note sets out the principal accounting policies adopted in the preparation of theFinancial Statements by Council as set out below. These policies have been consistentlyapplied to all the years presented, unless otherwise stated.

1. The Local Government Reporting Entity

Upper Lachlan Shire Council has its principal business office at 44 Spring Street,Crookwell, and also has administration offices at Gunning and Taralga. Upper LachlanShire Council is empowered by the New South Wales Local Government Act 1993 (hereinknown as "the Act") and its Charter is specified in Section 8, of the Act.

(a) Basis of Preparation

These general purpose Financial Statements have been prepared in accordance withAustralian Accounting Standards and Interpretations issued by the Australian AccountingStandards Board (AASB), the Local Government Act 1993 and Regulations, and the LocalGovernment Code of Accounting Practice and Financial Reporting. Upper Lachlan ShireCouncil is a not for-profit entity for the purpose of preparing the Financial Statements.

(i) New and amended Standards adopted by CouncilNone of the new standards and amendments to standards that are mandatory for the firsttime for the financial year beginning 1 July 2011 affected any of the amounts recognisedin the current period or any prior period and is not likely to affect future periods.

(ii) Early Adoption of StandardsUpper Lachlan Shire Council has not elected to apply any pronouncements before theiroperative date in the annual reporting period beginning 1 July 2011.

(Hi) Historical Cost Convention

These Financial Statements have been prepared under the historical cost convention, asmodified by the revaluation of available-for-sale financial assets, financial assets andliabilities at fair value through profit or loss, certain classes of property, plant andequipment and investment property.

(iv) Critical Accounting Estimates and JudgementsThe preparation of Financial Statements requires the use of certain critical accountingestimates. It also requires management to exercise its judgement in the process ofapplying Upper Lachlan Shire Council's accounting policies. Estimates and judgementsare continually evaluated and are based on historical experience and other factors,including expectations of future events that may have a financial impact on the entity andthat are believed to be reasonable under the circumstances.

6

Upper Lachlan Shire Council makes estimates and assumptions concerning the future.The resulting accounting estimates will, by definition, seldom equal the related actualresults. The estimates and assumptions that have a significant risk of causing a materialadjustment to the carrying amounts of assets and liabilities within the next financial yearare set out below: -

(i) Estimated fair values of Infrastructure, Property, Plant and Equipment assets.(ii) Estimated fair values of Water Supply and Sewerage network assets.

Critical Judgements in applying the Council's Accounting Policies(i) Projected Section 94 Commitments

Council has used significant judgement in determining future Section 94 income andexpenditure in Note 17.

(v) Financial Statements PresentationUpper Lachlan Shire Council applies the revised AASB 101 Presentation of FinancialStatements taking effect 1 January 2009. The revised standard requires separatepresentation of Statement of Comprehensive Income and a Statement of Changes inEquity.

(b) Revenue Recognition

Upper Lachlan Shire Council recognises revenue when the amount of revenue can bereliably measured, it is probable that future economic benefits will flow to the entity andspecific criteria have been met for each of the Council's activities as described below.Council bases its estimates on historical results, taking into consideration the type ofcustomer, the type of transaction and the specifics of each arrangement.

Revenue is measured at the fair value of the consideration received or receivable.Revenue is measured on major income categories as follows:-

Rates, Annual Charges, Grants and ContributionsRates, Annual Charges, Grants and Contributions (including developer contributions andSection 94 and Section 64 charges) are recognised as revenues when the Council obtainscontrol over the assets comprising these receipts. Developer Contributions may only beexpended for the purposes for which the contributions were required but the Council mayapply contributions according to the priorities established in work schedules.

Control over assets acquired from rates and annual charges is obtained at thecommencement of the rating year as it is an enforceable debt linked to the rateableproperty or, where earlier, upon receipt of the rates.

A provision for doubtful debts on rates and annual charges has been established.However the majority of unpaid rates accounts represent a charge against the rateableproperty that will be recovered when the property is next sold.

Control over granted assets is normally obtained upon their receipt (or acquittal) or uponearlier notification that a grant has been secured, and is valued at their fair value at thedate of transfer.

Revenue is recognised when the Council obtains control of the contribution or the right toreceive the contribution, it is probable that the economic benefits comprising thecontribution will flow to the Council and the amount of the contribution can be measuredreliably.

7

Where grants or contributions recognised as revenues during the financial year wereobtained on condition that they be expended in a particular manner or used over aparticular period and those conditions were undischarged at balance date, the unusedgrant or contribution is disclosed in note 3(g). The note also discloses the amount ofunused grant or contribution from prior years that was expended on Council's operationsduring the current year.

A liability is recognised in respect of revenue that is reciprocal in nature to the extent thatthe requisite service has not been provided at balance date.

User Charges and FeesUser charges and fees (including water billing charges and fines) are recognised asrevenue when the service has been provided, the payment is received, or when thepenalty has been applied, whichever first occurs.

A provision for doubtful debt is recognised when collection in full is no longer probable.

Sa/e of Plant, Property, Infrastructure and EquipmentThe profit or loss on sale of an asset is determined when control of the asset hasirrevocably passed to the buyer.

Interest and Rents

Interest and rents are recognised as revenue on a proportional basis when the payment isdue, the value of the payment is notified, or the payment is received, whichever firstoccurs.

(c) Principles of Consolidation

(i) The Consolidated FundIn accordance with the provisions of Section 409 (1), of the Local Government Act 1993,all money and property received by Upper Lachlan Shire Council is held in the Council'sConsolidated Fund unless it is required to be held in the Council's Trust Fund. Theconsolidated fund and other entities through which the Council controls resources to carryon its functions have been included in the Financial Statements forming part of this report.

The following funds have been included as part of the consolidated fund:-

General Purpose operations.

Bigga and Binda Hall special rates funds.

Water Supply - Crookwell, Gunning, Taralga and Dalton townships.

Sewerage Service - Crookwell, Gunning and Taralga townships.

Domestic Waste Management.

The following Committees, the transactions of which are considered immaterial either byamount or nature, have been excluded:-

. Tuena Hall and Recreation Area CommitteeBinda Memorial Hall Committee.

Bigga Memorial Hall Committee.

Taralga War Memorial Hall Committee.

Crookwell Memorial Hall Committee.

Upper Lachlan Tourist Association.

Crookwell and District Arts Council.

Community Technology Centre (CTC) Committee.

Collector Pumpkin Festival Committee.

. Crookwell Potato Festival Committee

8

Gunning and District Historical Society Committee.

Crookwell Historical Society Committee.

Gunning Golf Club Management Committee.

Breadalbane Hall Committee.

The total revenue and expenditure from continuing operations and the net assets held bythese Committees is as follows:-

Total revenue from continuing operations $279,000Total expenditure from continuing operations $255,000Total Net Assets (Equity) Held $274,000

Note: Where actual figures are not known, best estimates have been applied.

ii) The Trust FundIn accordance with the provisions of Section 411, of the Local Government Act 1993 (asamended), a separate and distinct Trust Fund is maintained to account for all money andproperty received by the Council in trust which must be applied only for the purposes of orin accordance with the trusts relating to those monies. Trust monies and property subjectto Council's control have been included in these reports.

Trust monies and property held by Council but not subject to the control of Council, havebeen excluded from these reports. A separate statement of monies held in the Trust Fundis available for inspection at the Council office by any person free of charge.

(Hi)w) Associates

Associates are all entities over which the Council has significant influence but not controlor joint control, generally accompanying a shareholding of between 20% and 50% of thevoting rights. Investments in associates are accounted for using the equity method ofaccounting, after initially being recognised at cost.

(iv) Joint Venture EntitiesThe interest in a joint venture partnership is accounted for using the equity method and iscarried at cost; Council has such an arrangement for the Southern Tablelands RegionalLibrary (STRL). Under the equity method, the share of the profits or losses of thepartnership is recognised in the Income Statement, and the share of post acquisitionmovements in reserves is recognised in Other Comprehensive Income. Details relating tothe joint venture are set out in Note 19.

Profits or losses on transactions establishing the joint venture partnership andtransactions with the joint venture are eliminated to the extent of the Council's ownershipinterest until such time as they are realised by the joint venture partnership onconsumption or sale. However, a loss on the transaction is recognised immediately if theloss provides evidence of a reduction in the net realisable value of current assets, or animpairment loss.

9

(d) Leases

Leases of property, plant and equipment where Council, as lessee, has substantially allthe risks and rewards of ownership are classified as finance leases. Finance leases arecapitalised at the lease's inception at the fair value of the leased property or, if lower, thepresent value of the minimum lease payments. The corresponding rental obligations, netof finance charges, are included in other short-term and long-term payables. Each leasepayment is allocated between the liability and finance cost. The finance cost is charged tothe Income Statement over the lease period so as to produce a constant periodic rate ofinterest on the remaining balance of the liability for each period. The property, plant andequipment acquired under finance leases is depreciated over the asset's useful life or overthe shorter of the asset's useful life and the lease term if there is no reasonable certaintythat Council will obtain ownership at the end of the lease term. Upper Lachlan ShireCouncil does not have any finance lease commitments.

Leases in which a significant portion of the risks and rewards of ownership are nottransferred to Council as lessee are classified as operating leases. Payments made underoperating leases (net of any incentives received from the lessor) are charged to theIncome Statement on a straight-line basis over the period of the lease. Upper LachlanShire Council does have Operating lease expense commitments as identified in Note 12.

Lease income from operating leases where Council is a lessor is recognised in income ona straight-line basis over the lease term. Council has no lease income from operatingleases.

(e) Acquisition of Assets

The purchase method of accounting is used to account for all acquisitions of assets. Costis measured as the fair value of the assets given, plus costs directly attributable to theacquisition.

Where settlement of any part of cash consideration is deferred, the amounts payable inthe future are discounted to their present value as at the date of exchange. The discountrate used is the Council's incremental borrowing rate, being the rate at" which a similarborrowing could be obtained from an independent financier under comparable terms andconditions.

(f) Impairment of Assets

Goodwill and intangible assets that have an indefinite useful life are not subject toamortisation and are tested annually for impairment or more frequently if events orchanges in circumstances indicate that they might be impaired. Other assets are testedfor impairment whenever events or changes in circumstances indicate that the carryingamount may not be recoverable. An impairment loss is recognised for the amount bywhich the asset's carrying amount exceeds its recoverable amount. The recoverableamount is the higher of an asset's fair value less costs to sell and value in use. For thepurposes of assessing impairment, assets are grouped at the lowest levels for which thereare separately identifiable cash inflows which are largely independent of the cash inflowsfrom other assets or groups of assets (cash-generating units). Nonfinancial assets otherthan goodwill that suffered impairment are reviewed for possible reversal of theimpairment at each reporting date.

10

(g) Cash and Cash Equivalents

For cash flow statement presentation purposes, cash and cash equivalents includes cashon hand, deposits held _ at call with financial institutions, other short-term, highly liquidinvestments with original maturities of three months or less that are readily convertible toknown amounts of cash and which are subject to an insignificant risk of changes in value,and bank overdrafts. Bank overdrafts are shown within borrowings in currenfliabilities onthe balance sheet.

(h) Receivables

Receivables are recognised initially at fair value and subsequently measured at amortisedcost using the effective interest method, less provision for impairment. Receivables aregenerally due for settlement within 30 days.

Collectability of receivables is reviewed on an ongoing basis. Debts which are known tobe uncollectible are written off by reducing the carrying amount directly. An allowanceaccount (provision for impairment of receivables) is used when there is objective evidencethat Council will not be able to collect all amounts due according to the original terms ofthe receivables. Significant financial difficulties of the debtor, probability that the debtor willenter bankruptcy or financial reorganisation, and default or delinquency in payments(more than 30_ days overdue) are considered indicators that the receivable is impaired.The amount of the impairment allowance is the difference between the asset's carryingamount and the present value of estimated future cash flows, discounted at the originaleffective interest rate. Cash flows relating to short term receivables are not discounted ifthe effect of discounting is immaterial.

The amount of the impairment loss is recognised in the Income Statement within otherexpenses. When a receivable for which an impairment allowance had been recognisedbecomes uncollectible in a subsequent period, it is written off against the allowanceaccount. Subsequent recoveries of amounts previously written off are credited againstother expenses in the Income Statement.

(i) Inventories

(i) Raw materials and stores, work in progress and finished goodsRaw materials and stores, work in progress and finished goods are stated at the lower ofcost and net realisable value. Cost comprises direct materials, direct labour and anappropriate proportion of variable and fixed overhead expenditure, the latter beingallocated on the basis of normal operating capacity. Cost includes the transfer from equityof any gains/losses on qualifying cash flow hedges relating to purchases of raw materiaLCosts are assigned to individual items of inventory on basis of weighted average costs.Costs of purchased inventory are determined after deducting rebates and discounts. Netrealisable value is the estimated selling price in the ordinary course of business less theestimated costs of completion and the estimated costs necessary to make the sale.

(ii) Land held for resale/capitalisation of borrowing costsLand held for resale is stated at the lower of cost and net realisable value. Cost isassigned by specific identification and includes the cost of acquisition, and developmentand borrowing costs during development. When development is completed borrowingcosts and other holding charges are expensed as incurred.

Borrowing costs included in the cost of land held for resale are those costs that wouldhave been avoided if the expenditure on the acquisition and development of the land hadnot been made. Borrowing costs incurred while active development is interrupted forextended periods are recognised as expenses.

11

(j) Non-current assets (or disposal groups) held for sale and discontinuedoperations

Non-current assets (or disposal groups) are classified as held for sale if their carryingamount will be recovered principally through a sale transaction rather than throughcontinuing use. They are measured at the lower of their carrying amount and fair valueless costs to sell, except for assets such as deferred tax assets, assets arising fromemployee benefits, financial assets and investment property that are carried at fair valueand contractual rights under insurance contracts, which are specifically exempt from thisrequirement.

An impairment loss is recognised for any initial or subsequent write-down of the asset (ordisposal group) to fair value less costs to sell. A gain is recognised for any subsequentincreases in fair value less costs to sell of an asset (or disposal group), but not in excessof any cumulative impairment loss previously recognised. A gain or loss not previouslyrecognised by the date of the sale of the non-current asset (or disposal group) isrecognised at the date of de-recognition.

Non-current assets (including those that are part of a disposal group) are not depreciatedor amortised while they are classified as held for sale. Interest and other expensesattributable to the liabilities of a disposal group classified as held for sale continue to berecognised.

Non-current assets classified as held for sale and the assets of a disposal group classifiedas held for sale are presented separately from the other assets in the balance sheet. Theliabilities of a disposal group classified as held for sale are presented separately fromother liabilities in the balance sheet.

A discontinued operation is a component of the entity that has been disposed of or isclassified as held for sale and that represents a separate major line of business orgeographical area of operations, is part of a single coordinated plan to dispose of such aline of business or area of operations, or is a subsidiary acquired exclusively with a viewto resale. The results of discontinued operations are presented separately on the face ofthe Income Statement.

(k) Investments and Other Financial Assets

Classification

Council classifies its financial assets in the following categories: financial assets at fairvalue through profit or loss, loans and receivables, held-to-maturity investments andavailable-for-sale financial assets. The classification depends on the purpose for whichthe investments were acquired. Management determines the classification of itsinvestments at initial recognition and, in the case of assets classified as held-to-maturity,re-evaluates this designation at each reporting date.

(i) Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss are financial assets held for trading. Afinancial asset is classified in this category if acquired principally for the purpose of sellingin the short term. Derivatives are classified as held for trading unless they are designatedas hedges. Assets in this category are classified as current assets.

(ii) Loans and ReceivablesLoans and receivables are non-derivative financial assets with fixed or determinablepayments that are not quoted in an active market. They are included in current assets,except for those with maturities greater than 12 months after the reporting date which are

12

classified as non-current assets. Loans and receivables are included in other receivables(Note 8) and receivables (Note 7) in the Balance Sheet.

(Hi) Held-to-maturity InvestmentsHeld-to-maturity investments are non-derivative financial assets with fixed or determinablepayments and fixed maturities that Council's management has the positive intention andability to hold to maturity. If Council were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified asavailable-for-sale. Held-to-maturity financial assets are included in non-current assets,except for those with maturities less than 12 months from the reporting date, which areclassified as current assets.

(iv) Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivatives that are either designated in thiscategory or not classified in any of the other categories. They are included m non-currentassets unless management intends to dispose of the investment within 12 months of thereporting date. Investments are designated as available-for-sale if they do not have fixedmaturities and fixed or determinable payments and management intends to hold them forthe medium to long term.

Financial assets - reclassification

Council may choose to reclassify a non-derivative trading financial asset out of the held-for-trading category if the financial asset is no longer held for the purpose of selling it inthe near term. Financial assets other than loans and receivables are permitted to bereclassified out of the held-for-trading category only in rare circumstances arising from asingle event that is unusual and highly unlikely to recur in the near term. In addition,Council may choose to reclassify financial assets that would meet the definition of loansand receivables out of the held-for-trading or available-for-sale categories if it has theintention and ability to hold these financial assets for the foreseeable future or untilmaturity at the date of reclassification.

Reclassifications are made at fair value as of the reclassification date. Fair value becomesthe new cost or amortised cost as applicable, and no reversals of fair value gains orlosses recorded before reclassification date are subsequently made. Effective interestrates for financial assets reclassified to loans and receivables and held-to-maturitycategories are determined at the reclassification date. Further increases in estimates ofcash flows adjust effective interest rates prospectively.

Change in Accounting PolicyUpper Lachlan Shire Council has not adopted the policy of reclassifying financial assetsout of the held-for-trading category from 1 July 2008, following amendments made toAASB 139 Financial Instruments: Recognition and Measurement in October 2008.

13

Recognition and DerecognitionRegular purchases and sales of financial assets are recognised on trade-date - the dateon which Council commits to purchase or sell the asset. Investments are initiallyrecognised at fair value plus transaction costs for all financial assets not carried at fai'rvalue through profit or loss. Financial assets carried at fair value through profit or loss isinitially recognised at fair value and transaction costs are expensed in the IncomeStatement. Financial assets are derecognised when the rights to receive cash flows fromthe financial assets have expired or have been transferred and Council has transferredsubstantially all the risks and rewards of ownership.

When securities classified as available-for-sale are sold, the accumulated fair valueadjustments recognised in equity are included in the Income Statement as gains andlosses from investment securities.

Subsequent MeasurementLoans and receivables and held-to-maturity investments are carried at amortised costusing the effective interest method.

Available-for-sale financial assets and financial assets at fair value through profit and lossare subsequently carried at fair value. Gains or losses arising from changes in the fairvalue of the financial assets at fair value through profit or loss- category are presented inthe Income Statement within other income or other expenses in the period in which theyarise. Dividend income from financial assets at fair value through profit and loss isrecognised in the income statement as part of revenue from continuing operations whenCouncil's right to receive payments is established.

Changes in the fair value of monetary securities denominated in a foreign currency andclassified as available-for-sale are analysed between translation differences resulting fromchanges inamortised cost of the security and other changes in the carrying amount of thesecurity. The translation differences related to changes in the amortised cost arerecognised in profit or loss, and other changes in carrying amount are recognised inequity. Changes in the fair value of other monetary and non-monetary securities classifiedas available-for-sale are recognised in equity.

Details on how the fair value of financial instruments is determined are disclosed in Note1(L).

ImpairmentCouncil assesses at the end of each reporting period whether there is objective evidencethat a financial asset or group of financial assets is impaired. A financial asset or a groupof financial assets is impaired and impairment losses are incurred only if there is objectiveevidence of impairment as a result of one or more events that occurred after the initialrecognition of the asset (a 'loss event') and that loss event (or events) has an impact onthe estimated future cash flows of the financial asset or group of financial assets that canbe reliably estimated. In the case of equity investments classified as available-for-sale, asignificant or prolonged decline in the fair value of the security below its cost is consideredan indicator that the assets are impaired. Impairment losses are recognised in the IncomeStatement.

(i) Assets carried at Amortised CostFor loans and receivables, the amount of the loss is measured as the difference betweenthe asset's carrying amount and the present value of estimated future cash flows(excluding future credit losses that have not been incurred) discounted at the financialasset's original effective interest rate. The carrying amount of the asset is reduced and theamount of the loss is recognised in profit or loss.

14

If a loan or held-to-maturity investment has a variable interest rate, the discount rate formeasuring any impairment loss is the current effective interest rate determined under thecontract. As a practical expedient, the group may measure impairment on the basis of aninstrument's fair value using an observable market price.

Investment PolicyUpper Lachlan Shire Council has an approved Investment Policy complying with Section625, of the Local Government Act 1993 and Section 212, of the Local Government(General) Regulation 2005. Investments are placed and managed in accordance with thatpolicy and having particular regard to authorised investments prescribed under theMinisterial Local Government Investment Order. Upper Lachlan Shire Council maintainsan Investment Policy that complies with the Act and ensures that it or its representativesexercise care, diligence and skill that a prudent person would exercise in investing Councilfunds.

Council amended its policy following revisions to the Ministerial Local GovernmentInvestment Order arising from the Cole Inquiry recommendations. Certain investments theCouncil holds are no longer prescribed; for example CDO's, however they have beenretained under grandfathering provisions of the Investment Order. These may be disposedof when most financially advantageous to Council or upon maturity of the investment

(L) Fair Value Estimation

The fair value of financial assets and financial liabilities must be estimated for recognitionand measurement or for disclosure purposes.

The fair value of financial instruments traded in active markets is based on quoted marketprices at the balance sheet date.

The fair value of financial instruments that are not traded in an active market isdetermined using valuation techniques. Council uses a variety of methods and makesassumptions that are based on market conditions existing at each balance date. Quotedmarket prices or dealer quotes for similar instruments are used for long-term debtinstruments held. Other techniques, such as estimated discounted cash flows, are used todetermine fair value for the remaining financial instruments.

There has been volatility in the global credit markets over the past four years. There havebeen wide reaching fluctuations in the global credit markets and there is no activesecondary market evident which makes the process of determining a reliable gauge of thefair value for the "financial assets held for trading at fair value" very difficult.

Upper Lachlan Shire Council has received valuations from custodians of investmentproducts and investment brokers and undertaken discounted cash flow / net present valueinvestment modelling valuations. However, due to the illiquidity in the market, thechallenge of obtaining a realistic mid market price has been extreme.

The disclaimer from investment product custodians of market valuations states that "thevaluation is an indicative price or estimate and is provided to you for information purposesonly and is not intended for use by any third party. The valuation generally represents agood faith estimate of a mid market price for the investment." Council remainsunconvinced from the best available evidence that the valuations provided are in factreliable.

Upper Lachlan Shire Council's cash flow has been marginally affected by non payment ofinterest on two CDO investments in the past twelve months. However, Council's principalamount has not defaulted and no actual principal cash losses have occurred. Council hasdecided to hold onto its investments until market conditions improve or until maturity.

15

Council's investment portfolio has sufficient diversification to provide liquidity until otherinvestments mature.

(m) Infrastructure, Property, Plant and Equipment (IPPE)

Council's assets have been progressively revalued to fair value in accordance with astaged implementation advised by the Division of Local Government (DLG). At balancedate the following classes of IPPE were stated at their fair value:-

Operational Land (External Valuation - Scott Fullarton Valuations Pty Ltd)..

Buildings - Specialised / Non-Specialised (External Valuation - Scott Fullarton.

Valuations Pty Ltd).

Water Supply and Sewerage Networks (Internal Valuation)..

Plant and Equipment (as approximated by depreciated historical cost)..

Road Assets - Roads, Bridges, and Footpaths (Internal Valuation)..

Bulk Earthworks (Internal Valuation)..

Drainage Assets (Internal Valuation)..

Community Land (External Valuation - Scott Fullarton Valuations Pty Ltd)..

Land Improvements (as approximated by depreciated historical cost)..

Other Assets (as approximated by depreciated historical cost)..

Other Structures (External Valuation - Scott Fullarton Valuations Pty Ltd)..

Water and Sewerage network assets are indexed annually between full revaluations inaccordance with the latest indices provided in the NSW Office of Water - RatesReference Manual. For all other assets, Council assesses at each reporting date whetherthere is any indication that a revalued asset's carrying amount may differ materially fromthat which would be determined if the asset were revalued at the reporting date. 'If anysuch indication exists, Council determines the asset's fair value and revalues the asset tothat amount. Full revaluations will be undertaken for all assets on a 5 year cycle.

Increases in the carrying amounts arising on revaluation are credited to the assetrevaluation reserve. _ To the extent that the increase reverses a decrease previouslyrecognising profit or loss, the increase is first recognised in profit or loss. Decreases thatreverse previous increases of the same asset are first charged against revaluationreserves directly in equity to the extent of the remaining reserve attributable to the asset;all other decreases are charged to the Income Statement.

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Subsequent costs are included in the asset's carrying amount or recognised as a separateasset, as appropriate, only when it is probable that future economic benefits associatedwith the item will flow to Council and the cost of the item can be measured reliably. Allother repairs and maintenance are charged to the Income Statement during the financialperiod in which they are incurred.

Depreciation of AssetsMajor depreciation periods for each class of asset are provided in Note 9(c). Land is notdepreciated. Depreciation on other assets is calculated using the straight line method toallocate their cost, net of their residual values, over their estimated useful lives, asfollows:-

Office Equipment 5-10 years Pumps and Telemetry 15-25yearsOffice Furniture 10 - 20 years Urban Stormwater 100yearsVehicles & Road making equipment 5-10 years Footpaths 80yearsOther Plant and Equipment 5-15 years Kerb & Guttering 80yearsBuildings - Masonry 50-100 years Roads Bulk EarthworksInfinite

- Other 20 - 50 years Sealed Roads - Surface 20yearsPlayground Equipment 15 years - Structure 100yearsBenches, Seats etc. 10 - 20 years Unsealed Roads 100yearsBores 25 - 50 years Bridges - Concrete 100yearsDams and Reservoirs 100 years - Timber 40-100yearsReticulation Pipes - PVC 80 years Road Drainage Structures 100years

- Other 80 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, ateach balance sheet date.

An asset's carrying amount is written down immediately to its recoverable amount if theasset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with carryingamount. These are included in the Income Statement.

Land, other than land under_ roads, is classified as either operational or community inaccordance with Part 2, of Chapter 6, of the Local Government Act 1993. thisclassification is made in Note 9(a).

Additional information relating to Infrastructure, Property, Plant and Equipment isdisclosed in Note 9(c) to the General Purpose Financial Statements.

(n) Investment Property

Investment property, principally comprising freehold office buildings, is held for long-termrental yields and is not occupied by the Council. Investment property is carried at fair

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value, which is based on active market prices, adjusted, if necessary, for any difference inthe nature, location or condition of the specific asset. If this information is not available,Council uses alternative valuation methods such as recent prices in less active markets ordiscounted cash flow projections. These valuations are reviewed annually by a member ofthe Australian Property Institute. Changes in fair values are recorded in the IncomeStatement as part of other income.

Investment property includes properties that are under construction for future use asinvestment properties. These are also carried at fair value unless the fair value can not yetbe reliably determined. Where that is the case, the property will be accounted for at costuntil either the fair value becomes reliably determinable or construction is complete. Thechange relates to changes made to AASB 140 Investment Property as a result of theIASB'S 2008 Improvements standard.

Please note that Upper Lachlan Shire Council does not have any investment properties.

(o) Payables

These amounts represent liabilities for goods and services provided to the Council prior tothe end of financial year which are unpaid. The amounts are unsecured and are usuallypaid within 30 days of recognition.

(p) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred.Borrowings are subsequently measured at amortised cost. Any difference between theproceeds (net of transaction costs) and the redemption amount is recognised in theIncome Statement over the period of the borrowings using the effective interest method.Fees paid on the establishment of loan facilities are recognised as transaction costs of theloan to the extent that it is probable that some or all of the facility will be drawn down. Inthis case, the fee is deferred until the draw down occurs. To the extent there is noevidence that it is probable that some or all of the facility will be drawn down, the fee iscapitalised as a prepayment for liquidity services and amortised over the period of thefacility to which it relates.

Borrowings are removed from the balance sheet when the obligation specified in thecontract is discharged, cancelled or expired. The difference between the carrying amountof a financial liability that has been extinguished or transferred to another party and theconsideration paid, including any non-cash assets transferred or liabilities assumed, isrecognised in other income or finance cost.

Borrowings are classified as current liabilities unless the Council has an unconditionalright to defer settlement of the liability for at least 12 months after the reporting date.

(q) Borrowing Costs

Borrowing costs incurred for the construction of any qualifying asset are capitalised duringthe period of time that is required to complete and prepare the asset for its intended useor sale. Other borrowing costs are expensed.

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(r) Provisions

Provisions are recognised when Council has a present legal or constructive obligation asa result of past events, it is probable that an outflow of resources will be requirecTto settlethe obligation and the amount has been reliably estimated. Provisions are not recognisedfor future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will berequired in settlement is determined by considering the class of obligations as a whole. Aprovision is recognised even if the likelihood of an outflow with respect to any one itemincluded in the same class of obligations may be small.

Provisions are measured at the present value of management's best estimate of theexpenditure required to settle the present obligation at the reporting date. The discountrate used to determine the present value reflects current market assessments of the timevalue of money and_the risks specific to the liability. The increase in the provision due tothe passage of time is recognised as interest expense.

Council has recognised and disclosed provisions in Note 10(a) and (b), Contingencies andother assets and liabilities not recognised in the Financial Statements are included in Note18.

(s) Employee Benefits

(i) Short-term obligationsLiabilities for wages and salaries, including non-monetary benefits, annual leave andaccumulating sick leave expected to be settled within 12 months after the end of theperiod in which the employees render the related service are recognised in respect ofemployees' services up to the end of the reporting period and are measured at theamounts expected to be paid when the liabilities are settled. The liability for annual leaveis recognised in the provision for employee benefits. All other short-term employee benefitobligations are presented as payables.

Upper Lachlan Shire Council does not recognise accumulated sick leave. Council doesnot make payment for untaken sick leave except in the case of death benefits.

(ii) Other long-term employee benefit obligationsThe liability for long service leave and annual leave which is not expected to be settledwithin 12 months after the end of the period in which the employees render the relatedservice is recognised in the provision for employee benefits and measured as the presentvalue of expected future payments to be made in respect of services provided byemployees up to the end of the reporting period using the projected unit credit method.Consideration is given to expected future wage and salary levels, experience of employeedepartures and periods of service. Expected future payments are discounted using marketyields at the end of the reporting period on national government bonds with terms tomaturity and currency that match, as closely as possible, the estimated future cashoutflows.

The obligations are presented as current liabilities in the Balance Sheet if Council doesnot have an unconditional right to defer settlement for at least twelve months after thereporting date, regardless of when the actual settlement is expected to occur.

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(Hi) Retirement Benefit ObligationsAll employees of Upper Lachlan Shire Council are entitled to benefits on retirement,disability or death. Council contributes to various defined benefit plans and definedcontribution plans on behalf of its employees.

A liability or asset in respect of defined benefit superannuation plans would ordinarily berecognised in the balance sheet, and measured as the present value of the definedbenefit obligation at ^ the reporting date plus unrecognised actuarial gains (lessunrecognised actuarial losses) less the fair value of the superannuation fund7s assets atthat date and any unrecognised past service cost. The present value of the defined benefitobligation is based on expected future payments which arise from membership of the fundto the reporting date, calculated annually by independent actuaries using the projectedunit credit method. Consideration is given to expected future wage and salary levels,experience of employee departures and periods of service. However, when thisinformation is not reliably available, Council accounts for its obligations to defined benefitplans on the same basis as its obligations to defined contribution plans (see below).

The Local Government Superannuation Scheme (LGSS) has advised that it is unable toprovide individual Councils with an accurate split of their share of the Scheme's assetsand liabilities and so no asset or liability is recognised.

Contributions to defined contribution plans are recognised as an expense as they becomepayable. Prepaid contributions are recognised as an asset to the extent that a cash refundor a reduction in the future payments is available.

Defined Benefit Members

The Local Government Superannuation Scheme (LGSS) - Pool B is a defined benefitplan that has been deemed as a multi-employer fund for purposes ofAASB119. Sufficientinformation under AASB119 is not available to account for the Scheme as a definedbenefit plan, because the assets to the Scheme are pooled together for all employers.

The last valuation of the Scheme was performed by Mr Martin Stevenson BSc, FIA, FIAAon 16 February 2010 and covers the period ended 30 June 2009. The financial position ismonitored annually and the Actuary has estimated that as at 30 June 2012 a deficit stillexists. The share of this deficit that can be broadly attributed to Upper Lachlan ShireCouncil was estimated to be $1,304,367 as at 30 June 2012.

Upper Lachlan Shire Council makes employer contributions to the defined benefitscategories of the Scheme at rates determined by the Scheme's Trustee for 36 employeemembers; the total employer contribution expense in 2011/2012 was $468,270. As aresult of the global financial crisis, and consequent deficiency of assets to liabilities, theLOSS have asked for^significant increases in contributions to recover that deficiency. Thecontribution rate for 2011/2012 is a contribution of twice the "notional" or long term cost ofsuperannuation salary, for up to 10 years in order to rectify the deficit. The amount ofadditional employer contributions paid by Upper Lachlan Shire Council in 2011/2012 was$183,516. Employees also make member contributions to the Fund. As such, assetsaccumulate in the Fund to meet the member's benefit, as defined in the Trust Deed, asthey accrue.

Council has disclosed a contingent liability in Note 18 to reflect the possible obligation thatmay arise should the Scheme require immediate payment to correct the deficiency.

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(t) Rounding of Amounts

Unless otherwise indicated, amounts in the financial statements have been rounded off tothe nearest thousand dollars.

(u) Land under Roads

Council has elected not to recognise land under roads acquired before 1 July 2008 inaccordance with AASB 1051.

Land under roads acquired after 1 July 2008 is recognised in accordance with AASB 116- Property, Plant and Equipment.

Land under roads _is land under roadways and road reserves including land underfootpaths, nature strips and median strips.

(y) Provisions foreclose Down and Restoration and for Environmental Clean UpCosts - Tips and Gravel Pits/Quarries

(i) RestorationClose down and restoration costs include the dismantling and demolition of infrastructureand the removal of residual materials and remediation of disturbed areas. Estimated closedown and restoration costs are provided for in the accounting period when the obligationarising from the related disturbance occurs, whether this occurs during the developmentor during the operation phase, based on the net present value of estimated future "costs.Provisions for close down and restoration costs do not include any additional obligationswhich are expected to arise from future disturbance. The costs are estimated on the basisof a closure plan. _ The cost estimates are calculated annually during the life of theoperation to reflect known developments, e.g. updated cost estimates and revisions to theestimated lives of operations, and are subject to formal review at regular intervals.

Close down and restoration costs are a normal consequence of tip and quarry operations,and the majority of close down and restoration expenditure is incurred at the end of the lifeof the operations. Although the ultimate cost to be incurred is uncertain, Council estimatesthe respective costs based on engineering studies using current restoration standards andtechniques.

The amortisation or -unwinding- of the discount applied in establishing the net presentvalue of provisions is charged to the Income Statement in each accounting period. Theamortisation of the discount is shown as a borrowing cost.

Other movements in the provisions for close down and restoration costs, including thoseresulting from new disturbance, updated cost estimates, changes to the estimated lives ofoperations and revisions to discount rates are capitalised within property, plant andequipment. These costs are then depreciated over the lives of the assets to which theyrelate.

(ii) RehabilitationWhere rehabilitation is conducted systematically over the life of the operation, rather thanat the time of closure, provision is made for the estimated outstanding continuousrehabilitation work at each balance sheet date and the cost is charged to the IncomeStatement.

Provision is made for the estimated present value of the costs of environmental cleanupobligations outstanding at the balance sheet date. These costs are charged to the IncomeStatement. Movements in the environmental cleanup provisions are presented as an

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operating cost, except for the unwind of the discount which is shown as a borrowing cost.Remediation procedures generally commence soon after the time the da'mage,remediation process and_estimated remediation costs become known, but may continuefor many years depending on the nature of the disturbance and the remediationtechniques.

As noted above, the ultimate cost of environmental remediation is uncertain and costestimates can vary in response to many factors including changes to the relevant legalrequirements, the emergence of new restoration techniques or experience at otherlocations. The expected timing of expenditure can also change, for example in responseto changes in quarry reserves or production rates. As a result there could be significantadjustments to the provision for close down and restoration and environmental cleanup,which would affect future financial results.

(w) Allocation between Current and Non-Current Assets and Liabilities

In the determination of whether an asset or liability is current or non-current, considerationis given to the time when each asset or liability is expected to be settled. The asset orliability is classified as current if it is expected to be settled within the next 12 months,being the Council's operational cycle. In the case of liabilities where Council does nothave the unconditional right to defer settlement beyond 12 months, such as vested longservice leave, the liability is classified as current even if not expected to be settled withinthe next 12 months. Inventories held for trading are classified as current even if notexpected to be realised in the next 12 months.

(x) New Accounting Standards and Interpretations

Certain new Accounting Standards and Interpretations have been published that are notmandatory for 30 June 2012 reporting periods. Council's assessment of the impact ofthese new standards and interpretations is set out below.

(i) AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian AccountingStandards arising from AASB 9 and AASB 2010-7 Amendments to Australian AccountingStandards arising from AASB9 (December 2010) (effective from 1 January 2013)

AASB 9 Financial Instruments addresses the classification, measurement andderecognition of financial assets and financial liabilities. The standard is not applicableuntil 1 January 2013 but is available for early adoption. When adopted, the standard willaffect in particular the Council's accounting for its avaitable-for sale financial assets, sinceAASB 9 only permits the recognition of fair value gains and losses in other comprehensiveincome if they relate to equity investments that are not held for trading. Fair value gainsand losses on available-for-sale debt investments, for example, will therefore have to berecognised directly in profit or loss.

There will be no impact on the Council's accounting for financial liabilities, as thenew requirements only affect the accounting for financial liabilities that aredesignated at fair value through profit or loss and the Council does not have anysuch liabilities. The derecognition rules have been transferred from AASB 139 FinancialInstruments: Recognition and Measurement and have not been changed.

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(ii) AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12Disclosure of Interests in Other Entities, revised AASB 127 Separate Financial Statementsand AASB 128 Investments in Associates and Joint Ventures and AASB 2011-7Amendments to Australian Accounting Standards arising from the Consolidation and JointArrangements Standards (effective 1 January 2013)

In August 2011, the AASB issued a suite of five new and amended standards whichaddress the accounting for joint arrangements, consolidated Financial Statements andassociated disclosures.

AASB 10 replaces all of the guidance on control and consolidation in AASB 127Consolidated and Separate Financial Statements, and Interpretation 12 Consolidation -Special Purpose Entities. The core principle that a consolidated entity presents a parentand its subsidiaries as if they are a single economic entity remains unchanged, as do themechanics of consolidation. However, the standard introduces a single definition of controlthat applies to all entities. It focuses on the need to have both power and rights orexposure to variable returns. Power is the current ability to direct the activities thatsignificantly influence returns. Returns must vary and can be positive, negative or both.Control exists when the investor can use its power to affect the amount of its returns.There is also new guidance on participating and protective rights and on agent/principalrelationships. Council does not expect the new standard to have a significant impact on itscomposition.

AASB 11 introduces a principles based approach to accounting for joint arrangements.The focus is no longer on the legal structure of joint arrangements, but rather on howrights and obligations are shared by the parties to the joint arrangement. Based on theassessment of rights and obligations, a joint arrangement will be classified as either a jointoperation or a joint venture. Joint ventures are accounted for using the equity method, andthe choice to proportionately consolidate will no longer be permitted. Parties to a jointoperation will account their share of revenues, expenses,assets and liabilities in much thesame way as under the previous standard. AASB 11 also provides guidance for partiesthat participate in joint arrangements but do not share joint control.

Council's investment in the joint venture partnership will be classified as a joint ventureunder the new rules. As Council already applies the equity method in accounting for thisinvestment, AASB 11 will not have any impact on the amounts recognised in its FinancialStatements.

AASB 12 sets out the required disclosures for entities reporting under the two newstandards, AASB 10 and AASB 11, and replaces the disclosure requirements currentlyfound in AASB 127 and AASB 128. Application of this standard by Council will not affectany of the amounts recognised in the Financial Statements, but will impact the type ofinformation disclosed in relation to Council's investments.

Amendments to AASB 128 provide clarification that an entity continues to apply the equitymethod and does not remeasure its retained interest as part of ownership changes wherea joint venture becomes an associate, and vice versa. The amendments also introduce a"partial disposal" concept. Council is still assessing the impact of these amendments.

Council does not expect to adopt the new standards before their operative date.They would therefore be first applied in the Financial Statements for the annualreporting period ending 30 June 2014.

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(Hi) AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to AustralianAccounting Standards arising from AASB 13 (effective 1 January 2013)

AASB 13 was released in September 2011. It explains how to measure fair value andaims to enhance fair value disclosures. Council has yet to determine which, if any, of itscurrent measurement techniques will have to change as a result of the new guidance. It istherefore not possible to state the impact, if any, of the new rules on any of the amountsrecognised in the Financial Statements. However, application of the new standard willimpact the type of information disclosed in the notes to the financial statements. Councildoes not intend to adopt the new standard before its operative date, which meansthat it would be first applied in the annual reporting period ending 30 June 2014.

(iv) Revised AASB 119 Employee Benefits, AASB 2011-10 Amendments to AustralianAccounting Standards arising from AASB 119 (September 2011) and AASB 2011-11Amendments to MSB 119 (September 2011) arising from Reduced DisclosureRequirements (effective 1 January 2013)

In September 2011, the AASB released a revised standard on accounting for employeebenefits. It requires the recognition of all remeasurements of defined benefitliabilities/assets immediately in other comprehensive income (removal of the so-called'corridor' method) and the calculation of a net interest expense or income by applying thediscount rate to the net defined benefit liability or asset. This replaces the expected returnon plan assets that is currently included in profit or loss. The standard also introduces anumber of additional disclosures for defined benefit liabilities/assets and could affect thetiming of the recognition of termination benefits. The amendments will have to beimplemented retrospectively. Council does not recognise defined benefit assets andliabilities for the reasons set out in note 1(s) (iii) and so these changes will not havean impact on its reported results.

There are no other standards that are not yet effective and that are expected to have amaterial impact on the entity in the current or future reporting periods and on foreseeablefuture transactions.

(y) Self insurance

Upper Lachlan Shire Councildoesnot self-insure for various risks including public liabilityand professional indemnity. Therefore no provision for self-insurance has been made inNote 10.

(z) Intangible Assets

IT development and softwareCosts incurred in developing products or systems and costs incurred in acquiring softwareand licenses that will contribute to future period financial benefits through revenuegeneration and/or cost reduction are capitalised to software and systems. Costscapitalised include external direct costs of materials and service, direct payroll and payrollrelated costs of employees' time spent on the project. Amortisation is calculated on astraight line basis over a period of 5 years.

IT development costs include only those costs directly attributable to the developmentphase and are only recognised following completion of technical feasibility and whereCouncil has an intention and ability to use the asset. Council has no such intangibleassets.

(aa) Crown Reserves

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Crown Reserves under Council's care and control are recognised as assets of theCouncil. While ownership of the reserves remains with the Crown, Council retainsoperational control of the reserves and is responsible for their maintenance and use inaccordance with the specific purposes to which the reserves are dedicated.

Improvements on Crown Reserves are also recorded as assets, while maintenance costsincurred by Council and revenues relating the reserves are recognised within Council'sIncome Statement.

Representations from both State and Local Government are being sought to develop aconsistent accounting treatment for Crown Reserves across both tiers of government.

(bb) Rural Fire Service assets

Upper Lachlan Shire Council amended its accounting policy in 2007/2008 in relation to theNSW Rural Fire Service (RFS) plant, vehicles and equipment assets. The Rural FireService plant, vehicles and equipment is not owned by Council and Council does not haveeffective control of the plant and equipment assets. Upper Lachlan Shire CouncilResolution No. 104/08 stated Council will no longer carry the asset valuations in thefinancial accounts for the Rural Fire Service plant and equipment assets. Upper LachlanShire Council has approved a Service Level Agreement with the Rural Fire Service whichwas signed under Council Seal with relevant amendments incorporated.

Upper Lachlan Shire Council will recognise RFS asset classes for land and buildings only.

(ec) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST,unless the GST incurred is not recoverable from the taxation authority. In this case it isrecognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable orpayable. The net amount of GST recoverable from, or payable to, the taxation authority isincluded with other receivables or payables in the Balance Sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arisingfrom investing or financing activities which are recoverable from, or payable to the taxationauthority, are presented as operating cash flows.

(dd) Financial Assistance Grant - First and Second Quarter Payments 2012/2013

Upper Lachlan Shire Council received the first and second quarter payments of its2012/2013 Financial Assistance Grant (FAG) during the year ended 30 June 2012. Thisresulted in the recognition of an additional $1.88 million in income during the current year,as well as increasing Council's cash balance at the end of the financial year.

If this payment had been received in the 2012/2013 as budgeted for in Council'sOperational Plan, the current year (2011/2012) Net Operating Result (before Grants andContributions provided for capital purposes) would have been reduced by $1.88 million.The Council's unrestricted cash balance will remain unchanged, as the $1.88 million hasbeen internally restricted by Council.

(ee) Natural Disaster Assistance Program

In February 2012, Upper Lachlan Shire Council local government area was declared as aNatural Disaster area due to the intense rainfall in the Shire and subsequent flooding andstorm damage that resulted. Council road network assets suffered considerable damage.

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To date, the Roads and Maritime Services (RMS) under the Natural Disaster AssistanceProgram have approved emergency response funding of $82K and has also issued aschedule of works totalling $717K for roads restoration works. In 2011/2012, Council hasexpended $70K on road restoration in addition to the $82K expense for road restoration.

There is a further claim by Council under the Natural Disaster Assistance Program to theRMS and RMS has approved an additional schedule of works for $1.36 million for roadsrestoration works to be completed in 2012/2013.

In addition to the above event, there was the December 2010 Natural Disaster AssistanceProgram for flooding damage. Council has an approved schedule of works totalling $6.04million for roads restoration works. The total contribution income received from RMS, overthe two year period, totals $4.1 million, as at 30 June 2012.

(ff) Employee Costs Note 4(a) - Salaries and Wages Variation

There is a significant decrease in salaries and wages shown between 2010/2011 ($7.04million) and 2011/2012 ($6.07 million). This variation is partly due to a systems errordetected in 2011/2012 that resulted in some salaries and wages overheads for past yearsbeing consolidated in salaries and wage costs. All salaries and wages overheads,including expense and contra accounts, should have been offset to materials andcontracts, which would have been cost neutral in that expense area. The salaries andwages costs shown in 201 1/2012 are correct.

This error did not result in any misstatement of the total expenses reported in past years,but merely a shift in costs shown from material and contacts to salaries and wages. Noamendment or restatement of the prior year's expense division between salaries andwages and materials and contract has been made as it is impractical to do so.

Budget Information

The Income Statement provides budget information on major income and expenditureitems. Details of material budget variations are shown in Note 16. Note 2(a) providesbudget information regarding the revenues and expenditures of the principal activities ofthe Council. Budget figures represented are those approved by Council and published inits annual Operational Plan at the beginning of the financial year and do not reflectCouncil approved variations (revotes) throughout the year.

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NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30th June 2012

Note No. 2 (b)

COMPONENTS OF FUNCTIONS OR ACTIVITIES

The activities relating to Council's functions or activities reported on in Note No. 2 (a) are as follows:

SOCIAL:

Health Services, Medical Centres, Aged, Disabled and Community Services, Emergency Services and Fire Protection,Public Halls, Cultural Services, Community Centres and Museums, Public Libraries, Swimming Pools,Animal Control, Sporting Grounds and Parks and Gardens.

ENVIRONMENTAL:

Town Planning and Development Control, Building Control, Food Control and Inspections, Noxious Weeds Control,Housing, Environmental Systems and Protection.

ECONOMIC:

Financial Services, Administration and Corporate Support, Workforce (Human Resources and WH&S),Information Technology, Tourism Promotion and Business, Caravan Parks.

INFRASTRUCURE, ACCESS AND TRANSPORT:

Roads - sealed and unsealed local and regional roads. Bridges - local and regional, Footpaths, Bus Shelters,Cycleways, Street Lighting, Drainage, Kerb and Guttering.Water Supplies - Crookwell, Gunning, Dalton and Taralga.Sewerage Services - Crookwell, Gunning and Taralga.Domestic Waste Management - throughout the Shire.Stormwater - Crookwell, Gunning, Taralga and Collector.Waste Centres and Rubbish Tips, Quarries and Gravel Pits, Public Cemeteries, Public Conveniences,Plant and Equipment Operations, Street Cleaning, Engineering, Purchasing and Works Supervision.

GOVERNANCE:

Costs relating to Council's role as a component of democratic government, including elections, members feesand expenses, meetings of Council and Committees, public disclosure and compliance.

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Note No. 3

INCOME FROM CONTINUING OPERATIONS

Actual Actual2012 2011

($-000) ($-000)( a) RATES AND ANNUAL CHARGES:

Ordinary RatesResidential 1,196 1,206Farmland 4,107 3,988Business 221 148Mining 3 2

Total Ordinary Rates 5,527 5,344

Special RatesWater Supplies 626 608Sewerage Services 1,049 964EnvironmentalInfrastructureDrainageTown ImprovementParkingMain StreetTourism

Other - Binda Hall and Bigga Hall Rates 12 12Total Special Rates 1,687 1,584

Annual Charges - (pursuant to S. 496 and S. 501 & S. 611)Domestic Waste Management Services 757 719Rural Waste Management Services - (not domestic waste management) 394 377Water SuppliesSewerage ServicesStormwater Management Services 43 43Other

Total Annual Charges 1,194 1,139

Total Rates and Annual Charges 8,408 8,067

Council has used 2010 valuations provided by the NSW Valuer General in calculating its rates.

29



Note No. 3 - ( Continued )REVENUE FROM CONTINUING OPERATIONS

( b ) USER CHARGES AND FEES: Actual Actual2012 2011

User Charges - pursuant to S. 502 ($'000) ($'000)Domestic Waste Management ServicesOther Waste Management - (not domestic waste management) 119 88Water Supplies 586 546Sewerage Services 0Drainage ServicesCaravan Park 43 39Other

Total User Charges 749 675

Fees

Regulatory / Statutory Fees - Town Planning / Building 265 250Discretionary Fees

- RMS Charges (State Roads not controlled by Council) 2,012 1,196- Private Works 1,662 716- Quarries 1,044 859- Public Cemeteries 73 76- Sporting Ground Charges 14 14- Truck Wash Facility 5- Other 61 56

Total Fees 5,136 3,168

Total User Charges and Fees 5,885 3,843

( c ) INTEREST AND INVESTMENT REVENUE / (LOSSES):(1)Overdue Rates and Annual Charges 33 23Development Contributions:- Section 94 87 83- Water Supplies 5 4- Sewerage Services 7 6

Cash, Cash Equivalents and Investments:- Externally Restricted - Water Supplies 61 66- Externally Restricted - Sewerage Services 105 123- Externally Restricted - Domestic Waste Management 26 29

Externally Restricted - Breadalbane Hall 4- Internally Restricted

Unrestricted 411 281Premiums Recognised on Financial Instrument Transactions:Amortisation of Discounts and Premiums:Gain/(Loss) on Revaluation of Investments 5 253

(1)Total Interest and Investment Revenue /(Losses) 740 872

(d) OTHER REVENUES:

Fair Value Adjustments - Investment PropertiesReversal of IPPE Revaluation Decrements ExpensedParking FinesOther FinesRental Income 57 46Legal Fees - Overdue Rates and Charges Recovery 12 16Insurance Claims 6 58Commissions and Agency Fees 103 105Ex-Gratia Payments in Lieu of Rates 26 26Fuel Tax Credits 64 63Australia Post Supplies / Sales 28 30Advertising Income - Council Newsletter 16 13Miscellaneous / Sundry Sales 31 37Other 25 39Total Other Revenue 368 4

Note (1): Where interest and investment revenue nets to an overall loss, this is carried to theinterest and investment losses line on the income statement.

30

Upper Lachlan Shire CouncilNOTES TO THE FINANCIAL STATEMENTS

for the year ended 30th June 2012

Note No. 3 - ( Continued )


OPERATING OPERATING CAPITAL CAPITALActual Actual Actual Actual2012 2011 2012 2011

< $-000 ) ($'000 ) ($'000 ) ($-000)(e) GRANTS:

General Purpose Grants ( Untied )- Financial Assistance Grant 4,642 3,556- Pensioner* Rates Subsidies - General 53 51

Special Purpose Pensioners' Rates Subsidies

- Domestic Waste Management Services 25 24- Water Supplies 18 17- Sewerage Services 16 16

Special Purposes

- Water Supplies 1,900 474- Sewerage Services 1,782- Noxious Weeds 121 117- Community Centres- Public Halls 15 10- Breadalbane Hall -Veolia Mulwaree Trust 17- Environment 21

Public Conveniences - Kiamma Ck Park Public Toilets 67- Public Libraries 44 43- Heritage and Cultural Services 18 13- Recreation and Culture 29 20- Collector Oval - Veolia Mulwaree Trust 40

Gunning Showground - Veolia Mulwaree Trust 5- RLCIP Federal Government Grant 133- Bushfire Services 285 283

Emergency Services 18Youth Week 2 2

- Footpaths 50 19- Cycleways 18

Transportation (3x3, Block, REPAIR, Regional Roads) 1,437 1,398 224Transportation (Roads to Recovery) 861 843

- Transportation (Regional Roads Timber Bridge Replacement) 315- Stormwater Drainage 10- Street Lighting 12 12 7

Health Services - Onsite Sewerage Management 9- Other

Total Grants 7 2.3026.386Comprising:

- Commonwealth Funding 5,503 4,399 1,900 133- State Funding 1,768 1,704 328 2,656- Other Funding 285 283 74 62

Total 7.556 6,386 2 2,851

(f) CONTRIBUTIONS:

Development Contributions ( pursuant to Section 94)- Planning Agreements 40- Drainage- Traffic Facilities- Roadworks 252 287- Open Space 19 17- Garbage 14 16

Bushflre 24 30- Community Facilities 39 46- Rural Addressing 2- Other - Administration 13 6

Section 64 - Water Supplies 21 25Section 64 - Sewerage Services 22 37

Natural Disaster Funding - Roads 2,739 1,331Natural Disaster Funding - Sewer 0 360Other Council - Joint Works 28Transferred Employee Leave Entitlements 19 55Vehicle Leaseback Contributions 62 62Other 2 10Total Contributions 2.820 1.810 3

TOTAL GRANTS AND CONTRIBUTIONS 10,376 8,196 2,745 3,357

31






( g ) RESTRICTIONS RELATING TO GRANTS AND CONTRIBUTIONS ($'000 ) ($'000)

Certain Grants and Contributions are obtained by Council on the conditionthat they be spent in a specified manner:

Grants and Contributions recognised in the current period which have not 2,100 351been spent:*

Less:

Grants and Contributions recognised in the previous reporting periods which (372) (348)have been spent in the current reporting period:

Net increase / ( decrease ) in restricted grants and contributions 1,728 3

* Note $1.9 million increase in Grants restrictions relates to the Water Supply external restricted fund.

32



Note No. 4

EXPENSES FROM CONTINUING OPERATIONS


($-000) ($'000 )( a) EMPLOYEE BENEFITS AND ON-COSTS:

Salaries and Wages 6,070 7,035Travelling 169 161Employee Leave Entitlements ,632 1,201Superannuation 927 1,007Workers' Compensation Insurance 435 338Fringe Benefits Taxation (FBT) 23 26Payroll TaxTraining Costs (excluding salaries ) 101 62Other 44 42

Less: ( Capital Costs Distributed ) (748) (780)Total Employee Costs Expensed 8,653 9,091

Number of Full time equivalent employees 132 132

( b ) BORROWING COSTS:

Interest on OverdraftsInterest on Loans 295 321Interest on AdvancesCharges on Finance LeasesDiscounts - Interest Free Loan to Sporting ClubAmortisation of Discounts and Premiums:

- Tip Remediation 14 13- Interest Free Loan Received

OtherLess: Capital Costs Distributed

Total Borrowing Costs Expensed 309 334

( c ) MATERIALS AND CONTRACTS:

Raw Materials and Consumables 3,918 2,460Contractor and Consultancy Costs:

- Contractors 3,128 2,165- Consultancy Services 73 26

Remuneration of Auditors(1> 51 49

Legal Fees:- Planning and Development 6 27- Other 18 37

Operating Leases:- Buildings- Computers- Motor Vehicles- Other Equipment 33 29

Other

Total Materials and Contracts 7,227 4,793

33






($'000) ( $'000 )( c ) MATERIALS AND CONTRACTS: (cont.)

Note (1) Remuneration of Auditors

1A - Audit Services - External 29 361B - Audit Services - Internal 22 13

Total Remuneration of Auditors 51 49

1A During the year the following fees were paid orpayable for the services provided by the Council's

external auditor - Morse Group

(il Audit and Other Assurance Services

Audit and Review of Financial Statements 17 24Other Assurance Services

- Audit of Regulatory Returns 2 2

- Due Diligence Services 10 10

Total Remuneration for Audit & Other Assurance Services 29 36

(iil Taxation Services

Tax Compliance ServicesTotal Remuneration for Taxation Services

(ill) Other Services

Remuneration Advice

Benchmarking ServicesTotal Remuneration for Other Services

1 B During the year the following fees were paid orpayable for the services provided by the Council'sinternal auditor - IAB Services

(il Audit and Other Assurance Services

Audit and Review of Financial Statements

Other Assurance Services

- Audit of Regulatory Returns- Due Diligence Services 22 13

Total Remuneration for Audit & Other Assurance Services 22 13

(ill Taxation Services

Tax Compliance ServicesTotal Remuneration for Taxation Services

(iiil Other Services

Remuneration Advice

Benchmarkii ;g ServicesTotal Remuneration for Other Services

34





Depreciation Deoreciation Impairment ImpairmentActual Actual Actual Actual2012 2011 2012 2011

($'000) ( $'000) ($'000 ($-000)( d ) DEPRECIATION, AMORTISATION AND IMPAIRMENT:

Intangibles - SoftwarePlant and Equipment 873 827Office Equipment 125 100Furniture and Fittings 9 9Property, Plant and Equipment LeasedBuildings - Non Specialised 41 41Buildings - Specialised 400 393Land Improvements (depreciable) 12 15Other Structures 97 49Infrastructure:

- Roads, Bridges, Footpaths etc. 2,628 2,561- Stormwater Drainage 23 23- Water Supplies 351 349- Sewerage Services 428 253

Other Assets 40 38Rubbish Tip Assets 16 15Gravel Pit Assets

Less: Capital Costs Distributed / Impairment ReversalsTotal Depreciation and Total Impairment 5,043 4,673 0 0


( e ) OTHER EXPENSES: ($'000) ( $'000)Bad and Doubtful Debts 2Mayoral Fee 22 21Councillors' Fees and Allowances 90 86Councillors' (Including Mayor) Expenses 40 33Insurance 528 545Street Lighting 78 68Electricity and Heating 335 292Telephone and Communications 128 116Contributions and Donations 222 233Bank Fees and Charges 28 16Water Usage 61 53Payments to Other Levels of Government 345 294Subscriptions & Publications 68 64Valuation Fees 48 45Printing & Stationary 116 91Australia Post Stock/Supplies 25 18Postage 30 32Advertising 26 25Revaluation Decrement- IPPE 0 0Other 96 106Total Other Expenses from Continuing Operations 2,288 2,139

35



Note No. 5

GAIN_( OR LOSS ) ON DISPOSAL OF ASSETS


($'000) ($'000)

GAIN ( OR LOSS ) ON DISPOSAL OF PROPERTT.

Proceeds from DisposalLess: Carrying amount of Assets sold

Gain (or Loss) on Disposal 0 0

GAIN ON DISPOSAL OF INFRASTRUCTURE,PLANT AND EQUIPMENT:

Proceeds from Disposal 506 223Less: Carrying amount of Assets sold 336 140

Gain ( or Loss) on Disposal 170 83

LOSS ON DISPOSAL OF INFRASTRUCTURE,PLANT AND EQUIPMENT:

Proceeds from Disposal 45Less: Carrying amount of Assets sold 73

Gain (or Loss ) on Disposal 0 (28)

NET GAIN ( OR LOSS ) ON DISPOSAL OF INFRASTRUCTURE,PLANT AND EQUIPMENT:Proceeds from Disposal 506 268

Less: Carrying amount of Assets sold 336 213


GAIN ( OR LOSS ) ON DISPOSAL OF REAL ESTATEASSETS HELD FOR SALE:Proceeds from Sales

Less: Cost of Sales


GAIN ( OR LOSS ) ON DISPOSAL OF INVESTMENT PROPERTT:Proceeds from Disposal

Less: Carrying Value of Investment PropertyGain ( or Loss) on Disposal 0 0

GAIN ( OR LOSS ) ON DISPOSAL OF FINANCIAL ASSETS:Proceeds from Disposal

Less: Carrying Value of Financial AssetsGain ( or Loss) on Disposal 0 0

NET GAIN ( OR LOSS ) FROM DISPOSAL OF ASSETS 170 55

36



Note No. 6 (a)

CASH AND CASH EQUIVALENTS


($'000) ($'000 )

CASH AND CASH EQUIVALENTS:Cash at Bank and on Hand 11 494 413Deposits at Call 11 1,225 4,400

TOTAL CASH 1,719 4,813

37



Note No. 6 ( b)

INVESTMENTS

The following financial assets are held as investments:Actual Actual2012 2011

Current Non-Current Current Non-Current($'000) ( $'000 ) ($'000 ) ($'000 )

INVESTMENTS:

Financial Assets at Fair Value through Profit and Loss 842 478 859Held to Maturity Investments 12,600 6,000Available For Sale Financial Assets

Total Financial Assets 13,442 0 6,478 859

Financial Assets at Fair Value through Profit and Loss:At Beginning of the year 478 859 497 1,087Adjustment on adoption ofAASB 132 & 139Revaluation to Income Statement 22 (17) 3 250Additions

Disposals ( Sale / Redemption ) (500) (500)Transfer to Current 842 L842) 478 L478)At End of the Year 842 0 478 859

Held for Trading:- Managed Funds- CDO's 362 406- FRN's 480 478 452- Listed Equity Securities

TOTAL 842 0 478 859

Held to Maturity Investments:At Beginning of the year 6,000 4,607Adjustment on adoption ofAASB 132 & 139Amortisation of Discounts and PremiumsAdditions 6,600 1,393DisposalsAt End of the Year 12,600 0 6,000 0

Comprising of:- Government Bonds- Term Deposits 12,600 6,000

Bank Bills- Equity Linked Notes

TOTAL 12,600 0 6,000 0

Available For Sale Financial Assets:At Beginning of the yearAdjustment on adoption ofAASB 132 & 139Additions

DisposalsRevaluation Surplus Transferred to EquityAt End of the Year 0 0 0 0

Comprising of:- Unlisted Equity Securities- Equity Linked Notes

TOTAL 0 0 0 0

38



Note No. 6( c )

RESTRICTED CASH. CASH EQUIVALENTS AND INVESTMENTS


Current Non-Current Current Non-Current

($'000) ( $'000) ($-000) ($-000)

Total Cash, Cash Equivalents and Investments 15,161 0 11,291 859

External Restrictions 8,596 6,610 235Internal Restrictions 6,274 4,438 624Unrestricted 291 243Total 15.161 0 11.291 859

Actual 2012Opening Transfers to Transfers from ClosingBalance Restrictions Restrictions Balance

Notes ($'000) ($-000) ($'000) ($'000)EXTERNAL RESTRICTIONS:

Included in liabilities.

Specific Purpose Unexpended Loans (A)RMS Advances (B)Self Insurance Claims (C)Other (not material)

0 0 0 0- Other

DDevelopment Confributions (D) 17 1,649 455 188 1,916RMS Contributions (E) 0 0

Specific Purpose Unexpended Grants (F) 433 253 372 314Water Supplies (G)w 1,433 1,911 3,344Sewerage Services (H) 2,667 221 2,446

(1)Domestic Waste Management Services (I) 540 86 454

Stormwater Management (J) 123 43 44 122TOTAL EXTERNAL RESTRICTIONS 6,845 2,662 911 8,596

INTERNAL RESTRICTIONS:- Included in liabilities

Employees' Leave Entitlements 903 121 1,024-Other

Plant and Equipment Replacement 504 642 133 1,013Buildings and Infrastructure Improvements 302 200 502Cullerin Road - Local Road Transfer Funds 157 68 90Information Technology and Equipment 122 43 80Bridges - Burwood Creek Bridge Replacement 703 584 119Southern Tablelands & South Coast Weeds Council 46 10 36Cemetery 29 29Community Projects 51 51Gravel Pit Restoration 258 258Rubbish Tips Remediation 351 13 364Garbage / Waste Disposal 37 37Payments in Advance - FAGS 899 1,888 899 1,888Uncompleted Carry-over Works 700 244 161 783

TOTAL INTERNAL RESTRICTIONS 5,062 3,108 1,898 6,274

TOTAL RESTRICTIONS 11,907 5,770 2,809 14.870

(1) Developer Contributions of $1 15k for Domestic Waste Management are included in "Developer Contributions (D)"(2) Grants received for the Gunning/Dalton water project are included in "Water Supplies (G)'

39



Note No. 6( c )

RESTRICTED CASH, CASH EQUIVALENTS AND INVESTMENTS

A. Loan moneys which must be applied for the purposes for which the loans were raised.

B. Advances by the Roads and Maritime Services (RMS) for works on the State's classified roads.

c. Self-lnsurance liability resulting from reported claims or incurred claims not yet reported.

D. Development Contributions which are not yet expended for the provisions of services and amenities inaccordance with Contribution Plans.

E. RMS Contributions which are not yet expended for the provision of services and amenities in accordancewith those Contributions.

F. Grants which are not yet expended for the purposes for which the grants were obtained. Refer toNote No. 1 - "Conditions over Grants".

G,H,1&J. Water Supply, Sewerage, Domestic Waste Management and Stormwater Management Funds whichmust be applied for the purposes for which they were raised. They are externally restricted assets.

40



Note No. 7

RECEIVABLES


Current Non-Current Current Non-CurrentPurpose ($-000) ($'000) ($'000) ($'000)

RECEIVABLES:Rates and Annual Charges 234 25 212 21Interest and Extra Charges 11 4 7 4User Charges and Fees 1,372 423 1,635 34Accrued Revenues 58 79Deferred DebtorsGovernment Grants and Subsidies

Loan to Sporting ClubOther 8 15

Sub-Total 1,783 452 1,948 59

Less; Provision for ImpairmentRates and Annual Charges (6) (6)Interest and Extra ChargesUser Charges and Fees (30) (30)Other

Sub-Total (36) 0 (36) 0

TOTAL RECEIVABLES 1,747 452 1,912 59

EXTERNALLY RESTRICTED RECEIVABLES


Current Non-Current Current Non-CurrentPurpose ($'000) ($'000) ($'000) ($-000)

EXTERNALLY RESTRICTED RECEIVABLES:

Water Supplies 196 12 116 14Sewerage Services 45 3 34 2Domestic Waste Management Services 35 2 29 2ParkingDrainageTown ImprovementOther

Sub-Total 276 17 180 18

Unrestricted Receivables 1,471 435 1,732 41

TOTAL RECEIVABLES 1,747 452 1,912 59

41



RECEIVABLES

Rates and Annual Charges

Rates and Annual Charges are secured by underlying properties. Interest of 11% pa was charged on overdue ratesin 2011/2012 (2010/2011 was at 9%). Rates are due for payment on the 31st August, 30th November, 28th Februaryand 31 st May.

Overdue Rates and Annual Charges are those amounts not paid within one (1) day after the due date. The amountof the overdue debts upon which interest is charged is $259,000. Where collection of the debt is doubtful and theassessed value of the property is less than the amount outstanding a provision for doubtful debt is recognised forthe shortfall.

User Charges and Fees

User charges and fees are unsecured. The credit risk for this classification of debtor varies as it incorporates amountsowed by Roads and Maritime Services under agreements to perform work on State Roads, water charges secured byunderlying properties through to revenues received after balance date. A provision for doubtful debts in respect of thisclassification of debtor has been provided for by an amount of $30,000.

Government Grants

Government grants, contributions and subsidies ( subject to terms and conditions of the relevant agreement) have beenguaranteed.

Private Works

Private works are currently only undertaken where an agreement has been signed accepting liability for payment for theworks. Major private works are only undertaken where a deposit has been paid or bank guarantee lodged as security.Some private works completed in previous years were not adequately secured and recovery on some outstandingcharges is not guaranteed.

42



Note No. 8

INVENTORIES AND OTHER ASSETS


Current Non-Current Current Non-Current($-000) ($'000) ($'000) ($-000)

INVENTORIES:Real Estate (Refer Below)Stores and Materials 1,242 943

Trading Stock - Australia Post 17 17Other

Total Inventories 1,259 0 959 0a

Inventories not expected to be realised within thenext 12 months. 0 0 0 0

OTHER ASSETS:

Prepayments 316 297Other

Total Other Assets 316 0 297 0

Real Estate DevelopmentResidentialIndustrial / CommercialOther Properties

Total Real Estate held for sale 0 0 0 0

(Valued at the lower of cost and net realisable value)

Represented by:Acquisition CostsDevelopment CostsBorrowing CostsOther Holding CostsOther Properties - Book Value

0 0 0 0Less: Provision for Under RecoveryTotal Real Estate held for sale 0 0 0 0

43



Note No. 8

INVENTORIES AND OTHER ASSETS

DETAILS OF EXTERNALLY RESTRICTED INVENTORIES AND OTHER ASSETS


Current Non-Current Current Non-Current($-000) ($-000) ($'000) ($'000)

WATER SUPPLIES:Stores and MaterialsTrading StockPrepayments

Total Water 0 0 0 0

SEWERAGE SERVICES:Stores and MaterialsTrading StockPrepayments

Total Sewerage 0 0 0 0

DOMESTIC WASTE MANAGEMENT SERVICES:Stores and MaterialsTrading StockPrepayments

Total DWM 0 0 0 0

OTHER:Stores and MaterialsTrading StockPre payments

Total Other 0 0 0 0

TOTAL EXTERNALLY RESTRICTED INVENTORIES

AND OTHER ASSETS 0 0 0 0

Unrestricted Inventories and Other Assets 1.575 0 1.256 0

TOTAL INVENTORIES AND OTHER ASSETS 0 1.256 0

44

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSfor the year ended 30 June 2012

Note 9 (c) - INFRASTRUCTURE, PROPERTY, PLANT AND EQUIPMENT

1.1 Materiality

Assets with an economic life, which is determined to be longer than one year, are only capitalised where thecost of acquisition/construction exceeds materiality thresholds established by Council for each type of asset.In determining such thresholds, which are reviewed annually, regard is given to the nature of the asset andits estimated service life.

Examples of capitalisation thresholds applied during the year under review are provided below:-

Land - Council Land - Operational and Community Capitalise- Open Space Capitalise- Land under Roads Not Capitalised

Roads, Bridges, and Footpaths- Construction/Reconstruction Capitalise if value >$10,000- Reseal/Resheet and Major Repairs Capitalise if value >$ 5,000

1.2 Fair Valuation

The Division of Local Government, Department of Premier and Cabinet (DLG) have determined that all assetclasses will be valued at fair value in accordance with AASB 116 in a staged approach. At balance date thefollowing classes of assets are stated at their fair value as follows:-

2006/2007 - Water Supply and Sewerage Networks.

2007/2008 - Buildings, Operational Land, and Property, Plant and Equipment Assets.

2009/2010 - Roads, Bridges, Footpaths, Stormwater, and Drainage Assets.

2010/2011 - Community Land, Land Improvements, Other Structures and Other Assets.

The revaluation of the asset classes to fair value of property, plant and equipment, operational land andbuildings assets were recognised from 1 July 2008. The asset classes of roads, bridges, footpaths,stormwater, and drainage assets were recognised at fair value from 1 July 2010. The asset classes ofcommunity land, land improvements, other structures and other assets were recognised at fair value from 1July 2011.

All assets revalued will be carried in the books at their revalued amount, being their fair value at the date ofrevaluation less any subsequent accumulated depreciation and subsequent accumulated impairment costs.All new assets and asset acquisitions made after the respective dates of valuation are recorded at their initialcost of acquisition.

Revaluation at Fair Value

All Water Supply and Sewerage assets were initially recognised at fair value from 1 July 2007. The WaterSupply and Sewerage network assets were indexed annually in accordance with the latest indices providedin the NSW Office of Water - Rates Reference Manual.

The Division of Local Government, Department of Premier and Cabinet (DLG) have determined that WaterSupply and Sewerage assets are to be re-valued in 2011/2012. As at balance date the Water Supply andSewerage network classes of assets have been revalued and are stated at their fair value.

All asset classes are required to be re-valued, every five years, at their fair value, as follows:-2011/2012- Water Supply and Sewerage network assets.2012/2013- Buildings, Operational Land, and Property, Plant and Equipment assets.2014/2015- Roads, Bridges, Footpaths, Stormwater, and Drainage assets.2015/2016- Community Land, Land Improvements, Other Structures, and other assets.

47


Note 9 (c) - Infrastructure, Property, Plant and Equipment (continued)

(i) Plant and Equipment, Office Equipment, Furniture and Fittings, Leased Plant and Equipment -Depreciation

These classes of assets are recognised at fair value, as approximated by depreciated historical cost, from 1July 2008. Prior to this date assets acquired after 1 January 1993 were recorded at cost.

Major depreciation periods are:-Plant and Equipment, Road-making Equipment 10 to 15 yearsOffice Equipment 5 to 10 yearsOffice Furniture and Fittings 10 to 20 yearsMotor Vehicles 5 years

Asset capitalisation thresholds include:-OfRce Equipment $1,000Furniture and Fittings $1,000Plant and Equipment $5,000

(ii) Plant and Equipment, Office Equipment, Furniture and Fittings, Leased Plant and Equipment - FairValue

Plant and Equipment, Office Equipment, Furniture and Fittings, Leased Plant and Equipment assets arevalued at Fair Value under AASB 116 from 1 July 2008, as per the Division of Local Government's directions,using the depreciated historical cost method:-

'In light of the nature and value of Council plant and equipment the Department has stated that NSWCouncils may use depreciated historic cost as fair value as long as Council has undertaken a high levelreview to determine if there has been any impairment to the assets.'

All new assets and asset acquisitions made after the respective dates of valuation are recorded at their initialcost of acquisition. Major depreciation periods and capitalisation thresholds remain unchanged.

Land Under Roads

Council has elected not to recognise land under roads acquired before 1 July 2008 in the Balance Sheet inaccordance with AASB 1051.

Land under roads acquired after 1 July 2008 is recognised in accordance with AASB 116 - Property, Plantand Equipment. No land under roads has been acquired after 1 July 2008.

Buildings and Operational Land

Land and Buildings were valued at Fair Value as per AASB 116 by independent Valuer; Scott Fullartonduring the reporting period ended 30 June 2007. Desktop updates were provided as at 30 June 2008 andthese values were recognised at fair value as at 1 July 2008.

All new assets and asset acquisitions made after the respective dates of valuation are recorded at their initialcost of acquisition. Major depreciation periods and capitalisation thresholds remain unchanged.

Major depreciation periods are:-Buildings 50 to 100 years

Asset capitalisation thresholds include:-Buildings construction/extensions/renovations $1,000

48



Community Land and Other Structures

Community Land and Other Structures were valued at Fair Value as per AASB 116 by independent Valuer;Scott Fullarton during the reporting period ended 30 June 2007. Desktop updates were provided as at 30June 2008 and these values were recognised at fair value as at 1 July 201 1.

All new assets and asset acquisitions made after the respective dates of valuation will be recorded at theirinitial cost of acquisition.

Major depreciation periods are:-Other Structures 15 to 50 yearsOther Structures - Masonry 50 to 80 yearsPlayground Equipment 15 yearsCommunity Land Non Depreciable

Asset capitalisation thresholds include:-Park Furniture and Playground Equipment $1,000Other Structures $1,000Community Land Valuation

Infrastructure Assets

Water Supply and Sewerage Assets . Fair Value

Water Supply and Sewerage infrastructure assets are valued at Fair Value by an internal valuationundertaken by Upper Lachlan Shire Council professional operations staff and are recognised at fair valuefrom 1 July 2012.

Water Supply and Sewerage infrastructure assets were initially valued by Andrew Nock Valuers Pty Ltd, anindependent plant, equipment and infrastructure Valuer at Fair Value according to AASB 116 using the grossrestatement method during the reporting period ended 30 June 2007.

All Council water and sewerage assets are recorded at fair value. All new assets and asset acquisitionsmade after the respective dates of valuation will be recorded at their initial cost of acquisition.

Major depreciation periods for future years determined following the revaluation are:-Dams 120 yearsReservoirs 100 yearsBores 25 - 50 yearsReticulation Pipes 80 yearsPump Stations 25 - 70 yearsPumps 25 yearsTelemetry 15 years

Augmentation works constructed subject to PWD and State Government schemes are recorded as follows:-Where the scheme has not been commissioned, works are recorded at their initial cost of.

acquisition. No depreciation costs are applicable until the scheme is commissioned.

Where the scheme has been commissioned but the final cost to Council has not been.

determined, the scheme has been recorded as a single asset and depreciated from the date ofcommissioning. The depreciation period applicable to its major components is shown above.

Where the final cost to Council has been determined, carrying value of the scheme has been.

apportioned between the individual components; the works are recorded at their initial cost ofacquisition. The depreciation period applicable to its major components is shown above.

Asset capitalisation thresholds include: -Reticulation extensions and new assets $1,000

49



Stormwater Drainage Assets

TheStormwater and Drainage asset classes were valued at Fair Value by an internal valuation undertakenbyLlpper Lachlan Shire Council professional engineering staff and are recognised at fair value from 1 July2010.


Previously, all stormwater and drainage assets were recorded at "deemed cost"' being the carrying amount ofthose assets at 30 June 2002 in accordance with AASB 1041.

Major depreciation periods are:-Drainage Structures 100 yearsCulverts 100 yearsStormwater and Flood Control Structures 100 years

Asset capitalisation thresholds include:-Drains and Culverts $5,000All other Stormwater assets $5,000

Transportation Infrastructure Assets

The transportation infrastructure asset classes were valued at Fair Value by an internal valuation undertakenby Upper Lachlan Shire Council professional engineering staff and are recognised at fair value from 1 July2010.


Previously^all transportation assets were recorded at "deemed cost'" being the carrying amount of thoseassets at 30 June 2002 in accordance with AASB 1041 .

Major depreciation periods are:-Sealed Roads - Surface 20 yearsSealed Roads - Structure 100 yearsUnsealed Roads 100 yearsOther Road Structures 100 yearsBridges - Concrete 100 yearsBridges - Timber 40-100 yearsDrainage Structures on Roads 100 yearsBulk Earthworks InfiniteKerb and Guttering 80 yearsFootpaths 80 years

Asset capitalisation thresholds include:-Road construction, gravel resheeting and reconstruction $5,000Bridge construction and reconstruction $5,000Footpaths and Kerb and Guttering $5,000

Other Assets

Other Assets are valued at Fair Value under AASB 1 16 from 1 July 2012 using the depreciated historical costmethod. All new assets and asset acquisitions made after the respective dates of valuation will be recordedat their initial cost of acquisition.

Previously, all assets acquired after 1 January 1993 were recorded at cost.

Major depreciation periods are indefinite.

50



Restricted Assets

Restrictions exist in relation to the following asset classes, which must be applied for the purposes for whichspecial rates and other charges enabling their purchase were raised.

Description 2012 ($000)Water Supplies 9,525Sewerage Services 13,118Domestic Waste Management 765Total $23,408

51



Note No. 10 (a)

PAYABLES. BORROWINGS AND PROVISIONS


Current Non-Current Current Non-CurrentItem ($'000 ) ($'000) ($'000 ) ( $-000)

PAYABLES:

Goods and Services 773 1,046Accrued Salaries and Wages 328 278Accrued Expenses - Other 145 45Payments Received in AdvanceAdvances

Deposits and Retentions 178 298Statewide LiabilityOther 2 0

TOTAL PAYABLES 1,426 0 1,667 0

Current Payables not Expected to be settledwithin the next 12 months.

INTEREST BEARING LIABILITIES:Bank OverdraftLoans:

(1)Secured 188 3,020 1,499 2,362UnsecuredGovernment AdvancesRatepayers' AdvancesFinance Lease LiabilityDeferred Payment LiabilitiesOther

TOTAL INTEREST BEARING LIABILITIES 188 3,020 1,499 2,362

PROVISIONS:(2)Annual Leave 808 741Sick LeaveLong Service Leave 2,289 1,989GratuitiesSelf Insurance ClaimsRubbish Tips Remediation ( Note 26) 364 350Gravel Pits Remediation ( Note 26) 313Other 8 7

TOTAL PROVISIONS 3,105 677 2,737 350

Current Provisions not Expected to be settledwithin the next 12 months. 2,077 1.995

LIABILITIES RELATING TO RESTRICTED ASSETS

PAYABLES:

- General Purpose Revenues 1,398 1,629- Domestic Waste Management Services- Water Supplies 7 9- Sewerage Services 21 29

TOTAL PAYABLES L426 1.667 0

INTEREST BEARING LIABILITIES:- General Purpose Revenues 77 1,422 70 1,499- Domestic Waste Management Services 40 196 38 236- Water Supplies 37 480 592 0- Sewerage Services 34 922 799 627

TOTAL INTEREST BEARING LIABILITIES 188 3.020 1.499 2.362

PROVISIONS:

- General Purpose Revenues 2,864 677 2,527 350- Domestic Waste Management Services 25 19- Water Supplies 107 94- Sewerage Services 109 97

TOTAL PROVISIONS 3.105 677 2,737 350

TOTAL CURRENT LIABILITIES 4.719 3 7 5.903 2.711

Notes:

(1) Loans are secured over the rating income of Council(2) Vested ELE is all carried as a current provision

52



Note No. 10 ( b )

DESCRIPTION OF AND MOVEMENTS IN PROVISIONS

Opening Increase in Reductions in Provision ClosingBalance Provision Payments Remeasurement Balance($.000) ($-000) ($.000) ($.000) ($'000)

PROVISIONS:Annual Leave 741 67 808Sick Leave 0 0Long Service Leave 1,989 300 2,289Gratuities 0 0Self Insurance Claims 0 0Rubbish Tip Remediation 350 14 364Gravel Pit Remediation 0 313 313Other 7 8

TOTAL PROVISIONS 3,087 695 0 0 3,782

53



Note No. 11

RECONCILIATION OF CASH FLOW MOVEMENTS


($-000) ($'000)(a ) Reconciliation of Cash Assets

Total Cash and Cash Equivalents 6(a) 1,719 4,813Less: Bank Overdraft 10(a) 0 0

Balance as per Cash Flow Statement 1,719 4,813

( b) Reconciliation of Net Operating Result to cashprovided from Operating Activities

Net Operating Result from Income Statement 5,193 3,794

Add: Depreciation and Impairment 5,043 4,673Increase - Provision for Doubtful DebtsIncrease - Provision for Leave Entitlements 368 122Increase - Other Provisions 14 13Decrease - Receivables 138Decrease - InventoriesDecrease - Other Current Assets 20Decrease - Equity Shares in Associates/Joint VenturesIncrease - Payables 66Increase - Accrued Interest Payable 32Decrements from Revaluations

Amortisation of Discounts and Premiums RecognisedLoss on Sale of AssetsOther

Sub-Total 10,618 8,858

Less: Decrease - Employees' Leave EntitlementsDecrease - Provision for Doubtful DebtsDecrease - Other ProvisionsIncrease - Receivables (228)Increase - Inventories (300) (51)Increase - Other Current Assets (19)Increase - Equity Shares in Associates/Joint Ventures (21) (1)Decrease - Payables (241)Decrease - Accrued Interest PayableReversal of Previous Revaluation Decrements (5) (253)Non-Cash Capital Grants and ContributionsGain on Sale of Assets (170) (55)Fair Value Adjustments to Investment PropertyFair Value Adjustments to Financial Assets through Profit and LossDiscounts and Premiums Recognised on Financial InvestmentOther - Cash Repaid to Goulburn Mulwaree Council Finalise Amalgamation

Sub-Total (984) (360)

Net Cash provided from ( or used in ) Operating Activitiesfrom the Cash Flow Statement 9,634 8,498

54



Note No. 11 -(Continued)

RECONCILIATION OF CASH FLOW MOVEMENTS


($'000) ($-000)

(c) Non-Cash Financing and Investing Activities

- Acquisition of plant and equipment by means of finance leasesPWD Construction

- Bushfire Grants- s. 94 Contributions in kind- Dedications- Other

0 0

(d ) Financing Arrangements

Unrestricted access was available at balance date to the following:

Bank Overdraft Facility 300 300Bank Mastercard - Corporate Credit Cards 19 19

319 319

Notes:

(1) The Bank Overdraft facility may be drawn at any time and may be terminated by the Bank without notice.(2) Interest rates on Bank Overdrafts are variable whilst the interest rates for all loans are fixed for the period

of the loan.

55



Note No. 12

COMMITMENTS FOR EXPENDITURE


($'000) ($'000)(a) CAPITAL COMMITMENTS:

Capital expenditure committed for at the reporting date but notrecognised in the Annual Financial Statements as liabilities:

- Buildings- Plant and Equipment - Water and Sewerage Infrastructure 747

Total 0 747

(b) FINANCE LEASE COMMITMENTS:Commitments under finance leases at the reporting date arepayable as follows:

Payable not later than one yearLater than one year and not later than 5 yearsLater than 5 years

Total 0 0

Minimun lease paymentsLess: Future finance charges

Lease Liability 0 0

(c) NON-CANCELLABLE OPERATING LEASE COMMITMENTSCommitments under non-cancellable operating leases at thereporting date but not recognised in the financial statements

are payable as follows:

Payable not later than one year 20 19Later than one year and not later than 5 years 39 50Later than 5 years

Total 59 69

(d) REPAIRS AND MAINTENANCE - INVESTMENT PROPERTIESContractuaral obligations for future repairs and maintenanceTotal 0 0

56



Note No. 13 (a)

STATEMENT OF PERFORMANCE MEASURES - CONSOLIDATED RESULTS

Amounts 2012 2011 2010( $'000 ) Indicators Current Year Past Year Past Year

Indicators Indicators IndicatorsUNRESTRICTED CURRENT RATIO:

FactorsCurrent Assets less All External Restrictions(1> 9,611 Ratio 4.25 3.44 3.28

Current Liabilities less SDeciflc Puroose Liabilities (2)'(3)' ('') 2,262

To assess the adequacy of working capital and the ability to satisfy obligations in the short-term for theunrestricted activities of Council.

2 DEBT SERVICE RATIO:Factors

Debt Service Cost 948 Ratio 0.047 0.036 0.033Income from Continuing Operations, 20,287

(Excludes capital items and specific purpose grants/contributions)

To assess the impact of loan principal and interest repayment on the discretionary revenue of Council.

3 RATE COVERAGE RATIO:Factors

Rates and Annual Charges 8,408 Ratio 0.293 0.325 0.294Income for Continuing Operations 28,713

To assess the degree of dependence upon revenues from Rates and Annual Charges and to assessthe financial security of Council's income.

4 RATES AND ANNUAL CHARGES OUTSTANDING PERCENTAGE:Factors

Rates and Annual Charges Outstanding 268 Percentage 3.08% 2.86% 2.65%Rates and Annual Charges Collectible 8,691

To assess the impact of uncollected Rates and Annual Charges on liquidity and the adequacy ofrecovery efforts of Council.

5 ASSET RENEWALS RATIO: (5)Factors

Asset Renewals

(depreciabte land improvements, other structures, buildings & infrastructure) 3,072 Ratio 0.77 1.00 1.07Depreciation, Amortisation and Impairment 3,980

(depreciable land improvements, other structures, buildings & infrastructure)

To assess the rate at which assets are being renewed against the rate at which they are depreciating.

(1) Refer to Notes 6-8 Inclusive(2) Refer to Note 10 (a)(3) $2.08 Million ELE Transferred Out (non current portion)(4) $zero payables not expected to be settled deducted(5) Depreciable Land Improvements, Other Structures,Buildings & Infrastructure Additions- Refer to Note 9 (a) 4,553

Less:Kiamma Creek Toilet Block 58Collector Ck Bridge 441Bunvood Ck Bridge 586Woolshed Ck Bridge 253Taralga Sewer Scheme 143Total Asset Renewals 3,072

57



Note No. 13 (b)

STATEMENT OF PERFORMANCE MEASURES BY FUND

Current Years Indicators

Amounts Amounts Amounts($'000) General(a> ($'000) Water ( $'000) Sewer

UNRESTRICTED CURRENT RATIO:Factors

Current Assets less All External Restrictions(1) 3,577 1.84 3,540 23.48 2,494 15.23Current Liabilities less Specific Purpose Liabilities(2)7P)'(4) 1,947 151 164

To assess the adequacy of working capital and the ability to satisfy obligations in the short-term for theunrestricted activities of Council.

2 DEBT SERVICE RATIO:FactorsDebt Service Cost 261 0.015 118 0.091 569 0.479Revenues from Continuing Operations, 17,803 1,298 1,187

(Excludes capital items and specific purpose grants/contributions)


3 RATE COVERAGE RATIO:Factors

Rates and Annual Charges 6,924 0.285 620 0.193 864 0.715Total Revenue for Continuing Operations 24,285 3,219 1,209

To assess the degree of dependence upon revenues from Rates and Annual Charges and to assessthe financial security of Council's income.

4 RATES & ANNUAL CHARGES OUTSTANDING PERCENTAGE:FactorsRates and Annual Charges Outstanding 174 2.51% 43 6.52% 51 4.70%Rates and Annual Charges Collectible 6,946 660 1,085

To assess the impact of uncollected Rates and Annual Charges on liquidity and the adequacy ofrecovery efforts of Council.

5 ASSET RENEWALS RATIO:(5)Factors

Asset Renewals

(depreciable land improvements, other structures, buildings & infrastructure) 2,779 0.88 257 0.70 36 0.08Depreciation, Amortisation and Impairment 3,170 366 444

(depreciable land improvements, other structures, buildings & infrastructure)

To assess the rate at which assets are being renewed against the rate at which they are depreciating.

(a) General Fund refers to all Council activities except Water & Sewer(1) Refer to Notes 6-8 Inclusive(2) Refer to Note 10 (a(3) $1.954 Million ELE Transferred Out (non current portion)(4) $zero payables not expected to be settled deducted(5) Depreciable Land Improvements, Other Structures,Buildings & Infrastructure Additions- Refer to Note 9 (a) 4,117 257 179

Less:Kiamma Creek Toilet Block 58Collector Ck Bridge 441Burwood Ck Bridge 586Woolshed Ck Bridge 253Taralga Sewer Scheme 143Total Asset Renewals 2,779 257 36

58



Note No. 14

INVESTMENT PROPERTIES

Upper Lachlan Shire Council has no investment properties.


($'000) ($'000)

AT FAIR VALUE

Opening Balance at 1 JulyAcquisitionsCapitalised Subsequent ExpenditureClassified as Held For Sale or DisposalsNet Gain / (Loss) from Fair Value AdjustmentTransfer (to) /from Inventories and Owner Occupied PropertyClosing Balance at 30 June 0 0

(a) Amounts recognised in Profit and Loss for Investment PropertyRental Income

Net Gain / (Loss) from Fair Value AdjustmentDirect Operating Expenses from Property that generated rental incomeDirect Operating Expenses from property that did not generate rental incomeTotal 0 0

(b) Valuation BasisThe basis of the valuation of investment properties is fair value being the amountsfor which the properties could be exchanged between willing parties in an arm'slength transaction, based on current prices in an active market for similar propertiesin the same location and condition and subject to similar leases. The 2007revaluations were based on independent assessments made by a member of theAustralian Property Institute.

(c) Contractual ObligationsRefer to Note 12 for disclosure of any contractual obligations to purchase, constructor develop investment property or for repairs, maintenance or enhancements.

(d) Leasing ArrangementsThe Investment properties are leased to tenants under long-term operating leaseswith rentals payable monthly. Minimum lease payments receivable on leases ofinvestment properties are as follows:

Minimum lease payments under non-cancellable operating leases of investmentproperties not recognised in the financial statements are receivable as follows:

Within one yearLater than one year but not later than 5 yearsLater than 5 years

Total 0 0

59

Upper Lachlan Council


Note No. 15

FINANCIAL INSTRUMENTS

RISK MANAGEMENT

Council's activities expose it to a variety of financial risks including price risk, credit risk, liquidity risk and interest rate risk.The Council's overall risk management program focuses on the unpredictability of financial markets and seeks to minimisepotential adverse effects on the financial performance of the Council. While this risk is controlled it is not possible to removeall exposure to, and the affects of, financial market fluctuations.

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

Financial risk management is carried out by the Finance & Administration Section under the oversight of Council's Audit& Investment Committee and under policies approved by the Council.

Council held the following financial instruments at balance date:


Carrying Net Fair Carrying Net FairNotes Amount Value Amount Value

($-000) ($'000) ($-000) ($-000)

Financial Assets:Cash and Cash Equivalents 6 (a) 1,719 1,719 4,813 4,813Receivables 7 2,199 2,199 1,971 1,971Financial Assets at Fair Value Through Profitor Loss 6(b) 842 842 1,337 1,337Available-for-Sale Financial AssetsHeld-to-Maturity Investments 6(b) 12,600 12,600 6,000 6,000

Total 17,360 17,360 14,121 14,121

Financial Liabilities:Payables 10 (a) 1,426 1,426 1,667 1,667Borrowings 10 (a) 3,208 3,208 3,861 3,861Other Financial Liabilities

Total 4,634 4,634 5,528 5,528

TOTALS 12,726 12.726 8.593 8.593

Fair value is determined as follows:

- Cash and Cash Equivalents, Receivables, Payables - estimated to be the carrying value which approximates netmarket value.

- Borrowings, Held-to-Maturity Investments - estimated future cash flows discounted by the current market interestrates applicable to assets and liabilities with similar risk profiles.

- Financial Assets at Fair Value through profit and loss, Available for Sale Financial Assets - based on reliablemarket prices, if available, at the reporting date. In the absence of any reliable market information, independent

valuation will be used where the basis of such valuation can be verified to equate to market value.If a reliable means of valuation is not available due to illiquidity and the lack of a secondary market, the current

cost price will be used.

60



Note No. 15-( Continued)


(a) Cash and cash equivalentsFinancial assets at fair value through profit and lossAvailable-for-sale financial assetsHeld-to-maturity investments

Council's objective^ tojnaximise its return on cash and investments whilst maintaining an adequate level of liquidity andpreserving capital. The Finance Section manages the cash and investments portfolio with oversight from Council's Audit& Investment Committee and in accordance with policies and procedures set by Council. Council has an investment policywhich complies with the Local Government Act and Minister's Order as in effect at the reporting date. The policy is regularlyreviewed by Council and an Investment Report provided to Council monthly setting out the make-up and performance ofthe portfolio.

The major risk associated with investments is price risk - the risk that the capital value of investments may fluctuate due tochanges in market prices, whether these changes are caused by factors specific to individual financial instruments or theirissuers or factors affecting similar instruments traded in a market. This will only affect the reported carrying value of investmentsand will not necessarily result in an actual loss unless unforseen circumstances requires the securities to be liquidated and aloss crystallised. This risk is mitigated by only purchasing securities, that Council is confident at the time of purchase, can beheld to maturity.

Cash and investments are also subject to interest rate risk - the risk that movements in interest rates could affect returns.

Another risk associated with cash and investments is credit risk - the risk that a contracting entity will not complete itsobligations under a financial instrument resulting in a financial loss to Council. Council manages these risks by diversifyingits portfolio and only purchasing investments from APRA regulated Australian Authorised Deposit Taking Institutions and/orwith high credit ratings and/or capital guarantees. Currently all investments are expected to yield the fulFface value uponmaturity. Council seeks advice from the Audit & Investment Committee and independent market sources before placing anycash into investment securities.

Cash and Cash Equivalents Note 6b 1,719Held to Maturity Investments Note 6b 12,600Financial Assets at Fair Value through Profit and Loss Note 6b 842

15,161

30/06/2012 30/06/2011$.000 $.000

Imoact of a 10%^ movement in orice ofinvestments:- Equity 84 134 1,336- Income statement 84 (2) 134 (2>

Imoact of a 1%^ movement in interest rateson cash and investments:- Equity 143 108 10,813- Income statement 143 108

Notes:

(1) Sensitivity percentages based on management's expectation of future possible market movements. (Price movementscalculated on investments subject to fair value adjustments. Interest rate movements calculated on cash, cash equivalents,managed funds, and FRNs.) Recent market volatility has seen larger market movements for certain types of investments.(2) Maximum impact.

61





(b) Receivables

Council's major receivables comprise rates and annual charges and user charges and fees. The major risk associatedwith these receivables is credit risk - the risk that the debts may not be repaid. Council manages this risk by monitoringoutstanding debt and employing stringent debt recovery policies. It also encourages ratepayers to pay rates by entering intorepayment arrangements outside of the usual rate instalment payment method.

Credit risk on rates and annual charges is minimised by the ability of Council to recover these debts as a secured chargeover the land - that is, the land can be sold to recover the debt. Council is also able to charge interest on overdue rates andannual charges at higher than market rates which further encourages payment.

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

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

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

The profile of the Council's credit risk at balance date was:

30/06/2012 30/06/2011$.000 $.000

Percentage of Rates and Annual Charges:- Current 0% 0%- Overdue 100% 100%

Percentage of Other ReceivablesCurrent 79% 87%

- Overdue 21% 13%

62



Note No. 15 - (Continued )


(c) PayablesBorrowingsPayables and borrowings are both subject to liquidity risk - that is the risk that insufficient funds may be on hand to meetpayment obligations as and when they fall due. Council manages this risk by monitoring its cash flow requirements andliquidity levels and maintaining an adequate cash buffer. Payment terms can be extended and overdraft facilities drawnupon in extenuating circumstances.

The contractual undiscounted cash flows of Council's Payables and Borrowings are set out in the Liquidity Sensitivity Tablebelow:

2012 TotalNotes Due Within Due Between Due After Contractual Carrying

1 Year 1 and 5 Years 5 Years Cashflows Values

Payables 10 (a) 1,426 1,426

Borrowings Principal & Interest 433 1,733 3,050 5,216

Total 1.859 1,733 3,050 0 6.642

2011 TotalDue Within Due Between Due After Contractual Carrying

1 Year 1 and 5 Years 5 Years Cashflows Values

Payables 10 (a) 1,667 1,667

Borrowings 1,779 1,253 2,760 5,792Total 3.446 1,253 2.760 0 7.459

Borrowings are also subject to interest rate risk - the risk that movements in interest rates could adversely affect funding costs.Council manages this risk by borrowing long term and where possible fixing the interest rate for the full term of the loan.The Finance Section regularly reviews interest rate movements to determine if it would be advantageous to refinance orrenegotiate part or all of the loan portfolio.

The following interest rates were applicable to Council's borrowings at balance date:

30/06/2012 30/06/2011

Weighted WeightedAverage Average

Interest Rate Balance Interest Rate Balance% $.000 % $'000

OverdraftBank Loans - Fixed 7.79% 3,208 8.34% 3,861

(1)Bank Loans VariableTotal 208 3.861

Note:

(1) the interest rate risk applicable to Variable Rate Bank Loans is not considered significant

63



Note No. 16

MATERIAL BUDGET VARIATIONS

Council's original budget was incorporated as part of the Operational Plan adopted by Council on 16th June 2011 .The original projections on which the budget was based have been affected by a number of factors. These includeState and Federal Government decisions including new grant programs, changing economic activity, the weather, andby decisions made by Council, including its works programmes. Material variations of more than 10% are explored below:

This Note sets out the details of material variations between the original budget and actual results within theIncome Statement. Material variances are categorised as either, being favourable ( F ) or unfavourable ( U ).

REVENUES:

1 User Charges and Fees:Actual User Charges and Fees received during the year were higher than budget by $843K (F) or 17%. This increase inincome was due to private works being completed by Council under contractual arrangement w'th Gunning Wind EnergyDevelopments Pty Ltd (Acciona Energy). The road works related to improvements to development internal roads and repairsto Gurrundah Road, Mullens Creek Road and Old South Road. The private works totalled $1 .3 million for road repairs,Council had budgeted $850K. Council completed road works on behalf of Roads and Maritime Services on MR54 State Roadthe total Works Orders income received was $1.6 million and Council had only budgeted $1 million. Conversely, Council'swater supply user pay income was $95K lower than budget due to lower water consumption during the summer season.

2 Interest and Investment RevenueInterest and Investment Revenue was above budget expectations by an amount of $190K (F) or 35%. This increaseis due in part to early payment of two quarters of the 2012/2013 Financial Assistance Grant and $1.9 million payment of theFederal Government Strengthening Basin Communities Grant. Council investment portfolio returns were above budgetprojections for interest income due to the delay in the commencement of the Gunning and Dalton water supply improvementproject which was to be funded in part from external restricted reserve funds and Council anticipated zero interest income.

3 Non-Capital Purposes - Operating Grants and ContributionsNon-Capital Grants and Contributions were above budget expectations by an amount of $3.75 Million (F) or 57%. Theincome for Financial Assistance Grants (FAGS) increased above expectations being $1.88 million above budgeted figuresfor the 2012/2013 FAGS prepayment amount for first two quarters. Also, changes to the recognition of Grant funding,predominantly Roads to Recovery and RMS Block Grants, resulted in an additional $1.53 Million being transferred fromcapital grants income to operational grants income. Also, Council received $2.7 million from the RMS Natural Disasterfunding program. Council budgeted $2 million and received $739K more than projected due to increased road remediationworks completed in 2012 relating to the December 2010 flood event.

4 Capital Purposes - Grants and ContributionsCapital Grants and Contributions were below budget expectations by an amount of $4.8 Million (U) or 64%. The decreaseis due to $2 Million budgeted for Crookwell Water Treatment project not eventuating under the Strengthening Basin Communitiesgrant program. The State Government did not match funding for the SBC grant and consequently zero funds were received.The Daton component of the successful SBC grant for Gunning and Dalton water improvements of $450K was not received.Also, Roads to Recovery & RMS Block Grant income of $1.53 Million was also fransferred from capital income to operationalgrants income,

5 Other Revenues

Other Revenues were below budget expectations by an amount of $50K (U) or 12%. The decrease comprises variousminor variations of other income from budget predictions; i.e. Australia Post Agency sales in Taralga Post Office.

6 Net Gain from the Disposal of AssetsThe Net Gain from the Disposal of Assets was higher than the income budget projections by an amount of $86K (F) or 102%.The profit was above budget due to a Caterpillar Grader (Plant Number 300) being written off and was an insurance claim.The insurance valuation exceeded the book value and Council were reimbursed $201 K and the resultant net profit was $92K.

EXPENSES:

Materials and Contracts:Materials and Contracts expenses in 2012 were higher than budgeted by $1.45 million (U) or 25%. This increase in expensewas due in part to the Natural Disaster flooding event in February 2012 which resulted in extensive damage to roads. Councilplant and stores, and external contractors were utilised in the restoration and emergency response works totalling $153K.Also, the 2010 flood event Natural Disaster road remediation works undertaken in 2012 totalled $2.6 million, which was $601 Khigher than budgeted. Council undertook $1.9 million road works on MR54 for the Roads & Maritime Services RMCC contract& Work Orders. This expense was $625K greater than budget. The above events increased the materials & contracts expense.Also, the gravel pits winning, crush, load and transportation costs were $300K above budget estimates due to increased works.

2 Net Loss from the Disposal of Assets:The Net Loss from the Disposal of Assets was below budget expectations by an amount of $29K (F) or 1 00%. TheDomestic Waste Fund owned Garbage Truck budgeted to be sold in 2011/2012 was actually sold in 2010/2011.

64

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0-



Note No. 18

CONTINGENCIES

The following assets and liabilities do not qualify for recognition in the Balance Sheet but knowledge of those itemsis considered relevant to the user of the financial reports in making and evaluating decisions about the allocation ofscarce resources.

Contingent Liabilities

Council contributes to the Local Government Superannuation Scheme which has a closed section where a portionof member entitlements are defined as a multiple of salary. Member councils bear the responsibility of ensuringthere are sufficient monies available to pay out benefits as these members cease employment. Advice has beenreceived that the Scheme has a deficit of assets over liabilities as at 30 June 2012. Council's share of this deficit iscurrently valued at $1.3 million, The Scheme administrators have advised it will be necessary for Council tocontinue to make significantly higher contribution payments during 2012/2013 to help reverse this deficit. Howeverthey may call upon Council to make an immediate payment sufficient to offset this deficit at any time. As theScheme is a mutual arrangement where assets and liabilities are pooled together for all member councils, theamount of such a payment is not able to be reliably quantified.

2 A Subpoena to Produce Documents in the District Court has been served on Council in relation to allegations of atrip fall incident at a Council owned car park. Council has informed its insurers of the public liability insurance claimand the insurers have engaged legal Counsel to defend Council in this potential compensation matter. The casewas heard on 26 September 2011 and judgement has been made in the claimants favour. Under advice fromCouncil's insurer and legal Counsel, an application to the Court of Appeal was filed on 24 October 2011. The matterwas heard beforetheCourtofAppealon 13August2012. The appeal was unsuccessful and judgement wasmade in favour of the plaintiff. Council's insurer and legal Counsel are now seeking advice regarding lodging anappeal to the High Court. Council does not have any direct exposure to the outcome of the court proceedings butthe outcome may affect future public liability insurance costs.

Contingent Assets

1 The Minister for Local Government made the following determination on 7 September 2006, relating to the transferof assets, rights and liabilities of the former Mulwaree Shire Council to Upper Lachlan Shire Council. Schedule 2 ofthe determination states that "the fixed assets of the Montague Street and Clinton Street, Goulburn propertiesremain with Goulburn Mulwaree Council. In the event of the sale of these properties Upper Lachlan Shire CouncilCouncil is to be reimbursed 24.22% of the net profit".

2 Council has entered into a voluntary Planning Agreement with AGL Energy Ltd on 11 September 2012 in relation toCritical Infrastructure Project reference number MP10_0035 for the project commonly known as the Dalton GasFired Power Station. As per section 5 of the voluntary Planning Agreement, AGL Energy Ltd has agreed to pay amonetary contribution of 0.833% of the total capital expenditure of stage one of the development into a CommunityEnhancement Fund, administered by Council._Payment shall be by instalments over a period of 40 years (indexed)as per clause 5.1 of the planning agreement. Should the development proceed to stage two, a further contributionpayment shall be made under clause 5.2 of the voluntary Planning Agreement with the terms and conditions beingthe same as those applying to stage one.

67



Note No. 19

INTERESTS IN JOINT VENTURES

(B) JOINTLY CONTROLLED ENTITY

Upper Lachlan Shire Council has a 15% interest in the Southern Tablelands Regional Library (STRL) inpartnership with Yass Valley and Goulburn Mulwaree Council's under a Service Agreement.This joint venture's activities are not controlled by any one member. Upper Lachlan Shire Council has twobranch libraries located at Crookwell and Gunning.

The interest in the STRL is accounted for in the financial statements using the equity method of accountingand is carried at cost. Information relating to the joint venture partnership is set out below.


($'000 ) ($'000 )

(A) Carrying Amount of Investment in Partnership 201 1

Share of Partnership's Assets and LiabilitiesCurrent Assets 86 70Non-Current Assets 128 122

Total Assets 214 192

Current Liabilities 13 12Non-Current Liabilities

Total Liabilities 1 12

Net Assets 201 180

(B) Share of Partnership's Revenue, Expenses and ResultsRevenues 124 121Expenses 103 120

Operating Result 21

(C) Share of Partnership's CommitmentsLease Commitments

Other Commitments (other than for the supply of inventories)Total Expenditure Commitments 0 0

Capital CommitmentsTotal Commitments 0

Contingent Liabilities relating to the jointly controlled entity of Southern Tablelands Regional LibraryEach of the partners in the Southern Tablelands Regional Library are jointly and severally liable for thedebts of the partnership. The assets of the partnership exceed its debts.

68



Note No. 20

REVALUATION RESERVES AND RETAINED EARNINGS

Actual ActualIncome & Expenses recognised directly in Equity 2012 2011

($'000) ($'000)

(a) RETAINED EARNINGSMovements in retained earnings were as follows:

Total at Beginning of the Year 248,896 245,036Adjustment to Correct Prior Year Period Errors - (Note 20 (d)) 21

(1)Income recognised directly in Equity 45

Land Under Roads Derecognised - (Note 20 (f))Net Operating Result for the Year 5,193 3,794

Total At End of the Year 254,089 248,896

(b) REVALUATION RESERVESInfrastructure, Property, Plant and Equipment Revaluation Reserve 147,896 152,619Available for Sale Investments Revaluation Reserve

Total 147,896 152,619

Movements:

Property, Plant and Equipment Revaluation ReserveAt Beginning of the Year 152,619 150,157Revaluations ( Note 9 ) (2,093) 2,462Prior Year Adjustments - (Note 20 (d)) (2,630)Transfers

Total At End of the Year 147.896 152,619

Available For Sale Investments Revaluation Reserve

At Beginning of the YearAdjustment on Adoption ofAASB132 and AASB139Revaluation - GrossTransfer to Net Profit - Gross

Total At End of the Year 0 0

(c) NATURE AND PURPOSE OF RESERVES

(i) Infrastructure, Property, Plant and Equipment Revaluation ReserveThe Infrastructure, Property, Plant and Equipment Revaluation Reserveis used to record increments and decrements on the revaluation ofnon-current assets.

(ii) Available for Sale Investments Revaluation ReserveChanges in fair value are taken to the available-for-sale investmentsrevaluation reserve, as described in Note 1 (k). Amounts are recognisedin profit and loss when the associated assets are sold or impaired.

69



Note No. 20 (Continued)

REVALUATION RESERVES AND RETAINEDEARNINGS

(d) CORRECTION OF ERRORS IN PREVIOUS YEARS Actual Actual2012 2011

A review of Councils asset register in 2011/2012 revealed that ($'000) ($-000)the annual indexation of Water & Sewer assets had been fullyattributed to the Revaluation Reserve in error. The correct

treatment is to allocate indexation amouts between the RevaluationReserve and Accumulated Depreciation on a pro rata basis.An adjustment has been made against the current year balancesof Retained Earnings and Accumulated depreciation because itwas found to be impractical to restate the prior years comparatives.

Water Assets Accumulated Depreciation Understated 1,584Sewer Assets Accumulated Depreciation Understated ,046Removal of Land Improvements unable to be identified and to correct the prior year errorRemoval of Other Assets now included in Other Structures

Operational Land Depreciation Overstated (17)Community Land Depreciation Overstated L4)Adjustment to Retained Earnings 2,630 (211

(e) VOLUNTARY CHANGES IN ACCOUNTING POLICY

There have been no changes to Upper Lachlan Shire Council's accounting policies in 2011/2012

(f) LAND UNDER ROADS RECOGNISED (DERECOGNISED)FOR PERIODS BEFORE 1st JULY 2008

70

Uooer Lachlan Shire Council


Note No. 21

RESULTS BY FUND <2)

Income Statement by Fund Actual Actual Actual2012 2012 2012

($'000 ) ($'000) ($'000 )General111 Water Sewer

Income from continuing operations

INCOME FROM CONTINUING OPERATIONSRevenue:

Rates and annual charges 6,924 620 864User charges and fees 5,108 592 185Interest and investment revenue 562 66 112Other revenues 360 2 6Grants and contributions provided for operating purposes 10,342 18 16

Grants and contributions provided for capital purposes 802 1,921 22Other Income:

Gain from the disposal of assets 166 4Net share of interests in joint ventures and associates using the 21

equity methodTOTAL INCOME FROM CONTINUING OPERATIONS 24,285 3,219 1,209

EXPENSES FROM CONTINUING OPERATIONS:

Employee benefits and on-costs 7,992 379 282Borrowing costs 167 43 99Materials and contracts 6,645 324 258Depreciation and amortisation 4,233 366 444ImpairmentOther expenses 2,017 161 109Interest and investment losses

Loss from the disposal of assetsNet share of interests in joint ventures and associates using theequity methodTOTAL EXPENSES FROM CONTINUING OPERATIONS 21,054 1,273 1,193

OPERATING RESULT FROM CONTINUING OPERATIONS 3,231 1,946 16

OPERATING RESULT FROM DISCONTINUED OPERATIONS

NET OPERATING RESULT FOR THE YEAR 3,231 1,946 16

Attributable to:- Council 3,210 1,946 16- Minority interests 21

NET OPERATING RESULT FOR THE YEAR BEFORE GRANTSAND CONTRIBUTIONS PROVIDED FOR CAPITAL PURPOSES 2,429 25 t6)

Notes:

(1) General Fund refers to all Council activities except Water and Sewer.(2) Note 21 is mandatory for 2011/12. Where Council does not have Water and Sewer Funds this note is not required.(3) The relevant operating result used for Water and Sewer is the 'Operating Result less Grants for Acquisition ofAssets' as reported in Special Schedule 3.

71

Uooer Lachlan Shire Council


Note No. 21 (continued)

(2)RESULTS BY FUND

(21Balance Sheet by Fund Actual Actual Actual2012 2012 2012

($'000 ) ($'000) ($'000)General0' Water Sewer

ASSETSCurrent assets

Cash and cash equivalents 1,719Investments 7,652 3,344 2,446Receivables 1,503 196 48Inventories 1,259Other 316Non-current assets classified as held for sale 0TOTAL CURRENT ASSETS 12,449 3,540 2,494

Non-current assets

InvestmentsReceivables 437 12 3

Infrastructure, property, plant and equipment 368,622 9525 13118Investments accounted for using equity method 201

Investment property 0

Intangible assets 0Other 0TOTAL NON-CURRENT ASSETS 369,260 9,537 13,121

TOTAL ASSETS 381,709 13,077 15,615

LIABILITIESCurrent liabilities

Payables 1,398 7 21Borrowings 117 37 34Provisions 2,889 107 109TOTAL CURRENT LIABILITIES 4,404 151 164

Non-Current Liabilities

Payables 0

Borrowings 1,618 480 922Provisions 677TOTAL NON-CURRENT LIABILITIES 2,295 480 922

TOTAL LIABILITIES 6,699 631 1,086

NET ASSETS 375,010 12,446 14,529

EQUITY

Retained earnings 230,451 9,919 13,518Revaluation reserves 144,358 2,527 1,011Council equity interest 374,809 12,446 14,529

Council equity interest 374,809 12,446 14,529Minority equity interest 201TOTAL EQUITY 375,010 12.446 14,529

Note:

(1) General Fund refers to all Council activities except Water and Sewer.(2) Note is mandatory for 2011/12

72



Note No. 22

NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE


($'000) ($'000)

0

73

Upper Lachlan Shire CouncilSustainable Finances Health Check


2010 Health Check Indicators«E^^1.1 Unrestricted Current Ratio 3.28 Over 2:1 is Green

. I .

1.2 Available Cash PositionCash assets less externally restricted assets 6,565 5,305 5,068 5,085 Council commitments being metUnrestricted available cash assets 291 243 318 443

1.3 Availability of Cash Assets/Total RevenueCash assets less externally restricted assets 22.9% 21.3% 19.3% 20.5%Unrestricted available cash assets 1 0% 1 0% 12% 18% Over 2:1 is Green

2. Operating Result before Capital Amounts Deficit is Red, Surplus is AmberfA Fd 'A

3 Successive Surpluses is Green3. Asset Renewal Expenditure

Capital expenditure on existing assets 3,072 3,676 3,143 5,292 Measure of Maintaining existingAnnual Depreciation 3,980 3,684 2,933 2,870 Assets, i.e. Gravel Resheeting

Asset Renewal Ratio 0.77 1.00 1.07 1.84 1:1 is Green, Less than 1:1 is Red

4. Debt Service Ratio 0.047 0.036 0.033 0.026 Less than 0.10 is Green

5. Collection PerformanceOutstanding rates, charges and fees 2,033 1,877 1,868 880

Invoices raised plus arrears b/fwd 11,976 11,621 10,818 9,030Greater than 9% is Red

Collection Performance Ratio 16.98% 16.15% 17.2 .. _| Less than 6% is Green79

6. Re-votes of ExpenditureRe-votes 318 2,044 330 (241)Ordinary & Capital Expenditure 30,002 28,350 29,882 28,104

Re-votes of Expenditure Ratio » Less than 2% is Green

7. Financial Data Statistics

- Financial bottom line (before capital) within +/-10% of forecast N N N Y

- Receipt of an unqualified audit report Y Y Y Y

- Statements lodged to meet compliance deadline Y Y Y Y

- Reports monthly to management within 5 days of month end Y Y Y Y

- Reports quarterly within 21 days of quarter end N N N Y

- Reports annually within 21 days of year end Y Y Y Y

- Budget incorporates a 10 year long-term financial plan Y Y N N

- Rigour of budget review is ongoing Y Y Y Y

- RAO formally report to Council in accordance with s413 (2) (c Y Y Y Y

- Has Council established an Audit Committee Y Y Y Y

Acceptable Measures 7 Measure of 8-10 is Green.;

8. Employee Costs to R.A.G's RatioEmployee Costs 8,653 9,091 8,973 8,027Rates, Annual Charges & General Purpose Grants (R.A.G.) 13,756 12,463 11,920 11,898

63% 73% 75°/< 67% Greater than 55% is Green0

9. Employee Leave Entitlements Reserve Greater Than 15% is GreenHowever, Large Provision forstaff entitlements

76


Comparatives to Previous Years

Income Statement Comparatives

Income Statement Comparatives(Includes Capital Grants & Contributions)

Fund 2012 2011 2010 2009General Fund ($4.879,810.76) ($1,032,296.30) ($2,705,478.11) ($3,214,514.99)Domestic Waste Management (DWM) ($254,000.00) ($116,712.10) ($171,315.14) ($48,051.94)Crookwell Water $53,392.00 ($63,382.40) ($223,807.21) ($13,698.24)Gunning Water ($75,238.00) ($97,298.95) ($97,944.16) ($54,328.31)Taralga Water ($27,336.00) ($402,282.39) ($17,449.35) ($26,088.62)Dalton Water $3,324.00 $7,218.13 $8,399.73 ($1,838.76)Crookwell Sewerage ($75,805.00) ($122,598.72) ($151,775.73) ($16,208.95)Gunning Sewerage ($54,982.00) ($132,148.60) ($104,178.05) $5,129.55Taralga Sewerage $115,972.00 ($1,830,619.92) ($3,827,651.95) ($978,745.61)Southern Tablelands Regional Library (STRL) $21,000.00) $1,000.00) $6,000.00 ($16,000.00)Total Operating Result ($5,194,483.76) ($3, ,121.25) ($7,285,199.97) ($4,364,345.87)

Cash Reserves Comparatives

Fund 2012 2011 2010 2009General Fund (Includes Grants/894/lnternal Restrictions) ($8,802,052.06) ($7,413,276.01) ($7,194,203.73) ($7,020,778.06)Domestic Waste Management (DWM) ($568,984.86) ($635,039.17) ($459,084.02) ($251,253.23)Crookwell Water ($701,639.10) ($659,341.39) ($506,887.35) ($509,523.48)Gunning Water ($2,592,881.49) ($642,151.00) ($532,703.93) ($465,000.19)Taralga Water $42,581.34 ($49,694.86) $363,980.60 $194,635.97Dalton Water ($92,091.31) ($82,560.58) ($77,856.02) ($129,451.90)Crookwell Sewerage ($985,770.14) ($1,201,641.35) ($1,019,124.10) ($801,538.41)Gunning Sewerage ($1,317,391.83) ($1,216,683.27) ($1,063,116.97) ($914,489.69)Taralga Sewerage $143,035.43 ($169,695.96 $126,010.63($12$^m^(^Total Cash Reserves I$1 161,264.88 ($10,658,691.48) ($9,771,388.36)

At end of 2011/2012 there is now $292,000 unrestricted cash in General FundAt end of 2010/2011 there is now $243,000 unrestricted cash in General FundAt end of 2009/2010 there was $318,000 unrestricted cash in General FundAt end of 2008/2009 there was $443,000 unrestricted cash in General FundAt end of 2007/2008 there was $243,000 unrestricted cash in General Fund

77


SPECIAL PURPOSE FINANCIAL STATEMENTSfor the year ended 30th June 2012

TABLE OF CONTENTS

Page

Auditor's Report [s.417 (2), (3)]

Statement by Councillors and Management [s.413 (2) (c)]

Special Purpose Financial Statements:

* Income Statement - by Water Supplies Business Activity 2* Income Statement - by Sewerage Business Activity 3

* Income Statement - by Domestic Waste Management Business Activity 4

* Balance Sheet - by Water Supplies Business Activity 5* Balance Sheet . by Sewerage Business Activity 6* Balance Sheet - by Domestic Waste Management Business Activity 7

Notes to the Special Purpose Financial Statements:

Note No. 1 Significant Accounting Policies 8-9Note No. 2 Water Supply Best Practice Management Disclosures 10Note No. 3 Sewerage Best Practice Management Disclosures 11-12

(i)


SPECIAL PURPOSE FINANCIAL STATEMENTSfor the year ended 30th June 2012

STATEMENT BY COUNCILLORS AND MANAGEMENTMADE PURSUANT TO THE LOCAL GOVERNMENT CODE OF ACCOUNTING PRACTICE

AND FINANCIAL REPORTING

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

(i) NSW Government Policy Statement -"Application of National Competition Policy to Local Government' )

(ii) Division of Local Government Guidelines -"Pricing and Costing for Council Businesses - A Guide to Competitive Neutrality"

(iii) The Local Government Code of Accounting Practice and Financial Reporting

(iv) The NSW Office of Water, Department of Environment, Climate Changeand Water Guidelines

To the best of our knowledge and belief, these Reports:

(i) Present fairly the Operating Result and Financial Position for each of Council'sdeclared Business Activities for the year, and

(") Accord with Council's accounting and other records.

We are not aware of any matter, which would render these reports false, or misleading in any way.

Signed in accordance with a Resolution of Council made on 20 September 2012.

^ ^/^i^o-^^ ^^J>/-

yg^

Clr. John Shaw Clr. James WheelwrightMAYOR COUNCILLOR

^(^JUi /yJohn Bell

GENERAL MANAGER RESPONSIBLE ACCOUNTING OFFICER

\>


INCOME STATEMENT OF WATER SUPPLY BUSINESS ACTIVITYfor the year ended 30th June 2012

Actual Actual Actual

Category 2 Business Activity 2012 2011 2010($.000) ($.000) ($.000)


Access Charges 620 605 574

User Charges 592 558 661FeesInterest 66 70 32Grants and Contributions for Non-Capital Purposes 18 18 17Profit from the Sale of AssetsInterest and Investment Gains 0 29 68Other Income 2 54 0

Total Income from Continuing Operations 1,298 1,334 1,353


Employee Benefits and On-Costs 379 254 250Borrowing Costs 43 50 55Materials and Contracts 324 417 412

Depreciation and Impairment 366 364 338Water Purchase ChargesLoss on the Sale of AssetsInterest and Investment Losses

Calculated Taxation EquivalentsDebt Guarantee Fees

Other Expenses 161 193 124

Total Expenses from Continuing Operations 1,273 1,277 1,180

Surplus/ (Deficit) from Continuing Operations before Capital Amounts 25 58 173

Grants and Contributions Provided for Capital Purposes 1,921 498 158

Surplus / (Deficit) from Continuing Operations after Capital Amounts 1,946 556 331

Surplus / (Deficit) from Discontinued Operations

Surplus / ( Deficit) from all operations before tax 1,946 556 331

Less: Corporate Taxation Equivalent (30%)(based on surplus result before capital) 7 17 52

Surplus / ( Deficit) after tax 1,938 539 279

Opening Retained Profits 13,531 12,218 11,279Adjustments for amounts unpaid:Taxation Equivalent PaymentsDebt Guarantee Fees

Corporate Taxation Equivalents (previous year) 17 52 25Water infrastructure assets fair value indexation (current year) 3,048) 723 635

Less: TER Dividend Paid

Closing Retained Profits 12,439 13,531 12,218

RATE OF RETURN ON CAPITAL ( %) 0.71% 0.85% 1.89%SUBSIDY FROM COUNCILCalculation of Dividend Payable:

Surplus/ (Deficit) after Tax 1,938 539 279

Less: Capital Grants & Contributions (excluding Developer Contributions) 1,921 498 158Surplus for Dividend Calculation Purposes 17 40 121Dividend Calculated from Surplus 9 20 61

2


INCOME STATEMENT OF SEWERAGE BUSINESS ACTIVITTfor the year ended 30th June 2012


Category 2 Business Activity 2012 2011 2010

($.000) ($'000) ($.000)INCOME FROM CONTINUING OPERATIONS

Access Charges 864 844 783User Charges 185 140 142Liquid Trade Waste ChargesFeesInterest 112 129 80

Grants and Contributions Provided for Non-Capital Purposes 16 16 16Profit from the Sale of Assets 4Interest and Investment Gains 50 114Other Income 6 374

Total Income from Continuing Operations 1,187 1,553 1,136


Employee Benefits and On-Costs 282 237 164Borrowing Costs 99 115 124Materials and Contracts 258 586 245

Depreciation and Impairment 444 267 257Loss on the Sale of AssetsInterest and Investment Losses

Calculated Taxation EquivalentsDebt Guarantee Fees

Other Expenses 109 83 53

Total Expenses from Continuing Operations 1,193 1,287 843

Surplus/ (Deficit) from Continuing Operations before Capital Amounts (6) 266 293

Grants and Contributions Provided for Capital Purposes 22 1,819 3,790

Surplus / (Deficit) from Continuing Operations after Capital Amounts 16 2,085 4,084


Surplus / ( Deficit) from all operations before tax 16 2,085 4,084


Surplus / (Deficit) after tax 16 2,005 3.996

Opening Retained Profits 16,107 13,407 8,965Adjustments for amounts unpaid:Taxation Equivalent PaymentsDebt Guarantee Fees

Corporate Taxation Equivalents (previous year) 80 88

Sewer infrastructure assets fair value indexation & revaluation (current year; (1,676) 607 446Less: TER Dividend Paid

Closing Retained Profits 14,529 16.107 13.407

RATE OF RETURN ON CAPITAL (%) 0.71 % 2.54% 3.24 %SUBSIDY FROM COUNCILCalculation of Dividend Payable:

Surplus/ (Deficit) after Tax 16 2,005 3,996Less: Capital Grants & Contributions (excluding Developer Contributions) 22 1,819 3,790Surplus for Dividend Calculation Purposes (6) 187 205Dividend Calculated from Surplus 93 103

3


INCOME STATEMENT OF DOMESTIC WASTE MANAGEMENT BUSINESS ACTIVITYfor the year ended 30th June 2012


Category 2 Business Activity 2012 2011 2010

($.000) ($.000) ($-000)INCOME FROM CONTINUING OPERATIONS

Access Charges 757 719 666User ChargesFeesInterest 30 32 20Grants and Contributions Provided for Non-Capital Purposes 25 24 23Profit from the Sale of AssetsOther Income

Total Income from Continuing Operations 813 776 710


Employee Benefits and On-Costs 155 98 131Borrowing Costs 20 23 25Materials and Contracts 338 477 347Depreciation and Impairment 59 49 50Loss on the Sale of Assets 28Calculated Taxation EquivalentsDebt Guarantee Fees

Other Expenses 0 4

Total Expenses from Continuing Operations 573 676 557

Surplus/ (Deficit) from Continuing Operations before Capital Amounts 240 101 154

Grants and Contributions Provided for Capital Purposes 14 16 18

Surplus / (Deficit) from Continuing Operations after Capital Amounts 254 117 171


Surplus / ( Deficit) from all operations before tax 254 117 171


Surplus / ( Deficit) after tax 182 87 125

Opening Retained Profits 812 692 557Adjustments for amounts unpaid:Taxation Equivalent PaymentsDebt Guarantee Fees

Corporate Taxation Equivalents (previous year) 30 46 10Asset Revaluation Movement (current year) 14 (12)

Less: TER Dividend Paid

Closing Retained Profits 1,038 812 692

KATE OF RETURN ON CAPITAL ( % ) 33.97 % 26.22 % 30.26 %SUBSIDY FROM COUNCILCalculation of Dividend Payable:

Surplus/ (Deficit) after Tax 182 87 125Less: Capital Grants & Contributions (excluding Developer Contributions)Surplus for Dividend Calculation Purposes 182 87 125Dividend Calculated from Surplus 91 43 63

4


BALANCE SHEET OF WATER SUPPLY BUSINESS ACTIVITY


Actual Actual ActualCategory 2 Business Activity 2012 2011 2010

($.000) ($'000) ($-000)ASSETSCURRENT ASSETS

Cash and Cash EquivalentsInvestments 3,344 1,434 753Receivables 196 116 195Inventories 0 0 0Other 0 0 0Non-Current Assets classified as Held For Sale

TOTAL CURRENT ASSETS 3,540 1,549 949

NON.CURRENT ASSETSInvestments 0 0 0Receivables 12 14 13Inventories 0 0 0Infrastructure, Property, Plant and Equipment 9,525 12,679 12,098Investments accounted for using equity methodInvestment PropertyOther 0 0 0

TOTAL NON-CURRENT ASSETS 9,537 12,693 12.111

TOTAL ASSETS 13,077 14,242 13,059

LIABILITIESCURRENT LIABILITIES

Payables 14 26 62

Interest Bearing Liabilities 37 592 69Provisions 107 94 119

TOTAL CURRENT LIABILITIES 158 712 250

NON-CURRENT LIABILITIES

Payables 0 0 0Interest Bearing Liabilities 480 0 592Provisions 0 0 0

TOTAL NON-CURRENT LIABILITIES 480 0 592

TOTAL LIABILITIES 638 712 842

NET ASSETS 12.439 13.531 12-218

EUUI r

Retained Earnings 9,911 7,956 7,365Revaluation Reserves 2,527 5,575 4,852Council Equity Interest 12,439 13,531 12,218Minority Equity Interest

TOTAL EQUITY 12,439 13,531 12,218

5


BALANCE SHEET OF SEWERAGE BUSINESS ACTIVITY



($.000) ($.000) ($.000)ASSETSCURRENT ASSETS

Cash and Cash EquivalentsInvestments 2,446 2,667 2,252Receivables 48 34 30Inventories 0 0 0Other 0 0 0Non-Current Assets classified as Held For Sale

TOTAL CURRENT ASSETS 2,494 2,701 2,282

NON-CURRENT ASSETSInvestments 0 0 0Receivables 3 2Inventories 0 0 0Infrastructure, Property, Plant and Equipment 13,118 15,036 12,873Investments accounted for using equity methodInvestment PropertyOther 0 0 0

TOTAL NON.CURRENT ASSETS 13,121 15,038 12,874

TOTAL ASSETS 15,615 17,739 15,156

LIABILITIESCURRENT LIABILITIES

Payables 21 109 119Interest Bearing Liabilities 34 799 110Provisions 109 97 95

TOTAL CURRENT LIABILITIES 164 1,005 324


Payables 0 0 0Interest Bearing Liabilities 922 627 1,426Provisions 0 0 0

TOTAL NON-CURRENT LIABILITIES 922 627 1,426

TOTAL LIABILITIES 1,086 1,632 1,749

NET ASSETS 14.529 16.107 13407

cUUI T

Retained Earnings 13,518 13,420 11,327Revaluation Reserves 1,011 2,687 2,079Council Equity Interest 14,529 16,107 13,407Minority Equity Interest

TOTAL EQUITY 14,529 16,107 13,407

6


BALANCE SHEET OF DOMESTIC WASTE MANAGEMENT BUSINESS ACTIVITYfor the year ended 30th June 2012


($-000) ($.000) ($.000)ASSETSCURRENT ASSETS

Cash and Cash EquivalentsInvestments 569 635 459Receivables 35 29 23InventoriesOther

Non-Current Assets classified as Held For Sale

TOTAL CURRENT ASSETS 604 664 482

NON-CURRENT ASSETSInvestmentsReceivables 2 2Inventories

Infrastructure, Property, Plant and Equipment 765 470 591Investments accounted for using equity methodInvestment PropertyOther

TOTAL NON-CURRENT ASSETS 767 472 592

TOTAL ASSETS 1,371 1.135 1,074

LIABILFTIES

CURRENT LIABILITIES

Payables - (Corporate Taxation Equivalent) 72 30 46Interest Bearing Liabilities 41 38 35Provisions 25 19 28

TOTAL CURRENT LIABILITIES 137 87 109


PayablesInterest Bearing Liabilities 196 236 274Provisions

TOTAL NON-CURRENT LIABILITIES 196 236 274

TOTAL LIABILITIES 333 323 384

NET ASSETS 1.038 B19 RQ9

cUUI

Retained Earnings 1,211 985 853Revaluation Reserves (173) (173) (161)Council Equity Interest 1,038 812 692

Minority Equity InterestTOTAL EQUrTV 1,038 812 692

7

Upper Lachlan Shire CouncilNOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS

for the year ended 30th June 2012Note No. 1

SIGNIFICANT ACCOUNTING POLICIES

These Financial Statements, are a Special Purpose Financial Statements (SPFS), and are prepared for utilisation by Council,and the Division of Local Government. For the purpose of these Statements, the Council is not a reporting entity.

Thefi9ures presented in these Special Purpose Financial Statements have been prepared in accordance with the recognitioncriteria of applicable Australian Accounting Standards, other authoritative pronouncements of the AASB and AustralianAccounting Interpretation. The disclosures in these Special Purpose Financial Statements have been prepared in accordancewith the Local Government Act and Regulations, and the Local Government Code of Accounting Practice and FinancialReporting.

The Statements are also prepared on an accruals basis. They are based upon historic costs, and do not take intoaccount changing money values, or, except where specifically stated, current values of non-current assets. Certaintaxes and other costs, appropriately described, have been imputed, for the purposes of the National Competition Policy.

NATIONAL COMPETITION POLICY:

Council has adopted the principle of "competitive neutrality" to its business activities as part of the NationalCompetition Policy, which is being applied throughout Australia, at all levels of Government. The frameworkfor its application, was formulated in the June 1996 Government Policy Statement on the "Application of NationalCompetition Policy to Local Government". The "Pricing and Costing for Council Businesses - A Guide to CompetitiveNeutrality", issued by the Division of Local Government in July, 1997, has also been adopted by Council.

The pricing and costing guidelines outline the processes for identifying and allocating costs to activities and provide astandard of disclosure requirements. These disclosures, are reflected in Council's pricing and / or, financial reportingsystems and include taxation equivalents; Council subsidies; return on investments (rate of return); and dividends paid.

DECLARED BUSINESS ACTIVITIES:

In accordance, with the "Pricing and Costing for Council Businesses - A Guide to Competitive Neutrality" Council hasdeclared that the following business activities are to be considered as CATEGORY 2.

WATER SUPPLIES

Provision of reticulated water to the townships of Crookwell, Gunning, Taralga and Dalton.SEWERAGE SERVICES

Provision of sewerage services to the townships of Crookwell, Gunning and Taralga.DOMESTIC WASTE MANAGEMENT

Provision of Domestic Waste disposal services for the townships of Crookwell, Gunning, Taralga and villages.

MONETARY AMOUNTS

Amounts shown in the financial statements are in Australian currency and rounded to the nearest one thousand dollars,with the exception of Note 2 (Water Supply Best Practice Management Disclosures A513) and Note 3 (Sewerage BestPractice Management Disclosures A514). As required by the NSW Office of Water, Department of Environment, ClimateChange and Water, the amounts shown in Notes 2 and Notes 3 are shown in whole dollars.

(il TAXATION EQUIVALENT CHARGES:

Council is liable to pay various taxes and financial duties. Where this is the case, these costs are disclosed as a costof operations (General Purpose Financial Statements ) just like all other costs. However, where Council does not paysome taxes, which are generally paid by private sector businesses, such as income tax, these equivalent tax payments havebeen applied to all Council-nominated business activities and are reflected in the Special Purpose Financial Statements.For the purposes of disclosing comparative information, relevant to private sector equivalent, the following taxationequivalents have been applied to all Council nominated business activities (this does not include Council's non-businessactivities): - Corporate Tax Rate - 30% Payroll Tax, Land Tax, Sales Tax and Stamp Duty - Not Applicable.

In accordance with the guidelines for Best Practice Management of Water Supply and Sewerage, a payment for theamount calculated as the annual taxation equivalent charges (excluding income tax), must be paid fmm Water Supplyand Sewerage Business activities The payment of taxation equivalent charges, referred in the Best Practice Management ofWater Supply and Sewerage Guides to as a "Dividend for Taxation equivalent", may be applied for any purpose allowedunder the Local Government Act 1993. Achievement of substantial compliance against the guidelines for Best PracticeManagement of Water Supply and Sewerage is not a prerequisite for the payment of the taxation equivalent charges;however the payment must not exceed $3 per assessment.

8


for the year ended 30th June 2012Note No. 1 - ( Continued)

SIGNIFICANT ACCOUNTING POLICIES

INCOME TAX:

An income tax equivalent has been applied on the profits of the business activity. Whilst income taxation is not aspecific cost for the purpose of pricing a good or service, it needs to be taken into account of in terms of assessingthe rate of return required on capital invested. Accordingly, the return on capital invested is set at a pre-tax level(gain/(loss) from ordinary activities before capital amounts) as would be applied by a private sector competitor- that is, it should include a provision equivalent to the corporate income tax rate, currently 30%.

Income Tax is only applied where a positive gain/(loss) from Ordinary Activities before Capital Amounts has beenachieved. Since the taxation equivalent is notional, that is, it is payable to the Council, as the owner of businessoperations, it represents an internal payment, and has no effect upon the operations of the Council.

Accordingly, there is no requirement for disclosure of internal charges in the General Purpose Financial Statements.The rate applied of 30% is the equivalent company tax rate prevalent as at balance date. There have been noadjustments for variations that have occurred during the financial year.

LOCAL GOVERNMENT RATES AND CHARGES:

A calculation of the equivalent rates and charges for all Category 2 Businesses has been applied to all assetsowned or exclusively used by the business activity.

LOAN AND DEBT GUARANTEE FEES:

The debt guarantee fee, is designed to ensure Council's business activities face " true " commercial borrowing costsin line with private sector competitors. In order to calculate a debt guarantee fee, Council has determined what thedifferential rate would have been between the commercial rate and the Councils borrowing rate for its business activity.

(iit SUBSIDIES:

Government Policy requires that subsidies provided to customers and the funding of those subsidies must beexplicitly disclosed. Subsidies occur where Council provides services on a less than cost recovery basis. This optionis exercised on a range of services in order for Council to meet its community service obligations. The overall effectof subsidies is contained within the Income Statement of Business Activities.

fiin RETURN ON INVESTMENTS: - ( RATE OF RETURN )

The Policy Statement requires that Councils with Category 2 Businesses "would be expected to generate a returnon capital funds employed that is comparable to rates of return for private businesses operating in a similar field."Funds are subsequently available for meeting commitments, or financing future investment strategies. The rate ofreturn is disclosed for each of Council's business activities on the Income Statement.

(ivl DIVIDENDS:

Council is not required to pay dividends to either itself, as an owner of a range of businesses, or to any external entities.

Local Government Water Supply and Sewerage Businesses are permitted to pay an annual dividend from its WaterSupply or Sewerage Business Surplus. The dividend, calculated and approved in accordance with the Best PracticeManagement Guidelines, must not exceed 50% of this surplus in any one year, or the number of Water Supply orSewerage Assessments at 30 June 2012 multiplied by $30 (less the payment for tax equivalent charges, notexceeding $3 per Assessment).

In accordance with the guidelines for Best Practice Management of Water Supply and Sewerage, a Dividend Paymentform. Statement of Compliance, unqualified independent Financial Audit Report and Compliance Audit Report aresubmitted to the NSW Office of Water.

9

WATER SUPPLY BUSINESS BEST PRACTICE MANAGEMENT DISCLOSURE

1. CALCULATION AND PAYMENT OF TAX EQUIVALENTS: 2012 2011

(i) Calculated Tax Equivalents $1 7,459 17,251 |

(ii) No. of Assessments multiplied by $ 3.00 per Assessment $1 5,838 I 5,832 |

(iii) Amounts payable for Tax Equivalents ( Lesser of (i) and (ii)) $1 5,838 I 5,832 |(iv) Tax Equivalents paid $1 u LJ

2. DIVIDEND FROM SURPLUS:

(i) 50% of Surplus before Dividend Payments(Calculated in accordance with Best Practice Management for Water <1 127,654 | 156,860 ISupply and Sewerage Guidelines)

(ii) No. of Assessments multiplied by $ 30.00 per AssessmentLess; Tax Equivalent Charges / Assessment <1 58,380 I 58,320 |(iii) Cumulative Surplus before Dividends for 3 Years to 30th June 2012Less: Cumulative Dividends Paid for 2 Years to 30th June 2011 $1 255,309 I 313,719 I

(iv) Maximum Dividend from Surplus ( Lesser of (i), (ii) and (iii)) <l 58,380 I 58,320 |

( v ) Dividend Paid from Surplus $1 OJ u

3. REQUIRED OUTCOMES FOR SIX ( 6 ) CRITERIA: Yes or No Yes or No

(1 ) Completion of Strategic Business Plan (Including Financial Plan) YES YES

2 ) Full cost-recovery, without significant cross-subsidies YES YES(Item 2 (a) in Table 1 on Page 22 of the Best Practice Management Guidelines)

Complying Charges - (Item 2 ( b) in Table 1 ) YES YES

Development Service Plan with Commercial Developer Charges (Item 2 (e) in Table 1) YES YES

If Dual Water Supplies, Complying Charges (Item 2 (g ) in Table 1 ) YES YES

( 3 ) Sound Water Conservation and Demand Management implemented NO NO

( 4 ) Sound Drought Management implemented YES YES

( 5 ) Complete performance Reporting Form by 15th September each year YES YES

(6 ) (a) Complete Integrated Water Cycle Management Evaluation NO NO

(b) Complete and implement Integrated Water Cycle Management Strategy NO NO

NATIONAL WATER INmATIVE (NWI) FINANCIAL PERFORMANCE INDICATORS: ($-000) ($.000)

NWI F1 - Total Revenue (Water) $ ('000)| 1,253 | 1,260 |

NWI F4 - Residential Revenue from Usage Charges (Water ) %1 48.83%| 47.98% I

NWI F9 - Written Down Replacement Cost of Fixed Assets (Water) $('000)| 9,525 I 12,679 |

NWI F 11 - Operating Cost ( OMA) ( Water $('000)| 864 | 864 |

NWI F14 - Capital Expenditure (Water) $ ('ooo)l 259^ 222

NWI F17 - Economic Real Rate of Return ( Water ) %1 9.31%| 4.02%|

NWI F26 - Capital Works Grants (Water) $ ('000)| 1,900 | ^4J

Notes: The NWI performance indicators are based on the National Performance Framework handbook for Urban Performance ReportingIndicators and Definitions.

10

SEWERAGE BUSINESS BEST PRACTICE MANAGEMENT DISCLOSURE

1. CALCULATION AND PAYMENT OF TAX EQUIVALENTS: 2012 2011

(i) Calculated Tax Equivalents $1 u 80,000 |

(ii) No. of Assessments multiplied by $ 3.00 per Assessment $1 5,097 I 5,250

iii) Amounts payable for Tax Equivalents ( Lesser of (i) and (ii)) $1 OJ 5,250

(iv ) Tax Equivalents paid <1 u OJ2. DIVIDEND FROM SURPLUS:

(i)50% of Surplus before Dividends(Calculated in accordance with Best Practice Management for Water Supply $1 276,870 | 259,406 |(and Sewerage Guidelines)

(ii) No. of Assessments multiplied by $ 30.00 per AssessmentLess; Tax Equivalent Charges / Assessment $1 50,970 I 52,500 |

(iii) Cumulative Surplus before Dividends for 3 Years to 30th June 2012Less: Cumulative Dividends Paid for 2 Years to 30th June 2011 $1 553,741 | 518,812 |

(iv ) Maximum Dividend from Surplus ( Lesser of (i), (ii) and (iii)) $1 50,970 | 52,500 I

(v ) Dividend Paid from Surplus $1 0-1 0

3. REQUIRED OUTCOMES FOR FOUR (4) CRITERIA: Yes or No Yes or No

(1 ) Completion of Strategic Business Plan (Including Financial Plan) YES YES

( 2 ) Pricing with full cost-recovery, without significant cross-subsidies (Item 2 (a ) in Table 1 YES YESon Page 22 of Best Practice Guidelines)

Complying Charges - (a) Residential (Item 2 ( c) in Table 1 ) YES I I YES

- (b) Non-Residential (Item 2 ( c) in Table 1 ) YES YES

- (c) Trade Waste (Item 2 ( d ) in Table 1 ) YES NO

Development Service Plan with Commercial Developer Charges (Item 2 ( e ) in Table 1 ) YES YES

Liquid Trade Waste Approvals and Policy (Item 2 ( f) in Table 1 ) YES YES

( 3 ) Complete Performance Reporting Form by 15th September each year YES YES

( 4 ) ( a ) Complete Integrated Water Cycle Management Evaluation NO NO

( b ) Complete and implement Integrated Water Cycle Management Strategy NO NO

NATIONAL WATER INITIATIVE (NWI) FINANCIAL PERFORMANCE INDICATORS: ($.000) ($.000)

NWI F2 - Total Revenue (Sewerage) $ ('000)| 1,093 I 3,193 |

NWI F10 - Written Down Replacement Cost of Fixed Assets ( Sewerage) $ ('000)[ 13,118 | 15,037 |

NWI F12 - Operating Cost (Sewerage) $ C000)| 644-| 535 |

NWI F15 - Capital Expenditure ( Sewerage) $ C000)| 214 I 1,823

NWI F18 - Economic Real Rate of Return ( Sewerage %1 0.04%| 4.05%|

11



SEWERAGE BUSINESS BEST PRACTICE MANAGEMENT DISCLOSURE

2012 2011

NWI F27 - Capital Works Grants (Sewerage) $ C000)| OJ 1,782

NWI F3 - Total Income (Water and Sewerage ) $ C000)| 2.346 I 4,453 I

NWI F8 - Revenue from Community Service Obligations ( Water and Sewerage) %1 1.45%| 0.73%|

NWI F16 - Capital Expenditure ( Water and Sewerage ) $ ('000)| 473| 2,0451

NWI F19 - Economic Real Rate of Return ( Water and Sewerage %1 3.94%| 7.68%|

NWI F20 - Dividend ( Water and Sewerage) $ ('000)[ u u

NWI F21 - Dividend Payout Ratio ( Water and Sewerage ) $COOO)| u u

NWI F22 - Net Debt to Equity ( Water and Sewerage) %1 2.26% I 2.31% I

NWI F23 - Interest Cover ( Water and Sewerage ) >100| >100 I

NWI F24 - Net Profit After Tax ( Water and Sewerage) $ ('000)[ 1,962 | 2,641 |

NWI F25 - Community Service Obligations ( Water and Sewerage ) $ ('000)[ 34 3£J

Notes: (1) The NWI performance indicators are based on the National Performance Framework handbook for Urban Performance ReportingIndicators and Definitions.

12


SPECIAL SCHEDULESfor the year ended 30th June 2012

TABLE OF CONTENTS

Page

SPECIAL SCHEDULES: - NOT AUDITED

1 * Net Cost of Services 13-152 (a) * Statement of Long-Term Debt (AII-Purposes) 162(b) * Statement of Internal Loans ( Section 410 (3) LGA 1993) 173 * Water Supply Income Statement 18-204 * Water Supply - Balance Sheet 215 * Sewerage Service Income Statement 22-246 * Sewerage Service - Balance Sheet 257 * Condition of Public Works 268 * Financial Projections 27

* Council Debt Service Ratios 28

(i)

Upper Lachlan Shire CouncilSPECIAL SCHEDULE NO. 1NET COST OF SERVICES

for the year ended 30th June 2012($'000)

EXPENSES FROM INCOME FROM NET COSTCONTINUING OPERATIONSCONTINUING OPERATIONS OF SERVICES

Non-CapitalFunction or Activity Expenses Capital Income Net CostIncomeGOVERNANCE 542 (542

ADMINISTRATION

Corporate Support 2,824 226 (2,598Engineering and Works 343 239 (104

rOTAL ADMINISTRATION 3,167 465 0 (2,702

PUBLIC ORDER & SAFETY

Contributions to Fire Service Levy 28 (28Fire Protection - Other 491 302 (189Animal Control 63 2 (61Enforcement of Local Gov't RegulationsEmergency Services 39 (39

QTAL PUBLIC ORDER & SAFETY 621 304 0 (317

HEALTH

Administration and Inspection 94 22 (72Food Control 0Noxious Plants / Vermin Control 380 206 (174)Health Centres 55 23 (32)Other

FOTAL HEALTH 529 252 0 (277)

ENVIRONMENT

Street Cleaning 66 (66)Stormwater Management 51 43 10 2Solid Waste Management 259 520 261Domestic Waste Management (DWM) 572 812 14 254Environmental Protection 69 12 (57)

OTAL ENVIRONMEN1 1,017 1,387 24 394

COMMUNITY SERVICES & EDUCATIONAdministration 59 4 (55)Heritage FundYouth Services 2 2 0Aged Persons and Disabled 10 (10)Other Community Services 10 10

OTALCOMMUNITY SERVICES & EDUCATld 71 6 10 (55)

13


for the year ended 30th June 2012($'000 )


Non-CapitalFunction or Activity Expenses Capital Income Net CostIncomeHOUSING & COMMUNIIAMENITIES

Housing 35 22 (13Town Planning 436 159 348 71Public Cemeteries 90 73 (17Public Conveniences 135 67 (68Other Community Amenities

TOTAL HOUSING & COMMUNITlT AMENITIES 696 254 415 (27

WATER SUPPLIES

Management and Operations 1,273 1,298 1,921 1,946

SEWERAGE SERVICES

Management and Operations 1,193 1,187 22 16

RECREATION & CULTUREPublic Libraries 356 50 (306)Museums 13 (13)Community Centres 75 6 (69)Public Halls 177 27 18 (132)Other Cultural ServicesSwimming Pools 233 32 (201)Sporting Grounds / Showground 249 14 29 (206)Parks, Gardens and Reserves 329 25 (304)Other Sport and Recreation

OTAL RECREATION & CULTURE 1,432 129 72 (1,231 )

MINING. MANUFACTURING & CONSTRUCTION

Building Control 188 101 (87)Quarries and Gravel Pits 982 1,044 62

OTAL MINING. MANUFACTURING 1,170 1,145 0 (25)CONSTRUCTIONd

14


for the year ended 30th June 2012($-000)


Non-CapitalFunction or Activity Expenses Capital Income Net CostIncomeFRANSPORT & COMMUNICATION

Urban Roads - Local 499 (499Sealed Rural Roads (SRR) - Local 1,859 (1,859Sealed Rural Roads (SRR) - Regional 1,061 1,440 224 603Unsealed Rural Roads (URR) - Local 4,208 2,739 (1,469 ]Unsealed Rural Roads (URR) - Regional 116 (116]Bridges on Urban Roads - Local 11 (11]Bridges on SRR - Local 104 (104]Bridges on URR - Local 212 (212]Bridges on URR - RegionalBridges on SRR - Regional 166 (166]Footpaths 62 50 (12]Kerb and GutteringBus Shelters and Services

RMS Works - MR54 (State Arterial) 1,969 2,010 41Roads to Recovery 861 861Aerodromes 4 (4Parking Areas 3 (3Street Lighting 78 12 7 (59Profit / (Loss) on Sale of AssetsOther Transport and Communication 21 4 (17

TOTAL TRANSPORT & COMMUNICATION 10,373 7,066 281 (3,026)

ECONOMIC AFFAIRSCaravan Parks 30 43 13Tourism and Area Promotion 208 (208)Saleyards and MarketsPrivate Works 1,126 1,578 452RMS Motor Registry Agency 72 66 (6)Other Business Undertakings

OTAL ECONOMIC AFFAIRS 1,436 1,687 0 251

OTAL. ALL FUNCTIONS 23,520 15,180 2,745 (5,595)fhENERAL PURPOSE REVENUES (1) 10,767 10,767u

0(HARE OF INTERESTS IN JOINT VENTURES 21AND ASSOCIATES USING THE EQUITY METHOD

NET OPERATING RESULT FOR THE YEAR

FROM ALL ACTIVITIES (2) 5,193

(1). General Purpose Revenues includes:-* Rates and Annual Charges ( excludes ex-gratia payments in lieu of rates) 5,540* Non-Capital General Purpose Grants* Interest on Overdue Rates. 33* Interest on Investments. 498* General Purpose Grants (FAGS & Pensioner Rate Subsidy) 4,696

(2). As reported on the Income Statement.

15

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SPECIAL SCHEDULE NO. 3

WATER SUPPLY INCOME STATEMENT(GROSS INCLUDING INTERNAL TRANSACTIONS)


2012 2011 2010

($.000) ($'000) ($.000)A. EXPENSES AND INCOMEEXPENSES1. Management Expenses

a.Administration 122 150 123b.Engineering and Supervision 115 124 102

2. Ooeratina and Maintenance Expenses. Dams & Weirs

a.Operation Expenses 27 41 33b.Maintenance expenses

- Mainsc.Operation Expenses 135 121 114d.Maintenance Expenses 4 5 11- Reservoirse.Operation Expenses 20 20 15f.Maintenance Expenses 3

. Pumping Stationsg.Operation Expenses (excluding energy costs) 97 86 90h.Energy Costs 74 84 50i.Maintenance Expenses 10 17 6

- Treatment.Operation Expenses (excluding chemical costs) 130 117 126

k.Chemical Costs 44 32 53I.Maintenance Expenses and Water Bores 26 23 5

- Otherm. Operation Expenses 23 18 27n. Maintenance Expenses 30 13 14o. Purchase of Water

3. Depreciationa.System Assets 361 349 338b.Plant and Equipment 5 15

4. Miscellaneous Expensesa.lnterest Expenses 43 50 55b.Revaluation Decrementsc.Other Expenses and Private Works 4 10 15

5. TOTAL EXPENSES 1,273 1,277 1,180

INCOME

6. Residential Chargesa. Access Charges (including rates) 620 605 574b. User Charges 592 558 661

7. Non-Residential Chargesa. Access Charges (including rates)b. User Charges

8. Extra Charoes9. Interest Income 66 70 329. Interest and Investment Gains/fLosses) 29 6810. Other Income and Private Works 2 1011. Grants

a. Grants for Acquisition of Assets 1,900 474b. Grants for Pensioner Rebates 18 18 17c. Other Grants 150

12. Contributionsa. Developer Charges 21 25 8b. Developer Provided Assetsc. Other Contributions 45^

13. TOTAL INCOME 3,219 1,833 1,510

14. Gain or Loss on Disposal of Assets

15. Operating Result 1,946 556 331

15a. OPERATING RESULT(Less Grants for Acquisition of Assets) 1,946 556 331

18


SPECIAL SCHEDULE NO. 3 (CONTINUED)

WATER SUPPLY INCOME STATEMENT

(GROSS INCLUDING INTERNAL TRANSACTIONS)for the year ended 30th June 2012

B. CAPITAL TRANSACTIONS 2012 2011 2010

($.000) ($-000) ($.000)NON-OPERATING EXPENDITURES

16. Acquisition of Fixed assetsa. Subsidised Schemeb. Other New System Assetsc. Renewals 257 219 725d. Plant & Equipment 2 3 2

17. Repayment of Debta.Loans 75 69 64b. Advancesc. Finance Leases

18. Transfer to Sinking Fund

19. TOTALS 334 291 791

NON-OPERATING FUNDS EMPLOYED20. Proceeds from the disposal of assets21. Borrowing Utilised

a. Loansb. Advancesc. Finance Leases

22. Transfer from Sinking Fund

23. TOTALS 0 0 0

C. RATES & CHARGES24. Number of Assessments

a. Residential (occupied) 1,635 ,609 1,588b. Residential (unoccupied) 81 93 92c. Non-Residential (occupied) 193 210 214d. Non-Residential (unoccupied) 37 32 34

25. Number of ET's for which developer charges were received 6 14 4

26. Total amount of Pensioner Rebates ($000) $ 32 $ 31 $ 32

19

Upper Lachlan Shire CouncilSPECIAL SCHEDULE No. 3 - ( CONTINUED )

WATER SUPPLY - CROSS-SUBSIDIES


D. BEST PRACTICE ANNUAL CHARGES AND DEVELOPER CHARGES

27. Annual Charges

a. Does Council have best-practice water supply annual charges and usage charges? YES

If Yes, go to 28a.

If No, please report if Council has removed Land Value from access charges (i.e. rates). N/A

b. Cross-Subsidy from Residential Customers using less than allowance Page 25 of Guidelines). NO

c. Cross-Subsidy to Non-Residential Customers (Page 24 of Guidelines). NO

d. Cross-Subsidy to large connections in un-metered supplies (Page 26 of Guidelines). NO

28. Developer Charges

a. Has Council completed a Water Supply Development Servicing Plan? YES

b. Total Cross-Subsidy in Water Supply Development Charges for 2011/2012 (Page 47 of Guidelines). NO

29. Disclosure of Cross-Subsidies

TOTAL OF CROSS-SUBSIDIES (27b + 27c +27d +28b) N/A

20

Upper Lachlan Shire CouncilSPECIAL SCHEDULE No. 4

WATER SUPPLY - BALANCE SHEET

( GROSS INCLUDING INTERNAL TRANSACTIONS )for the year ended 30th June 2012

Current Non-Current TotalASSETS: $-000 $.000 $.000

30. Cash and Investments

a. Developer Charges 105 105

b. Specific Purpose Grants 0c. Accrued Leave Entitlements 0

d. Unexpended Loans 0e. Sinking Fund 0f. Other 3,239 3,239

31. Receivables

a. Specific Purpose Grants 0b. Rates and Charges 31 12 43

c. User Charges and Fees 165 165d. Other 0

32. Inventories 0

33. Property, Plant and Equipmenta. System Assets 9,489 9,489b. Plant and Equipment 36 36

34. Other Assets 0

35. TOTAL ASSETS 3^40 9,537 13,077

LIABILITIES:

36. Bank Overdraft 037. Creditors

a. Goods and Services 0Unearned Revenues 0b. Accrued Expenses 7 7Other 0

38. Borrowingsa.Loans 37 480 517b. Advances 0c. Finance Leases 0

39. ProvisionsAccrued Leave Entitlements 107 107

a. Tax Equivalents 0b. Dividend 0c. Other 0

40. TOTAL LIABILITIES 151 480 631

41. NET ASSETS COMMITTED 3,389 9,057 12,446

EQUITY:

42. Accumulated Surplus / ( Deficit) 9,91943. Asset Revaluation Reserve 2,52744. TOTAL EQUIT/ 12,446

NOTE TO SYSTEM ASSETS (FROM NOTE 9(b)Y.

45. Current Cost of System Assets - Replacement 21,496

46. Current Cost of System Assets - Accumulated Depreciation 11,971

47. Current Cost of System Assets - Written-Down Current Value 9,525

21


SPECIAL SCHEDULE NO. 5

SEWERAGE INCOME STATEMENT


2012 011 2010($-000) ($.000) ($.000)A. EXPENSES AND INCOME

EXPENSES1.Management Expenses

a.Administration 78 149 79b.Engineering and Supervision 109 43 68

2.Operation and Maintenance Expenses- Mains

a.Operation Expenses 23 23 21b.Maintenance Expenses 17 24 6

- Pumping Stationsc.Operation Expenses (excluding energy costs) 71 38 35d.Energy Costs 54 50 19e.Maintenance Expenses 7 6 4

- Treatment

f.Operation Expenses (excluding chemical,energy, effluent & biosolids management costs) 161 125 127

g.Chemical Costs 17 14 16h.Energy Costs 32 9 12i.Effluent Management 14 8 17.Biosolids Management

k.Maintenance Expenses 54 40 43- Other

I.Operation Expenses 7 6 4m.Maintenance Expenses

S.Depreciationa.System Assets 433 259 257b.Plant and Equipment 11 8

4.Miscellaneousa. Interest Expenses 99 115 124b.Revaluation Decrementsc.Other Expenses and Private Works 6 370 11

5.TOTAL EXPENSES 1,193 1,287 843

INCOME6.Residential Charges (includina rates) 864 844 7377.Non -Residential charges

a.Access Charges (including rates)b.User Charges 185 140 142

8/Trade Waste CharaesaAnnual Feesb.User Fees

c.Excess Mass Charges and Re-inspection Fees9.Extra Charges10. Interest Income 112 129 8010.Interest and Investment Gains/d-osses) 50 11411 .Other Income and Private Works 6 1412.Grants

a.Grants for Acquisition of Assetsb.Grants for Pensioner Rebates 16 16 16c.Other Grants ,782 3,781

13.Contributionsa.Developer Charges 22 37 9b. Developer Provided Assetsc. Other Contributions 360

14.TOTAL INCOME 1,205 3,372 4,880

15.Gain or Loss on Disposal of Assets 4

16.0perating Result 12 2,085 4,038

16a.OPERATING RESULT

(Less Grants for Acquisition of Assets) 16 2,085 4,038

22


SPECIAL SCHEDULE NO. 5 (CONTINUED)

SEWERAGE INCOME STATEMENT


2012 2011 2010($.000) ($-000) ($.000)

B. CAPITAL TRANSACTIONSNON-OPERATING EXPENDITURES

17.Acauisition of Fixed Assetsa.Subsidised Scheme 143 1 742 3,519b.Other New System Assetsc.Renewals 36 81 44d.Plantand Equipment 35

18. Repayment of Debta.Loans 470 110 102b.Advancesc.Finance Leases

19. Transfer to Sinking Fund

20.TOTALS 684 1,933 3,665

NON-OPERATING FUNDS EMPLOYED21. Proceeds from Disposal of Assets22.Borrowina Utilised

a. Loansb.Advancesc.Finance Leases

23.Transfer from Sinking Fund

24.TOTALS 0 0 0

C. RATES AND CHARGES25.Number of Assessments

a.Residential (occupied) 1299 1141 1,127b.Residential (unoccupied) 170 420 415c.Non-Residential (occupied) 193 166 166d.Non-Residential (unoccupied) 37 23 23

26.Number of ET's for which Developer Charges were received 6 15 4

27.Total Amount of Pensioner Rebates (SOOO^ $ 30 $ 29 $ 30

23

Upper Lachlan Shire CouncilSPECIAL SCHEDULE No. 5 - ( CONTINUED )

SEWERAGE SERVICES - CROSS-SUBSIDIESfor the year ended 30th June 2012

D. BEST PRACTICE ANNUAL CHARGES AND DEVELOPER CHARGES

28. Annual Charges

a. Does Council have best-practice sewerage annual charges, usage charges and YEStrade waste fees and charges?

If Yes, go to 29a.If No, please report if Council has removed Land Value from access charges (i.e. rates). N/A

b. Cross-Subsidy to Non-Residential Customers (Page 45 of Guidelines). NO

c. Cross-Subsidy to Trade Waste discharges (Page 46 of Guidelines). NO

29. Developer Charges

a. Has Council completed a Sewerage Development Servicing Plan? YES

b. Total Cross-Subsidy in Sewerage Development Charges for 2011/2012 (Page 47 of Guidelines). NO

30. Disclosure of Cross-Subsidies

TOTAL OF CROSS-SUBSIDIES (28b + 28c + 29b) N/A

24

Upper Lachlan Shire CouncilSPECIAL SCHEDULE NO. 6

SEWERAGE SERVICES - BALANCE SHEET( GROSS INCLUDING INTERNAL TRANSACTIONS )


Current Non-Current TotalASSETS: $'000 $.000 $'000

31. Cash and Investments

a. Developer Charges 148 148b. Specific Purpose Grants 0c. Accrued Leave Entitlements 0d. Unexpended Loans 0

e. Sinking Fund 0f. Other 2,299 2,299

32. Receivables

a. Specific Purpose Grants 0b. Rates and Charges 48 3 51Interest and Extra Charges 0Accrued Interest on Investments 0c. User Charges and Fees 0d. Other 0

33. Inventories 0

34. Property, Plant and Equipmenta. System Assets 13,042 13,042b. Plant and Equipment 76 76

35. Other Assets

36. TOTAL ASSETS 2,494 13,121 15,615

LIABILITIES:

37. Bank Overdraft 038. Creditors

a. Goods and Services 0Unearned Revenues 0b. Accrued Expenses 21 21Other 0

39. Borrowingsa.Loans 34 922 956b. Advances 0c. Finance Leases 0

40. ProvisionsAccrued Leave Entitlements 109 109a. Tax Equivalents 0b. Dividend 0c. Other 0

41. TOTAL LIABILITIES 164 922 1,086

42. NET ASSETS COMMITTED 2,330 12,198 14,529

EQUITY:43. Accumulated Surplus / ( Deficit) 13,51844. Asset Revaluation Reserve 1,01145. TOTAL EQUITY 14,529

NOTE TO SYSTEM ASSETS (FROM NOTE 9(bM:

46. Current Cost of System Assets - Replacement 20,896

47. Current Cost of System Assets - Accumulated Depreciation 7,778

48. Current Cost of System Assets - Written-Down Current Value 13,118

25

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Upper Lachlan Shire CouncilSPECIAL SCHEDULE NO. 8

FINANCIAL PROJECTIONS


2012(1) 2013 2014 2015 2016$m $m $m $m $m

Recurrent BudgetIncome from Continuing Operations 28.7 30.5 29.0 27.3 28.1Expenses from Continuing Operations 22.0 23.3 22.9 23.3 24.0

Operating Result from Continuing Operations 6.7 7.2 6.1 4.0 4.1

Capital BudgetNew Capital Works (2) 12.6 12.5 11.3 8.5 7.9

Funded By:- Loans 0.5 0.4- Asset Sales 0.4 0.4 0.4 0.5 0.6- Reserves 1.6 1.1 0.8 0.3 0.3- Grants and Contributions 7.5 8.0 7.0 5.1 4.6- Recurrent Revenue 2.6 3.0 2.7 2.6 2.4- OtherTotal 12.6 12.5 11.3 8.5 7.9

Notes:

(1) From Income Statement(2) New Capital Works are major non-recurrent projects, eg new Library, new Swimming Pool etc.

27


COUNCIL DEBT SERVICE RATIOS


2012 2011 2010ALL FUNDS COMBINED DEBT SERVICE RATIO:

FactorsDebt Service Cost 948 4.67% 603 3.57% 565 3.28%

Revenues from Continuing Operations, 20,287 16,906 17,240(Excludes Capital Items and Specific Purpose Grants/Contributions)


DEBT SERVICE RATIO BY INDIVIDUAL FUND


1 SEWERAGE FUND DEBT SERVICE RATIO:Factors

Debt Service Cost 569 47.94% 225 14.51% 226 19.86%Revenues from Continuing Operations, 1,187 1,653 1,136

(Excludes Capital Items and Specific Purpose Grants/Contributions)

2 WATER SUPPLY FUND DEBT SERVICE RATIO:Factors



3 DOMESTIC WASTE MANAGEMENT (DWM) FUND DEBT SERVICE RATIO:Factors

Debt Service Cost 58 7.10% 58 7.42% 58 8.11%Revenues from Continuing Operations, 813 776 710


4 GENERAL FUND DEBT SERVICE RATIO:Factors



2012 2011 2010% of Water Supply & Sewerage Operational Income for all Council revenues 12.25% 17.08% 14.43%

of Water Supply & Sewerage Operational Expense for all Council expenditure 10.48% 13.46% 10.62%Rate of Return on Capital - Water Supply Fund 0.71% 0.85% 1.89%

Rate of Return on Capital - Sewerage Fund 0.71% 2.54% 3.24%Residential Revenue from Water Supply Usage Charges 48.83% 47.98% 53.54%

28