Bega Valley Shire's budget gap and dependence on state and federal grants

Ms Jordan said council did not meet the local government benchmark of 60 per cent own sourced revenue because grant funding outweighed council-generated income.

The quarterly budget review statement to December 2023 showed an adjustment to the general fund budget predicting a deficit of $6.17million. The water fund was shown heading into negative territory but only to the tune of $392,316.

The situation is not as bad as the same time last year but at that stage in February 2023, council hadn't seen the benefit of the first of two special rate variations of 24 per cent in 2023-24 and 19.6 per cent in 2024-25.

It puts the consolidated net operating result (for all funds, general, water, sewer and waste) before grants and contributions provided for capital purposes, at a projected deficit of $1.8million at the end of the current financial year.

Ms Jordan said receiving the Financial Assistance Grant (FAG) for 2024 in 2023 meant it was money that was budgeted for in 2024 but didn't appear in that year.

Mayor Russell Fitzpatrick said the FAG (which goes into the general fund) was $8.8million and the predicted general fund deficit was almost $6.2million and so if it had been paid in the right year there would have been a $2.6million surplus.

"But all it did was mask a loss last year," Cr Fitzpatrick said to which Ms Jordan agreed.

At the end of financial year 2023, council's operational plan had an anticipated budget deficit of $6.8million but the final result was a surplus of $7.88million due to the pre-payment in June 2023, of the $8.86million FAG.

Further to this action, council resolved to release $11,110,000 of internally restricted funds from the general fund asset replacement reserve to balance the books, with the instruction to replenish the asset replacement reserve as grant debtors were cleared in financial year 2024.

However, looking ahead to the end of financial year 2024 council's CEO Anthony McMahon said the general fund may not look as bad as the $6.17million deficit predicted at this stage given there had just been settlement of a council building.

Mr McMahon said it should add around $3million to the the general fund. Council agreed proceeds from the sale of the property would be placed in an internally restricted property development and reinvestment reserve.

As seen in 2023 internally restricted funds can be used to help balance the books at the end of the year.