What’s new at QTC – a LG update

Jodi Campbell and Jan Xanthopoulo

26 November 2015

Agenda

About QTC

Products and Services

– Debt and Investments

– Economics Services

– Education Services

What’s new?

2

3

Overview of QTC

QTC continues to be the central financing authority and

corporate treasury services provider for the Queensland

Government. Queensland’s AA credit rating means lower

cost of funds

Services include:

– cost-effective debt funding and management;

– short-to-medium term cash management facilities;

– financial risk management advisory and

– specialist public finance training facilities to Queensland’s public

sector

4

Overview of QTC

Why QTC?

Value-for-money

QTC acts in the interests of the

Queensland public sector our

fees are charged on a ‘cost

recovery’ basis.

Experienced people

QTC values our staff and draw

on our range of specialist skills,

expertise and experience to

deliver high quality outcomes to

our clients.

Whole-of-state focus

QTC is committed to delivering

the best possible financial

outcomes for the State and our

public sector clients.

Trusted Government

advisor

QTC is a trusted and

independent service provider.

We understand the political

environment and policy context.

Strong and Stable

reputation

QTC has a strong reputation in the

global markets for consistency,

stability and transparency, which

provides the State with sustainable

access to cost-effective funding to

secure the growth of Queensland.

Client Focus

QTC builds strong partnerships

with our clients to deliver simple

and well designed solutions that

maximise value for our clients

and the State.

QTC has the knowledge and resources to provide LG with solutions

5

Overview of QTC

Queensland’s central financing authority

Raise and manage funds for public sector entities

Operate on a cost-recovery basis

Provide the following key services to our clients:

– Cash management and investment

– Financial risk management and advisory services

– Education, training and information services

What is QTC and what do we do

Policy maker

Commercial ‘bank’

Profit generator

Government owned corporation

Public service department

What QTC is not

Overview of QTC

6

Client Services DivisionCLIENT SERVICES

Rupert Haywood

Executive General Manager

STRATEGIC PARTNERS

Diana Lollato

General Manager

CENTRAL AGENCIES

Seamus Parker

Director

TREASURY & DEPARTMENTS

Peter Dann

General Manager

LOCAL GOVERNMENT &

STATUTORY BODIES

Michelle McMullan

General Manager

TREASURY DEPARTMENT

David Johnston

Director

UTILITIES

Catherine Black

Director (A/g)

TRANSPORT

Elise Williams

Director

DEPARTMENTS

Stuart Crockett

Director

URBAN LOCAL GOVERNMENT

& UNIVERSITIES

John Clifton

Director

REGIONAL LOCAL GOVERNMENT

Anthony Coates

Director

STATUTORY BODIES & REMOTE

LOCAL GOVERNMENT

Lidia Zazzera

Director

EDUCATION SERVICES

7

Overview of QTC

LEGEND

South-East Qld Local Govts

Regional Local Govts

Remote Local Govts

Indigenous & Islander Local

Govts

QTC’s Local Government Group

Overview of services to local governments

8

QTC’s objective is to support the State’s financial success with a focus on whole-of-State outcomes.

Advisory Education and training

Credit reviews

Strategic and Financial

Sustainability Reviews

Project Evaluation and

Business Case

Assessments

Financial modelling for

decision making

Corporate Financial

Management

Business Case analysis

and project evaluation

Understanding financial

statements

Governance for new

Councilors

32

3.1

3.2

3.3

3.4

2.1

2.2

2.3

2.4

Within QTC’s Client Services team, QTC delivers on its objectives through 3 keys areas

Debt and investment

Debt funding and liquidity

management

Cash management

1

1.1

1.2

General financial

guidance and advice2.5 Tailored Courses3.5

9

Products and services – debt and investmentInvestmentEnsures surplus cash not idle until needed with good rates of return on a risk-adjusted basis. Investment

Products include; Capital Guaranteed Cash Fund, Working Capital Facility and Fixed Rate Deposits

10

Capital Guaranteed Cash Fund - Overview

QTC’s Capital Guaranteed Cash Fund

provides strong relative returns and

investment security. The key benefits:

Size and liquidity: One of the largest

Cash Funds in Australia, with

approximately $9.4 billion in AUD.

It also provides daily liquidity.

Features include:

Security: Guaranteed 100% return on capital invested (monthly). Assets are composed of

high quality credit (A- minimum).

Diversity: Investments include money market securities, floating rate notes, RMBS and

derivatives.

Low fees: Just 0.103% p.a. with no establishment or transaction fees.

13%

28%

43%

15%

1%

Whole of Government Investment (October 2015)*

Whole of GovernmentInvestment

Departments

Government OwnedCorporations

Local Government

Universities

Other

*excluding internal investments

11

Competitive returns: Returns are consistently higher than Bloomberg Aus Bond Bank Bill Index

and its peers. Strong focus on adding value.

Capital Guaranteed Cash Fund - Performance

The Cash Fund outperformed the

Bloomberg AusBond Bank Bill Index

by 0.66 per cent during the month of

October 2015

12

Local government and QTC – debt funding

Whole of government debt $93 billion of which around 8% is local government

debt (July 2015)

Products and services – Economics Services

13

Tailored monthly economic chart packs and publications provided on a weekly and monthly basis. Presentations and

access to additional forecast data or research provided as and when required.

14

Products and services – Education Services

Courses and workshops include:

– Business Cases in Practice course

– Central Treasury Management course

– Corporate Financial Management course

– Cost of Capital workshop

– Credit Analysis course

– Financial Management for Decision Makers

course

– Procurement workshop

– Project Evaluation workshop

– Project Management workshop

– Understanding Derivatives workshop, and

– Understanding Financial Statements course Over 850 clients attended courses in 2014-15 (from

103 organisations, including 17 LG) - participants

rated services 8.8/10

Tailored for the public sector and offers a unique

whole-of-State overlay

15

What’s new?

Product simplification

Asset Management Planning and long term forecasting

LGFM v3

Project Decision Framework

Property forum

WISDOM

Strategic Financial Reviews

16

Product simplification – looking ahead

1. Industry standard products

2. New system

3. Streamlining QTC processes

Approach – from 1 July 2016

17

Product simplification

An overview

QTC is simplifying its products and processes:

– To align with industry standards and remove

complexity

– To allow QTC to be more responsive to clients’ needs

and economic and market conditions

– In direct response to client feedback

18

Product simplification

An overview

Benefits include:

– Increased cost certainty

– Loans that are more transparent and easy to understand

– Removal of annual loan agreements and varying terms and

conditions

QTC’s fees and cost of funds remain the lowest available

to clients for comparable products

Launch of new products aligning with commencement of

the 2016/17 State Borrowing Program

More information coming soon

19

Asset Management Planning and Long Term Financial Forecasting

Improving the link – integrated planning

20

Asset Management Planning and Long Term Financial Forecasting

Financial statements linked to AMPs through

non-current asset accounting policies

Consideration of current replacement cost,

planned maintenance, estimated useful lives

(and potential obsolescence), segmentation

and componentisation required

LTFFs supported by AMPs will be more

relevant and reflect true cost of capex,

maintenance and depreciation

Improving the link – financial statements and NCAAP

QTC assisting with understanding :

issues and challenges

extent and quality of linkages – AMP and financials and NCAAP

impact of AM decisions on sustainability

21

What’s new - LGFM V3

A key component in supporting financial sustainability is a robust

forecast model and process – significant rollout to LGs to date

Timelines and progress to date:

• LGFM v3.0 external roll-outSep-14

• LGFM v3.0.1 release, roll-out and on-going support and training

Jan-15

• LGFM v3.0.1 release June -15

• LGFM v3.1 release and roll-outComing soon

• Business requirements + scopeNov-12 to Jun-13

• Model specificationJun-13 to Aug-13

• Draft modelAug-13 to Nov-13

• Independent review + finalise modelNov-13 to Feb-14

• Client beta testing + model fixesFeb-14 to Aug-14

• External roll-outSep-14 onwards

aa

aa

22

What’s new - LGFM V3.0.2

Past and present

Setting the standard

• 3-way financial forecast

• 10 years horizon

• Op. revenue and expenses

• Loan calculator

• PP&E inc. depreciation

• Calculated interest revenue

on cash

• Standardised financial

ratios

Keeping the best of v2.5 -

adding

• Business units

• Additional debt types

• More accurate interest

• Drivers for revenues and

expenses

• Revaluations for assets

• Dashboards

• Latest metrics and ratios

• Scenarios

• More efficient formulas

LGFM v2.5 LGFM v3.0

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What’s new - LGFM V3

Present and future

Building on v3.0

Suggested enhancements

have included:

• More business units

• More line items for

revenues, expenses and

capital expenditures

• Improved internal

transactions which more

accurately reflect practise

• User comments

Adapting to future needs

This will be guided by the

needs of our clients

• What features would help

improve financial

sustainability?

• What features would make

it easier to use?

• What extra internal and

external analysis would you

like to use it for?

LGFM v3.1 The Future

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What’s new -LGFM V3

Recent updates

• The “Import LGFM Data” function

copies across user inputs as

formulas instead of values,

preserving links to external files

that may be in place

• Export charts from the output

worksheets of the Model to a new

Excel workbook

25

What is the Project Decision Framework?

Concept

selection

Pre-

feasibility

Feasibility

Project Proposals

$ $ $ $ $ $

Approval $$

Planning: Are we doing the right project?Delivery: Are we doing

the project right?

Mapped across a typical project life cycle

In scope

It’s a decision-making process

for selecting the most viable

projects against available

budget – using a ‘funnel effect’

26

Tools & templates – Policy and process

Policy

Process

1. Concept

Approval

template

1. Options

Analysis

template

2. Project Risk

Assessment

Tool (Initial)

3. Whole-of-life

Costing Tool

1. Business Case

template

2. Project Risk

Assessment Tool

(Comprehensive)

1. Project Plan

template1. Draft whole-of-

Council policy

2. Draft Terms of

Reference for

Decision Making

Group

3. Guiding principles

for evaluation of

proposals

Governance

Tools & templates

Process

Policy

Tools & templates

Project Portfolio Tool

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What’s in the PDF kit? – QTC Connect

Outline for

Local Government Leaders

1. Council policy

2. Terms of Reference

3. Guiding Principles

4. Concept Approval

template

5. Options Analysis

template

6. Business Case

template

7. Project Plan

template

8. WOLC Tool & User Guide

9. Project Risk Assessment Tool & User Guide

10. Project Portfolio Tool & User Guide

11. Quick Reference Guide (A5 card)

Templates (Microsoft Word)

User Guide for practitioners

28

What’s new - Insights with QTC

The focus was on Qld and

matters relevant to public

sector portfolios

Over 40 attendees from across

state government agencies,

GOCs and Councils

QTC arranged economists and

analysts from Citigroup and

Urbis to give their views on:

the macro environment, and

emerging trends in the sector

Property forum – Oct 2015

29

Integrated Strategic Water Demand Options Model….WISDOM

Cost and

Revenue

Trunk Water

Network

Capacity

Water

Demand

Demand

management

initiatives

Optimise

B CA B CA

Better decisions …

What’s new – WISDOM

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Dam 1

Pipeline 2 Pipeline 3

Reservoir 1

Pipeline 4

Pipeline 1

Network supply

Demand

Segment 1

Demand

Segment 2

Demand

Segment 3

End Use1 End Use 2End user demand

Water Service

Area 1

Water Service

Area 2

Demand

Initiative 1

Demand

Initiative 2

Demand management

campaignsDemand initiatives drive changes in consumption

patterns, which lead to changes in demand

New Asset

Project B

New Asset

Project C

New Asset

Project A

New Asset

Project D

CAPEX &

OP&M costs

Demand is balanced

against supply in each

water service area…

Each network element

is ‘optimised’ to

deliver the right

capacity at the right

time and at the lowest

cost…

How does WISDOM work?

31

WISDOM key outputs (continued)

Highlights from WISDOM dashboards

DM initiative mappings summary

Demand initiativeTiming Scenario Demand segment Water end use Profile Initiative description

Start year end End year end Bas

e ca

se

Sce

nario

A

Sce

nario

B

Sce

nario

C

Sce

nario

D

Sce

nario

E

DS

eg 1

DS

eg 2

DS

eg 3

DS

eg 4

DS

eg 5

DS

eg 6

DS

eg 7

DS

eg 8

DS

eg 9

DS

eg 1

0

End

Use

1

End

Use

2

End

Use

3

End

Use

4

End

Use

5

End

Use

6

End

Use

7

End

Use

8

End

Use

9

[End

Use

] 10

Ave

. Day

Pk.

Day

Sprinkler Jun-17 Jun-19 - 1 - - - - 1 - 1 1 - - - - - - - 1 - - - - - - - - 1 - Sprinkler trade-in program

Showerhead Jun-18 Jun-20 - 1 - - - - - 1 - 1 1 - - - - - - - - - - 1 - - - - 1 - Showerhead retrofit program

32

Strategic Financial Review

Council ‘health check’

Comprehensive analysis of key risks and issues

Focus on 4 main areas:

– Regional, economic & strategic factors

– Governance and planning processes

– Financial management

– Infrastructure management

Available to all Councils, including non-borrowers

What is it?

33

Strategic Financial Review

Considers alignment of financial strategy with broader corporate

strategy & external environment

Assessment of risk & mitigation

Practical recommendations to address any issues identified

‘Traffic light’ system to evaluate Council’s approaches in mitigating key

risks and issues

What’s in it for Council?

Approach

Assessment

Description

Appropriate approach

Approach may require some further consideration to enhance outcomes

Approach requires considerable review to achieve outcomes

Approach requires substantial review to achieve outcomes

34

Strategic Financial Review

Discussions with Council’s key financial, technical, engineering &

senior management staff

Considerations:

– Council’s long term financial forecast, performance metrics and budgetary

analysis

– Council’s strategic, community & asset management plans

– Internal financial reporting processes

– Capital project decision-making processes

– Management of commercial business units

– Sensitivity/scenario analysis to test key risks and issues

Approach

Questions?

35

Jodi Campbell

Telephone: 07 3842 4724

Email: jcampbell@qtc.com.au

Jan Xanthopoulo

Telephone: 07 3842 4757

Email: jxanthopoulo@qtc.com.au

36

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© Queensland Treasury Corporation 2015