Local government Queensland Treasury Corporation (QTC) working capital facilities
This Bulletin is to advise local governments of the procedure for applying for new, and extensions to existing, working capital facilities provided by Queensland Treasury Corporation (QTC).
In accordance with the Statutory Bodies Financial Arrangements Act 1982 (SBFA Act), a local government is required to obtain the Treasurer's approval to undertake borrowings, including working capital facilities. Under a general approval dated 23 May 2003 and issued by the Queensland Treasurer under the SBFA Act, the Department of Infrastructure, Local Government and Planning may grant approval for local governments to establish working capital facilities with QTC.
Separate approval of the Treasurer is, however, still required for borrowings and working capital facilities not sourced from QTC.
Applications for new working capital facilities can be submitted for consideration by the department at any time. Councils should however be aware that the department's approvals for new and extended working capital facilities only takes effect once the state borrowing program for a given financial year is approved by the Treasurer (generally in July or August each year).
Application for extensions to existing facilities must be submitted to the department prior to the existing facility's expiration date. The department strongly encourages local governments to lodge applications for new or extended facilities as far in advance of the funding requirement as possible. This should ensure that applications are processed, and any identified issues resolved, in a timely manner.
The completed application and supporting documentation are to be addressed to:
Department of Infrastructure, Local Government and Planning, Local Government Finance and Funding
PO Box 15009
City East QLD 4002
Timing of application assessments
Applications for new or extended working capital facilities are assessed in order of receipt by the department, except for those that advise of an urgent need to access any approved funds by a specific date. The department cannot, however, provide an average response time for the assessment of working capital facility applications.
Factors that will impact on the amount of time needed to undertake an assessment include:
- whether a council has supplied all the required documentation
- the quality and defensibility of the cash flow forecast supplied
- the timeliness and sufficiency of responses to enquiries made to a council.
The application may require the inclusion of additional notes or supporting documentation.
Once approval for the establishment or extension of a working capital facility is granted by the department, a council can actively work with QTC to manage its requirements for the drawdown of any approved funds. There is no requirement that approved funds be drawn down immediately or at all.
Assessment, approval and drawdown process
The department will assess the supplied cash flow forecast for completeness and reasonableness, and to determine whether the local government has adequate financial capacity to repay the facility when due. The department may request further information to assist in the completion of the assessment.
If a local government significantly revises its cash flow forecast after lodging an application, but prior to approval, the details of the revisions must be communicated to the department.
When the assessment has been completed, the department will advise the local government and QTC of the outcome. If the requested facility is approved, the local government may then contact QTC directly to arrange the drawdown of any funding.
It is expected that when used, a working capital facility will show a pattern of transactions over the approved term and not be simply drawn or fully drawn for the entire approval period. A pattern of drawdowns and repayments is expected. It is considered that the primary purpose of a working capital facility is to assist with cash flow management.
The department requires the following information in order to assess an application for a QTC working capital facility:
- Letter signed by the Mayor and Chief Executive Officer providing:
- the purpose of the requested new working capital facility/confirmation of purpose for extension of existing facility
- the required time period for the new/extended facility
- confirmation that any balance in the facility will be repaid by the expiration date.
- A QTC cash flow forecast model for the required period of the facility.
Please also include any other information the council considers relevant to the application.
Letter signed by the Mayor and Chief Executive Officer
The working capital facility establishment/extension request is required to be certified by the Mayor and the Chief Executive Officer. The certification confirms that the borrowings attached to the facility are supported by council.
A working capital facility is only approved for a specific purpose, generally to assist local governments to manage specific short term financing needs where cash outflows are likely to exceed funds received over a given period. The letter provided to the department must stipulate the purpose that the facility is required for.
Required time period for the facility
The department also requires that any council seeking a new or extended facility outline in its letter the required time period for the facility. Generally, the department will grant an approval for up to 12 months. Longer periods may be considered and a council can request an extension prior to expiry where necessary. This is to ensure that the purpose and usage of the facility is still appropriate, and that a council has the financial capacity to support it.
Repayment on expiry of the facility
A condition imposed by the department upon a council seeking a working capital facility is that such a facility will be repaid to QTC by the facility expiration date. This is required to be confirmed in the letter signed by the council Mayor and Chief Executive Officer.
QTC cash flow forecast model for the required period of the facility
The cash flow forecast provided must:
- be based on the QTC local government cash flow forecast model
- show monthly cash balances over the working capital facility approval period sought.
The department only requires the summary page from the model to be provided which shows forecast monthly cash balances for the period of the requested working capital facility. Further supporting documentation may be submitted or required.
QTC can also undertake an informal completeness and reasonableness review of a local government's cash flow forecast, and assist local governments with related financial advisory services. QTC can be contacted directly on 1800 641 057.