Impact of COVID-19 on financial reporting
This year has proved very challenging for many Queensland councils.
Councils across the state continue to assist communities adversely affected by natural disasters, including bushfires and floods, as well as those suffering the economic and social impacts of the Novel Coronavirus (COVID-19) global pandemic.
The Department has provided the following detailed information to help councils to prepare balance sheets for the 2019 – 2020 financial year, considering the impact of COVID-19.
This information examines what might be happening at councils, associated financial reporting considerations, going concern issues, what the 2020 audit might look like and the disclosures that might be required.
What might be happening at councils?
Councils may have experienced different staff working arrangements over the past few months, with some employees continuing to work in council offices with physical distancing measures in place, while others have been working remotely.
Below are some considerations based on how your council has been operating, noting that with some restrictions lifting, there may be changes to these before 30 June 2020.
- Staff working remotely – considerations around Workcover insurance, health and safety, purchases of equipment (such as laptops and cyber security including for online platforms as well as staff productivity), performance and maintaining staff morale and mental health.
- Workforce flexibility - employees may be taking more or less annual/long service leave, reducing hours to care for children/sick family or have been stood down while facilities are closed.
- Closure of facilities (e.g. leisure centres, community centres) – increased security costs to protect unoccupied buildings, fixed costs remaining stagnant, yet the facility is not generating any revenue.
- Reopening of facilities – the reduced capacity and extra cleaning in facilities may cause additional costs to be incurred and the potential for renovations to facilitate necessary social distancing measures.
- Inability to travel – employees may not have been able to visit certain sites, planned maintenance/upgrades to certain infrastructure may be deferred which could impact on efficiencies and cause potential safety concerns.
- Requests from tenants – discussions with council tenants in relation to rent abatements and reductions and the consideration of assistance from the government for landlords and tenants.
- Liquidity decisions – prioritising where the cash should go – employees, creditors or other liabilities, where cash reserves have been depleted due to declines in revenue.
- Negotiations around financing arrangements including setting up short-term facilities and discussions about existing covenants with the Queensland Treasury Corporation.
What are the associated financial reporting considerations?
The impact of COVID-19 will be specific to each council.
The documentation around current estimates will be crucial to understand the basis behind any change in models.
Any decisions taken by councils directly or State and Federal Government before 30 June, will need to be carefully assessed, because the financial impacts of actioning those decisions by councils after this period may need to be reflected in the 30 June 2020 financial statements.
Councils should ensure that they have prepared high-quality accounting policy position papers for all material accounting areas (guidance on preparing a position paper), with a particular focus on the areas significantly impacted by COVID-19. This includes detailed materiality assessments, support for judgements and assumptions and accounting considerations of decisions made to support compliance with Australian Accounting Standards.
Significant financial reporting implications arising due to COVID-19 should be discussed and documented at the Audit Committee of Councils as well as during council meetings. This will suppor
Last updated: Monday, Nov 30, 2020