In recent times more and more residents have found reason to question the financial accounts of our council.
By Rob Steurmann
In brief many seek answers to just three basic questions;
- How much money (cash) do we have?,
- Are we making a profit? and,
- What is the value of our community assets?
In the commercial world these questions are answered by;
- A statement of profit and loss,
- A balance sheet.
It has been this way for a very long time, and is common to many businesses today. Care is taken to separate current (day-to-day) transactions from those of a capital nature.
Yet, of late, more residents comment on the lack of transparency in this regards in Council’s finances.
Apparently the world of local government finance is unique. Mere mortals will experience difficulty understanding local government finances. Or so say those engaged in local government anyway.
Mere mortals misunderstand the mix of transactions presented in a single report you see. Shame on the residents!
As required by law at the end of 2019 (see BS19/53 on 24/10/2019) a (final) report went up to council for adoption. It stated;
- Our total (gross) income was $213,940,000
- Our council received grants of a capital nature amounting to $37,146,000
- Our council made a net operating profit of $32,441,000
- And after the capital grants are excluded the result is a deficit of $4,705,000
However ‘final’ does not mean ‘final’ because we then get “normalised” figures.
Under this “normalised” term we now find;
- Our total (gross) income is now $196,437,000
- Our council received grants of a capital nature amounts to? We can’t tell*
- Our council made a net operating profit of $30,209,000
- And after the capital grants are excluding the result is? Deficit $854,000
There is no need to worry there is reconciliation of the operating surplus with two further sets of figures – the operating surplus and the cash flow figures.
|operating surplus (,000)||cash flow (,000)|
What did you think it was going to prove the surplus of $30,209,000 as shown in the “normalised” accounts or $32,221,000 as in the “final” account?
The reconciliation for the operating surplus works out as follows
Water (8.191), sewerage (8.276) and general fund (23.997). It adds up to $40.464m
In the cash flow the amounts for non-cash items were excluded – depreciation adjustment and the amount of the grants for capital purposes fell by $13,680, 00m.
Somehow it mysteriously appears our council got a grant that was not paid out in cash??
A reader has to look elsewhere to find out assets went up by $84.843 M. This, of course, is not income and explained away as follows;
“From the Revaluation of Infrastructure, Property, Plant and Equipment …. which is largely attributable to the assets held by the Coffs Coast Skate Park and transferred to council upon cessation of the Reserve Trust from 1 July 2018”.
An $84.8m skate park!?
Curiously there was a downward adjustment to the grants and a comment to see note (1). This note appears to be omitted and is not included under the (1) in the report.
But it is hard to see how this impacts of the “trading” position of council.
Our council will report to the OLG as follows;
- Our total (gross) income $215,223,000
- Our council received grants of a capital nature amounting to $32,137,000
- Our council made a net operating profit of $44,271,000
- And after the capital grants are excluded the result is deficit $3,939,000
Hang on a moment. The amount for the grants for capital purposes changed! The total grant figure was $45,669,000m of which $37,146,000m was for capital purposes.
The upshot of all of this is;
- We went from an operating surplus of $32,441,000 in the final accounts to be $44,271,000 reported to OLG.
- The deficit in the final accounts went from $4,705,000 to improve to $3,939,000 as reported to OLG.
It is no wonder there is a belief our financials are healthy.
So can you answer the three basic questions put at the start with a degree of certainty?
- How much money (cash) do we have, (apparently an extra $23.997M in the general operating fund).
- Are we making a profit (after excluding the grants – it would appear not) and
- What is the value of our community assets? (Do you want to know the actual or the artificial value?)
Perhaps someone might know if there is more than concrete in, or under, the Brelsford Park skate park. Gold perhaps?
* The 2018-19 Grant Figures are not readily apparent in the latest set of CHCC accounts from what I can see.
Rob Steurmann is a retired Government forensic auditor.