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Thursday
Apr142011

Financials - Council 13 April 

Oh dear, our Mayor claimed during the election that he would bring a new business acumen to the Council that he would head up, and that change was on the way.

Well, not as far as the Financial Reports are concerned – they are exactly as they have been presented since the advent of Steve Baker as Financial Controller in 2007. And good as they are, they do require interpretation, and some knowledge of accounting systems to understand the terminology, and principles. There was no evidence of that yesterday, and Councillors often jump to inappropriate conclusions.

As an example. The Mayor stated at one point during the item yesterday that as far as he was concerned all that mattered was to note that “expenditure was down on budget”, as if that was the end all and be all.

If he had gone a little further he may have noted that Developments Contributions are again – for about the 26th time in a row by my calculation, down on budget, and that capital expenditure at $3.4m. is running at 27% of the $12.2m. budget to date.

It appears that there has been a deliberate effort to clamp down on budgeted expenditure - the $19.3m. annual capital budget appears unattainable, and overall this shortfall appears to explain the sanguine attitude of management towards unbudgeted expenditure in a number of other areas, and in particular, in regard to storm damage, and the aquaculture business case. There appears to be a number of projects that are a way off budget - unexplained in the accompanying narrative. And this situation remains even though a revision was conducted in December – not best practice.

There is also an interesting reference to a ‘loss on Revaluation of Derivative Financial Instruments’ of $1.158m. This is described as a ‘non cash item – mark to market of Council’s interest rate hedges’. This is Wall St. gobbledegook, and a gamble that Council takes on in regard to interest rates – it goes up and down, but it deserves greater explanation as to how it has performed over time.

Councillors need to watch it very carefully, and question its performance, something that failed to happen yesterday as Mayor Leach railed against ill-thought out questions - even to the point of suggesting that answers should be sought before the meeting through phone callls to Council officers - a very bad practice in my opinion that councillors should avoid at all costs. It is very noticeable that those who are deficient in the finance area hate questions being asked by those who are more knowledgable - it seems to niggle for some reason.

The Derivative Financial Instrument does not appear to be doing very well at present, and Council is entirely reliant on its financial advisors in this regard.  It is governance issue – not to be dismissed on one line of the accounts, and overlooked by those who are charged with exercising oversight. I wonder if Cr. Fox has it on his agenda for the Audit Committee.

 

 

 

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Reader Comments (1)

Council financial reports are not simple to understand (why?) and persons standing for election should have spent a time preparing themselves by reading them, after all they are in the public domain. Once elected there is a responsibility to read
and understand the financial pages in each meeting's order paper (agenda). No questions during the meeting means no preparatory work. I've noted that past experiences and actual costs are with-held by staff so elected members seem in the dark.

April 20, 2011 | Unregistered CommenterPeter H Wood.

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