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Sunday
Oct082017

Kauaeranga Seal Extension Funding 

Here is the paper that will go to the Community Board tomorrow recommending that the Board complete its share of the seal extension regardless of the delays suggested in a letter from DoC who indicate that the current repair costs on that road will obviate their participation until 2020/21.

What concerns me is that the additional funds being sought ($75k), bringing the total Council budget to $680k, is to be met (once again!) from the Thames local depreciation reserves.

It is quite remarkable that our Council has over recent years consistently accessed this fund on new capital projects (including the disastrous Zoom Zone Dry Court), when it is clear that our elected representatives are increasingly reluctant to meet the costs of new capital projects from rates - it is as simple as that!

Just how legal, or in accordance with standard accounting practices that our Council is required to follow  can this practice possibly be, rather than a funding method only to be used in emergencies, or where no other possible source is available.

I cannot understand how or why our auditors allow the practice to continue. After all, the mere name of fund - "Thames local depreciation reserves" would surely indicate that it should only be accessed for the purpose of replacing existing assets.

If that is not the case, then why is it thus described. For it to used for capital items such as the Dry Court, and the Kauaeranga Seal Extension is a contradiction in every sense.  The methodology appears to have crept into Council processes over the past two Council terms, and along with a number of other processes in the finance area, needs independent examination, and verification.

I am not prepared to ague the toss on the issue - I simply raise it as an area where unqualified councillors can easily get sucked in, and later claim that they were simply implementing 'professional' advice from council staff. I am just as sure that the practice may well be used elsewhere for identical reasons as apply here, but that does not make it right.

Eventually the 'chickens will come home to roost' when assets need replacement, and the 'cupboard is bare.' It is simply not appropriate in my view that the reserves that are built up over time are put to use other than for the purpose of asset replacement. It is far too easy to simply 'tickle the kitty' for the purpose of acquiring new assets as set out above. 

I have heard this issue discussed in Council on several occasions, and have never accepted the arguments that were glibly put to justify this method of financing new assets. It is all too convenient for councillors to accept the argument because it makes them look good with rate-payers.  Assets can be acquired without any adverse effect on rates, and thus their reputation. 

There are substantial assets (other than those outlined above) that have been acquired over recent years that had they needed to be funded out of rate income would have probably resulted in a rate-payer reaction that would have rapidly changed the faces around the table. It thereby removes the careful and critical oversight required for the acqisition of new assets.

It is time questions were asked, and answered, preferably by a completely independent financial consultant. Those associated with the current policy should be excluded.

 

 

 

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