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Sunday
Sep082019

Depreciation Reserves

One of the most egregious (but no means the only!) holdovers from the Leach years was the extraordinary action, apparently taken with the active co-operation of our finance people, and Hammond - the Chief Executive at the time to 'dip into' depreciation reserves in order to purchase assets and undertake other activities other than for which the reserves were accumulated in the first place.

I drew attention to this practice on several occasions following an examination  of the Annual Accounts in 2016 which showed the reserves having dipped from over $100m to below $10m, thus putting a large number of 'replacement' projects at risk, or requiring substantially greater borrowing to fund.

I heard 'not a squeak ' from the the Council administration or within Council meetings over the entire time that the matter was extant. In fact the silence. and subsequent departure in 2017 of senior staff gave the impression that there was substantial embarrassment at having been 'caught out' by a mere blogger on such an important matter.

But suddenly, the matter is 'out in the open' with the election statement of Terry Walker - a candidate for re-election to the South Eastern Ward, and a current member the Audit & Risk Committee of Council,  containing the following:

"I have championed for a better deal for our rates contribution, prioritised infrastructure improvement and increased levels of service while dealing with coastal erosion, sea rise, increasing project costs and stopped Council from using depreciation reserves for funding new asset" (my underline)

It is quite remarkable that this deliberate mis-handling, and mis-allocation of reserve funds never elicited any comment from either the Audit Committee, or the Auditor General in his annual report on Council finances that was ever made public. I suspect that it was simply 'pushed under the carpet' at another of those famous 'workshops'!

The whole rationale for funding of projects by way of 'internal' borrowing  - genertally against deprecistion reserves, is one that is fraught with risk, and needs a thorough 'externa;' review, and tight guidelines to be established - a theme that has been played over and over on this blog since 2012 with minimal effect.   

 

 

 

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