Low rates 'unlikely to be sustainable': review

A PRICE Waterhouse Coopers review of Gisborne District Council’s finances has recommended the council have a more sustainable rates profile. The review will be be presented to the finance and audit committee tomorrow.

The review compared the council with other unitary authorities, and says Gisborne has a relatively low debt level but the council must improve its forecasting practices relating to capital expenditure.

Acting chief financial officer Pauline Foreman said the review, which was for the year ending June 30, found that actual expenditure failed to meet budgets and that the council had a very limited margin available to repay debt or set aside for future contingencies.

That was in part from pressure from low rate increases. The Gisborne council had $500 less rates per rateable unit compared to the unitary council benchmark.

The combination of annual low rates increases plus the use of activity balances to smooth rating impacts was highlighted as being unlikely to be sustainable. Further it was likely to lead to an accentuated rates requirement in future.

But on the positive side the council was found to have relatively low debt and lower financing costs when compared to other unitary councils. Also the treasury management was considered to be an effective funding regime.

She said the report recommended that key priorities should be improving forecasting including the forecasting of capital projects, determining a more sustainable rates profile and addressing some of the operational expenditure deficits.

Other recommendations included implementing more robust capital expenditure processes including a standard approach to business case development.

Price Waterhouse recommended that the council complete a review and rationalisation of the activity surplus-deficit accounting practice.

The review found it should also:

  • implement a proposed risk management framework,
  • continue to review financial policies, systems and processes with a view to simplifying them,
  • progress identified improvements in current asset management and depreciation practices.

A PRICE Waterhouse Coopers review of Gisborne District Council’s finances has recommended the council have a more sustainable rates profile. The review will be be presented to the finance and audit committee tomorrow.

The review compared the council with other unitary authorities, and says Gisborne has a relatively low debt level but the council must improve its forecasting practices relating to capital expenditure.

Acting chief financial officer Pauline Foreman said the review, which was for the year ending June 30, found that actual expenditure failed to meet budgets and that the council had a very limited margin available to repay debt or set aside for future contingencies.

That was in part from pressure from low rate increases. The Gisborne council had $500 less rates per rateable unit compared to the unitary council benchmark.

The combination of annual low rates increases plus the use of activity balances to smooth rating impacts was highlighted as being unlikely to be sustainable. Further it was likely to lead to an accentuated rates requirement in future.

But on the positive side the council was found to have relatively low debt and lower financing costs when compared to other unitary councils. Also the treasury management was considered to be an effective funding regime.

She said the report recommended that key priorities should be improving forecasting including the forecasting of capital projects, determining a more sustainable rates profile and addressing some of the operational expenditure deficits.

Other recommendations included implementing more robust capital expenditure processes including a standard approach to business case development.

Price Waterhouse recommended that the council complete a review and rationalisation of the activity surplus-deficit accounting practice.

The review found it should also:

  • implement a proposed risk management framework,
  • continue to review financial policies, systems and processes with a view to simplifying them,
  • progress identified improvements in current asset management and depreciation practices.

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