Internal loans ‘a minefield’ as council moves money around

One councillor describes council’s schedule of nearly $70 million in internal loans as “scary”.

One councillor describes council’s schedule of nearly $70 million in internal loans as “scary”.

INTERNAL loans borrowed by Gisborne District Council are a bit of a minefield, says the council’s finance and audit committee chairman Brian Wilson.

Another councillor, Graeme Thomson, described the council’s schedule of just under $70 million in internal loans as “scary”.

The committee was discussing a high level overview of its reserves and internal loans for the period ending December 31, 2016 from senior projects accountant Pauline Foreman.

It showed internal loans (money borrowed from a combination of reserve funds and external borrowing) at $69,628,000. This is funded by internal reserves of $30.3 million and external loans of $39.3 million.

Earlier in the meeting the committee was told that external loans (money owed to banks and other funding agencies) at December 31 was $39.3 million, which was $4 million over budget due to the timing of financial transactions.

Mr Wilson said he had called for the report because he wanted to know the level of internal loans and the council’s ability to borrow from surplus funds.

It appeared to be not much and the council had “skinned the cat”.

Workshops on numbers

The council was told a series of workshops would be held to determine the actual deficits and surpluses from the different activities.

Mr Wilson said that would be really good information because this report was only part of the story and it was hard to get a handle on exactly where they were until they got that information.

Funds were borrowed from one activity to fund a capital project in another. The borrower would be hoping that when it needed the money there would be some available somewhere else.

“It must be really complicated,” he said.

Told the council had 92 activity centres, he said he thought they had been cut down but they seemed to be on the rise again.

Asked about a loan of $14 million showing as “holding company”, acting operations group manager Herman Koenders said this did not relate to Gisborne Holdings. It was a loan on the books to make investments in the past. It had been on the books for a long time and related to the sale of the port.

Seymour queries loan

Pat Seymour queried a loan of $415,000 to Arts in Public Places. She thought that was funded from trusts and grants, wondered why the parks activity was owing $3.8 million and asked that this be looked at.

Mr Thomson said he found the whole thing a bit scary and was something he had always had an issue with. They were collecting money for replacements and he did not mind using that money because it was cheaper than borrowing it from a bank.

But it meant that when a bridge needed replacing, the money put aside for it was not there and had to be borrowed from somewhere else in the organisation. It was money that had been collected for a purpose and would need to be used one day.

Mr Wilson said the council would like to see a reduction in surpluses and internal loans. The bigger discussion would come later on when they had more information about this.

(There are a total of 21 activities as reported in the LTP 2015-25. The 92 as mentioned above relate to sub-activities that fit below the activity).

INTERNAL loans borrowed by Gisborne District Council are a bit of a minefield, says the council’s finance and audit committee chairman Brian Wilson.

Another councillor, Graeme Thomson, described the council’s schedule of just under $70 million in internal loans as “scary”.

The committee was discussing a high level overview of its reserves and internal loans for the period ending December 31, 2016 from senior projects accountant Pauline Foreman.

It showed internal loans (money borrowed from a combination of reserve funds and external borrowing) at $69,628,000. This is funded by internal reserves of $30.3 million and external loans of $39.3 million.

Earlier in the meeting the committee was told that external loans (money owed to banks and other funding agencies) at December 31 was $39.3 million, which was $4 million over budget due to the timing of financial transactions.

Mr Wilson said he had called for the report because he wanted to know the level of internal loans and the council’s ability to borrow from surplus funds.

It appeared to be not much and the council had “skinned the cat”.

Workshops on numbers

The council was told a series of workshops would be held to determine the actual deficits and surpluses from the different activities.

Mr Wilson said that would be really good information because this report was only part of the story and it was hard to get a handle on exactly where they were until they got that information.

Funds were borrowed from one activity to fund a capital project in another. The borrower would be hoping that when it needed the money there would be some available somewhere else.

“It must be really complicated,” he said.

Told the council had 92 activity centres, he said he thought they had been cut down but they seemed to be on the rise again.

Asked about a loan of $14 million showing as “holding company”, acting operations group manager Herman Koenders said this did not relate to Gisborne Holdings. It was a loan on the books to make investments in the past. It had been on the books for a long time and related to the sale of the port.

Seymour queries loan

Pat Seymour queried a loan of $415,000 to Arts in Public Places. She thought that was funded from trusts and grants, wondered why the parks activity was owing $3.8 million and asked that this be looked at.

Mr Thomson said he found the whole thing a bit scary and was something he had always had an issue with. They were collecting money for replacements and he did not mind using that money because it was cheaper than borrowing it from a bank.

But it meant that when a bridge needed replacing, the money put aside for it was not there and had to be borrowed from somewhere else in the organisation. It was money that had been collected for a purpose and would need to be used one day.

Mr Wilson said the council would like to see a reduction in surpluses and internal loans. The bigger discussion would come later on when they had more information about this.

(There are a total of 21 activities as reported in the LTP 2015-25. The 92 as mentioned above relate to sub-activities that fit below the activity).

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winston moreton - 2 years ago
So the council's finance chairman admits he has not got a handle on council borrowing. "It must be really complicated," he says - will chairman Wilson take the rap for the coming rates increase?

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