Roads and timing drive debt levels

EXTRA roading costs of $5 million and the timing of cash flows are the reasons behind Gisborne District Council having higher than scheduled external debt, the finance and audit committee was told.

The committee heard the council’s net external debt as at July 31 was $45 million, compared with $37.7 million in June. That was higher than the budget figure of $38.7 million.

Councillor Shannon Dowsing questioned the reason for the higher debt. With current borrowings higher than budgeted, it would appear the council was ahead of its capital works programme but it was not, he said.

He asked why that was so when the council was about to go into a big construction period, with major projects like the library that would take several million.

Acting chief financial officer Pauline Foreman said this was a timing issue because of cash flow. By the end of August it had been reduced by $5 million.

The figure was between $2m and $3m more than she would have expected it to be at this stage of the capital works programme.

Some of that would be cash flow but more analysis would be done.

Chairman Brian Wilson said it was also the over-expenditure on roading. The council had spent in the order of $5 million extra.

Mr Dowsing said every time a grant came in, it went straight back out with a bit more money because the council usually put in a third of what had been put in by the donors. That meant grants were actually a negative.

Graeme Thomson said he would like to have an assurance that when the timing issue was resolved, the council would be right back to where it ought to be.

Ms Foreman said the council’s external debt was a function of cash flow, so core debt was not as transparent within the reports.

Mr Thomson said that was the problem.

“We always get the bad news after it happens.”

Mr Wilson said the committee had been getting graphs showing the progress of the year’s budget. These included expenditure, revenue and debt.

“That shows you exactly how you are progressing through the year.”

EXTRA roading costs of $5 million and the timing of cash flows are the reasons behind Gisborne District Council having higher than scheduled external debt, the finance and audit committee was told.

The committee heard the council’s net external debt as at July 31 was $45 million, compared with $37.7 million in June. That was higher than the budget figure of $38.7 million.

Councillor Shannon Dowsing questioned the reason for the higher debt. With current borrowings higher than budgeted, it would appear the council was ahead of its capital works programme but it was not, he said.

He asked why that was so when the council was about to go into a big construction period, with major projects like the library that would take several million.

Acting chief financial officer Pauline Foreman said this was a timing issue because of cash flow. By the end of August it had been reduced by $5 million.

The figure was between $2m and $3m more than she would have expected it to be at this stage of the capital works programme.

Some of that would be cash flow but more analysis would be done.

Chairman Brian Wilson said it was also the over-expenditure on roading. The council had spent in the order of $5 million extra.

Mr Dowsing said every time a grant came in, it went straight back out with a bit more money because the council usually put in a third of what had been put in by the donors. That meant grants were actually a negative.

Graeme Thomson said he would like to have an assurance that when the timing issue was resolved, the council would be right back to where it ought to be.

Ms Foreman said the council’s external debt was a function of cash flow, so core debt was not as transparent within the reports.

Mr Thomson said that was the problem.

“We always get the bad news after it happens.”

Mr Wilson said the committee had been getting graphs showing the progress of the year’s budget. These included expenditure, revenue and debt.

“That shows you exactly how you are progressing through the year.”

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