Wanting the complete surplus picture

Councillors seek better understanding of financial performance

Councillors seek better understanding of financial performance

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A projected surplus for Gisborne District Council’s 2017/18 financial year does not represent a complete picture, the finance and audit committee was told.

Although final figures will not be available until October, the council has a projected surplus after tax of $3.9 million but some councillors believe this is because programmed work has not actually been done.

Chief financial officer Pauline Foreman said a report before the committee was not a final indication but it was probably at a high end of where the result would be .

This was mostly an accounting surplus that occurred when there were capital grants but no operational costs to offset them. That surplus would go towards reducing overall debt.

“We are not rating more than what we need — it is just basically recording accounting surplus against the operational expenses.

The main variances against the 2017/18 budget were a $3.2 million increase in revenue arising from emergency works, higher operational costs from emergency expenses and lower than expected revenue from capital grants.

When they received the full annual report in October, it would explain the detail of what was behind those results.

Shannon Dowsing said the reason the council did not receive capital grants was because it had not done the work.

If property revaluations and other gains were factored in, the council actually came up with a final figure of minus $6 million for the year — a very different picture.

There was a lot of work within the capital works programme that had not been done. Carryovers for the Lawson Field Theatre, Olympic Pool and Tairawhiti Roads as well as wastewater and stormwater meant there was a $16m carryover just from those areas.

When you looked at it from a project- based level and saw what had not been done, it started to tell a very different story, ‘‘that we are not achieving what we are saying we are going to do in our budget”.

“My concern is not that we are looking like we are forecasting a small surplus, but that we are not doing the work. The financial situation would be much worse if we did not have the property revaluations sitting on the side,” he said.

Mrs Foreman said it was a matter of looking at the controllable things and the variances. The main driver was predominantly $3.6 million of emergency works.

At the time of producing this report, there was $42 million of capital works, of which $30 million had been spent.

Chairman Brian Wilson said the bare bones of figures on the table were not the same as a performance report.

“If we really want to have an influence in this organisation and understand what is going on, we need performance reports,” he said.

Pat Seymour supported the earlier comments. Looking through the report there were a lot of things the council had not done. They had budgeted and rated to do them.

There were four quite substantial figures in wastewater carryovers.

“We rate for these and we say it is important, that we are going to do it and we don’t get around to doing it,” she said.

Chief executive Nedine Thatcher Swann acknowledged the concerns around progress on capital works.

“However, over the past 12 months staff had been bringing that to the committees and outlining reasons why they would need to carry some work forward.

Staff had done a really good analysis of what could realistically be achieved in the projects in the long term plan. “Overall, given where we were tracking 12 months ago, this is actually a good outcome for the council,” she said.

There had been a concerted effort by the council to rein in some of the costs.

Footnote: Mrs Foreman said that with the $6.9 million of property revaluation factored in, the council had an operating surplus of $10.8 million.

A projected surplus for Gisborne District Council’s 2017/18 financial year does not represent a complete picture, the finance and audit committee was told.

Although final figures will not be available until October, the council has a projected surplus after tax of $3.9 million but some councillors believe this is because programmed work has not actually been done.

Chief financial officer Pauline Foreman said a report before the committee was not a final indication but it was probably at a high end of where the result would be .

This was mostly an accounting surplus that occurred when there were capital grants but no operational costs to offset them. That surplus would go towards reducing overall debt.

“We are not rating more than what we need — it is just basically recording accounting surplus against the operational expenses.

The main variances against the 2017/18 budget were a $3.2 million increase in revenue arising from emergency works, higher operational costs from emergency expenses and lower than expected revenue from capital grants.

When they received the full annual report in October, it would explain the detail of what was behind those results.

Shannon Dowsing said the reason the council did not receive capital grants was because it had not done the work.

If property revaluations and other gains were factored in, the council actually came up with a final figure of minus $6 million for the year — a very different picture.

There was a lot of work within the capital works programme that had not been done. Carryovers for the Lawson Field Theatre, Olympic Pool and Tairawhiti Roads as well as wastewater and stormwater meant there was a $16m carryover just from those areas.

When you looked at it from a project- based level and saw what had not been done, it started to tell a very different story, ‘‘that we are not achieving what we are saying we are going to do in our budget”.

“My concern is not that we are looking like we are forecasting a small surplus, but that we are not doing the work. The financial situation would be much worse if we did not have the property revaluations sitting on the side,” he said.

Mrs Foreman said it was a matter of looking at the controllable things and the variances. The main driver was predominantly $3.6 million of emergency works.

At the time of producing this report, there was $42 million of capital works, of which $30 million had been spent.

Chairman Brian Wilson said the bare bones of figures on the table were not the same as a performance report.

“If we really want to have an influence in this organisation and understand what is going on, we need performance reports,” he said.

Pat Seymour supported the earlier comments. Looking through the report there were a lot of things the council had not done. They had budgeted and rated to do them.

There were four quite substantial figures in wastewater carryovers.

“We rate for these and we say it is important, that we are going to do it and we don’t get around to doing it,” she said.

Chief executive Nedine Thatcher Swann acknowledged the concerns around progress on capital works.

“However, over the past 12 months staff had been bringing that to the committees and outlining reasons why they would need to carry some work forward.

Staff had done a really good analysis of what could realistically be achieved in the projects in the long term plan. “Overall, given where we were tracking 12 months ago, this is actually a good outcome for the council,” she said.

There had been a concerted effort by the council to rein in some of the costs.

Footnote: Mrs Foreman said that with the $6.9 million of property revaluation factored in, the council had an operating surplus of $10.8 million.

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