For the third year running MidCoast Council has again struggled to complete its end of year Financial Statements on time.
At the 9 September Council Meeting the Corporate Services Division authorised by Director Steve Embry, presented the 2019/20 ‘Draft’ Financial Statements to Council to sign off on for Audit by the NSW Auditor General.
At the Meeting, Cr Peter Epov identified that there were a number of omissions and errors within the ‘Draft’ Financial Statements, including one relating to “Note 7(c) Restricted cash, cash equivalents and investments” where in the 2017/18 Year there was an amount of $29.43 million listed, and in the 2018/19 Year $33.919 Million was listed, and yet, there was no figure listed for 2019/20 Year – it was blank.
Whilst we are not suggesting that $33+ million is actually missing from council’s coffers, the Council’s Corporate Services staff have been unable to adequately account for the error. This, if not corrected could have significant consequences on other figures within the financial statements.
At the workshop prior to the Council meeting Cr Epov also raised a number of other inconsistencies within the 2019/2020 ‘Draft’ Financial Statements which the Administration was seeking to present for Audit by the NSW Auditor General, including:
. . . the absence of any income being listed from Council’s Swimming Pool’s (in the previous year it was $176,000).
. . . .the inconsistency in income that was listed from the Manning Entertainment Centre (in the 2018/19 Year it was $336,000 and for the 2019/20 Year it was listed at only $40,000).
Whilst Covid 19 may had been a factor, both entities had been trading for at least 9 months before they were closed so the income had to be much greater than what was presented within the Statements.
Former Greater Taree City Council Mayor Paul Hogan is quite scathing in his opinion of the 2019/20 ‘Draft’ Financial Statements:
“Cr Epov has pointed out some very basic and fundamental errors that should have been picked up before the document was published. This all really beggars belief, doesn’t anyone check the figures before they are published? I learnt back in primary school that I should always check my homework before I submitted it to the teacher.”
Mr Hogan also found a number of additional inconsistencies; blocks of missing figures and there were sections that have not been completed.
“This is the third year that this Administration has had problems with getting the Financial Statements right after having paid many many millions for a computer system which they can’t get to work, so the only reasonable conclusion is that there are obvious and significant competency issues within the management.”
At the Council Meeting, Cr Epov also revealed that Councillors were given limited access to view the very complex 120 page 2019/20 ‘Draft’ Financial Statements:
“We were On line from 7.30 pm on the Saturday Night (5September) and hard copies were made available after 12 noon on the Sunday (Father’s Day) which was less than 3 days before the meeting.”
Update Financial Statements
During what could be loosely described as the debate on the Financial Statements, an undertaking was made by the Director of Corporate Services to provide Councillors with an updated and corrected version of the 2019/20 Financial Statements including a reconciliation of changes and corrections on Friday 11 September, being the nominated date for submission to the NSW Auditor General.
Mr Embry also indicated that the 2019/20 Financial Statements had been presented to Council’s Audit Risk and Improvement Committee and that they had recommended the Statements be presented for Audit. Is this really their job to vet the financial statements before Audit or should they be looking at the processes to achieve the Statements?
After Council resolved to present the 2019/2020 Draft Financial Statements for Audit, there was only one dissenting vote.
Close to five pm Friday 11 September, Cr Epov received an email from the Director of Corporate Services advising that the promised documents would now be provided on the Monday 14 September, after submission to the Auditors.
We followed up Councillor Epov on 21 September, ten days after the original date, to see whether he had received the promised documents and his answer was: ‘No, I’m still waiting!’
Reader’s may recall that the audit of Council’s 2018/19 Financial Statements was only completed this year and only after Council had to seek a number of extensions from the Office of Local Government, with the eventual report from the NSW Auditor General’s Office being very late and quite critical and unflattering.
A motion was passed requiring GM Mr Panuccio’s Administration to regularly report to Council on the Corporate Services Division’s progress with the preparation of the 2019/20 Financial Statements for Audit.
A number of glowing reports were presented suggesting that all was on track until the 26 August Council meeting when the admission was made:
“The original timeframe targeted 7 August as the date by which all transactional work would be completed. This target was not achieved and work continues to obtain a final trial balance across all funds ready for uplift into the Statement templates”.
So much for the first major milestone in the lauded Audit schedule. It is difficult to comprehend how a series of repetitive and predictable errors can continue to be tolerated and condoned.
Questions with Notice
During Covid 19 Cr Peter Epov has maintained a program of asking a series of ‘Questions with Notice’ of the General Manager on behalf of the community.
On 10 July, he submitted a number of multiple part ‘Questions with Notice’ to the General Manager for responses to the 22 July Council Meeting (as per Council’s Code of Meeting Practice which dictates that questions must be submitted 10 days prior to the nominated meeting for responses). Some of his questions related to the March 2020 Quarterly Budget Review Statements which were presented to Council on 24 June.
The General Manager delayed providing responses until the Council Meeting of 26 August (Not for the first time).
When referring to the Quarterly Budget Review Statements the Council’s reports state:
Council is required by legislation to prepare quarterly budget review statements including an opinion by the Responsible Accounting Officer as to whether the financial position of the Council is considered to be satisfactory.
One of those responses to Cr Epov’s questions included the remarkable admission that within the Quarterly Budget Review Statements:
‘The Income & Expense Statement and Capital Statement for the Sewer Fund as at 31 March 2020 are incorrect.’
Those March Quarterly Budget Review Statements were signed off by Council’s Responsible Accounting Officer and were adopted by the Council on a vote of 8 to 1.
When Cr Epov asked whether the amended Quarterly Budget Review Statements should be re-presented to Council (and to the public) the response was a firm negative.
MidCoast Council has a budget of over $280 million dollars, and they control several billion dollars in assets.
Surely these continual fundamental financial errors raise and heighten very serious doubts over the competency of the management.