Council’s 2020/21 ‘Draft’ Financial Statements More Questions than Answers

MidCoast Council’s much awaited 2020/21 Financial Statements were finally made publicly available on Council’s website on 19 November 2021 in a draft format as they are now required to be re-signed by the NSW Audit Office.

For the fourth successive year MidCoast Council’s Financial Statements have been delayed and an application has had to be filed with the NSW Office of Local Government for an extension of time.

Whilst the Council Report boasts a Net Operating Result for the Year of a surplus of $37 Million, the key figures to look at are those in the Net Operating Result for the year, before grants and contributions provided for capital purposes, which show a loss of $20.9 Million. This result also has to be viewed in the context that the original Budget projection for the year was a loss of $15.5 Million and the previous year the loss was $11 Million. 

To reach the correct bottom line, grants and contributions which have been provided for Capital purchases must be included in the bottom line, if applied consistently, in Section D1-1 of the Statements, suddenly the ‘General Fund’ result, Council’s main trading entity, turns the Net operating result of $10 million surplus to a loss of $31.333m.

Water & Sewer

What is even more clear is that the Water and Sewer Divisions are both making a profit which is then being applied to subsidise Council’s General Fund losses. Little wonder our water and sewer rates are constantly increasing each year.

Perhaps the most troubling and the single biggest issue is the negative balance in the ‘Unrestricted Cash’, whilst on paper it looks like council is rolling in cash, but most of it has either an external or internal restriction. This means that those monies can only be usedfor the purposes of the restriction. 

‘Unrestricted cash’ is the monies available for the actual running of the General Fund, such as wages for staff etc. In 2019/20 there was $16.009m available, in 2020/21 this has reduced to a deficit of $54,000. A swing of $16.063m. This suggests that some ‘Restricted Cash’ has been used to pay for the deficit. A situation that should not be permitted to continue.

Questions of Concern

Workers Compensation has exceeded the Budget by $962,000.

Consultants fees have exceeded the Budget by $1.503m.

The ‘Operating Performance Ratio’ of the General Fund is a negative (14.45 %)  which is quite poor, particularly when the ‘official benchmark’ is greater than zero.

The ‘Rates and annual charges outstanding percentage’ (Debt Ratios) are very high with the General Fund at 9.28%, the Water Fund at 15.5% and Sewer Fund at 17.03 %; particularly when the ‘official benchmark’ is less than 10%.

So why has Council lost $10.827m on the disposal of infrastructure? 

We look forward to Council’s explanation to these questions. 

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