On the numbers

Dear Beagle Readers, It was with interest that the next ordinary Eurobodalla Council meeting to be held on 28 November 2017 will include the presentation of the Audited Financial Statements and the Auditor’s Reports for the year ending 30 June 2017. Of further interest was a comment we read elsewhere in your paper asking of Eurobodalla “If council’s income increased by 3% in FY2017, why did the expenses increase by 4%?” Here is our latest media release that looks at our own Bega Valley Shire Council figures that might be of interest to your readers and to those further south in the BVS area. on the numbers …

Bega Valley Shire Council (BVSC) has announced that its 2016/2017 Audited Financial Statements & Auditor’s Report will be presented at its Ordinary Meeting to be held on November 22nd, 2017.

The first point to note is the significantly different Income amounts cited by BVSC in its various financial publications throughout the year. To explain …

On May 18th, 2016, BVSC placed its Draft Operational Plan & Budget - 2016-2017 on Public Exhibition. Six weeks later, at its Ordinary Meeting on June 29th, 2016, BVSC adopted the draft Budget without amendment.

In November, 2016, BVSC conducted its first Quarterly Budget Review, with the reports tabled for that review reflecting a significantly higher budgeted Income figure to that adopted by BVSC on June 29th.

Fast forward to last week’s published Audited Financial Statements & the Budgeted Income figure is higher yet again.

These differences are highlighted in this summary.

In stark contrast to the confusion around Income, the Budgeted Expenses remained unchanged across all the various documents at $84.185M, although the final result of $92.773M is $8.588M over budget.

Of that over-budget expenditure, $6.1M was in Materials & Contracts, $2.2M in Depreciation, $988K in Other Expenses, all offset by under budget expenditure of $463K in Employment Costs & $290K in Borrowing Costs.

While the significant over-spend in Materials & Contracts is obviously related to the $8M over budget Income in Grants & Contributions, the absence of any management explanation makes it difficult to fathom what circumstances or events actually gave rise to the numbers.

While it is pleasing to note that Employment Costs were contained within Budget, the BVSRRA contends that at more than 45% of the Expense Budget before Depreciation, this cost is still way too high & is reflective of council’s “top heavy” management structure.

At the same time, the almost $1M (18%) budget over-spend in Other Expenses is also a major concern. That concern is exacerbated by the fact that BVSC refuses to publish budget figures for each of the 23 individual expense items within that overall Budget item.

The BVSRRA has been highly critical of BVSC for not publishing that information in the past, as expenditure in that area is often the most difficult to control & the absence of the information makes it harder to measure council’s success in managing the area. Nevertheless, the available information is of some use.

Ratepayers have funded the 23 Items Making Up Other Expenses to the tune of $30.2M over the past four years & in spite of council’s claims to have improved efficiency, that expense has increased by an average of 4.2% each year, way ahead of the CPI.

The Top 5 Items making-up Other Expenses amounted to almost $17.5M or 58% of the total over the past four years, with these items alone increasing by an average rate of 12.1% each year. Now the BVSRRA accepts that electricity costs are included in these figures however, even excluding that item, the other four largest items still amount to $11.9M over the past four years & have experienced average annual increases of 12.8%, suggesting that there is little evidence of effective management restraint being brought to bear.

And while the BVSRRA accepts that it may be difficult for BVSC to contain some of its major expenses, such as Electricity & Insurance, it can only wonder why BVSC has found it necessary to spend more than $3M on Computer Software over the past five years, including more than $750K last year.

There are a couple of other major expense items worthy of comment, including Legal Costs & the cost of Contractors & Consultants, with BVSC paying an average of $560K each year over the past five years in Legal Costs & an average of $9M each year over the same period for Contractors & Consultants. The BVSRRA notes that this latter expense has jumped significantly in the past three years, from $3.5M in 2013 to an average of $7.6M annually, while that expense amounted to $14M in 2015/2016 & $20.7M in 2016/2017. The BVSRRA is not aware of any management information to explain this explosion in costs.

While the Audited Financial Statements for 2016/2017 doubtless satisfy statutory requirements, the BVSRRA believes that they provide very little in the way of genuine insight into the real quality of BVSC’s management performance, while the issues canvassed here suggest that there is significant room for performance improvement.

Not for the first time, the BVSRRA calls on BVSC’s executive team to author a comprehensive management report explaining the substance behind its financial results to residents & ratepayers, so as to enhance their understanding of its performance

To underscore that point, the BVSRRA notes that BVSC has still not published full details of the approved 2017/2018 Budget, in spite of its promise that it would do so by July 31st, 2017 & in spite of the fact that we are approaching the end of the half way point for the current financial period.

Based on the above, the BVSRRA continues to have serious concerns about the adequacy of BVSC’s financial management capabilities.

John Richardson


Bega Valley Shire Residents & Ratepayers Association

Above: From Eurobodalla's Council Noticeboard Nov 15th


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