24 questions from the lord mayor

QUESTIONS

1. Why was interest and investment income so far above budget, yet closely aligned to last year? 

2.  Why did employee benefits and on-costs exceed budget by $3 million (3.5%)?

3.  What was the $400 million adjustment to depreciation on the adjusted asset revaluation last year? Did this occur during the year or at year end? (page 2)

4. The Statement of Cash Flows appears to be incomplete. No payments have been included as yet.

5.  Note 2(a) – Page 21

 Why are there such wide variations in expenses between this year, the budget and last year for the “City Assets” division and “City Engagement” division? Can you please provide this summary excluding the depreciation applied to each division as this will have a distorting effect.

6.  Note 3(b) – Page 24

Please explain how income from RTA works is derived, and how such works are commissioned.

7.  Note 3(c) – Page 25

 Is Interest charged on overdue rates and charges recognised when levied or collected? If when levied, how much of it is actually collected and who determines when to levy and when to write off?

 8.  Note 3(d) – Page 25

Parking fines have risen by 15% in the year. Are parking Rangers paid on any form of “commission” or bonus basis, or are they straight wages staff?

 ‘Investment Recoupment’ of $1 million – was this related to the Lehman Brothers investments?

 9.   Note 3(e) – Grants – Page 26

How do we earn Financial Assistance grants? Was the additional grant money received this year applicable to anything specific? Is the “financial assistance in advance” sum of $6.789 million monies that are allocated for expenditure in 2012/13, and why was it paid in advance?

10. Note 3(f) – Contributions – Page 27

 Please explain Employee’s Corporate Fitness/entitlements of $1.004 million. Is it offset by a cost?

 11. Note 3(g) – Restrictions Relating to Grants – Page 28

 Does this table highlight that the net operating result for the year has in essence been enhanced by $4.39 million in the current year for grant monies not yet spent? What is the process for recognising grant monies? Is it based on “receipt of cash”?

 Note that Grant “receivables” increased by $2.3 million in the current year (page 36).

 12. Note 4 – Expenses from Continuing Operations – Page 29

 (a)  Total Employee costs are net of any capitalised costs. When added back Total Employee Costs have risen by 3.8% on last year. Capitalised Wages Costs were $3.516million against $1.7million last year. What is the test for capitalisation of wages, and what assets was this allocated to, and why has the capitalisation value doubled this year?

 (c) Materials and Contracts – is there any internal accounting that matches the Variation in materials and contracts to grant related expenditure?

Is there an internal break-up of fees paid to external contractors and is this matched against projects?

Is there accountability and a reconciliation of individual projects?

 (d) Depreciation, Amortisation – Page 30

The amortisation of library looks doubled this year to $1.146 million. What is the value of library books and why the accelerated write-down?

 e) Other Expenses

 Street Lighting costs increased by $700K. Is this linked to electricity costs?

Electricity costs rose by $400K (23%). Do we have a long term deal with a retailer?

Telephone costs rose by 14%. Do we have a contract plan for all phones? Is personal use accounted for?

‘Other Expenses’ of $541K this year against a zero comparison last year. What are these costs related to?

 13.   Note 5 – Gain or Loss on Disposal of Assets – Page 31

 A loss of $1.388million was incurred on the sale of Infrastructure, Plant & Equipment. What was the detail behind this?

 14.  Note 6(a) – Cash & Cash Equivalents – Page 32

 Why was an additional $18million moved to Deposits on Call at the end of the Year?

 15.   Notes 6(b) and 6(c) – Page 33 and 34

 The level of ‘unrestricted cash’ has decreased by around $2.5 million, leaving just $4.7 million. Are Council’s cash flows separated by expenditure of ‘unrestricted’ and ‘restricted‘ cash?

How and when is the determination made to transfer monies to “restrictions”? is this part of the budget process?

 16.   Note 10(a) & (b) – Payables, Borrowings & Provisions – Page 40 & 41

 Employee provisions total $35.3 million this year compared to $33.6 million last year, an increase of 5%. Is there an active program to ensure staff leave is taken and backlogs are not accrued? It is noted that provision increases exceeded payments in all three leave categories.

 17.    Note 16 – Material Budget Variations – Page 51

 Is this a serious attempt to explain budget variations? What is the materiality test in reference to this note?

 18. Note 17 – Statement of Developer Contributions – Page 52

 The Note highlights $11.247 million held in s94A Plan Contributions. Is there an expenditure plan for these monies?

 The Note highlights a shortfall of $16.1million in “Project costs of works still outstanding”, which represents almost two-thirds of the amount. How will this shortfall be addressed and over what time frame? Most of it relates to “Open Space” (page 54). What does this mean?

 19.  Note 18 – Contingencies – Page 55

 - Superannuation – is there likely to be any further increases required in Employer Contributions in the short term?

- Lehman Bros Debt – are the auditors comfortable with the level of provision against non-recovery?

- Other Contingencies – what steps have been taken to ensure any/all contingencies have been disclosed?

 20.  Note 21 – Non-current assets classified as held for sale – Page 64

 What are the parcels of land that have been classified totalling $17.962 million, and what is the time frame for sale? Do we have current valuations supporting the values?

 21. Note 22 – Events Occurring after  Balance Date – Page 65

 What formal steps have been taken to determine any material events that should be included in this disclosure?

 Should the sale of the parking stations be included here?

 22. Special Schedule No. 1 – Net Cost of Services – Page 68

 - Governance Costs increased by $1.7M or 36%. Is this real or a reallocation issue?

- Administration costs decreased significantly. Is this real or a reallocation issue?

- Beach control net costs increased from $3.3M to $4.3M, an increase of 31%. Is this real or a reallocation issue?

- How much of the increased costs of the ‘Recreation & Culture’ category relates to depreciation? What are the real increases for pools, art galleries and libraries?

 23. Special Schedule No. 8 – Financial Projections – Page 72

The projections show a forecast operating loss over the next four years of $56M, with the capital program of $209M over the same period funded by $150M in reserves, $46M in asset sales, $29M in grants and contributions and $40M from new borrowings.

Does this allow for Council to make a serious inroad into the backlog of capital works required to bring assets up to an acceptable level?

Are we confident of the asset figures?

Where will the funding come from if there are shortfalls in asset sales or grants?

24. Special Schedule No. 7 – Page 71

The Estimated Cost to bring assets to a satisfactory standard has increased from $112.7 million last year to $117.3 million this year, as only $27.6 million was spent on maintenance, against $34.7 million last year. As such the required annual maintenance expenses required has increased to $46.1 million.

 Had not the Council decided to allocate more money to the maintenance program to ensure the backlog was caught up, and wasn’t this part of the reason behind the Special Rate Variation in 2008?

 How are decisions made in relation to new capital projects versus backlog maintenance?

 Do we have a sound long term financial plan? 

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