Audit warning may affect shire budget
SHIRE of Toodyay has been officially warned of a significant adverse trend in its financial position.
The warning by independent auditors Moore Stephens (left) says key performance measurements in shire financial reports have failed to meet State Government audit standards for the past three years.
“In our opinion, there is a significant adverse trend in the financial position of the shire,” Moore Stephens auditor Wen-Shien Chai wrote in a management report addressing legal and regulatory requirements published on the last page of the shire’s latest annual report.Read more
“The operating surplus ratio and asset sustainability ratio has been below the DLGSCI (State Department of Local Government, Sport and Cultural Industries) standard for the past three years.”
The statement appears to contradict the auditor’s cover letter which says: “We noted no matters we wish to draw to your attention.”
To add to the confusion, the shire’s three-year Corporate Business Plan shows target ratios as percentages, but its financial statements report them as decimal figures.
Discrepances not noted
The discrepancies were not noted in Shire CEO Stan Scott’s recommendation to adopt the audit report, which was carried 8-0 at last month’s council meeting.
However, the council voted 8-0 to refer a management report containing the warning to the audit committee “for consideration”.
The shire’s three-year corporate business plan says an operating surplus ratio is a financial indicator of the “extent to which revenues raised cover operational expenses only or are available for capital funding purposes”.
The desired trend/target is “10 per cent or greater” but the shire’s latest financial statements show it as “(0.12)” – brackets in financial statements usually mean a deficit.
The figure for 2018 was (0.21), and it was (0.24) in 2017 and (0.47) in 2016.
The shire’s corporate business plan also says that the desired trend/target for its asset sustainability ratio is “90 per cent or greater” but financial statements show 0.58 in 2018, 0.74 in 2017 and 0.67 in 2016.
No reference in report
CEO Stan Scott made no reference to the audit warning in his introduction to the shire’s new 130-page annual report.
However, President Bill Manning raised it in his accompanying foreword.
“The operating surplus ratio measures the local government’s ability to cover its operational costs and have revenues available for capital funding and other purposes,” President Manning said.
“The asset sustainability ratio indicates whether a local government is replacing or renewing non-financial assets at the same rate that its overall asset stock is wearing out.
“The issue will need to be taken into account when reviewing the long-term financial plan in 2020 and when setting future budgets.”
The auditor’s warning was published at the end of the shire annual report after 50 pages of figures and complex accounting details.
Previous annual reports appear to show that the shire failed to meet operating surplus ratio targets for the past seven years.
‘Beautiful audit’ – CEO
“We had a beautiful audit with nothing in it,” Mr Scott told last month’s council meeting.
President Manning said that if it contained nothing, then Moore Stephens should be asked for permission to publicly release a concluding memorandum, which Mr Scott said was marked ‘confidential’.
A motion for its release was carried 8-0.
Councillors also voted 8-0 for a motion by new Audit Committee Chair Beth Ruthven, seconded by Deputy President Rosemary Madacsi, to refer the audit management report – including the warning – to the committee for further consideration.
The annual report will be open to public questions at an annual meeting of electors in the council chamber in Fiennes Street at 7pm on Tuesday February 18.