The 2020-21 audited financial reports for Central Coast Council and the Central Coast Council Water Supply Authority have been adopted, with each receiving a qualification on the estimated size of their assets.
CEO David Farmer, speaking at the March 22 meeting where the reports were adopted, noted that Council had not met all the State Government benchmarks but was optimistic that Council would be on top of things by the end of this financial year.
Administrator Rik Hart said he shared the optimism and said the real loss would only be about $40M if staff restructuring costs that had to be done as a result of the financial crisis of October 2020 were taken out.
Council’s consolidated net operating result for the financial year ending 30 June 2021 was a deficit of $70.7M excluding Grants and Contributions for capital purposes.
After adjusting for Capital Grants and Contributions, the net operating result was a surplus of $13.0M.
Central Coast Council Water Supply Authority’s net operating result for the financial year was a deficit of $41.5M excluding Grants and Contributions for capital purposes.
After adjusting for Capital Grants and Contributions, the net operating deficit was $16.8M.
The net assets for Central Coast Council as at 30 June 2021 totalled $7.4 billion.
The net assets for Central Coast Council Water Supply Authority as at 30 June 2021 totalled $3.8 billion.
Council failed to meet three benchmarks set by the State Government.
The ‘Operating Performance Ratio’ measures how well Council contained operating expenditure
within operating revenue.
Council has breached this benchmark in line with the reported $70.7M operating loss before capital grants and contributions.
The ‘Own Source Operating Revenue Ratio’ measures Council’s fiscal flexibility and the degree of
reliance on external funding sources such as operating grants and contributions.
Council’s performance is satisfactory as it is above the benchmark.
The ‘Unrestricted Current Ratio’ measures the adequacy of working capital and Council’s ability to
satisfy obligations in the short term for the unrestricted activities of Council.
Council has corrected the prior year breach of this benchmark through additional $150M external
borrowings to substantially cover the reported overspend of unrestricted funds.
The ‘Debt Service Cover Ratio’ measures the availability of operating cash to service debt including interest, principal and lease payments.
Council has breached this ratio as the operating result before capital excluding interest and depreciation does not adequately cover loan principal repayments and borrowing costs.
The ‘Rate and Annual Charges Outstanding Ratio’ assesses the impact of uncollected rates and
annual charges on Council’s liquidity and the adequacy of debt recovery efforts.
Council has breached this ratio however Council’s debt recovery efforts have shown significant improvement highlighted by the reduction in the ratio deficit from FY 2020, Council said.
The ‘Cash Expense Cover Ratio’ indicates the number of months a Council can continue paying for its immediate expenses without additional cash inflow.
Council’s performance is above the benchmark.
The audit opinion included two qualifications.
At 30 June 2021, Council recognised $5.5B of roads, bridges, footpaths, bulk earthworks, stormwater drainage, water supply network and sewerage network assets but was unable to provide sufficient evidence to the Audit Office, to support that.
Council’s Water Supply Authority recognised $3.6B of stormwater drainage assets, water supply network assets and sewerage network assets including $11.6M newly found assets but it was unable to supply sufficient evidence to the Audit Office to that.
“A number of water and sewer assets were identified during this year’s comprehensive revaluations, which were not recorded in the Council’s financial statements,” Council said.
“Retrospective correction was made at 1July 2019 in accordance with AASB 108 ‘Accounting Policies, Changes in Accounting Estimates and Errors’, which increased the prior year comparatives for water supply network assets and sewerage network assets.”
The Authority was unable to provide sufficient evidence to the Audit Office, to support the carrying value of these assets on the Statement of Financial Position as at 30 June 2021.
Council said the qualified opinions noted by the Audit Office have no impact on Council’s cash flows, liquidity or ability to repay debts but related to fixed assets.
A working group has been initiated to align the two asset registers by 30 June 2022, Council said.
Merilyn Vale