Tuesday, October 3, 2023

Council heads for $2.9m loss

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The Tatiara District Council is headed for a $2.9million loss this financial year, thanks to some “extraordinary circumstances”.

The loss, which the council administration says is “largely due to grants not received yet,” was discussed at the council’s meeting in Bordertown on June 13.

When asked by this newspaper [Naracoorte Community News] for some clarity on the loss, council chief executive officer Anne Champness said the deficit included carry forwards and that it was important to understand where council revenue came from.

“A large part of the projected deficit is related to grant payments, which include both payments received in the previous financial year, the 2021–22 financial year for this current financial year, and grants expected to be paid in this financial year at the time of setting our 2022–23 annual budget but now likely to be received in 2023–24 instead,” Ms Champness said.

“Another significant component of the deficit is a one-off council grant of $400,000 towards the development of the Tatiara Motor Sports Precinct and a bad debt of $356,000 for the failed purchase of a patching truck.”

She said there were other factors for variances in revenue and expenditure, but these would be the largest items to call out.

“Importantly, this year’s deficit reflects extraordinary circumstances, ranging from significant grant prepayments in 2021-22, to equally significant grant payment delays in 2022-23, to a one-off council grant and significant council projects, rather than the council’s inability to cover its normal operating expenses.

“The largest source of revenue, usually between 60 percent and 65 percent, comes from general rates. Grants and contributions from other levels of government are the second largest source of revenue, followed by much smaller amounts for user charges and other income like interest and reimbursements,” she said.

Ms Champness said the council’s single largest grant contribution came from the Australian Government’s Financial Assistance Grants (FAGs) of roughly $4m.

“Part of the FAGs were paid early, which is not unusual – for the last few years, we have received 50 percent in the respective previous and current financial years.

“As long as these prepayments are consistent, they balance each other out, and though half of the funds may be for the next or preceding year, the total payment in the one financial year still ends up about 100 percent.”

She said what was unusual in the 2021-22 financial year was that the prepayment for 2022–23 was 75 percent.

“When setting our 2022–23 budget, we assumed that the prepayment for 2023–24 would return to 50 percent, meaning we are showing a shortfall of 25 percent in 2022–23, or approximately $1.2m.

“Of course, what, if any, prepayments are made is completely outside of our control, so it may well be that we receive another 75 percent, or we may not receive any, with 100 percent of the payment to be made in 2023–24.”

Ms Champness said the Local Roads and Community Infrastructure Program (LRCIP) was another grant program where payments did not align with expenditures.

“We received approximately $650,000 in 2021-22, but expenditure was incurred in this, the 2022-23 financial year.

“We also budgeted to receive further LRCIP funding in 2022–23, but though we have incurred a significant portion of the expenditure, grant payments are still to be made.

“Across the different LRCIP phases, this adds up to almost $1.3m. Considering how close we are to the end of this financial year, we expect that the remaining payments will be made in 2023–24.

“Considering its cash reserves, the council is able to carry this deficit but will need to ensure a return to surpluses in future years.”

Naracoorte Community News 28 June 2023

This article appeared in the Naracoorte Community News.


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