Full QLDC complaint and Alan Robb’s analysis

SHARE

Quangos are costing us by Frank Marvin.

This article seriously misrepresents the Council, its organisations and the cost to the community.

Contrary to the inference that this information was kept in the dark, many of the figures referred to were first disclosed (forecast) in the 2007/08 Annual Plan.

This was publicly released in April 2007, there were public notices and a public submissions process, media scrutiny and a public hearing. In addition to this, 22,000 copies of the Annual Plan summary were widely distributed and direct mailed to all out-of-town-ratepayers.

The Council is audited on this performance.

The Mountain Scene is not correct in its assertion that the Council ‘buried’ figures or ‘this time’ lacked ‘fanfare’.

The Annual Report may have ‘newly’ come to the attention of the Mountain Scene but it is not ‘newly released’ having been adopted in October, 2008.

The figures contained in this article- and indeed it would seem the entire rationale for the article – are incorrect.

The Council has tried to follow the logic for creating a figure of cost of $585 per ratepayer, which is not correct.

It appears that Council’s costs have not been correctly separated from the new costs of the Council Controlled Organisations. The figure of $11.6 million is not correct.

It is over-stated by around $5 million and does not take into account the fact that the 2007 year includes only three months of Lakes Environmental and no costs for Lakes Engineering. This naturally distorts any comparisons being made.

On the basis of the Mountain Scene calculation the actual cost per ratepayer per annum is $56.20.

The Mountain Scene has incorrectly attributed the cost of Council Controlled Organisations to rates. This is not correct. Queenstown Airport costs the ratepayer nothing as it recovers all costs from travellers.

Lakes Environmental recovers costs from applicants and delivers services direct to the community like parking, dog ranging and environmental health.

Lakes Engineering delivers the capital programme and essential engineering services and has minimised consultancy costs.

Lakes Leisure provides for 41 hectares of sports turf, manages five community facilities, three pools and delivers events for the community.

The article also fails to flag that staffing levels have been increased by bringing the horticultural task back ‘in house’ and by opening a new aquatic centre.

By failing to consider that 2007 did not include a full year of Lakes Environmental and Lakes Engineering, the Mountain Scene has created an unfair comparison.

Comparing ‘apples with apples’ means that the ‘rates and user charges’ figure is 6% not 22%. The staff wages calculation is 27% (horticultural team and aquatic centre staff), not 100%.

Neither the ‘bottom line’ calculation nor the ‘debt’ calculation is correct. All new debt in this period was incurred by Council itself and not its Council Controlled Organisations.

The vehicle calculation is almost entirely attributable to public safety with the purchase of a new fire engine $932,146 and utility vehicle $22,500 (replacing one 20-years old) for Queenstown Airport (which incidentally has no staff vehicles).

Other inaccuracies are as follows:

1. ‘The Council cannot ‘coin it’ .The Mountain Scene has previously been made aware that the Council cannot make a profit, not even a ‘pre spent profit’, this is a misleading statement. In fact the ‘bottom line’ is and must be planned to pay for debt repayment and new community assets (eg roads). The Council consults on this in each 10-Year-Plan.

2. Lakes Engineering wasn’t a ‘failed experiment’ On the contrary the evolving engineering structure will vastly improve and streamline the way engineering services are delivered. The staff at Lakes Engineering have contributed substantially to the delivery of the Council’s capital programmes and improved maintenance of infrastructure. It has been hampered by having two organisations when one would do. The Council is simply moving to a cleaner and easier way of operating engineering services.

3. The term ‘quango’ which means quasi-autonomous non-government organisation is being incorrectly tagged to ‘not for profit’ council (local government) controlled organisations.

Finally, the community can be proud of the facilities that have been developed by this and previous councils. These assets must be managed and operated efficiently.

That costs the same whether it is done in house or through council controlled organisations (not for profit).

The Council has absolute confidence in the skill and professionalism of the staff of the Council and its subsidiaries. 

– QLDC

 

Correction

Queenstown Lakes District Council has made multiple complaints over last week’s Quangos Are Costing Us story.

There’s no dispute over our statement “staff wages, vehicles, equipment and interest shot up nearly $15 million in QLDC’s last financial year”, but we also said “$11.6m of [the $15m is] down to council quangos”.

We erred – we should have said: “About $7.6m is down to council quangos.”

As a result, we should point out this $7.6m equates to $383 per ratepaying property, not $585 as reported.

QLDC has also complained on 20 further grounds – none of which stack up to us.

However, we’ve referred them to an out-of-town, independent accounting expert, please read on for his analysis.

– GARRY FERRIS, Editor

 

Queenstown Lakes District Council Annual Report 2008 by Professor Alan Robb

As requested I have reviewed the QLDC Annual Report, your article criticising the surpluses made by the Council, and the complaint by the QLDC on that article.

Your article pointed out that the annual report is a major document for public scrutiny but it has been given very little publicity by the Council.

Under the Local Government Act a council is required to adopt an annual report within four months of balance date and within one month of that must “make publicly available (a) its annual report and (b) a summary of the information contained in its annual report”.

The QLDC met on 31 October – the very last day in the four month period – and received a draft annual report.

The minutes of that meeting do not appear on the Council webpage but it would seem that the Council formally adopted the report. It had been signed by the auditor that morning. Printed copies are unlikely to have been publicly available that day.

The pdf of the annual report is on the webpage. It was created on 28 November. The summary annual report was signed off by the auditor on 24 November and its pdf was created on 26 November. It would appear most likely, therefore, that the two reports were “publicly available” no earlier than 28 November.

I can see no evidence that the Council publicised the fact that the reports were on the web. The log of press releases between 31 October and 30 November does not mention the availability of either the full annual report or the summary version.

I concur with your comment that the reports “were quietly dropped into an obscure pigeon-hole on QLDC’s website late last year without any announcement.”

Your comment that the QLDC was “coining it” in the amount of surplus recorded also provoked comment from the Council.

The Council reported a surplus of $23.6 million on Total Income of $93.7 million, that is 25.1%. By way of comparison, the Dunedin City Council recorded a surplus to total income of 2.1% and the Invercargill City Council reported 3.96%.

It may be argued that the group picture is more relevant. The QLDC group surplus was 22.9%. Dunedin City Council recorded less than 1% and Invercargill 7.1%. A similar pattern occurred in 2007 with the QLDC recording a surplus that was between 2.5 and 4 times greater than the other councils.

I believe your comment of overcharging is justified.

The comment by the Council that the bottom line (whether called ‘surplus’ or ‘profit’) is used “to pay for debt repayment and new community assets” is wrong. The surplus is based on accrual accounting and includes non-cash expenses such as depreciation and amortisation. It also includes revaluation gains and losses neither of which are cash transactions. It cannot possibly show cash available for any purpose.

The figure which does show cash available for debt repayment or capital expenditure is the ‘net cash flow from operating activities’. That was $15.5 million in 2008 compared with a surplus for the year of $23.6 million, a considerably smaller amount.

In reviewing the annual report and the summary report I found a major defect in the quality of information presented. The summary report makes no reference to the Statement of Recognised Income and Expenditure in which was recorded income of $36.79 million recorded directly in equity.

This is a material omission from the summary report. The Statement records something which increases equity by about 150% of the surplus and by almost as much as the amount collected in rates. Few readers of the summary statement would know that a whole section of the financial reports has been dropped out.

Equally concerning is the absence of any information, in the either report, about how this income arose. What was it? How can a ratepayer relate it to the annual plan if they are not told what it was? Is it likely to recur next year?
The Dunedin City Council provides very clear disclosure that its income recorded directly in equity arose from gains and losses on revaluations.

QLDC have followed a different method of accounting and have included their revaluations in the Statement of Financial Performance, although this is not apparent from the summary report.

The full annual report contains some 80 pages of notes and service performance statements. They do not attempt to quantify the impact of changes in council controlled organisations during the year on the figures reported. That is an omission which has impacted on the potential usefulness of the reports.

In summary I believe the QLDC financial reports fell short of the standard of information which ratepayers are entitled to expect.

– Alan Robb