Council spending lacked structure: Report

FILE

District councillors say they have been vindicated by an independent financial report that identified serious problems with historical council finances.

Mayor Steve Chadwick ordered the independent review of the Rotorua District Council's financial disclosures to councillors in February after several councillors claimed to be unaware of the extent of the council's debt crisis.

The report, which cost $45,000, did not find any evidence of intentional mishandling of council finances, but stated "financial reporting was too detailed and lacked appropriate summaries, financial impact assessments and commentaries to be meaningful and enable councillors to really understand the impact of their decision making".

It went on to state budget reforecasting lacked structure and was difficult to follow.

"The RDC lacked depth in senior financial experience which was accentuated by the finance manager position being vacant during crucial stages of the 2013/14 Annual Plan development. The outgoing chief executive had to take greater responsibility for its production, on top of his other accountabilities.

"Following the chief executive's departure and commencement of the financial year in question, significant unfavourable anomalies have been discovered in both revenue and expenditure which the new finance team have not been able to fully reconcile."

The report stated the council's new financial strategy was on the right track.

The review also made 16 recommendations for consideration, six of which have already been adopted or progressed by the council.

Deputy mayor Dave Donaldson said it was an excellent report.

"It was far more valuable to me than local government knowhow courses in financial management I've attended.

"The recommendations are particularly useful and I look forward to council's consideration of those recommendations.

"The previous council did put into place a new chief executive and gave him the mandate to employ a chief financial officer - we now are getting the correct financial picture."

Mr Donaldson said there was clearly a lack of resources and a lack of clear financial trends being reported to councillors.

"Councillors employ one person in the organisation - the chief executive. We are not chartered accountants, this is why we have to rely on the management team.

"It is a sense of relief we have made the right choices and I'm confident we are now better prepared to manage our finances sustainably," he said.

Two councillors voted against approving last year's Annual Plan - Charles Sturt and Mark Gould.

Mr Sturt said he was repeatedly shut down from questioning issues during Annual Plan debates by former mayor Kevin Winters and committee chairwoman Janet Wepa.

"They kept telling us the plan had been ticked off by the Auditor General. We are not out of the woods yet, but at least we can see the way ahead."

The council had previously indicated it had already put in place a range of measures to manage its finances.

They were to hold debt levels to a minimum and progressively reduce debt, increase rates by 3 per cent annually for the foreseeable future, decrease the business rating differential, sell property to balance its capital spend and cut capital expenditure back to $22 million for the 2014/15 financial year.

The council is also in the midst of an organisational review that could save $3 million in the next two financial years.

Council staff are currently being consulted on this and it is expected the refocused organisation will take effect on July 1.

The full PwC report is available on the council website - www.rdc.govt.nz.