The Auditor General of Victoria has released his report into the financial sustainability of local governments. The full report is available at: http://www.audit.vic.gov.au/publications/20111123-Local-Govt/20111123-Local-Govt.pdf
Below are some lowlights from his report, plus an extract from Council’s Chief Financial Officer’s response to the findings.
“Buloke Shire Council was again rated high risk and Glen Eira City Council increased from low to high risk”.
“The overall financial sustainability risk for inner metropolitan councils for 2010–11 was low. However, Glen Eira City Council was assessed as high risk. Glen Eira’s liquidity ratio fell below one in 2010–11. Its cash assets were used to fund building of the Glen Eira Sports and Aquatic Centre. This also increased the council’s non-current assets. Based on its forward plans, Glen Eira will borrow additional funds to complete the centre, thus keeping the liquidity ratio forecast for the next three years between 0.94 and 1.05″.
Peter Swabey’s response: “Over the last few years, we have forecast that our liquidity ratio would drop to a level of approximately 1, as we have invested heavily in our capital works progrms and have borrowed to complete construction of a major Sports & Acquatic Centre redevelopment (please note that the Centre is expected to operate at a cash surplus). Given that all other indicators for Glen Eira are green (i.e. Underlying Result; indebtedness; Self financing; Capital Replacement and Renewal Gap), we feel that an overall rating of red is a bit severe. A liquidity ratio around 1 indicates that we are fully utilising ratepayer funds to maintain a sustainable infrastructure base (supported by a high Renewal Gap indicator and high Capital Replacement Ratio)”.
COMMENTS
- Swabey’s letter is dated 3rd November 2011. So, how long has Council known this rating was coming? Why was nothing stated at the November 2nd Council Meeting?
- Is it mere coincidence that the CEO reappointment occurred prior to the release of this information and did Councillors know it was coming? If they did, then what impact did this have on their performance appraisal of the CEO?
- Have residents been sold a furphy the whole way along the GESAC journey?
- What impact will this report have on interest rates and future borrowings and ultimately rate increases?
There are literally dozens of other questions we might ask beginning with a thorough cost accounting of all GESAC expenses and incremental costs which have never been fully released nor itemised. It also makes us query the statement that GESAC will be operating at a cash surplus! What do our readers think?
Glen Eira Debates 
November 23, 2011 at 9:12 PM
All the other Councils who provided a response sent it from the CEO, but not Glen Eira. Our great leader was probably at the lawyers inventing a bullying claim to save his arse….oh hang on, he is the master of financial and risk management! bahahaha!!! Two more years. *shakes head depressed*
November 23, 2011 at 9:31 PM
Probably a good time to now draw a line in the sand and start again. There is a lot of disappointment in the way this City goes about their business. Everyone has taken a huge punt and financial risk in GESAC….it was always going to start at a loss. Our Councillors were elected to represent the people of Glen Eira…..give them a real chance and they should step up and do the job. This blog has opened the eyes of many and can hopefully influence the way many people think.
Let’s make the most of what we have…..it is a great place to live and with the right attitude we can do anything ( but make Lobo speak his mind!)
November 23, 2011 at 11:43 PM
Brendan I like your optimism but it won’t work – not with this administration and in particular this crop of councillors. The only way things will change is if every single councillor is turfed out and the community puts up its own candidates. Start looking around and find people who have integrity and honesty and believe in working for the electorate. They must also be individuals who will not be intimidated by threats, bullying, or an administration that likes to run the show. I’m sure that within Glen Eira there must be at least 9 people who fit that bill. Then and only then can this municipality achieve something. Are you interested?
November 23, 2011 at 10:53 PM
The claim that gesac will be operating with a cash surplus is hard to believe. The post is correct. We know very little of all the other costs that must by now be flooding into gesac. The only figures we’ve really been told is that the building itself will cost somewhere between 39 and 41 million – that’s if liquidated damages aren’t challenged. If they are then heaven only knows what the lawyers will be earning. On top of this I would really like to see some figures on all the outfittings, ranging from basic things like carpets, lighting, heating, outfitting cafes, staff and plenty of other items that I just can’t think of right now. Money is basically pouring out and we don’t know how much or exactly where it’s going.
Cash surplus means that more money will be coming in than going out. Some of the above might be once off payments, but there will still be continual ongoing costs – staff, heating, and so on. The biggest drain will be the interest repayments and once you’re declared at high risk either no one wants to lend you any more money, or they will lend it to you at higher interest rates, or you go for higher purchase as council has already done. All in all the picture certainly isn’t as rosy as Newton, Swabey and Lipshutz would like us to believe. Finally, with no transport, the projected attendances of 600,000 people per annum is definitely pie in the sky. Only time will tell, but this again depends on honest reporting to the community – something I dare say we have not had as yet.
November 23, 2011 at 11:31 PM
What do ya reckon is gonna happen with no transport? Everyone will be driving to gesac. We could end up with another 5 car parks to cater for the cars. What the heck, there’s still some green grass at Bailey Reserve that can be turned into concrete isn’t there? But oh but if they don’t build more car parks then people will be so pissed off that they can’t have parking that they’ll just turn around and go to waves which is round the corner. Great planning Newton and great bullshit from Lipshutz all the past years.
November 24, 2011 at 8:00 AM
You are right about people driving to GESAC. When you compare the numbers that they expect to use the facility with the available car park there is a big gap. Up to 2000 people a day everyday with little public transport. If it was a private outfit building this place they wouldn’t get past the planning desk let alone the councillors without adequate parking. School holidays is going to be a cruncher. I suppose Newton is looking forward to all the revenue from parking fines. You can bet he is factoring this into his budget.
November 23, 2011 at 11:16 PM
We all know how these things go .. Council would have been advised on the Auditor Generals findings months ago. The investigation that lead to those findings would have occurred considerably earlier (data analysis and report writing are time consuming). The focus of the AG report would have been on finanicials – no indepth analysis would have been made on progress.
We all know these findings will adversely afffect Glen Eira’s credit rating (probably well known to financial institutions well before the findings were announced) and hence the interest charged on loans.
The AG’s report was based on financial arrangements existing at the time, i.e many months ago. Since then dramatic changes have occurred in the finance world. One wonders what the AG’s report would say if investigations were conducted now …. the finance picture has worsened, the project has been delayed due to problems which proper project oversight should have detected much earlier. Additonal costs have been incurred (re building and lawyers), lost revenue and additional loans have been taken out.
Cr’s have really dropped the ball on this one … the buck stops there. Not only should they been aware of the looming GESAC fiasco but they should also have been aware of the AG’s findings and taken some sort of action.
Instead what do we get – zilch info, more of the same .. GSAC on course and how good this Amin is at risk management. Yeah!!!!!!
Tell me Maggie, is this what you define as “demonstrated excellent financial skills” (Media Release 21/11/11)?
November 24, 2011 at 12:00 AM
Here is a smattering from the report into government ICT’s released by the ombudsman today. Admittedly he was looking at major ICT projects. However, we just wonder whether any of his findings might just be relevant to the handling of GESAC? –
we see little sign of lessons learnt in the public sector. The evidence to date is that the public sector is not managing ICT-enabled projects effectively, as demonstrated by the current difficulties that Victoria is facing in this area and the increasingly adverse public comment about major ICT-enabled projects. A new and more disciplined approach is required if the government is to avoid being faced with continuing cost overruns and failures to deliver.
It identified that despite the extensive guidance and literature available, agencies are making the same mistakes around planning, governance, project management and procurement that our offices have observed and reported on for some years. This includes the lack of accountability of those responsible for these project failures, especially senior agency executives and the Department of Treasury and Finance.
None of the projects investigated was well planned. Agencies failed to commit the necessary time and effort into planning and business case development, which led to significant differences between the planned and actual time, costs and outcomes.
In some cases, optimism bias led to costs and timelines being based upon hope, rather than evidence or comparisons with similar projects and despite advice from experts and vendors.
• Agencies often gave the government no choice other than to invest in the agency’s preferred option and failed to provide government with adequate advice to make an informed decision.
• Business cases for many of the projects were not updated throughout the life of the projects. In some cases, they were not read by key people.
• Insufficient attention was given to managing or mitigating risks
The full report is available at: http://www.ombudsman.vic.gov.au/resources/documents/Investigation_into_ICT_enabled_projects_Nov_2011.pdf
November 24, 2011 at 8:05 AM
Quite frankly this could have been written about Glen Eira’s handling of GESAC. It fits right in with the complaints residents have made throughout the project.