Dear Sir,
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I am writing to you to try to clarify some misapprehensions about what the audit result means for Council.
Under Australian Auditing Standards an audit must provide reasonable assurance that the financial statements are not misleading (that there are no material, or big, misstatements (mistakes)). It is a backwards looking process and in this case refers to financial statements ending 30 June, 2019. An Auditor generally does not look at future projections and is therefore not in a position to comment on anything other than what has already happened in the past.
Moreover, an Auditor's Opinion, is exactly what it says - an opinion based on professional judgement, not a statement of fact, nor a guarantee.
The statement that Council had a surplus of $4.3 million should also be clarified. The measure preferred by the state government is operating result before capital grants (hence it appears on the very first statement of the financial reports). If we exclude capital grants the result as at 30 June 2019 is a deficit in the order of $2.9 million, following on from deficits in the previous year of over $9 million. The only thing that creates the appearance that Council is not in serious trouble are these capital grants, which must be spent on the specific infrastructure projects for which they were granted.
Moreover, Council is not swimming in cash as might be misunderstood by the statement that it has a 'quite healthy' balance of $27 million. If your readers download a copy of the audited financial statements and turn to note 6(c) on page 29 they will be able to read that only $3.350 million of this money is unrestricted - what this means is that most of the money can't be used for Council to fund day-to-day general operating expenses. Given that Council is itself projecting a string of deficits in its Consolidated Nett Operating Result of $2.583 million (2020/21), $2.169 million (2021/22) and $1.466 million (2022/23) - even when capital grants are included - things are clearly very grave and far from healthy.
Commenting on only a handful of backwards looking ratios, with no comparisons to other councils, can be very misleading. That is why my full report looks at 40 metrics and compares Cootamundra-Gundagai to 14 similar councils. It is also why I performed a detailed analysis of Council's Long Term Financial Plan.
Notably when Central Darling Shire had its period of financial administration extended by a further 3 years in October 2019, the financial statements the decision was based on also showed the cash expense ratio above the benchmark (as is the case for Cootamundra-Gundagai and 98% of councils), and had positive operating ratios for the last 3 years (not the case for Cootamundra-Gundagai). Clearly the Minister bases her decision on a more comprehensive analysis of financial statements than is indicated by just these few ratios.
The easiest thing for me to do would be nothing. My work is finished for Council and I could walk away content that I have done world class analysis and not be bothered by some unfortunate statements by the Auditor that have the strong potential to confuse some in the community if taken out of context. However, for me this was never about merely doing a job. I care about your community and know only too well what will happen if changes are not made. I therefore urge Council and residents to do their own homework, read my full report as well as the financial statements, and weigh this against some of the information they have recently been presented with.
Best Wishes, Professor Joseph Drew
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