FREMANTLE council has defied predictions, coming out of the last financial year with a $15 million surplus.
East Fremantle council, however, has been given a warning from WA’s auditor general that its ability to fund capital works after paying day-to-day costs has slipped below a state government benchmark.
Fremantle tabled its draft annual financial statements at its finance and policy committee meeting on Wednesday, and posted the surplus despite the collapse of Pindan just prior to completing its admin centre.
The builder’s demise was in fact partway responsible for the result after the council got back an unbudgeted $3.6 million bond from the company.
Mayor Hannah Fitzhardinge told the Herald while other parts of the surplus came from revalued assets rather than cash in the bank, it was also due
to sound management of the Walyalup Civic Centre project and “squirrelling” away money in preparation for Covid’s impact.
“I don’t think it’s bad we have a surplus going into 2022, but the challenge will be what do we spend the money on with the construction environment the way it is – it’s not brilliant at the moment,” Ms Fitzhardinge said.
The council also delayed about $5m worth of projects, while its fees and charges were about $2m above predictions.
It wasn’t all great news, with the figures showing how deeply the council dipped into its reserves to fund the civic centre; its investment reserve has just $5m left after starting the year with $21m.
Interest payments on the additional loans the council took out are also starting to mount, up to $1.6m already and going on the council’s last long-term budget (which is years out of date) they can be expected to climb for another five or six years before easing off.
The auditor general noted that East Freo’s “operating surplus ratio” which measures what’s left for capital works after paying running expenses has been below a local government department benchmark for the last three years.
A management report to East Freo’s last audit committee notes the ratio isn’t expected to meet the benchmark until the 2028/29 financial year, though “every effort” would be made to increase operating revenue at a faster rate than expenditure.
East Freo’s overall financial health as measured by the department has slipped from a high of 93 in 2013/14 to 71 in the latest reported period, though it’s still well above Freo’s score of 54.
But both councils have complained the matrix used to measure their financial health is flawed, and East Freo’s minutes suggest the department has agreed to reduce the number of inputs.