A report on Alexandrina Council’s end-of-financial-year results for 2023/24 has revealed a $1.8 million increase in the council’s operating deficit.

The Audit and Risk Committee report says the results for 2023/24 present a larger operating deficit, moving from an endorsed budget review of $5.233 million to $7.067 million.

Acting CEO Alan Harvey says there are three main factors contributing to the results: the impact of depreciation due to asset re-revaluation; receiving federal Financial Assistance Grants a day after the close of the financial year; and asbestos remediation costs impacting the subsidiary Fleurieu Regional Waste Authority (FRWA).

“The deficit increase is disappointing because, without the impact of the Subsidiary equity share and the late receipt of the Financial Assistance Grants, the Council was on track to have an improved operating budget deficit result of $5.147 million, compared to the endorsed budget review deficit of $5.233 million,” he says.

“The bulk of the deficit is due to Council completing a comprehensive asset re-evaluation of local roads, kerbs, footpaths and other assets in 2022/23. This was part of its ongoing asset management improvement program.

“In the high inflation environment, Council’s total assets across all asset classes increased in value from $496m to $665m. The resulting impact on depreciation figures flowed through during our quarter budget review which showed Council had a projected operating deficit of $5.233 million.

“This resulted in a significant increase to our depreciation figures which was anticipated and Council Members set the Annual Business Plan and Budget for 2024/25 with that impact in mind to steer Council towards a Long Term Financial Plan to get back into surplus.

“The receipt of $654,000 in Financial Assistance Grants from the Australian Government on 1 July 2024 – one day later than budgeted – which was unfortunate.

“It has no impact on our cash flow, but because it was a day late, we cannot account for the grants in the 2023/24 financial year.

“We also have to account for our equity share of the FRWA Subsidiary’s operating deficit for the costs of remediation works for asbestos contaminated material.

“Initially there was a forecast surplus for FRWA but the extra costs for remediation have resulted in $1.266 million decrease in the equity share of the Subsidiary’s results.

“This figure does not affect our cash flow. Still, as a member Council of the waste authority, we need to reflect this accounting adjustment in our Financial Statements.

“FRWA’s financial results along with other Subsidiary Annual Reports were received after the 2023/24 end of financial year and reported to Council at the 21 October 2024 Ordinary Meeting.

“Our financial results have been externally audited. The Auditor’s report and our financial results are being presented to the Audit and Risk Committee before being presented to the Council for adoption at the Council Meeting to be held on 16 December 2024.

“We’ve been engaging with our community on our Strategic Management Plans and one of our draft new actions areas is to be a trusted and financially sustainable Council.

“As a part of that commitment, we want to bring to the community’s attention our end-of-year financial results. Again, as part of that commitment, we continue to focus our attention on transparency and financial sustainability through appropriate long-term planning. 

“Our Draft Long Term Financial Plan projects a return to surplus in 2027/28,” Mr Harvey says.