Editorial: Budget – $27million unspent

Last month approximately $27million of last year’s $51.9million was reported unspent by Council. With the state of the roads, parks, and general infrastructure around the towns, that money could have been well spent by now. So how has Council failed to have undertaken more than half of the budget worth of activities?

Of more concern is that most of this budget and activities are to be deferred. That typically means the monies go into the restricted assets account and from there things can get murky.

On any project time is money, so if you delay activities for more than a year, you can expect the relative costs for those projects to go up and/or exceed the original budget allocated. This can then result in more money being needed for those deferred projects, so until more money is received, they sit on the back burner, and some may never happen.

One small example of this was the school bike path network. Several terms ago money was allocated, to build a school bike pathway for all schools in Scone, but the section for St Mary’s was deferred, and still hasn’t happened. Another example is the Cassilis sewerage network, the project was deferred and in the meantime the costs exceeded the allocated budget and now that project is in limbo.

Once money is in restricted assets, if it is not tied to government grant funding, Council can choose to reallocate those funds to other projects. With approximately half our budget unspent I am concerned many projects may never happen and monies ultimately used elsewhere.

Shifting monies

At the June Corporate Services (finance) meeting it was reported that until April 30, $27.5million of the $51.9million budget was unspent. The total budget of $51.9million includes $11million in rates and funding from the government, plus budget items carried over from the previous year.

Staff advised it meant that there was 40% of the budget to be spent in two months and to expect many proposed deferrals at the July meeting.

Clearly $27.5million is greater than $24.4million, which means 53% of the budget had not been spent until that point.

Which activities have not occurred?

In the meeting I asked for a list of what activities were proposed to defer, with the associated original budget, and when they were expected to commence. Staff said the information would be provided at the July Corporate Services meeting.

However, this was not documented in the minutes of that meeting. So, in the June Council meeting I asked why this had not been documented? Mayor Collison deferred my question to the General Manager, Greg McDonald, who deferred my question to the Finance Manager, Wayne Phelps. Mr Phelps agreed the document would be provided and should be in the minutes. The Mayor advised the minutes would be updated.

Until that document is presented, notably after the end of the financial year and when the new budget has been signed-off, there is not a transparent read on what Council has failed to deliver.

Deferrals and restricted assets

When a project is deferred, the budget allocated for that activity is typically shifted into the restricted assets account. The account is designed to set aside money until the project is ready to commence. However, Council can also decide to change plans and later use that money for other projects. A change in budget can mean a change in plan.

Each month there are typically many movements of monies in and out of restricted assets. Without the project breakdown I have requested, it would take a forensic accountant to go through 12 months of line items over thousands of pages of financial documents to trace the movement of these monies. And I am further interested to see exactly how that $27.5million ends up being spent and if it is reallocated to other projects.

In 2019, after an investigation by the Office of Local Government, Council was found to have broken the law by using $380,000 from restricted assets without approval by the Minister: Council broke law with $380,000 misappropriation. Council said it was “inadvertent”, and the monies were replaced once loan funding came through. Council had also wiped out $9.7million of internally restricted assets to begin the Saleyards and White Park projects, before receiving the loans. These type of actions severely impact the operating performance ratio of the Council, which has gone from -4.04 in 2019 to -20.21 in 2022. Council has stated that trajectory is set to continue, but my request for what those projections are in the budget have not been answered.

Time is money

Deferrals are often explained as needed due to “timing issues”. But time is money. Your money. The longer an activity is delayed the more money it costs in real terms.

We are consistently told the costs of goods and services are going up and budgets are blowing out. But if you then factor in delaying projects by 12 months, many of those projects may become untenable. If there was grant money associated with them, the grant money may need to be paid back to the government and the money lost.

Project management

Good project managers are acutely aware time is money and the skill involved to deliver projects on time and on budget. For this Council to have failed to deliver more than half the budget worth of projects is gob smacking.

One reason I’ve heard put forward is lack of staff. It concerns me that staff have not been replaced, positions cut or “adjusted” to the tune of approximately $523,000 by April 30. Council described this line item in the financials as “these are currently being assessed to be apply (applied) towards the 2022/23 efficiency gains.” I don’t believe saving $500,000 on staff costs, while failing to deliver $27million in projects is an efficiency gain!

Failing to plan, planning to fail

All projects need a proper testable and measurable business plan. I asked for the Airport business plan in March and was advised there isn’t one. We are into Year 3 of the airport project, it is losing $1.3million each year and there is NO business plan. There are lots of ideas being pitched, like thought bubbles on a white board, but not actual testable business plan with associated timeframes. The general manager, Greg McDonald, advised in the March Corporate Services meeting that the airport business plan was being worked on. Further they had hoped in the first 12 months of a staff member’s appointment it would have been developed, but “that hasn’t been as successful as we had hoped and Bek is reviewing that now,” said Greg McDonald. 

Bottom line

You can’t hope to deliver $51.9million worth of projects if you don’t have proper business plans, with tactical and prescript weekly deadlines for each project. I question the approach to Council’s project management if it is believed saving approximately $500,000 in staffing will deliver efficiencies and then turn around and blame not enough staff for not delivering millions of dollars worth of projects.

Time is money on all projects and Council don’t seem to have managed the $51.9million budget responsibly if they need to defer $27million worth of projects. In private sector a project manager who delivered that result would no doubt be fired. But this Council doesn’t seem to batter an eyelid, no emergency extraordinary meetings, and continue on a path of blind optimism and thought bubbles of hope. But figures showing more than half the budget and associated projects have not been delivered are the concrete test of Council’s performance. This is another indicator financial people refer to when they say, “Council have lost control of the budget.”

Oh, and don’t forget Council voted last month to prepare the community for a special rate variation…

Kind Regards,

Cr Elizabeth Flaherty

All of the above are my perspectives, opinions and beliefs as a Councillor on the Upper Hunter Shire Council, are my own, which may not (in fact probably don’t) reflect Council’s position, but which as an elected representative I am supported in law to freely express.