Is the City of Wanneroo in a financial mess?

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The City of Wanneroo’s failure to meet two benchmarks has led to claims on social media that the council’s finances are in the red. File picture

IS the City of Wanneroo in a financial mess?

Not according to information supplied by the city to the state government’s My Council website but that has not stopped claims the city is in the red being posted on social media during the local government election.

The claims surfaced after an auditor’s report showed the City of Wanneroo had failed to meet the current ratio and asset sustainability ratio guidelines set by the Department of Local Government for three years in a row.

Even the Department of Local Government has said that while the city had been required to report to the Minister and the ratepayers (via the city’s website) on what actions the city had taken about some matters raised in the audit, claims the city’s chief executive officer and councillors had been running the city’s finances in the red were not supported by the matters raised by the auditor.

The My Council website says a financial health indicator (FHI) of 70 and above indicates sound financial health.

The most up-to-date information available allows you to compare the City of Wanneroo’s FHI of 71 for the 2017-18 financial year with say the City of South Perth’s FHI of 51 – the metropolitan average for the same period is 72.

The financial health indicator is calculated using financial ratios published in each local government’s annual financial report.

The biggest difference between the two councils financial data on My Council is that Wanneroo shows an operating surplus ratio of 9.1 compared with South Perth’s ratio of zero.

An operating surplus ratio is the measure of a local government’s ability to cover its operational costs and have money left for capital projects and other purposes.

The My Council’s comparison of the two local government’s shows both scored an asset sustainability ratio of zero in 2017-18.

But they were not the only local governments to come to the attention of the department for their asset sustainability ratios.

“With the 2017-18 financial statement audits, 78 local governments had a significant matter reported in their audit report,’’ the department spokesman said.

“Within those 78 audit reports, the asset sustainability ratio was referred to on 37 occasions and the current ratio on three occasions.’’

The data shows both the Wanneroo and South Perth councils scored current ratios of 2.8 in 2017-18 with current ratio defined as the ability of a local government to meet its short-term financial obligations with funds it can access quickly (also known as liquidity).

In 2016-17 Wanneroo scored a current ratio of 3.1,  in 2015-16 a score of 3.6 and in 2014-15 a score of 2.8.

An officer’s report in August said the City of Wanneroo did not agree with the department’s generalised view as it deemed “restricted” cash as un-accessible.

The report said the city’s cash holdings (restricted and unrestricted) had progressively improved from $316.9 million in 2014-15, $338.7m in 2015-16, $340.8m in 2016-17 and $363.5m in 2017-18.

During the financial years 2012-13 to 2017-18 inclusive Wanneroo has not scored an asset sustainability ratio above zero – the ratio measures the extent to which the city’s assets are being replaced as they reach the end of their useful lives.

For the 2016-17 financial year Wanneroo’s FHI score was 69 while South Perth’s was 63 and the metropolitan average was 78.

In 2015-16 when the metropolitan average was 76, Wanneroo scored 70 and South Perth 84.

South Perth achieved a FHI of 97 in 2014-15 and Wanneroo’s was 72 compared with the metropolitan average of 81.

In 2013-14 both Wanneroo and South Perth had an FHI of 86 while in  2012-13 Wanneroo’s FHI was 83 and South Perth’s was 70.

Wanneroo Mayor Tracey Roberts said the city had almost $3 billion in assets (2017-18) and took the pressure off rates by securing $46.4m in grants, subsidies and contributions for 2017-18.

Cr Roberts said the city had also contained the rates rise to 1.8 per cent, the lowest in a decade, which was testament to the city’s practical financial management.

“At a recent business breakfast, the WA Treasurer Ben Wyatt praised and acknowledged the city’s ability to limit the rate increase to 1.8 per cent, considering the growth and capital demands the city faces,’’ she said.

Also she said the city’s annual financial reporting had continued to be recognised for its quality and transparency with it winning four awards in the past four financial years in the Australasian Reporting Awards which measured excellence in annual reporting.

“Receiving three gold and one silver in the awards was recognition of our openness and accountability to ratepayers and residents, the people the city works on behalf of.

“The Australasian Reporting Awards recognise high-quality coverage of all aspects of the ARA criteria.

“Award winners must provide full disclosure of key aspects of core business, address current legislative and regulatory requirements and be a model for other reports to follow.”

No breach by Wanneroo Mayor and councillors