On 28 & 29 November 2023, the Sydney Morning Herald (SMH) published a series of articles that does not convey the full and true picture of City of Ryde's financial situation, choosing to include only excerpts of the detailed and comprehensive financial information provided by Council.
The SMH continues to report that former state auditor-general Tony Harris describes Council's financial situation as "exceptionally strong", but that is simply not the case, as was outlined by our Chief Financial Officer (CFO) at the 28 November Council meeting. The detailed statement provided by the CFO can be found below.
It is important for our community to understand that their Councillors have been provided with numerous, professionally substantiated financial statements and briefings on the alleged wrong doing of past administrations, yet in some instances, the SMH has been selective in its coverage of the matter, quoting "Council" sources other than quotes from our Mayor, a Council spokesperson or myself, that is contrary to Council's actual position.
Our community can have confidence that the current Council and senior management are correcting our financial situation and will continue to be open and transparent with you regarding the implementation of the Action Plan (attached), collaboratively developed with the Office of Local Government (OLG), for correcting these financial wrongs, and allowing us to get back to delivering the projects, programs and services that make the City of Ryde the place to be for opportunity and lifestyle at your doorstep. It is also important to note that the inquiries by the OLG and the Independent Commission Against Corruption (ICAC) are ongoing.
Council has also provided detailed financial and other substantive information to the Public Accounts Committee of the NSW Parliament and is awaiting feedback from them on whether any further Council assistance is required on these matters.
- Statement Authorised by City of Ryde Chief Executive Officer Wayne Rylands.
Chief Financial Officer Statement at Council Meeting of 28 November 2023
The SMH was provided with the following detailed written response to three questions that it asked Council prior to the first article's publication on 28 November 2023. However, the Herald chose to only publish selected excerpts which did not accurately convey Council's true financial position.
In the interests of maintaining its transparency with the community regarding the Ryde Central project and other major planned capital expenditure, the responses provided to the three questions were as follows:
- According to the audited 2021/22 financial statement, Ryde reported an operating surplus of $34 million after excluding grants for capital purposes, after meeting some $134 million in total expenses. It has over a billion in assets and current assets are twice its liabilities. How does this equate to a "precarious" financial position, as described in the report to councillors published last week?
- How does the return of funds to externally restricted reserves from the Ryde Central reserve undermine the relatively healthy financial fundamentals outlined in previous annual financial statements?
Response:
City of Ryde did not report an operating surplus of $34m excluding capital grants and contributions (capital income), in fact the operating surplus of $34m includes capital grants and contributions.
When you exclude the capital income, the operating surplus is $15.6m as per what was reported in the Audited Financial Statements for Financial Year (FY) 21/22. It is important to note that this surplus of $15.6m includes non-cash accounting adjustments such as the revaluation of investment properties required by Australian Accounting Standards. In FY 21/22, this non-cash revaluation resulted in an increase of $13.2m which was reflected in the Income Statement as other income. This is not real cash. When this amount is removed, Council's operating surplus is only $2.4m for FY 21/22.
In FY21/22 Council had $1.9 billion of assets. This comprises mainly of community assets that cannot be sold such as roads, parks, buildings, bridges, footpaths, stormwater, kerb and gutter, carparks, traffic facilities etc. These assets service the community.
The current assets include cash and investments which are held for not only current liabilities but also are funds held for future commitments. Cash and Investments contain externally restricted funds, internally restricted funds and unrestricted cash. These Restricted Cash funds are funds set aside by Council to meet regulatory requirements, allocated against future projects/activities and to safeguard Council in scenarios of unexpected increases in expenditure, and meet long term financial obligations. You cannot utilise these funds other than for the purpose it is collected, and it must be managed and held in accordance with legislation. For example, funds collected from developer contributions are externally restricted funds. Accordingly, they must be held until such time as expenditure occurs, and this expenditure may not occur until at a future stage. The Legislation imposes strict obligations on how these funds are to be managed and spent.
The Office of Local Government has described the movement of funds from externally restricted funds, through written correspondence, as the "illegal use of restricted funds", and that 'there may have been, or may be potential for, significant waste of public money'. Council resolved to return these funds to the correct Externally Restricted reserves and adopted a new Cash Reserves Policy to ensure these actions do not occur again.
The purpose of this Cash Reserves Policy is to ensure that there is good governance and best practice financial management with the treatment and administration of Council's Cash Reserves. It has been developed to provide clarity and transparency in the restriction and withdrawal of funds in order to provide for long term expenditure as outlined in Council's long term financial plan.
It is very misleading to make assumptions about Council's financial performance and financial health by looking at the Financial Statements in isolation. The Financial Statements are merely a report card or snapshot as a particular point in time, being 30 June each year.
What is far more important is the 'going concern'. Council has a long term financial plan, and this can be found on Council's website Resourcing Strategy. The Long-Term Financial Plan (LTFP) is an integral part of Council's Resourcing Strategy, it supports the achievement of Council's goals as identified in the Community Strategic Plan, Delivery Program and Operational Plan. This plan sets out what resources will be needed, i.e., time, people, assets, and money in order to deliver essential services and infrastructure to the community.
Currently there is minimal or no funding for the major projects highlighted in Council's Report. Council's Long Term Financial Plan (LTFP) models Ryde Central Project with borrowing at 5.15%. However, this does not factor in all the other critical projects that are contained in the Council Report. These projections do not include funds required for Eastwood Central $81m, TG Millner $30m and Macquarie Centre (AMP) Voluntary Planning Agreement of $30m. Cashflow is critical and when you at look at the LTFP, with Ryde Central Project borrowings alone, the cashflow dramatically starts to decrease and over time ends up in a negative position. This is a precarious financial situation, and it means that Council will become financially unsustainable and will lead to Council being placed into administration. All of this information has been provided by staff to the current Councillors at briefing sessions.
In addition, Council recently undertook a review of its Voluntary Planning Agreements (VPAs). This matter was reported to Council at its 26 September 2023 meeting which detailed the findings and Council's financial liabilities arising as a result of these VPAs. The financial implications of these VPAs have never been considered nor funded previous to this review. This review identifies an ongoing financial impact of at least $5.8m per annum to Council's budgets. Council will need to also, as a priority, provide for this expenditure in our upcoming budgets as these VPAs are binding on Council. The Council Report which deals with the VPAs' and its financial implications can be found at Council Meeting - 26 September 2023
- Do you agree that the financial statements indicate that the council has significant capacity to fund new capital works from new borrowings and the sale of properties that are not providing core council services?
Response:
As stated above, it is financially irresponsible to make decisions that have major financial implications by merely looking at Council's financial statements. The Financial Statements are merely a report card or snapshot as a particular point in time, being 30 June each year.
As stated in the Report to Council, Council does not currently have the capacity to fund these new capital works from borrowings, Council does not have sufficient cashflow to service a loan repayment of $21.1m per annum that would result from borrowings of $254 million.
