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26. 11. 97
AUDIT SUB-COMMITTEE
17 NOVEMBER 1997
A meeting of the Audit Sub-Committee
was held on Monday 17 November 1997 at 12 noon
| PRESENT: | Councillor David Close (Chairman), Councillors Oscar Alpers and Margaret Murray. |
| IN ATTENDANCE: | Mr Jim Palmer (Audit New Zealand) |
| APOLOGIES: | Apologies for absence were received and accepted from Councillors Ian Howell and Garry Moore. |
| An apology for lateness was received from Councillor Margaret Murray. |
The Committee reports that:
PART A - MATTERS REQUIRING A COUNCIL DECISION
1. DRAFT ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 1997
The draft Annual Report for the Christchurch City Council for the year ended 30 June 1997 has been separately circulated to Councillors.
BACKGROUND
The Local Government Act requires the Council to adopt the 1996/97 Annual Report by 30 November 1997. One of the responsibilities of the Audit Sub-Committee is to approve the draft accounts and Annual Report prior to finalisation of the audit. The preparation of the financial aspects of the Annual Report is a complex process which is largely constrained by accounting standards particularly in relation to the overview statement of financial performance and the statement of financial position. The complex nature of the Council's financial organisation makes the preparation of these accounts a huge task. John Mackey is to be commended for his dedication and commitment to this complex task in his first year in his current position.
The Council has already undertaken a monitoring process through its Committees of the actual results for 1997 based on the management accounts. It is therefore not the role of the Council to monitor the results at management level on this occasion but rather to view the way in which the Council's results are presented for ultimate publication.
OVERVIEW OF RESULTS FOR THE YEAR
Statement of Financial Performance
The actual result on year end shows an operating surplus of $2.5M against a budgeted operating deficit of $2.4M. There are a number of reasons for the improved result which are expanded on below.
Interest Income
Included in the amount of $7.4M is $1.38M relating to interest received on advances to two subsidiary companies, Windsor Central Ltd and Travis Finance Ltd. While the amount is shown as operating income this is not additional cash to Council as a contra entry is in the Statement of Financial Position to reflect the purchase of additional shares to enable the companies to meet the interest liability.
Dividend Income
The increase is a direct result of the additional $2.4M received from CCHL.
Levies, Grants and Donations
Included in the $6.853M is $3.1M relating to external funding for capital projects. This was budgeted as a capital receipt and not included in the original operating projection of $2.4M deficit. However, financial reporting regulations require that money received is shown as operating revenue.
Significant Activity Expenditure
It is difficult to make a meaningful comparison of actual to budget for the year as the actual result includes carry forwards from the 1995/96 year and excludes carry forwards from the 1996/97 year.
Other Costs
The amount of $2.154M relates to the write-off of the old Centennial Pool and the expensing of redundant Cathedral Square redevelopment design costs.
CONCLUSION
The Statement of Financial Performance for the year reflects a number of unbudgeted revenue and expenditure items. If the external funding for the capital projects and the internally generated interest is deducted and treated as per the annual plan the actual result is a deficit of $2.0M compared to a budgeted deficit of $2.4M.
| Recommendation: |
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The meeting concluded at 2.05 pm
CONSIDERED THIS 26TH DAY OF NOVEMBER 1997
MAYOR