George Reynolds, 19 Agnes Street, Beaumaris, 3193 P. 0430900822. E. email@example.com
Formal complaint to Auditor General. Annual accounts of Bayside City council.
The Auditor-General, State of Victoria.
35 Collins Street
Dear Mr Greaves,
I wish to revisit our earlier correspondence on the topic of the truth, honesty and fairness of the Annual Accounts of the City of Bayside. In this new complaint, the accounts in question are those prepared, published and certified by Bayside City Council for the year ending June 30th 2017. My understanding, from correspondence with the Governance Manager of the City of Bayside, is that you have certified these accounts without qualification.
I recognise that you have “taken the Fifth Amendment”, in your letter to me of 10th April 2017.Your letter states “I do not intend to address your (my) issues of contention again..”. This does not resolve the “truth, honesty and fairness” matter. Indeed, your “opinion, (that) the financial report presents fairly, in all material respects, the financial position of the Bayside City Council …”, is questionable. IT IS MY FURTHER CONTENTION THAT THE FINANCIAL STATEMENTS OF BAYSIDE CITY COUNCIL FOR THE YEAR ENDING 30TH JUNE 2017, DO NOT PRESENT FAIRLY, THE FINANCIAL TRANSACTIONS OF COUNCIL, AS OF THAT DATE.
My evidence for this contention is as follows:
1. There is a fundamental flaw in the Local Government Model Financial Report (LGMFR) at paragraph G25. This paragraph states that “monetary and non-monetary contributions are recognised (as income) when council gains control over the contribution”. It quotes AASB 1004
12-15 as its supporting referenced Accounting Standard. However, the Standard has three qualifications for recognition as income. These are:
– the entity obtains control of the contribution, and
– the economic benefits … will flow to the entity, and
– the amount of the contribution can be measured reliably.
ALL THREE QUALIFICATIONS MUST BE MET SIMULTANEOUSLY. (Note that AASB 1004.13 also states “Contributions that are Income exclude contributions by owners”.)
2. Bayside City Council, in common with many others, exploits the defect at G24. Council claims contributions as income when they meet the single control requirement. Despite failing to meet both the “economic benefit” and the “reliable measurement” criteria, Council claims, as income, the surplus revenue collected from the General Rate payments. (How can surplus revenue provide an economic benefit?)
3. In your letter to me dated 2 February 2017 (Reference 10.09.03/1 Item1a) you ignore the first paragraph in the accounting policy note. This lists, in the policy note, the recognition of income requirement as stated in AASB 1004.12. You then go on to assume that (all) revenue is recognised as income, despite the fact that some revenue, particularly the General Rate Surplus, fails to meet the triple test in AASB 1004.12. THE LOCAL GOVERNMENT ACT, AT s165 AND s141(c) MAKES PROVISION FOR RATE REVENUE NOT ABLE TO BE RECOGNISED AS INCOME, TO BE RETURNED TO THE CONTRIBUTOR.
4. The LGMFR, at Box 1, para 6, on page 5, also states “In the event of any conflict between the requirements of the LGMFR and the requirements of the AAS, the requirements of the AAS take precedence.”
I am thus able to claim, on unquestionable evidence, that any Council stating that a rate revenue surplus becomes Council Income, is misappropriating ratepayer funds.
I will leave aside the question of which sectors of the 2017 Annual Accounts of the City of Bayside demonstrate Error or Fraud (EoF). That is the function of a competent Auditor, not a financial analyst. However, as an analyst, I suggest that:
1. The Comprehensive Income Statement is clearly defective. It would be better prepared in the format set out in AASB 101.103. Note that an expenditure on depreciation represents a transaction involving owner contributions. AASB 1004.13 prevents owner contributions being recognised as income.
2. An income statement needs to be assembled, and balanced, for each and every asset. Each income statement must then be reconciled with the Source of Funds estimate required by Regulation 10 (1)(b) in the Local Government (Planning and Reporting) Regulations, 2014.
3. The individual asset statements then need to be consolidated into four Standard Income Statements representing the four streams of revenue open to Councils, namely:
– General Rate
– Municipal Charge
– Special Rate
– User Fees and Charges
(Standard Income Statements were required prior to 2014, but not correctly utilised).
4. Finally, the four Standard Income Statements be consolidated into a Comprehensive Income Statement.
5. Note 31, the cash statement, needs critical review. It is the repository of the unspent and misappropriated funds. (The misappropriated funds are spent on providing cheap goods and services to the User Fee stream). This Note is also defective (in Bayside) in failing to provide “restricted funds” to meet the outstanding leave liabilities.
I trust that you will give due consideration to my complaint. I will be copying this letter to a number of other authorities concerned with “Rate Capping”. I have previously raised these General Rate issues with Bayside City Council, the Essential Services Commission and the Environmental and Planning Committee of the Parliament; they will be advised of the issues above.
Bayside Ratepayers Association.
agvbcc021017; rev1; 041017. Author GR.