Dr Pim Borren was directed by the council’s audit and risk subcommittee yesterday to instruct incoming councillors at the start of next term how to achieve an annual balanced budget and how to achieve the budget when unanticipated expenditures arise.
The subcommittee yesterday also referred a report on the council’s practice of budgeting for operational deficits, by corporate services general manager Nick Donnelly, to the final council meeting of the term next week so all councillors were made aware of it.
In his report Mr Donnelly noted first that the council was budgeting for deficits, and then was recording additional millions in unbudgeted deficits.
In the audit of the council’s 2020-21 annual report and the audit plan for its 2021-22 annual report the council’s auditor had raised the issue of the council’s ongoing operating deficits, he said.
In the most recently completed long-term plan three-yearly cycle, from 2018-19 to 2020-2021, the council had planned to run a $6.1 million deficit, but overshot that mark.
The actual deficit was $11.5 million more than the budgeted deficit set out in the long-term plan, Mr Donnelly said.
Of that, $4.8 million was due to adjustments made by the council in year two and year three of the plan and a further $6.7 million was due to unbudgeted spending, he said.
During yesterday’s discussion Dr Borren noted councillors had been presented with deficit budgets, "which you approved".
"By and large, I would have to say it is governance’s fault," Dr Borren said.
"Then there’s the issue of whether the organisation is managing [its spending] to the budget that has been approved, and if we end up with a bigger deficit than that which was planned, then that’s the chief executive’s fault."
The audit and risk subcommittee independent member Andrew Douglas said "without a doubt" the council needed to take action off the back of the report.
"I think we know these actions can be tough, but we shouldn’t avoid them because they are tough," he said.
Cr Hilary Calvert, who chaired yesterday’s meeting, said if councillors were making a decision that included a service level change in the hundreds of thousands of dollars, they should be told what effect it would have on rates for it to be offset by revenue.
The subcommittee yesterday asked for regular updates to the subcommittee in future to keep track on work towards achieving a balanced budget.
It also called for a detailed breakdown as to how the council’s public transport reserve for Dunedin decreased nearly $12 million from $5.4 million in 2016 to a deficit position of $6.5 million in deficit in a six-year span.
After the public meeting yesterday, the subcommittee met with the council’s auditors in a closed-door session to discuss its present annual report and the auditors’ formal comments and recommendations made in the audit management letter.
