11:10 AM2016/2017 Budget – Part 3 – How to keep your head low.
Manningham council has undermined promises the State Government made to the Victorian electorate. Instead of increasing rates by 2.5%, as the electorate was lead to believe, council rates for residential properties in 2016/17 will increase on average by 3.27%. While rates for Commercial, Industrial and Recreational land will see a very large decrease. (Please see the article above "Getting around state government election promises" for the calculation of the 3.27%)
You would think that Manningham council will need to stay off the state government's radar scope for the time being. They will need to keep their heads low, if they are going to escape criticism for what they are doing.
And that appears to be exactly what Manningham council is doing.
They have fiddled other numbers also, besides our rate increase, to make sure they appear selfless and only too ready to serve the ratepayers.
They Understated the Rate Increase early in the Budget document.
On page 16 of the 2016/17 budget document, you see some numbers that the state government will probably be very pleased with.
Please see the following table taken from page 16 of the budget. I have calculated the percentage increase over the prior year's rates and shown it in red. (I have also done this for employee expenses.)
This table says that the increase in rates for 2016/17 is JUST 1.07%. No doubt the state government will be impressed.
But that figure of 1.07% simply cannot be true. And it is not true.
You have to look further into the budget document, on page 42, to find table 7.10. Please see below.
This table on page 42 shows that total general rates increase by 2.5% in total dollar terms after ALL general rates have been taken into account. (Please see the article above "Getting around state government election promises" for the calculation of the 3.27% average increase figure for residential properties given above.)
So how did Manningham get this figure of 1.07% for table 3.1?
It was not that difficult really. In a prior article ("An accounting trick you need to be aware of") I told you of a trick that Manningham council often uses. What they do is inflate the forecast figures for the current year.
You see, when the budget for the coming year is being prepared, the actual figures for the current year are not known. So Manningham has to forecast (or estimate) what they will be. If they make the forecast numbers bigger than they think they really will be, then the following year's increase does not appear that big. And that is precisely what Manningham has done here.
If you look at table 7.10 they 'forecast' the total general rates for 2015/16 to be $80,223,286.
But in table 3.1 (where they get the small increase of 1.07%) they 'forecast' the same total general rates to be $81,335,000. Over a million dollars more!
So by making the forecast bigger in table 3.1, the increase for the following year does not appear to be that big. In table 3.1 the percentage increase over the prior year is only 1.07% but in table 7.10 the percentage increase over the prior year is 2.5%
Numbers are just a game for Manningham council. We see Manningham is both a clever and sneaky council.
Now no doubt Manningham council will have some argument to justify the 1.07% figure and the two different forecasts. But why have two very different forecast figures and two very different percentage increase figures in the first place? And why put the smaller increase at the start of the budget and give the more accurate and larger percentage increase many pages later?
Let us look at their deceptive increase in Employee costs.
'Employee costs' is basically staff pay and remuneration of various sorts.
Wouldn't it be terrible in a year when the rates should only go up by 2.5%, we were to find out that staff pay at the council had actually gone up by 3.2%. That would look bad for the council and Manningham council would need to do something about this.
And they have.
If you look at table 3.1 from page 16, you will see that I have inserted the percentage increase in employee costs over the prior in red text. We can see that they go up by 2.95% then 1.65% and so on.
But how can that be true? If we look further into the budget document, we find that the employee pay is actually going by by 3.2%. This is because a 3.2% increase in pay is built into their Enterprise Bargaining Agreement. That is, council staff get a 3.2% increase each year for just showing up to work. Please see page 61 of the budget.
"Employee costs are forecast to increase by 3.0 per cent or $1.43 million compared to 2015/16. The increase is mainly attributable to Council's EBA for the 2016/17 year which provides for a head line salary increase of 3.2 per cent for Council staff. The budget escalation factor approved by Council for the 2016/17 year was capped at 2.9 per cent. The difference of approximately $0.14 million represents cost savings and efficiencies that management have delivered when applying overall budget targets to service departments." (Budget 2016/17 page 61).
Yes, the council staff are getting a 3.2% pay increase but they state it is only 2.95% early in the budget. You have to dig down further into the budget if you want the whole story.
Manningham council say they have been able to make $140,000 in savings when "applying overall budget targets to service departments".
In other words, have made savings in some unspecified areas and will then use that money to pay for their salary increases. However, this saving -- which is going to be spent on employee costs -- is not going to be included in the figure for 'employee costs'
This is not good accounting practice at all. If money from any source is being spent on employee costs, it should be included as employee costs.
They seem to think that they can understate their real employee costs because the money did not come from 'rate revenue' but from savings made to the 'overall budget'.
No, I am not kidding you!
Note also how they reconcile these 'savings' to 'budgeted cash flows' on page 66 in the table under point 11.1.1. If anything, that table is meant to hide the truth not reveal it.
So how is all this chicanery going to work? How will they get these 'savings' into their pockets?
Will they record the savings as cash and then draw down on that cash when comes the time to pay themselves? Really?
And will they also hope that people will still think that they only got a 2.95% pay rise and not a 3.2% pay rise?
This is totally deceptive and terrible accounting. But it is typical of government standards of ethics.
So where exactly did these 'savings' come from?
Remember that the council is funding their salary increase by 'savings' they made to the 'overall budget'. Look what they have to say on 66, point 11.1.1 of the budget under the title "Operating Activities ($0.21 million decrease)"
"The cash outflows associated with employee costs is projected to increase by 3.2 per cent which is consistent with Council's Enterprise Bargaining Agreement. The increase outflow is partly offset by an increase in operating grants (refer to 5.1.1), user fees and monetary contributions (refer to 10.2)."
First note how employee costs are no longer spoken of as 'costs' but rather as 'cash outflows'. Is this why they don't include these costs in 'employee costs' because they are really 'cash outflows' and not 'expenses'. Boy, they think we are stupid!
Here we also see where these 'savings' are coming from.
It comes in part from State Government grants. Manningham would like us to think these grants are for 'operating expenses', which they are. But that is not the whole story. These grants from the State Government are given to the council to do certain things the state government wants them to do. Please check page 25 of the budget where each of these grants are earmarked for specific purposes such as 'food services', 'maternity and child health', and so on.
These grants are not for general 'operating expenses', as the council would like us to think. The grants are given so the council can provide specific services to certain ratepayers and should really go towards providing those services. They should not be spent on all staff to contribute to their 3.2% pay increase.
Next is User Fees. Please take a look at pages 90 to 110 of the budget. You will see page after page of fees, all in small font. The council charges a fee for just about anything they can. If you want to hold a court party, that will be $105 thank you. If you want to busk on the streets that will be $105 per day thank you. If you want to shoot film in Manningham that will be $105 per hour. If you want a charity clothing bin in front of your shop that will be $105 per bin thank you. If you want to camp on private property (what, like you back yard?) that will be $105 thank you. And the list goes on and on. These are unnecessary fees and charges. They bleed the community of as much money as possible and kill off all community spirit. And then Manningham council complains that they want to foster a sense of community and need even more money to do so! What they are actually doing, all along, is lining their own pockets.
Finally we come to monetary contributions. This is money that people just give the council or that developers give as 'developer contributions'. Developer contributions is money paid by land developers to councils so councils can provide parks, facilities, and other services that people will require after they buy and move in to the properties built by the developers. These 'contributions' were never meant to pay for annual salary increases.
So we see that these are not savings due to efficiency improvements brought about by the management and staff as council would like us to thing (see above quote from page 61 of budget). They are savings scraped together from various places – places that decent people would not expect. The council puts it quite accurately. They are savings made "when applying overall budget targets to service departments."
I have said it many times, Manningham council puts themselves, their pay rises, their superannuation and their entitlements first and foremost. Everything and everyone else, including you and me, comes in a very distant last. As Paul Keating used to say, 'The horse called Self Interest always comes in first.'
One other thing, look at how Manningham council buries all the snippets of relevant information in various places in the budget. They would never dare to put them all in one place where their greed, treachery and deception would be obvious.
Now We Come To The Sneaky Capital Works Budget.
They also fiddled the capital works budget. What they did is spike capital works expenditure for next year only. Please see page 20 of the budget.
Capital works is the buildings, parks, facilities, etc. the council provides for the ratepayers. It is an essential and basic work of any council. Please see their capital works budget on page 20.
Note the massive spike in spending on capital works for 2016/17 and notice how this spike in spending is 'pulled forward' from the spending of future years.
When the state government sees this they will say 'What a good council Manningham is! Not only have they decreased their rates, and their employee pay packages but they have dramatically increased how much they spend on the community. If only every council could be that good!'
Do you know why we have this spike in capital works spending? It is the replacement of our plastic rubbish bins (Budget page 1). Almost $6million of that $47.8 million is for the replacement of our rubbish bins. If you take this amount out of the capital works budget it brings it back to around $42 million which is almost the same as the other years spending on capital works.
The bins need to be replaced as part of the new waste contract. However I find it interesting that the council was able to arrange for the bins to be replaced next year, the very year they need to look as good as possible to the state government. An odd coincidence don't you think?
What is this budget really?
This is not a genuine budget. It is not really a financial document. In my view, it is a political document designed to protect and advance the interests and pay of council workers and protect them from their scheming.
Who does Manningham Countil think they are fooling?
Do they really think the State Government only reads the first few pages of their budget, see numbers they like, then move on to check the next council?
If the State Government and the Victorian Auditor Generals Office are really that shallow in their investigations, then this strategy would take the focus and scrutiny off Manningham and make the State Government focus on other councils that have not been that deceptive and sneaky.
Who really is doing the job of council properly?
Who shows us the right way to go about the work of council?
It is the private contractors again, off course.
Again they come to the rescue and do the same (or better) work at less cost. Off course I am talking about the waste collectors. They are private companies who know how to manage staff, resources, procedures and equipment properly. Not like Manningham Council who have no idea how to manage people, resources and processes to do the same job at reduced cost.
Please see Page 46 of the budget.
"The reduction of 1.17 per cent for the year is comprised of a 2.5 per cent increase in the general rate, whilst the waste charge for the new standard waste service with an 80 litre waste bin will decrease from $270 to $205 (24.1 per cent reduction)." (Page 46 of the 2016/17 Budget.)
The private waste contractors are able to deliver a 24.1% reduction in cost while doing the same job. That is what I call good, intelligent and informed management.
So maybe we should have the garbage collectors run the entire council? They certainly seem to know what they are doing.
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