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Thursday, 09.20.2018
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12:54 PM
Gaming the System - to do what?

Wikipedia defines 'Gaming the system' as 'using the rules and procedures meant to protect a system in order, instead, to manipulate the system for a desired outcome'.

I think something like that is going on at Manningham Council.

Please let me explain.

I went through all the council Budget and Annual Report documents I had on hand and compared the budgeted Income figure for a year with the actual income figure for the same year.

The budget, off course, is what the council plans or hopes to do in the coming year. It contains estimates, guesses and projections on what might happen in the coming year.

The Annual Report, on the other hand, looks back on the year and details exactly what did happen.

In the past, Manningham Council has been very good at estimating and projecting what income they would take in in the coming year. For instance, years ago, they were able to estimate the income they would earn in the coming year to within around one or two million dollars of what it actually turned out to be.

But in recent years Manningham council's estimates of what they would earn in the coming financial year have been way off when you compare it to the figures they publish later in the Annual Report for that same year.

And as the years go by, the figures show that Manningham Council are getting worse and worse at estimating their income when they prepare their budget.

Let me give you some numbers. Below are the budgeted incomes from the annual Budget documents as well as the actual income from the Annual Reports for the same year. I have also calculated the dollar difference between the two and the percentage difference. Note that all numbers are in thousands. So 112 would be $112,000. The last annual report the council has provided is for the 2016/2017 financial year. So the figures stop there. The figures start in 2012/2013 simply because I have no earlier Budgets along with the corresponding Annual Reports for the year.


Financial Year

Budgeted Income $,000

Actual Income $,000

Dollar Difference

Percent Difference



























C) Page 16, Budget 2016-2017.

D) Page 67, Budget 2015-2016

E) Page 62, Budget 2014-2015.

F) Page 55, Budget 2013-2014.

G) Page 52, Budget 2012-2013.

H) Page 115, Annual Report 2016-2017

I) Page 110, Annual Report 2015-2016.

J) Page 81, Annual Report 2014-2015

K) Page 82, Annual Report 2013-2014.

L) Page 103, Annual Report 2012-2013.

You can see that something is going a bit wrong. Four years ago Manningham Council could estimate their projected income in their budget to within around 2%. Now it appears Manningham Council has forgotten how to do this. Their budget income figures are getting more and more inaccurate as the years progress. And they are always inaccurate in the same direction. That this, they continually UNDERESTIMATE their income to a greater and greater degree.

I think we can all appreciate that budget figures (projections) will never be 100% accurate. But how is it possible for the council to be getting worse and worse at it? How is it possible to be off in their figures by almost $22million for 2016/2017 when a few years ago they could get it right to within 1 to 2 million?

We don't have the Annual Report for 2017/2018 yet, but if the trend continues, they will be out by an even greater figure for the year just ended.

But Ah, you may say. How do we know that the Budget and Annual Report figures are made up by the same things. Are we comparing apples with apples here?

I say we most certainly are. Let me give you graphics showing income figures from the Budgets and Annual Reports for the last two years.

First the budget for 2016/2017.

Next the income figures in the annual report for 2016/2017.

There is only one additional entry in the Annual Report Income. It is for an additional $122,000 for a return on an investment the council has. But that $122,000 does not account for the $21.9 million dollar difference for the year. Otherwise if you compare the items included in the income figures, they line up almost item by item.

Next the budget for 2015/2016.

Now, the income in the annual report for 2015/2016,

Again, the only additional entry in the Annual Report income figure is the return on an investment the council has which came to $522,000. But again, this does not account for the $8 million difference between the budget and annual report income figures for that year. And here also, if you compare the items included in the two income figures, you will see that they compare almost item by item.

As you can see, we are comparing apples with apples except for one line item.

So why is the council underestimating their income when they prepare their budget? It seems they are. And it seems they are doing this to a greater and greater extent as the years go progress.

Does this mean anything? Is there anything significant in the council repeatedly underestimating their income?


Is the council crying poor to the state government?

They could be, but it is unlikely.

It is true that the budget documents are probably more widely read and examined. People are interested in the council's plans for the future. That is: what money is going to be spent on, what they are not going to spend money on and what income they are going to take in, and so on.

Whereas, on the other hand, Annual reports are about the past. And it is possible that people are more interested in future plans than they are about what happened in the past.

It is also true that one of the ongoing complaints that Manningham Council has is that the state government is getting local councils to take on more work, but is not providing the funding to do it.

But if the council is crying poor, then the state government would be able to see it easily. Both the budget and annual report documents are submitted to the state govenment and it is probably safe to assume that someone in the state government reads them and compares the figures in them.


Is Manningham Council just after more money?

In my view, councils are always after money. But what is important to note here is that the planned income in the budget is basically 'spoken for'. That is there are various expenses, projects, plans and so on listed in the budget that basically nearly use all the money that the council plans to take in for that year.

So if the council underestimates their income for a year, then provided the additional income is not in the form of government grants (which typically need to be spent of certain specified areas) then the council will have a windfall that year that they can largely spend on what they like.

This is because any unforeseen income (provided it is not in the form of government grants) is not 'spoken for' in the budget. That is the council has no stated plans at the time the budget is prepared to spend this unexpected windfall so when it appears, they can spend it on whatever they like.

This by itself would be an incentive to understate the projected income for the year. It is always good to have extra money on hand to spend on whatever you like.


Could there be any other reasons?

There is one.

Manningham Council is facing a problem. From the figures they publish, there is a trend for staff pay to take up a larger and larger proportion of the rate money they take in. Usually the council spends about 50% of our rate money on wages and salaries. But in some years it can be much higher.

The problem is this. The more of our rates that go towards wages and salaries, then the less the council has to spend on services to the residents.

And there is a second problem. We expect something of real benefit in return for the money we pay the council. As they spend more of this money on themselves and less and less on the residents, we start to notice and ask questions about what is going on.

Off course, no government body likes to be in this situation because they look as though they are really only interested in taking care of themselves.

Lets take a look the size of this problem. Let us look at the proportion of our rate money that is spent on wages and salaries. Note that all figures in the table below are in $,000 and all figures have been taken from Annual Reports not budgets. In this way we can be sure we are looking at the real figures and expenses.

Note also that I go back seven financial years simply because that is all the Annual Reports I have available.



Rates & Charges

Employee Expenses

Percentage of Rates






























A) Annual Report 2012, page 120.

B) Annual Report 2013, page 103.

C) Annual Report 2014, page 82.

D) Annual Report 2015, page 94.

E) Annual Report 2016, page 110.

F) Annual Report 2017, page 115.


You can see that the proportion of our rate money spent on wages and salaries jumps around quite a bit. Sometimes it can be as low as 42% and other times it is as high as 64%.

Also if you ignore the once-off high in 2011/2012, you will see this proportion is trending upwards. By this I mean that the proportion of our rates they spend on wages and salaries is increasing.

It appears that Manningham Council is having difficulty containing the growth in their own wages. Manningham Council needs to keep this well managed and under control otherwise people will start to ask questions.

But Manningham has a third problem that puts them in an even worse situation.

A few years back the state government introduced a control on the amount by which councils can increase their income from rates. Councils were not allowed to increase the rates they charge - in total - by more than CPI. And CPI is currently around 2.4%

Manningham Council complained about this very strongly. They claimed that they had expenses that increase more than CPI.

And they are right.

The salary they pay their staff increases at around 3.5% each year. This annual increase is actually locked in by their enterprise award agreement. And it is these two things present them with this third problem.

Council rates can only increase now by 2.4%. Their salaries are locked in to increase by 3.5% each year. So basically they are in a situation where they are committed to a salary increase of 3.5% each year but they can only increase rates at 2.4% each year.

What effect will this have on the proportion of our rates they spend on their wages and salaries?

I think you can see that the council is in a bad spot. The government has basically put them in a situation where they need to spend more and more of their rate income on wages and salaries and less and less on services. Soon the proportion will increase from 62% of rates to 64% of rates, then to 68% and 72%.

Soon people will start asking questions. What are they getting in return for all the money they give to the council?

And this off course must never be allowed to happen. Manningham Council simply has to do something.

They need a source of money that increases by at least 3.5% each year and has no strings attached so they can spend it on whatever they need to.

And this is quite possibly exactly what the council is up to by 'gaming the system', as they appear to be doing.

They consistently underestimate their income in the budget and get an 'unexpected' windfall each year. That windfall, provided it is not in the form of government grants, can be spent on whatever they like. Which in their situation just happens to be themselves.


A Lesson to be learned.

It is interesting to note where the council directs their efforts and their skills and energies.

If the council put as much energy and thought into running the council efficiently and reducing costs of services, as they did to ensuring their own pay increases, then they would be able to do a more with less.

But no council, in fact no government body is encouraged to do that. They are not driven by the same forces as private enterprise. What drives government bodies typically is protection of their own jobs, protection of their own salaries, protection of their own superannuation and a desire for power.

Because they can take money by force, efficiency is simply not an issue to them. In private enterprise, you need to offer a product that people are willing to spend hard earned money on voluntarily. But in all government bodies, this is not the case. It does not matter if what they do is pointless, inefficient, wasteful or simply not wanted. They can take money from you by force.

And so for government bodies, reducing costs is simply not an issue. In fact, if you look at the council's efforts to improve efficiency and reduce costs, you can see that, to them, it is just another game they play to satisfy and deflect resident's concerns. That is, they throw the residents a bone every now and then to keep them off their backs.

It is unfortunate that nearly all the people who work in government bodies usually only know this demotivating, wasteful and inefficient government culture.

Fortunately there is one or two I know of at Manningham Council who have real world experience in private enterprise and they provide a stabilizing influence on the self-important arrogance and indifference others have come to accept.

But from what I can tell, the rest of the council is made up or career government bureaucrats who know only how to appropriate and spend as much money as they can and who then go on to convince themselves (and anyone else who is willing to listen), that their work is worthwhile, important, necessary and that are doing it as efficiently as possible.

Most of us who live in the real world do not see things that way.

There was a time, not so long ago, where councils were only concerned about rubbish, roads and rates. As for the other things councils now do, private groups stepped up to fill these needs. And many times, these people volunteered their time as part of charitable organisations.

How things have changed. Now we pay huge amounts of money to a council that has little interest in efficiency, value for money and elimination of waste. A council that devotes all it's best energy to it's highest priority – that is - ensuring their own annual pay increases.


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