The KCDC is good at ‘smoke and mirrors’ accounting and we have another example in the latest annual report for 2018-2019 which it has now posted online here.
The claim of a $3.1 million surplus occurs on page 89 of the pdf. No doubt the council will be claiming this in a media release.
Iride asked two financial analysts to comment: their replies:
There is not a surplus — the Council actually traded at a loss of $4,923,000 — this is because they made a loss of $8,021,000 on derivatives.
And this loss is actually part of their operations.
You will see from the accounts that the Council has actually lost $10,310,000 in the last three years in derivatives. I have never understood derivatives, but know that Aldous and I spent some time with Glenn Maxwell some years ago and I was just as confused at the end as I was at the beginning.
It would be interesting to know where the investment in derivatives is shown on the balance sheet.
Of real concern is that the revaluation of assets reserve is now $919,146,000 out of our total equity of $1,504,978,000 – a total of 61 % — no doubt this is to enable the Council to borrow more funds.
Creative accounting at its best!
I have attached an update of the summary of KCDC annual accounts including the 2018/19 data.
As you will see the $3.098 surplus is lower than last year’s $5.911 result. I noted that there is no increase in staff or Staff Expenses. Probably because a copy of the summary to 2017/18 was provided to Maxwell and Michael Scott. However, the disturbing aspect is the fact that Operating Expenses (doing the work) has seen no change for a very long time.
Mark de Haast is very shrewd and will be working very closely with the Manager of Financial Services. You will also note that net debt is now down to $147 million.