Mackenzie District Council financial report indicates $4.7m loss

The Mackenzie District Council is staring down the barrel of a $4.7 million loss as its final accounts for 2022-2023 are assembled.

A preliminary financial, to be tabled at Tuesday’s council meeting in Twizel, shows an operating deficit that is $6.08m below a budgeted surplus of $1.35m and sheds more light on ongoing staffing issues and the extra costs involved in using contractors.

The financials, written by finance manager Sandy Hogg, said the report “is a draft” as there were still a number of year-end processes to be completed.

“The draft and preliminary overall council performance year to date is showing an operating deficit of $4.732m compared to the budgeted surplus of $1.355m,” the report says.

“This includes both cash and non-cash items and a range of items either unexpected or related to the inflationary market conditions.”

Featuring prominently in the report were the ongoing staffing issues.

“With staff vacancies in roles difficult to fill in challenging market conditions, contracting costs were incurred for vacant staff positions.”

The report said costs “obviously exceed the staff budgets in those areas although are partially offset by the related underspend ($803,000) in personnel costs”.

“In recent months we have been successful with recruitment of staff, although this will only alleviate the contractor spend for the latter months of this (2022-2023) financial year.

“The financial savings of this successful recruitment compared to contractors will have a greater effect for 2023-2024.”

The report, under “other expenses” in the operating revenue category that includes staffing and contractor costs, showed an “unfavourable variance” of $5.059m.

The following areas were over budget in using external resources to cover previous staff vacancies: Community facilities by $533,013; Roading business unit by $322,151; IT support by $118,869; Operations management by $220,697; Engineering management by $222,006.

Over budget were also solid waste charges as a result of commercial waste contract changes; resource planning (district plan review) by $394,783, due to legal and consultancy support; Destination Mackenzie by $114,500, due to final project management costs received.

Unbudgeted expenditure of $3.618m was a big ticket item under “other expenses” for the emergency reinstatement works for floods.

Inspectorate contractors were over $402,435 over budget due to a budgeting error in the 2022-2023 Annual Plan with an external building manager and assurance contractor not budget for.

Hogg’s report said the key variations were consistent with the previous regular financial reporting to council meetings.

Other highlighted areas included:

• Less revenue than budgeted ($926,000) received from financial contributions, and fees and charges. These are dependent on developer activity and the conditions of their consents.
• Increased revenue from Waka Kotahi (NZTA) subsidies of $2,360,592 as a result of claims for emergency works/expenditure in regards the July, November and December 2022 flood events. This expenditure was approved by council, and council received the higher subsidy of 71%.
• Income from assets vested in council was budgeted at $2,979,000, and other gains and losses at $236,000. The vested assets and movements from valuation of forestry, investment property and land and buildings are still being compiled.
• Depreciation expenditure was higher than budget by $1,310,000 as a result of the infrastructural revaluations from 2022 increasing significantly in value. This was consistent with market inflationary effects, and aligned with the impacts felt by all councils and businesses, the report said.
• Increased expenditure in emergency reinstatement of roads from 2022 rain/flooding events. Interest costs also increased from what was budgeted due to higher interest rates.
• Consultancy and contracting for staff vacancies (only partially offset by savings in personnel budgets).
• Three waters reform projects (the latter for which revenue was received in prior years, but costs in 2022-23).
• Council spent less than half of its total capital budget of $22.7m. A number of projects have been re-budgeted into 2023-2024.