Overdraft to help council meet cash regulations
Wednesday October 28, 2009
Cobar Shire Council will apply for a $3million credit facility to ensure it meets local government regulations for external cash restrictions.
Councillors were presented with a supplementary report on the matter at last week’s general meeting of council after it was brought to council’s attention the week before that it was not in compliance with part of the Local Government Act.
According to a letter from council’s auditors Morse Accountants and Advisors, council “did not have sufficient cash assets and investment securities to cover its external restriction”.
Speaking at last week’s meeting, council’s director of corporate services Wally Black said the credit facility would act as a “safety net”.
“We have the money just not the cash,” he explained to councillors.
Mr Black said that council was waiting on a major payment from the RTA for road works carried out west of Cobar, which could almost eliminate the need for the credit facility.
According to the Local Government Act, a council’s restricted funds are subject to particular rules about their use.
The auditor’s report on Cobar Shire Council found that council’s general fund had borrowed an amount of money from restricted funds to cover the shortfall.
The Local Government Act allows for councils to grant an internal loan between particular funds, however the loan must be approved by the Minister for Local Government.
Councillors moved a recommendation to seek ministerial approval for the internal loan.
The auditor’s report found that the situation came about due to council’s extra capital works projects last year.
“Over the past year council has invested over $10.6m in capital works within the shire, which is nearly double the amount spent in 2008.
“This has drained the cash and investments of council from $5.88million in 2008 to $1.456million in 2009,” auditor Jeff Shanks reported.
A number of councillors raised concerns about the amount of the overdraft facility, with Cr Peter Yench having his name recorded as voting against the motion.
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