Shires on financial high-risk alert

The Shire of Denmark and Plantagenet have been classified as “high-risk” local governments in a Department of Local Government, Sport and Cultural Industries report due to respective financial situations.

The two Shires are among 22 other local governments that the DLGSC has identified with a high level of risk as part of its 2017 Risk Profile report.

Both have been listed due to financial health concerns relating to key performance ratios which are not being met.

Shire of Denmark chief executive Bill Parker said though being considered high risk by the State Government was concerning, he believes the financial ratios will improve.

“The Shire did not meet the benchmarks for the current ratio, asset sustainability ratio and operating surplus ratio,” he said.

“With the exception of the asset sustainability ratio in 2015, the Shire has not met these benchmarks for a number of years.

“Additionally, we have two asset ratios that are not being reported — this is due to not having an asset management plan.

“Council has provided the administration with the direction, support and resources to address these issues so I am confident that the Shire will trend positively over the coming years.”

Shire of Plantagenet chief executive Rob Stewart said the Shire’s current ratio was below the required threshold due to storm damage payouts.

“The Shire’s 2016 result is lower than normal due mainly to storm damage payments of almost $450,000 which had not been recouped by the end of the financial year,” he said. “For all of the other ratios that are below standard, the main reason they are below target is an increase in operating expenditure associated with increased depreciation. This has come about from the application of Fair Value to WA Local Government Financial Reporting and the resultant effect of revaluation of infrastructure assets.”

Mr Stewart said the Shire was confident of improvements.

“This will involve work on verifying the remaining useful life of infrastructure and ensuring depreciation rates are reliable,” he said.