The annual report for the year ended June 30, 2015 for the South Gippsland Shire Council includes in the 2015 Income and Expense Statement a Payroll Component of an extraordinary expenditure of $23.2 million.
This compares against the Rates Income of $35.8million.
Thus 65 per cent of Council Rates are spent on the payroll.
Of course there are many associated costs such as Fringe Benefits Tax, the tax on perks, at $154,000 that year and much more in other years.
Other costs, including the provision of motor vehicles to senior staff, remain hidden. Why?
It is interesting to take the Actual Payroll Expenditure over the last few years and compare that to the expected expenditure as per Official Budget figures.
It is immediately obvious that the increases in the forward projected budget figures are much lower than in the actual figures.
Based on past performance I do not believe the budget figures for one moment.
Salaries and wages amounts are as follows:
• 2013: Actual $20,330,000
• 2014: Actual $21,684,000, increase $1,354,000
• 2015: Actual $23,161,000, increase $1,477,000
• 2016: Budget $24,127,000, increase $966,000
• 2017: Budget $24,697,000, increase $570,000
• 2018: Budget $25,464,000, increase $767,000
• 2019: Budget $26,278,000, increase $814,000
For a small shire, it is very obvious that the manpower establishment is very much out of control.
When there is a culture of creating more positions whenever a problem arises together with extra spending in the hope the problem will be solved somehow, then usually the result are disastrous.
Such an approach does not work.
Newly created managers never work in isolation because in order to ‘manage’ they demand and create more positions to help them in their ‘management’, in particular when the phenomenon generally referred to as the “Peter’s Principle” is embedded in the culture.
The 2014/15 Financial Results reveal that one (1) ‘Responsible Person’ was awarded a salary increase of about $40,000 per year.
If this position received extra benefits it is not mentioned.
I estimate that, one way or another, this position costs the ratepayer $600,000 per year and possibly more.
If I then set the actual, direct, effective, working hours at 1,100 per year, the cost is $545 per hour. Food for some serious thought!
In addition, nine (9) Senior Officers received a total of $117,000 salary increases which is an average of $13,000 per position.
If these positions received additional benefits is – as per usual – not mentioned. Why?
How many other positions have been created and/or elevated and awarded salary increase beyond the normal CPI adjustment has not been revealed.
It is about time the councillors who commenced this ‘re-alignment’ or ‘re-positioning’ or whatever fancy expression is to be used, justify this extraordinary explosion of senior and other staff and associated expenditure and explain to the ratepayers the reasons why.
The additional danger of all these positions is the extra spending over and beyond the payroll.
It is a well-established fact that empire building, position protection, territory establishment, big spending requirements and many more human traits such as self-entitlement and self-promotion can quickly establish a toxic culture that is impossible to remedy.
In addition there is the capital expenditure which appears to be an activity engaged in with wild abandon.
I refer to the $4million loan taken out to pay for the $4.61m deficit payment in the Defined Superannuation Fund.
The balance sheet details increases in the general reserve of many millions of dollars to be used for future deficit payments of this disastrous Defined Super Fund expected in the next few years. Plus many more mysterious projects including $1m for the caravan parks; now there is a millstone around ratepayers’ necks if I have ever seen one!
And then, of course, there is this grandiose monument or what I call the greatest waste of ratepayers’ money I have encountered in a very long time – the Municipal Precinct, library and community centre project to be built – on condition of severe repercussions if even contemplated otherwise – within defined boundaries in Leongatha.
The projected costs are $25 million and the expected funding will be a $2m grant, $7m in accumulated savings from tax payers’ money and $16m in borrowings, all as stated in the financial year 2022/23.
Again, the six councillors who are promoting this are very much opposed by the three other councillors and I am happy to hereby offer my predictions based on a lifetime of budget, cost, financial and management accounting experience.
In addition, I have my two trusted crystal balls with me and will consult them when appropriate.
My projections are as follows: The project costs will be at least $40m at 2022/23.
Of course, the problem will be the progressive payments, including variations to the contract and where the money is to come from.
As these costs escalate beyond estimates, panic will result with the council trying to reduce the scale and thus the costs.
In particular the eventual use and scope of the finished product, the benefit to ratepayers and value for money remains a lotto right to the end.
A hotch-potch of compromises, incompetent planning and decision making will create lots of activity and very little real result.
All of this will happen at rapid speed and panic will escalate.
More and more money from loan providers will be sought and State Government will be approached to assist with cash, guarantees, loan payments, the forwarding of future grants or similar bail outs.
The persons responsible will no longer be councillors and will blame everyone and everything else. And the ratepayer, as usual, will have to live with the consequences.
Gus Blaauw, Venus Bay