Adelaide Hills Council reveals $4.863m operating deficit, instead of expected $559,000 surplus

An Adelaide Hills council was expecting a $600,000 surplus – until an investigation into its accounts revealed a shock deficit of nearly $5m.

Adelaide Hills Council has revealed it has a surprise operating deficit of $4.863m – instead of its expected surplus of $559,000 – blaming the previous administration.

Making the announcement via a press release late Monday afternoon, acting mayor Melanie Selwood said the council had self-reported the “significant adjustment” to its preliminary operating result for the 2023-24 financial year to the state Auditor-General.

“Clearly, this update as reported in our operating results is not council’s preferred outcome,” she said.

“Nonetheless council’s long-term financial plan remains viable and we do not anticipate that our service delivery to residents will be affected.”

Ms Selwood said the earlier operating result because of financial assumptions and accounting practices employed by the previous administration, which did not reflect current best practice.

“On identifying these discrepancies, council considered the matter and has reported it to the Auditor-General. Council is awaiting a response.”

Ms Selwood said the “unfavourable” variance in council’s 23-24 operating result occurred because of three main errors.

First, the council incorrectly calculated depreciation in relation to construction costs, contributing $860,000 to the deficit.

Adelaide Hills Council's council chambers and building in Stirling.

The calculation of depreciation did not reflect best accounting practice nor the post-Covid market conditions, council said.

Second, project management costs were incorrectly assigned to wages and salary budget lines, council said, accounting $1.2m of the deficit.

Thirdly, “inappropriate” assignment of works-in-progress to the capital works budget line resulted in a further $752,000 to the deficit.

Additionally, council expected to win $1.71m in federal grants and local roads grants during 2023. These were not received until the 2024/25 financial year.

The council said its financial results were still subject to finalisation of its statutory accounts and an audit.

It said the operating deficit was discovered by CEO Greg Georgopoulos and Gary Lewis, the director responsible for financial reporting when preparing the finalised 2023-24 accounts.

“In response to these matters the new CEO has put in place a number of measures to ensure best practice financial reporting in the future,” Ms Selwood said.

“Council is committed to openness, transparency and ensuring financial sustainability in the long term.”

Mr Georgopoulos joined AHC in July last year.

AHC declined to answer further questions, pointing The Advertiser to its press release.