Your Assets are Disappearing Fast

Last week the Fremantle Society wrote to members about Fremantle Council’s intention to sell the iconic Victoria Hall on High Street for $2 million, half of council’s own valuation. The story went viral. On the Fremantle Society Facebook page it reached over 8,000 people, and made the front page of this week’s Fremantle Herald.

This worrying story will not be going away.

The first Facebook comment, as seen above, came from one of the mayor’s supporters, the suspended Perth City Councillor Reece Harley, suggesting that the Fremantle Society should buy the hall – a ludicrous proposal trying to deflect responsibility from the current owners, the council.

In examining council documents to see what else is to be sold off by them to pay for the new unnecessary $50 million administration centre, it is alarming to see that council aim to sell a raft of ratepayer assets, for a projected LOSS of $12 million in just the next 12 months. Included in the fire sale of properties is the site bought for the new depot for $7.758 million. But it is projected to sell that site at 2 Jones Street O’Connor for a profit, at $7.8 million, a fanciful estimate given the current market (and not taking into account the hundreds of thousands of dollars wasted in buying the site and having it empty and not earning rent for years). Thus the $12 million loss is likely to be much higher. In selling previous ratepayer assets cheaply, council has already lost more than that amount already.

We gave the relevant sheets from the budget to a senior practising accountant, and this is his response:

Just looked at the council finance documents. Yep, trend to sell off properties continues & to borrow additional funds …I think originally it was to borrow $15m & has now increased to $20m. The financial statement results continue to be manipulated in relation to depreciation and loss on sale of assets. Depreciation is not shown appropriately in the monthly financial results and also the loss on sale of properties ($12m) is not accounted for in the correct period. If it was shown properly the result for FY18 would be a big loss & poor financial ratios….and bad publicity for the council.

The timing recognition of the significant loss of $12m of the properties to be sold next year is clear accounting manipulation. Under prudent accounting policies (& the council’s stated accounting policies) the loss for these properties should be recognised immediately in the FY18 profit & loss statement, and not deferred to FY19. If the auditors were stronger they should insist on this.

Time for an enquiry?

John Dowson
The Fremantle Society

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