Shire of Broome uncovers $700,000 deficit after accounting standards rule changes

The Shire of Broome has scrambled to cover a $700,000 deficit uncovered after a review of its finances.

Councillors are disappointed the Office of the Auditor General did not alert them of the deficit, which is the result of accounting rule changes made in 2020.

The new rules stipulate if there is a contract tied to money received by the council and the money is not used right away, the council has to show it owes the money until it is used.

When the money is used, it can be counted as income for that year.

The shire recorded a budget surplus from 2019 to 2022.

However, its closing positions were readjusted after a recent review by a private auditing firm resulted in a deficit of more than $700,000.

Shire officers attributed the deficit to confusion around the rule changes from 2020 and said the OAG had failed to point out shire officers’ misinterpretation of the new rules.

“The advice was not clear and professional opinions in the industry were mixed given the late notice of the changes,” a shire report said.

Deputy president Desiree Male said it was disappointing the OAG didn’t pick up the mistakes, especially considering the shire was forced to use the OAG due to legislation passed in 2017.

“The OAG needs to explain because at the end of the day they should be telling us how the changes in standards apply to us,” she said.

Cr Bruce Rudeforth Jnr said the rule changes had resulted in a “dog’s breakfast”.

“It is really disappointing our financial position has been compromised, considering we are forced to use the OAG that costs more than a private auditor,” he said.

Shire president Harold Tracey said many local governments were in a similar position, which was backed by chief executive Sam Mastrolembo.

“It’s not uncommon to be in this position,” Mr Mastrolembo said.

The council report said the deficit needed “immediate intervention” as it exceeded one per cent of shire operating costs.

Shire officers recommended the council reverse two contributions made to its public open spaces reserve — one of $350,000 and one of $46,000 — to immediately bring down the deficit from $715,000 to $318,000.

The recommendation was supported by the council, with only Cr Elsta Foy voting against it.

Although the deficit has come out of left field, shire officers said it would be able to be paid down by the end of the financial year.

“Officers are confident that through astute management of the budget through to 30 June 2023, savings could be delivered to balance the deficit position by year-end,” the report said.

The OAG was contacted for comment but did not provide a response at time of print.