POWER BOARD FINANCE.

Timaru Herald, Volume CXXV, Issue 18614, 9 July 1930, Page 6

POWER BOARD FINANCE.

WAIMATE'S GRIEVANCE. “IMPUDENT AND DICTATORIAL.” In the course of his statement at the South Canterbury Electric Power Board’s meeting, the chairman (Mr J. Kennedy) referred to the circular letter recently issued by the Waimate Borough Council. He said that, with reference to the various statements fathered by the Waimate Borough Council, which had appeared in the Press since last meeting, and which had been released for publication from three to five days before a copy was received by the Board, he had no objection to letters appearing in the Press, but thought the Board was justly entitled to receive a copy at the same time. Apparently local body etiquette was not practised by the Waimate Borough Council. This was borne out by the fact that directly the Board’s advertisement concerning the loans appeared in the Press, the Mayor of Waimate immediately launched an attack through the Press against the Board, with a view’ to swaying public opinion. Members Would have noted the magnitude of the accusations, also the impudent and dictatorial attitude taken up by the Waimate Borough Council, all of which had been replied to through the Press, and he would ask the Board to endorse his action. “The facts given to the Waimate Borough Council,” said Mr Kennedy, “were purely an internal analysis in round figures of the expenditure from revenue in each area. This is not required by law, but is kept in view in case any particular area is not sufficiently financial to meet its commitments when depreciation becomes due, and so that no area then making a profit will be penalised. The Waimate Borough Council appears to think that the Waimate Borough area has been penalised by £1 per cent, on the year’s working, and that by the manipulation of figures their profits have been plundered, but the fact is that our balance sheet is taken as a whole, and there is no such thing as legitimate profits by any particular area against that of another. A fair allocation has been given for internal analysis, taking the matter over a period of five years. If the Waimate Borough area quota in the Timam property were reduced from £5193 to £2OOO, of the sum released £3193, only £1416 would be available for distribution purposes, and even though this area has for the moment £1416 above its quota in the Board’s common burdens, it will be found by taking the matter back to 1925, that in the years prior to 1930, they were considerably below quota. “The total sum invested by the Board in land, buildings, plant, transport and movable stock is in round figures £28.477, of this amount the Waimate Borough area has for the time being an investment of £7112, instead of £5696, being £1416 over quota. This only represents last year’s figures, but if taken over a period of five years it will be seen that the present allocation is not any means unfair. Waimate Borough' area investments in permanent burdens over five years:—l92s, under quota, £2842; 1926, under quota £2293; 1927. under quota, £220; 1928, over quota, £412; 1929, over quota, £725; 1930, over quota, £l4ls. Three years under quota, £5355; three years over quota £2553. “For the period under review, If we get down to water-tight compartments, Waimate Borough area would have to find approximately another £414 interest and depreciation. We are further accused of plundering £325 from the Waimate Borough area profits. This matter has been carefully looked into, and it is found that over a period of five years, Waimate Borough area, if treated as a watertight compartment, has short-paid in respect of cost of current, administration, maintenance and meter reading, an amount of £l2Bl. This added to the £414 in the previous paragraph makes the total amount underpaid by Waimate Borough area £1695. The above figures are from an actual analysis of the expenditure from revenue in each area, since we commenced operations. We have, however, taken everything into consideration with regard to the overlapping of transmission, lines, substations, etc. An internal analysis of the expenditure from revenue is kept to give an indication of the earning power of each district. This, however, is not required by law. and does not appear in the Board’s regular accounts, as the revenue and expenditure from same is taken over the district as a whole, and so long as the district as a whole shows satisfactory results, the strong should help the weak. It would be inconsistent with our policy, which has been consistently honoured, that the district should be hived off into watertight compartments. I think you will agree with me that such a policy would be disastrous, since it would seriously militate against the success and progress of the vast area we are controlling, which must ever be regarded and treated as a whole.

“If, however, it comes to the question of a rate to make up a loss, the internal analysis will be referred to, and no district making a profit will be called upon to contribute to the liquidation of such a loss. The Waimate Borough Council is endeavouring to usurp dictatorial functions to which it is not entitled to aspire. Our policy as laid down at the inception has been carefully followed in every particular, and I think that I can claim further that our work as a Board has met with the cordial endorsement of the ratepayers; otherwise it is impossible to believe that there has been no change in the personnel of the Board through the years. Although the Waimate Borough Council arrogantly claim to speak for that part of the district, what of the three members who represent the district on the Board? They are in entire agreement with our policy. Does the Waimate Borough Council claim that it is better entitled to speak the voice of the district than are the freely elected members who represent the combined district of Waimate County and Borough on the Board? Discussion By Board. Mr Angland: “When will you allow this matter to be discussed.” The chairman: “There is some correspondence on the question, and when that comes along you will be able to discuss the matter.” Letters were read from the Mackenzie County Council and from the Geraldine Borough Council, expressing confidence in the policy of the Board. Then came the letter from the Waimate Borough Council, the trend of tjiis correspondence having been published in the “Timaru Herald” prior to the board meeting. The Waimate Borough Council asked for a report on the financial position of the Board by an independent accountant. Mr Fitch intimated that he proposed supporting to a certain extent the request of the 'Waimate Borough. He was not sufficiently qualified to deal with accountancy matters, or to make any criticism of the figures published in the Press and otherwise. He represented the Waimate Borough and the Waimate County combined districts on the Board, and as his home was in the Waimate Borough his interests were there. He was looked upon as

the borough’s representative on the Board. “I noticed,” said Mr Fitch,

“that the chairman of the Board questions the Council’s right to deal with this matter, and I can only say rhis that the Borough Council in its attitude towards this question is unanimous, and I believe, and as a matter of fact know, that it is supported in this matter by a majority of the ratepayers in the borough. Unless we can satisfy those ratepayers that the Board's affairs are in order we have very little hope of carrying any further loan proposals in the borough, and it is just possible that their opinion may be reflected in the county. The Deep Creek portion of the county is closely attached with the borough, and might almost be regarded as suburban to Waimate. With regard to the figures. I don’t propose here any analysis of them except to make this one remark. It is possible that the chairman, in saying that the Waimate Borough has been fairly treated in the past, has possibly gone to the other extreme, and proved it has been fairly treated at the expense of some of the other contributing special areas. It may be if separate investigations are made, it will be found that instead of Waimate benefiting by it, it wall pan out in the other direction. I admit that I have been a member of the Board since its inception, and I have supported all along the method of adjusting the finances inaugurated by the late manager, and carried out by the present engineer-secretary and the executive officers, with possibly some amendment. It may not be correct. We may have made mistakes, but that is no reason why an investigation should be regarded as a vote of no-confidence or as a reflection on the late manager or the present executive officers. I have every confidence in the executive officers of the Board; but they are only human, and it may be possible for us to have our attention directed to methods advantageous to the Board. I don’t think it can be taken as showing lack of confidence in the executive officers or the Board if we obtain from an independent person outside, a report on the Board’s methods. It may be that the course we have adopted will be found to be justified, reasonable and correct, and we will then have a convincing answer to our critics. Our financial methods have been criticised not only by the Waimate Borough, but there has also been adverse and hostile criticism of our methods by the leading daily newspaper circulated in this district; and I see no reason why we should regard it as hostile if we get a report from an outside authority. I feel it is a difficult matter, and one entailing a considerable amount of work, but we should answer the criticism levelled against us. So long as the Board carries oi> its business as a whole, and there is no risk of rating or anything of this sort, it does not seem to matter | whether we conduct our business as at present or whether we make our departments more watertight, but if it comes to a question of rating to make up losses, then it becomes material. The chairman realises this when he says ‘internal analysis will be referred to etc.’ The whole question of this internal analysis is, I understand, the position that has been questioned, and if our methods of internal analysis are not correct, it surely is time we attended to them, now rather than having a very much bigger job to go into at a later stage, when figures become very much mere complicated. The Audit Department has approved of our system of accounts, but I don’t know whether the Audit Department is greatly concerned to inquire whether payments are properly charged against one district or another. It is possible the Audit Department is not very largely concerned as to the correctness of internal management” Mr Fitch then moved:—“That this Board obtains a report from an independent qualified accountant as to the correctness of the method adopted by this Board in the allocation of its expenditure and overhead expenses, as between the different special areas in the Board’s district.”

Mr Hayman seconded the motion. He said he was sure the Waimate County did not want to get anything from the Waimate Borough “If there is anything to hide,” said Mr Hayman, “we don’t want to hide it. Unless there is something done, I am convinced these arguments in the newspapers will go on for years. I suggest that if we are right the Waimate Borough pays the cost of the investigation, and if we are wrong we will have to pay all expenses.”

The chairman: “It is a very intricate and difficult question.”

Mr Fitch: “If the Board approves of the general principles, my resolution can be modified to do what we decide will be thoroughly satisfactory.”

Mr Mills: “What appeals to me is the investigation of the internal analysis, and I have in view of the interest in this matter that the Board will have this investigation made. Mr Talbot complimented Mr Fitch upon the moderation of his language. “I am sorry a certain amount of irritation has come into this question by the language used by the Waimate Borough Council,” he said. “I am sorry, too, that the chairman has allowed himself to drift into language somewhat similar. I think discussions could be carried on in a more dignified manner, and not with the recriminatory language that has been adopted. In regard to the motion, I shall oppose it at the present juncture, because it shows lack of confidence in the late Mr C. Dash, and also in the present office staff and the engineer-secretary. I think that the matter presents far more difficulties than anyone in the Waimate Borough realises. We know the difficulties that have beset us from the inception of Yhe Board in the different areas. This is not a question for a competent accountant. I maintain an accountant is not qualified to go into the position from an engineering point of view from the inception of our works. It was unfortunate that our big proposal was turned down, or there would be no suggestion of parochialism. It is owing to the fact that our comprehensive proposal was rejected that these parochial questions have cropped up.” Mr Talbot said South Canterbury was a big district, and the Board had tried to run its business as a whole in this connection. This policy was laid down by the late manager, and was endorsed by the Board, and this was that the strong should help the weak, and the wisdom of it had been proved by the figures disclosed from time to time. He thought that the statements put out would prove that as time goes on the Board would gradually get into a position w’hen it would be able to eliminate any anomalies, and matters would be put on a basis on which each district would be standing on its own. The Audit Department had looked upon the Board’s operations as embracing the whole district not hived off, and the statements simply showed their whole operations and the result, so long as they paid their way and satisfied the ratepayers all the time. Coming to the question of allocations, Mr Talbot said he was quite satisfied a just allocation had been made in internal departments. The chairman in his statement showed there had been certain arrangements made when Waimate was below quota and some when Waimate was above quota. The position was clear, and showed what each disdistrict would be responsible for; and if there was a necessity for a rate they w'ould know which district would have to pay. He did not think the latter

contingency would arise. No one j could come in and investigate the Board's position with any guarantee that it would be satisfactory afterwards. If it was something so vital as had been suggested they should have an inquiry by a commission to investigate matters. It w’ould be almost an impossibility for an accountant and a lavman to figure out these things, unless he had expert advice to help him. To do what the motion asked wouid be to express want of confidence in their executive, and they should reject the proposal. Mr G. Saunders said he did not quite agree with Mr Talbot altogether, when he said it would be discourteous to the chairman and the staff to get a report. There w T as a deal of suspicion, and they should have a special audit. The public were asking questions, and they should go as far as to bring in a third party to satisfy the public. and what that third party said they should decide to do. Consequently he would support the motion. Mr Mathers said none of the speakers had referred to the question of overhead expenses. He did not see how they could base overhead expenses on capital. Mr Fitch: “I don’t support that myself.” Mr Mathers: “Overhead belongs to the business done. You can’t charge overhead expenses to capital employed in a business.’”

Mr Fitch: “Our overhead expenses are allocated among the various districts.”

Mr Mathers: “Waimate Borough ■would do far more business compared with the amount of its capital involved than some of the other areas. The percentage of overhead is in proportion to the amount of business done.”

Mr Oakey: “I think Mr Talbot has covered really w’hat I was going to say. lam going to oppose the motion. Perhaps some of the members don’t know that the Mackenzie County Council and the Geraldine Borough Council have endorsed the policy of the Board.”

Mr Fitch: “I don’t support any suggestion of unfair manipulation.” Mr Angland said the discussion carried his mind back to some two or three years ago. What should have happened then should happen now. He did not agree with the proposer of the resolution that the responsibility as to how the Board’s business was done should be thrown upon the executive officers. Mr Fitch and some of the other members would no doubt remember that the speaker wanted a Finance Committee appointed. If this had been done this would have overcome a lot of the difficulty they w f ere trying to explain now. ' The money received and expended would have been allotted to the different districts in true proportions to the best of the ability of the Board. He did not see why any responsibility should be placed on the executive officers of the Board in this matter. The members were responsible for this task. The correspondence which had appeared in the newspapers and the statements made by the Waimate Borough Council and the replies by the chairman, were the outcome of the Board not doing what it should have done to add to the efficiency of the executive officers. He had proposed that a balance sheet should be published once a year, a copy of which would be handed to each of the local bodies in each of the constituent districts, and this would have saved the discussion that had taken place. The motion before the meeting asked members to vote for a resolution of no-confidence in the Board and themselves. It was the executive’s duty to instruct the executive officers as to the manner in which the Board’s business should be carried on, and to report to the Board and to recommend proposals. Instead an effort was being made to throw the responsibility on to the executive officers, of something which should be the responsibility of a Finance Committee. To get over this difficulty an effort was being made to pass a resolution condemning the action or motion of the Board, and explaining the incapacity of the members to manage the affairs of the Board, and saying in effect that they have not the business kuowledge to enable them to deal with the publishing of a balance sheet, explaining the whole position of the Board in the four constituent districts. If the position was set out in a balance sheet and circulated among the local bodies interested, they would be quite satisfied. The chairman: “The balance sheet is not audited yet.” Mr Angland: “Well, why not have this statement added which will show everything. What I mean by a balance sheet is not a statement of receipts and expenditure.” Mr Talbot: “Assuming we do have an independent audit of our account, are we to alter our policy? I think the point raised by Mr Angland is an important one. If something in the nature of a territorial balance sheet similar to county riding accounts were prepared, I think would meet the position.”

The chairman said he had no wish to labour the matter further. “So far as I have been able to do it,” said Mr Kennedy, “and with what ability I have, my statements have been perfectly honest, and I am satisfied that the Board has done the best possible in the circumstances. Everyone of you who have been connected with the Board since its inception must be aware of the difficulties we had to face. We have been doing our best, and have given satisfaction to all consumers of electricity, and the remarks of the Waimate Borough Council have not any justification. There is no reason why we should have any audit forced upon us by anyone excepting the Audit Department. Mr Angland: “You have no power to pool the funds until the Act is altered.” Replying, Mr Fitch said he was prepared to take his share of responsibility for whatever had been done by the Board. He was not attempting to throw responsibility on to the executive officers. They made their reports on what occurred, and these reports were adopted. This was the responsibility of the Board and its members, and he for one was not attempting to shirk one atom of responsibility; nor had he brought a motion of no-confidence in himself. If an independent report was obtained, he suggested the Board’s action would be very largely if not wholly confirmed. Mr Talbot moved an amendment:—

“That a complete statement showing the position of each constituent area in the Board s district, dating from the inception of the Board, be published with the audited balance sheet.” Mr Angland seconded this. Mr Fitch said that with the approval of the seconder of his motion, he was prepared to withdraw it in. favour of the amendment. Mr Hayman agreed. The amendment, becoming the motion, was put and was carried unanimously.