IT'S a sign of extraordinary times when even one of Western Australia's most solid institutions, the City of Perth, can find itself on the receiving end of a qualified audit.
IT'S a sign of extraordinary times when even one of Western Australia's most solid institutions, the City of Perth, can find itself on the receiving end of a qualified audit.
While the city's operational performance was not markedly out of line with last year's performance or its budget, it was on the investment side of the ledger where its auditor, Grant Thornton, questioned the recoverability of more than $15 million in collateralised debt obligations.
City of Perth CEO Frank Edwards remained cautiously optimistic about the investments, including a further $4.7 million in CDO securities issued by Merrill Lynch, which the council had written down as impaired assets.
"We have written off two [assets] but at this stage they are still paying their interest dividends," Mr Edwards said.
"No interest payments have defaulted at all."
He said the issue around the CDOs was simply that their value could not be independently verified rather than the securities being worthless.
Two of the CDOs, worth $2.5 million, had matured since June 30 and the city had been repaid in full. The rest will mature over the next two years.
Mr Edwards pointed out that the city's $161.8 million investment portfolio, up from $152.7 million the previous year, was required to be well diversified which created investment dilemmas.
He said that the council was limited to having no more than 2.5 per cent of its portfolio in any particular investment.
"That means there is difficulty in finding safe havens for money that will generate good returns," Mr Edwards said.
Overall the council's financial performance was below 2006-07, though it was ahead of the 2007-08 budget, according to its recently published annual report.
Its net operating surplus of $32.2 million was down from $37.3 million but better than a budgeted $29.5 million figure.
At $47 million, council rates remained the biggest source of funding for the city's operations, being almost 38 per cent of income. However, parking was closing in on that jumping to more than $43 million, or 35 per cent income.
Rates and parking now represent 73 per cent of the city's income, compared to 71 per cent the previous year.
Mr Edwards said the fall in petrol prices appeared to have had an impact on city car parking patronage, which had lifted in recent weeks
