Devil in the detail in Freo financials

THE City of Fremantle will provide detailed costings of the unfinished Walyalup Civic Centre and produce its long overdue 2021 financial statements at the audit and risk committee this week.
And what a read at https://bit.ly/3JQwZT9.
According to the Wednesday agenda, elected members will be presented with the Auditor General’s report of the 2021 financials which raises serious failings in the cost controls and procurement and contract management of the new civic centre on the former Kings Square site at https://bit.ly/3vUMLXh.
Total project costs as at June 2022 was $61.2m. This is expected to climb to $66m, with $2.5m allocated in the 2023 budget to ‘continue’ completion of the building and $1.2 million in interest repayments on the City’s $20m Treasury loan (That’s $1.2m every year for 20 years).
And if the $16.2m cost blow out in the $45m Walyalup Koort civic space is bad enough, the architectural bill also has blown out from $4.2m to $6.9m because of, “time extensions due to the delayed commencement of the project and building delays”, after the Pindan collapse.
The Auditor found the architectural services contract failed to provide sufficient oversight required to monitor costs to ensure value for money. The original budget was $1.8m, not $4.2m as officers state on pages 36 and 48. The figure was revised to $4.2m in 2019 after it was considered as a confidential item. It again will be discussed behind closed doors on Wednesday.
StreetWise sources said failure to properly follow Australian accounting standards disclosure for Capital Work in Progress in the City’s 2020 financial statements and the lengthy delay in posting the 2021 financial statements allowed $5m in architectural services costs to go unscrutinised.
The Walyalup costing request follows a motion moved in June by Beaconsfield Cr Fedele J Camarda to have the City remove confusion in the community about the financial status of the building and provide a chronological and transparent report of the 2012 business plan.
The audit committee meeting, which is not streamed live, will be presented with a number of inconsistencies in the officer’s report (opposite).
For example, the cost of demolition is incorrect, the original figure is $650,000, not $2.15m. Project management costs are omitted originally and then doubled from 2016 ($734,798) to 2019 ($1.35m), now $1.58m. Professional fees are out by $5.1m and fit-out costs of $1.7m are omitted.
Among the financial failings identified by the Auditor were the City’s supplier invoices and order approvals, payroll controls and computer access security. And for the first time, all internal control findings which would show ratepayers the true financial impact of the Walyalup cost blow outs are confidential.
The audit ‘exit meeting’ on August 5, 2022 was attended by Mayor Hannah Fitzhardinge, CEO Glen Dougall and audit committee chair Su Groome. It remains unclear why the 2021 financial statements were signed off by the CEO the day before meeting the Auditor.

‘Told them so’

SOUTH Ward Cr Marija Vujcic for the past two years has asked the City repeatedly for explanations of its financials and true cost of the Walyalup civic centre – Fremantle’s biggest development project.
Her concerns over the stated numbers were acknowledged, her own figures confirmed at the June meeting of council – the cost of the $45m civic centre had blown out by nearly $20m. This is expected to climb to $66m by the end of this financial year.
Draft financial statements presented by City officers in March included Work in Progress (WIP) amounts for the period ended June 30, 2021: “This figure represents $52.15m … There were additional costs associated with completing the project as a result of Pindan going into administration. These additional costs will form part of the total contract costs. This would see the estimated figure for total project costs at $57.21m.”
Cr Vujcic asked Mayor Fitzhardinge at the June 22 council meeting: “When are you going to get involved in sorting out this financial situation so I don’t have to come in month after month?”
 The mayor supported Cr Camarda’s motion and acknowledged the City had a, “communications problem”, when it came to the, “costs in the business case that went beyond that building and there is all the other things we have done and approved under separate council decisions that’s contributed to this”.
She added: “Have we neatly and entirely reported that over the period of time, possibly not, and I think the opportunity for us now is to come up with those final numbers that says back then we made this decision, we thought it was going to cost this much, and do that final reckoning on those different categories.”
Mr Dougall said on May 25: “I agree we should probably amend those monthly financial statements, absolutely. We have been busy preparing budgets and financial audits and dealing with COVID and all those sorts of things, sometimes we have to prioritise how we respond to things.”
Cr Vujcic’s financial analysis showed the total project cost would be between $61m and $67m: “At the April 27 council meeting, I presented a narrative that commenced in 2012 with the business plan, the selling of city assets and government loan to fund the project. I concluded in April this year the cost overrun was between $16m and $22m. I am pleased to report I voted for the monthly financial report in June because the WIP figures are correct.”
 She added at the audit committee meeting on June 16 https://bit.ly/3JNGdze: “When the financials are checked, it is the ratepayers who are picking up the $1.2m loan repayment. We can expect the total project cost to be at least $66,232,320 at the end of 2023. What a legacy we are leaving for the next generation.”
The officer’s report to council states: “The revitalisation of the civic heart of Fremantle CBD has been a journey spanning over two decades … it then took nearly ten years to deliver. It could be said that more work is required to continue the redevelopment and revitalisation of Fremantle.”
Additional stories on the Walyalup civic centre cost blow out and City’s questionable financials at www.streetwisemedia.com.au.