‘Extreme risk’: The confidential report exposing Parramatta Council’s finances

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The City of Parramatta council overstated the value of its assets by more than $50 million and there is an “extreme risk” it will fail to deliver its ambitious redevelopment of Riverside Theatres, a confidential report from the state’s audit office has revealed.

The Audit Office’s report on the council’s finances for this financial year – which was labelled confidential and inadvertently published in council papers before being redacted – also reveals the council has routinely failed to report its financial position on time and did not correctly manage lease agreements on its properties, highlighting one lease that had not been updated since 2007.

The City of Parramatta council has overstated the value of its assets by more than $50 million.

The Audit Office, the state’s official auditor of government finances, accepted the council’s accounts, but its findings raise questions about how the council manages ratepayer money.

The audit will cost the council more than $318,000. Its findings were discussed at an extraordinary council meeting on Monday, where councillors also voted on the process to elect a new chief executive officer after the sacking of its former boss Gail Connolly this month.

$52.6 million overstatement in assets

In the 2023-24 financial year, the Audit Office identified “several anomalies” during the council’s revaluation of its road assets. This prompted a re-examination of the council’s bridges and stormwater drainage assets, and revealed the council had overstated the value of its infrastructure assets.

The council’s internal data checks found “further anomalies”, including assets that were missing from its register and assets recorded that the council did not own or control. This forced the council to issue a retrospective restatement of its finances. In June 2024, the cumulative overstatement of the value of its assets had jumped to $52.6 million.

The Audit Office said the council had since introduced a range of improvements to reduce the risk of incorrect recording of infrastructure assets.

“The Audit Office confirmed that the financial statements are free from material misstatement and comply with all relevant standards,” Lord Mayor Martin Zaiter said. “Our community can be confident that council is continuing to manage our budget responsibly and transparently.”

Riverside development an ‘extreme risk’

The $276 million vision to transform the 37-year-old Riverside Theatres into a new Broadway-style lyric theatre was reported as an “extreme risk” due to the council having an insufficient capital budget to deliver the design.

The long-awaited redevelopment of the Riverside Theatres was announced in 2023 but has remained in limbo due to a $93 million funding gap. In July, City of Parramatta announced it would plug that hole through different funding streams including philanthropy and “third-party fundraising” such as grants, but if that fails would draw on the “unallocated balance of the property reserve”.

A council spokesperson said major projects like the Riverside Theatres redevelopment are subject to rigorous oversight and that it is “proactively managing funding risks” by seeking additional funding sources.

Aquatic centre operating with no lease

The council’s signature $88.6 million cityside aquatic centre, opened in 2023, is operating on land leased by the Parramatta Park Trust without any lease agreement, the report revealed. “The council has not been able to assess the accounting implications arising from the lease.”

In addition, the report found 64 lease agreements had been categorised as “expired” or “internal on holdover”.

The office found one lease for the council had been ongoing since 2007 with no changes to lease revenue terms, meaning the unknown lessee has been paying the same amount in rent for 18 years.

Bookkeeping ‘requires improvement’

Also under fire was the “quality and timeliness” of the council’s financial reporting processes, which the office said “require[d] improvement”.

“Council is required to maintain adequate financial records and supply these to the audit team on a timely basis,” the document wrote. “This could risk delays to the audit process and increase audit costs.”

The report highlighted four areas of concern: the council did not submit its papers according to an agreed timetable; it did not prepare financial statements before the end of the financial year; there were “significant delays” in the valuations of its stormwater/drainage systems and roads; and the financial statements were not submitted to the council’s audit and risk committee for review before the audit office examined them.

A City of Parramatta spokesperson said the community could be assured the council was “managing the budget and ratepayers [sic] money with care and accountability”.

“The Audit Office’s report confirms that Council’s financial statements received unqualified audit opinions, meaning they are free from material misstatement and comply with Australian Accounting Standards,” they said.

“We welcome the Audit Office’s identified areas for improvement and have already taken steps to address these. Major projects like the Riverside Theatres redevelopment are subject to rigorous oversight, and Council is proactively managing funding risks by engaging with stakeholders and seeking additional funding sources.”

The Sydney Morning Herald has opened a bureau in the heart of Parramatta. Email [email protected] with news tips.