Council portfolio still in doubt

Three years after the start of the global financial crisis the value of Gosford Council's overseas investments is still in doubt.

Auditors of the council's accounts have stated that interest and investment revenue dropped by more than $1.4 million or 18 per cent over the year to June 30, and more than $5 million has been written off against interest and investment revenue.

The auditors stated that they have been unable "to obtain sufficient appropriate audit evidence to satisfy ourselves as to the fair value and recoverability of $68 million of council's total investment portfolio".

"Many of these securities do not have market values," the auditors said.

In a report dated November 3, auditors UHY Haines Norton stated: "Since July 2007, global financial markets have experienced a period of high volatility led by events in the US housing market, particularly sub prime loans, which has impacted the value, recoverability, liquidity, cash flows and rates of return on many financial assets including collateralised debt obligations (CDOs) and certain other managed funds.

"At 30 June 2010, Gosford Council's investment portfolio totalling $68 million has been impacted by this market volatility.

"The impact on individual securities varies depending on their degree of exposure to affected markets.

"Many of these securities do not have market values that are independently quoted and are not widely traded.

"Independent market valuations are not readily available and, in many cases, values are assessed based on estimates from issuers and/or evaluation models for which there is limited market evidence available to verify their reasonableness.

"Further, the ongoing volatility of financial markets creates greater uncertainty to the valuation process."

Council Agenda COR 130, 23 Nov 2010