Confidential documents sent anonymously to Examiner Newspapers have revealed the City of Canning has been underpaying senior staff and failing to meet Superannuation Guarantees [SG], putting the city at risk of being fined by the Australian Taxation Office.
The documents, including legal advice to the city, emails between executive officer Michael Littleton and Mayor Patrick Hall, and an email from the independent member of the city’s Audit and Risk Committee [ARC] Elsie Lee to Mr Hall, were posted anonymously to Examiner News, arriving last Wednesday morning.
The documents confirm the city was underpaying allowments to staff, impacting SG.
Ms Lee contacted Mr Hall, who is the chair of the ARC at 11.33am on Monday May 29, asking to discuss superannuation payments set to be presented under a confidential banner at the May 31 ARC meeting.
It is understood, based on an email sent by Mr Hall to City of Canning executive officer Michael Littleton four hours later, that Ms Lee, a Certified Public Accountant, had raised concerns about a potential penalty from the ATO.
As an employer, if you fail to make your required superannuation contributions in full and you do not lodge an SG statement within 28 days after the relevant quarter, you will be liable to a penalty made up of Super Guarantee Charge – 200 per cent of the original amount
While State and Federal Government departments are exempt from this ruling under the SG Act of 1992, local government is not explicitly referenced in the act.
In his email, Mr Hall demanded answers.
“As a CPA, Ms Lee believes that the potential 200% ATO penalty is mandatory, and that whilst it may be mitigated to an extent, she is highly concerned that the CoC is exposed to a significant financial penalty,” he wrote.
“On that, I must say that I am concerned by the lack of detail in the Officers report.
“Michael, there will be a lot of questions asked in relation to this matter at the ARC Meeting.”
Mr Littleton replied to Mr Hall and all ARC elected members – Crs Steve Parkinson and Craig Sweeney – revealing he knew of the issues in January.
“A broad timeline is as follow,” he wrote.
“There have been a number of issues identified with the payroll system (some minor and others not so). This particular matter relates to the payment of allowances and the application of the super guarantee and tax to those allowance payments.
“The matter was crystallised to me in January of this year. I believe that the matter had been spoken about previously and the City had formed the view that SG was not applicable to a motor vehicle allowance. That decision was reconsidered during the recent payroll optimisation project.
He went on to write that legal advice was received in February, with accounting firm Moore Australia called in to quantify the issue in early March, a process expected to be completed in August, with findings to be presented to the November ARC meeting.
At last Tuesday’s council meeting, four directors – corporate and commercial director Lorraine Driscoll, planning and development director Graeme Bride, infrastructure and environment director Warren Bow, customer and community manager Sarah McQuade, as well as general counsel Anne De Soyza , declared interests in relation to ARC report for the meeting held on May 31.
All interests were related to their contract of employment, however Ms Driscoll’s declaration went further.
“I am an employee, this report relates to my contract of employment, as the responsible officer for this report I have had oversight of employees included in the report and I took external legal advice and consulted independent audit and an independent audit firm to validate the information contained,” CEO Michael Littleton read.
The Mayor subsequently moved the report behind closed doors.
Examiner Newspaper sent 22 questions to the city on Thursday June 22, receiving a rare statement attributed to Mr Littleton.
“Through an internal review, an error in the application of the super guarantee to the motor vehicle allowance for our management cohort was identified,” he said.
“This affected 45 current and former employees and equates to an underpayment of superannuation contributions to the value of $249,495.80 accumulated over a five-year period (which includes interest).
“To ensure the matter was handled correctly, the City sought legal and independent audit advice.
“The City has acted in accordance with that advice in all instances. The matter has been rectified and addressed directly with the staff involved and all relevant external agencies have been notified.
“The matter will not have an impact on the new financial year budget being presented to Council this week.
“This is an operational matter, and we have taken all reasonable steps to resolve it in a timely manner.
“The city continues to review its payroll system to ensure that it is accurate.”
The response, however, provided no clarity on the potential of a penalty to be imposed by the ATO.
