The 2014 annual accounts were approved.
The operating result for the year was a surplus of approximately 76 million króna, whereas the budget had provided for an operating surplus of 619 million. This variance is mainly attributable to an increase in the council's pension liability of 928 million krónur, which is 515 million over the forecast.
The annual accounts of the Municipality of Hafnarfjörður were approved at a meeting that has just concluded.
The 2014 annual report for the Municipality of Hafnarfjörður shows that the municipality's financial position remains difficult and that it is important to reduce expenditure and pay down debt. The operating result for the year, for both A and B sections, was a surplus of only 76 million króna, which is not in line with the adjustment plan made under an agreement with the supervisory board for municipal finances. This could have the effect of a temporary rise in interest rates, as operating cash flow does not meet the benchmarks set as a condition in the agreements for refinancing foreign loans. The operating result for Section A was a deficit of 492 million króna. This compares with a budgeted surplus of 216 million króna.
The operating result for the year was a surplus of approximately 76 million króna, whereas the budget had provided for an operating surplus of 619 million. This variance is mainly attributable to an increase in the council's pension liability of 928 million kroner, which is 515 million over budget. Consultancy and borrowing costs for refinancing, totalling 156 million króna, which were not included in the plans, also affect the result.
Exceptional items are charges arising from the outcome of the Supreme Court's judgment of 5th March. March 2015 that the municipality is liable to pay the state corporation tax of 15% instead of the 10% previously forecast in the municipality's accounts, as well as interest on the sale of a stake in HS Orka hf. in 2008, amounting to 333 million króna.
Revenues amounted to 19,648 million króna, which is 418 million króna above the forecast. Wages and salaries are the municipality's largest expenditure item, amounting to 9,985 million króna, which is 442 million króna higher than forecast. Other expenses were 7,163 million króna, which is 230 million króna above the budget. Profit before finance and exceptional items amounted to 1,634 million króna. Financing items amounted to 1,226 million króna, which is 67 million above the forecast. Net operating working capital amounted to approximately 1,593 million króna, which is 478 million lower than forecast.
The running of the departments went well and was in line with the plan. The heads of the institutions deserve praise for their success in keeping to the budgets. The largest department is education and childcare, to which approximately 8,748 million krónur were allocated. Around 2,637 million króna was allocated to social services and 1,599 million króna to youth and sports affairs. Total assets at the end of the year amounted to a total of 48,198 million króna, having decreased by 285 million year-on-year, and total liabilities and obligations amounted to 39,766 million króna.
The auditors of the town's accounts draw special attention to the council's current ratio and debt position, and it is important to take these recommendations seriously. The negative operating result of the municipal treasury's A-section, amounting to 492 million króna, and the current ratio of 0.23% are unacceptable. Furthermore, interest expenses are a significant burden, amounting to 6.2% of the municipality's revenue, or around 1.2 billion krónur, which is an extremely high proportion.
The majority of the Independence and Bright Future parties believe that the foundations are in place to turn the city's finances around for the better, provided that matters are handled correctly and dealt with responsibly and decisively. Among other things, it is important to strengthen the foundations, attract businesses and residents to increase activity and thereby the town's revenues. However, the biggest challenge in the management of the municipality in the near future will be to get a better grip on expenditure and debt repayment. It is hoped that the operational review of the town's institutions and the subsequent recommendations will have a positive impact on the financial position of the Borough of Hafnarfjörður for the future. It is important to create room for a reduction in council charges and fees, to maintain or increase services, and to begin development using own funds for the benefit of all residents.