Nearly $7 million of non-funded asset depreciation has snatched away Tauranga City Council's hopes of reaching a $4 million budget surplus this year.

Council's 2013/2014 Draft Annual Plan recommended for approval by the Finance and Risk Committee this week reports $6.8m in ‘non-funded accounting adjustments'.

Committee chairman John Robson blames the adjustments for the council's failure to reach its $4m surplus goal.

'It makes for a good headline. It's an unfortunate headline for us because we are working to get things down.

He does say the bigger picture is yet to be made clear, and at the end of the day Council'c year-end debt is down.

'If you look at what the big issue was around the [TCC] election, there was an issue around rates and an issue around debt.”

There is a $365.4m year-end debt for the 2014 financial year, compared with $377.5 in 2013.

John says council budgets operate on a three-year cycle, meaning the current Annual Report is measured against a Long Term Plan set by the previous council.

The next annual report produced in September 2015 will be the first in which the current council sets the budget. It will still be measured against parameters set by the previous council's Ten Year Plan.

'It's only the third budget that crosses my desk as chairman of Finance and Risk Committee that I will have actually been there from ‘Go to whoa on',” says John.

'Whether you make a surplus or deficit, assuming the cash flow is okay and that the business is viable, all it does is have an impact on the balance sheet.

'And ultimately you want to build your balance sheet over time and build the business. But it's not a biggie, depending on its scale and size.”

John says the ‘non funded accounting adjustments' include $3.693m in asset impairment.

Asset impairment is a ‘write down in the book' value of assets, following an inspection.

'If it's not in the condition you would like it to be the book value comes down and you pass that pass that through the profit and loss – revenue and expenditure,” says John.

Assets written off totalled $2.339m, bad debts written off totalled $98,000, and there was a $750,000 loss on asset sales.

'It's a bit like the rates surplus number; it's not strictly speaking that you got more rates in than you budgeted. It is that the amount of rate revenue was $1.7m greater than what your rates funded expenditure turned out to be, so it could be that you spent slightly less.

'I'm not comfortable with the phrase rates surplus because it suggests it's to do with rates and not rate funded expenditure.”