In the Executive Summary of his 10 page, 30 Day report addressing the parlous financial position of the Central Coast Council (CCC), council’s Interim Administrator, Dick Persson AM, highlighted a number of critical findings, including:
• Council went from a $65.4 M surplus at time of amalgamation to a catastrophic financial loss in three years;
• the community had been badly let down & the widespread anger was totally understandable;
• Council is forecast to report a deficit of $115M this year alone;
• Council recorded a $89M deficit last year;
• Council’s accumulated losses since amalgamation three years earlier will exceed 200M;
• Council’s accumulated debt will be in order of $565M including funds that need to be paid back to restricted reserves;
• There are no easy measure to get CCC back into the black;
• This is a story of council failure to understand or practise the basics of sound financial management, although there is no evidence of corruption or theft;
• Amalgamation costs of upgrading the IT systems & infrastructure cost $50M, with $8M ongoing;
• A $39M loss of revenue from an IPART pricing decision for water, sewerage, drains & waste services from 2019;
• Staff costs increasing by about one third & significantly outstripping projected revenue growth;
• Industrial dispute payout & other harmonisation costs of $25M; &
• Increased costs & lost revenue from bushfires, floods & Covid-19 were estimated at $10.5M;
• A number of projects exceeded their budgets including the water fund capital budget blew by $12M in 2019-20.
• Mr Persson said: “While there were mitigating circumstances which may explain how the 2019-20 budget got away from council, with an $89M operational loss, there is no reasonable excuse for this current year’s budget overrun which is now forecast to blow out to $115M.
If the tough measures outlined later in this report were taken in March last financial year, council could now be between $50-100M better off."
• Some members of the elected body have claimed they were denied information by “council officers” however, the elected body has ample powers to obtain any financial information they want. Whether they did not know this, or did not know how to do this, they also failed to perform one of their most important responsibilities.
Mr Persson also detailed a series of measures necessary to turn around that situation, including:
• Asset sales of a least $40m over each of the next two years;
• Further borrowings;
• A substantial rate increase;
• An increase in some council charges;
• A major reduction in council’s senior and middle management numbers; &
• A reduction in staff numbers to return to the level at the time of amalgamation.
Mr Persson said that he will be asking the Minister for Local Government for a further three month appointment as Interim Administrator to oversee the recruitment of a new CEO, to deliver a balanced budget for 2020-21 to oversee the introduction of appropriate financial reporting systems & the introduction of contemporary budgeting systems & practices,
While CCC is a significantly larger council than its cousin in the Bega Valley, with an Income before grants & contributions for capital purposes more than two & a half times bigger, the association believes that Bega Valley Shire Council (BVSC) has suffered from some of the same acts of maladministration & failed performance that ultimately led to it ordering a “baseline audit for the 2106, 2017, 2018 & 2019 financial years" in August, 2020.
During the four year period under review, council recorded accumulated deficits, before grants & contributions for capital purposes, of more than $12.8M, not including the 2020 result still to be released, while it has been acknowledged that a majority of councillors failed to understand or practise the basics of sound financial management.
Council has thus far declined to respond to the association’s request to confirm the Terms of Reference that govern the completion of the baseline audit, the name of the organisation selected to undertake the audit, the expected date that the audit will be completed, the estimated/agreed cost of the audit & if the audit report will be released publicly.
John Richardson
Secretary/Treasurer
Bega Valley Shire Residents & Ratepayers Association
Tel: 0264945669
Email: secretary@begavalleyshireratepayers.asn.au
Website: http://www.begavalleyshireratepayers.asn.au