Central Coast Council has announced it “is in a serious financial situation and faces an immediate and serious liquidity issue”.
It is looking to borrow up to $100 million to maintain liquidity in the short term, and for other help from the State Government.
“Some expenditure over the past 12-18 months may have resulted in restricted funds being used contrary to the provisions of the Local Government Act 1993,” a media release issued by the council on October 6 stated.
“This is still under investigation.”
A deficit of $41 million reported in March is now expected to increase to $89 million.
“Council chief executive Mr Gary Murphy has today advised the Office of Local Government NSW of the financial issues.”
The media release stated: “These issues have recently come to light due to reviews commissioned by the chief executive officer and notwithstanding a previous audit and report that did not reveal the issues currently under investigation.”
On October 8, the Council issued a further media release stating that discussions had been held with Minister for Local Government Ms Shelley Hancock and the Office of Local Government.
It said the council had established a “100-Day Action Plan to Recovery”.
The Office of Local Government has been asked to provide an independent adviser to review Council’s financial position and identify possible options as quickly as possible.
It said a forensic audit would be undertaken of Council’s finances.
Changes were made to “management spending delegations”.
A Council working group was established to identify potential savings in capital works and operational services programs.
While full-time staffing would not change, a review of contracted and temporary workforce was underway.
Council staff were investigating whether appropriate financial controls and structures were in place for cashflow management.
The media release said they were also looking at the costs of council amalgamation in mid-2016 (estimated at more than $100 million), the cost of a recent IPART (close to $100 million over three years) and cost-shifting from State Government to Council (estimated at $45 million or more per year).
Following the October 12 council meeting, mayor Cr Lisa Matthews said the Council had resolved to continue to focus on its 100-Day Action Plan to financial recovery, to seek further assistance from the State Government and to establish a Finance Committee.
She said Mr Murphy was on leave.
He did not attend the council meeting.
Water and sewer director Mr Jamie Loader was acting chief executive officer.
Cr Matthews said councillors had requested Mr Loader to write to the Minister for Local Government seeking urgent assistance.
She said the council was seeking advice on the process for obtaining approval to borrow from restricted funds.
It was looking to borrow up to $100 million for “maintaining liquidity in the Council until such time as the actions within the draft 100-day recovery action plan are implemented”.
“A forensic audit of Council’s finances will be undertaken and Council will continue to seek additional support and advice from the Office of Local Government during this period of transition,” said Cr Matthews.
“A Finance Committee comprised of all the councillors, the Office of Local Government appointed independent financial expert and human resources adviser, and an independent legal adviser will be established to oversee Council’s forensic internal audit and the 100-Day Action Plan to financial recovery.”
Parliamentary Secretary for the Central Coast, Mr Adam Crouch, said the NSW Government would not “bail out” the Council.
“The NSW Government will not bend the rules for a council that has fundamentally failed to do the job the community expects them to do.”
Claiming that the situation arose from “financial mismanagement”, Mr Crouch said: “The councillors are Council’s governing body, and are responsible for these operational failings.
“Mayor Cr Lisa Matthews needs to stand up and take responsibility for the problems she was elected to oversee.
“She needs to show some leadership and work with her fellow councillors and tell the community what they are going to do about it.”
Media releases, 5, 8 and 13 Oct 2020
Central Coast Council
Media release, 14 Oct 2020
Adam Crouch, Parliamentary Secretary Central Coast