NEWS THAT MATTERS

The loss of our local democracy

What is democracy for the Central Coast? To suffer the autocratic and dictatorial machinations of the NSW State Government – denying the people’s right to choose governance.

 

On 17 March 2022, the Minister for Local Government recommended that "all civic offices at Central Coast Council (CCC) be declared vacant, effective immediately". This decision removed local democracy from the Central Coast community.

The public autopsy into Central Coast Council was never to be a judicial inquiry - it was always a predetermined and controlled outcome for the NSW LNP Government. An outcome to cover-up and protect their titanic failure in the merging of Wyong and Gosford Councils. And, because of the state government's fiasco, Central Coast ratepayers are now expected to accept the premise of ongoing serfdom - justice and democracy for them is a milch cow for the council.

29 March 2022

 

THE removal of all Councillors from office was the result of a report from the Public Inquiry into Central Coast Council. The removal of local democracy appeared to be a pre-determined outcome from the Inquiry. One expert in local government, Adjunct Prof Graham Sansom, said that the Terms of Reference were "clearly written by someone who was wanting a conclusion that the Councillors be dismissed... they were very selective terms of reference". (ABC radio, 21 March 2022).

 

The Public Inquiry provided very few answers for our community and has perhaps raised even more questions.

 

Of course, many people in the community will just see the headlines reported in the media or on social media but the reality is more complex - a government desperate to cover its own failed merger and the constant failure of certain senior council personnel, which contributed to council’s financial failure. But not surprisingly those individuals have not been sacked or held accountable, receiving nothing more than a 'slap on the wrists’ - they need more training.

 

The easy way out for the Government was to put the entire blame on the councillor’s shoulders, making them the ‘scapegoat’. Much of the blame, however, related to a change in accounting practice in 2016. This change resulted in Council thinking that it had more “unrestricted” cash than it really did. None of the four CEOs, the Administrator (Reynolds), Council’s financial staff, the financial experts on the Audit, Risk and Improvement Committee (ARIC) or the NSW Audit Office recognised the impact that this had on Council’s financial reports - until October 2020. The Crown Solicitor’s advice then was that this money may not need to be repaid. Yet unrelentingly, both administrators, Persson and Hart, since the Council was suspended, have held the ratepayers responsible to solve Council’s financial woes – a milch cow with a golden teat.

 

The Independent Pricing and Regulatory Tribunal (IPART), who pretend to be an independent body and arbitrator but who invariably of late have kowtowed to council’s requests, also played a part in the council’s financial demise.

 

In 2019, an IPART decision on water charges reduced the income that Council was budgeting for 2019/2020. IPART released a draft determination in April 2019 and then a final determination in May 2019.

 

Roslyn McCulloch, Commissioner of the Public Inquiry, states that “no adjustments were made to the draft budget after the IPART determination was announced”. This is contrary to the information provided to Councillors at the time.

 

A presentation to Councillors on 3 June 2019 on the IPART decisions (draft and final) included the impact on budget. It included the following:

 

  • Changes to the Mardi to Warnervale pipeline project

 

  • Reduction in budget for stormwater drainage

 

  • Reduction in service levels for some maintenance works

 

  • Deferring some drainage and detention basin projects

 

  • Deferral of capital works projects to value of $11.9 million

 

Many of these adjustments were made in consultation with IPART’s consultants.

 

And what of the council staff who ill-advised the councilors?

 

The Commissioner suggests that there was a lack of financial direction from Chief Financial Officers (CFO) between August 2017 and October 2020. In particular, the CFO  appointed in 2019 “may have facilitated the lack of information flowing to councillors about the situation and lack of action to counteract the downward trend of Central Coast Council’s cash position.”

 

The Commissioner also comments that “The investment report for October 2019 did not contain any additional comment to alert the reader to the fact that unrestricted cash was in the negative… At no time was any notation made in an investment report to alert councillors to that fact".

 

“The councillors were never informed that the unrestricted funds had been exhausted nor were they warned about the consequences of having no unrestricted funds available," she said.

 

“The financial information provided to councillors was not easy to read and was sadly lacking in attention to trends.”

 

The Commissioner identifies staff that should have been able to provide an accurate picture of the Council’s finances - and did not.

 

The Commissioner also pinpoints a staff member that could have answered certain relevant questions - but then indicates that she did not question him “as he was not able to be located”. Had there be due diligence by the inquiry this person could have been easily located and subpoenaed to appear before the inquiry. The individual bailed out before the mud hit the fan - but a recent search suggests that this person may now be working for the NSW State Government. A sideways promotion, perhaps, to get him out of the way and to not reveal the truth about Council's finances? The whole sordid mess reeks of a political rat!

 

“The investment reports from October 2019 until the financial crisis, were designed to obfuscate rather than elucidate. The staff of CCC responsible for those reports bear a significant responsibility for the lack of knowledge on the part of the councillors for the unlawful use of restricted funds," she said.

 

“The lax practices (together with a lack of cash flow reporting) have resulted in over $60 million of internally restricted funds being utilised for general purposes without the approval of the Councillors.” (Grant Thornton Consultancy).

 

The Commissioner has made no recommendations in her report regarding Council staff or the lax practices.

 

In April 2020 the then CEO engaged a consultancy, Grant Thornton, to review council’s COVID response, its budget processes and longer-term financial planning. Grant Thornton provided a Phase 1 report to Council’s Executive Team on 5 June - it included a warning about cash flow and use of restricted funds. While staff received the report - Councillors did not.

 

Grant Thornton provided a briefing to Councillors on 13 June 2020. It highlighted significant concerns and uncertainty about the impact of COVID on the Council’s budget. It did not include the warning of negative cash flow and the use of restricted funds.

 

The presentation identified eight levers to improve Council’s financial position - including increasing income and reducing expenditure. It also provided scenarios about the budget and the impact of COVID.

 

The Commissioner’s report suggested that Councillors did not intend to alter its draft Budget 2020/2021. This is not accurate.

 

When the draft budget was considered at a Council meeting on 23 March 2020, it was noted in debate and the decision of Council that there would be impacts and further updates would be needed after exhibition.

 

After the presentation from Grant Thornton on 13 June 2020, “Council staff were asked to go away and work on the details for the cash levers totalling $233 million”.

 

Further briefings included discussions about deferring capital works and the need for further changes in quarterly reviews once grant funding and the true impact of COVID was known.

 

The main changes between the exhibited draft Operational Plan 2020-21 and that ultimately adopted by the Council were:

 

  • decrease capital expenditure by $23.3 million

 

  • decrease operating expenditure by $10.8 million

 

It was not until 6 October 2020 that Councillors were made aware of the unauthorised use of restricted funds.

 

Yet Commissioner McCulloch recognised the expertise of Independent members of ARIC but then suggests that it was not within their role to notice any of the financial issues of Council.

 

This does not stand up to scrutiny. In ARIC meetings, committee members interrogated and discussed details of the draft Audit reports with the Auditor. Each year, ARIC recommended that Council sign the Audited Financial Statements. ARIC missed the issues that resulted from the change of accounting practice.

 

The big number - $565 million!

 

The figure of $565 million has been thrown around in the community. It should be noted that:

 

  • $317 million of the $565 million of debt owed by CCC in October 2020 had been inherited from WSC and GCC. This is not viewed as “bad debt”. (Most Councils have debt that they are paying down);

 

  • about $200 million was restricted funds, which were used unlawfully and without Councillors’ knowledge or approval. The advice of the Crown Solicitor in 2020  has cast doubt on whether these funds were used unlawfully and need to be repaid; and

 

  • The remaining amount are budget deficits.

 

In relation to the budget deficits, the following comments were made to the Public Inquiry from the Independent experts on the ARIC:

 

  • “...deficit budgets. If I had been asked at the time, I probably would have not been overly concerned on a short-term basis, because, at times when you’re trying to rebuild, of if you’re trying to do things, sometimes you have to go into deficit”... (Millington);

 

  • “...in reviewing the financial statements...I certainly agree with the sentiment: you cannot continue to run operating budget deficits and not pay the price, but in the short to medium term you can run deficits at the moment.” (Gordon); and

 

  • those accounts in terms of debt, in terms of operating result, that is a concern to me as an independent professional”. (Gordon).

 

Did Local Democracy need to be removed?

 

There is no doubt that issues of long term financial management existed at Central Coast Council and needed to be addressed - but did local democracy need to be removed? NO!

 

There were other options available to the Commissioner:

 

  • Reinstate the Councillors with a Performance Improvement Order that is binding on achieving outcomes;

 

  • Appoint an independent financial expert and a Human Resources advisor (as the Minister promised on 6 Oct 2020).

 

It must also be remembered, as previously reported by the Grapevine, that the state government failed to provide the merger funds as promised and that their single action has been a major factor is Central Coast Councils financial collapse. A collapse that the government has refused to acknowledge – instead, seizing on an opportunity to take control of the Central Coast, allowing unwarranted over-development at the expense of environment lands and greenfield space against the communities wishes, and leave an installed client dictator in place until their objectives, known and unknown, are achieved.

 

There is little doubt that the NSW Liberal Government’s actions and denial of local democracy should be investigated at a federal level, which won’t happen unless there is a change of government, and, likewise, a full and judicial investigation into Central Coast Council during administration – a change of state government will be needed for that to occur. Only then will the true picture of what has taken place ‘behind closed doors’ be revealed – it will confirm or repudiate whether or not there has been any corrupt behaviour.

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