Council's Financial Situation

In the course of a review of council’s financial situation, Council has determined that its budgetary position has deteriorated since the March quarter result in 2020 when a deficit of $41million was reported. Following a rigorous review of the Council’s budget this deficit has now increased to $89million. 

In addition, 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.

Council faces an immediate and serious liquidity issue.

Appointment of interim administrator

The Minister for Local Government, the Hon Shelley Hancock MP, has suspended Council for a period of three months from 30 October 2020.

Dick Persson AM has been appointed as interim administrator. Please find below FAQs on what this interim administration period means for Council and the community.

100 Day Recovery Plan  

Central Coast Council has, following a year of natural disasters and the impact of COVID-19,  undertaken a review of the Council's budget which reveals that its budgetary position has deteriorated since the March 2020 result. The deficit reported at that time of $41 million is now expected to increase to $89 million. Council is in a critical financial situation and faces an immediate and serious liquidity issue. Given the scope of change needed, the quantum of savings required to be identified, and the need for a full restructure, Council has endorsed and began implementation of a 100 day plan for a business restructure.

Council’s 100 day plan is a multi faceted approach to address the current liquidity issues and introduce structural changes aimed at ensuring the longer term financial sustainability of Council operations. 

Read the 100 Day Recovery Plan

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FAQs

Independent administrator of Council

An independent administrator has been appointed by the State Government under section 438M of the Local Government Act 1993 effective from 30 October 2020 for a period of three months.

What has happened? Why are we in administration?

The Minister for Local Government, Shelly Hancock has issued a suspension order, suspending all thirteen Councillors, including the Mayor, and appointed an independent administrator as the decision-making body of Council.  

How long is the administration period?

The administration period has been set by the Minister for three months. The term of administration may be extended if the duration of the council suspension is extended. The interim administrator will be required to prepare a final written report no fewer than 14 days before the end of the suspension period. Each Councillor and the Chief Executive Officer will be advised by the Minister when the suspension period has ended.

What is the role of the interim administrator?

The interim administrator constitutes the Council and, must perform all the functions, powers and duties of the Council, which must be treated as if they were performed by the Council. The interim administrator will effectively act as the Mayor and the Councillors.

In addition, the interim administrator is responsible for oversight of the implementation of the suspension order and any performance improvement order and reporting on progress to the Minister for Local Government or the Chief Executive, Division of Local Government at the identified reporting milestones.

Other functions may be specified in the order by which the interim administrator is appointed.

Who is the interim administrator?

Dick Persson AM. Mr Persson is a former senior NSW and Queensland public servant and local government administrator including as Administrator of Northern Beaches Council in 2016-17. 

Is the interim administrator role full time?

The interim administrator is expected to commit the necessary time to effectively:

  • conduct the relevant council meetings
  • undertake the civic and ceremonial functions of the governing body
  • undertake the administrative functions of the role, such as oversight of the Chief Executive Officer and implementation of any performance improvement orders.

The Office of Local Government has advised that the average time commitment is expected to be between one to three days per week.

How much is the interim administrator being paid and who is footing the bill?

The interim administrator’s remuneration is set out in the suspension order. The level of remuneration is generally based on the current level of Councillor and Mayoral fees for Central Coast Council as set by the Local Government Remuneration Tribunal. All remuneration and allowances are paid by Central Coast Council.

Where will the interim administrator work?

The interim administrator will be provided with the office space and other support that was previously provided to the Mayor of the Central Coast. 

Will the interim administrator make all the decisions relating to Council?

The interim administrator constitutes the Council and must perform all the functions, powers and duties of the Council, which must be treated as if they were performed by the Council. The interim administrator will effectively act as the Mayor and the Councillors. The interim administrator will work closely with the Chief Executive Officer and make all decisions that an elected Council would do. The interim administrator will consider all staff reports presented to Council and make decisions. The interim administrator will also be able to bring matters to Council via Administrator Minutes.

How do residents raise concerns when there are no Councillors to represent them?

The interim administrator is here for residents to contact and engage with.  The role acts as the Council, and undertakes the responsibilities of the Mayor and Councillors representing the interests of residents and our communities. More information on contacting and engaging with Administrators will be made available in the coming days.

In the meantime, you can continue to contact us or report an issue in the usual way:

Call our Customer Service Centre on 1300 463 954 (24 hours)

  • Email us at ask@centralcoast.nsw.gov.au
  • Submit an online customer request through our Customer Service Centre via our website  [link]
  • Write to us at PO Box 20, Wyong NSW 2259 or PO Box 21, Gosford NSW 2250
  • Visit us at 2 Hely Street, Wyong or 49 Mann Street Gosford.

Will the community have a say in decisions made by the interim administrator?

Yes. Engaging our community on a range of Council plans, projects and initiatives is a core responsibly of local government and this ongoing dialogue with our community will continue. 

If a decision on a plan, project or initiative is to be made by the interim administrator in lieu of Councillors, the results and recommendations from any community engagement will be included in Council’s Business Papers for consideration at Council meetings, as per the usual process.

For more information about engagement at Central Coast Council, please visit yourvoiceourcoast.com

Will Council meetings be open to the public?

Yes. Under Council’s Code of Meeting Practice, all Council meetings are open to the public and are live streamed and webcast. Community Forums will still operate as normal, with members of the public able to register to speak on items on Council’s published agenda.   Due to the Public Health Orders currently in place, Council Meetings are conducted remotely.

What about day-to-day operations of Council. Have staff been suspended too?

The suspension does not include any staff members of Council. The day to day running of Council and delivery of essential services will continue. 

What happens to Councillors? Will they still get paid?

During the suspension period, Councillors are suspended from office and as such are not entitled to exercise the functions of civic office or receive any fee or other remuneration.

Councillors will be required to hand over any Council equipment or resources they have for the period of the suspension.

Councillors who are suspended have the same rights as any other member of the public.

What happens at the end of the administration period? Do Councillors come back? Will there be an election? Or will the administrator continue?

On the expiry of the Ministerial suspension order, the Councillors resume office and the interim administrator leaves the office position unless: 

  • The Minister has fixed the date on which a general election for the Council is to be held and has published notice of that date in the Government Gazette
  • A bill to dismiss the Council has been introduced into Parliament.

Other FAQs

How did Council get here?

There have been many questions asked about how the financial situation evolved. We are still investigating and also conducting a forensic audit. 

Amalgamation costs are part of this story.

Amalgamation has been a complex process with challenges, including the consolidation of Council systems and processes.

We know from other local councils that amalgamation can take up to 10 years for completion.

At present we estimate the real costs of amalgamation will be in the order of $100million. Council received $20million at the time of merger to assist with amalgamation this included $10million to consolidate systems and process etc, and $10million for infrastructure ($9million for council $1million for the community)

Is the State Government recognising the cost of the merger was much more than what Council was given funding for?

Council cannot speak on behalf of the State Government but can say this is one of the items Council is investigating; what impact the amalgamation has had and the ongoing financial impacts which we estimate could be in excess of $100million.

How does Central Coast Council compare with budgets of other same sized amalgamated Councils?

It is difficult to compare directly with another council when taking into account differences in a local government area size, population, number of ratepayers and types of service delivered; such as Central Coast Council is also a water utility and other councils are not.

Geographically, the Central Coast Local Government Area is larger than Canberra and has the sixth highest population in NSW.  Council’s budget is amongst the highest budgets in local government in Australia.

COVID-19 costs are also part of this story.

The impacts of COVID-19 is one of the items Council is investigating. Both the timing of rate collections and the impact of reduced income has had a material impact on working capital in the order of $50million.

As the largest employer on the Central Coast, Council needed to ensure the local economy stimulus continued, by:

  • Ensuring all fulltime equivalent staff were kept on in employment – 92% of the Council workforce are local residents and high contributors to the local economy
  • Encouraging staff, where possible, to take leave but with the closure of buildings and facilities, staff were also required to work from home which meant a cost to Council in moving the staff from an office environment to a home-based environment - this factor is still an ongoing requirement as we come out of COVID
  • Providing a business relief program which meant rents on Council properties were deferred
  • Delivering a $242million Capital Works Program, the highest ever; has led to a reduction of income in the order of $50million.

Central Coast Council cannot speak for other councils, but it is likely that other councils will also have been impacted financially by COVID-19 and natural disasters in NSW, also experienced here on the Central Coast.

Can you explain the whole process? How could we suddenly have ended up in this situation?

An external consultant, Grant Thornton was commissioned to carry out a review of Council’s finances and systems this year due to COVID -19 impacts, including potential cashflow issues in relation to reduced revenue streams. The result of that review identified there were discrepancies.

On 2 September 2020, the Chief Executive Officer engaged a further external provider, DMB Consulting Pty Ltd, for the purpose of advising further on the discrepancy issues raised from the Grant Thornton review surrounding the use of Council reserves (internal restrictions) and specifically whether the reserves have been utilised in accordance with their approved purposes.

On 23 September 2020, DMB Consulting Pty Ltd met with Council’s Executive Leadership Team and the acting Chief Executive Officer to present preliminary findings. The provider was requested to provide an Interim report as soon as possible. As a preliminary measure, Council’s Executive Leadership ceased all but essential recruitment and removed delegations from staff with regards to tenders and contracts as a prudent action.

On 3 October 2020, DMB Consulting Pty Ltd submitted a draft interim report to the Chief Executive Officer. This draft report (dated 3 October 2020) highlighted 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.

Previous audits including the external audit of council finances for 2018/19 by the NSW Audit Office failed to pick up any discrepancies in the finances. A PWC report in 2019 in fact indicated that council had “a financially prudent plan” in place. It was not until Grant Thornton was commissioned to undertake a review of Council’s finances and systems this year by the CEO due to cashflow issues and COVID -19 impacts that the discrepancies were picked up.

For more information, see Item 3.8 Budget Review Process, Council Meeting 12 October 2020.

What is Council doing?

Council adopted the 100 Day Recovery Action Plan in the Council Meeting on 19 October.

Immediate focus of the Plan is reduction in rate of Council expenditure to address the serious cashflow issues of Council. Long term, the Plan is about financial stability of Council operations to deliver effective and efficient services to the community.

All decisions taken during this period of rapid change ensure that essential services are maintained and impact on the Central Coast community is minimised.

There are a number of actions in the plan including:

  • Identifying savings in the Capital Works and Operational Services programs
  • Reduction in non-essential services
  • Workforce reduction
  • Asset review
  • Fully costed restructure of the business
  • Identifying future revenue opportunities
  • Investigation of loans and borrowing options
  • More aggressive debt repayment programs

What have been the first few steps of the 100 Day Recovery Action Plan?

The following actions were implemented immediately as part of the 100 Day Recovery Action Plan:

  • Immediate stop on spending
  • Overtime restricted
  • Financial delegation changes
  • Portion of the contingent workforce released
  • Undergraduate program for 2021 paused
  • New apprentice roles not yet commenced are not proceeding
  • CAPEX savings of around $23M identified
  • Review of operational budget to identify further savings
  • Payment terms amendments and all suppliers notified

Will any support be given from the State Government?

Council is still seeking support from the State Government and continues regular communication including to the Minister for Local Government and the Office of Local Government.

What was the need to report findings to Office of Local Government? Was there enough evidence presented to a potential breach of Act?

The draft interim report from the external provider, DMB Consulting Pty Ltd highlighted that some expenditure over the last 12-18 months may have resulted in restricted funds being used contrary to the provisions of the Local Government Act 1993. Despite having concerns as to the accuracy of the detail in this draft interim report, noting that the draft interim report itself expressed concerns about the reliability of the financial information provided to DMB Consulting; there was enough substance for Councillors and the Office of Local Government to be notified.

Who is doing the forensic audit?

Council conducts annual financial audits as required by the Local Government Act and these are conducted by the NSW Auditor-General.

Council has also finalised the scope for a forensic financial audit for Council with an appointment of a provider imminent.

Has Council appointed a new CFO?

Yes. Natalia Cowley commences in the role of Chief Financial Officer on 27 October 2020.

How much land does Council own and are you going to sell it

Does Council own land like any other person or private entity?

Central Coast Council is responsible for the care, control and management of land and facilities for a variety of purposes relevant to the current and future needs of the community it serves. Much of this land Council manages on behalf of the NSW Government (Crown Lands) for the benefit of the Central Coast community. The majority of Council’s land holdings are classified as community land, including our beaches, parks and reserves. Council is also responsible for operational classified land which includes its administration buildings, depots, and commercial holdings. How Council land is acquired and classified is undertaken pursuant to the Local Government Act 1993 and other relevant land legislation. 

How big is Council’s land portfolio? 

Central Coast Council manages approximately 7,000 parcels of land. It should be noted though, that any one park or reserve could be made up of several individual land parcels. 

How much of this land can be sold? 

Of the land that Council manages, only a third is classified operational and could therefore be considered for sale. However, it must be stressed that Council is only considering selling 1% of operational land holdings. 

Why is Council looking to sell its land now?

Under Council’s adopted 100 Day Recovery Plan there is an action to review Council’s land holdings and consider the sale of non-core assets no longer required. This is the focus of this review, as these parcels of land have previously been considered for disposal, being either duplications from the amalgamation of the former Gosford and Wyong Councils, or surplus to Council’s current and future requirements. The disposal process is now being prioritised to assist Council’s financial position, as part of the 100 Day Recovery Plan.

What would be the process for Council to sell any of its land?

In undertaking this review of surplus land, Central Coast Council will take into consideration the social, environmental and operational purposes for which Council held this land and which land needs to be retained for the exercise of the functions of Council. Any land assessed as being surplus to Council’s needs would then require a Council resolution to approve the sale. Once a resolution has been made, Council would then go through a competitive sales process at an open market tender to achieve the best possible return on any transaction. 
 

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Last updated : Fri 30 Oct 2020