Overview
Council has met all milestones and targets in its Financial Recovery Plan that was put in place in late 2020. These actions have been taken to ensure Council’s ongoing financial sustainability.
The focus of Council is now on consolidating and improving the performance of the organisation.
Background
Council has taken a number of decisive actions since uncovering its financial situation in late 2020.
There are now tighter budget management controls in place. We have also implemented measures to manage costs including reducing staffing by $30 million, reducing materials and contracts by $20 million, capping capital works programs at $175 million, selling at least $60 million in property assets and obtaining $150 million in emergency bank loans to reimburse the $200 million in restricted funds that had been spent unlawfully on projects that the community had benefited from. This included $69 million of capital works projects delivered earlier than intended and a continuation of the same level of services for water and sewer, even though ratepayers had reduced rates equating to a loss of approximately $120 million in revenue to Council over three years to deliver these services.
These cost management measures made up 70% of what we needed to do to satisfy the external lenders that we were getting Council finances back on track. The other 30% comes from the temporary 13% special rate variation (plus 2% rate peg) approved by the Independent Pricing and Regulatory Tribunal (IPART) in May 2021 for three years, and then approved by IPART for a further seven years in May 2022.
The external loans are the backbone of our financial recovery and we are required to repay these within ten years from our current and forecasted surpluses as outlined in our ten year Long Term Financial Plan.
Everything possible has been done behind the scenes to reduce costs and minimise service reductions to the community. This includes a focus on productivity improvements which should have been realised as part of the 2016 merger of Gosford and Wyong Councils but were not, such as improving internal systems, processes, equipment and better management of staff time. Some of these productivity improvements will continue to have an ongoing positive impact on improved service delivery and the community will see the benefits year on year. For more information, see Productivity Improvements Fact Sheet.
There has been no fraud, corruption or criminal activity that has caused the financial problems of Central Coast Council. A Public Inquiry was conducted at the direction of the NSW Government and the final report released on 17 March 2022.
Timeline
- 10 May 2022 - Independent Pricing and Regulatory Tribunal (IPART) approved maintaining the one-off, temporary 15 percent Special Variation (SV) rate increase for the Central Coast for a further seven years to June 2031. This does not mean an increase in base rates as it is a continuation of the 2021-22 rates, with the exception of an increase by the IPART determined rate peg every year. Read FAQs on IPART's decison on SV rates in May 2022.
- 17 March 2022 - Minister for Local Government, the Hon Wendy Tuckerman MP, tabled the report into the Public Inquiry of Central Coast Council. Commissioner Roslyn McCulloch made eight recommendations, including that the Councillor roles be declared vacant and that an Administrator be appointed to serve until the Central Coast Council election, the date of which will be determined in consultation with the NSW Electoral Commission.
- 3 February 2022 – Council formally resolved to apply to IPART to maintain rates at their current levels for additional seven years, ten years in total to 2031. Council adopted the revised Community Strategic Plan; Delivery Program 2022-2025 (including Operational Plan 2022-23); Resourcing Strategy which includes the Long-Term Financial Plan, Workforce Management Strategy and Revised Asset Management Strategy; and Fees and Charges 2022-23.
- September 2021 to January 2022 – Council formally notified IPART of its intention at the end of September 2021 to make a submission in 2022 to maintain the current rates beyond the three years determined by IPART on 17 May 2021. Community consultation was undertaken over four months via stakeholder meetings, direct submissions, a Community Reference Group and community surveys and at the conclusion of the service levels and scenario engagement, Council engaged on the strategic documents that form the basis of Council’s planning, actions and budgets. To see a copy of the Consultation Report and more information go to https://www.yourvoiceourcoast.com/servicesandrates
- 27 September to 19 October 2021- Public hearings conducted by Commissioner Roslyn McCulloch for the Public Inquiry into Central Coast Council.
- 17 May 2021 – Independent Pricing and Regulatory Tribunal (IPART) approved a 15 percent Special Variation (SV) rates increase for the Central Coast for three years.
- 13 May 2021 – Rik Hart commenced as Administrator of Central Coast Council.
- 11 May 2021 – Council resolved to hold a Constitutional Referendum on 4 September 2021 to ask the community if they are in favour of reducing the number of Central Coast Councillors from 15 to nine, resulting in a reduction of Wards from five to three.
- 26 April 2021 – The NSW Government announced a public inquiry into Central Coast Council's financial situation and determined the terms of reference. Administrator, Mr Dick Persson AM welcomes the announcement.
- 15 April 2021 – Administrator releases his final report to the community on outlining a number of recommendations to the Minister for Local Government including to take whatever action is necessary to prevent the return of the currently suspended Councillors, and to delay the September 2021 election to allow for a formal inquiry to determine what is needed to achieve the successful merger of the two previous Councils.
- 12 April 2021 – new CEO, Mr David Farmer commences and Mr Rik Hart (Acting CEO) and Mr Malcolm Ryan (interim COO) step down.
- 15 March 2021– public consultation on the Constitutional Referendum for Council concludes with 78 percent of 613 survey participants wanting to reduce the number of Councillors from 15 to 9, and 55 percent of 465 survey participants wanting to abolish Wards and have all Councillors represent the whole Central Coast.
- 9 March 2021 – Council received the 'Clayton Utz Legal and Financial Forensic Review' and noted it will continue to receive a monthly report to a Council meeting detailing the financial position of Council at month end (being the Investment Report) as required under the Local Government Act 1993.
- 3 March 2021 – Mr David Farmer was appointed the new CEO for Central Coast Council.
- 8 February 2021 – Council resolved to apply to IPART for a 15 percent one-off permanent special rate increase. Council adopted the revised Long-Term Financial Plan (General Fund) as well as the Debt Recovery and Hardship Policy for purpose of public exhibition. Find out more about the application, impacts on ordinary rates and answers to frequently asked questions at yourvoiceourcoast.com
- 3 February 2021 – Council resolved to hold a Constitutional Referendum for the reduction of Councillors (from 15 to 9) in conjunction with the September 2021 Local Government Elections. On 1 March, public consultation commenced to understand the views of the community to inform referendum questions which would be delivered at the next Council election.
- 3 February 2021 – The Administrator issued a 3 Month Progress Report providing an update on the current situation and progress to date on the Business Recovery plan, with FAQs for the community.
- 8 January 2021 to 1 February 2021 – formal consultation on the rate rise options was undertaken. The results of the consultation can be found here – Securing Your Future Consultation Report 4 February 2021.
- 14 December 2020 – Council endorsed community consultation for a further rate option on for a one-off Special Variation of 13 percent in 2021-22 to remain permanently in the rate base as well as the two percent rate peg. This further option, to also undergo community consultation, was in response to further work undertaken in forecasting the reduction in service levels to achieve sustainable long-term financial plans and repay restricted reserves.
- 2 December 2020 – a 30 Day Interim Report was issued by the Administrator Dick Persson which sets out preliminary findings and conclusions about how Council found itself in the current financial situation. It states that Council has failed to understand or practise the basics of sound financial management and that the investigation found no evidence of theft or corruption. However there had been unlawful use of restricted funds.
- 30 November 2020 – it was determined that the former CEO Mr Gary Murphy did not meet required standards of his role particularly regarding the core requirement of sound financial management and his contract was terminated. Recruitment of a new CEO is underway with a planned commencement date of early April 2021.
- 26 November 2020 – Council endorsed the making of an application to the Independent Pricing and Regulatory Tribunal for a one-off Special Variation of eight percent in 2021-22 to remain permanently in the rate base for seven years, which plus the two percent rate peg increase in 2021-22 represents a total rate increase of 10 percent for 2021-22. Council further resolved to undertake community consultation on the application.
- October 30 2020 Minister for Local Government, Shelley Hancock MP suspended the Council and appointed an Administrator, Mr Dick Persson AM. Mr Persson is supported by Mr Rik Hart as Acting CEO to oversee Council’s operational recovery. This suspension has been extended until 29 April 2021.
- 26 October 2020 – Council engaged Clayton Utz and Clayton Utz engaged KPMG to undertake a targeted forensic review of a sample fund to gain understanding of Council’s financial accounting practices and adherence to the Office of Local Government Guidelines.
- 16 October 2020 – Natalia Cowley appointed as Chief Financial Officer and the temporary appointment of Malcolm Ryan as Chief Operating Officer on 30 November 2020 to assist with the implementation of structural change in Council.
- October 6 2020 – Council announced it was in a ‘serious financial situation’ and faced an ‘immediate and serious liquidity’ issue.
- The Office of Local Government was advised, there was an immediate review of Council’s budget and a 100-Day Recovery Plan (now Business Recovery Plan) was developed.
Proactive release of Information to be provided under a formal GIPA
Council has proactively released the following information on 9 March 2021.
| No | Date | Description of record | Download Link |
| 1 | 19/11/2020 | Meeting File Note | 1.Meeting File note 19112019.pdf |
| 2 | 20/3/2020 - 1/4/2020 | Email correspondance between Gary Murphy and Craig Norman | 2.Email correspondence between GM and CN |
| 3 | 23/3/2020 | Email correspondance between Gary Murphy and Craig Norman | 3.Email correspondence between GM and CN-23320 |
| 4 | 27/3/2020 | Email correspondance between Craig Norman and a number of people including Gary Murphy | 4.Email correspondence between CN and a number of people including GM 270320.pdf |
| 5 | 20/4/2020 - 21/4/2020 | Email correspondance between Gary Murphy and Craig Norman and forward email from Carlton Oldfield | 5.Email correspondence between GM and CN and forward email from CO.pdf |
Addressing community concerns
We have been listening to our community and have a strong commitment to answer your questions, respond to concerns and provide transparent and timely information.
Read community consultation on the special rate variation.
Community concerns
Why are the members of the Executive still in their jobs? Weren’t they responsible too?
The authority of the CEO of a Council is near absolute. Individual Directors are not able to challenge the way the CEO runs the organisation.
In the Administrator’s 3 Month Progress Report he confirms he is satisfied that the former CEO did not create a culture or structure whereby the Executive Team were able to discuss the overall Council finances. The Budget process was poorly controlled and there was little leadership from the CEO or CFO (Chief Financial Officer).
Directors often received financial information about their own areas of responsibility when it was too late to act and concerns had been raised during individual meetings with the CEO.
It is the CFO and CEO who present a budget and Operational Plan for endorsement by Council every financial year and the Council adopts that budget and Plan.
Who is responsible for Council’s financial situation and will they be held accountable?
Under the Local Government Act, the CEO is the ‘accountable officer’, with responsibility for financial management. The CEO did not adequately perform key parts of the role and therefore was a major contributor to the financial decline confronting the Council.
The CEO's required performance was not met and as such his position was terminated on 30 November 2020.
The CFO position was vacant at the time of the appointment of the Administrator. Council would like to reiterate, there is no evidence to support claims of theft or corruption.
Where did the money go?
Council’s rapid financial decline is in part due to several matters:
- The substantial costs in upgrading IT systems and infrastructure [net of $10m Government grant] is $50m, with $8m ongoing.
- The substantial costs of an industrial dispute concerning 38/35 hour week, unified salary scale and other harmonisation costs [$25.3m, with $3.2m on-going].
- The $39m loss of revenue (compared to 2018/19) from the 2019 IPART pricing determination for water, sewerage, stormwater drainage and trade waste services.
- The increased costs and revenue losses brought about by the bushfires, floods and COVID-19 are estimated at $10.5m.
- Increased employee costs – Council did not find savings that often come with amalgamation, Council embarked on a number of expansive initiatives, some with highly paid staff that resulted in employee costs significantly outstripping projected revenue growth. There are around 250 more people (FTE) employed now than at the time of the amalgamation.
- Overspend on capital works program (services and infrastructure) of around $70M a year.
In 2019/20 the Council embarked upon a $242M capital works program and another $224M was earmarked for this financial year. This is substantially more than Council can afford with its income (should be more like $170M) and much of this was delivered through accessing restricted funds.
The Administrator Minute adopted by Council on 14 December 2020 highlights the 1,383 projects delivered with this $242M spend and the benefits it did deliver to the community.
The Mardi to Warnervale Pipeline project was managed effectively in 2019-20 which meant that aspects of the around $50 million project were brought forward and over $14 million was expended on one of the region’s most significant infrastructure projects. This 9km pipeline will boost water supply to the Central Coast’s rapidly growing norther suburbs and will improve water security for the entire region.
Not all the works undertaken were major projects, significant infrastructure renewal and improvement was undertaken through the year. This included the resurfacing of 107km of road, upgrading 82 bus stops to make them accessible, 4.9km of drainage infrastructure and the upgrade of four wharves to improve access and usability. Work was also undertaken on projects that not only maintain essential services but also enhance the amenity of open spaces on the coast. These included works at Adcock Park, EDSACC at Bateau Bay, Heazlett Park in Avoca, Don Small Oval at Tacoma and Koolewong Foreshore on which a combined total of $7.137 million was spent. Over $6 million was spent on the maintenance and renewal of community assets including seven child care centres, 18 library projects, 11 community halls and 18 community centre projects.
A full list of Council approved projects for any financial year is detailed in the Delivery Program and Operational Plan.
What is the difference between restricted and unrestricted funds?
Restricted funds cannot be used for general purposes because they have some form of legislative or contractual obligation to only be spent on a specific purpose. In a household sense, restricted funds are similar to when a personal savings account is set up to save for something specific (e.g., holiday fund). Unrestricted funds can be used for general purposes and are the household equivalent of your everyday spending account.
What if I don’t pay my rates or can’t pay my rates? What will Council do?
Council provides rebates and hardship assistance for those having trouble paying their rates and encourage the community to refer to Council's Debt Recovery and Hardship Policy which includes pensioner rebates as well as opportunities for personalised payment plans. See Debt Recovery and Hardship Policy.
Under the Policy, Council is committed to engaging with our customers to limit the unreasonable use of legal action in recovering any arrears in rates and look at each individual case of genuine financial hardship. Under the Policy, Council will not reduce rates or annual charges, but will consider alternative available approaches to dealing with cases of financial hardship.
What are restricted funds used for?
One example of restricted funds is Development Contributions (also known as Local Infrastructure Contributions). These fees are charged by Council when new development occurs. These contributions fund local infrastructure needed to support an increased number of residents in the area.
This type of local infrastructure typically includes local roads, stormwater and drainage, shared pathways, parks, playspaces or other recreational areas, environmental land and community facilities.
To view details of our region’s various contribution plans and infrastructure that is provided within these, go to our webpage on Development Contributions.
What action has Council taken to remedy its financial situation?
An Administrator was appointed by the NSW Government in October 2020 to oversee Council’s financial recovery following the suspension of the Central Coast Councillors.
The outcomes of a Public Inquiry held in October 2021 were released on 17 March 2022. The Central Coast Council Public Inquiry Report can be viewed here: www.parliament.nsw.gov.au.
Council has taken decisive actions in a short space of time since uncovering its financial problems.
We have had a financial recovery plan in place since November 2020 and have delivered on it. We have implemented measures to manage costs including significant staff reductions, restrictions of spending and reducing capital works programs (such as infrastructure and IT systems); selling property assets and obtained emergency bank loans to reimburse the restricted funds that had been spent unlawfully on projects that the community had benefited from. Productivity improvements are also a continual process. We have done everything we can behind the scenes to reduce costs without largely impacting on the services we deliver for the community.
The merger (amalgamation) was supposed to improve things, but this does not seem to have happened. What’s going on?
Some of the benefits from the productivity improvements of the 2016 merger of Gosford and Wyong Councils have taken longer to be realised and some actions have taken longer to be implemented.
Council has put renewed focus on achieving these improvements through better management of staff time; purposeful equipment to help staff do their job efficiently; and our technological progression coming to fruition with our staff benefiting from using upgraded technology systems and transitioning manual processes into digital ones. This means we have stopped some clunky and inefficient processes.
These productivity improvements have ensured the necessary cost-cutting measures have meant minimal service reductions for the community. Some of these productivity gains will continue to have an ongoing positive impact on improved service delivery and the community will see the benefits year on year. In a nutshell, we continually strive to be more productive, so we can use those ‘saved hours of staff time’ to deliver an improved service level for our community, or reduce our costs where needed.
More information is available in the document Fact Sheet – Productivity Improvements.
The Coast is already a mess and I don’t get any services now so why should I pay more?
Council has had to take significant steps towards financial recovery, which has included a review of service levels including reduction in staff resources across the whole organisation. Council remains committed to continuing the delivery of essential services for the community.
Council has prioritised mowing work in order of; safety (roadsides), playability (sportsgrounds), usability (parks/playgrounds) and amenity (sports surrounds, reserves, roadsides and centre medians).
Council has prioritised its general funded Road and Drainage Capital Works Program in line with its Business Recovery Plan. All works were prioritised based on current stage of completion, as well as public safety and risk. From there, determinations were made regarding which projects were able to be deferred for completion at a later date when funding resources become available. Council also continues to prioritise Water and Sewer works in a similar way.
Council delivers many free services for the community, and for every rates payment it receives Council invests it back into:
- Roads, footpaths and shared pathways
- Sport, recreation and community facilities
- Waterways and natural environment
- People, arts and culture and leisure
- Libraries and learning
- Planning, building, health and economic development
Council now has an improved online customer service centre for the community, which provides more self-service options when lodging a request. It can also assist customers to find information and tips on how to resolve their issue quickly and easily. Users can submit customer service enquiries, provide feedback or report any issues that you would like Council to action. Once registered, users can also track and view any updates to their service requests.
Council has overspent on programs in both capital works and general operations, which has actually seen more infrastructure built for the community and more services delivered. Council embarked upon a $242m capital works program which is $69m more than the average capital spend over the previous two financial years, based on the incorrect assumption the capital works program could be paid for from Restricted Reserves. A number of these projects exceeded their budget – for example the Water Fund exceeded its capital budget allocation for 2019/20 financial year by $12m, while the Sewer Fund exceeded by $2.6m and Drainage Fund exceeded by $1.2m.
If the use of restricted funds was ‘unlawful’ why has it not been referred to ICAC?
There is a difference between unlawful and illegal. A breach of the Local Government Act is not a criminal or corrupt act. ICAC deals with matters of fraud, corruption or malpractice. The “unlawful” use of funds was of concern to the Minister for Local Government and considered during the Public Inquiry of Central Coast Council. See Public Inquiry.
If the CEO was terminated in his role for inadequate performance why was he provided with a full pay out?
The Administrator terminated the CEO’s contract on 30 November 2020. In confirming the termination the Administrator advised the following:
It is understandable that the community is angry about the ‘full payout’ given to the former Central Coast Council CEO following his termination.
“Given the provisions of the contract and the laws governing employee legal rights, a full payout of 38 weeks was necessary. This was the quickest way to allow the recruitment of a new CEO (usually 3-4 months) and expediate Council’s move toward financial recovery.
The path to remove a CEO for unsatisfactory performance, which would still have seen 13 weeks’ paid out, would have required a performance review to be conducted and the CEO an opportunity to respond. This would have taken at least eight weeks and would have been difficult given the previous Council determined his performance as “meets expectations” in the two previous CEO performance reviews.
The best of bad options was selected for the long term future of Council, it’s ratepayers and staff.”
How long will it take to get Council finances back in order?
Council is tracking well on its financial recovery and is currently forecasting a small operating surplus for the 2021-22 financial year needed for the principal loan repayments. Council is required to repay the commercial loans within 10 years. It is expected that it will take at least 10 years for Council finances to be back in order.
How are you ensuring that the financial situation doesn’t happen in the future?
Council has put in place a number of financial management measures and improved its checks and balances to ensure that Council finances are managed well. Currently Council has an Administrator in place overseeing Council’s financial recovery following the suspension, and then termination of the Central Coast Councillors. The NSW Government held a Public Inquiry in October 2021. Administrator Rik Hart made a submission-in-reply to the Commissioner leading the Public Inquiry and this submission outlined eight recommendations for the Commissioner’s consideration and provided a detailed timeline of matters related to the financial situation. You can view this submission on Council’s website. Go to the Administrator page at www.centralcoast.nsw.gov.au or find the document at this link.
On 17 March 2022, Minister for Local Government, Wendy Tuckerman tabled the report into the Public Inquiry into Central Coast Council. The Central Coast Council Public Inquiry Report can be viewed here: www.parliament.nsw.gov.au.
Administrator Rik Hart also recommended to the Minister for Local Government that the next general election for the Central Coast be conducted in September/October 2022 and be held in conjunction with the Constitutional Referendum, with the results of the Referendum to apply in the 2024 local government elections. The Referendum would ask Central Coast voters to determine the following question: ‘Do you favour a reduction in the number of Central Coast Councillors from fifteen to nine? This will result in three Wards with each Ward electing three Councillors’.
Did Council have to secure commercial bank loans?
Yes. Commercial bank loans are the backbone of the financial recovery and we have to repay these loans within 10 years. These loans are helping us to continue to deliver services at their current levels and this is why we applied to maintain the current ordinary rate for an additional seven years, or ten years in total. The decision from IPART to allow Council to maintain its rates for the full ten years allows Council to demonstrate to the commercial lenders that we are able to pay back the loans and maintain the current service levels for the Central Coast community.
Are Councillors responsible for Council’s financial situation?
Council, in their role as the Governing Body, shares responsibility with the CEO for Council finances. Part of their role is to ensure the financial sustainability of the Council and to monitor a general manager’s performance. For further information on the roles and responsibilities of a Councillor read the Office of Local Government NSW Councillor Handbook, 2017.
The role of Councillors in the current financial situation is outlined in the Administrator’s 30 Day Interim Report where he states:
“Some members of the elected body have claimed they were denied information by “council officers”. 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.
The Minister for Local Government has limited options for dealing with non-performing councils. The only way a council can be dismissed requires the formation of a formal inquiry. These typically take many months, and then the council must be given an opportunity to respond.
In Central Coast Council’s case, the Minister used her powers to suspend the council for 3 months on 30 October 2020 and appoint an Interim Administrator and then extended the suspension for a further 3 months. On 26 April 2021, the Minister announced a Public Inquiry into the Council’s financial situation.
On 17 March 2022, the Minister tabled the report into the Public Inquiry of Central Coast Council and took action to terminate all Councillors immediately, appointing an Administrator until the Central Coast Council election, the date of which will be determined in consultation with the NSW Electoral Commission.
The Public Inquiry Report examines the role of Councillors in more detail.
See Public Inquiry.
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