The sixth largest council in Australia, Central Coast Council, is in the grip of a financial crisis with a forecast budget blowout of more than $200 million and accrued debts of more than $565 million.
- Thirteen councillors, including the mayor, were suspended in October with the council on the brink of being unable to pay its 2,000 staff
- Today’s report reveals an operating loss for the past two years to be more than $200 million
- The report confirmed its former CEO, sacked just days ago, and the former CFO were aware of the use of restricted funds
A damning report detailing the findings of a 30-day investigation into the financially-stricken council, just north of Sydney, was released by newly-appointed administrator Dick Persson on Wednesday.
Thirteen councillors, including the mayor, were suspended in October when the council revealed it was facing an $89 million budget blowout and was on the brink of being unable to pay its 2,000 staff.
But the full extent of council’s financial position has sent shockwaves through a community which will ultimately be forced to pay the price for what has been described as serious financial mismanagement and the unlawful use of millions in restricted funds.
“They don’t expect to see things go from what seemed to be okay to what I’m calling the greatest financial calamity in the history of local government in New South Wales,” Mr Persson said.
Debt continues to grow
Mr Persson’s report details how the council went from a $65 million surplus to a $200 million deficit in four years.
The 10-page document reveals the Central Coast Council’s operating loss for the current financial year is forecast to be about $115 million, on top of last year’s known $89 million deficit.
While the investigation found no evidence of theft or corruption, the report confirmed the former chief executive officer, who was sacked just days ago, and the former chief financial officer were aware of the illegal use of restricted funds and allowed it to continue.
Interim administrator Dick Persson released the damning report on how council went from a $65 million surplus to a $200 million deficit in four years.(ABC Central Coast: Emma Simkin)
Mr Persson defended the elected councillors, to a point, by maintaining they could not have been expected to be aware of the unauthorised use of the restricted monies, particularly when it was not detailed in reports to council.
But he said they had ample powers to obtain any financial information they wanted, and by not doing so also “failed to perform one of their most important responsibilities”.
The amalgamation of Gosford and Wyong councils to form Central Coast Council continues to be a divisive community issue with some ongoing calls for the entity to be de-amalgamated, and the latest financial crisis has fuelled that argument.
The administrator was adamant the council merger played only a small part in the council’s “rapid financial decline”.
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Members of the two Central Coast councils were opposed to the State Government’s controversial amalgamation plans.(ABC News: Nick Dole)
Sales of council assets underway
Dick Persson stressed swift and decisive action was now required to turnaround the council’s financial fortunes and warned it would be a rough road ahead for at least the next five years.
Foreclosure on at least one significant loan was a very real possibility unless council showed it “had a serious strategy in hand”.
That recovery plan is already underway, with measures including the sale of council assets to the tune of $40 million, further borrowings, significant rate hikes, increased charges, and a reduction in staff.
Since Gosford and Wyong councils were merged in 2016, annual employee costs jumped from $154 million to $221 million, with the equivalent of an additional 242 full-time staff.
The administrator also said he will seek a three-month extension on his role in a bid to see the Central Coast Council at least “break even” in next year’s budget.
“It’s a sad day for the council and residents,” Mr Persson said.
“It’s a sad day for a lot of people who’ve worked hard in the council, and it’s a sad day for local government.”