Auditor’s letter conveys financial concerns to Minister
Published on 19 August 2022
Kiama Mayor Neil Reilly has called an Extraordinary Meeting, with the support of his colleagues Deputy Mayor Imogen Draisma and Councillor Stuart Larkins. The purpose of the meeting is to table on the public record a letter sent from the Auditor General of NSW to the Minister for Local Government confirming significant issues with Council’s 2020-21 Financial Statements.
The letter outlines concern about Council’s inability to repay its debts, noting that this poses “a significant risk to Council”. It also notes issues with the adequacy of Council’s books and records and the use of externally restricted funds.
“The Councillors and I are being transparent in releasing this letter so our community can see exactly what it says. Although the letter does not convey good news, it is not new information and it does verify what myself, the Councillors and our CEO have been saying publicly in regard to Council’s financial situation for the past 9 months now,” said Cr Reilly.
The letter was published today in the Business Papers for the Extraordinary Meeting, to be held on Wednesday 24 August at 4:00pm. Council has notified the Auditor General’s Office and the Office of Local Government of the Extraordinary Meeting and its purpose.
The Auditor’s letter confirms a key source of Council’s current liquidity issues involved construction of the Blue Haven Bonaira aged care facility, a project that was originally budgeted at $74 million, with a final cost estimated at $107.2 million.
The letter also refers to issues with the Blue Haven Refundable Accommodation Deposits (RADs) and the Independent Living Unit (ILU) entry payments, both of which were previously identified by Council and included in its State of the Organisation report in January 2022 and the Strategic Improvement Plan announced in May. Notably the letter raises the issues, previously communicated about the practice of merged ledgers for Blue Haven and Council causing significant issues in accurate financial reporting and compliance with legislation for accounting for expenditure.
The letter also mentions Council’s $60 million NSW Treasury Corporation (T-Corp) loan, which helped to fund the Bonaira project. The $45 million balance of the T-Corp loan is due to be paid in August 2023.
Repayment of the loan was to be partially met from the sale of Council’s Akuna Street landholdings. With delays due to legal issues that arose after Council approved the sale in June, the Auditor notes there is now no certainty the transaction can be completed before the T-Corp loan is due.
All of the matters mentioned in the letter have already been the subject of publicly available reports and documentation, meetings, media statements and continued community conversations.
“I would like to thank the Auditor General for summing up our situation so succinctly and for exercising their duties in reporting obligations. The Councillors and myself all understand the seriousness of where we find ourselves. We will continue to move forward and make decisions that propel us towards financial sustainability and long-term stability for Kiama Council. But I do believe while we do this, the people of our community have a right to know what our challenges are and how much effort is required to address these”
To this end, this week’s Ordinary Meeting of Council resolved to hold a Councillor Finance Workshop by the end of August.
The workshop will be attended by all elected Councillors to better understand and then determine how they might safeguard Council as a going concern that can meet its financial obligations as and when they fall due.
While continuing to do this work, Council will await a response to the Auditor General’s letter from the Minister for Local Government, Wendy Tuckerman.
While Council cannot anticipate what the Minister may do, options that have been introduced by past Local Government Ministers in similar circumstances have included: supporting regular meetings of staff, watching briefs of issues, issuing strategic improvement orders, appointing a financial controller, appointing an administrator or providing additional assistance or resources.
Kiama Council CEO Jane Stroud said, “I understand the seriousness of our situation, and have been committed to sharing information with the community and have consistently done so. Occasionally in the face of adversity and criticism. I will continue to work with all Councillors and staff to do everything we can to address these matters and will remain truthful with our community about the state of the organisation.”
“Importantly, this letter shows the truth and reality of what was previously publicly conveyed, and what has transpired in the 2020-21 financial year, which continues to impact on our Council today. The actions of the past always (both the good and bad) have a bearing on today’s position and this letter shows the very real challenges that we have been working on since I commenced in the role and that will continue to be the focus of future improvement work for Council. There is a long way to go yet.”
“I want to stress to our community that the business of government goes on. While the organisation waits for the Ministerial communication and decisions, our work does not stop, and nor should it. Kiama Council will still provide care for our residents and clients at Blue Haven, we’ll continue to collect waste, maintain our roads, facilities and outdoor spaces. Our libraries, Leisure Centre, SENTRAL, Pavilion and Holiday Parks remain open and operational. It is very much business as usual; our staff continue to do important public service work today, tomorrow and into the future. I know our team will keep working hard for this community, as they always do.”
Cr Reilly said: “I will be in contact with Minister Tuckerman to ensure she is aware of the huge body of work we have already completed and continue to undertake as a matter of urgency, to get our finances back on track.”
Council continues to work on its financial stability with the assistance of our key advisory bodies including the Audit, Risk and Improvement Committee (ARIC) and Finance Advisory Committee (FAC).
As well as providing monthly financial reports to Councillors and the community, the Auditor General has requested Council provides two years of monthly cashflow projections, which the CEO and finance team are working to produce.