Central Coast Council – A financial disaster

THE ISSUE HAD been brewing all through 2020. Central Coast Council was looking at a deficit of $80 million for the year and the only councillors calling it out were Clrs Best and McLachlan. All others were putting their head in the sand and the CEO had no idea.

By October the cash had run out and Minister for Local Government, Shelley Hancock was forced to pay workers wages and payments to suppliers amounting to $6.2 million. That was on the 21st October.

By the end of October the Minister had appointed an Interim Administrator, Dick Persson AM and Interim CEO, Rik Hart and suspended the Council, all 15 of them.

On taking office Mr Persson said that he was committed to finding out how this financial crisis had occurred and would report to the Minister and the community within 30 days.

He delivered his 30-Day Interim Report at an Extraordinary Meeting of Council on 2nd December.

A few days before that Mr Persson announced that he had terminated the employment of Mr Gary Murphy, Council’s CEO, in accordance with the provisions of Mr Murphy’s Contract of Employment, effective immediately.

Mr Persson said that recruitment of a new Chief Executive Officer will commence shortly.

“In the meantime, the Acting CEO Mr Rik Hart and Chief Operating Officer Mr Malcolm Ryan will continue to head the organisation through the challenging times ahead,” he said.

The ten page 30-day Interim Report set out the history of how poor financial decisions and catastrophic budget mismanagement had led Australia’s 6th largest council to the situation they find themselves in today.

“The financial crisis confronting the Central Coast Council is very serious. Council’s operating loss for the current financial year is on track to be in the order of $115m, this follows last year’s loss of $89m,” Mr Persson said.

The Report found that since amalgamation: • Accumulated losses have reached $232m • Debt has risen from $317m to an estimated $565m • Staff numbers have increased by 242 • Restricted reserves of around $200m have been used unlawfully to fund

Council opportunities and capital works.

“It will take urgent and strong action to turn things around. Tough decisions need to be made immediately”, said Mr Persson.

Mr Persson outlined a series of measures to achieve the necessary turnaround: • Significant asset sales of a least $40m

over each of the next two years; • Further borrowings; • A substantial rate increase; • An increase in some Council charges; • A major reduction in Council’s senior and middle management numbers; • A reduction in staff numbers to return to the level at the time of amalgamation.

“The Council’s rapid financial decline is due to several matters, with most of them not directly related to the amalgamation.

“Managing the Council’s financial position is the number one job of the CEO and CFO. It is clear the CEO was either unaware of the looming crisis, or simply failed to adequately respond. Either way the performance of the CEO was unsatisfactory.

“Council, in their role as the Governing Body, also shares that financial responsibility. They also failed in this regard.

“Central Coast residents have been badly let down by their Council and widespread anger over the Council’s performance is totally understandable.

Among the many issues highlighted In the Executive Summary of the Report the Administrator says, “The newly amalgamated Council clearly did not understand how much money they had at the outset. They set about a programme of expanded capital works and expanded services that they could not afford.

Apart from budget mismanagement, Council funded much of this new expenditure from Restricted Reserves, which was either unlawful, or done without the approval of the elected body.

Mr Dick Persson AM

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