Where are the Audited Financial Statements???

It has now been over 8 months since the end of the 2018/19 Financial Year and ratepayers and residents are still no wiser as to the state of Council’s finances and are now asking: “Where are MidCoast Council’s 2018 /19 Audited Financial Statements”?

Former GTCC Mayor, Paul Hogan OAM, says:

“This is just unbelievable, with all the staff and resources now at their disposal, I really can’t understand why Council’s Administration has not been able to arrange to have their Financial Statements audited on time. 

“Where is the Audit Risk and Improvement Committee? 

What role are they playing to ensuring that Council’s Administration adheres to the Act and the Regulations.

An additional concern has to be the situation where the majority of the current councillors do not appear to have an adequate level of financial expertise.

“Council should not be undertaking any major projects without a creditable financial baseline and an accurate Long Term Financial Plan.”

Councillor Professional Development.

Amendments made to the Local Government Act 1993, back in August 2016, saw the inclusion in the prescribed role of councillors under Section 232 a responsibility “to make all reasonable efforts to acquire and maintain the skills necessary to perform the role of a councillor”.

In support of this change, Regulations have been issued requiring Councils to provide ongoing professional development for Mayors and Councillors.

In response to this, we understand that in early 2018 (and on a number of subsequent occasions), MidCoast Councillors had agreed to undergo a training course offered by the Institute of Company Directors, which included financial training, however these courses did not get scheduled and are now unlikely to happen. Very convenient for the Administration.

Legislative requirements.

Under the Local Government Act, all Council’s in NSW must have their Financial Statements audited by November (in this case 2019) and placed on public exhibition to the community.

These audited Financial Statements together with the Annual Report and a review of the 12 month Operational Plan are supposed to inform the community on the performance of the Council. If any one of these instruments is not available or out of sync it becomes very difficult to assess Council’s performance. 

Council’s Administration has previously blamed the consolidation of three accounting systems (from the former Councils) for the delays, then it was the new computer system, in the end they have resorted to blaming the bushfires claiming: “The bushfires emergency then impacted on the ability of the NSW Audit Office to conduct onsite visits and finalise the auditing process”  (as if a safe place in Forster or Taree could not be found), now with no sign of the Audited Financial Statements in March, perhaps the only excuse left may be: “the dog ate my homework”?

Desalination Plant backflip.

MidCoast Council’s Administration has recently announced that Council will no longer be proceeding with the lease and commissioning of the $15 million desalination plant on the Wallamba River. 

You may recall that at five minutes to midnight last year, just before the Christmas break, one of those ‘late confidential reports’ was presented, giving Councillors less than twenty four hours to decide on the $15 million expenditure.

At the time Councillors were requested to pass a ‘Resolution’ granting a clear but limited authority to the General Manager for the implementation of the Desalination project including the expenditure of the funds.

The Local Government Act.

A Council ‘Resolution’ is a legal decision made at a formal meeting which is recorded and is binding on the local government agency until it is formally amended or repealed. 

Section 372, of the Local Government Act 1993 “Rescinding or altering resolutions”  states:

(1) A resolution passed by a council may not be altered or rescinded except by a motion to that effect of which notice has been duly given in accordance with the council’s code of meeting practice. 

So Who is running the Council?

The rather curious thing and perhaps a further insight as to who is really running the Council is that whilst the Administration needed the Councillors to vote (and take responsibility for the expenditure of $15M for the Desalination Plant), they didn’t seek their permission or authority to terminate the project.

We have now seen two Council Meetings pass without any attempt by the Administration to place a formal Report before the Council (and the community) regarding the financial consequences of the termination of the Desalination Project nor a request for a Rescission motion.

It seems the actual Resolution (452/19) granting authority for the desalination project and the expenditure of funds moved by Cr Troy Fowler (Liberal) and seconded by Cr Claire Pontin (Labor), has no ‘escape clause’ nor discretion granted to the General Manager (nor his Staff) to terminate the project. 

Prior Consultation with Councillors?

We asked Cr Peter Epov whether there had been any consultation with Councillors prior to the announcement of the termination of the Desalination Project or perhaps even some ‘Late Confidential Report’ or perhaps an ‘Extraordinary Council Meeting’ or one of those other secret / ‘Commercial in Confidence’ meetings? He said,

“I wasn’t consulted, and I am not aware of any meetings which may have been held with Councillors before the decision to discontinue the project was taken.”

Council’s Code of Meeting Practice clearly provides for emergency situations and Council meetings can been called at several days’ notice but neither the Mayor nor the GM opted to do this.

Legal Consequences

The absence of an authority from Council to terminate the project may have some legal consequences, particularly as the Administration will now have to settle with the owner of the Desalination Plant or it may turn in to a legal bunfight if the owner stands his ground and seeks full payment, which in either case will cost a great deal of ratepayers money.

We can only hope that Council’s General Manager, who we understand has legal training and was previously internal legal counsel at North Sydney Council, ensured that the appropriate termination clauses were set within the lease contract, otherwise Council may be up for a bill of $15 million without a single drop of water having been produced.

The absence of a Council Resolution also potentially raises the question of personal liabilities, as the Contract was terminated without the authority of Council, and no resolution has been sought, albeit retrospectively, to repeal the original Resolution and or validate that decision to abandon the project.

One can only hope that in the interests of our reputation the Council now does act ethically and sensibly with the owner of the Desalination plant.

Additional consequences

Then there will also be the question whether the piping from the Wallamba River to the Nabiac Treatment plant (which was allegedly damaged by vandals who drilled holes through it) and all the other associated equipment costing millions can be salvaged and reused or scrapped?

Key Water Projects deferred.

When the Desalination project was announced the Administration also indicated that a number of Water Projects would need to be deferred to pay for lease of the Desalination plant, and for the associated infrastructure. 

Council is still to announce which Water Projects will be deferred, and yet there are only four months left in this financial year. 

So it seems, given the reckless determination to proceed with the Masters Warehouse Office Centralisation Project at any cost, that important Water Projects will have to be aborted and or deferred past the 2020/21 Financial Year.

And Council’s decisions do have serious and very significant consequences.

Sale of Assets to Pay for Masters

The state of Council’s finances and the Desalination debacle are perhaps the lead into the recent announcement by MidCoast Council’s Administration that they have moved

forward with the sale of key assets to fund the Masters Warehouse Office Centralisation.

Unsurprisingly, and yet again perhaps further confirmation as to who is really running this Council, there has been no formal Report to Council (be it ‘Late or Confidential’) nor a request for a Council Resolution to be passed authorising the sale of any Council assets to fund Masters. 

Is this a question of arrogance, or a lack of respect for the Councillors, or an attempt to avoid a further embarrassing public debate on the Office Centralisation, or just plain old bloody minded determination to proceed regardless of the consequences?

And on the point of Council authority, did the Administration actually seek a mandate through a Council resolution authorising the lodgement of the DA with the Joint Regional Planning Panel and to put out a tender for the coffee shop within the Masters warehouse? Afre you saying no da was put thru appropriate chanes???

Council Resolution 124/19

Council Resolution 124/19 (10 April 2019), was the last significant resolution passed by MidCoast Council in relation to the Masters Office Centralisation Project. So it seems this Resolution did not provide any explicit authority nor a mandate to the Administration to go forward with the sale of assets.

Setting this important question of ‘authority to sell’ aside for the moment, this is perhaps a further confirmation of Council’s dire financial circumstances, as the Administration now wants and needs to sell our key assets at the bottom of the real estate market.

Part 4 of Resolution 124/19 required:  “That Council hold a workshop in relation to the financial strategy at the earliest opportunity.”

Was such a workshop ever convened? It seems not. 

Veil of Secrecy 

It looks like Councillors and the Community have been given very little detail regarding the proposed internal layout nor given the opportunity of any input into the design of the new office and Council Chambers. Some interesting drawings have now been discovered on a private web platform called ‘online.anyflip.com’ featuring schematics of the office layout including a basketball court, a table tennis setup and staff breakout room. 

Yet Council has refused to publicly display any designs nor provide any details regarding the internal layout asserting security issues. Isn’t the Masters office a public administration building? 

Forster Council Chambers
will go first.

First on the chopping block will be the Council Chambers in Forster, swiftly followed by the former MidCoast Water Office. 

It will be interesting to see who will actually want to buy the Forster Chambers given it’s been publicly acknowledged by  the Administration that the building needs a new roof, which former GM, Glenn Handford, had projected to cost $2 million.

Fire Sale?

One fears that we could end up with a fire sale of key assets to possibly vested interests, to cover the declining financial position and what should now be viewed as the maladministration of the Council, all to fund a project which is essentially an egregious misuse of ratepayers money.

The reality is that this centralisation will cause a great deal of further upheaval, further loss of services and productivity and increased costs, all at a time when Council should be cautious and be focused on core activities, including natural disasters.

Taree Chambers

Much was made recently about a University coming to Taree and the potential lease of the Taree Chambers to accommodate the institution. It appears this has also now stalled as the Taree Chambers will also be put up for sale. One only wonders who has already lined up to buy the building? 

“Hot Desking”

We have learnt that the Masters Office will be set up on what is called a ‘hot desk’ basis. A quick Google search on ‘hot desking’  reveals a myriad of articles published by the most reputable publications around the world condemning this practice, yet our Council is determined to go forward with it against most staff wishes.

Paperless Office

Anyone who has been inside a MidCoast Council office will have seen mountains of files and papers piled up on employees’ desks. Council staff traditionally work with hard copy paper documents. Part of this ‘hot desk’ practice is to go ‘paperless’. Which will mean a staff member will no longer have the same desk each every day. 

On arrival at work they will have to find a desk, log into the nearest available computer and work off one or more screens on that desk for the day – there will be no paper files nor documents. So if the computer system goes down, or perhaps a power loss then there will be delays (and losses of data leading to chaos).

These new work practices will place a great deal of stress on Council employees, and frustration to ratepayers and residents. There are a number of reports that have now been published on the negative psychological effects from this system of work.

There will also be significant costs, which appear to have not been quantified such as losses of productivity as a result of training and retraining of staff who are not used to this way of working.  You can bet these costs were not listed nor considered in the infamous Cost Benefit Analysis for the project.

Overall it will mean a decline in services, an increased burden on older members of Council staff, leading to resignations and early retirements which will only create a decline in the knowledge base and a reduction in talent bank of good employees.

This all leads to the simple question – if Council staff are not to have a permanent desk or an exclusive space and they will have to work without paper and login when they arrive, then why do they really need a centralised office at all? 

This type of work can be carried out anywhere, even from home. Many companies around the world are already experimenting with people working from home, not that we are advocating this practice at this time, but clearly this is the next major step in administrative cost reduction. Yet here we have our Council committing to repaying this Office Centralisation over the next 20 years.

So why do we really need this centralisation at this time?

You have to ask the Councillors who are for this centralisation plan (to move to Masters) just why they want to burden the Council with a $40 million plus debt to consolidate the amalgamation. And once it’s done, it’s very difficult to unscramble and guess who is left with egg on their face!

What ever happened to that claim that amalgamation would make the new Council “Fit for the Future”, financially stable and provide better services?