(THE MAYOR HAS IT IN HAND FOLKS. LET’S NOT WORRY.)
For immediate release: 1.30pm Friday 23 June 2023
Update from the Mayor’s desk: response to performance audit report
Last week the NSW Auditor-General tabled a Performance Audit Report titled Financial Management and Governance in MidCoast Council. The audit involved a retrospective look at Council’s processes between July 2019 and June 2022.
The Report details the merger challenges that Council faced and highlights some inadequacies in our procedures during this time. These findings were not a surprise to staff or Councillors. Merging four corporate and financial systems into one is a complicated exercise and has taken considerable time and resources.
As well as highlighting these procedural inadequacies, the Report also documents the continuing improvements that have been made by Council during this period to resolve these issues.
The report accurately reflects the journey we have been on since the NSW Government merger of the four previous entities into one (three Councils and the Water Authority).
The report is critical of delays in finalising a reliable Long-Term Financial Plan (LTFP). This plan depends heavily on accurate and reliable asset information. We have spent the last few years verifying and revaluing all our assets. While the former entities had asset management systems in place, they were not of sufficient quality or consistency to provide the level of confidence required for longer-term financial modelling.
I am pleased that these asset management plans are nearing completion, and we will be considering them at our Ordinary Council meeting next week.
We will also be considering an updated Long-Term Financial Plan at the meeting. This Plan has, for some time, indicated that we face challenges in our General Fund (which covers our transport assets, open spaces, and all our community services), with predicted future deficits. This is primarily due to our reliance on grant funding and our inherited backlog for roads and other public infrastructure maintenance and renewals. Our cashflows, however, are strong.
In recognition of these future budget challenges, Councillors last year called for a Financial Sustainability Strategy. This is currently being worked on and will be reported at the end of this calendar year.
At the same time, Council is undertaking service reviews with a view to optimizing service delivery to our community, eliminating unnecessary expenditure, and identifying opportunities to generate additional non-rate revenue streams.
We welcome the Report and the additional insights it has provided and will continue to implement the recommended improvements.
A copy of the audit report and Council’s response can be found at https://www.midcoast.nsw.gov.au/Your-Council/Our-news/News-releases/Update-from-the-Mayor’s-desk-response-to-performance-audit-report
Response from Cr. Peter Epov
The findings by the NSW Audit Office do not come as a surprise to me as it was only a matter of time, as to when someone in government would take a long hard look at the operations of MidCoast Council.
Still, it is very disheartening that such a damning report which casts a dark shadow over our Council’s integrity will be tabled in the NSW Parliament by the NSW Auditor General, and the findings will result in widespread and significant reputational damage to the credibility of MidCoast Council across Australia, which could result in significant and far reaching consequences.
I am embarrassed and disgusted that it has come to this, particularly as I have been speaking out about these failures and the consequences publicly in Council Meetings, Councillor workshops and during election campaign events over the past 5 years with no effect. Those responsible should not only hold their heads in shame, but frankly do the right and thing and go.
I’m not going to name who they are publicly, as from experience, this would trigger off a litany of legal threats and bullying as has happened to a former mayor who dared to speak out, to a local newspaper proprietor that dared to print an article questioning Council’s financial management, at least one local TV station executive, and one of the public service unions, and which would only serve to divert and distract from the root causes that need to be urgently addressed. However, I have written to both the Auditor General and the Minister for Local Government outlining my concerns.
What is even more disappointing is that the official public response to the Report, did not include a public apology, nor any form of contrition from the appropriate persons in leadership positions.
The finding that “MidCoast Council has not met all legislative and policy requirements for long-term financial planning” over a number of years is not about ‘learning lessons’, but flagrant violations of mandated regulations over many years.
It is also remarkable how the safeguard mechanisms all failed and that it needed the NSW Audit Office to step in! This is the first time the NSW Audit Office has undertaken a performance audit of any Council. Clearly, they have observed continuing and systemic issues whilst undertaking previous general audits of our Council. In the recent ‘Local Government 2022’ Report which analyses the results of the annual financial statement audits of all local councils, the Audit Office listed MidCoast Council as a repeat offender in section 3.4 Financial Accounting – ‘High Risk Findings’, and this is a continuation of a pattern over the previous 3 years where Council has been identified as a serial offender with unfavourable references in these reports.
Council employs highly paid executives who are there to ensure that all legislative and policy requirements are met. The expenditure on the executive team is $3.4 million. Council also spends $5.8M on Governance, and we have an Audit Risk and Improvement Committee all costing over $25,000 PA, which has not reported or highlighted these failures to Council.
In addition, Council’s Administration has had access to resources, ranging from the Local Government Act and the Regulations to various publications issued by the Office of Local Government (OLG) on financial management and obligations; to advice from the OLG itself and Local Government NSW to sort any issues out or misunderstandings of the requirements.
The Audit Office findings do not begin to scratch the surface. MidCoast Council has very real and serious financial and structural problems, which have amplified from year to year, but continue to be ignored with no visible attempts to address those problems over the past 6 years.
This is demonstrated by the 2023/24 Budget and the Delivery and Operational Plan documents which were placed on public exhibition back in April when the Performance Audit was being completed. As an example, despite the NSW Audit Office’s findings, the documents on public exhibition did not include a detailed Long Term Financial Plan (as mandated) but only a one page spreadsheet, with no assumptions to support or explain the figures.
Over the past five years the Administration has delivered what have been described as ‘business as usual budgets’ in Budget documents, and the majority of Councillors have adopted the staff’s recommendations.
The Audit Office findings are not only damning but demonstrate how poor the decision making processes have been through a lack of adequate long term financial planning.
We have seen a cavalier approach to expansion and relationships with certain developers; to the sale and lease of assets; major delays in capital works, project blowouts, annual carryovers averaging $40M per annum, all resulting in the waste of millions of dollars of public funds which could have been applied to improving service delivery, critical transport infrastructure and reducing the General Fund deficits.
The admission by Council to the NSW Audit Office that Council’s General Fund, which has a Projected Budget Result of over $239 Million for the 2022/23 year, will be in deficit for at least the next 10 years is quite an indictment on financial management and consolidates my calls over several years for urgent Budget repair.
One of the main aims of the Audit was to assess whether MidCoast Council has ‘effective management arrangements that support councillors and management to fulfill their financial stewardship responsibilities’. The report not only confirms my assertions of this failure but those of several other notable persons within our community. There has been a lack of clear and adequate financial information which has severely compromised the decision making processes and impacted on public confidence.
The Report refers to 74% of ‘Questions with Notice’ being on Council’s finances, and, as the person who submitted most of those questions, I can confirm that whilst there may have been responses from the Administration, the critical issues identified in those questions were mostly ignored or whitewashed and the Audit Office should look at responses to my questions during Council Meetings.
The Report states: “The Council advised that during this time MANEX meetings, and decisions made at those meetings, were informed by verbal updates from its finance department but this was not recorded in documentation from the meetings” this is not only staggering but indicates a failure to observe the requirements of the State Records Act 1998 No. 17.
The key issues are now:
What will the elected Council now do? And, What will the NSW Government do if Council does not act?