The August edition of this paper gave disturbing details of an adverse report about the MidCoast Council finances by the NSW Audit Office. The Report suggested that “MidCoast Council has not met all legislative and policy requirements for long-term financial planning,” and was critical of Council delays in finalising a reliable Long-Term Financial Plan.
The poor financial position of the MidCoast Council and the need for significant action was again highlighted by the ‘Draft’ 2022/23 Financial Statements which Council recently voted to refer for audit.
The figures in the Draft Financial Statements were significantly different to what was projected in either the ‘Original’ or the ‘Projected’ Budgets. Total expenses exceeded the Budget by $41 Million, nearly $14%, whilst income only exceeded the Budget projections by $32 Million.
Council’s Net Operating Result for the year before Grants and Contributions for Capital purposes showed a deficit of $45 million, when the ‘Original Budget’ projection was a deficit $10.3 Million, and the later ‘Projected Budget’ deficit was adjusted to $24.7 Million.
The Net Operating Result for the year, before Grants and Contributions for Capital purposes for the General Fund, which is the main Council trading account, (excluding Water and Sewer), showed a deficit of $47.979 Million, a new record.
A review of MidCoast Council’s Net Operating result before grants and contributions for capital purposes for the period 2018 to 2023 shows:
2018/19 – Deficit $5.5 Million
2019/20 – Deficit $11 Million
2020/21 – Deficit $20.9 Million
2021/22 – $8.9 Million
2022/23 – Deficit $45 Million
(a swing of $54 million from the previous year.)
The recent ‘Re-vote and Carried Forward’ details, which relate to projects previously approved, but not yet completed, shows a figure of $53.9 Million for over 187 projects. Projects which were either not commenced, or not completed within the Budgeted Year.
No doubt there are reasons for projects not to be commenced or completed as planned, but on its face, this does seem to be quite a large number.
Each year since its inception, MidCoast Council has not completed many budgeted projects requiring them to be carried forward. This can often result in additional costs and time to complete such projects.
The Re-vote and Carry Forward figures since 2016 are as follows:
|
2016/17 |
$39,954,903.00 |
|
2017/18 |
$49,209,748.00 |
|
2018/19 |
$46,376,670.00 |
|
2019/20 |
$30,515,672.00 |
|
2020/21 |
$53,205,167.89 |
|
2021/22 |
$49,975,420.00 |
|
2022/23 |
$53,924,437.65 |
The review of the Delivery and Operational Plan for the 2022/23 reported to Council in August showed that 58% or only 53 of the 91 originally planned actions were achieved.
In May 2022, Council resolved to produce a Plan by 22 September 2022 that would have Council’s General Fund return to a surplus position within a 4 – 6-year time-frame.
When September 2022 came around, and there was no Plan, Council then resolved that a ‘Financial Sustainability Strategy‘ (same thing, different name) be developed and finalised in early 2023, and exhibited for community consultation in conjunction with the 2023/2024 Integrated Planning and Reporting Documents (IP&R).
These IP&R Documents, along with the 2023/24 Budget, were publicly exhibited on 12 April 2023, but in the absence of any Financial Sustainability Strategy.
Council’s 2023/24 Budget was approved on 28 June 2023 but still with no Financial Sustainability Strategy.
The 2023/24 Budget projected the General Fund Net Operating Result before Capital Grants and contributions for capital purposes of a Deficit of $45,512,240.
As at the present time there has been no public advice as to precisely when the Financial Sustainability Strategy, which is going to “turn around Council’s General Fund in 4 to 6 years” will be unveiled and made public. The Mayor has commented that “the strategy is currently being worked on and will be reported at the end of this (2023) calendar year.”
It is clear from the NSW Audit Office Report, and the financial statements discussed above, that the Council is presently not in a strong financial position with, as yet, no clear plan as to how the budget might be repaired and returned to surplus. There are a number of unanswered questions such as:
Will there need to be a significant increase in Council rates?
Will there need to be cuts to Council staffing levels?
Will some Council assets need to sold? And,
Will there have to be cuts to Council services?
In a statement reported in this paper in August, the Mayor said:
“…Council is undertaking service reviews with a view to optimising service delivery to our community, eliminating unnecessary expenditure, and identifying opportunities to generate additional non-rate revenue streams.”
No doubt there is likely to be some community anxiety about what and how services might be impacted until more details are provided.
It does seem that a Long-Term Financial Plan, explaining how and when the situation can be turned around, is more necessary and urgent than ever.
Comment was sought from all Councillors and the Mayor but not received by the necessary deadline, except from Councillor Epov who said:
“The figures for the Net Operating result before grants and contributions for capital purposes show an average annual deficit since 2018/19 of $14.7 million. That’s unsustainable.”
And:
“The 22/23 Financial Statements are actually above all expectations. I didn’t think they would be so bad.”