All financials from financial years 2017 to 2020 should be corrected and reissued

Central Coast Council’s plan for a 15 percent rate rise is the most sustainable solution available to the Council, says a local resident who is a Governance Risk and Compliance Consultant.

Patrick Gallagher, who is on the Board of a not-for-profit organisation on the Coast, says the highest rate rise, made up of a two percent rate peg plus the proposed 13 percent Special Rate Variation, is the most sustainable solution over the long-term because it will allow Council to continue delivering services.

It will also provide surpluses that will allow debt to be paid down over the next decade, Gallagher said.

“Continuing with the two percent rate peg only, means that Council will never get out of debt and, in fact, the situation will further deteriorate as borrowings grow,” he said.

“This is the worst of all worlds because the end result will be that services will simply not be delivered and will be further reduced over time.”

Council is hoping to convince the Independent Pricing and Regulatory Tribunal (IPART) to allow a 15 percent rise but it also canvassed a lesser rise of 10 percent.

Gallagher said a lesser rise would almost certainly mean that Council would need to borrow again.

“The 10 percent rate rise made up of the two percent rate peg plus and eight percent Special Rate Variation will at some stage need a further Special Rate Variation in 2028 but certainly before 2029 to continue to enable Council to operate and debt to be paid down without incurring further large borrowings,” he said.

“The problem with any option that requires continual borrowings is that given the Council’s track record it will be not only harder to find a willing lender but the cost of borrowing and the interest rates will be higher because of the risk involved in lending to the Central Coast Council.

“Separately, to ensure that the long term financial plan remains viable, the estimated Baseline financial results for Financial Year 2021, the current financial year, used for the forecast figures will need to be updated as the year progresses and will only be confirmed after July 2021 in financial year 2022.”

Gallagher based his opinion on Council’s publicly available figures published with its long term financial plan (LTFP).

Gallagher also believes that Council needs to correct and re-issue its annual financial reports since financial year 2017.

He said there was a material difference in the figures for financial year 2017 shown in the graph on page 12 of an article quoting Council CEO Rik Hart published in the Central Coast Community Chronicle on March 10 and those provided in the annual financial report for the same financial year.

“For example, in the article there is a reduction in Council financial year 2017 revenue of somewhere between $38M-$40M and there is a concurrent reduction in labour costs of around $21M giving a total difference of around $60M overall.

“It is unclear exactly how and where those changes flow through all of the subsequent annual financial performance reports, but it is certainly safe to say that all the financials for the period from financial year 2017 through to financial year 2020 should be corrected and reissued.

“It is also difficult to see how some of the projected figures for financial year 2021 would not be affected by earlier accounting errors and this is important because the 2021 projections are used as the basis for the long-term financial planning forecasts,” he said.

Local Government consultancy LG Solutions said in December last year that it expected the Council would be asked to reissue its financial reports since 2016-17.

Gallagher also asked if the relevant professional bodies such as CPA and CA for certified accountants would be notified wherever professional incompetence has been identified in the financial and accounting processes of Council.

“It is important to note that whenever doctors are found guilty of malpractice they are deregistered, wherever lawyers are found to be professionally negligent they are disbarred,” he said.

“I’m surprised that the forensic investigation hasn’t been more forthcoming on the details of what it calls “poor financial management practices”.

The long-term financial plan was due to be adopted at the March 23 meeting.

Chief Operating Officer, Malcolm Ryan, said the plan was, by necessity, conservative.

“Council will need to explore every opportunity to reduce costs in its service delivery and engage with the community as to what service levels should be maintained as well as further measures to increase income,’’ he said in the report to the council meeting.

“This may include discussions on further rate increases.

“It is considered, however, that with a dedicated commitment to detailed service improvements, effective application of new technology and a more detailed understanding of Councils financial situation by the community, the outlook provided by the LTFP can be substantially improved.”

Merilyn Vale

Be the first to comment on "All financials from financial years 2017 to 2020 should be corrected and reissued"

Leave a comment

Your email address will not be published.


*