Council and the case of the missing line item

Suspended councillor Jillian Hogan

Suspended Central Coast councillor, Jillian Hogan, has revealed a line item was missing in the Council’s financial reports for a year.

Hogan says a briefing from acting CEO Rik Hart alerted her to the line missing from the October 2019 investment report.

She then looked at all the reports since that date and found the line was always missing and therefore the councillors did not see the growing deficit.

“All councillors, the ARIC Committee, the auditors did not pick up that the line item was missing in the financial reports,” Hogan said.

“Councillors, the CEO, the CFO and the ARIC Committee have a shared responsibility to oversee the financial position of Council and this I believe is where we failed.”

Ten of the 13 suspended councillors attended a briefing given by Hart and chief financial officer, Natalia Cowley, in March.

Councillors Chris Burke, Bruce McLachlan and Richard Mehrtens did not attend.

The councillors were told that the Investment Report for September 2019 showed a line item called unrestricted funds and it was favourable with $14,586,000.

The councillors adopted the investment report en-masse at the time.

The Investment Report for October 2019 showed no line item for unrestricted funds.

If it had been there, it would have shown a deficit – the first of many.

Again, the councillors adopted the report en-masse at the time.

“Adopted en-masse” means an item was not discussed at a Council meeting but was lumped in with a number of items that were all passed at once.

After the councillor briefing, Hogan did her own digging and brought out her calculator.

She said the Investment Report for October 2019 should have shown an actual deficit of $11,909,000.

Hogan then went back through the investment reports for the entire year from October 2019 to the last investment report the councillors saw in 2020 before they were suspended.

In all cases, there was no line item showing unrestricted funds.

That dropped off after September 2019 – which was the last time the line was in the black.

In all cases, the councillors did not question the reports but adopted them en-masse except for one month which was adopted unanimously.

If the councillors had done the figures at the time (subtracting the restricted funds from the total) they would have seen the deficit growing.

Hogan found the Investment Report for December 2019 should have shown a deficit of $27,373,000.

Hogan checked all the reports and the deficit kept growing until, in August 2020, the deficit was $117,896,000.

Hart showed a series of slides at the briefing explaining where the councillors should have seen the red flags that were leading to the financial woes which were made public in October last year.

The Council has revealed it had unlawfully been using restricted funds for operational purposes and has been under administration since October last year, with councillors suspended.

Administrator Dick Persson delivered his final report into the Council financial crisis on April 15.

Merilyn Vale